<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 29, 1998.
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
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BAYOU STEEL CORPORATION
(AND ITS SUBSIDIARIES IDENTIFIED IN FOOTNOTE (1) BELOW)
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 3312 72-1125783
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION INDUSTRIAL IDENTIFICATION NO.)
OF INCORPORATION OR CLASSIFICATION CODE
ORGANIZATION) NUMBER)
RIVER ROAD
P.O. BOX 5000
LAPLACE, LOUISIANA 70068
(504) 652-4900
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
RICHARD J. GONZALEZ
VICE PRESIDENT, CHIEF FINANCIAL OFFICER,
TREASURER AND SECRETARY
RIVER ROAD
P.O. BOX 5000
LAPLACE, LOUISIANA 70068
(504) 652-4900
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
COPIES TO:
CURTIS R. HEARN, ESQ.
JONES, WALKER, WAECHTER, POITEVENT,
CARRERE & DENEGRE, L.L.P.
201 ST. CHARLES AVENUE
NEW ORLEANS, LOUISIANA 70170
504-582-8188
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
---------------
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED
TITLE OF EACH CLASS OF MAXIMUM OFFERING PROPOSED
SECURITIES AMOUNT TO BE PRICE PER MAXIMUM AGGREGATE AMOUNT OF
TO BE REGISTERED REGISTERED UNIT(2) OFFERING PRICE(2) REGISTRATION FEE
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<S> <C> <C> <C> <C>
9 1/2% First Mortgage
Notes due 2008......... $110,000,000 100% $110,000,000 $32,450
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Guarantee of 9 1/2%
First Mortgage Notes
due 2008............... (3) (3) (3) (3)
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</TABLE>
(1) Bayou Steel Corporation (Tennessee), a Delaware corporation (I.R.S.
Employer Identification Number 62-1596494), and River Road Realty
Corporation, a Louisiana corporation (I.R.S. Employer Identification
Number 72-1162713), each a wholly owned subsidiary of the Company, will
each be a guarantor of the 9 1/2% First Mortgage Notes due 2008
(collectively, the "Subsidiary Guarantors").
(2) Determined solely for the purpose of calculating the registration fee in
accordance with Rule 457(f).
(3) Pursuant to Rule 475(n), no registration fee is required with respect to
the Guarantee of the First Mortgage Notes registered hereby.
THE CO-REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE CO-REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED JUNE , 1998
PROSPECTUS
OFFER TO EXCHANGE REGISTERED
9 1/2% FIRST MORTGAGE NOTES DUE 2008 FOR OUTSTANDING
UNREGISTERED 9 1/2% FIRST MORTGAGE NOTES DUE 2008
OF
BAYOU STEEL CORPORATION
LOGO
[LOGO OF BAYOU STEEL APPEARS HERE]
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME
ON , 1998 UNLESS EXTENDED BY THE COMPANY.
Bayou Steel Corporation (the "Company" or "Bayou Steel"), hereby offers (the
"Exchange Offer") to exchange an aggregate principal amount of up to
$110,000,000 of its registered 9 1/2% First Mortgage Notes due 2008 (the
"Exchange Notes") for a like principal amount of its unregistered 9 1/2% First
Mortgage Notes due 2008 (the "Old First Mortgage Notes") outstanding on the
date hereof upon the terms and subject to the conditions set forth in this
Prospectus and in the accompanying Letter of Transmittal (the "Letter of
Transmittal"). The Exchange Notes and the Old First Mortgage Notes are
collectively referred to hereinafter as the "First Mortgage Notes."
The terms of the Exchange Notes are identical in all material respects to those
of the Old First Mortgage Notes, except for certain transfer restrictions and
registration rights relating to the Old First Mortgage Notes. The Exchange
Notes will be issued pursuant to, and entitled to the benefits of the indenture
governing the Old First Mortgage Notes (the "Indenture"). Interest on the
Exchange Notes will accrue from the last interest payment date on which
interest was paid on the Old First Mortgage Notes surrendered in exchange
therefor or, if no interest has been paid on the Old First Mortgage Notes, from
the date of original issue of the Old First Mortgage Notes (the "Issue Date").
Interest on the Exchange Notes will be payable semi-annually on May 15 and
November 15 of each year, commencing November 15, 1998 at the rate of 9 1/2%
per annum. The Exchange Notes will mature on May 15, 2008. Except as described
below, the Company may not redeem the First Mortgage Notes prior to May 15,
2003. On and after such date, the Company may, at its option, redeem the First
Mortgage Notes, in whole or in part, from time to time, at the redemption
prices set forth herein, together with accrued and unpaid interest, if any, to
the date of redemption. In addition, at any time prior to May 15, 2001, the
Company may, at its option, from time to time, redeem up to 35% of the original
aggregate principal amount of the First Mortgage Notes at a redemption price
equal to 109.500% of the principal amount thereof, together with accrued and
unpaid interest, if any, to the date of redemption with all or a portion of the
net proceeds of public sales of common stock of the Company; provided, that at
least 65% of the original aggregate principal amount of the First Mortgage
Notes remains outstanding immediately after the occurrence of such redemption.
The First Mortgage Notes will not be subject to any sinking fund requirement.
See "Description of the First Mortgage Notes."
Upon a Change of Control (as defined herein), the Company will be required to
make an offer to repurchase all of the outstanding First Mortgage Notes at a
repurchase price equal to 101% of the principal amount thereof, together with
accrued and unpaid interest, if any, to the date of repurchase. In addition, at
any time on or prior to May 15, 2003, the Company may, at its option, redeem
the First Mortgage Notes, in whole but not in part, upon the occurrence of a
Change of Control at a redemption price equal to 100% of the principal amount
thereof, together with the Applicable Premium (as defined herein) as of, and
accrued and unpaid interest, if any, to, the date of redemption. See
"Description of the First Mortgage Notes."
(Continued on following page)
SEE "RISK FACTORS" BEGINNING ON PAGE 13 FOR A DESCRIPTION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED CAREFULLY BY PROSPECTIVE PURCHASERS IN EVALUATING AN
INVESTMENT IN THE EXCHANGE NOTES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is , 1998.
<PAGE>
The First Mortgage Notes will be senior obligations of the Company, secured by
a first priority lien, subject to certain exceptions, on certain existing and
future real property, plant and equipment (including certain operating
equipment classified as inventory), and all additions or improvements thereto
and all proceeds and products thereof. See "Description of the First Mortgage
Notes--Security." The First Mortgage Notes (together with any additional First
Mortgage Notes issued under the Indenture relating thereto) will rank pari
passu in right of payment with any existing and future senior indebtedness of
the Company, including obligations of the Company arising in connection with
the New Credit Facility (as defined herein) and will rank senior in right of
payment to all existing and future subordinated indebtedness of the Company.
The First Mortgage Notes are guaranteed (the "Subsidiary Guarantees"), jointly
and severally, by the Company's Recourse Subsidiaries (as defined herein) (the
"Subsidiary Guarantors"). As of March 31, 1998, after giving pro forma effect
to the offering of the Old First Mortgage Notes (the "Original Offering") and
the New Credit Facility, and the application of the proceeds therefrom, the
Company would have had approximately $110 million of senior indebtedness
outstanding. The Company and its subsidiaries are permitted to incur
additional secured and unsecured indebtedness under the Indenture (as defined
herein) governing the First Mortgage Notes (including indebtedness under the
New Credit Facility).
The Exchange Notes are being offered hereunder in order to satisfy certain
obligations of the Company contained in the Exchange and Registration Rights
Agreement dated as of May 22, 1998 (the "Exchange and Registration Rights
Agreement"), among the Company, Chase Securities Inc., BT Alex. Brown
Incorporated and PaineWebber Incorporated (the "Initial Purchasers"), with
respect to the Exchange Offer. Based on interpretations by the staff of the
Securities and Exchange Commission (the "Commission" or "SEC"), as set forth
in no-action letters issued to third parties, the Company believes that the
Exchange Notes issued pursuant to the Exchange Offer in exchange for Old First
Mortgage Notes may be offered for resale, resold and otherwise transferred by
any holder thereof (other than any such holder which is an "affiliate" of the
Company within the meaning of Rule 405 under the Securities Act) without
compliance with the registration and prospectus delivery provisions of the
Securities Act, provided that such Exchange Notes are acquired in the ordinary
course of such holder's business and such holder has no arrangement with any
person to participate in the distribution of such Exchange Notes.
Each holder will be required to acknowledge in the Letter of Transmittal that
it is not, and does not intend to engage in, a distribution of the Exchange
Notes. Notwithstanding the foregoing, Each broker-dealer that receives
Exchange Notes for its own account pursuant to the Exchange Offer must
acknowledge that it will deliver a prospectus in connection with any resale of
such Exchange Notes. The Letter of Transmittal states that by so acknowledging
and by delivery of a prospectus, a broker-dealer will not be deemed to admit
that it is an "underwriter" within the meaning of the Securities Act of 1933,
as amended (the "Securities Act"). This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of Exchange Notes received in exchange for Old First Mortgage
Notes where such Old First Mortgage Notes were acquired by such broker-dealer
as a result of market-making activities or other trading activities. The
Company has agreed that for a period of the lesser of 180 days following the
consummation of the Exchange Offer or the date on which all such broker-
dealers have sold all Exchange Notes held by them, it will make this
Prospectus available to any broker-dealer for use in connection with any such
resale. See "Plan of Distribution." Based on the above-mentioned
interpretations by the staff of the Commission, the Company believes that
broker-dealers who acquired the Old First Mortgage Notes directly from the
Company and not as a result of market-making activities or other trading
activities cannot rely on such interpretations by the staff of the Commission
and must, in the absence of an exemption, comply with the registration and
prospectus delivery requirements of the Securities Act in connection with
secondary resales of the Exchange Notes. Such broker-dealers may not use this
Prospectus, as it may be amended or supplemented from time to time, in
connection with any resales of the Exchange Notes.
The Company will not receive any proceeds from the Exchange Offer. The Company
will pay all the expenses incident to the Exchange Offer. Tenders of Old First
Mortgage Notes pursuant to the Exchange Offer may be withdrawn at any time
prior to the Expiration Date (as defined herein) for the Exchange Offer. In
the event the company terminates the Exchange Offer and does not accept for
exchange any Old First Mortgage Notes with respect to the Exchange Offer, the
Company will promptly return such Old First Mortgage Notes to the holders
thereof. See "The Exchange Offer."
Prior to the Exchange Offer, there has been no public market for the Old First
Mortgage Notes. The Old First Mortgage Notes have been designated for trading
in the Private Offering, Resales and Trading through Automated Linkages
("PORTAL") Market. There can be no assurance that any public market for the
Exchange Notes will develop; however, if a market for the Exchange Notes
should develop, such Exchange Notes could trade at a discount from their
principal amount.
The Exchange Offer is not conditioned upon any minimum principal amount of Old
First Mortgage Notes being tendered for exchange pursuant to the Exchange
Offer.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 (the "Exchange Act") and the rules and regulations
thereunder, and in accordance therewith files periodic reports, proxy
statements and other documents with the Commission. All documents filed by the
Company with the Commission may be inspected at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the regional offices of the Commission located at 7 World
Trade Center, 13th Floor, New York, New York 10048, and 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. Copies of such material may be
obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. The Commission also
maintains a Web site (http://www.sec.gov) that contains information regarding
registrants, such as the Company, that file electronically with the
Commission. The Company's Class A Common Stock is traded on the American Stock
Exchange and its reports, proxy statements and other information can also be
inspected at the offices of the American Stock Exchange, Inc., 86 Trinity
Place, New York, New York 10006-1881.
NOTICE REGARDING FORWARD-LOOKING STATEMENTS
Certain of the matters discussed under the captions "Summary," "Risk
Factors," "Management's Discussion and Analysis of Financial Condition and
Results of Operations," "Business" and elsewhere in this Prospectus may
constitute "forward-looking" statements, and as such may involve known and
unknown risks, uncertainties and other factors that may cause the Company's
actual results to be materially different from the anticipated future results
expressed or implied by such forward-looking statements. Such forward-looking
statements may include, without limitation, statements with respect to the
Company's anticipated future performance, financial position and liquidity,
growth opportunities, business and competitive outlook, demand for products,
business strategies, and other similar statements of expectations or
objectives that are highlighted by words such as "expects," "anticipates,"
"intends," "plans," "believes," "projects," "seeks," "estimates," "should "
and "may," and variations thereof and similar expressions. The Company
cautions that a number of important factors could, individually or in the
aggregate, cause actual results to differ materially from those included in
the forward-looking statements including, without limitation, the following:
(i) changes in the price of supplies, power, natural gas, or purchased
billets; (ii) changes in the selling price of the Company's finished products
or the purchase price of steel scrap; (iii) weather conditions in the market
area of the finished product distribution; (iv) unplanned equipment outages;
and (v) changes in the laws affecting labor, employee benefit costs and
environmental and other governmental regulations. See "Risk Factors" and
"Business." Due to these uncertainties, each prospective investor is cautioned
not to place undue reliance upon the Company's forward-looking statements,
which speak only as of the date hereof. The Company undertakes no obligation
to update or revise any of its forward-looking statements.
i
<PAGE>
SUMMARY
The following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information and financial statements,
including the notes thereto, contained elsewhere herein. See "Glossary" for the
definition of certain terms used in this Prospectus. Unless the context
requires otherwise, all references to the Company or Bayou Steel in this
Prospectus shall include Bayou Steel Corporation and its subsidiaries.
THE COMPANY
GENERAL
Bayou Steel is a leading producer of light structural shapes and merchant bar
steel products. Bayou Steel owns and operates a steel minimill and a stocking
warehouse located on the Mississippi River in LaPlace, Louisiana (the
"Louisiana Facility"), three additional stocking locations accessible to the
Louisiana Facility through the Mississippi River waterway system, and a rolling
mill in Harriman, Tennessee (the "Tennessee Facility"). The Company produces
light structural steel products ranging in size from three to eight inches at
the Louisiana Facility and merchant bar products ranging from one-half to four
inches at the Tennessee Facility. The Company estimates that it currently has
aggregate annual steel melting capacity of approximately 610,000 tons and
finished product rolling capacity aggregating approximately 800,000 tons, with
approximately 550,000 tons at the Louisiana Facility and approximately 250,000
tons at the Tennessee Facility, depending on the product mix. The Company has
been increasing its production at the Tennessee Facility, and for the twelve
months ended March 31, 1998, the Company shipped 697,943 tons of steel
products, generating net sales of $251.8 million and Adjusted EBITDA (as
defined) of $32.0 million.
The Louisiana Facility, which was constructed in 1981 at a cost of $243
million, is a minimill consisting of an electric arc furnace, a rolling mill,
climate controlled warehouse facilities, and a deep-water dock on the
Mississippi River. A "minimill" is a relatively low-cost steel production
facility which uses steel scrap rather than iron ore as its basic raw material.
In general, minimills recycle scrap using electric arc furnaces, continuous
casters, and rolling mills. The Louisiana Facility's minimill includes a Krupp
computer-controlled, electric arc furnace utilizing water-cooled sidewalls and
roof, two Voest-Alpine four-strand continuous casters, a computer supervised
Italimpianti reheat furnace, and a 15-stand Danieli rolling mill.
The Tennessee Facility was acquired and re-started by the Company in July
1995 following the purchase by the Company of substantially all of the assets
of the Tennessee Valley Steel Company ("TVSC"). The rolling mill at the
Tennessee Facility includes a computer supervised reheat furnace, a 16-stand
rolling mill and automated straightening, continuous cut-to-length, stacking
and bundling equipment. Since the acquisition, the Company has retrained the
workforce, improved the profitability of the product mix, enhanced operational
efficiencies and increased capacity utilization. The Tennessee Facility has
been profitable since July 1997, and the Company expects continued operational
improvements should result in higher capacity utilization, lower costs per ton
and additional sales volume.
The Company purchases most of its scrap in the open market from a large
number of steel scrap dealers, although the Company also operates an automobile
shredder to produce some of the scrap used in its operations. At the Louisiana
Facility, the Company uses steel scrap to produce finished steel in a variety
of shapes, including angles, flats, channels, standard beams, and wide flange
beams. At the Tennessee Facility, the Company rolls billets to produce merchant
bar products,
1
<PAGE>
including angles, flats, rounds, and squares, and also has the capability to
produce rebar. The merchant bar product mix of the Tennessee Facility extends
and complements the Company's Louisiana Facility product line. The Company's
products are used for a wide range of commercial and industrial applications.
The location of the Company's production and distribution facilities allows
the Company to serve customers across a wide geographic area, including its
primary markets in the Southeast, the lower Midwest, the Northeast, the Mid-
Atlantic and the Appalachian states. The Company also sells to customers in the
West Coast region, Canada, Mexico and other overseas locations. The Company
sells its products to over 550 customers, the majority of which are steel
service centers, in 44 states, Canada, Mexico, and overseas.
COMPETITIVE STRENGTHS
Advantageous Geographic Locations. The Company's production and distribution
facilities are positioned to provide the Company with access to a broad
geographic customer base and are strategically located to reduce transportation
costs for raw materials and finished products. The Louisiana Facility, which
includes a deep-water dock, is strategically located on the Mississippi River,
which reduces the Company's transportation costs and enhances its competitive
position. Both scrap and finished products may be shipped to and from the
Louisiana Facility by barge, normally the least costly method of transportation
in the steel industry. The Company also believes that the location of the
Louisiana Facility on the Mississippi River and its network of three inland
waterway inventory stocking warehouses in Chicago, Tulsa and Pittsburgh enable
it to access remote markets for its products on a cost-effective basis. The
Louisiana Facility's deep-water dock also provides the Company with low-cost
alternative sources of scrap from the Caribbean and elsewhere, partially
protecting the Company from domestic scrap price increases.
Strong Market Position. The Company believes that it is currently the second
largest producer of structural steel products, excluding flats and wide flange
beams, in the United States and estimates that it supplied approximately 16% of
shipments of such products in the United States in 1997. In the Company's
primary geographic markets, the Company has an even larger market share as
producers of light structural products tend to serve customers located near
their facilities. The Company believes that its strong market position and
extensive distribution network provide it with competitive market intelligence
and other advantages from scale and vertical integration relative to smaller
competitors.
Improving Operating Performance. Through efficiency and productivity
improvement efforts and targeted capital expenditures, the Company has
generated significant gains in its performance at its production facilities
over the past several years. In the first six months of fiscal 1998, the
Company achieved record productivity levels at the Louisiana and Tennessee
Facilities following record years in terms of shipments of finished products
from both facilities in fiscal 1997. The Louisiana Facility and Tennessee
Facility shipped 529,707 and 133,968 tons of rolled finished products in fiscal
1997, respectively, and 288,138 and 74,568 tons of rolled finished products in
the first six months of fiscal 1998, respectively, as opposed to rolled
finished product shipments of 504,944 and 75,125 tons, respectively, in fiscal
1996. Productivity has improved at the Louisiana Facility rolling mill such
that the Company had no internally produced billets available for external
sales in the first six months of fiscal 1998, despite record production levels
in the melt shop. Since its acquisition of the Tennessee Facility in fiscal
1995, the Company has invested approximately $7.7 million in projects to
improve the facility's productivity and efficiency, which are beginning to
generate benefits. In fiscal 1997, the Tennessee Facility realized a 4%
improvement in its yield of shapes rolled from billets over fiscal 1996,
creating savings of $6 per ton. The Tennessee Facility also realized a 51%
increase in finished product tons produced, a 15% reduction in conversion cost
and a 49% increase in productivity in
2
<PAGE>
fiscal 1997 over fiscal 1996 levels. Such improvements continued in the first
six months of 1998 as the Tennessee Facility realized a $3 per ton conversion
cost improvement over the corresponding fiscal 1997 period.
Broad Product Offering. The Company's broad product range of light structural
steel products makes the Company an attractive supplier for steel service
centers, which prefer a supplier that offers a full range of products. These
products are used in a variety of applications and industries, including
commercial, infrastructure and home construction, and truck, trailer and ship
manufacturing and construction. The Company believes that the breadth of its
products and markets mitigates the impact of adverse conditions in any one of
the Company's markets on its overall performance.
Advantageous Labor Arrangements. The Company believes that the labor
agreements it recently entered into with its Louisiana and Tennessee workforces
advantageously position the Company for future cost savings and efficiency
enhancing opportunities. After a lengthy labor disruption at the Louisiana
Facility was settled in late 1996, the Company entered into a six-year labor
contract with the Louisiana workforce that provides for no compulsory wage
increases other than through the Company's productivity incentive and profit-
sharing plans. In 1997, the Company entered into a similar seven and one-half
year labor contract with its Tennessee workforce. The Company believes that
these incentive programs have contributed to the record productivity levels
achieved by the Company in the first six months of fiscal 1998. As part of its
strategic employee development efforts, the Company is committed to developing
a high performance work culture through extensive training, a "pay-for-
performance" culture, and individual development efforts incentivized through a
"pay-for-knowledge" program. The Company believes that the workforce, through
this program, will have an impact in achieving operational and productivity
improvements.
Experienced and Committed Management Team. Senior management of the Company
average over 12 years with the Company and 17 years in the steel industry.
Management has demonstrated its ability to successfully manage and incentivize
its labor force, achieve improvements in operating results in challenging
market conditions and integrate acquired operations.
BUSINESS STRATEGY
The Company's objective is to continue to improve operating efficiencies and
reduce costs through improved production processes, higher capacity
utilization, and targeted capital investments. The Company will also consider
strategic acquisitions, such as the acquisition of the Tennessee Facility,
which complement or expand the Company's current operations or add finished
goods or raw material capacity.
Continue Operating Efficiency and Productivity Improvements. The Company
intends to continue to improve operating results through increases in
productivity and capacity utilization, reduced costs, and increased sales of
high margin shape products. Through such efforts the Louisiana Facility lowered
its labor cost by $15 per ton from 1992 through 1997, despite a $3 per ton
increase in 1997 attributable to costs incurred from the return of previously
striking employees. The Company believes that conversion cost per ton will be
reduced further through capital investments and production incentives under its
new labor contract. Additionally, the Company believes that at a minimal
capital cost, it can expand its rolling capacity at the Louisiana Facility to
approximately 600,000 tons per year. At the Tennessee Facility, the Company
will continue to expand its merchant bar production. In fiscal 1997, the
Tennessee Facility, which has an estimated annual rolling capacity of 250,000
tons, produced 144,609 tons of merchant bar products, a 51% increase over the
prior year, and its production is expected to reach over 170,000 tons in fiscal
1998. The Company expects to commit approximately $4.0 million on various
capital projects at the Tennessee Facility in fiscal 1998 to continue to reduce
costs and improve productivity. The Company will continue to review capital
spending opportunities that will benefit production while reducing costs and
expanding product mix in its customer markets.
3
<PAGE>
Balance Melting and Rolling Capacity. The Company has approximately 610,000
tons of annual melting capacity compared to approximately 800,000 tons of
annual rolling capacity, and as a result, must meet a portion of its steel
billet requirements through purchases in the open market. The Company plans to
increase the proportion of lower cost, internally produced billets supplied to
its rolling operations through increased melt capacity at its Louisiana
Facility. The Company is in the process of installing a ladle metallurgy
furnace ("LMF") at the Louisiana Facility that is expected to increase melt
shop capacity to approximately 650,000 tons at a capital cost of approximately
$3.2 million. The LMF station is expected to allow better sequencing of melts
by balancing the melting furnace operation with the continuous caster
operation, which the Company believes will generate approximately $500,000 to
$1.0 million in annual cost savings by enabling the melt furnace to run at an
optimal rate. Management is also developing plans to implement a major melt
shop upgrade which is expected to be completed in approximately two and one
half years and would expand melt shop capacity to approximately 850,000 tons
per year. The furnace upgrade would increase the size of the furnace to accept
a larger scrap bucket, reducing the number of buckets per charge, and would
replace the existing 60 MVA transformer with an ultra-high-powered 80 MVA
transformer. The furnace upgrade is expected to generate cost savings of
approximately $7.0 to $8.0 million per year. Upon the completion of these
capital projects, the Company expects the Louisiana melt shop to have the
capacity to supply the rolling mills at the Louisiana Facility and the
Tennessee Facility with all of their billet requirements. In 1997, the melt
shop at the Louisiana Facility supplied the rolling mill at the Tennessee
Facility with only 17% of its billet requirements.
Improve Scrap Sourcing. The Company continually seeks to increase its control
over and reduce the cost of its scrap supply. In late 1995, in order to reduce
its reliance on third parties for prepared scrap metal, the Company installed
an automobile shredder on a site adjacent to the Louisiana Facility. During
1997, the automobile shredder supplied the Company with 12% of its total scrap
requirements and all of its shredded scrap requirements at significantly
reduced costs. Since its commencement of operations, the automobile shredder
has continued to improve its efficiency and reduce costs, lowering the
Company's cost to produce shredded scrap by 5% for the first six months of
fiscal 1998 over the same period in fiscal 1997. The automobile shredder
currently operates on one shift at a production run-rate of 100,000 tons of
shredded scrap per year, and the Company intends to eventually increase its
output. To supplement its shredded scrap activities, the Company has recently
initiated the processing of other grades of scrap, including demolition scrap
(scrap from tanks, barges and railcars), to further reduce its scrap costs.
Additionally, the Company has procured approximately 25% of its scrap at prices
lower than those offered by large scrap dealers by sourcing a portion of its
scrap through smaller local dealers. The Company plans to expand the scope of
these activities and seek opportunities to improve its scrap supply position in
the future.
Pursue Strategic Acquisitions. The Company may, from time to time, seek
strategic acquisitions, such as the acquisition of the Tennessee Facility in
1995. Attractive candidates include steel producers and recycling operators
which provide the opportunity to accelerate growth while complementing or
expanding the Company's current operations.
Realize Tax Benefits of Net Operating Loss Carryforwards. The Company will
seek to maximize and accelerate its utilization of net operating loss
carryforwards to offset taxable earnings achieved through efficiency
improvements, cost savings and acquisitions. As of September 30, 1997, the
Company had approximately $280 million of net operating loss carryforwards
which could be used to offset taxable earnings of the Company, including the
earnings of acquired entities.
----------------
The Company is a Delaware corporation headquartered in LaPlace, Louisiana.
The Company's principal office is located at 138 Highway 3217, LaPlace,
Louisiana 70068, telephone number (504) 652-4900.
4
<PAGE>
THE ORIGINAL OFFERING AND USE OF PROCEEDS
The Old First Mortgage Notes were sold by the Company on May 22, 1998 to the
Initial Purchasers and were thereupon offered and sold by the Initial
Purchasers within the United States only to persons whom they reasonably
believed to be qualified institutional buyers in reliance on Rule 144A under
the Securities Act and outside the United States only in offshore transactions
in reliance on Regulation S under the Securities Act. The Company has applied
or intends to apply substantially all of the net proceeds from the Original
Offering (i) to redeem the Company's 10 1/4% First Mortgage Notes due 2001 (the
"Notes due 2001"); (ii) to redeem the Company's redeemable preferred stock, par
value $0.01 per share (the "Preferred Stock"); and (iii) to repay outstanding
indebtedness under the Company's term loan agreement (the "Term Loan"). The
remaining proceeds will be used for general corporate purposes, including
ongoing capital expenditures. The Company will not receive any cash proceeds
from the Exchange Offer.
THE EXCHANGE OFFER
Securities Offered.......... Up to $110,000,000 aggregate principal amount of
registered 9 1/2% First Mortgage Notes due 2008.
The terms of the Exchange Notes and Old First
Mortgage Notes are identical in all material
respects, except for certain transfer
restrictions and registration rights relating to
the Old First Mortgage Notes.
The Exchange Offer.......... The Exchange Notes are being offered in exchange
for a like principal amount of Old First Mortgage
Notes. Old First Mortgage Notes may be exchanged
only in integral multiples of $1,000. The
issuance of the Exchange Notes is intended to
satisfy obligations of the Company contained in
the Exchange and Registration Rights Agreement.
Expiration Date............. The Exchange Offer will expire at 5:00 p.m., New
York City time, on , 1998, or
such later date and time to which it is extended
by the Company in its sole discretion. See "The
Exchange Offer--Expiration Date; Extensions;
Termination; Amendments."
Conditions to the Exchange
Offer....................... The Company's obligation to consummate the
Exchange Offer is subject to certain customary
conditions. See "The Exchange Offer--Conditions
to the Exchange Offer." The Company reserves the
right to terminate or amend the Exchange Offer at
any time prior to the Expiration Date upon the
occurrence of any such condition.
Withdrawal Rights........... Tenders may be withdrawn at any time prior to the
Expiration Date. Any Old First Mortgage Notes not
accepted for any reason will be returned without
expense to the tendering holder thereof as
promptly as practicable after the expiration or
termination of the Exchange Offer. See "The
Exchange Offer--Withdrawal Rights."
5
<PAGE>
Procedures for Tendering
Old Notes................... Each holder of Old First Mortgage Notes wishing
to accept the Exchange Offer must complete, sign
and date the Letter of Transmittal, or a
facsimile thereof, in accordance with the
instructions contained herein and therein, and
mail or otherwise deliver such Letter of
Transmittal, or such facsimile, together with
such Old First Mortgage Notes and any other
required documentation, to the Exchange Agent (as
hereinafter defined) at the address set forth
herein. Persons holding Old First Mortgage Notes
through a book-entry transfer facility and
wishing to accept the Exchange Offer must do so
in accordance with such book-entry transfer
facility's procedures for transfer. See "The
Exchange Offer--Exchange Offer Procedures."
Guaranteed Delivery
Procedures.................. Holders of Old First Mortgage Notes who wish to
tender their Old First Mortgage Notes and whose
Old First Mortgage Notes are not immediately
available or who cannot deliver their Old First
Mortgage Notes, the Letter of Transmittal or any
other documents required by the Letter of
Transmittal to the Exchange Agent prior to the
Expiration Date, or who cannot complete the
procedures for book-entry transfer on a timely
basis, must tender their Old First Mortgage Notes
according to the guaranteed delivery procedures
set forth in "The Exchange Offer--Exchange Offer
Procedures-- Guaranteed Delivery Procedures."
Use of Proceeds............. The Company will not receive any cash proceeds
from the issuance of Exchange Notes pursuant to
the Exchange Offer.
Exchange Agent.............. First National Bank of Commerce is serving as the
Exchange Agent in connection with the Exchange
Offer.
United States Federal
Income Tax Consequences.... The exchange of Old First Mortgage Notes pursuant
to the Exchange Offer will not be a taxable event
for United States federal income tax purposes.
See "The Exchange Offer--United States Federal
Income Tax Consequences of the Exchange Offer."
Effect on Holders of Old
First Mortgage Notes ...... As a result of the making of this Exchange Offer,
and upon acceptance for exchange of all validly
tendered Old First Mortgage Notes pursuant to the
terms of this Exchange Offer, the Company will
have fulfilled a covenant contained in the
Exchange and Registration Rights Agreement and,
accordingly, the holders of the Old First
Mortgage Notes will have no further registration
or other rights under the Exchange and
Registration Rights, except under certain limited
circumstances. See "Exchange and Registration
Rights Agreement." Holders of the Old First
Mortgage Notes who do not tender their Old First
Mortgage Notes in the
6
<PAGE>
Exchange Offer will continue to hold such Old
First Mortgage Notes and will be entitled to all
rights and limitations thereto under the
Indenture. All untendered, and tendered but
unaccepted, Old First Mortgage Notes will
continue to be subject to the restrictions on
transfer provided for in such Old First Mortgage
Notes and the Indenture. To the extent Old First
Mortgage Notes are tendered and accepted in the
Exchange Offer, the trading market, if any, for
the Old First Mortgage Notes could be adversely
affected. See "Risk Factors--Consequences of
Failure to Exchange."
TERMS OF THE FIRST MORTGAGE NOTES
Issuer...................... Bayou Steel Corporation
Interest.................... The First Mortgage Notes will bear interest at a
rate of 9 1/2% per annum. Interest on the
Exchange Notes will accrue from the last interest
payment date on which interest was paid on the
Old First Mortgage Notes surrendered in exchange
therefor or, if no interest has been paid on the
Old First Mortgage Notes, from the date of
original issue of the Old First Mortgage Notes.
Interest on the Exchange Notes will be payable
semi-annually on May 15 and November 15 of each
year, commencing on November 15, 1998.
Maturity Date............... May 15, 2008.
Optional Redemption......... Except as described below, the Company may not
redeem the First Mortgage Notes prior to May 15,
2003. On and after such date, the Company may, at
its option, redeem the First Mortgage Notes, in
whole or in part, from time to time, at the
redemption prices set forth herein, together with
accrued and unpaid interest, if any, to the date
of redemption. In addition, at any time prior to
May 15, 2001, the Company may, at its option,
from time to time, redeem up to 35% of the
original aggregate principal amount of the First
Mortgage Notes at a redemption price equal to
109.500% of the principal amount thereof,
together with accrued and unpaid interest, if
any, to the date of redemption with all or a
portion of the net proceeds of public sales of
Common Stock of the Company; provided, that at
least 65% of the original aggregate principal
amount of the First Mortgage Notes remains
outstanding immediately after the occurrence of
such redemption. In addition, under certain
circumstances, the Company may redeem the First
Mortgage Notes upon the occurrence of a Change of
Control. See "--Change of Control."
Ranking..................... The First Mortgage Notes will be senior
obligations of the Company, secured by a first
priority lien, subject to certain exceptions, on
certain existing and future real property, plant
7
<PAGE>
and equipment (including certain operating
equipment classified as inventory), and all
additions or improvements thereto and all
proceeds and products thereof. The principal
asset comprising the Collateral (as defined
herein) is the Louisiana Facility. Under certain
circumstances the Company may issue additional
First Mortgage Notes under the Indenture, all of
which will be secured by the Collateral. See
"Description of the First Mortgage Notes--
Security." The First Mortgage Notes will rank
pari passu in right of payment with any existing
and future senior indebtedness of the Company,
including obligations of the Company arising in
connection with the New Credit Facility and will
rank senior in right of payment to all existing
and future subordinated indebtedness of the
Company. As of March 31, 1998, after giving pro
forma effect to the Original Offering and the New
Credit Facility, and the application of the
proceeds therefrom, the Company would have had
approximately $110 million of senior indebtedness
outstanding. The Company and its subsidiaries are
permitted to incur additional secured and
unsecured indebtedness under the indenture
governing the First Mortgage Notes (including
additional First Mortgage Notes and indebtedness
under the New Credit Facility).
Subsidiary Guarantors....... The First Mortgage Notes are guaranteed, jointly
and severally, by each of the Subsidiary
Guarantors. See "Description of the First
Mortgage Notes--Security."
Change of Control........... Upon a Change of Control, the Company will be
required to make an offer to purchase all of the
outstanding First Mortgage Notes at a redemption
price of 101% of the principal amount thereof,
plus accrued and unpaid interest, if any, to the
date of repurchase. In addition, at any time on
or prior to May 15, 2003, the Company may, at its
option, redeem the First Mortgage Notes, in whole
but not in part, upon the occurrence of a Change
of Control at a redemption price equal to 100% of
the principal amount thereof, together with the
Applicable Premium as of, and accrued and unpaid
interest, if any, to, the date of redemption.
Certain Covenants........... The Indenture contains certain restrictive
covenants that, among other things, will limit
the ability of the Company to incur additional
indebtedness; create liens; make certain
restricted payments; engage in certain
transactions with affiliates; engage in sale and
leaseback transactions; dispose of assets; issue
preferred stock of its subsidiaries; transfer
assets to its subsidiaries; enter into agreements
that restrict the ability of its subsidiaries to
make dividends and distributions; engage in
mergers, consolidations and transfer of
substantially all of the Company's assets; make
certain investments, loans and advances; and
create non-recourse subsidiaries.
8
<PAGE>
Asset Sale Proceeds......... Subject to certain exceptions, the net cash
proceeds of sales or other dispositions of
Collateral by the Company will become subject to
the lien of the Indenture and the Security
Documents. In the event the net cash proceeds of
asset sales not otherwise retained by the Company
or applied as permitted under the Indenture equal
or exceed $5 million, the Company may elect,
within six months of such date, to either apply
such net cash proceeds to the acquisition of
assets that, upon purchase, shall become subject
to the lien of the Security Documents if the net
cash proceeds represent Collateral Proceeds, to
make offers to purchase a portion (calculated as
set forth herein) of the First Mortgage Notes at
a purchase price equal to 100% of the principal
amount thereof, together with accrued and unpaid
interest to the date of repurchase or, in the
case of net cash proceeds that do not represent
Collateral Proceeds, to repay other senior
indebtedness.
Registration Rights......... Holders of Exchange Notes will not be entitled to
any registration rights with respect to the
Exchange Notes. Pursuant to the Exchange and
Registration Rights Agreement, the Company agreed
to file, at its cost, the registration statement
of which this Prospectus is a part with respect
to the Exchange Offer (the "Exchange Offer
Registration Statement"). See "Exchange and
Registration Rights."
RISK FACTORS
See "Risk Factors" for a discussion of certain factors that should be
considered by holders of Old First Mortgage Notes prior to tendering their Old
First Mortgage Notes in the Exchange Offer.
9
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
The summary consolidated financial data presented below for each of the years
in the three-year period ended September 30, 1997 have been derived from and
should be read in conjunction with the audited consolidated financial
statements of the Company and the notes thereto included elsewhere in this
Prospectus. The summary consolidated financial data presented below for each of
the years in the two-year period ended September 30, 1994 have been derived
from the audited consolidated financial statements of the Company and the notes
thereto not included elsewhere in this Prospectus. The summary consolidated
financial data presented below as of March 31, 1998 and for the six month
periods ended March 31, 1997 and 1998 have been derived from and should be read
in conjunction with the unaudited consolidated financial statements of the
Company included elsewhere in this Prospectus. The summary consolidated
financial data presented below for the twelve months ended March 31, 1998 have
been derived from the audited and unaudited consolidated financial statements
of the Company and notes thereto included elsewhere in this Prospectus. The
unaudited consolidated financial statements have been prepared on the same
basis as the audited consolidated financial statements and include all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of the Company's financial condition and results of
operations for those periods. Operating results for the six months ended March
31, 1997 and 1998 and for the twelve months ended March 31, 1998 are not
necessarily indicative of the results that may be expected for any future date
or period. The unaudited pro forma financial data presented below has been
prepared to give effect to the Original Offering and the use of proceeds
therefrom as though such transaction had occurred as of March 31, 1998 for
purposes of balance sheet data and as of October 1, 1996 for purposes of the
operating data for the year ended September 30, 1997 and the six month and
twelve month periods ended March 31, 1998. The unaudited pro forma financial
data does not purport to represent what the Company's financial position or
results of operations would have been had the Original Offering in fact
occurred on the assumed dates or to project the Company's financial position or
results of operations for any future date or period. The information in the
following table should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations," "Selected
Consolidated Financial Data," "Unaudited Pro Forma Financial Information," the
consolidated financial statements of the Company and notes thereto and other
financial information pertaining to the Company included elsewhere in this
Prospectus.
10
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
TWELVE
MONTHS
SIX MONTHS ENDED ENDED MARCH
MARCH 31, 31,
YEARS ENDED SEPTEMBER 30, (UNAUDITED) (UNAUDITED)
------------------------------------------------ ------------------ -----------
1993 1994 1995 1996 1997 1997 1998 1998
-------- -------- -------- -------- -------- -------- -------- -----------
(IN THOUSANDS, EXCEPT EMPLOYEES, TONS AND PER TON DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Net sales.............. $136,008 $160,823 $185,772 $204,426 $232,161 $112,518 $132,183 $251,826
Gross profit........... 7,975 16,509 23,614 15,973 22,231 7,965 16,567 30,833
Operating income....... 827 11,588 17,302 7,932 12,597 3,417 13,334 22,514
Interest expense....... (8,261) (7670) (7,821) (8,635) (8,962) (4,517) (4,133) (8,578)
Interest income........ 193 280 543 147 12 3 179 188
Income (loss) before
extraordinary items... (6,739) 4,361 10,337 315 3,784 (1,000) 9,319 14,103
Net income (loss)(1)... (6,154) (1,107) 10,337 315 3,784 (1,000) 9,319 14,103
Other Data:
EBITDA(2).............. $ 6,138 $ 17,306 $ 24,317 $ 16,209 $ 19,755 $ 6,941 $ 16,978 $ 29,792
Adjusted EBITDA(3)..... 9,300 18,302 25,317 17,977 23,078 8,188 17,095 31,985
Capital expenditures... 3,184 2,761 12,470 4,990 5,998 2,081 2,387 6,304
Depreciation and
amortization.......... 4,616 5,275 6,041 7,259 6,959 3,424 3,328 6,863
Finished product tons
shipped............... 403,274 446,572 503,297 580,069 663,675 328,679 362,706 697,702
Billet tons shipped.... 59,604 35,503 11,072 15,638 241 -- -- 241
-------- -------- -------- -------- -------- -------- -------- --------
Total tons shipped.... 462,878 482,075 514,369 595,707 663,916 328,679 362,706 697,943
Average shape selling
price per ton......... $ 300 $ 337 $ 360 $ 340 $ 345 $ 337 $ 359 $ 361
Average billet selling
price per ton......... 209 224 235 233 260 -- -- 260
Employees at end of
period................ 395 428 545 550 563 580 583 583
Pro Forma Financial
Data:
Pro forma net interest
expense(4)(5)(6)...... -- -- -- -- 10,990 -- 5,098 10,380
Ratio of Adjusted
EBITDA to pro forma
net interest
expense(3)(5)(6)...... -- -- -- -- -- -- -- 3.1x
Ratio of pro forma
total debt to Adjusted
EBITDA(3)(5)(6)....... -- -- -- -- -- -- -- 3.4x
</TABLE>
<TABLE>
<CAPTION>
AS OF MARCH 31,
1998
(UNAUDITED)
------------------
ACTUAL PRO FORMA
-------- ---------
<S> <C> <C>
Balance Sheet Data:
Working capital............................................ $ 78,820 $ 87,051
Total assets............................................... 206,557 212,612
Long-term debt (including current portion)................. 82,010 108,963
Preferred Stock............................................ 13,301 --
Common stockholders' equity................................ 79,526 71,929
</TABLE>
- -------
(1) In fiscal 1995, 1996, and 1997 income (loss) applicable to common shares
after dividends accrued and accretion on Preferred Stock was $9.6, ($2.3),
and $1.2 million, respectively. For the six month periods ended March 31,
1997 and 1998 the income (loss) applicable to common shares after dividends
accrued and accretion on Preferred Stock was ($2.3) and $8.0 million,
respectively. For the twelve months ended March 31, 1998, income applicable
to common shares after dividends accrued and accretion on Preferred Stock
was $11.5 million.
11
<PAGE>
(2) EBITDA is defined as net income before extraordinary items plus interest
expense, income taxes, depreciation and amortization. This is the same
definition for EBITDA that is contained in the Indenture. The Company
believes that EBITDA provides additional information for determining its
ability to meet debt service requirements. EBITDA does not represent and
should not be considered as an alternative to net income or cash flow from
operations as determined by generally accepted accounting principles, and
EBITDA does not necessarily indicate whether cash flow will be sufficient
for cash requirements.
(3) Adjusted EBITDA represents EBITDA as adjusted to exclude non-production
strike and corporate campaign expenses as follows:
<TABLE>
<CAPTION>
TWELVE
FOR THE SIX MONTHS
MONTHS ENDED ENDED MARCH
MARCH 31, 31,
FOR YEARS ENDED SEPTEMBER 30, (UNAUDITED) (UNAUDITED)
-------------------------------------- -------------- -----------
1993 1994 1995 1996 1997 1997 1998 1998
------ ------- ------- ------- ------- ------ ------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
EBITDA.................. $6,138 $17,306 $24,317 $16,209 $19,755 $6,941 $16,978 $29,792
Non-Production Strike
And Corporate Campaign
Expenses............... 3,162 996 1,000 1,768 3,323 1,247 117 2,193
------ ------- ------- ------- ------- ------ ------- -------
Adjusted EBITDA......... $9,300 $18,302 $25,317 $17,977 $23,078 $8,188 $17,095 $31,985
====== ======= ======= ======= ======= ====== ======= =======
</TABLE>
(4) Net interest expense is defined as interest expense less interest income.
(5) Gives effect to the Original Offering and use of proceeds therefrom at an
assumed interest rate of 9.5%. See "Unaudited Pro Forma Financial
Information."
(6) Pro forma net interest expense for the six months ended September 30, 1997
of approximately $5.0 million was used to calculate pro forma net interest
expense for the last twelve months ended March 31, 1998.
12
<PAGE>
RISK FACTORS
In addition to the other information in this Prospectus, the following
factors should be considered carefully in evaluating the Company and its
business before making a decision to tender Old First Mortgage Notes in the
Exchange Offer.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Old First Mortgage Notes who do not exchange their Old First
Mortgage Notes for Exchange Notes pursuant to the Exchange Offer will continue
to be subject to the restrictions on transfer of such Old First Mortgage Notes
as set forth in the legend thereon as a consequence of the issuance of the Old
First Mortgage Notes pursuant to an exemption from, or in a transaction not
subject to, the registration requirements of the Securities Act and applicable
state securities laws. In general, the Old First Mortgage Notes may not be
offered or sold, unless registered under the Securities Act, except pursuant
to an exemption from, or in a transaction not subject to, the Securities Act
and applicable state securities laws. The Company does not currently
anticipate that it will register Old First Mortgage Notes under the Securities
Act.
Based on interpretations by the staff of the SEC, as set forth in no-action
letters issued to third parties, the Company believes that Exchange Notes
issued pursuant to the Exchange Offer in exchange for Old First Mortgage Notes
may be offered for resale, resold or otherwise transferred by holders thereof
(other than any such holder which is an "affiliate" of the Company within the
meaning of Rule 405 under the Securities Act) without compliance with the
registration and prospectus delivery provisions of the Securities Act,
provided that such Exchange Notes are acquired in the ordinary course of such
holder's business and such holder has no arrangement with any person to
participate in the distribution of such Exchange Notes. However, the Company
does not intend to request the SEC to consider, and the SEC has not
considered, the Exchange Offer in the context of a no-action letter and there
can be no assurance that the staff of the SEC would make a similar
determination with respect to the Exchange Offer as in such other
circumstances. Each holder, other than a broker-dealer, must acknowledge that
it is not engaged in, and does not intend to engage in, a distribution of
Exchange Notes and has no arrangement or understanding to participate in a
distribution of Exchange Notes. If any holder is an affiliate of the Company,
is engaged in or intends to engage in or has any arrangement or understanding
with respect to the distribution of the Exchange Notes to be acquired pursuant
to the Exchange Offer, such holder (i) cannot rely on the applicable
interpretations of the staff of the SEC and (ii) must comply with registration
and prospectus delivery requirements of the Securities Act in connection with
any resale transaction. Each broker-dealer that receives Exchange Notes for
its own account pursuant to the Exchange Offer must acknowledge that it will
deliver a prospectus in connection with any resale of such Exchange Notes. The
Letter of Transmittal states that by so acknowledging and by delivering a
prospectus a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. This Prospectus, as it
may be amended or supplemented from time to time, may be used by a broker-
dealer in connection with resales of Exchange Notes received in exchange for
Old First Mortgage Notes where such Old First Mortgage Notes were acquired by
such broker-dealer as a result of market-making activities or other trading
activities (other than Old First Mortgage Notes acquired directly from the
Company). The Company has agreed that, for a period of the lesser of 180 days
following the consummation of the Exchange Offer or the date on which all such
broker-dealers have sold all Exchange Notes held by them, it will make this
Prospectus available to any broker-dealer for use in connection with any such
resale. See "Plan of Distribution."
In addition, to comply with the securities laws of certain jurisdictions,
the Exchange Notes may not be offered or sold unless they have been registered
or qualified for sale in such jurisdiction or an exemption from registration
or qualification is available and is complied with. The Company has agreed,
pursuant to the Exchange and Registration Rights Agreement and subject to
certain specified limitations therein, to register or qualify the Exchange
Notes for offer or sale under the securities or blue sky laws of such states
as any holder of the Notes reasonably requests in writing.
13
<PAGE>
COMPLIANCE WITH EXCHANGE OFFER PROCEDURES
To participate in the Exchange Offer and avoid the restrictions on transfer
of the Old First Mortgage Notes, holders of Old First Mortgage Notes must
transmit a properly completed Letter of Transmittal, including all other
documents required by such Letter of Transmittal, to the Exchange Agent at one
of the addresses set forth below under "The Exchange Offer--Exchange Agent" on
or prior to the Expiration Date. In addition, either (i) certificates for such
Old First Mortgage Notes must be received by the Exchange Agent along with the
Letter of Transmittal or (ii) a timely confirmation of a book-entry transfer
of such Old First Mortgage Notes, if such procedure is available, into the
Exchange Agent's account at The Depository Trust Company pursuant to the
procedure for book-entry transfer described herein, must be received by the
Exchange Agent prior to the Expiration Date, or (iii) the holder must comply
with the guaranteed delivery procedures described herein. See "The Exchange
Offer."
LEVERAGE AND CERTAIN RESTRICTIONS
As of March 31, 1998, after giving pro forma effect to the Original Offering
and the New Credit Facility, and the application of proceeds therefrom, the
Company would have had approximately $110.0 million of indebtedness
outstanding. After completion of the Original Offering, and the application of
proceeds therefrom, the Company will continue to be highly leveraged and will
devote a substantial portion of its operating income to debt service. The
indebtedness of the Company and the restrictive covenants and tests contained
in its debt instruments, including its New Credit Facility and the Indenture
relating to the First Mortgage Notes, could significantly limit the Company's
operating and financial flexibility. These covenants and tests could also
significantly impair the Company's ability to respond to competitive pressures
or adverse economic consequences, by limiting its ability to obtain additional
financing in the future for working capital, acquisitions or general corporate
or other purposes.
The availability of funds under the New Credit Facility will depend upon the
Company's continued compliance with financial and other covenants imposed by
the New Credit Facility. A Company default under the New Credit Facility could
result in a termination of the New Credit Facility and accelerate any
indebtedness outstanding thereunder. The New Credit Facility has a sliding
scale rate obligation and, therefore, is subject to changes in prevailing
interest rates.
The First Mortgage Notes will rank pari passu in right of payment with any
existing and future senior indebtedness of the Company, including obligations
of the Company arising in connection with the New Credit Facility, and will
rank senior in right of payment to all existing and future subordinated
indebtedness of the Company. Borrowings under the New Credit Facility (or any
successor facility) will be secured by a first priority lien on the inventory
and accounts receivable of Bayou Steel. See "Description of New Credit
Facility."
SECURITY FOR THE FIRST MORTGAGE NOTES
The First Mortgage Notes will be secured by a first priority lien, subject
to certain exceptions, on certain existing and future real property, plant and
equipment (including certain operating equipment classified as inventory), and
certain additions or improvements thereto and all proceeds or products thereof
(the "Collateral"). The principal asset comprising the Collateral is the
Louisiana Facility. See "Description of the First Mortgage Notes--Security."
The fair market value of the Collateral is subject to fluctuations based on
factors that include, among others, the condition of the steel industry, the
ability to sell the Collateral in an orderly sale, the condition of the
national and local economies, the availability of buyers, and similar factors.
There can be no assurance that the proceeds of any sale of the Collateral, in
whole or in part, following an event of default under the Indenture would be
sufficient to satisfy payments due on the First Mortgage Notes. As described
under "Description of the First Mortgage Notes--Certain Covenants--
Restrictions on Asset Sales," the net cash proceeds of sales of Collateral
above prescribed amounts and subject to certain exceptions are required to be
14
<PAGE>
deposited in an account to serve as Collateral prior to the making of an offer
to purchase the First Mortgage Notes in an Asset Sale Offer (as defined
herein) or the application of such net cash proceeds to a Permitted Related
Acquisition (as defined herein). Property acquired in connection with a
Permitted Related Acquisition will serve as Collateral unless such property
serves as collateral under the New Credit Facility. See "Description of the
First Mortgage Notes--Security," "--Possession, Use and Release of Collateral"
and "Description of New Credit Facility."
The Company has the ability to issue additional First Mortgage Notes
subsequent to the issuance of the First Mortgage Notes offered in the Original
Offering. While all of any such additional First Mortgage Notes will be
secured ratably by the Collateral, the proceeds from the sale of up to $30
million aggregate principal amount of any such additional First Mortgage Notes
may be invested by the Company in properties or assets that will not become
Collateral. In such event, the value of the Collateral as a percentage of the
aggregate principal amount of outstanding First Mortgage Notes would decrease.
In addition, in the event that the proceeds from the sale of any additional
First Mortgage Notes are invested in properties or assets that become
Collateral, there can be no assurance that there will be a proportionate
increase in the value of the Collateral as a percentage of the aggregate
principal amount of outstanding First Mortgage Notes. See "Description of the
First Mortgage Notes--Principal, Maturity and Interest" and "--Security."
Under the Indenture, amendments and modifications of, and waivers with
respect to, the Indenture and the First Mortgage Notes relating to
intercreditor agreements or similar arrangements to facilitate the financing,
construction, or operation of new facilities at the Louisiana Facility can be
made or given with the approval of not less than two-thirds of the aggregate
principal amount of the outstanding First Mortgage Notes. See "Description of
the First Mortgage Notes--Modification of the Indenture."
The right of the Trustee under the Indenture (as the secured party under the
various collateral documents) to foreclose upon and sell the Collateral upon
an acceleration after an Event of Default is likely to be significantly
impaired by applicable bankruptcy laws if a bankruptcy proceeding were to be
commenced by or against the Company. Under applicable federal bankruptcy laws,
secured creditors are prohibited from foreclosing upon collateral held by a
debtor in a bankruptcy case, or from disposing of collateral repossessed from
such a debtor, without bankruptcy court approval. Moreover, applicable federal
bankruptcy laws generally permit a debtor to continue to retain and to use
collateral, including cash collateral, even if the debtor is in default under
the applicable debt instruments, provided that the secured creditor is given
"adequate protection." The interpretation of the term "adequate protection"
may vary according to the circumstances, but it is intended in general to
protect the value of the secured creditor's interest in collateral. Because
the term "adequate protection" is subject to varying interpretation and
because of the broad discretionary powers of a bankruptcy court, it is
impossible to predict (i) if payments under the First Mortgage Notes would be
made following commencement of and during a bankruptcy case, (ii) whether or
when the Trustee could foreclose upon or sell the Collateral or (iii) whether
or to what extent holders of any First Mortgage Notes would be compensated for
any delay in payment or loss of value of Collateral securing the First
Mortgage Notes under the doctrine of "adequate protection." Furthermore, in
the event a bankruptcy court were to determine that the value of the
Collateral securing the First Mortgage Notes is not sufficient to repay all
amounts due on the First Mortgage Notes, the holders of the First Mortgage
Notes would become holders of "undersecured claims." Applicable federal
bankruptcy laws do not permit the payment and/or accrual of interest, costs
and attorney's fees for "undersecured claims" during a debtor's bankruptcy
case.
LIMITATIONS ON ABILITY TO PURCHASE THE FIRST MORTGAGE NOTES FOLLOWING A CHANGE
OF CONTROL
Upon the occurrence of a Change of Control, each holder of First Mortgage
Notes will have the right to require the Company to repurchase all or any part
(equal to $1,000 or any integral multiple
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thereof) of such holder's First Mortgage Notes at a repurchase price equal to
101% of the principal amount thereof, together with accrued and unpaid
interest, if any, to the date of repurchase. The Company expects that
prepayment of the First Mortgage Notes following a Change of Control would
constitute a default under the New Credit Facility. In the event that a Change
of Control occurs, the Company would likely be required to refinance the
indebtedness outstanding under the New Credit Facility and the First Mortgage
Notes. There can be no assurance that the Company would be able to refinance
such indebtedness or, if such refinancing were to occur, that such refinancing
would be on terms favorable to the Company. See "Description of the First
Mortgage Notes--Change of Control."
CYCLICAL INDUSTRY AND ECONOMIC CONDITIONS
Demand for most of the Company's products is cyclical in nature and
sensitive to general economic conditions. The steel industry is affected by
economic conditions generally, and future economic downturns may adversely
affect the Company. The merchant bar and light structural shape product market
is influenced by trends primarily in the fabricated metal products, machinery,
construction and transportation equipment industries.
COMPETITION
The Company competes with a number of domestic minimills. The domestic
minimill steel industry is characterized by vigorous competition with respect
to price, quality and service. In addition, the domestic minimill steel
industry has from time to time experienced excess production capacity, which
reinforces competitive product pricing and results in continued pressures on
industry profit margins. The high fixed costs of operating a steel minimill
encourage minimill operators to maintain high levels of output, regardless of
demand levels, which increases the downward pressures on selling prices.
Technological advancements also affect competition in the domestic minimill
steel industry by increasing the efficiency and productivity of their plants
and labor force. Several domestic minimills which are competitors of the
Company have financial resources substantially greater than those available to
the Company.
In recent years, foreign steel producers have not competed significantly
with the Company in the domestic market for structural and merchant shape
sales due to higher freight costs in the relatively low priced structural and
merchant shape market. Foreign competition could increase, however, as a
result of changes in currency exchange rates and increased steel subsidies by
foreign governments, which could adversely affect the Company's operating
results. See "Business--Competition."
FLUCTUATIONS IN RAW MATERIAL AND ENERGY COSTS
The market for steel scrap, the principal raw material used in the Company's
operations, is highly competitive and its price volatility is influenced by
periodic shortages, freight costs, speculation by scrap brokers and other
market conditions largely beyond the Company's control. Generally, increases
in finished steel prices lag behind increases in steel scrap prices, and
competition has sometimes restricted the ability of minimill producers to
raise prices to recover higher raw material costs. Although the Company
purchases steel scrap from a number of dealers in different markets and is not
dependent on any single supplier, the Company's profitability would be
adversely affected to the extent it is unable to pass on higher raw material
costs to its customers. See "Business--Raw Materials."
The Company's manufacturing process also consumes substantial volumes of
electricity and natural gas. A significant increase in the Company's
electricity costs or in the price of natural gas would adversely affect the
Company's profitability to the extent it would not be able to pass such higher
energy costs on to its customers. See "Business--Energy."
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UNIONIZED LABOR FORCE
The United Steelworkers of America (the "Union" or "USWA") represents
approximately 70% of the Company's employees as of March 31, 1998.
Approximately 320 employees at the Louisiana Facility, and approximately 95
employees at the Tennessee Facility, are covered under collective bargaining
agreements with the USWA that expire in 2002 and 2004, respectively. Of these
covered employees, approximately 90 employees at the Louisiana Facility, and
approximately 50 employees at the Tennessee Facility, are dues-paying members
of the USWA. There can be no assurance that any future collective bargaining
agreements with any labor unions will contain terms comparable to the terms
contained in the existing collective bargaining agreements. See "Business--
Employees."
COST OF COMPLIANCE WITH ENVIRONMENTAL REGULATIONS
Like others in the industry, the Company's minimill is required to control
the emission of dust from its electric arc furnaces that contains lead,
cadmium, and chromium, which are considered hazardous. The Company is subject
to various Federal, state and local laws and regulations, including, among
others, the Clean Air Act, the 1990 amendments to the Clean Air Act (the "1990
Amendments"), the Resource Conservation and Recovery Act, the Clean Water Act
and the Louisiana Environmental Quality Act, and the regulations promulgated
in connection therewith, concerning the discharge of contaminants which may be
emitted into the air and discharged into the waterways, and the disposal of
solid and/or hazardous waste such as electric arc furnace dust (collectively,
"Environmental Laws").
In the event of a release or discharge of a hazardous substance to certain
environmental media, the Company could be responsible for the costs of
remediating the contamination caused by such a release or discharge. During
fiscal 1997, the United States Public Interest Research Group ("USPIRG") filed
a lawsuit in Louisiana against the Company for alleged violations of air
quality regulations. USPIRG is asking the court to award it appropriate legal
fees and to assess appropriate penalties against the Company. The Company
believes it has meritorious defenses to these charges. See "Business--
Environmental Matters."
The Company plans to close two storm-water retention ponds at the Louisiana
Facility's minimill. The Company has conducted limited analysis of the
effluents of these ponds, and although this analysis has indicated that there
is a limited potential for contamination, the Company does not believe that
future remediation costs, if any, will be material. The Louisiana Department
of Environmental Quality ("LDEQ") has approved a sampling plan to analyze the
contents of the pond sediments which could indicate a greater level of
contaminants than suggested by the Company's limited testing. In such case,
the costs of clean up could be higher than the Company now believes. Until
such sampling is completed, however, it is impossible to estimate such costs.
See "Business--Environmental Matters."
The Resource Conservation and Recovery Act regulates the management of
emission dust from electric arc furnaces. The Company currently collects the
dust resulting from its melting operation through an emissions control system
and disposes of it through an approved waste recycling firm. In fiscal 1990, a
small quantity of dust containing very low concentrations of radioactive
material inadvertently entered the scrap stream on one occasion. All of this
dust was captured by the emissions control system and is being held pending a
decision as to its appropriate disposal. The Company has estimated that the
ultimate disposal costs of this dust will be approximately $500,000.
TVSC, the prior owners of the Tennessee Facility, had entered into a Consent
Agreement and Order (the "TVSC Consent Order") with the Tennessee Department
of Environment and Conservation under its voluntary clean-up program. The
Company, in acquiring the assets of TVSC, has entered into a Consent Agreement
and Order (the "Bayou Steel Consent Order") with the Tennessee
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Department of Environment and Conservation. The Bayou Steel Consent Order is
supplemental to the previous TVSC Consent Order and does not affect the
continuing validity of the TVSC Consent Order. The ultimate remedy and clean-
up goals will be dictated by the results of human health and ecological risk
assessment which are components of a required, structured investigative,
remedial, and assessment process. The definitive asset 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
activities pursuant to the TVSC Consent Order (with an additional $1.0 million
to be held for one year for such costs and other costs resulting from a breach
of TVSC's representations and warranties in the agreement). As of March 31,
1998, investigative, remedial, and risk assessment activities have resulted in
expenses of approximately $1.3 million. At this time, the Company does not
expect the costs of resolution of the TVSC Consent Order to exceed funds
provided by the escrow agreement. In July 1997, TVSC's former bank lenders and
certain other parties filed an adversary proceeding against the Company in the
United States Bankruptcy Court. The banks are contesting certain of the
Company's reimbursement claims, aggregating approximately $1.1 million, in
connection with remediation work performed by the Company, alleging that much
of the remediation work was not performed prior to the first anniversary of
the closing date of the acquisition and that the work performed exceeded the
scope of the remediation work required under the TVSC Consent Order. If the
banks are successful in their claims, the Company may incur costs for
remediation work that will not be reimbursed from the escrow fund. Except for
the foregoing consent orders, the Company believes that it is in material
compliance with all Environmental Laws.
Environmental Laws have been enacted, and may in the future be enacted, to
create liability for past actions that were lawful at the time taken, but that
have been found to affect the environment and to create rights of action for
environmental conditions and activities. Under some federal legislation
(sometimes referred to as "Superfund" legislation) a company that has sent
waste to a third party disposal site could be held liable for the entire cost
of remediating such site regardless of fault or the lawfulness of the original
disposal activity and also for related damages to natural resources. As of
March 31, 1998, the Company has not received any notice letters under
Superfund legislation.
The Company's future expenditures for installation of environmental control
facilities are difficult to predict. Environmental legislation, regulations
and related administrative policies are continuously modified. Environmental
issues are also subject to differing interpretations by the regulated
community, the regulating authorities and the courts. Consequently, it is
difficult to forecast expenditures needed to comply with future regulations.
Furthermore, there can be no assurance that material environmental liabilities
will not be incurred by the Company in the future or that future compliance
with Environmental Laws (whether those currently in effect or enacted in the
future) will not require additional expenditures by the Company or require
changes to the Company's current operations, any of which could have a
material adverse effect on the Company's competitive position, results of
operations and financial condition. See "Business--Environmental Matters" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
FRAUDULENT TRANSFER CONSIDERATIONS
Under applicable provisions of the United States Bankruptcy Code or
comparable provisions of state fraudulent transfer or conveyance laws, if any
Subsidiary Guarantor, at the time it incurred the Subsidiary Guarantee, (a)
incurred such indebtedness with the intent to hinder, delay or defraud
creditors, or (b)(i) received less than reasonably equivalent value or fair
consideration and (ii)(A) was insolvent at the time of such incurrence, (B)
was rendered insolvent by reason of such incurrence (and the application of
the proceeds thereof), (C) was engaged or was about to engage in a business or
transaction for which the assets remaining with the Company constituted
unreasonably small capital to carry on its business, or (D) intended to incur,
or believed that it would incur, debts beyond its
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ability to pay such debts as they mature, then, in each such case, a court of
competent jurisdiction could void, in whole or in part, the Subsidiary
Guarantee issued by such Subsidiary Guarantor or, in the alternative,
subordinate such Subsidiary Guarantee to existing and future indebtedness of
the Subsidiary Guarantor. Among other things, a legal challenge of the
Subsidiary Guarantee issued by any Subsidiary Guarantor on fraudulent
conveyance grounds may focus on the benefits, if any, realized by such
Subsidiary Guarantor as a result of the issuance by the Company of the First
Mortgage Notes. To the extent a Subsidiary Guarantee was voided as a
fraudulent conveyance or held unenforceable for any other reason, the holders
of the First Mortgage Notes would cease to have any claim against such
Subsidiary Guarantor and would be creditors solely of the Company and any
Subsidiary Guarantor whose Subsidiary Guarantee was not voided or held
unenforceable. In such event, the claims of the holders of the First Mortgage
Notes against the issuer of an invalid Subsidiary Guarantee would be subject
to the prior payment of all liabilities of such Subsidiary Guarantor. There
can be no assurance that, after providing for all prior claims, there would be
sufficient assets to satisfy the claims of the holders of the First Mortgage
Notes relating to any voided portion of a Subsidiary Guarantee.
The measure of insolvency for purposes of the foregoing would likely vary
depending upon the law applied in such case. Generally, however, a Subsidiary
Guarantor would be considered insolvent if the sum of its debts, including
contingent liabilities, was greater than all of its assets at a fair
valuation, or if the present fair saleable value of its assets was less than
the amount that would be required to pay the probable liabilities on its
existing debts, including contingent liabilities, as such debts become
absolute and matured. The Company believes that, for purposes of the United
States Bankruptcy Code and state fraudulent transfer or conveyance laws, each
Subsidiary Guarantee will be issued without the intent to hinder, delay or
defraud creditors and for proper purposes and in good faith, and that each
Subsidiary Guarantor will receive reasonably equivalent value or fair
consideration therefor, and that after the issuance of the Subsidiary
Guarantees and the application of the net proceeds therefrom, each Subsidiary
Guarantor will be solvent, have sufficient capital for carrying on their
businesses and will be able to pay their debts as they mature. However, there
can be no assurance that a court passing on such issues would agree with the
determination of the Company.
ABSENCE OF PUBLIC MARKET FOR THE EXCHANGE NOTES
The Exchange Notes will be new securities for which there currently is no
market. Although the Company has been advised by the Initial Purchasers that
they currently intend to make a market in the Exchange Notes, they are not
obligated to do so and any such market making may be discontinued at any time
without notice. In addition, such market making activity may be limited during
the pendency of the Exchange Offer or the effectiveness of a shelf
registration statement in lieu thereof. Accordingly, there can be no assurance
as to the development or liquidity of any market for the Exchange Notes. The
Old First Mortgage Notes currently are eligible for trading by qualified
buyers in the PORTAL market.
No assurance can be given as to the liquidity of any trading market that may
develop for the Exchange Notes (or any Old First Mortgage Notes not
exchanged), the ability of holders of the Exchange Notes to sell their
Exchange Notes, or the price at which holders would be able to sell the
Exchange Notes. Future trading prices of the Exchange Notes will depend on
many factors, including, among other things, prevailing interest rates, the
Company's operating results and the market for similar securities.
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THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
The Old First Mortgage Notes were originally issued and sold on May 22, 1998
in a transaction not registered under the Securities Act in reliance upon the
exemptions provided by Section 4(2), Rule 144A and Regulation S of the
Securities Act. In connection with the sale of the Old First Mortgage Notes,
the Company agreed to use its best efforts to file with the Commission a
registration statement relating to an exchange offer (the "Exchange Offer
Registration Statement") pursuant to which another series of notes of the
Company, the Exchange Notes, covered by such registration statement and
containing substantially the same terms as the Old First Mortgage Notes,
except as set forth in this Prospectus, would be offered in exchange for Old
First Mortgage Notes tendered at the option of the holders thereof. In the
event that either (i) the Company fails to file any of the registration
statements required by the Exchange and Registration Rights Agreement on or
prior to 60 days after the Issue Date, (ii) any of such registration
statements is not declared effective within 150 days after the Issue Date,
(iii) the Exchange Offer is not consummated on or prior to 180 days after the
Issue Date, or (iv) the Shelf Registration Statement is filed and declared
effective within 150 days after the Issue Date but shall thereafter cease to
be effective (at any time that the Company is obligated to maintain the
effectiveness thereof) without being succeeded within 45 days by an additional
registration statement filed and declared effective (each such event referred
to in clauses (i) through (iv), a "Registration Default"), the Company will be
obligated to pay liquidated damages to each holder of Transfer Restricted
Securities (as defined herein), during the period of one or more such
Registration Defaults, in an amount equal to $0.192 per week per $1,000
principal amount of the First Mortgage Notes constituting Transfer Restricted
Securities held by such holder until the applicable registration statement is
filed, the Exchange Offer Registration Statement is declared effective and the
Exchange Offer is consummated or the Shelf Registration Statement is declared
effective or again becomes effective, as the case may be. All accrued
liquidated damages shall be paid to holders in the same manner as interest
payments on the First Mortgage Notes on semi-annual payment dates which
correspond to interest payment dates for the First Mortgage Notes. Following
the cure of all Registration Defaults, the accrual of liquidated damages will
cease.
Each broker-dealer that receives Exchange Notes for its own account in
exchange for Old First Mortgage Notes, where such First Mortgage Notes were
acquired by such broker-dealer as a result of market-making activities or
other trading activities, must acknowledge that it will deliver a Prospectus
in connection with any resale of such Exchange Notes. See "Plan of
Distribution."
The sole purpose of the Exchange Offer is to fulfill the obligations of the
Company with respect to the Exchange and Registration Rights Agreement.
TERMS OF THE EXCHANGE
The Company hereby offers to exchange, upon the terms and subject to the
conditions set forth herein and in the Letter of Transmittal, $1,000 in
principal amount of Exchange Notes for each $1,000 in principal amount of Old
First Mortgage Notes. The terms of the Exchange Notes are identical in all
respects to the terms of the Old First Mortgage Notes for which they may be
exchanged pursuant to this Exchange Offer, except that the Exchange Notes will
generally be freely transferable by holders thereof, and the holders of the
Exchange Notes (as well as remaining holders of any Old First Mortgage Notes)
will not be entitled to registration rights under the Exchange and
Registration Rights Agreement. See "Exchange and Registration Rights
Agreement." The Exchange Notes will evidence the same debt as the Old First
Mortgage Notes and will be entitled to the benefits of the Indenture pursuant
to which such Old First Mortgage Notes were issued. See "Description of the
First Mortgage Notes."
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The Exchange Offer is not conditioned upon any minimum aggregate principal
amount of Old First Mortgage Notes being tendered for exchange.
Based on interpretations by the staff of the SEC, as set forth in no-action
letters issued to third parties, the Company believes that Exchange Notes
issued pursuant to the Exchange Offer in exchange for Old First Mortgage Notes
may be offered for resale, resold or otherwise transferred by holders thereof
(other than any such holder which is an "affiliate" of the Company within the
meaning of Rule 405 under the Securities Act) without compliance with the
registration and prospectus delivery provisions of the Securities Act,
provided that such Exchange Notes are acquired in the ordinary course of such
holder's business and such holder has no arrangement with any person to
participate in the distribution of such Exchange Notes. However, the Company
does not intend to request the SEC to consider, and the SEC has not
considered, the Exchange Offer in the context of a no-action letter and there
can be no assurance that the staff of the SEC would make a similar
determination with respect to the Exchange Offer as in such other
circumstances. Each holder, other than a broker-dealer, must acknowledge that
it is not engaged in, and does not intend to engage in, a distribution of
Exchange Notes and has no arrangement or understanding to participate in a
distribution of Exchange Notes. If any holder is an affiliate of the Company,
is engaged in or intends to engage in or has any arrangement or understanding
with respect to the distribution of the Exchange Notes to be acquired pursuant
to the Exchange Offer, such holder (i) cannot rely on the applicable
interpretations of the staff of the SEC and (ii) must comply with registration
and prospectus delivery requirements of the Securities Act in connection with
any resale transaction. Each broker-dealer that receives Exchange Notes for
its own account pursuant to the Exchange Offer must acknowledge that it will
deliver a prospectus in connection with any resale of such Exchange Notes. The
Letter of Transmittal states that by so acknowledging and by delivering a
prospectus a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. This Prospectus, as it
may be amended or supplemented from time to time, may be used by a broker-
dealer in connection with resales of Exchange Notes received in exchange for
Old First Mortgage Notes where such Old First Mortgage Notes were acquired by
such broker-dealer as a result of market-making activities or other trading
activities (other than Old First Mortgage Notes acquired directly from the
Company). The Company has agreed that, for a period of the lesser of 180 days
following the consummation of the Exchange Offer or the date on which all such
broker-dealers have sold all Exchange Notes held by them, it will make this
Prospectus available to any broker-dealer for use in connection with any such
resale. See "Plan of Distribution."
Tendering holders of Old First Mortgage Notes will not be required to pay
brokerage commissions or fees or, subject to the instructions in the Letter of
Transmittal, transfer taxes with respect to the exchange of the Old First
Mortgage Notes pursuant to the Exchange Offer.
The Exchange Notes will bear interest from and including their respective
dates of issuance. Holders whose Old First Mortgage Notes are accepted for
exchange will receive accrued interest thereon to, but not including, the date
of issuance of the Exchange Notes, such interest to be payable with the first
interest payment on the Exchange Notes, but will not receive any payment in
respect of interest on the Old First Mortgage Notes accrued after the issuance
of the Exchange Notes.
EXPIRATION DATE; EXTENSIONS; TERMINATION; AMENDMENTS
The Exchange Offer expires on the Expiration Date. The term "Expiration
Date" means 5:00 p.m., New York City time, on , 1998, unless the
Company in its sole discretion extends the period during which the Exchange
Offer is open, in which event the term "Expiration Date" means the latest time
and date on which the Exchange Offer, as so extended by the Company, expires.
The Company reserves the right to extend the Exchange Offer at any time and
from time to time prior to the Expiration Date by giving written notice to
First National Bank of Commerce (the "Exchange Agent") and by timely public
announcement communicated, unless otherwise required by applicable law or
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regulation, by making a release to the Dow Jones News Service. During any
extension of the Exchange Offer, all Old First Mortgage Notes previously
tendered pursuant to the Exchange Offer will remain subject to the Exchange
Offer.
The Company expressly reserves the right to (i) terminate the Exchange Offer
and not accept for exchange any Old First Mortgage Notes for any reason,
including if any of the events set forth below under "- Conditions to the
Exchange Offer" shall have occurred and shall not have been waived by the
Company and (ii) amend the terms of the Exchange Offer in any manner, whether
before or after any tender of the Old First Mortgage Notes. If any such
termination or amendment occurs, the Company will notify the Exchange Agent in
writing and will either issue a press release or give written notice to the
holders of the Old First Mortgage Notes as promptly as practicable. Unless the
Company terminates the Exchange Offer prior to 5:00 p.m., New York City time,
on the Expiration Date, the Company will exchange the Exchange Notes for the
Old First Mortgage Notes promptly following the Expiration Date.
If the Company waives any material condition to the Exchange Offer, or
amends the Exchange Offer in any other material respect, and if at the time
that notice of such waiver or amendment is first published, sent or given to
holders of Old First Mortgage Notes in the manner specified above, the
Exchange Offer is scheduled to expire at any time earlier than the expiration
of a period ending on the fifth business day from, and including, the date
that such notice is first so published, sent or given, then the Exchange Offer
will be extended until the expiration of such period of five business days.
This Prospectus and the related Letter of Transmittal and other relevant
materials will be mailed by the Company to record holders of Old First
Mortgage Notes and will be furnished to brokers, banks and similar persons
whose names, or the names of whose nominees, appear on the lists of holders
for subsequent transmittal to beneficial owners of Old First Mortgage Notes.
EXCHANGE OFFER PROCEDURES
The tender of the Old First Mortgage Notes to the Company by a holder
thereof pursuant to one of the procedures set forth below will constitute an
agreement between such holder and the Company in accordance with the terms and
subject to the conditions set forth herein and in the Letter of Transmittal.
General Procedures. A holder of an Old First Mortgage Note may tender the
same by (i) properly completing and signing the Letter of Transmittal or a
facsimile thereof (all references in this Prospectus to the Letter of
Transmittal shall be deemed to include a facsimile thereof) and delivering the
same, together with the certificate or certificates representing the Old First
Mortgage Notes being tendered and any required signature guarantees (or a
timely confirmation of a book-entry transfer (a "Book-Entry Confirmation")
pursuant to the procedure described below), to the Exchange Agent at its
address set forth below under "--Exchange Agent" on or prior to the Expiration
Date or (ii) complying with the guaranteed delivery procedures described
below.
If tendered Old First Mortgage Notes are registered in the name of the
signer of the Letter of Transmittal and the Exchange Notes to be issued in
exchange therefor are to be issued (and any untendered Old First Mortgage
Notes are to be reissued) in the name of the registered holder, the signature
of such signer need not be guaranteed. In any other case, the tendered Old
First Mortgage Notes must be endorsed or accompanied by written instruments of
transfer in form satisfactory to the Company and duly executed by the
registered holder and the signature on the endorsement or instrument of
transfer must be guaranteed by a firm (an "Eligible Institution") that is a
member of a recognized signature guarantee medallion program (an "Eligible
Program") within the meaning of Rule 17Ad-15 under the Exchange Act. If the
Exchange Notes and/or Old First Mortgage Notes not
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exchanged are to be delivered to an address other than that of the registered
holder appearing on the note register for the Old First Mortgage Notes, the
signature on the Letter of Transmittal must be guaranteed by an Eligible
Institution.
Any beneficial owner whose Old First Mortgage Notes are registered in the
name of a broker, dealer, commercial bank, trust company or other nominee and
who wishes to tender Old First Mortgage Notes should contact such holder
promptly and instruct such holder to tender Old First Mortgage Notes on such
beneficial owner's behalf. If such beneficial owner wishes to tender such Old
First Mortgage Notes himself, such beneficial owner must, prior to completing
and executing the Letter of Transmittal and delivering such Old First Mortgage
Notes, either make appropriate arrangements to register ownership of the Old
First Mortgage Notes in such beneficial owner's name or follow the procedures
described in the immediately preceding paragraph. The transfer of record
ownership may take considerable time.
Book-Entry Transfer. The Exchange Agent will establish the Exchange Offer
with The Depository Trust Company (the "Book-Entry Transfer Facility") as
eligible for the Book-Entry Transfer Facility's Automated Tender Offer Program
("ATOP") within two business days after receipt of this Prospectus, and any
financial institution that is a participant in the Book-Entry Transfer
Facility's systems may make book-entry delivery of Old First Mortgage Notes in
accordance with the Book-Entry Transfer Facility's procedures for such
transfer under ATOP. If delivery of the Old First Mortgage Notes is effected
through book-entry transfer, Book Entry Confirmation and an Agent's Message is
necessary to tender validly such Old First Mortgage Notes. The term "Agent's
Message" means a message transmitted by the Book-Entry Transfer Facility and
forming a part of the Book-Entry Confirmation that states that the Book-Entry
Transfer Facility has received an express acknowledgment from the participant
in the Book-Entry Transfer Facility described in such Agent's Message, stating
the aggregate principal amount of the Old First Mortgage Notes that have been
tendered by such participant pursuant to the Exchange Offer and that such
participant has received this Prospectus and the Letter of Transmittal and
agrees to be bound by their terms and that the Company may enforce such
agreement against such participant.
THE METHOD OF DELIVERY OF OLD FIRST MORTGAGE NOTES AND ALL OTHER DOCUMENTS
IS AT THE ELECTION AND RISK OF THE HOLDER. IF SENT BY MAIL, IT IS RECOMMENDED
THAT REGISTERED MAIL, RETURN RECEIPT REQUESTED, BE USED, PROPER INSURANCE BE
OBTAINED, AND THE MAILING BE MADE SUFFICIENTLY IN ADVANCE OF THE EXPIRATION
DATE TO PERMIT DELIVERY TO THE EXCHANGE AGENT ON OR BEFORE THE EXPIRATION
DATE.
Unless an exemption applies under the applicable law and regulations
concerning "backup withholding" of federal income tax, the Exchange Agent will
be required to withhold, and will withhold, 31% of the gross proceeds
otherwise payable to a holder pursuant to the Exchange Offer if the holder
does not provide its taxpayer identification number (social security number or
employer identification number) and certify that such number is correct. Each
tendering holder should complete and sign the main signature form and the
Substitute Form W-9 included as part of the Letter of Transmittal, so as to
provide the information and certification necessary to avoid backup
withholding, unless an applicable exemption exists and is proved in a manner
satisfactory to the Company and the Exchange Agent.
Guaranteed Delivery Procedures. If a holder desires to accept the Exchange
Offer and time will not permit a Letter of Transmittal or Old First Mortgage
Notes to reach the Exchange Agent before the Expiration Date, a tender may be
effected if the Exchange Agent has received at the address specified below
under "--Exchange Agent" on or prior to the Expiration Date a letter or
facsimile transmission from an Eligible Institution setting forth the name and
address of the tendering holder, the names in which the Old First Mortgage
Notes are registered and, if possible, the certificate
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numbers of the Old First Mortgage Notes to be tendered, and stating that the
tender is being made thereby and guaranteeing that within three New York Stock
Exchange trading days after the date of execution of such letter or facsimile
transmission by the Eligible Institution, the Old First Mortgage Notes, in
proper form for transfer, will be delivered by such Eligible Institution
together with a properly completed and duly executed Letter of Transmittal
(and any other required documents). Unless Old First Mortgage Notes being
tendered by the above-described method (or a timely Book-Entry Confirmation)
are deposited with the Exchange Agent within the time period set forth above
(accompanied or preceded by a properly completed Letter of Transmittal and any
other required documents), the Company may, at its option, reject the tender.
Copies of a Notice of Guaranteed Delivery which may be used by Eligible
Institutions for the purposes described in this paragraph are being delivered
with this Prospectus and the related Letter of Transmittal.
A tender will be deemed to have been received as of the date when the
tendering holder's properly completed and duly signed Letter of Transmittal
accompanied by the Old First Mortgage Notes (or a timely Book-Entry
Confirmation) is received by the Exchange Agent. Issuances of Exchange Notes
in exchange for Old First Mortgage Notes tendered pursuant to a Notice of
Guaranteed Delivery or letter or facsimile transmission to similar effect (as
provided above) by an Eligible Institution will be made only against deposit
of the Letter of Transmittal (and any other required documents) and the
tendered Old First Mortgage Notes (or a timely Book-Entry Confirmation).
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance for exchange of any tender of Old First Mortgage Notes
will be determined by the Company, whose determination shall be final and
binding on all parties. The Company reserves the absolute right to reject any
or all tenders not in proper form or the acceptance of which, or exchange for
which, may, in the opinion of counsel to the Company, be unlawful. The Company
also reserves the absolute right, subject to applicable law, to waive any of
the conditions of the Exchange Offer or any defects or irregularities in
tenders of any particular holder whether or not similar defects or
irregularities are waived in the case of other holders. The Company's
interpretation of the terms and conditions of the Exchange Offer (including
the Letter of Transmittal and the instructions thereto) will be final and
binding. No tender of Old First Mortgage Notes will be deemed to have been
validly made until all defects and irregularities with respect to such tender
have been cured or waived. None of the Company, the Exchange Agent or any
other person will be under any duty to give notification of any defects or
irregularities in tenders or shall incur any liability for failure to give any
such notification.
Each broker-dealer that receives Exchange Notes for its own account in
exchange for Old First Mortgage Notes, where such First Mortgage Notes were
acquired by such broker-dealer as a result of market-making activities or
other trading activities, must acknowledge that it will deliver a Prospectus
in connection with any resale of such Exchange Notes. See "Plan of
Distribution."
TERMS AND CONDITIONS OF THE LETTER OF TRANSMITTAL
The Letter of Transmittal contains, among other things, the following terms
and conditions, which are part of the Exchange Offer.
The party tendering Old First Mortgage Notes for exchange (the "Transferor")
exchanges, assigns and transfers the Old First Mortgage Notes to the Company
and irrevocably constitutes and appoints the Exchange Agent as the
Transferor's agent and attorney-in-fact to cause the Old First Mortgage Notes
to be assigned, transferred and exchanged. The Transferor represents and
warrants that it has full power and authority to tender, exchange, sell,
assign and transfer the Old First Mortgage Notes, and that, when the same are
accepted for exchange, the Company will acquire good, marketable and
unencumbered title to the tendered Old First Mortgage Notes, free and clear of
all liens, restrictions, charges and encumbrances and not subject to any
adverse claim. The
24
<PAGE>
Transferor also warrants that it will, upon request, execute and deliver any
additional documents deemed by the Company or the Exchange Agent to be
necessary or desirable to complete the exchange, assignment and transfer of
tendered Old First Mortgage Notes. All authority conferred by the Transferor
will survive the death or incapacity of the Transferor and every obligation of
the Transferor shall be binding upon the heirs, legal representatives,
successors, assigns, executors and administrators of such Transferor.
By tendering Old First Mortgage Notes, the Transferor certifies that it is
not an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act, that it is not a broker-dealer that owns Old First Mortgage
Notes acquired directly from the Company or an affiliate of the Company, that
it is acquiring the Exchange Notes offered hereby in the ordinary course of
such Transferor's business and that such Transferor has no arrangement with
any person to participate in the distribution of such Exchange Notes.
WITHDRAWAL RIGHTS
Old First Mortgage Notes tendered pursuant to the Exchange Offer may be
withdrawn at any time prior to the Expiration Date.
For a withdrawal to be effective, a written or facsimile transmission of
such notice of withdrawal must be timely received by the Exchange Agent at its
address set forth below under "--Exchange Agent" on or prior to the Expiration
Date. Any such notice of withdrawal must specify the person named in the
Letter of Transmittal as having tendered Old First Mortgage Notes to be
withdrawn, the certificate numbers of Old First Mortgage Notes to be
withdrawn, the aggregate principal amount of Old First Mortgage Notes to be
withdrawn (which must be an authorized denomination), that such holder is
withdrawing his election to have such Old First Mortgage Notes exchanged, and
the name of the registered holder of such Old First Mortgage Notes, if
different from that of the person who tendered such Old First Mortgage Notes.
Additionally, the signature on the notice of withdrawal must be guaranteed by
an Eligible Institution (except in the case of Old First Mortgage Notes
tendered for the account of an Eligible Institution). The Exchange Agent will
return the properly withdrawn Old First Mortgage Notes promptly following
receipt of notice of withdrawal. All questions as to the validity of notices
of withdrawals, including time of receipt, will be determined by the Company,
in its sole discretion, and such determination will be final and binding on
all parties.
If Old First Mortgage Notes have been tendered pursuant to the procedures
for book entry transfer, the notice of withdrawal must specify the name and
number of the account at DTC to be credited with the withdrawal of Old First
Mortgage Notes, in which case a notice of withdrawal will be effective if
delivered to the Exchange Agent by written or facsimile transmission.
Withdrawals of tenders of Old First Mortgage Notes may not be rescinded. Old
First Mortgage Notes properly withdrawn will not be deemed validly tendered
for purposes of the Exchange Offer, but may be retendered at any subsequent
time on or prior to the Expiration Date by following any of the procedures
described herein.
ACCEPTANCE OF OLD FIRST MORTGAGE NOTES FOR EXCHANGE; DELIVERY OF EXCHANGE
NOTES
Upon the terms and subject to the conditions of the Exchange Offer, the
acceptance for exchange of Old First Mortgage Notes validly tendered and not
withdrawn and the issuance of the Exchange Notes will be made promptly
following the Expiration Date. For the purposes of the Exchange Offer, the
Company shall be deemed to have accepted for exchange validly tendered Old
First Mortgage Notes when, as and if the Company has given notice thereof to
the Exchange Agent.
The Exchange Agent will act as agent for the tendering holders of Old First
Mortgage Notes for the purposes of receiving Exchange Notes from the Company
and causing the Old First Mortgage
25
<PAGE>
Notes to be assigned, transferred and exchanged. Upon the terms and subject to
the conditions of the Exchange Offer, delivery of Exchange Notes to be issued
in exchange for accepted Old First Mortgage Notes will be made by the Exchange
Agent promptly after acceptance of the tendered Old First Mortgage Notes. Old
First Mortgage Notes not accepted for exchange by the Company will be returned
without expense to the tendering holders (or in the case of Old First Mortgage
Notes tendered by book-entry transfer into the Exchange Agent's account at the
Book-Entry Transfer Facility pursuant to the procedures of the Book-Entry
Transfer Facility) promptly following the Expiration Date or, if the Company
terminates the Exchange Offer prior to the Expiration Date, promptly after the
Exchange Offer is so terminated.
CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provision of the Exchange Offer, or any extension
of the Exchange Offer, the Company will not be required to issue Exchange
Notes in respect of any properly tendered Old First Mortgage Notes not
previously accepted and may terminate the Exchange Offer (by oral or written
notice to the Exchange Agent and by timely public announcement communicated,
unless otherwise required by applicable law or regulation, by making a release
to the Dow Jones News Service) or, at its option, modify or otherwise amend
the Exchange Offer, if (a) there shall be threatened, instituted or pending
any action or proceeding before, or any injunction, order or decree shall have
been issued by, any court or governmental agency or other governmental
regulatory or administrative agency or commission, (i) seeking to restrain or
prohibit the making or consummation of the Exchange Offer or any other
transaction contemplated by the Exchange Offer, (ii) assessing or seeking any
damages as a result thereof, or (iii) resulting in a material delay in the
ability of the Company to accept for exchange or exchange some or all of the
Old First Mortgage Notes pursuant to the Exchange Offer; (b) any statute,
rule, regulation, order or injunction shall be sought, proposed, introduced,
enacted, promulgated or deemed applicable to the Exchange Offer or any of the
transactions contemplated by the Exchange Offer by any government or
governmental authority, domestic or foreign, or any action shall have been
taken, proposed or threatened, by any government, governmental authority,
agency or court, domestic or foreign, that in the sole judgment of the Company
might directly or indirectly result in any of the consequences referred to in
clauses (a)(i) or (ii) above or, in the sole judgment of the Company, might
result in the holders of Exchange Notes having obligations with respect to
resales and transfers of Exchange Notes which are greater than those described
in the interpretations of the Commission referred to above under "- Terms of
the Exchange Offer," or would otherwise make it inadvisable to proceed with
the Exchange Offer; or (c) a material adverse change shall have occurred in
the business, condition (financial or otherwise), operations, or prospects of
the Company.
The foregoing conditions are for the sole benefit of the Company and may be
asserted by it with respect to all or any portion of the Exchange Offer
regardless of the circumstances (including any action or inaction by the
Company) giving rise to such condition or may be waived by the Company in
whole or in part at any time or from time to time in its sole discretion. The
failure by the Company at any time to exercise any of the foregoing rights
will not be deemed a waiver of any such right, and each right will be deemed
an ongoing right which may be asserted at any time or from time to time. In
addition, the Company has reserved the right, notwithstanding the satisfaction
of each of the foregoing conditions, to terminate or amend the Exchange Offer.
Any determination by the Company concerning the fulfillment or non-
fulfillment of any conditions will be final and binding upon all parties.
In addition, the Company will not accept for exchange any Old First Mortgage
Notes tendered and no Exchange Notes will be issued in exchange for any such
Old First Mortgage Notes, if at such time any stop order shall be threatened
or in effect with respect to (i) the Registration Statement of which this
Prospectus constitutes a part or (ii) qualification under the Trust Indenture
Act of 1939 (the "Trust Indenture Act") of the Indenture pursuant to which
such Old First Mortgage Notes were issued.
26
<PAGE>
EXCHANGE AGENt
First National Bank of Commerce has been appointed as the Exchange Agent of
the Exchange Offer. All executed Letters of Transmittal should be directed to
the Exchange Agent at one of the addresses set forth below. Questions and
requests for assistance, requests for additional copies of this Prospectus or
of the Letter of Transmittal and requests for Notices of Guaranteed Delivery
should be directed to the Exchange Agent addressed as follows:
In New York: By Hand By Registered or
Delivery/Overnight Certified Mail:
Delivery:
First National Bank of First National Bank of First National Bank of
Commerce Commerce Commerce
c/o First Chicago Trust Corporate Trust Services Corporate Trust Services
Company Department Department
14 Wall Street, 8th 210 Baronne Street, P.O. Box 60030
Floor, Suite 4607 Basement Level New Orleans, Louisiana
New York, New York 10002 New Orleans, Louisiana 70160-0030
70112
Attn: Teri Lucas
Attn: Teri Lucas
Via Facsimile:
(504) 623-1095
Confirm by telephone:
(504) 623-7579
For Information Call:
(504) 623-1640
DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH HEREIN, OR TRANSMISSIONS OF
INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN THE ONES SET FORTH HEREIN, WILL
NOT CONSTITUTE A VALID DELIVERY.
SOLICITATIONS OF TENDERS; EXPENSES
The Company has not retained any dealer-manager or similar agent in
connection with the Exchange Offer and will not make any payments to brokers,
dealers or others for soliciting acceptances of the Exchange Offer. The
Company will, however, pay the Exchange Agent reasonable and customary fees
for its services and will reimburse it for reasonable out-of-pocket expenses
in connection therewith. The Company will also pay brokerage houses and other
custodians, nominees and fiduciaries the reasonable out-of-pocket expenses
incurred by them in forwarding tenders for their customers. The expenses to be
incurred in connection with the Exchange Offer, including the fees and
expenses of the Exchange Agent and printing, accounting and legal fees, will
be paid by the Company.
No person has been authorized to give any information or to make any
representations in connection with the Exchange Offer other than those
contained in this Prospectus. If given or made, such information or
representations should not be relied upon as having been authorized by the
Company. Neither the delivery of this Prospectus nor any exchange made
hereunder shall, under any circumstances, create any implication that there
has been no change in the affairs of the Company since the respective dates as
of which information is given herein. The Exchange Offer is not being made to
(nor will tenders be accepted from or on behalf of) holders of Old First
Mortgage Notes in any jurisdiction in which the making of the Exchange Offer
or the acceptance thereof would not be in compliance with the laws of such
jurisdiction. However, the Company may, at its discretion, take such action as
it may deem necessary to make the Exchange Offer in any such jurisdiction and
extend the Exchange Offer to
27
<PAGE>
holders of Old First Mortgage Notes in such jurisdiction. In any jurisdiction
the securities laws or blue sky laws of which require the Exchange Offer to be
made by a licensed broker or dealer, the Exchange Offer is being made on
behalf of the Company by one or more registered brokers or dealers which are
licensed under the laws of such jurisdiction.
ACCOUNTING TREATMENT
The Exchange Notes will be recorded at the same carrying value as the Old
First Mortgage Notes, which is the principal amount as reflected in the
Company's accounting records on the date of the exchange. Accordingly, no gain
or loss for accounting purposes will be recognized. The expenses of the
Exchange Offer will be capitalized for accounting purposes.
APPRAISAL RIGHTS
HOLDERS OF OLD FIRST MORTGAGE NOTES WILL NOT HAVE DISSENTERS' RIGHTS OR
APPRAISAL RIGHTS IN CONNECTION WITH THE EXCHANGE OFFER.
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE EXCHANGE OFFER
The Company believes that the following summary fairly describes the
material United States federal income tax consequences expected to apply to
the exchange of Old First Mortgage Notes for Exchange Notes and the ownership
of Exchange Notes under currently applicable federal income tax law. The
following summary of the material anticipated federal income tax consequences
of the issuance of Exchange Notes and the Exchange Offer is based upon the
provisions of the Internal Revenue Code of 1986, as amended, the final,
temporary and proposed regulations promulgated thereunder, and administrative
rulings and judicial decisions now in effect, all of which are subject to
change (possibly with retroactive effect) or different interpretations. The
following summary is not binding on the Internal Revenue Service ("IRS") and
there can be no assurance that the IRS will take a similar view with respect
to the tax consequences described below. No ruling has been or will be
requested by the Company from the IRS on any tax matters relating to the
Exchange Notes or the Exchange Offer. This discussion is for general
information only and does not purport to address all of the possible federal
income tax consequences or any state, local or foreign tax consequences of the
acquisition, ownership and disposition of the Old First Mortgage Notes, the
Exchange Notes or the Exchange Offer. It is limited to investors who will hold
the Old First Mortgage Notes and the Exchange Notes as capital assets and does
not address the federal income tax consequences that may be relevant to
particular investors in light of their unique circumstances or to certain
types of investors (such as dealers in securities, insurance companies,
financial institutions, foreign corporations, partnerships, trusts,
nonresident individuals, and tax-exempt entities) who may be subject to
special treatment under federal income tax laws. PERSONS CONSIDERING THE
PURCHASE, OWNERSHIP OR DISPOSITION OF EXCHANGE NOTES SHOULD CONSULT THEIR OWN
TAX ADVISORS CONCERNING THE U.S. FEDERAL INCOME TAX CONSEQUENCES IN LIGHT OF
THEIR PARTICULAR SITUATIONS AS WELL AS ANY CONSEQUENCES ARISING UNDER THE LAWS
OF ANY STATE, LOCAL OR INTERNATIONAL TAXING JURISDICTION.
The exchange of the Old First Mortgage Notes for the Exchange Notes pursuant
to the Exchange Offer will not be treated as an exchange or other taxable
event to holders for United States federal income tax purposes because the
terms of the Exchange Notes are not materially different from the terms of the
Old First Mortgage Notes. The Exchange Notes should be treated as a
continuation of the Old First Mortgage Notes. Consequently, for United States
federal income tax purposes, no gain or loss will be realized by a holder upon
receipt of an Exchange Note; the holding period of the Exchange Note will
include the holding period of the Old First Mortgage Note exchanged therefor,
and the adjusted tax basis of the Exchange Note will be the same as the
adjusted tax basis of the Old First Mortgage Note exchanged therefor
immediately before the exchange.
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<PAGE>
A holder of an Exchange Note will be required to report stated interest on
the Exchange Note as interest income in accordance with the holder's method of
accounting for tax purposes.
The foregoing does not discuss special rules that may affect the treatment
of holders that acquired the Old First Mortgage Notes other than at par. Any
such holders should consult their tax advisors regarding the consequences of
the Exchange Offer.
OTHER
Participation in the Exchange Offer is voluntary and holders should
carefully consider whether to accept. Holders of the Old First Mortgage Notes
are urged to consult their financial and tax advisors in making their own
decisions on what action to take.
As a result of the making of, and upon acceptance for exchange of all
validly tendered Old First Mortgage Notes pursuant to the terms of this
Exchange Offer, the Company will have fulfilled a covenant contained in the
terms of the Old First Mortgage Notes and the Exchange and Registration Rights
Agreements. Holders of the Old First Mortgage Notes who do not tender their
certificates in the Exchange Offer will continue to hold such certificates and
will be entitled to all the rights, and limitations applicable thereto, under
the Indenture pursuant to which such Old First Mortgage Notes were issued,
except for any such rights under the Exchange and Registration Rights
Agreement, which by its term terminates or ceases to have further effect as a
result of the making of this Exchange Offer. See "Exchange and Registration
Rights Agreement." All untendered Old First Mortgage Notes will continue to be
subject to the restriction on transfer set forth in the Indenture. To the
extent that Old First Mortgage Notes are tendered and accepted in the Exchange
Offer, the trading market, if any, for the Old First Mortgage Notes could be
adversely affected. See "Risk Factors--Consequences of Failure to Exchange."
The Company may in the future seek to acquire untendered Old First Mortgage
Notes in open market or privately negotiated transactions, through subsequent
exchange offers or otherwise. The Company has no present plan to acquire any
Old First Mortgage Notes which are not tendered in the Exchange Offer.
29
<PAGE>
USE OF PROCEEDS
The Exchange Offer is intended to satisfy certain of the Company's
obligations under the Exchange and Registration Rights Agreement. The Company
will not receive any cash proceeds from the issuance of the Exchange Notes
pursuant to the Exchange Offer. The proceeds from the Original Offering were
approximately $105.6 million after deducting the Initial Purchasers' discount
and estimated expenses of the Original Offering. The Company has applied or
intends to apply the net proceeds of the Original Offering as follows: (i)
$77.5 million to redeem, at a redemption price of 103.33%, the Notes due 2001
bearing interest at a fixed rate of 10.25%; (ii) $15.8 million to redeem, at a
redemption price of 105.5%, the Preferred Stock paying mandatory quarterly
dividends at a fixed rate of 14.5%; and (iii) $7.0 million to retire the Term
Loan currently bearing interest at LIBOR plus 1.75% (or 7.5% at March 31,
1998). The remaining proceeds will be used for general corporate purposes,
including ongoing capital expenditures. Pending application of the proceeds as
described above, the Company has invested the proceeds in short-term
securities. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Liquidity and Capital Resources--Capital
Expenditures" and "Business--Business Strategy."
30
<PAGE>
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company as of March 31, 1998 and as adjusted to reflect the Original Offering,
including the application of a portion of the net proceeds from the Original
Offering as described in "Use of Proceeds." This table should be read in
conjunction with the consolidated financial Statements of the Company and the
notes thereto, "Selected Consolidated Financial Data," "Unaudited Pro Forma
Financial Information," and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" included elsewhere herein.
<TABLE>
<CAPTION>
MARCH 31, 1998
--------------------
ACTUAL AS ADJUSTED
-------- -----------
(IN THOUSANDS)
<S> <C> <C>
Cash and temporary cash investments....................... $ 12,939 $ 18,170
======== ========
Long-term debt (including current portion):
New Credit Facility(1).................................. $ -- $ --
Term Loan............................................... 7,000 --
Notes due 2001.......................................... 75,000 --
First Mortgage Notes offered hereby(2).................. -- 108,953
Other notes payable..................................... 10 10
-------- --------
Total long-term debt.................................. 82,010 108,963
Preferred Stock........................................... 13,301 --
Common stockholders' equity:
Common stock, $.01 par value:
Class A: 24,271,127 shares authorized; 10,613,380
shares outstanding................................... 106 106
Class B: 4,302,347 shares authorized; 2,271,127 shares
outstanding.......................................... 23 23
Class C: 100 shares authorized; 100 shares
outstanding.......................................... -- --
-------- --------
Total common stock.................................... 129 129
Paid-in capital......................................... 47,769 47,769
Retained earnings(3).................................... 31,628 24,031
-------- --------
Total common stockholders' equity..................... 79,526 71,929
-------- --------
Total capitalization.................................. $174,837 $180,892
======== ========
</TABLE>
- --------
(1) The Company has replaced its current revolving credit facility with the
New Credit Facility under which the Company may borrow up to $50 million,
subject to a borrowing base. See "Description of New Credit Facility. "
(2) Represents gross proceeds to the Company from the issuance of $110.0
million aggregate principal amount at maturity of the First Mortgage
Notes.
(3) The change in retained earnings reflects the redemption premium of the
Notes due 2001 of approximately $2.5 million, the redemption premium of
the Preferred Stock of approximately $0.8 million, the accretion of
discount on the Preferred Stock of approximately $1.7 million, and the
write-off of the unamortized debt issue costs of approximately $2.6
million.
31
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data presented below for each of the
years in the three-year period ended September 30, 1997 and as of September
30, 1996 and 1997 have been derived from and should be read in conjunction
with the audited consolidated financial statements of the Company and the
notes thereto included elsewhere in this Prospectus. The selected consolidated
financial data presented below for each of the years in the two-year period
ended September 30, 1994 and as of September 30, 1993, 1994 and 1995 have been
derived from the audited consolidated financial statements of the Company and
the notes thereto not included elsewhere in this Prospectus. The selected
consolidated financial data presented below as of March 31, 1998 and for the
six month periods ended March 31, 1997 and 1998 have been derived from and
should be read in conjunction with the unaudited consolidated financial
statements of the Company included elsewhere in this Prospectus. The selected
consolidated balance sheet data presented below as of March 31, 1997 have been
derived from the unaudited consolidated financial statements of the Company
not included elsewhere in this Prospectus. The unaudited consolidated
financial statements have been prepared on the same basis as the audited
consolidated financial statements and include all adjustments, consisting only
of normal recurring adjustments, necessary for a fair presentation of the
Company's financial condition and results of operations for those periods.
Operating results for the six months ended March 31, 1997 and 1998 are not
necessarily indicative of the results that may be expected for any future date
or period. The information in the following table should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations," "Summary Consolidated Financial Data," the
consolidated financial statements of the Company and the notes thereto and
other financial information pertaining to the Company included elsewhere in
this Prospectus.
32
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
SIX MONTHS ENDED
MARCH 31,
YEARS ENDED SEPTEMBER 30, (UNAUDITED)
------------------------------------------------ ------------------
1993 1994 1995 1996 1997 1997 1998
-------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT EMPLOYEES, TONS AND PER TON DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Net sales.............. $136,008 $160,823 $185,772 $204,426 $232,161 $112,518 $132,183
Cost of sales.......... 128,033 144,314 162,158 188,453 209,930 104,553 115,616
-------- -------- -------- -------- -------- -------- --------
Gross profit........... 7,975 16,509 23,614 15,973 22,231 7,965 16,567
Selling, general and
administrative........ 3,986 3,925 5,312 6,273 6,311 3,301 3,116
Non-production strike
and corporate campaign
expenses.............. 3,162 996 1,000 1,768 3, 323 1,247 117
-------- -------- -------- -------- -------- -------- --------
Operating income....... 827 11,588 17,302 7,932 12,597 3,417 13,334
Interest expense....... (8,261) (7,670) (7,821) (8,635) (8,962) (4,517) (4,133)
Interest income........ 193 280 543 147 12 3 179
Miscellaneous.......... 502 163 431 871 187 97 137
-------- -------- -------- -------- -------- -------- --------
Income (loss) before
taxes................. (6,739) 4,361 10,455 315 3,834 (1,000) 9,517
Provision for taxes.... -- -- 118 -- 50 -- 198
-------- -------- -------- -------- -------- -------- --------
Income (loss) before
extraordinary items... (6,739) 4,361 10,337 315 3,784 (1,000) 9,319
Extraordinary items.... 585 (5,468) -- -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Net income (loss)(1)... $ (6,154) $ (1,107) $ 10,337 $ 315 $ 3,784 $ (1,000) $ 9,319
======== ======== ======== ======== ======== ======== ========
Other Data:
EBITDA(2).............. $ 6,138 $ 17,306 $ 24,317 $ 16,209 $ 19,755 $ 6,941 $ 16,978
Adjusted EBITDA(3)..... 9,300 18,302 25,317 17,977 23,078 8,188 17,095
Capital expenditures... 3,184 2,761 12,470 4,990 5,998 2,081 2,387
Depreciation and
amortization.......... 4,616 5,275 6,041 7,259 6,959 3,424 3,328
Ratio of earnings to
fixed charges(4)...... -- 1.5x 2.2x 1.0x 1.4x -- 3.1x
Finished product tons
shipped............... 403,274 446,572 503,297 580,069 663,675 328,679 362,706
Billet tons shipped.... 59,604 35,503 11,072 15,638 241 -- --
-------- -------- -------- -------- -------- -------- --------
Total tons shipped.... 462,878 482,075 514,369 595,707 663,916 328,679 362,706
Average shape selling
price per ton......... $ 300 $ 337 $ 360 $ 340 $ 345 $ 337 $ 359
Average billet selling
price per ton......... 209 224 235 233 260 -- --
Employees at end of
period................ 395 428 545 550 563 580 583
Balance Sheet Data:
Working capital........ $ 32,389 $ 65,186 $ 73,301 $ 70,090 $ 72,031 $ 68,898 $ 78,820
Total assets........... 138,280 156,068 197,076 199,272 196,465 196,621 206,557
Total debt............. 54,817 76,076 85,751 88,142 83,540 95,875 82,010
Preferred Stock........ -- -- 12,239 10,489 13,089 11,789 13,301
Common stockholders'
equity................ 61,231 60,124 72,605 70,328 71,512 68,027 79,526
</TABLE>
- -------
(1) In fiscal 1995, 1996, and 1997 income (loss) applicable to common shares
after dividends accrued and accretion on Preferred Stock was $9.6, ($2.3),
and $1.2 million, respectively. For the six month periods ended March 31,
1997 and 1998 the income (loss) applicable to common shares after
dividends accrued and accretion of Preferred Stock was ($2.3) and $8.0
million, respectively.
(2) EBITDA is defined as net income before extraordinary items plus interest
expense, income taxes, depreciation and amortization. This is the same
definition for EBITDA that is contained in the Indenture. The Company
believes that EBITDA provides additional information for determining its
ability to meet debt service requirements. EBITDA does not represent and
should not be considered as an alternative to net income or cash flow from
operations as determined by generally accepted accounting principles, and
EBITDA does not necessarily indicate whether cash flow will be sufficient
for cash requirements.
(3) Adjusted EBITDA represents EBITDA as adjusted to exclude non-production
strike and corporate campaign expenses.
(4) Ratio of earnings to fixed charges is defined as income before income
taxes and extraordinary items plus amortization of debt issuance costs and
interest expense divided by the sum of amortization of debt issuance costs
plus interest expense. Earnings were insufficient to cover fixed charges
in fiscal 1993 and the six months ended March 31, 1997 by approximately
$6.7 million and $1.0 million, respectively.
33
<PAGE>
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma financial information (the "Pro Forma
Financial Information") of the Company is based on the audited and unaudited
financial statements of Bayou Steel. The Pro Forma Financial Information has
been prepared to reflect adjustments to Bayou Steel's historical balance sheet
and statements of operations to give effect to (i) the refinancing of the
Notes due 2001 and the Term Loan and (ii) the redemption of the Preferred
Stock with the proceeds from the Original Offering. The Pro Forma Financial
Information and accompanying notes should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Summary Consolidated Financial Data," "Selected Consolidated
Financial Data," the consolidated financial statements of the Company and the
notes thereto and other financial information pertaining to the Company
included elsewhere in this Prospectus.
The Pro Forma Financial Information has been prepared to give effect to the
Original Offering and the use of proceeds therefrom as though such transaction
had occurred as of March 31, 1998 for purposes of the pro forma balance sheet
and as of October 1, 1996 for purposes of the pro forma statements of
operations. Management believes that the assumptions used provide a reasonable
basis on which to present the Pro Forma Financial Information.
The Pro Forma Financial Information is presented for informational purposes
only and does not purport to be indicative of what the Company's financial
position or results of operations would actually have been had the Original
Offering been consummated on such date or at the beginning of the periods
indicated, nor does it purport to project the Company's results of operations
for any future period or as of any future date.
34
<PAGE>
BAYOU STEEL CORPORATION
UNAUDITED PRO FORMA BALANCE SHEET
AS OF MARCH 31, 1998
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
ASSETS HISTORICAL ADJUSTMENTS PRO FORMA
------ ---------- ----------- ---------
<S> <C> <C> <C>
Cash and temporary cash investments......... $ 12,939 $ 5,231 (1) $ 18,170
Accounts receivable, net.................... 28,584 -- 28,584
Inventories................................. 71,600 -- 71,600
Prepaid expenses and other assets........... 427 -- 427
-------- -------- --------
Total current assets...................... 113,550 5,231 118,781
Property, plant and equipment............... 137,472 -- 137,472
Less-accumulated depreciation............... (47,844) -- (47,844)
-------- -------- --------
Net property, plant and equipment......... 89,628 -- 89,628
Other assets................................ 3,379 824 (2) 4,203
-------- -------- --------
Total assets.............................. $206,557 $ 6,055 $212,612
======== ======== ========
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<S> <C> <C> <C>
Current maturities of long-term debt........ 3,010 (3,000)(3) 10
Accounts payable............................ 26,264 -- 26,264
Accrued liabilities......................... 5,456 -- 5,456
-------- -------- --------
Total current liabilities................. 34,730 (3,000) 31,730
Long-term debt.............................. 79,000 29,953 (3) 108,953
Redeemable preferred stock.................. 13,301 (13,301)(3) --
Common stock................................ 129 -- 129
Paid-in capital............................. 47,769 -- 47,769
Retained earnings........................... 31,628 (7,597)(4) 24,031
-------- -------- --------
Total common stockholders' equity......... 79,526 (7,597) 71,929
-------- -------- --------
Total liabilities and common stockholders'
equity................................... $206,557 $ 6,055 $212,612
======== ======== ========
</TABLE>
See Notes to Unaudited Pro Forma Balance Sheet
35
<PAGE>
BAYOU STEEL CORPORATION
NOTES TO UNAUDITED PRO FORMA BALANCE SHEET
(AMOUNTS IN THOUSANDS)
The accompanying unaudited pro forma balance sheet as of March 31, 1998 has
been prepared as if the Original Offering and the use of proceeds therefrom
occurred on that date and reflects the following adjustments:
(1) Reflects the net cash remaining from the gross proceeds of $108,953
from the issuance of $110,000 aggregate principal amount at maturity of the
First Mortgage Notes after payment of (i) $77,497 to retire the Notes due
2001 (including a prepayment penalty of $2,497), (ii) $7,000 to retire the
Term Loan, (iii) $15,825 to redeem the Preferred Stock (including $1,699 to
cover unaccreted original issue discount, and a prepayment penalty of
$825), and (iv) $3,400 of estimated fees and expenses related to the
Original Offering.
(2) Reflects the estimated deferred financing fees of $3,400 associated
with the Original Offering, net of the write-off of $2,576 of remaining
deferred financing costs associated with the Notes due 2001 and Term Loan.
(3) Reflects the net effect on Bayou Steel's total debt and Preferred
Stock of the Original Offering, net of the repayment of certain
indebtedness (and redemption of Preferred Stock) as follows:
<TABLE>
<S> <C>
Issuance of First Mortgage Notes pursuant to the Original
Offering..................................................... $108,953
Repayment of Notes due 2001................................... (75,000)
Repayment of Term Loan........................................ (7,000)
Redemption of Preferred Stock................................. (13,301)
--------
Net effect on debt and Preferred Stock...................... $ 13,652
========
</TABLE>
The net effect on debt and Preferred Stock is presented in the unaudited pro
forma balance sheet as follows:
<TABLE>
<S> <C>
Reduction of current maturities of long-term debt.............. $ (3,000)
Reduction of Preferred Stock................................... (13,301)
Increase in long-term debt..................................... 29,953
--------
$ 13,652
========
</TABLE>
(4) Reflects an estimate of charges to be recognized in connection with
the Original Offering and the use of proceeds therefrom through adjustments
to retained earnings in the unaudited pro forma balance sheet. The pro
forma adjustment is comprised of the following:
<TABLE>
<S> <C>
Notes due 2001 prepayment penalty................................. $2,497
Preferred Stock prepayment penalty................................ 825
Unaccreted discount on Preferred Stock at the date of refinancing. 1,699
Write-off of deferred financing costs associated with refinanced
debt............................................................. 2,576
------
$7,597
======
</TABLE>
The prepayment penalties, payment of unaccreted Preferred Stock discount and
the write-off of deferred financing costs reflected above have not been
included in the accompanying unaudited pro forma statements of operations;
they will be recorded as charges against earnings in the period when the
Original Offering and use of proceeds therefrom occurs.
These assumed adjustments have not been reflected net of a benefit for
income taxes because of Bayou Steel's historical deferred tax position, which
as of March 31, 1998 included a full valuation allowance against the Company's
net deferred tax assets, a substantial portion of which relate to available
tax net operating loss carryforwards that may not be realized in the future.
36
<PAGE>
BAYOU STEEL CORPORATION
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1997
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
<S> <C> <C> <C>
Net sales................................ $232,161 $ -- $232,161
Cost of sales............................ 209,930 -- 209,930
-------- ------- --------
Gross profit............................. 22,231 -- 22,231
Selling, general and administrative...... 6,311 (385)(1) 5,926
Non-production strike and corporate
campaign expenses....................... 3,323 -- 3,323
-------- ------- --------
Operating income......................... 12,597 385 12,982
Other income (expense):
Interest expense....................... (8,962) (2,040)(2) (11,002)
Interest income........................ 12 -- 12
Miscellaneous.......................... 187 -- 187
-------- ------- --------
Income before taxes...................... 3,834 (1,655) 2,179
Provision for income taxes............... 50 -- 50
-------- ------- --------
Net income............................... 3,784 (1,655) 2,129
Dividends accrued and accretion on
preferred stock......................... (2,600) 2,600 (3) --
-------- ------- --------
Net income applicable to common and
common equivalent shares................ $ 1,184 $ 945 (4) $ 2,129 (4)
======== ======= ========
Weighted average shares outstanding:
Basic.................................. 12,885 12,885
Diluted................................ 13,707 13,707
Basic income per share................. $ 0.09 $ 0.17
Diluted income per share............... $ 0.09 $ 0.16
</TABLE>
See Notes to Unaudited Pro Forma Statement of Operations
37
<PAGE>
BAYOU STEEL CORPORATION
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED MARCH 31, 1998
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
<S> <C> <C> <C>
Net sales................................ $132,183 $ -- $132,183
Cost of sales............................ 115,616 -- 115,616
-------- ------- --------
Gross profit............................. 16,567 -- 16,567
Selling, general and administrative...... 3,116 (193)(1) 2,923
Non-production strike and corporate
campaign expenses....................... 117 -- 117
-------- ------- --------
Operating income......................... 13,334 193 13,527
Other income (expense):
Interest expense....................... (4,133) (1,144)(2) (5,277)
Interest income........................ 179 -- 179
Miscellaneous.......................... 137 -- 137
-------- ------- --------
Income before taxes...................... 9,517 (951) 8,566
Provision for income taxes............... 198 -- 198
-------- ------- --------
Net income............................... 9,319 (951) 8,368
Dividends accrued and accretion on
preferred stock......................... (1,304) 1,304 (3) --
-------- ------- --------
Net income applicable to common and
common equivalent shares................ $ 8,015 $ 353 (4) $ 8,368 (4)
======== ======= ========
Weighted average shares outstanding:
Basic.................................. 12,885 12,885
Diluted................................ 13,732 13,732
Basic income per share................. $ 0.62 $ 0.65
Diluted income per share............... $ 0.58 $ 0.61
</TABLE>
See Notes to Unaudited Pro Forma Statement of Operations
38
<PAGE>
BAYOU STEEL CORPORATION
NOTES TO UNAUDITED PRO FORMA STATEMENTS OF OPERATIONS
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
The accompanying unaudited pro forma statements of operations for the year
ended September 30, 1997 and the six months ended March 31, 1998 have been
reflected as if the Original Offering and the use of proceeds therefrom
occurred on October 1, 1996 and reflect the following adjustments:
(1) Represents decreased expense associated with amortization of deferred
financing costs for the Original Offering reflecting the impact of the 10
year term of the First Mortgage Notes compared to the shorter original
maturities of Bayou Steel's existing debt.
(2) Represents the incremental impact to interest expense based upon
$110,000 par value of long-term debt assumed outstanding at an assumed
interest rate of 9.5% plus accretion of the discount to par value at which
the First Mortgage Notes were issued recognized over the ten year term of
the First Mortgage Notes.
(3) Represents the elimination of preferred dividend expense and discount
accretion.
(4) The pro forma Bayou Steel net income amounts do not include an
extraordinary charge of approximately $7,597 related to a debt
extinguishment loss for the refinancing of Bayou Steel's existing debt.
This charge, which will relate to the refinancing transaction, will be
reflected as an extraordinary loss associated with the early extinguishment
of debt included in earnings in the period when the refinancing transaction
occurs.
39
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Bayou Steel is a leading producer of light structural shapes and merchant
bar steel products. Bayou Steel owns and operates a steel minimill and a
stocking warehouse located on the Mississippi River in LaPlace, Louisiana,
three additional stocking locations accessible to the Louisiana Facility
through the Mississippi River waterway system, and a rolling mill in Harriman,
Tennessee. The Company produces light structural steel products ranging in
size from three to eight inches at the Louisiana Facility and merchant bar
products ranging from one-half to four inches at the Tennessee Facility. The
Company estimates that it currently has aggregate annual steel melting
capacity of approximately 610,000 tons and finished product rolling capacity
aggregating approximately 800,000 tons, with approximately 550,000 tons at the
Louisiana Facility and approximately 250,000 tons at the Tennessee Facility,
depending on the product mix. For the twelve months ended March 31, 1998, the
Company shipped 697,943 tons of steel products, generating net sales of $251.8
million and Adjusted EBITDA (as defined) of $32.0 million.
The Louisiana Facility, which was constructed in 1981 at a cost of $243
million, is a minimill consisting of an electric arc furnace, a rolling mill,
climate controlled warehouse facilities, and a deep-water dock on the
Mississippi River. The Tennessee Facility was acquired and re-started by the
Company in July 1995 following the purchase by the Company of substantially
all of the assets of TVSC, which was then in bankruptcy. During the first two
years of operation, the Tennessee Facility experienced losses of approximately
$11.7 million attributable to the inexperience of the new workforce, the
change of the product mix from rebar to the higher margin merchant bar,
problems with re-starting idle equipment (some of which was relatively new and
untested), and a decrease in selling prices due to market conditions. Since
then, steel prices have improved and the Company has enhanced operational
efficiencies. The Tennessee Facility has been profitable since July 1, 1997.
The Company expects continued operational improvements at the Tennessee
Facility which should result in lower costs per ton and additional sales
volume. The backlog of unfilled cancelable orders for the Tennessee Facility's
product is at a near record high of approximately $26 million as of February
28, 1998.
From March 1993 until September 1996, the Louisiana Facility experienced a
labor disruption that had a significant impact on production for fiscal 1993.
Although the administrative, legal and security costs attributable to the
strike adversely affected the Company's results of operations through
September 1997, these costs were insignificant in the first quarter of fiscal
1998 and are not expected to affect the Company's results of operations in
future periods. The Company's new six-year labor contract provides for no
compulsory wage increases other than compensation awards under management-
controlled productivity incentive and profit sharing plans which management
believes resulted in the Louisiana Facility's production processes achieving
an 18-year productivity record in the first six months of fiscal 1998.
RESULTS OF OPERATION
Six Months Ended March 31, 1998 Compared to Six Months Ended March 31, 1997
The Company reported consolidated net income of $9.3 million before
dividends accrued and accretion on preferred stock in the first six months of
fiscal 1998 compared to a net loss of $1.0 million for the comparable period
of fiscal 1997. The $10.3 million improvement in the Company's results was due
to several significant factors. Comparing the first six months of fiscal 1998
to the same period in the prior year, shape shipment tons increased 10% and
the average selling price per ton increased 7%. Additionally, non-production
strike and corporate campaign expenses decreased by $1.1 million as a result
of the settlement of these issues. The Tennessee Facility, which recorded
40
<PAGE>
its third consecutive profitable quarter, showed significant improvement by
increasing net income by $2.9 million over the first six months of the prior
year.
The following table sets forth shipment and sales data:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
MARCH 31,
-----------------
1997 1998
-------- --------
<S> <C> <C>
Net Sales (in thousands)............................... $112,518 $132,183
Shape shipment tons.................................... 328,679 362,706
Shape selling price per ton............................ 337 359
</TABLE>
Sales. Net sales for the first six months of 1998 increased by 17%, or $19.7
million compared to the same period of fiscal 1997 as a result of shipment
increases of 34,027 tons and a $22 per ton increase in the average selling
price resulting from the strong demand for the Company's products.
(i) Shapes. Shipments for the first six months of fiscal 1998 increased 10%
compared to the same period of fiscal 1997. The higher shipments were mainly
due to a strong economy, increases in shipments to the original equipment
manufacturing/fabricator ("OEM/FAB") market, and a good product mix. The total
increase in tons shipped for the first six months of fiscal 1998 was comprised
of 21,717 tons from the Louisiana Facility and 12,310 tons from the Tennessee
Facility. Higher production levels, due to record productivity levels enabled
the Company to capitalize on the strong demand for its products.
Overall selling price increased approximately $22 per ton or 7% during the
first six months of fiscal 1998 compared to the same period of fiscal 1997.
The Tennessee Facility benefitted from an overall improved market as well as
consistent production and availability of products. Additionally, during the
first six months of fiscal 1998, the Tennessee Facility and the Louisiana
Facility each benefitted from an increase in selling price of $30 and $20 per
ton, respectively, over the same period of fiscal 1997. The Company has not
experienced significant competition from foreign producers during the first
six months of fiscal 1998.
(ii) Billets. Due to the high productivity of the Company's rolling mills,
no billets were sold on the open market during the first six months of 1998
and 1997. The Tennessee Facility's demand for billets has been primarily
satisfied by the purchase of billets on the open market at competitive prices
while the Company internally supplied all of the Louisiana Facility's rolling
mill requirements. Depending on market conditions and its own rolling mill
requirements, the Company may sell billets on an occasional and selective
basis to domestic and export customers while purchasing additional billets
when required.
Cost of Goods Sold. Cost of goods sold was 87% of sales for the first six
months of fiscal 1998 compared to 93% of sales for the same period of fiscal
1997. The improvement was attributable to the items noted above and certain
nonrecurring charges recorded in fiscal 1997 related to a power outage in the
melting facility and the retraining and related costs of striking employees
returning to work.
A major component of cost of goods sold is the raw material scrap. Scrap
cost in the first six months of fiscal 1998 increased 4% compared to the same
period last year. As with the demand for the Company's finished goods, scrap
demand has also risen. However, the export demand for scrap has decreased
sharply allowing for a greater domestic supply and lower prices, thereby
minimizing this increase. The Company has been able to control the
availability and the cost of scrap to some degree by producing its own
shredded scrap through a scrap processing division of the Company, Mississippi
River Recycling ("MRR"). When compared with the first six months of the prior
year, the cost to produce shredded scrap was reduced by 5%.
41
<PAGE>
Another significant portion of cost of goods sold is conversion cost, which
includes labor, energy, maintenance materials and supplies used to convert raw
materials into billets and billets into shapes. Conversion cost per ton for
the Tennessee Facility in the first six months of fiscal 1998 compared to the
same period of fiscal 1997 has improved by $3 per ton over the prior period.
This improvement is due to increased production and rolling mill yield at the
Tennessee Facility. Conversion cost at the Louisiana Facility has increased in
the second quarter by $5 per ton resulting in year-to-date conversion costs
approximating the prior year. This increase is a result of the melt shop
experiencing a decrease in yield during the second quarter of fiscal 1998.
Selling, General and Administrative Expense. Selling, general and
administrative expenses in the first six months of fiscal 1998 compared to the
comparable period of the prior fiscal year were approximately the same.
Non-Production Strike and Corporate Campaign Expenses. Non-production
strike-related expenses have decreased significantly since the settlement of
the Racketeer Influenced Corrupt Organization Act ("RICO") lawsuit and post-
strike issues at the end of fiscal 1997. Costs are $1.1 million less in the
first six months of fiscal 1998 when compared to the same period of fiscal
1997.
Net Income. Net income before dividends accrued and accretion on preferred
stock was $10.3 million better in the first six months of 1998 compared to the
same period of fiscal 1997. The primary reasons for the increase in earnings
were increased revenue from higher sales prices and volume increases,
increased metal margins and decreased non-production strike and corporate
campaign expenses. The Tennessee Facility reported its third consecutive
quarterly profit in the second quarter of fiscal 1998.
Fiscal 1997, 1996 and 1995 Year to Year Comparisons
Bayou Steel reported consolidated net income in fiscal 1997 of $3.8 million
compared to $0.3 million in fiscal 1996. The $3.5 million improvement in the
Company's results was mainly due to three factors. First, the results at the
Tennessee Facility, improved by $4.1 million. The Tennessee Facility achieved
its first quarterly profit in the fourth fiscal quarter of 1997. Second, metal
margin at the Louisiana Facility, the difference between shape selling price
and raw material ("scrap") cost, improved by 4% or $9 per ton. And third, the
Louisiana Facility shipments increased by 5% or 23,474 tons. Offsetting some
of the improvements in earnings were increased expenses of $1.6 million
related to settling the extended strike and a lawsuit related to the strike.
In addition, the price of power and key supply items increased by $2 per ton
of steel produced or $1.1 million.
The Company reported consolidated net income in fiscal 1996 of $0.3 million
compared to $10.3 million in fiscal 1995. The $10.0 million reduction in the
Company's results was mainly due to three factors. First, metal margin at the
Louisiana Facility decreased by 4% or $9 per ton. Second, the prices of
certain supply items and energy increased significantly at the Louisiana
Facility, resulting in additional expenses of $4.4 million. Third, start-up
losses at the Tennessee Facility increased by $4.6 million because of
decreased selling prices and higher than expected operating costs.
The following table sets forth the shipment and sales data for the fiscal
years indicated.
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
--------------------------
1995 1996 1997
-------- -------- --------
<S> <C> <C> <C>
Shape Shipment Tons........................... 503,297 580,069 663,675
Average Shape Selling Price Per Ton........... $ 360 $ 340 $ 345
Billet Shipment Tons.......................... 11,072 15,638 241
Average Billet Selling Price Per Ton.......... $ 235 $ 233 $ 260
Net Sales (in thousands)...................... $185,772 $204,426 $232,161
</TABLE>
42
<PAGE>
Sales. Net sales increased by $28 million or 14% in fiscal 1997 compared to
fiscal 1996 due to increased shape shipments out of both the Louisiana and
Tennessee Facilities. This was a record shape shipment year for both
facilities. The average shape selling price also increased by 1%. Net sales
increased by $19 million or 10% in fiscal 1996 compared to fiscal 1995 due to
shipments out of the Tennessee Facility which started operations in late
fiscal 1995. The fiscal 1996 increase in shape shipments were partially offset
by an overall decreased selling price. The improvements in both years
represent a strengthening in the economy.
(i) Shapes. In fiscal 1997, the increase of 83,606 tons in shape shipments
was attributable to a strong economy and improved product mix which enabled
the Company to better respond to customer demand. Exports to Mexico and
overseas were minimal, while exports to Canada remained approximately the same
compared to fiscal 1996. Shipments from the Tennessee Facility in fiscal 1997
improved by 81% or 60,132 tons while the selling price improved by 8% or $25
per ton. Shipments from the Louisiana Facility improved by 5% or 23,474 tons
while the selling price improved 1% or $4 per ton. The increase in shape
prices Company wide was primarily in response to a strong market demand and an
improving economy. The Company has focused its sales efforts on capturing a
larger share of the OEM/FAB market. More shipments, as a percentage of the
total, went to OEM/FAB and less to steel service center customers in fiscal
1997 compared to last year. Compared to last year, tons shipped to this
segment increased by 31,223 tons at the Louisiana Facility and 28,663 at the
Tennessee Facility.
In fiscal 1996, the Company increased shape shipments by 76,772 tons which
was attributable to improved product demand and the additional product line
from the Tennessee Facility. Shipments from the Louisiana Facility increased
by 5,972 tons compared to the prior year. Exports to Mexico and overseas were
minimal, while shipments to Canada were slightly less than the prior year.
More shipments, as a percentage of the total, went to steel service centers
and less to end users. The $20 per ton or 6% decrease in shape prices from the
Louisiana Facility was the result of additional capacity being shifted into
the Company's product line from mills previously producing for the special bar
quality ("SBQ") market. This unanticipated shift was due to the extreme
softness of the SBQ market. In addition, excess inventory at certain minimills
and imports in the Southwest from Mexican mills contributed to the decrease in
selling price. Shipments from the Tennessee Facility increased by 70,800 tons.
The prices for the merchant bar product line from the Tennessee Facility also
carried a lower selling price compared to the structural products from the
Louisiana Facility. Consequently, the mix of selling more merchant bar
products from the Tennessee Facility in fiscal 1996 resulted in lowering the
overall selling price by $4 per ton. The Company also expanded its market area
for merchant bar resulting in lower selling prices.
Shipments are expected to improve in fiscal 1998 mainly due to the
availability of additional production from Tennessee as operations continue to
improve. The Company plans to continue to optimize its product mix to remain
competitive and maintain its share in the structural shape and merchant bar
markets.
(ii) Billets. In fiscal 1997, billet shipments, the Company's semi-finished
product, decreased compared to fiscal 1996 due to the lack of billets
available for sale. More billets were used in Louisiana's rolling mill due to
higher production levels, resulting in fewer billets available for sale to
customers. Also, the Louisiana Facility supplied the Tennessee Facility's
rolling mill with approximately 26,500 tons of billets exhausting the
remainder of the Company's production. The rest of the Tennessee Facility's
billet requirements were purchased on the open market at competitive prices.
In fiscal 1996, billet shipments increased slightly compared to fiscal 1995
due to a large export shipment and several smaller domestic shipments. The
overall selling price of billets was consistent with the prior year. The
Company supplied approximately 29,000 tons of billets to the Tennessee
43
<PAGE>
rolling mill, exhausting the remainder of the Company's excess billet
production in fiscal 1996. The rest of the Tennessee Facility's billet
requirements were purchased on the open market at competitive prices.
In fiscal 1998, the Company will continue to supply all of the Louisiana
Facility's billet requirements for its rolling mill. Excess billets will be
shipped to Tennessee's rolling mill to partially fill its billet requirements.
The Tennessee Facility's remaining billet requirements will be purchased from
other steel mills. 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 the Tennessee Facility. The Company
will continue to evaluate its long-term billet supply strategy while reacting
to short-term market changes.
Cost of Goods Sold. Cost of goods sold was 90% of sales in fiscal 1997
compared to 92% in fiscal 1996. The percentage decrease was due to shape
selling prices increasing more than the scrap price increases and conversion
cost (the costs to convert billets into merchant bar products) at the
Tennessee Facility improving by 15%.
Cost of goods sold was 92% of sales in fiscal 1996 compared to 87% in fiscal
1995. The percent increase was due to shape selling prices decreasing more
than scrap prices, the learning curve associated with the start-up of
operations at the Tennessee Facility, the learning curve associated with the
installation of new capital improvements at Louisiana, and price increases of
certain key supply items.
(i) Raw Material. In fiscal 1996, scrap costs decreased 3% compared to
fiscal 1995 levels. The Louisiana Facility's shape selling prices decreased $9
more than scrap costs resulting in a 4% reduction in the Louisiana Facility's
metal margin. Partially offsetting the margin reduction was the best scrap
yield in the history of the Company. In fiscal 1997, scrap costs decreased an
average 4% compared to fiscal 1996. Shape selling prices increased $10 per ton
more than the scrap price decreases resulting in significantly better margins.
Scrap prices dropped in fiscal 1997 due to increased availability and the
absence of a significant export market. Pressure on scrap supply is expected
due to increased domestic capacity planned in the steel industry. This could
result in higher scrap prices.
In order to achieve better control over scrap cost (a major component of
cost of goods sold) and availability, the Company opened MRR which operates an
automobile shredder. MRR produces shredded scrap metal which is one of several
scrap types used in steel making at the minimill. This project was completed
late in fiscal 1995 and experienced normal start-up issues in fiscal 1996.
Productivity, tons produced, and costs in fiscal 1997 have improved
significantly over last year. In fiscal 1996, the market for car bodies, the
principal raw material feed for a shredder, was higher than anticipated due to
local competitive conditions and increased domestic demand for shredded
material. However, the market stabilized in fiscal 1997. The shredder
currently supplies approximately 12% of the melt shop's raw material
requirements. The processed shredded material costs considerably less than
purchasing shredded material on the open market. MRR may expand by processing
additional scrap types.
The Tennessee rolling mill Facility's principal raw material is billets
which are produced at the Louisiana Facility or purchased on the open market.
Billet cost decreased by 1% in fiscal 1997 compared to fiscal 1996. The yield
of billets rolled into shapes improved by 4% in fiscal 1997 compared to fiscal
1996 resulting in a yield savings of approximately $6 per ton. The Louisiana
Facility supplied approximately 17% of the Tennessee Facility's rolling mill's
total billet requirements in fiscal 1997. The price of billets purchased on
the open market normally follows the scrap market. Currently, the Company
purchases billets at competitive prices and believes that the supply of
billets is adequate.
44
<PAGE>
Another component of raw materials is additives, alloys and flux ("AAF").
AAF cost remained approximately the same in fiscal 1997 compared to fiscal
1996. Cost in fiscal 1997 was affected by increased consumption caused by the
production of a richer grade of products and by a moderation in prices for
some items. AAF cost increased in fiscal 1996 by 12% mainly due to increased
prices caused by reduced product availability. An anti-dumping suit against
foreign producers utilized by the Louisiana Facility and its competitors
resulted in higher duties on imported AAF. Also contributing to higher prices
was the increased domestic demand due to the high steel-making capacity
utilization. These general market conditions affected both the Company and its
competition.
(ii) Conversion Cost. Another significant portion of cost of goods sold is
conversion cost, which includes labor, energy, maintenance material, and
supplies used to convert raw materials into billets and billets into shapes.
Conversion cost per ton for the Louisiana Facility, which includes fixed and
variable costs, increased 1% in fiscal 1997 compared to fiscal 1996, and 6% in
fiscal 1996 compared to fiscal 1995.
In fiscal 1997, conversion cost per ton at the Louisiana Facility increased
by 1% compared to fiscal 1996. The price of various energy items and certain
supply items increased conversion cost by 2% compared to 1996. During the
first quarter of fiscal 1997 the Company incurred some one-time expenses
related to the strikers returning to work under a settlement agreement. In
addition, productivity was affected as returning and current workers became
re-acquainted with the equipment or learned new jobs. To shorten this process
and to promote other improvements in productivity and other cost efficiencies,
the Company introduced a productivity incentive plan. The Company experienced
two unusual equipment outages at its Louisiana Facility which affected
production and resulted in increased maintenance costs. Contributing to
improving the cost in the melting facility was record productivity, as
measured in tons produced per hour, and power consumption in fiscal 1997. The
rolling mill's record productivity level in fiscal 1997 contributed to
reducing fixed conversion cost per ton.
In fiscal 1996, conversion cost per ton at the Louisiana Facility increased
by 6% compared to fiscal 1995. The main increase in conversion cost was caused
by $3 million in price increase for power and natural gas. Also, as a result
of the continued impact of the second furnace learning curve and the 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 significant unexpected outages. Several
operating records were established in fiscal 1996 which contributed to
offsetting increased costs of certain supply items.
In July 1995, the Tennessee Facility started operating its rolling mill. The
learning curve associated with new and refurbished equipment combined with an
inexperienced work force caused production tons to be lower and conversion
cost per ton to be higher than expected. During fiscal 1996, the Tennessee
Facility rolled 44 new section sizes which impacted productivity yet provided
opportunities for penetrating the OEM/FAB markets. Consequently, production
costs exceeded sales by $4.8 million and $1.3 million in fiscal 1996 and 1995,
respectively. The rolling mill performance has improved since start-up due to
capital improvements and the experience gained by the workforce. Comparing
fiscal 1997 to fiscal 1996, tons produced improved by 51%, conversion cost per
ton improved by 15%, productivity improved by 49%, and yield loss was reduced
by 4%. The Tennessee Facility reported its first quarterly profit of $0.2
million in the fourth fiscal quarter of 1997.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased in fiscal 1997 and 1996 compared to fiscal
1995 due to an increase in amortization expenses related to the financing of
the Tennessee Facility, additional administrative expenses related to the
Tennessee Facility, and additional franchise and property taxes.
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<PAGE>
Non-Production Strike & Corporate Campaign Expenses. In fiscal 1997 and
1996, the Company's expenses for direct out-of-pocket strike-related and
corporate campaign issues increased by $1.6 million and $0.8 million,
respectively. In fiscal 1996, these expenses increased to an average of
$147,000 per month mainly due to increased legal expenses related to the RICO
suit which the Company filed against the Union. In fiscal 1997, expenses
related to the RICO law suit and expenses related to strikers returning to
work averaged $272,000 per month. The RICO law suit against the Union was
settled on October 29, 1997. This settlement will not have a material impact
on the Company's financial position or results of operations. Non-production
strike and corporate campaign expenses should be minimal after the first
quarter of fiscal 1998.
Interest Expense and Miscellaneous. Interest expense increased in fiscal
1997 and 1996 compared to the prior fiscal year due to additional short-term
borrowings under the line of credit, term loan and higher interest rates. The
Company borrowed an average of $1.7 million under its line of credit at a
weighted average interest rate of 8.4% in fiscal 1996 and had average
borrowings of $5.4 million at a weighted average interest rate of 8.8% in
fiscal 1997.
Interest income decreased in fiscal 1997 and fiscal 1996 compared to the
prior fiscal years due to the Company having less cash to invest.
Miscellaneous income increased in fiscal 1996 compared to the prior year due
to a better collection record on credit sales and a one time sale of scrapped
inventory.
Net Income/Loss. In fiscal 1997, the Company's consolidated results improved
by $3.5 million compared to fiscal 1996 mainly due to improvement in the
Tennessee Facility's operations, stronger shape shipments, and a better metal
margin. The improvements were partially offset by increased costs associated
with non-production strike and corporate campaign expenses, increased price of
energy sources and certain supply items, and two major outages at the
Louisiana Facility which resulted in lost production.
In fiscal 1996, the Company's consolidated results were $10 million less
than fiscal 1995 mainly due to the Tennessee Facility incurring substantial
losses for fiscal 1996. The metal margin decreased substantially while prices
of certain supply items and energy increased, and the start-up costs of
several recently completed capital projects and the idle furnace at the
Louisiana Facility contributed to the reduction in results.
The Tennessee Facility operation reported an income of $0.2 million for the
fourth fiscal quarter of fiscal 1997. This was the first quarterly profit
reported by the Tennessee Facility's operation. Both facilities benefitted
from a strong metal margin. The results were adversely affected by several
factors. The price of power increased the conversion cost in the Louisiana
Facility which was caused by the power company passing on the cost for an
extended nuclear unit shutdown in the form of a fuel adjustment to their
customers.
Income Taxes. The provision for income taxes in fiscal 1997, 1996, 1995 was
minimal due to utilization of certain tax benefits including the benefit of
net operating loss carry forwards.
LIQUIDITY AND CAPITAL RESOURCES
The Company ended the second fiscal quarter of 1998 with $12.9 million in
cash and temporary cash investments and no short-term borrowings. At March 31,
1998, current assets exceeded current liabilities by a ratio of 3.27 to 1.0.
Working capital increased by $6.8 million to $78.8 million during the six
months ended March 31, 1998. As of March 31, 1998, the Company had invested
cash of $14.5 million.
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<PAGE>
Operating Cash Flow. In the first six months of fiscal 1998, cash provided
by operations was $17.9 million while $3.7 million was used in operations
during the first six months of fiscal 1997. Contributing to the significant
improvement was a decrease in inventories of $3.4 million caused by strong
demand for the Company's products along with an increase in accounts payable
of $2.5 million due to the resulting increase in production activities.
For fiscal 1997, net cash provided by operations was $12.8 million. Income,
depreciation, and amortization contributed $10.7 million in operating cash.
Inventories at the Louisiana Facility decreased as prime sales exceeded prime
production and the productivity of the rolling mill increased resulting in
fewer billets in inventory. Offsetting some of the increase in operating cash
was an increase in accounts receivable of $3.2 million caused by increased
sales by the Louisiana and Tennessee Facilities.
Capital Expenditures. Capital expenditures amounted to $6.0 million in
fiscal 1997 and $2.4 million in the first six months of fiscal 1998. The
Company spent approximately $4.4 million in fiscal 1997 at the Louisiana
Facility which was directed at reducing operating costs, increasing melt shop
and rolling capacity, and maintaining its plant. The Company also spent
approximately $1.6 million in fiscal 1997 at the Tennessee Facility on capital
projects to reduce costs, increase productivity and maintain its plant. The
capital expenditures in the first six months of fiscal 1998 were for cost
reduction, productivity enhancements, plant maintenance and safety and
environmental programs. In fiscal 1998, depending on market conditions, the
Company expects to commit approximately $14 million on various capital
projects to reduce costs and increase productivity, enhance safety and
environmental programs, and maintain the plants.
Financing Activities. The Company paid $2.2 million in dividends to the
holders of Preferred Stock and repaid $3.0 million in short-term borrowings in
fiscal 1997. Also, $1.5 million in principal on the Term Loan was paid off in
each of fiscal 1997 and the first six months of fiscal 1998.
The Company has applied or intends to apply a portion of the net proceeds of
the Original Offering to redeem all of its outstanding Notes due 2001 and
Preferred Stock and to repay its Term Loan. See "Use of Proceeds."
On June 20, 1995, the Company entered into an amendment and restatement of
its then current credit facility agreement which is 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 derived as a certain percentage of accounts receivable and
inventory. This 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. There were no borrowings under the line of credit as of March
31, 1998, and the amount available to borrow was $35 million.
Concurrently with the Original Offering, the Company entered into a five-
year secured $50.0 million revolving credit facility (the "New Credit
Facility") with The Chase Manhattan Bank, an affiliate of one of the Initial
Purchasers. The New Credit Facility replaced the Company's prior credit
facility which was scheduled to terminate on June 1, 2000. See "Description of
New Credit Facility."
On February 12, 1998, the Company executed a letter of intent with
Northwestern Steel and Wire Company ("Northwestern") relating to the
acquisition by the Company of Northwestern, a major minimill producer of
structural steel, rod and wire products. On April 27, 1998, the Company
announced that it would not proceed with its plans to acquire Northwestern.
47
<PAGE>
The Company has no financial obligations with respect to post-employment or
post-retirement benefits other then the employee retirement plans.
The Company believes that current cash balances, internally generated funds,
the New Credit Facility, the proceeds from the Original Offering and
additional purchase money mortgages will adequate to meet its foreseeable
short-term and long-term liquidity needs. If additional funds are required to
accomplish long-term expansion of its production facilities or significant
acquisitions, the Company believes funding can be obtained from a secondary
equity offering or additional indebtedness.
OTHER COMMENTS
Year 2000. The Company is preparing for the impact that the year 2000 is
expected to have on the electronic data processing and other information
systems relevant to the Company's business. A detailed plan has been outlined
and system changes to address this issue are well under way. The year 2000
should not significantly impact the Company's results of operations, financial
position or cash flows.
Litigation. 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.
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<PAGE>
BUSINESS
GENERAL
Bayou Steel is a leading producer of light structural shapes and merchant
bar steel products. Bayou Steel owns and operates a steel minimill and a
stocking warehouse located on the Mississippi River in LaPlace, Louisiana,
three additional stocking locations accessible to the Louisiana Facility
through the Mississippi River waterway system, and a rolling mill in Harriman,
Tennessee. The Company produces light structural steel products ranging in
size from three to eight inches at the Louisiana Facility and merchant bar
products ranging from one-half to four inches at the Tennessee Facility. The
Company estimates that it currently has aggregate annual steel melting
capacity of approximately 610,000 tons and finished product rolling capacity
aggregating approximately 800,000 tons, with approximately 550,000 tons at the
Louisiana Facility and approximately 250,000 tons at the Tennessee Facility,
depending on the product mix. The Company has been increasing its production
at the Tennessee Facility, and for the twelve months ended March 31, 1998, the
Company shipped 697,943 tons of steel products, generating net sales of $251.8
million and Adjusted EBITDA (as defined) of $32.0 million.
The Louisiana Facility, which was constructed in 1981 at a cost of $243
million, is a minimill consisting of an electric arc furnace, a rolling mill,
climate controlled warehouse facilities, and a deep-water dock on the
Mississippi River. A "minimill" is a relatively low-cost steel production
facility which uses steel scrap rather than iron ore as its basic raw
material. In general, minimills recycle scrap using electric arc furnaces,
continuous casters, and rolling mills. The Louisiana Facility's minimill
includes a Krupp computer-controlled, electric arc furnace utilizing water-
cooled sidewalls and roof, two Voest-Alpine four-strand continuous casters, a
computer supervised Italimpianti reheat furnace, and a 15-stand Danieli
rolling mill.
The Tennessee Facility was acquired and re-started by the Company in July
1995 following the purchase by the Company of substantially all of the assets
of the TVSC. The rolling mill at the Tennessee Facility includes a computer
supervised reheat furnace, a 16-stand rolling mill and automated
straightening, continuous cut-to-length, stacking and bundling equipment.
Since the acquisition, the Company has retrained the workforce, improved the
profitability of the product mix, enhanced operational efficiencies and
increased capacity utilization. The Tennessee Facility has been profitable
since July 1997, and the Company expects continued operational improvements
should result in higher capacity utilization, lower costs per ton and
additional sales volume.
The Company purchases most of its scrap in the open market from a large
number of steel scrap dealers, although the Company also operates an
automobile shredder to produce some of the scrap used in its operations. At
the Louisiana Facility, the Company uses steel scrap to produce finished steel
in a variety of shapes, including angles, flats, channels, standard beams, and
wide flange beams. At the Tennessee Facility, the Company rolls billets to
produce merchant bar products, including angles, flats, rounds, and squares,
and also has the capability to produce rebar. The merchant bar product mix of
the Tennessee Facility extends and complements the Company's Louisiana
Facility product line. The Company's products are used for a wide range of
commercial and industrial applications.
The location of the Company's production and distribution facilities allows
the Company to serve customers across a wide geographic area, including its
primary markets in the Southeast, the lower Midwest, the Northeast, the Mid-
Atlantic and the Appalachian states. The Company also sells to customers in
the West Coast region, Canada, Mexico and other overseas locations. The
Company sells its products to over 550 customers, the majority of which are
steel service centers, in 44 states, Canada, Mexico, and overseas.
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INDUSTRY OVERVIEW
Finished steel products consist of flat rolled and long products. Flat
rolled products generally consist of hot rolled, cold rolled, and coated sheet
and coil that are principally used in the automotive, construction, packaging,
electrical equipment and appliance manufacturing industries. The Company does
not produce any flat rolled products. Long products generally consist of
structural shapes, rebar, and bar and wire products. Structural shapes are
principally used for infrastructure, commercial and home construction, and
heavy manufacturing. Rebar is generally used for infrastructure projects,
parking garages, driveways, sidewalks, and swimming pools. Bar products are
used in various manufacturing and construction applications, and wire products
are used primarily in the electrical products, fencing, power generation and
distribution, and retail and construction industries.
The Company produces light structural and merchant bar products. The Company
estimates that in 1997 it accounted for approximately 16% of United States
structural products shipments, excluding flats and wide flange beams (which
the Company does produce), and approximately 3% of the merchant bar products
market. According to 1997 data compiled by the American Iron and Steel
Institute, overall domestic demand for products in the markets in which the
Company competes, measured by apparent consumption, exceeded domestic supply.
In 1997, industry sources estimate that domestic shipments of the Company's
primary products, structural products, excluding flats and wide flange beams,
totaled 2.7 million tons while demand was an estimated 2.9 million tons.
Domestic shipments of hot rolled bar totaled 8.0 million tons while demand was
8.9 million tons.
The primary determinants of a customer's purchase decision for light
structural shapes and merchant bar products are price, availability, quality
and customer service. Timely delivery required by customers to maintain
efficient inventory levels as well as high shipping costs for these products
relative to their selling price typically limit the geographic area which can
be economically served by a particular mill. As a result, a structural or bar
products mill in one region of the United States may not necessarily compete
with a similar mill in another region. Likewise, in recent years imports have
not posed a significant threat to the markets served by the Company. According
to industry sources, in 1997 imports accounted for only an estimated 11% of
the market for structural products, excluding flats and wide flange beams,
7.4% of the bar sized light structurals market and 14% of the market for hot
rolled bar products.
COMPETITIVE STRENGTHS
Advantageous Geographic Locations. The Company's production and distribution
facilities are positioned to provide the Company with access to a broad
geographic customer base and are strategically located to reduce
transportation costs for raw materials and finished products. The Louisiana
Facility, which includes a deep-water dock, is strategically located on the
Mississippi River, which reduces the Company's transportation costs and
enhances its competitive position. Both scrap and finished products may be
shipped to and from the Louisiana Facility by barge, normally the least costly
method of transportation in the steel industry. The Company also believes that
the location of the Louisiana Facility on the Mississippi River and its
network of three inland waterway inventory stocking warehouses in Chicago,
Tulsa and Pittsburgh enable it to access remote markets for its products on a
cost-effective basis. The Louisiana Facility's deep-water dock also provides
the Company with low-cost alternative sources of scrap from the Caribbean and
elsewhere, partially protecting the Company from domestic scrap price
increases.
Strong Market Position. The Company believes that it is currently the second
largest producer of structural steel products, excluding flats and wide flange
beams, in the United States and estimates that it supplied approximately 16%
of shipments of such products in the United States in 1997. In the Company's
primary geographic markets, the Company has an even larger market share as
producers of light structural products tend to serve customers located near
their facilities. The
50
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Company believes that its strong market position and extensive distribution
network provide it with competitive market intelligence and other advantages
from scale and vertical integration relative to smaller competitors.
Improving Operating Performance. Through efficiency and productivity
improvement efforts and targeted capital expenditures, the Company has
generated significant gains in its performance at its production facilities
over the past several years. In the first six months of fiscal 1998, the
Company achieved record productivity levels at the Louisiana and Tennessee
Facilities following record years in terms of shipments of finished products
from both facilities in fiscal 1997. The Louisiana Facility and Tennessee
Facility shipped 529,707 and 133,968 tons of rolled finished products in
fiscal 1997, respectively, and 288,138 and 74,568 tons of rolled finished
products in the first six months of fiscal 1998, respectively, as opposed to
rolled finished product shipments of 504,944 and 75,125 tons, respectively, in
fiscal 1996. Productivity has improved at the Louisiana Facility rolling mill
such that the Company had no internally produced billets available for
external sales in the first six months of fiscal 1998, despite record
production levels in the melt shop. Since its acquisition of the Tennessee
Facility in fiscal 1995, the Company has invested approximately $7.7 million
in projects to improve the facility's productivity and efficiency, which are
beginning to generate benefits. In fiscal 1997, the Tennessee Facility
realized a 4% improvement in its yield of shapes rolled from billets over
fiscal 1996, creating savings of $6 per ton. The Tennessee Facility also
realized a 51% increase in finished product tons produced, a 15% reduction in
conversion cost and a 49% increase in productivity in fiscal 1997 over fiscal
1996 levels. Such improvements continued in the first six months of 1998 as
the Tennessee Facility realized a $3 per ton conversion cost improvement over
the corresponding fiscal 1997 period.
Broad Product Offering. The Company's broad product range of light
structural steel products makes the Company an attractive supplier for steel
service centers, which prefer a supplier that offers a full range of products.
These products are used in a variety of applications and industries, including
commercial, infrastructure and home construction, and truck, trailer and ship
manufacturing and construction. The Company believes that the breadth of its
products and markets mitigates the impact of adverse conditions in any one of
the Company's markets on its overall performance.
Advantageous Labor Arrangements. The Company believes that the labor
agreements it recently entered into with its Louisiana and Tennessee
workforces advantageously position the Company for future cost savings and
efficiency enhancing opportunities. After a lengthy labor disruption at the
Louisiana Facility was settled in late 1996, the Company entered into a six-
year labor contract with the Louisiana workforce that provides for no
compulsory wage increases other than through the Company's productivity
incentive and profit-sharing plans. In 1997, the Company entered into a
similar seven and one-half year labor contract with its Tennessee workforce.
The Company believes that these incentive programs have contributed to the
record productivity levels achieved by the Company in the first six months of
fiscal 1998. As part of its strategic employee development efforts, the
Company is committed to developing a high performance work culture through
extensive training, a "pay-for-performance" culture, and individual
development efforts incentivized through a "pay-for-knowledge" program. The
Company believes that the workforce, through this program, will have an impact
in achieving operational and productivity improvements.
Experienced and Committed Management Team. Senior management of the Company
average over 12 years with the Company and 17 years in the steel industry.
Management has demonstrated its ability to successfully manage and incentivize
its labor force, achieve improvements in operating results in challenging
market conditions and integrate acquired operations.
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BUSINESS STRATEGY
The Company's objective is to continue to improve operating efficiencies and
reduce costs through improved production processes, higher capacity
utilization, and targeted capital investments. The Company will also consider
strategic acquisitions, such as the acquisition of the Tennessee Facility,
which complement or expand the Company's current operations or add finished
goods or raw material capacity.
Continue Operating Efficiency and Productivity Improvements. The Company
intends to continue to improve operating results through increases in
productivity and capacity utilization, reduced costs, and increased sales of
high margin shape products. Through such efforts the Louisiana Facility
lowered its labor cost by $15 per ton from 1992 through 1997, despite a $3 per
ton increase in 1997 attributable to costs incurred from the return of
previously striking employees. The Company believes that conversion cost per
ton will be reduced further through capital investments and production
incentives under its new labor contract. Additionally, the Company believes
that at a minimal capital cost, it can expand its rolling capacity at the
Louisiana Facility to approximately 600,000 tons per year. At the Tennessee
Facility, the Company will continue to expand its merchant bar production. In
fiscal 1997, the Tennessee Facility, which has an estimated annual rolling
capacity of 250,000 tons, produced 144,609 tons of merchant bar products, a
51% increase over the prior year, and its production is expected to reach over
170,000 tons in fiscal 1998. The Company expects to commit approximately $4.0
million on various capital projects at the Tennessee Facility in fiscal 1998
to continue to reduce costs and improve productivity. The Company will
continue to review capital spending opportunities that will benefit production
while reducing costs and expanding product mix in its customer markets.
Balance Melting and Rolling Capacity. The Company has approximately 610,000
tons of annual melting capacity compared to approximately 800,000 tons of
annual rolling capacity, and as a result, must meet a portion of its steel
billet requirements through purchases in the open market. The Company plans to
increase the proportion of lower cost, internally produced billets supplied to
its rolling operations through increased melt capacity at its Louisiana
Facility. The Company is in the process of installing a ladle metallurgy
furnace at the Louisiana Facility that is expected to increase melt shop
capacity to approximately 650,000 tons at a capital cost of approximately $3.2
million. The LMF station is expected to allow better sequencing of melts by
balancing the melting furnace operation with the continuous caster operation,
which the Company believes will generate approximately $500,000 to $1.0
million in annual cost savings by enabling the melt furnace to run at an
optimal rate. Management is also developing plans to implement a major melt
shop upgrade which is expected to be completed in approximately two and one
half years and would expand melt shop capacity to approximately 850,000 tons
per year. The furnace upgrade would increase the size of the furnace to accept
a larger scrap bucket, reducing the number of buckets per charge, and would
replace the existing 60 MVA transformer with an ultra-high-powered 80 MVA
transformer. The furnace upgrade is expected to generate cost savings of
approximately $7.0 to $8.0 million per year. Upon the completion of these
capital projects, the Company expects the Louisiana melt shop to have the
capacity to supply the rolling mills at the Louisiana Facility and the
Tennessee Facility with all of their billet requirements. In 1997, the melt
shop at the Louisiana Facility supplied the rolling mill at the Tennessee
Facility with only 17% of its billet requirements.
Improve Scrap Sourcing. The Company continually seeks to increase its
control over and reduce the cost of its scrap supply. In late 1995, in order
to reduce its reliance on third parties for prepared scrap metal, the Company
installed an automobile shredder on a site adjacent to the Louisiana Facility.
During 1997, the automobile shredder supplied the Company with 12% of its
total scrap requirements and all of its shredded scrap requirements at
significantly reduced costs. Since its commencement of operations, the
automobile shredder has continued to improve its efficiency and reduce costs,
lowering the Company's cost to produce shredded scrap by 5% for the first six
months
52
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of fiscal 1998 over the same period in fiscal 1997. The automobile shredder
currently operates on one shift at a production run-rate of 100,000 tons of
shredded scrap per year, and the Company intends to eventually increase its
output. To supplement its shredded scrap activities, the Company has recently
initiated the processing of other grades of scrap, including demolition scrap
(scrap from tanks, barges and railcars), to further reduce its scrap costs.
Additionally, the Company has procured approximately 25% of its scrap at
prices lower than those offered by large scrap dealers by sourcing a portion
of its scrap through smaller local dealers. The Company plans to expand the
scope of these activities and seek opportunities to improve its scrap supply
position in the future.
Pursue Strategic Acquisitions. The Company may, from time to time, seek
strategic acquisitions, such as the acquisition of the Tennessee Facility in
1995. Attractive candidates include steel producers and recycling operators
which provide the opportunity to accelerate growth while complementing or
expanding the Company's current operations.
Realize Tax Benefits of Net Operating Loss Carryforwards. The Company will
seek to maximize and accelerate its utilization of net operating loss
carryforwards to offset taxable earnings achieved through efficiency
improvements, cost savings and acquisitions. As of September 30, 1997, the
Company had approximately $280 million of net operating loss carryforwards
which could be used to offset taxable earnings of the Company, including the
earnings of acquired entities.
MANUFACTURING PROCESS AND FACILITIES
Steel scrap is the principal raw material used by the Company in its
production process. The Company purchases most of its scrap needs on the open
market and transports it to the Louisiana Facility by barge, rail, and truck,
and stores it in a scrap receiving yard. With the use of a newly installed
automobile shredder, the Company is able to process all of its shredded scrap
requirements at significantly reduced costs, constituting approximately 12% of
its steel scrap requirements. The scrap is transported to the Louisiana
Facility's melt shop by rail or truck, where it is melted in a 99-ton capacity
alternating current electric arc furnace which heats the scrap to
approximately 3100(degrees)F. During the scrap melting and refining process,
impurities are removed from the molten steel. After the scrap reaches a molten
state, it is poured from the furnace into ladles, where adjustments of
alloying elements and carbon are made to obtain the desired chemistry. The
ladles of steel are then transported to one of two four-strand continuous
casters in which the molten steel is solidified in water-cooled molds. The
casters produce long strands of steel that are cut by torch into billets
(semi-finished product), moved to a cooling bed and marked for identification.
After cooling, the billets are transferred to the Louisiana rolling mill for
further processing. Billets in excess of the Louisiana Facility's rolling mill
requirements are either shipped to the Tennessee Facility via rail or sold to
other processors.
In the Louisiana Facility's rolling mill, the billets are reheated in a
walking beam furnace with recuperative burners. After the billets are reheated
to approximately 2000(degrees)F, they are rolled through up to fifteen mill
stands which form the billets into the dimensions and sizes of the finished
products. The heated finished shapes are placed on a cooling bed and then
straightened and cut into either standard 40-foot lengths or specific customer
lengths. The shapes are stacked into 2 1/2 to 5-ton bundles, processed (if
needed) through an off-line saw to 20 foot standard lengths, and placed in a
climate-controlled warehouse where they are subsequently shipped to the
Company's stocking locations via barge or to customers directly via truck,
rail, or barge.
The Tennessee Facility's rolling mill uses steel billets which are received
by rail, truck, or barge and then stored in a billet yard. The billets are
reheated in a pusher reheat furnace with recuperative burners before being
rolled. Once the billets are heated to approximately 2000(degrees)F, they are
rolled through up to sixteen mill stands which form the billets into the
dimensions and sizes of the finished products. The heated finished shapes are
placed on a cooling bed and then straightened and cut into
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the appropriate customer lengths. The shapes are then stacked into 2 1/2 ton
bundles and placed in a climate-controlled warehouse where they are
subsequently shipped to customers directly via truck or rail.
PRODUCTS
The Louisiana Facility is capable of producing a variety of light structural
steel products and the Tennessee Facility is capable of producing a wide range
of merchant bar products and rebar.
<TABLE>
<CAPTION>
SIZE RANGE (IN
INCHES)
-------------------
PROFILE TENNESSEE LOUISIANA
------- --------- ---------
<S> <C> <C>
Equal Angles.......................................... 3/4-2 1/2 2-6
Flats................................................. 1-4 4-8
Channels.............................................. N/A 3-8
Squares............................................... 1/2-1 N/A
Rounds................................................ 1/2-2 N/A
Unequal Angles........................................ N/A 4-7
Rebar (#3--#11)....................................... 3/8-1 3/8 N/A
Standard Beams........................................ N/A 3-6
Wide Flange Beams..................................... N/A 4-8
</TABLE>
The light structural shapes, merchant bar products and rebar produced by the
Company are used for a wide range of commercial and industrial applications,
including the construction and maintenance of petrochemical plants, barges and
light ships, railcars, trucks and trailers, rack systems, tunnel and mine
support products, joists, sign and guardrail posts for highways, power and
radio transmission towers, and bridges. Rebar is used in highway and bridge
construction, concrete structures such as parking garages, and home
construction for driveways, sidewalks and swimming pools.
The Company plans to continue to emphasize the production of light
structural shapes and merchant bar products. Rebar was last produced in 1995.
Shape margins are historically considerably higher than those of rebar. The
Tennessee Facility will produce rebar when appropriate opportunities exist.
The Company's shapes are produced to various national specifications, such
as those set by the American Society for Testing and Materials, or to specific
customer specifications which have more stringent quality criteria. In
addition, the Company is one of a few minimills that is certified by the
American Bureau of Shipping. The Company certifies that its products are
tested in accordance with nuclear, state highway, bridge and military
specifications. The Company's products are also certified for state highway
and bridge structures.
CUSTOMERS AND SALES
The Company has approximately 550 customers in 44 states, Canada, Mexico,
and overseas. The majority of the Company's finished products (approximately
64% in fiscal 1997) are sold to domestic steel service centers, while the
remainder are sold to original equipment manufacturers (approximately 25% in
fiscal 1997) and export customers (approximately 11% in fiscal 1997). Steel
service centers warehouse steel products from various minimills and integrated
mills and sell combinations of products from different mills to their
customers. Some steel service centers also provide additional labor-intensive
value-added services such as fabricating, cutting or selling steel by the
piece rather than by the bundle. Rebar, when produced, will be selectively
sold to a few customers who are not necessarily part of the existing customer
base.
In fiscal 1997, the Company's top ten customers accounted for approximately
39% of total shipments. No single customer accounted for greater than 10% of
total sales. The Company believes
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<PAGE>
that it is not dependent on any customer and that it could, over time, replace
lost sales attributable to any one customer.
The Company's products are sold domestically and in Canada, Mexico, and
overseas on the basis of availability, quality, service, and price. The
Company maintains a real-time computer information system, which tracks prices
offered by competitors, as well as freight rates from its customers to both
the Company's stocking locations and the nearest competitive facilities. A new
system that allows the customer to manage its inventory needs at the Company
was recently implemented at the location of a major customer. This system,
which interfaces with the customer's system, reduces overhead and is intended
to increase sales for the Company. The system also provides the customer with
just-in-time inventory capabilities. The Company expects to expand use of this
system and believes that this system gives it a competitive advantage.
Although sales of shapes tend to be slower during the winter months due to
the impact of winter weather on construction and transportation activities and
during the late summer due to planned plant shutdowns of end-users,
seasonality has not been a material factor in the Company's business. The
Company's backlog of unfilled cancelable orders for shapes totaled $110
million as of September 30, 1997 and $63 million as of September 30, 1996. As
of February 28, 1998, the Company's backlog totaled $137 million.
The level of billet sales to third parties is dependent on the Company's
billet requirements and worldwide market conditions, which may vary greatly
from year to year. In the past three fiscal years the Company has consumed
substantially all of its billet production resulting in minimal billet sales
to third parties.
DISTRIBUTION
The Louisiana Facility, which includes a deep-water dock, is strategically
located on the Mississippi River, which the Company believes enhances its
competitive posture by reducing its overall transportation costs because it
can receive steel scrap and ship its product by barge, normally the least
costly method of transportation in the steel industry. The Company also
believes that the location of its minimill on the Mississippi River and its
network of inland waterway warehouses enable it to access markets for its
products that would otherwise be uneconomical to the Company due to the high
freight costs of light structural products relative to their end selling
price. The Company operates three inventory stocking warehouses in Chicago,
Tulsa, and Pittsburgh, which complement its operations in Louisiana and
Tennessee. These facilities, each of which is equipped with an inland waterway
dock, enable the Company to significantly increase its marketing territory by
providing storage capacity for its finished products in three additional
markets and by allowing the Company to meet customer demand far from its
Louisiana minimill and Tennessee rolling mill facilities on a timely basis.
From these locations, product is primarily distributed by truck. In addition,
the Company makes rail shipments to some customers, primarily those on the
West Coast and in Mexico. With the recent completion of a rail spur into the
Louisiana warehouse, the Company has expanded rail shipment.
The Louisiana Facility's deep-water dock enables the Company to load vessels
or ocean-going barges for overseas shipments, giving the Company low cost
access to overseas markets. Additionally, the dock enables the Company to
access scrap from the Caribbean and South and Central America, an important
strategic factor which mitigates the impact of fluctuations in domestic scrap
prices on the Company's performance. Since the minimill is only 35 miles from
the Port of New Orleans, smaller quantities of shapes or billets can be
shipped overseas on cargo ships from that port. The Company believes it has a
freight cost advantage over land-locked domestic competitors in serving the
export market. This advantage permits the Company to compete with foreign
minimills in certain export markets. In recent years, due to strong domestic
margins, the Company has only occasionally accessed overseas markets.
55
<PAGE>
The Tennessee Facility provides access for the Company to the Appalachian
states and the lower Midwest, plus additional access to the upper Midwest, the
Southeast and the Mid-Atlantic regions. The Tennessee Facility's product line
can be distributed through the Louisiana Facility or through its distribution
centers in Chicago, Pittsburgh, and Tulsa. Currently, the Tennessee Facility
is only using the Chicago stocking location. The Tennessee Facility's location
is accessible by all forms of transportation; the plant is in close proximity
to two major interstate highways, is four miles from a barge dock, and is
situated on the main line of the Norfolk Southern Railroad.
The Company believes that the elimination of current duties in Canada and
Mexico as a result of the passage of the North American Free Trade Agreement
("NAFTA") will increase the competitiveness of the Company's products compared
to locally produced products in such countries. During fiscal 1997, 1996, and
1995, 10%, 9% and 10% respectively, of the Company's tons shipped were
exported to Canada and Mexico. There can be no assurance, however, that there
will be an increase in the Company's shipments to Canada and Mexico as a
result of the passage of NAFTA.
COMPETITION
The Company competes in the markets for light steel structural shapes and
bar shape products. The Company does not currently compete with minimill flat
rolled producers, most domestic integrated steel producers, or rebar
manufacturers.
Structural Shapes. The Louisiana Facility's location on the Mississippi
River, as well as the Company's stocking locations in three additional regions
of the country, provide access to large markets in the Eastern, Midwestern,
Southern, and Central portions of the United States. As a result, the Company
competes in the structural shape market with several major domestic minimills
in each of these regions. Depending on the region and product, the Company
primarily competes with Nucor Corporation, Structural Metals, Inc., North Star
Steel Co., Lake Ontario Steel Corporation, Birmingham Steel, Ameristeel, and
Northwestern Steel and Wire Company, among others. Certain of these
competitors have significantly greater financial resources than the Company.
Bar Shapes. In fiscal 1998, the Company expects to sell most of the
Tennessee Facility's yearly production of bar shape products in its regional
market. Competitors in the region are Ameristeel, Structural Metals, Inc.,
Nucor Corporation, Birmingham Steel, Roanoke Electric, North Star Steel Co.,
SMI/Cayce Steel, and Marion Steel.
Rebar. The Tennessee Facility will produce rebar in varying quantities
depending on economic and market trends. The Tennessee Facility's main
competitor will be AmeriSteel in Knoxville, Tennessee. Ameristeel, however,
fabricates a large portion of its rebar in competition with independent
fabricators who would be the target customers of the Tennessee Facility.
Independent fabricators opting not to buy from a competitor may create a
significant niche for the Tennessee Facility's rebar. Other competitors
include SMI/Cayce Steel, Birmingham Steel, Nucor Corporation, and Co-Steel.
Foreign steel producers historically have not competed significantly with
the Company in the domestic market for shape sales due to higher freight costs
relative to end product prices. Foreign competition could increase, however,
as a result of changes in currency exchange rates and increased steel
subsidies by foreign governments.
RAW MATERIALS
The Company's major raw material is steel scrap, which is generated
principally from industrial, automotive, demolition, railroad, and other scrap
sources and is primarily purchased directly by the Company in the open market
through a large number of steel scrap dealers. The Company is able to
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<PAGE>
efficiently transport scrap from suppliers throughout the inland waterway
system and through the Gulf of Mexico, permitting it to take advantage of
scrap purchasing opportunities far from its minimill, and to protect itself
from supply imbalances that develop from time to time in specific local
markets. In addition, unlike many other minimills, the Company, through its
own scrap purchasing staff, buys scrap primarily from scrap dealers and
contractors rather than through brokers. The Company believes that its
enhanced knowledge of scrap market conditions gained by being directly
involved in scrap procurement on a daily basis, coupled with management's
extensive experience in metals recycling markets, gives the Company a
competitive advantage. The Company does not currently depend upon any single
supplier for its scrap. No single vendor supplies more than 10% of the
Company's scrap needs. The Company, on average, maintains a 25-day inventory
of steel scrap.
The Company has a program of buying directly from local scrap dealers for
cash. Through this program, the Company has procured approximately 25% of its
scrap at prices lower than those of large scrap dealers. The Company has also
installed an automobile shredder, which is located at a site adjacent to the
Louisiana Facility, to produce shredded steel scrap, one of several types used
by the Company. MRR, a division of the Company, began operating the automobile
shredder in late fiscal 1995. It is the Company's intention to expand MRR's
business activities to processing other types of unprepared scrap which would
be used by the Company, thereby decreasing the Company's demand on third
parties for prepared scrap metal. During fiscal 1997, MRR supplied 12% of the
Company's total scrap requirements.
The cost of steel scrap is subject to market forces, including demand by
other steel producers. The cost of steel scrap to the Company can vary
significantly, and product prices generally cannot be adjusted in the short-
term to recover large increases in steel scrap costs. Over longer periods of
time, however, product prices and steel scrap prices have tended to move in
the same direction.
The long-term demand for steel scrap and its importance to the domestic
steel industry may be expected to increase as steel makers continue to expand
scrap-based electric arc furnace capacity. For the foreseeable future,
however, the Company believes that supplies of steel scrap will continue to be
available in sufficient quantities at competitive prices. In addition, a
number of technologies exist for the processing of iron ore into forms which
may be substituted for steel scrap in electric arc furnace-based steel making.
Such forms include direct-reduced iron, iron carbide, and hot-briquetted iron.
While such forms may not be cost competitive with steel scrap at present, a
sustained increase in the price of steel scrap could result in increased
implementation of these alternative technologies.
The Tennessee Facility currently purchases billets on the open market to
supply part of its billet requirements. The Company currently has competitive
billet supply contracts with several vendors which expire on December 31,
1998.
The Company has not experienced any shortages or significant delays in
delivery of these materials. The Company believes that an adequate supply of
raw materials will continue to be available.
ENERGY
The Company's manufacturing process at the Louisiana Facility consumes large
volumes of electrical energy and natural gas. The Company purchases its
electrical service needs from a local utility company pursuant to a contract
originally executed in 1980 and extended in 1995 for a six year period. The
base contract is supplemented to provide lower cost off-peak power and known
maximums in higher cost firm demand power. In addition, the Company receives
discounted peak power rates in return for the utility company's right to
periodically curtail service during periods of peak demand. These curtailments
are generally limited to a few hours and, in prior years, have had negligible
impact on operations; however, the Louisiana Facility experienced an unusual
number and
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<PAGE>
duration of power curtailments in the fourth quarter of fiscal 1996 and 1997
due to generating and transmission failures at the local utility company.
The Louisiana Facility's contract with the local utility company contains a
fuel adjustment clause which allows the utility company to pass on to its
customers any increases in price paid for the various fuels used in generating
electrical power and other increases in operating costs. This fuel adjustment
applies to all of the utility company's consumers. In the fourth quarter of
fiscal 1997, the Company experienced high fuel adjustment cost due to the
utility company passing on the cost for an extended nuclear unit shutdown. If
the price that the utility company pays for fuel, such as natural gas,
increases, then the Louisiana Facility's energy expense could increase. The
Company believes that its utility rates at the Louisiana Facility have, in the
past, been competitive in the domestic minimill steel industry; however, due
to the aforementioned factors, the Company believes that its utility rates
were not as competitive in fiscal 1997 and late fiscal 1996 as they had
previously been. To a lesser extent, the Louisiana Facility's manufacturing
Facility consumes quantities of natural gas via two separate pipelines serving
the facility. The Company purchases its natural gas on a month-to-month basis
from a variety of suppliers. Natural gas expense increased slightly from 1996
to 1997. Historically, the Louisiana Facility has been adequately supplied
with electricity and natural gas and does not anticipate any significant
curtailments in its operations resulting from energy shortages.
The Tennessee Facility's manufacturing process consumes both electricity and
natural gas. The Tennessee Facility purchases its electricity from a local
Tennessee utility company. Historically, the Tennessee Facility's local
utility company has had one of the lowest power rates in the country. In 1995,
the Company negotiated a ten year contract at a favorable rate with the local
utility company and has no reason to believe that a similar contract will not
be renewed upon similar terms. The Harriman, Tennessee area is served by only
one gas pipeline. Currently, the Tennessee Facility does not have a direct
interconnect with this pipeline so all gas for the plant must be purchased
through a Local Distribution Company ("LDC"). Thus, the Company must pay the
wellhead price plus transportation charges and the LDC mark up. The Company
believes this premium adds approximately $1 per ton to the Tennessee
Facility's cost structure. (This is not an uncommon arrangement throughout the
industry.) In fiscal 1997, natural gas prices per ton charged increased by $1
per ton due largely to market forces.
ENVIRONMENTAL MATTERS
Like others in the industry, the Company's minimill is required to control
the emission of dust from its electric arc furnaces that contains lead,
cadmium, and chromium, which are considered hazardous. The Company is subject
to various Federal, state and local laws and regulations, including, among
others, the Clean Air Act, the 1990 Amendments, the Resource Conservation and
Recovery Act, the Clean Water Act and the Louisiana Environmental Quality Act,
and the regulations promulgated in connection therewith, concerning the
discharge of contaminants which may be emitted into the air and discharged
into the waterways, and the disposal of solid and/or hazardous waste such as
electric arc furnace dust. The Company has a full-time manager who is
responsible for monitoring the Company's procedures for compliance with such
rules and regulations. The Company does not anticipate any substantial
increase in its costs for environmental remediation or that such costs will
have a material adverse effect on the Company's competitive position,
operations or financial condition.
In the event of a release or discharge of a hazardous substance to certain
environmental media, the Company could be responsible for the costs of
remediating the contamination caused by such a release or discharge. In the
last five years, the only environmental penalty assessed to the Company was a
$2,500 fine levied in 1996 in conjunction with an Air Quality Notice of
Violation issued by the Louisiana Department of Environmental Quality (the
"LDEQ"). During fiscal 1997, the USPIRG filed a lawsuit in Louisiana against
the Company for alleged violations of air quality regulations. USPIRG is
asking the court to award it appropriate legal fees and to assess appropriate
penalties against the
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<PAGE>
Company. The Company believes it has meritorious defenses to these charges.
The Company believes it is in substantial compliance with applicable air
quality environmental requirements.
The Company plans to close two storm-water retention ponds at the Louisiana
Facility's minimill. The Company has conducted limited analysis of the
effluents of these ponds, and although this analysis has indicated that there
is a limited potential for contamination, the Company does not believe that
future remediation costs, if any, will be material. The LDEQ has approved a
sampling plan to analyze the contents of the pond sediments which could
indicate a greater level of contaminants than suggested by the Company's
limited testing. In such case, the costs of clean up could be higher than the
Company now believes. Until such sampling is completed, however, it is
impossible to estimate such costs.
The Resource Conservation and Recovery Act regulates the management of
emission dust from electric arc furnaces. The Company currently collects the
dust resulting from its melting operation through an emissions control system
and disposes of it through an approved waste recycling firm. The dust
management costs were approximately $2.0 million in fiscal 1995, $2.0 million
in fiscal 1996 and $1.3 million in fiscal 1997. The recycling costs declined
in fiscal 1997 due to increases in recycling competition and implementation of
a new dust recycling contract. In fiscal 1990, a small quantity of dust
containing very low concentrations of radioactive material inadvertently
entered the scrap stream on one occasion. All of this dust was captured by the
emissions control system and is being held pending a decision as to its
appropriate disposal. The Company has estimated that the ultimate disposal
costs of this dust will be approximately $500,000.
TVSC, the prior owners of the Tennessee Facility, had entered into the TVSC
Consent Order with the Tennessee Department of Environment and Conservation
under its voluntary clean-up program. The Company, in acquiring the assets of
TVSC, has entered into the Bayou Steel Consent Order, which is supplemental to
the previous TVSC Consent Order and does not affect the continuing validity of
the TVSC Consent Order. The ultimate remedy and clean-up goals will be
dictated by the results of human health and ecological risk assessment which
are components of a required, structured investigative, remedial, and
assessment process. The definitive asset 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 activities pursuant to
the TVSC Consent Order (with an additional $1.0 million to be held for one
year for such costs and other costs resulting from a breach of TVSC's
representations and warranties in the agreement). As of March 31, 1998,
investigative, remedial, and risk assessment activities have resulted in
expenses of approximately $1.3 million. At this time, the Company does not
expect the costs of resolution of the TVSC Consent Order to exceed funds
provided by the escrow agreement. In July 1997, TVSC's former bank lenders and
certain other parties filed an adversary proceeding against the Company in the
United States Bankruptcy Court. The banks are contesting certain of the
Company's reimbursement claims, aggregating approximately $1.1 million, in
connection with remediation work performed by the Company, alleging that much
of the remediation work was not performed prior to the first anniversary of
the closing date of the acquisition and that the work performed exceeded the
scope of the remediation work required under the TVSC Consent Order. If the
banks are successful in their claims, the Company may incur costs for
remediation work that will not be reimbursed from the escrow fund. Except for
the foregoing consent orders, the Company believes that it is currently in
material compliance with all Environmental Laws.
Environmental Laws have been enacted, and may in the future be enacted, to
create liability for past actions that were lawful at the time taken, but that
have been found to affect the environment and to create rights of action for
environmental conditions and activities. Under Superfund legislation, a
company that has sent waste to a third party disposal site could be held
liable for the entire cost of remediating such site regardless of fault or the
lawfulness of the original disposal activity and also for related damages to
natural resources. As of March 31, 1998, the Company has not received any
notice letters under Superfund legislation.
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<PAGE>
The Company's future expenditures for installation of environmental control
facilities are difficult to predict. Environmental legislation, regulations
and related administrative policies are continuously modified. Environmental
issues are also subject to differing interpretations by the regulated
community, the regulating authorities and the courts. Consequently, it is
difficult to forecast expenditures needed to comply with future regulations.
Therefore, at this time, the Company cannot estimate those costs associated
with compliance and the effect the upcoming regulations will have on the
Company's competitive position, operations, or financial condition. In fiscal
1997, the Company spent approximately $200,000 on various environmental
capital projects. In fiscal 1998, the Company intends to spend approximately
$900,000 on various environmental capital projects. Furthermore, there can be
no assurance that material environmental liabilities will not be incurred by
the Company in the future or that future compliance with Environmental Laws
(whether those currently in effect or enacted in the future) will not require
additional expenditures by the Company or require changes to the Company's
current operations, any of which could have a material adverse effect on the
Company's results of operations and financial condition. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
SAFETY AND HEALTH MATTERS
The Company is subject to various regulations and standards promulgated
under the Occupational Safety and Health Act, which are administered by OSHA.
These regulations and standards are minimum requirements for employee
protection and health. It is the Company's policy to meet or exceed these
minimum requirements in all of the Company's safety and health policies,
programs, and procedures.
The Company knows of no other material safety or health issues.
EMPLOYEES
As of March 31, 1998, the Company had 583 employees, of whom 147 were
salaried office, supervisory and sales personnel, and 436 were hourly
employees. Approximately 415 are covered by labor contracts. During the later
part of October and early November of 1996, the Company began the process of
rehiring eligible employees that were previously on strike. All returning
employees have been integrated into the work force and there are no current
disputes with employees related to their employment, and the Company believes
its relations with employees to be good.
On March 21, 1993, the Union initiated a strike after the parties failed to
reach agreement on a new labor contract due to differences on economic issues.
As a result of a strategic contingency plan, the Company was able to avoid
complete suspension of operations by operating the minimill with fewer workers
and by utilizing a combination of temporary replacement workers, strikers who
returned to work, and salaried employees. On September 23, 1996, the Company
and Union entered into a settlement agreement which, among other issues,
resulted in a new six year labor contract. The Company considers the contract
terms to be favorable. The Company incurred in fiscal 1997 some one-time
expenditures, such as employment physicals and drug tests, training for
returning workers and existing workers, extra security, and legal expenses for
arbitration cases related to disciplinary action.
In August 1993, the Union announced a corporate campaign designed to bring
pressure on the Company from individuals and institutions with direct
financial or other interests in the Company. The Company filed a lawsuit in
federal court in Delaware under RICO against the Union for their conduct in
connection with this campaign. On October 29, 1997, the Company reached an
agreement with the Union, the effect of which was not material to the
financial position or results of operations of the Company.
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<PAGE>
In conjunction with the acquisition of the assets of TVSC the Union filed
certain charges with the NLRB. On August 16, 1996, the Company reached a
settlement with the Union which was approved by the NLRB. A seven and one half
year labor agreement was negotiated and ratified on May 16, 1997. The Company
considers the contract terms to be favorable.
PROPERTIES
The Company's principal operating properties are listed in the table below.
The Company believes that its properties and warehouse facilities are suitable
and adequate to meet its needs and that the size of its warehouse facilities
is sufficient to store the level of inventory necessary to support its level
of distribution.
<TABLE>
<CAPTION>
LOCATION PROPERTY
-------- --------
<S> <C>
LaPlace, Louisiana...... Approximately 287 acres of land, including a shredder,
melt shop, rolling mill, related equipment, a 75,000
square foot warehouse, and dock facilities situated on
state-leased water bottom in the Mississippi River under
a 45-year lease with 39 years remaining.
Harriman, Tennessee..... Approximately 198 acres of land, 175,000 square feet of
steel mill buildings, including a melt shop (which the
Company does not intend to use), a 39,600 square foot
warehouse, a rolling mill, and related equipment.
Chicago, Illinois....... Approximately 7 acres of land, a dock on the Calumet
River, and buildings, including a recently renovated
100,000 square foot warehouse.
Tulsa, Oklahoma......... 63,500 square foot warehouse facility with a dock on the
Arkansas River system. Located on land under a long-term
lease. The original term of the lease is from April 1,
1989 through March 31, 1999; the Company has two 10-year
Pittsburgh, renewal options through March 31, 2019.
Pennsylvania........... 112,000 square foot leased warehouse facility with a dock
on the Ohio River. The original term of the lease was
from January 1, 1987 through June 30, 1992; the Company
is in the second of three 5-year renewal options through
Louden County, June 30, 2007.
Tennessee.............. Approximately 25 acres of undeveloped land along the
Tennessee River, available for future use as a stocking
location.
</TABLE>
The principal asset comprising the Collateral is the Louisiana Facility. See
"Description of the First Mortgage Notes--Security." None of the other
properties described above serve as Collateral.
LEGAL PROCEEDINGS
The Company is not involved in any pending legal proceedings which involve
claims for damages exceeding 10% of its current assets. The Company is not a
party to any material pending litigation which, if decided adversely, would
have a significant impact on the business, income, assets, or operation of the
Company, and the Company is not aware of any material threatened litigation
which might involve the Company. See also "--Employees," "--Environmental
Matters," "--Safety and Health Matters," and the consolidated financial
statements of the Company and notes thereto included elsewhere herein.
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MANAGEMENT
Set forth below is information concerning the directors and executive
officers of the Company as of December 31, 1997. Directors of Bayou Steel
serve a term of one year, expiring in February 1999, or until their successors
are elected and qualified.
<TABLE>
<CAPTION>
NAME AGE CURRENT POSITION
---- --- ----------------
<S> <C> <C>
Howard M. Meyers........ 55 Chairman and Chief Executive Officer
Jerry M. Pitts.......... 46 President, Chief Operating Officer and Director
Richard J. Gonzalez..... 50 Vice President, Chief Financial Officer, Treasurer and Secretary
Timothy R. Postlewait... 47 Vice President of Plant Operations
Rodger A. Malehorn...... 55 Vice President of Commercial Operations
Henry S. Vasquez........ 47 Vice President of Human Resources
Lawrence E. Golub....... 38 Director
Jeffrey P. Sangalis..... 39 Director
Stanley S. Shuman....... 62 Director
Melvyn N. Klein......... 55 Director
Albert P. Lospinoso..... 61 Director
</TABLE>
Howard M. Meyers has been Director, Chairman of the Board, and Chief
Executive Officer of the Company since September 1986, and was also President
until September 21, 1994. Since 1984, Mr. Meyers has been a Director, Chairman
of the Board, Chief Executive Officer and President of Quexco Incorporated
("Quexco"), a privately owned company.
Jerry M. Pitts has been Director, President and Chief Operating Officer of
the Company since September 1994. He served as Executive Vice President and
Chief Operating Officer of the Company from 1991 to 1994. He served as
Executive General Manager of the Company from 1987 to 1991. From 1986 to 1987,
he served the Company as General Manager of Operations; from 1984 to 1986, he
was Superintendent of Melting Operations; and from 1980 to 1984, he was
General Foreman of Melting. Mr. Pitts worked in various management capacities
related to production and process engineering at U.S. Steel Corporation from
1974 to 1980.
Richard J. Gonzalez has been Vice President, Treasurer, and Chief Financial
Officer of the Company since July 1991 and Secretary of the Company since
September 1994. He served as General Manager, Finance of the Company from 1987
to 1991. He has served the Company since October 1983 in the capacities of
Data Processing Manager and Assistant to the Vice President of Finance and
Controller. From 1982 to 1983, he was Vice President and Chief Financial
Officer of Jimco, Incorporated. Prior to that, Mr. Gonzalez was a Manager in
the Consulting Division of the accounting firm of Arthur Andersen LLP for nine
years. Mr. Gonzalez spent three years in the U.S. Public Health Service and is
a certified public accountant.
Timothy R. Postlewait has been Vice President of Plant Operations of the
Company since July 1991. He served as General Manager, Plant Operations of the
Company from 1987 to 1991. He has served in management positions with the
Company as Superintendent, Melt Shop Operations from 1986 to 1987 and
Superintendent, Quality Assurance from 1981 to 1986. From 1977 to 1981, Mr.
Postlewait worked in management positions with Chaparral Steel Company, and
from 1972 to 1977, he worked with United Nuclear Corporation as a Senior
Engineer.
Rodger A. Malehorn has been Vice President of Commercial Operations of the
Company since July 1991. He served as General Manager, Commercial Operations
from 1987 to 1991. Mr. Malehorn has served in management-level positions with
the Company since April 1984. From 1981 to 1984, he was Vice President and
General Manager of Louisiana Scrap Metal Inc. Prior to that, Mr. Malehorn
worked for Luria Brothers & Co., Inc., a scrap recycling operation, for three
years and Lukens Steel Company for thirteen years in various management
positions relating to melt shop operations.
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<PAGE>
Henry S. Vasquez has been Vice President of Human Resources since September
1992. Prior thereto, he had been employed in various executive Human Resource
positions with Lyondell Petrochemical Inc. from April 1989 to April 1992; with
Frito Lay Company from August 1983 to April 1989; with Hydril Co. from May
1977 to August 1983; and with Stanco Industries from April 1975 to May 1977.
Lawrence E. Golub has served as a director of the Company since 1988. Mr.
Golub has been President of Golub Associates, Inc., an equity investment firm,
since August 1994. From September 1993 to August 1994, Mr. Golub was a
Managing Director of Bankers Trust Company in New York, New York. From
September 1992 to August 1993, Mr. Golub was a White House Fellow. Mr. Golub
was Managing Director of Wasserstein Perella Capital Markets from February
1990 to August 1992 and an officer of Allen & Company Incorporated, an
investment banking firm, from 1984 to February 1990. From February 21, 1991
until September 21, 1994, Mr. Golub served as a Director of the Company
elected by the Class B Common Stockholder.
Jeffrey P. Sangalis has served as a director of the Company since 1995. Mr.
Sangalis is a Partner and director of Rice Sangalis Toole & Wilson, Vice
President and Managing Director of Rice Mezzanine Lenders, L.P., Rice Partners
II, L.P. and RSTW Partners III, L.P., and Chairman and director of Jotan, Inc.
Stanley S. Shuman has served as a director of the Company since 1988. Mr.
Shuman is an Executive Vice President and Managing Director of both Allen
Holding, Inc. and Allen & Company Incorporated. Mr. Shuman is a director of
The News Corporation Limited, Hudson General Corporation, Global Asset
Management, U.S.A., and Sesac Inc.
Melvyn N. Klein has served as a director of the Company since 1988. Mr.
Klein has been a practicing attorney and a private investor in Corpus Christi,
Texas. He has been a director of Quexco since 1984. He is the sole
shareholder, sole director and President of JAAK Holding Corporation, the
Managing General Partner of GKH Partners, L.P., which is the sole General
Partner of GKH Investments, L.P., an investment fund; founder and principal of
Questor Partners Fund, L.P.; and a director of Anixter International, Inc.,
Santa Fe Energy Resources, and Hanover Compressor Company.
Albert P. Lospinoso has served as a director of the Company since 1988. Mr.
Lospinoso was Chairman of the Board of RSR Corporation ("RSR") a privately
owned, nonferrous metals recycle smelting and refining company with offices in
Dallas, Texas, and plants in Dallas, Texas; Middletown, New York;
Indianapolis, Indiana; and City of Industry, California from May 1996 to March
1997. He was Chief Executive Officer, President and director of RSR until May
1996. From July 1992 until July 1995, Mr. Lospinoso was President and Chief
Operating Officer of RSR, and for more than five years prior to that he was
the Executive Vice President, Chief Operating Officer and a director of RSR
and its predecessor companies. Since 1984, Mr. Lospinoso has been a director
of Quexco.
There are no family relationships among the directors and executive officers
of the Company.
DIRECTOR COMPENSATION
The Company pays each non-employee director $30,000 per year, payable in
quarterly installments, for serving as a director, plus expenses for each
meeting of the Board of Directors or a Committee of the Board that a director
attends. The Company does not compensate directors who are officers of the
Company for services as directors. Mr. Meyers and Mr. Pitts are the only
directors who are officers of the Company.
63
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Company's Compensation Committee are Messrs. Stanley S.
Shuman, Lawrence E. Golub, and Albert P. Lospinoso. No member of the
Compensation Committee has been an officer or employee of the Company. No
executive officer of the Company served in the last fiscal year as a director
or member of the compensation committee of another entity, one of whose
executive officers served as a director or on the Compensation Committee of
the Company.
EXECUTIVE COMPENSATION
The following table sets forth the compensation earned by the Company's
Chief Executive Officer and the four other most highly-compensated executive
officers for the fiscal years 1995 through 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL
COMPENSATION
----------------- ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1)
--------------------------- ---- ------ -------- ---------------
<S> <C> <C> <C> <C>
Howard M. Meyers......................... 1997 $502,488 $ 0 $ 0
Chairman and Chief 1996 474,675 0 0
Executive Officer 1995 465,504 0 0
Jerry M. Pitts........................... 1997 300,000 0 2,549
President and Chief 1996 225,000 0 2,477
Operating Officer 1995 225,000 112,500 1,538
Timothy R. Postlewait.................... 1997 166,000 0 2,249
Vice President 1996 150,000 0 2,062
of Plant Operations 1995 150,000 63,974 1,508
Richard J. Gonzalez...................... 1997 157,000 0 2,049
Vice President, Chief Financial 1996 147,000 0 1,855
Officer, Treasurer and Secretary 1995 147,000 77,910 1,489
Rodger A. Malehorn....................... 1997 150,000 0 1,751
Vice President of 1996 132,000 0 1,636
Commercial Operations 1995 132,000 60,065 1,457
</TABLE>
- --------
(1) Includes amounts contributed by the Company to a 401(k) Plan for matching
contributions. For fiscal 1997, the Company's contributions were $2,375
for Mr. Pitts, $2,075 for Mr. Postlewait, $1,875 for Mr. Gonzalez, and
$1,463 for Mr. Malehorn. Also includes the dollar value of term life
insurance premiums paid by the Company for the benefit of these officers.
FISCAL YEAR-END OPTION VALUES
The following table presents the value of unexercised options at September
30, 1997.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
SEPTEMBER 30, 1997 SEPTEMBER 30, 1997(1)
------------------------- -------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Howard M. Meyers............ 0 0 $ N/A $ N/A
Jerry M. Pitts.............. 18,000 12,000 9,000 6,000
Timothy R. Postlewait....... 9,000 6,000 4,500 3,000
Richard J. Gonzalez......... 9,000 6,000 4,500 3,000
Rodger A. Malehorn.......... 9,000 6,000 4,500 3,000
</TABLE>
- --------
(1) At September 30, 1997, the closing sales price for Bayou Steel's Class A
Common Stock on the American Stock Exchange was $4.875.
64
<PAGE>
EMPLOYEE BENEFIT PLANS
The following table specifies the estimated annual benefits upon retirement
under the Bayou Steel Corporation Retirement Plan (the "Retirement Plan") to
eligible employees of the Company of various levels of average annual
compensation and for the years of service classifications specified:
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
-------------------------------
AVERAGE ANNUAL COMPENSATION 10 20 30 40
--------------------------- ------- ------- ------- -------
<S> <C> <C> <C> <C>
$ 20,000................................. $ 1,200 $ 2,400 $ 3,600 $ 3,600
50,000................................. 4,035 8,070 12,105 12,105
100,000................................. 9,535 19,070 28,605 28,605
150,000................................. 15,035 30,070 45,105 45,105
200,000................................. 16,135 32,270 48,405 48,405
250,000................................. 16,135 32,270 48,405 48,405
300,000................................. 16,135 32,270 48,405 48,405
600,000................................. 16,135 32,270 48,405 48,405
</TABLE>
The Company has adopted the Retirement Plan covering eligible employees of
the Company not covered by a collective bargaining agreement. Under the terms
of the Retirement Plan, the monthly retirement benefits of a participant
payable at the participant's normal retirement date are equal to (i) .6% of
average monthly compensation, multiplied by years of credited service (not to
exceed 30 years), plus (ii) .5% of that portion, if any, of average monthly
compensation which is in excess of the participant's average social security
taxable wage base, multiplied by years of credited service (not to exceed 30
years).
Annual retirement benefits are computed on a straight life annuity basis
without deduction for Social Security or other benefits. The Tax Code limits
the amount of annual compensation that may be counted for the purpose of
calculating pension benefits, as well as the annual pension benefits that may
be paid, under the Retirement Plan. For 1997, these amounts are $160,000 and
$125,000, respectively.
Earnings of the named executive officers, for purposes of calculating
pension benefits, approximate the aggregate amounts shown in the Annual
Compensation columns of the Summary Compensation Table, except for Messrs.
Meyers, Pitts, and Postlewait whose earnings for purposes of such calculation
are subject to the $160,000 limitation discussed above.
The years of credited service under the Retirement Plan as of October 1,
1997 for each of the five most highly compensated officers of the Company are:
Howard M. Meyers, 11 years; Jerry M. Pitts, 16 years; Timothy R. Postlewait,
16 years; Richard J. Gonzalez, 14 years; and Rodger A. Malehorn, 13 years.
EMPLOYMENT CONTRACT
Pursuant to agreements between Mr. Howard M. Meyers and the Company, Mr.
Meyers is entitled to an annual cash salary equal to the greater of (x) a base
amount of $350,000 adjusted for increases in the consumer price index since
December 1985 or (y) 2% of the Company's pretax net income earned during the
immediately preceding year (or 1% if Mr. Meyers is no longer both the Chairman
and Chief Executive Officer of the Company with substantial day-to-day
managerial responsibilities).
65
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information as of February 28, 1998
with respect to the beneficial ownership of each class of Common Stock of the
Company by (a) each person known by the Company to own beneficially more than
5% of the Class A, Class B or Class C Common Stock of the Company, (b) each
director or named executive officer of the Company, and (c) all directors and
executive officers of the Company as a group. The information set forth below
is based upon information furnished by the persons listed. Unless otherwise
indicated, all shares shown as beneficially owned are held with sole voting
and investment power.
<TABLE>
<CAPTION>
COMMON STOCK(1)
-----------------------------------------------------
CLASS A CLASS B
-------------------------- --------------------------
NUMBER OF NUMBER OF
SHARES PERCENT SHARES PERCENT
BENEFICIALLY OUTSTANDING & BENEFICIALLY OUTSTANDING &
OWNED EXERCISABLE OWNED EXERCISABLE
------------ ------------- ------------ -------------
<S> <C> <C> <C> <C>
How & Company............ 540,300 5.09 0 0
c/o The Northern Trust
Co.
P.O. Box 92303
Chicago, Il 60675
Bayou Steel Properties
Limited(2).............. 0 0 2,271,127 100
2777 Stemmons Freeway
Dallas, TX 75207
Jeffrey P. Sangalis(3)... 822,422 7.19 0 0
Stanley S. Shuman(2)(4).. 817,880 7.71 0 0
Howard M. Meyers(2)...... 300,000 2.83 2,271,127 100
Lawrence E. Golub........ 103,000 * 0 0
Melvyn N. Klein(2)....... 60,000 * 0 0
Jerry M. Pitts(5)........ 24,204 * 0 0
Richard J. Gonzalez(6)... 13,180 * 0 0
Timothy R. Postlewait(6). 12,287 * 0 0
Rodger A. Malehorn(6).... 11,504 * 0 0
Albert P. Lospinoso(2)... 10,000 * 0 0
All directors and
executive officers as a
group(7)
(11 persons)............ 2,181,037 18.99 2,271,127 100
</TABLE>
- --------
* Less than one percent.
(1) All 100 shares of Bayou Steel's Class C Common Stock are owned by Voest-
Alpine International Corporation, Lincoln Building, Suite 4510, 60 East
42nd Street, New York, New York 10165. Holders of Class C Common Stock
have a vote on all matters, except for the election of directors. See
"Principal Shareholders--Voting Rights."
(2) All 300,000 shares of Class A Common Stock are owned by a limited
partnership in which Mr. Meyers and his wife are the sole limited partners
and of which the general partner is a corporation all of the stock of
which is owned by Mr. Meyers. Through his control of the corporate general
partner of the limited partnership, Mr. Meyers has sole voting and
dispositive power over the 300,000 shares of Class A Common Stock. The
limited partnership also owns 60% of the Common Stock of Bayou Steel
Properties Limited (the "BSPL"), a Delaware corporation.
66
<PAGE>
Through his control of the corporate general partner of the limited
partnership, Mr. Meyers controls BSPL's voting power. Since BSPL owns 100%
of the Company's Class B Common Stock, Mr. Meyers has sole voting and
dispositive control of the Class B Common Stock. The Class B Common Stock
accounts for a maximum of 60% of the voting power of the Company. Therefore
Mr. Meyers may be deemed to "control" the Company. Allen & Company
Incorporated and Messrs. Klein, Lospinoso, and Shuman are minority
stockholders of BSPL owning 2.08%, 2.77%, 0.76%, and 1.17%, respectively,
and Messrs. Lospinoso and Meyers are directors of BSPL.
(3) All 822,422 shares are subject to a warrant beneficially owned by Rice
Partners II, L.P. Mr. Sangalis is a Vice President and Managing Director
of Rice Partners II, L.P. Mr. Sangalis disclaims beneficial ownership of
such shares. In addition, Rice Partners II, L.P. owns preferred stock of
the Company pursuant to a Preferred Stock and Warrant Purchase Agreement,
dated June 13, 1995, which among other things, allows the holder to
designate a director to the Company's board.
(4) Includes 522,528 shares of Class A Common Stock owned by Allen Holding,
Inc., which owns all of the outstanding shares of Allen & Company
Incorporated; Mr. Shuman is an Executive Vice President and Managing
Director of Allen & Company Incorporated. Mr. Shuman disclaims beneficial
ownership of such shares. Includes an aggregate of 60,000 shares of Class
A Common Stock owned by trusts for the benefit of Mr. Shuman's children,
of which Mr. Shuman disclaims beneficial ownership. Mr. Shuman has no
voting or investment power, shared or otherwise, in the foregoing shares.
(5) Includes exercisable options for 18,000 shares of Class A Common Stock.
(6) Includes exercisable options for 9,000 shares of Class A Common Stock for
each of Messrs. Gonzalez, Postlewait and Malehorn.
(7) Includes 873,422 shares of Class A Common Stock, subject to exercisable
warrants and stock options held by such persons.
VOTING RIGHTS
Except as to certain matters on which holders of the Class B Common Stock
and the holders of the Class C Common Stock have class voting rights, the
holders of the Class A Common Stock, together with the holders of the Class C
Common Stock, are entitled to one vote per share and in the aggregate 40% of
the votes eligible to be cast for all matters other than the election of
directors. The holders of the Class B Common Stock are entitled to 60% of the
votes eligible to be cast for all matters other than the election of
directors. Certain transactions, such as the sale or acquisition of assets
that exceed 20% of the Company's consolidated net worth (as determined in
accordance with the Company's certificate of incorporation) require the
consent of stockholders representing 80% of the votes that may be cast.
The holders of the Class A Common Stock have the right to elect, as a class,
that number of directors which represents 40% of the number of directors then
comprising the Board of Directors and the holders of the Class B Common Stock
have the right to elect, as a class, that number of directors which represents
60% of the number of directors then comprising the Board of Directors. Except
as set forth below, the holders of the Class C Common Stock are not entitled
to elect directors. So long as the Class A Common Stock is listed on the
American Stock Exchange, if the number of shares of Class B Common Stock
outstanding is less than 12.5% of the aggregate number of outstanding shares
of Common Stock, the holders of the Class A Common Stock will, in addition to
the voting rights discussed above, be entitled to vote as a class with the
Class B Common Stock for the election of the remaining 60% of the Board of
Directors, with the holders of the Class A Common Stock entitled to one vote
per share and the holders of the Class B Common Stock entitled
67
<PAGE>
to ten votes per share. In the event that Howard M. Meyers is no longer Chief
Executive Officer of the Company or more than 1,362,676 shares (as adjusted)
of Class B Common Stock have been converted into Class A Common Stock, the
holders of the Class A, Class B and Class C Common Stock will vote together,
as a single class, in the election of directors and will be entitled to one
vote per share. The holders of Class B Common Stock have the option to convert
all or any portion of their shares of Class B Common Stock into shares of
Class A Common Stock at any time at the rate of one share of Class A Common
Stock for one share of Class B Common Stock.
With certain limited exceptions, in the absence of the full approval of the
Board of Directors of the Company and the delivery of an opinion of counsel to
the effect that the Company will not lose the benefits of its NOLs, until
December 31, 2003, transfers of shares of Class A Common Stock or Class B
Common Stock shall be null and void insofar as such transaction would cause
the transferee to attain 5% ownership of the fair market value of the
Company's Class A Common Stock or if such transferee owned Class A or Class B
Common Stock with a fair market value equal to 5% or more of the fair market
value of the Company's Class A Common Stock. In addition, except for transfers
to or for the benefit of direct or indirect beneficial owners of Class B
Common Stock, or the immediate family thereof, or transactions approved by the
holders of 75% of the then outstanding Class A Common Stock, shares of Class B
Common Stock are transferable only upon conversion of such shares into shares
of Class A Common Stock. Moreover, pursuant to an agreement executed between
the Company, BSPL and Howard M. Meyers immediately prior to the 1988 public
offering of the Class A Common Stock, if any entity acquires within a four-
year period a percentage of the voting power of BSPL in excess of 50% (the
"Percentage"), such entity shall agree to purchase through a public tender
offer a number of shares of Class A Common Stock equal to the total number of
outstanding shares of Class A Common Stock multiplied by the Percentage,
subject to certain exceptions.
The shares of common stock of BSPL owned by Mr. Howard M. Meyers may not be
sold, nor may shares of BSPL be issued, at a price which represents a premium
attributable to the underlying Class B Common Stock over the market price of
the Class A Common Stock, to any person or group if such sale, when aggregated
with all prior sales during the immediately preceding four-year period, would
result in such person or group owning more than 50% of the common stock of
BSPL, unless such person or group agrees to make a tender offer within 30 days
for an equivalent percentage of Class A Common Stock at the highest price paid
by such person or group (expressed in equivalent shares of Class B Common
Stock) for the shares of common stock of BSPL; provided that the Directors
elected by the holders of the Class A Common Stock waive the charter
restriction prohibiting a purchaser from acquiring 5% or more of the aggregate
fair market value of the Class A Common Stock. The agreement terminates when
the holders of the Class B Common Stock no longer have the right to elect a
majority of the Board of Directors of the Company.
The Company's Certificate of Incorporation provides that if Mr. Meyers
resigns, retires or is removed for cause as Chief Executive Officer of the
Company, the Class B Common Stock will no longer vote separately by class with
respect to the election of directors, and will only have one vote per share.
68
<PAGE>
DESCRIPTION OF NEW CREDIT FACILITY
Concurrently with the Original Offering, the Company entered into the New
Credit Facility with The Chase Manhattan Bank, an affiliate of one of the
Initial Purchasers. The New Credit Facility replaced the Company's prior
Credit Facility which was scheduled to terminate on June 1, 2000. The
following is a summary description of the principal terms of the New Credit
Facility and is subject to, and qualified in its entirety by reference to, the
definitive New Credit Facility, copies of which will be made available upon
request to the Company.
The New Credit Facility provides that at any one time, the Company may
borrow up to the lesser of $50 million and the then current Borrowing Base (as
defined in the New Credit Facility) under the New Credit Facility. The
Borrowing Base is based on a percentage of the Company's qualifying inventory
and accounts receivable under the New Credit Facility. Up to $10 million of
the New Credit Facility is available for the issuance of standby letters of
credit, provided that the aggregate borrowings and letters of credit
outstanding under the New Credit Facility do not exceed the lesser of $50
million or the Borrowing Base. As of March 31, 1998, the Company's Borrowing
Base under the New Credit Facility would have been $50.0 million. The New
Credit Facility will terminate after five years (subject to successive one-
year extensions at the request of the Company and the approval of all the
Lenders under the New Credit Facility), at which time all amounts outstanding,
together with any and all accrued interest thereon, will be due and payable.
Borrowings under the New Credit Facility will be used by the Company to repay
certain outstanding indebtedness, to provide working capital, to finance
investments in stock (subject to certain limitations) or acquisitions of
assets of third parties (subject to certain limitations) and for other general
corporate purposes.
The New Credit Facility will bear interest on a sliding scale based on the
Company's leverage ratio, which is defined as indebtedness divided by EBITDA
for the most recent four fiscal quarters. The Company will pay interest on
outstanding amounts borrowed under the New Credit Facility, at the option of
the Company, at either (i) the Alternate Base Rate plus an applicable margin
which ranges from 0.25% to 1.00% depending on the Company's leverage ratio or
(ii) the Eurodollar Rate plus an applicable margin which ranges from 1.50% to
2.25% depending on the Company's leverage ratio.
The New Credit Facility is secured by a first priority security interest in
the inventory and accounts receivable (subject to certain exceptions) of the
Company and each of the Company's material domestic recourse subsidiaries.
The New Credit Facility contains numerous operating and financial covenants,
including a debt to capitalization ratio and interest coverage ratio and
maintenance of minimum tangible net worth.
The New Credit Facility includes, among other customary covenants, covenants
prohibiting dividends, additional debt or liens (except as specified in the
New Credit Facility), annual capital expenditures, certain acquisition
expenditures, certain investments, and sales of assets.
69
<PAGE>
DESCRIPTION OF THE FIRST MORTGAGE NOTES
As used in this "Description of the First Mortgage Notes" section,
references to the "First Mortgage Notes" refer to the Old First Mortgage Notes
and the Exchange Notes.
The Old First Mortgage Notes were and the Exchange Notes will be issued
under an indenture (the "Indenture") between the Company and First National
Bank of Commerce, New Orleans Louisiana, as trustee (the "Trustee"), a copy of
which is available from the Company upon request. The following summary of
certain provisions of the Indenture does not purport to be complete and is
subject to, and is qualified in its entirety by reference to, the Trust
Indenture Act of 1939, as amended (the "TIA"), as in effect on the date of the
Indenture. The definitions of certain capitalized terms used in the following
summary are set forth below under "--Certain Definitions."
PRINCIPAL, MATURITY AND INTEREST
The First Mortgage Notes will be senior secured obligations of the Company.
The First Mortgage Notes will mature on May 15, 2008. Interest on the First
Mortgage Notes will accrue at the rate of 9 1/2% per annum and will be payable
semi-annually on May 15 and November 15 of each year, commencing November 15,
1998, to the Holders of record of First Mortgage Notes at the close of
business on the May 1 and November 1 immediately preceding such interest
payment date. Interest on the First Mortgage Notes will accrue from the most
recent date to which interest has been paid or, if no interest has been paid,
from the original date of issuance. Interest will be computed on the basis of
a 360-day year comprised of twelve 30-day months. Interest on overdue
principal and (to the extent permitted by law) on overdue installments of
interest will accrue at a rate equal to the stated rate of interest.
The Company has the ability to issue additional First Mortgage Notes
subsequent to the issuance of the First Mortgage Notes offered pursuant to the
Original Offering as part of the series of First Mortgage Notes offered
pursuant to the Original Offering or in one or more different series, all of
which will be equally and ratably secured by the Collateral.
As discussed below, payment of principal of, premium, if any, and interest
on, First Mortgage Notes represented by one or more permanent global First
Mortgage Notes will be made in immediately available funds.
OPTIONAL REDEMPTION
Except as described below, the Company may not redeem the First Mortgage
Notes prior to May 15, 2003. On and after May 15, 2003, the Company may, at
its option, redeem the First Mortgage Notes, in whole or in part, from time to
time, at the redemption prices set forth below (expressed as a percentage of
the principal amount thereof), in each case together with accrued and unpaid
interest, if any, to the date of redemption, if redeemed during the twelve-
month period beginning May 15 of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2003........................................................... 104.750%
2004........................................................... 103.167%
2005........................................................... 101.583%
2006 and thereafter............................................ 100.000%
</TABLE>
provided, that if the date fixed for redemption is May 15 or November 15, then
the interest payable on such date shall be paid to the Holder of record on the
next preceding May 1 or November 1.
Prior to May 15, 2001, the Company may, at its option, from time to time,
redeem up to 35% of the original aggregate principal amount of the First
Mortgage Notes at a redemption price equal to 109.500% of the principal amount
thereof, together with accrued and unpaid interest, if any, to the date of
redemption, with all or a portion of the net proceeds of public sales of
common stock of the Company; provided, that at least 65% of the original
aggregate principal amount of the First
70
<PAGE>
Mortgage Notes remains outstanding immediately after the occurrence of such
redemption; and, provided, further, that such redemption shall occur within 60
days of the date of the closing of the related sale of common stock of the
Company.
At any time on or prior to May 15, 2003, the Company may, at its option,
redeem the First Mortgage Notes, in whole but not in part, upon the occurrence
of a Change of Control, upon not less than 30 nor more than 60 days prior
notice (but in no event more than 90 days after the occurrence of such Change
of Control) mailed by first-class mail to each holder's registered address, at
a redemption price equal to 100% of the principal amount thereof, together
with the Applicable Premium as of, and accrued and unpaid interest, if any,
to, the date of redemption.
"Applicable Premium" means, with respect to a First Mortgage Note at any
redemption date, the greater of (i) 1.0% of the principal amount of such First
Mortgage Note and (ii) the excess of (A) the present value at such time of (1)
the redemption price of such First Mortgage Note at May 15, 2003 (such
redemption price being described in the first paragraph under "--Optional
Redemption") plus (2) all required interest payments due on such First
Mortgage Note through May 15, 2003, computed using a discount rate equal to
the Treasury Rate plus 50 basis points, over (B) the then outstanding
principal amount of such First Mortgage Note.
"Treasury Rate" means the yield to maturity at the time of computation of
United States Treasury securities with a constant maturity (as compiled and
published in the most recent Federal Reserve Statistical Release H.15 (519)
which has become publicly available at least two business days prior to the
redemption date (or, if such Statistical Release is no longer published, any
publicly available source or similar market data)) most nearly equal to the
period from the redemption date to May 15, 2003; provided, however, that if
the period from the redemption date to May 15, 2003 is not equal to the
constant maturity of a United States Treasury security for which a weekly
average yield is given, the Treasury Rate shall be obtained by linear
interpolation (calculated to the nearest one-twelfth of a year) from the
weekly average yields of United States Treasury securities for which such
yields are given, except that if the period from the redemption date to May
15, 2003 is less than one year, the weekly average yield on actually traded
United States Treasury securities adjusted to a constant maturity of one year
shall be used.
SELECTION AND NOTICE
In the event that less than all of the First Mortgage Notes are to be
redeemed at any time, selection of First Mortgage Notes for redemption will be
made by the Trustee on a pro rata basis, by lot or by such method as the
Trustee shall deem fair and appropriate; provided, however, that no First
Mortgage Notes of $1,000 or less shall be redeemed in part. Notice of
redemption shall be mailed by first class mail at least 30 but not more than
60 days before the redemption date to each Holder to be redeemed at its
registered address. If any First Mortgage Note is to be redeemed in part only,
the notice of redemption that relates to such First Mortgage Note shall state
the portion of the principal amount thereof to be redeemed. A new First
Mortgage Note in a principal amount equal to the unredeemed portion thereof
will be issued in the name of the Holder thereof upon cancellation of the
original First Mortgage Note. On and after the redemption date, interest will
cease to accrue on First Mortgage Notes or the portion thereof called for
redemption unless the Company defaults in the payment of the redemption price
or accrued interest. First Mortgage Notes that are optionally redeemed by the
Company or that are purchased by the Company pursuant to an Asset Sale Offer
as described under "--Certain Covenants--Restrictions on Asset Sales" or
pursuant to a Change of Control Offer as described under "--Change of Control"
will be surrendered to the Trustee for cancellation.
The New Credit Facility contains certain financial covenants that may
restrict the ability of the Company to redeem the First Mortgage Notes without
the prior written consent of the Lenders. See "Description of New Credit
Facility."
71
<PAGE>
CHANGE OF CONTROL
The Indenture provides that upon a Change of Control the Company will be
obligated to make an offer to each Holder of First Mortgage Notes to
repurchase all or any part of such Holder's First Mortgage Notes at a cash
purchase price equal to 101% of the principal amount, together with accrued
and unpaid interest, if any, to the date of repurchase pursuant to the
procedures set forth in the Indenture (a "Change of Control Offer"). As more
fully described below, if the Company recapitalizes or enters into a
transaction with management which results in control of the Company being held
by persons other than the controlling Persons as of the date of the Indenture,
a Change of Control may be deemed to have occurred.
Within 30 days following any Change of Control, the Company shall send, by
first class mail, a notice to each Holder, with a copy to the Trustee, which
notice will govern the terms of the Change of Control Offer. This notice will
state, among other things, the repurchase date (which shall not be earlier
than 30 days or later than 60 days from the date such notice is mailed) and
the circumstance and relevant facts regarding such Change of Control
(including information with respect to pro forma historical income, cash flow
and capitalization after giving effect to such Change of Control). Failure to
make a Change of Control Offer as required will constitute a covenant Default
under the Indenture.
In the event a Change of Control occurs and any Holder exercises such
Holder's right to require the Company to repurchase the First Mortgage Notes,
and assuming that such repurchase constitutes a "tender offer" for purposes of
Rule 14e-1 under the Exchange Act at the time it is required, the Company will
comply with the requirements of Rule 14e-1 as then in effect with respect to
such repurchase.
A Change of Control under the Indenture could constitute a default under the
New Credit Facility. Therefore, upon the occurrence of a Change of Control,
the Lenders may accelerate their loans and the Company may be required to
prepay all of its outstanding obligations under the New Credit Facility
simultaneously with the payment of the principal of any of the First Mortgage
Notes that the Company is required to repurchase pursuant to the Indenture.
See "Description of New Credit Facility."
The definition of "Change of Control," and the other components of this
covenant, generally mean that the Company will be obligated to repurchase
First Mortgage Notes from tendering Holders if control of the Company (whether
through stock ownership or control of the Company's assets) is held by Persons
other than the controlling Persons of the Company as of the Issue Date. With
respect to the disposition of assets, the phrase "all or substantially all" as
used in the Indenture varies according to the facts and circumstances of the
subject transaction, has no clearly established meaning under New York law
(which governs the Indenture) and is subject to judicial interpretation.
Accordingly, in certain circumstances there may be a degree of uncertainty in
ascertaining whether a particular transaction would involve a disposition of
"all or substantially all" of the assets of the Company, and therefore it may
be unclear as to whether a Change of Control has occurred and whether the
Holders have the right to require the Company to repurchase First Mortgage
Notes. None of the provisions relating to a repurchase upon a Change of
Control are waivable by the Board of Directors of the Company.
RANKING
The First Mortgage Notes will rank pari passu in right of payment with any
existing and future senior Indebtedness of the Company, including obligations
of the Company arising in connection with the New Credit Facility, and will
rank senior to all subordinated Indebtedness of the Company.
72
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SECURITY
For the benefit of the Trustee and the Holders, the Company and its Recourse
Subsidiaries have assigned and pledged and granted a security interest in the
following property and assets: (a) the real property interests in the
minimill, stocking location, and land owned by the Company and its Recourse
Subsidiaries in LaPlace, Louisiana and the real property interests in all
other real property improvements now or hereafter located on such land,
together with all additions or improvements thereto (collectively, the
"Mortgaged Facility," which term shall be deemed to exclude the Released
Property, if any); (b) all Integral Fixtures and Equipment, and (c) all
proceeds and products of any and all of the foregoing (including Trust Moneys
and property acquired in Permitted Related Acquisitions other than property
and assets acquired with the proceeds of any Integral Fixtures and Equipment
to the extent such proceeds are converted into property and assets securing
the New Credit Facility) (the properties and assets described under clauses
(a), (b), and (c) are collectively referred to as "Collateral"). Except as
contemplated above in this paragraph, the security interest will not extend to
the inventory and accounts receivable of the Company and its Recourse
Subsidiaries because these assets secure the obligations of the Company under
the New Credit Facility (the "Lender Secured Property"). In addition, the
security interest will not extend to the Tennessee Facility or any other
property or assets of the Company or any Recourse Subsidiary. The security
interest in the Collateral is a first priority interest (to the extent
attainable by filing or possession) subject to Permitted Liens. The Recourse
Subsidiaries executed a guarantee of the Company's obligations with respect to
the First Mortgage Notes (the "Subsidiary Guarantee"). The guarantee of each
Recourse Subsidiary is limited to the amount which can be guaranteed by such
Subsidiary under applicable Federal and state laws relating to insolvency of
debtors. The obligations of a Recourse Subsidiary under the Subsidiary
Guarantee are secured by all Collateral owned by such Recourse Subsidiary.
The real property Collateral is mortgaged pursuant to first mortgages or
deeds of trust (the "Mortgages"), subject to Permitted Liens. See "--Certain
Covenants--Limitation on Liens." Each Mortgage executed by the Company secures
the full amount payable arising in connection with the First Mortgage Notes.
Each Mortgage executed by a Recourse Subsidiary secures all obligations
arising under its Subsidiary Guarantee. The Company may grant or establish
Permitted Easements in favor of the Released Property Facility and its owners
and operators, and the Mortgages shall be automatically subordinated to any
Permitted Easement. The Trustee shall execute and deliver any confirmation of
such subordination requested by the Company. Upon issuance of the First
Mortgage Notes, the Collateral Agent received a customary mortgagee's title
insurance policy for covered losses of up to $90 million. The personal
property to be included within the Collateral will be pledged pursuant to
security agreements which will create a first priority Lien, subject to
Permitted Liens (the "Security Agreements" and, together with the Mortgages,
the "Security Documents"). See "--Certain Covenants--Limitation on Liens."
Upon the occurrence of an Event of Default under the Indenture, the First
Mortgage Notes or the Security Documents, the Collateral Agent will have the
customary rights and remedies of a secured party under applicable law with
respect to the Collateral granted by the Company, and to the Collateral
granted by a Recourse Subsidiary upon a default under the Subsidiary
Guarantee.
The principal asset comprising the Collateral is the Mortgaged Facility
which was completed in 1981 at a cost of $243 million. The Mortgaged Facility
consists of a 472,000 square foot steel minimill and a 75,000 square foot
warehouse facility. The Mortgaged Facility forms part of a tract of land
consisting of approximately 287 acres adjacent to the Mississippi River with a
280-foot deep river loading dock. Approximately 36 undeveloped acres of such
287 acre tract may be released as Collateral. See "Possession, Use and Release
of Collateral."
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The Mortgaged Facility was appraised by an independent appraisal firm in
March 1998 on various bases and using various methods at fair market values
ranging from approximately $110 million to $125 million. The fair market value
of the Collateral is subject to fluctuations based on factors that include,
among others, the condition of the steel industry, the ability to sell the
Collateral in an orderly sale, the condition of the national and local
economies, the availability of buyers and similar factors. There can be no
assurance that the proceeds of any sale of the Collateral, in whole or in
part, pursuant to the Indenture and the Security Documents following an Event
of Default would be sufficient to satisfy payments due on the First Mortgage
Notes. To the extent that Liens on the Collateral have been granted to third
parties pursuant to "Certain Covenants--Limitation on Liens," such third
parties have or may exercise rights and remedies with respect to the property
subject to such Liens that could adversely affect the value of such Collateral
and the ability of the Collateral Agent, Trustee or the Holders to realize or
foreclose on such Collateral. In addition, the ability of the Trustee to
realize upon the Collateral may be subject to certain bankruptcy law
limitations in the event of a bankruptcy. See "--Certain Bankruptcy
Limitations" below.
The Company has the ability to issue additional First Mortgage Notes
subsequent to the issuance of the First Mortgage Notes offered pursuant to the
Original Offering as part of the same series of First Mortgage Notes offered
pursuant to the Original Offering or in one or more different series, all of
which will be equally and ratably secured by the Collateral. The proceeds from
the sale of up to $30 million aggregate principal amount of any such
additional First Mortgage Notes may be invested by the Company in properties
or assets that will not become Collateral. In such event, the value of the
Collateral as a percentage of the aggregate principal amount of outstanding
First Mortgage Notes would decrease. In addition, in the event that the
proceeds from the sale of any additional First Mortgage Notes are invested in
properties or assets that become Collateral, there can be no assurance that
there will be a proportionate increase in the value of the Collateral as a
percentage of the aggregate principal amount of outstanding First Mortgage
Notes.
The collateral release provisions of the Indenture permit the release of
Collateral in connection with Asset Sales of Collateral. See "--Possession,
Use and Release of Collateral." As described under "--Certain Covenants--
Restrictions on Asset Sales," the Net Cash Proceeds of such Asset Sales, above
prescribed amounts and subject to certain exceptions, are required to be
deposited in the Collateral Account prior to the making of an offer to
purchase First Mortgage Notes in an Asset Sale Offer or a Permitted Related
Acquisition. To the extent an Asset Sale Offer is not subscribed to by
Holders, the unutilized Net Cash Proceeds may be retained by the Company free
of the Lien of the Indenture and the Security Documents. In addition, the
Collateral release provisions of the Indenture permit the sale, lease,
transfer or other disposition of tangible personal property that, in the
reasonable judgement of the Company, has become worn out, obsolete or no
longer necessary to the operation of the Company's or its Subsidiaries'
business and which is disposed in the ordinary course of business, subject to
certain limitations. The collateral release provisions of the Indenture also
permit the release of up to 36 acres of undeveloped land constituting part of
the Mortgaged Facility under certain circumstances described under
"--Possession, Use and Release of Collateral."
If an Event of Default has occurred and is continuing and the Trustee has
been directed by the Holders of at least 25% in aggregate principal amount of
First Mortgage Notes to foreclose upon all or any part of the Collateral
(including the Collateral pledged by the Recourse Subsidiaries upon a default
under the Subsidiary Guarantee), the Collateral Agent will take such action to
foreclose upon the Collateral as is consistent with such directions, the
Indenture, the Security Documents and applicable law. The Collateral Agent
will thereupon foreclose upon the Collateral in accordance with instructions
from such representatives, unless Holders of a majority in aggregate principal
amount of the First Mortgage Notes shall have given contrary instructions, in
each case as provided in the Security Documents. The proceeds received by the
Collateral Agent will be applied by the Collateral Agent first to pay the
expenses of such foreclosure and fees and other amounts then payable to the
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Trustee under the Indenture, and thereafter to pay, pro rata, the principal
of, premium, if any, and interest on the First Mortgage Notes.
Dispositions of real property Collateral may be subject to delay pursuant to
an intercreditor agreement to be entered into with the Lenders (the
"Collateral Agency and Intercreditor Agreement"). The Collateral Agency and
Intercreditor Agreement will provide that the Collateral Agent will provide
access to and use of the real property and, under certain circumstances, may
delay liquidation of the real property for a period of time to permit the
agent for the Lenders to conduct an orderly liquidation of the Lender Secured
Property located on the real property (including, without limitation, the
processing of work in progress inventory). Dispositions of Collateral may also
be subject to delay pursuant to intercreditor and similar agreements with
lenders financing the construction of Released Property Facilities.
Under the laws of some states and under the federal Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended
("CERCLA"), a secured party may be liable as an "owner or operator" for
certain costs and damages associated with releases or threatened releases of
hazardous substances on or from a mortgaged property, even though the released
environmental damage was caused by a prior owner or other third party.
Excluded from CERCLA's definition of "owner or operator," however, is a person
"who, without participating in the management of the facility, holds indicia
of ownership primarily to protect his security interest" (the "secured-
creditor exemption"). In 1996, legislation was enacted that reduced the
uncertainty concerning the meaning of the secured creditor exemption.
Nonetheless, the precise meaning of CERCLA's secured-creditor exemption
remains uncertain and continues to be the subject of litigation. Among the
situations in which a secured party faces a heightened risk of liability under
CERCLA by falling outside the scope of the exemption are (i) when a secured
party's activities begin to involve the actual management of a facility or
property and (ii) after a secured party has foreclosed on and taken title to
such a facility or property. A secured party that has taken possession of real
property may also subject itself to liabilities associated with other matters
arising directly out of its own operation of the facility, including fines and
penalties and other third party claims under environmental laws. In addition,
environmental laws and regulations may change significantly from time to time
at all levels of government, and in the past such changes have imposed
substantial new burdens upon those with an interest in real property affected
by such laws.
Under the Indenture, the Trustee may, prior to taking certain actions,
request Holders to provide an indemnification against its costs, expenses, and
liabilities. It is possible that CERCLA (or analogous) cleanup costs could
become a liability of the Trustee and cause a loss to any Holders that
provided an indemnification. In addition, such Holders may act directly rather
than through the Trustee, in specified circumstances, in order to pursue a
remedy under the Indenture. If Holders exercise that right, they could be
deemed to be secured parties that are subject to the risks discussed above.
CERTAIN BANKRUPTCY LIMITATIONS
The right of the Collateral Agent to repossess and dispose of the Collateral
upon the occurrence of an Event of Default would be significantly impaired by
applicable Bankruptcy Law in the event that a bankruptcy case were to be
commenced by or against the Company and its Subsidiaries prior to the
Collateral Agent having repossessed and disposed of the Collateral. Upon the
commencement of a case for relief under Title 11 of the United States Code, as
amended (the "Bankruptcy Code"), a secured creditor such as the Collateral
Agent is prohibited from repossessing its security from a debtor in a
bankruptcy case, or from disposing of security repossessed from such debtor,
without bankruptcy court approval. Moreover, the Bankruptcy Code permits the
debtor to continue to retain and use collateral even though the debtor is in
default under the applicable debt instruments provided
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that the secured creditor is given "adequate protection." The meaning of the
term "adequate protection" may vary according to circumstances, but it is
intended in general to protect the value of the secured creditor's interest in
the collateral and may include cash payments or the granting of additional
security, if and at such times as the court in its discretion determines, for
any diminution in the value of the collateral as a result of the stay of
repossession or disposition or any use of the collateral by the debtor during
the pendency of the bankruptcy case. A bankruptcy court may determine that a
secured creditor may not require compensation for a diminution in the value of
the collateral if the value of the collateral exceeds the debt it secures.
In view of the broad equitable powers of a bankruptcy court, it is
impossible to predict how long payments under the First Mortgage Notes could
be delayed following commencement of a bankruptcy case, whether or when the
Collateral Agent could repossess or dispose of the Collateral, the value of
the Collateral at the time of a bankruptcy petition or whether or to what
extent Holders would be compensated for any delay in payment or loss of value
of the Collateral through the requirement of "adequate protection." Any
disposition of the Collateral during a bankruptcy case would also require
permission from the bankruptcy court. Furthermore, in the event a bankruptcy
court determines the value of the Collateral is not sufficient to repay all
amounts due on the First Mortgage Notes, the Holders would hold secured claims
to the extent of the value of the Collateral to which the Holders are
entitled, and unsecured claims with respect to such shortfall. The Bankruptcy
Code only permits the payment and/or accrual of post-petition interest, costs
and attorney's fees to a secured creditor during a debtor's bankruptcy case to
the extent the value of the Collateral is determined by the bankruptcy court
to exceed the aggregate outstanding principal amount of the First Mortgage
Notes. None of the Company's Non-Recourse Subsidiaries has guaranteed
repayment of any of the First Mortgage Notes. There can be no assurance,
however, that a creditor of a Non-Recourse Subsidiary could not successfully
seek satisfaction from the Company or its Recourse Subsidiaries or that, in
the event of the bankruptcy of the Company or one or more Non-Recourse
Subsidiaries, a bankruptcy court would not consolidate the assets and debts of
the Company and its Recourse Subsidiaries with those of the Non-Recourse
Subsidiaries.
POSSESSION, USE AND RELEASE OF COLLATERAL
Unless an Event of Default shall have occurred and be continuing, the
Company and its Recourse Subsidiaries will have the right to remain in
possession and retain exclusive control of the Collateral securing the First
Mortgage Notes (other than Trust Moneys and other personal property held by,
or required to be deposited or pledged with, the Collateral Agent under the
Indenture or any Security Document), to freely operate the Collateral and to
collect, invest and dispose of any income thereon.
Release of Collateral. The Company and its Recourse Subsidiaries will have
the right to sell, exchange or otherwise dispose of any of the Collateral
(excluding Trust Moneys) (the "Released Collateral") upon delivery to the
Trustee of documents required by the Indenture (which may include, among
others, a Company Order, an Officers' Certificate and an Opinion of Counsel)
and all documentation required by the TIA prior to the release of the Released
Collateral by the Collateral Agent. Subject to certain exceptions for amounts
the Company and its Subsidiaries are permitted to retain pursuant to
"--Certain Covenants--Restrictions on Asset Sales," all cash or Cash Equivalents
received by the Collateral Agent upon an Asset Sale with respect to Collateral
will be held by the Collateral Agent as Trust Moneys under the Indenture prior
to application as provided in "--Use of Trust Moneys" below. All purchase money
and other obligations received as part of the net proceeds by the Collateral
Agent pursuant to these "--Release of Collateral" provisions shall be held by
the Collateral Agent.
As described under "--Limitations on Restricted Payments," the Company is
permitted to contribute up to 36 acres of undeveloped land constituting part
of the Mortgaged Facility to a Non-
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Recourse Subsidiary in exchange for an equity interest therein. Upon delivery
to the Trustee of documents required by the Indenture (which may include,
among others, a Company Order, an Officers' Certificate and an Opinion of
Counsel) and all documentation required by the TIA prior to the release of
such property, the Company may contribute such property free of the Lien of
the Indenture and the Security Documents.
In case a Default or an Event of Default shall have occurred and be
continuing, the Company and its Subsidiaries, while in possession of the
Collateral (other than cash and other personal property held by, or required
to be deposited or pledged with, the Collateral Agent under the Indenture or
any Security Document or with any trustee, mortgagee or other holder of a
prior Lien permitted under the Security Documents), may do any of the things
enumerated in the "--Release of Collateral" provisions only if the Trustee, in
its discretion, or the Holders of a majority in aggregate principal amount of
the outstanding First Mortgage Notes, shall consent to such action. In all
circumstances, however, the Trustee shall, if requested by the Company,
execute and deliver a disclaimer of any Lien on any Fixtures and Equipment
which are not Integral Fixtures and Equipment.
Use of Trust Moneys. All Trust Moneys shall be held by the Collateral Agent
as a part of the Collateral securing the First Mortgage Notes or the
obligations of the Recourse Subsidiaries of the Company under the Subsidiary
Guarantee. So long as no Event of Default shall have occurred and be
continuing, all Trust Moneys, other than the proceeds from the sale of
additional First Mortgage Notes, Condemnation Awards and Net Insurance
Proceeds, may, at the direction of the Company, upon delivery to the Trustee
of certain documents (that may include, among others, a Company Order, an
Officer's Certificate, and documentation required by the TIA and an Opinion of
Counsel), be applied by the Collateral Agent from time to time as provided
under "--Certain Covenants--Restrictions on Asset Sales." The proceeds from
the sale of additional First Mortgage Notes that constitute Trust Moneys shall
be applied as provided under "--Limitations on Indebtedness." Trust Moneys
from Condemnation Awards or Net Insurance Proceeds will be applied as provided
in the Indenture.
CERTAIN COVENANTS
The following is a summary of certain covenants contained in the Indenture.
Such covenants will be applicable (unless waived or amended) so long as any of
the First Mortgage Notes are outstanding.
Limitations on Indebtedness. The Indenture provides that the Company will
not, and will not permit any of its Recourse Subsidiaries to, directly or
indirectly, incur, create, assume, guarantee, become liable, contingently or
otherwise, with respect to, or otherwise become responsible for the payment of
(each event, an "incurrence") any Indebtedness unless (a) the pro forma EBITDA
Ratio of the Company and its Recourse Subsidiaries for the Reference Period
prior to the incurrence of such Indebtedness (taken as a whole and calculated
on the assumptions that such Indebtedness had been incurred and the proceeds
thereof had been applied on the first day of the Reference Period) would have
been greater than 2.00 to 1.00 and (b) no Default or Event of Default shall
have occurred and be continuing at the time of, or after giving effect to, the
incurrence of such Indebtedness.
The foregoing limitation will not apply to: (i) Indebtedness evidenced by
the First Mortgage Notes to be issued on the Issue Date and the obligations of
the Company and its Subsidiaries under the Indenture in an aggregate amount
not to exceed $110,000,000; (ii) Indebtedness of the Company or any Recourse
Subsidiary issued to the Company or any Wholly-Owned Recourse Subsidiary;
provided, that (a) any such Indebtedness is unsecured and is subordinated to
the First Mortgage Notes and (b) any subsequent issuance or transfer of any
Capital Stock or any other event which results in any such Wholly-Owned
Recourse Subsidiary ceasing to be a Wholly-Owned Recourse Subsidiary or any
transfer of such Indebtedness by any Wholly-Owned Recourse Subsidiary to
someone not a Wholly-Owned Recourse Subsidiary will, in each case, be deemed
an incurrence of
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Indebtedness under the Indenture; (iii) Indebtedness of the Company or any
Recourse Subsidiary which is existing immediately following the issuance of
the First Mortgage Notes and the application of the proceeds thereof as set
forth under "Use of Proceeds;" (iv) Indebtedness incurred under the New Credit
Facility, but not to exceed the greater of $50,000,000 or the sum of (a) 85%
of the value of the Company's consolidated qualifying accounts receivable and
(b) 60% of the value of the Company's consolidated qualifying inventory (with
each such amount to be determined in accordance with the terms of the New
Credit Facility), less the amount of Indebtedness incurred pursuant to clause
(viii) below; (v) Indebtedness incurred with respect to Interest Rate
Agreements covering floating rate Indebtedness of the Company that is
permitted under this covenant to the extent the notional principal amount of
such Interest Rate Agreements does not exceed the principal amount of the
Indebtedness to which such Interest Rate Agreements relate; (vi) Indebtedness
incurred with respect to the deferred purchase price of machinery and
equipment related to the business of the Company or its Recourse Subsidiaries
at the time of purchase and other purchase money obligations (including
Capitalized Lease Obligations) not to exceed, in the aggregate, $5,000,000;
provided, that the maturity of any such obligation does not exceed the
anticipated useful life of the asset being financed; (vii) Indebtedness
arising from the honoring of a check, draft or similar instrument drawn
against insufficient funds; provided, that such Indebtedness is extinguished
within two business days of its incurrence; (viii) the incurrence by an Asset
Backed Entity of Indebtedness in a Qualified Asset Backed Transaction that is
nonrecourse to the Company or any Subsidiary of the Company (except for
Standard Securitization Undertakings) in an aggregate principal amount
outstanding at any one time not to exceed the amount permitted under clause
(iv) above; (ix) Indebtedness of a Recourse Subsidiary outstanding on the date
on which such Recourse Subsidiary was acquired by the Company; provided,
however, that at the time such Recourse Subsidiary is acquired by the Company,
the Company would have been able to incur $1.00 of additional Indebtedness
pursuant to the immediately preceding paragraph after giving effect to the
incurrence of such Indebtedness pursuant to this clause (ix); (x) Indebtedness
(A) in respect of performance bonds, bankers' acceptances and surety or appeal
bonds provided by the Company or any of its Recourse Subsidiaries to their
customers in the ordinary course of their business, (B) in respect of
performance bonds or similar obligations of the Company or any of its Recourse
Subsidiaries for or in connection with pledges, deposits or payments made or
given in the ordinary course of business in connection with or to secure
statutory, regulatory or similar obligations, including obligations under
health, safety or environmental obligations and (C) arising from Guarantees to
suppliers, lessors, licensees, contractors, franchisees or customers of
obligations (other than Indebtedness) incurred in the ordinary course of
business; (xi) Indebtedness arising from agreements providing for
indemnification, adjustment of purchase price or similar obligations, or from
Guarantees or letters of credits, surety bonds or performance bonds securing
any obligations of the Company or any of its Recourse Subsidiaries pursuant to
such agreements, in each case incurred in connection with the disposition of
any business assets or Recourse Subsidiary of the Company (other than
Guarantees of Indebtedness or other obligations incurred by any person
acquiring all or any portion of such business assets or Recourse Subsidiary of
the Company for the purpose of financing such acquisition) in a principal
amount not to exceed the gross proceeds actually received by the Company or
any of its Recourse Subsidiaries in connection with such disposition; (xii)
Indebtedness incurred in connection with Private Activity Bonds, as such term
is defined under the Internal Revenue Code of 1986, as amended (the "Code"),
in an aggregate principal amount not to exceed $5,000,000; (xiii) other
Indebtedness of the Company and its Recourse Subsidiaries not to exceed, in
the aggregate, $15,000,000; and (xiv) any renewal, extension or refinancing
(and subsequent renewals, extensions or refinancings) of any Indebtedness of
the Company and its Recourse Subsidiaries permitted under the preceding
paragraph or under clauses (i), (iii), (vi), (ix), (x) or (xii) above;
provided, however, that in no event may Indebtedness of the Company be
renewed, extended or refinanced by means of Indebtedness of any Recourse
Subsidiary of the Company pursuant to this clause (xv). See "Prospectus
Summary--Summary Consolidated Financial Data" and "Selected Consolidated
Financial Data" for the Ratio of EBITDA to Net Interest Expense.
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In addition to the limitation imposed under the first paragraph of
"--Limitations on Indebtedness," any issuance of First Mortgage Notes in excess
of $140,000,000 shall be subject to the further requirements that (a) the
proceeds of such issuance shall be used to finance improvements to the Mortgaged
Facility, (b) Standard & Poors Rating Service and Moody's Investor Service shall
have confirmed their ratings of the First Mortgage Notes assuming the subsequent
issuance of First Mortgage Notes as contemplated for Mortgaged Facility
improvements at ratings not below the ratings assigned to the First Mortgage
Notes immediately prior to the public announcement or disclosure to such rating
agencies of the Company's plan or intention for such construction, (c) the
Mortgaged Facility improvements to be constructed must, as conclusively
established by a Board Resolution, be intended to add supplemental production,
handling or performance capacity to the then existing Mortgaged Facility
(although a portion of the intended construction may simply replace existing
improvements and Fixtures and Equipment to the extent ancillary to such
construction), (d) the Mortgage shall be amended prior to or contemporaneously
with such additional issuance to increase the maximum amount secured by the
Mortgage by an amount equal to the aggregate principal amount of the additional
issuance of First Mortgage Notes, and (e) in connection with the issuance of
such additional First Mortgage Notes, the Company shall provide an endorsement
to the original mortgagee's policy issued in connection with the initial
issuance of First Mortgage Notes (or an additional mortgagee's title insurance
policy in substantially the same form as the mortgagee's title policy issued in
connection with the initial issuance of First Mortgage Notes) which provides
mortgagee's title insurance with respect to the Mortgaged Facility improvements
in question in an amount equal to the lesser of (i) the aggregate principal
amount of the additional issuance of First Mortgage Notes less the estimated
fair market value of the personal property to be included in the Mortgaged
Facility improvements to be financed by such First Mortgage Notes or (ii) the
estimated fair market value of the real property (including all real property
improvements) to be included in the Mortgaged Facility improvements to be
financed by such First Mortgage Notes, in each instance under clauses (e)(i) or
(e)(ii), as conclusively established by a Board Resolution. Pending application
of the proceeds from any such additional issuance of First Mortgage Notes as
described above, such proceeds will be retained by the Collateral Agent in the
Collateral Account.
Limitation on Liens. The Indenture provides that the Company shall not, and
shall not permit, cause or suffer any of its Recourse Subsidiaries to, create,
incur, assume or suffer to exist any Liens of any kind upon any property or
assets of the Company or any Recourse Subsidiary, whether now owned or
hereafter acquired, except for Permitted Liens.
Limitation on Preferred Stock of Subsidiaries. The Indenture provides that
the Company will not permit any of its Recourse Subsidiaries to issue,
directly or indirectly, any Preferred Stock, except: (i) Preferred Stock
issued to and held by the Company or a Wholly-Owned Recourse Subsidiary,
except that any subsequent issuance or transfer of any Capital Stock or any
other event which results in any Wholly-Owned Recourse Subsidiary ceasing to
be a Wholly-Owned Recourse Subsidiary or any transfer of such Preferred Stock
by any Wholly-Owned Recourse Subsidiary will, in each case, be deemed an
issuance of Preferred Stock under the Indenture; (ii) Preferred Stock issued
by a Person prior to the time (a) such Person became a Recourse Subsidiary,
(b) such Person merges with or into a Recourse Subsidiary or (c) another
Recourse Subsidiary merges with or into such Person (in a transaction in which
such Person becomes a Recourse Subsidiary), in each case if such Preferred
Stock was not incurred in anticipation of such transaction; and (iii)
Preferred Stock (other than Disqualified Stock) which is exchanged for
Preferred Stock permitted to be outstanding pursuant to clauses (i) and (ii)
or which are used to refinance Indebtedness of a Recourse Subsidiary (or any
extension, renewal or refinancing thereof), having a liquidation preference
not to exceed the liquidation preference of the Preferred Stock or the
principal amount of the Indebtedness so exchanged or refinanced; provided,
that the Preferred Stock so issued in exchange (i) shall have a stated
maturity not earlier than the stated maturity of the Indebtedness or Preferred
Stock being
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refunded or refinanced and (ii) shall have an Average Life equal to or greater
than the remaining Average Life of the Indebtedness or Preferred Stock being
refunded or refinanced.
Limitations on Restricted Payments. The Indenture provides that neither the
Company nor any of its Recourse Subsidiaries shall, directly or indirectly,
declare, pay or set apart for payment, any Restricted Payment, if after giving
effect thereto: (i) a Default or an Event of Default shall have occurred and
be continuing; (ii) the Company would not be permitted to incur or become
liable with respect to at least $1.00 of additional Indebtedness as determined
in accordance with the first paragraph of the covenant "--Limitations on
Indebtedness"; or (iii) the aggregate amount of all Restricted Payments made
by the Company or any of its Recourse Subsidiaries (the amount expended or
distributed for such purposes, if other than in cash, to be valued at its fair
market value as determined in good faith by the Board of Directors of the
Company, whose determination shall be conclusive and evidenced by a Board
Resolution delivered to the Trustee) from and after the date of the Indenture,
through and including the date on which such Restricted Payment is made, would
exceed the sum of:
(a) the aggregate of 50% of the Company's Consolidated Net Income accrued
for the period (taken as one accounting period) (or if such aggregate
Consolidated Net Income shall be a deficit, minus 100% of the amount of
such deficit) commencing with the first full fiscal quarter after the Issue
Date to and including the fiscal quarter ended immediately prior to the
date of such calculation; and
(b) the aggregate net cash proceeds or the fair market value of
marketable securities received by the Company after the Issue Date from the
issuance or sale (other than to a Recourse Subsidiary) by the Company of
its Capital Stock (excluding Disqualified Stock, but including Capital
Stock other than Disqualified Stock issued upon conversion of, or exchange
for, Disqualified Stock or securities other than its Capital Stock), and
upon the exercise of warrants and rights to purchase such Capital Stock
(the "Aggregate Cash Proceeds"). For purposes of clause (b), the aggregate
net cash proceeds received by the Company (x) from the issuance of its
Capital Stock upon the conversion of, or exchange for, securities
evidencing Indebtedness of the Company, shall be calculated on the
assumption that the gross proceeds from such issuance are equal to the
aggregate principal amount (or, if discounted Indebtedness, the aggregate
accreted amount) of Indebtedness evidenced by such securities converted or
exchanged and (y) upon the conversion or exchange of other securities of
the Company shall be equal to the aggregate net proceeds of the original
sale of the securities so converted or exchanged if such proceeds of such
original sale were not previously included in any calculation for the
purposes of clause (b) of the preceding sentence, plus any additional sums
payable upon conversion or exchange.
Notwithstanding the foregoing, this provision shall not prevent (i) the
payment of any dividend within 60 days after the date of its declaration (if
the declaration of such dividend was permitted by the foregoing provision at
the time of such declaration); (ii) the repurchase, retirement or other
acquisition of any shares of the Company's Capital Stock, or any option,
warrant or other right to purchase shares of the Company's Capital Stock, or
the repayment of any subordinated Indebtedness of the Company solely in
exchange for shares of, or out of the proceeds of a substantially
contemporaneous issuance of, Capital Stock (other than Disqualified Stock);
provided, however, that such purchase, retirement or acquisition shall be
excluded from subsequent calculations of Restricted Payments; (iii) the
contribution to or other Investment in a Majority-Owned Non-Recourse
Subsidiary in an amount not to exceed $15 million; (iv) the defeasance,
redemption or repurchase of subordinated Indebtedness with the net cash
proceeds from an incurrence of subordinated refinancing Indebtedness,
provided, however, that such defeasance, redemption or repurchase shall be
excluded from subsequent calculations of Restricted Payments; (v)
distributions or payments of Receivables Fees, provided, however, that such
distributions or payments shall be
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excluded from subsequent calculations of Restricted Payments; (vi) Permitted
Investments, provided, however, that Permitted Investments shall be excluded
from subsequent calculations of Restricted Payments; (vii) Permitted Payments,
provided, however, that Permitted Payments shall be excluded from subsequent
calculations of Restricted Payments; (viii) the contribution to or other
Investment by the Company in a Wholly-Owned Non-Recourse Subsidiary; provided,
that the amount of such contribution or Investment, together with the amount
of all other contributions or Investments pursuant to this clause (viii),
shall not exceed the amount of Aggregate Cash Proceeds; and, provided,
further, that such contribution or Investment is otherwise permitted under the
first paragraph under "--Limitations on Restricted Payments" without giving
effect to clause (ii) of such paragraph; (ix) the contribution of the Released
Property to a Non-Recourse Subsidiary in exchange for an equity interest
therein; provided, that at the time of such contribution, such land is not
used or necessary in the business of the Company or any of its Recourse
Subsidiaries as conclusively determined by a Board Resolution; and (x) other
Restricted Payments not to exceed $5 million in the aggregate.
Limitations on Transactions with Stockholders and Affiliates. The Indenture
provides that the Company shall not, and shall not permit any of its Recourse
Subsidiaries to, enter into or permit to exist any transaction (or series of
related transactions), including without limitation, any loan, advance,
guarantee or capital contribution to, or for the benefit of, or any sale,
purchase, lease, exchange or other disposition of any property or the
rendering of any service, or any other direct or indirect payment, transfer or
other disposition (a "Transaction"), involving payments, with any holder of 5%
or more of any class of Capital Stock of the Company or with any Affiliate of
such holder or with any Affiliate of the Company (other than a Wholly-Owned
Recourse Subsidiary of the Company), on terms and conditions less favorable to
the Company or such Recourse Subsidiary, as the case may be, than would be
available at such time in a comparable Transaction in arm's length dealings
with an unrelated Person as determined by the Board of Directors of the
Company or a Recourse Subsidiary, such determination, in the case of any
transaction (or series of related transactions) involving aggregate
consideration in excess of $75,000 to be evidenced by a Board Resolution.
Notwithstanding the foregoing, the Company shall be entitled to grant
gratuitous Permitted Easements in connection with the construction and
operation of Released Property Facilities and shall be entitled to make
capital contributions to Subsidiaries to the extent permitted under
"--Limitations on Restricted Payments."
The provisions of the foregoing paragraph will not apply to (i) Restricted
Payments otherwise permitted pursuant to the Indenture; (ii) transactions
between the Company and one or more of its Recourse Subsidiaries; provided,
that such transactions are not otherwise prohibited by the Indenture; (iii)
reasonable and customary fees and compensation (including amounts and other
benefits paid pursuant to employee benefit plans) paid to, and indemnity
provided on behalf of, officers, directors, employees or consultants of the
Company or any Subsidiary, as determined by the Board of Directors of the
Company or any Subsidiary; (iv) payments for goods and services purchased in
the ordinary course of business on an arms-length basis; (v) transactions
effected as part of a Qualified Asset Backed Transaction; and (vi) the
provision of, and the payment for, shared administrative services to
Affiliates in the ordinary course of business.
Restrictions on Asset Sales. The Indenture provides that the Company will
not, and will not permit any of its Recourse Subsidiaries to, make any Asset
Sale, unless (a) the Company or such Recourse Subsidiary, as the case may be,
receives consideration at the time of such Asset Sale at least equal to the
fair market value (as determined in good faith by its Board of Directors or,
in the case of any Asset Sale involving aggregate consideration of $125,000 or
less, by the Chief Financial Officer of the Company or, in the case of any
Asset Sale involving aggregate consideration of $25,000 or less, by any Vice
President) of the Capital Stock or assets to be sold and (b) the consideration
therefor received by the Company or such Recourse Subsidiary is in the form of
cash, Cash Equivalents or
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assets that are useful in the steel business ("Steel Business Assets");
provided, that (A) the amount of (x) any liabilities (as shown on the
Company's or such Recourse Subsidiary's most recent balance sheet) of the
Company or any Recourse Subsidiary (other than contingent liabilities and
liabilities that are by their terms subordinated to the First Mortgage Notes
or any guarantee thereof) that are assumed by the transferee of any such
assets pursuant to a customary novation agreement that releases the Company or
such Recourse Subsidiary from further liability and (y) any non-cash
consideration received by the Company or any such Recourse Subsidiary from
such transferee that is converted by the Company or such Recourse Subsidiary
into cash within 180 days of closing such Asset Sale, shall be deemed to be
cash for purposes of this provision (to the extent of the cash received) and
(B) the Company or such Recourse Subsidiary may accept consideration
(including consideration in the form of assumption of liabilities) from such
Asset Sale in other than cash, Cash Equivalents and Steel Business Assets if
the aggregate fair market value (as determined in good faith by the Company's
Board of Directors and evidenced by a Board Resolution) of all consideration
from all Asset Sales since the date of the Indenture that is other than cash,
Cash Equivalents and Steel Business Assets ("Other Consideration") at the time
of such Asset Sale, less the sum of the amount of any cash and Cash
Equivalents and the fair market value (as determined in good faith by the
Company's Board of Directors and evidenced by a resolution of such Board) of
any Steel Business Assets realized from, or received in exchange for, any
Other Consideration prior to the time of such Asset Sale, does not exceed 5%
of total assets at the time of such Asset Sale.
Within twelve months of the date that the Available Amount equals or exceeds
$5,000,000, the Company will elect to either (a) apply or cause to be applied
the Available Amount to a Permitted Related Acquisition or the commencement
thereof (provided, that such project is completed within a reasonable time of
the commencement thereof), (b) make an offer to purchase First Mortgage Notes
(an "Asset Sale Offer") from all Holders and, in the case of an Asset Sale of
Collateral and to the extent required by the terms of any other First Mortgage
Notes issued under the Indenture, from all holders thereof up to an amount
equal to the Available Amount (rounded to the next lowest multiple of $1,000)
at a purchase price equal to 100% of the principal amount thereof plus accrued
interest thereon, if any, to the date of purchase, (c) repay other senior
Indebtedness from the Net Cash Proceeds of Asset Sales other than sales of
Collateral or (d) any combination of clauses (a), (b) and (c) above; provided,
that (i) property acquired at any time as a Permitted Related Acquisition
(other than a Permitted Related Acquisition of property securing the New
Credit Facility) that has been acquired with Collateral Proceeds shall be
subject to a first priority Lien in favor of the Collateral Agent for the
benefit of the Trustee and the Holders; (ii) pending application to a
Permitted Related Acquisition or an Asset Sale Offer, the Collateral Proceeds,
together with all Condemnation Awards and Net Insurance Proceeds received by
the Collateral Agent, will be retained by the Collateral Agent in the
Collateral Account subject to a first priority Lien in favor of the Collateral
Agent for the benefit of the Trustee and the Holders; and (iii)
notwithstanding the foregoing and as long as no Event of Default shall have
occurred and be continuing, (A) the Company and its Recourse Subsidiaries, in
the aggregate, shall be permitted to retain $1,000,000 of Net Cash Proceeds
from Asset Sales, (B) to the extent that Holders do not subscribe to an Asset
Sale Offer, the Company may retain the unutilized Available Amount and (C) the
Company and its Recourse Subsidiaries collectively may retain the Net Cash
Proceeds from the sale of any machinery, equipment, furniture, apparatus,
tools or implements or other similar property subject to the Lien of the
Security Documents, which may have become worn out, obsolete or no longer
necessary to the operation of the Company's or its Recourse Subsidiaries'
business ("Obsolete Assets") in an aggregate amount not to exceed $2,000,000
in any year, in the case of clauses (A), (B) and (C) in this clause (iii),
free of the Lien of the Security Documents, and such retained amounts shall be
released from the Collateral Account promptly upon demand.
Notwithstanding anything to the contrary in the Indenture, neither the
Company nor any of its Recourse Subsidiaries shall apply the proceeds of any
Collateral described in clause (a) in the first
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paragraph under the caption "--Security" to the purchase of collateral
securing the New Credit Facility.
Each Asset Sale Offer will be mailed to the Holders within twelve months
after the Available Amount equals or exceeds $5,000,000, with a copy to the
Trustee, will specify the purchase date (which will be no earlier than 30 days
nor more than 60 days from the date such notice is mailed) and will otherwise
comply with the procedures set forth in the Indenture and the Security
Documents.
Limitation on Dividend and Other Payment Restrictions Affecting Recourse
Subsidiaries. The Indenture provides that the Company will not, and will not
permit any of its Recourse Subsidiaries to, directly or indirectly, create,
assume or otherwise cause or suffer to exist or enter into any agreement with
any Person that would cause any consensual encumbrance or restriction of any
kind on the ability of any such Recourse Subsidiary to (a) pay dividends, in
cash or otherwise, or make any other distributions on its Capital Stock; (b)
make payments in respect of any Indebtedness owed to the Company or any of the
Company's Recourse Subsidiaries; (c) make loans or advances to the Company or
any of the Company's Recourse Subsidiaries; or (d) transfer any of its assets
to the Company or any of the Company's Recourse Subsidiaries, other than by
reason of (i) the First Mortgage Notes, the Indenture and the Security
Documents; (ii) restrictions existing under agreements in effect on the Issue
Date, including, without limitation, restrictions under the New Credit
Facility as in effect on the Issue Date; (iii) consensual encumbrances or
restrictions binding upon any Person at the time such Person becomes a
Recourse Subsidiary of the Company so long as such encumbrances or
restrictions are not created, incurred or assumed in contemplation of such
Person becoming a Recourse Subsidiary of the Company; (iv) restrictions
existing under any agreement which refinances or replaces any of the
agreements containing the restrictions in (ii) or (iii); provided, that the
terms and conditions of any such restrictions are not materially less
favorable to the Company or such Recourse Subsidiary than those under the
agreement evidencing the refinanced Indebtedness; (v) customary non-assignment
or sublease provisions of (A) any lease governing a leasehold interest of the
Company or any Recourse Subsidiaries or (B) any other contract or agreement of
the Company or any Recourse Subsidiary for the purchase or sale of goods or
services entered into in the ordinary course of business and involving, in the
case of any contract or agreement, payments of $1,000,000 or less in the
aggregate in any fiscal year; (vi) customary restrictions relating to assets
acquired with the proceeds of a purchase money obligation; (vii) any
restrictions with respect to a Recourse Subsidiary of the Company imposed
pursuant to an agreement which has been entered into for the sale or
disposition of all or substantially all of the Capital Stock or assets of such
Recourse Subsidiary; (viii) restrictions created in connection with a
Qualified Asset Backed Transaction that, in the good faith determination of
the Board of Directors, are necessary to effect such Qualified Asset Backed
Transaction; provided, that such restrictions apply only to such Asset Backed
Entity; and (ix) customary provisions contained in joint venture agreements
and other similar agreements entered into in the ordinary course of business.
Merger and Consolidation. The Indenture provides that the Company may not
consolidate with or merge into any other Person or convey, sell, assign,
transfer or lease all or substantially all of its properties and assets
(determined on a consolidated basis for the Company and its Recourse
Subsidiaries taken as a whole) in one transaction or a series of transactions
to any other Person or Persons, or permit any Person to consolidate with or
merge into the Company, or convey, sell, assign, transfer or lease all or
substantially all of such Person's properties and assets in one transaction or
a series of transactions to the Company, unless: (i) such Person is a solvent
corporation, partnership or trust organized under the laws of the United
States, one of the States thereof or the District of Columbia; (ii) the
resulting, surviving or transferee corporation, partnership or trust (if other
than the Company) assumes by a supplemental indenture executed and delivered
to the Trustee, in form satisfactory to the Trustee, all of the Company's
obligations under the First Mortgage Notes, the Indenture and the Security
Documents; (iii) immediately before and after giving effect to such
transaction or series of transactions, no Default or Event of Default shall
have occurred and be
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continuing; (iv) immediately after giving effect to such transaction or series
of transactions (including, without limitation, any Indebtedness incurred or
anticipated to be incurred in connection with or in respect of the transaction
or series of transactions), the Company, or the successor or transferee
corporation, would be permitted to incur an additional $1.00 of Indebtedness
pursuant to the Indenture; and (v) the Company or the surviving entity shall
have delivered to the Trustee an Officer's Certificate and an Opinion of
Counsel, each stating that such consolidation, merger, conveyance, sale,
transfer or lease and, if a supplemental indenture has been executed in
connection with such transaction or series of transactions, such supplemental
indenture complies with this covenant and that all conditions precedent in the
Indenture relating to the transaction or series of transactions have been
satisfied. Notwithstanding the foregoing, clause (iv) of the preceding
sentence shall not prohibit a transaction, the principal purpose of which is
(as determined in good faith by the Board of Directors of the Company and
evidenced by the resolution or resolutions thereof) to change the state of
incorporation of the Company, and such transaction does not have as one of its
purposes the evasion of the limitation on merger, consolidations and sales of
assets. Nothing contained in this section should be deemed to prevent the
Company or any Subsidiary from granting a security interest in, or a mortgage
or Lien upon, or otherwise encumbering, any of its assets, subject to the
limitations on Liens set forth in the Indenture. Notwithstanding the
foregoing, the Company and its Recourse Subsidiaries may not consolidate with
or merge into a Non-Recourse Subsidiary or convey, sell, assign, transfer or
lease all or substantially all of their properties and assets (determined,
with respect to the Company, on a consolidated basis for the Company and its
Subsidiaries taken as a whole) in one transaction or a series of transactions
to any Non-Recourse Subsidiary, or permit any Non-Recourse Subsidiary to
consolidate with or merge into the Company or any of its Recourse Subsidiaries
or convey, sell, assign, transfer or lease all or substantially all of such
Non-Recourse Subsidiary's properties and assets in one transaction or a series
of transactions to the Company or any of its Recourse Subsidiaries.
Limitation on Sale and Leaseback Transactions. The Indenture provides that
the Company will not, and will not permit any of its Recourse Subsidiaries to,
enter into, directly or indirectly, any Sale and Leaseback Transaction, with
respect to any real or tangible personal property, other than (i) a Sale and
Leaseback Transaction entered into between the Company and any of its Wholly-
Owned Recourse Subsidiaries or between Wholly-Owned Recourse Subsidiaries of
the Company, as the case may be; (ii) Capitalized Lease Obligations permitted
to be incurred by the Company or any of its Subsidiaries pursuant to the
limitations on Indebtedness set forth in the Indenture; and (iii) a Sale and
Leaseback Transaction the gross cash proceeds of which are at least equal to
the fair market value (as determined in good faith by a Board Resolution,
which determined shall be conclusive evidence of compliance with this
provision) of the property that is the subject of such Sale and Leaseback
Transaction and the transfer of assets in such Sale and Leaseback Transaction
is permitted by, and the Company applies the net proceeds of such transaction
in compliance with, the covenant described above under the caption
"--Restrictions on Asset Sales."
Limitations as to Non-Recourse Subsidiaries. The Indenture provides that the
Company will not permit any Non-Recourse Subsidiary to create, assume, incur,
guarantee or otherwise become liable in respect of any Indebtedness other than
Non-Recourse Indebtedness. Neither the Company nor any of its Recourse
Subsidiaries will sell, lease, convey or otherwise transfer to any Non-
Recourse Subsidiary any asset which is essential to the steelmaking operations
of the Company or its Recourse Subsidiaries. The Released Property shall be
deemed to be not essential to the steel making operations of the Company and
its Recourse Subsidiaries.
Limitation on Improvements to the Released Property. In the event that the
Company contributes the Released Property to a Non-Recourse Subsidiary as
permitted under "--Limitations on Restricted Payments," and new facilities are
constructed on such property, the Company covenants that such new facilities
(the "Released Property Facilities") (i) shall be designed for use in lines of
business related to the Company's or one of its Recourse Subsidiaries'
business at such time, (ii) may not be
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financed in whole or in part by the sale of additional First Mortgage Notes
under the Indenture (provided, however, that subject to the restrictions on
the use of proceeds from any future issuance of First Mortgage Notes as
provided under "--Limitations on Indebtedness," the Company may contribute
capital or otherwise invest in such Non-Recourse Subsidiary to the extent
permitted under the Indenture under "--Limitations on Restricted Payments"
even if such capital or investment is financed, directly or indirectly, by the
sale of additional First Mortgage Notes under the Indenture), (iii) may not
replace any Integral Fixtures and Equipment and (iv) if subsequently removed,
will not have a material adverse impact on the operations in the ordinary
course of business of the Mortgaged Facility, as in existence immediately
prior to commencement of the construction of the Released Property Facility
(in the case of clause (iv), as conclusively established by a Board
Resolution). The Company and the owner or operator of any Released Property
Facility may enter into shared infrastructure, supply and other agreements to
the extent permitted under the Indenture, including to the extent permitted
under "--Limitations on Transactions with Stockholders and Affiliates." The
Company may request that the Trustee execute and deliver any consents,
approvals, and agreements deemed desirable by the Company to permit
construction and operation of Released Property Facilities in accordance with
the terms of this covenant.
Impairment of Security Interest. The Indenture provides that the Company
will not, and will not permit any of its Recourse Subsidiaries to, take or
omit to take any action, which action or omission might or would have the
result of affecting or impairing the security interest in favor of the
Collateral Agent, on behalf of the Trustee and the Holders with respect to the
Collateral, and the Company shall not grant to any Person (other than the
Collateral Agent on behalf of the Trustee and the Holders) any interest
whatsoever in the Collateral, except, in either case, as expressly permitted
by the Indenture and the Security Documents.
Conflicting Agreements. The Indenture provides that the Company will not,
and will not permit any of its Recourse Subsidiaries to, enter into any
agreement or instrument that by its terms expressly (i) prohibits the Company
from redeeming or otherwise making any payments on or in respect of the First
Mortgage Notes in accordance with the terms thereof and of the Indenture, as
in effect from time to time, or (ii) requires that the proceeds received from
the sale of any Collateral be applied to repay, redeem or otherwise retire any
Indebtedness of any Person other than the Indebtedness represented by the
First Mortgage Notes of all series then outstanding, except as expressly
permitted by the Indenture or the Security Documents.
Amendment to Security Documents. The Indenture provides that the Company
will not, and will not permit any of its Recourse Subsidiaries to, amend,
modify or supplement, or permit or consent to any amendment, modification or
supplement of, any of the Security Documents in any way which would be adverse
to the Holders or which would constitute a Default under the Indenture or a
default under any Security Document.
EVENTS OF DEFAULT
The following events are defined in the Indenture as "Events of Default":
(i) the Company defaults in the payment of interest on any First Mortgage
Note when due and payable and such default in the payment of interest
continues for a period of 30 days;
(ii) the Company defaults in the payment of the principal, or premium, if
any, of any First Mortgage Note when due and payable at maturity, upon
acceleration, redemption, pursuant to an offer to purchase required under
the Indenture or otherwise (including failure to make payment pursuant to a
Change of Control Offer or Asset Sale Offer);
(iii) the Company fails to comply with any of its covenants or agreements
described under "--Certain Covenants--Restrictions on Asset Sales" or
"--Change of Control," and such failure continues for a period of thirty days
or the Company fails to comply with the covenant described under "--Merger and
Consolidation;"
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(iv) the Company fails to observe or perform any covenant, condition or
agreement in the First Mortgage Notes, the Indenture or the Security
Documents (other than as described in clause (i), (ii) or (iii)) and such
failure to observe or perform continues for a period of 30 days after there
has been given to the Company by the Trustee, or has been received by the
Company and the Trustee from the Holders of at least 25% of the principal
amount of the First Mortgage Notes then outstanding, a written notice
specifying such default, demanding that it be remedied and stating that the
notice is a "Notice of Default", unless, with respect to defaults under the
Security Documents, the remedy or cure of such default requires work to be
performed, acts to be done or conditions to be removed which cannot, by
their nature, reasonably be performed, done or removed within such 30-day
period, or if such remedy or cure is prevented by causes outside of the
control or responsibility of the Company, in which case no "Event of
Default" shall be deemed to have occurred until the date that is 90 days
after such written notice so long as the Company shall have commenced cure
within such 90-day period and shall diligently prosecute the same to
completion;
(v) a default in the payment of principal at final maturity under any
mortgage, indenture or instrument under which there may be issued or by
which there may be secured or evidenced any Indebtedness of the Company or
any of its Recourse Subsidiaries (or the payment of which is guaranteed now
or hereafter by the Company or any of its Subsidiaries), whether such
Indebtedness or Guarantee now exists or shall be created hereafter, in a
principal amount of at least $5,000,000;
(vi) a default occurs under any mortgage, indenture or instrument under
which there may be issued or by which there may be secured or evidenced any
Indebtedness (including any interest thereon) of the Company or its
Recourse Subsidiaries (or the payment of which is guaranteed now or
hereafter by the Company or any of its Subsidiaries), whether such
Indebtedness or Guarantee now exists or shall be created hereafter, if (i)
as a result of such event of default the maturity of such Indebtedness has
been accelerated prior to its stated maturity and (ii) the principal amount
of such Indebtedness, together with the principal amount of any other
Indebtedness of the Company and its Recourse Subsidiaries the maturity of
which has been so accelerated, aggregates $5,000,000 or more;
(vii) the Company or any Subsidiary (other than a Non-Recourse
Subsidiary, unless such action or proceeding results in the Company or any
Recourse Subsidiary becoming liable or responsible for liabilities or
obligations of such Non-Recourse Subsidiary in an aggregate amount in
excess of $5,000,000 and has a material adverse effect on the ability of
the Company to satisfy its obligations under the Indenture or the Notes)
pursuant to or within the meaning of any Bankruptcy Law: (a) commences a
voluntary case or proceeding; (b) consents to the entry of an order for
relief against it in an involuntary case or proceeding; (c) consents to the
appointment of a Custodian of it or for all or substantially all of its
property; (d) makes a general assignment for the benefit of its creditors;
or (e) admits in writing its inability to pay its debts as the same become
due;
(viii) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that: (a) is for relief against the Company or any
Subsidiary in an involuntary case; (b) appoints a Custodian of the Company
or any Subsidiary for all or substantially all of its property; or (c)
orders the liquidation of the Company or any Subsidiary; provided, that
clauses (a), (b) and (c) shall not apply to a Non-Recourse Subsidiary,
unless such action or proceeding results in the Company or any Recourse
Subsidiary becoming liable or responsible for liabilities or obligations of
such Non-Recourse Subsidiary in an aggregate amount in excess of $5,000,000
and has a material adverse effect on the ability of the Company to satisfy
its obligations under the Indenture or the Notes and in any such case the
order or decree remains unstayed and in effect for 60 days;
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(ix) the Company or any Recourse Subsidiary shall fail to discharge any
one or more judgments not covered by insurance (from which no further
appeal may be taken) in excess of $5,000,000, and such judgments shall
remain in force, undischarged, unsatisfied, unstayed and unbonded for more
than 30 days;
(x) (a) the Security Documents shall cease, for any reason, to be in full
force and effect or shall cease to be effective to grant a perfected Lien
on the Collateral with the priority purported to be created thereby, in
each case with respect to Collateral the aggregate value of which is in
excess of $3,000,000 or (b) the Security Documents shall cease, for any
reason, to be in full force and effect or shall cease to be effective to
grant a perfected Lien on the Collateral with the priority purported to be
created thereby in any case with respect to Collateral the aggregate value
of which is $3,000,000 or less and the Company or any Recourse Subsidiary,
as applicable, shall have failed to take reasonable steps to cure such
event promptly after having learned thereof; or
(xi) an event of default shall have occurred with respect to the First
Mortgage Notes of any other series and as a result of such event of default
the maturity of the First Mortgage Notes of such other series shall have
been accelerated prior to its stated maturity.
If an Event of Default (other than an Event of Default specified in
subparagraph (vii) or (viii) set forth above) occurs and is continuing, the
Trustee or the Holders of at least 25% of the principal amount of the First
Mortgage Notes then outstanding by notice to the Company (and to the Trustee
if such notice is given by the Holders) may declare the principal amount and
accrued interest on the First Mortgage Notes to be immediately due and
payable. If an Event of Default specified in section (vii) or (viii) above
occurs, the principal amount and accrued interest shall ipso facto become and
be immediately due and payable on all outstanding First Mortgage Notes without
any declaration or other act on the part of the Trustee or any Holder. The
Holders of a majority in principal amount of the then outstanding First
Mortgage Notes by notice to the Company and the Trustee may rescind an
acceleration and its consequences if all existing Events of Default, other
than the nonpayment of the principal of the First Mortgage Notes which have
become due solely by such declaration of acceleration, have been cured or
waived. The Holders of a majority in principal amount of the outstanding First
Mortgage Notes also have the right to waive certain past defaults under the
Indenture except a default in the payment of the principal of, premium, if
any, or interest on any First Mortgage Note, or in respect of a covenant or a
provision which cannot be modified or amended without the consent of all
Holders.
No Holder has the right to institute any proceeding with respect to the
Indenture, the Security Documents or any remedy thereunder, unless the Holders
of at least 25% in principal amount of the outstanding First Mortgage Notes
have made written request, and offered reasonable indemnity, to the Trustee to
institute such proceeding as Trustee, the Trustee has failed to institute such
proceeding within 15 days after receipt of such notice, and the Trustee has
not within such 15-day period received directions inconsistent with such
written request by Holders of a majority in principal amount of the
outstanding First Mortgage Notes. Such limitations do not apply, however, to
suits instituted by a Holder for the enforcement of the payment of the
principal of, premium, if any, or interest on such First Mortgage Note on or
after the respective due dates expressed in such First Mortgage Note.
The Holders of a majority in principal amount of the outstanding First
Mortgage Notes will have the right, subject to certain limitations, to direct
the time, method and place of conducting any proceeding for any remedy
available to the Trustee or exercising any trust or power conferred on the
Trustee. The Indenture provides that in case an Event of Default shall occur
and be continuing, the Trustee will exercise such of its rights and powers
under the Indenture, and use the same degree of care and skill in their
exercise, as a prudent Person would exercise or use under the circumstances in
the conduct of his or her own affairs. Subject to certain provisions of the
Indenture, the Trustee will be under no obligation to exercise any of its
rights or powers under the Indenture at the request of any of the Holders
unless they have offered to the Trustee reasonable security or indemnity
against
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the costs, expenses and liabilities which might be incurred by it in
compliance with such request. The Trustee may withhold from Holders notice of
any continuing default (except a default in payment) if it determines in good
faith that the withholding of such notice is in the interest of such Holders.
Under the Indenture, the Company is required to furnish to the Trustee
annually (i) a statement by certain officers of the Company to the effect that
to the best of their knowledge the Company is not in default in the
fulfillment of any of its obligations under such Indenture or, if there has
been such default, specifying each such default and (ii) an Opinion of Counsel
either stating that action has been taken with respect to the filing,
refiling, recording or re-recording of the Indenture as is necessary to
maintain the Lien of the Indenture or that no such action is necessary to
maintain such Lien.
MODIFICATION OF THE INDENTURE
From time to time, the Company, when authorized by a Board Resolution, and
the Trustee and the Collateral Agent (if a party thereto) may amend, waive or
supplement the Indenture, the Security Documents or the First Mortgage Notes
for certain specified purposes, including, among other things, curing
ambiguities, defects or inconsistencies, maintaining the qualification of the
Indenture under the TIA, making any change that does not adversely affect the
rights of any Holder or mortgaging, pledging, or granting a security interest
in favor of the Collateral Agent as additional security for the payment and
performance of the obligations under the Indenture, in any property or assets,
including any which are required to be mortgaged, pledged or hypothecated, or
in which a security interest is required to be granted, to the Collateral
Agent pursuant to any Security Document or otherwise; provided, that, in the
case of certain amendments to the Indenture, the Company delivers to the
Trustee an Opinion of Counsel stating that such change does not adversely
affect the rights of any Holder. Other amendments and modifications of the
Indenture, the First Mortgage Notes or the Security Documents may be made by
the Company, the Collateral Agent (if a party thereto) and the Trustee with
the consent of the Holders of not less than a majority of the aggregate
principal amount of the outstanding First Mortgage Notes; provided, that no
such modification or amendment may, without the consent of the Holder of each
outstanding First Mortgage Note affected thereby, (i) reduce the principal
amount of, extend the final maturity of or alter the redemption provisions of,
the First Mortgage Notes, (ii) change the currency in which any First Mortgage
Notes or any premium thereon is payable, (iii) reduce the percentage in
principal amount of outstanding First Mortgage Notes that must consent to an
amendment, supplement or waiver or consent to take any action under the
Indenture, the First Mortgage Notes or the Security Documents, (iv) impair the
right to institute suit for the enforcement of any payment on or with respect
to the First Mortgage Notes, (v) waive a default in payment with respect to
the First Mortgage Notes, (vi) reduce or change the rate or time for payment
of interest on the First Mortgage Notes, or (vii) affect the ranking or
security of the First Mortgage Notes.
Notwithstanding clause (vii) of the preceding paragraph, any amendment or
modification of, or waiver with respect to, the Indenture, the First Mortgage
Notes or the Security Documents requested by the Company in connection with
any intercreditor agreement or similar arrangement to facilitate the
financing, construction, or operation of Released Property Facilities shall
only require the approval of not less than a two-thirds majority of the
aggregate principal amount of the then outstanding First Mortgage Notes even
if such intercreditor agreement or similar arrangement affects the ranking or
security of the First Mortgage Notes. No such intercreditor agreement or
similar arrangement shall, however, cause the Trustee to release the Lien in
favor of the Trustee and Holders on the Collateral except in compliance with
"--Release of Collateral," "--Legal Defeasance and Covenant Defeasance," and
"--Satisfaction and Discharge of the Indenture." Further, no such
intercreditor agreement or similar arrangement shall cause the Trustee to
subordinate the Liens in favor of the Holders under the Security Documents to
Liens in favor of creditors financing Released Property Facilities.
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LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company at any time may terminate (i) all its obligations under the
First Mortgage Notes and, to the extent related thereto, the Indenture and the
Security Documents ("legal defeasance option") or (ii) its obligations to
comply with certain restrictive covenants, including certain of the covenants
described under "--Certain Covenants" above ("covenant defeasance option").
The Company may exercise its legal defeasance option notwithstanding its prior
exercise of its covenant defeasance option.
If the Company exercises its legal defeasance option, payment of the First
Mortgage Notes may not be accelerated because of an Event of Default. If the
Company exercises its covenant defeasance option, payment of the Notes may not
be accelerated because of certain Events of Default described under "Events of
Default" above (not including Events of Default relating to non-payment,
bankruptcy and insolvency events, among others) or because of the failure of
the Company to comply with certain covenants specified in the Indenture.
The Company may exercise its legal defeasance option or its covenant
defeasance option only if:
(1) the Company irrevocably deposits in trust with the Trustee money or
U.S. Government Obligations for the payment of principal and interest on
the First Mortgage Notes to maturity or redemption, as the case may be;
(2) the Company delivers to the Trustee a certain certificate from a
nationally recognized firm of independent certified public accountants
expressing their opinion that the payments of principal and interest when
due and without reinvestment on the deposited U.S. Government Obligations
plus any deposited money without investment will provide cash at such times
and in such amounts as will be sufficient to pay principal and interest
when due on all the First Mortgage Notes to maturity or redemption, as the
case may be;
(3) 91 days pass after the deposit is made and during the 91-day period
no Default relating to bankruptcy and insolvency events with respect to the
Company occurs which is continuing at the end of the period;
(4) no Default has occurred and is continuing on the date of such deposit
and after giving effect thereto;
(5) the Company delivers to the Trustee an Opinion of Counsel to the
effect that (i) the trust resulting from the deposit does not constitute,
or is qualified as, a regulated investment company under the Investment
Company Act of 1940, (ii) the Holders have a valid first priority perfected
security interest in the trust funds, and (iii) after passage of 91 days
following the deposit (except, with respect to any trust funds for the
account of any Holder who may be deemed to be an "insider" for purposes of
the Bankruptcy Code, after one year following the deposit), the trust funds
will not be subject to the effect of Section 547 of the Bankruptcy Code or
Section 15 of the New York Debtor and Creditor Law in a case commenced by
or against the Company under either such statute, and either (A) the trust
funds will no longer remain the property of the Company (and therefore,
will not be subject to the effect of any applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally) or
(B) if a court were to rule under any such law in any case or proceeding
that the trust funds remained property of the Company, (x) assuming such
trust funds remained in the possession of the Trustee prior to such court
ruling to the extent not paid to Holders, the Trustee will hold, for the
benefit of the Holders, a valid first priority perfected security interest
in such trust funds that is not avoidable in bankruptcy or otherwise except
for the effect of Section 552(b) of the Bankruptcy Code on interest on the
trust funds accruing after the commencement of a case under such statute
and (y) the Holders will be entitled to receive adequate protection of
their interests in such trust funds if such trust funds are used in such
case or proceeding;
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(6) in the case of the legal defeasance option, the Company shall have
delivered to the Trustee an Opinion of Counsel stating that (i) the Company
has received from, or there has been published by, the Internal Revenue
Service a ruling, or (ii) since the date of the Indenture there has been a
change in the applicable U.S. Federal income tax law or a regulation
clarifying existing law, in either case to the effect that, and based
thereon such Opinion of Counsel shall confirm that, the Holders will not
recognize income, gain or loss for U.S. Federal income tax purposes as a
result of such defeasance and will be subject to U.S. Federal income tax on
the same amounts, in the same manner and at the same times as would have
been the case if such defeasance had not occurred;
(7) in the case of the covenant defeasance option, the Company shall have
delivered to the Trustee an Opinion of Counsel to the effect that the
Holders will not recognize income, gain or loss for U.S. Federal income tax
purposes as a result of such covenant defeasance and will be subject to
U.S. Federal income tax on the same amounts, in the same manner and at the
same times as would have been the case if such covenant defeasance had not
occurred; and
(8) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent to the defeasance and discharge of the First Mortgage Notes have
been complied with.
SATISFACTION AND DISCHARGE OF THE INDENTURE
The Indenture will cease to be of further effect with respect to the First
Mortgage Notes (except as to the surviving rights of registration of transfer
or exchange of First Mortgage Notes, as expressly provided for in the
Indenture, and as otherwise expressly provided for in the Indenture) when
either (i) all such First Mortgage Notes theretofore authenticated and issued
have been delivered (except lost, stolen or destroyed First Mortgage Notes
which have been replaced or paid, or First Mortgage Notes for whose payment
money has been deposited in trust or segregated and held in trust by the
Company and thereafter repaid to the Trustee or discharged from such trust) to
the Trustee for cancellation or (ii) all such First Mortgage Notes not
theretofore delivered to the Trustee for cancellation have become due and
payable or will become due and payable within one year and the Company has
irrevocably deposited or caused to be deposited with the Trustee funds in an
amount sufficient to pay at maturity or redemption the entire indebtedness on
such First Mortgage Notes not theretofore delivered to the Trustee for
cancellation, including interest thereon, and the Company has paid all sums
payable by it under the Indenture. The Trustee is required to acknowledge
satisfaction and discharge of the Indenture with respect to the First Mortgage
Notes on demand of the Company accompanied by an Officers' Certificate and an
Opinion of Counsel and at the cost and expense of the Company.
REGARDING THE TRUSTEE AND THE COLLATERAL AGENT
First National Bank of Commerce serves as Trustee under the Indenture and
acts as Collateral Agent under the Security Documents.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
Directors, officers, employees or stockholder of the Company and the
Recourse Subsidiaries will not have any liability for any obligations of the
Company or the Recourse Subsidiaries under the First Mortgage Notes, the
Indenture or the Security Documents or for any claim based on, in respect of,
or by reason of, such obligations or their creation. Each Holder, by accepting
a First Mortgage Note, waives and releases all such liability. The waiver and
release are part of the consideration for the issue of the First Mortgage
Notes.
REPORTS
The Company shall file with the Commission, and furnish the Trustee with
copies of, all quarterly and annual reports, and any other documents,
specified pursuant to Section 13 or 15(d) of the Exchange Act.
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GOVERNING LAW
The Indenture, the Security Documents and the First Mortgage Notes shall be
governed by, and construed in accordance with, the laws of the State of New
York.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
Indenture. Reference is made to the Indenture for the full definition of all
such terms as well as any other capitalized terms used herein for which no
definition is provided.
"Affiliate" means, with respect to any specific Person, any other Person
directly or indirectly controlling or controlled by or under direct or
indirect common control with such specific Person. For the purposes of this
definition, "control," as used with respect to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person whether through the
ownership of voting securities, or by agreement or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"Asset Acquisition" means (i) any capital contribution (by means of transfer
of cash or other property to others or payments for property or services for
the account or use of others, or otherwise), or purchase or acquisition of
Capital Stock by the Company or any of its Recourse Subsidiaries in any other
Person, in either case pursuant to which such Person shall become a Subsidiary
of the Company or any of its Subsidiaries or shall be merged with or into the
Company or any of its Subsidiaries or (ii) any acquisition by the Company or
any of its Recourse Subsidiaries of the assets of any Person which constitute
substantially all of an operating unit or business of such Person.
"Asset Backed Entity" means a Wholly Owned Subsidiary of the Company (or
another Person in which the Company or any Subsidiary of the Company makes an
Investment and to which the Company or any Subsidiary of the Company transfers
accounts receivable or inventory and related assets) which engages in no
activities other than in connection with the financing of accounts receivable
or inventory and which is designated by the Board of Directors of the Company
(as provided below) as an Asset Backed Entity, (a) no portion of the
Indebtedness or any other obligations (contingent or otherwise) of which (i)
is guaranteed by the Company or any Subsidiary (excluding guarantees of
obligations (other than the principal of, and interest on, Indebtedness)
pursuant to Standard Securitization Undertakings) or (ii) is recourse to or
obligates the Company or any Subsidiary of the Company in any way or any
Subsidiary of the Company, directly or indirectly, contingently or otherwise,
to the satisfaction thereof, other than pursuant to Standard Securitization
Undertakings, (b) with which neither the Company nor any Subsidiary of the
Company has any material contract, agreement, arrangement or understanding
other than on terms no less favorable to the Company or such Subsidiary than
those that might be obtained at the time from Persons that are not Affiliates
of the Company, other than fees payable in the ordinary course of business in
connection with servicing accounts receivable or inventory, and (c) to which
neither the Company nor any Subsidiary of the Company has any obligation to
maintain or preserve such entity's financial condition or cause such entity to
achieve certain levels of operating results. Any such designation by the Board
of Directors of the Company shall be evidenced to the Trustee by filing with
the Trustee a certified copy of the resolution of the Board of Directors of
the Company giving effect to such designation and an Officers' Certificate
certifying that such designation complied with the foregoing conditions.
"Asset Sale" means any direct or indirect sale, conveyance, transfer, lease
or other disposition (excluding the granting of Permitted Liens) of property,
rights or assets to any Person (including any Non-Recourse Subsidiary), other
than (a) pursuant to the sale of accounts receivable and inventory and related
assets of the type specified in the definition of "Qualified Asset Backed
Transaction" to an Asset Backed Entity for the fair market value thereof, (b)
to the Company or a Recourse Subsidiary of the Company, in one transaction or
a series of related transactions, of (i) any Capital Stock of any
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Recourse Subsidiary of the Company or (ii) any other property or asset of the
Company or any Recourse Subsidiary of the Company, in each case, other than in
the ordinary course of business and (c) sales of products in the ordinary
course of business.
"Available Amount" means the sum of Net Cash Proceeds of Asset Sales less
the sum of Net Cash Proceeds (i) previously applied to Permitted Related
Acquisitions, (ii) from the sale of Obsolete Assets not exceeding an aggregate
fair market value of $2,000,000 in any year, (iii) of $1,000,000 and (iv)
retained by the Company following an Asset Sale Offer that is not fully
subscribed as contemplated under "--Restrictions on Asset Sales."
"Average Life" means, as of the date of determination, with respect to any
Indebtedness or Preferred Stock, the quotient obtained by dividing (i) the sum
of the products of the numbers of the years from the date of determination to
the dates of each successive scheduled principal payment of such Indebtedness
or redemption or similar payment with respect to such Preferred Stock
multiplied by the amount of such payment by (ii) the sum of all such payments.
"Bankruptcy Law" means Title 11, United States Code or any similar Federal
or state law for the relief of debtors, as amended.
"Board Resolution" means a copy of a resolution certified by the Secretary
or an Assistant Secretary of the Company or its Subsidiaries, as the case may
be, to have been duly adopted by the Board of Directors of the Company or its
Subsidiaries, as the case may be, and to be in full force and effect on the
date of such certification, and delivered to the Trustee.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations, warrants, options or other equivalents (however
designated and whether voting or non-voting) of capital stock of a corporation
and any and all equivalent ownership interests in a Person (other than a
corporation), in each case whether outstanding on the Issue Date or thereafter
issued, including, without limitation, all common stock and Preferred Stock.
"Capitalized Lease" means, as applied to any Person, any lease of any
property (whether real, personal or mixed) the discounted present value of the
rental obligations of such Person as lessee under which, in conformity with
GAAP, is required to be capitalized on the balance sheet of that Person.
"Capitalized Lease Obligation" means, at the time any determination thereof
is to be made, the amount of the liability in respect of a capital lease that
would at such time be required to be capitalized and reflected as a liability
on a balance sheet (excluding the footnotes thereto) in accordance with GAAP.
"Cash Equivalents" means, at any time, (i) any evidence of Indebtedness with
a maturity of 365 days or less issued or directly and fully guaranteed or
insured by the United States of America or any agency or instrumentality
thereof (provided that the full faith and credit of the United States of
America is pledged in support thereof); (ii) certificates of deposit or
acceptances with a maturity of 180 days or less of any financial institution
that is a member of the Federal Reserve System having combined capital and
surplus and undivided profits of not less than $250,000,000; (iii) commercial
paper with a maturity of 180 days or less issued by a corporation (except an
Affiliate of the Company) organized under the laws of any state of the United
States or the District of Columbia and rated at least A-1 by Standard & Poor's
Corporation or at least P-1 by Moody's Investors Service, Inc.
"Change of Control" means the occurrence of one or more of the following
events:
(a) the direct or indirect sale, lease, exchange or other transfer of all
or substantially all of the assets of the Company to any Person or entity
or group of Persons or entities acting in
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concert as a partnership or other group (a "Group of Persons") other than
an Affiliate of the Company;
(b) the consummation of any consolidation or merger of the Company with
or into another corporation with the effect that the stockholders of the
Company as of the date of the Indenture hold less than 51% of the combined
voting power of the outstanding voting securities of the surviving entity
of such merger or the corporation resulting from such consolidation
ordinarily having the right to vote in the election of directors (apart
from rights accruing under special circumstances) immediately after such
merger or consolidation;
(c) the stockholders of the Company shall approve any plan or proposal
for the liquidation or dissolution of the Company; and
(d) a Person or Group of Persons (other than management of the Company
and their respective Affiliates) shall, as a result of a tender or exchange
offer, open market purchases, privately negotiated purchases or otherwise,
have become the direct or indirect beneficial owner (within the meaning of
Rule 13d-3 under the Exchange Act) of securities of the Company
representing a majority of the combined voting power of the then
outstanding securities of the Company ordinarily (and apart from rights
accruing under special circumstances) having the right to vote in the
election of directors.
For purposes of this definition, the following shall not be considered a
Change of Control:
(i) Transfers of Securities of the Company among (A) Meyers; (B) any son,
daughter, stepson, stepdaughter or spouse of Meyers; (C) any lineal
descendant of an individual referred to in clause (A) or (B); (D) any trust
in which one or more of the Persons referred to in clause (A), (B) or (C)
are principal beneficiaries; and (e) any entity described in Section
501(c)(3) of the Code over which one or more of the Persons (and no other
Person) referred to in clause (A), (B) or (C) actually has and exercises
control; provided, that, if at any time any Person other than a Person
referred to in clause (A), (B) or (C) has the ability to exercise control
(whether or not shared) over any such entity, any securities of the Company
then owned by such entity shall be deemed to be beneficially owned by a
Person or Group of Persons other than a Person referred to in clause (A),
(B) or (C) for purpose of determining whether a Change of Control has
occurred; or
(ii) A merger resulting in the proportionate interest of the Class B
Common Stock held by Bayou Steel Properties Limited being held by Bayou
Steel Properties Limited's shareholders, provided such transaction shall
have no adverse effect on the Company.
"Collateral" means, collectively, all of the property and assets (including,
without limitation, Trust Moneys) that are from time to time subject to the
Lien of the Security Documents.
"Collateral Account" means the collateral account to be established pursuant
to the Indenture.
"Collateral Proceeds" means the Net Cash Proceeds received by the Collateral
Agent from the sale of Collateral.
"Company Order" means a written request or order signed in the name of the
Company by its Chairman of the Board, its Vice Chairman of the Board, its
President or a Vice President, and by its Treasurer, an Assistant Treasurer,
its Secretary or an Assistant Secretary, and delivered to the Trustee.
"Condemnation Award" means any proceeds, award or payment paid to the
mortgagee or beneficiary under the Mortgages relating to any taking of the
Collateral subject to such Mortgage by condemnation or eminent domain or
similar action, together with interest accrued thereon, less certain expenses.
"Consolidated Domestic Income Tax Expense" of any Person for any period
means, without duplication, the aggregate amount of net U.S. taxes based on
income or profits for such period of the operations of such Person and its
Consolidated Recourse Subsidiaries, determined in accordance
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with GAAP (to the extent such income or profits were included in computing
Consolidated Net Income).
"Consolidated Interest Expense" of any Person for any period means the sum
of (a) the interest expense (including amortization of original issue discount
and non-cash interest payments or accruals) of such Person and its
Consolidated Recourse Subsidiaries for such period and (b) to the extent not
included in clause (a), all commissions, discounts and other fees and charges
owed with respect to letters of credit and banker's acceptance financing, the
net cost associated with Interest Rate Agreements and Currency Agreements,
amortization of other financing fees and expenses and the interest portion of
any deferred payment obligation.
"Consolidated Interest Income" of any Person means all amounts that would be
included under interest income on a consolidated income statement of such
Person and its Consolidated Recourse Subsidiaries determined in accordance
with GAAP, less accreted amounts attributable to original issue discount
securities prior to the receipt thereof and other non-cash interest payments
or accruals.
"Consolidated Net Income" of any Person for any period means the Net Income
of such Person and its Consolidated Recourse Subsidiaries for such period,
determined on a consolidated basis in accordance with GAAP; provided, that
there shall be excluded (i) the Net Income of any Person (other than a
Consolidated Recourse Subsidiary) in which such Person or any of its
Consolidated Recourse Subsidiaries has a joint interest with a third party
except to the extent of the amount of dividends or distributions actually paid
to such Person or a Recourse Subsidiary during such period; (ii) except to the
extent includable pursuant to the foregoing clause (i), the Net Income of any
Person accrued prior to the date it becomes a Recourse Subsidiary of such
Person or is merged into or consolidated with such Person or any of its
Recourse Subsidiaries or that Person's assets are acquired by such Person or
any of its Recourse Subsidiaries; (iii) the Net Income (if positive), or any
portion thereof, of any Recourse Subsidiary of such Person to the extent that
the declaration or payment of dividends or similar distributions by that
Recourse Subsidiary to such Person or to any other Recourse Subsidiary of such
Net Income is not at the time permitted by operation of the terms of its
charter or any agreement, instrument, judgment, decree, order, statute, rule
or governmental regulation applicable to that Recourse Subsidiary; (iv)
without duplication, any gains or losses attributable to Asset Sales; (v) Net
Income, arising from the adoption of changes in accounting policy to comply
with GAAP or voluntarily by the Company with the consent of its independent
auditors that so qualify under Regulation S-X of the Securities Act; (vi) Net
Income arising in connection with a merger, combination or consolidation that
is accounted for as a pooling of interests; and (vii) foreign currency
translation gains and losses.
"Consolidated Net Worth" of any Person means as of any date all amounts that
would be included under stockholders' equity on a consolidated balance sheet
of such Person and its Consolidated Recourse Subsidiaries determined in
accordance with GAAP.
"Consolidated Recourse Subsidiary" of any Person means a Recourse Subsidiary
which for financial reporting purposes is or, in accordance with GAAP, should
be, accounted for by such Person as a consolidated Subsidiary.
"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement designed to protect the
Company or any of its Subsidiaries against fluctuations in currency values.
"Custodian" means any receiver, trustee, assignee, liquidator or similar
official under any Bankruptcy Law.
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"Default" means any event which is, or after the giving of notice or passage
of time or both would be, an Event of Default.
"Disqualified Stock" means any Capital Stock which, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable
at the option of the holder thereof, in whole or in part on, or prior to, the
final maturity date of the First Mortgage Notes.
"EBITDA" of any Person for any period means the sum of (a) Consolidated Net
Income of such Person; (b) Consolidated Domestic Income Tax Expense of such
Person; (c) Consolidated Interest Expense of such Person; and (d) depreciation
and amortization expense determined on a consolidated basis for such Person
and its Consolidated Recourse Subsidiaries in accordance with GAAP for such
period; and (e) other non-cash charges; provided, that the amounts set forth
in clauses (b), (c), (d) and (e) will be included only to the extent such
amounts were deducted in computing Consolidated Net Income. Notwithstanding
the foregoing, the amounts set forth in clauses (b), (c), and (d) in respect
of a Recourse Subsidiary of a Person shall be added to Consolidated Net Income
to compute EBITDA of such Person only to the extent (and in the same
proportion) that the net income of such Recourse Subsidiary was included in
calculating the Consolidated Net Income of such Person.
"EBITDA Ratio" means the ratio, on a pro forma basis, of (a) EBITDA of any
Person for the Reference Period immediately prior to the date of the
transaction giving rise to the need to calculate the EBITDA Ratio (the
"Transaction Date") to (b) the Net Interest Expense of such Person during such
Reference Period; provided, that in making such computation, (i) the
incurrence of the Indebtedness giving rise to the need to calculate the EBITDA
Ratio and the application of the proceeds therefrom shall be assumed to have
occurred on the first day of the Reference Period; (ii) Asset Sales and Asset
Acquisitions which occur during the Reference Period or subsequent to the
Reference Period but prior to the Transaction Date (but including any Asset
Acquisition to be made with such Indebtedness) shall be assumed to occur on
the first day of the Reference Period; (iii) the issuance of any Indebtedness
(other than Indebtedness borrowed under a revolving credit or similar
arrangement which Indebtedness is not outstanding on the Transaction Date)
during the Reference Period or subsequent to the Reference Period but prior to
the Transaction Date and the application of the proceeds therefrom shall be
assumed to have occurred on the first day of the Reference Period; (iv) the
Consolidated Interest Expense attributable to interest on any Indebtedness
(whether existing or being incurred but not including Indebtedness borrowed
under a revolving credit or similar arrangement which Indebtedness is not
outstanding on the Transaction Date) computed on a pro forma basis and bearing
a floating interest rate shall be computed as if the rate in effect on the
date of computation had been the applicable rate for the entire period, unless
such Person or any of its Recourse Subsidiaries is a party to an Interest Rate
Agreement which has the effect of reducing the interest rate below the rate on
the date of computation, in which case such lower rate shall be used; (v)
there shall be excluded from Consolidated Interest Expense any Consolidated
Interest Expense related to any Indebtedness which was outstanding during and
subsequent to the Reference Period but is not outstanding on the Transaction
Date, except for Consolidated Interest Expense actually incurred with respect
to Indebtedness borrowed under a revolving credit or similar arrangement to
the extent the commitment thereunder remains in effect on the Transaction Date
and (vi) if the transaction giving rise to the need to calculate the EBITDA
Ratio is an Asset Acquisition, in calculating Consolidated Net Income for the
Reference Period, there shall be deducted from the calculation of expenses all
cost savings resulting from employee terminations, facilities consolidations
and closings, standardization of employee benefits and compensation practices,
consolidation of property, casualty and other insurance coverage and policies,
standardization of sales representation commissions and other contract rates,
and reductions in taxes other than income taxes (collectively, "Cost Savings
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Measures"), which cost savings the Company reasonably believes in good faith
(i) would have been achieved during the Reference Period as a result of such
Asset Acquisition, (ii) are directly attributable to such Asset Acquisition
and (iii) will have a recurring impact on the Company (regardless of whether
such cost savings could then be reflected in pro forma financial statements
under GAAP, Regulation S-X promulgated by the Commission or any other
regulation or policy of the Commission); provided, that both (A) such cost
savings and Cost Savings Measures were identified and such cost savings were
quantified in an officer's certificate delivered to the Trustee at the time of
the consummation of the Asset Acquisition, (B) with respect to each Asset
Acquisition completed prior to the 90th day preceding such date of
determination, actions were commenced or initiated by the Company within 90
days of such Asset Acquisition to effect the Cost Savings Measures identified
in such officer's certificate (regardless, however, of whether the
corresponding cost savings were ultimately achieved). For the purposes of
making the computation referred to in the preceding sentence, Asset Sales and
Asset Acquisitions which have been made by any Person which has become a
Recourse Subsidiary of the Company or been merged with or into the Company or
any Recourse Subsidiary of the Company during the Reference Period or
subsequent to the Reference Period and prior to the Transaction Date shall be
calculated on a pro forma basis (including all of the calculations referred to
in numbers (i) through (vi) of the preceding sentence) assuming such Asset
Sales or Asset Acquisitions occurred on the first day of the Reference Period.
"Fixtures and Equipment" means fixtures, machinery, tools, equipment
(including certain operating equipment classified as inventory on the
Company's books and records), and similar personal property.
"GAAP" means generally accepted accounting principles in the United States
as in effect from time to time, including, without limitation, those set forth
in the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment of
the accounting profession of the United States, which are applicable as of the
date of determination.
"Guarantee" means, as applied to any Indebtedness, (a) a guarantee (other
than by endorsement of negotiable instruments for collection in the ordinary
course of business), direct or indirect, in any manner, of any part or all of
such Indebtedness, and (b) an agreement, direct or indirect, contingent or
otherwise, the practical effect of which is to assure the payment or
performance (or payment of damages in the event of nonperformance) of any part
or all of such Indebtedness, including, without limiting the foregoing, the
payment of amounts drawn under letters of credit. The amount of any Guarantee
shall be deemed to be an amount equal to the stated or determinable amount of
the primary obligation in respect of which such Guarantee is made (unless such
Guarantee shall be expressly limited to a lesser amount, in which case such
lesser amount shall apply) or, if not stated or determinable, the maximum
reasonably anticipated liability in respect thereof as determined by such
Person in good faith.
"Holder" means the registered holders of the First Mortgage Notes.
"Indebtedness" of any Person means at any date, without duplication, (a) all
obligations of such Person for borrowed money or evidenced by bonds,
debentures, notes or other similar instruments; (b) all obligations of such
Person in respect of letters of credit or other similar instruments (or
reimbursement obligations with respect thereto); (c) all obligations of such
Person to pay the deferred purchase price of property or services, except
Trade Payables; (d) all Capitalized Lease Obligations of such Person, (e) all
Indebtedness of others secured by a Lien on any asset of such Person, whether
or not such Indebtedness is assumed by such Person, provided, that, for
purposes of determining the amount of any Indebtedness of the type described
in this clause, if recourse with respect to such Indebtedness is limited to
such asset, the amount of such Indebtedness shall be limited to the fair
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market value of the asset; (f) to the extent not otherwise included, all
obligations under Interest Rate Agreements and Currency Agreements; (g) all
Guarantees of such Person in respect of Indebtedness of others; and (h) all
Disqualified Stock issued by such Person and all Preferred Stock issued by the
Recourse Subsidiaries of such Person (the amount of Indebtedness represented
by any Disqualified Stock or Preferred Stock will be the greater of the
voluntary or involuntary liquidation preference thereof).
"Integral Fixtures and Equipment" means all Fixtures and Equipment now or
hereafter located at the Mortgaged Facility other than (i) all vehicles and
mobile equipment subject to certificate of title laws, in each instance with a
fair market value of $100,000 or less and (ii) any Fixtures and Equipment
acquired (whether such acquisition is denominated as a purchase, a Capitalized
Lease or otherwise) by the Company or a Recourse Subsidiary after the Issue
Date and whose (x) acquisition adds supplemental production, handling or
performance capacity to the Mortgaged Facility rather than merely replacing
Fixtures and Equipment forming part of the Mortgaged Facility as in existence
immediately prior to the acquisition in question and (y) subsequent removal
from service will have no material adverse impact on the operations in the
ordinary course of business of the Mortgaged Facility as in existence
immediately prior to the acquisition in question, in each instance under
clauses (x) or (y), as conclusively established by a Board Resolution.
"Interest Rate Agreement" means any interest rate protection agreement,
interest rate future, interest rate option, interest rate swap, interest rate
cap or other interest rate hedge agreement, to or under which the Company or
any of its Subsidiaries is a party or a beneficiary on the date of the
Indenture or becomes a party or a beneficiary thereafter.
"Investment" of any Person means all investments in other Persons in the
form of loans, advances or capital contributions of cash or other assets
(excluding commission, travel and similar advances to officers and employees
made in the ordinary course of business), and purchases (or other acquisitions
for consideration) or guarantees of Indebtedness, Capital Stock or other
securities issued by any other Person.
"Issue Date" means May 22, 1998.
"Joint Venture" means a joint venture, partnership or other similar
arrangement, whether in corporate, partnership or other legal form; provided,
that as to any such arrangement in corporate form, such corporation shall not,
as to any Person of which such corporation is a Subsidiary, be considered to
be a Joint Venture to which such Person is a party.
"Lenders" means the lenders who are from time to time parties to the New
Credit Facility.
"Lien" means, with respect to any property, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such
property. For the purposes of the Indenture and the Security Documents, the
Company and its Subsidiaries shall be deemed to own subject to a Lien any
property which they have acquired or hold subject to the interest of a vendor
or lessor under any conditional sales agreement, capital lease or other title
retention agreement relating to such property.
"Majority-Owned Non-Recourse Subsidiary" means a Majority-Owned Subsidiary
that is a Non-Recourse Subsidiary.
"Majority-Owned Subsidiary" means, with respect to any Person, a Subsidiary
of which more than 50% of the Capital Stock (other than any director's
qualifying stock), or in the case of a non-corporate Subsidiary, other equity
interests having ordinary voting power for the election of directors
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or other governing body of such Subsidiary, is owned by such Person or another
Majority-Owned Subsidiary of such Person.
"Meyers" means Howard M. Meyers, an individual with a business address on
the Issue Date at 2777 Stemmons Freeway, Dallas, Texas.
"Net Cash Proceeds" from a sale, transfer or other disposition (other than
from the granting of a Permitted Lien thereon) of properties or assets means
cash payments received (including any cash payments received by way of
deferred payment of principal pursuant to a note or installment receivable or
otherwise, but only as and when received (including any cash received upon
sale or disposition of such note or receivable), excluding any other
consideration received in the form of assumption by the acquiring Person of
Indebtedness or other obligations relating to such properties or assets or
received in any other non-cash form) therefrom, in each case, net of all
legal, title and recording tax expenses, commissions and other fees and
expenses incurred, and all Federal, state, provincial, foreign and local taxes
required to be accrued as a liability under GAAP as a consequence of such
sale, transfer or other disposition, and in each case net of appropriate
amounts to be provided by the Company or its Recourse Subsidiaries as a
reserve, in accordance with GAAP, against any liabilities associated with such
assets and retained by the Company or any Recourse Subsidiary after such sale,
transfer or other disposition, including, without limitation, pension and
other post-employment benefit liabilities and liabilities related to
environmental matters and the after-tax cost of any indemnification payments
(fixed and contingent) attributable to seller's indemnities to the purchaser
undertaken by the Company or any of its Recourse Subsidiaries in connection
with such sale, transfer or other disposition (but excluding any payments,
which by the terms of the indemnities will not, under any circumstances, be
made during the term of the First Mortgage Notes) and net of all payments made
on any Indebtedness which is secured by such assets, in accordance with the
terms of any Lien upon or with respect to such assets or which must by its
terms, or in order to obtain a necessary consent to such asset disposition, or
by applicable law be repaid out of the proceeds from such sale, transfer or
other disposition, and net of all distributions and other payments made to
minority interest holders in Subsidiaries or Joint Ventures as a result of
such sale, transfer or other disposition.
"Net Income" of any Person for any period means the net income (loss) of
such Person for such period, determined in accordance with GAAP, except that
(i) extraordinary items, (ii) unusual and non-recurring gains and losses and
(iii) unusual and non-recurring expenses, in the case of clauses (i), (ii) and
(iii) as determined in accordance with GAAP, shall be excluded; provided, that
non-recurring expenses shall not be excluded if the event or circumstances
giving rise to such expenses is continuing or exist on the last day of the
period for which Net Income is calculated.
"Net Insurance Proceeds" means all proceeds paid to the Collateral Agent or
any mortgagee or beneficiary under the Security Documents relating to damage
to, or loss or destruction of, improvements on equipment constituting
Collateral, together with interest earned thereon, less certain expenses.
"Net Interest Expense" means the difference between Consolidated Interest
Expense and Consolidated Interest Income; provided, that such amount shall not
be less than zero.
"New Credit Facility" means the Credit Agreement, dated as of May 22, 1998,
among the Company, the Lenders named therein, or any renewal, replacement,
refinancing or continuation thereof as each of the foregoing may be amended,
supplemented or otherwise modified from time to time.
"Non-Recourse Indebtedness" means Indebtedness of a Non-Recourse Subsidiary
where (a) neither the Company nor any Recourse Subsidiary: (i) provides any
Guarantee or credit support for
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such Indebtedness (including any undertaking, guaranty, indemnity, agreement
or instrument which would constitute Indebtedness); or (ii) is directly or
indirectly liable for such Indebtedness; and (b) no default with respect to
such Indebtedness (including any rights which the holder thereof may have to
take enforcement action against such Non-Recourse Subsidiary) would permit
(upon notice, lapse of time or both) any holder or holders of other
Indebtedness of the Company or any Recourse Subsidiary (excluding Indebtedness
in an aggregate principal amount not to exceed $5 million at any time) to
declare a default on such other Indebtedness or cause the payment thereof to
be accelerated or payable prior to its stated maturity.
"Non-Recourse Subsidiary" means a special purpose Subsidiary of the Company
or any of its Subsidiaries formed to acquire securities or assets of a third
party and which, in any case, (i) has no Indebtedness other than Non-Recourse
Indebtedness and (ii) does not, directly or indirectly, own any Indebtedness,
stock or securities of, and has no Investment in, the Company or any Recourse
Subsidiary.
"Officers' Certificate" means, when used with respect to the Company, a
certificate signed by the Chairman of the Board, the President, a Vice
Chairman of the Board or the Chief Financial Officer of the Company (or any
other officer identified by any of the foregoing officers in an Officers'
Certificate to be an executive officer of the Company) and the Secretary, an
Assistant Secretary or the Controller of the Company.
"Opinion of Counsel" means an opinion in writing signed by legal counsel,
who may be an employee of or of counsel to the Company, or who may be other
counsel satisfactory to the Trustee.
"Permitted Easements" means all rights-of-way, easements, rights of use or
similar rights (generally designated under Louisiana law as "servitudes")
granted by the Company over the Mortgaged Facility for the purpose of
constructing and operating a Released Property Facility which, in the
aggregate, do not materially (i) diminish the value of the Mortgaged Facility
or (ii) interfere with the ordinary conduct of the business of the Company and
its Recourse Subsidiaries, in each instance under clauses (i) or (ii), as
conclusively established by a Board Resolution.
"Permitted Investment" means (i) advances and loans to, and Investments in,
any Recourse Subsidiary by the Company and advances or loans to, and
Investments in, the Company or any Recourse Subsidiary of the Company by any
Subsidiary; (ii) cash and Cash Equivalents held by the Company and its
Recourse Subsidiaries; (iii) advances and loans by the Company and its
Recourse Subsidiaries to officers and employees in the ordinary course of
business not to exceed $100,000 in the aggregate at any one time outstanding;
(iv) advances or loans by the Company in connection with Currency Agreements
provided such agreements are made in the ordinary course of business; (v)
advances or loans by the Company in connection with Interest Rate Agreements
provided such agreements are made in the ordinary course of business; (vi)
Investments by the Company and its Recourse Subsidiaries in exchange for
assets sold or otherwise disposed of in accordance with the provisions
described under "--Restrictions on Asset Sales"; (vii) Investments by the
Company and its Recourse Subsidiaries in the form of advances, extensions of
credit, progress payments and prepayments for assets purchased by it in the
ordinary course of business; (viii) accounts receivable arising and trade
credit granted in the ordinary course of business and any securities received
in satisfaction or partial satisfaction thereof from financially troubled
account debtors to the extent reasonably necessary in order to prevent or
limit loss; (ix) any Investment by the Company or any Recourse Subsidiary of
the Company in a Person that is engaged in a similar business if as a result
of such Investment (a) such Person becomes a Recourse Subsidiary or (b) such
Person, in one transaction or a series of concurrent related transactions, is
merged, consolidated or amalgamated with or into, or transfers or conveys
substantially all of its assets to, or is liquidated into, the Company or a
Recourse Subsidiary; (x) any Investment acquired by the Company or any of its
Subsidiaries (a)
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in exchange for any other Investment or accounts receivable held by the
Company or any such Subsidiary in connection with or as a result of a
bankruptcy, workout, reorganization or recapitalization of the issuer of such
other Investment or accounts receivable or (b) as a result of a foreclosure by
the Company or any of its Subsidiaries with respect to any secured Investment
or other transfer of title with respect to any secured Investment in default;
(xi) Investments the payment for which consists of Capital Stock of the
Company (other than Disqualified Stock); and (xii) other Investments not to
exceed $15 million in the aggregate.
"Permitted Liens" means (i) Liens in favor of the Collateral Agent or the
Holders, including Liens created by the First Mortgage Notes, the Indenture
and the Security Documents; (ii) Liens on the Lender Secured Property to
secure the New Credit Facility and Liens on the Tulsa and Chicago stocking
locations; (iii) Liens on the property of the Company or any of its Recourse
Subsidiaries created solely for the purpose of securing purchase money
obligations; provided, that (a) such property so acquired is for use in the
Company's business and (b) no such Lien shall extend to or cover other
property or assets of the Company and its Recourse Subsidiaries other than the
respective property or assets so acquired and the principal amount of
Indebtedness secured by any such Lien shall at no time exceed the original
purchase price of such property or assets; (iv) Liens on the assets of any
entity existing at the time such entity or assets are acquired by the Company
or any of its Recourse Subsidiaries, whether by merger, consolidation,
purchase of assets or otherwise; provided, however, that such Liens (a) are
not created, incurred or assumed in connection with, or in contemplation of,
such assets being acquired by the Company or any of its Recourse Subsidiaries
and (b) do not extend to any other property of the Company or any of its
Recourse Subsidiaries; (v) Liens in existence on the date of the Indenture;
(vi) Liens securing Private Activity Bonds, as such term is defined in the
Code; provided, that any Lien permitted by this clause (vi) shall not extend
to any other property of the Company or any of its Subsidiaries; (vii) Liens
for taxes, assessments, governmental charges or claims which are not yet
delinquent or which are being contested in good faith by appropriate
proceedings, if a reserve or other appropriate provision, if any, as shall be
required in conformity with GAAP shall have been made therefor; (viii) other
Liens incidental to the conduct of the Company's and its Recourse
Subsidiaries' business or the ownership of its property and assets not
securing any Indebtedness, and which do not in the aggregate materially
detract from the value of the Company's and its Recourse Subsidiaries'
property or assets when taken as a whole, or materially impair the use thereof
in the operation of its business (including, without limitation, Liens
securing any obligation to landlords, vendors, carriers, warehousemen,
mechanics, laborers and materialman and other similar obligations arising by
operation of law not yet delinquent or which are being contested in good faith
by appropriate proceedings, if a reserve or other appropriate provision, if
any, as shall be required in conformity with GAAP shall have been made
therefor); (ix) Liens with respect to assets of a Recourse Subsidiary granted
by such Recourse Subsidiary to the Company to secure Indebtedness owing to the
Company; (x) Liens on assets owned by Non-Recourse Subsidiaries to secure Non-
Recourse Indebtedness; (xi) Liens on assets not constituting Collateral to
secure senior Indebtedness; (xii) pledges and deposits made in the ordinary
course of business in connection with workers' compensation, unemployment
insurance and other types of social security; (xiii) deposits made to secure
the performance of tenders, bids, leases, statutory obligations, surety and
appeal bonds, government contracts, performance and return-of-money bonds and
other obligations of a like nature incurred in the ordinary course of business
(exclusive of obligations for the payment of borrowed money); (xiv) zoning
restrictions, servitudes, easements, rights-of-way, mineral reservations,
building and subdivision restrictions, levee, road and other riparian
landowner obligations and other similar charges or encumbrances incurred in
the ordinary course of business which, in the aggregate, are not substantial
in amount and which do not in any case materially detract from the value of
the property subject thereto or interfere with the ordinary conduct of the
business of the Company or its Recourse Subsidiaries; (xv) Permitted
Easements; (xvi) Liens arising out of judgments or awards against the Company
or any Recourse Subsidiary with respect to which the Company or such Recourse
Subsidiary is prosecuting an appeal or proceeding for review and the
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Company or such Recourse Subsidiary is maintaining adequate reserves in
accordance with GAAP; (xvii) any interest or title of a lessor in the property
subject to any Capitalized Lease Obligation or operating lease; (xviii) Liens
on assets transferred to an Asset Backed Entity or on assets of an Asset
Backed Entity incurred in connection with a Qualified Asset Backed
Transaction; (xix) other Liens on assets with an aggregate book value not in
excess of 7 1/2% of the book value of the Company's total assets as shown on
the Company's most recent consolidated balance sheet; (xx) obligations under
Interest Rate Agreements and Currency Agreements entered into in the ordinary
course of business; (xxi) Liens by a depositary or financial institution on
funds deposited with such institution arising in the ordinary course of
business under standard account agreements or by operation of law; and (xxii)
any extension, renewal or replacement (or successive extensions, renewals or
replacements), in whole or in part, of any Lien referred to in the foregoing
clauses; provided, that the principal amount of Indebtedness secured thereby
shall not exceed the principal amount of Indebtedness so secured immediately
prior to the time of such extension, renewal or replacement, and that such
extension, renewal, or replacement Lien shall be limited to all or a part of
the property which secured the Lien so extended, renewed or replaced (plus
improvements on such property).
"Permitted Payments" means, with respect to the Company or any of its
Recourse Subsidiaries, (a) any dividend on shares of Capital Stock payable
solely in shares of Capital Stock (other than Disqualified Stock) or in
options, warrants or other rights to purchase Capital Stock (other than
Disqualified Stock); (b) any dividend, other distribution, loan or advance to
the Company by any of its Subsidiaries or by a Subsidiary to a Recourse
Subsidiary and any dividends payable by a Recourse Subsidiary on its Common
Stock; (c) any defeasance, redemption, repurchase or other acquisition for
value of any Indebtedness of the Company with the proceeds from the issuance
of (i) Indebtedness which is subordinate to the First Mortgage Notes at least
to the extent and in the manner as the Indebtedness to be defeased, redeemed,
repurchased or otherwise acquired is subordinate to the First Mortgage Notes;
provided, however, that (1) such newly-issued subordinated Indebtedness
provides for no payments of principal by way of sinking fund, mandatory
redemption, defeasance or otherwise by the Company or its Recourse
Subsidiaries (including, without limitation, at the option of the holder
thereof other than an option given to a holder pursuant to a "Change of
Control" covenant which (x) is no more favorable to the holders of such
Indebtedness than the provisions in favor of the Holders and (y) such
Indebtedness provides that the Company or its Recourse Subsidiaries will not
repurchase such Indebtedness pursuant to such provisions prior to the
Company's repurchase of the First Mortgage Notes required to be repurchased by
the Company upon a Change of Control) prior to the maturity of the
Indebtedness being replaced and (2) the proceeds of such new Indebtedness are
utilized for such purpose within 45 days of issuance or (ii) Capital Stock
(other than Disqualified Stock); and (d) the redemption or repurchase by a
Wholly-Owned Recourse Subsidiary of its Capital Stock owned by the Company or
another Wholly-Owned Recourse Subsidiary.
"Permitted Related Acquisition" means acquisitions of property and assets
used in lines of business related to the Company's or one of its Recourse
Subsidiaries' business at such time.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"Preferred Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated) of such
Person's preferred or preference stock whether now outstanding or issued after
the Issue Date, and includes, without limitation, all classes and series of
preferred or preference stock.
"Qualified Asset Backed Transaction" means any transaction or series of
transactions that may be entered into by the Company or any of its
Subsidiaries pursuant to which the Company or any of its Subsidiaries may
sell, convey or otherwise transfer to (a) an Asset Backed Entity (in the case
of a
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transfer by the Company or any of its Subsidiaries) and (b) any other Person
(in the case of a transfer by an Asset Backed Entity), or may grant a security
interest in, inventory, any accounts receivable (whether now existing or
arising in the future) of the Company or any of its Subsidiaries, and any
assets related thereto, including, without limitation, all collateral securing
such accounts receivable, all contracts and all guarantees or other
obligations in respect of such accounts receivable, proceeds of such accounts
receivable and other assets which are customarily transferred or in respect of
which security interests are customarily granted in connection with asset
securitization transactions involving inventory or accounts receivable.
"Receivables Fees" means distributions or payments made directly or by means
of discounts with respect to any participation interest issued or sold in
connection with, and other fees paid to a Person that is not a Recourse
Subsidiary in connection with, any Qualified Asset Backed Transaction.
"Recourse Subsidiary" means any Subsidiary other than a Non-Recourse
Subsidiary.
"Reference Period" means the four fiscal quarters for which financial
information is available preceding the date of a transaction giving rise to
the need to make a financial calculation.
"Released Property" means up to 36 acres of undeveloped land comprising part
of the Mortgaged Facility, which shall be selected by the Company in one or
more parcels from the up to 80 acres of undeveloped land designated as land
subject to being released from the Mortgage on that certain survey by Lucien
Gassen, P.L.S., attached as Exhibit G to the Indenture, from and after the
time such land is released from the Lien of the Indenture and the Security
Documents as provided under "--Possession, Use and Release of Collateral."
"Restricted Investment" means any Investment in any Person other than a
Recourse Subsidiary of the Company.
"Restricted Payment" means, with respect to any Person, (a) any dividend or
other distribution on any shares of such Person's Capital Stock (other than
dividends or distributions payable in Capital Stock that is not Disqualified
Stock); (b) any payment on account of the purchase, redemption, retirement or
other acquisition of (i) any shares of such Person's Capital Stock or (ii) any
option, warrant or other right to acquire shares of such Person's Capital
Stock; (c) any defeasance, redemption, repurchase or other acquisition or
retirement of value prior to scheduled maturity, scheduled repayment or
scheduled sinking fund payment of any Indebtedness ranked subordinate in right
of payment to the First Mortgage Notes (other than in connection with the
refunding or refinancing of such Indebtedness); and (d) any Restricted
Investment; provided, however, that "Restricted Payments" shall not include
any payment or investment described in (a), (b), (c) or (d) above made by a
Subsidiary to the Company or to a Recourse Subsidiary of the Company.
"Sale and Leaseback Transaction" means, with respect to any Person, an
arrangement with any bank, insurance company or other lender or investor or to
which such lender or investor is a party, providing for the leasing by such
Person or any of its Recourse Subsidiaries of any property or asset of such
Person or any of its Recourse Subsidiaries which has been or is being sold or
transferred by such Person or such Recourse Subsidiary to such lender or
investor or to any person to whom funds have been or are to be advanced by
such lender or investor on the security of such property or asset.
"Security Documents" means, collectively, (i) the Mortgages, (ii) the
Security Agreement, (iii) the Subsidiary Guarantee and (iv) the Collateral
Agency and Intercreditor Agreement.
"Standard Securitization Undertakings" means representations, warranties,
covenants and indemnities entered into by the Company or any Subsidiary of the
Company which are reasonably customary in an accounts receivable and inventory
securitization transactions.
"Subsidiary" means, with respect to any Person, any corporation or other
entity of which 50% or more of the Capital Stock or other ownership interests
having ordinary voting power to elect a
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majority of the board of directors or other persons performing similar
functions are at the time directly or indirectly owned by such Person.
"Trade Payables" means accounts payable or any other indebtedness or
monetary obligations to trade creditors created or assumed by the Company or
its Subsidiaries in the ordinary course of business in connection with the
obtaining of materials or services.
"Trust Moneys" means all cash or Cash Equivalents received by the Collateral
Agent (a) as Net Cash Proceeds received by the Company and its Recourse
Subsidiaries from Asset Sales to be subject to the Lien of the Security
Documents in accordance with "--Restrictions on Asset Sales"; (b) as
Condemnation Awards with respect to all or any part of the Collateral; (c) as
Net Insurance Proceeds with respect to all or any part of the Collateral; (d)
as proceeds from the issuance of Securities to the extent provided under
"--Limitations on Indebtedness"; or (e) as proceeds of any other sale or other
disposition of all or any part of the Collateral by or on behalf of the
Collateral Agent or any collection, recovery, receipt, appropriation or other
realization of or from all or any part of the Collateral pursuant to the
Security Documents or otherwise.
"U.S. Government Obligations" means securities that are (x) direct
obligations of the United States of America for the payment of which its full
faith and credit is pledged or (y) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States
of America, the payment of which is unconditionally guaranteed as a full faith
and credit obligation by the United States of America, which, in either case,
are not callable or redeemable at the option of the issuer thereof, and shall
also include a depository receipt issued by a bank (as defined in Section
3(a)(2) of the Securities Act) as custodian with respect to any such U.S.
Government Obligation or a specific payment of principal of or interest on any
such U.S. Government Obligation held by such custodian for the account of the
holder of such depository receipt; provided, that (except as required by law)
such custodian is not authorized to make any deduction from the amount payable
to the holder of such depository receipt from any amount received by the
custodian in respect of the U.S. Government Obligation or the specific payment
of principal of or interest on the U.S. Government Obligation evidenced by
such depository receipt.
"Wholly-Owned Non-Recourse Subsidiary" means a Wholly-Owned Subsidiary that
is a Non-Recourse Subsidiary.
"Wholly-Owned Recourse Subsidiary" means a Wholly-Owned Subsidiary that is a
Recourse Subsidiary.
"Wholly-Owned Subsidiary" means, with respect to any Person, a Subsidiary of
which at least 95% of the Capital Stock (other than any director's qualifying
stock), or in the case of a non-corporate Subsidiary, other equity interests
having ordinary voting power for the election of directors or other governing
body of such Subsidiary, is owned by such Person or another Wholly-Owned
Subsidiary of such Person.
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EXCHANGE AND REGISTRATION RIGHTS AGREEMENT
The Company, the Subsidiary Guarantors and the Initial Purchasers entered
into the Exchange and Registration Rights Agreement concurrently with the
issuance of the Old First Mortgage Notes. Pursuant to the Exchange and
Registration Rights Agreement, the Company agreed to (i) file the Exchange
Offer Registration Statement with the Commission on or prior to 60 days after
the Issue Date and (ii) use its reasonable best efforts to cause the Exchange
Offer Registration Statement to be declared effective under the Securities Act
within 150 days after the Issue Date. As soon as practicable after the
effectiveness of the Exchange Offer Registration Statement, the Company will
offer to the holders of Transfer Restricted Securities (as defined below) who
are not prohibited by any law or policy of the Commission from participating
in the Exchange Offer the opportunity to exchange their Transfer Restricted
Securities for Exchange Notes, which are identical in all material respects to
the Old First Mortgage Notes (except that the Exchange Notes will not contain
terms with respect to transfer restrictions) and which are registered under
the Securities Act. The Company will keep the Exchange Offer open for not less
than 30 days (or longer, if required by applicable law) after the date on
which notice of the Exchange Offer is mailed to the holders of the Old First
Mortgage Notes.
If (i) because of any change in law or applicable interpretations thereof by
the staff of the Commission, the Company is not permitted to effect the
Exchange Offer as contemplated by the Exchange and Registration Rights
Agreement, (ii) any Transfer Restricted Securities validly tendered pursuant
to the Exchange Offer are not exchanged for Exchange Notes within 180 days
after the Issue Date, (iii) any Initial Purchaser so requests with respect to
Old First Mortgage Notes not eligible to be exchanged for Exchange Notes in
the Exchange Offer, (iv) any applicable law or interpretations do not permit
any holder of Old First Mortgage Notes to participate in the Exchange Offer,
(v) any holder of Old First Mortgage Notes that participates in the Exchange
Offer does not receive freely transferable Exchange Notes in exchange for
tendered Old First Mortgage Notes, or (vi) the Company so elects, then the
Company will file with the Commission a shelf registration statement (the
"Shelf Registration Statement") to cover resales of Transfer Restricted
Securities by such holders who satisfy certain conditions relating to the
provision of information in connection with the Shelf Registration Statement.
For purposes of the foregoing, "Transfer Restricted Securities" means each Old
First Mortgage Note until (i) the date on which such Old First Mortgage Note
has been exchanged for a freely transferable Exchange Note in the Exchange
Offer; (ii) the date on which such Old First Mortgage Note has been
effectively registered under the Securities Act and disposed of in accordance
with the Shelf Registration Statement or (iii) the date on which such Old
First Mortgage Note is distributed to the public pursuant to Rule 144 under
the Securities Act or is salable pursuant to Rule 144(k) under the Securities
Act.
The Company will use its reasonable best efforts to have the Exchange Offer
Registration Statement or, if applicable, the Shelf Registration Statement
(each, a "Registration Statement") declared effective by the Commission as
promptly as practicable after the filing thereof, but in any event prior to
150 days after the Issue Date. Unless the Exchange Offer would not be
permitted by a policy of the Commission, the Company will commence the
Exchange Offer and will use its reasonable best efforts to consummate the
Exchange Offer as promptly as practicable, but in any event prior to 180 days
after the Issue Date. If applicable, the Company will use its reasonable best
efforts to keep the Shelf Registration Statement effective for a period of two
years after the Issue Date.
If (i) the applicable Registration Statement is not filed with the
Commission on or prior to 60 days after the Issue Date; (ii) the Exchange
Offer Registration Statement or the Shelf Registration Statement, as the case
may be, is not declared effective within 150 days after the Issue Date; (iii)
the Exchange Offer is not consummated on or prior to 180 days after the Issue
Date or (iv) the Shelf Registration Statement is filed and declared effective
within 150 days after the Issue Date but shall thereafter cease to be
effective (at any time that the Company is obligated to maintain the
104
<PAGE>
effectiveness thereof) without being succeeded within 45 days by an additional
Registration Statement filed and declared effective (each such event referred
to in clauses (i) through (iv), a "Registration Default"), the Company will be
obligated to pay liquidated damages to each holder of Transfer Restricted
Securities, during the period of one or more such Registration Defaults, in an
amount equal to $0.192 per week per $1,000 principal amount of the First
Mortgage Notes constituting Transfer Restricted Securities held by such holder
until the applicable Registration Statement is filed, the Exchange Offer
Registration Statement is declared effective and the Exchange Offer is
consummated or the Shelf Registration Statement is declared effective or again
becomes effective, as the case may be. All accrued liquidated damages shall be
paid to holders in the same manner as interest payments on the First Mortgage
Notes on semi-annual payment dates which correspond to interest payment dates
for the First Mortgage Notes. Following the cure of all Registration Defaults,
the accrual of liquidated damages will cease.
The Exchange and Registration Rights Agreement also provides that the
Company (i) shall make available for a period of 180 days after the
consummation of the Exchange Offer a prospectus meeting the requirements of
the Securities Act to any broker-dealer for use in connection with any resale
of any such Exchange Notes and (ii) shall pay all expenses incident to the
Exchange Offer and will indemnify certain holders of the Old First Mortgage
Notes (including any broker-dealer) against certain liabilities, including
liabilities under the Securities Act. A broker-dealer which delivers such a
prospectus to purchasers in connection with such resales will be subject to
certain of the civil liability provisions under the Securities Act and will be
bound by the provisions of the Exchange and Registration Rights Agreement
(including certain indemnification rights and obligations).
Each holder of Old First Mortgage Notes who wishes to exchange such Old
First Mortgage Notes for Exchange Notes in the Exchange Offer will be required
to make certain representations, including representations that (i) any
Exchange Notes to be received by it will be acquired in the ordinary course of
its business; (ii) it has no arrangement or understanding with any person to
participate in the distribution of the Exchange Notes and (iii) it is not an
"affiliate" (as defined in Rule 405 under the Securities Act) of the Company,
or if it is an affiliate, that it will comply with the registration and
prospectus delivery requirements of the Securities Act to the extent
applicable.
If the holder is not a broker-dealer, it will be required to represent that
it is not engaged in, and does not intend to engage in, the distribution of
the Exchange Notes. If the holder is a broker-dealer that will receive
Exchange Notes for its own account in exchange for Old First Mortgage Notes
that were acquired as a result of market-making activities or other trading
activities (an "Exchanging Dealer"), it will be required to acknowledge that
it will deliver a prospectus in connection with any resale of such Exchange
Notes.
Holders of the Old First Mortgage Notes will be required to make certain
representations to the Company (as described above) in order to participate in
the Exchange Offer and will be required to deliver information to be used in
connection with the Shelf Registration Statement in order to have their Old
First Mortgage Notes included in the Shelf Registration Statement and benefit
from the provisions regarding liquidated damages set forth in the preceding
paragraphs. A holder who sells Old First Mortgage Notes pursuant to the Shelf
Registration Statement generally will be required to be named as a selling
securityholder in the related prospectus and to deliver a prospectus to
purchasers, will be subject to certain of the civil liability provisions under
the Securities Act in connection with such sales and will be bound by the
provisions of the Exchange and Registration Rights Agreement which are
applicable to such a holder (including certain indemnification obligations).
For so long as the Old First Mortgage Notes are outstanding, the Company
will continue to provide to holders of the Old First Mortgage Notes and to
prospective purchasers of the First Mortgage Notes the information required by
Rule 144A(d)(4) under the Securities Act.
105
<PAGE>
The foregoing description of the Exchange and Registration Rights Agreement
is a summary only, does not purport to be complete and is qualified in its
entirety by reference to all provisions of the Exchange and Registration
Rights Agreement. The Company will provide a copy of the Exchange and
Registration Rights Agreement to prospective purchasers of Old First Mortgage
Notes identified to the Company by an Initial Purchaser upon request.
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Notes for its own account pursuant
to the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Notes. This Prospectus, as it may
be amended or supplemented from time to time, may be used by a broker-dealer
in connection with resales of Exchange Notes received in exchange for Old
First Mortgage Notes where such Old First Mortgage Notes were acquired as a
result of market-making activities or other trading activities. The Company
has agreed that, for a period of the lesser of 180 days following the
consummation of the Exchange Offer or the date on which all such broker-
dealers have sold all Exchange Notes held by them, it will make this
Prospectus, as amended or supplemented, available to any broker-dealer for use
in connection with any such resale. In addition, until , 1998 (90 days
after the date of this Prospectus), all dealers effecting transactions in the
Exchange Notes may be required to deliver a prospectus.
The Company will not receive any proceeds from any sales of Exchange Notes
by broker-dealers. Exchange Notes received by broker-dealers for their own
account pursuant to the Exchange Offer may be sold from time to time in one or
more transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the Exchange Notes or a combination of such
methods of resale, at market prices prevailing at the time of resale, at
prices related to such prevailing market prices or negotiated prices. Any such
resale may be made directly to purchasers or to or through brokers or dealers
who may receive compensation in the form of commissions or concessions from
any such broker-dealer or the purchasers of any such Exchange Notes. Any
broker-dealer that resells Exchange Notes that were received by it for its own
account pursuant to the Exchange Offer and any broker or dealer that
participates in a distribution of such Exchange Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit on any
such resale of Exchange Notes and any commissions or concessions received by
any such persons may be deemed to be underwriting compensation under the
Securities Act. The Letter of Transmittal states that, by acknowledging that
it will deliver and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the
Securities Act.
For a period of not less than 90 days after the Expiration Date the Company
will promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such
documents in the Letter of Transmittal. The Company has agreed to pay all
expenses incident to the Exchange Offer other than commissions or concessions
of any brokers or dealers and will indemnify the holders of the Old First
Mortgage Notes (including any broker-dealers) against certain liabilities,
including liabilities under the Securities Act.
106
<PAGE>
LEGAL MATTERS
The validity of the Exchange Notes will be passed upon for the Company by
Jones, Walker, Waechter, Poitevent, Carrere & Denegre, L.L.P., New Orleans,
Louisiana.
EXPERTS
The consolidated balance sheets of the Company as of September 30, 1996 and
1997 and the related statements of operations, changes in equity and cash
flows for each of the three years in the period ended September 30, 1997
included elsewhere in this Prospectus have been audited by Arthur Andersen
LLP, independent public accountants, as stated in their report with respect
thereto, and are included herein in reliance upon the authority of such firm
as experts in auditing and accounting in giving such reports.
107
<PAGE>
GLOSSARY
billets...................... are long, square or rectangular strands of
steel that minimills cast from molten steel in
a continuous casting process. Billets are an
intermediate product of a type commonly
referred to as semi-finished steel.
continuous casting........... is a method of casting steel into a billet
directly from its molten form, in which steel
from the electric arc furnace is poured into a
tundish (a shallow tub-like vessel) and
carefully flows from the tundish into the
water-cooled copper mold of the caster, where
it solidifies into an extremely hot ribbon of
steel. At the bottom of the caster, torches cut
the continuously flowing solidified steel to
form billets.
conversion cost.............. is the cost of labor, energy, maintenance
material, and supplies used to convert raw
materials into billets and billets into shapes.
electric arc furnace......... is a steel making furnace where scrap or iron
substitutes are the raw materials. Heat is
supplied from electricity that arcs from
graphite electrodes to the metal bath.
merchant bar products........ are commodity steel shapes that consist of
rounds, squares, flats, angles, and channels
that fabricators, steel service centers and
manufacturers cut, bend and shape into
products. (Channels and angles that are less
than three inches in size are classified as
merchant bar products, and channels and angles
that are three inches or greater in size are
classified as structural steel shapes.)
mill stand................... is the structure that houses rolls used to
shape billets by passing the billets through
the rolls and placing pressure on the billets
as they pass.
minimill..................... is a steel production facility that uses an
electric arc furnace to melt steel scrap and/or
iron substitutes to cast the molten steel into
long strands of various shapes in a continuous
casting process, in contrast to an integrated
steel producer, which produces steel from coke
and iron ore through the use of blast furnaces
and basic oxygen furnaces. Although the
definition of what constitutes a minimill has
evolved coincident with the competitive
position of minimills within the steel
industry, two constant factors apply to the
minimill industry: the minimization of costs
and a flexible approach to available
technology.
rebar........................ is used in the construction process to
reinforce concrete and other aggregate and
cementing materials.
rod.......................... is small, round, thin semi-finished steel, less
than one inch in diameter, rolled from a billet
and coiled for further processing. Rod is
commonly drawn into wire products or used to
make bolts and nails.
G-1
<PAGE>
rolling mills................ are a series of mill stands used to shape semi-
finished steel by passing it from stand to
stand.
scrap........................ is a ferrous (iron-containing) material that
generally is remelted and recast into new
steel. Integrated steel mills use scrap for up
to 25% of their basic oxygen furnace charge;
100% of the minimills' raw materials for their
electric furnaces generally is scrap.
shredded scrap............... is fist-sized, homogenous pieces of old
automobile hulks and other light gauge steel
scrap. After cars are sent through a shredder,
the recyclable steel is separated by magnets.
Minimills consume shredded scrap in their
electric arc operations.
structural steel shapes...... are rolled flanged sections that have at least
one dimension of their cross sections three
inches or greater. The category includes beams,
channels, flats and angles.
G-2
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
BAYOU STEEL CORPORATION
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Arthur Andersen LLP............................................. F-2
Consolidated balance sheets as of September 30, 1996 and 1997 and March
31, 1998 (unaudited)..................................................... F-3
Consolidated statements of operations for the years ended September 30,
1995, 1996 and 1997, and the six months ended March 31, 1997 and 1998
(unaudited).............................................................. F-4
Consolidated statements of cash flows for the years ended September 30,
1995, 1996 and 1997, and the six months ended March 31, 1997 and 1998
(unaudited).............................................................. F-5
Consolidated statements of changes in equity for the years ended September
30, 1995, 1996 and 1997.................................................. F-6
Notes to consolidated financial statements................................ F-7
Consolidated financial statement schedules for the years ended September
30, 1995, 1996 and 1997:
Report of Arthur Andersen LLP........................................... F-19
Schedule II--Valuation and Qualifying Accounts.......................... F-20
</TABLE>
F-1
<PAGE>
BAYOU STEEL CORPORATION
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders of
Bayou Steel Corporation:
We have audited the accompanying consolidated balance sheets of Bayou Steel
Corporation (a Delaware corporation) and subsidiary as of September 30, 1997
and 1996, and the related consolidated statements of operations, cash flows,
and changes in equity for the years ended September 30, 1997, 1996, and 1995.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Bayou Steel Corporation
and subsidiary as of September 30, 1997 and 1996 and the results of their
operations and their cash flows for the years ended September 30, 1997, 1996,
and 1995 in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
New Orleans, Louisiana
November 19, 1997
F-2
<PAGE>
BAYOU STEEL CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30, MARCH 31,
-------------------------- 1998
ASSETS 1996 1997 (UNAUDITED)
------ ------------ ------------ ------------
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and temporary cash
investments....................... $ 748,608 $ 971,477 $ 12,939,097
Receivables, net of allowance for
doubtful accounts of $352,965,
$500,459 and $560,970,
respectively...................... 24,107,566 27,162,056 28,584,415
Inventories........................ 79,856,062 75,022,554 71,600,102
Prepaid expenses................... 292,458 239,161 427,081
------------ ------------ ------------
Total current assets............. 105,004,694 103,395,248 113,550,695
------------ ------------ ------------
PROPERTY, PLANT AND EQUIPMENT:
Land............................... 3,790,398 3,790,399 3,790,399
Machinery and equipment............ 104,683,209 110,028,977 112,071,767
Plant and office building.......... 20,975,997 21,265,577 21,609,802
------------ ------------ ------------
129,449,604 135,084,953 137,471,968
Less-Accumulated depreciation...... (39,115,207) (44,946,654) (47,844,212)
------------ ------------ ------------
Net property, plant and
equipment....................... 90,334,397 90,138,299 89,627,756
------------ ------------ ------------
OTHER ASSETS......................... 3,932,594 2,931,507 3,378,579
------------ ------------ ------------
Total assets..................... $199,271,685 $196,465,054 $206,557,030
============ ============ ============
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<S> <C> <C> <C>
CURRENT LIABILITIES:
Current maturities of long-term
debt.............................. $ 1,601,851 $ 3,040,257 $ 3,010,359
Borrowings under line of credit.... 3,000,000 -- --
Accounts payable................... 24,281,494 23,749,765 26,263,478
Accrued liabilities................ 3,856,341 4,574,144 5,455,611
Accrued dividends on redeemable
preferred stock................... 2,175,000 -- --
------------ ------------ ------------
Total current liabilities........ 34,914,686 31,364,166 34,729,448
------------ ------------ ------------
LONG-TERM DEBT....................... 83,540,331 80,500,073 79,000,000
------------ ------------ ------------
COMMITMENTS AND CONTINGENCIES
REDEEMABLE PREFERRED STOCK........... 10,489,091 13,089,010 13,301,469
------------ ------------ ------------
COMMON STOCKHOLDERS' EQUITY:
Common stock, $.01 par value:
Class A: 24,271,172 authorized
and 10,613,380 outstanding
shares.......................... 106,134 106,134 106,134
Class B: 4,302,347 authorized and
2,271,127 outstanding shares.... 22,711 22,711 22,711
Class C: 100 authorized and
outstanding shares.............. 1 1 1
------------ ------------ ------------
Total common stock............... 128,846 128,846 128,846
Paid-in capital.................... 47,769,034 47,769,034 47,769,034
Retained earnings.................. 22,429,697 23,613,925 31,628,233
------------ ------------ ------------
Total common stockholders'
equity.......................... 70,327,577 71,511,805 79,526,113
------------ ------------ ------------
Total liabilities and common
stockholders'equity............. $199,271,685 $196,465,054 $206,557,030
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-3
<PAGE>
BAYOU STEEL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
MARCH 31,
YEAR ENDED SEPTEMBER 30, (UNAUDITED)
---------------------------------------- --------------------------
1995 1996 1997 1997 1998
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
NET SALES............... $185,772,280 $204,425,858 $232,161,116 $112,517,624 $132,183,347
COST OF SALES........... 162,158,316 188,453,259 209,930,423 104,552,946 115,616,100
------------ ------------ ------------ ------------ ------------
GROSS PROFIT............ 23,613,964 15,972,599 22,230,693 7,964,678 16,567,247
------------ ------------ ------------ ------------ ------------
SELLING, GENERAL AND
ADMINISTRATIVE......... 5,312,402 6,272,624 6,310,688 3,300,924 3,116,094
NON-PRODUCTION STRIKE
AND CORPORATE CAMPAIGN
EXPENSES............... 999,938 1,768,197 3,323,385 1,247,120 116,952
------------ ------------ ------------ ------------ ------------
17,301,624 7,931,778 12,596,620 3,416,634 13,334,201
------------ ------------ ------------ ------------ ------------
OTHER INCOME (EXPENSE):
Interest expense........ (7,821,244) (8,634,510) (8,961,587) (4,516,955) (4,133,076)
Interest income......... 542,909 146,825 12,193 2,637 178,525
Miscellaneous........... 431,655 870,507 186,716 97,122 136,616
------------ ------------ ------------ ------------ ------------
(6,846,680) (7,617,178) (8,762,678) (4,417,196) (3,817,935)
------------ ------------ ------------ ------------ ------------
INCOME BEFORE TAXES..... 10,454,944 314,600 3,833,942 (1,000,562) 9,516,266
PROVISION FOR INCOME
TAXES.................. 118,155 ---- 49,795 ---- 197,530
------------ ------------ ------------ ------------ ------------
NET INCOME.............. 10,336,789 314,600 3,784,147 (1,000,562) 9,318,736
DIVIDENDS ACCRUED AND
ACCRETION ON PREFERRED
STOCK.................. (733,902) (2,592,418) (2,599,919) (1,299,959) (1,304,428)
------------ ------------ ------------ ------------ ------------
INCOME (LOSS) APPLICABLE
TO COMMON AND COMMON
EQUIVALENT SHARES...... $ 9,602,887 $ (2,277,818) $ 1,184,228 $ (2,300,521) $ 8,014,308
============ ============ ============ ============ ============
WEIGHTED AVERAGE COMMON
AND COMMON EQUIVALENT
SHARES OUTSTANDING:
Basic................. 12,884,607 12,884,607 12,884,607 12,884,607 12,884,607
Diluted............... 13,113,058 13,707,029 13,707,029 13,707,029 13,731,917
INCOME (LOSS) PER COMMON
AND COMMON EQUIVALENT
SHARE:
Basic income (loss)
per share............ $ .75 $ (.18) $ .09 $ (.18) $ .62
============ ============ ============ ============ ============
Diluted income (loss)
per share............ $ .73 $ (.18) $ .09 $ (.18) $ .58
============ ============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-4
<PAGE>
BAYOU STEEL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
MARCH 31,
YEAR ENDED SEPTEMBER 30, (UNAUDITED)
--------------------------------------- ------------------------
1995 1996 1997 1997 1998
------------ ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES:
Income................. $ 10,336,789 $ 314,600 $ 3,784,147 $(1,000,562) $ 9,318,736
Depreciation........... 5,148,300 6,094,870 5,953,714 2,849,406 2,897,558
Amortization........... 893,185 1,163,952 1,005,686 574,456 429,864
Provision for
(reduction in) losses
on accounts
receivable............ (53,204) (186,039) 143,393 114,928 54,129
Changes in working
capital:
(Increase) in
receivables.......... (2,711,736) (2,000,180) (3,197,883) (2,515,372) (1,476,488)
Decrease (increase) in
inventories.......... (10,549,191) (12,161,321) 4,833,508 3,996,895 3,422,452
Decrease (increase) in
prepaid expenses..... (68,953) (35,053) 53,297 (553,472) (187,920)
(Decrease) increase in
accounts payable..... 5,648,479 2,093,010 (531,729) (6,712,925) 2,513,713
(Decrease) increase in
accrued liabilities.. 348,236 180,625 717,803 (495,356) 881,467
------------ ------------ ----------- ----------- -----------
Net cash provided by
(used in) operations. 8,991,905 (4,535,536) 12,761,936 (3,742,002) 17,853,511
------------ ------------ ----------- ----------- -----------
CASH FLOWS FROM
INVESTING ACTIVITIES:
Acquisition of
Tennessee Facility--
net of current assets. (17,056,000) -- -- -- --
Purchases of property,
plant and equipment... (12,469,603) (4,989,761) (5,997,630) (2,080,991) (2,387,015)
Proceeds from the sale
of property, plant and
equipment............. -- 210,541 240,013 -- --
------------ ------------ ----------- ----------- -----------
Net cash used by
investing activities.. (29,525,603) (4,779,220) (5,757,617) (2,080,991) (2,387,015)
------------ ------------ ----------- ----------- -----------
CASH FLOWS FROM
FINANCING ACTIVITIES:
Net (payments)
borrowings under line
of credit............. -- 3,000,000 (3,000,000) 7,800,000 --
Payments of long-term
debt.................. (325,008) (608,966) (1,601,851) (66,492) (1,529,971)
Increase in other
assets................ (2,523,043) (65,585) (4,599) (4,599) (876,936)
Proceeds from issuance
of long-term debt..... 10,000,000 -- -- -- --
Proceeds from issuance
of preferred stock and
warrants.............. 15,000,000 -- -- -- --
Payments of dividends
on preferred stock.... -- (2,783,749) (2,175,000) (2,175,000) (1,091,969)
------------ ------------ ----------- ----------- -----------
Net cash provided by
(used in) financing
activities............ 22,151,949 (458,300) (6,781,450) 5,553,909 (3,498,876)
------------ ------------ ----------- ----------- -----------
NET INCREASE (DECREASE)
IN CASH AND TEMPORARY
CASH INVESTMENTS....... 1,618,251 (9,773,056) 222,869 (269,084) 11,967,620
CASH AND TEMPORARY CASH
INVESTMENTS, beginning
balance................ 8,903,413 10,521,664 748,608 748,608 971,477
------------ ------------ ----------- ----------- -----------
CASH AND TEMPORARY CASH
INVESTMENTS, ending
balance................ $ 10,521,664 $ 748,608 $ 971,477 $ 479,524 $12,939,097
============ ============ =========== =========== ===========
SUPPLEMENTAL CASH FLOW
DISCLOSURES:
Cash paid during the
period for:
Interest (net of
amounts capitalized). $ 8,162,394 $ 8,651,413 $ 9,011,608 $ 4,345,677 $ 4,189,222
Income taxes.......... $ -- $ 42,611 $ -- $ 18,300 $ 19,200
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-5
<PAGE>
BAYOU STEEL CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
<TABLE>
<CAPTION>
COMMON STOCK TOTAL COMMON
------------------------ PAID-IN RETAINED STOCKHOLDERS' PREFERRED
CLASS A CLASS B CLASS C CAPITAL EARNINGS EQUITY STOCK
-------- ------- ------- ----------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
BEGINNING BALANCE,
October 1, 1994........ $106,134 $22,711 $ 1 $44,890,554 $15,104,628 $60,124,028 $ --
Issuance of preferred
stock net of discount. -- -- -- -- -- -- 12,121,520
Discount from issuance
of preferred stock.... -- -- -- 2,878,480 -- 2,878,480 --
Net income............. -- -- -- -- 10,336,789 10,336,789 --
Dividends on preferred
stock................. -- -- -- -- (616,249) (616,249) --
Accretion on preferred
stock................. -- -- -- -- (117,653) (117,653) 117,653
-------- ------- ------ ----------- ----------- ----------- -----------
ENDING BALANCE,
September 30, 1995..... 106,134 22,711 1 47,769,034 24,707,515 72,605,395 12,239,173
Net income............. -- -- -- -- 314,600 314,600 --
Dividends on preferred
stock................. -- -- -- -- (2,167,500) (2,167,500) --
Prepaid dividends on
preferred stock....... -- -- -- -- -- -- (2,175,000)
Accretion on preferred
stock................. -- -- -- -- (424,918) (424,918) 424,918
-------- ------- ------ ----------- ----------- ----------- -----------
ENDING BALANCE,
September 30, 1996..... 106,134 22,711 1 47,769,034 22,429,697 70,327,577 10,489,091
Net income............. -- -- -- -- 3,784,147 3,784,147 --
Dividends on preferred
stock................. -- -- -- -- (2,175,000) (2,175,000) 2,175,000
Accretion on preferred
stock................. -- -- -- -- (424,919) (424,919) 424,919
-------- ------- ------ ----------- ----------- ----------- -----------
ENDING BALANCE,
September 30, 1997..... $106,134 $22,711 $ 1 $47,769,034 $23,613,925 $71,511,805 $13,089,010
======== ======= ====== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-6
<PAGE>
BAYOU STEEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION WITH RESPECT TO MARCH 31, 1998 AND 1997 IS UNAUDITED)
1. NATURE OF OPERATIONS AND RECENT DEVELOPMENTS:
Bayou Steel Corporation (the "Company") owns and operates a steel minimill
located on the Mississippi River in LaPlace, Louisiana ("BSCL") and a rolling
mill in Harriman, Tennessee ("BSCT"). BSCL produces structural steel products
and BSCT produces merchant bar shapes. In addition, the Company operates four
stocking locations along the inland waterway system and an additional
warehouse in Tennessee. The Company's customer base is comprised of steel
service centers and original equipment manufacturers/fabricators located
throughout the United States, with export shipments going to Canada and
Mexico.
During 1995, the Company formed BSCT to acquire the assets of Tennessee
Valley Steel Corporation ("TVSC") for $26.8 million. BSCT is a wholly owned
subsidiary of the Company. During fiscal 1997 and 1996, the first two full
years of operations for BSCT, unaudited operating losses associated with this
subsidiary were approximately $2.7 million and $6.8 million, respectively.
In February 1998, the Company entered into a Letter of Intent to purchase
all of the outstanding shares of Northwestern Steel and Wire Company
("Northwestern"), a major minimill producer of structural steel, rod and wire
products. On April 27, 1998 the Company announced that it would not proceed
with its plan to purchase the outstanding shares of Northwestern. Included in
other assets as of March 31, 1998 is approximately $750,000 of costs related
to this transaction that will be expensed in the Company's third fiscal
quarter.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
BSCL and BSCT after elimination of all significant intercompany accounts and
transactions.
Basis of Interim Period Presentation
The unaudited interim consolidated financial statements as of March 31, 1998
and for the six months ended March 31, 1998 and 1997 have been prepared
pursuant to the rules and regulations of the Securities and Exchange
Commission ("SEC"). Certain information and note disclosure 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. However, all adjustments which, in the opinion of management,
are necessary for fair presentation have been included except adjustments
related to inventory. Inventory valuations as of March 31, 1998 are based on
last-in, first-out ("LIFO") estimates of year-end levels and prices. Actual
LIFO inventories will not be known until year-end quantities and indices are
determined.
The results for the six months ended March 31, 1998 are not necessarily
indicative of the results to be expected for the fiscal year ending September
30, 1998.
Inventories
Inventories are carried at the lower of cost (last-in, first-out) or market
except mill rolls which are stated at cost (specific identification) and
operating supplies which are stated at average cost.
F-7
<PAGE>
BAYOU STEEL CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION WITH RESPECT TO MARCH 31, 1998 AND 1997 IS UNAUDITED)
Property, Plant and Equipment
Property, plant and equipment acquired as part of the acquisition of BSCL in
1986 and of BSCT in 1995 (see Note 1) has been recorded based on the
respective purchase prices. Betterments and improvements on property, plant
and equipment are capitalized at cost. Interest during construction of
significant additions is capitalized. Repairs and maintenance are expended as
incurred. Depreciation is provided on the units-of-production method for
machinery and equipment and on the straight-line method for buildings over an
estimated useful life of 30 years.
Cash and Temporary Cash Investments
The Company considers investments purchased with original maturities of
three months or less to be temporary cash investments.
Earnings Per Share
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement No. 128, "Earnings per Share" ("FAS 128"), which simplifies the
computation of earnings per share. FAS 128 is effective for financial
statements issued for fiscal years ending after December 15, 1997, and it
requires restatement for all prior period earnings per share data presented.
Effective October 1, 1997, the Company adopted FAS 128, which has been
reflected retroactively for presentation of earnings per share in the
accompanying statements of operations.
Basic earnings per share was computed by deducting dividends accrued and
accretion on preferred stock from net income then dividing this amount by the
weighted average number of outstanding common shares of 12,884,607 for the
years ended September 30, 1997, 1996 and 1995 and the six months ended March
31, 1998 and 1997. In connection with the issuance of redeemable preferred
stock on June 20, 1995, 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. In addition, the Company has an incentive award plan
under which stock options to purchase 115,000 shares of common stock at an
exercise price $4.375 per share have been granted to certain key employees.
Diluted earnings per share amounts were determined by assuming that the
outstanding warrants and stock options were exercised and considered as
additional common stock equivalents outstanding computed under the treasury
stock method. Additional common stock equivalents computed for purposes of the
diluted earnings per share computation were 822,422, 822,422, 228,451, 847,310
and 822,422 for the years ended September 30, 1997, 1996 and 1995 and the six
month periods ended March 31, 1998 and 1997, respectively.
Other Accounting Pronouncements
In June 1997, the FASB issued FAS 130, "Reporting Comprehensive Income" and
FAS 131, "Disclosures About Segments of an Enterprise and Related
Information." FAS 130 establishes standards for reporting and display of
comprehensive income in the financial statements. Comprehensive income is the
total of net income and all other non-owner changes in equity. FAS 131
requires that companies disclose segment data based on how management makes
decisions about allocating resources to segments and measuring their
performance. FAS 130 and 131 are effective for fiscal years beginning after
December 15, 1997. Adoption of these standards is not expected to have an
effect on the reporting requirement of the Company's financial position or
results of operations.
F-8
<PAGE>
BAYOU STEEL CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION WITH RESPECT TO MARCH 31, 1998 AND 1997 IS UNAUDITED)
Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amount of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Credit Risk
The Company extends credit to its customers primarily on 30 day terms and
encourages discounting. The Company believes that the credit risk is minimal
due to the ongoing review of its customers' financial conditions, the
Company's sizeable customer base, and the geographical dispersion of the
customer base. On some occasions, particularly large export shipments, the
Company requires letters of credit. Historically, credit losses have not been
significant. Also, the Company invests its excess cash in high-quality short-
term financial instruments.
Operating Lease Commitments
The Company has no significant operating lease commitments that would be
considered material to the financial statement presentation.
3. INVENTORIES:
Inventories, as of September 30, 1996 and 1997 consisted of the following:
<TABLE>
<CAPTION>
1996 1997
----------- -----------
<S> <C> <C>
Scrap steel..................................... $ 6,567,308 $ 5,623,964
Billets......................................... 7,778,092 4,799,025
Finished product................................ 47,943,429 46,717,869
LIFO adjustments................................ (3,255,589) (2,497,697)
----------- -----------
59,033,240 54,643,161
Mill rolls, operating supplies, and other....... 20,822,822 20,379,393
----------- -----------
$79,856,062 $75,022,554
=========== ===========
</TABLE>
Decrements in the last-in, first-out ("LIFO") inventories had no material
impact on the Company's results of operations in fiscal 1997. There were
increments in the LIFO inventories in 1996. At September 30, 1996 and 1997,
the first-in, first-out ("FIFO") inventories were $62.3 million and $57.1
million, respectively. A lower of cost or market evaluation of the carrying
value of inventory was prepared at the end of each fiscal year and in fiscal
1996 lower of cost or market adjustments of $382,000 were required for the
finished goods inventory at BSCT. The market values, after adjustments, were
in excess of the carrying value of the LIFO and FIFO inventories for both
years presented.
4. PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment of TVSC was acquired for $17.1 million during
fiscal 1995. Excluding the acquisition, capital expenditures totaled $12.5
million, $5.0 million, and $6.0 million in
F-9
<PAGE>
BAYOU STEEL CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION WITH RESPECT TO MARCH 31, 1998 AND 1997 IS UNAUDITED)
fiscal 1995, 1996, and 1997, respectively. As of September 30, 1997, the
estimated costs to complete authorized projects under construction or contract
amounted to $2.8 million.
The Company capitalized interest of $394,000, $18,000, and $50,000 during
the years ended September 30, 1995, 1996, and 1997, respectively, related to
qualifying assets under construction. Effective July 1, 1996, estimates of
total plant production capacity were revised, due in part to production
enhancements attained by recent capital expenditures. As a result of these
revised estimates, depreciation expense decreased approximately $0.66 per ton
produced in the melt shop and $1.62 per ton produced in BSCL's rolling mill,
generating a total decrease in depreciation expense in the fourth quarter of
fiscal 1996 of approximately $318,000, or $.02 per common and common
equivalent share. Depreciation expense during the years ended September 30,
1995, 1996, and 1997 was as follows:
<TABLE>
<CAPTION>
1995 1996 1997
---------- ---------- ----------
<S> <C> <C> <C>
Inventory................................ $ 178,835 $ 140,401 $ 19,683
Cost of sales............................ 4,964,204 5,947,719 5,928,467
Selling, general and administrative...... 5,261 6,750 5,564
---------- ---------- ----------
$5,148,300 $6,094,870 $5,953,714
========== ========== ==========
</TABLE>
5. OTHER ASSETS:
Other assets consist of financing costs associated with the issuance of
long-term debt, redeemable preferred stock and warrants, and the revolving
line of credit (see Notes 6, 7, and 14) which are being amortized over the
lives of the related transactions. During fiscal 1995, the Company wrote off
$165,000 of other assets related to the previously existing revolving line of
credit and capitalized $2,176,000 of deferred financing costs related to the
term loan, redeemable preferred stock and warrants, and the amended and
restated revolving line of credit. In fiscal 1994, the Company capitalized
$3,783,000 of deferred financing costs related to a 10.25% First Mortgage
Notes ("10.25% Notes") and the 1993 amended and restated revolving line of
credit. Amortization of other assets was approximately $893,000, $1,164,000,
and $1,006,000 for the years ended September 30, 1995, 1996, and 1997,
respectively. Other assets are reflected in the accompanying balance sheets
net of accumulated amortization of $2,009,000 and $3,015,000 at September 30,
1996 and 1997, respectively.
6. LONG-TERM DEBT:
Long-term debt of as of September 30, 1996 and 1997 consists of the
following:
<TABLE>
<CAPTION>
1996 1997
----------- -----------
<S> <C> <C>
First Mortgage Notes (see below)................. $75,000,000 $75,000,000
Term loan (see below)............................ 10,000,000 8,500,000
Other notes payable, due monthly, bearing
interest of 8.75% secured by certain assets..... 142,182 40,330
----------- -----------
85,142,182 83,540,330
Less--current maturities......................... 1,601,851 3,040,257
----------- -----------
$83,540,331 $80,500,073
=========== ===========
</TABLE>
F-10
<PAGE>
BAYOU STEEL CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION WITH RESPECT TO MARCH 31, 1998 AND 1997 IS UNAUDITED)
On June 20, 1995, the Company entered into a five-year term loan agreement
for $10 million. The proceeds received from the term loan were used to repay
the loan outstanding under the Company's revolving credit facility which had
been obtained to acquire substantially all of the assets of TVSC. The term
loan is partially secured by the Company's accounts receivable and
inventories. The term loan agreement calls for quarterly principal payments of
$750,000 beginning June 30, 1997 through March 31, 1999 and $1.0 million
beginning June 30, 1999 through December 31, 1999. The remaining $1.0 million
principal payment is due on the final maturity date of June 20, 2000. As of
September 30, 1997 and 1996, $3,000,000 and $1,500,000, respectively, were
classified as a current liabilities. The term loan bears interest on a sliding
scale based on the quarterly leverage ratio, as defined in the agreement. As
of September 30, 1997, the interest rate was LIBOR plus 2.5% or approximately
8.2%. Term loan interest is payable quarterly. Fair value of the term loan
approximates its carrying value.
The 10.25% Notes were issued in 1994 in order to redeem certain notes and
are secured by a first priority security interest granted by the Company,
subject to certain exceptions, in substantially all unencumbered existing and
future real and personal property, fixtures, machinery and equipment
(including certain operating equipment classified as inventory) and the
proceeds from sales thereof, whether existing or hereafter acquired. The
Indenture under which the 10.25% Notes are issued contains covenants,
including an interest expense coverage ratio, which restrict the Company's
ability to incur additional indebtedness, make dividend payments, or place
liens on the assets acquired with such indebtedness.
The 10.25% Notes bear interest at the rate of 10.25% per annum payable semi-
annually on each March and September 1, which commenced September 1, 1994. The
10.25% Notes will be redeemable, in whole or in part, at any time on and after
March 1, 1998, initially at 103.33% of the principal amount, plus accrued
interest to the date of redemption, and declining ratably to par on March 1,
2000. No principal payments are due on the 10.25% Notes until maturity in
2001. The fair value of the 10.25% Notes on September 30, 1997 was
approximately $77.3 million.
7. SHORT-TERM BORROWING ARRANGEMENT:
On June 20, 1995, the Company entered into an amendment and restatement of
its revolving line of credit agreement which is 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 derived as a certain percentage of accounts receivable and
inventory. Based on these criteria, the amount available as of September 30,
1997 was $34.5 million, net of $1.8 million outstanding letters of credit. The
agreement is secured by inventory and accounts receivable at interest rates on
a sliding scale based on the quarterly leverage ratio, as defined in the
agreement. As of September 30, 1997, the interest rate was LIBOR plus 2.5% or
approximately 8.2%. 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 other indebtedness. There were no borrowings under the line of credit
as of September 30, 1997 and there were $3 million of borrowings outstanding
as of September 30, 1996. Fair value of borrowings under the line of credit
approximates the Company's carrying value.
F-11
<PAGE>
BAYOU STEEL CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION WITH RESPECT TO MARCH 31, 1998 AND 1997 IS UNAUDITED)
The following information relates to the Company's borrowings under the line
of credit during the years ended September 30, 1995, 1996, and 1997:
<TABLE>
<CAPTION>
1995 1996 1997
----------- ---------- -----------
<S> <C> <C> <C>
Maximum amount outstanding.......... $23,300,000 $6,400,000 $13,400,000
Average amount outstanding.......... $ 2,200,000 $1,700,000 $ 5,400,000
Weighted average interest rate...... 8.9% 8.4% 8.8%
</TABLE>
8. INCOME TAXES:
The Company is subject to United States Federal income taxes and accounts
for income taxes under the provisions of Statement of Financial Accounting
Standards No. 109 "Accounting for Income Taxes" ("FAS 109"). The primary
difference between book and tax reporting of income relates to the allocation
of the carrying cost of property, plant and equipment to operations due to (a)
different depreciation methods used for tax and financial reporting purposes,
(b) a writedown of the carrying value of property, plant and equipment to
estimated net realizable value recorded for financial reporting purposes in
prior years, and (c) the sale of tax benefits discussed below.
In 1981, the Company entered into lease agreements with an unrelated
corporation whereby certain tax benefits were transferred to the unrelated
corporation as allowed under the provisions of the Economic Recovery Tax Act
of 1981. These agreements, the last of which expired in May 1997, included
various covenants not to dispose of the property covered by the agreement and
indemnification of the unrelated corporation by the former majority
stockholder against any losses which might result from a breach of the
Company's warranties and covenants, including those related to the Federal
income tax implications of the transaction. The Company recognized interest
income of approximately $50,000 and rent expense of approximately $1.4 million
for tax reporting purposes in fiscal year 1997 based upon the lease
agreements.
The Company and an individual controlling the current majority stockholder
agreed to indemnify the former majority stockholder for any payments required
to be made to the unrelated corporation caused by the Company's failure to
comply with the foregoing agreements. The former stockholder retains ownership
of the Company's Class C Common Stock which carries certain limited voting
rights including the holders' right to prevent certain transactions
(liquidation and certain mergers) which could result in liability to the
former majority stockholder under its indemnification to the unrelated
corporation. The Company's Class B Common Stock carries these same voting
rights.
As of September 30, 1997, for tax purposes, the Company had net operating
loss carryforwards ("NOLs") of approximately $280 million and $262 million
available to offset against regular tax and alternative minimum tax,
respectively. As of September 30, 1995 and 1997, the Company provided $118,115
and $49,795, respectively, for federal alternative minimum tax and state
income tax purposes. Due to generating tax losses in fiscal 1996, there was no
provision for income taxes.
The NOLs will expire in varying amounts through fiscal 2011. A substantial
portion of the available NOLs, approximately $151.2 million, expires by fiscal
2000. Even though management believes the Company will be profitable in the
future and will be able to utilize a portion of the NOLs, management does not
believe that it is likely that all of the NOLs will be utilized. FAS 109
requires recognition of future tax benefits, subject to a valuation allowance
based on the likelihood of realizing such benefits. Deferred tax assets of
approximately $103.6 million (NOLs and other temporary timing differences
F-12
<PAGE>
BAYOU STEEL CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION WITH RESPECT TO MARCH 31, 1998 AND 1997 IS UNAUDITED)
multiplied by the federal income tax rate) and deferred tax liabilities of
approximately $8.0 million (basis differences between tax and book plant,
property and equipment multiplied by the federal income tax rate) were
recorded in fiscal 1997. However, in recording these net deferred assets, FAS
109 requires the Company to determine whether it is "more-likely-than-not"
that the Company will realize such benefits and that all negative and positive
evidence be considered (with more weight given to evidence that is "objective
and verifiable") in making the determination. FAS 109 indicates that "forming
a conclusion that a valuation allowance is not needed is difficult when there
is negative evidence such as cumulative losses in recent years"; therefore,
the Company has determined a valuation allowance of $95.6 million is required
for all of the recorded net deferred tax assets. The assessment, which is
consistent with fiscal 1996, resulted in no net deferred tax amounts reflected
in the accompanying consolidated balance sheets. In view of the fact that this
determination was based primarily on historical losses with no regard for the
impact of proposed capital expenditures and business plans, future favorable
adjustments to the valuation allowance may be required if and when
circumstances change.
9. COMMITMENTS AND CONTINGENCIES:
Strike and Corporate Campaign
On March 21, 1993, the United Steelworkers of America Local 9121 (the
"Union") initiated a strike after the parties failed to reach agreement on a
new labor contract due to differences on economic issues. On September 23,
1996, the Company and Union entered into a settlement agreement which, among
other issues, resulted in a new labor contract, ending the strike.
In August 1993, the Union announced a corporate campaign designed to bring
pressure on the Company from individuals and institutions with direct
financial or other interests in the Company. The Company filed a lawsuit in
federal court in Delaware under the Racketeer Influenced Corrupt Organizations
Act ("RICO") against the Union for their conduct in connection with this
campaign. Non-production strike and corporate campaign expenses include legal
and other charges incurred by the Company in connection with its suit against
the Union. On October 29, 1997, the Company reached an agreement with the
Union the effect of which was not material to the financial position or
results of operations of the Company.
In conjunction with the acquisition of the assets of TVSC, the Union filed a
charge with the National Labor Relations Board (the "NLRB") alleging that the
Company has violated the National Labor Relations Act relating to its refusal
to hire at BSCT certain individuals, who were former employees of TVSC. On
August 16, 1996, the Company reached a settlement with the Union which was
approved by the NLRB and resolved the issue. The Company agreed to recognize
the Union as the bargaining agent for the employees and pay 135 former
employees, who applied for work but were not employed, a settlement amount of
25% of lost wages, less interim earnings. Until interim earnings for 1996 are
known for each applicant, the liability cannot be fully determined. The
Company has developed its best estimate of the potential exposure based on
available information and has accrued amounts deemed adequate to cover the
settlement of this matter.
Environmental
The Company is subject to various federal, state, and local laws and
regulations concerning the discharge of contaminants which may be emitted into
the air, discharged into waterways, and the disposal of solids and/or
hazardous wastes such as electric arc furnace dust. In addition, in the event
F-13
<PAGE>
BAYOU STEEL CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION WITH RESPECT TO MARCH 31, 1998 AND 1997 IS UNAUDITED)
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. During, fiscal 1997, the United States Public
Interest Research Group ("USPIRG") filed a lawsuit in Louisiana against the
Company for alleged violations of air quality regulations. USPIRG is asking
the courts to award them their appropriate legal fees and assess appropriate
penalties against the Company. The Company believes it has meritorious
defenses to these charges. The Company believes that it is in compliance, in
all material respects, with applicable environmental requirements and that the
cost of such continuing compliance (including the ultimate resolution of the
USPIRG matter discussed above) 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
September 30, 1997 and 1996, the Company has accrued loss contingencies for
environmental matters.
TVSC, the prior owners of the BSCT facility, had entered into a Consent
Agreement and Order (the "Voluntary Consent Order") under the Tennessee
Department of Environment and Conservation's voluntary clean up program. The
Company, in acquiring the assets of TVSC, has entered into a similar order.
The ultimate remedy and clean-up goals will be dictated by the results of
human health and ecological risk assessments which are components of a
required, structured investigative, remedial process. As of September 30,
1997, investigative, remedial and risk assessment activities have resulted in
expenses of approximately $1.3 million. Estimates indicate that the future
cost for remediating the affected areas ranges from $400,000 for the lowest
cost remedy to $1,300,000 for higher cost remedies.
The definitive asset 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 activities pursuant to the
Voluntary Consent Order (with an additional $1.0 million held for one year for
such costs and other costs resulting from a breach of TVSC's representations
and warranties in the agreement). At this time, the Company does not expect
the costs of resolution of the Voluntary Consent Order to exceed funds
provided by the escrow fund. 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
the escrow funds, the Company would be liable to cover such amounts, if any.
Raw Material Supply/Contracts
The Company has commitments to purchase billets for use in the BSCT rolling
mill through December 31, 1997. As of September 30, 1997, the commitments were
approximately $5.9 million.
OTHER
The Company does not provide any post-employment or post-retirement benefits
to its employees other than those described in Note 11.
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
F-14
<PAGE>
BAYOU STEEL CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION WITH RESPECT TO MARCH 31, 1998 AND 1997 IS UNAUDITED)
that the Company's liability, if any, under such claims or proceedings would
not materially affect its financial position or results of operations.
10. STOCK OPTION PLAN:
The Board of Directors and the Stockholders approved the 1991 Employees
Stock Option Plan (the "1991 Plan") for the purpose of attracting and
retaining key employees.
On September 21, 1994, the Board of Directors granted 115,000 incentive
stock options to purchase Class A Common Stock, exercisable at the market
price on that date of $4.375, to key employees. The options are exercisable in
five equal annual installments commencing on September 21, 1995. As of
September 30, 1997, no options were exercised, 69,000 shares were exercisable,
and 485,000 additional shares were available for grant under the 1991 Plan.
A summary of activity relating to stock options is as follows:
<TABLE>
<CAPTION>
# OF
STOCK OPTIONS
-------------
<S> <C>
Outstanding, September 30, 1996............................. 115,000
Granted..................................................... 0
Exercised................................................... 0
Canceled.................................................... 0
-------
Outstanding, September 30, 1997............................. 115,000
=======
</TABLE>
In fiscal 1997, the Company adopted Statement of Financial Accounting
Standards No. 123 "Accounting for Stock-Based Compensation" ("FAS 123") which,
among other provisions, establishes an optional fair value method of
accounting for stock-based compensation, including stock options awards. As
provided under the statement, the Company has elected to adopt the disclosure
only provisions of FAS 123, and continues to apply APB Opinion No. 25
"Accounting for Stock Issued to Employees" and related interpretations in
accounting for its stock-based compensation plans. The disclosure requirements
of FAS 123 include providing pro forma net income and pro forma earnings per
share as if the fair value based accounting method had been used to account
for stock-based compensation cost for the effects of all awards granted in
fiscal years beginning after December 31, 1994. There have been no additional
stock option awards granted by the Company other than those discussed above
awarded in September, 1994.
11. EMPLOYEE RETIREMENT PLANS:
Effective October 1, 1991, the Company implemented two defined benefit
retirement plans (the "Plan(s)"), one for employees covered by the contracts
with the United Steelworkers of America ("hourly employees") and one for
substantially all other employees ("salaried employees"), except those
employees at BSCT who are covered by a defined contribution plan. The Plan for
the hourly employees provides benefits of stated amounts for a specified
period of service. The Plan for the salaried employees provides benefits based
on employees' years of service and average compensation for a specified period
of time before retirement. The Company follows the funding requirements under
the Employee Retirement Income Security Act of 1974 ("ERISA"). The net pension
cost for both non-contributory Company sponsored pension plans consists of the
following components for fiscal year 1996 and 1997.
F-15
<PAGE>
BAYOU STEEL CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION WITH RESPECT TO MARCH 31, 1998 AND 1997 IS UNAUDITED)
The actuarial present value of future benefit obligations:
<TABLE>
<S> <C> <C>
<CAPTION>
1996 1997
----------- -----------
<S> <C> <C>
Vested benefit obligation............................ $ 1,230,062 $ 1,504,232
Non-vested benefit obligation........................ 64,779 125,537
----------- -----------
Accumulated benefit obligation....................... $ 1,294,841 $ 1,629,769
=========== ===========
Projected benefit obligation......................... $ 2,001,427 $ 2,441,103
Plan assets at fair value............................ (1,884,984) (2,366,508)
----------- -----------
Funded status........................................ 116,443 74,595
Unrecognized net gain (loss)......................... (170,847) 120,558
----------- -----------
Accrued pension liability............................ $ (54,404) $ 195,153
=========== ===========
Determination of net periodic pension cost:
Service cost......................................... $ 335,976 $ 390,534
Interest cost........................................ 111,708 147,959
Expected return on plan assets....................... (134,083) (168,925)
Net amortization..................................... 1,061 4,820
----------- -----------
Total net periodic pension cost.................... $ 314,662 $ 374,388
=========== ===========
</TABLE>
The primary actuarial assumptions used in determining the above benefit
obligation amounts were established on the September 30, 1996 and 1997
measurement dates and include a discount rate of 7.5% per annum on valuing
liabilities; long-term expected rate of return on assets of 9% per annum;
salary increases of 5% per annum for salaried employees; and an inflation rate
of 5% per annum.
The Company recognized expenses of $58,000 in fiscal 1995, $63,000 in fiscal
1996, and $75,000 in fiscal 1997 in connection with a defined contribution
plan to which employees contribute and the Company makes matching
contributions based on employee contributions. In addition, the Company
recognized expenses of $31,000, $84,000, and $115,000 for the fiscal years
1995, 1996, and 1997, respectively, in connection with a defined contribution
plan at BSCT to which the employees contribute and the Company makes matching
contributions based on employee contributions and profit sharing contributions
based on employees' annual wages.
12. MAJOR CUSTOMERS:
No single customer accounted for 10% or more of total sales for the years
ended September 30, 1995, 1996, and 1997.
13. RELATED PARTY TRANSACTIONS:
The Company entered into an agreement on May 28, 1987 with a stockholder to
provide certain investment banking services to the Company on a competitive,
first refusal basis. During the year ended September 30, 1995, the stockholder
acted as co-manager in conjunction with the placement of preferred stock and
warrants (see Note 14) and received $160,000 for these services. The agreement
terminated on September 4, 1996 and although services were provided, no
obligation was incurred in fiscal 1996.
F-16
<PAGE>
BAYOU STEEL CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION WITH RESPECT TO MARCH 31, 1998 AND 1997 IS UNAUDITED)
14. 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. 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, approximately 77,000 shares, in
the event that any two consecutive quarterly payments are missed or other
defined events take place. Prior to September 30, 1996, the Company declared
and recorded as a prepayment the regular dividends for fiscal 1997. The
dividend prepayment was recorded as a reduction in the balance of the
preferred stock in the accompanying 1996 balance sheet, as the Company would
have been able to apply any remaining amount against the principal balance in
the event of an early redemption of the preferred stock. The carrying amount
of the preferred stock increased as the accrued dividends were paid and
charged to retained earnings during fiscal 1997 and by periodic accretion of
the difference between the recorded value of the stock at the date of issuance
and the redemption value from 1995 through the mandatory redemption date of
June 20, 2002. The terms of the preferred stock purchase agreement impose
certain financial covenants which are generally related to covenants
associated with the revolving line of credit or the 10.25% Notes.
The preferred stock is mandatorily redeemable by the Company on June 20,
2002; however, the Company can redeem at any time after June 20, 1996,
initially at 113.0% of the outstanding balance, plus accrued dividends to the
date of redemption, and declining ratably to par on June 20, 2000. The fair
value of the preferred stock and warrants on September 30, 1997 was $17.7
million and $4 million, respectively.
15. COMMON STOCK:
Income (loss) per common and common equivalent share are based on the
weighted average number of common shares and common stock equivalent shares
outstanding of 13,113,058 for the year ended September 30, 1995 and 13,707,030
for the years ended September 30, 1996 and 1997. In connection with the
issuance of redeemable preferred stock on June 20, 1995, as discussed in Note
14, 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
income per common and common equivalent share for fiscal 1995, 1996 and 1997.
There was no material impact on primary or fully diluted earnings per share
for all years presented resulting from the stock options granted in September,
1994 (see Note 10).
Other than for voting rights, all classes of common stock have similar
rights. With respect to voting rights, Class B Common Stock has 60% and Class
A and Class C Common Stock have 40% of the votes except for special voting
rights for Class B and Class C Common Stock on liquidation and certain mergers
(see Note 8). The Company's ability to pay dividends is subject to restrictive
covenants under the Indenture pursuant to which the Company's 10.25% Notes
were issued, the preferred stock and warrant purchase agreement, and the
Company's line of credit (see Notes 6, 7 and 14).
F-17
<PAGE>
BAYOU STEEL CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION WITH RESPECT TO MARCH 31, 1998 AND 1997 IS UNAUDITED)
16. MISCELLANEOUS:
Miscellaneous income (expense) as of September 30, 1995, 1996, and 1997
included the following:
<TABLE>
<CAPTION>
1995 1996 1997
-------- -------- ---------
<S> <C> <C> <C>
Discount earned.............................. $211,566 $220,919 $ 174,089
Allowance for doubtful accounts.............. 53,204 186,039 (143,393)
Other income................................. 166,885 463,549 156,020
-------- -------- ---------
$431,655 $870,507 $ 186,716
======== ======== =========
</TABLE>
17. QUARTERLY FINANCIAL DATA (UNAUDITED):
<TABLE>
<CAPTION>
FISCAL YEAR 1996 QUARTERS
------------------------------------------
FIRST SECOND THIRD FOURTH
--------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Net Sales............... $ 41,163 $ 52,145 $ 58,875 $ 52,243
Gross Profit............ 4,055 3,647 4,214 4,057
Net Income (Loss)....... 175 21 222 (103)
Dividends and Accretion
on Preferred Stock..... (646) (650) (650) (646)
Loss Applicable to
Common and Common
Equivalent Shares...... (471) (629) (428) (750)
Loss Per Common and
Common Equivalent
Shares................. (.04) (.05) (.03) (.05)
---
</TABLE>
<TABLE>
<CAPTION>
FISCAL YEAR 1997 QUARTERS
------------------------------------------
FIRST SECOND THIRD FOURTH
--------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Net Sales.................... $ 54,865 $ 57,653 $ 59,075 $ 60,568
Gross Profit................. 2,813 5,152 7,157 7,109
Net Income (Loss)............ (1,803) 803 2,113 2,671
Dividends and Accretion on
Preferred Stock............. (650) (650) (650) (650)
Income (Loss) Applicable to
Common and Common Equivalent
Shares...................... (2,453) 152 1,463 2,022
Income (Loss) Per Common and
Common Equivalent Shares.... (.18) .01 .11 .15
</TABLE>
F-18
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders of
Bayou Steel Corporation
We have audited, in accordance with generally accepted auditing standards,
the consolidated financial statements as of September 30, 1997 and 1996 and
for each of the three years in the period ended September 30, 1997 included in
Bayou Steel Corporation's annual report to stockholders included in this
Offering Memorandum, and have issued our report thereon dated November 19,
1997. Our audits were made for the purpose of forming an opinion on the
consolidated financial statements taken as a whole. The accompanying Schedule
of Valuation and Qualifying Accounts (Schedule II) is the responsibility of
the Company's management and is presented for purposes of complying with the
Securities and Exchange Commission's rules and is not part of the basic
consolidated financial statements. This schedule has been subjected to the
auditing procedures applied in the audits of the basic consolidated financial
statements and, in our opinion, fairly states in all material respects the
financial data required to be set forth therein in relation to the basic
consolidated financial statements taken as a whole.
ARTHUR ANDERSEN LLP
New Orleans, Louisiana
November 19, 1997
F-19
<PAGE>
BAYOU STEEL CORPORATION
SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED SEPTEMBER 30, 1995, 1996 AND 1997
<TABLE>
<CAPTION>
BALANCE ADDITIONS BALANCE
AT CHARGED AT END
BEGINNING TO OF
DESCRIPTION OF PERIOD EXPENSES OTHER(1) PERIOD
- ----------- --------- --------- -------- --------
<S> <C> <C> <C> <C>
September 30, 1995
Allowance for doubtful accounts........ $617,497 $ (53,204) $ 3,677 $567,970
-------- --------- -------- --------
September 30, 1996
Allowance for doubtful accounts........ $567,970 $(186,039) $(28,966) $352,965
-------- --------- -------- --------
September 30, 1997
Allowance for doubtful accounts........ $352,965 $ 143,393 $ 4,101 $500,459
-------- --------- -------- --------
</TABLE>
- --------
(1) (Write-offs)/recoveries of uncollectible accounts.
F-20
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESEN-
TATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE,
SUCH INFORMATION AND REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AU-
THORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITA-
TION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO WHICH IT
RELATES OR ANY OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH SECU-
RITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UN-
DER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN
THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CON-
TAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<S> <C>
Available Information...................................................... i
Summary.................................................................... 1
Risk Factors............................................................... 13
The Exchange Offer......................................................... 20
Use of Proceeds............................................................ 30
Capitalization............................................................. 31
Selected Consolidated Financial Data....................................... 32
Unaudited Pro Forma Financial Information.................................. 34
Management's Discussion and Analysis of Financial Condition and Results of
Operations................................................................ 40
Business................................................................... 49
Management................................................................. 62
Principal Stockholders..................................................... 66
Description of New Credit Facility......................................... 69
Description of the First Mortgage Notes ................................... 70
Exchange and Registration Rights Agreement................................. 104
Plan of Distribution....................................................... 106
Legal Matters.............................................................. 107
Experts.................................................................... 107
Glossary................................................................... G-1
</TABLE>
UNTIL , 1998 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEAL-
ERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT PARTIC-
IPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS
IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
PROSPECTUS
$110,000,000
BAYOU STEEL CORPORATION
OFFER TO EXCHANGE REGISTERED 9 1/2% FIRST MORTGAGE NOTES DUE 2008 FOR
OUTSTANDING UNREGISTERED 9 1/2% FIRST MORTGAGE NOTES DUE 2008
[LOGO BAYOU STEEL APPEARS HERE]
----------------
PROSPECTUS
----------------
, 1998
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the General Corporation Law of the State of Delaware empowers
a corporation to indemnify any person who was or is a party or is threatened
to be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative, by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation or serves or served in these capacities for another
enterprise, if serving at the request of the corporation. Depending on the
character of the proceeding, a corporation may indemnify against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred in connection with such action, suit or
proceeding if the person indemnified acted in good faith and in a manner
reasonably believed to be in or not opposed to the best interest of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. In the case of an action
by or in the right of the corporation, no indemnification may be made in
respect to any claim, issue or matter as to which such person shall have been
adjudged to be liable to the corporation unless and only to the extent that
the Court of Chancery or the court in which such action or suit was brought
shall determine that despite the adjudication of liability such person is
fairly and reasonably entitled to indemnity for such expenses which the court
shall deem proper. Section 145 further provides that to the extent a director
or officer of a corporation has been successful in the defense of any action,
suit or proceeding referred to above or in the defense of any claim, issue or
matter therein, he shall be indemnified against expenses (including attorneys'
fees) actually and reasonably incurred by him in connection therewith.
Section 13 of the Company's Restated Certificate of Incorporation provides
that the Company shall provide indemnification to the fullest extent permitted
by Delaware law.
The Purchase Agreement provides that the Initial Purchasers will, severally,
indemnify the directors, officers, employees, representatives and agents of
the Company against certain liabilities, including liabilities under the
Securities Act of 1933, insofar as such liabilities arise out of or are based
on written information furnished to the Company by the Initial Purchasers.
Under an insurance policy maintained by the Company, the directors and
officers of the Company are insured, within the limits and subject to the
limitations of the policy, against certain expenses in connection with the
defense of certain claims, actions, suits or proceedings, and certain
liabilities which might be imposed as a result thereof, which may be brought
against them by reason of their being or having been directors and officers.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
The following is a list of all exhibits filed as part of this Registration
Statement.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------- -----------------------
<C> <S>
4.1 Indenture, dated May 22, 1998, between Bayou Steel Corporation, Bayou
Steel Corporation (Tennessee), River Road Realty Corporation and First
National Bank of Commerce, as trustee.
4.2 Form of Exchange Note.
5.1 Opinion of Jones, Walker, Waechter, Poitevent, Carrere & Denegre,
L.L.P. as to the legality of the Notes.
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------- -----------------------
<C> <S>
10.1 Exchange and Registration Rights Agreement, dated as of May 22, 1998,
among Bayou Steel Corporation, Bayou Steel Corporation (Tennessee),
River Road Realty Corporation, Chase Securities Inc., BT Alex. Brown
Incorporated and PaineWebber Incorporated.
10.2 Credit Agreement, dated as of May 22, 1998, among Bayou Steel
Corporation, The Chase Manhattan Bank, as Agent, and the lenders party
thereto.
12.1 Statement regarding Ratio of Earnings to Fixed Charges.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Jones, Walker, Waechter, Poitevent, Carrere & Denegre,
L.L.P. (included in Exhibit 5).
24.1 Power of Attorney (included in Signature Page to the Registration
Statement).
25.1 Statement of Eligibility of First National Bank of Commerce.
99.1 Form of Letter of Transmittal.
99.2 Form of Notice of Guaranteed Delivery.
99.3 Form of Letter to Nominees.
99.4 Form of Letter to Clients.
</TABLE>
ITEM 22. UNDERTAKINGS.
The Registrant hereby undertakes the following:
(a) For purposes of determining any liability under the Securities Act of
1933, each filing of the Registrant's annual report pursuant to Section
13(a) or 15(d) of the Exchange Act that is incorporated by reference in
this Registration Statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial bona fide
offering thereof.
(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions described
under Item 20 or otherwise, each of the registrants has been advised that
in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities
Act of 1933 and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by
any of the registrants of expenses incurred or paid by a director,
officer, or controlling person of such registrant in the successful
defense of any action, suit, or proceeding) is asserted by such director,
officer, or controlling person in connection with the securities being
registered, the registrants will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it
is against public policy as expressed in the Securities Act of 1933 and
will be governed by the final adjudication of such issue.
(c) Each of the undersigned registrants hereby undertakes to respond to
requests for information that is incorporated by reference into the
prospectus pursuant to Item 4, 10(b), 11, or 13 of this form, within one
business day of receipt of such request, and to send the incorporated
document by first class mail or other equally prompt means. This includes
information contained in documents filed subsequent to the effective date
of the registration statement through the date of responding to the
request.
(d) Each of the undersigned registrants hereby undertakes to supply by means
of a post-effective amendment all information concerning a transaction,
and the company being acquired involved therein, that was not the subject
of and included in the registration statement when it became effective.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of LaPlace, State of
Louisiana, on June 29, 1998.
BAYOU STEEL CORPORATION
By: /s/ Howard M. Meyers
__________________________________
Howard M. Meyers
Chairman of the Board and
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
immediately below constitutes and appoints Howard M. Myers and Richard J.
Gonzalez, and each of them acting individually, his true and lawful attorney-
in-fact and agent, with full power of substitution, for him and in his name,
place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement, and to
file the same with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorney-in-fact and agent or his substitute or
substitutes may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
/s/ Howard M. Meyers Chairman of the Board, June 29, 1998
- ----------------------------------- Chief Executive
HOWARD M. MEYERS Officer and Director
/s/ Jerry M. Pitts President, Chief June 29, 1998
- ----------------------------------- Operating Officer
JERRY M. PITTS and Director
/s/ Richard J. Gonzalez Vice President, June 29, 1998
- ----------------------------------- Chief Financial
RICHARD J. GONZALEZ Officer, Treasurer
and Secretary
/s/ Lawrence E. Golub Director June 29, 1998
- -----------------------------------
LAWRENCE E. GOLUB
/s/ Melvyn N. Klein Director June 29, 1998
- -----------------------------------
MELVYN N. KLEIN
/s/ Albert P. Lospinoso Director June 29, 1998
- -----------------------------------
ALBERT P. LOSPINOSO
/s/ Stanley S. Shuman Director June 29, 1998
- -----------------------------------
STANLEY S. SHUMAN
/s/ Jeffrey P. Sangalis Director June 29, 1998
- -----------------------------------
JEFFREY P. SANGALIS
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of LaPlace, State of
Louisiana, on June 29, 1998.
BAYOU STEEL CORPORATION (TENNESSEE)
By: /s/ Howard M. Meyers
__________________________________
Howard M. Meyers
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
/s/ Howard M. Meyers Chief Executive June 29, 1998
- ----------------------------------- Officer
HOWARD M. MEYERS
/s/ Jerry M. Pitts President, Chief June 29, 1998
- ----------------------------------- Operating Officer
JERRY M. PITTS and Director
/s/ Richard J. Gonzalez Vice President, Chief June 29, 1998
- ----------------------------------- Financial Officer,
RICHARD J. GONZALEZ Treasurer and
Secretary
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of LaPlace, State of
Louisiana, on June 29, 1998.
RIVER ROAD REALTY CORPORATION
By: /s/ Howard M. Meyers
__________________________________
Howard M. Meyers
Chief Executive Officer
and Director
Pursuant to the requirements of the Securities Act of 1933, as amended, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
/s/ Howard M. Meyers Chief Executive June 29, 1998
- ----------------------------------- Officer and Director
Howard M. Meyers
/s/ Richard J. Gonzalez Vice President and June 29, 1998
- ----------------------------------- Treasurer
Richard J. Gonzalez
II-5
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------- -----------------------
<C> <S>
4.1 Indenture, dated May 22, 1998, between Bayou Steel Corporation, Bayou
Steel Corporation (Tennessee), River Road Realty Corporation and First
National Bank of Commerce, as trustee.
4.2 Form of Exchange Note.
5.1 Opinion of Jones, Walker, Waechter, Poitevent, Carrere & Denegre,
L.L.P. as to the legality of the Notes.
10.1 Exchange and Registration Rights Agreement, dated as of May 22, 1998,
among Bayou Steel Corporation, Bayou Steel Corporation (Tennessee),
River Road Realty Corporation, Chase Securities Inc., BT Alex. Brown
Incorporated and PaineWebber Incorporated.
10.2 Credit Agreement, dated as of May 22, 1998, among Bayou Steel
Corporation, The Chase Manhattan Bank, as Agent, and the lenders party
thereto.
12.1 Statement regarding Ratio of Earnings to Fixed Charges.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Jones, Walker, Waechter, Poitevent, Carrere & Denegre,
L.L.P. (included in Exhibit 5).
24.1 Power of Attorney (included in Signature Page to the Registration
Statement).
25.1 Statement of Eligibility of First National Bank of Commerce.
99.1 Form of Letter of Transmittal.
99.2 Form of Notice of Guaranteed Delivery.
99.3 Form of Letter to Nominees.
99.4 Form of Letter to Clients.
</TABLE>
<PAGE>
EXHIBIT 4.1
EXECUTION COPY
-----------------------------------
BAYOU STEEL CORPORATION
TO
FIRST NATIONAL BANK OF COMMERCE, as Trustee
-------------------
Indenture
Dated May 22, 1998
--------------------
-----------------------------------
<PAGE>
Certain Sections of this Indenture relating to
Sections 310 through 318 of the
Trust Indenture Act of 1939:
Trust Indenture Indenture
Act Section Section(s)
- --------------- ----------
(S)310(a)(1).................................................. 9.9
(a)(2)................................................... 9.9
(a)(3)................................................... Not applicable
(a)(4)................................................... Not applicable
(a)(5)................................................... 9.9
(b)...................................................... 9.8; 9.10
(c)...................................................... Not applicable
(S)311(a)...................................................... 9.13
(b)...................................................... 9.13
(c)...................................................... Not applicable
(S)312(a)...................................................... 10.1; 10.2(a)
(b)...................................................... 10.2(b)
(c)...................................................... 10.2(c)
(S)313(a)...................................................... 10.3(a)
(a)(4)................................................... 1.1
(b)...................................................... 10.3(a)
(c)...................................................... 10.3(a)
(d)...................................................... 10.3(b)
(S)314(a)...................................................... 10.4
(a)(4)................................................... 6.5
(b)...................................................... 12.2
(c)(1)................................................... 13.4
(c)(2)................................................... 13.4
(c)(3)................................................... 13.4
(d)...................................................... 12.2; 12.3;
12.4; 12.5;
13.2; 13.3;
13.4; 13.5
(e)...................................................... 13.6
(f)...................................................... Not applicable
Note: This reconciliation and tie shall not, for any purpose, be deemed to be a
part of the Indenture.
<PAGE>
Trust Indenture Indenture
Act Section Section(s)
- --------------- ----------
(S)315(a)...................................................... 9.1
(b)...................................................... 9.2
(c)...................................................... 9.1
(d)...................................................... 9.1
(e)...................................................... 8.14
(S)316(a)...................................................... 1.1
(a)(1)(A)................................................ 8.2; 8.12
(a)(1)(B)................................................ 8.13
(a)(2)................................................... Not applicable
(b)...................................................... 8.8
(c)...................................................... 1.4
(S)317(a)(1)................................................... 8.3
(a)(2)................................................... 8.4
(b)...................................................... 6.26
(S)318(a)...................................................... 1.7
Note: This reconciliation and tie shall not, for any purpose, be deemed to be a
part of the Indenture.
<PAGE>
TABLE OF CONTENTS
Page(s)
ARTICLE I
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION......................... 2
SECTION 1.1. Definitions................................................ 2
"Act"..................................................................... 3
"Affiliate"............................................................... 3
"Agent Members"........................................................... 3
"Aggregate Cash Proceeds"................................................. 3
"Applicable Premium"...................................................... 3
"Appraiser"............................................................... 3
"Asset Acquisition"....................................................... 4
"Asset Backed Entity"..................................................... 4
"Asset Sale".............................................................. 4
"Asset Sale Offer"........................................................ 5
"Asset Sale Payment Date"................................................. 5
"Authenticating Agent".................................................... 5
"Available Amount"........................................................ 5
"Average Life"............................................................ 5
"Bankruptcy Law".......................................................... 5
"Board of Directors"...................................................... 5
"Board Resolution"........................................................ 5
"Business Day"............................................................ 5
"Capital Stock"........................................................... 5
"Capitalized Lease Obligation"............................................ 6
"Cash Equivalents"........................................................ 6
"Certificated Securities"................................................. 6
"Change of Control"....................................................... 6
"Change of Control Date".................................................. 7
"Change of Control Offer"................................................. 7
"Change of Control Payment Date".......................................... 7
"Collateral".............................................................. 7
"Collateral Account"...................................................... 7
"Collateral Agent"........................................................ 7
"Collateral Proceeds"..................................................... 8
"Commission".............................................................. 8
"Common Stock"............................................................ 8
"Company"................................................................. 8
"Company Obligations"..................................................... 8
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"Company Request" or "Company Order"...................................... 8
"Company Security Agreement".............................................. 8
"Condemnation Award"...................................................... 8
"Consolidated Domestic Income Tax Expense"................................ 8
"Consolidated Interest Expense"........................................... 9
"Consolidated Interest Income"............................................ 9
"Consolidated Net Income"................................................. 9
"Consolidated Net Worth".................................................. 9
"Consolidated Recourse Subsidiary"........................................ 10
"Corporate Trust Office".................................................. 10
"Corporation"............................................................. 10
"Currency Agreement"...................................................... 10
"Custodian"............................................................... 10
"Default"................................................................. 10
"Defaulted Interest"...................................................... 10
"Depositary".............................................................. 10
"Disqualified Stock"...................................................... 10
"EBITDA".................................................................. 10
"EBITDA Ratio"............................................................ 11
"Event of Default"........................................................ 12
"Exchange Act"............................................................ 12
"Exchange Global Note".................................................... 12
"Exchange Notes".......................................................... 12
"Financial Advisor"....................................................... 12
"Fixtures and Equipment".................................................. 12
"GAAP".................................................................... 12
"Global Securities"....................................................... 12
"Guarantee"............................................................... 12
"Holder".................................................................. 13
"Indebtedness"............................................................ 13
"Indenture"............................................................... 13
"Independent"............................................................. 13
"Initial Notes"........................................................... 14
"Institutional Accredited Investor Global Note"........................... 14
"Institutional Accredited Investor Note".................................. 14
"Intercreditor Agreement"................................................. 14
"Interest Payment Date"................................................... 14
"Interest Rate Agreement"................................................. 14
"Internal Revenue Code"................................................... 15
"Investment".............................................................. 15
"Issue Date".............................................................. 15
"Joint Venture"........................................................... 15
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"Lenders"................................................................. 15
"Lender Secured Property"................................................. 15
"Lien".................................................................... 15
"Majority-Owned Non-Recourse Subsidiary".................................. 15
"Majority-Owned Subsidiary"............................................... 15
"Maturity Date"........................................................... 15
"Meyers".................................................................. 16
"Mortgage"................................................................ 16
"Mortgaged Facility"...................................................... 16
"1998 Issue Date"......................................................... 16
"Net Cash Proceeds"....................................................... 16
"Net Income".............................................................. 17
"Net Insurance Proceeds".................................................. 17
"Net Interest Expense".................................................... 17
"New Credit Facility"..................................................... 17
"Non-Collateral Proceeds"................................................. 17
"Non-Recourse Indebtedness"............................................... 17
"Non-Recourse Subsidiary"................................................. 18
"Obsolete Assets"......................................................... 18
"Offering Memorandum"..................................................... 18
"Officer"................................................................. 18
"Officers' Certificate"................................................... 18
"Opinion of Counsel"...................................................... 18
"Other Consideration"..................................................... 18
"Outstanding"............................................................. 18
"Paying Agent"............................................................ 19
"Permitted Easement"...................................................... 19
"Permitted Investment".................................................... 19
"Permitted Liens"......................................................... 20
"Permitted Payments"...................................................... 22
"Permitted Related Acquisition"........................................... 22
"Person".................................................................. 22
"Preferred Stock"......................................................... 22
"Private Exchange Securities"............................................. 23
"Private Placement Legend"................................................ 23
"Purchase Agreement"...................................................... 23
"Qualified Asset Backed Transaction"...................................... 23
"Receivables Fees"........................................................ 23
"Recourse Subsidiary"..................................................... 23
"Reference Period"........................................................ 23
"Registered Exchange Offer"............................................... 23
"Registration Rights Agreement"........................................... 23
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"Regular Record Date"..................................................... 23
"Regulation S"............................................................ 24
"Regulation S Global Note"................................................ 24
"Regulation S Legend"..................................................... 24
"Regulation S Note"....................................................... 24
"Released Interests"...................................................... 24
"Released Trust Moneys"................................................... 24
"Responsible Officer"..................................................... 24
"Restricted Investment"................................................... 24
"Restricted Payment"...................................................... 24
"Restricted Period"....................................................... 25
"Retained Trust Moneys"................................................... 25
"Rule 144A"............................................................... 25
"Rule 144A Global Note"................................................... 25
"Rule 144A Note".......................................................... 25
"Sale and Leaseback Transaction".......................................... 25
"Securities".............................................................. 25
"Security Documents"...................................................... 25
"Security Register" and "Security Registrar".............................. 25
"Special Record Date"..................................................... 25
"Standard Securitization Undertakings".................................... 26
"Stated Maturity"......................................................... 26
"Steel Business Assets"................................................... 26
"Subsidiary".............................................................. 26
"Subsidiary Guarantee".................................................... 26
"Subsidiary Security Agreement"........................................... 26
"Transaction"............................................................. 26
"Treasury Rate"........................................................... 26
"Trust Moneys"............................................................ 27
"Trust Moneys Release Notice"............................................. 27
"Trustee"................................................................. 27
"Trust Indenture Act"..................................................... 27
"Trust Officer"........................................................... 27
"U.S. Government Obligations"............................................. 28
"Valuation Date".......................................................... 28
"Vice President".......................................................... 28
"Wholly-Owned Non-Recourse Subsidiary".................................... 28
"Wholly-Owned Recourse Subsidiary"........................................ 28
"Wholly-Owned Subsidiary"................................................. 28
"Withdrawal Notice"....................................................... 28
SECTION 1.2. Compliance Certificates and Opinions........................ 28
SECTION 1.3. Form of Documents Delivered to Trustee...................... 29
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SECTION 1.4. Acts of Holders; Record Dates............................... 30
SECTION 1.5. Notices, Etc. to Trustee, Company and Subsidiary Guarantors. 31
SECTION 1.6. Notice to Holders; Waiver................................... 31
SECTION 1.7. Conflict with Trust Indenture Act........................... 32
SECTION 1.8. Effect of Headings and Table of Contents.................... 32
SECTION 1.9. Successors and Assigns...................................... 32
SECTION 1.10. Separability Clause......................................... 32
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SECTION 1.11. Benefits of Indenture..................................... 32
SECTION 1.12. Governing Law............................................. 32
SECTION 1.13. Legal Holidays............................................ 32
SECTION 1.14. Immunity of Incorporators, Stockholders,
Officers and Directors.................................... 33
ARTICLE II
SECURITY FORMS............................ 33
SECTION 2.1. Forms Generally........................................... 33
ARTICLE III
THE SECURITIES........................... 40
SECTION 3.1 Amount Unlimited; Issuable in Series; Title and
Terms of the 1998 Securities.............................. 40
SECTION 3.2. Transfer and Exchange..................................... 42
SECTION 3.3. Execution, Authentication, Delivery and Dating............ 48
SECTION 3.4. Temporary Securities...................................... 49
SECTION 3.5. Registration.............................................. 49
SECTION 3.6. Mutilated, Destroyed, Lost and Stolen Securities.......... 49
SECTION 3.7. Payment of Interest; Interest Rights Preserved............ 50
SECTION 3.8. Persons Deemed Owners..................................... 51
SECTION 3.9. Cancellation.............................................. 52
SECTION 3.10. Computation of Interest................................... 52
ARTICLE IV
SATISFACTION AND DISCHARGE..................... 52
SECTION 4.1. Satisfaction and Discharge of Any Series.................. 52
SECTION 4.2. Application of Monies for Satisfaction and Discharge..... 54
SECTION 4.3. Satisfaction and Discharge of Indenture................... 54
ARTICLE V
REDEMPTION.............................. 54
SECTION 5.1. Applicability of Article.................................. 54
SECTION 5.2. Notices to Trustee........................................ 54
SECTION 5.3. Selection of Securities To Be Redeemed.................... 55
SECTION 5.4. Notice of Redemption...................................... 55
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SECTION 5.5. Effect of Notice of Redemption............................ 56
SECTION 5.6. Deposit of Redemption Price............................... 56
SECTION 5.7. Securities Redeemed in Part............................... 57
SECTION 5.8. Optional Redemption....................................... 57
ARTICLE VI
COVENANTS.............................. 58
SECTION 6.1. Payment of Securities..................................... 58
SECTION 6.2. Maintenance of Office or Agency........................... 58
SECTION 6.3. Corporate Existence....................................... 59
SECTION 6.4. Payment of Taxes and Other Claims; Tax Consolidation...... 59
SECTION 6.5. Compliance Certificates................................... 59
SECTION 6.6. SEC Reports............................................... 60
SECTION 6.7. Waiver of Stay, Extension or Usury Laws................... 61
SECTION 6.8. Maintenance of Properties; Insurance; Books and
Records; Compliance with Law.............................. 61
SECTION 6.9. Limitations on Indebtedness............................... 62
SECTION 6.10. Limitation on Liens....................................... 65
SECTION 6.11. Limitation on the Issuance of Preferred Stock by
Recourse Subsidiaries..................................... 66
SECTION 6.12. Intentionally Omitted..................................... 66
SECTION 6.13. Limitations on Restricted Payments........................ 66
SECTION 6.14. Limitations on Transactions with Stockholders and
Affiliates................................................ 68
SECTION 6.15. Restrictions on Asset Sales............................... 69
SECTION 6.16. Limitation on Dividend and Other Payment Restrictions
Affecting Recourse Subsidiaries........................... 73
SECTION 6.17. Limitation on Sale and Leaseback Transactions............. 74
SECTION 6.18. Intentionally Omitted..................................... 74
SECTION 6.19. Change of Control......................................... 74
SECTION 6.20. Limitations as to Non-Recourse Subsidiaries............... 76
SECTION 6.21. Impairment of Security Interest........................... 76
SECTION 6.22. Conflicting Agreements.................................... 76
SECTION 6.23. Amendment to Security Documents........................... 77
SECTION 6.24. Inspection................................................ 77
SECTION 6.25. Use of Proceeds........................................... 77
SECTION 6.26. Money for Security Payments to Be Held in Trust........... 77
SECTION 6.27. Limitation on Improvements to the Released Property....... 79
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ARTICLE VII
SUCCESSOR CORPORATION....................... 79
SECTION 7.1. Merger and Consolidation.................................. 79
SECTION 7.2. Surviving Person Substituted.............................. 80
ARTICLE VIII
EVENTS OF DEFAULT.......................... 81
SECTION 8.1. Events of Default......................................... 81
SECTION 8.2. Acceleration of Maturity; Rescission and
Annulment................................................. 83
SECTION 8.3. Collection of Debt and Suits for Enforcement by
Trustee................................................... 84
SECTION 8.4. Trustee May File Proofs of Claims......................... 85
SECTION 8.5. Trustee May Enforce Claims Without Possession
of Securities............................................. 86
SECTION 8.6. Application of Money Collected............................ 86
SECTION 8.7. Limitation on Suits....................................... 87
SECTION 8.8. Unconditional Right of Holders to Receive
Principal and Interest.................................... 87
SECTION 8.9. Restoration of Rights and Remedies........................ 88
SECTION 8.10. Rights and Remedies Cumulative............................ 88
SECTION 8.11. Delay or Omission Not Waiver.............................. 88
SECTION 8.12. Control by Holders........................................ 88
SECTION 8.13. Waiver of Past Defaults................................... 89
SECTION 8.14. Undertaking for Costs..................................... 89
SECTION 8.15. Waiver of Stay or Extension Laws.......................... 90
SECTION 8.16. Collection Suit by Trustee................................ 90
ARTICLE IX
THE TRUSTEE........................... 90
SECTION 9.1. Certain Duties and Responsibilities....................... 90
SECTION 9.2. Notice of Defaults........................................ 91
SECTION 9.3. Certain Rights of Trustee................................. 91
SECTION 9.4. Not Responsible for Recitals or Issuance of
Securities................................................ 92
SECTION 9.5. May Hold Securities....................................... 93
SECTION 9.6. Money Held in Trust....................................... 93
SECTION 9.7. Compensation and Reimbursement............................ 93
SECTION 9.8. Disqualification; Conflicting Interests................... 94
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SECTION 9.9. Corporate Trustee Required; Eligibility................... 94
SECTION 9.10. Resignation and Removal; Appointment of
Successor................................................. 94
SECTION 9.11. Acceptance of Appointment by Successor.................... 96
SECTION 9.12. Merger, Conversion, Consolidation or
Succession to Business.................................... 96
SECTION 9.13. Preferential Collection of Claims Against
Company................................................... 97
SECTION 9.14. Appointment of Authenticating Agent....................... 97
ARTICLE X
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY........ 99
SECTION 10.1. Company to Furnish Trustee Names and
Addresses of Holders...................................... 99
SECTION 10.2. Preservation of Information; Communications to
Holders................................................... 99
SECTION 10.3. Reports by Trustee........................................ 100
SECTION 10.4. Reports by Company........................................ 100
ARTICLE XI
SUPPLEMENTAL INDENTURES..................... 100
SECTION 11.1. Supplemental Indentures without Consent of
Holders................................................... 100
SECTION 11.2. Supplemental Indentures with Consent of
Holders................................................... 102
SECTION 11.3. Execution of Supplemental Indentures...................... 103
SECTION 11.4. Effect of Supplemental Indentures......................... 103
SECTION 11.5. Conformity with Trust Indenture Act....................... 104
SECTION 11.6. Reference in Securities to Supplemental
Indentures................................................ 104
ARTICLE XII
COLLATERAL AND SECURITY....................... 104
SECTION 12.1. Collateral and Security Documents......................... 104
SECTION 12.2. Recording and Opinions.................................... 105
SECTION 12.3. Release of Collateral..................................... 106
SECTION 12.4. Possession and Use of Collateral.......................... 107
SECTION 12.5. Specified Releases of Collateral.......................... 107
SECTION 12.6. Disposition of Collateral Without Release................. 110
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SECTION 12.7. Form and Sufficiency of Release........................... 110
SECTION 12.8. Purchaser Protected....................................... 111
SECTION 12.9. Authorization of Actions To Be Taken by The
Trustee Under the Security Documents...................... 111
SECTION 12.10. Authorization of Receipt of Funds by the
Trustee Under the Security Documents...................... 111
ARTICLE XIII
APPLICATION OF TRUST MONEYS................... 112
SECTION 13.1. Collateral Account........................................ 112
SECTION 13.2. Withdrawals of Insurance Proceeds and Condemnation Awards. 112
SECTION 13.3. Withdrawal of Trust Moneys for Asset Sale Offer........... 113
SECTION 13.4. Withdrawal of Trust Moneys for Permitted Related
Acquisitions.............................................. 114
SECTION 13.5. Withdrawal of Trust Moneys for Retention by
the Company or its Subsidiaries........................... 115
SECTION 13.6. Withdrawals of Proceeds from Certain Sales of Securities.. 116
SECTION 13.7. Investment of Trust Moneys................................ 117
ARTICLE XIV
DEFEASANCE AND COVENANT DEFEASANCE.................. 117
SECTION 14.1. Company's Option to Effect Defeasance or
Covenant Defeasance....................................... 118
SECTION 14.2. Defeasance and Discharge.................................. 118
SECTION 14.3. Covenant Defeasance....................................... 118
SECTION 14.4. Conditions to Defeasance or Covenant Defeasance........... 119
SECTION 14.5. Deposited Money and U.S. Government Obligations to be
held in Trust; Other Miscellaneous Provisions............. 121
SECTION 14.6. Reinstatement............................................. 122
ARTICLE XV
INTERVENTION........................... 122
SECTION 15.1. Intervention.............................................. 122
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<PAGE>
ANNEX
ANNEX A Terms of Subsidiary Guarantee
EXHIBITS
EXHIBIT A Form of Initial Note
EXHIBIT B Form of Exchange Note
EXHIBIT C Form of Company Security Agreement
EXHIBIT D Form of Mortgage (Louisiana)
EXHIBIT E Form of Subsidiary Security Agreement
EXHIBIT F Form of Intercreditor Agreement
EXHIBIT G Survey of Lucien Gassen, P.L.S.
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<PAGE>
UNITED STATES OF
INDENTURE
AMERICA
BY
BAYOU STEEL CORPORATION STATE OF LOUISIANA
TO
FIRST NATIONAL BANK OF COMMERCE, PARISH OF ORLEANS
AS TRUSTEE
On this 22nd day of May 1998, before the undersigned, a Notary Public
duly commissioned and qualified in and for the above State and Parish and in the
presence of the undersigned competent witnesses, personally came and appeared:
BAYOU STEEL CORPORATION, a Delaware corporation (herein called the
"Company"), the Federal Employer Identification Number of which is 72-
1125783, represented herein by Richard J. Gonzalez, its Vice President,
duly authorized by resolutions of the Board of Directors of the Company;
Mailing address: P.O. Box 5000
River Road
LaPlace, LA 70069;
RIVER ROAD REALTY CORPORATION, a Louisiana corporation, the Federal
Employer Identification Number of which is 72-1162713, represented herein
by Richard J. Gonzalez, its Vice President, duly authorized by resolutions
of the Board of Directors of River Road Realty Corporation;
Mailing address: P.O. Box 5000
River Road
LaPlace, LA 70069;
BAYOU STEEL CORPORATION (TENNESSEE), a Delaware corporation, the Federal
Employer Identification Number of which is 62-1596494, represented herein
by Richard J. Gonzalez, its Vice President, duly authorized by resolutions
of the Board of Directors of Bayou Steel Corporation (Tennessee);
Mailing address: P.O. Box 5000
River Road
LaPlace, LA 70069; and
FIRST NATIONAL BANK OF COMMERCE, a national banking association, as Trustee
(herein called the "Trustee"), the Federal Employer Identification Number
of which is 72-0269760, represented by Denis Milliner, its Vice President
and Trust Officer.
<PAGE>
2
Mailing address: Trust Department
210 Baronne Street
New Orleans, LA 70112
who declared as follows:
RECITALS OF THE COMPANY
The Company has duly authorized the creation of an issue of its
9 1/2% First Mortgage Notes due 2008 (herein called the "1998 Initial Notes") of
substantially the tenor and amount hereinafter set forth and, if and when issued
in exchange for Initial Notes as provided in the Registration Rights Agreement
(as hereinafter defined), the Company's 9 1/2% First Mortgage Notes due 2008
(the "1998 Exchange Notes" and, together with the 1998 Initial Notes, the "1998
Securities"), and to provide therefor, and to provide for the issuance of
additional Securities from time to time as contemplated hereby, the Company has
duly authorized the execution and delivery of this Indenture.
All things necessary to make the 1998 Securities, when executed by the
Company and authenticated and delivered hereunder and duly issued by the
Company, the valid obligations of the Company, and to make this Indenture a
valid agreement of the Company and the Subsidiary Guarantors, in accordance with
their and its terms, have been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the 1998
Securities by the Holders thereof, it is mutually agreed, for the equal and
proportionate benefit of all Holders of the Securities, as follows:
ARTICLE I
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 1.1. Definitions.
For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings assigned to
them in this Article and include the plural as well as the singular;
<PAGE>
3
(2) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein;
(3) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted accounting
principles, and, except as otherwise herein expressly provided, the term
"generally accepted accounting principles" with respect to any computation
required or permitted hereunder shall mean such accounting principles as
are generally accepted at the date of this instrument; and
(4) the words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision.
"Act", when used with respect to any Holder, has the meaning
specified in Section 1.4.
"Affiliate" means, with respect to any specific Person, any other
Person directly or indirectly controlling or controlled by or under direct or
indirect common control with such specific Person. For the purposes of this
definition, "control," as used with respect to any Person, means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management or policies of such Person whether through the ownership of voting
securities, or by agreement or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Agent Members" has the meaning specified in Section 2.1(d).
"Aggregate Cash Proceeds" has the meaning specified in Section 6.13.
"Applicable Premium" means, with respect to a 1998 Security at any
redemption date, the greater of (i) 1.0% of the principal amount of such 1998
Security and (ii) the excess of (A) the present value at such time of (1) the
redemption price of such 1998 Security at 2003 (such redemption price being
described in Section 5.8(a) hereof) plus (2) all required interest payments due
on such 1998 Security through May 15, 2003, computed using a discount rate equal
to the Treasury Rate plus 50 basis points, over (B) the then outstanding
principal amount of such 1998 Security.
"Appraiser" means a Person who in the course of its business appraises
property and, where real property is involved, who is a member in good standing
of the Appraisal Institute, recognized and licensed to do business in the
jurisdiction where the applicable real property is situated, and who may be
employed by the Company.
"Asset Acquisition" means (i) any capital contribution (by means of
transfer of cash or other property to others or payments for property or
services for the account or use of others, or otherwise), or purchase or
acquisition of Capital Stock by the
<PAGE>
4
Company or any of its Recourse Subsidiaries in any other Person, in either case
pursuant to which such Person shall become a Subsidiary of the Company or any of
its Subsidiaries or shall be merged with or into the Company or any of its
Subsidiaries or (ii) any acquisition by the Company or any of its Recourse
Subsidiaries of the assets of any Person which constitute substantially all of
an operating unit or business of such Person.
"Asset Backed Entity" means a Wholly Owned Subsidiary of the Company
(or another Person in which the Company or any Subsidiary of the Company makes
an Investment and to which the Company or any Subsidiary of the Company
transfers accounts receivable or inventory and related assets) which engages in
no activities other than in connection with the financing of accounts receivable
or inventory and which is designated by the Board of Directors of the Company
(as provided below) as an Asset Backed Entity, (a) no portion of the
Indebtedness or any other obligations (contingent or otherwise) of which (i) is
guaranteed by the Company or any Subsidiary (excluding guarantees of obligations
(other than the principal of, and interest on, Indebtedness) pursuant to
Standard Securitization Undertakings) or (ii) is recourse to or obligates the
Company or any Subsidiary of the Company in any way or any Subsidiary of the
Company, directly or indirectly, contingently or otherwise, to the satisfaction
thereof, other than pursuant to Standard Securitization Undertakings, (b) with
which neither the Company nor any Subsidiary of the Company has any material
contract, agreement, arrangement or understanding other than on terms no less
favorable to the Company or such Subsidiary than those that might be obtained at
the time from Persons that are not Affiliates of the Company, other than fees
payable in the ordinary course of business in connection with servicing accounts
receivable or inventory, and (c) to which neither the Company nor any Subsidiary
of the Company has any obligation to maintain or preserve such entity's
financial condition or cause such entity to achieve certain levels of operating
results. Any such designation by the Board of Directors of the Company shall be
evidenced to the Trustee by filing with the Trustee a certified copy of the
resolution of the Board of Directors of the Company giving effect to such
designation and an Officers' Certificate certifying that such designation
complied with the foregoing conditions.
"Asset Sale" means any direct or indirect sale, conveyance, transfer,
lease or other disposition (excluding the granting of Permitted Liens) of
property, rights or assets to any Person (including any Non-Recourse
Subsidiary), other than (a) pursuant to the sale of accounts receivable and
inventory and related assets of the type specified in the definition of
"Qualified Asset Backed Transaction" to an Asset Backed Entity for the fair
market value thereof, (b) to the Company or a Recourse Subsidiary of the
Company, in one transaction or a series of related transactions, of (i) any
Capital Stock of any Recourse Subsidiary of the Company or (ii) any other
property or asset of the Company or any Recourse Subsidiary of the Company, (c)
sales of products in the ordinary course of business and (d) sales of Capital
Stock of the Company.
"Asset Sale Offer" has the meaning specified in Section 6.15(b).
<PAGE>
5
"Asset Sale Payment Date" has the meaning specified in Section
6.15(c).
"Authenticating Agent" means any Person authorized by the Trustee
pursuant to Section 9.14 to act on behalf of the Trustee to authenticate
Securities.
"Available Amount" means the sum of Net Cash Proceeds of Asset Sales
less the sum of Net Cash Proceeds (i) previously applied to Permitted Related
Acquisitions, (ii) from the sale of Obsolete Assets not exceeding an aggregate
fair market value of $2,000,000 in any year, (iii) of $1,000,000 and (iv)
retained by the Company following an Asset Sale Offer that is not fully
subscribed as contemplated under Section 6.15.
"Average Life" means, as of the date of determination, with respect to
any Indebtedness or Preferred Stock, the quotient obtained by dividing (i) the
sum of the products of the numbers of the years from the date of determination
to the dates of each successive scheduled principal payment of such Indebtedness
or redemption or similar payment with respect to such Preferred Stock multiplied
by the amount of such payment by (ii) the sum of all such payments.
"Bankruptcy Law" means Title 11, United States Code or any similar
Federal or state law for the relief of debtors, as amended.
"Board of Directors" means either the board of directors of the
Company or its Subsidiaries, as the case may be, or any duly authorized
committee of such boards or any duly authorized committee consisting of one or
more officers and/or directors of the Company, as the case may be.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company or its Subsidiaries, as the
case may be, to have been duly adopted by the Board of Directors of the Company
or its Subsidiaries, as the case may be, and to be in full force and effect on
the date of such certification, and delivered to the Trustee.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in New York City or New
Orleans are authorized or obligated by law or executive order to close.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations, warrants, options or other equivalents (however
designated and whether voting or non-voting) of capital stock of a corporation
and any and all equivalent ownership interests in a Person (other than a
corporation), in each case whether outstanding on the date of the Indenture or
thereafter issued, including, without limitation, all Common Stock and Preferred
Stock.
<PAGE>
6
"Capitalized Lease" means as applied to any Person, any lease of any
property (whether real, personal or mixed) the discounted present value of the
rental obligations of such Person as lessee under which, in conformity with
GAAP, is required to be capitalized on the balance sheet of that Person.
"Capitalized Lease Obligation" means, at the time any determination
thereof is to be made, the amount of the liability in respect of a Capitalized
Lease.
"Cash Equivalents" means, at any time, (i) any evidence of
Indebtedness with a maturity of 365 days or less issued or directly and fully
guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States of America is pledged in support thereof); (ii) certificates of deposit
or acceptances with a maturity of 180 days or less of any financial institution
that is a member of the Federal Reserve System having combined capital and
surplus and undivided profits of not less than $250,000,000; (iii) commercial
paper with a maturity of 180 days or less issued by a corporation (except an
Affiliate of the Company) organized under the laws of any state of the United
States or the District of Columbia and rated at least A-1 by Standard & Poors
Rating Service or at least P-1 by Moody's Investor Service.
"Certificated Securities" has the meaning set forth in Section
2.1(e).
"Change of Control" means the occurrence of one or more of the
following events:
(a) the direct or indirect sale, lease, exchange or other transfer of
all or substantially all of the assets of the Company to any Person or
entity or group of Persons or entities acting in concert as a partnership
or other group (a "Group of Persons") other than an Affiliate of the
Company;
(b) the consummation of any consolidation or merger of the Company
with or into another corporation with the effect that the stockholders of
the Company as of the date of the Indenture hold less than 51% of the
combined voting power of the outstanding voting securities of the surviving
entity of such merger or the corporation resulting from such consolidation
ordinarily having the right to vote in the election of directors (apart
from rights accruing under special circumstances) immediately after such
merger or consolidation;
(c) the stockholders of the Company shall approve any plan or
proposal for the liquidation or dissolution of the Company; and
(d) a Person or Group of Persons (other than management of the
Company and their respective Affiliates) shall, as a result of a tender or
exchange offer, open market purchases, privately negotiated purchases or
otherwise, have become the direct or indirect beneficial owner (within the
meaning of Rule 13d-3
<PAGE>
7
under the Exchange Act) of securities of the Company representing a
majority of the combined voting power of the then outstanding securities of
the Company ordinarily (and apart from rights accruing under special
circumstances) having the right to vote in the election of directors.
For purposes of this definition, the following shall not be considered
a Change of Control:
(i) Transfers of Capital Stock of the Company among (A) Meyers;
(B) any son, daughter, stepson, stepdaughter or spouse of Meyers; (C) any
lineal descendant of an individual referred to in clause (A) or (B); (D)
any trust in which one or more of the Persons referred to in clause (A),
(B) or (C) are principal beneficiaries; and (E) any entity described in
Section 501(c)(3) of the Internal Revenue Code, over which one or more of
the Persons (and no other Person) referred to in clause (A), (B) or (C)
actually has and exercises control; provided, that, if at any time any
Person other than a Person referred to in clause (A), (B) or (C) has the
ability to exercise control (whether or not shared) over any such entity,
any securities of the Company then owned by such entity shall be deemed to
be beneficially owned by a Person or Group of Persons other than a Person
referred to in clause (A), (B) or (C) for purpose of determining whether a
Change of Control has occurred; or
(ii) A merger resulting in the proportionate interest of the
Class B Common Stock held by Bayou Steel Properties Limited being held by
Bayou Steel Properties Limited's shareholders, provided such transaction
shall have no adverse effect on the Company.
"Change of Control Date" has the meaning specified in Section 6.19.
"Change of Control Offer" has the meaning specified in Section 6.19.
"Change of Control Payment Date" has the meaning specified in Section
6.19.
"Collateral" means, collectively, all of the property and assets
(including, without limitation, Trust Moneys) that are from time to time subject
to the Lien of the Security Documents.
"Collateral Account" means the collateral account to be established
pursuant to the Indenture.
"Collateral Agent" means the Trustee in its capacity as agent for the
Holders under the Security Documents.
"Collateral Proceeds" means the Net Cash Proceeds received by the
Collateral Agent from the sale of Collateral.
<PAGE>
8
"Commission" means the Securities and Exchange Commission, as from
time to time constituted, created under the Securities Exchange Act of 1934, or,
if at any time after the execution of this instrument such Commission is not
existing and performing the duties now assigned to it under the Trust Indenture
Act, then the body performing such duties at such time.
"Common Stock" includes any stock of any class of the Company which
has no preference in respect of dividends or of amounts payable in the event of
any voluntary or involuntary liquidation, dissolution or winding-up of the
Company and which is not subject to redemption by the Company.
"Company" means the Person named as the "Company" in the first
paragraph of this instrument until a successor Person shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Company" shall mean such successor Person.
"Company Obligations" has the meaning specified in Section 12.1(a).
"Company Request" or "Company Order" means a written request or order
signed in the name of the Company by its Chairman of the Board, its Vice
Chairman of the Board, its President or a Vice President, and by its Treasurer,
an Assistant Treasurer, its Secretary or an Assistant Secretary, and delivered
to the Trustee.
"Company Security Agreement" means the security agreement dated as of
the date hereof between the Company and the Trustee, in substantially the form
attached hereto as Exhibit C, as the same may be amended, supplemented or
otherwise modified from time to time.
"Condemnation Award" means any proceeds, award or payment paid to the
mortgagee or beneficiary under the Mortgages relating to any taking of the
Collateral subject to such Mortgage by condemnation or eminent domain or similar
action or sold pursuant to the exercise by the United States of America or any
state, municipality or other governmental authority of any right which it may
then have to purchase, or to designate a purchaser or to order a sale of, any
part of the Collateral, together with interest accrued thereon, less all
reasonable expenses incurred by the mortgagee or beneficiary in connection with
obtaining such award.
"Consolidated Domestic Income Tax Expense" of any Person for any
period means, without duplication, the aggregate amount of net U.S. taxes based
on income or profits for such period of the operations of such Person and its
Consolidated Recourse Subsidiaries, determined in accordance with GAAP (to the
extent such income or profits were included in computing Consolidated Net
Income).
"Consolidated Interest Expense" of any Person for any period means the
sum of (a) the interest expense (including amortization of original issue
discount and
<PAGE>
9
non-cash interest payments or accruals) of such Person and its Consolidated
Recourse Subsidiaries for such period and (b) to the extent not included in
clause (a), all commissions, discounts and other fees and charges owed with
respect to letters of credit and banker's acceptance financing, the net cost
associated with Interest Rate Agreements and Currency Agreements, amortization
of other financing fees and expenses and the interest portion of any deferred
payment obligation.
"Consolidated Interest Income" of any Person means all amounts that
would be included under interest income on a consolidated income statement of
such Person and its Consolidated Recourse Subsidiaries determined in accordance
with GAAP, less accreted amounts attributable to original issue discount
securities prior to the receipt thereof and other non-cash interest payments or
accruals.
"Consolidated Net Income" of any Person for any period means the Net
Income of such Person and its Consolidated Recourse Subsidiaries for such
period, determined on a consolidated basis in accordance with GAAP; provided,
that there shall be excluded (i) the Net Income of any Person (other than a
Consolidated Recourse Subsidiary) in which such Person or any of its
Consolidated Recourse Subsidiaries has a joint interest with a third party
except to the extent of the amount of dividends or distributions actually paid
to such Person or a Recourse Subsidiary during such period; (ii) except to the
extent includable pursuant to the foregoing clause (i), the Net Income of any
Person accrued prior to the date it becomes a Recourse Subsidiary of such Person
or is merged into or consolidated with such Person or any of its Recourse
Subsidiaries or that Person's assets are acquired by such Person or any of its
Recourse Subsidiaries; (iii) the Net Income (if positive), or any portion
thereof, of any Recourse Subsidiary of such Person to the extent that the
declaration or payment of dividends or similar distributions by that Recourse
Subsidiary to such Person or to any other Recourse Subsidiary of such Net Income
is not at the time permitted by operation of the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to that Recourse Subsidiary; (iv) without duplication, any
gains or losses attributable to Asset Sales; (v) Net Income, arising from the
adoption of changes in accounting policy to comply with GAAP or voluntarily by
the Company with the consent of its independent auditors that so qualify under
Regulation S-X of the Securities Act; (vi) Net Income arising in connection with
a merger, combination or consolidation that is accounted for as a pooling of
interests; and (vii) foreign currency translation gains and losses.
"Consolidated Net Worth" of any Person means as of any date all
amounts that would be included under stockholders' equity on a consolidated
balance sheet of such Person and its Consolidated Recourse Subsidiaries
determined in accordance with GAAP.
"Consolidated Recourse Subsidiary" of any Person means a Recourse
Subsidiary which for financial reporting purposes is or, in accordance with
GAAP, should be, accounted for by such Person as a consolidated Subsidiary.
<PAGE>
10
"Corporate Trust Office" means the principal office of the Trustee in
New Orleans at which at any particular time its corporate trust business shall
be administered.
"Corporation" means a corporation, association, company, joint-stock
company or business trust.
"Currency Agreement" means any foreign exchange contract, currency
swap agreement or other similar agreement or arrangement designed to protect the
Company or any of its Subsidiaries against fluctuations in currency values.
"Custodian" means any receiver, trustee, assignee, liquidator or
similar official under any Bankruptcy Law.
"Default" means any event which is, or after the giving of notice or
passage of time or both would be, an Event of Default.
"Defaulted Interest" has the meaning specified in Section 3.7.
"Depositary" means The Depository Trust Company, its nominees and
their respective assigns, or such other depository institution hereinafter
appointed by the Company.
"Disqualified Stock" means any Capital Stock which, by its terms (or
by the terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at
the option of the holder thereof, in whole or in part on, or prior to, the final
maturity date of the Securities.
"EBITDA" of any Person for any period means the sum of (a)
Consolidated Net Income of such Person; (b) Consolidated Domestic Income Tax
Expense of such Person; (c) Consolidated Interest Expense of such Person; and
(d) depreciation and amortization expense determined on a consolidated basis for
such Person and its Consolidated Recourse Subsidiaries in accordance with GAAP
for such period; and (e) other non-cash charges; provided, that the amounts set
forth in clauses (b), (c), (d) and (e) will be included only to the extent such
amounts were deducted in computing Consolidated Net Income. Notwithstanding the
foregoing, the amounts set forth in clauses (b), (c), and (d) in respect of a
Recourse Subsidiary of a Person shall be added to Consolidated Net Income to
compute EBITDA of such Person only to the extent (and in the same proportion)
that the net income of such Recourse Subsidiary was included in calculating the
Consolidated Net Income of such Person.
"EBITDA Ratio" means the ratio, on a pro forma basis, of (a) EBITDA of
any Person for the Reference Period immediately prior to the date of the
transaction giving rise to the need to calculate the EBITDA Ratio (the
"Transaction Date") to (b) the Net
<PAGE>
11
Interest Expense of such Person during such Reference Period; provided, that in
making such computation, (i) the incurrence of the Indebtedness giving rise to
the need to calculate the EBITDA Ratio and the application of the proceeds
therefrom shall be assumed to have occurred on the first day of the Reference
Period; (ii) Asset Sales and Asset Acquisitions which occur during the Reference
Period or subsequent to the Reference Period but prior to the Transaction Date
(but including any Asset Acquisition to be made with such Indebtedness) shall be
assumed to occur on the first day of the Reference Period; (iii) the issuance of
any Indebtedness (other than Indebtedness borrowed under a revolving credit or
similar arrangement which Indebtedness is not outstanding on the Transaction
Date) during the Reference Period or subsequent to the Reference Period but
prior to the Transaction Date and the application of the proceeds therefrom
shall be assumed to have occurred on the first day of the Reference Period; (iv)
the Consolidated Interest Expense attributable to interest on any Indebtedness
(whether existing or being incurred but not including Indebtedness borrowed
under a revolving credit or similar arrangement which Indebtedness is not
outstanding on the Transaction Date) computed on a pro forma basis and bearing a
floating interest rate shall be computed as if the rate in effect on the date of
computation had been the applicable rate for the entire period, unless such
Person or any of its Recourse Subsidiaries is a party to an Interest Rate
Agreement which has the effect of reducing the interest rate below the rate on
the date of computation, in which case such lower rate shall be used; (v) there
shall be excluded from Consolidated Interest Expense any Consolidated Interest
Expense related to any Indebtedness which was outstanding during and subsequent
to the Reference Period but is not outstanding on the Transaction Date, except
for Consolidated Interest Expense actually incurred with respect to Indebtedness
borrowed under a revolving credit or similar arrangement to the extent the
commitment thereunder remains in effect on the Transaction Date and (vi) if the
transaction giving rise to the need to calculate the EBITDA Ratio is an Asset
Acquisition, in calculating Consolidated Net Income for the Reference Period,
there shall be deducted from the calculation of expenses all cost savings
resulting from employee terminations, facilities consolidations and closings,
standardization of employee benefits and compensation practices, consolidation
of property, casualty and other insurance coverage and policies, standardization
of sales representation commissions and other contract rates, and reductions in
taxes other than income taxes (collectively, "Cost Savings Measures"), which
cost savings the Company reasonably believes in good faith (i) would have been
achieved during the Reference Period as a result of such Asset Acquisition, (ii)
are directly attributable to such Asset Acquisition and (iii) will have a
recurring impact on the Company (regardless of whether such cost savings could
then be reflected in pro forma financial statements under GAAP, Regulation S-X
promulgated by the Commission or any other regulation or policy of the
Commission); provided, that both (A) such cost savings and Cost Savings Measures
were identified and such cost savings were quantified in an officer's
certificate delivered to the Trustee at the time of the consummation of the
Asset Acquisition, (B) with respect to each Asset Acquisition completed prior to
the 90th day preceding such date of determination, actions were commenced or
initiated by the Company within 90 days of such Asset Acquisition to effect the
Cost Savings Measures identified in such officer's
<PAGE>
12
certificate (regardless, however, of whether the corresponding cost savings were
ultimately achieved). For the purposes of making the computation referred to in
the preceding sentence, Asset Sales and Asset Acquisitions which have been made
by any Person which has become a Recourse Subsidiary of the Company or been
merged with or into the Company or any Recourse Subsidiary of the Company during
the Reference Period or subsequent to the Reference Period and prior to the
Transaction Date shall be calculated on a pro forma basis (including all of the
calculations referred to in numbers (i) through (vi) of the preceding sentence)
assuming such Asset Sales or Asset Acquisitions occurred on the first day of the
Reference Period.
"Event of Default" has the meaning specified in Section 8.1.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Global Note" has the meaning specified in Section 2.1(a).
"Exchange Notes" means the 1998 Exchange Notes and any other notes of
the Company issued in exchange for Initial Notes pursuant to an exchange and
registration rights agreement substantially in the form of the Registration
Rights Agreement.
"Financial Advisor" means an investment banking firm of national
reputation which (except as otherwise expressly provided in this Indenture) may
be employed by the Company.
"Fixtures and Equipment" means fixtures, machinery, tools, equipment
(including rolling equipment classified as inventory on the Company's books and
records) and similar personal property.
"GAAP" means generally accepted accounting principles in the United
States as in effect from time to time, including, without limitation, those set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment of
the accounting profession of the United States, which are applicable as of the
date of determination.
"Global Securities" has the meaning specified in Section 2.1(a).
"Guarantee" means, as applied to any Indebtedness, (a) a guarantee
(other than by endorsement of negotiable instruments for collection in the
ordinary course of business), direct or indirect, in any manner, of any part or
all of such Indebtedness, and (b) an agreement, direct or indirect, contingent
or otherwise, the practical effect of which is to assure the payment or
performance (or payment of damages in the event of nonperformance) of any part
or all of such Indebtedness, including, without limiting
<PAGE>
13
the foregoing, the payment of amounts drawn under letters of credit. The amount
of any Guarantee shall be deemed to be an amount equal to the stated or
determinable amount of the primary obligation in respect of which such Guarantee
is made (unless such Guarantee shall be expressly limited to a lesser amount, in
which case such lesser amount shall apply) or, if not stated or determinable,
the maximum reasonably anticipated liability in respect thereof as determined by
such Person in good faith.
"Holder" means a Person in whose name a Security is registered in the
Security Register.
"Indebtedness" of any Person means at any date, without duplication,
(a) all obligations of such Person for borrowed money or evidenced by bonds,
debentures, notes or other similar instruments; (b) all obligations of such
Person in respect of letters of credit or other similar instruments (or
reimbursement obligations with respect thereto); (c) all obligations of such
Person to pay the deferred purchase price of property or services, except Trade
Payables; (d) all Capitalized Lease Obligations of such Person; (e) all
Indebtedness of others secured by a Lien on any asset of such Person, whether or
not such Indebtedness is assumed by such Person, provided that, for purposes of
determining the amount of any Indebtedness of the type described in this clause,
if recourse with respect to such Indebtedness is limited to such asset, the
amount of such Indebtedness shall be limited to the fair market value of the
asset; (f) to the extent not otherwise included, all obligations under Interest
Rate Agreements and Currency Agreements; (g) all Guarantees of such Person in
respect of Indebtedness of others; and (h) all Disqualified Stock issued by such
Person and all Preferred Stock issued by the Recourse Subsidiaries of such
Person (the amount of Indebtedness represented by any Disqualified Stock or
Preferred Stock will be the greater of the voluntary or involuntary liquidation
preference thereof).
"Indenture" means this instrument as originally executed or as it may
from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof,
including, for all purposes of this instrument and any such supplemental
indenture, the provisions of the Trust Indenture Act that are deemed to be a
part of and govern this instrument and any such supplemental indenture,
respectively.
"Independent" when used with respect to any specified Person means
such a Person who (a) is in fact independent, (b) does not have any direct
financial interest or any material indirect financial interest in the Company or
in any other obligor in respect of the Securities or in any Affiliate of the
Company or such other obligor and (c) is not an officer, employee, promotor,
underwriter, trustee, partner, director or person performing similar functions
to any of the foregoing for the Company or such other obligor or any Affiliate
thereof. Whenever it is provided in the Indenture that any Independent Person's
opinion or certificate shall be furnished to the Trustee, such Person shall be
appointed by the Company and approved by the Trustee in the exercise
<PAGE>
14
of reasonable care, and such opinion or certificate shall state that the signer
has read this definition and that the signer is Independent within the meaning
thereof.
"Initial Notes" means the 1998 Initial Notes and any other series of
Securities issued pursuant to this Indenture, prior to the exchange thereof for
Exchange Notes.
"Institutional Accredited Investor Global Note" has the meaning
specified in Section 2.1(a).
"Institutional Accredited Investor Note" has the meaning specified in
Section 2.1(a).
"Integral Fixtures and Equipment" means all Fixtures and Equipment
now or hereafter located at the Mortgaged Facility other than (i) all vehicles
and mobile equipment subject to certificate of title laws, in each instance with
a fair market value of $100,000 or less and (ii) any Fixtures and Equipment
acquired (whether such acquisition is denominated as a purchase, a Capitalized
Lease or otherwise) by the Company or a Recourse Subsidiary after the date of
this Indenture and whose (x) acquisition adds supplemental production, handling
or performance capacity to the Mortgaged Facility rather than merely replacing
Fixtures and Equipment forming part of the Mortgaged Facility as in existence
immediately prior to the acquisition in question and (y) subsequent removal from
service will have no material adverse impact on the operations in the ordinary
course of business of the Mortgaged Facility as in existence immediately prior
to the acquisition in question, in each instance under clauses (x) or (y), as
conclusively established by a Board Resolution.
"Intercreditor Agreement" means the Intercreditor Agreement dated of
even date herewith between the Trustee and The Chase Manhattan Bank, as agent
for the financial institutions parties to the New Credit Facility, in
substantially the form of Exhibit F hereto, as the same may be amended,
supplemented or otherwise modified from time to time.
"Interest Payment Date" when used with respect to any Security, means
the Stated Maturity of an installment of interest on such Security.
"Interest Rate Agreement" means any interest rate protection
agreement, interest rate future, interest rate option, interest rate swap,
interest rate cap or other interest rate hedge agreement, to or under which the
Company or any of its Subsidiaries is a party or a beneficiary on the date of
the Indenture or becomes a party or a beneficiary thereafter.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended.
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15
"Investment" of any Person means all investments in other Persons in
the form of loans, advances or capital contributions of cash or other assets
(excluding commission, travel and similar advances to officers and employees
made in the ordinary course of business), and purchases (or other acquisitions
for consideration) or Guarantees of Indebtedness, Capital Stock or other
securities issued by any other Person.
"Issue Date" when used with respect to any Security, means the
original date of issuance of such Security.
"Joint Venture" means a joint venture, partnership or other similar
arrangement, whether in corporate, partnership or other legal form; provided,
that as to any such arrangement in corporate form, such corporation shall not,
as to any Person of which such corporation is a Subsidiary, be considered to be
a Joint Venture to which such Person is a party.
"Lenders" means the lenders who are from time to time parties to the
New Credit Facility.
"Lender Secured Property" means the properties and assets of the
Company, and the proceeds thereof, that secure the obligations of the Company
under the New Credit Facility.
"Lien" means, with respect to any property, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of such
property. For the purposes of the Indenture and the Security Documents, the
Company and its Subsidiaries shall be deemed to own subject to a Lien any
property which they have acquired or hold subject to the interest of a vendor or
lessor under any conditional sales agreement, capital lease or other title
retention agreement relating to such property.
"Majority-Owned Non-Recourse Subsidiary" means a Majority-Owned
Subsidiary that is a Non-Recourse Subsidiary.
"Majority-Owned Subsidiary" means, with respect to any Person, a
Subsidiary of which more than 50% of the Capital Stock (other than any
director's qualifying stock), or in the case of a non-corporate Subsidiary,
other equity interests having ordinary voting power for the election of
directors or other governing body of such Subsidiary, is owned by such Person or
another Majority-Owned Subsidiary of such Person.
"Maturity Date" when used with respect to any Security, means the date
on which the principal of such Security becomes due and payable as therein or
herein provided, whether at the Stated Maturity or by declaration of
acceleration, call for redemption, Asset Sale Offer, Change of Control Offer or
otherwise.
<PAGE>
16
"Meyers" means Howard M. Meyers, an individual with a business address
on the 1998 Issue Date at 2777 Stemmons Freeway, Dallas, Texas.
"Mortgage" means each mortgage (or deed of trust), dated as of the
date hereof, between the Company and the Trustee or between a Recourse
Subsidiary of the Company and the Trustee, in either case in substantially the
form of Exhibit D, as the same may be amended, supplemented or modified from
time to time in accordance with its terms.
"Mortgaged Facility" means the real property interests in the
minimill, stocking location and land owned by the Company and its Recourse
Subsidiaries in LaPlace, Louisiana and the real property interests in all other
real property additions or improvements now or hereafter located on such land,
together with all additions or improvements thereto, which term shall be deemed
to exclude the Released Property, if any.
"1998 Exchange Notes" has the meaning specified in the recitals
hereto.
"1998 Initial Notes" has the meaning specified in the recitals hereto.
"1998 Issue Date" means the Issue Date of the 1998 Initial Notes.
"1998 Securities" has the meaning specified in the recitals hereto.
"Net Cash Proceeds" from a sale, transfer or other disposition (other
than from the granting of a Permitted Lien thereon) of properties or assets
means cash payments received (including any cash payments received by way of
deferred payment of principal pursuant to a note or installment receivable or
otherwise, but only as and when received (including any cash received upon sale
or disposition of such note or receivable), excluding any other consideration
received in the form of assumption by the acquiring Person of Indebtedness or
other obligations relating to such properties or assets or received in any other
non-cash form) therefrom, in each case, net of all legal, title and recording
tax expenses, commissions and other fees and expenses incurred, and all Federal,
state, provincial, foreign and local taxes required to be accrued as a liability
under GAAP as a consequence of such sale, transfer or other disposition, and in
each case net of appropriate amounts to be provided by the Company or its
Recourse Subsidiaries as a reserve, in accordance with GAAP, against any
liabilities associated with such assets and retained by the Company or any
Recourse Subsidiary after such sale, transfer or other disposition, including,
without limitation, pension and other post-employment benefit liabilities and
liabilities related to environmental matters and the after-tax cost of any
indemnification payments (fixed and contingent) attributable to seller's
indemnities to the purchaser undertaken by the Company or any of its Recourse
Subsidiaries in connection with such sale, transfer or other disposition (but
excluding any payments, which by the terms of the indemnities will not, under
any circumstances, be made during the term of the Securities) and net of all
payments made on any
<PAGE>
17
Indebtedness which is secured by such assets, in accordance with the terms of
any Lien upon or with respect to such assets or which must by its terms, or in
order to obtain a necessary consent to such asset disposition, or by applicable
law be repaid out of the proceeds from such sale, transfer or other disposition,
and net of all distributions and other payments made to minority interest
holders in Subsidiaries or Joint Ventures as a result of such sale, transfer or
other disposition.
"Net Income" of any Person for any period means the net income (loss)
of such Person for such period, determined in accordance with GAAP, except that
(i) extraordinary items, (ii) unusual and non-recurring gains and losses and
(iii) unusual and non-recurring expenses, in the case of clauses (i), (ii) and
(iii) as determined in accordance with GAAP, shall be excluded; provided, that
non-recurring expenses shall not be excluded if the event or circumstances
giving rise to such expenses is continuing or exists on the last day of the
period for which Net Income is calculated.
"Net Insurance Proceeds" means all proceeds paid to the Collateral
Agent or any mortgagee or beneficiary under the Security Documents relating to
damage to, or loss or destruction of, improvements on equipment constituting
Collateral, together with interest earned thereon, less all reasonable expenses
incurred by the Collateral Agent, mortgagee or beneficiary in connection with
obtaining such proceeds.
"Net Interest Expense" means the difference between Consolidated
Interest Expense and Consolidated Interest Income; provided, that such amount
shall not be less than zero.
"New Credit Facility" means the Credit Agreement, dated as of May 22,
1998, among the Company, the Lenders named therein, or any renewal, replacement,
refinancing or continuation thereof as each of the foregoing may be amended,
supplemented or otherwise modified from time to time.
"Non-Collateral Proceeds" means the Net Cash Proceeds of any Asset
Sale that does not represent Collateral Proceeds.
"Non-Recourse Indebtedness" means Indebtedness of a Non-Recourse
Subsidiary where (a) neither the Company nor any Recourse Subsidiary: (i)
provides any Guarantee or credit support for such Indebtedness (including any
undertaking, guaranty, indemnity, agreement or instrument which would constitute
Indebtedness); or (ii) is directly or indirectly liable for such Indebtedness;
and (b) no default with respect to such Indebtedness (including any rights which
the holder thereof may have to take enforcement action against such Non-Recourse
Subsidiary) would permit (upon notice, lapse of time or both) any holder or
holders of other Indebtedness of the Company or any Recourse Subsidiary
(excluding Indebtedness in an aggregate principal amount not to exceed
$5,000,000 at any time) to declare a default on such other Indebtedness or cause
the payment thereof to be accelerated or payable prior to its stated maturity.
<PAGE>
18
"Non-Recourse Subsidiary" means a special purpose Subsidiary of the
Company or any of its Subsidiaries formed to acquire securities or assets of a
third party and which, in any case, (i) has no Indebtedness other than Non-
Recourse Indebtedness and (ii) does not, directly or indirectly, own any
Indebtedness, stock or securities of, and has no Investment in, the Company or
any Recourse Subsidiary.
"Obsolete Assets" has the meaning specified in Section 6.15(b).
"Offering Memorandum" means the Offering Memorandum dated May 19, 1998
pursuant to which the 1998 Initial Notes were offered.
"Officer" means any of the Chairman of the Board, the Chief Executive
Officer, the President, the Chief Operating Officer, any Vice President, the
Treasurer, the Secretary or the Controller of the Company.
"Officers' Certificate" means, when used with respect to the Company
or any Subsidiary Guarantor, a certificate signed by the Chairman of the Board,
the President, a Vice Chairman of the Board or the Chief Financial Officer of
the Company or such Subsidiary Guarantor, as the case may be, or any other
officer identified by any of the foregoing officers in an Officers' Certificate
to be an executive officer of the Company or such Subsidiary Guarantor, as the
case may be, and the Secretary, an Assistant Secretary or the Controller of the
Company or such Subsidiary Guarantor, as the case may be. One of the officers
signing an Officers' Certificate given pursuant to Section 6.5 shall be the
principal executive, financial or accounting officer of the Company or the
applicable Subsidiary Guarantor, as the case may be.
"Opinion of Counsel" means an opinion in writing signed by legal
counsel, who may be an employee of or of counsel to the Company, or who may be
other counsel satisfactory to the Trustee.
"Other Consideration" has the meaning specified in Section 6.15(a).
"Outstanding", when used with respect to Securities, means, as of the
date of determination, all Securities theretofore authenticated and delivered
under this Indenture, except:
(i) Securities theretofore cancelled by the Trustee or
delivered to the Trustee for cancellation;
(ii) Securities for whose payment or redemption money in the
necessary amount has been theretofore deposited with the Trustee or any
Paying Agent (other than the Company) in trust or set aside and segregated
in trust by the Company (if the Company shall act as its own Paying Agent)
for the Holders of such Securities; provided, that if such Securities are
to be redeemed, notice of
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19
such redemption has been duly given pursuant to this Indenture or provision
therefor satisfactory to the Trustee has been made; and
(iii) Securities which have been paid pursuant to Section 3.6
or in exchange for or in lieu of which other Securities have been
authenticated and delivered pursuant to this Indenture, other than any such
Securities in respect of which there shall have been presented to the
Trustee proof satisfactory to it that such Securities are held by a bona
fide purchaser in whose hands such Securities are valid obligations of the
Company;
provided, however, that in determining whether the Holders of the requisite
principal amount of the Outstanding Securities have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, Securities owned
by the Company or any other obligor upon the Securities or any Affiliate of the
Company or of such other obligor shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Trustee shall be protected
in relying upon any such request, demand, authorization, direction, notice,
consent or waiver, only Securities which the Trustee knows to be so owned shall
be so disregarded. Securities so owned which have been pledged in good faith
may be regarded as Outstanding if the pledgee establishes to the satisfaction of
the Trustee the pledgee's right so to act with respect to such Securities and
that the pledgee is not the Company or any other obligor upon the Securities or
any Affiliate of the Company or of such other obligor.
"Paying Agent" means any Person authorized by the Company to pay the
principal of or interest on any Securities on behalf of the Company.
"Permanent Regulation S Global Note" has the meaning specified in
Section 2.1(a).
"Permitted Easement" means all rights-of-way, easements, rights of use
or similar rights (generally designated under Louisiana law as "servitudes")
granted by the Company over the Mortgaged Facility for the purpose of
constructing and operating a Released Property Facility which, in the aggregate,
do not materially (i) diminish the value of the Mortgaged Facility or (ii)
interfere with the ordinary conduct of the business of the Company and its
Recourse Subsidiaries, in each instance under clauses (i) or (ii), as
conclusively established by a Board Resolution.
"Permitted Investment" means (i) advances and loans to, and
Investments in, any Recourse Subsidiary by the Company and advances or loans to,
and Investments in, the Company or any Recourse Subsidiary of the Company by any
Subsidiary; (ii) cash and Cash Equivalents held by the Company and its Recourse
Subsidiaries; (iii) advances and loans by the Company and its Recourse
Subsidiaries to officers and employees in the ordinary course of business not to
exceed $100,000 in the aggregate at any one time outstanding; (iv) advances or
loans by the Company in connection with Currency Agreements provided such
agreements are made in the ordinary course of business; (v) advances or loans by
the Company in connection with Interest Rate Agreements provided such agreements
are made in the ordinary course of
<PAGE>
20
business; (vi) Investments by the Company and its Recourse Subsidiaries in
exchange for assets sold or otherwise disposed of in accordance with the
covenants and agreements set forth in Section 6.15; (vii) Investments by the
Company and its Recourse Subsidiaries in the form of advances, extensions of
credit, progress payments and prepayments for assets purchased by it in the
ordinary course of business; (viii) accounts receivable arising and trade credit
granted in the ordinary course of business and any securities received in
satisfaction or partial satisfaction thereof from financially troubled account
debtors to the extent reasonably necessary in order to prevent or limit loss;
(ix) any Investment by the Company or any Recourse Subsidiary of the Company in
a Person that is engaged in a similar business if as a result of such Investment
(a) such Person becomes a Recourse Subsidiary or (b) such Person, in one
transaction or a series of concurrent related transactions, is merged,
consolidated or amalgamated with or into, or transfers or conveys substantially
all of its assets to, or is liquidated into, the Company or a Recourse
Subsidiary; (x) any Investment acquired by the Company or any of its
Subsidiaries (a) in exchange for any other Investment or accounts receivable
held by the Company or any such Subsidiary in connection with or as a result of
a bankruptcy, workout, reorganization or recapitalization of the issuer of such
other Investment or accounts receivable or (b) as a result of a foreclosure by
the Company or any of its Subsidiaries with respect to any secured Investment or
other transfer of title with respect to any secured Investment in default; (xi)
Investments the payment for which consists of Capital Stock of the Company
(other than Disqualified Stock); and (xii) other Investments not to exceed
$15,000,000 in the aggregate.
"Permitted Liens" means (i) Liens in favor of the Collateral Agent or
the Holders of each series of Securities, including Liens created by the
Securities, the Indenture and the Security Documents; (ii) Liens on the Lender
Secured Property to secure the New Credit Facility and Liens on the Tulsa and
Chicago stocking locations; (iii) Liens on the property of the Company or any of
its Recourse Subsidiaries created solely for the purpose of securing purchase
money obligations; provided, that (a) such property so acquired is for use in
the Company's business and (b) no such Lien shall extend to or cover other
property or assets of the Company and its Recourse Subsidiaries other than the
respective property or assets so acquired and the principal amount of
Indebtedness secured by any such Lien shall at no time exceed the original
purchase price of such property or assets; (iv) Liens on the assets of any
entity existing at the time such entity or assets are acquired by the Company or
any of its Recourse Subsidiaries, whether by merger, consolidation, purchase of
assets or otherwise; provided, however, that such Liens (a) are not created,
incurred or assumed in connection with, or in contemplation of, such assets
being acquired by the Company or any of its Recourse Subsidiaries and (b) do not
extend to any other property of the Company or any of its Recourse Subsidiaries;
(v) Liens in existence on the date of the Indenture; (vi) Liens securing Private
Activity Bonds, as such term is defined in the Internal Revenue Code; provided,
that any Lien permitted by this clause (vi) shall not extend to any other
property of the Company or any of its Subsidiaries; (vii) Liens for taxes,
assessments,
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21
governmental charges or claims which are not yet delinquent or which are being
contested in good faith by appropriate proceedings, if a reserve or other
appropriate provision, if any, as shall be required in conformity with GAAP
shall have been made therefor; (viii) other Liens incidental to the conduct of
the Company's and its Recourse Subsidiaries' business or the ownership of its
property and assets not securing any Indebtedness, and which do not in the
aggregate materially detract from the value of the Company's and its Recourse
Subsidiaries' property or assets when taken as a whole, or materially impair the
use thereof in the operation of its business (including, without limitation,
Liens securing any obligation to landlords, vendors, carriers, warehousemen,
mechanics, laborers and materialman and other similar obligations arising by
operation of law not yet delinquent or which are being contested in good faith
by appropriate proceedings, if a reserve or other appropriate provision, if any,
as shall be required in conformity with GAAP shall have been made therefor);
(ix) Liens with respect to assets of a Recourse Subsidiary granted by such
Recourse Subsidiary to the Company to secure Indebtedness owing to the Company;
(x) Liens on assets owned by Non-Recourse Subsidiaries to secure Non-Recourse
Indebtedness; (xi) Liens on assets not constituting Collateral to secure senior
Indebtedness; (xii) pledges and deposits made in the ordinary course of business
in connection with workers' compensation, unemployment insurance and other types
of social security; (xiii) deposits made to secure the performance of tenders,
bids, leases, statutory obligations, surety and appeal bonds, government
contracts, performance and return-of-money bonds and other obligations of a like
nature incurred in the ordinary course of business (exclusive of obligations for
the payment of borrowed money); (xiv) zoning restrictions, servitudes,
easements, rights-of-way, mineral reservations, building and subdivision
restrictions, levee, road and other riparian landowner obligations and other
similar charges or encumbrances incurred in the ordinary course of business
which, in the aggregate, are not substantial in amount and which do not in any
case materially detract from the value of the property subject thereto or
interfere with the ordinary conduct of the business of the Company or its
Recourse Subsidiaries; (xv) Permitted Easements; (xvi) Liens arising out of
judgments or awards against the Company or any Recourse Subsidiary with respect
to which the Company or such Recourse Subsidiary is prosecuting an appeal or
proceeding for review and the Company or such Recourse Subsidiary is maintaining
adequate reserves in accordance with GAAP; (xvii) any interest or title of a
lessor in the property subject to any Capitalized Lease Obligation or operating
lease; (xviii) Liens on assets transferred to an Asset Backed Entity or on
assets of an Asset Backed Entity incurred in connection with a Qualified Asset
Backed Transaction; (xix) other Liens on assets with an aggregate book value not
in excess of 7 1/2% of the book value of the Company's total assets as shown on
the Company's most recent consolidated balance sheet; (xx) obligations under
Interest Rate Agreements and Currency Agreements entered into in the ordinary
course of business; (xxi) Liens by a depositary or financial institution on
funds deposited with such institution arising in the ordinary course of business
under standard account agreements or by operation of law; and (xxii) any
extension, renewal or replacement (or successive extensions, renewals or
replacements), in whole or in part, of any Lien referred to in the foregoing
clauses; provided, that the principal amount of Indebtedness secured thereby
shall not
<PAGE>
22
exceed the principal amount of Indebtedness so secured immediately prior to the
time of such extension, renewal or replacement, and that such extension,
renewal, or replacement Lien shall be limited to all or a part of the property
which secured the Lien so extended, renewed or replaced (plus improvements on
such property).
"Permitted Payments" means, with respect to the Company or any of its
Recourse Subsidiaries, (a) any dividend on shares of Capital Stock payable
solely in shares of Capital Stock (other than Disqualified Stock) or in options,
warrants or other rights to purchase Capital Stock (other than Disqualified
Stock); (b) any dividend, other distribution, loan or advance to the Company by
any of its Subsidiaries or by a Subsidiary to a Recourse Subsidiary and any
dividends payable by a Recourse Subsidiary on its Common Stock; (c) any
defeasance, redemption, repurchase or other acquisition for value of any
Indebtedness of the Company with the proceeds from the issuance of (i)
Indebtedness which is subordinate to the Securities at least to the extent and
in the manner as the Indebtedness to be defeased, redeemed, repurchased or
otherwise acquired is subordinate to the Securities; provided, however, that (1)
such newly-issued subordinated Indebtedness provides for no payments of
principal by way of sinking fund, mandatory redemption, defeasance or otherwise
by the Company or its Recourse Subsidiaries (including, without limitation, at
the option of the holder thereof other than an option given to a holder pursuant
to a "Change of Control" covenant which (x) is no more favorable to the holders
of such Indebtedness than the provisions in favor of the Holders and (y) such
Indebtedness provides that the Company or its Recourse Subsidiaries will not
repurchase such Indebtedness pursuant to such provisions prior to the Company's
repurchase of the 1998 Securities required to be repurchased by the Company upon
a Change of Control) prior to the maturity of the Indebtedness being replaced
and (2) the proceeds of such new Indebtedness are utilized for such purpose
within 45 days of issuance or (ii) Capital Stock (other than Disqualified
Stock); and (d) the redemption or repurchase by a Wholly-Owned Recourse
Subsidiary of its Capital Stock owned by the Company or another Wholly-Owned
Recourse Subsidiary.
"Permitted Related Acquisition" means acquisitions of property and
assets used in lines of business related to the Company's or one of its Recourse
Subsidiaries' business at such time.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"Preferred Stock" means, with respect to any Person, any and all
shares, interests, participations or other equivalents (however designated) of
such Person's preferred or preference stock whether now outstanding or issued
after the Issue Date, and includes, without limitation, all classes and series
of preferred or preference stock.
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23
"Private Exchange Securities" shall have the meaning set forth in the
Registration Rights Agreement.
"Private Placement Legend" has the meaning specified in Section
2.1(c).
"Purchase Agreement" has the meaning specified in Section 2.1(a).
"QIB" has the meaning specified in Section 3.2(a).
"Qualified Asset Backed Transaction" means any transaction or series
of transactions that may be entered into by the Company or any of its
Subsidiaries pursuant to which the Company or any of its Subsidiaries may sell,
convey or otherwise transfer to (a) an Asset Backed Entity (in the case of a
transfer by the Company or any of its Subsidiaries) and (b) any other Person (in
the case of a transfer by an Asset Backed Entity), or may grant a security
interest in, inventory, any accounts receivable (whether now existing or arising
in the future) of the Company or any of its Subsidiaries, and any assets related
thereto, including, without limitation, all collateral securing such accounts
receivable, all contracts and all guarantees or other obligations in respect of
such accounts receivable, proceeds of such accounts receivable and other assets
which are customarily transferred or in respect of which security interests are
customarily granted in connection with asset securitization transactions
involving inventory or accounts receivable.
"Receivables Fees" means distributions or payments made directly or by
means of discounts with respect to any participation interest issued or sold in
connection with, and other fees paid to a Person that is not a Recourse
Subsidiary in connection with, any Qualified Asset Backed Transaction.
"Recourse Subsidiary" means any Subsidiary other than a Non-Recourse
Subsidiary.
"Reference Period" means the four fiscal quarters for which financial
information is available preceding the date of a transaction giving rise to the
need to make a financial calculation.
"Registered Exchange Offer" shall have the meaning set forth in the
Registration Rights Agreement, or, if applicable, a similar agreement.
"Registration Rights Agreement" means the Exchange and Registration
Rights Agreement, dated May 22, 1998, among the Company, Chase Securities Inc.,
BT Alex. Brown and PaineWebber Incorporated.
"Regular Record Date" for the interest payable on any Interest Payment
Date on the 1998 Securities means the May 1 or November 1 (whether or not a
Business Day), as the case may be, next preceding such Interest Payment Date and
for the interest
<PAGE>
24
payable on any Interest Payment Date on the Securities of any series other than
the 1998 Securities means the date specified for such purpose as contemplated by
Section 3.1(a).
"Regulation S" has the meaning specified in Section 2.1(a).
"Regulation S Global Note" has the meaning specified in Section
2.1(a).
"Regulation S Legend" has the meaning specified in Section 2.1(c).
"Regulation S Note" has the meaning specified in Section 2.1(a).
"Released Interests" has the meaning specified in Section 12.5(b).
"Released Property" means up to 36 acres of undeveloped land
comprising part of the Mortgaged Facility which shall be selected by the Company
in one or more parcels from approximately 54 acres of undeveloped land
designated as land subject to being released from the Mortgage on that certain
survey by Lucien Gassen, P.L.S., attached as Exhibit G hereto, from and after
the time such land is released from the Lien of the Indenture and the Security
Documents as provided under Article XII.
"Released Property Facilities" has the meaning specified in Section
6.27.
"Released Trust Moneys" has the meaning specified in Section 13.4.
"Resale Restriction Termination Date" has the meaning specified in
Section 3.2(a).
"Responsible Officer", when used with respect to the Trustee, means
the chairman or any vice-chairman of the board of directors, the chairman or any
vice-chairman of the executive committee of the board of directors, the chairman
of the trust committee, the president, any vice president, the secretary, any
assistant secretary, the treasurer, any assistant treasurer, the cashier, any
assistant cashier, any Trust Officer or assistant Trust Officer, the controller
or any assistant controller or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of his knowledge of
and familiarity with the particular subject.
"Restricted Investment" means any Investment in any Person other than
a Recourse Subsidiary of the Company.
"Restricted Payment" means, with respect to any Person, (a) any
dividend or other distribution on any shares of such Person's Capital Stock
(other than dividends or distributions payable in Capital Stock that is not
Disqualified Stock); (b) any payment on account of the purchase, redemption,
retirement or other acquisition of (i) any shares
<PAGE>
25
of such Person's Capital Stock or (ii) any option, warrant or other right to
acquire shares of such Person's Capital Stock; (c) any defeasance, redemption,
repurchase or other acquisition or retirement of value prior to scheduled
maturity, scheduled repayment or scheduled sinking fund payment of any
Indebtedness ranked subordinate in right of payment to the Securities (other
than in connection with the refunding or refinancing of such Indebtedness); and
(d) any Restricted Investment; provided, however, that "Restricted Payments"
shall not include any payment or investment described in (a), (b), (c) or (d)
above made by a Subsidiary to the Company or to a Recourse Subsidiary of the
Company.
"Restricted Period" means with respect to any series of Securities,
the period prior to and including the 40th day after the later of the
commencement of the offering of such series of Securities and the Issue Date of
such series of Securities.
"Retained Trust Moneys" has the meaning specified in Section 13.5.
"Rule 144A" has the meaning specified in Section 2.1(a).
"Rule 144A Global Note" has the meaning specified in Section 2.1(a).
"Rule 144A Note" has the meaning specified in Section 2.1(a).
"Sale and Leaseback Transaction" means, with respect to any Person, an
arrangement with any bank, insurance company or other lender or investor or to
which such lender or investor is a party, providing for the leasing by such
Person or any of its Recourse Subsidiaries of any property or asset of such
Person or any of its Recourse Subsidiaries which has been or is being sold or
transferred by such Person or such Recourse Subsidiary to such lender or
investor or to any person to whom funds have been or are to be advanced by such
lender or investor on the security of such property or asset.
"Securities" means any securities authenticated and delivered under
this Indenture.
"Security Documents" means, collectively, (i) the Mortgages, (ii) the
Company Security Agreement, (iii) the Subsidiary Security Agreements, (iv) the
Subsidiary Guarantees, (iv) the Collateral Agency and Intercreditor Agreement
and (v) any other mortgage, security agreement or other agreement evidencing a
security interest executed in accordance with Section 12.1 after the date
hereof.
"Security Register" and "Security Registrar" have the respective
meanings specified in Section 3.5.
"Special Record Date" for the payment of any Defaulted Interest means
a date fixed by the Trustee pursuant to Section 3.7.
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26
"Standard Securitization Undertakings" means representations,
warranties, covenants and indemnities entered into by the Company or any
Subsidiary of the Company which are reasonably customary in an accounts
receivable and inventory securitization transactions.
"Stated Maturity", when used with respect to any Security or any
installment of interest thereon, means the date specified in such Security as
the fixed date on which the principal of such Security or such installment of
interest is due and payable.
"Steel Business Assets" has the meaning set forth in Section 6.15(a).
"Subsidiary" means, with respect to any Person, any corporation or
other entity of which 50% or more of the Capital Stock or other ownership
interests having ordinary voting power to elect a majority of the board of
directors or other persons performing similar functions are at the time directly
or indirectly owned by such Person.
"Subsidiary Guarantee" means each Guarantee pursuant to Section 15.1
hereof and each Guarantee given or made subsequent to the date hereof pursuant
to Section 12.1(a).
"Subsidiary Guarantor" means each Recourse Subsidiary of the Company
which is, or from time to time becomes, a party to this Indenture.
"Subsidiary Security Agreement" means each Security Agreement dated as
of the date hereof, or with respect to Persons that become Recourse Subsidiaries
of the Company subsequent to the date hereof, as of such subsequent date,
between the Trustee and each Recourse Subsidiary of the Company, substantially
in the form of Exhibit E hereto, as the same may be amended, supplemented or
otherwise modified from time to time.
"Temporary Regulation S Global Note" has the meaning specified in
Section 2.1(a).
"Transaction" has the meaning specified in Section 6.14.
"Treasury Rate" means the yield to maturity at the time of
computation of United States Treasury securities with a constant maturity (as
compiled and published in the most recent Federal Reserve Statistical Release
H.15 (519) which has become publicly available at least two Business Days prior
to the redemption date (or, if such Statistical Release is no longer published,
any publicly available source or similar market data)) most nearly equal to the
period from the redemption date to May 15, 2003; provided, however, that if the
period from the redemption date to May 15, 2003 is not equal to the constant
maturity of a United States Treasury security for which a
<PAGE>
27
weekly average yield is given, the Treasury Rate shall be obtained by linear
interpolation (calculated to the nearest one-twelfth of a year) from the weekly
average yield of United States Treasury securities for which such yields are
given, except that if the period from the redemption date to May 15, 2003 is
less than one year, the weekly average yield on actually traded United States
Treasury securities adjusted to a constant maturity of one year shall be used.
"Trust Moneys" means all cash or Cash Equivalents received by the
Collateral Agent (a) as Net Cash Proceeds received by the Company and its
Recourse Subsidiaries from Asset Sales to be subject to the Lien of the Security
Documents in accordance with the covenants and agreements set forth in Section
6.15; (b) as Condemnation Awards with respect to all or any part of the
Collateral; (c) as Net Insurance Proceeds with respect to all or any part of the
Collateral; (d) as proceeds from the issuance of Securities to the extent
provided in Section 6.9; (e) as proceeds of any other sale or other disposition
of all or any part of the Collateral by or on behalf of the Collateral Agent or
any collection, recovery, receipt, appropriation or other realization of or from
all or any part of the Collateral pursuant to the Security Documents or
otherwise; (f) for application under Article XIII as elsewhere provided in this
Indenture or the Security Documents or whose disposition is not elsewhere
specifically provided for in the Indenture or the Security Documents; provided,
however, that Trust Moneys shall not include any property deposited with the
Trustee pursuant to Article IV or XIV or Section 5.6 or delivered to or received
by the Trustee for application in accordance with Section 8.6 hereof. Trust
Moneys shall be held by the Trustee for the benefit of the Holders of Securities
of all series as a part of the Collateral and, upon any entry upon or sale or
other disposition of the Collateral or any part thereof pursuant to the Security
Documents, said Trust Moneys shall be applied in accordance with Section 8.6;
but prior to any such entry, sale or other disposition, all or any part of the
Trust Money may be withdrawn, and shall be released, paid or applied by the
Trustee, from time to time as provided in Article XIII.
"Trust Moneys Release Notice" has the meaning specified in Section
13.4.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this instrument until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean such successor Trustee.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as
amended, and as in force at the date as of which this instrument was executed;
provided, however, that in the event the Trust Indenture Act is amended after
such date, "Trust Indenture Act" means, to the extent required by any such
amendment, the Trust Indenture Act of 1939, as so amended.
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28
"Trust Officer" means any Vice President, any Assistant Vice President
or any other officer or assistant officer of the Trustee assigned by the Trustee
to administer its corporate trust matters.
"U.S. Government Obligations" means securities that are (x) direct
obligations of the United States of America for the payment of which its full
faith and credit is pledged or (y) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America, the payment of which is unconditionally guaranteed as a full faith and
credit obligation by the United States of America, which, in either case, are
not callable or redeemable at the option of the issuer thereof, and shall also
include a depository receipt issued by a bank (as defined in Section 3(a)(2) of
the Securities Act) as custodian with respect to any such U.S. Government
Obligation or a specific payment of principal of or interest on any such U.S.
Government Obligation held by such custodian for the account of the holder of
such depository receipt; provided, that (except as required by law) such
custodian is not authorized to make any deduction from the amount payable to the
holder of such depository receipt from any amount received by the custodian in
respect of the U.S. Government Obligation or the specific payment of principal
of or interest on the U.S. Government Obligation evidenced by such depository
receipt.
"Valuation Date" has the meaning specified in Section 12.5(b).
"Vice President", when used with respect to the Company or the
Trustee, means any vice president, whether or not designated by a number or a
word or words added before or after the title "vice president".
"Wholly-Owned Non-Recourse Subsidiary" means a Wholly-Owned Subsidiary
that is a Non-Recourse Subsidiary.
"Wholly-Owned Recourse Subsidiary" means a Wholly-Owned Subsidiary
that is a Recourse Subsidiary.
"Wholly-Owned Subsidiary" means, with respect to any Person, a
Subsidiary of which at least 95% of the Capital Stock (other than any director's
qualifying stock), or in the case of a non-corporate Subsidiary, other equity
interests having ordinary voting power for the election of directors or other
governing body of such Subsidiary, is owned by such Person or another Wholly-
Owned Subsidiary of such Person.
"Withdrawal Notice" has the meaning specified in Section 13.5.
<PAGE>
29
SECTION 1.2. Compliance Certificates and Opinions.
Upon any application or request by the Company or any Subsidiary
Guarantor to the Trustee to take any action under any provision of this
Indenture, the Company or such Subsidiary Guarantor, as the case may be, shall
furnish to the Trustee such certificates and opinions as may be required under
the Trust Indenture Act or under this Indenture. Each such certificate or
opinion shall be given in the form of an Officers' Certificate, if to be given
by officers of the Company or a Subsidiary Guarantor, or an Opinion of Counsel,
if to be given by counsel, and shall comply with the requirements of the Trust
Indenture Act and any other requirement set forth in this Indenture.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(i) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein
relating thereto;
(ii) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(iii) a statement that, in the opinion of each such
individual, he has made such examination or investigation as is necessary
to enable him to express an informed opinion as to whether or not such
covenant or condition has been complied with; and
(iv) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
SECTION 1.3. Form of Documents Delivered to Trustee.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate or opinion of counsel may be based, insofar as
it relates to factual matters, upon a certificate or
<PAGE>
30
opinion of, or representations by, an officer or officers of the Company stating
that the information with respect to such factual matters is in the possession
of the Company, unless such counsel knows, or in the exercise of reasonable care
should know, that the certificate or opinion or representations with respect to
such matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
SECTION 1.4. Acts of Holders; Record Dates.
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Indenture to be given or taken by
Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by one or more
agents duly appointed in writing; and, except as herein otherwise expressly
provided, such action shall become effective when such instrument or instruments
are delivered to the Trustee and, where it is hereby expressly required, to the
Company. Such instrument or instruments (and the action embodied therein and
evidenced thereby) are herein sometimes referred to as the "Act" of the Holders
signing such instrument or instruments. Proof of execution of any such
instrument or of a writing appointing any such agent shall be sufficient for any
purpose of this Indenture and (subject to Section 9.1) conclusive in favor of
the Trustee and the Company, if made in the manner provided in this Section 1.4.
(b) The fact and date of the execution of any such instrument or
writing, or the authority of the Person executing the same, may be proved in any
manner which the Trustee deems sufficient.
(c) The Company may, in the circumstances permitted by the Trust
Indenture Act, fix any day as the record date for the purpose of determining the
Holders entitled to give or take any request, demand, authorization, direction,
notice, consent, waiver or other action, or to vote on any action, authorized or
permitted to be given or taken by Holders. If not set by the Company prior to
the first solicitation of a Holder made by any Person in respect of any such
action, or, in the case of any such vote, prior to such vote, the record date
for any such action or vote shall be the 30th day (or, if later, the date of the
most recent list of Holders required to be provided pursuant to Section 10.1)
prior to such first solicitation or vote, as the case may be. With regard to
any record date, only the Holders on such date (or their duly designated
proxies) shall be entitled to give or take, or vote on, the relevant action.
(d) The ownership of Securities shall be proved by the Security
Register.
(e) Any request, demand, authorization, direction, notice, consent,
waiver or other Act of the Holder of any Security shall bind every future Holder
of the same Security and the Holder of every Security issued upon the
registration of transfer
<PAGE>
31
thereof or in exchange therefor or in lieu thereof in respect of anything done,
omitted or suffered to be done by the Trustee or the Company in reliance
thereon, whether or not notation of such action is made upon such Security.
SECTION 1.5. Notices, Etc. to Trustee, Company and Subsidiary Guarantors.
Any request, demand, authorization, direction, notice, consent, waiver
or Act of Holders or other document provided or permitted by this Indenture to
be made upon, given or furnished to, or filed with:
(i) the Trustee by any Holder, by the Company, or any Subsidiary
Guarantor shall be sufficient for every purpose hereunder if made, given,
furnished or filed in writing to or with the Trustee at its Corporate Trust
Office, Attention: Corporate Trustee, 210 Baronne Street, New Orleans,
Louisiana 70112; or
(ii) the Company or any Subsidiary Guarantor, by the Trustee or
by any Holder shall be sufficient for every purpose hereunder (unless
otherwise herein expressly provided) if in writing and mailed, first-class
postage prepaid, to the Company or the Subsidiary Guarantor, as the case
may be, addressed to the attention of its Secretary at the address of its
principal office specified in the first paragraph of this instrument or at
any other address previously furnished in writing to the Trustee by the
Company or the Subsidiary Guarantor, as the case may be.
SECTION 1.6. Notice to Holders; Waiver.
Where this Indenture provides for notice to Holders of any event, such
notice shall be sufficiently given (unless otherwise herein expressly provided)
if in writing and mailed, first-class postage prepaid, to each Holder affected
by such event, at his address as it appears in the Security Register, not later
than the latest date (if any), and not earlier than the earliest date (if any),
prescribed for the giving of such notice. In any case where notice to Holders
is given by mail, neither the failure to mail such notice, nor any defect in any
notice so mailed, to any particular Holder shall affect the sufficiency of such
notice with respect to other Holders. Where this Indenture provides for notice
in any manner, such notice may be waived in writing by the Person entitled to
receive such notice, either before or after the event, and such waiver shall be
the equivalent of such notice. Waivers of notice by Holders shall be filed with
the Trustee, but such filing shall not be a condition precedent to the validity
of any action taken in reliance upon such waiver.
In case by reason of the suspension of regular mail service or by
reason of any other cause it shall be impracticable to give such notice by mail,
then such notification as shall be made with the approval of the Trustee shall
constitute a sufficient notification for every purpose hereunder.
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32
SECTION 1.7. Conflict with Trust Indenture Act.
If any provision hereof limits, qualifies or conflicts with a
provision of the Trust Indenture Act that is required under such Act to be a
part of and govern this Indenture, the latter provision shall control. If any
provision of this Indenture modifies or excludes any provision of the Trust
Indenture Act that may be so modified or excluded, the latter provision shall be
deemed to apply to this Indenture as so modified or to be excluded, as the case
may be.
SECTION 1.8. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of Contents are
for convenience only and shall not affect the construction hereof.
SECTION 1.9. Successors and Assigns.
All covenants and agreements in this Indenture by the Company, the
Subsidiary Guarantors and the Trustee shall bind their respective successors and
assigns, whether so expressed or not.
SECTION 1.10. Separability Clause.
In case any provision in this Indenture or in the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
SECTION 1.11. Benefits of Indenture.
Nothing in this Indenture or in the Securities, express or implied,
shall give to any Person, other than the parties hereto and their successors
hereunder and the Holders of Securities, any benefit or any legal or equitable
right, remedy or claim under this Indenture.
SECTION 1.12. Governing Law.
This Indenture and the Securities shall be governed by and construed
in accordance with the laws of the State of New York.
SECTION 1.13. Legal Holidays.
In any case where any Interest Payment Date, Maturity Date or Stated
Maturity of any Security shall not be a Business Day, then (notwithstanding any
other provision of this Indenture or of the Securities) payment of interest or
principal need not be made on such date, but may be made on the next succeeding
Business Day with the same force and effect as if made on the Interest Payment
Date or Maturity Date, or
<PAGE>
33
at the Stated Maturity; provided, that no interest shall accrue for the period
from and after such Maturity Date or Stated Maturity, as the case may be.
SECTION 1.14. Immunity of Incorporators, Stockholders, Officers and Directors.
No recourse shall be had for the payment of the principal of or
interest on any Security or for any claim based thereon, or upon any obligation,
covenant or agreement of this Indenture, against any incorporator, stockholder,
officer or director, as such, past, present or future, of the Company, or any
Subsidiary Guarantor, or of any successor corporation, either directly or
indirectly through the Company, or any Subsidiary Guarantor, or any successor
corporation, whether by virtue of any constitution, statute or rule of law or by
the enforcement of any assessment of penalty or otherwise; it being expressly
agreed and understood that this Indenture and all the Securities are solely
corporate obligations, and that no personal liability whatever shall attach to,
or is incurred by, any incorporator, stockholder, officer or director, past,
present or future, of the Company, or any Subsidiary Guarantor, or of any
successor corporation, either directly or indirectly through the Company, or any
Subsidiary Guarantor, or any successor corporation, because of the incurring of
the indebtedness hereby authorized or under or by reason of any of the
obligations, covenants or agreements contained in this Indenture or in any of
the Securities, or to be implied herefrom or therefrom; and that all such
personal liability is hereby expressly released and waived as a condition of,
and as part of the consideration for, the execution of this Indenture and the
issuance of the Securities.
ARTICLE II
SECURITY FORMS
SECTION 2.1. Forms Generally.
(a) The 1998 Initial Notes are being offered and sold by the Company
pursuant to a Purchase Agreement, dated May 19, 1998, among the Company, Chase
Securities Inc., BT Alex. Brown Incorporated and PaineWebber Incorporated (the
"Purchase Agreement").
Initial Notes of any series of Securities offered and sold to
qualified institutional buyers (as defined in Rule 144A under the Securities Act
("Rule 144A")) in the United States of America (a "Rule 144A Note") will be
issued in the form of a permanent global Security substantially in the form of
Exhibit A, which is hereby incorporated by reference and expressly made a part
of this Indenture (a "Rule 144A Global Note"), deposited with the Trustee, as
custodian for the Depositary, duly executed by the Company and authenticated by
the Trustee as hereinafter provided. A Rule 144A Global Note may be represented
by more than one certificate, if so required by the Depositary's rules regarding
the maximum principal amount to be represented by a
<PAGE>
34
single certificate. The aggregate principal amount of a Rule 144A Global Note
may from time to time be increased or decreased by adjustments made on the
records of the Trustee, as custodian for the Depositary or its nominee, as
hereinafter provided.
Initial Notes of any series of Securities offered and sold outside the
United States of America (a "Regulation S Note") in reliance on Regulation S
under the Securities Act ("Regulation S") will initially be issued in the form
of a temporary global security substantially in the form of Exhibit A hereto (a
"Regulation S Temporary Global Note"), deposited with the Trustee, as custodian
for the Depositary, duly executed by the Company and authenticated by the
Trustee as hereinafter provided. Beneficial interests in the Regulation S
Temporary Global Note of any series shall be exchanged for beneficial interests
in a corresponding Security of the same series in permanent global form,
substantially in the form of Exhibit A, with the global securities legend and
the restricted securities legend (a "Regulation S Permanent Global Note" and,
together with the Regulation S Temporary Global Note, a "Regulation S Global
Note") within a reasonable time after the expiration of the Restricted Period.
A Regulation S Global Note may be represented by more than one certificate, if
so required by the Depositary's rules regarding the maximum principal amount to
be represented by a single certificate. The aggregate principal amount of a
Regulation S Global Note may from time to time be increased or decreased by
adjustments made on the records of the Trustee, as custodian for the Depositary
or its nominee, as hereinafter provided.
Initial Notes of any series of notes resold to institutional
"accredited investors" (as defined in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act) in the United States of America (an "Institutional Accredited
Investor Note") will be issued in the form of a permanent global Security
substantially in the form of Exhibit A (an "Institutional Accredited Investor
Global Note") deposited with the Trustee, as custodian for the Depositary, duly
executed by the Company and authenticated by the Trustee as hereinafter
provided. An Institutional Accredited Investor Global Note may be represented
by more than one certificate, if so required by the Depositary's rules regarding
the maximum principal amount to be represented by a single certificate. The
aggregate principal amount of an Institutional Accredited Investor Global Note
may from time to time be increased or decreased by adjustments made on the
records of the Trustee, as custodian for the Depositary or its nominee, as
hereinafter provided.
Exchange Notes exchanged for interests in the a 144A Note, a
Regulation S Note and an Institutional Accredited Investor Note will be issued
in the form of a permanent global Security substantially in the form set forth
in Exhibit B hereto, which is hereby incorporated by reference and expressly
made a part of this Indenture, deposited with the Trustee as hereinafter
provided, with the applicable legend set forth in Section 2.1(c) hereof (an
"Exchange Global Note"). An Exchange Global Note may be represented by more
than one certificate, if so required by the Depositary's rules regarding the
maximum principal amount to be represented by a single certificate.
<PAGE>
35
The Rule 144A Global Note, the Regulation S Global Note, the Exchange
Global Note and the Institutional Accredited Investor Global Note of any series
are sometimes collectively herein referred to as the "Global Securities."
The Private Exchange Securities of any series of notes shall be in the
form of Exhibit A. The Securities may have notations, legends or endorsements
required by law, stock exchange rule or usage, in addition to those set forth on
Exhibit A and Exhibit B. The Company and the Trustee shall approve the forms of
the Securities and any notation, endorsement or legend on them. Each Security
shall be dated the date of its authentication. The terms of the Securities set
forth in Exhibit A and Exhibit B are part of the terms of this Indenture and, to
the extent applicable, the Company and the Trustee, by their execution and
delivery of this Indenture, expressly agree to be bound by such terms.
(b) Denominations. The Securities shall be issuable only in fully
registered form, without coupons, and only in denominations of $1,000 and any
integral multiple thereof.
(c) Restrictive Legends. Unless and until (i) an Initial Note is
sold under an effective registration statement or (ii) an Initial Note is
exchanged for an Exchange Note in connection with an effective registration
statement, in each case pursuant to the Registration Rights Agreement or similar
agreement, (A) such Rule 144A Global Note and Institutional Accredited Investor
Global Note shall bear the following legend (the "Private Placement Legend") on
the face thereof:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE OR
OTHER JURISDICTION. NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED,
PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH
REGISTRATION UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO,
SUCH REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES, ON ITS OWN
BEHALF AND ON BEHALF OF ANY INVESTOR ACCOUNT FOR WHICH IT HAS PURCHASED
SECURITIES, TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO
THE DATE (THE "RESALE RESTRICTION TERMINATION DATE") WHICH IS TWO YEARS
AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON
WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS
SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY), ONLY (A) TO THE COMPANY,
(B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE
<PAGE>
36
UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE
FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT, TO A PERSON IT
REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE
144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND
SALES THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION
S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED INVESTOR"
WITHIN THE MEANING OF RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES
ACT THAT IS ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT
OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, IN EACH CASE IN A TRANSACTION
INVOLVING A MINIMUM PRINCIPAL AMOUNT OF $250,000 OF SECURITIES, FOR
INVESTMENT PURPOSES AND NOT WITH A VIEW TO OR FOR OFFER OR SALE IN
CONNECTION WITH ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F)
PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S AND THE TRUSTEE'S RIGHT
PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (i) PURSUANT TO CLAUSE (D), (E)
OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION
AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM AND (ii) PURSUANT TO
CLAUSE (E), TO REQUIRE THAT THE TRANSFEROR DELIVER TO THE TRUSTEE A LETTER
FROM THE TRANSFEREE SUBSTANTIALLY IN THE FORM OF ANNEX A TO THE OFFERING
MEMORANDUM DATED ________, ____. IN CONNECTION WITH ANY TRANSFER OF THIS
SECURITY WITHIN THE TIME PERIOD REFERRED TO ABOVE, THE HOLDER MUST CHECK
THE APPROPRIATE BOX SET FORTH HEREON RELATING TO THE MANNER OF SUCH
TRANSFER AND SUBMIT THIS SECURITY TO THE TRUSTEE. THIS LEGEND WILL BE
REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION
TERMINATION DATE."; and
(B) such Regulation S Global Note shall bear the following legend (the
"Regulation S Legend") on the face thereof:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD WITHIN THE UNITED STATES OR TO OR FOR THE ACCOUNT OR
BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY
ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT IT IS NOT A U.S.
PERSON NOR IS IT PURCHASING FOR THE ACCOUNT OF A U.S.
<PAGE>
37
PERSON AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION IN
ACCORDANCE WITH REGULATION S UNDER THE SECURITIES ACT ("REGULATION S"), (2)
BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH
SECURITY, PRIOR TO THE DATE (THE "RESALE RESTRICTION TERMINATION DATE")
WHICH IS TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND
THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE
OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY), ONLY (A) TO
THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN
DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE
SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT
REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE
144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND
SALES THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION
S, (E) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF RULE
501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT THAT IS ACQUIRING THE
SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL
ACCREDITED INVESTOR, IN EACH CASE IN A MINIMUM PRINCIPAL AMOUNT OF THE
SECURITIES OF $250,000, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO OR
FOR OFFER OR SALE IN CONNECTION WITH ANY DISTRIBUTION IN VIOLATION OF THE
SECURITIES ACT, OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S
AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (i)
PURSUANT TO CLAUSE (D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF
COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF
THEM AND (ii) PURSUANT TO CLAUSE (E), TO REQUIRE THAT THE TRANSFEROR
DELIVER TO THE TRUSTEE A LETTER FROM THE TRANSFEREE SUBSTANTIALLY IN THE
FORM OF ANNEX A TO THE OFFERING MEMORANDUM DATED ________, ____. IN
CONNECTION WITH ANY TRANSFER OF THIS SECURITY WITHIN THE TIME PERIOD
REFERRED TO ABOVE, THE HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH
HEREON RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS SECURITY TO
THE TRUSTEE. THIS LEGEND WILL BE REMOVED AFTER 40 CONSECUTIVE DAYS
BEGINNING ON AND INCLUDING THE LATER OF (A) THE DAY ON WHICH THE SECURITIES
ARE OFFERED TO PERSONS OTHER THAN DISTRIBUTORS (AS DEFINED IN REGULATION S)
AND (B) THE DATE OF THE CLOSING OF THE ORIGINAL OFFERING. AS USED HEREIN,
THE TERMS "OFFSHORE
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38
TRANSACTION", "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO
THEM BY REGULATION S UNDER THE SECURITIES ACT.".
The Global Securities of any series, whether or not an Initial Note,
shall bear the following legend on the face thereof:
"UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW
YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO.
OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE,
BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL
BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH
IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF."
(d) Book-Entry Provisions. (i) This Section 2.1(d) shall apply only
to Global Securities deposited with the Trustee, as custodian for the
Depositary.
(ii) Each Global Security initially shall (x) be registered in the
name of the Depositary for such Global Security or the nominee of such
Depositary, (y) be delivered to the Trustee as custodian for such Depositary and
(z) bear legends as set forth in Section 2.1(c).
(iii) Members of, or participants in, the Depositary ("Agent
Members") shall have no rights under this Indenture with respect to any Global
Security held on their behalf by the Depositary or by the Trustee as the
custodian of the Depositary or under such Global Security, and the Depositary
may be treated by the Company, the Trustee and any agent of the Company or the
Trustee as the absolute owner of such Global Security for all purposes
whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the
Company, the Trustee or any agent of the Company or the Trustee from giving
effect to any written certification, proxy or other authorization furnished by
the Depositary or impair, as between the Depositary and its Agent
<PAGE>
39
Members, the operation of customary practices of the Depositary governing the
exercise of the rights of a holder of a beneficial interest in any Global
Security.
(iv) In connection with any transfer of a portion of the beneficial
interest in a Global Security pursuant to subsection (e) of this Section to
beneficial owners who are required to hold Certificated Securities (as defined
below), the Trustee shall reflect on its books and records the date and a
decrease in the principal amount of such Global Security in an amount equal to
the principal amount of the beneficial interest in the Global Security to be
transferred, and the Company shall execute, and the Trustee shall authenticate
and deliver, one or more Certificated Securities of like tenor and amount.
(v) In connection with the transfer of an entire Global Security to
beneficial owners pursuant to subsection (e) of this Section, such Global
Security shall be deemed to be surrendered to the Trustee for cancellation, and
the Company shall execute, and the Trustee shall authenticate and deliver, to
each beneficial owner identified by the Depositary in exchange for its
beneficial interest in such Global Security, an equal aggregate principal amount
of Certificated Securities of authorized denominations.
(e) Certificated Securities. Except as provided below, owners of
beneficial interests in Global Securities will not be entitled to receive
certificated Securities ("Certificated Securities"). If required to do so
pursuant to any applicable law or regulation, beneficial owners of Securities of
any series may obtain Certificated Securities representing such series in
exchange for their beneficial interests in a Global Security upon written
request in accordance with the Depositary's and the Security Registrar's
procedures. In addition, Certificated Securities shall be transferred to all
beneficial owners in exchange for their beneficial interests in a Global
Security if (i) the Depositary notifies the Company that it is unwilling or
unable to continue as Depositary for such Global Security or the Depositary
ceases to be a clearing agency registered under the Exchange Act, at a time when
the Depositary is required to be so registered in order to act as Depositary,
and in each case a successor depositary is not appointed by the Company within
90 days of such notice or (ii) the Company executes and delivers to the Trustee
and the Security Registrar an Officers' Certificate stating that such Global
Security shall be so exchangeable or (iii) an Event of Default has occurred and
is continuing and the Security Registrar has received a request from the
Depositary. Any Certificated Security delivered in exchange for an interest in
a Global Security pursuant to Section 2.1(d)(iv) and (v) shall, except as
otherwise provided by paragraph (c) of Section 3.2, bear the applicable legend
regarding transfer restrictions applicable to the Certificated Security set
forth in Section 2.1(c).
(f) Proxies. The registered holder of a Global Security may grant
proxies and otherwise authorize any person, including Agent Members and persons
that may hold interests through Agent Members, to take any action which a Holder
is entitled to take under this Indenture or the Securities.
<PAGE>
40
ARTICLE III
THE SECURITIES
SECTION 3.1. Amount Unlimited; Issuable in Series; Title and Terms of the 1998
Securities.
(a) The aggregate principal amount of Securities which may be
authenticated and delivered under this Indenture is unlimited. The Securities
may be issued in one or more series, including the series of Securities
established pursuant to Section 3.1(c). Except with respect to the series of
Securities established pursuant to Section 3.1(c), there shall be established in
or pursuant to a Board Resolution, or established in one or more indentures
supplemental hereto, prior to the issuance of Securities of any series:
(1) the title of the Securities of the series (which shall
distinguish the Securities of the series from all other series of
Securities);
(2) any limit upon the aggregate principal amount of the Securities
of the series which may be authenticated and delivered under this Indenture
(except for Securities authenticated and delivered upon registration of
transfer of, or in exchange for, or in lieu of, other Securities of the
series);
(3) the date or dates on which the principal of the Securities of the
series is payable;
(4) the rate or rates at which the Securities of the series shall
bear interest, if any, and the date or dates from which such interest shall
accrue, the Interest Payment Dates on which such interests shall be payable
and the Regular Record Date for the interest payable on any Interest
Payment Date;
(5) the price or prices at which and the period or periods within and
the terms and conditions upon which Securities of the series may be
redeemed, as a whole or in part, at the option of the Company, pursuant to
any sinking fund or otherwise;
(6) the obligation, if any, of the Company to redeem, purchase or
repay Securities of the series at the option of a Holder thereof and the
price or prices at which the Securities of the series are payable, and the
period or periods within which and the terms and conditions upon which
Securities of the series shall be redeemed, purchased or repaid, as a whole
or in part, pursuant to such obligation;
<PAGE>
41
(7) any addition to, or any modification of, any Event of Default or
covenant of the Company specified herein with respect to the Securities of
such series; and
(8) any other terms of the series (which terms shall not be
inconsistentwith the provisions of this Indenture.
(b) If any of the terms of the Securities of a series are established
by action taken pursuant to a Board Resolution, a copy of an appropriate record
of such action shall be certified by the Secretary or an Assistant Secretary of
the Company and delivered to the Trustee at or prior to the delivery of the
Officers' Certificate setting forth the terms of the series.
(c) There is hereby established a series of Securities which shall be
known and designated as the "9 1/2% First Mortgage Notes due 2008". Their
Stated Maturity shall be May 15, 2008, and they shall bear interest at the rate
of 9 1/2% per annum, from May 22, 1998 or from the most recent Interest Payment
Date to which interest has been paid or duly provided for, as the case may be,
payable semi-annually on May 15 and November 15 in each year, commencing
November 15, 1998, until the principal thereof is paid or made available for
payment.
(d) All Securities of any one series shall be substantially identical
except as to the date from which interest, if any, shall accrue, which term may
be determined by the Company from time to time as to Securities of a series if,
in the case of any series established pursuant to Section 3.1(a), so provided in
or established pursuant to the authority granted in a Board Resolution or in any
such indenture supplemental hereto. All Securities of any one series need not
be issued at the same time, and unless otherwise provided, a series may be
reopened for issuance of additional Securities of such series. In connection
with the authentication and delivery of Securities of any series after the date
of this Indenture (other than Securities authenticated and delivered upon
registration of transfer of, or in exchange for, or in lieu of, other Securities
of the series), each Subsidiary Guarantor shall reaffirm in writing its
Subsidiary Guarantee.
(e) The principal of and interest on the Securities of any series
shall be payable at the office or agency of the Paying Agent in The City of New
Orleans, maintained for such purpose; provided, however, that at the option of
the Company payment of interest may be made by check mailed to the address of
the Person entitled thereto as such address shall appear in the Security
Register; provided, further, that a Holder of $10,000,000 in aggregate principal
amount of Securities of any series shall be entitled to receive payments of
interest by wire transfer in immediately available funds (but only if
appropriate payment instructions have been received in writing by the Paying
Agent not less than 15 calendar days prior to the applicable Interest Payment
Date).
Notwithstanding any other provision of this Section 3.1, if a Security
is in the form of a Global Security, immediately available funds for the payment
of the
<PAGE>
42
principal of and interest on the Security due on any Interest Payment Date or
Maturity Date, as the case may be, will be made available to the Paying Agent to
permit the Paying Agent to pay such funds to the Depositary on such respective
dates. The Depositary will allocate and pay such funds to the owners of
beneficial interests in the Security in accordance with its existing operating
procedures.
The Securities shall be subject to redemption and repurchase by the
Company as provided herein.
SECTION 3.2. Transfer and Exchange.
(a) The following provisions shall apply with respect to any proposed
transfer of a Rule 144A Note or an Institutional Accredited Investor Note prior
to the date which is two years after the later of the date of original issue and
the last date on which the Company or any affiliate of the Company was the owner
of such Notes (or any predecessor thereto) (the "Resale Restriction Termination
Date"):
(i) a transfer of a Rule 144A Note or an Institutional
Accredited Investor Note or a beneficial interest therein to a Qualified
Institutional Buyer as defined under Rule 144A (a "QIB") shall be made upon
the representation of the transferee that it is purchasing the Security for
its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A, and is aware that the
sale to it is being made in reliance on Rule 144A and acknowledges that it
has received such information regarding the Company as it has requested
pursuant to Rule 144A or has determined not to request such information and
that it is aware that the transferor is relying upon its foregoing
representations in order to claim the exemption from registration provided
by Rule 144A;
(ii) a transfer of a Rule 144A Note or an Institutional
Accredited Investor Note or a beneficial interest therein to an
institutional accredited investor shall be made upon receipt by the Trustee
or its agent of a certificate substantially in the form set forth in
paragraph (g) of this Section 3.2 from the proposed transferee and, if
requested by the Company or the Trustee, the delivery of an Opinion of
Counsel, certification and/or other information satisfactory to each of
them; and
(iii) a transfer of a Rule 144A Note or an Institutional
Accredited Investor Note or a beneficial interest therein to a Non-U.S.
Person shall be made upon receipt by the Trustee or its agent of a
certificate substantially in the form set forth in paragraph (h) of this
Section 3.2 from the proposed transferee and, if requested by the Company
or the Trustee, the delivery of an opinion of counsel, certification and/or
other information satisfactory to each of them.
<PAGE>
43
(b) The following provisions shall apply with respect to any proposed
transfer of a Regulation S Note prior to the expiration of the Restricted
Period:
(i) a transfer of a Regulation S Note or a beneficial interest
therein to a QIB shall be made upon the representation of the transferee
that it is purchasing the Security for its own account or an account with
respect to which it exercises sole investment discretion and that it and
any such account is a "qualified institutional buyer" within the meaning of
Rule 144A, and is aware that the sale to it is being made in reliance on
Rule 144A and acknowledges that it has received such information regarding
the Company as the undersigned has requested pursuant to Rule 144A or has
determined not to request such information and that it is aware that the
transferor is relying upon its foregoing representations in order to claim
the exemption from registration provided by Rule 144A;
(ii) a transfer of a Regulation S Note or a beneficial interest
therein to an institutional accredited investor shall be made upon receipt
by the Trustee or its agent of a certificate substantially in the form set
forth in paragraph (g) of this Section 3.2 from the proposed transferee
and, if requested by the Company or the Trustee, the delivery of an Opinion
of Counsel, certification and/or other information satisfactory to each of
them; and
(iii) a transfer of a Regulation S Note or a beneficial
interest therein to a Non-U.S. Person shall be made upon receipt by the
Trustee or its agent of a certificate substantially in the form set forth
in paragraph (h) of this Section 3.2 from the proposed transferee and, if
requested by the Company or the Trustee, receipt by the Trustee or its
agent of an Opinion of Counsel, certification and/or other information
satisfactory to each of them.
After the expiration of the Restricted Period, interests in the
Regulation S Note may be transferred without requiring certification set forth
in paragraph (h) of this Section 3.2 or any additional certification.
(c) Restricted Securities Legend. Upon the transfer, exchange or
replacement of Securities not bearing a Restricted Securities Legend, the
Security Registrar shall deliver Securities that do not bear a Restricted
Securities Legend. Upon the transfer, exchange or replacement of Securities
bearing the Restricted Securities Legend, the Security Registrar shall deliver
only Securities that bear such Restricted Securities Legend unless there is
delivered to the Security Registrar an Opinion of Counsel to the effect that
neither such legend nor the related restrictions on transfer are required in
order to maintain compliance with the provisions of the Securities Act.
(d) The Security Registrar shall retain copies of all letters, notices
and other written communications received pursuant to Section 2.1 or this
Section 3.2. The Company shall have the right to inspect and make copies of all
such letters, notices or
<PAGE>
44
other written communications at any reasonable time upon the giving of
reasonable written notice to the Security Registrar.
(e) Obligations with Respect to Transfers and Exchanges of Securities.
(i) To permit registrations of transfers and exchanges, the
Company shall, subject to the other terms and conditions of this Article
III, execute and the Trustee shall authenticate Certificated Securities and
Global Securities at the Security Registrar's or co-registrar's request.
(ii) No service charge shall be made to a Holder for any
registration of transfer or exchange, but the Company may require payment
of a sum sufficient to cover any transfer tax, assessments, or similar
governmental charge payable in connection therewith (other than any such
transfer taxes or similar governmental charges payable upon exchange or
transfer pursuant to Section 11.6).
(iii) The Security Registrar or co-registrar shall not be
required to register the transfer of or exchange of any Security for a
period beginning (1) 15 Business Days before the mailing of a notice of an
offer to repurchase Securities of the same series as such Security and
ending at the close of business on the day of such mailing or (2) 15
Business Days before an interest payment date for such series of Securities
and ending on such interest payment date.
(iv) All Securities issued upon any transfer or exchange pursuant
to the terms of this Indenture shall evidence the same debt and shall be
entitled to the same benefits under this Indenture as the Securities
surrendered upon such transfer or exchange.
(f) No Obligation of the Trustee. (i) The Trustee shall have no
responsibility or obligation to any beneficial owner of a Global Security, a
member of, or a participant in, the Depositary or other Person with respect to
the accuracy of the records of the Depositary or its nominee or of any
participant or member thereof, with respect to any ownership interest in the
Securities or with respect to the delivery to any participant, member,
beneficial owner or other Person (other than the Depositary) of any notice or
the payment of any amount or delivery of any Securities (or other security or
property) under or with respect to such Securities. All notices and
communications to be given to the Holders of any series of Securities and all
payments to be made to Holders in respect of a series of Securities shall be
given or made only to or upon the order of the registered Holders of such series
of Securities (which shall be the Depositary or its nominee in the case of a
Global Security). The rights of beneficial owners in any Global Security shall
be exercised only through the Depositary subject to the applicable rules and
procedures of the Depositary. The Trustee may rely and shall be fully protected
in relying upon information furnished by the Depositary with respect to its
members, participants and any beneficial owners.
<PAGE>
45
(ii) The Trustee shall have no obligation or duty to monitor,
determine or inquire as to compliance with any restrictions on transfer imposed
under this Indenture or under applicable law with respect to any transfer of any
interest in any Security (including any transfers between or among Depositary
participants, members or beneficial owners in any Global Security) other than to
require delivery of such certificates and other documentation or evidence as are
expressly required by, and to do so if and when expressly required by, the terms
of this Indenture, and to examine the same to determine substantial compliance
as to form with the express requirements hereof.
(g) Form of Certificate to be Delivered in Connection with Transfers
to Institutional Accredited Investors.
[Date]
Bayou Steel Corporation
c/o First National Bank of Commerce
210 Baronne Street
New Orleans, LA 70112
Attention: Trust Department
Dear Sirs:
This certificate is delivered to request a transfer of $
principal amount of the __% First Mortgage Notes due 200__ (the "Notes") of
Bayou Steel Corporation (the "Company").
Upon transfer, the Notes would be registered in the name of the new
beneficial owner as follows:
Name: ___________________________________
Address: ________________________________
Taxpayer ID Number: _____________________
The undersigned represents and warrants to you that:
1. We are an institutional "accredited investor" (as defined in
Rule 501(a)(1), (2), (3) or (7) under the Securities Act of 1933, as amended
(the "Securities Act")) purchasing for our own account or for the account of
such an institutional "accredited investor" at least $250,000 principal amount
of the Notes, and we are acquiring the Notes not with a view to, or for offer or
sale in connection with, any distribution in violation of the Securities Act.
We have such knowledge and experience
<PAGE>
46
in financial and business matters as to be capable of evaluating the merits and
risk of our investment in the Notes and we invest in or purchase securities
similar to the Notes in the normal course of our business. We and any accounts
for which we are acting are each able to bear the economic risk of our or its
investment.
2. We understand that the Notes have not been registered under
the Securities Act and, unless so registered, may not be sold except as
permitted in the following sentence. We agree on our own behalf and on behalf
of any investor account for which we are purchasing Notes to offer, sell or
otherwise transfer such Notes prior to the date which is two years after the
later of the date of original issue and the last date on which the Company or
any affiliate of the Company was the owner of such Notes (or any predecessor
thereto) (the "Resale Restriction Termination Date") only (a) to the Company,
(b) pursuant to a registration statement which has been declared effective under
the Securities Act, (c) in a transaction complying with the requirements of Rule
144A under the Securities Act, to a person we reasonably believe is a qualified
institutional buyer (a "QIB") under Rule 144A of the Securities Act ("Rule
144A") that purchases for its own account or for the account of a QIB and to
whom notice is given that the transfer is being made in reliance on Rule 144A,
(d) pursuant to offers and sales that occur outside the United States within the
meaning of Regulation S under the Securities Act, (e) to an institutional
"accredited investor" within the meaning of Rule 501(a)(1), (2), (3) or (7)
under the Securities Act that is purchasing for its own account or for the
account of such an institutional "accredited investor," in each case in a
minimum principal amount of Notes of $250,000 or (f) pursuant to any other
available exemption from the registration requirements of the Securities Act,
subject in each of the foregoing cases to any requirement of law that the
disposition of our property or the property of such investor account or accounts
be at all times within our or their control and in compliance with any
applicable state securities laws. The foregoing restrictions on resale will not
apply subsequent to the Resale Restriction Termination Date. If any resale or
other transfer of the Notes is proposed to be made pursuant to clause (e) above
prior to the Resale Restriction Termination Date, the transferor shall deliver a
letter from the transferee substantially in the form of this letter to the
Company and the Trustee, which shall provide, among other things, that the
transferee is an institutional "accredited investor" (within the meaning of Rule
501(a)(1), (2), (3) or (7) under the Securities Act) and that it is acquiring
such Notes for investment purposes and not for distribution in violation of the
Securities Act. Each purchaser acknowledges that the Company and the Trustee
reserve the right prior to any offer, sale or other transfer prior to the Resale
Termination Date of the Notes pursuant to clauses (d), (e) or (f) above to
require the delivery of an opinion of counsel, certifications and/or other
information satisfactory to the Company and the Trustee.
TRANSFEREE:_____________________
BY______________________________
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47
(h) Form of Certificate to be Delivered in Connection with Transfers
Pursuant to Regulation S.
[Date]
Bayou Steel Corporation
c/o First National Bank of Commerce
210 Baronne Street
New Orleans, LA 70112
Attention: Trust Department
Re: Bayou Steel Corporation
__% First Mortgage Notes due 200__ (the "Securities")
Ladies and Gentlemen:
In connection with our proposed sale of $________ aggregate principal
amount of the Securities, we confirm that such sale has been effected pursuant
to and in accordance with Regulation S under the United States Securities Act of
1933, as amended (the "Securities Act"), and, accordingly, we represent that:
(1) the offer of the Securities was not made to a person in the United
States;
(2) either (i) at the time the buy order was originated, the
transferee was outside the United States or we and any person acting on our
behalf reasonably believed that the transferee was outside the United
States or (ii) the transaction was executed in, on or through the
facilities of a designated off-shore securities market and neither we nor
any person acting on our behalf knows that the transaction has been pre-
arranged with a buyer in the United States;
(3) no directed selling efforts have been made in the United States in
contravention of the requirements of Rule 903(b) or Rule 904(b) of
Regulation S, as applicable; and
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act.
In addition, if the sale is made during a restricted period and the
provisions of Rule 903(c)(3) or Rule 904(c)(1) of Regulation S are applicable
thereto, we confirm that such sale has been made in accordance with the
applicable provisions of Rule 903(c)(3) or Rule 904(c)(1), as the case may be.
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48
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby. Terms used in this certificate have the
meanings set forth in Regulation S.
Very truly yours,
[Name of Transferor]
By:____________________________ ______________________________
Authorized Signature Signature Medallion Guaranteed
SECTION 3.3. Execution, Authentication, Delivery and Dating.
The Securities of any series shall be executed on behalf of the
Company by its Chairman of the Board, its Vice Chairman of the Board, its
President or its Chief Financial Officer and attested by its Secretary or one of
its Assistant Secretaries. The signature of any of these officers on the
Securities may be manual or facsimile.
Securities bearing the manual or facsimile signatures of individuals
who were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Securities or did not
hold such offices on the date of such Securities.
At any time and from time to time after the execution and delivery of
this Indenture, the Trustee shall authenticate and make available for delivery:
(1) 1998 Initial Notes, (2) one or more other series of Initial Notes as the
Company may elect to issue from time to time pursuant to Section 3.1(a) and (3)
Exchange Notes for issue only in a Registered Exchange Offer, and only in
exchange for Initial Notes of such series of an equal principal amount, in each
case upon a Company Order. Such Company Order shall specify the amount of the
Securities to be authenticated and the date on which the original issue of such
series of Securities is to be authenticated and whether the Securities are to be
Initial Notes or Exchange Notes.
Each Security shall be dated the date of its authentication.
No Security shall be entitled to any benefit under this Indenture or
be valid or obligatory for any purpose unless there appears on such Security a
certificate of authentication substantially in the form provided for herein
executed by the Trustee by manual signature, and such certificate upon any
Security shall be conclusive evidence,
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49
and the only evidence, that such Security has been duly authenticated and
delivered hereunder.
SECTION 3.4. Temporary Securities.
Pending the preparation of definitive Securities of any series of
Securities, the Company may execute, and upon Company Order the Trustee shall
authenticate and deliver, temporary Securities for such series which are
printed, lithographed, typewritten, mimeographed or otherwise produced, in any
authorized denomination, substantially of the tenor of the definitive Securities
in lieu of which they are issued and with such appropriate insertions,
omissions, substitutions and other variations as the officers executing such
Securities may determine, as evidenced by their execution of such Securities.
If temporary Securities are issued, the Company will cause definitive
Securities to be prepared without unreasonable delay. After the preparation of
definitive Securities, the temporary Securities shall be exchangeable for
definitive Securities of the same series upon surrender of the temporary
Securities at any office or agency of the Company designated pursuant to Section
6.2, without charge to the Holder. Upon surrender for cancellation of any one
or more temporary Securities the Company shall execute and the Trustee shall
authenticate and deliver in exchange therefor a like principal amount of
definitive Securities of the same series of authorized denominations. Until so
exchanged the temporary Securities shall in all respects be entitled to the same
benefits under this Indenture as definitive Securities.
SECTION 3.5. Registration.
The Company shall cause to be kept at the Corporate Trust Office of
the Trustee a register (the register maintained in such office and in any other
office or agency designated pursuant to Section 6.2 being herein sometimes
collectively referred to as the "Security Register") in which, subject to such
reasonable regulations as it may prescribe, the Company shall provide for the
registration of Securities and of transfers of Securities. The Trustee is
hereby appointed Security Registrar for the purpose of registering Securities
and transfers of Securities as herein provided.
SECTION 3.6. Mutilated, Destroyed, Lost and Stolen Securities.
If any mutilated Security is surrendered to the Trustee, the Company
shall execute and the Trustee shall authenticate and deliver in exchange
therefor a new Security of the same series of like tenor and principal amount
and bearing a number not contemporaneously outstanding.
If there shall be delivered to the Company and the Trustee (i)
evidence to their satisfaction of the destruction, loss or theft of any Security
and (ii) such security or indemnity as may be required by them to save each of
them and any agent of either of
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50
them harmless, then, in the absence of notice to the Company or the Trustee that
such Security has been acquired by a bona fide purchaser, the Company shall
execute and the Trustee shall authenticate and deliver, in lieu of any such
destroyed, lost or stolen Security, a new Security of the same series of like
tenor and principal amount and bearing a number not contemporaneously
outstanding.
In case any such mutilated, destroyed, lost or stolen Security has
become or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section 3.6, the
Company may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Security issued pursuant to this Section 3.6 in lieu of any
destroyed, lost or stolen Security shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Security shall be at any time enforceable by anyone, and shall be
entitled to all the benefits of this Indenture equally and proportionately with
any and all other Securities duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Securities.
SECTION 3.7. Payment of Interest; Interest Rights Preserved.
Interest on any Security which is payable, and is punctually paid or
duly provided for, on any Interest Payment Date shall be paid to the Person in
whose name that Security (or one or more Predecessor Securities) is registered
at the close of business on the Regular Record Date for such interest.
Any interest on any Security of any series which is payable, but is
not punctually paid or duly provided for, on any Interest Payment Date (herein
called "Defaulted Interest") shall forthwith cease to be payable to the Holder
on the relevant Regular Record Date by virtue of having been such Holder, and
such Defaulted Interest may be paid by the Company, at its election in each
case, as provided in Clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted Interest to
the Persons in whose names the Securities of such series (or their
respective Predecessor Securities) are registered at the close of business
on a Special Record Date for the payment of such Defaulted Interest, which
shall be fixed in the following manner. The Company shall notify the
Trustee in writing
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51
of the amount of Defaulted Interest proposed to be paid on each Security of
such series and the date of the proposed payment, and at the same time the
Company shall deposit with the Trustee an amount of money equal to the
aggregate amount proposed to be paid in respect of such Defaulted Interest
or shall make arrangements satisfactory to the Trustee for such deposit
prior to the date of the proposed payment, such money when deposited to be
held in trust for the benefit of the Persons entitled to such Defaulted
Interest as in this Clause provided. Thereupon the Trustee shall fix a
Special Record Date for the payment of such Defaulted Interest which shall
be not more than 15 days and not less than 10 days prior to the date of the
proposed payment and not less than 10 days after the receipt by the Trustee
of the notice of the proposed payment. The Trustee shall promptly notify
the Company of such Special Record Date and, in the name and at the expense
of the Company, shall cause notice of the proposed payment of such
Defaulted Interest and the Special Record Date therefor to be mailed,
first-class postage prepaid, to each Holder of Securities of such series at
his address as it appears in the Security Register, not less than 10 days
prior to such Special Record Date. Notice of the proposed payment of such
Defaulted Interest and the Special Record Date therefor having been so
mailed, such Defaulted Interest shall be paid to the Persons in whose names
the Securities of such series (or their respective Predecessor Securities)
are registered at the close of business on such Special Record Date and
shall no longer be payable pursuant to the following Clause (2).
(2) The Company may make payment of any Defaulted Interest on the
Securities of any series in any other lawful manner not inconsistent with
the requirements of any securities exchange on which the Securities of such
series may be listed, and upon such notice as may be required by such
exchange, if, after notice given by the Company to the Trustee of the
proposed payment pursuant to this Clause, such manner of payment shall be
deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section, each Security
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Security shall carry the rights to interest accrued
and unpaid, and to accrue, which were carried by such other Security.
SECTION 3.8. Persons Deemed Owners.
Prior to due presentment of a Security for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name such Security is registered as the owner of such
Security for the purpose of receiving payment of principal of and (subject to
Section 3.7) interest on such Security and for all other purposes whatsoever,
whether or not such Security be overdue, and neither the Company, the Trustee
nor any agent of the Company or the Trustee shall be affected by notice to the
contrary.
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52
SECTION 3.9. Cancellation.
All Securities surrendered for payment, redemption, repurchase,
registration of transfer or exchange shall, if surrendered to any Person other
than the Trustee, be delivered to the Trustee and shall be promptly cancelled by
it. The Company may at any time deliver to the Trustee for cancellation any
Securities previously authenticated and delivered hereunder which the Company
may have acquired in any manner whatsoever, and all Securities so delivered
shall be promptly cancelled by the Trustee. Notwithstanding any other provision
of this Indenture to the contrary, in the case of a series all the Securities of
which are not to be originally issued at one time, a Security of such series
shall not be deemed to have been Outstanding at any time hereunder if and to the
extent that, subsequent to the authentication and delivery thereof, such
Security is delivered to the Trustee for cancellation by the Company or any
agent thereof upon the failure of the original purchaser thereof to make payment
therefor against delivery thereof, and any Security so delivered to the Trustee
shall be promptly cancelled by it. No Securities shall be authenticated in lieu
of or in exchange for any Securities cancelled as provided in this Section,
except as expressly permitted by this Indenture. All cancelled Securities held
by the Trustee shall be destroyed and certification of their destruction
delivered to the Company unless by a Company Order the Company shall direct that
cancelled Securities be returned to it.
SECTION 3.10. Computation of Interest.
Interest on the Securities shall be computed on the basis of a 360-day
year of twelve 30-day months.
ARTICLE IV
SATISFACTION AND DISCHARGE
SECTION 4.1. Satisfaction and Discharge of Any Series.
(a) The Company shall be deemed to have satisfied and discharged the
entire indebtedness on all the Securities of any particular series (except as to
any surviving rights of registration of transfer or exchange of Securities
herein expressly provided for), and, so long as no Event of Default shall be
continuing, the Trustee, on demand of and at the expense of the Company, shall
execute proper instruments acknowledging satisfaction and discharge of such
indebtedness, when
(1) either
(A) all Securities of such series theretofore authenticated and
issued (other than (i) Securities of such series which have been
destroyed, lost or stolen and which have been replaced or paid as
provided in Section 3.6 and (ii) Securities for whose payment money
has theretofore been
<PAGE>
53
deposited in trust or segregated and held in trust by the Company and
thereafter repaid to the Trustee or discharged from such trust, as
provided in Section 6.26) have been delivered to the Trustee for
cancellation; or
(B) all such Securities of such series not theretofore delivered
to the Trustee for cancellation
(i) have become due and payable; or
(ii) will become due and payable within one year,
and the Company, in the case of (B) (i) or (ii) above, has deposited
or caused to be deposited with the Trustee as trust funds in trust an
amount sufficient to pay and discharge the entire indebtedness on such
Securities not theretofore delivered to the Trustee for cancellation,
for principal and interest to the date of such deposit (in the case of
Securities which have become due and payable) or to the Maturity Date,
as the case may be;
(2) the Company has paid or caused to be paid all other sums payable
with respect to the Securities of such series; and
(3) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that all conditions precedent
herein provided for relating to the satisfaction and discharge of the
entire Indebtedness on all Securities of such series have been complied
with.
(b) Upon the satisfaction of the conditions set forth in this Section
4.1 with respect to all the Securities of any series, the terms and conditions
of such series, including the terms and conditions with respect thereto set
forth in this Indenture, shall no longer be binding upon, or applicable to, the
Company or the Subsidiary Guarantors, and the Holders of the Securities of such
series shall look for payment only to the funds or obligations deposited with
the Trustee pursuant to Section 4.1(a); provided, however, that in no event
shall the Company be discharged from (i) any obligations under Sections 9.7 or
9.10 or (ii) any obligations under Sections 3.5 and 3.6 (except that Securities
of such series issued upon registration of transfer or exchange or in lieu of
mutilated, lost, destroyed or stolen Securities shall not be obligations of the
Company) and Sections 10.1 and 6.2.
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54
SECTION 4.2. Application of Monies for Satisfaction and Discharge.
Subject to the provisions of the last paragraph of Section 6.26, all
money deposited with the Trustee pursuant to Section 4.1 shall be held in trust
and applied by it, in accordance with the provisions of the Securities and this
Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Persons entitled thereto, of the principal and interest for
whose payment such money has been deposited with the Trustee.
SECTION 4.3. Satisfaction and Discharge of Indenture.
Upon compliance by the Company with the provisions of Section 4.1 as
to the satisfaction and discharge of each series of Securities issued hereunder,
and if the Company has paid or caused to be paid all other sums payable under
this Indenture, this Indenture shall cease to be of any further effect (except
as otherwise provided herein). Upon Company Request and receipt of an Opinion
of Counsel and an Officers' Certificate, the Trustee (at the expense of the
Company) shall execute proper instruments acknowledging satisfaction and
discharge of this Indenture and the cancellation of all Security Documents.
Notwithstanding the satisfaction and discharge of this Indenture, any
obligations of the Company under Section 9.7 and the obligations of the Trustee
under Sections 4.2, 6.26 and 9.14 shall survive.
ARTICLE V
REDEMPTION
SECTION 5.1. Applicability of Article.
Securities of any series which are redeemable before their Stated
Maturity shall be redeemable in accordance with their terms and (except as
otherwise specified as contemplated by Section 3.1(a) for Securities of any
series) in accordance with this Article.
SECTION 5.2. Notices to Trustee.
If the Company elects to redeem all or any part of the Securities of
any series, it shall notify the Trustee and the Paying Agent in writing of the
redemption date and the principal amount of Securities of such series to be
redeemed.
The Company shall give each notice provided for in this Section 5.2 at
least 75 days before the redemption date (unless a shorter notice shall be
agreed to by the Trustee in writing), together with an Officers' Certificate
stating that such
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55
redemption shall comply with the conditions contained herein and in the
Securities being redeemed.
SECTION 5.3. Selection of Securities To Be Redeemed.
If less than all of the Securities of any series are to be redeemed,
the Trustee shall select the Securities of such series to be redeemed in
compliance with the requirements of the principal national securities exchange,
if any, on which the Securities being redeemed are listed or, if the Securities
are not listed on a national securities exchange, on a pro rata basis, by lot or
by such method as the Trustee shall deem fair and appropriate; provided, that no
Securities of $1,000 or less shall be redeemed in part.
The Trustee shall make the selection from the Outstanding Securities
of the series of Securities being redeemed not previously called for redemption.
The Trustee shall promptly notify the Company in writing of such Securities and,
in the case of Securities selected for partial redemption, the principal amount
to be redeemed. The Trustee may select for redemption portions (equal to $1,000
or any integral multiple thereof) of the principal of Securities that have
denominations larger than $1,000. The Securities and portions of them the
Trustee selects shall be in amounts of $1,000 or integral multiples of $1,000.
Provisions of this Indenture that apply to Securities called for redemption also
apply to portions of Securities called for redemption.
SECTION 5.4. Notice of Redemption.
At least 30 days but not more than 60 days prior to a redemption date
(but, in the case of any redemption of 1998 Securities pursuant to Section
5.8(c), in no event more than 90 days after the occurrence of the applicable
Change of Control), the Company shall mail or cause the mailing of a notice of
redemption by first-class mail to each Holder of Securities to be redeemed at
its registered address.
The notice shall identify the Securities to be redeemed and shall
state:
(1) the redemption date;
(2) the redemption price and the amount of accrued interest, if any,
to be paid;
(3) the name and address of the Paying Agent;
(4) that the Securities called for redemption must be surrendered to
the Paying Agent to collect the redemption price and accrued interest, if
any;
(5) that, unless the Company defaults in making the redemption
payment, interest on Securities called for redemption ceases to accrue on
and
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56
after the redemption date and the only remaining right of the Holders is to
receive payment of the redemption price upon surrender to the Trustee or
the Paying Agent of the Securities redeemed;
(6) if any Security is being redeemed in part, the portion of the
principal amount (equal to $1,000 or any integral multiple thereof) of such
Security to be redeemed and that, on and after the redemption date, upon
surrender of such Security, a new Security or Securities in principal
amount equal to the unredeemed portion thereof shall be issued without
charge to the Holder; and
(7) if less than all of the Securities of any series are to be
redeemed, the identification of the particular Securities of such series
(or portion thereof) to be redeemed as well as the aggregate principal
amount of such series of Securities to be redeemed and the aggregate
principal amount of Securities of such series estimated to be outstanding
after the redemption.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at the Company's expense.
SECTION 5.5. Effect of Notice of Redemption.
Once notice of redemption is mailed, Securities called for redemption
become due and payable on the redemption date and at the redemption price and
shall cease to bear interest from and after the redemption date (unless the
Company shall default in the payment of the redemption price or accrued
interest). Upon surrender to the Paying Agent, such Securities shall be paid at
the redemption price, plus accrued interest to the redemption date; provided,
that if the redemption date is also an Interest Payment Date, then the interest
payable on such date shall be paid to the Holder of record on the next preceding
Regular Record Date relating to such Interest Payment Date.
SECTION 5.6. Deposit of Redemption Price.
At least one Business Day prior to any redemption date, the Company
shall deposit with the Paying Agent in immediately available funds money
sufficient to pay the redemption price of and accrued interest on all Securities
or portions thereof to be redeemed on the redemption date.
If any Security surrendered for redemption in the manner provided in
the Securities shall not be so paid on the redemption date due to the failure of
the Company to deposit sufficient funds with the Paying Agent, interest shall
continue to accrue from the redemption date until such payment is made on the
unpaid principal and, to the extent lawful, on any interest not paid on such
unpaid principal, in each case at the date and in the manner provided in the
Securities which were to be redeemed.
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57
SECTION 5.7. Securities Redeemed in Part.
Upon surrender of a Security that is redeemed in part, the Company
shall issue and the Trustee shall authenticate for the Holder a new Security of
the same series equal in principal amount to the unredeemed portion of the
Security surrendered.
SECTION 5.8. Optional Redemption of the 1998 Securities.
(a) Except as otherwise described below, the Company may not redeem
the 1998 Securities prior to May 15, 2003. On and after May 15, 2003, the
Company may, at its option, redeem the 1998 Securities, in whole or in part,
from time to time, at the redemption prices set forth below (expressed as
percentage of the principal amount thereof), in each case together with accrued
and unpaid interest, if any, to the date of redemption, if redeemed during the
twelve-month period beginning on May 15 of the years indicated below:
YEAR PERCENTAGE
---- ----------
2003 104.750%
2004 103.167%
2005 101.583%
2006 and thereafter 100.000%
provided, that if the date fixed for redemption is May 15 or November 15, then
the interest payable on such date shall be paid to the Holder of record on the
next preceding May 1 or November 1.
(b) Prior to May 15, 2001, the Company may, at its option, from time
to time, redeem up to 35% of the original aggregate principal amount of the 1998
Securities at a redemption price equal to 109.500% of the principal amount
thereof, together with accrued and unpaid interest, if any, to the date of
redemption with all or a portion of the net proceeds of public sales of Common
Stock; provided, that at least 65% of the original aggregate principal amount of
the 1998 Securities remains outstanding immediately after the occurrence of such
redemption; and provided, further, that such redemption shall occur within 60
days of the date of the closing of the related sale of Common Stock.
(c) At any time prior to May 15, 2003, the Company may, at its
option, redeem the 1998 Securities, in whole but not in part, upon the
occurrence of a Change of Control, at a redemption price equal to 100% of the
principal amount thereof, together with the Applicable Premium as of, and
accrued and unpaid interest, if any, to, the date of redemption.
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58
ARTICLE VI
COVENANTS
SECTION 6.1. Payment of Securities.
The Company shall pay, or cause to be paid, the principal of and
interest on each series of Securities on the dates and in the manner provided in
such series of Securities and this Indenture. If any Securities are not
represented by one or more global Securities, an installment of principal or
interest with respect to such Securities shall be considered paid on the date
due if the Trustee or Paying Agent (other than the Company or any Subsidiary)
holds on that date money in immediately available funds designated for and
sufficient to pay such installment. The Company agrees with the Trustee to
deposit such funds with the Trustee or Paying Agent prior to the close of
business on the Business Day immediately preceding the date such payment is due.
Unless otherwise provided pursuant to Section 3.1(a), the Company
shall pay interest on overdue principal and (to the extent permitted by law) on
overdue installments of interest with respect to any Security at the rate at
which the Securities of the same series bear interest.
SECTION 6.2. Maintenance of Office or Agency.
The Company shall maintain in the City of New Orleans, Louisiana an
office or agency where Securities may be surrendered for registration of
transfer or exchange or for presentation for payment and where notices and
demands to or upon the Company in respect of the Securities and this Indenture
may be served. The Company shall give prompt written notice to the Trustee of
the location, and any change in the location, of such office or agency. If at
any time the Company shall fail to maintain any such required office or agency
or shall fail to furnish the Trustee with the address thereof, such
presentations, surrenders, notices and demands may be made or served at the
address of the Trustee as set forth in Section 1.5 hereof.
The Company may also from time to time designate one or more other
offices or agencies where the Securities may be presented or surrendered for any
or all such purposes and may from time to time rescind such designations;
provided, however, that no such designation or rescission shall in any manner
relieve the Company of its obligation to maintain an office or agency in the
City of New Orleans, Louisiana for such purposes. The Company shall give prompt
written notice to the Trustee of such designation or rescission and of any
change in the location of any such other office or agency.
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59
The Company hereby initially designates the Corporate Trust Office of
the Trustee located at 210 Baronne Street, New Orleans, Louisiana 70112 as such
offices of the Company in accordance with Sections 3.5 and 9.9 hereof.
SECTION 6.3. Corporate Existence.
Subject to Article VII, the Company shall do or cause to be done, at
its own cost and expense, all things necessary to, and shall cause each
Subsidiary to, preserve and keep in full force and effect the corporate
existence and the rights (charter and statutory), licenses and franchises of the
Company and its Subsidiaries; provided, however, that the Company shall not be
required to preserve any such right, license or franchise, or the corporate
existence of any Subsidiary, if in the judgment of the Board of Directors of the
Company, (a) such preservation or existence is not desirable in the conduct of
business of the Company or such Subsidiary and (b) the loss of such right,
license or franchise or the dissolution of such Subsidiary is not adverse in any
material respect to the Holders.
SECTION 6.4. Payment of Taxes and Other Claims; Tax Consolidation.
The Company shall pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (a) all taxes, assessments and
governmental charges levied or imposed upon the Company or upon the income,
profits or property of the Company or any Subsidiary, and (b) all lawful claims
for labor, materials and supplies that, if unpaid, might by law become a Lien
upon the property of the Company or any Subsidiary; provided, however, that,
subject to the terms of the applicable Security Documents, the Company shall not
be required to pay or discharge or cause to be paid or discharged any such tax,
assessment, charge or claim whose amount, applicability or validity is being
contested in good faith by appropriate proceedings and for which adequate
reserves (in the good faith judgment of the Board of Directors of the Company)
have been made.
SECTION 6.5. Compliance Certificates.
(a) The Company shall deliver to the Trustee, within 45 days after
the end of each of the respective first three quarters of the Company's fiscal
year, and within 90 days after the end of its respective fiscal year, Officers'
Certificates of the Company stating (i) that a review of the activities of the
Company during the preceding fiscal quarter or year, as the case may be, has
been made under the supervision of the signing officers with a view to
determining whether the Company has kept, observed, performed and fulfilled its
obligations under this Indenture, and further stating, as to each such
Responsible Officer signing such certificate, (ii) that, to the best knowledge
of such Responsible Officer, the Company has kept, observed, performed and
fulfilled each and every covenant contained in this Indenture and is not in
default in the performance or observance of any of the terms, provisions and
conditions hereof (or, if a Default or Event of Default shall have occurred,
describing all such Defaults or Events
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60
of Default of which such Responsible Officer may have knowledge, their status
and what action the Company is taking or proposes to take with respect thereto)
and (iii) that to the best of his knowledge no event has occurred and remains in
existence by reason of which payments on account of the principal of or
interest, if any, on the Securities are prohibited (or, if such event has
occurred, describing the event and what action the Company is taking or proposes
to take with respect thereto).
(b) So long as (and to the extent) not contrary to the then current
recommendations of the American Institute of Certified Public Accountants, the
annual financial statements delivered pursuant to Section 6.6 shall be
accompanied by a written statement of the Company's independent public
accountants that in making the examination necessary for certification of such
annual financial statements nothing has come to their attention that would lead
them to believe that the Company has violated any provisions of this Indenture
or, if any such violation has occurred, specifying the nature and period of
existence thereof, it being understood that such accountants shall not be liable
directly or indirectly to any Person for any failure to obtain knowledge of any
such violation that would not be disclosed in the course of an audit examination
conducted in accordance with generally accepted auditing standards.
(c) The Company shall, so long as any of the Securities of any series
are outstanding, deliver to the Trustee, forthwith upon any officer becoming
aware of any Default or Event of Default, an Officers' Certificate specifying
such Default or Event of Default and what action the Company is taking or
proposes to take with respect thereto.
SECTION 6.6. SEC Reports.
(a) In accordance with the provisions of Section 314(a) of the Trust
Indenture Act, at any time that the Company is required to file periodic reports
with the Commission pursuant to Section 13 or 15(d) of the Exchange Act, the
Company shall file with the Trustee, within 15 days after it files them with the
Commission, copies of the annual reports and of the information, documents and
other reports (or copies of such portions of any of the foregoing as the
Commission may by rules and regulations prescribe) which the Company is required
to file with the Commission. The Company also shall comply with the other
provisions of Section 314(a) of the Trust Indenture Act. In addition, at any
time that the Company has a class of equity securities registered under the
Exchange Act, the Company shall cause its annual report to stockholders and any
quarterly or other financial reports furnished by it to stockholders generally
to be filed with the Trustee and mailed, no later than the date such materials
are mailed or made available to the Company's stockholders, to the Holders at
their addresses as set forth in the Security Register.
(b) At any time that the Company does not have a class of securities
registered under the Exchange Act, the Company shall furnish to the Trustee
(who is hereby authorized and directed to furnish a copy thereof to any person
requesting the
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61
same in writing) and shall mail (or cause to be mailed by the Trustee at the
Company's expense) to each of the Holders at their addresses as set forth in the
Security Register maintained by the Security Registrar within 60 days after the
close of each of the first three quarters of each fiscal year and within 105
days after the close of each fiscal year consolidated balance sheets of the
Company as of the end of each such quarter or fiscal year, as the case may be,
and consolidated statements of income and changes in financial position of the
Company for the period commencing at the end of the Company's previous fiscal
year and ending with the end of such quarter or fiscal year, as the case may be,
all such financial statements setting forth in comparative form the
corresponding figures for the corresponding period of the preceding fiscal year,
all in reasonable detail and duly certified (subject to year-end adjustments) by
a Responsible Officer of the Company as having been prepared in accordance with
GAAP consistently applied, and, in the case of annual consolidated financial
statements, certified by independent public accountants of recognized standing
and a discussion and analysis of the results of operations and financial
condition of the Company and its subsidiaries for the periods presented, which
discussion and analysis shall be prepared by the management of the Company in a
manner responsive to the requirements of Item 303 (or any successor item or
section) of Regulation S-K. All financial statements shall be prepared in
accordance with GAAP consistently applied, except for changes with which the
Company's independent public accountants concur and except that quarterly
statements may be subject to year-end adjustments.
SECTION 6.7. Waiver of Stay, Extension or Usury Laws.
The Company covenants (to the extent that it may lawfully do so) that
it shall not at any time insist upon, plead, or in any manner whatsoever claim
or take the benefit or advantage of, any stay or extension law or any usury law
or other law that would prohibit or forgive the Company from paying all or any
portion of the principal of or interest on the Securities of any series as
contemplated therein or herein, wherever enacted, now or at any time hereafter
in force, or that may affect the covenants or the performance of this Indenture;
and (to the extent that it may lawfully do so) the Company hereby expressly
waives all benefit or advantage of any such law, and covenants that it shall not
hinder, delay or impede the execution of any power herein granted to the Trustee
but shall suffer and permit the execution of every such power as though no such
law had been enacted.
SECTION 6.8. Maintenance of Properties; Insurance; Books and Records;
Compliance with Law.
(a) Subject to the applicable provisions of the Security Documents,
the Company shall, and shall cause each Subsidiary to, at all times cause all
properties used or useful in the conduct of its business to be maintained and
kept in good working order and condition, ordinary wear and tear excepted, and
shall cause to be made all necessary (in the good faith opinion of management)
repairs, renewals, replacements, additions, betterments and improvements
thereto.
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62
(b) Except as provided in the Mortgage with respect to the
Collateral, the Company shall and shall cause each Subsidiary to maintain
insurance with insurance companies or associations with a rating of "A-" or
better, as established by Best's Rating Guide (or an equivalent rating with such
other publication of a similar nature as shall be in current use), subject to
the provisions of the applicable Security Documents, in such amounts and
covering such risks as are usually and customarily carried with respect to
similar facilities according to their respective locations.
(c) The Company shall and shall cause each Subsidiary to keep proper
books of record and account in which full and correct entries shall be made of
all financial transactions and the assets and business of the Company and each
Subsidiary, in accordance with GAAP consistently applied to the Company and its
Subsidiaries taken as a whole.
(d) The Company shall and shall cause each Recourse Subsidiary to
comply with all statutes, laws, ordinances, or government rules and regulations
to which it is subject, non-compliance with which would materially and adversely
affect the business, prospects, earnings, properties, assets or condition
(financial or otherwise) of the Company and its Subsidiaries taken as a whole.
SECTION 6.9. Limitations on Indebtedness.
(a) So long as any 1998 Securities shall remain Outstanding, the
Company shall not, and shall not permit any of its Recourse Subsidiaries,
directly or indirectly, to incur, create, assume, guarantee, become liable,
contingently or otherwise, with respect to, or otherwise become responsible for
the payment of (each event, an "incurrence") any Indebtedness unless (a) the pro
forma EBITDA Ratio of the Company and its Recourse Subsidiaries for the
Reference Period prior to the incurrence of such Indebtedness (taken as a whole
and calculated on the assumptions that such Indebtedness had been incurred and
the proceeds thereof had been applied on the first day of the Reference Period)
would have been greater than 2.00 to 1.00 and (b) no Default or Event of Default
shall have occurred and be continuing at the time of, or after giving effect to,
the incurrence of such Indebtedness.
(b) The limitation set forth in paragraph (a) shall not apply to:
(i) Indebtedness evidenced by the issuance of the 1998 Securities
and the obligations, which relate to such issuance, of the Company and its
Subsidiaries under the Indenture in an aggregate amount not to exceed
$110,000,000;
(ii) Indebtedness of the Company or any Recourse Subsidiary
issued to the Company or any Wholly-Owned Recourse Subsidiary; provided,
that (a) any such Indebtedness is unsecured and is subordinated to the
Securities and (b) any subsequent issuance or transfer of any Capital Stock
or any other event which
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63
results in any such Wholly-Owned Recourse Subsidiary ceasing to be a
Wholly-Owned Recourse Subsidiary or any transfer of such Indebtedness by
any Wholly-Owned Recourse Subsidiary to someone not a Wholly-Owned Recourse
Subsidiary will, in each case, be deemed an incurrence of Indebtedness
under the Indenture;
(iii) Indebtedness of the Company or any Recourse Subsidiary
which is existing immediately following the issuance of the 1998 Initial
Notes and the application of the proceeds therefrom;
(iv) Indebtedness incurred under the New Credit Facility, but not
to exceed the greater of $50,000,000 or the sum of (a) 85% of the value of
the Company's consolidated qualifying accounts receivable and (b) 60% of
the value of the Company's consolidated qualifying inventory (with each
such amount to be determined in accordance with the terms of the New Credit
Facility), less the amount of Indebtedness incurred pursuant to clause
(viii) below;
(v) Indebtedness incurred with respect to Interest Rate
Agreements covering floating rate Indebtedness of the Company that is
permitted under this covenant to the extent the notional principal amount
of such Interest Rate Agreements does not exceed the principal amount of
the Indebtedness to which such Interest Rate Agreements relate;
(vi) Indebtedness incurred with respect to the deferred purchase
price of machinery and equipment related to the business of the Company or
its Recourse Subsidiaries at the time of purchase and other purchase money
obligations (including Capitalized Lease Obligations) not to exceed, in the
aggregate, $5,000,000; provided, that the maturity of any such obligation
does not exceed the anticipated useful life of the asset being financed;
(vii) Indebtedness arising from the honoring of a check, draft or
similar instrument drawn against insufficient funds; provided, that such
indebtedness is extinguished within two Business Days of its incurrence;
(viii) the incurrence by an Asset Backed Entity of Indebtedness
in a Qualified Asset Backed Transaction that is nonrecourse to the Company
or any Subsidiary of the Company (except for Standard Securitization
Undertakings) in an aggregate principal amount outstanding at any one time
not to exceed the amount permitted under clause (iv) above;
(ix) Indebtedness of a Recourse Subsidiary outstanding on the
date on which such Recourse Subsidiary was acquired by the Company;
provided, however, that at the time such Recourse Subsidiary is acquired by
the Company, the Company would have been able to incur $1.00 of additional
Indebtedness
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64
pursuant to the immediately preceding paragraph after giving effect to the
incurrence of such Indebtedness pursuant to this clause (ix);
(x) Indebtedness (A) in respect of performance bonds, bankers'
acceptances and surety or appeal bonds provided by the Company or any of
its Recourse Subsidiaries to their customers in the ordinary course of
their business, (B) in respect of performance bonds or similar obligations
of the Company or any of its Recourse Subsidiaries for or in connection
with pledges, deposits or payments made or given in the ordinary course of
business in connection with or to secure statutory, regulatory or similar
obligations, including obligations under health, safety or environmental
obligations and (C) arising from Guarantees to suppliers, lessors,
licensees, contractors, franchisees or customers of obligations (other than
Indebtedness) incurred in the ordinary course of business;
(xi) Indebtedness arising from agreements providing for
indemnification, adjustment of purchase price or similar obligations, or
from Guarantees or letters of credit, surety bonds or performance bonds
securing any obligations of the Company or any of its Recourse Subsidiaries
pursuant to such agreements, in each case incurred in connection with the
disposition of any business assets or Recourse Subsidiary of the Company
(other than Guarantees of Indebtedness or other obligations incurred by any
person acquiring all or any portion of such business assets or Recourse
Subsidiary of the Company for the purpose of financing such acquisition) in
a principal amount not to exceed the gross proceeds actually received by
the Company or any of its Recourse Subsidiaries in connection with such
disposition;
(xii) Indebtedness incurred in connection with Private Activity
Bonds, as such term is defined under the Internal Revenue Code, in an
aggregate principal amount not to exceed $5,000,000;
(xiii) other Indebtedness of the Company and its Recourse
Subsidiaries not to exceed, in the aggregate, $15,000,000; and
(xiv) any renewal, extension or refinancing (and subsequent
renewals, extensions or refinancings) of any Indebtedness of the Company
and its Recourse Subsidiaries permitted under the preceding paragraph or
under clauses (i), (iii), (vi), (ix), (x) or (xii) above; provided,
however, that in no event may Indebtedness of the Company be renewed,
extended or refinanced by means of Indebtedness of any Recourse Subsidiary
of the Company pursuant to this clause (xiv).
(c) In addition to the limitation imposed pursuant to Section 6.9(a)
and so long as any 1998 Securities remain Outstanding, once Securities in an
aggregate principal amount of $140,000,000 have been issued under this Indenture
(not including Securities authenticated and delivered upon registration or
transfer of, and in exchange for, or in lieu of, other Securities), any further
issuance of Securities hereunder shall be
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65
subject to the further requirements that (i) the proceeds of such issuance shall
be used to finance the construction of or improvements to the Mortgaged
Facility, (ii) Standard & Poors Rating Service and Moody's Investor Service
shall have confirmed their ratings of the 1998 Securities assuming such further
issuance Securities as contemplated for Mortgaged Facility improvements at
ratings not below the ratings assigned to such Securities immediately prior to
the public announcement or disclosure to such rating agencies of the Company's
plan or intention for such construction, (iii) the Mortgaged Facility
improvements to be constructed must, as conclusively established by a Board
Resolution, be intended to add supplemental production, handling or performance
capacity to the then existing Mortgaged Facility (although a portion of the
intended construction may simply replace existing improvements and Fixtures and
Equipment to the extent ancillary to such construction), (iv) the Mortgage shall
be amended prior to or contemporaneously with such additional issuance to
increase the maximum amount secured by the Mortgage by an amount equal to the
aggregate principal amount of the additional issuance of Securities and (v)
prior to or substantially concurrently with such further issuance of Securities,
the Company shall provide an endorsement to the original mortgagee's policy
issued in connection with the issuance of the 1998 Securities (or an additional
mortgagee's title insurance policy in substantially the same form as the
mortgagee's title policy issued in connection with the issuance of the 1998
Securities) which provides mortgagee's title insurance for the benefit of all
Outstanding Securities with respect to the Mortgaged Facility improvements in
question in an amount equal to the lesser of (A) the aggregate principal amount
of the Securities issued or to be issued in such further issuance less the
estimated fair market value of the personal property to be included in the
Mortgaged Facility improvements to be financed by such Securities or (B) the
estimated fair market value of the real property (including all real property
improvements) to be included in the Mortgaged Facility improvements to be
financed by such further issuance of Securities, in each instance under clauses
(iv)(A) or (iv)(B), as conclusively established by a Board Resolution. Pending
application in accordance with clause (i) above of the proceeds from any such
further issuance of Securities, such proceeds will be retained by the Collateral
Agent in the Collateral Account subject to a first priority Lien, subject only
to Permitted Liens, in favor of the Collateral Agent for the benefit of the
Trustee and the Holders. Such proceeds shall be disbursed in accordance with
Section 13.6.
SECTION 6.10. Limitation on Liens.
So long as any 1998 Securities shall remain Outstanding, the Company
shall not, and shall not permit, cause or suffer any of its Recourse
Subsidiaries to, create, incur, assume or suffer to exist any Liens of any kind
upon any property or assets of the Company or any Recourse Subsidiary, whether
now owned or hereafter acquired, except for Permitted Liens.
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66
SECTION 6.11. Limitation on the Issuance of Preferred Stock by Recourse
Subsidiaries.
So long as any 1998 Securities shall remain Outstanding, the Company
shall not permit any of its Recourse Subsidiaries to issue, directly or
indirectly, any Preferred Stock, except:
(i) Preferred Stock issued to and held by the Company or a
Wholly-Owned Recourse Subsidiary, except that any subsequent issuance or
transfer of any Capital Stock or any other event which results in any
Wholly-Owned Recourse Subsidiary ceasing to be a Wholly-Owned Recourse
Subsidiary or any transfer of such Preferred Stock by any Wholly-Owned
Recourse Subsidiary will, in each case, be deemed an issuance of Preferred
Stock under the Indenture;
(ii) Preferred Stock issued by a Person prior to the time (a)
such Person became a Recourse Subsidiary, (b) such Person merges with or
into a Recourse Subsidiary or (c) another Recourse Subsidiary merges with
or into such Person (in a transaction in which such Person becomes a
Recourse Subsidiary), in each case if such Preferred Stock was not incurred
in anticipation of such transaction; and
(iii) Preferred Stock (other than Disqualified Stock) which
is exchanged for Preferred Stock permitted to be outstanding pursuant to
clauses (i) and (ii) or which is used to refinance Indebtedness of a
Recourse Subsidiary (or any extension, renewal or refinancing thereof),
having a liquidation preference not to exceed the liquidation preference of
the Preferred Stock or the principal amount of the Indebtedness so
exchanged or refinanced; provided, that the Preferred Stock so issued in
exchange (i) shall have a stated maturity not earlier than the stated
maturity of the Indebtedness or Preferred Stock being refunded or
refinanced and (ii) shall have an Average Life equal to or greater than the
remaining Average Life of the Indebtedness or Preferred Stock being
refunded or refinanced.
SECTION 6.12. Intentionally Omitted.
SECTION 6.13. Limitations on Restricted Payments.
So long as any 1998 Securities shall remain Outstanding, neither the
Company nor any of its Recourse Subsidiaries shall, directly or indirectly,
declare, pay or set apart for payment, any Restricted Payment, if after giving
effect thereto: (i) a Default or an Event of Default shall have occurred and be
continuing; (ii) the Company would not be permitted to incur or become liable
with respect to at least $1.00 of additional Indebtedness as determined in
accordance with Section 6.9(a); or (iii) the aggregate amount of all Restricted
Payments made by the Company or any of its Recourse Subsidiaries (the amount
expended or distributed for such purposes, if other than in cash, to be valued
at its fair market value as determined in good faith by the
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67
Board of Directors of the Company, whose determination shall be conclusive and
evidenced by a Board Resolution delivered to the Trustee) from and after the
date of the Indenture, through and including the date on which such Restricted
Payment is made, would exceed the sum of:
(i) the aggregate of 50% of the Company's Consolidated Net Income
accrued for the period (taken as one accounting period) (or if such
aggregate Consolidated Net Income shall be a deficit, minus 100% of the
amount of such deficit) commencing with the first full fiscal quarter after
the date of this Indenture to and including the fiscal quarter ended
immediately prior to the date of such calculation; and
(ii) the aggregate net cash proceeds or the fair market value of
marketable securities received by the Company after the date of this
Indenture from the issuance or sale (other than to a Recourse Subsidiary)
by the Company of its Capital Stock (excluding Disqualified Stock, but
including Capital Stock other than Disqualified Stock issued upon
conversion of, or exchange for, Disqualified Stock or securities other than
its Capital Stock), and upon the exercise of warrants and rights to
purchase such Capital Stock (the "Aggregate Cash Proceeds"). For purposes
of this clause (ii), the aggregate net cash proceeds received by the
Company (x) from the issuance of its Capital Stock upon the conversion of,
or exchange for, securities evidencing Indebtedness of the Company, shall
be calculated on the assumption that the gross proceeds from such issuance
are equal to the aggregate principal amount (or, if discounted
Indebtedness, the aggregate accreted amount) of Indebtedness evidenced by
such securities converted or exchanged and (y) upon the conversion or
exchange of other securities of the Company shall be equal to the aggregate
net proceeds of the original sale of the securities so converted or
exchanged if such proceeds of such original sale were not previously
included in any calculation for the purposes of this clause (ii), plus any
additional sums payable upon conversion or exchange.
Notwithstanding the foregoing, this provision shall not prevent (i)
the payment of any dividend within 60 days after the date of its declaration (if
the declaration of such dividend was permitted by the foregoing provision at the
time of such declaration); (ii) the repurchase, retirement or other acquisition
of any shares of the Company's Capital Stock, or any option, warrant or other
right to purchase shares of the Company's Capital Stock, or the repayment of any
subordinated Indebtedness of the Company solely in exchange for shares of, or
out of the proceeds of a substantially contemporaneous issuance of, Capital
Stock (other than Disqualified Stock); provided, however, that such purchase,
retirement or acquisition shall be excluded from subsequent calculations of
Restricted Payments; (iii) the contributions to or other Investments in a
Majority-Owned Non-Recourse Subsidiary in an aggregate amount not to exceed
$15,000,000; (iv) the defeasance, redemption or repurchase of subordinated
Indebtedness with the net cash proceeds from an incurrence of
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subordinated refinancing Indebtedness, provided, however, that such defeasance,
redemption or repurchase shall be excluded from subsequent calculations of
Restricted Payments; (v) distributions or payments of Receivables Fees,
provided, however, that such distributions or payments shall be excluded from
subsequent calculations of Restricted Payments; (vi) Permitted Investments,
provided, however, that Permitted Investments shall be excluded from subsequent
calculations of Restricted Payments; (vii) Permitted Payments, provided,
however, that Permitted Payments shall be excluded from subsequent calculations
of Restricted Payments; (viii) the contribution to or other Investment by the
Company in a Wholly-Owned Non-Recourse Subsidiary; provided, that the amount of
such contribution or Investment, together with the amount of all other
contributions or Investments pursuant to this clause (viii), shall not exceed
the amount of Aggregate Cash Proceeds; and, provided, further, that such
contribution or Investment is otherwise permitted under the first paragraph of
this Section 6.13 without giving effect to clause (ii) of such paragraph; (ix)
the contribution of the Released Property to a Non-Recourse Subsidiary in
exchange for an equity interest therein; provided, that at the time of such
contribution, such land is not used or necessary in the business of the Company
or any of its Recourse Subsidiaries as conclusively determined by a Board
Resolution; and (x) other Restricted Payments not to exceed $5,000,000 in the
aggregate.
SECTION 6.14. Limitations on Transactions with Stockholders and Affiliates.
(a) So long as any 1998 Securities shall remain Outstanding, the
Company shall not, and shall not permit any of its Recourse Subsidiaries to,
enter into or permit to exist any transaction (or series of related
transactions), including, without limitation, any loan, advance, guarantee or
capital contribution to, or for the benefit of, or any sale, purchase, lease,
exchange or other disposition of any property or the rendering of any service,
or any other direct or indirect payment, transfer or other disposition (a
"Transaction"), involving payments, with any holder of 5% or more of any class
of Capital Stock of the Company or with any Affiliate of such holder or with any
Affiliate of the Company (other than a Wholly-Owned Recourse Subsidiary of the
Company), on terms and conditions less favorable to the Company or such Recourse
Subsidiary, as the case may be, than would be available at such time in a
comparable Transaction in arm's length dealings with an unrelated Person as
determined by the Board of Directors of the Company or a Recourse Subsidiary,
such determination, in the case of any transaction (or series of related
transactions) involving aggregate consideration in excess of $75,000 to be
evidenced by a Board Resolution. Notwithstanding the foregoing, the Company
shall be entitled to grant gratuitous Permitted Easements in connection with the
construction and operation of Released Property Facilities and shall be entitled
to make capital contributions to Subsidiaries to the extent permitted pursuant
to Section 6.13.
(b) The provisions of paragraph (a) will not apply to:
(i) Restricted Payments otherwise permitted pursuant to the
Indenture;
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(ii) transactions between the Company and one or more of its
Recourse Subsidiaries; provided, that such transactions are not otherwise
prohibited by the Indenture;
(iii) reasonable and customary fees and compensation
(including amounts and other benefits paid pursuant to employee benefit
plans) paid to, and indemnity provided on behalf of, officers, directors,
employees or consultants of the Company or any Subsidiary, as determined by
the Board of Directors of the Company or any Subsidiary;
(iv) payments for goods and services purchased in the ordinary
course of business on an arms-length basis;
(v) transactions effected as part of a Qualified Asset Backed
Transaction; and
(vi) the provision of, and the payment for, shared
administrative services to Affiliates in the ordinary course of business.
SECTION 6.15. Restrictions on Asset Sales.
(a) So long as any 1998 Securities shall remain Outstanding, the
Company shall not, and shall not permit any of its Recourse Subsidiaries to,
make any Asset Sale, unless (i) the Company or such Recourse Subsidiary, as the
case may be, receives consideration at the time of such Asset Sale at least
equal to the fair market value (as determined in good faith by its Board of
Directors or, in the case of any Asset Sale involving aggregate consideration of
$125,000 or less, by the Chief Financial Officer of the Company or, in the case
of any Asset Sale involving aggregate consideration of $25,000 or less, by any
Vice President) of the Capital Stock or assets to be sold and (ii) the
consideration therefor received by the Company or such Recourse Subsidiary is in
the form of cash, Cash Equivalents or assets that are useful in the steel
business ("Steel Business Assets"); provided that (A) the amount of (x) any
liabilities (as shown on the Company's or such Recourse Subsidiary's most recent
balance sheet) of the Company or any Recourse Subsidiary (other than contingent
liabilities and liabilities that are by their terms subordinated to the
Securities or any guarantee thereof) that are assumed by the transferee of any
such assets pursuant to a customary novation agreement that releases the Company
or such Recourse Subsidiary from further liability and (y) any non-cash
consideration received by the Company or any such Recourse Subsidiary from such
transferee that is converted by the Company or such Recourse Subsidiary into
cash within 180 days of closing such Asset Sale, shall be deemed to be cash for
purposes of this provision (to the extent of the cash received) and (B) the
Company or such Recourse Subsidiary may accept consideration (including
consideration in the form of assumption of liabilities) from such
Asset Sale in other than cash, Cash Equivalents and Steel Business Assets if the
aggregate fair market value (as determined in good faith by the Company's Board
of Directors and evidenced by a Board Resolution) of all
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consideration from all Asset Sales since the date of this Indenture that is
other than cash, Cash Equivalents and Steel Business Assets ("Other
Consideration") at the time of such Asset Sale, less the sum of the amount of
any cash and Cash Equivalents and the fair market value (as determined in good
faith by the Company's Board of Directors and evidenced by a Board Resolution)
of any Steel Business Assets realized from, or received in exchange for, any
Other Consideration prior to the time of such Asset Sale, does not exceed 5% of
total assets at the time of such Asset Sale.
(b) Within twelve months of the date that the Available Amount equals
or exceeds $5,000,000, the Company shall elect to either (A) apply or cause to
be applied the Available Amount to a Permitted Related Acquisition or the
commencement thereof (provided that such project is completed within a
reasonable time of the commencement thereof), (B) make an offer (an "Asset Sale
Offer") to purchase 1998 Securities from all Holders thereof and, in the case of
an Asset Sale of Collateral and to the extent required by the terms of any other
Securities issued hereunder, from all Holders thereof (treating the Holders of
all Securities as one group for such purpose) up to an amount equal to the
Available Amount (rounded to the next lowest multiple of $1,000) at a purchase
price equal to 100% of the principal amount thereof plus accrued interest
thereon, if any, to the date of purchase, (C) repay senior Indebtedness, other
than Indebtedness represented by the 1998 Securities, from Net Cash Proceeds of
Asset Sales other than sales of Collateral or (D) any combination of clauses
(A), (B) and (C) above; provided, that (i) property acquired at any time as a
Permitted Related Acquisition (other than a Permitted Related Acquisition of
property securing the New Credit Facility) that has been acquired with
Collateral Proceeds shall be subject to a first priority Lien in favor of the
Collateral Agent for the benefit of the Trustee and the Holders; (ii) pending
application to a Permitted Related Acquisition or an Asset Sale Offer or
distribution under Section 13.2, the Collateral Proceeds, together with all
Condemnation Awards and Net Insurance Proceeds received by the Collateral Agent,
will be retained by the Collateral Agent in the Collateral Account subject to a
first priority Lien in favor of the Collateral Agent for the benefit of the
Trustee and the Holders; and (iii) notwithstanding the foregoing, as long as no
Event of Default shall have occurred and be continuing, (A) the Company and its
Recourse Subsidiaries, in the aggregate, shall be permitted to retain $1,000,000
of Net Cash Proceeds from Asset Sales, (B) to the extent that Holders do not
subscribe to an Asset Sale Offer, the Company may retain the unutilized
Available Amount and (C) the Company and its Recourse Subsidiaries collectively
may retain the Net Cash Proceeds from the sale of any machinery, equipment,
furniture, apparatus, tools or implements or other similar property subject to
the Lien of the Security Documents, which may have become worn out, obsolete or
no longer necessary to the operation of the Company's or its Recourse
Subsidiaries' business ("Obsolete Assets") in an aggregate amount not to exceed
$2,000,000 in any year, in the case of clauses (A), (B) and (C) in this clause
(iii), free of the Lien of the Security Documents, and such retained amounts
shall be released from the Collateral Account promptly upon demand.
Notwithstanding anything to the contrary in this Indenture, neither the Company
nor any of its Recourse Subsidiaries
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shall apply the proceeds of any Collateral which is a part of the Mortgaged
Facility to the purchase of collateral securing the New Credit Facility.
(c) The Company shall provide the Trustee with notice of any Asset
Sale Offer at least 10 days before any notice of an Asset Sale Offer is mailed
to Holders of the Securities (unless shorter notice is acceptable to the
Trustee). If the Company elects to make an Asset Sale Offer, notice of such
Asset Sale Offer shall be mailed by the Company to the Holders of the Securities
subject to the Asset Sale Offer, with a copy to the Trustee and the Paying
Agent, not more than twelve months after the Available Amount equals or exceeds
$5,000,000 which notice shall specify the purchase date (which shall be no
earlier than 30 days nor later than 60 days from the date such notice is mailed
(the "Asset Sale Payment Date") and will otherwise comply with the procedures
set forth in the Indenture and the Security Documents. The Asset Sale Offer
shall remain open from the time of mailing for at least 20 Business Days and
until at least 5:00 p.m., Central time, on the Business Day immediately
preceding the Asset Sale Payment Date. The notice, which shall govern the terms
of the Asset Sale Offer, shall include such disclosures as are required by law
and shall state:
(i) that the Asset Sale Offer is being made pursuant to this
Section 6.15;
(ii) the purchase price (including the amount of accrued
interest, if any) for each Security and the Asset Sale Payment Date;
(iii) that any Security not tendered or accepted for payment
shall continue to accrue interest in accordance with the terms thereof;
(iv) that any Security accepted for payment pursuant to the Asset
Sale Offer shall cease to accrue interest after the Asset Sale Payment
Date;
(v) that Holders electing to have Securities purchased pursuant
to an Asset Sale Offer must surrender their Securities with the form
"Option of Holder to Elect Purchase" on the reverse of the Securities
completed, to the Paying Agent at the address specified in the notice prior
to 5:00 p.m., Central time, on the Business Day immediately preceding the
Asset Sale Payment Date and must complete any form letter of transmittal
proposed by the Company and acceptable to the Trustee and the Paying Agent;
(vi) that Holders shall be entitled to withdraw their elections
if the Paying Agent receives, not later than 5:00 p.m., Central time, on
the third Business Day immediately preceding the Asset Sale Payment Date, a
facsimile transmission or letter setting forth the name of the Holder, the
principal amount of Securities the Holder delivered for purchase, the
Security certificate number (if any) and a statement that such Holder is
withdrawing his election to have such Securities purchased;
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(vii) that if Securities in a principal amount in excess of the
Holders' pro rata share of the Available Amount are tendered pursuant to
the Asset Sale Offer, the Company shall purchase on a pro rata basis among
the Securities tendered (with such adjustments as may be deemed appropriate
by the Company so that only Securities in denominations of $1,000 or
integral multiples of $1,000 shall be acquired);
(viii) that Holders whose Securities are purchased only in part
shall be issued new Securities of the same series and equal in principal
amount to the unpurchased portion of the Securities surrendered; and
(ix) the instructions that Holders must follow to tender their
Securities.
On or about the Asset Sale Payment Date, the Company shall (i) accept
for payment, on a pro rata basis among the Securities tendered, Securities or
portions thereof pursuant to the Asset Sale Offer and (ii) deliver to the Paying
Agent the Securities so accepted together with an Officers' Certificate setting
forth the Securities or portions thereof tendered to and accepted for payment by
the Company. The Paying Agent shall promptly mail or deliver (or, in the case
of a Global Security, transfer immediately available funds, on the Asset Sale
Payment Date to the Depositary) to each Holder of the Securities so accepted,
payment in an amount equal to the purchase price, and the Trustee shall promptly
authenticate and mail or deliver to each such Holder a new Security of the same
series and equal in principal amount to any unpurchased portion of the
Securities surrendered upon receipt from the Company thereof. Any Security not
so accepted shall be promptly mailed or delivered by the Company to the Holder
thereof. The Company shall publicly announce the results of the Asset Sale
Offer on the first Business Day following the Asset Sale Payment Date. To the
extent the Holders' pro rata portion of an Asset Sale Offer is not fully
subscribed to by such Holders, the Company may retain (free and clear of the
Lien of this Indenture and the Security Documents) such unutilized portion. The
Paying Agent shall promptly deliver to the Company the balance of any such Trust
Moneys held by the Paying Agent after payment to the Holders as aforesaid. For
purposes of this Section 6.15, so long as the Collateral Agent is also the
Trustee, the Collateral Agent shall act as the Paying Agent and, otherwise, the
Trustee shall act as Paying Agent.
The Company shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Securities pursuant to the
Asset Sale Offer. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this Section 6.15, the Company shall
comply with the applicable securities laws and regulations and shall not be
deemed to have breached its obligations under this Section 6.15 by virtue
thereof.
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SECTION 6.16. Limitation on Dividend and Other Payment Restrictions Affecting
Recourse Subsidiaries.
So long as any 1998 Securities shall remain Outstanding, the Company
shall not, and shall not permit any of its Recourse Subsidiaries to, directly or
indirectly, create, assume or otherwise cause or suffer to exist or enter into
any agreement with any Person that would cause any consensual encumbrance or
restriction of any kind on the ability of any such Recourse Subsidiary to (a)
pay dividends, in cash or otherwise, or make any other distributions on its
Capital Stock; (b) make payments in respect of any Indebtedness owed to the
Company or any of the Company's Recourse Subsidiaries; (c) make loans or
advances to the Company or any of the Company's Recourse Subsidiaries; or (d)
transfer any of its assets to the Company or any of the Company's Recourse
Subsidiaries, other than by reason of (i) the Securities, the Indenture and the
Security Documents; (ii) restrictions existing under agreements in effect on the
date of this Indenture, including, without limitation, restrictions under the
New Credit Facility as in effect on the date of this Indenture; (iii) consensual
encumbrances or restrictions binding upon any Person at the time such Person
becomes a Recourse Subsidiary of the Company so long as such encumbrances or
restrictions are not created, incurred or assumed in contemplation of such
Person becoming a Recourse Subsidiary of the Company; (iv) restrictions existing
under any agreement which refinances or replaces any of the agreements
containing the restrictions in (ii) or (iii); provided, that the terms and
conditions of any such restrictions are not materially less favorable to the
Company or such Recourse Subsidiary than those under the agreement evidencing
the refinanced Indebtedness; (v) customary non-assignment or sublease provisions
of (A) any lease governing a leasehold interest of the Company or any Recourse
Subsidiaries or (B) any other contract or agreement of the Company or any
Recourse Subsidiary for the purchase or sale of goods or services entered into
in the ordinary course of business and involving, in the case of any contract or
agreement, payments of $1,000,000 or less in the aggregate in any fiscal year;
(vi) customary restrictions relating to assets acquired with the proceeds of a
purchase money obligation; (vii) any restrictions with respect to a Recourse
Subsidiary of the Company imposed pursuant to an agreement which has been
entered into for the sale or disposition of all or substantially all of the
Capital Stock or assets of such Recourse Subsidiary; (viii) restrictions created
in connection with a Qualified Asset Backed Transaction that, in the good faith
determination of the Board of Directors, are necessary to effect such Qualified
Asset Backed Transaction; provided, that such restrictions apply only to such
Asset Backed Entity; and (ix) customary provisions contained in joint venture
agreements and other similar agreements entered into in the ordinary course of
business.
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SECTION 6.17. Limitation on Sale and Leaseback Transactions.
So long as any 1998 Securities shall remain Outstanding, the Company
shall not, and shall not permit any of its Subsidiaries to, enter into, directly
or indirectly, any Sale and Leaseback Transaction, with respect to any real or
tangible personal property, other than (i) a Sale and Leaseback Transaction
entered into between the Company and any of its Wholly-Owned Recourse
Subsidiaries or between Wholly-Owned Recourse Subsidiaries of the Company, as
the case may be; (ii) Capitalized Lease Obligations permitted to be incurred by
the Company or any of its Subsidiaries pursuant to the limitations on
Indebtedness set forth in Section 6.9; and (iii) a Sale and Leaseback
Transaction the gross cash proceeds of which are at least equal to the fair
market value (as determined in good faith by a Board Resolution, which
determined shall be conclusive evidence of compliance with this provision) of
the property that is the subject of such Sale and Leaseback Transaction and the
transfer of assets in such Sale and Leaseback Transaction is permitted by, and
the Company applies the net proceeds of such transaction in compliance with, the
covenants and agreements set forth in Section 6.15.
SECTION 6.18. Intentionally Omitted.
SECTION 6.19. Change of Control.
In the event of a Change of Control (the date of such occurrence, the
"Change of Control Date"), the Company shall notify the Holders of 1998
Securities in writing of such occurrence and shall make an offer to purchase
(the "Change of Control Offer") on a Business Day (the "Change of Control
Payment Date") not earlier than 30 days nor later than 60 days from the date
such notice is mailed all 1998 Securities then outstanding at a purchase price
equal to 101% of the principal amount thereof plus accrued interest to the
Change of Control Payment Date, if any.
Notice of a Change of Control Offer shall be mailed by the Company
within 30 days following the Change of Control Date to the Holders of 1998
Securities at their last registered addresses with a copy to the Trustee and the
Paying Agent. The Change of Control Offer shall remain open from the time of
mailing for at least 20 Business Days and until 5:00 p.m., Central time, on the
Business Day immediately preceding the Change of Control Payment Date. The
notice, which shall govern the terms of the Change of Control Offer, shall
include such disclosures as are required by law and shall state:
(i) that the Change of Control Offer is being made pursuant to this
Section 6.19 and that all 1998 Securities tendered shall be accepted for
payment;
(ii) the purchase price (including the amount of accrued interest, if
any) for each 1998 Security and the Change of Control Payment Date;
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(iii) that any 1998 Security not tendered or accepted for payment
shall continue to accrue interest in accordance with the terms thereof;
(iv) that any 1998 Security accepted for payment pursuant to the
Change of Control Offer shall cease to accrue interest after the Change of
Control Payment Date;
(v) that Holders electing to have 1998 Securities purchased pursuant
to a Change of Control Offer must surrender their 1998 Securities with the
form "Option of Holder to Elect Purchase" on the reverse of the Securities
completed, to the Paying Agent at the address specified in the notice prior
to 5:00 p.m., Central time, on the Business Day immediately preceding the
Change of Control Payment Date and must complete any form letter of
transmittal proposed by the Company and acceptable to the Trustee and the
Paying Agent;
(vi) that Holders shall be entitled to withdraw their election if the
Paying Agent receives, not later than 5:00 p.m., Central time, on the third
Business Day immediately preceding the Change of Control Payment Date, a
telegram, facsimile transmission or letter setting forth the name of the
Holder, the principal amount of 1998 Securities the Holder delivered for
purchase, the 1998 Security certificate number (if any), and a statement
that such Holder is withdrawing his election to have such 1998 Securities
purchased;
(vii) that Holders whose 1998 Securities are purchased only in part
shall be issued 1998 Securities equal in principal amount to the
unpurchased portion of the 1998 Securities surrendered;
(viii) the instructions that Holders must follow to tender their
Securities; and
(ix) the circumstances and relevant facts regarding such Change of
Control (including, but not limited to, information with respect to pro
forma historical financial information, including income, cash flow and
capitalization, after giving effect to such Change of Control, information
regarding the Persons acquiring control and such Person's business plans
going forward).
On or before the Change of Control Payment Date, the Company shall (i)
accept for payment 1998 Securities or portions thereof tendered pursuant to the
Change of Control Offer, (ii) deposit with the Payment Agent money sufficient to
pay the purchase price of all 1998 Securities or portions thereof so tendered
and accepted and (iii) deliver to the Trustee the 1998 Securities so accepted
together with an Officers' Certificate setting forth the Securities or portions
thereof tendered to and accepted for payment by the Company. The Paying Agent
shall promptly mail or deliver (or, in the case of a Global Security, transfer
immediately available funds on the Change of Control Payment Date to the
Depositary) to the Holders of 1998 Securities so accepted
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for payment in an amount equal to the purchase price, and the Trustee shall
promptly authenticate and mail or deliver to such Holders a new 1998 Security
equal in principal amount to any unpurchased portion of the 1998 Security
surrendered upon receipt from the Company thereof. Any 1998 Security not so
accepted shall be promptly mailed or delivered by the Company to the Holder
thereof. The Company shall publicly announce the results of the Change of
Control Offer not later than the first Business Day following the Change of
Control Payment Date.
The Company shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act, and any other securities laws
or regulations in connection with the repurchase of 1998 Securities pursuant to
a Change of Control Offer. To the extent that the provisions of any securities
laws or regulations conflict with provisions of this Section 6.19, the Company
shall comply with the applicable securities laws and regulations and shall not
be deemed to have breached its obligations under this Section 6.19 by virtue
thereof.
SECTION 6.20. Limitations as to Non-Recourse Subsidiaries.
So long as any 1998 Securities shall remain Outstanding, the Company
shall not permit any Non-Recourse Subsidiary to create, assume, incur, guarantee
or otherwise become liable in respect to any Indebtedness other than Non-
Recourse Indebtedness. Neither the Company nor any if its Non-Recourse
Subsidiaries will sell, lease, convey or otherwise transfer to any Non-Recourse
Subsidiary any asset which is essential to the steel making operations of the
Company or its Recourse Subsidiaries. The Released Property shall be deemed to
be not essential to the steel making operations of the Company and its Recourse
Subsidiaries.
SECTION 6.21. Impairment of Security Interest.
So long as any 1998 Securities shall remain Outstanding, the Company
shall not, and shall not permit any of its Recourse Subsidiaries to, take or
omit to take any action, which action or omission might or would have the result
of affecting or impairing the security interest in favor of the Collateral
Agent, on behalf of the Trustee and the Holders with respect to the Collateral,
and the Company shall not grant to any Person (other than the Collateral Agent
on behalf of the Trustee and the Holders) any interest whatsoever in the
Collateral, except, in either case, as expressly permitted by Section 6.10 and
the Security Documents.
SECTION 6.22. Conflicting Agreements.
So long as any 1998 Securities shall remain Outstanding, the Company
shall not, and shall not permit any of its Recourse Subsidiaries to, enter into
any agreement or instrument that by its terms expressly (i) prohibits the
Company from redeeming or otherwise making any payments on or in respect of the
1998 Securities in accordance with the terms thereof or hereof, as in effect
from time to time (provided
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that any provision which would result in a breach of, or a default under, the
New Credit Facility in the event that the Company makes any payments on or in
respect of the 1998 Securities shall not be considered a prohibition in
violation of this Section 6.22), or (ii) requires that the proceeds received
from the sale of any Collateral be applied to repay, redeem or otherwise retire
any Indebtedness of any Person other than the Indebtedness represented by the
Securities of all series, except as expressly permitted hereby or by the
Security Documents.
SECTION 6.23. Amendment to Security Documents.
So long as any 1998 Securities shall remain Outstanding and except as
otherwise permitted by this Indenture, the Company shall not, and shall not
permit any of its Recourse Subsidiaries to, amend, modify or supplement, or
permit or consent to any amendment, modification or supplement of, any of the
Security Documents in any way which would be adverse to the Holders or which
would constitute a Default hereunder or a default under any Security Document.
SECTION 6.24. Inspection.
The Company shall, and shall cause each of its Subsidiaries to, permit
authorized representatives of the Trustee and the Collateral Agent to visit and
inspect the properties of the Company or its Subsidiaries, and any or all books,
records and documents in the possession of the Company relating to the
Collateral, and to make copies and take extracts therefrom and to visit and
inspect the Collateral, all upon reasonable prior notice and at such reasonable
times during normal business hours and as often as may be reasonably requested.
SECTION 6.25. Use of Proceeds.
The Company shall use the proceeds of the 1998 Securities in the
manner described in the Offering Memorandum. The Company shall not use any part
of such proceeds to purchase or carry any margin stock or to extend credit to
others for the purpose of purchasing or carrying any margin stock. Neither the
issuance of any Security nor the use of the proceeds thereof shall violate or be
inconsistent with the provisions of Regulations G, T, U or X of the Board of
Governors of the Federal Reserve System.
SECTION 6.26. Money for Security Payments to Be Held in Trust.
If the Company shall at any time act as its own Paying Agent, it will,
on or before each due date of the principal of or interest on any of the
Securities, segregate and hold in trust for the benefit of the Persons entitled
thereto a sum sufficient to pay the principal or interest so becoming due until
such sums shall be paid to such Persons or otherwise disposed of as herein
provided and will promptly notify the Trustee of its action or failure so to
act.
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Whenever the Company shall have one or more Paying Agents, it will, on
or prior to each due date of the principal of or interest on any Securities,
deposit with a Paying Agent a sum sufficient to pay such amount, such sum to be
held as provided by the Trust Indenture Act, and (unless such Paying Agent is
the Trustee) the Company will promptly notify the Trustee of its action or
failure so to act.
The Company will cause each Paying Agent other than the Trustee to
execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee, subject to the provisions of this Section, that
such Paying Agent will (i) comply with the provisions of Section 317 of the
Trust Indenture Act applicable to it as a Paying Agent and (ii) during the
continuance of any default by the Company (or any other obligor upon the
Securities) in the making of any payment in respect of the Securities of any
series, upon the written request of the Trustee, forthwith pay to the Trustee
all sums held in trust by such Paying Agent as such in respect of such series.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held in
trust by the Company or such Paying Agent, such sums to be held by the Trustee
upon the same terms as those upon which such sums were held by the Company or
such Paying Agent; and, upon such payment by any Paying Agent to the Trustee,
such Paying Agent shall be released from all further liability with respect to
such money.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of or interest on any
Security and remaining unclaimed for two years after such principal or interest
has become due and payable shall be paid to the Company on Company Request, or
(if then held by the Company) shall be discharged from such trust; and the
Holder of such Security shall thereafter, as an unsecured general creditor, look
only to the Company for payment thereof, and all liability of the Trustee or
such Paying Agent with respect to such trust money, and all liability of the
Company as trustee thereof, shall thereupon cease; provided, however, that the
Trustee or such Paying Agent, before being required to make any such repayment,
may at the expense of the Company cause to be published once, in a newspaper
published in the English language, customarily published on each Business Day
and of general circulation in New Orleans and New York City, or give by mail to
each Holder, notice that such money remains unclaimed and that, after a date
specified therein, which shall not be less than 30 days from the date of such
publication or mailing, any unclaimed balance of such money then remaining will
be repaid to the Company.
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SECTION 6.27. Limitation on Improvements to the Released Property.
In the event that the Company contributes the Released Property to a
Non-Recourse Subsidiary as permitted under Section 6.13 and new facilities are
constructed on such property, the Company covenants that such new facilities
(the "Released Property Facilities") (i) shall be designed for use in lines of
business related to the Company's or one of its Recourse Subsidiaries' business
at such time, (ii) may not be financed in whole or in part by the sale of
Securities of any series (provided, however, that subject to the restrictions on
the use of proceeds from any future issuance of Securities as provided under
Section 6.9, the Company may contribute capital or otherwise invest in such Non-
Recourse Subsidiary to the extent permitted under the Indenture under Section
6.13 even if such capital or investment is financed, directly or indirectly, by
the sale of Securities of any series), (iii) may not replace any Integral
Fixtures and Equipment and (iv) if subsequently removed, will not have a
material adverse impact on the operations in the ordinary course of business of
the Mortgaged Facility, as in existence immediately prior to commencement of the
construction of the Released Property Facility (in the case of clause (iv), as
conclusively established by a Board Resolution).
ARTICLE VII
SUCCESSOR CORPORATION
SECTION 7.1. Merger and Consolidation.
The Company shall not consolidate with or merge into any other Person
or convey, sell, assign, transfer or lease all or substantially all of its
properties and assets (determined on a consolidated basis for the Company and
its Recourse Subsidiaries taken as a whole) in one transaction or a series of
transactions to any other Person or Persons, or permit any Person to consolidate
with or merge into the Company, or convey, sell, assign, transfer or lease all
or substantially all of such Person's properties and assets in one transaction
or a series of transactions to the Company, unless:
(i) such Person is a solvent corporation, partnership or trust
organized under the laws of the United States, one of the States thereof or
the District of Columbia;
(ii) the resulting, surviving or transferee corporation,
partnership or trust (if other than the Company) assumes by a supplemental
indenture executed and delivered to the Trustee, in form satisfactory to
the Trustee, all of the Company's obligations under the Securities, the
Indenture and the Security Documents;
(iii) immediately before and after giving effect to such
transaction or series of transactions, no Default or Event of Default shall
have occurred and be continuing;
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(iv) immediately after giving effect to such transaction or
series of transactions (including, without limitation, any Indebtedness
incurred or anticipated to be incurred in connection with or in respect of
the transaction or series of transactions), the Company, or the successor
or transferee corporation, would be permitted to incur an additional $1.00
of Indebtedness pursuant to the Indenture; and
(v) the Company or the surviving entity shall have delivered to
the Trustee an Officer's Certificate and an Opinion of Counsel, each
stating that such consolidation, merger, conveyance, sale, transfer or
lease and, if a supplemental indenture has been executed in connection with
such transaction or series of transactions, such supplemental indenture
complies with this covenant and that all conditions precedent in the
Indenture relating to the transaction or series of transactions have been
satisfied.
Notwithstanding the foregoing, clause (iv) shall not prohibit a
transaction, the principal purpose of which is (as determined in good faith by
the Board of Directors of the Company and evidenced by the Board Resolution or
Board Resolutions thereof) to change the state of incorporation of the Company,
and such transaction does not have as one of its purposes the evasion of the
limitation on merger, consolidations and sales of assets contained herein.
Nothing contained in this Article shall be deemed to prevent the Company or any
Subsidiary from granting a security interest in, or a mortgage or Lien upon, or
otherwise encumbering, any of its assets, subject to the limitations on Liens
set forth in Section 6.10. Notwithstanding the foregoing, the Company and its
Recourse Subsidiaries may not consolidate with or merge into a Non-Recourse
Subsidiary or convey, sell, assign, transfer or lease all or substantially all
of their properties and assets (determined, with respect to the Company, on a
consolidated basis for the Company and its Subsidiaries taken as a whole) in one
transaction or a series of transactions to any Non-Recourse Subsidiary, or
permit any Non-Recourse Subsidiary to consolidate with or merge into the Company
or any of its Recourse Subsidiaries or convey, sell, assign, transfer or lease
all or substantially all of such Non-Recourse Subsidiary's properties and assets
in one transaction or a series of transactions to the Company or any of its
Recourse Subsidiaries.
SECTION 7.2. Surviving Person Substituted.
Upon any consolidation or merger or any transfer of all or
substantially all of the assets of the Company in accordance with Section 7.1,
the surviving person formed by such consolidation or into which the Company is
merged or to which such transfer is made shall succeed to, and be substituted
for, and may exercise every right and power of, the Company under this Indenture
with the same effect as if such surviving person had been named as the Company
herein.
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ARTICLE VIII
EVENTS OF DEFAULT
SECTION 8.1. Events of Default.
"Event of Default", wherever used herein with respect to Securities of
any series (unless otherwise provided pursuant to Section 3.1(a) with respect to
any other series of Securities), means any one of the following events (whatever
the reason for such Event of Default and whether it shall be voluntary or
involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(i) default in the payment of any interest upon any Security of
that series when it becomes due and payable, and continuance of such
default for a period of 30 days; or
(ii) default in the payment of the principal, or premium, if any,
of any Security of that series on a Maturity Date; or
(iii) default in the performance, or breach, of any covenant
or agreement described in Sections 6.15 or 6.19 of this Indenture, and
continuance of such default or breach for a period of thirty days or the
Company fails to comply with the covenant set forth in Section 7.1; or
(iv) failure to observe or perform any covenant, condition or
agreement in respect of the Securities of that series, the Indenture (other
than any covenant, condition or agreement which has expressly been included
in this Indenture solely for the benefit of series of Securities other than
that series) or the Security Documents (other than as described in clause
(i), (ii), (iii) or (x)), or established in respect of the Securities of
that series pursuant to Section 3.1(a), and such failure to observe or
perform continues for a period of 30 days after there has been given to the
Company by the Trustee, or has been received by the Company and the Trustee
from the Holders of at least 25% of the principal amount of the Outstanding
Securities of that series, a written notice specifying such default,
demanding that it be remedied and stating that the notice is a "Notice of
Default", unless, with respect to defaults under the Security Documents,
the remedy or cure of such default requires work to be performed, acts to
be done or conditions to be removed which cannot, by their nature,
reasonably be performed, done or removed within such 30-day period, or if
such remedy or cure is prevented by causes outside of the control or
responsibility of the Company, in which case no "Event of Default" shall be
deemed to have occurred until the date that is 90 days after such written
notice so long as the Company shall have commenced cure within such 90-day
period and shall diligently prosecute the same to completion; or
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(v) a default in the payment of principal at final maturity
under any mortgage, indenture or instrument under which there may be issued
or by which there may be secured or evidenced any Indebtedness of the
Company or any of its Recourse Subsidiaries (or the payment of which is
guaranteed now or hereafter by the Company or any of its Subsidiaries),
whether such Indebtedness or Guarantee now exists or shall hereafter be
created in a principal amount of at least $5,000,000; or
(vi) a default occurs under any mortgage, indenture or instrument
under which there may be issued or by which there may be secured or
evidenced any Indebtedness (including any interest thereon) of the Company
or its Recourse Subsidiaries (or the payment of which is guaranteed now or
hereafter by the Company or any of its Subsidiaries), whether such
Indebtedness or Guarantee now exists or shall hereafter be created if (a)
as a result of such event of default the maturity of such Indebtedness has
been accelerated prior to its stated maturity and (b) the principal amount
of such Indebtedness, together with the principal amount of any other
Indebtedness of the Company and its Recourse Subsidiaries the maturity of
which has been so accelerated, aggregates $5,000,000 or more; or
(vii) the Company or any Subsidiary (other than a Non-Recourse
Subsidiary, unless such action or proceeding results in the Company or any
Recourse Subsidiary becoming liable or responsible for liabilities or
obligations of such Non-Recourse Subsidiary in an aggregate amount in
excess of $5,000,000 and has a material adverse effect on the ability of
the Company to satisfy its obligations under this Indenture or the
Securities of any series) pursuant to or within the meaning of any
Bankruptcy Law (a) commences a voluntary case or proceeding; (b) consents
to the entry of an order for relief against it in an involuntary case or
proceeding; (c) consents to the appointment of a Custodian of it or for all
or substantially all of its property; (d) makes a general assignment for
the benefit of its creditors; or (e) admits in writing its inability to pay
its debts as the same become due; or
(viii) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that (a) is for relief against the Company
or any Subsidiary in an involuntary case; (b) appoints a Custodian of the
Company or any Subsidiary for all or substantially all of its property; or
(c) orders the liquidation of the Company or any Subsidiary; provided, that
clauses (a), (b) and (c) shall not apply to a Non-Recourse Subsidiary,
unless such action or proceeding results in the Company or any Recourse
Subsidiary becoming liable or responsible for liabilities or obligations of
such Non-Recourse Subsidiary in an aggregate amount in excess of $5,000,000
and has a material adverse effect on the ability of the Company to satisfy
its obligations under this Indenture or the Securities of any series and in
any such case the order or decree remains unstayed and in effect for 60
days; or
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(ix) the Company or any Recourse Subsidiary shall fail to
discharge any one or more judgments not covered by insurance (from which no
further appeal may be taken) in excess of $5,000,000, and such judgments
shall remain in force, undischarged, unsatisfied, unstayed and unbonded for
more than 30 days; or
(x) (a) the Security Documents shall cease, for any reason, to be
in full force and effect or shall cease to be effective to grant a
perfected Lien on the Collateral with the priority purported to be created
thereby, in each case with respect to Collateral the aggregate value of
which is in excess of $3,000,000 or (b) the Security Documents shall cease,
for any reason, to be in full force and effect or shall cease to be
effective to grant a perfected Lien on the Collateral with the priority
purported to be created thereby in any case with respect to Collateral the
aggregate value of which is $3,000,000 or less and the Company or any
Recourse Subsidiary, as applicable, shall have failed to take reasonable
steps to cure such event promptly after having learned thereof; or
(xi) an event of default shall have occurred with respect to the
Securities of any other series and as a result of such event of default,
the maturity of the Securities of such other series shall been accelerated
prior to its stated maturity; or
(xii) with respect to any series of Securities other than
the 1998 Securities, any other Event of Default provided in the applicable
Board Resolution or in the supplemental indenture under which such series
of Securities is issued, as the case may be, as contemplated by Section
3.1(a).
SECTION 8.2. Acceleration of Maturity; Rescission and Annulment.
If an Event of Default (other than an Event of Default specified in
subparagraph (vii), (viii) or (xi) of Section 8.1) with respect to Securities of
any series at any time Outstanding occurs and is continuing, then and in every
such case the Trustee or the Holders of at least 25% in principal amount of the
Outstanding Securities of that series may declare the principal of and accrued
interest on all the Securities of that series to be due and payable immediately,
by a notice in writing to the Company (and to the Trustee if given by Holders),
and upon any such declaration such principal shall become immediately due and
payable. If an Event of Default specified in clause (vii), (viii) or (xi) of
Section 8.1 occurs, the principal amount and accrued interest shall ipso facto
become and be immediately due and payable on all Outstanding Securities without
any declaration or other act on the part of the Trustee or any Holder.
At any time after such a declaration of acceleration with respect to
Securities of any series has been made and before a judgment or decree for
payment of the money due has been obtained by the Trustee as hereinafter in this
Article provided, the Holders of a majority in principal amount of the
Outstanding Securities of that
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series, by written notice to the Company and the Trustee, may rescind and annul
such declaration and its consequences if:
(i) the Company has paid or deposited with the Trustee a sum
sufficient to pay:
(a) all overdue interest on all Securities of that series;
(b) the principal of any Securities of that series which have
become due otherwise than solely by such declaration of acceleration
and interest thereon at the rate borne by the Securities of that
series;
(c) to the extent that payment of such interest is lawful,
interest upon overdue interest at the rate borne by the Securities of
that series; and
(d) all sums paid or advanced by the Trustee hereunder and the
reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel; and
(ii) all Events of Default with respect to the Securities of
that series, other than the non-payment of the principal of Securities of
that series which has become due solely by such declaration of
acceleration, have been cured or waived as provided in Section 8.13.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
SECTION 8.3. Collection of Debt and Suits for Enforcement by Trustee.
The Company covenants that if:
(i) default is made in the payment of any interest on any Security of
any series when such interest becomes due and payable and such default
continues for a period of 30 days; or
(ii) default is made in the payment of the principal of any Security
of any series on a Maturity Date,
the Company will, upon demand of the Trustee, pay to it, for the benefit of the
Holders of such Securities, the whole amount then due and payable on such
Securities for principal and interest, and, to the extent that payment of such
interest shall be legally enforceable, interest on any overdue principal and on
any overdue interest, at the rate borne by such Securities, and, in addition
thereto, such further amount as shall be sufficient to cover the costs and
expenses of collection, including the reasonable
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compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel.
If an Event of Default with respect to Securities of any series occurs
and is continuing, the Trustee may in its discretion proceed to protect and
enforce its rights and the rights of the Holders of Securities of such series by
such appropriate judicial proceedings as the Trustee shall deem most effectual
to protect and enforce any such rights, whether for the specific enforcement of
any covenant or agreement in this Indenture or the Security Documents or in aid
of the exercise of any power granted herein, or to enforce any other proper
remedy.
Each Holder, by accepting a Security, acknowledges that the exercise
of remedies by the Trustee with respect to the Collateral is subject to the
terms and conditions of the Security Documents and the proceeds received upon
realization of the Collateral shall be applied by the Trustee in accordance with
Section 8.6.
SECTION 8.4. Trustee May File Proofs of Claims.
In case of any judicial proceeding relative to the Company (or any
other obligor upon the Securities of any series), its property or its creditors,
the Trustee shall be entitled and empowered, by intervention in such proceeding
or otherwise, to take any and all actions authorized under the Trust Indenture
Act in order to have claims of the Holders and the Trustee allowed in any such
proceeding. In particular, the Trustee shall be authorized to collect and
receive any moneys or other property payable or deliverable on any such claims
and to distribute the same; and any custodian, receiver, assignee, trustee,
liquidator, sequestrator or other similar official in any such judicial
proceeding is hereby authorized by each Holder to make such payments to the
Trustee and, in the event that the Trustee shall consent to the making of such
payments directly to the Holders, to pay to the Trustee any amount due it for
the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 9.7.
No provision of this Indenture shall be deemed to authorize the
Trustee to authorize or consent to or accept or adopt on behalf of any Holder of
Securities of any series any plan of reorganization, arrangement, adjustment or
composition affecting the Securities of such series or the rights of any Holder
thereof or to authorize the Trustee to vote in respect of the claim of any
Holder in any such proceeding.
SECTION 8.5. Trustee May Enforce Claims Without Possession of Securities.
All rights of action and claims under this Indenture, the Security
Documents or the Securities of any series may be prosecuted and enforced by the
Trustee without the possession of any of the Securities of such series or the
production thereof in any proceeding relating thereto, and any such proceeding
instituted by the Trustee shall be brought in its own name as trustee of an
express trust, and any
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recovery of judgment shall, after provision for the payment of the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, be for the ratable benefit of the Holders of the Securities in
respect of which such judgment has been recovered.
SECTION 8.6. Application of Money Collected.
Any money collected by the Trustee pursuant to this Article shall be
applied in the following order, at the date or dates fixed by the Trustee and,
in case of the distribution of such money on account of principal or interest,
upon presentation of the Securities with respect to which such moneys were
collected and the notation thereon of the payment if only partially paid and
upon surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee under
Section 9.7 and, in its capacity as Collateral Agent, for amounts due
under the Security Documents;
SECOND: To the payment of unpaid interest accrued on the
Securities in respect of which or for the benefit of which such money
has been collected, ratably, without preference or priority of any
kind, according to the amounts due and payable on such Securities for
interest;
THIRD: To the payment of the unpaid principal of the Securities
in respect of which or for the benefit of which such money has been
collected, ratably, without preference or priority of any kind,
according to the amounts due and payable on such Securities for
principal; and
FOURTH: To the Company or any other obligors on the Securities,
as their interests may appear, or as a court of competent jurisdiction
may direct.
SECTION 8.7. Limitation on Suits.
Except as provided in Section 8.8, no Holder of any Security of any
series shall have any right to institute any proceeding, judicial or otherwise,
with respect to this Indenture, or for the appointment of a receiver or trustee,
or for any other remedy hereunder, unless:
(i) such Holder has previously given written notice to the Trustee of
a continuing Event of Default with respect to Securities of that series;
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(ii) the Holders of not less than 25% in principal amount of the
Outstanding Securities of that series shall have made written request to
the Trustee to institute proceedings in respect of such Event of Default in
its own name as Trustee hereunder;
(iii) such Holder or Holders have offered to the Trustee reasonable
indemnity against the costs, expenses and liabilities to be incurred in
compliance with such request;
(iv) the Trustee for 15 days after its receipt of such notice, request
and offer of indemnity has failed to institute any such proceeding; and
(v) no direction inconsistent with such written request has been given
to the Trustee during such 15-day period by the Holders of a majority in
principal amount of the Outstanding Securities of that series;
it being understood and intended that no one or more Holders shall have any
right in any manner whether by virtue of, or by availing of, any provision of
this Indenture to affect, disturb or prejudice the rights of any other Holders,
or to obtain or to seek to obtain priority or preference over any other Holders
or to enforce any right under this Indenture, except in the manner herein
provided and for the equal and ratable benefit of all the Holders.
The foregoing limitations shall not apply to a suit instituted by a
Holder for the enforcement of the payment of principal of or accrued interest on
such Securities on or after the respective due dates set forth in such
Securities.
SECTION 8.8. Unconditional Right of Holders to Receive Principal and Interest.
Notwithstanding any other provision in this Indenture, the Holder of
any Security shall have the right, which is absolute and unconditional, to
receive payment of the principal of and (subject to Section 3.7) interest on
such Security on the respective Maturity Dates expressed in such Security and to
institute suit for the enforcement of any such payment, and such rights shall
not be impaired or affected without the consent of such Holder, except to the
extent that the institution or prosecution of such suit or entry of judgment
therein would, under applicable law, result in the surrender, impairment or
waiver of the Lien of this Indenture and the Security Documents upon the
Collateral.
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SECTION 8.9. Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every such case, subject to any
determination in such proceeding, the Company, the Trustee and the Holders shall
be restored severally and respectively to their former positions hereunder and
thereafter all rights and remedies of the Trustee and the Holders shall continue
as though no such proceeding had been instituted.
SECTION 8.10. Rights and Remedies Cumulative.
Except as otherwise provided with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities in the last paragraph
of Section 3.6, no right or remedy herein conferred upon or reserved to the
Trustee or to the Holders is intended to be exclusive of any other right or
remedy, and every right and remedy shall, to the extent permitted by law, be
cumulative and in addition to every other right and remedy given hereunder or
now or hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall not prevent the
concurrent assertion or employment of any other appropriate right or remedy.
SECTION 8.11. Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder of Securities of
any series to exercise any right or remedy accruing upon any Event of Default
shall impair any such right or remedy or constitute a waiver of any such Event
of Default or an acquiescence therein. Every right and remedy given by this
Article or by law to the Trustee or to the Holders may be exercised from time to
time, and as often as may be deemed expedient, by the Trustee or by the Holders,
as the case may be.
SECTION 8.12. Control by Holders.
The Holders of a majority in principal amount of the Outstanding
Securities of any series, shall have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on the Trustee with respect to the
Securities of that series; provided, that the Trustee may refuse to follow any
direction that:
(i) conflicts with any rule of law or with this Indenture;
(ii) the Trustee determines may be unduly prejudicial to the
rights of another Holder; or
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(iii) may involve the Trustee in personal liability unless the
Trustee has indemnification satisfactory to it in its sole discretion
against any loss or expense caused by it following such directions;
provided, further, that the Trustee may take any other action deemed proper by
the Trustee which is not inconsistent with such direction.
SECTION 8.13. Waiver of Past Defaults.
The Holders of not less than a majority in principal amount of the
Outstanding Securities of any series may on behalf of the Holders of all the
Securities of such series waive any past default hereunder with respect to such
series and its consequences, except a default
(i) in the payment of the principal of or interest on any
Security of such series; or
(ii) in respect of a covenant or provision hereof which under
Article XI cannot be modified or amended without the consent of the Holder
of each Outstanding Security affected.
Upon any such waiver, such default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other default or impair any right consequent thereon.
SECTION 8.14. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this
Indenture, or in any suit against the Trustee for any action taken, suffered or
omitted by it as Trustee, a court may require any party litigant in such suit to
file an undertaking to pay the costs of such suit, and may assess reasonable
costs, including reasonable attorneys' fees, against any such party litigant, in
the manner and to the extent provided in the Trust Indenture Act; provided, that
neither this Section nor the Trust Indenture Act shall be deemed to authorize
any court to require such an undertaking or to make such an assessment in any
suit instituted by the Trustee, a suit by a Holder of any Security pursuant to
Section 8.8, or a suit by a Holder or Holders of more than 10% in aggregate
principal amount of the Outstanding Securities of any series.
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SECTION 8.15. Waiver of Stay or Extension Laws.
The Company covenants (to the extent that it may lawfully do so) that
it will not at any time insist upon, or plead, or in any manner whatsoever claim
or take the benefit or advantage of, any stay or extension law wherever enacted,
now or at any time hereafter in force, which may affect the covenants or the
performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such law
and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.
SECTION 8.16. Collection Suit by Trustee.
If an Event of Default specified in Section 8.1(i) or 8.1(ii) or
8.1(iii) occurs and is continuing with respect to the Securities of any series,
the Trustee may recover judgment in its own name and as trustee of an express
trust against the Company (or any other obligor upon such Securities) for the
whole amount of principal and accrued interest remaining unpaid, together with
interest overdue on principal and, to the extent that payment of such interest
is lawful, interest on overdue installments of interest, in each case at the
rate per annum borne by the Securities of such series, and such further amount
as shall be sufficient to cover the costs and expenses of collection, including
the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel.
ARTICLE IX
THE TRUSTEE
SECTION 9.1. Certain Duties and Responsibilities.
The duties and responsibilities of the Trustee shall be as provided by
the Trust Indenture Act. Notwithstanding the foregoing, no provision of this
Indenture shall require the Trustee to expend or risk its own funds or otherwise
incur any financial liability in the performance of any of its duties hereunder,
or in the exercise of any of its rights or powers, if it shall have reasonable
grounds for believing that repayment of such funds or adequate indemnity against
such risk or liability is not reasonably assured to it. Whether or not therein
expressly so provided, every provision of this Indenture relating to the conduct
or affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section 9.1. If an Event of Default has
occurred and is continuing with respect to the Securities of any series, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture and use the same degree of care and skill in its exercise as a prudent
person would exercise or use under the circumstances in the conduct of its own
affairs.
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SECTION 9.2. Notice of Defaults.
The Trustee shall give the Holders of each series of Securities notice
of any default hereunder or in respect of the Securities of any series as and to
the extent provided by Section 315(b) of the Trust Indenture Act. Except in the
case of a Default or an Event of Default in payment of principal of or interest
on any Security (including the failure to make payments with respect to
redemptions, Asset Sale Offers or a Change of Control Offer), the Trustee may
withhold the notice if and so long as the Trustee in good faith determines that
withholding the notice is in the interest of Holders.
SECTION 9.3. Certain Rights of Trustee.
Subject to Sections 315(a) through (d) of the Trust Indenture Act, the
terms of which are hereby incorporated herein by this reference:
(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other paper or
document believed by it to be genuine and to have been signed or presented
by the proper party or parties;
(b) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order and any
resolution of the Board of Directors may be sufficiently evidenced by a
Board Resolution;
(c) whenever in the administration of this Indenture the Trustee shall
deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, the Trustee (unless other
evidence be herein specifically prescribed) may, in the absence of bad
faith on its part, rely upon an Officers' Certificate;
(d) the Trustee may consult with counsel and the written advice of
such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or
omitted by it hereunder in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction
of any of the Holders of Securities of any series pursuant to this
Indenture, unless such Holders shall have offered to the Trustee reasonable
security or indemnity against the costs, expenses and liabilities,
including but not limited to environmental liabilities, which might be
incurred by it in compliance with such request or direction;
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(f) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other paper or
document, but the Trustee, in its discretion, may make such further inquiry
or investigation into such facts or matters as it may see fit, and, if the
Trustee shall determine to make such further inquiry or investigation, it
shall be entitled to examine the books, records and premises of the
Company, personally or by agent or attorney;
(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by
it hereunder;
(h) Except for the failure of the Company to make or cause to be made
any scheduled payment to the Trustee provided for in this Indenture, the
Trustee shall not be deemed to have knowledge of any fact or circumstance,
including but not limited to a Default or Event of Default, unless and
until the Trustee shall been given written notice thereof or until an
officer of the Trustee who customarily handles coporate trusts and is
assigned to supervise the Indenture shall have actual knowledge thereof;
and
(i) subject to Section 11.2 hereof, the Trustee may (but shall not be
obligated to), without the consent of the Holders of Securities of any
series, give any consent, waiver or approval required under the Security
Documents or by the terms hereof with respect to the Collateral, but shall
not without the consent of the Holders of a majority in aggregate principal
amount of the Outstanding Securities of each series (i) give any consent,
waiver or approval or (ii) agree to any amendment or modification of the
Security Documents, in each case, that shall have an adverse effect on the
interests of any Holder. The Trustee shall be entitled to request and
conclusively rely on an Opinion of Counsel with respect to whether any
consent, waiver, approval, amendment or modification shall have an adverse
effect on the interests of any Holder.
SECTION 9.4. Not Responsible for Recitals or Issuance of Securities.
The recitals contained herein and in the Securities of any series,
except the Trustee's certificates of authentication, shall be taken as the
statements of the Company, and the Trustee assumes no responsibility for their
correctness. The Trustee makes no representations as to the validity or
sufficiency of this Indenture or of the Securities of any series. The Trustee
shall not be accountable for the use or application by the Company of Securities
of any series or the proceeds thereof.
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SECTION 9.5. May Hold Securities.
The Trustee, any Authenticating Agent, any Paying Agent, any Security
Registrar or any other agent of the Company, in its individual or any other
capacity, may become the owner or pledgee of Securities and, subject to Section
9.8 and 9.13, may otherwise deal with the Company with the same rights it would
have if it were not Trustee, Authenticating Agent, Paying Agent, Security
Registrar or such other agent.
SECTION 9.6. Money Held in Trust.
Money held by the Trustee in trust hereunder need not be segregated
from other funds except to the extent required by law. The Trustee shall be
under no liability for interest on any money received by it hereunder except as
otherwise agreed in writing with the Company.
SECTION 9.7. Compensation and Reimbursement.
The Company agrees:
(i) to pay to the Trustee from time to time reasonable
compensation for all services rendered by it hereunder and under the
Security Documents (which compensation shall not be limited by any
provision of law in regard to the compensation of a trustee of an express
trust);
(ii) except as otherwise expressly provided herein, to reimburse
the Trustee upon its request for all reasonable expenses, disbursements and
advances incurred or made by the Trustee in accordance with any provision
of this Indenture or the Security Documents (including the reasonable
compensation and the expenses and disbursements of its agents and counsel),
except any such expense, disbursement or advance as may be attributable to
its negligence or bad faith; and
(iii) to indemnify the Trustee for, and to hold it harmless
against, any loss, liability or expense incurred without negligence or bad
faith on its part, arising out of or in connection with the acceptance or
administration of this Indenture or the Security Documents, including the
costs and expenses of defending itself against any claim or liability in
connection with the exercise or performance of any of its powers or duties
hereunder or thereunder.
The Trustee shall notify the Company promptly of any claim asserted
against it for which it may seek indemnity.
As security for the performance of the obligations of the Company
under this Section the Trustee shall have a Lien prior to the Securities on all
properties and
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funds held or collected by the Trustee as such, except funds held in trust for
the payment of principal of or interest on particular Securities.
If the Trustee incurs expenses or renders services after an Event of
Default specified in Section 8.1(vii) or (viii) occurs, the expenses and
compensation for the services will be intended to constitute expenses of
administration under any applicable Bankruptcy Law or other similar law.
The Company's obligations under this Section 9.7 and any Lien arising
hereunder shall survive the resignation or removal of any Trustee, the discharge
of the Company's obligations pursuant to Articles IV or XII of this Indenture
and/or the termination of this Indenture.
SECTION 9.8. Disqualification; Conflicting Interests.
If the Trustee has or shall acquire a conflicting interest within the
meaning of Section 310(b) of the Trust Indenture Act, the Trustee shall either
eliminate such interest or resign, to the extent and in the manner provided by,
and subject to the provisions of, the Trust Indenture Act and this Indenture.
SECTION 9.9. Corporate Trustee Required; Eligibility.
There shall at all times be a Trustee hereunder which shall be a
Person that is eligible pursuant to Section 310(a) of the Trust Indenture Act to
act as such and has a combined capital and surplus of at least $50,000,000 and
its Corporate Trust Office in New Orleans, Louisiana. If such Person publishes
reports of condition at least annually, pursuant to law or to the requirements
of said supervising or examining authority, then for the purposes of this
Section 9.9, the combined capital and surplus of such Person shall be deemed to
be its combined capital and surplus as set forth in its most recent report of
condition so published. If at any time the Trustee shall cease to be eligible
in accordance with the provisions of this Section 9.9, it shall resign
immediately in the manner and with the effect hereinafter specified in this
Article.
SECTION 9.10. Resignation and Removal; Appointment of Successor.
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee under Section 9.11.
(b) The Trustee may resign at any time by giving written notice
thereof to the Company. If an instrument of acceptance by a successor Trustee
shall not have been delivered to the Trustee within 30 days after the giving of
such notice of resignation, the resigning Trustee may petition any court of
competent jurisdiction for the appointment of a successor Trustee.
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(c) The Trustee may be removed at any time with respect to the
Securities of any series, by Act of the Holders of a majority in principal
amount of the Outstanding Securities of such series, delivered to the Trustee
and to the Company.
(d) If at any time:
(i) the Trustee shall fail to comply with Section 9.8 with
respect to Securities of any series after written request therefor by the
Company or by any Holder of Securities of such series who has been a bona
fide Holder of a Security of such series for at least six months; or
(ii) the Trustee shall cease to be eligible under Section 9.9 and
shall fail to resign after written request therefor by the Company or by
any such Holder; or
(iii) the Trustee shall become incapable of acting or shall be
adjudged a bankrupt or insolvent, or a receiver of the Trustee or of its
property shall be appointed or any public officer shall take charge or
control of the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation;
then, in any such case, (1) the Company by a Board Resolution may remove the
Trustee with respect to Securities of any series, or (2) subject to Section
8.14, any Holder of a Security of such series who has been a bona fide Holder of
such Security for at least six months may, on behalf of himself and all others
similarly situated, petition any court of competent jurisdiction for the removal
of the Trustee with respect to Securities of such series and the appointment of
a successor Trustee.
(e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause, the
Company, by a Board Resolution, shall promptly appoint a successor Trustee. If,
within one year after such resignation, removal or incapability, or the
occurrence of such vacancy, a successor Trustee shall be appointed by Act of the
Holders of a majority in principal amount of the Outstanding Securities
delivered to the Company and the retiring Trustee, the successor Trustee so
appointed shall, forthwith upon its acceptance of such appointment, become the
successor Trustee and supersede the successor Trustee appointed by the Company.
If no successor Trustee shall have been so appointed by the Company or the
Holders and accepted appointment in the manner hereinafter provided, any Holder
who has been a bona fide Holder of a Security for at least six months may, on
behalf of himself and all others similarly situated, petition any court of
competent jurisdiction for the appointment of a successor Trustee.
(f) The Company shall give notice of each resignation and each removal
of the Trustee with respect to any series of Securities and each appointment of
a successor Trustee with respect to any series of Securities to all Holders of
Securities of
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such series in the manner provided in Section 1.6. Each notice shall include the
name of the successor Trustee and the address of its Corporate Trust Office.
(g) Any resignation or removal of the Trustee pursuant to this
Indenture shall be deemed to be a resignation or removal of the Trustee in its
capacity as Collateral Agent under the Security Documents and any appointment of
a successor Trustee pursuant to this Indenture shall be deemed to be an
appointment of a successor Collateral Agent under the Security Documents and
such successor shall assume all of the obligations of the Trustee in its
capacity as Collateral Agent under the Security Documents.
SECTION 9.11. Acceptance of Appointment by Successor.
Every successor Trustee with respect to one or more series of
Securities appointed hereunder shall execute, acknowledge and deliver to the
Company and to the retiring Trustee an instrument accepting such appointment,
and thereupon the resignation or removal of the retiring Trustee for that or
those series of Securities shall become effective and such successor Trustee,
without any further act, deed or conveyance, shall become vested with all the
rights, powers, trusts and duties of such retiring Trustee; but, on request of
the Company or such successor Trustee, such retiring Trustee shall, upon payment
of its charges, execute and deliver an instrument transferring to such successor
Trustee all the rights, powers and trusts of such retiring Trustee and shall
duly assign, transfer and deliver to such successor Trustee all property and
money held by such retiring Trustee hereunder, subject nevertheless to its Lien,
if any, provided for in Section 9.7. Upon request of any such successor
Trustee, the Company shall execute any and all instruments for more fully and
certainly vesting in and confirming to such successor Trustee all such rights,
powers and trusts.
No successor Trustee shall accept its appointment unless at the time
of such acceptance such successor Trustee shall be qualified and eligible under
this Article.
SECTION 9.12. Merger, Conversion, Consolidation or Succession to Business.
Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all the corporate trust business
of the Trustee, shall be the successor of the Trustee hereunder; provided such
corporation shall be otherwise qualified and eligible under this Article,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto. In case any Securities shall have been
authenticated, but not delivered, by the Trustee then in office, any successor
by merger, conversion or consolidation to such authenticating Trustee may adopt
such authentication and deliver the Securities so authenticated with the same
effect as if such successor Trustee had itself authenticated such Securities.
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SECTION 9.13. Preferential Collection of Claims Against Company.
If and when the Trustee shall be or become a creditor of the Company
(or any other obligor upon any series of Securities), the Trustee shall be
subject to the provisions of Section 311 of the Trust Indenture Act regarding
the collection of claims against the Company (or any such other obligor).
SECTION 9.14. Appointment of Authenticating Agent.
The Trustee may appoint an Authenticating Agent or Agents with respect
to one or more series of Securities which shall be authorized to act on behalf
of the Trustee to authenticate Securities of such series issued upon original
issue and upon exchange, registration of transfer or partial repurchase or
pursuant to Section 3.6, and Securities so authenticated shall be entitled to
the benefits of this Indenture and shall be valid and obligatory for all
purposes as if authenticated by the Trustee hereunder. Wherever reference is
made in this Indenture to the authentication and delivery of Securities by the
Trustee or the Trustee's certificate of authentication, such reference shall be
deemed to include authentication and delivery on behalf of the Trustee by an
Authenticating Agent and a certificate of authentication executed on behalf of
the Trustee by an Authenticating Agent. Each Authenticating Agent shall be
acceptable to the Company and shall at all times be a corporation organized and
doing business under the laws of the United States of America, any State thereof
or the District of Columbia, authorized under such laws to act as Authenticating
Agent, having a combined capital and surplus of not less than $50,000,000 and
subject to supervision or examination by Federal or State authority. If such
Authenticating Agent publishes reports of condition at least annually, pursuant
to law or to the requirements of said supervising or examining authority, then
for the purposes of this Section 9.14, the combined capital and surplus of such
Authenticating Agent shall be deemed to be its combined capital and surplus as
set forth in its most recent report of condition so published. If at any time
an Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section 9.14, such Authenticating Agent shall resign
immediately in the manner and with the effect specified in this Section.
Any corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Authenticating Agent
shall be a party, or any corporation succeeding to the corporate agency or
corporate trust business of an Authenticating Agent, shall continue to be an
Authenticating Agent, provided such corporation shall be otherwise eligible
under this Section 9.14, without the execution or filing of any paper or any
further act on the part of the Trustee or the Authenticating Agent.
An Authenticating Agent may resign at any time by giving written
notice thereof to the Trustee and to the Company. The Trustee may at any time
terminate the agency of an Authenticating Agent by giving written notice thereof
to such
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Authenticating Agent and to the Company. Upon receiving such a notice of
resignation or upon such a termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section 9.14, the Trustee may appoint a successor
Authenticating Agent which shall be acceptable to the Company and shall mail
written notice of such appointment by first-class mail, postage prepaid, to all
Holders of Securities of all series with respect to which such Authentication
Agent will serve as their names and addresses appear in the Security Register.
Any successor Authenticating Agent upon acceptance of its appointment hereunder
shall become vested with all the rights, powers and duties of its predecessor
hereunder, with like effect as if originally named as an Authenticating Agent.
No successor Authenticating Agent shall be appointed unless eligible under the
provisions of this Section 9.14.
The Trustee agrees to pay to each Authenticating Agent from time to
time reasonable compensation for its services under this Section 9.14, and the
Trustee shall be entitled to be reimbursed for such payments, subject to the
provisions of Section 9.7.
If an appointment with respect to one or more series of Securities is
made pursuant to this Section 9.14, the Securities of such series may have
endorsed thereon, in addition to the Trustee's certificate of authentication, an
alternative certificate of authentication in the following form:
This is one of the Securities of the series designated therein and
referred to in the within-mentioned Indenture.
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
This is one of the Securities of the series
designated therein issued under the Indenture
described herein.
FIRST NATIONAL BANK
OF COMMERCE, As Trustee
By_______________________________
As Authenticating Agent
By_______________________________
Authorized Officer
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ARTICLE X
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 10.1. Company to Furnish Trustee Names and Addresses of Holders.
The Company will, with respect to the Securities of each series, furnish
or cause to be furnished to the Trustee:
(i) semi-annually, not more than 15 days after each Regular
Record Date for the Securities of such series, a list, in such form as the
Trustee may reasonably require, of the names and addresses of the Holders
of the Securities of such series as of such Regular Record Date; and
(ii) at such other times as the Trustee may request in writing
with respect to any series of Securities, within 30 days after the receipt
by the Company of any such request, a list of similar form and content with
respect to such series as of a date not more than 15 days prior to the time
such list is furnished;
provided, no such list need be furnished if the Trustee is acting as Security
Registrar.
SECTION 10.2. Preservation of Information; Communications to Holders.
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of Holders of Securities of each series
contained in the most recent list furnished to the Trustee as provided in
Section 10.1 and the names and addresses of Holders of each series received by
the Trustee in its capacity as Security Registrar. The Trustee may destroy any
list furnished to it as provided in Section 10.1 upon receipt of a new list so
furnished.
(b) The rights of Holders of Securities of any series to communicate
with other Holders of Securities of such series with respect to their rights
under this Indenture or under the Securities of such series, and the
corresponding rights and duties of the Trustee, shall be as provided by Section
312 of the Trust Indenture Act.
(c) Every Holder of Securities, by receiving and holding the same,
agrees with the Company and the Trustee that neither the Company nor the Trustee
nor any agent of either of them shall be held accountable by reason of any
disclosure of information as to names and addresses of Holders made pursuant to
Section 312 of the Trust Indenture Act.
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SECTION 10.3. Reports by Trustee.
(a) Within 60 days after each May 15 beginning with May 15, 1999, with
respect to Securities of any series, so long as Securities of such series are
Outstanding, the Trustee shall transmit to Holders of Securities of such series
such reports concerning the Trustee and its actions under this Indenture as may
be required pursuant to Section 313 of the Trust Indenture Act at the times and
in the manner provided pursuant thereto.
(b) A copy of each such report shall, at the time of such transmission
to Holders, be filed by the Trustee with each stock exchange upon which any
Securities are listed, with the Commission and with the Company. The Company
will notify the Trustee when and as any Securities are listed on any stock
exchange.
SECTION 10.4. Reports by Company.
The Company shall file with the Trustee and the Commission, and
transmit to Holders of Securities of all series, such information, documents and
other reports, and such summaries thereof, as may be required pursuant to
Section 314 of the Trust Indenture Act at the times and in the manner provided
pursuant to such Act; provided, that any such information, documents or reports
required to be filed with the Commission pursuant to Section 13 or 15(d) of the
Exchange Act shall be filed with the Trustee within 15 days after the same shall
be so required to be filed with the Commission; provided further that if the
Company is not subject to the periodic reporting and information requirements of
the Exchange Act, it will provide to Holders of Securities of all series annual
reports containing audited consolidated financial statements and an opinion
thereon by the Company's independent certified public accountants, and quarterly
reports for the first three quarters of each fiscal year containing unaudited
condensed consolidated financial statements.
ARTICLE XI
SUPPLEMENTAL INDENTURES
SECTION 11.1. Supplemental Indentures without Consent of Holders.
Without the consent of any Holders, the Company and the Subsidiary
Guarantors, when authorized by a Board Resolution, and the Trustee, at any time
and from time to time, may enter into one or more indentures supplemental hereto
or amendments to the Security Documents, in form satisfactory to the Trustee,
for any of the following purposes:
(i) to evidence the succession of another Person to the Company
and the assumption by any such successor of the covenants of the Company
herein and in the Securities; or
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(ii) to add to the covenants of the Company for the benefit of
the Holders of all or any series of Securities (and if such covenants are
for the benefit of less than all series of Securities, stating that such
covenants are expressly being included solely for the benefit of such
series), or to surrender any right or power herein conferred upon the
Company; or
(iii) to comply with any requirements of the Commission in
order to obtain or maintain the qualification of this Indenture under the
Trust Indenture Act, as contemplated by Section 11.5; or
(iv) to pledge or grant a security interest in favor of the
Trustee for the benefit of the Holders of Securities of all series as
additional security for the payment and performance of the Company's
obligations under this Indenture and such Securities, in any property or
assets, including any that are required to be pledged or in which a
security interest is required to be granted, to the Trustee pursuant to the
Security Documents or otherwise; or
(v) to cure any ambiguity, to correct or supplement any provision
herein which may be inconsistent with any other provision herein, or to
make any other provisions with respect to matters or questions arising
under this Indenture which shall not be inconsistent with the provisions of
this Indenture; provided, that such action pursuant to this Clause (v)
shall not adversely affect the interests of the Holders of Securities of
any series; or
(vi) to establish the terms of Securities of any series, other
than the 1998 Securities, as permitted by Section 3.1(a);
(vii) to supplement any provisions of this Indenture to such
extent as shall be necessary to permit or facilitate the issuance of the
Securities of any series initially as securities registered under the
Securities Act; provided, that any such action shall not adversely affect
the interests of the Holders of any other series; or
(viii) to add any Person who becomes a Recourse Subsidiary
of the Company after the date of this Indenture as a party to this
Indenture as contemplated by Section 12.1(a).
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SECTION 11.2. Supplemental Indentures with Consent of Holders.
(a) With the consent of the Holders of not less than a majority in
principal amount of the Outstanding Securities of each series affected by such
supplemental indenture, by Act of said Holders delivered to the Company and the
Trustee, the Company and the Subsidiary Guarantors, when authorized by a Board
Resolution, and the Trustee may enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Indenture, the
Securities of such series or the Security Documents or of modifying in any
manner the rights of the Holders under this Indenture, the Securities of such
series or the Security Documents; provided, however, that no such supplemental
indenture shall, without the consent of the Holder of each Outstanding Security
affected thereby:
(i) change the Stated Maturity of the principal of, or any
installment of interest on, any Security, or alter the redemption
provisions or reduce the principal amount thereof or the rate of interest
thereon, or change the place of payment where, or the coin or currency in
which, any Security or interest thereon is payable, or impair the right to
institute suit for the enforcement of any such payment on or after the
Maturity Date thereof; or
(ii) reduce the percentage in principal amount of the Outstanding
Securities of any series, the consent of whose Holders is required for any
such supplemental indenture, or the consent of whose Holders is required
for any waiver (of compliance with certain provisions of this Indenture or
certain defaults hereunder and their consequences) provided for in this
Indenture; or
(iii) modify any of the provisions of this Section 11.2 or
Section 8.8 or 8.13, except to increase any such percentage or to provide
that certain other provisions of this Indenture cannot be modified or
waived without the consent of the Holder of each Outstanding Security
affected thereby; or
(iv) affect the ranking of the Securities of any series or the
Liens in favor of the Trustee, the Collateral Agent and the Holders in a
manner adverse to the Holders of Securities of any series or release all or
substantially all of the Collateral.
Notwithstanding clause (iv) above, any amendment or modification of,
or waiver with respect to, the Indenture, any series of Securities or the
Security Documents requested by the Company in connection with any intercreditor
agreement or similar arrangement to facilitate the financing, construction or
operation of Released Property Facilities shall only require the approval of not
less than a two-thirds majority of the aggregate principal amount of the
Outstanding Securities of each series affected
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thereby, even if such intercreditor agreement or similar arrangement affects the
ranking or security of such series. No such intercreditor agreement or similar
arrangement shall, however, cause the Trustee to release the Lien in favor of
the Trustee and the Holders of any series of Securities on the Collateral except
in compliance with Sections 4.1, 4.3, 12.3, 14.2 and 14.3. Further, no such
intercreditor agreement or similar arrangement shall cause the Trustee to
subordinate the Liens in favor of the Holders of any series of Securities under
the Security Documents to Liens in favor of creditors financing Released
Property Facilities.
(b) It shall not be necessary for any Act of Holders under this
Section to approve the particular form of any proposed supplemental indenture,
but it shall be sufficient if such Act shall approve the substance thereof.
(c) After an amendment, supplement or waiver under this Section 11.2
becomes effective, the Company shall mail to the Holders of any series of
Securities affected thereby a notice briefly describing the amendment,
supplement or waiver. Any failure of the Company to mail such notice, or any
defect therein, shall not, however, in any way impair or affect the validity of
any such amendment, supplement or waiver.
SECTION 11.3. Execution of Supplemental Indentures.
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications thereby of
the trusts created by this Indenture, the Trustee shall be entitled to receive,
and (subject to Section 9.1) shall be fully protected in relying upon, an
Opinion of Counsel stating that the execution of such supplemental indenture is
authorized or permitted by this Indenture. The Trustee may, but shall not be
obligated to, enter into any such supplemental indenture which affects the
Trustee's own rights, duties or immunities under this Indenture or otherwise.
SECTION 11.4. Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this Article,
this Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Securities theretofore or thereafter authenticated and delivered hereunder
shall be bound thereby. Each Subsidiary Guarantor agrees that each supplemental
indenture under this Article shall constitute a reaffirmation by such Subsidiary
Guarantor of its Subsidiary Guarantee.
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SECTION 11.5. Conformity with Trust Indenture Act.
Every supplemental indenture executed pursuant to this Article shall
conform to the requirements of the Trust Indenture Act.
SECTION 11.6. Reference in Securities to Supplemental Indentures.
Securities of any series authenticated and delivered after the
execution of any supplemental indenture pursuant to this Article may, and shall
if required by the Trustee, bear a notation in form approved by the Trustee as
to any matter provided for in such supplemental indenture. If the Company shall
so determine, new Securities of any series so modified as to conform, in the
opinion of the Trustee and the Company, to any such supplemental indenture may
be prepared and executed by the Company and authenticated and delivered by the
Trustee in exchange for Outstanding Securities.
ARTICLE XII
COLLATERAL AND SECURITY
SECTION 12.1. Collateral and Security Documents.
(a) In order to secure the due and punctual payment of the principal
of and interest on the Securities of each series when and as the same shall be
due and payable, whether on an Interest Payment Date, Maturity Date, by
acceleration, redemption or otherwise, and interest on the overdue principal of
and interest (to the extent permitted by law), if any, on the Securities of each
series and the performance of all other obligations of the Company to the
Holders or the Trustee under this Indenture and the Securities of each series
(the "Company Obligations"), the Company and the Trustee have simultaneously
with the execution of this Indenture entered into the Company Security Agreement
and a certain Mortgage pursuant to which the Company has granted to the Trustee,
in its capacity as Collateral Agent, for the benefit of the Holders of
Securities of each series, a first priority Lien on and security interest in the
Collateral described therein, subject to the exceptions permitted by Section
6.10. Each Subsidiary of the Company on the date of the Indenture, by executing
this Indenture, shall Guarantee the Company Obligations. The Company shall
cause each Person which becomes a Recourse Subsidiary of the Company after the
date of this Indenture to become a party to this Indenture as a Subsidiary
Guarantor on the date such Person becomes a Recourse Subsidiary. On the date of
this Indenture, each Subsidiary of the Company which holds real property
constituting part of the Mortgaged Facility or which owns any Integral Fixtures
and Equipment shall enter into a Subsidiary Security Agreement and a Mortgage to
secure its obligations under its Subsidiary Guarantee, pursuant to which such
Subsidiary has granted to the Trustee, in its capacity as Collateral Agent, for
the benefit of the Holders of Securities of each series a first priority Lien on
and security interest in the Collateral described in such Subsidiary Security
Agreement and Mortgage, subject to the exceptions permitted by Section 6.10.
Subsequent to the date of this Indenture, the Company and its Subsidiaries (with
the
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exception of Non-Recourse Subsidiaries) shall execute, as soon as practicable,
any further security agreements (substantially in the form of the Company
Security Agreement or the Subsidiary Security Agreement, as the case may be),
mortgages, or other agreements necessary and take such other actions as
necessary to create and maintain an effective security interest in the Mortgaged
Facility, all Integral Fixtures and Equipment and all proceeds and products of
any and all of the foregoing.
The Trustee, the Company and the Subsidiary Guarantors hereby agree
that the Trustee holds the Collateral in trust for the benefit of the Holders of
Securities of each series pursuant to the terms of the Security Documents.
(b) The Trustee is authorized and directed by the Holders of
Securities of each series to enter into and comply with the provisions of the
Intercreditor Agreement. Compliance with the Intercreditor Agreement shall in no
event serve as the basis for any claim by the Company or any other party having
an interest in the Collateral that the Collateral was not sold or otherwise
disposed of in a commercially reasonable manner. The Trustee is authorized to
execute and deliver the documents referred to in Section 2(c) of the
Intercreditor Agreement upon receipt of such documents and an Officer's
Certificate and an Opinion of Counsel, each to the effect that such documents
comply with the requirements of the Intercreditor Agreement and the conditions
contained herein with respect to the execution of such documents have been
complied with and that such documents do not release property subject to the
Lien of this Indenture or the Security Documents in contravention of the
provisions of this Indenture or such Security Documents.
(c) Each Holder, by accepting a Security, agrees to all of the terms
and provisions of the Security Documents, as the same may be amended from time
to time pursuant to the provisions of the Security Documents and this Indenture.
SECTION 12.2. Recording and Opinions.
(a) The Company and its Subsidiaries as soon as practicable shall
take or cause to be taken all action required to perfect, maintain, preserve and
protect the first priority Lien on and security interest in the Collateral,
subject to the exceptions set forth in Section 6.10, granted by the Security
Documents, including without limitation, the filing of financing statements,
continuation statements and any instruments of further assurance, in such manner
and in such places as may be required by law fully to preserve and protect the
rights of the Holders and the Trustee under this Indenture and the Security
Documents to all property now and hereafter comprising the Collateral. The
Company shall from time to time promptly pay all financing and continuation
statement recording and/or filing fees, charges and taxes relating to this
Indenture and the Security Documents, any amendments thereto and any other
instruments of further assurance required pursuant to the Security Documents.
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(b) The Company shall furnish to the Trustee promptly after the time
of execution and delivery of this Indenture, Opinion(s) of Counsel either (i)
substantially to the effect that, in the opinion of such Counsel, this Indenture
and the grant of a security interest in the Collateral intended to be made by
the Security Documents and all other instruments of further assurance,
including, without limitation, financing statements, have been properly recorded
and filed to the extent necessary to perfect the security interests in the
Collateral created by the Security Documents and reciting the details of such
action, and stating that as to the security interests created pursuant to the
Security Documents, such recordings and filings are the only recordings and
filings necessary to give notice thereof and that no re-recordings or refilings
are necessary to maintain such notice (other than as stated in such opinion) or
(ii) to the effect that, in the opinion of such counsel, no such action is
necessary to perfect such security interests. To the extent not required by the
preceding sentence, the Company shall deliver the opinion(s) required by Section
314(b) of the Trust Indenture Act. Subsequent to the date of this Indenture, at
the time of the execution of any Security Document, Opinion(s) of Counsel with
respect to the identical matters set forth in this paragraph (ii) and an Opinion
of Counsel to the effect that the Security Documents executed on such date
constitute the legally valid, binding and enforceable obligation of the Company
or such Subsidiary, as the case may be, subject to acceptable bankruptcy and
similar exceptions, shall be delivered to the Trustee.
(c) The Company shall furnish to the Trustee on June 1 in each year,
beginning with June 1, 1999, an Opinion of Counsel, dated as of such date,
either (i)(A) stating that, in the opinion of such counsel, action has been
taken with respect to the recording, filing, re-recording and refiling of all
supplemental indentures, financing statements and continuation statements as is
necessary to maintain the Lien of the Security Documents and reciting with
respect to the security interests in the Collateral the details of such action
or referring to prior Opinions of Counsel in which such details are given, and
(B) stating that, based on relevant laws as in effect on the date of such
Opinion of Counsel, all financing statements and continuation statements have
been executed and filed that are necessary as of such date and during the
succeeding 12 months fully to maintain the security interest of the Holders and
the Trustee hereunder and under the Security Documents with respect to the
Collateral, or (ii) stating that, in the opinion of such Counsel, no such action
is necessary to maintain such Lien.
SECTION 12.3. Release of Collateral.
(a) The Trustee, in its capacity as Collateral Agent under the
Security Documents, shall not at any time release Collateral from the security
interest created by this Indenture and the Security Documents unless such
release is in accordance with the provisions of this Indenture and the Security
Documents.
(b) At any time when an Event of Default shall have occurred and be
continuing, no release of Collateral pursuant to the provisions of this
Indenture and the
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Security Documents shall be effective as against the Holders of the Securities
of any series.
(c) The release of any Collateral from the terms of the Security
Documents shall not be deemed to impair the security under this Indenture in
contravention of the provisions hereof if and to the extent the Collateral is
released in accordance with this Indenture and the Security Documents. To the
extent applicable, the Company shall cause Section 314(d) of the Trust Indenture
Act relating to the release of property from the Lien of the Security Documents
and relating to the substitution therefor of any property to be subjected to the
Lien of the Security Documents to be complied with. Any certificate or opinion
required by Section 314(d) of the Trust Indenture Act may be made by a
Responsible Officer of the Company, except in cases where Section 314(d) of the
Trust Indenture Act requires that such certificate or opinion be made by an
Independent Person, which Person shall be an independent engineer, or other
expert selected or approved by the Trustee in the exercise of reasonable care.
SECTION 12.4. Possession and Use of Collateral.
Subject to and in accordance with the provisions of this Indenture and
the Security Documents, so long as no Event of Default shall have occurred and
be continuing the Company and its Subsidiaries shall have the right to remain in
possession and retain exclusive control of the Collateral other than Trust
Moneys held by the Trustee, to operate, manage, develop, lease, use, consume and
enjoy the Collateral (other than Trust Moneys and other personal property held
by, or required to be deposited or pledged with, the Collateral Agent under the
Indenture or any Security Document), to alter or repair any Collateral
consisting of vehicles, machinery or equipment so long as such alterations and
repairs do not diminish the value thereof or impair the Lien of the Security
Documents thereon and to collect, receive, use, invest and dispose of the
reversions, remainders, interest, rents, lease payments, issues, profits,
revenues, proceeds and other income thereof.
SECTION 12.5. Specified Releases of Collateral.
(a) Satisfaction and Discharge; Defeasance. The Company and its
Subsidiaries shall be entitled to obtain a full release of all of the Collateral
from the Liens of this Indenture and of the Security Documents upon compliance
with the conditions precedent set forth in Article IV for satisfaction and
discharge of this Indenture or for legal defeasance of the Outstanding
Securities of all series pursuant to Section 14.2. Upon delivery by the Company
to the Trustee of an Officers' Certificate and Opinion of Counsel, each to the
effect that such conditions precedent have been complied with (and which may be
the same Officers' Certificate and Opinion of Counsel required by Section 4.1 or
14.4), the Trustee shall forthwith take all necessary action (at the request of
and the expense of the Company) to release and reconvey to the Company all of
the Collateral, and shall deliver such Collateral in its possession to the
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Company including, without limitation, the execution and delivery of releases
and satisfactions whenever required.
(b) Sales of Collateral Permitted by Section 6.15. The Company shall
be entitled to obtain a release of items of Collateral (the "Released
Interests") subject to an Asset Sale upon compliance with the condition
precedent that the Company shall have delivered to the Trustee the following:
(i) Company Order. A Company Order requesting release of
Released Interests, such Company Order (A) specifically describing the
proposed Released Interests, (B) specifying the fair market value of such
Released Interests on a date within 60 days of the Company Order (the
"Valuation Date"), (C) stating that the purchase price received is at least
equal to the fair value of the Released Interest, (D) stating that the
release of such Released Interests is not anticipated to have a material
adverse effect on the financial condition, results of operations, business
or prospects of the Company and its Subsidiaries taken as a whole, taking
into account the planned use of proceeds from the sale of such Released
Interests, (E) confirming the sale of, or an agreement to sell, such
Released Interests in a bona fide sale to a Person that is not an Affiliate
of the Company or, in the event that such sale is to a Person that is an
Affiliate, that such sale is being made in accordance with Section 6.14,
(F) certifying that such Asset Sale complies with the terms and conditions
of Section 6.15 hereof and (G) in the event that there is to be a
substitution of property for the Collateral to be sold, specifying the
property intended to be substituted for the Collateral to be sold;
(ii) Officers' Certificate. An Officers' Certificate certifying
that (A) such Asset Sale covers only the Released Interests and complies
with the terms and conditions of an Asset Sale pursuant to Section 6.15,
(B) all Net Cash Proceeds from the sale of any of the Released Interests
constitutes Collateral and will be deposited in the Collateral Account for
application in accordance with Section 6.15, (C) there is no Default or
Event of Default in effect or continuing on the date thereof, the Valuation
Date or the date of such Asset Sale, (D) the release of the Collateral will
not result in a Default or Event of Default hereunder and (E) all
conditions precedent to such release have been complied with; and
(iii) Other Documents. All other documentation, if any,
required by Section 314(d) of the Trust Indenture Act.
(c) Eminent Domain and Other Governmental Takings. The Company shall
be entitled to obtain a release of, and the Trustee shall release, items of
Collateral taken by eminent domain or sold pursuant to the exercise by the
United States of America or any State, municipality, other governmental
authority or private Person holding the power of eminent domain of any right
which it may then have to purchase, or to designate a purchaser or to
order a sale of, all or any part of the Collateral, upon
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compliance with the condition precedent that the Company shall have delivered to
the Trustee the following:
(i) Officer's Certificate. An Officer's Certificate (A) stating
that such property has been taken by eminent domain and the amount of the
award therefor, or that such property has been sold pursuant to a right
vested in the United States of America, or a State, municipality, other
governmental authority or private Person holding the power of eminent
domain to purchase, or to designate a purchaser, or order a sale of such
property and the amount of the proceeds of such sale, and (B) stating that
all conditions precedent to such release have been complied with;
(ii) Opinion of Counsel. An Opinion of Counsel, subject to
reasonable qualifications and assumptions, to the effect that (A) such
property has been lawfully taken by exercise of the right of eminent
domain, or has been sold pursuant to the exercise of a right vested in the
United States of America or a State, municipality, other governmental
authority or private Person holding the power of eminent domain to
purchase, or to designate a purchaser or order a sale of, such property,
(B) in the case of any such taking by eminent domain, the award for such
property has become final or an appeal therefrom is not advisable in the
interests of the Company or the Holders, and (C) all conditions precedent
herein provided relating to such release have been complied with; and
(iii) Eminent Domain Award. Subject to the requirements of
any prior Lien on the Collateral so taken, cash equal to the amount of the
award for such property or the proceeds of such sale, to be held as Trust
Moneys subject to the disposition thereof pursuant to Article XIII hereof.
(d) Released Property. The Company shall be entitled to obtain a
release of items of Collateral that upon such release will constitute the
Released Property upon compliance with the condition precedent that the Company
shall have delivered to the Trustee the following:
(i) Company Order. A Company Order requesting release of such
Collateral, such Company Order (A) specifically describing the proposed
Collateral to be released, (B) stating that such Collateral is not used or
necessary in the ordinary course of business of the Company or any of its
Recourse Subsidiaries, (C) stating that such Collateral will, upon such
release, meet the definition of Released Property and (D) confirming the
Company's intention to contribute such Collateral to a Non-Recourse
Subsidiary in exchange for an equity interest therein;
(ii) Officers' Certificate. An Officers' Certificate certifying
that (A) such Collateral will, upon such release, meet the definition of
Released Property, (B) there is no Default or Event of Default in effect or
continuing on the date thereof,
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(C) the release of such Collateral will not result in a Default or Event of
Default hereunder and (D) all conditions precedent to such release have
been complied with; and
(iii) Other Documents. All other documentation, if any,
required by Section 314(d) of the Trust Indenture Act.
Upon compliance by the Company with the conditions precedent set forth
above, and upon delivery by the Company to the Trustee of an Opinion of Counsel
to the effect that such deliveries have been made to the Trustee, the Trustee
shall cause to be released and reconveyed to the Company, the Collateral
proposed to be released. At the Company's expense and reasonable request, the
Trustee shall cooperate with any resubdivision of the Company's property deemed
desirable by the Company to effect the release and subsequent development of the
Released Property in accordance with Section 6.27; provided, however, that the
Trustee shall not be required to cooperate with any such actions which could
reasonably be expected to have a material adverse effect on the remainder of the
Collateral (it being expressly agreed that the release of the Released Property
will not, in and of itself, have such a material adverse effect).
SECTION 12.6. Disposition of Collateral Without Release.
So long as no Event of Default shall have occurred and be continuing,
the Company or any of its Subsidiaries may, without any release or consent by
the Collateral Agent or the Trustee, sell or otherwise dispose of any Obsolete
Assets subject to the Lien of the Security Documents, in an aggregate amount not
to exceed, in fair market value, $2,000,000 in any year.
SECTION 12.7. Form and Sufficiency of Release.
In the event that the Company or any of its Subsidiaries have sold,
exchanged or otherwise disposed of or proposes to sell, exchange or otherwise
dispose of any portion of the Collateral that under the provisions of Section
12.5 or 12.6 may be sold, exchanged or otherwise disposed of by the Company or
its Subsidiary, and the Company or its Subsidiary requests the Trustee to
furnish a written disclaimer, release or quit-claim of any interest in such
property under this Indenture and the Security Documents, the Trustee, in its
capacity as Collateral Agent under the Security Documents, shall execute,
acknowledge and deliver to the Company or its Subsidiary (in proper and
recordable form) such an instrument promptly after satisfaction of the
conditions set forth herein for delivery of any such release. Notwithstanding
the preceding sentence, all purchasers and grantees of any property or rights
purporting to be released herefrom shall be entitled to rely upon any release
executed by the Trustee hereunder as sufficient for the purpose of this
Indenture and as constituting a good and valid release of the property therein
described from the Lien of this Indenture or of the Security Documents.
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SECTION 12.8. Purchaser Protected.
No purchaser or grantee of any property or rights purporting to be
released herefrom shall be bound to ascertain the authority of the Trustee to
execute the release or to inquire as to the existence of any conditions herein
prescribed for the exercise of such authority; nor shall any purchaser or
grantee of any property or rights permitted by this Indenture to be sold or
otherwise disposed of by the Company or any of its Subsidiaries be under any
obligation to ascertain or inquire into the authority of the Company or its
Subsidiary to make such sale or other disposition.
SECTION 12.9. Authorization of Actions To Be Taken by The Trustee Under the
Security Documents.
Subject to the provisions of the Security Documents, (a) the Trustee
may, in its sole discretion and without the consent of the Holders, take all
actions it deems necessary or appropriate in order to (i) enforce any of the
terms of the Security Documents and (ii) to collect and receive any and all
amounts payable in respect of the obligations of the Company hereunder or of the
Subsidiaries of the Company under the relevant Subsidiary Guarantee and (b) the
Trustee shall have power to institute and to maintain such suits and proceedings
as it may deem expedient to prevent any impairment of the Collateral by any acts
that may be unlawful or in violation of the Security Documents or this
Indenture, and such suits and proceedings as the Trustee may deem expedient to
preserve or protect its interests and the interests of the Holders in the
Collateral (including the power to institute and maintain suits or proceedings
to restrain the enforcement of or compliance with any legislative or other
governmental enactment, rule or order that may be unconstitutional or otherwise
invalid if the enforcement of, or compliance with, such enactment, rule or order
would impair the security interest thereunder or be prejudicial to the interests
of the Holders or of the Trustee).
SECTION 12.10. Authorization of Receipt of Funds by the Trustee Under the
Security Documents.
The Trustee is authorized to receive any funds for the benefit of
Holders distributed under the Security Documents, and to make further
distributions of such funds to the Holders in accordance with the provisions of
Article XIII and the other provisions of this Indenture.
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ARTICLE XIII
APPLICATION OF TRUST MONEYS
SECTION 13.1. Collateral Account.
On the date of this Indenture there shall be established and, at all
times hereafter until this Indenture shall have terminated, there shall be
maintained with the Trustee an account which shall be entitled the "Collateral
Account" (the "Collateral Account"). The Collateral Account shall be
established and maintained by the Trustee at its corporate trust offices. All
Trust Moneys which are received by the Trustee shall be deposited in the
Collateral Account and thereafter shall be held, applied and/or disbursed by the
Trustee in accordance with the terms of this Article.
SECTION 13.2. Withdrawals of Insurance Proceeds and Condemnation Awards.
To the extent that any Trust Moneys consist of either (i) Net
Insurance Proceeds or (ii) Condemnation Awards, such Trust Moneys may be
withdrawn by the Company (or by a Subsidiary of the Company if title to the
property damaged or taken was held by such Subsidiary, but only to the extent of
the Net Insurance Proceeds or Condemnation Proceeds relating thereto) and shall
be paid by the Trustee upon a Company Order to reimburse the Company or its
Subsidiary for expenditures made, or to pay costs incurred, by the Company or
its Subsidiary to repair, rebuild or replace the property destroyed, damaged or
taken, upon receipt by the Trustee of the following:
(a) an Officers' Certificate of the Company or its Subsidiary, dated
not more than 30 days prior to the date of the application for the
withdrawal and payment of such Trust Moneys:
(i) that expenditures have been made or costs incurred, by
the Company or its Subsidiary in a specified amount for the purpose of
making certain repairs, rebuildings and replacements of the
Collateral, which shall be briefly described, and stating the fair
value thereof to the Company or its Subsidiary at the date of the
expenditure or incurrence thereof by the Company or its Subsidiary;
(ii) that no part of such expenditures or costs has been or
is being made the basis for the withdrawal of any Trust Moneys in any
previous or then pending application pursuant to this Section 13.2;
(iii) that the property to be repaired, rebuilt or
replaced is necessary or desirable in the conduct of the Company's or
its Subsidiary's business; and
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(iv) that no Default or Event of Default shall have occurred
and be continuing;
(b) all documentation, if any, required under Section 314(d) of the
Trust Indenture Act; and
(c) an Opinion of Counsel substantially stating that the instruments
that have been or are therewith delivered to the Trustee conform to the
requirements of this Indenture and the Security Documents, and that, upon
the basis of such request of the Company or its Subsidiary and the
accompanying documents specified in this Section 13.2, all conditions
precedent herein provided for relating to such withdrawal and payment have
been complied with, and the Trust Moneys whose withdrawal is then requested
may be lawfully paid over under this Section 13.2.
Upon compliance with the foregoing provisions of this Section 13.2,
the Trustee shall pay on the written request of the Company or its Subsidiary an
amount of Trust Moneys of the character aforesaid equal to the amount of the
expenditures or costs stated in the Officers' Certificate required by clause (i)
of subsection (a) of this Section 13.2, or the fair value to the Company or its
Subsidiary of such repairs, rebuildings and replacements stated in such
Officers' Certificate (or in such Independent Appraiser's or Independent
Financial Advisor's certificate, if required by the Trust Indenture Act),
whichever is less; provided, however, that notwithstanding the above, so long as
no Default or Event of Default shall have occurred and be continuing, in the
event that any Net Insurance Proceeds or Condemnation Award for such property or
proceeds of such sale does not exceed the lesser of $25,000 or 1% of the
principal amount of the Outstanding Securities, and, in the good faith estimate
of the Company, such destruction or damage resulting in such Net Insurance
Proceeds or Condemnation Award does not detrimentally affect the value or use of
the applicable Collateral in any material respect, upon delivery to the Trustee
of an Officers' Certificate of the Company or its Subsidiary to such effect, the
Trustee shall release to the Company or its Subsidiary such Net Insurance
Proceeds or Condemnation Award for such property or proceeds of such sale, free
of the Lien hereof and of the Security Documents.
SECTION 13.3. Withdrawal of Trust Moneys for Asset Sale Offer.
Except to the extent of Trust Moneys consisting of the proceeds from
the sale of Securities of any series, Condemnation Awards or Net Insurance
Proceeds, Trust Moneys may be withdrawn by the Company and shall be paid by the
Trustee to the Company (or as otherwise directed by the Company) upon a Company
Order to the Trustee and upon receipt by the Trustee of the following:
(a) an Officers' Certificate, dated not more than five days prior to
the Asset Sale Payment Date stating:
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(i) that no Event of Default exists;
(ii) (A) that pursuant to and in accordance with Section
6.15, the Company has made an Asset Sale Offer, (B) the amount of
money to be applied to the repurchase of Securities pursuant to the
Asset Sale Offer, and (C) the amount of money to be retained by the
Company;
(iii) the Asset Sale Payment Date; and
(iv) that all conditions precedent and covenants herein
provided for relating to such application of Trust Moneys have been
complied with; and
(b) all documentation, if any, required under Section 314(d) of the
Trust Indenture Act; and
(c) an Opinion of Counsel stating that the documents that have been
or are therewith delivered to the Trustee in connection with the Asset Sale
Offer pursuant to this Section 13.3 conform to the requirements of this
Indenture and that all conditions precedent herein provided for relating to
such application of Trust Moneys have been complied with.
Upon compliance with the foregoing provisions of this Section 13.3,
the Trustee shall apply the Trust Moneys as directed and specified by such
Company Order.
SECTION 13.4. Withdrawal of Trust Moneys for Permitted Related Acquisitions.
In the event the Company (or a Subsidiary of the Company if such
Subsidiary has engaged in the Asset Sale) intends to reinvest Net Cash Proceeds
of an Asset Sale in a manner that would constitute a Permitted Related
Acquisition (the "Released Trust Moneys"), such Net Cash Proceeds constituting
Trust Moneys may be withdrawn by the Company (or, to the extent that the legal
title to the property transferred in an Asset Sale is held by a Subsidiary, by
such Subsidiary; provided, that the aggregate cost of the Permitted Related
Acquisitions to be made by such Subsidiary shall not exceed the Net Cash
Proceeds of such Asset Sale unless such excess is paid for by the Subsidiary
with funds other than Released Trust Moneys) and shall be paid by the Trustee to
the Company or its Subsidiary (or as otherwise directed by the Company or its
Subsidiary) upon a Company Order to the Trustee and upon receipt by the Trustee
of the following:
(a) A notice (each, a "Trust Moneys Release Notice"), which shall (i)
refer to this Section 13.4, (ii) contain all documents referred to below,
(iii) state the amount of the Released Trust Moneys and (iv) describe with
particularity the
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Permitted Related Acquisition to be made with respect to the Released Trust
Moneys;
(b) An Officer's Certificate certifying that (i) the release of the
Released Trust Moneys complies with the terms and conditions of Section
6.15 of this Indenture, (ii) there is no Default or Event of Default in
effect or continuing on the date thereof, (iii) the release of the Released
Trust Moneys will not result in a Default or Event of Default hereunder and
(iv) all conditions precedent to such release have been complied with;
(c) All other documentation, if any, required under Section 314(d) of
the Trust Indenture Act; and
(d) An Opinion of Counsel stating that the documents that have been
or are therewith delivered to the Collateral Agent and the Trustee in
connection with a Permitted Related Acquisition conform to the requirements
of this Indenture and that all conditions precedent herein provided for
relating to such application of Trust Moneys have been complied with.
Upon compliance with the foregoing provisions of this Indenture, the
Trustee shall apply the Released Trust Moneys as directed and specified by the
Company or its Subsidiary.
SECTION 13.5. Withdrawal of Trust Moneys for Retention by the Company or its
Subsidiaries.
To the extent that any Trust Moneys consist of Net Cash Proceeds
received by the Trustee pursuant to the provisions of Section 6.15 (including
Asset Sales relating to Obsolete Assets), and the Company (or a Subsidiary of
the Company if such Subsidiary has engaged in an Asset Sale, including an Asset
Sale relating to Obsolete Assets) intends to retain, subject to the limitations
set forth in Section 6.15, all or a portion of such Net Cash Proceeds (the
"Retained Trust Moneys"), such Trust Moneys may be withdrawn by the Company or
its Subsidiary and shall be paid by the Trustee to the Company or its Subsidiary
(or as otherwise directed by the Company or its Subsidiary) upon a Company Order
to the Trustee and upon receipt by the Trustee of the following:
(a) A notice (each, a "Withdrawal Notice"), which shall (i) refer to
this Section 13.5, (ii) contain all documents referred to below and (iii)
describe with particularity the Retained Trust Moneys and the Asset Sale
from which such Retained Trust Moneys were held as Collateral;
(b) An Officer's Certificate certifying that (i) the release of the
Retained Trust Moneys complies with the terms and conditions of Section
6.15 of the Indenture, (ii) there is no Default or Event of Default in
effect or continuing on
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the date thereof, (iii) the release of the Retained Trust Moneys will not
result in a Default or Event of Default hereunder and (iv) all conditions
precedent to such release have been complied with;
(c) All other documentation, if any, required under Section 314(d) of
the Trust Indenture Act; and
(d) An Opinion of Counsel stating that the documents that have been
or are therewith delivered to the Collateral Agent and the Trustee in
connection with a release of Retained Trust Moneys conform to the
requirements of this Indenture and that all conditions precedent herein
provided for relating to such application of Trust Moneys have been
complied with.
Upon compliance with the foregoing provisions of this Indenture, the
Trustee shall apply the Retained Trust Moneys as directed and specified by the
Company or its Subsidiary.
SECTION 13.6. Withdrawals of Proceeds from Certain Sales of Securities.
To the extent that any Trust Moneys consist of proceeds form the sale
of Securities deposited in the Collateral Account pursuant to Section 6.9, such
Trust Moneys may be withdrawn by the Company or by a Recourse Subsidiary of the
Company and shall be paid by the Trustee upon a Company Order to reimburse the
Company or its Recourse Subsidiary for expenditures made, or to pay costs
incurred, by the Company or its Recourse Subsidiary to finance improvements to
the Mortgaged Facility, upon receipt by the Trustee of the following:
(a) an Officers' Certificate of the Company or its Recourse
Subsidiary, dated not more than 30 days prior to the date of the
application for the withdrawal and payment of such Trust Moneys:
(i) that expenditures have been made or costs incurred, by
the Company or its Subsidiary in a specified amount for the purpose of
financing the construction of improvements to to the Mortgaged
Facility (including the acquisition of Fixtures and Equipment);
(ii) that no part of such expenditures or costs has been or
is being made the basis for the withdrawal of any Trust Moneys in any
previous or then pending application pursuant to this Section 13.6;
(iii) that the Mortgaged Facility improvements to be
constructed are intended to add supplemental production, handling or
performance capacity to the then existing Mortgaged Facility,
including through the acquisition of Fixtures and Equipment (except
that such Officers' Certificate may state that a portion of the
planned construction is intended
<PAGE>
117
to replace existing improvements and Fixtures and Equipment to the
extent ancillary to such construction); and
(iv) that no Default or Event of Default shall have occurred
and be continuing;
(b) all other documentation, if any, required under Section 314(d) of
the Trust Indenture Act; and
(c) an Opinion of Counsel substantially stating that the instruments
that have been or are therewith delivered to the Trustee conform to the
requirements of this Indenture and the Security Documents, and that, upon
the basis of such request of the Company or its Subsidiary and the
accompanying documents specified in this Section 13.6, all conditions
precedent herein provided for relating to such withdrawal and payment have
been complied with, and the Trust Moneys whose withdrawal is then requested
may be lawfully paid over under this Section 13.6.
Upon compliance with the foregoing provisions of this Section 13.6,
the Trustee shall pay on the written request of the Company or its Recourse
Subsidiary an amount of Trust Moneys of the character aforesaid equal to the
amount of the expenditures or costs stated in the Officers' Certificate required
by clause (i) of subsection (a) of this Section 13.6.
SECTION 13.7. Investment of Trust Moneys.
All or any part of any Trust Moneys held by the Trustee shall from
time to time be invested or reinvested by the Trustee in any Cash Equivalents
pursuant to the written direction of the Company, which shall specify the Cash
Equivalents in which such Trust Moneys shall be invested. Unless an Event of
Default occurs and is continuing, any interest in such Cash Equivalents (in
excess of any accrued interest paid at the time of purchase) that may be
received by the Trustee shall be forthwith paid to the Company. Such Cash
Equivalents shall be held by the Trustee as a part of the Collateral, subject to
the same provisions hereof as the cash used by it to purchase such Cash
Equivalents.
The Trustee shall not be liable or responsible for any loss resulting
from such investments or sales except only for its own grossly negligent action,
its own grossly negligent failure to act or its own willful misconduct in
complying with this Section 13.7.
<PAGE>
118
ARTICLE XIV
DEFEASANCE AND COVENANT DEFEASANCE
SECTION 14.1. Company's Option to Effect Defeasance or Covenant Defeasance.
The Company may at its option by Board Resolution, at any time, elect
to have either Section 14.2 or Section 14.3 applied to the Outstanding
Securities of any series upon compliance with the applicable conditions set
forth below in this Article XIV.
SECTION 14.2. Defeasance and Discharge.
Upon the Company's exercise of the option provided in Section 14.1
applicable to this Section 14.2 with respect to the Securities of any series,
the Company shall be deemed to have been discharged from its obligations with
respect to the Outstanding Securities of such series (other than those specified
in the next sentence) on the date the applicable conditions set forth below are
satisfied (hereinafter, "legal defeasance"). For this purpose, such defeasance
means that the Company shall be deemed to have paid and discharged the entire
indebtedness represented by the Outstanding Securities of such series and to
have satisfied all its other obligations under such Securities and this
Indenture insofar as such Securities are concerned (and the Trustee, at the
expense of the Company, shall execute proper instruments acknowledging the
same), except for the following which shall survive until otherwise terminated
or discharged hereunder: (A) the rights of Holders of such Securities to
receive, solely from the trust fund described in Section 14.4 and as more fully
set forth in such Section, payments in respect of the principal of and interest
on such Securities when such payments are due, (B) the Company's obligations
with respect to such Securities under Sections 3.4, 3.5, 3.6, 6.2 and 6.26 and
with respect to the Trustee under Section 9.7, (C) the rights, powers, trusts,
duties and immunities of the Trustee hereunder and (D) this Article XIV.
Subject to compliance with the applicable conditions under this Article XIV, the
Company may exercise its option under this Section 14.2 notwithstanding the
prior exercise of its option under Section 14.3.
SECTION 14.3. Covenant Defeasance.
Upon the Company's exercise of the option provided in Section 14.1
applicable to this Section 14.3 with respect to the Securities of any series,
(i) the Company shall be released from its obligations with respect to such
Securities under Sections 6.9 through 6.25 and Section 6.27 and (ii) the
occurrence of an event specified in Section 8.1(iv) with respect to such
Securities (with respect to any of Section 6.9 through 6.25 and Section 6.27),
8.1(v) and (vi)) shall not be deemed to be an Event of Default (hereinafter,
"covenant defeasance"). For this purpose, such covenant defeasance means that
the Company may omit to comply with and shall have no liability in respect of
any term, condition or limitation set forth in any such Section, whether
directly, or indirectly by reason of any reference elsewhere herein to any such
Section or by reason of any reference in any such Section, insofar as any suuch
term, condition or limitation relates to the Securities of such series to any
other provision herein or in any other document, but the remainder of this
Indenture with respect to the Securities of such
<PAGE>
119
series, the Indenture as it relates to the Securities of any other series, and
the Securities of any other series shall be unaffected thereby.
SECTION 14.4. Conditions to Defeasance or Covenant Defeasance.
Except as otherwise indicated below, the following shall be the
conditions to application of either Section 14.2 or Section 14.3 to the then
Outstanding Securities of any series:
The Company may exercise its legal defeasance option or its covenant
defeasance option only if:
(1) the Company shall irrevocably have deposited or caused to be
deposited in trust with the Trustee (or another trustee satisfying the
requirements of Section 9.9 who shall agree to comply with the provisions
of this Article applicable to the Trustee) as trust funds in trust for the
purpose of making the following payments, specifically pledged as security
for, and dedicated solely to, the benefit of the Holders of Securities of
such series, (A) money in an amount, or (B) U.S. Government Obligations
which through the scheduled payment of principal and interest in respect
thereof in accordance with their terms will provide, not later than one day
before the due date of any payment, money in an amount sufficient to pay
the principal of and each installment of interest on the Securities of such
series on the Maturity Date of such principal or Interest Payment Date, as
the case may be, in accordance with the terms of this Indenture and the
Securities of such series, or (C) a combination of (A) and (B);
(2) the Company delivers to the Trustee a certificate from a
nationally recognized firm of independent certified public accountants
expressing their opinion that the payments of principal and interest when
due and without reinvestment of the deposited U.S. Government Obligations
plus any deposited money without investment will provide cash at such times
and in such amounts as will be sufficient to pay principal and interest
when due on all the Securities of such series to maturity or redemption, as
the case may be;
(3) 91 days pass after the deposit is made and during the 91-day
period no Event of Default or Default relating to bankruptcy and insolvency
events with respect to the Company occurs which is continuing at the end of
the period;
(4) no Event of Default or Default with respect to the Securities of
such series has occurred and is continuing on the date of such deposit and
after giving effect thereto;
(5) the Company delivers to the Trustee an Opinion of Counsel to the
effect that (i) the trust resulting from the deposit does not constitute,
or is
<PAGE>
120
qualified as, a regulated investment company under the Investment Company
Act of 1940, (ii) the Holders of Securities of such series have a valid
first priority perfected security interest in the trust funds, and (iii)
after passage of 91 days following the deposit (except, with respect to any
trust funds for the account of any Holder of Securities of such series who
may be deemed to be an "insider" for purposes of the Bankruptcy Code, after
one year following the deposit), the trust funds will not be subject to the
effect of Section 547 of the Bankruptcy Law or Section 15 of the New York
Debtor and Creditor Law in a case commenced by or against the Company under
either such statute, and either (A) the trust funds will no longer remain
the property of the Company (and therefore, will not be subject to the
effect of any applicable bankruptcy, insolvency, reorganization or similar
laws affecting creditors' rights generally) or (B) if a court were to rule
under any such law in any case or proceeding that the trust funds remained
property of the Company, (x) assuming such trust funds remained in the
possession of the Trustee prior to such court ruling to the extent not paid
to Holders of Securities of such series, the Trustee will hold, for the
benefit of the Holders of Securities of such series, a valid first priority
perfected security interest in such trust funds that is not avoidable in
bankruptcy or otherwise except for the effect of Section 552(b) of the
Bankruptcy Law on interest on the trust funds accruing after the
commencement of a case under such statute and (y) the Holders of Securities
of such series will be entitled to receive adequate protection of their
interests in such trust funds if such trust funds are used in such case or
proceeding;
(6) in the case of the legal defeasance option, the Company shall
have delivered to the Trustee an Opinion of Counsel stating that (i) the
Company has received from, or there has been published by, the Internal
Revenue Service a ruling, or (ii) since the date of the Indenture there has
been a change in the applicable U.S. Federal income tax law or a regulation
clarifying existing law, in either case to the effect that, and based
thereon such Opinion of Counsel shall confirm that, the Holders of
Securities of such series will not recognize income, gain or loss for U.S.
Federal income tax purposes as a result of such defeasance and will be
subject to U.S. Federal income tax on the same amounts, in the same manner
and at the same times as would have been the case if such defeasance had
not occurred;
(7) in the case of the covenant defeasance option, the Company shall
have delivered to the Trustee an Opinion of Counsel to the effect that the
Holders of Securities of such series will not recognize income, gain or
loss for U.S. Federal income tax purposes as a result of such covenant
defeasance and will be subject to U.S. Federal income tax on the same
amounts, in the same manner and at the same times as would have been the
case if such covenant defeasance had not occurred;
<PAGE>
121
(8) such defeasance or covenant defeasance shall not cause the Trustee
to have a conflicting interest as defined in Section 9.8 and for purposes
of the Trust Indenture Act with respect to any securities of the Company;
(9) such defeasance or covenant defeasance shall not result in a
breach or violation of, or constitute default under, any other agreement or
instrument to which the Company is a party or by which it is bound; and
(10) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent to the defeasance and discharge of the Securities of such series
have been complied with.
SECTION 14.5. Deposited Money and U.S. Government Obligations to be held in
Trust; Other Miscellaneous Provisions.
Subject to the provisions of the last paragraph of Section 6.26, all
money and U.S. Government Obligations (including the proceeds thereof) deposited
with the Trustee (or other qualifying trustee -- collectively, for purposes of
this Section 14.5 and Section 14.6, the "Trustee") pursuant to Section 14.4 in
respect of the Securities of any series shall be held in trust and applied by
the Trustee, in accordance with the provisions of such Securities and this
Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Holders of such Securities, of all sums due and to become due
thereon in respect of principal and interest.
The Company shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against the U.S. Government Obligations
deposited pursuant to Section 14.4 or the principal and interest received in
respect thereof other than any such tax, fee or other charge which by law is for
the account of the Holders of the Outstanding Securities of such series.
Anything in this Article XIV to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon Company
Request any money or U.S. Government Obligations held by it as provided in
Section 14.4 which, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee, are in excess of the amount thereof which would then
be required to be deposited to effect an equivalent defeasance or covenant
defeasance.
The provisions of the last paragraph of Section 6.26 shall apply to
any money held by the Trustee or any Paying Agent under this Article XIV that
remains unclaimed for two years after the Maturity Date of the applicable series
of Securities for which money or Government Obligations have been deposited
pursuant to Section 14.4.
<PAGE>
122
SECTION 14.6. Reinstatement.
If the Trustee or the Paying Agent is unable to apply any money in
accordance with Section 14.5 by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, then the Company's obligations under this Indenture and any
applicable series of Securities shall be revived and reinstated as though no
deposit had occurred pursuant to this Article until such time as the Trustee or
Paying Agent is permitted to apply all such money in accordance with Section
14.5; provided, however, that if the Company makes any payment of principal of
or interest on any Security following the reinstatement of the Company's
obligations, the Company shall be subrogated to the rights of the Holders of
such Securities to receive such payment from the money held by the Trustee or
the Paying Agent.
ARTICLE XV
INTERVENTION
SECTION 15.1. Intervention.
(a) The Company's Wholly-Owned Subsidiaries, River Road Realty
Corporation and Bayou Steel Corporation (Tennessee), hereby (i) intervene in
this Indenture in furtherance of the purposes hereof and in the Security
Documents to which each is a party and (ii) agree with and for the benefit of
the Trustee to the terms and provisions set forth in Annex A hereto, which terms
and provisions shall be incorporated by reference herein as if set forth herein.
(b) The Trustee hereby accepts and agrees to clause (ii) of paragraph
(a) above.
<PAGE>
______________________
THUS DONE AND PASSED in multiple originals, on the date first above
written, at New Orleans, Louisiana, in the presence of the undersigned competent
witnesses, and of the undersigned Notary Public, after due reading of the whole.
WITNESSES TO ALL BAYOU STEEL CORPORATION
SIGNATURES:
/S/ MARGARET M. LANDRY BY: /S/ RICHARD J. GONZALEZ
- ---------------------- -----------------------
PRINTED NAME: PRINTED NAME:
--------------------- ---------------------
TITLE:
----------------------------
RIVER ROAD REALTY CORPORATION
/S/ MARGARET M. LANDRY BY: /S/ RICHARD J. GONZALEZ
- ---------------------- -----------------------
PRINTED NAME: PRINTED NAME:
--------------------- ---------------------
TITLE:
----------------------------
BAYOU STEEL CORPORATION
(TENNESSEE)
/S/ MARGARET M. LANDRY BY: /S/ RICHARD J. GONZALEZ
- ---------------------- -----------------------
PRINTED NAME: PRINTED NAME:
--------------------- ---------------------
TITLE:
----------------------------
FIRST NATIONAL BANK OF COMMERCE,
AS TRUSTEE
/S/ MARGARET M. LANDRY BY: /S/DENIS L. MILLINER
- ---------------------- --------------------
PRINTED NAME: PRINTED NAME:
--------------------- ---------------------
TITLE:
----------------------------
<PAGE>
EXHIBIT A
[FORM OF FACE OF INITIAL NOTE]
[Applicable Restricted Securities Legend]
[Depository Legend, if applicable]
No. Principal Amount $[______________]
CUSIP NO. ____________
BAYOU STEEL CORPORATION
[__]% First Mortgage Note due 200[ ]
Bayou Steel Corporation, a Delaware corporation promises to pay to
[___________], or registered assigns, the principal sum of [__________________]
Dollars on [________], 200[ ].
Interest Payment Dates: [______________].
Record Dates: [______________].
Additional provisions of this Security are set forth on the other side
of this Security.
Dated: BAYOU STEEL CORPORATION
By:
--------------------------------
Attest by:
-------------------------
<PAGE>
2
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
FIRST NATIONAL BANK OF COMMERCE
as Trustee, certifies
that this is one of
the Securities referred
to in the Indenture.
By
---------------------------------
Authorized Signatory [DATE]
<PAGE>
[FORM OF REVERSE SIDE OF INITIAL NOTE]
[__]% First Mortgage Note due 200[ ]
1. Interest
Bayou Steel Corporation, a Delaware corporation (such corporation, and
its successors and assigns under the Indenture hereinafter referred to, being
herein called the "Company"), promises to pay interest on the principal amount
of this Security at the rate per annum shown above.
The Company will pay interest semiannually on [_________] and
[________] of each year. Interest on this Security will accrue from the most
recent date to which interest has been paid on this Security or, if no interest
has been paid, from [ISSUE DATE]. The Company shall pay interest on overdue
principal (plus interest on such interest to the extent lawful), at the rate
borne by this Security to the extent lawful. Interest will be computed on the
basis of a 360-day year of twelve 30-day months.
2. Method of Payment
The principal of and interest on this Security shall be payable at the
office or agency of the Paying Agent in The City of New Orleans, maintained for
such purpose; provided, however, that at the option of the Company payment of
interest may be made by check mailed to the address of the Person entitled
thereto as such address shall appear in the Security Register; provided,
further, that a Holder of $10,000,000 in aggregate principal amount of
Securities of any series shall be entitled to receive payments of interest by
wire transfer in immediately available funds (but only if appropriate payment
instructions have been received in writing by the Paying Agent not less than 15
calendar days prior to the applicable Interest Payment Date).
3. Paying Agent and Security Registrar
Initially, First National Bank of Commerce, a national banking
association ("Trustee"), will act as Paying Agent and Security Registrar. The
Company may appoint and change any Paying Agent without notice to any Holder.
The Company may act as Paying Agent.
4. Indenture
The Company issued this Security under an Indenture dated as of May
22, 1998 (as it may be amended or supplemented from time to time in accordance
with the terms thereof, the "Indenture"), among the Company and the Trustee.
The terms of this Security include those stated in the Indenture and those made
part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C.
(S)(S) 77aaa-77bbbb) as in effect from time to time (the "Act"). Capitalized
terms used herein and not defined herein
<PAGE>
2
have the meanings ascribed thereto in the Indenture. This Security is subject to
all such terms, and the Holder of this Security is referred to the Indenture and
the Act for a statement of those terms.
The Securities are senior secured obligation of the Company. This
Security is one of the [1998] Initial Notes referred to in the Indenture. The
[1998] Initial Notes and the [1998] Exchange Notes are treated as a single
series of Securities under the Indenture. The Indenture imposes certain
limitations on, among other things, the ability of the Company to incur
additional Indebtedness; create Liens; make Restricted Payments; engage in
certain transactions with stockholders and Affiliates; engage in Sale and
Leaseback Transactions; dispose of assets; issue Preferred Stock of
Subsidiaries; transfer assets to its subsidiaries; enter into agreements that
restrict the ability of its Subsidiaries to make dividends and distributions;
engage in mergers, consolidations and transfers of substantially all of the
Company's assets; make certain Investments, loans, and advances; and create Non-
Recourse Subsidiaries. These limitations are subject to a number of important
qualifications and exceptions. The Company must report to the Trustee annually
its compliance with the limitations contained in the Indenture.
No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional to pay the principal of and interest on this
Security at the times, place and rate, and in the coin or currency, herein
prescribed.
5. Mandatory Redemption
Upon a Change of Control, the Holder of this Security will have the
right to cause the Company to repurchase all or any part of this Security at a
purchase price in cash equal to 101% of the principal amount hereof, plus
accrued and unpaid interest, if any, to the date of repurchase (subject to the
right of the Holder of record on the relevant record date to receive interest
due on the relevant interest payment date) as provided in, and subject to the
terms of, the Indenture.
Section 6.15 of the Indenture provides that after certain Asset Sales,
subject to certain limitations contained therein, the Company may be required to
make an offer to purchase all or a portion of this Security in accordance with
the procedures set forth in the Indenture.
6. Optional Redemption
[The Company, at its option, may redeem this Security, in whole or in
part, from time to time on and after [__________, 2003], at the redemption
prices set forth below (expressed as a percentage of the principal amount
thereof), in each case together with accrued interest, if any, to the date of
redemption, if redeemed during the twelve-month period beginning
[_______________] of the years indicated below:
<PAGE>
3
Year Percentage
---- ----------
[2003] ___.__%
[2004] ___.__%
[2005] ___.__%
[2006] and thereafter 100.00%
provided that if the date fixed for redemption is [________] or [________], then
the interest payable on such date shall be paid to the Holder of record on the
next preceding [_________] or [__________].
Prior to [__________], 2001, the Company may, at its option, from time
to time, redeem up to 35% of the original aggregate principal amount of the 1998
Securities at a redemption price equal to ___% of the principal amount thereof,
together with accrued and unpaid interest, if any, to the date of redemption
with all or a portion of the net proceeds of public sales of common stock of the
Company; provided, that at least 65% of the original aggregate principal amount
of the 1998 Securities remains outstanding immediately after the occurrence of
such redemption; and provided, further, that such redemption shall occur within
60 days of the date of the closing of the related sale of common stock of the
Company.
At any time prior to [____________], 2003, the Company may, at its
option, redeem the 1998 Securities, in whole but not in part, upon the
occurrence of a Change of Control, at a redemption price equal to 100% of the
principal amount thereof, together with the Applicable Premium as of, and
accrued and unpaid interest, if any, to, the date of redemption.]
In the event that less than all of the Securities of any series are to
be redeemed, the Trustee shall select the Securities of such series to be
redeemed in compliance with the requirements of the principal national
securities exchange, if any, on which the Securities being redeemed are listed,
or, if the Securities are not listed on a national securities exchange, on a pro
rata basis, by lot or by such method as the Trustee shall deem fair and
appropriate; provided, that no Securities of $1,000 or less shall be redeemed in
whole or in part.
At least 30 days but not more than 60 days prior to a redemption date
(but, in the case of any redemption of this Security pursuant to a Change of
Control, in no event more than 90 days after the occurrence of such Change of
Control), the Company shall mail or cause the mailing of a notice of redemption
by first-class mail to the Holder of this Security at its registered address.
If this Security is to be redeemed in
<PAGE>
4
part only, the notice of redemption shall state the portion of the principal
amount to be redeemed. A new Security in a principal amount equal to the
unredeemed portion hereof will be issued in the name of the Holder hereof upon
cancellation of the original Security. On and after the redemption date,
interest will cease to accrue on this Security or the portion hereof called for
redemption unless the Company defaults in the payment of the redemption price or
accrued interest.
7. Senior Secured Obligations
The Securities are senior obligations of the Company, secured by a
first priority lien, subject to certain exceptions, on the Collateral owned by
it to the Collateral Agent for the benefit of the Holders pursuant to the
Indenture and the Security Documents. The Recourse Subsidiaries of the Company
shall, by executing the Indenture, guarantee the obligations of the Company with
respect to the Securities. The Securities will rank senior in right of payment
to all future subordinated indebtedness of the Company. The Subsidiary
Guarantees will be secured by the Collateral assigned by such Subsidiary
pursuant to a Subsidiary Security Agreement.
Each Holder, by accepting a Security, agrees to all of the terms and
provisions of the Security Documents, as the same may be amended from time to
time pursuant to the respective provisions thereof and the Indenture, and hereby
irrevocably appoints the Trustee as its special attorney-in-fact for the Holder
and vests the Trustee on behalf of the Holder with full power to act on such
Holder's behalf and enforce the Security Documents for the benefit of the
Holder.
The Trustee, the Collateral Agent and each Holder acknowledges that a
release of any of the Collateral or any Lien strictly in accordance with the
terms and provisions of the Indenture and Security Documents will not be deemed
for any purpose to be an impairment of the Security under the Indenture.
8. Denominations; Transfer; Exchange
The Securities are in registered form without coupons in denominations
of principal amount of $1,000 and whole multiples of $1,000. A Holder may
transfer or exchange Securities in accordance with the Indenture and the face of
this Security. The Company shall provide for the registration of Securities and
of transfers of Securities in the Security Register. The Security Registrar may
require a Holder, among other things, to furnish appropriate endorsements or
transfer documents. No service charge shall be made to the Holder of this
Security for any registration of transfer or exchange, but the Company may
require the payment of a sum sufficient to cover any transfer tax, assessments
or similar governmental charge payable in connection therewith (other than any
such transfer taxes or similar governmental charges payable upon exchanges or
transfers pursuant to Section 11.6 of the Indenture). The Security Registrar
shall not be required to register the transfer of or exchange any Securities for
a period beginning (i) 15 Business Days before the mailing of a notice of an
offer to repurchase the
<PAGE>
5
Securities of the same series as this Security and ending on the close of
business on the day of such mailing or (ii) 15 Business Days before an interest
payment date for this Security and ending on such interest payment date.
9. Persons Deemed Owners
The registered holder of this Security may be treated as the owner of
it for all purposes.
10. Unclaimed Money
If money for the payment of principal or interest remains unclaimed
for two years, the Trustee or Paying Agent shall pay the money back to the
Company at its request unless an abandoned property law designates another
Person. After any such payment, Holders entitled to the money must look only to
the Company and not to the Trustee for payment as unsecured general creditors.
11. Defeasance
Subject to certain conditions set forth in the Indenture, the Company
at any time may terminate some or all of its obligations with respect to this
Security and the Indenture if the Company deposits with the Trustee money or
U.S. Government Obligations for the payment of principal and interest on the
series of Securities, of which this Security is a part, to maturity.
12. Supplemental Indentures, Amendment, Waiver
From time to time, the Company and the Subsidiary Guarantors when
authorized by a Board Resolution, and the Trustee (or the Collateral Agent, if a
party thereto), may, without the consent of any Holders, supplement the
Indenture, or amend or waive the Security Documents or the Securities of any
series for certain specified purposes, including, among other things, curing
ambiguities, defects, or inconsistences maintaining the qualification of the
Indenture under the Trust Indenture Act, making any change that does not
adversely affect the rights of any Holder of Securities of any series or
mortgaging, pledging, or granting a security interest in favor of the Collateral
Agent as additional security for the payment and performance of the obligations
of the Company under the Indenture, in any property or assets, including any
which are required to be mortgaged, pledged or hypothecated, or in which a
security interest is required to be granted, to the Collateral Agent pursuant to
any Security Document or otherwise, to establish the terms of Securities of any
series as permitted by Section 3.1(a) of the Indenture, to supplement any
provisions of the Indenture to such extent as shall be necessary to permit or
facilitate the issuance of the Securities of any series initially as securities
registered under the Securities Act; provided, that any such action shall not
adversely affect the interests of the Holders of any other series, or to add any
Person
<PAGE>
6
who becomes a Recourse Subsidiary of the Company after the date of the Indenture
as a party to the Indenture.
Other amendments, modifications and supplements of the Indenture, the
Securities of any series or the Security Documents may be made by the Company,
the Collateral Agent (if a party thereto) and the Trustee with the consent of
the Holders of not less than a majority of the aggregate principal amount of the
Outstanding Securities of each series affected by such amendment waiver or
supplement; provided, that no such modification or amendment may, without the
consent of the Holder of each Outstanding Security affected thereby, (1) change
the Stated Maturity of the principal of, or any installment of interest on, any
Security, or alter the redemption provisions or reduce the principal amount
thereof or the rate of interest thereon, or change the place of payment where,
or the coin or currency in which, any Security or interest thereon is payable,
or impair the right to institute suit for the enforcement of any such payment on
or after the Maturity Date thereof; or (2) reduce the percentage in principal
amount of the Outstanding Securities of any series, the consent of whose Holders
is required for any such supplemental indenture, or the consent of whose Holders
is required for any waiver (of compliance with certain provisions of the
Indenture or certain defaults hereunder and their consequences) provided for in
the Indenture; or (3) modify any of the provisions of Sections 8.8, 8.13 or 11.2
of the Indenture except to increase any such percentage or to provide that
certain other provisions of the Indenture cannot be modified or waived without
the consent of the Holder of each Outstanding Security affected thereby; or (4)
affect the ranking of the Securities of any series or the Liens in favor of the
Trustee, the Collateral Agent and the Holders of Securities of any series in a
manner adverse to the Holders or release all or substantially all of the
Collateral.
13. Defaults and Remedies
If an Event of Default (other than an Event of Default specified in
Section 8.1(vii), (viii) or (xi) of the Indenture) occurs and is continuing with
respect to Outstanding Securities of any series, the Trustee or the Holders of
at least 25% of the principal amount of the Outstanding Securities of such
series by notice to the Company (and to the Trustee if such notice is given by
the Holders) may declare the principal amount and accrued interest on the
Securities of that series to be immediately due and payable. If an Event of
Default specified in Section 8.1(vii), (viii) or (xi) of the Indenture occurs,
the principal amount and accrued interest shall ipso facto become and be
immediately due and payable on all Outstanding Securities without any
declaration or other act on the part of the Trustee or any Holder. The Holders
of a majority in principal amount of the then Outstanding Securities of any
series by notice to the Trustee and the Company may rescind an acceleration and
its consequences with respect to such series if the Company has paid or
deposited with the Trustee a sum sufficient to pay all amounts due on Securities
of that series, other than amounts due by declaration of acceleration, and all
existing Events of Default, other than the nonpayment of the principal of the
Securities of that series which have became due solely by such declaration of
acceleration have been cured or waived. The Holders of a
<PAGE>
7
majority in principal amount of the Outstanding Securities of any series also
have the right to waive certain past defaults under the Indenture with respect
to such series, except a default in the payment of the principal of, premium, if
any, or interest on any Security of such series, or in respect of a covenant or
a provision which cannot be modified or amended without the consent of all
Holders of Securities of such series.
Holders of Securities of any series may not enforce the Indenture or
the Securities of such series except as provided in the Indenture. The Trustee
may refuse to enforce the Indenture or the Securities of any series unless it
receives reasonable indemnity or security. Subject to certain limitations,
Holders of a majority in principal amount of the Securities of any series may
direct the Trustee in its exercise of any trust or power. The Trustee may
withhold from Holders of Securities of any series notice of any continuing
Default or Event of Default (except a Default or Event of Default in payment of
principal or interest) if it determines that withholding notice is in their
interest.
14. Trustee Dealings with the Company
Subject to certain limitations set forth in the Indenture, the Trustee
under the Indenture, in its individual or any other capacity, may become the
owner or pledgee of Securities and may otherwise deal with and collect
obligations owed to it by the Company or its affiliates and may otherwise deal
with the Company or its affiliates with the same rights it would have if it were
not Trustee.
15. No Recourse Against Others
A director, officer, employee or stockholder, as such, of the Company
shall not have any liability for any obligations of the Company under the
Securities or the Indenture or for any claim based on, in respect of or by
reason of such obligations or their creation. By accepting a Security, each
Holder waives and releases all such liability. The waiver and release are part
of the consideration for the issue of the Securities.
16. Authentication
This Security shall not be valid until an authorized signatory of the
Trustee (or an authenticating agent acting on its behalf) manually signs the
certificate of authentication on the other side of this Security.
17. Abbreviations
Customary abbreviations may be used in the name of a Holder or an
assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the
entirety), JT TEN (=joint tenants with rights of survivorship and not as tenants
in common), CUST (=custodian) and U/G/M/A (=Uniform Gift to Minors Act).
<PAGE>
8
18. CUSIP Numbers
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures the Company has caused CUSIP numbers to be
printed on this Security. No representation is made as to the accuracy of such
numbers as printed on this Security and reliance may be placed only on the other
identification numbers placed thereon.
19. Governing Law
This Security shall be governed by, and construed in accordance with,
the laws of the State of New York but without giving effect to applicable
principles of conflicts of law to the extent that the application of the laws of
another jurisdiction would be required thereby.
The Company will furnish to any Holder upon written request and
without charge to the Holder a copy of the Indenture which has in it the text of
this Security in larger type. Requests may be made to:
Bayou Steel Corporation
P.O. Box 5000
River Road
LaPlace, LA 70069
Attention: Secretary
<PAGE>
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
- --------------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint _____________________ agent to transfer this Security on
the books of the Company. The agent may substitute another to act for him.
- --------------------------------------------------------------------------------
Date:____________________ Your Signature:___________________
Signature Guarantee:______________________________
(Signature must be guaranteed)
- --------------------------------------------------------------------------------
Sign exactly as your name appears on the other side of this Security.
The signature(s) should be guaranteed by an eligible guarantor institution
(banks, stockbrokers, savings and loan associations and credit unions with
membership in an approved signature guarantee medallion program), pursuant to
S.E.C. Rule 17Ad-15.
In connection with any transfer or exchange of any of the Securities evidenced
by this certificate occurring prior to the date that is two years after the
later of the date of original issuance of such Securities and the last date, if
any, on which such Securities were owned by the Company or any Affiliate of the
Company, the undersigned confirms that such Securities are being:
CHECK ONE BOX BELOW:
1[ ] acquired for the undersigned's own account, without transfer; or
2[ ] transferred to the Company; or
3[ ] transferred pursuant to and in compliance with Rule 144A under
the Securities Act of 1933, as amended (the "Securities Act"); or
4[ ] transferred pursuant to an effective registration statement under
the Securities Act; or
<PAGE>
2
5[ ] transferred pursuant to and in compliance with Regulation S under
the Securities Act; or
6[ ] transferred to an institutional "accredited investor" (as defined
in Rule 501(a)(1), (2), (3) or (7) under the Securities Act), that has
furnished to the Trustee a signed letter containing certain representations
and agreements (the form of which letter appears as Section 3.2(g) of the
Indenture); or
7[ ] transferred pursuant to another available exemption from the
registration requirements of the Securities Act of 1933.
Unless one of the boxes is checked, the Trustee will refuse to register any of
the Securities evidenced by this certificate in the name of any person other
than the registered holder thereof; provided, however, that if box (5), (6) or
(7) is checked, the Trustee or the Company may require, prior to registering any
such transfer of the Securities, in their sole discretion, such legal opinions,
certifications and other information as the Trustee or the Company may
reasonably request to confirm that such transfer is being made pursuant to an
exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act of 1933, such as the exemption provided by
Rule 144 under such Act.
______________________________
Signature
Signature Guarantee:
____________________________________ ______________________________
(Signature must be guaranteed) Signature
____________________________________________________________
The signature(s) should be guaranteed by an eligible guarantor institution
(banks, stockbrokers, savings and loan associations and credit unions with
membership in an approved signature guarantee medallion program), pursuant to
S.E.C. Rule 17Ad-15.
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing this
Security for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act of
1933, as amended, and is aware that the sale to it is being made in reliance on
Rule 144A and acknowledges that it has received such information regarding the
Company as the
<PAGE>
3
undersigned has requested pursuant to Rule 144A or has determined not to request
such information and that it is aware that the transferor is relying upon the
undersigned's foregoing representations in order to claim the exemption from
registration provided by Rule 144A.
_____________________
Dated: NOTICE: To be executed by an executive officer
<PAGE>
[TO BE ATTACHED TO GLOBAL SECURITIES]
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY
The following increases or decreases in this Global Security have been
made:
<TABLE>
<CAPTION>
Amount of decrease in Amount of increase in Principal Amount of this Signature of authorized
Date of Principal Amount of this Principal Amount of this Global Security following signatory of Trustee or
Exchange Global Security Global Security such decrease or increase Securities Custodian
<S> <C> <C> <C> <C>
</TABLE>
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company
pursuant to Section 6.15 or Section 6.19 of the Indenture, check the box:
[ ]
If you want to elect to have only part of this Security purchased by
the Company pursuant to Section 6.15 or Section 6.19 of the Indenture, state the
amount in principal amount (must be integral multiple of $1,000): $
Date: _______________ Your Signature: _________________________
(Sign exactly as your name appears on the other side
of the Security)
Signature Guarantee: _______________________________________
(Signature must be guaranteed)
The signature(s) should be guaranteed by an eligible guarantor institution
(banks, stockbrokers, savings and loan associations and credit unions with
membership in an approved signature guarantee medallion program), pursuant to
S.E.C. Rule 17Ad-15.
<PAGE>
[FORM OF FACE OF EXCHANGE NOTE]
[Depository Legend, if applicable]
No. Principal Amount $[____________]
CUSIP NO. _____________
BAYOU STEEL CORPORATION
[__]% First Mortgage Note due 200[ ]
Bayou Steel Corporation, a Delaware corporation promises to pay to
[___________], or registered assigns, the principal sum of [__________________]
Dollars on [________], 200[ ].
Interest Payment Dates: [______________].
Record Dates: [______________].
Additional provisions of this Security are set forth on the other side
of this Security.
Dated: BAYOU STEEL CORPORATION
By:
--------------------------------
Attest by:
-------------------------
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
FIRST NATIONAL BANK OF COMMERCE
as Trustee, certifies
that this is one of
the Securities referred
to in the Indenture.
By
-------------------------------
Authorized Signatory [DATE]
<PAGE>
EXHIBIT B
[FORM OF REVERSE SIDE OF EXCHANGE NOTE]
[__]% First Mortgage Note due 200[]
1. Interest
Bayou Steel Corporation, a Delaware corporation (such corporation, and
its successors and assigns under the Indenture hereinafter referred to, being
herein called the "Company"), promises to pay interest on the principal amount
of this Security at the rate per annum shown above.
The Company will pay interest semiannually on [_________] and
[________] of each year. Interest on this Security will accrue from the most
recent date to which interest has been paid on this Security or, if no interest
has been paid, from [ISSUE DATE]. The Company shall pay interest on overdue
principal (plus interest on such interest to the extent lawful), at the rate
borne by this Security to the extent lawful. Interest will be computed on the
basis of a 360-day year of twelve 30-day months.
2. Method of Payment
The principal of and interest on this Security shall be payable at the
office or agency of the Paying Agent in The City of New Orleans, maintained for
such purpose; provided, however, that at the option of the Company payment of
interest may be made by check mailed to the address of the Person entitled
thereto as such address shall appear in the Security Register; provided,
further, that a Holder of $10,000,000 in aggregate principal amount of
Securities of any series shall be entitled to receive payments of interest by
wire transfer in immediately available funds (but only if appropriate payment
instructions have been received in writing by the Paying Agent not less than 15
calendar days prior to the applicable Interest Payment Date).
3. Paying Agent and Security Registrar
Initially, First National Bank of Commerce, a national banking
association ("Trustee"), will act as Paying Agent and Security Registrar. The
Company may appoint and change any Paying Agent without notice to any Holder.
The Company may act as Paying Agent.
4. Indenture
The Company issued this Security under an Indenture dated as of May
22, 1998 (as it may be amended or supplemented from time to time in accordance
with the terms thereof, the "Indenture"), among the Company and the Trustee.
The terms of this Security include those stated in the Indenture and those made
part of the Indenture by
<PAGE>
2
reference to the Trust Indenture Act of 1939 (15 U.S.C. (S)(S) 77aaa-77bbbb) as
in effect from time to time (the "Act"). Capitalized terms used herein and not
defined herein have the meanings ascribed thereto in the Indenture. This
Security is subject to all such terms, and the Holder of this Security is
referred to the Indenture and the Act for a statement of those terms.
The Securities are senior secured obligation of the Company. This
Security is one of the [1998] Exchange Notes referred to in the Indenture. The
[1998] Initial Notes and the [1998] Exchange Notes are treated as a single
series of Securities under the Indenture. The Indenture imposes certain
limitations on, among other things, the ability of the Company to incur
additional Indebtedness; create Liens; make Restricted Payments; engage in
certain transactions with stockholders and Affiliates; engage in Sale and
Leaseback Transactions; dispose of assets; issue Preferred Stock of
Subsidiaries; transfer assets to its subsidiaries; enter into agreements that
restrict the ability of its Subsidiaries to make dividends and distributions;
engage in mergers, consolidations and transfers of substantially all of the
Company's assets; make certain Investments, loans, and advances; and create Non-
Recourse Subsidiaries. These limitations are subject to a number of important
qualifications and exceptions. The Company must report to the Trustee annually
its compliance with the limitations contained in the Indenture.
No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional to pay the principal of and interest on this
Security at the times, place and rate, and in the coin or currency, herein
prescribed.
5. Mandatory Redemption
Upon a Change of Control, the Holder of this Security will have the
right to cause the Company to repurchase all or any part of this Security at a
purchase price in cash equal to 101% of the principal amount hereof, plus
accrued and unpaid interest, if any, to the date of repurchase (subject to the
right of the Holder of record on the relevant record date to receive interest
due on the relevant interest payment date) as provided in, and subject to the
terms of, the Indenture.
Section 6.15 of the Indenture provides that after certain Asset Sales,
subject to certain limitations contained therein, the Company may be required to
make an offer to purchase all or a portion of this Security in accordance with
the procedures set forth in the Indenture.
<PAGE>
3
6. Optional Redemption
[The Company, at its option, may redeem this Security, in whole or in
part, from time to time on and after [__________, 2003], at the redemption
prices set forth below (expressed as a percentage of the principal amount
thereof), in each case together with accrued interest, if any, to the date of
redemption, if redeemed during the twelve-month period beginning
[_______________] of the years indicated below:
Year Percentage
---- ----------
[2003] ---.--%
[2004] ___.__ %
[2005] ___.__%
[2006] and thereafter 100.00%
provided that if the date fixed for redemption is [________] or [________], then
the interest payable on such date shall be paid to the Holder of record on the
next preceding [_________] or [__________].
Prior to [__________], 2001, the Company may, at its option, from time
to time, redeem up to 35% of the original aggregate principal amount of the 1998
Securities at a redemption price equal to ___% of the principal amount thereof,
together with accrued and unpaid interest, if any, to the date of redemption
with all or a portion of the net proceeds of public sales of common stock of the
Company; provided, that at least 65% of the original aggregate principal amount
of the 1998 Securities remains outstanding immediately after the occurrence of
such redemption; and provided, further, that such redemption shall occur within
60 days of the date of the closing of the related sale of common stock of the
Company.
At any time prior to [____________], 2003, the Company may, at its
option, redeem the 1998 Securities, in whole but not in part, upon the
occurrence of a Change of Control, at a redemption price equal to 100% of the
principal amount thereof, together with the Applicable Premium as of, and
accrued and unpaid interest, if any, to, the date of redemption.]
In the event that less than all of the Securities of any series are to
be redeemed, the Trustee shall select the Securities of such series to be
redeemed in compliance with the requirements of the principal national
securities exchange, if any, on which the Securities being redeemed are listed,
or, if the Securities are not listed on a national securities exchange, on a pro
rata basis, by lot or by such method as the Trustee
<PAGE>
4
shall deem fair and appropriate; provided, that no Securities of $1,000 or less
shall be redeemed in whole or in part.
At least 30 days but not more than 60 days prior to a redemption date
(but, in the case of any redemption of this Security pursuant to a Change of
Control, in no event more than 90 days after the occurrence of such Change of
Control), the Company shall mail or cause the mailing of a notice of redemption
by first-class mail to the Holder of this Security at its registered address.
If this Security is to be redeemed in part only, the notice of redemption shall
state the portion of the principal amount to be redeemed. A new Security in a
principal amount equal to the unredeemed portion hereof will be issued in the
name of the Holder hereof upon cancellation of the original Security. On and
after the redemption date, interest will cease to accrue on this Security or the
portion hereof called for redemption unless the Company defaults in the payment
of the redemption price or accrued interest.
7. Senior Secured Obligations
The Securities are senior obligations of the Company, secured by a
first priority lien, subject to certain exceptions, on the Collateral owned by
it to the Collateral Agent for the benefit of the Holders pursuant to the
Indenture and the Security Documents. The Recourse Subsidiaries of the Company
shall, by executing the Indenture, guarantee the obligations of the Company with
respect to the Securities. The Securities will rank senior in right of payment
to all future subordinated indebtedness of the Company. The Subsidiary
Guarantees will be secured by the Collateral assigned by such Subsidiary
pursuant to a Subsidiary Security Agreement.
Each Holder, by accepting a Security, agrees to all of the terms and
provisions of the Security Documents, as the same may be amended from time to
time pursuant to the respective provisions thereof and the Indenture, and hereby
irrevocably appoints the Trustee as its special attorney-in-fact for the Holder
and vests the Trustee on behalf of the Holder with full power to act on such
Holder's behalf and enforce the Security Documents for the benefit of the
Holder.
The Trustee, the Collateral Agent and each Holder acknowledges that a
release of any of the Collateral or any Lien strictly in accordance with the
terms and provisions of the Indenture and Security Documents will not be deemed
for any purpose to be an impairment of the Security under the Indenture.
8. Denominations; Transfer; Exchange
The Securities are in registered form without coupons in denominations
of principal amount of $1,000 and whole multiples of $1,000. A Holder may
transfer or exchange Securities in accordance with the Indenture and the face of
this Security. The Company shall provide for the registration of Securities and
of transfers of Securities in
<PAGE>
5
the Security Register. The Security Registrar may require a Holder, among other
things, to furnish appropriate endorsements or transfer documents. No service
charge shall be made to the Holder of this Security for any registration of
transfer or exchange, but the Company may require the payment of a sum
sufficient to cover any transfer tax, assessments or similar governmental charge
payable in connection therewith (other than any such transfer taxes or similar
governmental charges payable upon exchanges or transfers pursuant to Section
11.6 of the Indenture). The Security Registrar shall not be required to register
the transfer of or exchange any Securities for a period beginning (i) 15
Business Days before the mailing of a notice of an offer to repurchase the
Securities of the same series as this Security and ending on the close of
business on the day of such mailing or (ii) 15 Business Days before an interest
payment date for this Security and ending on such interest payment date.
9. Persons Deemed Owners
The registered holder of this Security may be treated as the owner of
it for all purposes.
10. Unclaimed Money
If money for the payment of principal or interest remains unclaimed
for two years, the Trustee or Paying Agent shall pay the money back to the
Company at its request unless an abandoned property law designates another
Person. After any such payment, Holders entitled to the money must look only to
the Company and not to the Trustee for payment as unsecured general creditors.
11. Defeasance
Subject to certain conditions set forth in the Indenture, the Company
at any time may terminate some or all of its obligations with respect to this
Security and the Indenture if the Company deposits with the Trustee money or
U.S. Government Obligations for the payment of principal and interest on the
series of Securities, of which this Security is a part, to maturity.
12. Supplemental Indentures, Amendment, Waiver
From time to time, the Company and the Subsidiary Guarantors when
authorized by a Board Resolution, and the Trustee (or the Collateral Agent, if a
party thereto), may, without the consent of any Holders, supplement the
Indenture, or amend or waive the Security Documents or the Securities of any
series for certain specified purposes, including, among other things, curing
ambiguities, defects, or inconsistences maintaining the qualification of the
Indenture under the Trust Indenture Act, making any change that does not
adversely affect the rights of any Holder of Securities of any series or
mortgaging, pledging, or granting a security interest in favor of the Collateral
<PAGE>
6
Agent as additional security for the payment and performance of the obligations
of the Company under the Indenture, in any property or assets, including any
which are required to be mortgaged, pledged or hypothecated, or in which a
security interest is required to be granted, to the Collateral Agent pursuant to
any Security Document or otherwise, to establish the terms of Securities of any
series as permitted by Section 3.1(a) of the Indenture, to supplement any
provisions of the Indenture to such extent as shall be necessary to permit or
facilitate the issuance of the Securities of any series initially as securities
registered under the Securities Act; provided, that any such action shall not
adversely affect the interests of the Holders of any other series, or to add any
Person who becomes a Recourse Subsidiary of the Company after the date of the
Indenture as a party to the Indenture.
Other amendments, modifications and supplements of the Indenture, the
Securities of any series or the Security Documents may be made by the Company,
the Collateral Agent (if a party thereto) and the Trustee with the consent of
the Holders of not less than a majority of the aggregate principal amount of the
Outstanding Securities of each series affected by such amendment waiver or
supplement; provided, that no such modification or amendment may, without the
consent of the Holder of each Outstanding Security affected thereby, (1) change
the Stated Maturity of the principal of, or any installment of interest on, any
Security, or alter the redemption provisions or reduce the principal amount
thereof or the rate of interest thereon, or change the place of payment where,
or the coin or currency in which, any Security or interest thereon is payable,
or impair the right to institute suit for the enforcement of any such payment on
or after the Maturity Date thereof; or (2) reduce the percentage in principal
amount of the Outstanding Securities of any series, the consent of whose Holders
is required for any such supplemental indenture, or the consent of whose Holders
is required for any waiver (of compliance with certain provisions of the
Indenture or certain defaults hereunder and their consequences) provided for in
the Indenture; or (3) modify any of the provisions of Sections 8.8, 8.13 or 11.2
of the Indenture except to increase any such percentage or to provide that
certain other provisions of the Indenture cannot be modified or waived without
the consent of the Holder of each Outstanding Security affected thereby; or (4)
affect the ranking of the Securities of any series or the Liens in favor of the
Trustee, the Collateral Agent and the Holders of Securities of any series in a
manner adverse to the Holders or release all or substantially all of the
Collateral.
13. Defaults and Remedies
If an Event of Default (other than an Event of Default specified in
Section 8.1(vii), (viii) or (xi) of the Indenture) occurs and is continuing with
respect to Outstanding Securities of any series, the Trustee or the Holders of
at least 25% of the principal amount of the Outstanding Securities of such
series by notice to the Company (and to the Trustee if such notice is given by
the Holders) may declare the principal amount and accrued interest on the
Securities of that series to be immediately due and payable. If an Event of
Default specified in Section 8.1(vii), (viii) or (xi) of the Indenture
<PAGE>
7
occurs, the principal amount and accrued interest shall ipso facto become and be
immediately due and payable on all Outstanding Securities without any
declaration or other act on the part of the Trustee or any Holder. The Holders
of a majority in principal amount of the then Outstanding Securities of any
series by notice to the Trustee and the Company may rescind an acceleration and
its consequences with respect to such series if the Company has paid or
deposited with the Trustee a sum sufficient to pay all amounts due on Securities
of that series, other than amounts due by declaration of acceleration, and all
existing Events of Default, other than the nonpayment of the principal of the
Securities of that series which have became due solely by such declaration of
acceleration have been cured or waived. The Holders of a majority in principal
amount of the Outstanding Securities of any series also have the right to waive
certain past defaults under the Indenture with respect to such series, except a
default in the payment of the principal of, premium, if any, or interest on any
Security of such series, or in respect of a covenant or a provision which cannot
be modified or amended without the consent of all Holders of Securities of such
series.
Holders of Securities of any series may not enforce the Indenture or
the Securities of such series except as provided in the Indenture. The Trustee
may refuse to enforce the Indenture or the Securities of any series unless it
receives reasonable indemnity or security. Subject to certain limitations,
Holders of a majority in principal amount of the Securities of any series may
direct the Trustee in its exercise of any trust or power. The Trustee may
withhold from Holders of Securities of any series notice of any continuing
Default or Event of Default (except a Default or Event of Default in payment of
principal or interest) if it determines that withholding notice is in their
interest.
14. Trustee Dealings with the Company
Subject to certain limitations set forth in the Indenture, the Trustee
under the Indenture, in its individual or any other capacity, may become the
owner or pledgee of Securities and may otherwise deal with and collect
obligations owed to it by the Company or its affiliates and may otherwise deal
with the Company or its affiliates with the same rights it would have if it were
not Trustee.
15. No Recourse Against Others
A director, officer, employee or stockholder, as such, of the Company
shall not have any liability for any obligations of the Company under the
Securities or the Indenture or for any claim based on, in respect of or by
reason of such obligations or their creation. By accepting a Security, each
Holder waives and releases all such liability. The waiver and release are part
of the consideration for the issue of the Securities.
<PAGE>
8
16. Authentication
This Security shall not be valid until an authorized signatory of the
Trustee (or an authenticating agent acting on its behalf) manually signs the
certificate of authentication on the other side of this Security.
17. Abbreviations
Customary abbreviations may be used in the name of a Holder or an
assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the
entirety), JT TEN (=joint tenants with rights of survivorship and not as tenants
in common), CUST (=custodian) and U/G/M/A (=Uniform Gift to Minors Act).
18. CUSIP Numbers
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures the Company has caused CUSIP numbers to be
printed on this Security. No representation is made as to the accuracy of such
numbers as printed on this Security and reliance may be placed only on the other
identification numbers placed thereon.
19. Governing Law
This Security shall be governed by, and construed in accordance with,
the laws of the State of New York but without giving effect to applicable
principles of conflicts of law to the extent that the application of the laws of
another jurisdiction would be required thereby.
The Company will furnish to any Holder upon written request and
without charge to the Holder a copy of the Indenture which has in it the text of
this Security in larger type. Requests may be made to:
Bayou Steel Corporation
P.O. Box 5000
River Road
LaPlace, LA 70069
Attention: Secretary
<PAGE>
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
- --------------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint _____________________ agent to transfer this Security on
the books of the Company. The agent may substitute another to act for him.
- --------------------------------------------------------------------------------
Date: _______________ Your Signature ____________________
Signature Guarantee: ____________________________________
(Signature must be guaranteed)
- --------------------------------------------------------------------------------
Sign exactly as your name appears on the other side of this Security.
The signature(s) should be guaranteed by an eligible guarantor institution
(banks, stockbrokers, savings and loan associations and credit unions with
membership in an approved signature guarantee medallion program), pursuant to
S.E.C. Rule 17Ad-15.
<PAGE>
[TO BE ATTACHED TO GLOBAL SECURITIES]
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY
The following increases or decreases in this Global Security have been
made:
<TABLE>
<CAPTION>
Amount of decrease in Amount of increase in Principal Amount of this Signature of authorized
Date of Principal Amount of this Principal Amount of this Global Security following signatory of Trustee or
Exchange Global Security Global Security such decrease or increase Securities Custodian
<S> <C> <C> <C> <C>
</TABLE>
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company
pursuant to Section 6.15 or Section 6.19 of the Indenture, check the box:
[ ]
If you want to elect to have only part of this Security purchased by
the Company pursuant to Section 6.15 or Section 6.19 of the Indenture, state the
amount in principal amount (must be integral multiple of $1,000): $
Date: _______________ Your Signature: _________________________
(Sign exactly as your name appears on the other side
of the Security)
Signature Guarantee: _______________________________________
(Signature must be guaranteed)
The signature(s) should be guaranteed by an eligible guarantor institution
(banks, stockbrokers, savings and loan associations and credit unions with
membership in an approved signature guarantee medallion program), pursuant to
S.E.C. Rule 17Ad-15.
<PAGE>
EXHIBIT 4.2
[FORM OF FACE OF EXCHANGE NOTE]
[Depository Legend, if applicable]
No. Principal Amount $[____________]
CUSIP NO. _____________
BAYOU STEEL CORPORATION
[__]% First Mortgage Note due 200[_]
Bayou Steel Corporation, a Delaware corporation promises to pay to
[___________], or registered assigns, the principal sum of [__________________]
Dollars on [________], 200[_].
Interest Payment Dates: [______________].
Record Dates: [______________].
Additional provisions of this Security are set forth on the other
side of this Security.
Dated: BAYOU STEEL CORPORATION
By:
Attest by:
<PAGE>
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
FIRST NATIONAL BANK OF COMMERCE
as Trustee, certifies
that this is one of
the Securities referred
to in the Indenture.
By__________________________
Authorized Signatory [DATE]
<PAGE>
[FORM OF REVERSE SIDE OF EXCHANGE NOTE]
[__]% First Mortgage Note due 200[_]
1. Interest
Bayou Steel Corporation, a Delaware corporation (such corporation, and
its successors and assigns under the Indenture hereinafter referred to, being
herein called the "Company"), promises to pay interest on the principal amount
of this Security at the rate per annum shown above.
The Company will pay interest semiannually on [_________] and
[________] of each year. Interest on this Security will accrue from the most
recent date to which interest has been paid on this Security or, if no interest
has been paid, from [ISSUE DATE]. The Company shall pay interest on overdue
principal (plus interest on such interest to the extent lawful), at the rate
borne by this Security to the extent lawful. Interest will be computed on the
basis of a 360-day year of twelve 30-day months.
2. Method of Payment
The principal of and interest on this Security shall be payable at the
office or agency of the Paying Agent in The City of New Orleans, maintained for
such purpose; provided, however, that at the option of the Company payment of
interest may be made by check mailed to the address of the Person entitled
thereto as such address shall appear in the Security Register; provided,
further, that a Holder of $10,000,000 in aggregate principal amount of
Securities of any series shall be entitled to receive payments of interest by
wire transfer in immediately available funds (but only if appropriate payment
instructions have been received in writing by the Paying Agent not less than 15
calendar days prior to the applicable Interest Payment Date).
3. Paying Agent and Security Registrar
Initially, First National Bank of Commerce, a national banking
association ("Trustee"), will act as Paying Agent and Security Registrar. The
Company may appoint and change any Paying Agent without notice to any Holder.
The Company may act as Paying Agent.
<PAGE>
2
4. Indenture
The Company issued this Security under an Indenture dated as of May
22, 1998 (as it may be amended or supplemented from time to time in accordance
with the terms thereof, the "Indenture"), among the Company and the Trustee. The
terms of this Security include those stated in the Indenture and those made part
of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C.
(S)(S) 77aaa-77bbbb) as in effect from time to time (the "Act"). Capitalized
terms used herein and not defined herein have the meanings ascribed thereto in
the Indenture. This Security is subject to all such terms, and the Holder of
this Security is referred to the Indenture and the Act for a statement of those
terms.
The Securities are senior secured obligation of the Company. This
Security is one of the [1998] Exchange Notes referred to in the Indenture. The
[1998] Initial Notes and the [1998] Exchange Notes are treated as a single
series of Securities under the Indenture. The Indenture imposes certain
limitations on, among other things, the ability of the Company to incur
additional Indebtedness; create Liens; make Restricted Payments; engage in
certain transactions with stockholders and Affiliates; engage in Sale and
Leaseback Transactions; dispose of assets; issue Preferred Stock of
Subsidiaries; transfer assets to its subsidiaries; enter into agreements that
restrict the ability of its Subsidiaries to make dividends and distributions;
engage in mergers, consolidations and transfers of substantially all of the
Company's assets; make certain Investments, loans, and advances; and create Non-
Recourse Subsidiaries. These limitations are subject to a number of important
qualifications and exceptions. The Company must report to the Trustee annually
its compliance with the limitations contained in the Indenture.
No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional to pay the principal of and interest on this
Security at the times, place and rate, and in the coin or currency, herein
prescribed.
5. Mandatory Redemption
Upon a Change of Control, the Holder of this Security will have the
right to cause the Company to repurchase all or any part of this Security at a
purchase price in cash equal to 101% of the principal amount hereof, plus
accrued and unpaid interest, if any, to the date of repurchase (subject to the
right of the Holder of record on the
<PAGE>
3
relevant record date to receive interest due on the relevant interest payment
date) as provided in, and subject to the terms of, the Indenture.
Section 6.15 of the Indenture provides that after certain Asset Sales,
subject to certain limitations contained therein, the Company may be required to
make an offer to purchase all or a portion of this Security in accordance with
the procedures set forth in the Indenture.
6. Optional Redemption
[The Company, at its option, may redeem this Security, in whole or in
part, from time to time on and after [__________, 2003], at the redemption
prices set forth below (expressed as a percentage of the principal amount
thereof), in each case together with accrued interest, if any, to the date of
redemption, if redeemed during the twelve-month period beginning
[_______________] of the years indicated below:
Year Percentage
---- ----------
[2003] ___.__%
[2004] ___.__%
[2005] ___.__%
[2006] and thereafter 100.00%
provided that if the date fixed for redemption is [________] or [________], then
the interest payable on such date shall be paid to the Holder of record on the
next preceding [_________] or [__________].
Prior to [__________], 2001, the Company may, at its option, from time
to time, redeem up to 35% of the original aggregate principal amount of the 1998
Securities at a redemption price equal to ___% of the principal amount thereof,
together with accrued and unpaid interest, if any, to the date of redemption
with all or a portion of the net proceeds of public sales of common stock of the
Company; provided, that at least 65% of the original aggregate principal amount
of the 1998 Securities remains outstanding immediately after the occurrence of
such redemption; and provided, further,
<PAGE>
4
that such redemption shall occur within 60 days of the date of the closing of
the related sale of common stock of the Company.
At any time prior to [____________], 2003, the Company may, at its
option, redeem the 1998 Securities, in whole but not in part, upon the
occurrence of a Change of Control, at a redemption price equal to 100% of the
principal amount thereof, together with the Applicable Premium as of, and
accrued and unpaid interest, if any, to, the date of redemption.]
In the event that less than all of the Securities of any series are to
be redeemed, the Trustee shall select the Securities of such series to be
redeemed in compliance with the requirements of the principal national
securities exchange, if any, on which the Securities being redeemed are listed,
or, if the Securities are not listed on a national securities exchange, on a pro
rata basis, by lot or by such method as the Trustee shall deem fair and
appropriate; provided, that no Securities of $1,000 or less shall be redeemed in
whole or in part.
At least 30 days but not more than 60 days prior to a redemption date
(but, in the case of any redemption of this Security pursuant to a Change of
Control, in no event more than 90 days after the occurrence of such Change of
Control), the Company shall mail or cause the mailing of a notice of redemption
by first-class mail to the Holder of this Security at its registered address.
If this Security is to be redeemed in part only, the notice of redemption shall
state the portion of the principal amount to be redeemed. A new Security in a
principal amount equal to the unredeemed portion hereof will be issued in the
name of the Holder hereof upon cancellation of the original Security. On and
after the redemption date, interest will cease to accrue on this Security or the
portion hereof called for redemption unless the Company defaults in the payment
of the redemption price or accrued interest.
7. Senior Secured Obligations
The Securities are senior obligations of the Company, secured by a
first priority lien, subject to certain exceptions, on the Collateral owned by
it to the Collateral Agent for the benefit of the Holders pursuant to the
Indenture and the Security Documents. The Recourse Subsidiaries of the Company
shall, by executing the Indenture, guarantee the obligations of the Company with
respect to the Securities. The Securities will rank senior in right of payment
to all future subordinated indebtedness of the Company. The Subsidiary
Guarantees will be secured by the Collateral assigned
<PAGE>
5
by such Subsidiary pursuant to a Subsidiary Security Agreement.
Each Holder, by accepting a Security, agrees to all of the terms and
provisions of the Security Documents, as the same may be amended from time to
time pursuant to the respective provisions thereof and the Indenture, and hereby
irrevocably appoints the Trustee as its special attorney-in-fact for the Holder
and vests the Trustee on behalf of the Holder with full power to act on such
Holder's behalf and enforce the Security Documents for the benefit of the
Holder.
The Trustee, the Collateral Agent and each Holder acknowledges that a
release of any of the Collateral or any Lien strictly in accordance with the
terms and provisions of the Indenture and Security Documents will not be deemed
for any purpose to be an impairment of the Security under the Indenture.
8. Denominations; Transfer; Exchange
The Securities are in registered form without coupons in denominations
of principal amount of $1,000 and whole multiples of $1,000. A Holder may
transfer or exchange Securities in accordance with the Indenture and the face of
this Security. The Company shall provide for the registration of Securities and
of transfers of Securities in the Security Register. The Security Registrar may
require a Holder, among other things, to furnish appropriate endorsements or
transfer documents. No service charge shall be made to the Holder of this
Security for any registration of transfer or exchange, but the Company may
require the payment of a sum sufficient to cover any transfer tax, assessments
or similar governmental charge payable in connection therewith (other than any
such transfer taxes or similar governmental charges payable upon exchanges or
transfers pursuant to Section 11.6 of the Indenture). The Security Registrar
shall not be required to register the transfer of or exchange any Securities for
a period beginning (i) 15 Business Days before the mailing of a notice of an
offer to repurchase the Securities of the same series as this Security and
ending on the close of business on the day of such mailing or (ii) 15 Business
Days before an interest payment date for this Security and ending on such
interest payment date.
9. Persons Deemed Owners
The registered holder of this Security may be treated as the owner of
it for all purposes.
<PAGE>
6
10. Unclaimed Money
If money for the payment of principal or interest remains unclaimed
for two years, the Trustee or Paying Agent shall pay the money back to the
Company at its request unless an abandoned property law designates another
Person. After any such payment, Holders entitled to the money must look only to
the Company and not to the Trustee for payment as unsecured general creditors.
11. Defeasance
Subject to certain conditions set forth in the Indenture, the Company
at any time may terminate some or all of its obligations with respect to this
Security and the Indenture if the Company deposits with the Trustee money or
U.S. Government Obligations for the payment of principal and interest on the
series of Securities, of which this Security is a part, to maturity.
12. Supplemental Indentures, Amendment, Waiver
From time to time, the Company and the Subsidiary Guarantors when
authorized by a Board Resolution, and the Trustee (or the Collateral Agent, if a
party thereto), may, without the consent of any Holders, supplement the
Indenture, or amend or waive the Security Documents or the Securities of any
series for certain specified purposes, including, among other things, curing
ambiguities, defects, or inconsistences maintaining the qualification of the
Indenture under the Trust Indenture Act, making any change that does not
adversely affect the rights of any Holder of Securities of any series or
mortgaging, pledging, or granting a security interest in favor of the Collateral
Agent as additional security for the payment and performance of the obligations
of the Company under the Indenture, in any property or assets, including any
which are required to be mortgaged, pledged or hypothecated, or in which a
security interest is required to be granted, to the Collateral Agent pursuant to
any Security Document or otherwise, to establish the terms of Securities of any
series as permitted by Section 3.1(a) of the Indenture, to supplement any
provisions of the Indenture to such extent as shall be necessary to permit or
facilitate the issuance of the Securities of any series initially as securities
registered under the Securities Act; provided, that any such action shall not
adversely affect the interests of the Holders of any other series, or to add any
Person who becomes a Recourse Subsidiary of the Company after the date of the
Indenture as a party to the Indenture.
<PAGE>
7
Other amendments, modifications and supplements of the Indenture, the
Securities of any series or the Security Documents may be made by the Company,
the Collateral Agent (if a party thereto) and the Trustee with the consent of
the Holders of not less than a majority of the aggregate principal amount of the
Outstanding Securities of each series affected by such amendment waiver or
supplement; provided, that no such modification or amendment may, without the
consent of the Holder of each Outstanding Security affected thereby, (1) change
the Stated Maturity of the principal of, or any installment of interest on, any
Security, or alter the redemption provisions or reduce the principal amount
thereof or the rate of interest thereon, or change the place of payment where,
or the coin or currency in which, any Security or interest thereon is payable,
or impair the right to institute suit for the enforcement of any such payment on
or after the Maturity Date thereof; or (2) reduce the percentage in principal
amount of the Outstanding Securities of any series, the consent of whose Holders
is required for any such supplemental indenture, or the consent of whose Holders
is required for any waiver (of compliance with certain provisions of the
Indenture or certain defaults hereunder and their consequences) provided for in
the Indenture; or (3) modify any of the provisions of Sections 8.8, 8.13 or 11.2
of the Indenture except to increase any such percentage or to provide that
certain other provisions of the Indenture cannot be modified or waived without
the consent of the Holder of each Outstanding Security affected thereby; or (4)
affect the ranking of the Securities of any series or the Liens in favor of the
Trustee, the Collateral Agent and the Holders of Securities of any series in a
manner adverse to the Holders or release all or substantially all of the
Collateral.
13. Defaults and Remedies
If an Event of Default (other than an Event of Default specified in
Section 8.1(vii), (viii) or (xi) of the Indenture) occurs and is continuing with
respect to Outstanding Securities of any series, the Trustee or the Holders of
at least 25% of the principal amount of the Outstanding Securities of such
series by notice to the Company (and to the Trustee if such notice is given by
the Holders) may declare the principal amount and accrued interest on the
Securities of that series to be immediately due and payable. If an Event of
Default specified in Section 8.1(vii), (viii) or (xi) of the Indenture occurs,
the principal amount and accrued interest shall ipso facto become and be
immediately due and payable on all Outstanding Securities without any
declaration or other act on the part of the Trustee or any Holder. The Holders
of a majority in principal amount of the then Outstanding Securities of any
series by notice to the Trustee and the Company may rescind an acceleration and
its consequences with respect to such series if the Company has paid or
deposited with the Trustee a sum
<PAGE>
8
sufficient to pay all amounts due on Securities of that series, other than
amounts due by declaration of acceleration, and all existing Events of Default,
other than the nonpayment of the principal of the Securities of that series
which have became due solely by such declaration of acceleration have been cured
or waived. The Holders of a majority in principal amount of the Outstanding
Securities of any series also have the right to waive certain past defaults
under the Indenture with respect to such series, except a default in the payment
of the principal of, premium, if any, or interest on any Security of such
series, or in respect of a covenant or a provision which cannot be modified or
amended without the consent of all Holders of Securities of such series.
Holders of Securities of any series may not enforce the Indenture or
the Securities of such series except as provided in the Indenture. The Trustee
may refuse to enforce the Indenture or the Securities of any series unless it
receives reasonable indemnity or security. Subject to certain limitations,
Holders of a majority in principal amount of the Securities of any series may
direct the Trustee in its exercise of any trust or power. The Trustee may
withhold from Holders of Securities of any series notice of any continuing
Default or Event of Default (except a Default or Event of Default in payment of
principal or interest) if it determines that withholding notice is in their
interest.
14. Trustee Dealings with the Company
Subject to certain limitations set forth in the Indenture, the Trustee
under the Indenture, in its individual or any other capacity, may become the
owner or pledgee of Securities and may otherwise deal with and collect
obligations owed to it by the Company or its affiliates and may otherwise deal
with the Company or its affiliates with the same rights it would have if it were
not Trustee.
15. No Recourse Against Others
A director, officer, employee or stockholder, as such, of the Company
shall not have any liability for any obligations of the Company under the
Securities or the Indenture or for any claim based on, in respect of or by
reason of such obligations or their creation. By accepting a Security, each
Holder waives and releases all such liability. The waiver and release are part
of the consideration for the issue of the Securities.
<PAGE>
9
16. Authentication
This Security shall not be valid until an authorized signatory of the
Trustee (or an authenticating agent acting on its behalf) manually signs the
certificate of authentication on the other side of this Security.
17. Abbreviations
Customary abbreviations may be used in the name of a Holder or an
assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the
entirety), JT TEN (=joint tenants with rights of survivorship and not as tenants
in common), CUST (=custodian) and U/G/M/A (=Uniform Gift to Minors Act).
18. CUSIP Numbers
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures the Company has caused CUSIP numbers to be
printed on this Security. No representation is made as to the accuracy of such
numbers as printed on this Security and reliance may be placed only on the other
identification numbers placed thereon.
19. Governing Law
This Security shall be governed by, and construed in accordance with,
the laws of the State of New York but without giving effect to applicable
principles of conflicts of law to the extent that the application of the laws of
another jurisdiction would be required thereby.
The Company will furnish to any Holder upon written request and
without charge to the Holder a copy of the Indenture which has in it the text of
this Security in larger type. Requests may be made to:
Bayou Steel Corporation
P.O. Box 5000
River Road
LaPlace, LA 70069
Attention: Secretary
<PAGE>
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
- --------------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint _____________________ agent to transfer this Security on
the books of the Company. The agent may substitute another to act for him.
Date: _______________ Your Signature ____________________
Signature Guarantee: ____________________________________
(Signature must be guaranteed)
Sign exactly as your name appears on the other side of this Security.
The signature(s) should be guaranteed by an eligible guarantor institution
(banks, stockbrokers, savings and loan associations and credit unions with
membership in an approved signature guarantee medallion program), pursuant to
S.E.C. Rule 17Ad-15.
<PAGE>
[TO BE ATTACHED TO GLOBAL SECURITIES]
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY
The following increases or decreases in this Global Security have been
made:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Amount of decrease in Amount of increase in Principal Amount of this Signature of authorized
Date of Principal Amount of this Principal Amount of this Global Security following signatory of Trustee or
Exchange Global Security Global Security such decrease or increase Securities Custodian
</TABLE>
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company
pursuant to Section 6.15 or Section 6.19 of the Indenture, check the box:
[_]
If you want to elect to have only part of this Security purchased by
the Company pursuant to Section 6.15 or Section 6.19 of the Indenture, state the
amount in principal amount (must be integral multiple of $1,000): $
Date: _______________ Your Signature: _________________________
(Sign exactly as your name appears on the other side
of the Security)
Signature Guarantee: _______________________________________
(Signature must be guaranteed)
The signature(s) should be guaranteed by an eligible guarantor institution
(banks, stockbrokers, savings and loan associations and credit unions with
membership in an approved signature guarantee medallion program), pursuant to
S.E.C. Rule 17Ad-15.
<PAGE>
JONES, WALKER
WAECHTER, POITEVENT
CARRERE & DENEGRE, L.L.P.
June 29, 1998
Bayou Steel Corporation
River Road
P.O. Box 5000
LaPlace, Louisiana 70068
Re: Bayou Steel Corporation
Registration Statement on Form S-4
$110,000,000 aggregate principal amount of
9 1/2% First Mortgage Notes due 2008
Gentlemen:
We have acted as your counsel in connection with the preparation of the
registration statement on Form S-4 (the "Registration Statement") filed by
Bayou Steel Corporation, a Delaware corporation (the "Company"), and Bayou
Steel Corporation (Tennessee), a Delaware Corporation, and River Road Realty
Corporation, a Louisiana corporation (collectively, the "Guarantors") with the
Securities and Exchange Commission (the "Commission") under the Securities Act
of 1933, as amended, on the date hereof with respect to the Company's offer to
exchange (the "Exchange Offer") up to $110 million aggregate principal amount
of the Company's registered 9 1/2% First Mortgage Notes due 2008 (the
"Exchange Notes") for a like principal amount of the Company's unregistered 9
1/2% First Mortgage Notes due 2008 (the "Old Notes"). The Guarantors will
jointly and severally guarantee (the "Guarantees") the Exchange Notes. The
Exchange Notes and Guarantees will be offered under an Indenture dated as of
May 22, 1998, between the Company, the Guarantors and First National Bank of
Commerce, as trustee (the "Indenture").
In so acting, we have examined originals, or photostatic or certified
copies, of the Indenture, the form of the Exchange Notes and such records of
the Company, certificates of officers of the Company and of public officials,
and such other documents as we have deemed relevant. In such examination, we
have assumed the genuineness of all signatures, the authenticity of all
documents submitted to us as originals, the conformity to original documents
of all documents submitted to us as certified or photostatic copies and the
authenticity of the originals of such documents.
Based upon the foregoing, and subject to the qualifications stated herein,
we are of the opinion that:
When the Exchange Notes issuable upon consummation of the Exchange Offer
have been (i) duly executed by the Company and authenticated by the trustee
therefor in accordance with the terms of the Indenture and (ii) duly issued
and delivered against the receipt of Old Notes surrendered in exchange
therefor, and if a court of appropriate jurisdiction were to hold that the
Exchange Notes and Guarantees were governed by and to be construed under
the laws of the State of Louisiana notwithstanding the choice in the
Exchange Notes and the Indenture of New York as the governing law, the
Exchange Notes and Guarantees will constitute the legal, valid and binding
obligations of the Company and the Guarantors, respectively, enforceable
against the Company and the Guarantors in accordance with their terms,
except as the enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws and court decisions relating to
or affecting the enforcement of creditors' rights generally and except as
enforcement thereof is subject to general principles of equity (regardless
of whether enforcement is considered in a proceeding in equity or at law).
<PAGE>
The foregoing opinion is limited in all respects to the laws of the State of
Louisiana and federal laws. We are members of the Bar of the State of
Louisiana and have neither been admitted to nor purport to be experts on the
laws of any other jurisdiction.
We consent to the filing of this opinion as an exhibit to the Registration
Statement and to the reference to us in the prospectus included therein under
the caption "Legal Matters." In giving this consent, we do not admit that we
are within the category of persons whose consent is required under Section 7
of the Securities Act of 1933, as amended, or the general rules and
regulations of the Commission promulgated thereunder.
Very truly yours,
JONES, WALKER, WAECHTER, POITEVENT,
CARRERE & DENEGRE, L.L.P.
By: /s/ Lisa M. Buchanan
-----------------------------
Lisa M. Buchanan, Partner
<PAGE>
EXHIBIT 10.1
BAYOU STEEL CORPORATION
$110,000,000
9 1/2% First Mortgage Notes due 2008
EXCHANGE AND REGISTRATION RIGHTS AGREEMENT
------------------------------------------
May 22, 1998
Chase Securities Inc.
BT Alex. Brown Incorporated
PaineWebber Incorporated
c/o Chase Securities Inc.
270 Park Avenue, 4th floor
New York, New York 10017
Ladies and Gentlemen:
Bayou Steel Corporation, a Delaware corporation (the "Company"), proposes
to issue and sell to Chase Securities Inc. ("CSI"), BT Alex. Brown Incorporated
and PaineWebber Incorporated (collectively, the "Initial Purchasers"), upon the
terms and subject to the conditions set forth in a purchase agreement dated May
19, 1998 (the "Purchase Agreement"), $110,000,000 aggregate principal amount of
its 9 1/2% First Mortgage Notes due 2008 (the "Securities"), which Securities
will be guaranteed, jointly and severally, by each of the Company's subsidiaries
(the "Subsidiary Guarantors"). Capitalized terms used but not defined herein
shall have the meanings given to such terms in the Purchase Agreement.
As an inducement to the Initial Purchasers to enter into the Purchase
Agreement and in satisfaction of a condition to the obligations of the Initial
Purchasers thereunder, the Company and each Subsidiary Guarantor agree with the
Initial Purchasers, for the benefit of the holders (including the Initial
Purchasers) of the Securities, the Exchange Securities (as defined herein) and
the Private Exchange Securities (as defined herein) (collectively, the
"Holders"), as follows:
1. Registered Exchange Offer. The Company and the Subsidiary Guarantors
shall (i) prepare and, not later than 60 days following the date of original
issuance of the Securities (the "Issue Date"), file with the Commission a
registration statement (the "Exchange Offer Registration Statement") on an
appropriate form under the Securities Act with respect to a proposed offer to
the Holders of the Securities (the "Registered Exchange Offer") to issue and
deliver to such Holders, in exchange for the Securities, a like aggregate
principal amount of debt securities of the Company guaranteed, jointly and
severally, by the Subsidiary Guarantors (the "Exchange Securities") that are
identical in all material respects to the
<PAGE>
2
Securities, except for the transfer restrictions relating to the Securities,
(ii) use their reasonable best efforts to cause the Exchange Offer Registration
Statement to become effective under the Securities Act no later than 150 days
after the Issue Date and the Registered Exchange Offer to be consummated no
later than 180 days after the Issue Date and (iii) keep the Exchange Offer
Registration Statement effective for not less than 30 days (or longer, if
required by applicable law) after the date on which notice of the Registered
Exchange Offer is mailed to the Holders (such period being called the "Exchange
Offer Registration Period"). The Exchange Securities will be issued under the
Indenture or an indenture (the "Exchange Securities Indenture") among the
Company, the Subsidiary Guarantors and the Trustee or such other bank or trust
company that is reasonably satisfactory to the Initial Purchasers, as trustee
(the "Exchange Securities Trustee"), such indenture to be identical in all
material respects to the Indenture, except for the transfer restrictions
relating to the Securities (as described above).
Upon the effectiveness of the Exchange Offer Registration Statement, the
Company and the Subsidiary Guarantors shall promptly commence the Registered
Exchange Offer, it being the objective of such Registered Exchange Offer to
enable each Holder electing to exchange Securities for Exchange Securities
(assuming that such Holder (a) is not an affiliate of the Company or an
Exchanging Dealer (as defined herein) not complying with the requirements of the
next sentence, (b) acquires the Exchange Securities in the ordinary course of
such Holder's business and (c) has no arrangements or understandings with any
person to participate in the distribution of the Exchange Securities) and to
trade such Exchange Securities from and after their receipt without any
limitations or restrictions under the Securities Act and without material
restrictions under the securities laws of the several states of the United
States. The Company, the Subsidiary Guarantors, the Initial Purchasers and each
Exchanging Dealer acknowledge that, pursuant to current interpretations by the
Commission's staff of Section 5 of the Securities Act, each Holder that is a
broker-dealer electing to exchange Securities, acquired for its own account as a
result of market-making activities or other trading activities, for Exchange
Securities (an "Exchanging Dealer"), is required to deliver a prospectus
containing substantially the information set forth in Annex A hereto on the
cover, in Annex B hereto in the "Exchange Offer Procedures" section and the
"Purpose of the Exchange Offer" section and in Annex C hereto in the "Plan of
Distribution" section of such prospectus in connection with a sale of any such
Exchange Securities received by such Exchanging Dealer pursuant to the
Registered Exchange Offer.
If, prior to the consummation of the Registered Exchange Offer, any Holder
holds any Securities acquired by it that have, or that are reasonably likely to
be determined to have, the status of an unsold allotment in an initial
distribution, or any Holder is not entitled to participate in the Registered
Exchange Offer, the Company shall, upon the request of any such Holder,
simultaneously with the delivery of the Exchange Securities in the Registered
Exchange Offer, issue and deliver to any such Holder, in exchange for the
Securities held by such Holder (the "Private Exchange"), a like aggregate
principal amount of debt securities of the Company guaranteed, jointly and
severally, by the Subsidiary Guarantors (the "Private Exchange Securities") that
are identical in all material respects to the Exchange Securities, except for
the transfer restrictions relating to such Private Exchange Securities. The
Private Exchange Securities will be issued under the same indenture as the
Exchange Securities, and the Company shall use its reasonable best efforts to
cause the Private Exchange Securities to bear the same CUSIP number as the
Exchange Securities.
<PAGE>
3
In connection with the Registered Exchange Offer, the Company and the
Subsidiary Guarantors shall:
(a) mail to each Holder a copy of the prospectus forming part of the
Exchange Offer Registration Statement, together with an appropriate letter
of transmittal and related documents;
(b) keep the Registered Exchange Offer open for not less than 30 days
(or longer, if required by applicable law) after the date on which notice
of the Registered Exchange Offer is mailed to the Holders;
(c) utilize the services of a depositary for the Registered Exchange
Offer with an address in the Borough of Manhattan, The City of New York;
(d) permit Holders to withdraw tendered Securities at any time prior
to the close of business, New York City time, on the last business day on
which the Registered Exchange Offer shall remain open; and
(e) otherwise comply in all respects with all laws that are applicable
to the Registered Exchange Offer.
As soon as practicable after the close of the Registered Exchange
Offer and any Private Exchange, as the case may be, the Company and the
Subsidiary Guarantors shall:
(a) accept for exchange all Securities tendered and not validly
withdrawn pursuant to the Registered Exchange Offer and the Private
Exchange;
(b) deliver to the Trustee for cancellation all Securities so accepted
for exchange; and
(c) cause the Trustee or the Exchange Securities Trustee, as the case
may be, promptly to authenticate and deliver to each Holder, Exchange
Securities or Private Exchange Securities, as the case may be, equal in
principal amount to the Securities of such Holder so accepted for exchange.
The Company and the Subsidiary Guarantors shall use their reasonable
best efforts to keep the Exchange Offer Registration Statement effective and to
amend and supplement the prospectus contained therein in order to permit such
prospectus to be used by all persons subject to the prospectus delivery
requirements of the Securities Act for such period of time as such persons must
comply with such requirements in order to resell the Exchange Securities;
provided that (i) in the case where such prospectus and any amendment or
supplement thereto must be delivered by an Exchanging Dealer, such period shall
be the lesser of 180 days and the date on which all Exchanging Dealers have sold
all Exchange Securities held by them and (ii) the Company and the Subsidiary
Guarantor shall make such prospectus and any amendment or supplement thereto
available to any broker-dealer for use in connection with any resale of any
Exchange Securities for a period of not less than 90 days after the consummation
of the Registered Exchange Offer.
<PAGE>
4
The Indenture or the Exchange Securities Indenture, as the case may
be, shall provide that the Securities, the Exchange Securities and the Private
Exchange Securities shall vote and consent together on all matters as one class
and that none of the Securities, the Exchange Securities or the Private Exchange
Securities will have the right to vote or consent as a separate class on any
matter.
Interest on each Exchange Security and Private Exchange Security
issued pursuant to the Registered Exchange Offer and in the Private Exchange
will accrue from the last interest payment date on which interest was paid on
the Securities surrendered in exchange therefor or, if no interest has been paid
on the Securities, from the Issue Date.
Each Holder participating in the Registered Exchange Offer shall be
required to represent to the Company that at the time of the consummation of the
Registered Exchange Offer (i) any Exchange Securities received by such Holder
will be acquired in the ordinary course of business, (ii) such Holder will have
no arrangements or understanding with any person to participate in the
distribution of the Securities or the Exchange Securities within the meaning of
the Securities Act and (iii) such Holder is not an affiliate of the Company or,
if it is such an affiliate, such Holder will comply with the registration and
prospectus delivery requirements of the Securities Act to the extent applicable.
Notwithstanding any other provisions hereof, the Company and the
Subsidiary Guarantors will ensure that (i) any Exchange Offer Registration
Statement and any amendment thereto and any prospectus forming part thereof and
any supplement thereto complies in all material respects with the Securities Act
and the rules and regulations of the Commission thereunder, (ii) any Exchange
Offer Registration Statement and any amendment thereto does not, when it becomes
effective, contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading and (iii) any prospectus forming part of any Exchange
Offer Registration Statement, and any supplement to such prospectus, does not,
as of the consummation of the Registered Exchange Offer, include an untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements therein, in the light of the circumstances under which
they were made, not misleading.
2. Shelf Registration. If (i) because of any change in law or applicable
interpretations thereof by the Commission's staff the Company and the Subsidiary
Guarantors are not permitted to effect the Registered Exchange Offer as
contemplated by Section 1 hereof, (ii) any Securities validly tendered pursuant
to the Registered Exchange Offer are not exchanged for Exchange Securities
within 180 days after the Issue Date, (iii) any Initial Purchaser so requests
within 90 days after the consummation of the Registered Exchange Offer with
respect to Securities or Private Exchange Securities not eligible to be
exchanged for Exchange Securities in the Registered Exchange Offer and held by
it following the consummation of the Registered Exchange Offer, (iv) any
applicable law or interpretations do not permit any Holder to participate in the
Registered Exchange Offer, (v) any Holder that participates in the Registered
Exchange Offer notifies the Company within 20 Business Days (as defined in the
Purchase Agreement) after the consummation of the Registered Exchange Offer that
it did not receive freely transferable Exchange Securities in exchange for
tendered Securities or (vi) the Company so elects, then the following provisions
shall apply:
<PAGE>
5
(a) The Company and the Subsidiary Guarantors shall use their
reasonable best efforts to file as promptly as practicable (but in no event more
than 45 days after so required or requested pursuant to this Section 2) with the
Commission, and thereafter shall use their reasonable best efforts to cause to
be declared effective, a shelf registration statement on an appropriate form
under the Securities Act relating to the offer and sale of the Transfer
Restricted Securities (as defined below) by the Holders thereof from time to
time in accordance with the methods of distribution set forth in such
registration statement (hereafter, a "Shelf Registration Statement" and,
together with any Exchange Offer Registration Statement, a "Registration
Statement"); provided, however, that no Holder (other than Initial Purchaser)
shall be entitled to have the Securities held by it covered by such Shelf
Registration Statement unless such Holder agrees in writing to be bound by all
the provisions of this Agreement applicable to such Holder (including certain
indemnification obligations).
(b) The Company and the Subsidiary Guarantors shall use their
reasonable best efforts to keep the Shelf Registration Statement continuously
effective in order to permit the prospectus forming part thereof to be used by
Holders of Transfer Restricted Securities for a period of two years from the
Issue Date or such shorter period that will terminate when all the Transfer
Restricted Securities covered by the Shelf Registration Statement have been sold
pursuant thereto (in any such case, such period being called the "Shelf
Registration Period"). The Company and the Subsidiary Guarantor shall be deemed
not to have used their reasonable best efforts to keep the Shelf Registration
Statement effective during the requisite period if any of them voluntarily takes
any action that would result in Holders of Transfer Restricted Securities
covered thereby not being able to offer and sell such Transfer Restricted
Securities during that period, unless such action is required by applicable law.
(c) Notwithstanding any other provisions hereof, the Company and the
Subsidiary Guarantors will ensure that (i) any Shelf Registration Statement and
any amendment thereto and any prospectus forming part thereof and any supplement
thereto complies in all material respects with the Securities Act and the rules
and regulations of the Commission thereunder, (ii) any Shelf Registration
Statement and any amendment thereto (in either case, other than with respect to
information included therein in reliance upon or in conformity with written
information furnished to the Company and the Subsidiary Guarantors by or on
behalf of any Holder specifically for use therein (the "Holders' Information"))
does not, when it becomes effective, contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading and (iii) any prospectus forming
part of any Shelf Registration Statement, and any supplement to such prospectus
(in either case, other than with respect to Holders' Information), does not
include an untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
3. Liquidated Damages. (a) The parties hereto agree that the Holders of
Transfer Restricted Securities will suffer damages if the Company and the
Subsidiary Guarantors fail to fulfill their obligations under Section 1 or
Section 2, as applicable, and that it would not be feasible to ascertain the
extent of such damages. Accordingly, if (i) the applicable Registration
Statement is not filed with the Commission on or prior to 60 days after the
Issue Date, (ii) the Exchange Offer Registration Statement or the Shelf
Registration Statement, as the case may be, is not declared effective within 150
days after the Issue Date (or in the case of a Shelf Registration Statement
required to be filed in response to a change in law or the applicable
interpretations of the Commission's staff, if later, within 60 days after
publication of
<PAGE>
6
the change in law or interpretation), (iii) the Registered Exchange Offer is not
consummated on or prior to 180 days after the Issue Date, or (iv) the Shelf
Registration Statement is filed and declared effective within 150 days after the
Issue Date (or in the case of a Shelf Registration Statement required to be
filed in response to a change in law or the applicable interpretations of the
Commission's staff, if later, within 60 days after publication of the change in
law or interpretation) but shall thereafter cease to be effective (at any time
that the Company and the Subsidiary Guarantors are obligated to maintain the
effectiveness thereof) without being succeeded within 45 days by an additional
Registration Statement filed and declared effective (each such event referred to
in clauses (i) through (iv), a "Registration Default"), the Company will be
obligated to pay liquidated damages to each Holder of Transfer Restricted
Securities, during the period of one or more such Registration Defaults, in an
amount equal to $ 0.192 per week per $1,000 principal amount of Transfer
Restricted Securities held by such Holder until (i) the applicable Registration
Statement is filed, (ii) the Exchange Offer Registration Statement is declared
effective and the Registered Exchange Offer is consummated, (iii) the Shelf
Registration Statement is declared effective or (iv) the Shelf Registration
Statement again becomes effective, as the case may be. Following the cure of all
Registration Defaults, the accrual of liquidated damages will cease. As used
herein, the term "Transfer Restricted Securities" means (i) each Security until
the date on which such Security has been exchanged for a freely transferable
Exchange Security in the Registered Exchange Offer, (ii) each Security or
Private Exchange Security until the date on which it has been effectively
registered under the Securities Act and disposed of in accordance with the Shelf
Registration Statement or (iii) each Security or Private Exchange Security until
the date on which it is distributed to the public pursuant to Rule 144 under the
Securities Act or is saleable pursuant to Rule 144(k) under the Securities Act.
Notwithstanding anything to the contrary in this Section 3(a), the Company shall
not be required to pay liquidated damages to a Holder of Transfer Restricted
Securities if such Holder failed to comply with its obligations to make the
representations set forth in the second to last paragraph of Section 1 or failed
to provide the information required to be provided by it, if any, pursuant to
Section 4(n).
(b) The Company and the Subsidiary Guarantors shall notify the Trustee
and the Paying Agent under the Indenture immediately upon the happening of each
and every Registration Default. The Company shall pay the liquidated damages
due on the Transfer Restricted Securities by depositing with the Paying Agent
(which may not be the Company or a Subsidiary Guarantor for these purposes), in
trust, for the benefit of the Holders thereof, prior to 10:00 a.m., New York
City time, on the next interest payment date specified by the Indenture and the
Securities, sums sufficient to pay the liquidated damages then due. The
liquidated damages due shall be payable on each interest payment date specified
by the Indenture and the Securities to the record holder entitled to receive the
interest payment to be made on such date. Each obligation to pay liquidated
damages shall be deemed to accrue from and including the date of the applicable
Registration Default.
(c) The parties hereto agree that the liquidated damages provided for
in this Section 3 constitute a reasonable estimate of and are intended to
constitute the sole damages that will be suffered by Holders of Transfer
Restricted Securities by reason of the failure of (i) the Shelf Registration
Statement or the Exchange Offer Registration Statement to be filed, (ii) the
Shelf Registration Statement to be declared effective and remain effective or
(iii) the Exchange Offer Registration Statement to be declared effective and the
Registered Exchange Offer to be consummated, in each case to the extent required
by this Agreement.
<PAGE>
7
4. Registration Procedures. In connection with any Registration Statement,
the following provisions shall apply:
(a) The Company and the Subsidiary Guarantors shall (i) furnish to
each Initial Purchaser, prior to the filing thereof with the Commission, a copy
of the Registration Statement and each amendment thereof and each supplement, if
any, to the prospectus included therein and shall use its reasonable best
efforts to reflect in each such document, when so filed with the Commission,
such comments as any Initial Purchaser may reasonably propose; (ii) include the
information set forth in Annex A hereto on the cover, in Annex B hereto in the
"Exchange Offer Procedures" section and the "Purpose of the Exchange Offer"
section and in Annex C hereto in the "Plan of Distribution" section of the
prospectus forming a part of the Exchange Offer Registration Statement, and
include the information set forth in Annex D hereto in the Letter of Transmittal
delivered pursuant to the Registered Exchange Offer; and (iii) if requested by
any Initial Purchaser, include the information required by Items 507 or 508 of
Regulation S-K, as applicable, in the prospectus forming a part of the Exchange
Offer Registration Statement.
(b) The Company and the Subsidiary Guarantors shall advise each
Initial Purchaser, each Exchanging Dealer and the Holders (if applicable) and,
if requested by any such person, confirm such advice in writing (which advice
pursuant to clauses (ii)-(v) hereof shall be accompanied by an instruction to
suspend the use of the prospectus until the requisite changes have been made):
(i) when any Registration Statement and any amendment thereto has been
filed with the Commission and when such Registration Statement or any post-
effective amendment thereto has become effective;
(ii) of any request by the Commission for amendments or supplements to
any Registration Statement or the prospectus included therein or for additional
information;
(iii) of the issuance by the Commission of any stop order suspending
the effectiveness of any Registration Statement or the initiation of any
proceedings for that purpose;
(iv) of the receipt by the Company of any notification with respect to
the suspension of the qualification of the Securities, the Exchange Securities
or the Private Exchange Securities for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose; and
(v) of the happening of any event that requires the making of any
changes in any Registration Statement or the prospectus included therein in
order that the statements therein are not misleading and do not omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading.
(c) The Company and the Subsidiary Guarantors will make every
reasonable effort to obtain the withdrawal at the earliest possible time of any
order suspending the effectiveness of any Registration Statement.
<PAGE>
8
(d) The Company and the Subsidiary Guarantors will furnish to each
Holder of Transfer Restricted Securities included within the coverage of any
Shelf Registration Statement, without charge, at least one conformed copy of
such Shelf Registration Statement and any post-effective amendment thereto,
including financial statements and schedules and, if any such Holder so requests
in writing, all exhibits thereto (including those, if any, incorporated by
reference).
(e) The Company and the Subsidiary Guarantors will, during the Shelf
Registration Period, promptly deliver to each Holder of Transfer Restricted
Securities included within the coverage of any Shelf Registration Statement,
without charge, as many copies of the prospectus (including each preliminary
prospectus) included in such Shelf Registration Statement and any amendment or
supplement thereto as such Holder may reasonably request; and the Company and
each Subsidiary Guarantor consent to the use of such prospectus or any amendment
or supplement thereto by each of the selling Holders of Transfer Restricted
Securities in connection with the offer and sale of the Transfer Restricted
Securities covered by such prospectus or any amendment or supplement thereto.
(f) The Company and the Subsidiary Guarantors will furnish to each
Initial Purchaser and each Exchanging Dealer, and to any other Holder who so
requests, without charge, at least one conformed copy of the Exchange Offer
Registration Statement and any post-effective amendment thereto, including
financial statements and schedules and, if any Initial Purchaser or Exchanging
Dealer or any such Holder so requests in writing, all exhibits thereto
(including those, if any, incorporated by reference).
(g) The Company and the Subsidiary Guarantors will, during the
Exchange Offer Registration Period or the Shelf Registration Period, as
applicable, promptly deliver to each Initial Purchaser, each Exchanging Dealer
and such other persons that are required to deliver a prospectus following the
Registered Exchange Offer, without charge, as many copies of the final
prospectus included in the Exchange Offer Registration Statement or the Shelf
Registration Statement and any amendment or supplement thereto as such Initial
Purchaser, Exchanging Dealer or other persons may reasonably request; and the
Company and each Subsidiary Guarantor consent to the use of such prospectus or
any amendment or supplement thereto by any such Initial Purchaser, Exchanging
Dealer or other persons, as applicable, as aforesaid.
(h) Prior to the effective date of any Registration Statement, the
Company and the Subsidiary Guarantors will use their reasonable best efforts to
register or qualify, or cooperate with the Holders of Securities, Exchange
Securities or Private Exchange Securities included therein and their respective
counsel in connection with the registration or qualification of such Securities,
Exchange Securities or Private Exchange Securities for offer and sale under the
securities or blue sky laws of such jurisdictions as any such Holder reasonably
requests in writing and do any and all other acts or things necessary or
advisable to enable the offer and sale in such jurisdictions of the Securities,
Exchange Securities or Private Exchange Securities covered by such Registration
Statement; provided that the Company and each Subsidiary Guarantor will not be
required to qualify generally to do business in any jurisdiction where it is not
then so qualified or to take any action which would subject it to general
service of process or to taxation in any such jurisdiction where it is not then
so subject.
(i) The Company and the Subsidiary Guarantors will cooperate with the
Holders of Securities, Exchange Securities or Private Exchange Securities to
facilitate the timely preparation and
<PAGE>
9
delivery of certificates representing Securities, Exchange Securities or Private
Exchange Securities to be sold pursuant to any Registration Statement free of
any restrictive legends and in such denominations and registered in such names
as the Holders thereof may request in writing prior to sales of Securities,
Exchange Securities or Private Exchange Securities pursuant to such Registration
Statement.
(j) If any event contemplated by Section 4(b)(ii) through (v) occurs
during the period for which the Company and the Subsidiary Guarantors are
required to maintain an effective Registration Statement, the Company and the
Subsidiary Guarantors will promptly prepare and file with the Commission a post-
effective amendment to the Registration Statement or a supplement to the related
prospectus or file any other required document so that, as thereafter delivered
to purchasers of the Securities, Exchange Securities or Private Exchange
Securities from a Holder, the prospectus will not include an untrue statement of
a material fact or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
(k) Not later than the effective date of the applicable Registration
Statement, the Company and the Subsidiary Guarantors will provide a CUSIP number
for the Securities, the Exchange Securities and the Private Exchange Securities,
as the case may be, and provide the applicable trustee with printed certificates
for the Securities, the Exchange Securities or the Private Exchange Securities,
as the case may be, in a form eligible for deposit with The Depository Trust
Company.
(l) The Company and the Subsidiary Guarantors will comply with all
applicable rules and regulations of the Commission and will make generally
available to its security holders as soon as practicable after the effective
date of the applicable Registration Statement an earning statement satisfying
the provisions of Section 11(a) of the Securities Act; provided that in no event
shall such earning statement be delivered later than 45 days after the end of a
12-month period (or 90 days, if such period is a fiscal year) beginning with the
first month of the Company's first fiscal quarter commencing after the effective
date of the applicable Registration Statement, which statement shall cover such
12-month period.
(m) The Company and the Subsidiary Guarantors will cause the Indenture
or the Exchange Securities Indenture, as the case may be, to be qualified under
the Trust Indenture Act as required by applicable law in a timely manner.
(n) The Company and the Subsidiary Guarantors may require each Holder
of Transfer Restricted Securities to be registered pursuant to any Shelf
Registration Statement to furnish to the Company and the Subsidiary Guarantors
such information concerning the Holder and the distribution of such Transfer
Restricted Securities as the Company and the Subsidiary Guarantors may from time
to time reasonably require for inclusion in such Shelf Registration Statement,
and the Company and the Subsidiary Guarantors may exclude from such registration
the Transfer Restricted Securities of any Holder that fails to furnish such
information within a reasonable time after receiving such request. Each such
Holder agrees to notify the Company as promptly as practicable of any inaccuracy
or change in information previously furnished by such Holder to the Company or
of the occurrence of any event, in either case, as a result of which any
prospectus relating to such registration contains or would contain an untrue
statement of a material fact regarding such Holder of such Holder's intended
method of distribution of such Transfer Restricted Notes, or omits to state a
material fact regarding such Holder or such Holder's intended method of
distribution of Transfer Restricted Notes, required to be stated therein or
necessary to
<PAGE>
10
make the statements therein not misleading in light of the circumstances then
existing, and promptly to furnish to the Company any additional information
required to correct and update any previously furnished information or required
so that such prospectus shall not contain, with respect to such Holder or the
distribution of such Transfer Restricted Notes, an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make a statement therein not misleading in light of the
circumstances then existing. Each such Holder shall comply with the provisions
of the Securities Act applicable to such Holder with respect to the disposition
by such Holder of Transfer Restricted Notes, covered by such registration
statement in accordance with the intended methods of disposition by such Holder
set forth in such registration statement.
(o) In the case of a Shelf Registration Statement, each Holder of
Transfer Restricted Securities to be registered pursuant thereto agrees by
acquisition of such Transfer Restricted Securities that, upon receipt of any
notice from the Company pursuant to Section 4(b)(ii) through (v), such Holder
will discontinue disposition of such Transfer Restricted Securities until such
Holder's receipt of copies of the supplemental or amended prospectus
contemplated by Section 4(j) or until advised in writing (the "Advice") by the
Company and the Subsidiary Guarantors that the use of the applicable prospectus
may be resumed. If the Company and the Subsidiary Guarantors shall give any
notice under Section 4(b)(ii) through (v) during the period that the Company is
required to maintain an effective Registration Statement (the "Effectiveness
Period"), such Effectiveness Period shall be extended by the number of days
during such period from and including the date of the giving of such notice to
and including the date when each seller of Transfer Restricted Securities
covered by such Registration Statement shall have received (x) the copies of the
supplemental or amended prospectus contemplated by Section 4(j) (if an amended
or supplemental prospectus is required) or (y) the Advice (if no amended or
supplemental prospectus is required).
(p) In the case of a Shelf Registration Statement, the Company and the
Subsidiary Guarantors shall enter into such customary agreements (including, if
requested, an underwriting agreement in customary form) and take all such other
action, if any, as Holders of a majority in aggregate principal amount of the
Securities, Exchange Securities and Private Exchange Securities being sold or
the managing underwriters (if any) shall reasonably request in order to
facilitate any disposition of Securities, Exchange Securities or Private
Exchange Securities pursuant to such Shelf Registration Statement.
(q) In the case of a Shelf Registration Statement, the Company and the
Subsidiary Guarantors shall (i) make reasonably available for inspection by a
representative of, and Special Counsel (as defined below) acting for, Holders of
a majority in aggregate principal amount of the Securities, Exchange Securities
and Private Exchange Securities being sold and any underwriter participating in
any disposition of Securities, Exchange Securities or Private Exchange
Securities pursuant to such Shelf Registration Statement, all relevant financial
and other records, pertinent corporate documents and properties of the Company
and its subsidiaries and (ii) use their reasonable best efforts to have their
officers, directors, employees, accountants and counsel supply all relevant
information reasonably requested by such representative, Special Counsel or any
such underwriter (an "Inspector") in connection with such Shelf Registration
Statement.
(r) In the case of a Shelf Registration Statement, the Company and the
Subsidiary Guarantors each shall, if requested by Holders of a majority in
aggregate principal amount of the
<PAGE>
11
Securities, Exchange Securities and Private Exchange Securities being sold,
their Special Counsel or the managing underwriters (if any) in connection with
such Shelf Registration Statement, use its reasonable best efforts to cause (i)
its counsel to deliver an opinion relating to the Shelf Registration Statement
and the Securities, Exchange Securities or Private Exchange Securities, as
applicable, in customary form, (ii) its officers to execute and deliver all
customary documents and certificates requested by Holders of a majority in
aggregate principal amount of the Securities, Exchange Securities and Private
Exchange Securities being sold, their Special Counsel or the managing
underwriters (if any) and (iii) its independent public accountants to provide a
comfort letter in customary form, subject to receipt of appropriate
documentation as contemplated, and only if permitted, by Statement of Auditing
Standards No. 72.
5. Registration Expenses. The Company and the Subsidiary Guarantors will bear
all expenses incurred in connection with the performance of its obligations
under Sections 1, 2, 3 and 4, and the Company and the Subsidiary Guarantors will
reimburse the Initial Purchasers and the Holders for the reasonable fees and
disbursements of one firm of attorneys (in addition to any local counsel) chosen
by the Holders of a majority in aggregate principal amount of the Securities,
the Exchange Securities and the Private Exchange Securities to be sold pursuant
to each Shelf Registration Statement (the "Special Counsel") acting for the
Initial Purchasers or Holders in connection therewith.
6. Indemnification. (a) In the event of a Shelf Registration Statement or in
connection with any prospectus delivery pursuant to an Exchange Offer
Registration Statement by an Initial Purchaser or Exchanging Dealer, as
applicable, the Company and the Subsidiary Guarantors shall indemnify and hold
harmless each Holder (including, without limitation, any such Initial Purchaser
or Exchanging Dealer), its affiliates, their respective officers, directors,
employees, representatives and agents, and each person, if any, who controls
such Holder within the meaning of the Securities Act or the Exchange Act
(collectively referred to for purposes of this Section 6 and Section 7 as a
Holder) from and against any loss, claim, damage or liability, joint or several,
or any action in respect thereof (including, without limitation, any loss,
claim, damage, liability or action relating to purchases and sales of
Securities, Exchange Securities or Private Exchange Securities), to which that
Holder may become subject, whether commenced or threatened, under the Securities
Act, the Exchange Act, any other federal or state statutory law or regulation,
at common law or otherwise, insofar as such loss, claim, damage, liability or
action arises out of, or is based upon, (i) any untrue statement or alleged
untrue statement of a material fact contained in any such Registration Statement
or any prospectus forming part thereof or in any amendment or supplement thereto
or (ii) the omission or alleged omission to state therein a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, and shall reimburse each Holder promptly upon demand for any legal
or other expenses reasonably incurred by that Holder in connection with
investigating or defending or preparing to defend against or appearing as a
third party witness in connection with any such loss, claim, damage, liability
or action as such expenses are incurred; provided, however, that the Company and
the Subsidiary Guarantors shall not be liable in any such case to the extent
that any such loss, claim, damage, liability or action arises out of, or is
based upon, an untrue statement or alleged untrue statement in or omission or
alleged omission from any of such documents in reliance upon and in conformity
with any Holders' Information; and provided, further, that with respect to any
such untrue statement in or omission from any related preliminary prospectus,
the indemnity agreement contained in this Section 6(a) shall not inure to the
benefit of any Holder from whom the person asserting any such loss, claim,
damage, liability or action received Securities, Exchange Securities or Private
Exchange Securities to the extent
<PAGE>
12
that such loss, claim, damage, liability or action of or with respect to such
Holder results from the fact that both (A) a copy of the final prospectus was
not sent or given to such person at or prior to the written confirmation of the
sale of such Securities, Exchange Securities or Private Exchange Securities to
such person and (B) the untrue statement in or omission from the related
preliminary prospectus was corrected in the final prospectus unless, in either
case, such failure to deliver the final prospectus was a result of non-
compliance by the Company or a Subsidiary Guarantor with Section 4(d), 4(e),
4(f) or 4(g).
(b) In the event of a Shelf Registration Statement, each Holder shall
indemnify and hold harmless the Company, its affiliates (including the
Subsidiary Guarantors), their respective officers, directors, employees,
representatives and agents, and each person, if any, who controls the Company
within the meaning of the Securities Act or the Exchange Act (collectively
referred to for purposes of this Section 6(b) and Section 7 as the Company),
from and against any loss, claim, damage or liability, joint or several, or any
action in respect thereof, to which the Company or a Subsidiary Guarantor may
become subject, whether commenced or threatened, under the Securities Act, the
Exchange Act, any other federal or state statutory law or regulation, at common
law or otherwise, insofar as such loss, claim, damage, liability or action
arises out of, or is based upon, (i) any untrue statement or alleged untrue
statement of a material fact contained in any such Registration Statement or any
prospectus forming part thereof or in any amendment or supplement thereto or
(ii) the omission or alleged omission to state therein a material fact required
to be stated therein or necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading, but
in each case only to the extent that the untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in
conformity with any Holders' Information furnished to the Company and the
Subsidiary Guarantors by such Holder, and shall reimburse the Company and the
Subsidiary Guarantors for any legal or other expenses reasonably incurred by the
Company and the Subsidiary Guarantors in connection with investigating or
defending or preparing to defend against or appearing as a third party witness
in connection with any such loss, claim, damage, liability or action as such
expenses are incurred; provided, however, that no such Holder shall be liable
for any indemnity claims hereunder in excess of the amount of net proceeds
received by such Holder from the sale of Securities, Exchange Securities or
Private Exchange Securities pursuant to such Shelf Registration Statement.
(c) Promptly after receipt by an indemnified party under this Section
6 of notice of any claim or the commencement of any action, the indemnified
party shall, if a claim in respect thereof is to be made against the
indemnifying party pursuant to Section 6(a) or 6(b), notify the indemnifying
party in writing of the claim or the commencement of that action; provided,
however, that the failure to notify the indemnifying party shall not relieve it
from any liability which it may have under this Section 6 except to the extent
that it has been materially prejudiced (through the forfeiture of substantive
rights or defenses) by such failure; and provided, further, that the failure to
notify the indemnifying party shall not relieve it from any liability which it
may have to an indemnified party otherwise than under this Section 6. If any
such claim or action shall be brought against an indemnified party, and it shall
notify the indemnifying party thereof, the indemnifying party shall be entitled
to participate therein and, to the extent that it wishes, jointly with any other
similarly notified indemnifying party, to assume the defense thereof with
counsel reasonably satisfactory to the indemnified party. After notice from the
indemnifying party to the indemnified party of its election to assume the
defense of such claim or action, the indemnifying party shall not be liable to
the indemnified party under this Section 6 for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other than the
<PAGE>
13
reasonable costs of investigation; provided, however, that an indemnified party
shall have the right to employ its own counsel in any such action, but the fees,
expenses and other charges of such counsel for the indemnified party will be at
the expense of such indemnified party unless (1) the employment of counsel by
the indemnified party has been authorized in writing by the indemnifying party,
(2) the indemnified party has reasonably concluded (based upon advice of counsel
to the indemnified party) that there may be legal defenses available to it or
other indemnified parties that are different from or in addition to those
available to the indemnifying party, (3) a conflict or potential conflict exists
(based upon advice of counsel to the indemnified party) between the indemnified
party and the indemnifying party (in which case the indemnifying party will not
have the right to direct the defense of such action on behalf of the indemnified
party) or (4) the indemnifying party has not in fact employed counsel reasonably
satisfactory to the indemnified party to assume the defense of such action
within a reasonable time after receiving notice of the commencement of the
action, in each of which cases the reasonable fees, disbursements and other
charges of counsel will be at the expense of the indemnifying party or parties.
It is understood that the indemnifying party or parties shall not, in connection
with any proceeding or related proceedings in the same jurisdiction, be liable
for the reasonable fees, disbursements and other charges of more than one
separate firm of attorneys (in addition to any local counsel) at any one time
for all such indemnified party or parties. Each indemnified party, as a
condition of the indemnity agreements contained in Sections 6(a) and 6(b), shall
use all reasonable efforts to cooperate with the indemnifying party in the
defense of any such action or claim. No indemnifying party shall be liable for
any settlement of any such action effected without its written consent (which
consent shall not be unreasonably withheld), but if settled with its written
consent or if there be a final judgment for the plaintiff in any such action,
the indemnifying party agrees to indemnify and hold harmless any indemnified
party from and against any loss or liability by reason of such settlement or
judgment. No indemnifying party shall, without the prior written consent of the
indemnified party (which consent shall not be unreasonably withheld), effect any
settlement of any pending or threatened proceeding in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability on claims
that are the subject matter of such proceeding.
7. Contribution. If the indemnification provided for in Section 6 is
unavailable or insufficient to hold harmless an indemnified party under Section
6(a) or 6(b), then each indemnifying party shall, in lieu of indemnifying such
indemnified party, contribute to the amount paid or payable by such indemnified
party as a result of such loss, claim, damage or liability, or action in respect
thereof, (i) in such proportion as shall be appropriate to reflect the relative
benefits received by the Company and the Subsidiary Guarantors from the offering
and sale of the Securities, on the one hand, and a Holder with respect to the
sale by such Holder of Securities, Exchange Securities or Private Exchange
Securities, on the other, or (ii) if the allocation provided by clause (i) above
is not permitted by applicable law, in such proportion as is appropriate to
reflect not only the relative benefits referred to in clause (i) above but also
the relative fault of the Company and the Subsidiary Guarantors on the one hand
and such Holder on the other with respect to the statements or omissions that
resulted in such loss, claim, damage or liability, or action in respect thereof,
as well as any other relevant equitable considerations. The relative benefits
received by the Company and the Subsidiary Guarantors on the one hand and a
Holder on the other with respect to such offering and such sale shall be deemed
to be in the same proportion as the total net proceeds from the offering of the
Securities (before deducting expenses) received by or on behalf of the Company
and the Subsidiary Guarantors as set forth in the table on the cover of the
Offering Memorandum, on the one
<PAGE>
14
hand, bear to the total proceeds received by such Holder with respect to its
sale of Securities, Exchange Securities or Private Exchange Securities, on the
other. The relative fault shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to the Company or
a Subsidiary Guarantor or information supplied by the Company or a Subsidiary
Guarantor, on the one hand, or to any Holders' Information supplied by such
Holder, on the other, the intent of the parties and their relative knowledge,
access to information and opportunity to correct or prevent such untrue
statement or omission. The parties hereto agree that it would not be just and
equitable if contributions pursuant to this Section 7 were to be determined by
pro rata allocation or by any other method of allocation that does not take into
account the equitable considerations referred to herein. The amount paid or
payable by an indemnified party as a result of the loss, claim, damage or
liability, or action in respect thereof, referred to above in this Section 7
shall be deemed to include, for purposes of this Section 7, any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending or preparing to defend any such action or claim.
Notwithstanding the provisions of this Section 7, an indemnifying party that is
a Holder of Securities, Exchange Securities or Private Exchange Securities shall
not be required to contribute any amount in excess of the amount by which the
total price at which the Securities, Exchange Securities or Private Exchange
Securities sold by such indemnifying party to any purchaser exceeds the amount
of any damages which such indemnifying party has otherwise paid or become liable
to pay by reason of any untrue or alleged untrue statement or omission or
alleged omission. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
8. Rules 144 and 144A. The Company shall use its reasonable best efforts to
file the reports required to be filed by it under the Securities Act and the
Exchange Act in a timely manner and, if at any time the Company is not required
to file such reports, it will, upon the written request of any Holder of
Transfer Restricted Securities, make publicly available other information so
long as necessary to permit sales of such Holder's securities pursuant to Rules
144 and 144A. The Company and the Subsidiary Guarantors each covenants that it
will take such further action as any Holder of Transfer Restricted Securities
may reasonably request, all to the extent required from time to time to enable
such Holder to sell Transfer Restricted Securities without registration under
the Securities Act within the limitation of the exemptions provided by Rules 144
and 144A (including, without limitation, the requirements of Rule 144A(d)(4)).
Upon the written request of any Holder of Transfer Restricted Securities, the
Company and the Subsidiary Guarantors shall deliver to such Holder a written
statement as to whether they have complied with such requirements.
Notwithstanding the foregoing, nothing in this Section 8 shall be deemed to
require the Company or a Subsidiary Guarantor to register any of its securities
pursuant to the Exchange Act.
9. Underwritten Registrations. If any of the Transfer Restricted Securities
covered by any Shelf Registration Statement are to be sold in an underwritten
offering, the investment banker or investment bankers and manager or managers
that will administer the offering will be selected by the Holders of a majority
in aggregate principal amount of such Transfer Restricted Securities included in
such offering, subject to the consent of the Company and the Subsidiary
Guarantors (which shall not be unreasonably withheld or delayed), and such
Holders shall be responsible for all underwriting commissions and discounts in
connection therewith.
<PAGE>
15
No person may participate in any underwritten registration hereunder
unless such person (i) agrees to sell such person's Transfer Restricted
Securities on the basis reasonably provided in any underwriting arrangements
approved by the persons entitled hereunder to approve such arrangements and (ii)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents reasonably required under the terms
of such underwriting arrangements.
10. Miscellaneous. (a) Amendments and Waivers. The provisions of this
Agreement may not be amended, modified or supplemented, and waivers or consents
to departures from the provisions hereof may not be given, unless the Company
and the Subsidiary Guarantors have obtained the written consent of Holders of a
majority in aggregate principal amount of the Securities, the Exchange
Securities and the Private Exchange Securities, taken as a single class.
Notwithstanding the foregoing, a waiver or consent to depart from the provisions
hereof with respect to a matter that relates exclusively to the rights of
Holders whose Securities, Exchange Securities or Private Exchange Securities are
being sold pursuant to a Registration Statement and that does not directly or
indirectly affect the rights of other Holders may be given by Holders of a
majority in aggregate principal amount of the Securities, the Exchange
Securities and the Private Exchange Securities being sold by such Holders
pursuant to such Registration Statement.
(b) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by first-class mail or, in the case
of an Initial Purchaser or the Company and the Subsidiary Guarantors, by
telecopier:
(i) if to a Holder, at the most current address given by such Holder
to the Company in accordance with the provisions of this Section 10(b),
which address initially is, with respect to each Holder, the address of
such Holder maintained by the Registrar under the Indenture, with a copy in
like manner to CSI, BT Alex. Brown Incorporated and PaineWebber
Incorporated;
(ii) if to an Initial Purchaser, as provided in the Purchase
Agreement; and
(iii) if to the Company or a Subsidiary Guarantor, as provided in the
Purchase Agreement.
All such notices and communications shall be deemed to have been duly
given when received.
(c) Successors And Assigns. This Agreement shall be binding upon the
Company, the Subsidiary Guarantors and their respective successors and assigns.
(d) Counterparts. This Agreement may be executed in any number of
counterparts (which may be delivered in original form or by telecopier) and by
the parties hereto in separate counterparts, each of which when so executed
shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement.
(e) Definition of Terms. For purposes of this Agreement, (i) the term
"business day" means any day on which the New York Stock Exchange, Inc. is open
for trading, (ii) the term "subsidiary" has the meaning set forth in Rule 405
under the Securities Act and (iii) except where otherwise expressly provided,
the term "affiliate" has the meaning set forth in Rule 405 under the Securities
Act.
<PAGE>
16
(f) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(g) Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York.
(h) Remedies. In the event of a breach by the Company, a Subsidiary
Guarantor or by any Holder of any of their obligations under this Agreement,
each Holder or the Company and the Subsidiary Guarantors, as the case may be, in
addition to being entitled to exercise all rights granted by law, including
recovery of damages (other than the recovery of damages for a breach by the
Company or a Subsidiary Guarantor of its obligations under Sections 1 or 2
hereof for which liquidated damages have been paid pursuant to Section 3
hereof), will be entitled to specific performance of its rights under this
Agreement. The Company, the Subsidiary Guarantors and each Holder agree that
monetary damages would not be adequate compensation for any loss incurred by
reason of a breach by it of any of the provisions of this Agreement and hereby
further agree that, in the event of any action for specific performance in
respect of such breach, it shall waive the defense that a remedy at law would be
adequate.
(i) No Inconsistent Agreements. The Company and the Subsidiary
Guarantors each represents, warrants and agrees that (i) it has not entered
into, shall not, on or after the date of this Agreement, enter into any
agreement that is inconsistent with the rights granted to the Holders in this
Agreement or otherwise conflicts with the provisions hereof, (ii) it has not
previously entered into any agreement which remains in effect granting any
registration rights with respect to any of its debt securities to any person and
(iii) without limiting the generality of the foregoing, without the written
consent of the Holders of a majority in aggregate principal amount of the then
outstanding Transfer Restricted Securities, it shall not grant to any person the
right to request the Company or any Subsidiary Guarantor to register any debt
securities of the Company or any Subsidiary Guarantor (or any guarantees of such
debt securities) under the Securities Act unless the rights so granted are not
in conflict or inconsistent with the provisions of this Agreement.
(j) No Piggyback on Registrations. The Company, the Subsidiary
Guarantors and each of their respective security holders (other than the Holders
of Transfer Restricted Securities in such capacity) shall not have the right to
include any securities of the Company or a Subsidiary Guarantor in any Shelf
Registration or Registered Exchange Offer other than Transfer Restricted
Securities.
(k) Severability. The remedies provided herein are cumulative and not
exclusive of any remedies provided by law. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their reasonable best efforts to find and employ an alternative
means to achieve the same or substantially the same result as that contemplated
by such term, provision, covenant or restriction. It is hereby stipulated and
declared to be the intention of the parties that they would have executed the
remaining terms, provisions, covenants and restrictions without including any of
such that may be hereafter declared invalid, illegal, void or unenforceable.
<PAGE>
17
[Signatures follow beginning on page S-1.]
<PAGE>
S-1
Please confirm that the foregoing correctly sets forth the agreement among the
Company, the Subsidiary Guarantors and the Initial Purchasers.
Very truly yours,
BAYOU STEEL CORPORATION
By /s/ Richard J. Gonzalez
-----------------------
Name:
Title:
RIVER ROAD REALTY CORPORATION
By /s/ Richard J. Gonzalez
-----------------------
Name:
Title:
BAYOU STEEL CORPORATION (TENNESSEE)
By /s/ Richard J. Gonzalez
-----------------------
Name:
Title:
Accepted:
CHASE SECURITIES INC.
By /s/ Daniel P. Tredwell
----------------------
Authorized Signatory
<PAGE>
S-2
BT ALEX. BROWN INCORPORATED
By /s/ Christine B. Foggia
-----------------------
Authorized Signatory
PAINEWEBBER INCORPORATED
By /s/ Mark Bernstein
-----------------------
Authorized Signatory
<PAGE>
S-3
ANNEX A
Each broker-dealer that receives Exchange Securities for its own
account pursuant to the Registered Exchange Offer must acknowledge that it will
deliver a prospectus in connection with any resale of such Exchange Securities.
The Letter of Transmittal states that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. This Prospectus, as it
may be amended or supplemented from time to time, may be used by a broker-dealer
in connection with resales of Exchange Securities received in exchange for
Securities where such Securities were acquired by such broker-dealer as a result
of market-making activities or other trading activities. The Company has agreed
that, for a period of 180 days after the Expiration Date (as defined herein), it
will make this Prospectus available to any broker-dealer for use in connection
with any such resale. See "Plan of Distribution."
<PAGE>
S-4
ANNEX B
Each broker-dealer that receives Exchange Securities for its own
account in exchange for Securities, where such Securities were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Securities. See "Plan of Distribution."
<PAGE>
S-5
ANNEX C
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Securities for its own
account pursuant to the Registered Exchange Offer must acknowledge that it will
deliver a prospectus in connection with any resale of such Exchange Securities.
This Prospectus, as it may be amended or supplemented from time to time, may be
used by a broker-dealer in connection with resales of Exchange Securities
received in exchange for Securities where such Securities were acquired as a
result of market-making activities or other trading activities. The Company has
agreed that, for a period of 180 days after the Expiration Date, it will make
this prospectus, as amended or supplemented, available to any broker-dealer for
use in connection with any such resale. In addition, until _______________,
199_, all dealers effecting transactions in the Exchange Securities may be
required to deliver a prospectus./1/
The Company will not receive any proceeds from any sale of Exchange
Securities by broker-dealers. Exchange Securities received by broker-dealers
for their own account pursuant to the Registered Exchange Offer may be sold from
time to time in one or more transactions in the over-the-counter market, in
negotiated transactions, through the writing of options on the Exchange
Securities or a combination of such methods of resale, at market prices
prevailing at the time of resale, at prices related to such prevailing market
prices or at negotiated prices. Any such resale may be made directly to
purchasers or to or through brokers or dealers who may receive compensation in
the form of commissions or concessions from any such broker-dealer or the
purchasers of any such Exchange Securities. Any broker-dealer that resells
Exchange Securities that were received by it for its own account pursuant to the
Registered Exchange Offer and any broker or dealer that participates in a
distribution of such Exchange Securities may be deemed to be an "underwriter"
within the meaning of the Securities Act and any profit on any such resale of
Exchange Securities and any commission or concessions received by any such
persons may be deemed to be underwriting compensation under the Securities Act.
The Letter of Transmittal states that, by acknowledging that it will deliver and
by delivering a prospectus, a broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act.
For a period of 180 days after the Expiration Date the Company will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents
in the Letter of Transmittal. The Company has agreed to pay all expenses
incident to the Registered Exchange Offer (including the expenses of one counsel
for the Holders of the Securities) other than commissions or concessions of any
broker-dealers and will indemnify the Holders of the Securities (including any
broker-dealers) against certain liabilities, including liabilities under the
Securities Act.
- ---------------
/1/ In addition, the legend required by Item 502(e) of Regulation S-K will
appear on the back cover page of the Registered Exchange Offer prospectus.
<PAGE>
S-6
ANNEX D
[_] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10
ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR
SUPPLEMENTS THERETO.
Name: ________________________________
Address: _____________________________
_____________________________
If the undersigned is not a broker-dealer, the undersigned represents that it is
not engaged in, and does not intend to engage in, a distribution of Exchange
Securities. If the undersigned is a broker-dealer that will receive Exchange
Securities for its own account in exchange for Securities that were acquired as
a result of market-making activities or other trading activities, it
acknowledges that it will deliver a prospectus in connection with any resale of
such Exchange Securities; however, by so acknowledging and by delivering a
prospectus, the undersigned will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
<PAGE>
EXHIBIT 10.2
================================================================================
AMENDED AND RESTATED CREDIT AGREEMENT
Among
BAYOU STEEL CORPORATION
The Lenders Named Herein
And
THE CHASE MANHATTAN BANK,
as Administrative Agent
Dated as of May 22, 1998
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I. DEFINITIONS.................................................................. 1
SECTION 1.01. Defined Terms..................................................... 1
SECTION 1.02. Terms Generally................................................... 24
ARTICLE II. THE CREDITS................................................................. 25
SECTION 2.01. Commitments....................................................... 25
SECTION 2.02. Loans............................................................. 25
SECTION 2.03. Notice of Borrowings.............................................. 27
SECTION 2.04. Notes; Repayment of Loans......................................... 27
SECTION 2.05. Fees.............................................................. 27
SECTION 2.06. Interest on Loans................................................. 28
SECTION 2.07. Default Interest.................................................. 28
SECTION 2.08. Alternate Rate of Interest........................................ 29
SECTION 2.09. Termination, Reduction and Extension of Commitments............... 29
SECTION 2.10. Prepayment........................................................ 31
SECTION 2.11. Reserve Requirements; Change in Circumstances..................... 31
SECTION 2.12. Change in Legality................................................ 33
SECTION 2.13. Indemnity......................................................... 33
SECTION 2.14. Pro Rata Treatment................................................ 34
SECTION 2.15. Sharing of Setoffs................................................ 34
SECTION 2.16. Payments.......................................................... 35
SECTION 2.17. Taxes............................................................. 35
ARTICLE III. LETTERS OF CREDIT.......................................................... 37
SECTION 3.01. Issuance of Letters of Credit; Lender Participants................ 37
SECTION 3.02. Request for Issuance.............................................. 39
SECTION 3.03. Payment; Reimbursement............................................ 39
SECTION 3.04. Payments in Respect of Increased Costs............................ 41
SECTION 3.05. Fees.............................................................. 42
ARTICLE IV. REPRESENTATIONS AND WARRANTIES.............................................. 43
SECTION 4.01. Organization; Powers.............................................. 43
SECTION 4.02. Authorization..................................................... 43
SECTION 4.03. Enforceability.................................................... 44
SECTION 4.04. Governmental Approvals............................................ 44
SECTION 4.05. Financial Statements.............................................. 44
SECTION 4.06. No Material Adverse Change........................................ 44
SECTION 4.07. Title to Properties; Possession Under Leases...................... 45
SECTION 4.08. Subsidiaries...................................................... 45
SECTION 4.09. Litigation; Compliance with Laws.................................. 45
SECTION 4.10. Agreements........................................................ 46
SECTION 4.11. Federal Reserve Regulations....................................... 46
</TABLE>
(i)
<PAGE>
<TABLE>
<S> <C>
SECTION 4.12. Investment Company Act; Public Utility Holding Company Act......... 46
SECTION 4.13. Use of Proceeds.................................................... 46
SECTION 4.14. Tax Returns........................................................ 46
SECTION 4.15. No Material Misstatements.......................................... 46
SECTION 4.16. Employee Benefit Plans............................................. 47
SECTION 4.17. Environmental and Safety Matters................................... 47
SECTION 4.18. Security Agreement................................................. 48
SECTION 4.19. Solvency........................................................... 48
SECTION 4.20. Labor Matters...................................................... 48
SECTION 4.21. Intellectual Property.............................................. 48
SECTION 4.22. Year 2000 Compliance............................................... 48
ARTICLE V. CONDITIONS OF LENDING......................................................... 49
SECTION 5.01. All Borrowings..................................................... 49
SECTION 5.02. First Borrowing.................................................... 50
ARTICLE VI. AFFIRMATIVE COVENANTS........................................................ 52
SECTION 6.01. Existence; Businesses and Properties............................... 52
SECTION 6.02. Maintenance of Property; Insurance................................. 53
SECTION 6.03. Obligations and Taxes.............................................. 53
SECTION 6.04. Financial Statements, Reports, etc................................. 53
SECTION 6.05. Litigation and Other Notices....................................... 55
SECTION 6.06. ERISA.............................................................. 55
SECTION 6.07. Maintaining Records; Access to Properties and Inspections.......... 56
SECTION 6.08. Use of Proceeds.................................................... 56
SECTION 6.09. Environmental Matters.............................................. 56
SECTION 6.10. Fiscal Year-End.................................................... 57
SECTION 6.11. Further Assurances................................................. 57
SECTION 6.12. Landlord's Waiver and Consent...................................... 57
SECTION 6.13. Additional Collateral.............................................. 57
SECTION 6.14. Compliance with Year 2000.......................................... 58
SECTION 6.15. Preferred Stock.................................................... 58
SECTION 6.16. Collateral Examination............................................. 58
SECTION 6.17. Tennessee Collateral............................................... 59
ARTICLE VII. NEGATIVE COVENANTS.......................................................... 59
SECTION 7.01. Indebtedness....................................................... 59
SECTION 7.02. Liens.............................................................. 60
SECTION 7.03. Sale and Lease-Back Transactions................................... 62
SECTION 7.04. Investments, Loans and Advances.................................... 62
SECTION 7.05. Mergers, Consolidations and Sales of Assets........................ 62
SECTION 7.06. Dividends and Distributions........................................ 63
SECTION 7.07. Transactions with Affiliates....................................... 63
SECTION 7.08. Business of Borrower and Recourse Subsidiaries..................... 63
SECTION 7.09. Capital Expenditures............................................... 63
</TABLE>
(ii)
<PAGE>
<TABLE>
<S> <C>
SECTION 7.10. Acquisition Expenditures............................................ 64
SECTION 7.11. Optional Payments and Modifications of Senior Secured Notes......... 64
SECTION 7.12. Minimum Tangible Net Worth.......................................... 64
SECTION 7.13. Debt to Capitalization.............................................. 65
SECTION 7.14. Interest Expense Coverage Ratio..................................... 65
ARTICLE VIII. EVENTS OF DEFAULT........................................................... 66
ARTICLE IX. THE ADMINISTRATIVE AGENT...................................................... 70
ARTICLE X. MISCELLANEOUS.................................................................. 73
SECTION 10.01. Notices............................................................ 73
SECTION 10.02. Survival of Agreement.............................................. 74
SECTION 10.03. Binding Effect..................................................... 74
SECTION 10.04. Successors and Assigns............................................. 74
SECTION 10.05. Expenses; Indemnity................................................ 77
SECTION 10.06. Right of Setoff.................................................... 78
SECTION 10.07. APPLICABLE LAW..................................................... 79
SECTION 10.08. Waivers; Amendment................................................. 79
SECTION 10.09. Interest Rate Limitation........................................... 80
SECTION 10.10. Entire Agreement................................................... 80
SECTION 10.11. Waiver of Jury Trial............................................... 80
SECTION 10.12. Severability....................................................... 80
SECTION 10.13. Counterparts....................................................... 80
SECTION 10.14. Headings........................................................... 81
SECTION 10.15. Jurisdiction; Consent to Service of Process........................ 81
SECTION 10.16. Confidentiality.................................................... 81
</TABLE>
(iii)
<PAGE>
References
Schedule 2.01 Lenders and Commitments
Schedule 4.04 Government Approvals
Schedule 4.09 Litigation
Schedule 4.16 Employee Benefit Plans
Schedule 4.17(a) Environmental Litigation
Schedule 4.17(b) Environmental Liabilities
Schedule 5.01(d) Form of Borrowing Base Certificate
Schedule 7.01 Indebtedness
Schedule 7.02 Liens
Schedule 7.09 Budgeted Capital Expenditures
Exhibit A Form of Promissory Note
Exhibit B Form of Security Agreement
Exhibit C Form of Subsidiary Guarantee
Exhibit D Form of Opinion
Exhibit E Form of Landlord Waiver and Consent
Exhibit F Assignment and Acceptance
Exhibit G Form of Commitment Increase Supplement
Exhibit H Form of New Lender Supplement
(iv)
<PAGE>
AMENDED AND RESTATED CREDIT AGREEMENT dated as of May 22, 1998, among
BAYOU STEEL CORPORATION, a Delaware corporation (the "Borrower"), the several
banks, financial institutions and other entities from time to time parties to
this Agreement (the "Lenders") and THE CHASE MANHATTAN BANK, a New York banking
corporation, as administrative agent for the Lenders hereunder (in such
capacity, the "Administrative Agent").
WHEREAS, the Borrower, the Lenders (the "Original Lenders") party to
this Agreement on June 1, 1995 and the Administrative Agent are parties to the
Credit Agreement dated as of June 28, 1989, as amended and restated through June
1, 1995 and as in effect immediately prior to the effectiveness of this
Agreement (the "Original Credit Agreement");
WHEREAS, the parties to the Original Credit Agreement wish to amend and
restate the Original Credit Agreement pursuant to this Agreement in order, inter
alia, to extend the Maturity Date and amend certain covenants; and
WHEREAS, the parties hereto have elected to amend and restate the
Original Credit Agreement pursuant to this Agreement rather than amend the
Original Credit Agreement or enter into a new credit agreement for their
convenience and intend that all indebtedness, obligations and liens created
under the Original Credit Agreement and the other Loan Documents be continued
hereunder and thereunder and remain in full force and effect and not be
discharged, paid, satisfied or cancelled;
NOW THEREFORE, the parties hereto hereby agree as follows:
ARTICLE I. DEFINITIONS
SECTION 1.011. Defined Terms. As used in this Agreement, the
following terms shall have the meanings specified below:
"ABR Borrowing" shall mean a Borrowing comprised of ABR Loans.
"ABR Loan" shall mean any Loan bearing interest at a rate determined by
reference to the Alternate Base Rate in accordance with the provisions of
Article II.
"Account Debtor" shall mean any Person who is obligated to the Borrower
under, with respect to or on account of an Account.
"Accounts" shall mean any and all rights of the Borrower or Bayou
(Tennessee) to payment for goods and services sold, leased or otherwise provided
by the Borrower or Bayou (Tennessee), including any such right evidenced by
chattel paper, whether due or to become due, whether or not it has been earned
by performance, and
<PAGE>
2
whether now or hereafter acquired or arising in the future, including, without
limitation, accounts receivable from Affiliates or employees of the Borrower or
Bayou (Tennessee).
"Acquisition Expenditures" shall mean, for the Borrower in respect of
any period, the aggregate of all expenditures by the Borrower during such period
to acquire, by purchase or otherwise, either (a) the assets of any Person other
than any Subsidiary which constitute substantially all of an operating unit or
business of such Person or (b) all the capital stock of or other beneficial
ownership interests in another Person other than any Subsidiary.
"Add-On Public Debt" shall have the meaning assigned to such term in
Section 7.01(i).
"Adjusted LIBO Rate" shall mean, with respect to any Eurodollar
Borrowing for any Interest Period, an interest rate per annum (rounded upwards,
if necessary, to the next 1/16 of 1%) equal to the product of (a) the LIBO Rate
in effect for such Interest Period and (b) Statutory Reserves. For purposes
hereof, the term "LIBO Rate" shall mean the rate (rounded upwards, if necessary,
to the next 1/16 of 1%) at which dollar deposits approximately equal in
principal amount to Chase's portion of such Eurodollar Borrowing and for a
maturity comparable to such Interest Period are offered to the principal London
office of the Administrative Agent in immediately available funds in the London
interbank market at approximately 11:00 a.m., London time, two Business Days
prior to the commencement of such Interest Period.
"Affiliate" shall mean, with respect to a corporation, any person
(including any member of the immediate family of any natural person) which
directly or indirectly beneficially owns or controls 5% or more of the total
voting power of shares of capital stock of such corporation having the right to
vote for directors under ordinary circumstances, any person controlling,
controlled by or under common control with any such corporation (within the
meaning of Rule 405 under the Securities Act of 1933, as amended), and any
director or executive officer of any such corporation.
"Aggregate Amount" shall be as defined in Section 5.01(d).
"Aggregate Outstanding Extensions of Credit" shall mean an amount equal
to the sum of (a) the aggregate principal amount of all Loans then outstanding
and (b) the aggregate amount of all Letter of Credit obligations then
outstanding.
"Alternate Base Rate" shall mean, for any day, a rate per annum (rounded
upwards, if necessary, to the next 1/16 of 1%) equal to the greatest of (a) the
Prime Rate in effect on such day, (b) the Base CD Rate in effect on such day
plus 1% and (c) the Federal Funds Effective Rate in effect on such day plus 1/2
of 1%. For purposes hereof, "Prime Rate" shall mean the rate of interest per
annum publicly announced from time to
<PAGE>
3
time by Chase as its prime rate in effect at its principal office in New York
City; each change in the Prime Rate shall be effective on the date such change
is publicly announced. "Base CD Rate" shall mean the sum of (a) the product of
(i) the Three-Month Secondary CD Rate and (ii) Statutory Reserves and (b) the
Assessment Rate. "Three-Month Secondary CD Rate" shall mean, for any day, the
secondary market rate for three-month certificates of deposit reported as being
in effect on such day (or, if such day shall not be a Business Day, the next
preceding Business Day) by the Board through the public information telephone
line of the Federal Reserve Bank of New York (which rate will, under the current
practices of the Board, be published in Federal Reserve Statistical Release
H.15(519) during the week following such day), or, if such rate shall not be so
reported on such day or such next preceding Business Day, the average of the
secondary market quotations for three-month certificates of deposit of major
money center banks in New York City received at approximately 10:00 a.m., New
York City time, on such day (or, if such day shall not be a Business Day, on the
next preceding Business Day) by the Administrative Agent from three New York
City negotiable certificate of deposit dealers of recognized standing selected
by it. "Federal Funds Effective Rate" shall mean, for any day, the weighted
average of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers, as published on the
next succeeding Business Day by the Federal Reserve Bank of New York, or, if
such rate is not so published for any day which is a Business Day, the average
of the quotations for the day of such transactions received by the
Administrative Agent from three Federal funds brokers of recognized standing
selected by it. If for any reason the Administrative Agent shall have determined
(which determination shall be conclusive absent manifest error) that it is
unable to ascertain the Base CD Rate or the Federal Funds Effective Rate or both
for any reason, including the inability or failure of the Administrative Agent
to obtain sufficient quotations in accordance with the terms thereof, the
Alternate Base Rate shall be determined without regard to clause (b) or (c), or
both, of the first sentence of this definition, as appropriate, until the
circumstances giving rise to such inability no longer exist. Any change in the
Alternate Base Rate due to a change in the Prime Rate, the Three-Month Secondary
CD Rate or the Federal Funds Effective Rate shall be effective on the effective
date of such change in the Prime Rate, the Three-Month Secondary CD Rate or the
Federal Funds Effective Rate, respectively.
"Applicable Margin": for each Type of Loan at any time, the rate per
annum set forth opposite the Leverage Ratio at such time under the relevant
column heading below:
<PAGE>
4
<TABLE>
<CAPTION>
Leverage Ratio Eurodollar Loans ABR Loans
- ---------------------------------- ----------------- ----------
<S> <C> <C>
Less than 3.0 1.50% 0.25%
- ------------------------------------------------------------------
3.0 and above but less than 4.0 1.75% 0.50%
- ------------------------------------------------------------------
4.0 and above but less than 5.0 2.00% 0.75%
- ------------------------------------------------------------------
Greater than or equal to 5.0 2.25% 1.00%
- ------------------------------------------------------------------
</TABLE>
The Applicable Margin for any date shall be determined by reference to the
Leverage Ratio as of the last day of the fiscal quarter most recently ended, and
any change in the Applicable Margin shall become effective upon the delivery to
the Administrative Agent of a certificate of a Responsible Officer of the
Borrower (which certificate may be delivered prior to delivery of
the relevant financial statements) with respect to the financial statements to
be delivered pursuant to Section 6.04 for the most recently ended fiscal quarter
(a) setting forth in reasonable detail the calculation of the Leverage Ratio at
the end of such fiscal quarter and (b) stating that the signer has reviewed the
terms of this Agreement and other Loan Documents and has made, or caused to be
made under his or her supervision, a review in reasonable detail of the
transactions and condition of the Borrower and its Subsidiaries during the
applicable fiscal quarter, and that the signer does not have knowledge of the
existence as of the date of such officers' certificate of any Event of Default
or Default and any such change in the Applicable Margin shall apply (i) in the
case of the ABR Loans, to ABR Loans outstanding on such delivery date or made on
and after such delivery date and (ii) in the case of the Eurodollar Loans, to
Eurodollar Loans outstanding on such delivery date or made on and after such
delivery date. It is understood that the foregoing certificate of a Responsible
Officer shall be permitted to be delivered prior to, but in no event later than,
the time of the actual delivery of the financial statements required to be
delivered pursuant to Section 6.04. Notwithstanding the foregoing, (i) at all
times from the Closing Date to the date on which the first certificate required
under Section 6.04(d) is delivered, the Applicable Margin shall be (x) for
Eurodollar Loans 1.75% and (y) for ABR Loans, 0.50% and (ii) if the Borrower
fails to deliver the certificate required under Section 6.04(d) with respect to
a fiscal quarter, then at all times from and including the date the delivery
thereof is due until such certificate is delivered, the Leverage Ratio shall be
deemed, solely for the purposes of this definition, to be greater than 5.0 to
1.0.
"Assessment Rate" shall mean for any date the annual rate (rounded
upwards, if necessary, to the next 1/100 of 1%) most recently estimated by the
Administrative Agent (in good faith, but in no event in excess of statutory or
regulatory maximums) as the then current net annual assessment rate that will be
employed in determining amounts payable by Chase to the Federal Deposit
Insurance Corporation (or any successor) for insurance by such Corporation (or
such successor) of time deposits made in dollars at the Administrative Agent's
domestic offices.
<PAGE>
5
"Assignment and Acceptance" shall mean an assignment and acceptance
entered into by a Lender and an assignee, and accepted by the Administrative
Agent, in the form of Exhibit F or such other form as shall be approved by the
Administrative Agent.
"Bayou (Tennessee)" shall mean Bayou Steel Corporation (Tennessee), a
Delaware corporation.
"Board" shall mean the Board of Governors of the Federal Reserve System
of the United States.
"Borrowing" shall mean a group of Loans of a single Type made by the
Lenders on a single date and as to which a single Interest Period is in effect.
"Borrowing Base" shall mean (x) the sum of 85% of the Eligible Accounts
Receivable and 60% of the Eligible Inventory; provided, that the foregoing
percentages shall be subject to one adjustment upon the approval of the Required
Lenders after the completion of the collateral examination referred to in
Section 6.16.
"Borrowing Base Certificate" shall mean a certificate in the form of
Schedule 5.01(d), duly completed and executed by a Financial Officer.
"Budgeted Capital Expenditures" shall mean the Capital Expenditures set
forth on Schedule 7.09 hereto.
"Business Day" shall mean any day (other than a day which is a Saturday,
Sunday or legal holiday in the State of New York) on which lenders are open for
business in New York City; provided, however, that, when used in connection with
a Eurodollar Loan, the term "Business Day" shall also exclude any day on which
lenders are not open for dealings in dollar deposits in the London interbank
market.
"Capital Expenditures" shall mean, for the Borrower and its Recourse
Subsidiaries in respect of any period, the aggregate of all expenditures by the
Borrower and its Recourse Subsidiaries during such period that, in accordance
with GAAP, are or should be included in "additions to property, plant or
equipment" or similar items reflected in the consolidated statement of cash
flows of the Borrower, excluding therefrom any such expenditures constituting
Acquisition Expenditures and any such expenditures for mill rolls previously
classified as inventory.
"Capital Lease Obligations" of any person shall mean the obligations of
such person to pay rent or other amounts under any lease of (or other
arrangement conveying the right to use) real or personal property, or a
combination thereof, which obligations are required to be classified and
accounted for as capital leases on a balance
<PAGE>
6
sheet of such person under GAAP and, for the purposes of this Agreement, the
amount of such obligations at any time shall be the capitalized amount thereof
at such time determined in accordance with GAAP.
"Capitalization" for any Person shall mean the sum of (i) such person's
Funded Indebtedness plus (ii) such Person's Tangible Net Worth (less any
deferred financing costs in connection with the issuance of the Add-On Pubic
Debt).
A "Change in Control" shall be deemed to have occurred if the Owners
shall cease to beneficially own securities of the Borrower representing in the
aggregate at least 51% of the combined voting power of the Borrower's then
outstanding securities. For purposes of this definition, a person shall be
deemed to "beneficially own" a security if such person, directly or indirectly,
has the power to vote, or to direct the voting of, such security.
"Chase" shall mean The Chase Manhattan Bank.
"Closing Date" shall mean the date on which the conditions precedent set
forth in Section 5.02 shall be satisfied.
"Code" shall mean the Internal Revenue Code of 1986, as the same may be
amended from time to time.
"Collateral" shall mean all Collateral as defined in the Security
Agreement.
"Collateral Agent" shall mean the Administrative Agent, as collateral
agent for the Lenders under the Security Agreement.
"Commitment" shall mean, with respect to each Lender, the commitment of
such Lender to make Loans hereunder as set forth in Section 2.01, as the same
may be reduced from time to time pursuant to Section 2.09.
"Commitment Fee" shall have the meaning assigned to such term in Section
2.05(a).
"Commitment Fee Rate": the rate per annum set forth opposite the
Leverage Ratio below:
<PAGE>
7
<TABLE>
<CAPTION>
Commitment Fee Rate
--------------------
Leverage Ratio
- ----------------------------------
<S> <C>
Less than 3.0 0.25%
- --------------------------------------------------------
3.0 and above but less than 4.0 0.25%
- --------------------------------------------------------
4.0 and above but less than 5.0 0.25%
- --------------------------------------------------------
Greater than or equal to 5.0 0.375%
- --------------------------------------------------------
</TABLE>
The Commitment Fee Rate for any date shall be determined by reference to the
Leverage Ratio as of the last day of the fiscal quarter most recently ended, and
any change in the Commitment Fee Rate shall become effective upon the delivery
to the Administrative Agent of a certificate of a Responsible Officer of the
Borrower (which certificate may be delivered prior to delivery of the relevant
financial statements) with respect to the financial statements to be delivered
pursuant to Section 6.04 for the most recently ended fiscal quarter (a) setting
forth in reasonable detail the calculation of the Leverage Ratio at the end of
such fiscal quarter and (b) stating that the signer has reviewed the terms of
this Agreement and other Loan Documents and has made, or caused to be made under
his or her supervision, a review in reasonable detail of the transactions and
condition of the Borrower and its Subsidiaries during the applicable fiscal
quarter, and that the signer does not have knowledge of the existence as of the
date of such officers' certificate of any Event of Default or Default. It is
understood that the foregoing certificate of a Responsible Officer shall be
permitted to be delivered prior to, but in no event later than, the time of the
actual delivery of the financial statements required to be delivered pursuant to
Section 6.04. Notwithstanding the foregoing, (i) at all times from the Closing
Date to the date on which the first certificate required under Section 6.04(d)
is delivered, the Commitment Fee Rate shall be 0.25% and (ii) if the Borrower
fails to deliver the certificate required under Section 6.04(d) with respect to
a fiscal quarter, then at all times from and including the date the delivery
thereof is due until such certificate is delivered, the Leverage Ratio shall be
deemed, solely for the purposes of this definition, to be greater than 5.0 to
1.0.
"Commitment Increase Supplement" means a Commitment Increase Supplement,
substantially in the form of Exhibit G, executed and delivered pursuant to
Section 2.09.
"Commitment Percentage" shall mean, with respect to any Lender, the
ratio (expressed as a percentage) of such Lender's Commitment to the Total
Commitment.
<PAGE>
8
"Consolidated" shall mean, as to any Person, as applied to any financial
or accounting term, such term determined on a consolidated basis for such Person
and its recourse subsidiaries in accordance with GAAP (except as otherwise
required herein). When used in connection with the Borrower, "Consolidated"
shall mean, as applied to any financial or accounting term, such term determined
on a consolidated basis for the Borrower and its Recourse Subsidiaries in
accordance with GAAP (except as otherwise required herein).
"Consolidated EBITDA" shall mean, with respect to the Borrower and its
Recourse Subsidiaries, computed on a Consolidated basis for any period, the sum
of (i) Net Income for such period, (ii) Interest Expense for such period, (iii)
Federal, state and local income and franchise taxes deducted from revenue in
determining such Net Income, (iv) depreciation and amortization deducted from
revenue in determining such Net Income and (v) non-cash charges associated with
mill rolls to the extent deducted in computing Net Income.
"Consolidated Fixed Charges" shall mean, with respect to the Borrower
and its Recourse Subsidiaries, computed on a Consolidated basis for any period,
the Interest Expense incurred in such period.
"Default" shall mean any event or condition which upon notice, lapse of
time or both would constitute an Event of Default.
"Determination Date" shall have the meaning assigned such term in
Section 6.04(c).
"dollars" or "$" shall mean lawful money of the United States of
America.
"Due Date" shall mean the date on which payment is due with respect to
an Account.
"Eligible Accounts Receivable" shall mean Accounts of the Borrower and
Bayou (Tennessee) payable in United States Dollars reduced by the aggregate
amount of all limits and deductions provided for in this definition and
elsewhere in this Agreement. Unless otherwise approved in writing by the
Administrative Agent, no Account shall be deemed to be an Eligible Account
Receivable if and to the extent:
(a) it arises out of a sale made by the Borrower or Bayou (Tennessee)
to an Affiliate or an administrative charge to an Affiliate; or
(b) the Account is unpaid more than 90 days after the original invoice
date; provided, however, that Accounts may remain unpaid up to 180 days after
the original invoice date if (i) such Accounts are supported and secured by an
irrevocable
<PAGE>
9
letter of credit or other credit insurance, in a form or forms, and issued or
confirmed by a financial institution, meeting criteria reasonably specified from
time to time by the Administrative Agent after consultation with the Borrower
(together with sufficient documentation to permit direct draws by the
Administrative Agent) and (ii) such Accounts do not exceed in the aggregate 15%
of all Eligible Accounts Receivable in the then current Borrowing Base; or
(c) it is from an Account Debtor (or any Affiliate thereof) and 25% or
more, in face amount, of all Accounts from such Account Debtor (or any Affiliate
thereof) are ineligible pursuant to (b) above; or
(d) the Account does not satisfy the Borrower's or Bayou (Tennessee)'s,
as the case may be, credit and collection policies or has been or should have
been charged off in conformity with such credit and collection policies; or
(e) the Account from such Account Debtor arises subsequent to a decree
or order for relief with respect to such Account Debtor under the federal
bankruptcy laws, as now or hereafter in effect, unless the Administrative Agent
shall have determined that the timely payment and collection of such Account
will not be impaired; or
(f) the Account, when aggregated with all other Accounts of the Account
Debtor and its Affiliates, exceeds 15% or, in the event that the Account Debtor
is Trinity Industries, Inc., 25%, in face value of all Eligible Accounts
Receivable of the Borrower and Bayou (Tennessee), in the aggregate, then
outstanding; provided, however, that Accounts which (i) have terms not exceeding
30 days and/or are payable within 30 days (or in the event that the Account
Debtor is Trinity Industries, Inc., have terms not exceeding 60 days and/or are
payable within 60 days) and (ii) are supported or secured by an irrevocable
letter of credit or other credit insurance, in a form or forms, and issued or
confirmed by a financial institution, meeting criteria reasonably specified from
time to time by the Administrative Agent after consultation with the Borrower
(together with sufficient documentation to permit direct draws by the
Administrative Agent) shall be excluded to the extent of the face amount of such
letter of credit or credit insurance for the purposes of such calculation; or
(g) (i) the Account Debtor is also a creditor of the Borrower or Bayou
(Tennessee), (ii) the Account Debtor has disputed its liability on, or the
Account Debtor has made any claim or defense with respect to, such Account or
any other Account due from such Account Debtor to the Borrower or Bayou
(Tennessee), which has not been resolved or (iii) the Account otherwise is or
may become subject to any right of setoff by the Account Debtor; provided, that
any Account deemed ineligible pursuant to this clause (g) shall only be
ineligible to the extent of the amount owed by the Borrower or Bayou (Tennessee)
to the Account Debtor, the amount of such dispute, claim or defense, or the
amount of such setoff, as applicable; provided, further, that routine
adjustments to an
<PAGE>
10
Account common in the industry in which the Borrower or Bayou (Tennessee)
engages and common to the Borrower's or Bayou (Tennessee)'s business, such as
for volume or quantity differences, will be deemed not to constitute a dispute,
claim, defense to setoff; or
(h) any bankruptcy, insolvency or similar event or proceeding has
occurred or commenced and is continuing with respect to the Account Debtor,
unless the payment of Accounts from such Account Debtor is secured in a manner
satisfactory to the Administrative Agent or, if the Account from such Account
Debtor arises subsequent to a decree or order for relief with respect to such
Account Debtor under the federal bankruptcy laws, as now or hereafter in effect,
the Administrative Agent shall have determined that the timely payment and
collection of such Account will not be impaired; or
(i) the sale is to an Account Debtor outside the continental United
States or Canada, unless the Account Debtor thereon has supplied the Borrower or
Bayou (Tennessee) with an irrevocable letter of credit or other credit
insurance, in a form or forms, and issued or confirmed by a financial
institution, meeting criteria reasonably specified from time to time by the
Administrative Agent after consultation with the Borrower (together with
sufficient documentation to permit direct draws by, or payment to, the
Administrative Agent, as the case may be); or
(j) the sale to the Account Debtor is on a bill-and-hold (except where
the Account represents a final sale or transfer of title to the Account Debtor
pursuant to appropriate bill-and-hold acknowledgements, on terms and conditions
reasonably approved by the Administrative Agent), guaranteed sale, sale-and-
return, sale on approval or consignment basis or made pursuant to any other
written agreement providing for repurchase or return, provided, however, that no
Account shall be excluded pursuant to this clause (j) solely as a result of the
Borrower's or Bayou (Tennessee)'s customary quality warranties that it provides
to its customers; or
(k) the Account is the result of a charge-back or re-invoice of a
disputed or defaulted Account; or
(l) the Account Debtor is the United States of America or any
department, agency or instrumentality thereof, unless Borrower or Bayou
(Tennessee), as the case may be, duly assigns its rights to payment of such
Account to the Collateral Agent pursuant to the Assignment of Claims Act of
1940, as amended (31 U.S.C. (S) 3727 et seq.); or
(m) the goods giving rise to such Account have not been shipped and
delivered to the Account Debtor or the services giving rise to such Account have
not been performed or the Account otherwise does not represent a final sale or
transfer of title to
<PAGE>
11
the Account Debtor pursuant to appropriate bill and hold acknowledgements, on
terms and conditions reasonably approved by the Administrative Agent; or
(n) the Account does not comply with all applicable legal requirements,
including, where applicable, the Federal Consumer Credit Protection Act, the
Federal Truth in Lending Act and Regulation Z of the Board of Governors of the
Federal Reserve System, in each case as amended; or
(o) the Account is subject to any restrictions on the transfer,
assignability or sale thereof, enforceable against the assignee, except as
described in clause (l) above; or
(p) the Collateral Agent does not have a valid and perfected first
priority security interest in such Account or the Account does not otherwise
conform to the representations and warranties contained in the Loan Documents;
or
(q) it is an Account which may be set-off or charged against any
adverse security deposit, progress payment or other similar advance or deposit
made by or for the benefit of the applicable Account Debtor; provided that any
Account deemed ineligible pursuant to this clause (q) shall only be ineligible
to the extent of the applicable security deposit, progress payment or other
advance or deposit.
"Eligible Inventory" shall mean Inventory of the Borrower and Bayou
(Tennessee) that consists of raw materials, billets and finished goods, valued
at the lower of cost (prior to the LIFO reserve) or market on a basis consistent
with the Borrower's or Bayou (Tennessee)'s current and historical accounting
practice, less (i) any goods returned or rejected by the Borrower's or Bayou
(Tennessee)'s customers for reasons relating to the quality of such goods and
(ii) any goods in transit to third parties. The valuation of Eligible Inventory
shall also be reduced by the amount of transportation costs. Unless otherwise
approved in writing by the Administrative Agent, no Inventory shall be deemed
Eligible Inventory if:
(a) the Inventory is not owned solely by the Borrower or Bayou
(Tennessee) or is leased or on consignment or the Borrower or Bayou (Tennessee)
does not have good, valid and marketable title thereto; or
(b) the Inventory is not located at or is not in transit to property
that is either owned or leased by the Borrower or Bayou (Tennessee); provided,
however, that where such item of Inventory is located on a leasehold, such
Inventory shall not be deemed Eligible Inventory unless (i) the applicable
lessor has been notified of the Lien granted under the Security Agreement and
has entered into a written agreement, satisfactory in form and substance to the
Collateral Agent, acknowledging that such item of Inventory is subject to the
Lien granted under the Security Agreement and waiving and
<PAGE>
12
releasing any applicable Lien held by it with respect to such item of Inventory
at any time upon the occurrence or during the continuance of a Default or Event
of Default and such other rights as may be reasonably required by the Collateral
Agent or (ii) the Collateral Agent shall have received (A) an opinion, in form
and substance acceptable to and from local counsel approved by the Collateral
Agent, and addressed to the Administrative Agent, the Issuing Bank, the Lenders
and the Collateral Agent, to the effect that there is no law in the jurisdiction
where such Inventory is located that would allow Inventory located on such
leasehold to be subjected to any Lien in favor of the applicable lessor and (B)
a certificate of a Responsible Officer or the General Counsel of the Borrower or
Bayou (Tennessee) certifying that there is no term or condition of any agreement
or other document governing the relationship between the Borrower or Bayou
(Tennessee), as the case may be, and the applicable lessor that provides for any
such Lien; provided further that Inventory shall not be excluded which is
consigned by the Borrower or Bayou (Tennessee) pursuant to agreements which,
among other things, (i) provide for such Inventory to be segregated and clearly
identified as the property of the Borrower or Bayou (Tennessee), as the case may
be, (ii) grant to the Borrower or Bayou (Tennessee) a first priority Lien on and
security interest in such consigned Inventory (and as to which Uniform
Commercial Code financing statements have been filed in the appropriate
locations by the Borrower or Bayou (Tennessee), as the case may be) and (iii)
permit the Borrower or Bayou (Tennessee) reasonable access to the premises on
which such Inventory is located for the purpose of inspecting such Inventory,
such agreements and copies of such financing statements to be provided to the
Administrative Agent; or
(c) the Inventory is not subject to a perfected first priority Lien in
favor of the Collateral Agent except, with respect to Eligible Inventory in
transit to sites described in clause (b) above, for liens for transportation and
processing charges; or
(d) the Inventory is not located in the United States of America; or
(e) the Inventory is more than 24 months old or is otherwise aged
according to the Borrower's or Bayou (Tennessee)'s, as the case may be,
accounting policies (other than Inventory that is raw materials or semi-finished
Inventory that, in accordance with such accounting policies, is not aged) or the
Inventory does not otherwise conform to the representations and warranties
contained in the Loan Documents; provided, however, that (i) the Borrower and
Bayou (Tennessee) shall not be required to test the Inventory for aging in
accordance with such accounting policies more often than once in any period of
12 consecutive months and (ii) if the results of such test reveal that less than
2.5% of the Borrower's and Bayou (Tennessee)'s Inventory is so aged, then all of
such Inventory shall, subject to the other provisions of this definition, be
deemed Eligible Inventory; or
(f) the Inventory is classified under the heading "miscellaneous" in
accordance with the accounting policies of the Borrower or Bayou (Tennessee).
<PAGE>
13
"Environmental Laws" shall have the meaning assigned to such term in
Section 4.17.
"Environmental Permits" shall mean any and all permits, licenses,
registrations, approvals, notifications, exemptions and other authorizations
required under any Environmental Law.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as the same may be amended from time to time.
"ERISA Affiliate" shall mean any trade or business (whether or not
incorporated) that is a member of a group of which the Borrower is a member and
which is treated as a single employer under Section 414 of the Code.
"Eurodollar Borrowing" shall mean a Borrowing comprised of Eurodollar
Loans.
"Eurodollar Loan" shall mean any Loan bearing interest at a rate
determined by reference to the Adjusted LIBO Rate in accordance with the
provisions of Article II.
"Event of Default" shall have the meaning assigned to such term in
Article VIII.
"Fees" shall mean the Letter of Credit Fees as defined in Section 3.05,
and the Commitment Fees as defined in Section 2.05.
"Financial Officer" of the Borrower or any Subsidiary shall mean the
chairman, chief executive officer, president, vice-president, the chief
financial officer, principal accounting manager, treasurer or controller.
"First Mortgage Financing" means Indebtedness in an aggregate principal
amount equal to $75,000,000 incurred by the Borrower under the First Mortgage
Indenture.
"First Mortgage Indenture" means (i) the Indenture, dated April 2, 1994,
between the Borrower and First National Bank of Commerce, as trustee thereunder,
relating to the First Mortgage Financing, (ii) the Notes issued pursuant thereto
and (iii) any mortgage, security agreement, guarantee or other document securing
or guaranteeing the First Mortgage Financing, as such may hereafter be modified,
renewed, substituted, replaced or reissued.
<PAGE>
14
"Funded Indebtedness" shall mean, as to any Person, the Indebtedness of
such Person other than Guarantees and Letters of Credit which by its terms or by
the terms of any instrument or agreement relating thereto matures one year or
more from the date of the initial creation thereof; provided that Funded
Indebtedness shall include any Indebtedness which does not otherwise come within
the foregoing definition but which is directly or indirectly renewable or
extendible at the option of such Person to a date of one year or more (including
an option of such Person under a revolving credit or similar agreement
obligating the lender or lenders to extend credit over a period of one year or
more) from the date of the initial creation of such Indebtedness or which may be
payable out of the proceeds of a similar obligation pursuant to the terms of
such obligation or any such agreement; provided, further, Funded Indebtedness
shall include the then current maturities thereof.
"GAAP" shall mean generally accepted accounting principles.
"Governmental Authority" shall mean any Federal, state, local or foreign
court or governmental agency, authority, instrumentality or regulatory body.
"Guarantee" of or by any person shall mean any obligation, contingent or
otherwise, of such person guaranteeing or having the economic effect of
guaranteeing any Indebtedness of any other person (the "primary obligor") in any
manner, whether directly or indirectly, and including any obligation of such
person, direct or indirect, (a) to purchase or pay (or advance or supply funds
for the purchase or payment of) such Indebtedness or to purchase (or to advance
or supply funds for the purchase of) any security for the payment of such
Indebtedness, (b) to purchase property, securities or services for the purpose
of assuring the owner of such Indebtedness of the payment of such Indebtedness
or (c) to maintain working capital, equity capital, available cash or other
financial statement condition or liquidity of the primary obligor so as to
enable the primary obligor to pay such Indebtedness; provided, however, that the
term Guarantee shall not include endorsements for collection or deposit, in
either case in the ordinary course of business.
"Indebtedness" of any person shall mean, without duplication, (a) all
obligations of such person for borrowed money or with respect to deposits or
advances of any kind, (b) all obligations of such person evidenced by bonds,
debentures, notes or similar instruments, (c) all obligations of such person
upon which interest charges are customarily paid, (d) all obligations of such
person under conditional sale or other title retention agreements relating to
property or assets purchased by such person, (e) all obligations of such person
issued or assumed as the deferred purchase price of property or services (except
current accounts payable arising in the ordinary course of business), (f) all
Indebtedness of others secured by (or for which the holder of such Indebtedness
has an existing right, contingent or otherwise, to be secured by) any Lien on
property owned or acquired by such person, whether or not the obligations
secured thereby have been
<PAGE>
15
assumed, (g) all Guarantees by such person of Indebtedness of others, (h) all
Capital Lease Obligations of such person, (i) all obligations of such person in
respect of interest rate protection agreements, foreign currency exchange
agreements or other interest or exchange rate hedging arrangements and (j) all
obligations of such person as an account party in respect of letters of credit
and bankers' acceptances. The Indebtedness of any person shall include the
Indebtedness of any partnership in which such person is a general partner.
"Interest Expense" shall mean, with respect to any Person and its
recourse subsidiaries, computed on a Consolidated basis for any period, the sum
(net of all Interest Income) of (a) gross interest expense for such period
determined in accordance with GAAP consistently applied, including (i) the
amortization of debt discounts, (ii) the amortization of all fees payable in
connection with the incurrence of Indebtedness to the extent included in
interest expense and (iii) the portion of any payments or accruals with respect
to Capital Lease Obligations allocable to interest expense and (b) Consolidated
capitalized interest of such Person and its recourse subsidiaries.
"Interest Income" of any Person shall mean all amounts that would be
included under interest income on a consolidated income statement of such Person
determined in accordance with GAAP, less accreted amounts attributable to
original issue discount securities prior to the receipt thereof and other non-
cash interest payments or accruals.
"Interest Payment Date" shall mean, with respect to any Loan, the last
day of the Interest Period applicable to the Borrowing of which such Loan is a
part and, in the case of a Eurodollar Borrowing with an Interest Period of more
than three months' duration, each day that would have been an Interest Payment
Date had successive Interest Periods of three months duration been applicable to
such Borrowing, and, in addition, the date of any refinancing or conversion of
such Borrowing with or to a Borrowing of a different type.
"Interest Period" shall mean (a) as to any Eurodollar Borrowing, the
period commencing on the date of such Borrowing or on the last day of the
immediately preceding Interest Period applicable to such Borrowing, as the case
may be, and ending on the numerically corresponding day (or, if there is no
numerically corresponding day, on the last day) in the calendar month that is 1,
2, 3 or 6 months thereafter, as the Borrower may elect and (b) as to any ABR
Borrowing, the period commencing on the date of such Borrowing or on the last
day of the immediately preceding Interest Period applicable to such Borrowing,
as the case may be, and ending on the earliest of (i) the next succeeding March
31, June 30, September 30 or December 31, (ii) the Maturity Date and (iii) the
date such Borrowing is converted to a Borrowing of a different Type in
accordance with Section 2.10 or repaid or prepaid in accor dance with Section
2.11 or 2.12; provided, however, that if any Interest Period would end on a day
other than a Business Day,
<PAGE>
16
such Interest Period shall be extended to the next succeeding Business Day
unless, in the case of a Eurodollar Borrowing only, such next succeeding
Business Day would fall in the next calendar month, in which case such Interest
Period shall end on the next preceding Business Day. Interest shall accrue from
and including the first day of an Interest Period to but excluding the last day
of such Interest Period.
"Inventory" shall mean all merchandise intended for sale by the Borrower
or Bayou (Tennessee), or consumed in the Borrower's or Bayou (Tennessee)'s
business, together with all raw materials, including, without limitation, scrap,
billets, shapes, additives, alloys, fluxes, electrodes and refractories, whether
now owned or hereafter acquired or arising, and all such property the sale or
other disposition of which has given rise to Accounts and which has been
returned to, repossessed or stopped in transit by or on behalf of the Borrower
or Bayou (Tennessee); provided, however, that Inventory shall not include (i)
all bearings, rolls, guides and stores that relate to machinery and equipment,
(ii) all licenses, franchises, permits, patents, patent rights, formulae,
processes, compounds, drawings, designs, blueprints, surveys, reports, manuals
and operating standards relating to or used in the operation of the Borrower's
or Bayou (Tennessee's) business and all trade secret rights, rights in works of
authorship and contract rights relating to computer software programs in
whatever form created or maintained, (iii) all proceeds of the properties,
rights and interests referred to in clauses (i) and (ii) above and (iv) any
other properties, rights or interests granted to First National Bank of
Commerce, as trustee, pursuant to the Senior Secured Note Indenture, and
thereafter assumed by the Borrower or Bayou (Tennessee).
"Investment" in any person shall mean any loan or advance to, any
acquisition of capital stock, equity interest, obligation or other security of,
or capital contribution to, or other investment in such person provided that
"Investments" shall exclude Acquisition Expenditures.
"Issuing Bank" shall mean Chase, in its capacity as the issuer of any
Letter of Credit.
"Issuing Bank Payment Amount" shall mean, with respect to a Letter of
Credit Disbursement, an amount equal to the amount of such Letter of Credit
Disbursement less the amount of any payment from the Borrower in partial
satisfaction of the reimbursement obligation of the Borrower with respect to
such Letter of Credit Disbursement received by the Issuing Bank by 12:00 Noon
New York time, on the date of such Letter of Credit Disbursement pursuant to
Section 3.03.
"Letters of Credit" shall mean the letters of credit issued by the
Issuing Bank pursuant to Article III, including any Scheduled Letters of Credit
deemed to have been issued hereunder pursuant to Section 3.01(b).
<PAGE>
17
"Letter of Credit Disbursement" shall mean a disbursement by the Issuing
Bank to the beneficiary of a Letter of Credit in connection with a drawing
thereunder.
"Letter of Credit Exposure" shall mean at any time the sum of (a) the
aggregate undrawn amount of Letters of Credit issued for the account of the
Borrower and outstanding and (b) the aggregate amount of all drawings under
Letters of Credit for which the Lenders shall not have been reimbursed as
provided in Section 3.03.
"Leverage Ratio" shall mean, at any date, the ratio of Consolidated
Indebtedness of the Borrower and its Subsidiaries as of the last day of the
fiscal quarter most recently ended prior to such date to Consolidated EBITDA for
the four consecutive fiscal quarters ended as of such date.
"Lien" shall mean, with respect to any asset, (a) any mortgage, deed of
trust, lien, pledge, encumbrance, charge or security interest in or on such
asset, (b) the interest of a vendor or a lessor under any conditional sale
agreement, capital lease or title retention agreement relating to such asset and
(c) in the case of securities, any purchase option, call or similar right of a
third party with respect to such securities.
"Loans" shall mean the revolving loans made by the Lenders to the
Borrower pursuant to Section 2.01. Each Loan shall be a Eurodollar Loan or an
ABR Loan.
"Loan Documents" shall mean this Agreement, the Security Agreement, the
Subsidiary Guarantee and the Notes.
"Loan Parties" shall mean the Borrower and each Subsidiary of the
Borrower which is a party to a Loan Document.
"Margin Stock" shall have the meaning given such term under Regulation
U.
"Material Adverse Effect" shall mean (a) a materially adverse effect on
the business, assets, operations or financial condition of the Borrower and its
Recourse Subsidiaries taken as a whole, (b) a material impairment of the ability
of the Borrower or any Subsidiary to perform any of its obligations under any
Loan Document to which it is or will be a party or (c) a material impairment of
the rights of or benefits available to the Lenders under any Loan Document.
"Maturity Date" shall mean the fifth anniversary of the Closing Date (or
if such day is not a Business Day, the immediately preceding Business Day).
<PAGE>
18
"Meyers" means Howard M. Meyers, an individual with a business address
on the Closing Date at 2777 Stemmons Freeway, Suite 1800, Dallas, Texas 75207.
"Multiemployer Plan" shall mean a multiemployer plan as defined in
Section 4001(a)(3) of ERISA to which the Borrower or any ERISA Affiliate (other
than one considered an ERISA Affiliate only pursuant to subsection (m) or (o) of
Section 414 of the Code) is making or accruing any obligation to make
contributions, or has within any of the preceding five plan years made or
accrued an obligation to make contributions.
"Net Income" shall mean, with respect to any Person and its recourse
subsidiaries for any period, (a) net revenues and other proper income for such
period minus to the extent not counted in calculating net revenue (b) the
aggregate for such period of, without duplication, (i) cost of goods sold, (ii)
Interest Expense, (iii) operating expenses, (iv) selling, general and
administrative expenses, (v) taxes, (vi) depreciation and amortization, (vii)
any other items that are treated as expenses under GAAP, but excluding from the
definition of Net Income any non-cash extraordinary, unusual or nonrecurring
gains or losses (including the effect of the adoption of Financial Accounting
Standards No. 106 and 109) and any non-cash gains or losses in connection with
any sales of assets and (viii) in the case of the Borrower, payments made with
respect to any premium upon the prepayment of Indebtedness outstanding under the
Senior Secured Note Indenture, all computed on a Consolidated basis in
accordance with GAAP consistently applied; provided, that there shall be
included in Net Income, to the extent deducted in accordance with paragraph (b)
above, the amount of any premium paid upon the prepayment of the Indebtedness
outstanding under the First Mortgage Indenture or the Term Loan Agreement or the
redemption of the Preferred Stock, up to a maximum aggregate premium of
$8,500,000; provided, further, that there shall be excluded from Net Income
amounts arising from the adoption or change in accounting policies of such
Person in accordance with GAAP or voluntarily upon the advice of such Person's
independent auditors that so qualify under Regulation S-X of the Securities Act
of 1933, as amended.
"New Lender Supplement" means a New Lender Supplement, substantially in
the form of Exhibit H, executed and delivered pursuant to Section 2.09.
"non-recourse Indebtedness" means Indebtedness of a non-recourse
subsidiary of a Person or any of its subsidiaries where (a) neither such Person
nor any subsidiary of such Person (other than such non-recourse subsidiary):
(i) provides any Guarantee or credit support for such Indebtedness (including
any undertaking, guaranty, indemnity, agreement or instrument which would
constitute Indebtedness); or (ii) is directly or indirectly liable for such
Indebtedness, (b) the holders of such Indebtedness expressly waive any recourse
which they may have, in law, equity or otherwise, whether based on
misrepresentation, control, ownership or otherwise, to such Person and any
<PAGE>
19
subsidiary of such Person (other than such non-recourse subsidiary) and (c) no
default with respect to such Indebtedness (including any rights which the holder
thereof may have to take enforcement action against such non-recourse
subsidiary) would permit (upon notice, lapse of time or both) any holder of any
other Indebtedness of such Person or any subsidiary of such Person (other than
such non-recourse subsidiary) to declare a default on such other Indebtedness or
cause the payment thereof to be accelerated or payable prior to its stated
maturity.
"Non-Recourse Indebtedness" means Indebtedness of a Non-Recourse
Subsidiary of the Borrower or any of its Subsidiaries where (a) neither the
Borrower nor any Subsidiary (other than such Non-Recourse Subsidiary): (i)
provides any Guarantee or credit support for such Indebtedness (including any
undertaking, guaranty, indemnity, agreement or instrument which would constitute
Indebtedness); or (ii) is directly or indirectly liable for such Indebtedness,
(b) the holders of such Indebtedness expressly waive any recourse which they may
have, in law, equity or otherwise, whether based on misrepresentation, control,
ownership or otherwise, to the Borrower and any Subsidiary (other than such Non-
Recourse Subsidiary) and (c) no default with respect to such Indebtedness
(including any rights which the holder thereof may have to take enforcement
action against such Non-Recourse Subsidiary) would permit (upon notice, lapse of
time or both) any holder of any other Indebtedness of the Borrower or any
Subsidiary of such Person (other than such Non-Recourse Subsidiary) to declare a
default on such other Indebtedness or cause the payment thereof to be
accelerated or payable prior to its stated maturity.
"non-recourse subsidiary" of any Person means a special purpose
subsidiary of such Person or any of its subsidiaries formed to acquire
securities or assets of a third party and which (i) has no Indebtedness other
than Non-Recourse Indebtedness and (ii) does not, directly or indirectly, own
any Indebtedness, stock or securities of, and has no Investment in, such Person
or any recourse subsidiary of such Person.
"Non-Recourse Subsidiary" shall mean any non-recourse subsidiary of the
Borrower or any of its Subsidiaries.
"Note" shall mean a promissory note of the Borrower, substantially in
the form of Exhibit A, evidencing Loans.
"Owners" means any or all of (i) Meyers, (ii) any son, daughter,
stepson, stepdaughter or spouse of Meyers, (iii) any lineal descendant of an
individual referred to in clause (i) or clause (ii), and (iv) any trust in which
one or more of the persons referred to in clause (i), (ii) or (iii) are
principal beneficiaries.
"PBGC" shall mean the Pension Benefit Guaranty Corporation referred to
and defined in ERISA.
<PAGE>
20
"Permitted Investments" shall mean:
(a) direct obligations of, or obligations the principal of and interest
on which are unconditionally guaranteed by, the United States of America
(or by any agency thereof to the extent such obligations are backed by the
full faith and credit of the United States of America), in each case
maturing within 365 days from the date of acquisition thereof;
(b) Investments in commercial paper maturing within 365 days from the
date of acquisition thereof and having, at such date of acquisition, a
rating of A-1 or better from Standard & Poor's Ratings Group or P-1 or
better from Moody's Investors Service, Inc. or any successor to either of
such rating services;
(c) Investments in certificates of deposit, banker's acceptances and
time deposits maturing within 365 days from the date of acquisition thereof
issued or guaranteed by or placed with, and money market deposit accounts
issued or offered by, any domestic office of any commercial lender
organized under the laws of the United States of America or any State
thereof which has a combined capital and surplus and undivided profits of
not less than $250,000,000;
(d) Investments pursuant to repurchase agreements and reverse repurchase
agreements relating to marketable direct obligations issued or
unconditionally guaranteed by the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States
of America or pursuant to repurchase agreements with nationally recognized
securities dealers having total capital funds in excess of $200,000,000;
(e) other Investment instruments approved in writing by the Required
Lenders and offered by financial institutions which have a combined capital
and surplus and undivided profits of not less than $250,000,000;
(f) loans or advances to employees in an aggregate amount not to exceed
$100,000;
(g) loans to, or Investments in, any Person, other than Non-Recourse
Subsidiaries, not to exceed at any time outstanding an aggregate amount
equal to $250,000 with respect to loans to, and Investments in, all such
Persons (the value of any such loans and Investments to be the original
amount of the loan or Investment less the amount repaid or otherwise
returned in cash); and
(h) Cash equity investments of the Borrower in Non-Recourse Subsidiaries
of the Borrower provided that (i) at the time any such Investment is made,
there shall be (x) no Loans outstanding and (y) no Letter of Credit
<PAGE>
21
Exposure in excess of $2,000,000, (ii) such Investments shall be made
solely with Unencumbered Cash of the Borrower, (iii) after giving effect to
such Investments, Unencumbered Cash owned and held by or for the benefit of
the Borrower shall be not less than $2,500,000 and (iv) such Investments
shall not exceed $15,000,000 in the aggregate at any time.
"Person" or "person" shall mean any natural person, corporation,
business trust, joint venture, association, company, partnership or government,
or any agency or political subdivision thereof.
"Plan" shall mean any pension plan (other than a Multiemployer Plan)
subject to the provisions of Title IV of ERISA or Section 412 of the Code which
is maintained for employees of the Borrower or any ERISA Affiliate.
"Preferred Stock" shall mean the fixed-rate preferred stock of the
Borrower having an aggregate liquidation value of $15,000,000.
"Preferred Stock Documents" shall mean (i) the Preferred Stock and
Warrant Purchase Agreement and (ii) the Shareholder Agreement.
"Preferred Stock and Warrant Purchase Agreement" shall mean the
Preferred Stock and Warrant Purchase Agreement, made as of June 13, 1995, by and
between the Borrower and Rice.
"recourse subsidiary" of a Person means any subsidiary of such Person
that is not a non-recourse subsidiary of such Person.
"Recourse Subsidiary" shall mean any recourse subsidiary of the
Borrower.
"Register" shall have the meaning given such term in Section 10.04(d).
"Regulation T" shall mean Regulation T of the Board as from time to
time in effect and all official rulings and interpretations thereunder or
thereof.
"Regulation U" shall mean Regulation U of the Board as from time to
time in effect and all official rulings and interpretations thereunder or
thereof.
"Regulation X" shall mean Regulation X of the Board as from time to
time in effect and all official rulings and interpretations thereunder or
thereof.
"Reportable Event" shall mean any reportable event as defined in
Section 4043(b) of ERISA or the regulations issued thereunder with respect to a
Plan
<PAGE>
22
(other than a Plan maintained by an ERISA Affiliate which is considered an ERISA
Affiliate only pursuant to subsection (m) or (o) of Section 414 of the Code).
"Required Lenders" shall mean, at any time, Lenders holding Loans
representing at least 60% of the aggregate principal amount of the aggregate
Loans outstanding or, if no Loans are outstanding, Lenders having Commitments
representing at least 60% of the aggregate Commitments.
"Responsible Officer" of the Borrower or any Subsidiary shall mean any
executive officer or Financial Officer of such corporation and any other officer
or similar representative thereof responsible for the administration of the
obligations of such corporation in respect of this Agreement.
"Rice" shall mean Rice Partners II, L.P., a Delaware limited
partnership.
"River Road Realty" shall mean River Road Realty Corporation, a
Louisiana corporation and a subsidiary of the Borrower.
"Scheduled Letters of Credit" shall mean the letters of credit, if
any, issued under the Original Credit Agreement that are outstanding on the
Closing Date.
"Security Agreement" shall mean the Amended and Restated Security
Agreement, dated as of May 22, 1998, between the Borrower, Bayou (Tennessee) and
the Collateral Agent, on behalf of the Lenders, in substantially the form of
Exhibit B hereto.
"Security Documents" shall mean the Security Agreement and the
Subsidiary Guarantee.
"Senior Secured Note Indenture" means the Indenture entered into by
the Borrower in connection with the issuance of the Senior Secured Notes, as the
same may be amended, supplemented or otherwise modified from time to time in
accordance with Section 7.11.
"Senior Secured Notes" means the Senior Secured Notes of the Borrower
due 2008 issued on the Closing Date, as the same may be amended, supplemented or
otherwise modified from time to time in accordance with Section 7.11.
"Shareholder Agreement" shall mean the Shareholder Agreement, made as
of June 13, 1995, by and between the Borrower, Howard M. Meyers, Bayou Steel
Properties Limited, a Delaware corporation, and Rice.
"Solvent" when used with respect to any Person, means that, as of any
date of determination, (a) the amount of the "present fair saleable value" of
the assets of such
<PAGE>
23
Person will, as of such date, exceed the amount of all "liabilities of such
Person, contingent or otherwise", as of such date, as such quoted terms are
determined in accordance with applicable federal and state laws governing
determinations of the insolvency of debtors, (b) the present fair saleable value
of the assets of such Person will, as of such date, be greater than the amount
that will be required to pay the probable liability of such Person on its debts
as such debts become absolute and matured, (c) such Person will not have, as of
such date, an unreasonably small amount of capital with which to conduct its
business, and (d) such Person will be able to pay its debts as they mature. For
purposes of this definition, (i) "debt" means liability on a "claim", and (ii)
"claim" means any (x) right to payment, whether or not such a right is reduced
to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured,
disputed, undisputed, legal, equitable, secured or unsecured or (y) right to an
equitable remedy for breach of performance if such breach gives rise to a right
to payment, whether or not such right to an equitable remedy is reduced to
judgment, fixed, contingent, matured or unmatured, disputed, undisputed, secured
or unsecured.
"Specified Change of Control" means a "Change of Control" as defined
in the Senior Secured Note Indenture.
"Statutory Reserves" shall mean a fraction (expressed as a decimal),
the numerator of which is the number one and the denominator of which is the
number one minus the aggregate of the maximum reserve percentages (including any
marginal, special, emergency or supplemental reserves) expressed as a decimal
established by the Board and any other banking authority to which Chase is
subject (a) with respect to the Base CD Rate (as such term is used in the
definition of "Alternate Base Rate"), for new negotiable nonpersonal time
deposits in dollars of over $100,000 with maturities approximately equal to
three months and (b) with respect to the Adjusted LIBO Rate, for Eurocurrency
Liabilities (as defined in Regulation D of the Board). Such reserve percentages
shall include those imposed pursuant to such Regulation D. Eurodollar Loans
shall be deemed to constitute Eurocurrency Liabilities and as such shall be
deemed to be subject to such reserve requirements without benefit of or credit
for proration, exemptions or offsets which may be available from time to time to
any Lender under such Regulation D. Statutory Reserves shall be adjusted
automatically on and as of the effective date of any change in any reserve
percentage.
"subsidiary" shall mean, with respect to any person (herein referred
to as the "parent"), any corporation, partnership, association or other business
entity (a) of which securities or other ownership interests representing more
than 50% of the equity or more than 50% of the ordinary voting power or more
than 50% of the general partnership interests are, at the time any determination
is being made, owned, controlled or held, or (b) which is, at the time any
determination is made, otherwise controlled, by the parent or
<PAGE>
24
one or more subsidiaries of the parent or by the parent and one or more
subsidiaries of the parent.
"Subsidiary" shall mean any subsidiary of the Borrower.
"Subsidiary Guarantee" shall mean the Subsidiary Guarantee, dated as
of May 22, 1998, by the Subsidiaries party thereto in favor of the Collateral
Agent, for the ratable benefit of the Lenders, in substantially the form of
Exhibit C.
"Tangible Net Worth" shall mean, with respect to any person at any
time, (i) the sum of such person's capital stock, capital in excess of par or
stated value of shares of its capital stock, retained earnings and any other
account principles which, in accordance with GAAP, constitutes stockholders'
equity, less (ii) to the extent not already excluded from item (i) above,
treasury stock and any minority interest in Subsidiaries, less (iii) the amount
of all assets reflected as goodwill, patents, research and development and all
other assets required to be classified as intangibles in accordance with GAAP
and less (iv) the amount of any write up in the value of any asset above the
cost or depreciated cost thereof to such person.
"Term Loan Agreement" shall mean the Term Loan Agreement, dated as of
June 1, 1995, among Bayou (Tennessee), the lenders party thereto and the agent
party thereto, as the same may be amended, modified or otherwise supplemented
for time to time.
"Total Commitment" shall mean the sum of the Lenders' Commitments, as
the same may be reduced from time to time pursuant to Section 2.09.
"Transactions" shall mean the collective reference to (a) the
execution, delivery and performance by each Loan Party of each of the Loan
Documents and the borrowings hereunder, (b) the repayment of all loans and other
amounts outstanding under the Original Credit Agreement, (c) the repayment of
all loans and other amounts outstanding under the Term Loan Agreement and the
termination of the Term Loan Agreement and the release of all collateral
security provided in respect of the Term Loan Agreement, (d) the repayment of
all notes and other amounts outstanding under the First Mortgage Indenture and
the termination of the First Mortgage Indenture and the release of all
collateral security provided in respect of the First Mortgage Indenture and (e)
the redemption of the Preferred Stock and the termination of the Preferred Stock
Documents and all obligations of the Borrower and its Subsidiaries with respect
to the Preferred Stock Documents and (f) the issuance of the Senior Secured
Notes pursuant to the Senior Secured Note Indenture.
"Type", when used in respect of any Loan or Borrowing, shall refer to
the Rate by reference to which interest on such Loan or on the Loans comprising
such
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25
Borrowing is determined. For purposes hereof, "Rate" shall include the Adjusted
LIBO Rate and the Alternate Base Rate.
"Unencumbered Cash" shall mean cash owned and held by or on behalf of
the Borrower which is not subject to the Lien of another Person, it being agreed
that any such cash subject to any depositary bank set-off rights or any
depositary agreements with such bank shall be deemed "unencumbered" for purposes
of this Agreement.
"Withdrawal Liability" shall mean liability to a Multiemployer Plan as
a result of a complete or partial withdrawal from such Multiemployer Plan, as
such terms are defined in Part I of Subtitle E of Title IV of ERISA.
SECTION 1.012. Terms Generally. (a) The definitions in Section 1.01
shall apply equally to both the singular and plural forms of the terms defined.
Whenever the context may require, any pronoun shall include the corresponding
masculine, feminine and neuter forms. The words "include", "includes" and
"including" shall be deemed to be followed by the phrase "without limitation".
All references herein to Articles, Sections, Exhibits and Schedules shall be
deemed references to Articles and Sections of, and Exhibits and Schedules to,
this Agreement unless the context shall otherwise require. Except as otherwise
expressly provided herein, all terms of an accounting or financial nature shall
be construed in accordance with GAAP, as in effect from time to time; provided
that, if the Borrower notifies the Administrative Agent that the Borrower wishes
to amend any covenant in Article VII or any related definition to eliminate the
effect of any change in GAAP on the operation of such covenant (or if the
Administrative Agent notifies the Borrower that the Required Lenders wish to
amend Article VII or any related definition for such purpose), then the
Borrower's compliance with such covenant shall be determined on the basis of
GAAP in effect immediately before the relevant change in GAAP became effective,
until either such notice is withdrawn or such covenant is amended in a manner
satisfactory to the Borrower and the Required Lenders.
(b) For purposes of the calculation of the Borrowing Base, the
determination of compliance with this Agreement and the other Loan Documents,
including the financial covenants contained herein, the interpretation of the
defined terms used in such financial covenants and the preparation of the
financial statements of the Borrower and its Subsidiaries delivered to the
Lenders pursuant to this Agreement, Inventory of the Borrower and its
Subsidiaries shall be valued on a FIFO basis, computed and consolidated in
accordance with GAAP, as consistently applied.
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26
ARTICLE II. THE CREDITS
SECTION 1.021. Commitments. Subject to the terms and conditions and
relying upon the representations and warranties herein set forth, each Lender
agrees, severally and not jointly, to make Loans to the Borrower, at any time
and from time to time on or after the Closing Date and until the earlier of the
Maturity Date and the termination of the Commitment of such Lender in accordance
with the terms hereof, in an aggregate principal amount at any time outstanding
not to exceed, when added to such Lender's pro rata percentage, based upon its
Commitment, of the Letter of Credit Exposure at such time, the lesser of (a) the
Commitment set forth opposite its name in Schedule 2.01 hereto, as the same may
be reduced from time to time pursuant to Section 2.09 and (b) such Lender's pro
rata percentage, based upon its Commitment, of the Borrowing Base in effect at
such time.
Within the limits set forth in the preceding sentence, the Borrower
may borrow, pay or prepay and reborrow Loans on or after the Closing Date and
prior to the Maturity Date, subject to the terms, conditions and limitations set
forth herein.
SECTION 1.022. Loans. (a) Each Loan shall be made as part of a
Borrowing consisting of Loans made by the Lenders ratably in accordance with
their respective Commit ments; provided, however, that the failure of any
Lender to make any Loan shall not in itself relieve any other Lender of its
obligation to lend hereunder (it being understood, however, that no Lender shall
be responsible for the failure of any other Lender to make any Loan required to
be made by such other Lender). The Loans comprising each Borrowing shall be in
an aggregate principal amount which is (a) if an ABR Loan, an integral multiple
of $100,000 and not less than $200,000 and (b) if a Eurodollar Loan, an integral
multiple of $250,000 and not less than $500,000 (or an aggregate principal
amount equal to the remaining balance of the Commitments); provided, however,
that unless otherwise agreed in writing by all the Lenders, the Eurodollar Loans
made on any date must be in a minimum aggregate principal amount of $500,000.
(b) Each Borrowing shall be comprised entirely of ABR Loans or
Eurodollar Loans, as the Borrower may request pursuant to Section 2.03. Each
Lender may at its option fulfill its Commitment with respect to any Eurodollar
Loan by causing any domestic or foreign branch or Affiliate of such Lender to
make such Loan; provided that any exercise of such option shall not affect the
obligation of the Borrower to repay such Loan in accordance with the terms of
this Agreement and the applicable Note. Borrowings of more than one Type may be
outstanding at the same time; provided, however, that the Borrower shall not be
entitled to request any Borrowing which, if made, would result in an aggregate
of more than ten separate Eurodollar Loans of any Lender being outstanding
hereunder at any one time. For purposes of the foregoing, Loans
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27
having different Interest Periods, regardless of whether they commence on the
same date, shall be considered separate Loans.
(c) Subject to paragraph (e) below, each Lender shall make a Loan in
the amount of its pro rata portion, as determined under Section 2.14, of each
Borrowing hereunder on the proposed date thereof by wire transfer of immediately
available funds to the Administrative Agent in New York, New York, not later
than 2:00 P.M., New York City time, and the Administrative Agent shall by 3:00
p.m., New York City time, credit the amounts so received to the general deposit
account of the Borrower with the Administrative Agent or, if a Borrowing shall
not occur on such date because any condition precedent herein specified shall
not have been met, return the amounts so received to the respective Lenders.
Unless the Administrative Agent shall have received notice from a Lender prior
to the date of any Borrowing that such Lender will not make available to the
Administrative Agent such Lender's portion of such Borrowing, the Administrative
Agent may assume that such Lender has made such portion available to the
Administrative Agent on the date of such Borrowing in accordance with this
paragraph (c) and the Administrative Agent may, in reliance upon such
assumption, make available to the Borrower on such date a corresponding amount.
If and to the extent that such Lender shall not have made such portion available
to the Administrative Agent, such Lender and the Borrower severally agree to
repay to the Administrative Agent forthwith on demand such corresponding amount
together with interest thereon, for each day from the date such amount is made
available to the Borrower until the date such amount is repaid to the
Administrative Agent at (i) in the case of the Borrower the interest rate
applicable at the time to the Loans comprising such Borrowing and (ii) in the
case of such Lender, the Federal Funds Effective Rate. If such Lender shall
repay to the Administrative Agent such corresponding amount, such amount shall
constitute such Lender's Loan as part of such Borrowing for purposes of this
Agreement.
(d) Notwithstanding any other provision of this Agreement, the
Borrower shall not be entitled to request any Borrowing if the Interest Period
requested with respect thereto would end after the Maturity Date.
(e) The Borrower may refinance all or any part of any Borrowing with
a Borrowing of the same or a different Type, subject to the conditions and
limitations set forth in this Agreement. Any Borrowing or part thereof so
refinanced shall be deemed to be repaid or prepaid in accordance with Section
2.04 or 2.10, as applicable, with the proceeds of a new Borrowing, and the
proceeds of the new Borrowing, to the extent they do not exceed the principal
amount of the Borrowing being refinanced, shall not be paid by the Lenders to
the Administrative Agent or by the Administrative Agent to the Borrower pursuant
to paragraph (c) above.
SECTION 1.023. Notice of Borrowings. The Borrower shall give the
Administrative Agent written or by telecopy notice (or telephone notice promptly
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28
confirmed in writing or by telecopy) (a) in the case of a Eurodollar Borrowing,
not later than 12:00 noon, New York City time, three Business Days before a
proposed borrowing, and (b) in the case of an ABR Borrowing, not later than
12:00 noon, New York City time, on the day of a proposed borrowing. Such notice
shall be irrevocable and shall in each case refer to this Agreement and specify
(i) whether such Borrowing is to be a Eurodollar Borrowing or an ABR Borrowing;
(ii) the date of such Borrowing (which shall be a Business Day) and the amount
thereof; and (iii) if such Borrowing is to be a Eurodollar Borrowing, the
Interest Period with respect thereto. If no election as to the Type of Borrowing
is specified in any such notice, then the requested Borrowing shall be an ABR
Borrowing. If no Interest Period with respect to any Eurodollar Borrowing is
specified in any such notice, then the Borrower shall be deemed to have selected
an Interest Period of one month's duration. If the Borrower shall not have given
notice in accordance with this Section 2.03 of its election to refinance a
Borrowing prior to the end of the Interest Period in effect for such Borrowing,
then the Borrower shall (unless such Borrowing is repaid at the end of such
Interest Period) be deemed to have given notice of an election to refinance such
Borrowing with an ABR Borrowing. In order that each Lender may make a Loan
pursuant to the terms set forth in Section 2.02(c), the Administrative Agent
shall promptly advise the Lenders of any notice given pursuant to this Section
2.03 and of each Lender's portion of the requested Borrowing.
SECTION 1.024. Notes; Repayment of Loans. The Loans made by each
Lender shall at the Lender's request be evidenced by a Note, duly executed on
behalf of the Borrower, dated the Closing Date, in substantially the form
attached hereto as Exhibit A, with the blanks appropriately filled, payable to
the order of such Lender in a principal amount equal to such Lender's
Commitment. The outstanding principal balance of each Loan, as evidenced by
such a Note, shall be payable on the last day of the Interest Period applicable
to such Loan and on the Maturity Date. Each Note shall bear interest from the
date of the first borrowing hereunder on the outstanding principal balance
thereof as set forth in Section 2.06. Each Lender shall, and is hereby
authorized by the Borrower to, endorse on the schedule attached to each Note
delivered to such Lender (or on a continuation of such schedule attached to such
Note and made a part thereof), or otherwise to record in such Lender's internal
records, an appropriate notation evidencing the date and amount of each Loan
from such Lender, each payment and prepayment of principal of any such Loan,
each payment of interest on any such Loan and the other information provided for
on such schedule; provided, however, that the failure of any Lender to make
such a notation or any error therein shall not affect the obligation of the
Borrower to repay the Loans made by such Lender in accordance with the terms of
this Agreement and the applicable Notes.
SECTION 1.025. Fees. (a) The Borrower agrees to pay to each Lender,
through the Administrative Agent, on the last day of March, June, September and
December in each year, and on the date on which the Commitment (including
amounts available for Letters of Credit) of such Lender shall be terminated as
provided herein, a
<PAGE>
29
commitment fee (a "Commitment Fee") at a rate per annum equal to the Commitment
Fee Rate on the average daily unused amount of the Commitment (including unused
available amounts for Letters of Credit) of such Lender during the preceding
quarter (or shorter period commencing with the Closing Date or ending with the
Maturity Date or the date on which the Commitment of such Lender shall be
terminated). All Commitment Fees shall be computed on the basis of the actual
number of days elapsed in a year of 365 days. The Commitment Fee due to each
Lender shall commence to accrue on the date of this Agreement and shall cease to
accrue on the date on which the Commitment of such Lender shall be terminated as
provided herein.
(b) All Fees shall be paid on the dates due, in immediately available
funds, to the Administrative Agent for distribution, if and as appropriate,
among the Lenders. Once paid, none of the Fees shall be refundable under any
circumstances.
SECTION 1.026. Interest on Loans. (a) Subject to the provisions of
Section 2.07, the Loans comprising each ABR Borrowing shall bear interest
(computed on the basis of the actual number of days elapsed over a year of (i)
365 or 366 days, as the case may be, during any period in which the Alternate
Base Rate is based on the Prime Rate and (ii) 360 days during any period in
which the Alternate Base Rate is based on the Base CD Rate or the Federal Funds
Effective Rate) at a rate per annum equal to the Alternate Base Rate plus the
Applicable Margin.
(b) Subject to the provisions of Section 2.07, the Loans comprising
each Eurodollar Borrowing shall bear interest (computed on the basis of the
actual number of days elapsed over a year of 360 days) at a rate per annum equal
to the Adjusted LIBO Rate for the Interest Period in effect for such Borrowing
plus the Applicable Margin.
(c) Interest on each Loan shall be payable on the Interest Payment
Dates applicable to such Loan except as otherwise provided in this Agreement.
The applicable Alternate Base Rate or Adjusted LIBO Rate for each Interest
Period or day within an Interest Period, as the case may be, shall be determined
by the Administrative Agent, and such determination shall be conclusive absent
manifest error.
SECTION 1.027. Default Interest. If the Borrower shall default in
the payment of the principal of or interest on any Loan or any other amount
becoming due hereunder, by acceleration or otherwise, the Borrower shall on
demand from time to time pay interest, to the extent permitted by law, on such
defaulted amount up to (but not including) the date of actual payment (after as
well as before judgment) at a rate per annum (computed on the basis of the
actual number of days elapsed over a year of (i) 365 or 366 days, as the case
may be, during any period in which the Alternate Base Rate is based on the Prime
Rate and (ii) 360 days, during any period in which the Alternate base rate is
based on the Base CD rate or the Federal Funds Effective Rate) equal to the rate
at the time applicable to ABR Borrowings plus 2%.
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30
SECTION 1.028. Alternate Rate of Interest. In the event, and on each
occasion, that on the day two Business Days prior to the commencement of any
Interest Period for a Eurodollar Borrowing the Administrative Agent shall have
determined that dollar deposits in the principal amounts of the Loans comprising
such Borrowing are not generally available in the London interbank market, or
that the rates at which such dollar deposits are being offered will not
adequately and fairly reflect the cost to any Lender of making or maintaining
its Eurodollar Loan during such Interest Period, or that reasonable means do not
exist for ascertaining the Adjusted LIBO Rate, the Administrative Agent shall,
as soon as practicable thereafter, give written or telecopy notice of such
determination to the Borrower and the Lenders. In the event of any such
determination, any request by the Borrower for a Eurodollar Borrowing pursuant
to Section 2.03 shall, until the Administrative Agent shall have advised the
Borrower and the Lenders that the circumstances giving rise to such notice no
longer exist, be deemed to be a request for an ABR Borrowing. Each determination
by the Administrative Agent hereunder shall be conclusive absent manifest error.
SECTION 1.029. Termination, Reduction and Extension of Commitments.
(a) The Commitments shall be automatically terminated on the Maturity
Date.
(b) Upon at least three Business Days' prior irrevocable written or
telecopy notice to the Administrative Agent, the Borrower may at any time in
whole permanently terminate, or from time to time in part permanently reduce,
the Commitments; provided, however, that each partial reduction of the
Commitments shall be in an integral multiple of $500,000 and in a minimum
principal amount of $1,000,000; provided, further, that any prepayment pursuant
to this Section 2.09 shall be applied first to prepay the Loans then outstanding
and then to cash collateralize any Letter of Credit Exposure on terms reasonably
satisfactory to the Administrative Agent.
(c) Each reduction in the Commitments hereunder shall be made ratably
among the Lenders in accordance with their respective applicable Commitments.
The Borrower shall pay to the Administrative Agent for the account of the
Lenders, on the date of each termination or reduction, the Commitment Fees on
the amount of the Commitments so terminated or reduced and accrued through the
date of such termination or reduction.
(d) The Borrower may on any day not earlier than the day which is
sixty Business Days prior to each anniversary of the Closing Date nor later than
the day which is thirty Business Days prior to each anniversary of the Closing
Date request by notice to the Administrative Agent that the Maturity Date be
extended for an additional one-year period effective from the original Maturity
Date. Subject to paragraph (e) of this Section, the Maturity Date shall be so
extended provided that (i) no Default or Event of Default shall have occurred
and be continuing at such time, (ii) the Borrower shall have received
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31
the prior written consent of all of the Lenders for such extension and (iii)
after giving effect to any such extension, the Maturity Date shall not extend
beyond the date which is six months prior to the scheduled maturity of the
Senior Secured Notes. The Maturity Date may be so extended up to four times.
(e) If any Lender (the "Non-Consenting Lender") does not consent to
the request by the Borrower that the Maturity Date be extended pursuant to
paragraph (d) above, then the outstanding principal of the Loans of the Non-
Consenting Lender, accrued interest thereon, accrued fees and all other amounts
payable to it hereunder shall be payable to it on the original Maturity Date and
the Non-Consenting Lender shall cease to be a Lender under this Agreement as of
the original Maturity Date. The Borrower may, at its election, (i) offer one or
more of the Lenders the opportunity to assume all or a portion of the
Commitments of the Non-Consenting Lenders pursuant to paragraph (g) below and/or
(ii) with the consent of the Administrative Agent (which consent shall not be
unreasonably withheld), offer one or more additional banks, financial
institutions or other entities the opportunity to assume all or a portion of the
Commitments of the Non-Consenting Lenders pursuant to paragraph (f) below, in
each case effective on the original Maturity Date.
(f) Any additional bank, financial institution or other entity which
the Borrower selects to offer the right to assume a portion of the Commitments
of the Non-Consenting Lenders and which elects to become a party to this
Agreement and obtain a Commitment in an amount so offered and accepted by it
pursuant to Section 2.09(e)(ii) shall execute a New Lender Supplement with the
Borrower and the Administrative Agent, whereupon such bank, financial
institution or other entity shall become a Lender for all purposes and to the
same extent as if originally a party hereto and shall be bound by and entitled
to the benefits of this Agreement, and Schedule 2.01 shall be deemed to be
amended to add the name and Commitment of such new Lender.
(g) Any Lender which accepts an offer to it by the Borrower to
increase its Commitment pursuant to Section 2.09(e)(i) shall, in each case,
execute a Commitment Increase Supplement with the Borrower and the
Administrative Agent, whereupon such Lender shall be bound by and entitled to
the benefits of this Agreement with respect to the full amount of its Commitment
as so increased, and Schedule 2.01 shall be deemed to be amended to so increase
the Commitment of such Lender.
(h) No Lender shall have any obligation to increase its Commitment
pursuant to this Section 2.09 unless it agrees to do so in its sole discretion.
SECTION 2.10. Prepayment. (a) The Borrower shall have the right at
any time and from time to time to prepay any Borrowing, in whole or in part,
upon written (including by telecopy) notice (or telephone notice promptly
confirmed by written notice) to the Administrative Agent, which notice, in the
case of a prepayment of a
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32
Eurodollar Loan, shall be received by the Administrative Agent one Business Day
prior to such prepayment; provided, however, that each partial prepayment shall
be in an amount which is, if (a) an ABR Loan, an integral multiple of $100,000
and not less than $200,000 and (b) if a Eurodollar Loan, an integral multiple of
$250,000 and not less than $1,000,000.
(b) On the date of any termination or reduction of the Commitments
pursuant to Section 2.09, the Borrower shall pay or prepay so much of the
Borrowings as shall be necessary in order that the aggregate principal amount of
the Loans outstanding will not exceed the aggregate Commitments after giving
effect to such termination or reduction.
(c) Not later than the Business Day next succeeding any date on which
the sum of the aggregate principal amount of the outstanding Borrowings and the
aggregate Letter of Credit Exposure exceeds the then current Borrowing Base, the
Borrower shall prepay the Borrowings in such amount as shall be necessary so
that after giving effect to such prepayment there shall be no such excess.
(d) Each notice of prepayment shall specify the prepayment date, the
principal amount of each Borrowing (or portion thereof) to be prepaid, and the
Borrowing to be repaid, shall be irrevocable and shall commit the Borrower to
prepay such Borrowing by the amount stated therein on the date stated therein.
All prepayments under this Section 2.10 shall be subject to Section 2.13 but
otherwise without premium or penalty. All prepayments under this Section 2.10
shall be accompanied by accrued interest on the principal amount being prepaid
to the date of payment. Any prepayment pursuant to this Section 2.10 shall be
applied first to prepay the Loans then outstanding and then to cash
collateralize any Letter of Credit Exposure (such cash to be held in an
interest-bearing account) on terms reasonably satisfactory to the Administrative
Agent.
SECTION 2.11. Reserve Requirements; Change in Circumstances. (a)
Notwithstanding any other provision herein, if after November 23, 1993 any
change in applicable law or regulation or in the interpretation or
administration thereof by any governmental authority charged with the
interpretation or administration thereof (whether or not having the force of
law) shall change the basis of taxation of payments to any Lender of the
principal of or interest on any Eurodollar Loan made by such Lender or any fees
or other amounts payable hereunder (other than changes in respect of taxes
imposed on the overall net income of such Lender by the jurisdiction in which
such Lender has its principal office or by any political subdivision or taxing
authority therein), or shall impose, modify or deem applicable any reserve,
special deposit or similar requirement against assets of, deposits with or for
the account of or credit extended by such Lender (except any such reserve
requirement which is reflected in the Adjusted LIBO Rate) or shall impose on
such Lender or the London interbank market any other condition affecting this
Agreement or Eurodollar Loans made by such Lender, and the result of
<PAGE>
33
any of the foregoing shall be to increase the cost to such Lender of making or
maintaining any Eurodollar Loan or to reduce the amount of any sum received or
receivable by such Lender hereunder or under the Notes (whether of principal,
interest or otherwise) by an amount deemed by such Lender to be material, then
the Borrower will pay to such Lender upon demand such additional amount or
amounts as will compensate such Lender for such additional costs incurred or
reduction suffered. The Administrative Agent and each Lender agree to give
notice to the Borrower of any such change in law, regulation, interpretation or
administration with reasonable promptness after becoming actually aware thereof
and of the applicability thereof to the Transactions.
(b) If any Lender shall have determined that the applicability of any
law, rule, regulation or guideline adopted pursuant to or arising out of the
July 1988 report of the Basle Committee on Banking Regulations and Supervisory
Practices entitled "International Convergence of Capital Measurement and Capital
Standards", or the adoption after the date hereof of any other law, rule,
regulation or guideline regarding capital adequacy, or any change in any of the
foregoing or in the interpretation or administration of any of the foregoing by
any governmental authority, central lender or comparable agency charged with the
interpretation or administration thereof, or compliance by any Lender (or any
lending office of such Lender) or any Lender's holding company with any request
or directive regarding capital adequacy (whether or not having the force of law)
of any such authority, central lender or comparable agency, has or would have
the effect of reducing the rate of return on such Lender's capital or on the
capital of such Lender's holding company, if any, as a consequence of this
Agreement or the Loans made by such Lender pursuant hereto to a level below that
which such Lender or such Lender's holding company could have achieved but for
such adoption, change or compliance (taking into consideration such Lender's
policies and the policies of such Lender's holding company with respect to
capital adequacy) by an amount deemed by such Lender to be material, then from
time to time the Borrower shall pay to such Lender such additional amount or
amounts as will compensate such Lender or such Lender's holding company for any
such reduction suffered. The Administrative Agent and each Lender agree to give
notice to the Borrower of any such change in law, regulation, interpretation or
administration with reasonable promptness after becoming actually aware thereof
and of the applicability to the Transactions.
(c) A certificate of each Lender setting forth such amount or
amounts, supported by calculations in reasonable detail, as shall be necessary
to compensate such Lender or its holding company as specified in paragraph (a)
or (b) above, as the case may be, shall be delivered to the Borrower and shall
be conclusive absent manifest error. The Borrower shall pay each Lender the
amount shown as due on any such certificate delivered by it within 10 days after
its receipt of the same.
(d) Failure on the part of any Lender to demand compensation for any
increased costs or reduction in amounts received or receivable or reduction in
return on
<PAGE>
34
capital with respect to any period shall not constitute a waiver of such
Lender's right to demand such compensation with respect to such period or any
other period. The protection of this Section shall be available to each Lender
regardless of any possible contention of the invalidity or inapplicability of
the law, rule, regulation, guideline or other change or condition which shall
have occurred or been imposed.
SECTION 2.12. Change in Legality. (a) Notwithstanding any other
provision herein, if any change in any law or regulation or in the
interpretation thereof by any governmental authority charged with the
administration or interpretation thereof shall make it unlawful for any Lender
to make or maintain any Eurodollar Loan or to give effect to its obligations as
contemplated hereby with respect to any Eurodollar Loan, then, by written notice
to the Borrower and to the Administrative Agent, such Lender may:
(i) declare that Eurodollar Loans will not thereafter be made by such
Lender hereunder, whereupon any request by the Borrower for a Eurodollar
Borrowing shall, as to such Lender only, be deemed a request for an ABR
Loan unless such declaration shall be subsequently withdrawn; and
(ii) require that all outstanding Eurodollar Loans made by it be
converted to ABR Loans, in which event all such Eurodollar Loans shall be
automatically converted to ABR Loans as of the effective date of such
notice as provided in paragraph (b) below.
In the event any Lender shall exercise its rights under (i) or (ii) above, all
payments and prepayments of principal which would otherwise have been applied to
repay the Eurodollar Loans that would have been made by such Lender or the
converted Eurodollar Loans of such Lender shall instead be applied to repay the
ABR Loans made by such Lender in lieu of, or resulting from the conversion of,
such Eurodollar Loans.
(b) For purposes of this Section 2.12, a notice to the Borrower by
any Lender shall be effective as to each Eurodollar Loan, if lawful, on the last
day of the Interest Period currently applicable to such Eurodollar Loan; in all
other cases such notice shall be effective on the date of receipt by the
Borrower.
SECTION 2.13. Indemnity. The Borrower shall indemnify each Lender
against any loss or reasonable expense which such Lender may sustain or incur as
a consequence of (a) any failure by the Borrower to fulfill on the date of any
borrowing hereunder the applicable conditions set forth in Article V, (b) any
failure by the Borrower to borrow or to refinance, convert or continue any Loan
hereunder after irrevocable notice of such borrowing, refinancing, conversion or
continuation has been given pursuant to Section 2.03, (c) any payment,
prepayment or conversion of a Eurodollar Loan required by any other provision of
this Agreement or otherwise made on a date other than the last day of the
Interest Period applicable thereto, (d) any default in payment or prepayment of
<PAGE>
35
the principal amount of any Loan or any part thereof or interest accrued
thereon, as and when due and payable (at the due date thereof, by irrevocable
notice of prepayment or otherwise) or (e) the occurrence of any Event of
Default, including, in each such case, any loss or reasonable expense sustained
or incurred or to be sustained or incurred in liquidating or employing deposits
from third parties acquired to effect or maintain such Loan or any part thereof
as a Eurodollar Loan. Such loss or reasonable expense shall include an amount
equal to the excess, if any, as reasonably determined by such Lender, of (i) its
cost of obtaining the funds for the Loan being paid, prepaid, converted or not
borrowed, converted or continued (based on the Adjusted LIBO Rate applicable
thereto) for the period from the date of such payment, prepayment, conversion or
failure to borrow, convert or continue to the last day of the Interest Period
for such Loan (or, in the case of a failure to borrow, convert or continue, the
Interest Period for such Loan which would have commenced on the date of such
failure) over (ii) the amount of interest (as reasonably determined by such
Lender) that would be realized by such Lender in reemploying the funds so paid,
prepaid, converted or not borrowed, converted or continued for such period or
Interest Period, as the case may be. A certificate of any Lender setting forth
any amount or amounts, supported by calculations in reasonable detail, which
such Lender is entitled to receive pursuant to this Section shall be delivered
to the Borrower and shall be conclusive absent manifest error.
SECTION 2.14. Pro Rata Treatment. Except as required under Section
2.12, each Borrowing, each payment or prepayment of principal of any Borrowing,
each payment of interest on the Loans, each payment of the Commitment Fees, each
reduction of the Commitments and each refinancing of any Borrowing with,
conversion of any Borrowing to or continuation of any Borrowing as a Borrowing
of any Type shall be allocated pro rata among the Lenders in accordance with
their respective Commitments (or, if such Commitments shall have expired or been
terminated, in accordance with the respective principal amounts of their
outstanding Loans). Each Lender agrees that in computing such Lender's portion
of any Borrowing to be made hereunder, the Administrative Agent may, in its
discretion, round each Lender's percentage of such Borrowing, computed in
accordance with Section 2.01, to the next higher or lower whole dollar amount.
SECTION 2.15. Sharing of Setoffs. Each Lender agrees that if it
shall, through the exercise of a right of banker's lien, setoff or counterclaim
against the Borrower, or pursuant to a secured claim under Section 506 of Title
11 of the United States Code or other security or interest arising from, or in
lieu of, such secured claim, received by such Lender under any applicable
bankruptcy, insolvency or other similar law or otherwise, or by any other means,
obtain payment (voluntary or involuntary) in respect of any Loan or Loans as a
result of which the unpaid principal portion of its Loans shall be
proportionately less than the unpaid principal portion of the Loans of any other
Lender, it shall be deemed simultaneously to have purchased from such other
Lender at face value, and shall promptly pay to such other Lender the purchase
price for, a
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36
participation in the Loans of such other Lender, so that the aggregate unpaid
principal amount of the Loans and participation in Loans held by each Lender
shall be in the same proportion to the aggregate unpaid principal amount of all
Loans then outstanding as the principal amount of its Loans prior to such
exercise of banker's lien, setoff or counterclaim or other event referred to
above was to the principal amount of all Loans outstanding prior to such
exercise of banker's lien, setoff or counterclaim or other event; provided,
however, that, if any such purchase or purchases or adjustments shall be made
pursuant to this Section and the payment giving rise thereto shall thereafter be
recovered, such purchase or purchases or adjustments shall be rescinded to the
extent of such recovery and the purchase price or prices or adjustment restored
without interest. The Borrower expressly consents to the foregoing arrangements
and agrees that any Lender holding a participation in a Loan deemed to have been
so purchased may exercise any and all rights of banker's lien, setoff or
counterclaim with respect to any and all moneys owing by the Borrower to such
Lender by reason thereof as fully as if such Lender had made a Loan directly to
the Borrower in the amount of such participation.
SECTION 2.16. Payments. (a) The Borrower shall make each payment
(including principal of or interest on any Borrowing or any Fees or other
amounts) hereunder and under any other Loan Document not later than 12:00
(noon), New York City time, on the date when due in dollars to the
Administrative Agent at its offices at 270 Park Avenue, New York, New York, in
immediately available funds. Payments received by the Administrative Agent
after such time on such date shall be deemed to have been received on the next
succeeding Business Day (and, with respect to payments of principal, interest
thereon shall be payable at the then applicable rates).
(b) Whenever any payment (including principal of or interest on any
Borrowing or any Fees or other amounts provided for in this Agreement) hereunder
or under any other Loan Document shall become due, or otherwise would occur, on
a day that is not a Business Day, such payment may be made on the next
succeeding Business Day, and such extension of time shall in such case be
included in the computation of interest or Fees, if applicable.
SECTION 2.17. Taxes. (a) Any and all payments by the Borrower
hereunder shall be made, in accordance with Section 2.16, free and clear of and
without deduction for any and all present or future taxes, levies, imposts,
deductions, charges or withholdings, and all liabilities with respect thereto,
excluding taxes imposed on the Administrative Agent's or any Lender's income and
franchise taxes imposed on the Administrative Agent or any Lender by the United
States or any jurisdiction under the laws of which the Administrative Agent or
any such Lender is organized or any political subdivision thereof (all such
nonexcluded taxes, levies, imposts, deductions, charges, withholdings and
liabilities being hereinafter referred to as "Taxes"). If the Borrower shall be
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37
required by law to deduct any Taxes from or in respect of any sum payable
hereunder to the Lenders or the Administrative Agent (i) the sum payable shall
be increased by the amount necessary so that after making all required
deductions (including deductions applicable to additional sums payable under
this Section 2.17) such Lender or the Administrative Agent (as the case may be)
shall receive an amount equal to the sum it would have received had no such
deductions been made, (ii) the Borrower shall make such deductions and (iii) the
Borrower shall pay the full amount deducted to the relevant taxing authority or
other Governmental Authority in accordance with applicable law.
(b) In addition, the Borrower agrees to pay any present or future
stamp or documentary taxes or any other excise or property taxes, charges or
similar levies which arise from any payment made hereunder or from the
execution, delivery or registration of, or otherwise with respect to, this
Agreement or any other Loan Document (hereinafter referred to as "Other Taxes").
(c) The Borrower will indemnify each Lender and the Administrative
Agent for the full amount of Taxes and Other Taxes (including any Taxes or Other
Taxes imposed by any jurisdiction on amounts payable under this Section 2.17)
paid by such Lender or the Administrative Agent, as the case may be, and any
liability (including penalties, interest and expenses) arising therefrom or with
respect thereto, whether or not such Taxes or Other Taxes were correctly or
legally asserted. Such indemnification shall be made within 30 days after the
date any Lender or the Administrative Agent, as the case may be, makes written
demand therefor. If a Lender or the Administrative Agent shall become aware
that it is entitled to receive a refund in respect of Taxes or Other Taxes, it
shall promptly notify the Borrower of the availability of such refund and shall,
within 30 days after receipt of a request by the Borrower, apply for such refund
at the Borrower's expense. If any Lender or the Administrative Agent receives a
refund in respect of any Taxes or Other Taxes for which such Lender or the
Administrative Agent has received payment from the Borrower hereunder it shall
promptly notify the Borrower of such refund and shall, within 30 days after
receipt of a request by the Borrower (or promptly upon receipt, if the Borrower
has requested application for such refund pursuant hereto), repay such refund to
the Borrower without interest; provided that the Borrower, upon the request of
such Lender or the Administrative Agent, agrees to return such refund (plus
penalties, interest or other charges) to such Lender or the Administrative Agent
in the event such Lender or the Administrative Agent is required to repay such
refund.
(d) Within 30 days after the date of any payment of Taxes or Other
Taxes withheld by the Borrower in respect of any payment to any Lender or the
Administrative Agent, the Borrower will furnish to the Administrative Agent, at
its address referred to in Section 2.01, the original or a certified copy of a
receipt evidencing payment thereof.
(e) Without prejudice to the survival of any other agreement
contained herein, the agreements and obligations contained in this Section 2.17
shall survive the payment in full of principal and interest hereunder and the
termination of this Agreement.
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38
(f) Each Lender which is organized outside the United States shall
promptly notify the Borrower of any change in its funding office and upon
written request of the Borrower shall, prior to the immediately following due
date of any payment by the Borrower hereunder, deliver to the Borrower such
certificates, documents or other evidence, as required by the Code or Treasury
Regulations issued pursuant thereto, including Internal Revenue Service Form
4224 and 1001 and any other certificate or statement or exemption required by
Treasury Regulation Section 1.1441-1(a) or Section 1.1441-6(c) or any subsequent
version thereof, properly completed and duly executed by such Lender
establishing that such payment is (i) not subject to withholding under the Code
because such payment is effectively connected with the conduct by such Lender of
a trade or business in the United States or (ii) totally exempt from United
States tax under a provision of an applicable tax treaty. Unless the Borrower
and the Administrative Agent have received forms or other documents satisfactory
to them indicating that payments hereunder or under the Notes are not subject to
United States withholding tax or are subject to such tax at a rate reduced by an
applicable tax treaty, the Borrower or the Administrative Agent shall withhold
taxes from such payments at the applicable statutory rate in the case of
payments to or for any Lender or assignee organized under the laws of a
jurisdiction outside the United States.
(g) Any Lender claiming any additional amounts payable pursuant to
this Section 2.17 shall use reasonable efforts (consistent with legal and
regulatory restrictions) to file any certificate or document requested by the
Borrower or to change the jurisdiction of its applicable lending office if the
making of such a filing or change would avoid the need for or reduce the amount
of any such additional amounts which may thereafter accrue and would not, in the
sole determination of such Lender, be otherwise disadvantageous to such Lender.
ARTICLE III. LETTERS OF CREDIT
SECTION 1.031. Issuance of Letters of Credit; Lender Participants.
(a) Subject to the terms and conditions and relying upon the representations and
warranties herein set forth, the Issuing Bank agrees to issue and deliver to the
Borrower, at any time and from time to time, Letters of Credit in an aggregate
undrawn amount at any time outstanding not to exceed the lesser of $10,000,000
and the amount by which the lower of the Total Commitment and the then current
Borrowing Base exceeds the sum of (i) the aggregate principal amount of all
outstanding Loans and (ii) the Letter of Credit Exposure. Each Letter of Credit
shall be in a form mutually agreed upon by the Borrower and the Issuing Bank,
shall permit drawings upon the presentation of one or more sight drafts
(provided that no draft shall be payable prior to the second Business Day
following the date on which the Administrative Agent notifies the Lenders and
the applicable Borrower of the presentment thereof pursuant to Section 3.03) and
such other documents
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39
as shall be specified by such Borrower in the applicable notice delivered
pursuant to Section 3.02 and shall expire on a date not later than the date one
year from the date of issuance of such Letter of Credit less one day (provided,
that any such Letter of Credit may provide for automatic annual renewals of one
year unless a notice of non-renewal is given to the beneficiary thereof);
provided, however, that the Borrower shall not be entitled to request the
issuance of a Letter of Credit hereunder if after such issuance (x) such Letter
of Credit would expire after five Business Days prior to the Maturity Date, (y)
an aggregate of more than fifteen Letters of Credit would be outstanding at any
one time or (z) the sum of (i) the aggregate amount of all Loans to the
Borrower, and (ii) the Letter of Credit Exposure would exceed the lesser of the
Total Commitments and the Borrowing Base.
(b) By the issuance of a Letter of Credit and without any further
action on the part of the Issuing Bank or any of the Lenders in respect thereof,
the Issuing Bank hereby grants to each Lender and each Lender hereby agrees to
acquire from the Issuing Bank a participation in such Letter of Credit,
effective upon the issuance thereof, equal to such Lender's Commitment
Percentage of the amount of such Letter of Credit. In furtherance of the
foregoing, each Lender hereby absolutely and unconditionally agrees to pay to
the Issuing Bank, as and when required by Section 3.03, such Lender's Commitment
Percentage of each Letter of Credit Disbursement. Each Lender acknowledges and
agrees that its obligation to acquire a participation pursuant to this Section
3.01 in respect of each Letter of Credit is absolute and unconditional and shall
not be affected by any circumstance whatsoever, including without limitation the
occurrence and continuance of an Event of Default or any event which with notice
or lapse of time, or both, would constitute an Event of Default, and that each
such payment shall be made without any offset, abatement, withholding or
reduction whatsoever. This agreement to grant and acquire a participation is an
agreement between the Issuing Bank and the Lenders, and neither the Borrower nor
any beneficiary of a Letter of Credit shall be entitled to rely thereon. The
Borrower agrees that each Lender purchasing a participation from an Issuing Bank
pursuant to this Section 3.01 may exercise all its rights to payment against the
Borrower, including the right of setoff, with respect to such participation as
fully as if such Lender were the direct creditor of the Borrower in the amount
of such participation.
The Issuing Bank agrees with each Lender that it shall transfer to
such Lender without any offset, abatement, withholding or reduction whatsoever,
such Lender's propor tionate share of any payment of a reimbursement obligation
of the Borrower with respect to a Letter of Credit Disbursement including,
subject to the proviso below, interest payments made to the Issuing Bank
pursuant to Section 2.07 or Section 3.03 based upon the proportion that the
payment made by such Lender pursuant to Section 3.03 bears to the Issuing Bank
Payment Amount with respect to such Letter of Credit Disbursement; provided that
each Lender shall receive interest (as set forth in Section 2.07 and Section
3.03, as applicable) on its participation in a Letter of Credit
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40
Disbursement from the date on which the amount paid by such Lender pursuant to
Section 3.03 is received by the Issuing Bank and not from the date on which the
Issuing Bank makes such Letter of Credit Disbursement, unless such dates are the
same.
On the Closing Date, all Scheduled Letters of Credit that satisfy the
requirements of Section 3.01(a) shall be deemed to have been issued hereunder on
such date for all purposes hereof, notwithstanding the requirements of the
following Sections of this Article III; provided, however, that the Borrower and
the Issuing Bank shall prepare a schedule of all such Scheduled Letters of
Credit and deliver such schedule to the Administrative Agent and other Lenders
promptly following the Closing Date.
SECTION 1.032. Request for Issuance. The Borrower shall give the
Issuing Bank written or telex (or telephonic, promptly confirmed in writing)
notice not later than 12:00 noon, New York City time, two Business Days before
any proposed issuance of a Letter of Credit. Each such notice shall refer to
this Agreement and shall specify (a) the date on which such Letter of Credit is
to be issued (which shall be a Business Day) and the principal amount thereof,
(b) the name and address of the beneficiary, (c) whether such Letter of Credit
shall permit a single drawing or multiple drawings, (d) the form of the draft
and any other documents required to be presented at the time of any drawing
(including the exact wording of such documents or copies thereof) and (e) the
expiration date of such Letter of Credit. The Administrative Agent shall
promptly notify each Lender of any notice given by the Borrower pursuant to this
Section 3.02 and of each Lender's portion of the requested Letter of Credit.
SECTION 1.033. Payment; Reimbursement. The Issuing Bank shall
review each draft and any accompanying documents presented under a Letter of
Credit and shall notify each Lender of any such presentment. Promptly after it
shall have ascertained that any draft and any accompanying documents presented
under a Letter of Credit appear on their face to be in substantial conformity
with the terms and conditions of such Letter of Credit, the Issuing Bank shall
give telephonic or telecopy notice to the Borrower of the receipt and amount of
such draft and the date on which payment thereon will be made, and the Lenders
shall, by 12:00 noon, New York City time on the date such payment is to be made,
pay the amounts required to the Issuing Bank in New York, New York in
immediately available funds, and the Issuing Bank, not later than 3:00 p.m., New
York City time on such day, shall make the appropriate payment to the
beneficiary. If the Lenders shall pay any draft presented under a Letter of
Credit, then the Issuing Bank, on behalf of the Lenders, shall charge the
general deposit account of the Borrower with the Issuing Bank for the amount
thereof, together with the Issuing Bank's customary overdraft fee in the event
the funds available in such account shall not be sufficient to reimburse the
Lenders for such payment and such Borrower shall not otherwise have discharged
such reimbursement obligation by 10:00 a.m., New York City time, on the date of
such payment. The amount of any drawing under a Letter of Credit for which the
Lenders shall not have been reimbursed as provided in the preceding sentence
shall be
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41
paid by the Borrower to the Issuing Bank, for the account of the Lenders, no
later than 12:00 noon on the date of such drawing. If the Lenders have not been
reimbursed with respect to such drawing as provided above, such Borrower shall
pay to the Issuing Bank, for the account of the Lenders, the amount of the
drawing together with interest on such amount at a rate per annum (computed on
the basis of the actual number of days elapsed over a year of 365 days) equal to
the interest rate at the time applicable to ABR Borrowings plus 2%. The
obligations of the Borrower under this Section 3.03 shall be absolute,
unconditional and irrevocable and shall be satisfied strictly in accordance with
their terms, irrespective of:
(a) any lack of validity or enforceability of any Letter of Credit;
(b) the existence of any claim, setoff, defense or other right which
any Borrower or any other person may at any time have against the
beneficiary under any Letter of Credit, the Issuing Bank or any Lender or
any other person in connection with this Agreement or any other
transaction;
(c) any draft or other document presented under a Letter of Credit
proving to be forged, fraudulent, invalid or insufficient in any respect or
any statement therein being untrue or inaccurate in any respect;
(d) payment by the Issuing Bank or any Lender under a Letter of Credit
against presentation of a draft or other document which does not comply
with the terms of such Letter of Credit; and
(e) any other circumstance or event whatsoever, whether or not similar
to any of the foregoing.
Without limiting the generality of the foregoing, but subject to the
next sentence, it is expressly understood and agreed that the absolute and
unconditional obligation of the Borrower hereunder to reimburse Letter of Credit
disbursements will not be excused by the gross negligence or wilful misconduct
of the Issuing Bank. However, the foregoing shall not be construed to excuse
the Issuing Bank from liability to the Borrower to the extent of any direct
damages (as opposed to consequential damages, claims in respect of which are
hereby waived by the Borrower to the extent permitted by applicable law)
suffered by the Borrower that are caused by the Issuing Bank's gross negligence
or wilful misconduct in determining whether drafts or other documents presented
under a Letter of Credit comply with the terms thereof. It is understood that
in making any payment under a Letter of Credit (i) the Issuing Bank's and any
Lender's exclusive reliance on the documents presented to it under such Letter
of Credit as to any and all matters set forth therein, including, without
limitation, reliance on the amount of any draft presented under such Letter of
Credit, whether or not the amount due to the beneficiary equals the amount of
such draft and whether or not any document presented
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42
pursuant to such Letter of Credit proves to be insufficient in any respect, if
such document on its face appears to be in order, and whether or not any other
statement or any other document presented pursuant to such Letter of Credit
proves to be forged or invalid or any statement therein proves to be inaccurate
or untrue in any respect whatsoever and (ii) any noncompliance in any immaterial
respect of the documents presented under a Letter of Credit with the terms
thereof shall, in each case, not be deemed willful misconduct or gross
negligence of the Issuing Bank or any Lender. The Issuing Bank shall not be
liable for any error, omission, interruption or delay in transmission, dispatch
or delivery of any message or advice, however transmitted, in connection with
any Letter of Credit, except for errors or omissions caused by the Issuing
Bank's gross negligence or willful misconduct.
SECTION 1.034. Payments in Respect of Increased Costs. (a)
Notwithstanding any other provision herein, if after the date of this Agreement
any change in applicable law or regulation or in the interpretation or
administration thereof by any governmental authority charged with the
interpretation or administration thereof (whether or not having the force of
law) or any change in generally accepted accounting principles or regulatory
accounting principles applicable to the Issuing Bank or any Lender shall (a)
impose, modify or make applicable to the Issuing Bank or any Lender any reserve,
special deposit or similar require ment with respect to its obligations under
this Article III or the Letters of Credit, (b) impose on the Issuing Bank or any
Lender any other condition with respect to its obligations under this Article
III or the Letters of Credit, or (c) subject the Issuing Bank or any Lender to
any tax (other than (x) taxes imposed on the overall net income of the Issuing
Bank or such Lender and (y) franchise taxes imposed on the Issuing Bank or such
Lender, in either case by the country or other jurisdiction in which the Issuing
Bank or such Lender has its principal office or lending office or by any
political subdivision or taxing authority of either thereof), charge, fee,
deduction or withholding of any kind whatsoever, and the result of any of the
foregoing shall be to increase the cost to the Issuing Bank or such Lender of
maintaining any Letter of Credit or making any payment under a Letter of Credit
or this Article III or to reduce the amount of principal, interest or any fee or
compensation receivable by the Issuing Bank or such Lender in respect of this
Article III or any Letter of Credit, then such additional amount or amounts as
will compensate the Issuing Bank or such Lender for such additional costs or
reduction shall be paid to the Issuing Bank or such Lender by the Borrowers upon
demand. Each Lender agrees to give notice to the Borrower of any such change in
law, regulation, interpretation or administration with reasonable promptness
after becoming actually aware thereof and of the applicability thereof to the
Transactions.
(b) If, after the date of this Agreement, any Lender shall have
determined that the adoption of any applicable law, rule, regulation or
guideline regarding capital adequacy, or any change therein, or any change in
the interpretation or administration thereof by any governmental authority,
central lender or comparable agency charged with the interpretation or
administration thereof, or compliance by any Lender (or its lending
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43
office) with any request or directive regarding capital adequacy (whether or not
having the force of law) or any such authority, central lender or comparable
agency, has or would have the effect of reducing the rate of return on such
Lender's capital as a consequence of its obligations hereunder to a level below
that which such Lender could have achieved but for such adoption, change or
compliance (taking into consideration such Lender's policies with respect to
capital adequacy) then from time to time, each Borrower shall pay to such Lender
such additional amount or amounts as will compensate the Issuing Bank or such
Lender for such reduction. Each Lender agrees to give notice to the Borrower of
any adoption of, change in, or change in interpretation or administration of any
such law, rule, regulation or guideline with reasonable promptness after
becoming actually aware thereof and of the applicability thereof to the
Transactions.
(c) A certificate of the Issuing Bank or a Lender setting forth such
amount or amounts, supported by calculations in reasonable detail, as shall be
necessary to compensate the Issuing Bank or such Lender as specified in
paragraphs (a) and (b) above shall be delivered to the Borrower and shall be
conclusive absent manifest error. The Borrower shall pay the Issuing Bank or
such Lender the amount shown as due on any such certificate within 10 Business
Days after its receipt of the same. The protection of this Section 3.04 shall
be available to the Issuing Bank and each Lender regardless of any possible
contention of the invalidity or inapplicability of any law, regulation or other
condition which shall give rise to any demand by the Issuing Bank or any Lender
for compensation.
(d) Failure on the part of any Lender or the Issuing Bank to demand
compensation for any increased costs, reduction in amounts received or
receivable with respect to any Interest Period or reduction in the rate of
return earned on such Lender's capital, shall not constitute a waiver of the
Administrative Agent's or such Lender's rights to demand compensation for any
increased costs or reduction in amounts received or receivable or reduction in
rate of return. The protection under this Section 3.04 shall be available to
each Lender or the Issuing Bank regardless of any possible contention of the
invalidity or inapplicability of any law, regulation or other condition which
shall give rise to any demand by such Lender or the Issuing Bank for
compensation.
SECTION 1.035. Fees. (a) At the time each Letter of Credit is
issued, the Borrower shall pay to the Issuing Bank, in immediately available
funds, the Issuing Bank's customary fees and expenses in respect of the
issuance, negotiation, transfer and payment of such Letter of Credit.
(b) The Borrower agrees to pay (i) each Lender, through the Issuing
Bank, on the last day of each March, June, September and December and on the
Maturity Date, a per annum fee equal to (x) with respect to Letter of Credit
Nos. H368846, T231728 and T245256 (the sum of the undrawn amount of which
Letters of Credit plus the amount of all unreimbursed drawings under which
Letter of Credit shall not exceed $1,800,000), 3/4
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44
of 1% per annum on such Lender's portion of the face amount of such Letter of
Credit so long as it remains outstanding, and (y) with respect to all other
Letters of Credit, the Applicable Margin in effect on each date for Eurodollar
Loans on such Lender's portion of the face amount of the aggregate outstanding
Letters of Credit from time to time during the quarter (or shorter period
commencing with the Closing Date or ending with the Maturity Date) ending on
such date, and (ii) the Issuing Bank, on the last day of each March, June,
September and December and on the Maturity Date a fee of 1/8 of 1% per annum on
the face amount of each Letter of Credit outstanding from time to time during
the quarter (or shorter period commencing with the Closing Date or ending with
the Maturity Date) and ending on such date. All fees under this paragraph (b)
shall be computed on the basis of the actual number of days elapsed in a year of
365 days.
ARTICLE IV. REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to each of the Lenders that:
SECTION 1.041. Organization; Powers. The Borrower and each
Subsidiary (a) is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization, (b) has all
requisite power and authority to own its property and assets and to carry on its
business as now conducted, (c) is qualified to do business in every jurisdiction
where such qualification is required, except where the failure so to qualify
would not result in a Material Adverse Effect, and (d) in the case of each Loan
Party, has the corporate power and authority to execute, deliver and perform its
obligations under each of the Loan Documents and each other agreement or
instrument contemplated thereby to which it is or will be a party and to borrow
hereunder.
SECTION 1.042. Authorization. The execution, delivery and
performance by each Loan Party of each of the Loan Documents and the borrowings
hereunder (a) have been duly authorized by all requisite corporate and, if
required, stockholder action and (b) will not (i) violate (A) any provision of
law, statute, rule or regulation, or of the certificate or articles of
incorporation or other constitutive documents or by-laws of the Borrower or any
Subsidiary, (B) any order of any Governmental Authority which is binding upon
the Borrower or any Subsidiary or (C) any provision of the Senior Secured Note
Indenture or any other indenture, agreement or instrument to which the Borrower
or any Subsidiary is a party or by which any of them or any of their property is
or may be bound, (ii) be in conflict with, result in a breach of or constitute
(alone or with notice or lapse of time or both) a default under any indenture,
agreement or other instrument or (iii) result in the creation or imposition of
any Lien upon any property or assets of the Borrower or any Subsidiary other
than in favor of the Collateral Agent for the benefit of the Lenders.
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45
SECTION 1.043. Enforceability. This Agreement has been duly executed
and delivered by the Borrower and constitutes, and each other Loan Document when
executed and delivered by each Loan Party party thereto will constitute, a
legal, valid and binding obligation of such Loan Party enforceable against such
Loan Party in accordance with its terms, subject to the effect of any applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors' rights generally.
SECTION 1.044. Governmental Approvals. No action, consent or
approval of, registration or filing with or any other action by any Governmental
Authority or any other person, including any material permits, consents and
filings required in connection with the Borrower's construction and expansion
plans, other than filings required to perfect the security interests of the
Collateral Agent on behalf of the Lenders, is or will be required in connection
with the Transactions, except such as have been made or obtained and are in full
force and effect and except as listed on Schedule 4.04.
SECTION 1.045. Financial Statements. (a) The Borrower has
heretofore furnished to the Lenders its consolidated and consolidating balance
sheets and statements of income and changes in cash flows (i) as of and for the
fiscal year ended September 30, 1996 and 1997 audited by and accompanied by the
opinion of Arthur Andersen LLP, independent public accountants, and (ii) as of
and for the fiscal quarters and the portions of the fiscal year ended December
31, 1997 and March 31, 1998 certified by a Financial Officer. Such financial
statements present fairly the financial condition and results of operations of
the Borrower and its consolidated subsidiaries as of such dates and for such
periods.
(b) The Borrower has hereto furnished to the Lenders its pro forma
consolidated balance sheet as of March 31, 1998, giving pro forma effect to the
Transactions contemplated to occur on or prior to the Closing Date and the
issuance of the Senior Secured Notes.
(c) Such balance sheets and the notes thereto disclose all material
liabilities, direct or contingent, of the Borrower and its consolidated
subsidiaries as of the dates thereof. Such financial statements were prepared
in accordance with GAAP applied on a consistent basis subject to normal year-end
adjustments.
SECTION 1.046. No Material Adverse Change. There has been no
material adverse change in the business, assets, operations or financial
condition of the Borrower and the Recourse Subsidiaries, taken as a whole, since
September 30, 1997.
SECTION 1.047. Title to Properties; Possession Under Leases. (a)
The Borrower and each of the Recourse Subsidiaries has good and marketable title
to, or valid leasehold interests in, all its material properties and assets,
except for minor defects in title that do not interfere with its ability to
conduct its business as currently conducted or
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46
to utilize such properties and assets for their intended purposes and except for
such properties as are no longer used or useful in the conduct of their
businesses or as have been disposed of in the ordinary course of business. All
such material properties and assets are free and clear of Liens, other than
Liens expressly permitted by Section 7.02.
(b) The Borrower and each of the Recourse Subsidiaries has complied
with all material obligations under all material leases to which it is a party
and all such leases are in full force and effect. The Borrower and each of the
Recourse Subsidiaries enjoys peaceful and undisturbed possession under all such
material leases.
SECTION 1.048. Subsidiaries. (a) As of the Closing Date, the only
Subsidiaries are Bayou (Tennessee) and River Road Realty.
(b) On and as of the Closing Date the only assets of Bayou
(Tennessee) which constitute Collateral are located in Tennessee, Louisiana and
Illinois.
(c) On and as of the Closing Date, River Road Realty has assets
consisting of certain pipeline and land in La Place, Louisiana and land in
Loudon County, Tennessee.
SECTION 1.049. Litigation; Compliance with Laws. (a) Except as set
forth in Schedule 4.09, there are not any actions, suits, proceedings or
investigations at law or in equity or by or before any Governmental Authority
now pending or, to the knowledge of the Borrower, threatened against or
affecting the Borrower or any Subsidiary or any business, property or rights of
any such person (i) which involve any Loan Document or the Transactions or (ii)
which, if adversely determined, could, individually or in the aggregate,
reasonably be expected to result in a Material Adverse Effect; none of the
matters set forth on Schedule 4.09, individually or in the aggregate, could
reasonably be expected to result in a Material Adverse Effect.
(b) Neither the Borrower nor any of the Subsidiaries is in violation
of any law, rule or regulation, or in default with respect to any judgment,
writ, injunction or decree of any Governmental Authority, where such violation
or default, individually or in the aggregate, could reasonably be expected to
result in a Material Adverse Effect.
SECTION 4.10. Agreements. (a) Neither the Borrower nor any of the
Subsidiaries is a party to any agreement or instrument or subject to any
corporate restriction that has resulted or could reasonably be expected to
result in a Material Adverse Effect.
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47
(b) Neither the Borrower nor any of its Subsidiaries is in default in
any manner under any provision of any indenture or other agreement or instrument
evidencing Indebtedness, or any other material agreement or instrument to which
it is a party or by which it or any of its properties or assets are or may be
bound, where such default could reasonably be expected to result in a Material
Adverse Effect.
SECTION 4.11. Federal Reserve Regulations. (a) Neither the Borrower
nor any of the Subsidiaries is engaged principally, or as one of its important
activities, in the business of extending credit for the purpose of purchasing or
carrying Margin Stock.
(b) No part of the proceeds of any Loan will be used, whether
directly or indirectly, and whether immediately, incidentally or ultimately, (i)
to purchase or carry Margin Stock or to extend credit to others for the purpose
of purchasing or carrying Margin Stock or to refund indebtedness originally
incurred for such purpose, or (ii) for any purpose which entails a violation of,
or which is inconsistent with, the provisions of the Regulations of the Board,
including Regulations T, U or X.
SECTION 4.12. Investment Company Act; Public Utility Holding Company
Act. Neither the Borrower nor any Subsidiary is (a) an "investment company" as
defined in, or subject to regulation under, the Investment Company Act of 1940
or (b) a "holding company" as defined in, or subject to regulation under, the
Public Utility Holding Company Act of 1935.
SECTION 4.13. Use of Proceeds. The Borrower will use the proceeds of
the Loans (i) to refinance the Original Credit Agreement and (ii) for general
corporate purposes in the ordinary course of business (including working capital
and Acquisition Expenditures and Capital Expenditures permitted hereunder).
SECTION 4.14. Tax Returns. The Borrower and each Subsidiary has
filed or caused to be filed all Federal, state and local tax returns required to
have been filed by it and has paid or caused to be paid all taxes, including
without limitation, franchise taxes, shown to be due and payable on such returns
or on any assessments received by it, except taxes that are being contested in
accordance with Section 6.03.
SECTION 4.15. No Material Misstatements. No written information,
report, financial statement, exhibit or schedule furnished by or on behalf of
the Borrower to the Administrative Agent or any Lender in connection with the
negotiation of any Loan Document or included therein or delivered pursuant
thereto contained, contains or will contain any material misstatement of fact or
omitted, omits or will omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were, are
or will be made, not misleading.
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48
SECTION 4.16. Employee Benefit Plans. Except as set forth in
Schedule 4.16 (which failure to file would not result in liabilities in excess
of $250,000), the Borrower and each of its ERISA Affiliates is in compliance in
all material respects with the applicable provisions of ERISA and the
regulations and published interpretations thereunder. No Reportable Event has
occurred as to which the Borrower or any ERISA Affiliate was required to file a
report with the PBGC, and the present value of all benefit liabilities under
each Plan (based on those assumptions used to fund such Plan) did not, as of the
last annual valuation date applicable thereto, exceed by more than $1,000,000
the value of the assets of such Plan. Neither the Borrower nor any ERISA
Affiliate has incurred any Withdrawal Liability that could result in a Material
Adverse Effect. Neither the Borrower nor any ERISA Affiliate has received any
notification that any Multiemployer Plan is in reorganization or has been
terminated within the meaning of Title IV of ERISA, and no Multiemployer Plan is
reasonably expected to be in reorganization or to be terminated where such
reorganization or termination has resulted or could reasonably be expected to
result, through increases in the contributions required to be made to such Plan
or otherwise, in a Material Adverse Effect.
SECTION 4.17. Environmental and Safety Matters. The Borrower and
each Subsidiary complies, and, except with respect to such matters that gave
rise to those actions, suits, proceedings or investigations set forth in
Schedule 4.09 and that are also set forth on Schedule 4.17(a), has complied, in
all material respects, with all applicable foreign, Federal, state, local and
other statutes, ordinances, orders, judgments, rulings and regulations relating
to environmental pollution or to environmental regulation or control or to
employee health or safety (collectively, "Environmental Laws"). Neither the
Borrower nor any Subsidiary has received notice of any failure so to comply
which alone or together with any other such notice could reasonably be expected
to result in a Material Adverse Effect. The Borrower and its Subsidiaries
reasonably believe that they will be able to continue to comply with all
applicable Environmental Laws, and renew or obtain all permits necessary under
the Environmental Laws, except for such compliance or permits the absence of
which, individually or in the aggregate, could not reasonably be expected to
result in a Material Adverse Effect. The Borrower's and the Subsidiaries' plants
do not manage any hazardous wastes, hazardous substances, hazardous materials,
toxic substances or toxic pollutants, as those terms are used in the Resource
Conservation and Recovery Act, the Comprehensive Environmental Response
Compensation and Liability Act, the Hazardous Materials Transportation Act, the
Toxic Substance Control Act, the Clean Air Act, the Clean Water Act or any other
Environmental Law in a manner that could reasonably be expected to result,
individually or together with other such management, in a Material Adverse
Effect. Neither the Borrower nor any Subsidiary has assumed, by contract or, to
the best of its knowledge, by operation of law, any liability, including
contingent liability, under any Environmental Law, except as set forth on
Schedule 4.17(b). The Borrower is aware of no events, conditions or
circumstances involving environmental pollution or contamination or employee
health or safety that could reasonably be expected to result in a Material
Adverse Effect.
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49
SECTION 4.18. Security Agreement. The security interests created in
favor of the Collateral Agent for the benefit of the Lenders under the Security
Agreement constitute a first priority perfected security interest in the
Collateral (as defined in the Security Agreement).
SECTION 4.19. Solvency. Each Loan Party is, and after giving effect
to the Transactions and the incurrence of all Indebtedness and obligations being
incurred in connection herewith and therewith will be and will continue to be,
Solvent.
SECTION 4.20. Labor Matters. There are no strikes pending or
threatened against the Borrower or any of its Subsidiaries. The hours worked
and payments made to the Borrower or any of its Subsidiaries have not been in
violation in any material respect of the Fair Labor Standards Act or any other
applicable law dealing with such matters. All material payments due from the
Borrower or any of its Subsidiaries or for which any claim may be made against
the Borrower or any of its Subsidiaries, on account of wages and employee health
and welfare insurance and other benefits have been paid or accrued as a
liability on the books of the Borrower or such Subsidiary to the extent required
by GAAP. The consummation of the Transactions will not give rise to a right of
termination or right of renegotiation on the part of any union under any
collective bargaining agreement to which the Borrower or any of its Subsidiaries
(or any predecessor) is a party or by which the Borrower or any Subsidiary (or
any predecessor) is bound.
SECTION 4.21. Intellectual Property. Each of the Borrower and its
Subsidiaries owns, or is licensed to use, all trademarks, tradenames,
copyrights, technology, know-how and processes necessary for the conduct of its
business as currently conducted except for those the failure to own or license
which could not have a Material Adverse Effect (the "Intellectual Property").
No claim has been asserted and is pending by any Person challenging or
questioning the use of any such Intellectual Property or the validity or
effectiveness of any such Intellectual Property, nor does the Borrower know of
any valid basis for any such claim. The use of such Intellectual Property by the
Borrower and its Subsidiaries does not infringe on the rights of any Person,
except for such claims and infringements that, in the aggregate, do not have a
Material Adverse Effect.
SECTION 4.22. Year 2000 Compliance. Any reprogramming required to
permit the proper functioning, in and following the year 2000, of (i) the
Borrower's or its Subsidiaries' computer systems and (ii) equipment containing
embedded microchips (including systems and equipment supplied by others or with
which the Borrower's or its Subsidiaries' systems interface) and the testing of
all such systems and equipment, as so reprogrammed, will be completed by June
30, 1999. The cost to the Borrower and its Subsidiaries of such reprogramming
and testing and of the reasonably foreseeable consequences of year 2000 to the
Borrower (including, without limitation,
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50
reprogramming errors and the failure of others' systems or equipment) will not
result in an Event of Default or a Material Adverse Effect. Except for such of
the reprogramming referred to in the preceding sentence as may be necessary, the
computer and management information systems of the Borrower and its Subsidiaries
are and, with ordinary course upgrading and maintenance, will continue for the
term of this Agreement to be, sufficient to permit the Borrower and its
Subsidiaries to conduct their business without a Material Adverse Effect.
ARTICLE V. CONDITIONS OF LENDING
The obligations of the Lenders to make Loans and to issue Letters of
Credit hereunder are subject to the satisfaction of the following conditions:
SECTION 1.051. All Borrowings. On the date of each Borrowing,
including each Borrowing in which Loans are refinanced with new Loans as
contemplated by Section 2.02(e):
(a) The Administrative Agent shall have received a notice of such
borrowing as required by Section 2.03.
(b) The representations and warranties set forth in Article IV hereof
shall be true and correct in all material respects on and as of the date of
such Borrowing with the same effect as though made on and as of such date,
except to the extent such representations and warranties expressly relate
to an earlier date.
(c) Each Loan Party shall be in compliance with all the terms and
provisions set forth herein and in each other Loan Document on its part to
be observed or performed, and at the time of and immediately after such
Borrowing no Event of Default or Default shall have occurred and be
continuing.
(d) At the time of such Borrowing the Borrower shall deliver to the
Administrative Agent (i) a certificate dated the date of such Borrowing and
signed by a Financial Officer of the Borrower, confirming (A) compliance
with the conditions precedent set forth in paragraphs (b) and (c) of this
Section 5.01; and (B) to the best knowledge of the Borrower after due
inquiry, that the Borrowing Base on such date is equal to or greater than
the sum of (x) the amount of the Loans to be made on such date, (y) the
aggregate principal amount of Loans then outstanding and (z) the Letter of
Credit Exposure on such date (the sum of (x), (y) and (z) being herein
referred to as the "Aggregate Amount") and (ii) in the event that it shall
not have been delivered previously to the Administrative Agent, a Borrowing
Base Certificate computing the Borrowing Base as of the most recent
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51
Determination Date (and the Borrowing Base as of such Determination Date
shall be equal to or greater than the Aggregate Amount).
SECTION 1.052. First Borrowing. On the Closing Date:
(a) The Administrative Agent shall have received the favorable
written opinion of Jones, Walker, Waechter, Poitevent, Carrere & Denegre,
LLP, special Louisiana counsel, dated the Closing Date and addressed to the
Lenders, in the form of Exhibit D hereto and any such other legal opinions
as may be reasonably requested by the Administrative Agent.
(b) All legal matters incident to this Agreement and the borrowings
hereunder shall be satisfactory to the Lenders and their counsel.
(c) The Administrative Agent shall have received (i) a copy of the
certificate or articles of incorporation, including all amendments thereto,
of each Loan Party, certified as of a recent date by the Secretary of State
of the state of its organization, and a certificate as to the good standing
of each Loan Party as of a recent date, from such Secretary of State; (ii)
a certificate of the Secretary or Assistant Secretary of each Loan Party
dated the Closing Date and certifying (A) that attached thereto is a true
and complete copy of the by-laws of such Loan Party as in effect on the
Closing Date and at all times since a date prior to the date of the
resolutions described in clause (B) below, (B) that attached thereto is a
true and complete copy of resolutions duly adopted by the Board of
Directors of such Loan Party authorizing the execution, delivery and
performance of the Loan Documents to which it is a party and the borrowings
under such Loan Documents, and that such resolutions have not been
modified, rescinded or amended and are in full force and effect, (C) that
the certificate or articles of incorporation of such Loan Party have not
been amended since the date of the last amendment thereto shown on the
certificate of good standing furnished pursuant to clause (i) above, and
(D) as to the incumbency and specimen signature of each officer or
representative executing any Loan Document or any other document delivered
in connection herewith on behalf of such Loan Party; (iii) a certificate of
another officer as to the incumbency and specimen signature of the
Secretary or Assistant Secretary executing the certificate pursuant to (ii)
above; and (iv) such other documents as any Lender or its respective
counsel may reasonably request.
(d) The Administrative Agent shall have received a certificate, dated
the Closing Date and signed by a Financial Officer of the Borrower,
confirming compliance with the conditions precedent set forth in paragraphs
(b) and (c) of Section 5.01.
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52
(e) All Loan Documents shall have been duly executed and delivered by
the parties thereto and shall be in full force and effect.
(f) The Lenders shall have received from the Borrower all financing
statements and other filings necessary to create a first priority perfected
security interest in the Collateral, which financing statements and other
filings shall be fully executed by a duly authorized representative of the
Borrower or the other relevant Loan Party and in a form immediately
acceptable to all necessary filing offices, and upon filing with such
offices, together with the payment of all fees and taxes in connection
therewith, shall create such a perfected security interest.
(g) On the Closing Date, all Loans and other amounts outstanding
under the Original Credit Agreement shall be repaid in full and the
Original Credit Agreement shall be amended and restated hereby; provided
that Scheduled Letters of Credit shall remain outstanding as contemplated
by Section 3.01.
(h) On the Closing Date, all Loans and other amounts outstanding
under the Term Loan Agreement shall be repaid in full, the Term Loan
Agreement shall be terminated and all collateral security provided in
respect of the Term Loan Agreement shall be released.
(i) On the Closing Date, all notes and other amounts outstanding
under the First Mortgage Indenture shall be repaid in full, the First
Mortgage Indenture shall be terminated and all collateral security provided
in respect of the First Mortgage Indenture shall be released.
(j) The Borrower shall have received at least $110,000,000 in gross
cash proceeds from the issuance of the Senior Secured Notes. All
documents, instruments and other matters relating to the issuance of the
Senior Secured Notes shall be satisfactory to the Lenders in all respects.
(k) The Lenders shall be reasonably satisfied with each of the other
documents relating to the Transactions and the transactions contemplated
hereby and thereby.
(l) The Administrative Agent shall have received evidence,
satisfactory to the Administrative Agent that the only existing
intercompany Indebtedness shall be between the Borrower and Bayou
(Tennessee).
(m) All material governmental and third party approvals and filings
(including, without limitation, landlords' and other consents) necessary in
connection with the Transactions, the financing contemplated hereby and
others material to the continuing operations of the Borrower and its
Subsidiaries and the
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53
transactions contemplated hereby shall have been obtained or made, as
applicable, and be in full force and effect, and all applicable waiting
periods shall have expired without any action being taken or threatened by
any competent authority which would restrain, prevent or otherwise impose
adverse conditions on the Transactions or the financing contemplated
hereby.
(n) The Administrative Agent shall have received the results of a
recent lien search in each of the jurisdictions where assets of the Loan
Parties are located, and such search shall reveal no liens on any of the
assets of the Borrower or its Subsidiaries except for liens permitted by
Section 7.02 or liens to be discharged on or prior to the Closing Date.
(o) The Borrower shall have paid to the Administrative Agent all fees
due on or prior to the Closing Date to the Administrative Agent and the
Lenders hereunder.
ARTICLE VI. AFFIRMATIVE COVENANTS
The Borrower covenants and agrees with each Lender that so long as
this Agreement shall remain in effect or the principal of or interest on any
Loan, any Fees or any other expenses or amounts payable under any Loan Document
shall be unpaid, unless the Required Lenders shall otherwise consent in writing,
the Borrower will, and will cause each Recourse Subsidiary (and where indicated,
each Subsidiary) to:
SECTION 1.061. Existence; Businesses and Properties. (a) Do or
cause to be done all things necessary to preserve, renew and keep in full force
and effect its legal existence, except as otherwise expressly permitted under
Section 7.05.
(b) In the case of the Borrower and each of the Subsidiaries, do or
cause to be done all things necessary to obtain, preserve, renew, extend and
keep in full force and effect the rights, licenses, permits, franchises,
authorizations, patents, copyrights, trademarks and trade names material to the
conduct of its business; maintain and operate such business in substantially the
manner in which it is presently conducted and operated; comply, and to the
extent reasonably possible ensure that any tenants or subtenants comply, in all
material respects with all applicable laws, rules, regulations and orders of any
Governmental Authority, whether now in effect or hereafter enacted, the failure
to comply with which could reasonably be expected to have a Material Adverse
Effect; and at all times maintain and preserve all property material to the
conduct of such business and keep such property in good repair, working order
and condition and from time to time make, or cause to be made, all needful and
proper repairs, renewals, additions, improvements and replacements thereto
necessary in order that the business carried on in connection therewith may be
properly conducted at all times; and ensure to the extent
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54
reasonably possible that any tenants or subtenants do not cause or contribute to
any condition, including environmental pollution or contamination or employee
health or safety, that alone or together with other such conditions could
reasonably be expected to result in a Material Adverse Effect.
SECTION 1.062. Maintenance of Property; Insurance. Keep all property
useful and necessary in its business in good working order and condition; keep
its insurable properties adequately insured at all times by financially sound
and reputable insurers; maintain such other insurance, to such extent and
against such risks, including fire and other risks insured against by extended
coverage, as is customary with companies in the same or similar businesses,
including public liability insurance against claims for personal injury or death
or property damage occurring upon, in, about or in connection with the use of
any properties owned, occupied or controlled by it; and maintain such other
insurance as may be required by law.
SECTION 1.063. Obligations and Taxes. In the case of each Loan Party
and, with respect to taxes, assessments and governmental charges or levies, each
of the other Subsidiaries, pay its Indebtedness and other obligations promptly
and in accordance with their terms and pay and discharge promptly all taxes,
assessments and governmental charges or levies imposed upon it or upon its
income or profits or in respect of its property, before the same shall become
delinquent or in default, as well as all lawful claims for labor, materials and
supplies or otherwise which, if unpaid, might give rise to a Lien upon such
properties or any part thereof; provided, however, that such payment and
discharge shall not be required with respect to any such tax, assessment,
charge, levy or claim so long as the validity or amount thereof shall be
contested in good faith by appropriate proceedings or where the failure to pay
such tax, assessment, charge, levy or claim would not (a) have a material
adverse effect on the business, assets, operations or financial condition of the
Borrower and the Recourse Subsidiaries taken as a whole or (b) result in the
imposition of any Lien securing a material amount in favor of any party
entitling such party to priority of payment over the Lenders, and the Borrower
shall have set aside on its books adequate reserves with respect thereto.
SECTION 1.064. Financial Statements, Reports, etc. In the case of the
Borrower, furnish to the Administrative Agent and each Lender:
(a) within 120 days after the end of each fiscal year, its
consolidated and consolidating (which shall include the Non-Recourse
Subsidiaries) balance sheets and related statements of income and changes
in cash flows, showing the financial condition of the Borrower and the
Subsidiaries as of the close of such fiscal year and the results of its
operations and the operations of such Subsidiaries during such year, all
audited by Arthur Andersen or other independent public accountants of
recognized national standing acceptable to the Required Lenders and
accompanied by an opinion of such accountants (which shall not be qualified
in
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55
any material respect) to the effect that such consolidated financial
statements fairly present the financial condition and results of operations
of the Borrower on a consolidated basis in accordance with GAAP
consistently applied;
(b) within 45 days after the end of each of the first three fiscal
quarters of each fiscal year, its consolidated and consolidating balance
sheets (which shall include the Non-Recourse Subsidiaries) and related
statements of income and changes in cash flows, showing the financial
condition of the Borrower and the Subsidiaries as of the close of such
fiscal quarter and the results of its operations and the operations of such
subsidiaries during such fiscal quarter and the then elapsed portion of the
fiscal year, all certified by one of its Financial Officers as fairly
presenting the financial condition and results of operations of the
Borrower on a consolidated basis in accordance with GAAP consistently
applied, subject to normal year-end adjustments;
(c) within 15 Business Days after the last day of each fiscal month
(each such last day being called a "Determination Date"), (i) a Borrowing
Base Certificate setting forth the Borrowing Base as of such Determination
Date and (ii) a certificate of a Financial Officer setting forth in
reasonable detail the amounts and types of Inventory and Accounts of the
Borrower and its Subsidiaries as of such Determination Date and an aging of
the Accounts; provided, however, that the Determination Date shall be the
last day of each fiscal quarter, and the foregoing certificates shall be
required only on a quarterly basis, as long as the aggregate amount of all
Loans or Letters of Credit outstanding on the date that would otherwise be
the Determination Date is less than $3,000,000; provided, further, that, if
the Borrower desires to request a Borrowing or the issuance of a Letter of
Credit at a time when the foregoing certificates would have been required
as of a more recent date but have not been delivered because of the
foregoing proviso, then the foregoing certificates shall be delivered
without regard to the foregoing proviso as a condition to such Borrowing or
issuance;
(d) concurrently with any delivery of financial statements under (a)
or (b) above, a certificate of the Financial Officer (i) certifying such
statements, (ii) certifying that no Event of Default or Default has
occurred or, if such an Event of Default or Default has occurred,
specifying the nature and extent thereof and any corrective action taken or
proposed to be taken with respect thereto and, (iii) setting forth
computations in reasonable detail satisfactory to the Administrative Agent
(x) demonstrating compliance with the covenants contained in Sections 7.09,
7.10, 7.13, 7.14 and 7.15 hereof and (y) setting forth the Leverage Ratio
as of the last day of such fiscal quarter or fiscal year, as the case may
be;
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56
(e) promptly after the same become publicly available, copies of all
periodic and other reports, proxy statements and other materials filed by
it with the Securities and Exchange Commission, or any governmental
authority succeeding to any of or all the functions of said Commission, or
with any national securities exchange, or distributed to its shareholders,
as the case may be;
(f) promptly, from time to time, such other information regarding the
operations, business affairs and financial condition of the Borrower or any
Subsidi ary, or compliance with the terms of any Loan Document, as the
Administrative Agent or any Lender may reasonably request; and
(g) prior to entering into any commitment to acquire any ownership or
leasehold interest with a fair market value not less than $5,000,000 in
real property, an assessment, in form and substance reasonably acceptable
to the Administrative Agent, of the environmental compliance and liability
issues associated with such real property.
SECTION 1.065. Litigation and Other Notices. Furnish to the
Administrative Agent and each Lender prompt written notice of the following:
(a) any Event of Default or Default, specifying the nature and extent
thereof and the corrective action (if any) proposed to be taken with
respect thereto;
(b) the filing or commencement of, or any threat or notice of
intention of any person to file or commence, any action, suit or
proceeding, whether at law or in equity or by or before any Governmental
Authority, against the Borrower or any Subsidiary thereof which, if
adversely determined, could reasonably be expected to result in a Material
Adverse Effect; and
(c) any development that has resulted in, or could reasonably be
expected to result in, a Material Adverse Effect.
SECTION 1.066. ERISA. (a) In the case of the Borrower and each
Subsidiary, comply in all material respects with the applicable provisions of
ERISA and (b) furnish to the Administrative Agent and each Lender (i) as soon as
possible, and in any event within 30 days after any Responsible Officer of the
Borrower or any ERISA Affiliate either knows or has reason to know that any
Reportable Event has occurred that alone or together with any other Reportable
Event could reasonably be expected to result in liability of the Borrower to the
PBGC in an aggregate amount exceeding $2,000,000, a statement of a Financial
Officer setting forth details as to such Reportable Event and the action
proposed to be taken with respect thereto, together with a copy of the notice,
if any, of such Reportable Event given to the PBGC, (ii) promptly after receipt
thereof, a
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57
copy of any notice the Borrower or any ERISA Affiliate may receive from the PBGC
relating to the intention of the PBGC to terminate any Plan or Plans (other than
a Plan maintained by an ERISA Affiliate which is considered an ERISA Affiliate
only pursuant to subsection (m) or (o) of Section 414 of the Code) or to appoint
a trustee to administer any Plan or Plans, (iii) within 10 days after the due
date for filing with the PBGC pursuant to Section 412(n) of the Code of a notice
of failure to make a required installment or other payment with respect to a
Plan, a statement of a Financial Officer setting forth details as to such
failure and the action proposed to be taken with respect thereto, together with
a copy of such notice given to the PBGC and (iv) promptly and in any event
within 30 days after receipt thereof by the Borrower or any ERISA Affiliate from
the sponsor of a Multiemployer Plan, a copy of each notice received by the
Borrower or any ERISA Affiliate concerning (A) the imposition of Withdrawal
Liability or (B) a determination that a Multiemployer Plan is, or is expected to
be, terminated or in reorganization, in each case within the meaning of Title IV
of ERISA.
SECTION 1.067. Maintaining Records; Access to Properties and
Inspections. In the case of the Borrower and each Subsidiary, maintain all
financial records in accordance with GAAP and permit any representatives
designated by any Lender, upon reasonable prior notice and at reasonable times,
to visit and inspect the financial records and the properties of the Borrower or
any Subsidiary at reasonable times and as often as requested and to make
extracts from and copies of such financial records, and permit any
representatives designated by any Lender to discuss the affairs, finances and
condition of the Borrower or any Subsidiary with the officers thereof and
independent accountants therefor (with a representative of the Borrower present
if the Borrower is not in default), and permit the Administrative Agent, or any
representatives of the Administrative Agent, to conduct, not more than once
during any fiscal year, an audit of the Collateral and the Borrowing Base on
behalf of the Lenders provided that such audit may be conducted more frequently
at the request of the Required Lenders and as often as requested upon the
occurrence and during the continuance of a Default or an Event of Default.
SECTION 1.068. Use of Proceeds. Use (i) the proceeds of the Loans
and (ii) the Letters of Credit only for the purposes set forth in Section 4.13.
SECTION 1.069. Environmental Matters. (a)(i) Comply with all
Environmental Laws applicable to it, and obtain, comply with and maintain any
and all Environmental Permits necessary for its operations as conducted and as
planned; and (ii) take all reasonable efforts to ensure that all of its tenants,
subtenants, contractors, subcontractors, and invitees comply with all
Environmental Laws, and obtain, comply with and maintain any and all
Environmental Permits, applicable to any of them insofar as any failure to so
comply, obtain or maintain reasonably could be expected to adversely affect the
Borrower. For purposes of this Section 6.09(a), noncompliance by the Borrower
with any applicable Environmental Law or Environmental Permit shall be
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58
deemed not to constitute a breach of this covenant provided that, upon learning
of any actual or suspected noncompliance, the Borrower shall promptly undertake
all reasonable efforts to achieve compliance, and provided further that, in any
case, such non-compliance, and any other noncompliance with Environmental Law,
individually or in the aggregate, could not reasonably be expected to give rise
to a Material Adverse Effect or materially and adversely affect the value of the
property which is the subject of such noncompliance, taken as a whole.
(b) Promptly comply with all orders and directives of all
Governmental Authorities regarding Environmental Laws, other than such orders
and directives as to which an appeal has been timely and properly taken in good
faith, and provided that the pendency of any and all such appeals could not
reasonably be expected to give rise to a Material Adverse Effect and does not
materially and adversely affect the value of the property which is the subject
of such noncompliance, taken as a whole.
(c) Maintain, periodically review, update, and implement in all
material respects, a program to identify and promote compliance with and to
minimize prudently any liabilities or potential liabilities under any
Environmental Law that may affect Borrower or any of its Subsidiaries, including
without limitation compliance and liabilities relating to: discharges to air and
water; acquisition, transportation, storage, and use of hazardous materials;
waste disposal; species protection; repair, maintenance and improvement of
properties; employee health and safety; and record keeping (the "Environmental
Program"). The Environmental Program shall be reviewed from time to time (at
least annually) by a reputable independent environmental consultant reasonably
acceptable to the Administrative Agent.
SECTION 6.10. Fiscal Year-End. Cause its fiscal year-end to be
September 30, in each year.
SECTION 6.11. Further Assurances. Execute any and all further
documents and take all further actions which may be required under applicable
law, or which the Administrative Agent may reasonably request on behalf of the
Required Lenders, (i) to grant, preserve, protect and perfect the first priority
security interest in the Collateral created by the Security Agreement and (ii)
maintain the guarantee under the Subsidiary Guarantee with respect to any
Recourse Subsidiary in full force and effect, including for Recourse
Subsidiaries acquired hereafter.
SECTION 6.12. Landlord's Waiver and Consent. Obtain a Landlord's
Waiver and Consent in the form of Exhibit E (the "Landlord's Waiver and
Consent") in respect of the Collateral (as defined in the Security Agreement)
located at properties of the Borrower or its Subsidiaries in which such persons
have a valid leasehold interest or at warehouses in which Inventory of the
Borrower is stored.
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59
SECTION 6.13. Additional Collateral. (a) It is the intention of the
parties hereto that the obligations of the Borrower and Bayou (Tennessee) under
the Loan Documents and guarantees thereof be secured by a perfected first
priority security interest in the Inventory and Accounts of the Borrower and
Bayou (Tennessee). Accordingly, with respect to assets acquired after the
Closing Date that are intended to be subject to the Lien created by the Security
Agreement but which are not so subject, the Borrower and Bayou (Tennessee)
shall, from time to time (and, in any event, within 30 days after the reasonable
request by the Administrative Agent to do so), (A) execute and deliver to the
Collateral Agent such amendments to the Security Agreement or such other
documents as the Collateral Agent shall reasonably deem necessary or advisable
to grant to the Collateral Agent, for the benefit of the Lenders, a Lien on such
assets, (B) take all actions necessary or advisable to cause such Lien to be
duly perfected in accordance with all applicable requirements of law, including,
without limitation, the filing of financing statements in such jurisdictions as
may be reasonably requested by the Administrative Agent, and (C) if requested by
the Administrative Agent, deliver to the Administrative Agent legal opinions
relating to the matters described in clauses (A) and (B) immediately preceding,
which opinions shall be in form and substance, and from counsel, reasonably
satisfactory to the Administrative Agent.
(b) With respect to any Person that, subsequent to the Closing Date,
becomes a domestic Recourse Subsidiary of the Borrower, promptly upon the
request of the Administrative Agent: (i) cause such new Subsidiary to become a
party to the Subsidiary Guarantee, pursuant to documentation which is in form
and substance reasonably satisfactory to the Administrative Agent and (ii) if
requested by the Administrative Agent, deliver to the Administrative Agent legal
opinions relating to the matters described in clause (i) immediately preceding,
which opinions shall be in form and substance, and from counsel, reasonably
satisfactory to the Administrative Agent.
SECTION 6.14. Compliance with Year 2000. Do or cause to be done all
things necessary to (i) insure that any reprogramming required to permit the
proper functioning, in and following the year 2000, of (i) the Borrower's
computer systems and (ii) equipment containing embedded microchips (including
systems and equipment supplied by others or with which Borrower's systems
interface) and the testing of all such systems and equipment, as so
reprogrammed, will be completed by June 30, 1999.
SECTION 6.15. Preferred Stock. Within 90 days following the Closing
Date, the Preferred Stock shall have been redeemed in accordance with its terms
and the Preferred Stock Documents shall be terminated and all obligations of the
Borrower and its Subsidiaries with respect to the Preferred Stock Documents
shall have been satisfied.
SECTION 6.16. Collateral Examination. Within 90 days following the
Closing Date, permit a collateral examination to be completed by the
Administrative Agent
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60
with respect to the Accounts and Inventory of the Borrower and Bayou
(Tennessee).
SECTION 6.17. Tennessee Collateral. At any time when the aggregate
fair market value of the Inventory and Accounts of Bayou (Tennessee) located in
Tennessee exceeds $15,000,000, provide notice to the Administrative Agent and
execute such documents and instruments (including, without limitation UCC
financing statements), pay all applicable recording taxes and filing fees and
procure all legal opinions, in each case, as may be reasonably requested by the
Administrative Agent, to ensure that the Administrative Agent maintains a fully
perfected first priority security interest in such Inventory and Accounts.
ARTICLE VII. NEGATIVE COVENANTS
The Borrower covenants and agrees with each Lender that, so long as
this Agreement shall remain in effect or the principal of or interest on any
Loan, any Fees or any other expenses or amounts payable under any Loan Document
shall be unpaid, unless the Required Lenders shall otherwise consent in writing,
the Borrower will not, and will not cause or permit any Recourse Subsidiary (and
where indicated each Subsidiary) to:
SECTION 1.071. Indebtedness. In the case of the Borrower and each
Subsidiary, incur, create, assume or permit to exist any Indebtedness except:
(a) Indebtedness of the Borrower and its Recourse Subsidiaries for
borrowed money or otherwise existing on the date hereof and set forth in
Schedule 7.01, but not any extensions, renewals, refinancings or replacements of
such Indebtedness;
(b) Indebtedness represented by the Notes and all other Indebtedness
incurred hereunder;
(c) Indebtedness of the Borrower and its Recourse Subsidiaries
incurred pursuant to Capital Lease Obligations in an aggregate amount not to
exceed $5,000,000 outstanding at any time;
(d) additional Indebtedness of the Borrower in an aggregate amount not
to exceed $15,000,000 outstanding at any time;
(e) Non-Recourse Indebtedness incurred by Non-Recourse Subsidiaries;
(f) Indebtedness secured by purchase money security interests
permitted by Section 7.02(i) hereof;
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61
(g) Indebtedness secured by Industrial Development Bonds permitted by
Section 7.02(n) hereof;
(h) Indebtedness of the Borrower in respect of the Senior Secured
Notes issued on the Closing Date; provided, that the aggregate gross proceeds
thereof do not exceed $110,000,000; and
(i) Indebtedness of the Borrower in respect of Senior Secured Notes
issued after the Closing Date pursuant to the terms of the Senior Secured Note
Indenture; provided, that the aggregate gross proceeds of all such subsequent
issues do not exceed $15,000,000 (collectively, the "Add-On Public Debt").
SECTION 1.072. Liens. Create, incur, assume or permit to exist any
Lien on any property or assets (including stock or other securities of any
person, including any Subsidiary) now owned or hereafter acquired by it or on
any income or rights in respect of any thereof, except:
(a) Liens on property or assets of the Borrower and its Subsidiaries
existing on the date hereof and set forth in Schedule 7.02; provided that,
except as provided in clause (l) below, such Liens shall secure only those
obligations which they secure on the date hereof and may not be reinstated
if released at any time by the secured party;
(b) any Lien existing on any property or asset prior to the
acquisition thereof by the Borrower or any Recourse Subsidiary; provided
that (i) such Lien is not created in contemplation of or in connection with
such acquisition and (ii) such Lien does not apply to any other property or
assets of the Borrower or any Subsidiary;
(c) Liens for taxes not yet due or which are being contested in
compliance with Section 6.03;
(d) carriers', warehousemen's, mechanic's, vendor's, lessor's,
materialmen's, repairmen's or other like Liens arising in the ordinary
course of business and securing obligations which are not due or which are
being contested in connection with Section 6.03;
(e) pledges and deposits made in the ordinary course of business in
compliance with workmen's compensation, unemployment insurance and other
social security laws or regulations;
(f) deposits to secure the performance of bids, tenders, trade
contracts (other than for Indebtedness), leases (other than Capital Lease
Obligations which
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62
are not permitted by paragraph (k) of this Section 7.02), statutory
obligations, surety, customs and appeal bonds, performance bonds and other
obligations of a like nature incurred in the ordinary course of business;
(g) zoning restrictions, servitudes, easements, licenses, rights-of-
way, restrictions on use of real property and other similar encumbrances
incurred in the ordinary course of business which, in the aggregate, are
not substantial in amount and do not materially detract from the value of
the property subject thereto or interfere with the ordinary conduct of the
business of the Borrower or any of its Subsidiaries;
(h) Liens created in favor of the Collateral Agent for the benefit of
the Lenders pursuant to the Security Agreement;
(i) Liens on property hereafter acquired existing at the time of
acquisition thereof or to secure the payment of all or any part of the
purchase price or construction cost thereof or to secure any Indebtedness
incurred prior to, at the time of or within six months after, the
acquisition of such property or completion of such construction for the
purpose of financing all or any part of the purchase price or the
construction cost thereof; provided, however, that no such Lien shall
extend to or cover any property or asset other than the property so
acquired or constructed and fixed improvements thereon;
(j) Liens on any Inventory consigned to the Borrower by others;
(k) Liens securing Indebtedness incurred pursuant to Capital Lease
Obligations; provided that such security interest secures Indebtedness
permitted by Section 7.01(c) hereof;
(l) Liens securing Non-Recourse Indebtedness incurred by Non-Recourse
Subsidiaries;
(m) Liens securing Indebtedness that constitutes an extension,
rearrangement, renewal or refunding (or any successive extension,
rearrangement, renewal or refunding) in whole or in part of Indebtedness
secured by any Lien referred to in clauses (a) through (l) above
(hereinafter referred to as a "Prior Lien"), if limited to the same
property (plus additions, extensions, improvements, repairs, replacements
and rebuildings) subject to, and securing no more Indebtedness than the
amount secured by, the Prior Lien;
(n) Liens securing Indebtedness which (i) has an aggregate principal
amount not in excess of $10,000,000 and (ii) is incurred in connection with
Industrial Development Bonds (including Pollution Control Bonds) as such
terms are defined in the Code;
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63
(o) Liens on assets of the Borrower and its Subsidiaries in favor of
the holders of the Senior Secured Notes issued under the Senior Secured
Note Indenture; and
(p) Liens on real property of the Borrower and its Subsidiaries to
the extent such Liens are permitted under the Senior Secured Note
Indenture.
SECTION 1.073. Sale and Lease-Back Transactions. Enter into any
arrangement, directly or indirectly, with any person whereby it shall sell or
transfer any property, real or personal, used or useful in its business, whether
now owned or hereafter acquired, and thereafter rent or lease such property or
other property which it intends to use for substantially the same purpose or
purposes as the property being sold or transferred.
SECTION 1.074. Investments, Loans and Advances. Purchase, hold or
acquire any capital stock, evidences of indebtedness or other securities of,
make or permit to exist any loans or advances to, or make or permit to exist any
Investment or any other interest in, any other person, except Permitted
Investments.
SECTION 1.075. Mergers, Consolidations and Sales of Assets. Merge
into or consolidate with any other person, or permit any other person to merge
into or consolidate with it, enter into any transaction of amalgamation, or
liquidate, wind up or dissolve itself (or suffer any liquidation or
dissolution), convey, sell, transfer, lease or otherwise dispose of (in one
transaction or in a series of transactions) all or any substantial part of its
business or assets (whether now owned or hereafter acquired) or any capital
stock of any Recourse Subsidiary, or purchase, lease or otherwise acquire (in
one transaction or a series of transactions) all or any substantial part of the
assets of any other person or make any material change in the method by which it
conducts business, except that (a) the Borrower and any Recourse Subsidiary may
purchase and sell inventory, sell used and surplus equipment, sell any one of
the three warehouses it owns and sell real property owned by River Road Realty
which is not collateral for the Senior Secured Notes, in each case, in the
ordinary course of business, (b) if at the time thereof and immediately after
giving effect thereto no Event of Default or Default shall have occurred and be
continuing (i) any wholly owned Recourse Subsidiary may merge into the Borrower
in a transaction in which the Borrower is the surviving corporation and (ii) any
wholly owned Recourse Subsidiary may merge into or consolidate with any other
wholly owned Recourse Subsidiary in a transaction in which the surviving entity
is a wholly owned Recourse Subsidiary and no person other than the Borrower or a
wholly owned Subsidiary receives any consideration, (c) another person may merge
into or consolidate with the Borrower if (i) the Borrower is the surviving
entity, (ii) the Required Lenders consent to such merger or consolidation, (iii)
at the time thereof and immediately after giving effect thereto, no Event of
Default or Default shall have occurred and be continuing and (iv) at the time
thereof and immediately after giving effect thereto the
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64
Borrower is in compliance with the provisions of Articles IV, VI and VII hereof
and two Financial Officers of the Borrower provide certificates of compliance
therewith to the Lenders, and (d) the Borrower may make Acquisition Expenditures
in accordance with Section 7.10 hereof.
SECTION 1.076. Dividends and Distributions. Declare or pay, directly
or indirectly, any dividend or make any other distribution (by reduction of
capital or otherwise), whether in cash, property, securities or a combination
thereof, with respect to any shares of its capital stock (or any warrants or
options with respect thereto) or directly or indirectly redeem, purchase, retire
or otherwise acquire for value (or permit any Subsidiary to purchase or acquire)
any shares of its capital stock (or any warrants or options with respect
thereto) or set aside any amount for any such purpose unless, after giving
effect to any such transaction, the Consolidated Tangible Net Worth of the
Borrower exceeds $63,000,000 plus 50% of the Borrower's Consolidated Net Income
from the Closing Date (but excluding any fiscal quarter (or portion thereby) for
which Consolidated Net Income is negative) and at the time thereof and
immediately after giving effect thereto, no Default or Event of Default shall
have occurred and be continuing; provided, however, such dividends,
distributions, redemptions, purchases, retirements, acquisitions or settings
aside shall not in the aggregate for any given fiscal year exceed 50% of the
Borrower's Consolidated Net Income for the immediately preceding fiscal year.
Notwithstanding the provisions set forth in this Section 7.06, any
Subsidiary may declare and pay dividends or make other distributions to the
Borrower.
SECTION 1.077. Transactions with Affiliates. Sell or transfer any
property or assets to, or purchase or acquire any property or assets of, or
otherwise engage in any other transactions with, any of its Affiliates, except
that as long as no Default or Event of Default shall have occurred and be
continuing, the Borrower or any Recourse Subsidiary may engage in any of the
foregoing transactions with persons in the ordinary course of business at prices
and on terms and conditions materially not less favorable to the Borrower or
such Recourse Subsidiary than could be obtained on an arm's-length basis from an
unrelated third party; provided, however, that the foregoing shall not restrict
Investments by the Borrower or a Subsidiary in a Subsidiary of the Borrower to
the extent permitted by Section 7.04 hereof; provided, further, that the
foregoing shall not restrict the performance of the Loan Documents.
SECTION 1.078. Business of Borrower and Recourse Subsidiaries.
Engage at any time in any business or business activity other than the business
currently conducted by it and business activities reasonably incidental thereto.
SECTION 1.079. Capital Expenditures. Incur Capital Expenditures in
any fiscal year in an aggregate amount in excess of (i) 125% of Budgeted Capital
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65
Expenditures for such year plus (ii) the excess, if any, of the aggregate amount
of Capital Expenditures that would have been permitted in the immediately
preceding two fiscal years based solely on clause (i) above over the amount of
Capital Expenditures actually incurred during such immediately preceding two
fiscal years, provided that the amount determined pursuant to this clause (ii)
for any fiscal year shall not exceed $15,000,000; provided that in addition to
the amounts set forth above the Borrower may incur Capital Expenditures in an
aggregate amount not to exceed $25,000,000 to finance the upgrade of the major
furnace at the Borrower's La Place, Louisiana facility (the "Furnace Upgrade"),
so long as (i) after giving effect to any Capital Expenditure used to finance
the Furnace Upgrade the amount available to be borrowed under this Agreement
shall exceed $25,000,000 and (ii) prior to making any such Capital Expenditure
the Borrower provides to the Administrative Agent evidence (including supporting
calculations) which demonstrates pro forma compliance with the covenants
contained in Sections 7.12, 7.13 and 7.14 both before and after giving effect to
such Capital Expenditure.
SECTION 7.10. Acquisition Expenditures. Only the Borrower can make
Acquisition Expenditures, such Acquisition Expenditures to be funded with (a)
100% of the proceeds from equity offerings of the Borrower after the Closing
Date, (b) 100% of the Add-On Public Debt, (c) up to $15,000,000 of the Loans at
any one time, (d) up to and including 50% of cumulative Consolidated Net Income
from and including the Closing Date to and including the last day of the most
recently ended fiscal quarter of the Borrower and (e) 50% of the Unencumbered
Cash as of the Closing Date, minus the aggregate amount which has been expended
on or prior to the date of making such Acquisition Expenditure for the Furnace
Upgrade; provided, that the amount referred to in the foregoing clause (e) shall
only be available for Acquisition Expenditures made on or prior to the date
which is one year from the Closing Date.
SECTION 7.11. Optional Payments and Modifications of Senior Secured
Notes. (a) Make or offer to make any payment, prepayment, repurchase or
redemption of or otherwise defease or segregate funds with respect to the Senior
Secured Notes (other than scheduled interest payments required to be made in
cash), unless, after giving effect to any such transaction, the Consolidated
Tangible Net Worth of the Borrower exceeds $63,000,000 plus 50% of the
Borrower's Consolidated Net Income from the Closing Date (but excluding any
fiscal quarter (or portion thereby) for which Consolidated Net Income is
negative) and at the time thereof and immediately after giving effect thereto,
no Default or Event of Default shall have occurred and be continuing; provided,
however, such payments, prepayments, repurchases and redemptions shall not in
the aggregate for any given fiscal year exceed 50% of the Borrower's
Consolidated Net Income for the immediately preceding fiscal year or (b) amend,
modify, waive or otherwise change, or consent or agree to any amendment,
modification, waiver or other change to, any of the terms of the Senior Secured
Notes (other than any such amendment, modification, waiver or other change that
(x)(i) would extend the maturity or reduce the amount of any payment of
principal thereof or reduce the rate or extend the date for payment of interest
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66
thereon and (ii) does not involve the payment of a consent fee) or (y) is
administrative or corrective in nature and is not adverse to the interests of
the Lenders).
SECTION 7.12. Minimum Tangible Net Worth. In the case of the
Borrower and its Recourse Subsidiaries, permit Tangible Net Worth, computed on a
Consolidated basis, at any time to be less than the sum of (i) $58,900,000 plus
(ii) 50% of Net Income from March 31, 1998 to the date of any computation of
Tangible Net Worth (but excluding any fiscal quarter (or portion thereof) for
which Net Income is negative) plus (iii) 100% of the proceeds from equity
offerings of the Borrower after the Closing Date and up to the date of any
computation of Tangible Net Worth minus (iv) any deferred financing costs in
connection with the issuance of the Add-On Public Debt.
SECTION 7.13. Debt to Capitalization. In the case of the Borrower
and its Recourse Subsidiaries, permit the ratio (the "Debt to Cap Ratio") of (a)
amounts outstanding under this Agreement plus total long-term Funded
Indebtedness of the Borrower and its Subsidiaries, computed on a Consolidated
basis, less Unencumbered Cash owned and held by or on behalf of the Borrower to
(b) Capitalization, computed in each case on a Consolidated basis, at any time
to exceed .700 to 1.00; provided, that upon the issuance of any of the Add-On
Public Debt, the Borrower and its Recourse Subsidiaries shall not permit the
Debt to Cap Ratio, at any time during each of the periods specified below to
exceed the ratio specified below for such period:
Date Ratio
------ -----
Date of Issuance of Add-On Public Debt -
December 31, 1999 0.750 to 1.00
January 1, 2000 - June 30, 2001 0.735 to 1.00
July 1, 2001 - June 30, 2002 0.720 to 1.00
July 1, 2002 and thereafter 0.700 to 1.00
SECTION 7.14. Interest Expense Coverage Ratio. In the case of the
Borrower and its Recourse Subsidiaries, fail to maintain a ratio of Consolidated
EBITDA to Consolidated Fixed Charges ("Interest Expense Coverage Ratio") for any
period of four consecutive fiscal quarters ending on any date equal to or
greater than the Interest Expense Coverage Ratio specified below opposite the
Aggregate Outstanding Extensions of Credit at such date of determination:
Outstanding Ratio
----------- -----
Less than $10,000,000 1.50 to 1.00
At least $10,000,000, but less than $15,000,000 1.60 to 1.00
At least $15,000,000, but less than $25,000,000 1.70 to 1.00
At least $25,000,000, and up to $50,000,000 1.90 to 1.00
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ARTICLE VIII. EVENTS OF DEFAULT
In case of the happening of any of the following events ("Events of
Default"):
(a) any representation or warranty made or deemed made in or in
connection with any Loan Document or the Borrowings hereunder or in any
Borrowing Base Certificate delivered pursuant to Section 6.04(c), or any
representation, warranty, statement or information contained in any report,
certificate, financial statement or other instrument furnished in
connection with or pursuant to any Loan Document, shall prove to have been
false or misleading in any material respect when so made, deemed made or
furnished;
(b) default shall be made in the payment of any principal of any Loan
when and as the same shall become due and payable, whether at the due date
thereof or at a date fixed for prepayment thereof or by acceleration
thereof or otherwise or default shall be made in the due and punctual
reimbursement of any drawing under any Letter of Credit, when and as the
same shall become due and payable and such default shall continue
unremedied for a period of three days;
(c) default shall be made in the payment of any interest on any Loan
or any Fee or any other amount (other than an amount referred to in (b)
above) due under any Loan Document, when and as the same shall become due
and payable, and such default shall continue unremedied for a period of
three days;
(d) default shall be made in the due observance or performance by the
Borrower or any Subsidiary of any covenant, condition or agreement
contained in Section 6.01(a);
(e) default shall be made in the due observance or performance by the
Borrower or any Subsidiary of any covenant, condition or agreement
contained in Article VI, other than as specified in (d) above, and such
default shall continue unremedied for a period of 30 days; provided,
however, that if the Administrative Agent has actual knowledge of the
occurrence of a default specified in this paragraph (e) and the Borrower
does not have knowledge of such occurrence, the 30-day period shall begin
on the date on which the Administrative Agent sends notice of such default
to the Borrower;
(f) default shall be made in the due observance or performance by the
Borrower or any Subsidiary of any covenant, condition or agreement
contained in
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Article VII, and such default shall continue unremedied for a period of 30
days; provided, however, that if the Administrative Agent has actual
knowledge of the occurrence of a default specified in this paragraph (f)
and the Borrower does not have knowledge of such occurrence, the 30 day
period shall begin on the date on which the Administrative Agent sends
notice of such default to the Borrower;
(g) default shall be made in the due observance or performance by the
Borrower or any Subsidiary of any covenant, condition or agreement
contained in any Loan Document (other than those specified in (b), (c),
(d), (e) or (f) above) and such default shall continue unremedied for a
period of 15 days after notice thereof from the Administrative Agent or any
Lender to the Borrower;
(h) the Borrower or any Recourse Subsidiary shall (i) fail to pay any
principal or interest, regardless of amount, due in respect of any
Indebtedness, in any principal amount, when and as the same shall become
due and payable and after giving effect to applicable grace periods, or
(ii) fail to observe or perform any other term, covenant, condition or
agreement contained in any agreement or instrument evidencing or governing
any such Indebtedness if the effect of any failure referred to in this
clause (ii) is to cause, or to permit the holder or holders of such
Indebtedness or a trustee on its or their behalf (with or without the
giving of notice, the lapse of time or both) to cause, such Indebtedness to
become due prior to its stated maturity and after giving effect to
applicable grace periods;
(i) an involuntary proceeding shall be commenced or an involuntary
petition shall be filed in a court of competent jurisdiction seeking (i)
relief in respect of the Borrower or any Subsidiary, or of a substantial
part of the property or assets of the Borrower or a Subsidiary, under Title
11 of the United States Code, as now constituted or hereafter amended, or
any other Federal or state bankruptcy, insolvency, receivership or similar
law, (ii) the appointment of a receiver, trustee, custodian, sequestrator,
conservator or similar official for the Borrower or any Subsidiary or for a
substantial part of the property or assets of the Borrower or a Subsidiary
or (iii) the winding-up or liquidation of the Borrower or any Subsidiary;
and such proceeding or petition shall continue undismissed for 60 days or
an order or decree approving or ordering any of the foregoing shall
continue unstayed and in effect for 30 days; provided, however, that this
provision shall not apply to a Non-Recourse Subsidiary unless such action
or proceeding materially adversely affects the interests of the Borrower or
a Recourse Subsidiary;
(j) the Borrower or any Subsidiary (other than a Non-Recourse
Subsidiary unless such action or proceeding materially adversely affects
the interests of the Borrower or a Recourse Subsidiary) shall (i)
voluntarily commence any proceeding or file any petition seeking relief
under Title 11 of the United States Code,
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69
as now constituted or hereafter amended, or any other Federal or state
bankruptcy, insolvency, receivership or similar law, (ii) consent to the
institution of, or fail to contest in a timely and appropriate manner, any
proceeding or the filing of any petition described in (i) above, (iii)
apply for or consent to the appointment of a receiver, trustee, custodian,
sequestrator, conservator or similar official for the Borrower or any
Subsidiary or for a substantial part of the property or assets of the
Borrower or any Subsidiary, (iv) file an answer admitting the material
allegations of a petition filed against it in any such proceeding, (v) make
a general assignment for the benefit of creditors, (vi) become unable,
admit in writing its inability or fail generally to pay its debts as they
become due or (vii) take any action for the purpose of effecting any of the
foregoing;
(k) one or more judgments for the payment of money in an aggregate
amount in excess of $1,500,000 (after giving effect to reimbursement by
insurance carriers) shall be rendered against the Borrower, any Recourse
Subsidiary or any combination thereof and the same shall remain
undischarged for a period of 30 consecutive days during which execution
shall not be effectively stayed, or any action shall be legally taken by a
judgment creditor to levy upon assets or properties of the Borrower or any
Recourse Subsidiary to enforce any such judgment;
(l) a Reportable Event or Reportable Events, or a failure to make a
required installment or other payment (within the meaning of Section
412(n)(l) of the Code), shall have occurred with respect to any Plan or
Plans that reasonably could be expected to result in liability of the
Borrower to the PBGC or to a Plan in an aggregate amount exceeding
$2,000,000 and, within 30 days after the reporting of any such Reportable
Event to the Administrative Agent or after the receipt by the
Administrative Agent of the statement required pursuant to Section 6.06,
the Administrative Agent shall have notified the Borrower in writing that
(i) the Required Lenders have made a determination that, on the basis of
such Reportable Event or Reportable Events or the failure to make a
required payment, there are reasonable grounds (A) for the termination of
such Plan or Plans by the PBGC, (B) for the appointment by the appropriate
United States District Court of a trustee to administer such Plan or Plans
or (C) for the imposition of a Lien in favor of a Plan and (ii) as a result
thereof an Event of Default exists hereunder; or a trustee shall be
appointed by a United States District Court to administer any such Plan or
Plans; or the PBGC shall institute proceedings to terminate any Plan or
Plans;
(m) (i) the Borrower or any ERISA Affiliate shall have been notified
by the sponsor of a Multiemployer Plan that it has incurred Withdrawal
Liability to such Multiemployer Plan, (ii) the Borrower or such ERISA
Affiliate does not have reasonable grounds for contesting such Withdrawal
Liability or is not in fact
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contesting such Withdrawal Liability in a timely and appropriate manner and
(iii) the amount of the Withdrawal Liability specified in such notice, when
aggregated with all other amounts required to be paid to Multiemployer
Plans in connection with Withdrawal Liabilities (determined as of the date
or dates of such notification), exceeds $2,000,000 or requires payments
exceeding $1,000,000 in any year;
(n) the Borrower or any ERISA Affiliate shall have been notified by
the sponsor of a Multiemployer Plan that such Multiemployer Plan is in
reorganization or is being terminated, within the meaning of Title IV of
ERISA, if solely as a result of such reorganization or termination the
aggregate annual contributions of the Borrower and its ERISA Affiliates to
all Multiemployer Plans that are then in reorganization or have been or are
being terminated have been or will be increased over the amounts required
to be contributed to such Multiemployer Plans for their most recently
completed plan years by an amount exceeding $1,000,000;
(o) there shall have occurred a Change in Control or a Specified
Change of Control; or
(p) (i) Any of the Security Documents shall cease, for any reason, to
be in full force and effect, or the Borrower or any other Loan Party which
is a party to any of the Security Documents shall so assert in writing or
(ii) the Lien created by any of the Security Documents shall cease to be
enforceable and of the same effect and priority purported to be created
thereby;
then, and in every such event (other than an event with respect to any Loan
Party described in paragraph (i) or (j) above), and at any time thereafter
during the continuance of such event, the Administrative Agent may, and at the
request of the Required Lenders shall, by written notice to the Borrower, take
any or all of the following actions, at the same or different times: (i)
terminate forthwith the Commitments, (ii) demand that the Borrower provide to
the Lenders, and the Borrower upon such demand agrees to provide, cash
collateral in an amount equal to the aggregate Letter of Credit Exposure then
existing, such cash collateral to be deposited in a special cash collateral
account to be held by the Administrative Agent for the benefit of the Lenders
and (iii) declare the Loans then outstanding to be forthwith due and payable in
whole or in part, whereupon the principal of the Loans so declared to be due and
payable, together with accrued interest thereon and any unpaid accrued Fees and
all other liabilities of the Borrower accrued hereunder and under any other Loan
Document, shall become forthwith due and payable, without presentment, demand,
protest or any other notice of any kind, all of which are hereby expressly
waived by the Borrower, anything contained herein or in any other Loan Document
to the contrary notwithstanding; and in any event with respect to the Borrower
or any Recourse Subsidiary described in paragraph (i) or (j) above, the
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71
Commitments shall automatically terminate and the principal of the Loans then
outstanding, together with accrued interest thereon and any unpaid accrued Fees
and all other liabilities of the Borrower accrued hereunder and under any other
Loan Document, shall automatically become due and payable, without presentment,
demand, protest or any other notice of any kind, all of which are hereby
expressly waived by the Borrower, anything contained herein or in any other Loan
Document to the contrary notwithstanding.
With respect to all Letters of Credit with respect to which
presentment for honor shall not have occurred at the time of an acceleration
pursuant to the preceding paragraph, the Borrower shall at such time deposit in
a cash collateral account opened by the Administrative Agent an amount equal to
the aggregate then undrawn and unexpired amount of such Letters of Credit. The
Borrower shall be deemed to grant at such time to the Administrative Agent, for
the benefit of the Issuing Bank and Lenders, a security interest in such cash
collateral (such cash to be held in an interest-bearing account) to secure all
obligations of the Borrower in respect of such Letters of Credit under this
Agreement and the other Loan Documents. The Borrower shall execute and deliver
to the Administrative Agent, for the account of the Issuing Bank and the
Lenders, such further documents and instruments as the Administrative Agent may
request to evidence the creation and perfection of such security interest in
such cash collateral account. Amounts held in such cash collateral account
shall be applied by the Administrative Agent to the payment of drafts drawn
under such Letters of Credit, and the unused portion thereof after all such
Letters of Credit shall have expired or been fully drawn upon, if any, shall be
applied to repay other obligations of the Borrower hereunder and under the
Notes. After all such Letters of Credit shall have expired or been fully drawn
upon and there shall be no Letter of Credit Exposure and all other obligations
of the Borrower hereunder and under the Notes and the other Loan Documents shall
have been paid in full, the balance, if any, in such cash collateral account
(including interest thereon, if any) shall be returned to the Borrower.
ARTICLE IX. THE ADMINISTRATIVE AGENT
In order to expedite the transactions contemplated by this Agreement,
Chase is hereby appointed to act as Administrative Agent on behalf of the
Lenders. Each of the Lenders, and each subsequent holder of any Note by its
acceptance thereof, hereby irrevocably authorizes the Administrative Agent to
take such actions on behalf of such Lender or holder and to exercise such powers
as are specifically delegated to the Administrative Agent by the terms and
provisions of the Loan Documents, together with such actions and powers as are
reasonably incidental thereto. The Administrative Agent is hereby expressly
authorized by the Lenders, without hereby limiting any implied authority, (a) to
receive on behalf of the Lenders all payments of principal of and interest
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on the Loans and all other amounts due to the Lenders hereunder and under the
other Loan Documents, and promptly to distribute to each Lender its proper share
of each payment so received; (b) to give notice on behalf of each of the Lenders
to the Borrower of any Event of Default specified in this Agreement of which the
Administrative Agent has actual knowledge acquired in connection with its agency
hereunder; and (c) to distribute to each Lender copies of all notices, financial
statements and other materials delivered by the Borrower pursuant to this
Agreement as received by the Administrative Agent.
Neither the Administrative Agent nor any of its directors, officers,
employees or agents shall be liable as such for any action taken or omitted by
any of them except for its or his own gross negligence or willful misconduct, or
be responsible for any statement, warranty or representation herein or the
contents of any document delivered in connection herewith, or be required to
ascertain or to make any inquiry concerning the performance or observance by the
Borrower of any of the terms, conditions, covenants or agreements contained in
any Loan Document. The Administrative Agent shall not be responsible to the
Lenders or the holders of the Notes for the due execution, genuineness,
validity, enforceability or effectiveness of this Agreement, the Notes or any
other Loan Documents or other instruments or agreements. The Administrative
Agent may deem and treat the payee of any Note as the owner thereof for all
purposes hereof until it shall have received from the payee of such Note notice,
given as provided herein, of the transfer thereof. The Administrative Agent
shall in all cases be fully protected in acting, or refraining from acting, in
accordance with written instructions signed by the Required Lenders (or when
expressly required hereby, all the Lenders) and, except as otherwise
specifically provided herein, such instructions and any action or inaction
pursuant thereto shall be binding on all the Lenders and each subsequent holder
of any Note. The Administrative Agent shall, in the absence of knowledge to the
contrary, be entitled to rely on any instrument or document believed by it in
good faith to be genuine and correct and to have been signed or sent by the
proper person or persons. Neither the Administrative Agent nor any of its
directors, officers, employees or agents shall have any responsibility to the
Borrower on account of the failure of or delay in performance or breach by any
Lender of any of its obligations hereunder or to any Lender on account of the
failure of or delay in performance or breach by any other Lender or the Borrower
of any of their respective obligations hereunder or under any other Loan
Document or in connection herewith or therewith. The Administrative Agent may
execute any and all duties hereunder by or through agents or employees and shall
be entitled to rely upon the advice of legal counsel selected by it with respect
to all matters arising hereunder and shall not be liable for any action taken or
suffered in good faith by it in accordance with the advice of such counsel.
The Lenders hereby acknowledge that the Administrative Agent shall be
under no duty to take any discretionary action permitted to be taken by it
pursuant to the
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73
provisions of the Loan Documents unless it shall be requested in writing to do
so by the Required Lenders (or when expressly required hereby, all the Lenders).
Subject to the appointment and acceptance of a successor
Administrative Agent as provided below, the Administrative Agent may resign at
any time by notifying the Lenders and the Borrower. Upon any such resignation,
the Required Lenders shall have the right to appoint a successor which successor
Administrative Agent shall be acceptable to the Borrower. If no successor shall
have been so appointed by the Required Lenders and shall have accepted such
appointment within 30 days after the retiring Administrative Agent gives notice
of its resignation, then the retiring Administrative Agent may, on behalf of the
Lenders, appoint a successor Administrative Agent which shall be a lender with
an office in New York, New York, having a combined capital and surplus of at
least $500,000,000 or an Affiliate of any such lender. Upon the acceptance of
any appointment as Administrative Agent hereunder by a successor lender, such
successor shall succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Administrative Agent and the retiring
Administrative Agent shall be discharged from its duties and obligations
hereunder. After the Administrative Agent's resignation hereunder, the
provisions of this Article and Section 10.05 shall continue in effect for its
benefit in respect of any actions taken or omitted to be taken by it while it
was acting as Administrative Agent.
With respect to the Loans made by it hereunder, the Notes issued to it
and any Letter of Credit issued by it, the Administrative Agent in its
individual capacity and not as Administrative Agent shall have the same rights
and powers as any other Lender and may exercise the same as though it were not
the Administrative Agent, and the Administrative Agent and its Affiliates may
accept deposits from, lend money to and generally engage in any kind of business
with the Borrower or any Subsidiary or other Affiliate thereof as if it were not
the Administrative Agent.
Each Lender agrees (i) to reimburse the Administrative Agent, on
demand, in the amount of its pro rata share (based on its Commitment hereunder)
(or, if indemnification is sought after the date upon which the Commitments
shall have terminated and the Loans shall have been paid in full, ratably in
accordance with their Commitment Percentages immediately prior to such date) of
any expenses incurred for the benefit of the Lenders by the Administrative
Agent, including counsel fees and compensation of agents and employees paid for
services rendered on behalf of the Lenders, which shall not have been reimbursed
by the Borrower and (ii) to indemnify and hold harmless the Administrative Agent
and any of its directors, officers, employees or agents, on demand, in the
amount of such pro rata share, from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever which may be imposed
on, incurred by or asserted against it in its capacity as the Administrative
Agent or any of them in any way relating to or arising out of this Agreement or
any other Loan Document
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or any action taken or omitted by it or any of them under this Agreement or any
other Loan Document, to the extent the same shall not have been reimbursed by
the Borrower (including, without limitation, at any time following the payment
of the Notes); provided that no Lender shall be liable to the Administrative
Agent for any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements resulting
from the gross negligence or willful misconduct of the Administrative Agent or
any of its directors, officers, employees or agents. The Administrative Agent
shall have the right to deduct any amount owed to it by any Lender under this
paragraph from any payment made by it to such Lender hereunder.
Each Lender acknowledges that it has, independently and without
reliance upon the Administrative Agent or any other Lender and based on such
documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement and the other Loan Documents.
Each Lender also acknowledges that it will, independently and without reliance
upon the Administrative Agent or any other Lender and based on such documents
and information as it shall from time to time deem appropriate, continue to make
its own decisions in taking or not taking action under or based upon this
Agreement or any other Loan Document, any related agreement or any document
furnished hereunder or thereunder.
The terms and conditions set forth in this Article IX shall apply
mutatis mutandis to the Administrative Agent in its capacity as Collateral Agent
under the Security Agreement.
ARTICLE X. MISCELLANEOUS
SECTION 1.101. Notices. Notices and other communications provided
for herein shall be in writing and shall be delivered by telecopy, hand or
overnight courier service, or mailed, as follows:
(a) if to the Borrower, to it at River Road, La Place, Louisiana
70068, Attention of Richard J. Gonzalez (Telecopy No. 504-652-0472), with a
copy to 2777 Stemmons Freeway, Suite 1800, Dallas, Texas 75207, Attention
of Howard M. Meyers (Telecopy No. 214-631-6146);
(b) if to Bayou (Tennessee), to it at River Road, La Place, Louisiana
70068, Attention of Richard J. Gonzalez (Telecopy No. 504-652-0472), with a
copy to 2777 Stemmons Freeway, Suite 1800, Dallas, Texas 75207, Attention
of Howard M. Meyers (Telecopy No. 214-631-6146);
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(c) if to the Administrative Agent, to it at 1 Chase Manhattan Plaza
(8th Floor) New York, NY 10081, Attention of Muniram Appana (Telecopy No.
212-552-7490) with copies to it at 270 Park Avenue (23rd Floor) New York,
NY 10017, Attention of Paul Pacchiana and James Ramage (Telecopy No. 212-
270-4624); and
(d) if to a Lender, to it at its address (or telecopy number) set
forth in Schedule 2.01.
All notices and other communications given to any party hereto in accordance
with the provisions of this Agreement and the other Loan Documents shall be
deemed to have been given on the date of receipt if delivered by hand or
overnight courier service or sent by telecopy equipment of the sender, or on the
date five Business Days after dispatch by certified or registered mail if
mailed, in each case delivered, sent or mailed (properly addressed) to such
party as provided in this Section 10.01 or in accordance with the latest
unrevoked direction from such party given in accordance with this Section 10.01
provided that any notice, request or demand to or upon the Administrative Agent
or the Lenders pursuant to Sections 2.03 and 3.02 shall not be effective until
received.
SECTION 1.102. Survival of Agreement. All covenants, agreements,
representations and warranties made by each Loan Party in the Loan Documents and
in the certificates or other instruments prepared or delivered in connection
with or pursuant to this Agreement or any other Loan Document shall be
considered to have been relied upon by the Lenders and shall survive the making
by the Lenders of the Loans, and the execution and delivery to the Lenders of
the Notes evidencing such Loans, regardless of any investigation made by the
Lenders or on their behalf, and shall continue in full force and effect as long
as the principal of or any accrued interest on any Loan or any Fee or any other
amount payable under this Agreement or any other Loan Document is outstanding
and unpaid and so long as the Commitments have not been terminated.
SECTION 1.103. Binding Effect. This Agreement shall become effective
when it shall have been executed by the Borrower and the Administrative Agent
and when the Administrative Agent and the Borrower shall have received copies
hereof which, when taken together, bear the signatures of each Lender, and
thereafter shall be binding upon and inure to the benefit of the Borrower, the
Administrative Agent and each Lender and their respective successors and
assigns, except that the Borrower shall not have the right to assign its rights
hereunder or any interest herein without the prior consent of all the Lenders.
SECTION 1.104. Successors and Assigns. (a) Whenever in this
Agreement any of the parties hereto is referred to, such reference shall be
deemed to include the successors and assigns of such party; and all covenants,
promises and agreements by or on behalf of the Borrower, the Administrative
Agent or the Lenders that
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are contained in this Agreement shall bind and inure to the benefit of their
respective successors and assigns.
(b) Each Lender may assign to one or more assignees all or a portion
of its interests, rights and obligations under this Agreement (including all or
a portion of its Commitment and the Loans at the time owing to it and the Notes
held by it); provided, however, that (i) except in the case of an assignment to
a Lender or an Affiliate of a Lender, the Borrower and the Administrative Agent
must give their prior written consent to such assignment (which consent shall
not be unreasonably withheld), (ii) each such assignment shall be of a constant,
and not a varying, percentage of all the assigning Lender's rights and
obligations under this Agreement and (iii) the parties to each such assignment
shall execute and deliver to the Administrative Agent an Assignment and
Acceptance in the form of Exhibit F hereto, together with the Note or Notes
subject to such assignment and a processing and recordation fee of $4,000 (which
recordation fee shall be paid by a person other than the Borrower). Upon
acceptance and recording pursuant to paragraph (e) of this Section 10.04, from
and after the effective date specified in each Assignment and Acceptance, which
effective date shall be at least five Business Days after the execution thereof,
(A) the assignee thereunder shall be a party hereto and, to the extent provided
in such Assignment and Acceptance, have the rights and obligations of a Lender
under this Agreement and (B) the assigning Lender thereunder shall, to the
extent provided in such assignment, be released from its obligations under this
Agreement (and, in the case of an Assignment and Acceptance covering all or the
remaining portion of an assigning Lender's rights and obligations under this
Agreement, such Lender shall cease to be a party hereto).
(c) By executing and delivering an Assignment and Acceptance, the
assigning Lender thereunder and the assignee thereunder shall be deemed to
confirm to and agree with each other and the other parties hereto as follows:
(i) other than the representation and warranty that it is the legal and
beneficial owner of the interest being assigned thereby free and clear of any
adverse claim, such assigning Lender makes no representation or warranty and
assumes no responsibility with respect to any statements, warranties or
representations made in or in connection with this Agreement or the execution,
legality, validity, enforceability, genuine ness, sufficiency or value of this
Agreement, any other Loan Document or any other instrument or document furnished
pursuant hereto; (ii) such assigning Lender makes no representation or warranty
and assumes no responsibility with respect to the financial condition of the
Borrower or any Subsidiary or the performance or observance by the Borrower or
any Subsidiary of any of its obligations under this Agreement, any other Loan
Document or any other instrument or document furnished pursuant hereto; (iii)
such assignee confirms that it has received a copy of this Agreement, together
with copies of the most recent financial statements delivered pursuant to
Section 6.04 and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into such
Assignment and Acceptance; (iv) such assignee will independently and without
reliance
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upon the Administrative Agent, such assigning Lender or any other Lender and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking action
under this Agreement; (v) such assignee appoints and authorizes the
Administrative Agent to take such action as agent on its behalf and to exercise
such powers under the Loan Documents as are delegated to the Administrative
Agent by the terms hereof, together with such powers as are reasonably
incidental thereto; and (vi) such assignee agrees that it will perform in
accordance with their terms all the obligations which by the terms of this
Agreement are re quired to be performed by it as a Lender.
(d) The Administrative Agent shall maintain at one of its offices in
The City of New York a copy of each Assignment and Acceptance delivered to it
and a register for the recordation of the names and addresses of the Lenders,
and the Commitment of, and principal amount of the Loans owing to, each Lender
pursuant to the terms hereof from time to time (the "Register"). The entries in
the Register shall be conclusive in the absence of manifest error and the
Borrower, the Administrative Agent and the Lenders may treat each person whose
name is recorded in the Register pursuant to the terms hereof as a Lender
hereunder for all purposes of this Agreement. The Register shall be available
for inspection by the Borrower and any Lender, at any reasonable time and from
time to time upon reasonable prior notice and copies shall be made available to
the Borrower upon request.
(e) Upon its receipt of a duly completed Assignment and Acceptance
executed by an assigning Lender and an assignee together with the Note or Notes
subject to such assignment, the processing and recordation fee referred to in
paragraph (b) above and, if required, the written consent of the Borrower to
such assignment, the Administrative Agent shall (subject to the consent of the
Administrative Agent to such assignment, if required), (i) accept such
Assignment and Acceptance, (ii) record the information contained therein in the
Register and (iii) give prompt notice thereof to the Lenders. Within five
Business Days after receipt of notice, the Borrower, at its own expense, shall
execute and deliver to the Administrative Agent, in exchange for the surrendered
Note or Notes, a new Note or Notes to the order of such assignee in a principal
amount equal to the applicable Commitment assumed by it pursuant to such
Assignment and Acceptance and, if the assigning Lender has retained a
Commitment, a new Note to the order of such assigning Lender in a principal
amount equal to the applicable Commitment retained by it. Such new Note or Notes
shall be in an aggregate principal amount equal to the aggregate principal
amount of such surrendered Note; such new Notes shall be dated the date of the
surrendered Notes which they replace and shall otherwise be in substantially the
form of Exhibit A hereto. Canceled Notes shall be returned to the Borrower.
(f) Each Lender may without the consent of the Borrower or the
Administrative Agent sell participations to one or more Lenders or other
financial
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institutions in all or a portion of its rights and obligations under this
Agreement (including all or a portion of its Commitment and the Loans owing to
it and the Notes held by it); provided, however, that (i) such Lender's
obligations under this Agreement shall remain unchanged, (ii) such Lender shall
remain solely responsible to the other parties hereto for the performance of
such obligations, (iii) the participating lenders or other entities shall be
entitled to the benefit of the cost protection provisions contained in Sections
2.11 and 2.13 to the same extent that the Lender from which such participating
lender or other entity acquired its participation would be entitled to the
benefit of such cost protection provisions, and (iv) the Borrower, the
Administrative Agent and the other Lenders shall continue to deal solely and
directly with such Lender in connection with such Lender's rights and
obligations under this Agreement, and such Lender shall retain the sole right to
enforce the obligations of the Borrower relating to the Loans and their right to
approve any amendment, modification or waiver of any provision of this Agreement
(other than amendments, modifications or waivers with respect to any Fees
payable hereunder or the amount of principal of or the rate at which interest is
payable on the Loans, or the dates fixed for payments of principal of or
interest on the Loans).
(g) Any Lender may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this Section
10.04, disclose to the assignee or participant or proposed assignee or
participant any information relating to either Loan Party furnished to such
Lender by or on behalf of such Loan Party; provided that, prior to any such
disclosure, each such assignee or participant or proposed assignee or
participant shall execute an agreement whereby such assignee or participant
shall agree (subject to customary exceptions) to preserve the confidentiality of
any confidential information relating to the Loan Parties received from such
Lender.
(h) Nothing herein shall prohibit any Lender from pledging or
assigning any Note to any Federal Reserve Bank in accordance with applicable
law.
(i) The Borrower shall not assign or delegate any of its rights or
duties hereunder.
SECTION 1.105. Expenses; Indemnity. (a) The Borrower agrees to pay
all reasonable out-of-pocket expenses incurred by the Administrative Agent, the
Issuing Bank and their Affiliates in connection with the preparation of this
Agreement, the Letters of Credit and the other Loan Documents or in connection
with any amendments, modifications or waivers of the provisions hereof or
thereof (whether or not the transactions hereby contemplated shall be
consummated) or incurred by the Administrative Agent, the Issuing Bank or any
Lender in connection with the enforcement or protection of their rights in
connection with this Agreement, the Letters of Credit and the other Loan
Documents or in connection with the Loans made or the Notes issued hereunder,
including the reasonable fees and disbursements of Simpson Thacher & Bartlett,
counsel for the Administrative Agent, and, in connection with any such
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amendment, modification or waiver or any such enforcement or protection, the
reasonable fees and disbursements of any other counsel for the Administrative
Agent, the Issuing Bank or any Lender. The Borrower further agrees that it
shall indemnify the Lenders from and hold them harmless against any documentary
taxes, assessments or charges made by any Governmental Authority by reason of
the execution and delivery of this Agreement, the Letters of Credit or any of
the other Loan Documents.
(b) The Borrower agrees to indemnify the Administrative Agent, the
Issuing Bank and each Lender and its respective directors, officers, employees
and agents (each such person being called an "Indemnitee") against, and to hold
each Indemnitee harmless from, any and all losses, claims, damages, liabilities,
obligations, actions, penalties, judgments, suits, costs and related expenses or
disbursements, including reasonable counsel fees and expenses, incurred by or
asserted against any Indemnitee arising out of, in any way connected with, or as
a result of (i) the execution or delivery of this Agreement, the Letters of
Credit or any other Loan Document or any agreement or instrument contemplated
thereby, the performance by the parties thereto of their respective obligations
thereunder or the consummation of the transactions contemplated thereby, (ii)
the use of the proceeds of the Loans, (iii) any claim, litigation, investigation
or proceeding relating to any of the foregoing, whether or not any Indemnitee is
a party thereto, or (iv) the noncompliance or asserted noncompliance with, or
liability or asserted liability under, any Environmental Law that is asserted to
be applicable to the Borrower or any Subsidiary, or to any property owned or
operated by any of them; provided that such indemnity shall not, as to any
Indemnitee, be available to the extent that such indemnified party's losses are
the result of any unexcused breach by an indemnified party of its obligations
under this Agreement or any other Loan Document or the result of the gross
negligence or willful misconduct of such Indemnitee. Without limiting the
foregoing, and to the extent permitted by applicable law, the Borrower agrees
not to assert and hereby waives, and shall cause each of its Subsidiaries not to
assert and to so waive, all rights for contribution or any other rights of
recovery with respect to all claims, demands, penalties, fines, liabilities,
settlements, damages, costs and expenses of whatever kind or nature, under or
related to Environmental Laws, that any of them now or hereafter may have by
statute or otherwise against any Indemnitee.
(c) The provisions of this Section 10.05 shall remain operative and
in full force and effect regardless of the expiration of the term of this
Agreement, the consummation of the transactions contemplated hereby, the
repayment of any of the Loans, the invalidity or unenforceability of any term or
provision of this Agreement, the Letters of Credit or any other Loan Document,
or any investigation made by or on behalf of the Administrative Agent or any
Lender. All amounts due under this Section 10.05 shall be payable on written
demand therefor.
SECTION 1.106. Right of Setoff. If an Event of Default shall have
occurred and be continuing and any Lender shall have requested the
Administrative
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Agent to declare the Loans immediately due and payable pursuant to Article VIII,
such Lender is hereby authorized at any time and from time to time, to the
fullest extent permitted by law, to set off and apply any and all deposits
(general or special, time or demand, provisional or final) at any time held and
other indebtedness at any time owing by such Lender to or for the credit or the
account of the Borrower against any of and all the obligations of the Borrower
now or hereafter existing under this Agreement and other Loan Documents held by
such Lender, irrespective of whether or not such Lender shall have made any
demand under this Agreement or such other Loan Document and although such
obligations may be unmatured. The rights of each Lender under this Section are
in addition to other rights and remedies (including other rights of setoff)
which such Lender may have.
SECTION 1.107. APPLICABLE LAW. THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE
STATE OF NEW YORK.
SECTION 1.108. Waivers; Amendment. (a) No failure or delay of the
Administrative Agent, any Lender in exercising any power or right hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such right or power, or any abandonment or discontinuance of steps to
enforce such a right or power, preclude any other or further exercise thereof or
the exercise of any other right or power. The rights and remedies of the
Administrative Agent and the Lenders hereunder and under the other Loan
Documents are cumulative and not exclusive of any rights or remedies which they
would otherwise have. No waiver of any provision of this Agreement or any other
Loan Document or consent to any departure by the Borrower therefrom shall in any
event be effective unless the same shall be permitted by paragraph (b) below,
and then such waiver or consent shall be effective only in the specific instance
and for the purpose for which given. No notice or demand on either Loan Party in
any case shall entitle such Loan Party to any other or further notice or demand
in similar or other circumstances. Each holder of any of the Notes shall be
bound by any amendment, modification, waiver or consent authorized as provided
herein, whether or not such Note shall have been marked to indicate such
amendment, modification, waiver or consent.
(b) Neither this Agreement, any provision hereof nor any other Loan
Document may be waived, amended or modified except pursuant to an agreement or
agreements in writing entered into by the applicable Loan Party and the Required
Lenders; provided, however, that no such agreement shall (i) change the
principal amount of, or extend or advance the maturity of or any date for the
payment of any principal of or interest on, any Loan, or waive or excuse any
such payment or any part thereof, or change the rate of interest on any Loan,
without the prior written consent of each Lender, or
<PAGE>
81
(ii) change the Commitment or Commitment Fees of any Lender without the prior
written consent of such Lender, the provisions of this Section or the
definitions of "Borrowing Base" or "Required Lenders" or release at any time
from the security interest created by the Security Agreement any of the
Collateral in excess of 10% in the aggregate of the book value of the Collateral
at such time (other than as permitted under Section 7.05), in any such case,
without the prior written consent of each Lender; provided further that no such
agreement shall amend, modify or otherwise affect the rights or duties of the
Administrative Agent hereunder without the prior written consent of the
Administrative Agent. Each Lender and each holder of a Note shall be bound by
any modification or amendment authorized by this Section regardless of whether
its Note shall have been marked to make reference thereto, and any consent by
any Lender or holder of a Note pursuant to this Section shall bind any person
subsequently acquiring a Note from it, whether or not such Note shall have been
so marked.
SECTION 1.109. Interest Rate Limitation. Notwithstanding anything
herein or in the Notes to the contrary, if at any time the applicable interest
rate, together with all fees and charges which are treated as interest under
applicable law (collectively the "Charges"), as provided for herein or in any
Loan Document or in any other document executed in connection herewith or
therewith, or otherwise contracted for, charged, received, taken or reserved by
any Lender, shall exceed the maximum lawful rate (the "Maximum Rate") which may
be contracted for, charged, taken, received or reserved by such Lender in
accordance with applicable law, the rate of interest payable under the Note held
by such Lender, as the case may be, together with all Charges payable to such
Lender, shall be limited to the Maximum Rate.
SECTION 10.10. Entire Agreement. This Agreement and the other Loan
Documents constitute the entire contract between the parties relative to the
subject matter hereof. Any previous agreement among the parties with respect to
the subject matter hereof is superseded by this Agreement and the other Loan
Documents. Nothing in this Agreement or in the other Loan Documents, expressed
or implied, is intended to confer upon any party other than the parties hereto
any rights, remedies, obligations or liabilities under or by reason of this
Agreement or the other Loan Documents.
SECTION 10.11. Waiver of Jury Trial. Each party hereto hereby
waives, to the fullest extent permitted by applicable law, any right it may have
to a trial by jury in respect of any litigation directly or indirectly arising
out of, under or in connection with this Agreement or any of the other Loan
Documents. Each party hereto (a) certifies that no representative, agent or
attorney of any other party has represented, expressly or otherwise, that such
other party would not, in the event of litigation, seek to enforce the foregoing
waiver and (b) acknowledges that it and the other parties hereto have been
induced to enter into this Agreement and the other Loan Documents, as
applicable, by, among other things, the mutual waivers and certifications in
this Section 10.11.
<PAGE>
82
SECTION 10.12. Severability. In the event any one or more of the
provisions contained in this Agreement or in any other Loan Document should be
held invalid, illegal or unenforceable in any respect, the validity, legality
and enforceability of the remaining provisions contained herein and therein
shall not in any way be affected or impaired thereby. The parties shall endeavor
in good-faith negotiations to replace the invalid, illegal or unenforceable
provisions with valid provisions the economic effect of which comes as close as
possible to that of the invalid, illegal or unenforceable provisions.
SECTION 10.13. Counterparts. This Agreement may be executed in two
or more counterparts, each of which shall constitute an original but all of
which when taken together shall constitute but one contract, and shall become
effective as provided in Section 10.03.
SECTION 10.14. Headings. Article and Section headings and the Table
of Contents used herein are for convenience of reference only, are not part of
this Agreement and are not to affect the construction of, or to be taken into
consideration in interpreting, this Agreement.
SECTION 10.15. Jurisdiction; Consent to Service of Process. (a) The
Borrower hereby irrevocably and unconditionally submits, for itself and its
property, to the nonexclusive jurisdiction of any New York State court or
Federal court of the United States of America sitting in New York City, and any
appellate court from any thereof, in any action or proceeding arising out of or
relating to this Agreement or the other Loan Documents, or for recognition or
enforcement of any judgment, and each of the parties hereto hereby irrevocably
and unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in such New York State or, to the extent
permitted by law, in such Federal court. Each of the parties hereto agrees that
a final judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law. Nothing in this Agreement shall affect any right that any
Lender may otherwise have to bring any action or proceeding relating to this
Agreement or the other Loan Documents against the Borrower or its properties in
the courts of any jurisdiction.
(b) The Borrower hereby irrevocably and unconditionally waives, to
the fullest extent it may legally and effectively do so, any objection which it
may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this agreement or the other Loan
Documents in any New York State or Federal court. Each of the parties hereto
hereby irrevocably waives, to the fullest extent permitted by law, the defense
of an inconvenient forum to the maintenance of such action or proceeding in any
such court.
<PAGE>
83
(c) Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 10.01. Nothing in this
Agreement will affect the right of any party to this Agreement to serve process
in any other manner permitted by law.
SECTION 10.16. Confidentiality. The Administrative Agent and the
Lenders agree to keep confidential (and to cause their respective officers,
directors, employees, agents and representatives to keep confidential) all
information, materials and documents concerning the Loan Parties furnished to
the Administrative Agent or any Lender, including, without limitation, cost,
market sales and consumption information (the "Information"). Notwithstanding
the foregoing, the Administrative Agent and each Lender shall be permitted to
disclose Information (i) to such of its officers, directors, employees, agents
and representatives as need to know such Information in connection with its
participation in any of the Transactions or the administration of this
Agreement; (ii) to the extent required by applicable laws and regulations or by
any subpoena or similar legal process, or requested by any governmental agency
or authority; (iii) to the extent such Information (A) becomes publicly
available other than as a breach of this Agreement, (B) becomes available to the
Administrative Agent or such Lender on a non-confidential basis from a source
other than the Borrower or Subsidiary or (C) was available to the Administrative
Agent or such Lender on a non-confidential basis prior to its disclosure to the
Administrative Agent or such Lender by the Borrower or a Subsidiary; (iv) to the
extent the Borrower or a Subsidiary shall have consented to such disclosure in
writing, (v) in connection with the sale of any Collateral pursuant to the
provisions of the Security Agreement or (vi) as necessary in connection with an
assignment or participation contemplated by Sections 10.04(b) and 10.04(f)
hereof.
<PAGE>
84
IN WITNESS WHEREOF, the Borrower, the Administrative Agent and the
Lenders have caused this Agreement to be duly executed by their respective
authorized officers as of the day and year first above written.
BAYOU STEEL CORPORATION
By: /s/ Richard J. Gonzalez
-----------------------
Title: Vice President and CEO
THE CHASE MANHATTAN BANK, as
Administrative Agent and as a Lender
By: /s/ James H. Ramage
-----------------------
Title: Vice President
<PAGE>
ING (U.S.) CAPITAL CORPORATION
By: __________________________
Title:
<PAGE>
WELLS FARGO BANK (TEXAS) N.A.
By: /s/ Nipul V. Patel
-----------------------
Title: Assistant Vice President
<PAGE>
HIBERNIA NATIONAL BANK
By: /s/ William P. Herrington
-------------------------
Title: Senior Vice President
<PAGE>
EXHIBIT 12.1
BAYOU STEEL CORPORATION
STATEMENT OF COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(IN THOUSANDS, EXCEPT RATIOS)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED MARCH
YEAR ENDED SEPTEMBER 31, 31,
----------------------------------- --------------
1993 1994 1995 1996 1997 1997 1998
------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Income (loss) before taxes
and extraordinary items.... (6,739) 4,361 10,455 315 3,834 (1,000) 9,517
Interest expense............ 8,261 7,670 7,821 8,635 8,962 4,517 4,133
Amortization................ 458 553 893 1,164 1,006 574 430
------ ------ ------ ------ ------ ------ ------
Earnings from continuing
operations before fixed
charges.................... 1,980 12,584 19,169 10,114 13,802 4,091 14,080
Fixed charges:
Amortization.............. 458 553 893 1,164 1,006 574 430
Interest expense.......... 8,261 7,670 7,821 8,635 8,962 4,517 4,133
------ ------ ------ ------ ------ ------ ------
Total fixed charges..... 8,719 8,223 8,714 9,799 9,968 5,091 4,563
Ratio of earnings to fixed
charges.................... 0.2 1.5 2.2. 1.0 1.4 0.8 3.1
</TABLE>
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports and to all references to our Firm included in or made a part of this
Registration Statement.
/s/ ARTHUR ANDERSEN LLP
New Orleans, Louisiana
June 29, 1998
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
-------------------------
FORM T-1
STATEMENT OF ELIGIBILITY AND QUALIFICATION
UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF
A TRUSTEE PURSUANT TO SECTION 305(B)(2)__________
FIRST NATIONAL BANK OF COMMERCE
(Exact name of trustee as specified in its charter)
N/A 72-0269760
----------------------------- -----------------
(Jurisdiction of incorporation (I.R.S. Employer
or organization if not a Identification No.)
U. S. National Bank)
210 BARONNE STREET
NEW ORLEANS, LOUISIANA 70112
---------------------- ----------
(Address of principal (Zip Code)
executive offices)
FIRST NATIONAL BANK OF COMMERCE
210 Baronne Street
New Orleans, Louisiana 70112
Telephone: 504-623-1606
(Name, address and telephone number of agent for service)
BAYOU STEEL CORPORATION
(Exact name of obligor as specified in its charter)
DELAWARE 72-1125783
-------------------------- ------------------
(State or other (I.R.S. Employer
jurisdiction of incorporation Identification No.)
or organization)
P. O. BOX 5000, RIVER ROAD
LAPLACE, LOUISIANA 70068
-------------------------- ----------
(Address of principal (Zip Code)
executive offices)
-------------------------
9 1/2% FIRST MORTGAGE NOTES DUE 2008
(Title of Indenture Securities)
<PAGE>
1. General Information. Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to which
it is subject.
Comptroller of the Currency, Washington D. C.
Federal Deposit Insurance Corporation, Washington, D. C.
The Board of Governors of the Federal Reserve System,
Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
2. Affiliations with obligor and underwriters. If the obligor or any
underwriter for the obligor is an affiliate of the trustee, describe such
affiliation.
No such affiliation exists.
3. Voting securities of the trustee. Furnish the following information as to
each class of voting securities of the trustee.
As of June 24, 1998
Col. A Col. B
Title of class Amount outstanding
-------------- ------------------
First National Bank of Commerce 927,500 shares
Common Stock, $10 Par Value
First Commerce Corporation is the record owner of all issued and
outstanding voting securities of the Trustee. On October 20, 1997, First
Commerce Corporation signed a definitive agreement to merge with Banc One
Corporation of Columbus, Ohio. First Commerce Corporation and Banc One
Corporation completed the merger on June 12, 1998.
4. Trusteeships under other indentures. If the trustee is a trustee under
interest or participation in any other securities, of the obligor are
outstanding, furnish the following information:
(a) Title of the securities outstanding under each other indenture.
Not applicable
-2-
<PAGE>
(b) A brief statement of the facts relied upon as a basis for the claim
that no conflicting interest within the meaning of Section 310(b)(1)
of the Act arises as a result of the trusteeship under any such other
indenture, including a statement as to how the indenture securities
will rank as compared with the securities issued under such other
indenture.
Not applicable.
5. Interlocking directorates and similar relationships with the obligor or
underwriters. If the trustee or any of the directors or executive officers
of the trustee is a director, officer, partner, employee, appointee, or
representative of the obligor or of any underwriter for the obligor,
identify each such person having any such connection and state the nature
of each such connection.
Neither the trustee nor any of the directors or executive officers of
the trustee is a director, officer, partner, employee, appointee or
representative of the obligor.
6. Voting securities of the trustee owned by the obligor or its officials.
Furnish the following information as to the voting securities of the
trustee owned beneficially by the obligor and each director, partner and
executive officer of the obligor.
As of June 24, 1998
Based upon an examination of the books and records of the trustee,
inquiries made by the trustee and information furnished to the trustee by
the obligor, voting securities of the trustee, owned beneficially, directly
or indirectly, by the obligor and its directors, partners and executive
officers, taken as a group, do not exceed 1% of the outstanding voting
securities of the trustee. As to the accuracy and completeness of the
information received from the obligor, the trustee disclaims
responsibility.
7. Voting securities of the trustee owned by underwriters or their officials.
Furnish the following information as to the voting securities of the
trustee owned beneficially by each underwriter for the obligor and each
director, partner and executive officer of each such underwriter.
As of June 24, 1998
Based upon an examination of the books and records of the trustee,
inquiries made by the trustee and information furnished to the trustee by the
underwriters, no single underwriter, its directors, partners and executive
officers, taken as a group, owned beneficially, directly or indirectly, in
excess of 1% of the outstanding voting securities of the trustee. As to the
accuracy and completeness of the information received from the underwriters, the
trustee disclaims responsibility.
-3-
<PAGE>
8. Securities of the obligor owned or held by the trustee. Furnish the
following information as to the securities of the obligor owned
beneficially or held as collateral security for obligations in default by
the trustee.
As of June 24, 1998
Securities of the obligor owned or held by the trustee, beneficially
or as collateral security for obligations in default, did not exceed 1% of
the outstanding shares of any class.
9. Securities of underwriters owned or held by the trustee. If the trustee
owns beneficially or holds as collateral security for obligations in
default any securities of an underwriter for the obligor, furnish the
following information as to each class of securities of such underwriter
any of which are so owned or held by the trustee.
As of June 24, 1998
The trustee did not so own or hold in excess of 1% of any class of
security of any such underwriter.
10. Ownership or holdings by the trustee of voting securities of certain
affiliates or security holders of the obligor. If the trustee owns
beneficially or holds as collateral security for obligations in default
voting securities of a person who, to the knowledge of the trustee (1) owns
10% or more of the voting securities of the obligor or (2) is an affiliate,
other than a subsidiary, of the obligor, furnish the following information
as to the voting securities of such person.
As of June 24, 1998
No such securities in excess of 1% of the outstanding shares of any
class were so owned or held.
As to the identity of persons included in the classes described in
clauses (1) and (2) of this item, the answer is based on information
furnished the trustee by the obligor. As to the accuracy or completeness of
such information, the trustee disclaims responsibility.
-4-
<PAGE>
11. Ownership or holdings by the trustee of any securities of a person owning
50% or more of the voting securities of the obligor. If the trustee owns
beneficially or holds as collateral security for obligations in default any
securities of a person who, to the knowledge of the trustee, owns 50% or
more of the voting securities of the obligor, furnish the following
information as to each class of securities of such person any of which are
so owned or held by the trustee.
As of June 24, 1998
No such securities in excess of 1% of the outstanding shares of any
class were so owned or held.
As to the identity of persons of this class, the answer is based on
information furnished the trustee by the obligor. As to the accuracy or
completeness of such information, the trustee disclaims responsibility.
12. Indebtedness of the Obligor to the Trustee. If the Obligor is indebted to
the Trustee, furnish the following information: nature of indebtedness,
amount outstanding and date due.
As of June 24, 1998
The Obligor was not indebted to the Trustee.
13. Defaults by the Obligor. (a) State whether there is or has been a default
with respect to the securities under this indenture. Explain the nature of
any such default. (b) If the trustee is a trustee under another indenture
under which any other securities are outstanding, state whether there has
been a default under any such indenture and explain the nature of any such
default.
As of June 24, 1998
There has been no default respecting such securities.
14. Affiliations with the Underwriters. If the underwriter is an affiliate of
the trustee, describe each such affiliation.
As of June 24, 1998
The underwriter is not an affiliate of the trustee.
-5-
<PAGE>
15. Foreign Trustee. Identify the order or rule pursuant to which the foreign
trustee is under the authorized to act as sole trustee under indentures
qualified or to be qualified Act.
Not applicable.
16. List of Exhibits. List below all exhibits filed as part of this statement
of eligibility and qualification.
* 1. A copy of the articles of incorporation of the trustee as now in
effect.
** 2. A copy of the certificate of authority of the trustee to commence
business.
** 3. A copy of the certificate of authorization of the trustee to
exercise corporate trust powers issued by the Board of Governors
of the Federal Reserve System under date of May 20, 1933 .
* 4. A copy of the existing bylaws of the trustee.
5. Not applicable.
6. The consent of the trustee required by Section 321(b) of the Act.
7. A copy of the latest report of condition of the trustee published
pursuant to law or to requirements of its supervising or examining
authority.
8. Not applicable.
9. Not applicable.
- ---------------
* Incorporated by reference to Exhibit bearing the same Exhibit number
submitted with the trustee's Form T-1 (File No. 22-20536).
** Incorporated by reference to Exhibit bearing the same Exhibit number
submitted with the trustee's Form T-1 (File No. 2-32069).
-6-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939 as
amended, the Trustee, First National Bank of Commerce, a national banking
association organized and existing under the laws of the United States of
America, has duly caused this statement of eligibility and qualification to be
signed on its behalf by the undersigned, thereunto duly authorized, all in the
City of New Orleans, and State of Louisiana on the 24th day of June 1998.
FIRST NATIONAL BANK OF COMMERCE
By: /s/ Denis L. Milliner
----------------------------
Name: Denis L. Milliner
Title: Vice President and
Trust Officer
-7-
<PAGE>
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
6. The consent of the trustee required by Section 321(b) of the Act.
7. A copy of the latest report of condition of the trustee published
pursuant to law or to requirements of its supervising or examining
authority.
<PAGE>
Consent of Trustee Required by Section 321(b)
of the Trust Indenture Act of 1939
In connection with the Indenture referred to in the Form T-1 of even
date herewith between Bayou Steel Corporation and First National Bank of
Commerce, as Trustee, pursuant to Section 321(b) of the Trust Indenture Act of
1939 as amended to November 15, 1990, hereby consents that reports of
examinations by Federal, State, Territorial or District authorities may be
furnished by such authorities to the Securities and Exchange Commission upon
request thereof.
Dated as of June 24 1998
FIRST NATIONAL BANK OF COMMERCE
By /s/ Denis L. Milliner
------------------------
Name: Denis L. Milliner
Title: Vice President and
Trust Officer
<PAGE>
LETTER OF TRANSMITTAL
OFFER TO EXCHANGE REGISTERED
9 1/2% FIRST MORTGAGE NOTES DUE 2008 FOR OUTSTANDING
UNREGISTERED 9 1/2% FIRST MORTGAGE NOTES DUE 2008
(PURSUANT TO THE PROSPECTUS DATED , 1998)
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK
CITY TIME, ON , 1998, UNLESS THE OFFER IS EXTENDED BY THE COMPANY.
TENDERS MAY BE WITHDRAWN PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE
EXPIRATION DATE.
The Exchange Agent for the Exchange Offer is:
First National Bank of Commerce
In New York: By Hand By Registered or
Delivery/Overnight Certified Mail:
Delivery:
First National Bank of First National Bank of First National Bank of
Commerce Commerce Commerce
c/o First Chicago Trust Corporate Trust Services Corporate Trust Services
Company Department Department
14 Wall Street, 8th 210 Baronne Street, P.O. Box 60030
Floor, Suite 4607 Basement Level New Orleans, Louisiana
New York, New York 10002 New Orleans, Louisiana 70160-0030
70112 Attn: Teri Lucas
Attn: Teri Lucas
Via Facsimile:
(504) 623-1095
Confirm by telephone:
(504) 623-7579
For Information Call:
(504) 623-1640
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF THIS LETTER OF TRANSMITTAL VIA FACSIMILE TO A NUMBER
OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY.
The undersigned acknowledges that he or she has received the Prospectus,
dated , 1998 (the "Prospectus"), of Bayou Steel Corporation, a Delaware
corporation (the "Company"), and this Letter of Transmittal, which together
constitute the Company's offer (the "Exchange Offer") to exchange an aggregate
principal amount of up to $110 million 9 1/2% First Mortgage Notes due 2008
(the "Exchange Notes"), which have been registered under the Securities Act of
1933, as amended (the "Securities Act") of the Company for a like principal
amount of the issued and outstanding 9 1/2% First Mortgage Notes due 2008 (the
"Old First Mortgage Notes") of the Company from the holders thereof.
<PAGE>
THE INSTRUCTIONS CONTAINED HEREIN SHOULD BE READ CAREFULLY BEFORE THIS
LETTER OF TRANSMITTAL IS COMPLETED.
Capitalized terms used but not defined herein shall have the same meaning
given them in the Prospectus (as defined below).
This Letter of Transmittal is to be completed by holders of Old First
Mortgage Notes either if Old First Mortgage Notes are to be forwarded herewith
or if tenders of Old First Mortgage Notes are to be made by book-entry
transfer to an account maintained by First National Bank of Commerce (the
"Exchange Agent") at The Depository Trust Company (the "Book-Entry Transfer
Facility" or "DTC") pursuant to the procedures set forth in "The Exchange
Offer--Exchange Offer Procedures" section of the Prospectus.
Holders of Old First Mortgage Notes whose certificates (the "Certificates")
for such Old First Mortgage Notes are not immediately available or who cannot
deliver their Certificates and all other required documents to the Exchange
Agent on or prior to the Expiration Date (as defined in the Prospectus) or who
cannot complete the procedures for book-entry transfer on a timely basis, must
tender their Old First Mortgage Notes according to the guaranteed delivery
procedures set forth in "The Exchange Offer--Exchange Offer Procedures--
Guaranteed Delivery Procedures" section of the Prospectus.
DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY DOES NOT
CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
List below the Old First Mortgage Notes to which this Letter of Transmittal
relates. If the space below is inadequate, list the registered numbers and
principal amount on a separate signed schedule and affix the list to this
Letter of Transmittal.
DESCRIPTION OF OLD FIRST MORTGAGE NOTES TENDERED
<TABLE>
<CAPTION>
NAME(S) AND ADDRESS(ES) OF
REGISTERED OWNER(S) AS
(IT/THEY) APPEAR(S) ON THE
9 1/2% FIRST MORTGAGE NOTES
DUE 2008
- ---------------------------------------------------------------------------------------
CERTIFICATE NUMBERS AGGREGATE PRINCIPAL PRINCIPAL
OF OLD FIRST AMOUNT REPRESENTED BY AMOUNT
MORTGAGE NOTES* OLD FIRST MORTGAGE NOTES TENDERED
-----------------------------------------------------
<S> <C> <C> <C>
-----------------------------------------------------
-----------------------------------------------------
-----------------------------------------------------
-----------------------------------------------------
<CAPTION>
TOTAL PRINCIPAL
AMOUNT OF OLD FIRST
MORTGAGE
NOTES TENDERED**
- ---------------------------------------------------------------------------------------
(If additional space is required, attach a continuation sheet in substantially
the above form.)
- ---------------------------------------------------------------------------------------
</TABLE>
* Need not be completed if Old First Mortgage Notes are being tendered by
book-entry holders.
** Unless otherwise indicated in the column, a holder will be deemed to have
tendered all Old First Mortgage Notes represented by the Old First Mortgage
Notes indicated in Column 2. See Instruction 4.
2
<PAGE>
(BOXES BELOW TO BE CHECKED BY ELIGIBLE INSTITUTIONS ONLY)
[_]CHECK HERE IF TENDERED OLD FIRST MORTGAGE NOTES ARE BEING DELIVERED BY
BOOK-ENTRY TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT
WITH THE BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution: __________________________________________
Account Number: _________________________________________________________
Transaction code Number: ________________________________________________
[_]CHECK HERE AND ENCLOSE A PHOTOCOPY OF THE NOTICE OF GUARANTEED DELIVERY
IF TENDERED OLD FIRST MORTGAGE NOTES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND
COMPLETE THE FOLLOWING:
Name of Registered Holder(s): ___________________________________________
Window Ticket Number (if any): __________________________________________
Date of Execution of Notice of Guaranteed Delivery: _____________________
Name of Institution which Guaranteed Delivery: __________________________
IF GUARANTEED DELIVERY IS TO BE MADE BY BOOK ENTRY TRANSFER:
Name of Tendering Institution: __________________________________________
Account Number: _________________________________________________________
Transaction Code Number: ________________________________________________
[_]CHECK HERE IF TENDERED BY BOOK-ENTRY TRANSFER AND NON-EXCHANGED OLD FIRST
MORTGAGE NOTES ARE TO BE RETURNED BY CREDITING THE BOOK-ENTRY TRANSFER
FACILITY ACCOUNT NUMBER SET FORTH ABOVE.
3
<PAGE>
LADIES AND GENTLEMEN:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to the Company the above described aggregate
principal amount of the Company's 9 1/2% First Mortgage Notes due 2008 (the
"Old First Mortgage Notes") in exchange for a like aggregate principal amount
of the Company's 9 1/2% First Mortgage Notes due 2008 (the "Exchange Notes")
which have been registered under the Securities Act upon the terms and subject
to the conditions set forth in the Prospectus dated , 1998 (as the same
may be amended or supplemented from time to time, the "Prospectus"), receipt
of which is acknowledged, and in this Letter of Transmittal (which, together
with the Prospectus, constitute the "Exchange Offer").
Subject to and effective upon the acceptance for exchange of all or any
portion of the Old First Mortgage Notes tendered herewith in accordance with
the terms and conditions of the Exchange Offer (including, if the Exchange
Offer is extended or amended, the terms and conditions of any such extension
or amendment), the undersigned hereby exchanges, assigns and transfers to or
upon the order of the Company all right, title and interest in and to such Old
First Mortgage Notes as are being tendered herewith. The undersigned hereby
irrevocably constitutes and appoints the Exchange Agent as its agent and
attorney-in-fact (with full knowledge that the Exchange Agent is also acting
as agent of the Company in connection with the Exchange Offer) with respect to
the tendered Old First Mortgage Notes, with full power of substitution (such
power of attorney being deemed to be an irrevocable power coupled with an
interest) subject only to the right of withdrawal described in the Prospectus,
to (i) deliver Certificates for Old First Mortgage Notes to the Company
together with all accompanying evidences of transfer and authenticity to, or
upon the order of, the Company, upon receipt by the Exchange Agent, as the
undersigned's agent, of the Exchange Notes to be issued in exchange for such
Old First Mortgage Notes, (ii) present Certificates for such Old First
Mortgage Notes for transfer, and to transfer the Old First Mortgage Notes on
the books of the Company, and (iii) receive for the account of the Company all
benefits and otherwise exercise all rights of beneficial ownership of such Old
First Mortgage Notes, all in accordance with the terms and conditions of the
Exchange Offer.
THE UNDERSIGNED HEREBY REPRESENTS AND WARRANTS THAT THE UNDERSIGNED HAS FULL
POWER AND AUTHORITY TO TENDER, EXCHANGE, SELL, ASSIGN AND TRANSFER THE OLD
FIRST MORTGAGE NOTES TENDERED HEREBY, AND THAT, WHEN THE SAME ARE ACCEPTED FOR
EXCHANGE, THE COMPANY WILL ACQUIRE GOOD, MARKETABLE AND UNENCUMBERED TITLE
THERETO, FREE AND CLEAR OF ALL LIENS, RESTRICTIONS, CHARGES AND ENCUMBRANCES,
AND THAT THE OLD FIRST MORTGAGE NOTES TENDERED HEREBY ARE NOT SUBJECT TO ANY
ADVERSE CLAIMS OR PROXIES. THE UNDERSIGNED WILL, UPON REQUEST, EXECUTE AND
DELIVER ANY ADDITIONAL DOCUMENTS DEEMED BY THE COMPANY OR THE EXCHANGE AGENT
TO BE NECESSARY OR DESIRABLE TO COMPLETE THE EXCHANGE, ASSIGNMENT AND TRANSFER
OF THE OLD FIRST MORTGAGE NOTES TENDERED HEREBY, AND THE UNDERSIGNED WILL
COMPLY WITH ITS OBLIGATIONS UNDER THE EXCHANGE AND REGISTRATION RIGHTS
AGREEMENT. THE UNDERSIGNED HAS READ AND AGREES TO ALL OF THE TERMS OF THE
EXCHANGE OFFER.
The name(s) and address(es) of the registered holder(s) of the Old First
Mortgage Notes tendered hereby should be printed above, if they are not
already set forth above, as they appear on the Certificates representing such
Old First Mortgage Notes. The Certificate number(s) and the Old First Mortgage
Notes that the undersigned wishes to tender should be indicated in the
appropriate boxes above.
If any tendered Old First Mortgage Notes are not exchanged pursuant to the
Exchange Offer for any reason, or if Certificates are submitted for more Old
First Mortgage Notes than are tendered or accepted for exchange, Certificates
for such nonexchanged or nontendered Old First Mortgage Notes
4
<PAGE>
will be returned (or, in the case of Old First Mortgage Notes tendered by
book-entry transfer, such Old First Mortgage Notes will be credited to an
account maintained at DTC), without expense to the tendering holder, promptly
following the expiration or termination of the Exchange Offer.
The undersigned understands that tenders of Old First Mortgage Notes
pursuant to any one of the procedures described in "The Exchange Offer--
Exchange Offer Procedures" section of the Prospectus and in the instructions,
attached hereto will, upon the Company's acceptance for exchange of such
tendered Old First Mortgage Notes, constitute a binding agreement between the
undersigned and the Company upon the terms and subject to the conditions of
the Exchange Offer. The undersigned recognizes that, under certain
circumstances set forth in the Prospectus, the Company may not be required to
accept for exchange any of the Old First Mortgage Notes tendered hereby.
Unless otherwise indicated herein in the box entitled "Special Issuance
Instructions" below, the undersigned hereby directs that the Exchange Notes be
issued in the name(s) of the undersigned or, in the case of a book-entry
transfer of Old First Mortgage Notes, that such Exchange Notes be credited to
the account indicated above maintained at DTC. If applicable, substitute
Certificates representing Old First Mortgage Notes not exchanged or not
accepted for exchange will be issued to the undersigned or, in the case of a
book-entry transfer of Old First Mortgage Notes, will be credited to the
account indicated above maintained at DTC. Similarly, unless otherwise
indicated under "Special Delivery Instructions," please deliver Exchange Notes
to the undersigned at the address shown below the undersigned's signature.
BY TENDERING OLD FIRST MORTGAGE NOTES AND EXECUTING THIS LETTER OF
TRANSMITTAL, THE UNDERSIGNED HEREBY REPRESENTS AND AGREES THAT (I) THE
UNDERSIGNED IS NOT AN "AFFILIATE" OF THE COMPANY, (II) ANY EXCHANGE NOTES TO
BE RECEIVED BY THE UNDERSIGNED ARE BEING ACQUIRED IN THE ORDINARY COURSE OF
ITS BUSINESS, (III) THE UNDERSIGNED HAS NO ARRANGEMENT OR UNDERSTANDING WITH
ANY PERSON TO PARTICIPATE IN A DISTRIBUTION (WITHIN THE MEANING OF THE
SECURITIES ACT) OF EXCHANGE NOTES TO BE RECEIVED IN THE EXCHANGE OFFER, AND
(IV) IF THE UNDERSIGNED IS NOT A BROKER-DEALER, THE UNDERSIGNED IS NOT ENGAGED
IN, AND DOES NOT INTEND TO ENGAGE IN, A DISTRIBUTION (WITHIN THE MEANING OF
THE SECURITIES ACT) OF SUCH EXCHANGE NOTES. BY TENDERING OLD FIRST MORTGAGE
NOTES PURSUANT TO THE EXCHANGE OFFER AND EXECUTING THIS LETTER OF TRANSMITTAL,
A HOLDER OF OLD FIRST MORTGAGE NOTES WHICH IS A BROKER-DEALER REPRESENTS AND
AGREES, CONSISTENT WITH CERTAIN INTERPRETIVE LETTERS ISSUED BY THE STAFF OF
THE DIVISION OF CORPORATION FINANCE OF THE SECURITIES AND EXCHANGE COMMISSION
TO THIRD PARTIES, THAT (A) SUCH OLD FIRST MORTGAGE NOTES HELD BY THE BROKER-
DEALER ARE HELD ONLY AS A NOMINEE, OR (B) SUCH OLD FIRST MORTGAGE NOTES WERE
ACQUIRED BY SUCH BROKER-DEALER FOR ITS OWN ACCOUNT AS A RESULT OF MARKET
MAKING ACTIVITIES OR OTHER TRADING ACTIVITIES AND IT WILL DELIVER THE
PROSPECTUS (AS AMENDED OR SUPPLEMENTED FROM TIME TO TIME) MEETING THE
REQUIREMENTS OF THE SECURITIES ACT IN CONNECTION WITH ANY RESALE OF SUCH
EXCHANGE NOTES (PROVIDED THAT, BY SO ACKNOWLEDGING AND BY DELIVERING A
PROSPECTUS, SUCH BROKER-DEALER WILL NOT BE DEEMED TO ADMIT THAT IT IS AN
"UNDERWRITER" WITHIN THE MEANING OF THE SECURITIES ACT).
THE COMPANY HAS AGREED THAT, SUBJECT TO THE PROVISIONS OF THE EXCHANGE AND
REGISTRATION RIGHTS AGREEMENT, THE PROSPECTUS, AS IT MAY BE AMENDED OR
SUPPLEMENTED FROM TIME TO TIME, MAY BE USED BY AN EXCHANGING DEALER (AS
DEFINED BELOW) IN CONNECTION WITH RESALES OF EXCHANGE NOTES RECEIVED IN
EXCHANGE FOR OLD FIRST MORTGAGE NOTES, WHERE SUCH OLD FIRST MORTGAGE NOTES
WERE ACQUIRED BY SUCH EXCHANGING DEALER FOR ITS OWN ACCOUNT AS A RESULT OF
5
<PAGE>
MARKET-MAKING ACTIVITIES OR OTHER TRADING ACTIVITIES, FOR A PERIOD ENDING 180
DAYS AFTER THE EXPIRATION DATE (SUBJECT TO EXTENSION UNDER CERTAIN LIMITED
CIRCUMSTANCES DESCRIBED IN THE PROSPECTUS) OR, IF EARLIER, WHEN ALL SUCH
EXCHANGE NOTES HAVE BEEN DISPOSED OF BY SUCH EXCHANGING DEALER. IN THAT
REGARD, EACH BROKER-DEALER WHO ACQUIRED OLD FIRST MORTGAGE NOTES FOR ITS OWN
ACCOUNT AS A RESULT OF MARKET-MAKING OR OTHER TRADING ACTIVITIES (AN
"EXCHANGING DEALER"), BY TENDERING SUCH OLD FIRST MORTGAGE NOTES AND EXECUTING
THIS LETTER OF TRANSMITTAL, AGREES THAT, UPON RECEIPT OF NOTICE FROM THE
COMPANY OF THE OCCURRENCE OF ANY EVENT OR THE DISCOVERY OF ANY FACT WHICH
MAKES ANY STATEMENT CONTAINED OR INCORPORATED BY REFERENCE IN THE PROSPECTUS
UNTRUE IN ANY MATERIAL RESPECT OR WHICH CAUSES THE PROSPECTUS TO OMIT TO STATE
A MATERIAL FACT NECESSARY IN ORDER TO MAKE THE STATEMENTS CONTAINED OR
INCORPORATED BY REFERENCE THEREIN, IN LIGHT OF THE CIRCUMSTANCES UNDER WHICH
THEY WERE MADE, NOT MISLEADING OR OF THE OCCURRENCE OF CERTAIN OTHER EVENTS
SPECIFIED IN THE EXCHANGE AND REGISTRATION RIGHTS AGREEMENT, SUCH EXCHANGING
DEALER WILL SUSPEND THE SALE OF EXCHANGE NOTES PURSUANT TO THE PROSPECTUS
UNTIL THE COMPANY HAS AMENDED OR SUPPLEMENTED THE PROSPECTUS TO CORRECT SUCH
MISSTATEMENT OR OMISSION AND HAVE FURNISHED COPIES OF THE AMENDED OR
SUPPLEMENTED PROSPECTUS TO THE EXCHANGING DEALER OR THE COMPANY HAS GIVEN
NOTICE THAT THE SALE OF THE EXCHANGE NOTES MAY BE RESUMED, AS THE CASE MAY BE.
IF THE COMPANY GIVES SUCH NOTICE TO SUSPEND THE SALE OF THE EXCHANGE NOTES,
THEY SHALL EXTEND THE 180-DAY PERIOD REFERRED TO ABOVE DURING WHICH EXCHANGING
DEALERS ARE ENTITLED TO USE THE PROSPECTUS IN CONNECTION WITH THE RESALE OF
EXCHANGE NOTES BY THE NUMBER OF DAYS DURING THE PERIOD FROM AND INCLUDING THE
DATE OF THE GIVING OF SUCH NOTICE TO AND INCLUDING THE DATE WHEN EXCHANGING
DEALERS SHALL HAVE RECEIVED COPIES OF THE SUPPLEMENTED OR AMENDED PROSPECTUS
NECESSARY TO PERMIT RESALES OF THE EXCHANGE NOTES OR TO AND INCLUDING THE DATE
ON WHICH THE COMPANY HAS GIVEN NOTICE THAT THE SALE OF EXCHANGE NOTES MAY BE
RESUMED, AS THE CASE MAY BE.
Holders of Old First Mortgage Notes whose Old First Mortgage Notes are
accepted for exchange will not receive accrued interest on such Old First
Mortgage Notes for any period from and after the last Interest Payment Date to
which interest has been paid or duly provided for on such Old First Mortgage
Notes prior to the Old First Mortgage issue date of the Exchange Notes or, if
no such interest has been paid or duly provided for, will not receive any
accrued interest on such Old First Mortgage Notes, and the undersigned waives
the right to receive any interest on such Old First Mortgage Notes accrued
from and after such Interest Payment Date or, if no such interest has been
paid or duly provided for, from and after May 22, 1998.
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Company to be necessary or desirable to complete the
sale, assignment and transfer of the Old First Mortgage Notes tendered hereby.
All authority herein conferred or agreed to be conferred in this Letter of
Transmittal shall survive the death or incapacity of the undersigned and any
obligation of the undersigned hereunder shall be binding upon the heirs,
executors, administrators, personal representatives, trustees in bankruptcy,
legal representatives, successors and assigns of the undersigned. Except as
stated in the Prospectus, this tender is irrevocable.
THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF OLD FIRST
MORTGAGE NOTES TENDERED" ABOVE AND SIGNING THIS LETTER, WILL BE DEEMED TO HAVE
TENDERED THE OLD FIRST MORTGAGE NOTES AS SET FORTH IN SUCH BOX.
6
<PAGE>
HOLDER(S) SIGN HERE
(SEE INSTRUCTIONS 2, 5 AND 6)
(PLEASE COMPLETE SUBSTITUTE FORM W-9 ON PAGE )
(NOTE: SIGNATURE(S) MUST BE GUARANTEED IF REQUIRED BY INSTRUCTION 2)
Must be signed by registered holder(s) exactly as name(s) appear(s) on
Certificate(s) for the Old First Mortgage Notes hereby tendered or on the
register of holders maintained by the Company, or by any person(s)
authorized to become the registered holder(s) by endorsements and documents
transmitted herewith (including such opinions of counsel, certifications and
other information as may be required by the Company or the Trustee for the
Old First Mortgage Notes to comply with the restrictions on transfer
applicable to the Old First Mortgage Notes). If signature is by an attorney-
in-fact, executor, administrator, trustee, guardian, officer of a
corporation or another acting in a fiduciary capacity or representative
capacity, please set forth the signer's full title. See Instruction 5.
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
(Signature(s) of Holder(s))
Date: , 1998
Name(s): ____________________________________________________________________
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
(Please Print)
Capacity (full title): ______________________________________________________
Address: ____________________________________________________________________
(Include Zip Code)
Area Code and Telephone Number: _____________________________________________
(Tax Identification or Social Security Number(s)): __________________________
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 2 AND 5)
-----------------------------------------------------------------------------
(Authorized Signature)
Date: , 199
Name of Firm: _______________________________________________________________
Capacity (full title): ______________________________________________________
(Please Print)
Address: ____________________________________________________________________
(Include Zip Code)
Area Code and Telephone Number: _____________________________________________
7
<PAGE>
SPECIAL ISSUANCE INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 5 AND 6) (SEE INSTRUCTIONS 5 AND 6)
To be completed ONLY (i) if Old To be completed ONLY if the
First Mortgage Notes in a principal Exchange Notes are to be issued or
amount not tendered, or Exchange sent to someone other than the
Notes issued in exchange for Old undersigned or to the undersigned
First Mortgage Notes accepted for at an address other than as
exchange, are to be issued in the indicated above.
name of someone other than the
undersigned, or (ii) if Old First [_] Mail [_] Issue (check
Mortgage Notes tendered by book- appropriate boxes) certificates to:
entry transfer which are not
exchanged are to be returned by Name: ______________________________
credit to an account maintained at (Type or Print)
the Book-entry Transfer Facility.
Issue Exchange Notes and/or Old Address: ___________________________
First Mortgage Notes to:
------------------------------------
Name: ______________________________ (Zip
(Type or Print) Code)
Address: ___________________________ ------------------------------------
(Tax Identification or Social
Security Number)
------------------------------------
(Zip Code)
------------------------------------
(Tax Identification or Social
Security Number)
(COMPLETE SUBSTITUTE FORM W-9)
Credit nonexchanged Old First
Mortgage Notes delivered by book-
entry transfer to the Book-Entry
Transfer Facility set forth below:
Book-Entry Transfer Facility
Account Number:
------------------------------------
SPECIAL BROKER-DEALER INSTRUCTIONS
[_]Check here if you are a broker-dealer and wish to receive 10 additional
copies of the Prospectus and 10 copies of any amendments or supplements
thereto.
Name: ____________________________________________________________________
Address: _________________________________________________________________
--------------------------------------------------------------------------
(Zip Code)
If the undersigned is not a broker-dealer, the undersigned represents that it
is engaged in, and does not intend to engage in, a distribution of Exchange
Notes. If the undersigned is a broker-dealer that will receive Exchange Notes
for its own account in exchange for Old First Mortgage Notes that were
acquired as a result of market-making activities or other trading activities,
it acknowledges that it will deliver a prospectus in connection with any
resale of such Exchange Notes; however, by so acknowledging and by delivering
a prospectus, the undersigned will not be deemed to admit it is an
"underwriter" within the meaning of the Securities Act.
8
<PAGE>
INSTRUCTIONS FORMING PART OF THE TERMS
AND CONDITIONS OF THE EXCHANGE OFFER
1. Delivery of Letter of Transmittal and Certificates; Guaranteed Delivery
Procedures. This Letter of Transmittal is to be completed either if (a)
Certificates are to be forwarded herewith or (b) tenders are to be made
pursuant to the procedures for tender by book-entry transfer set forth in "The
Exchange Offer--Exchange Offer Procedures" in the Prospectus. In order to
tender Old First Mortgage Notes, Certificates, or timely confirmation of a
book-entry transfer of such Old First Mortgage Notes into the Exchange Agent's
account at DTC, as well as this Letter of Transmittal (or facsimile thereof),
properly completed and duly executed, with any required signature guarantees,
and any other documents required by this Letter of Transmittal, must be
received by the Exchange Agent at its address set forth herein on or prior to
the Expiration Date.
Holders who wish to tender their Old First Mortgage Notes and (i) whose Old
First Mortgage Notes are not immediately available or (ii) who cannot deliver
their Old First Mortgage Notes, this Letter of Transmittal and all other
required documents to the Exchange Agent on or prior to the Expiration Date or
(iii) who cannot complete the procedures for delivery by book-entry transfer
on a timely basis, may tender their Old First Mortgage Notes by properly
completing and duly executing a Notice of Guaranteed Delivery pursuant to the
guaranteed delivery procedures set forth in "The Exchange Offer--Exchange
Offer Procedures--Guaranteed Delivery Procedures" in the Prospectus. Pursuant
to such procedures: (i) such tender must be made by or through an Eligible
Institution (as defined below); (ii) a properly completed and duly executed
Notice of Guaranteed Delivery, substantially in the form made available by the
Company, must be received by the Exchange Agent on or prior to the Expiration
Date; and (iii) the Certificates (or a book-entry confirmation (as defined in
the Prospectus)) representing all tendered Old First Mortgage Notes may be
tendered in whole or in part, in proper form for transfer, together with a
Letter of Transmittal (or facsimile thereof), properly completed and duly
executed, with any required signature guarantees and any other documents
required by this Letter of Transmittal, must be received by the Exchange Agent
within three New York Stock Exchange, Inc. trading days after the date of
execution of such Notice of Guaranteed Delivery, all as provided in "The
Exchange Offer--Exchange Offer Procedures" in the Prospectus.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted by
facsimile or mail to the Exchange Agent, and must include a guarantee by an
Eligible Institution in the form set forth in such notice. For Old First
Mortgage Notes to be properly tendered pursuant to the guaranteed delivery
procedure, the Exchange Agent must receive a Notice of Guaranteed Delivery on
or prior to the Expiration Date. As used herein and in the Prospectus,
"Eligible Institution" means a firm or other entity identified in Rule 17Ad-15
under the Exchange Act as "an eligible guarantor institution," including (as
such terms are defined therein) (i) a bank; (ii) a broker, dealer, municipal
securities broker or dealer or government securities broker or dealer; (iii) a
credit union; (iv) a national securities exchange, registered securities
association or clearing agency; or (v) a savings association that is a
participant in a Securities Transfer Association.
THE METHOD OF DELIVERY OF CERTIFICATES, THIS LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND SOLE RISK OF THE TENDERING
HOLDER AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE
EXCHANGE AGENT. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT
REQUESTED, PROPERLY INSURED, OR OVERNIGHT DELIVERY SERVICE IS RECOMMENDED. IN
ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
The Company will not accept any alternative, conditional or contingent
tenders. Each tendering holder, by execution of a Letter of Transmittal (or
facsimile thereof), waives any right to receive any notice of the acceptance
of such tender.
9
<PAGE>
2. Guarantee of Signatures. No signature guarantee on this Letter of
Transmittal is required if:
(i) this Letter of Transmittal is signed by the registered holder (which
term, for purposes of this document, shall include any participant in
DTC whose name appears on the register of holders maintained by the
Company as the owner of the Old First Mortgage Notes) of Old First
Mortgage Notes tendered herewith, unless such holder(s) has completed
either the box entitled "Special Issuance Instructions" or the box
entitled "Special Delivery Instructions" above, or
(ii) such Old First Mortgage Notes are tendered for the account of a firm
that is an Eligible Institution.
In all other cases, an Eligible Institution must guarantee the signature(s)
on this Letter of Transmittal. See Instruction 5.
3. Inadequate Space. If the space provided in the box captioned "Description
of Old First Mortgage Notes Tendered" is inadequate, the Certificate number(s)
and/or the principal amount of Old First Mortgage Notes and any other required
information should be listed on a separate signed schedule which is attached
to this Letter of Transmittal.
4. Partial Tenders and Withdrawal Rights. Tenders of Old First Mortgage
Notes will be accepted only in the principal amount of $1,000 and integral
multiples of $1,000 in excess thereof. If less than all the Old First Mortgage
Notes evidenced by any Certificate submitted are to be tendered, new
Certificate(s) for the remainder of the Old First Mortgage Notes that were
evidenced by your old Certificate(s) will only be sent to the holder of the
Old First Mortgage Note, promptly after the Expiration Date. All Old First
Mortgage Notes represented by Certificates delivered to the Exchange Agent
will be deemed to have been tendered unless otherwise indicated.
Except as otherwise provided herein, tenders of Old First Mortgage Notes may
be withdrawn at any time on or prior to the Expiration Date. In order for a
withdrawal to be effective, a written or facsimile transmission of such notice
of withdrawal must be timely received by the Exchange Agent at one of its
addresses set forth above or in the Prospectus on or prior to the Expiration
Date. Any such notice of withdrawal must specify the name of the person who
tendered the Old First Mortgage Notes to be withdrawn (which must be an
authorized denomination), that such holder is withdrawing his election to have
such Old First Mortgage Notes exchanged, the aggregate principal amount of Old
First Mortgage Notes to be withdrawn, and (if Certificates for Old First
Mortgage Notes have been tendered) the name of the registered holder of the
Old First Mortgage Notes as set forth on the Certificate for the Old First
Mortgage Notes, if different from that of the person who tendered such Old
First Mortgage Notes. If Certificates for the Old First Mortgage Notes have
been delivered or otherwise identified to the Exchange Agent, then prior to
the physical release of such Certificates for the Old First Mortgage Notes,
the tendering holder must submit the serial numbers shown on the particular
Certificates for the Old First Mortgage Notes to be withdrawn and the
signature on the notice of withdrawal must be guaranteed by an Eligible
Institution (except in the case of Old First Mortgage Notes tendered for the
account of an Eligible Institution).
If Old First Mortgage Notes have been tendered pursuant to the procedures
for book entry transfer set forth in the Prospectus under "The Exchange
Offer--Exchange Offer Procedures," the notice of withdrawal must specify the
name and number of the account at DTC to be credited with the withdrawal of
Old First Mortgage Notes, in which case a notice of withdrawal will be
effective if delivered to the Exchange Agent by written or facsimile
transmission. Withdrawals of tenders of Old First Mortgage Notes may not be
rescinded. Old First Mortgage Notes properly withdrawn will not be deemed
validly tendered for purposes of the Exchange Offer, but may be retendered at
any subsequent time on or prior to the Expiration Date by following any of the
procedures described in the Prospectus under "The Exchange Offer--Exchange
Offer Procedures."
10
<PAGE>
All questions as to the validity, form and eligibility (including time of
receipt) of such withdrawal notices will be determined by the Company, in its
sole discretion, whose determination shall be final and binding on all
parties. None of the Company, any affiliates or assigns of the Company, the
Exchange Agent or any other person shall be under any duty to give any
notification of any irregularities in any notice of withdrawal or incur any
liability for failure to give any such notification. Any Old First Mortgage
Notes which have been tendered but which are withdrawn will be returned to the
holder thereof without cost to such holder promptly after withdrawal.
5. Signatures on Letter of Transmittal, Assignments and Endorsements. If
this Letter of Transmittal is signed by the registered holder(s) of the Old
First Mortgage Notes tendered hereby, the signatures must correspond exactly
with the name(s) as written on the face of the Certificate(s) without
alteration, enlargement or any change whatsoever.
If any of the Old First Mortgage Notes tendered hereby are owned of record
by two or more joint owners, all such owners must sign this Letter of
Transmittal.
If any tendered Old First Mortgage Notes are registered in different name(s)
on several Certificates, it will be necessary to complete, sign and submit as
many separate Letters of Transmittal (or facsimiles thereof) as there are
different registrations of Certificates.
If this Letter of Transmittal or any Certificates or bond powers are signed
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations or others acting in a fiduciary or representative capacity,
such persons should so indicate when signing and must submit proper evidence
satisfactory to the Company, in its sole discretion, of each such person's
authority so to act.
When this Letter of Transmittal is signed by the registered owner(s) of the
Old First Mortgage Notes listed and transmitted hereby, no endorsement(s) of
Certificate(s) or separate bond power(s) are required unless Exchange Notes
are to be issued in the name of a person other than the registered holder(s).
Signature(s) on such Certificate(s) or bond power(s) must be guaranteed by an
Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered owner(s) of the Old First Mortgage Notes listed, the Certificates
must be endorsed or accompanied by appropriate bond powers, signed exactly as
the name or names of the registered owner(s) appear(s) on the Certificates,
and also must be accompanied by such opinions of counsel, certifications and
other information as the Company or the Trustee for the Old First Mortgage
Notes may require in accordance with the restrictions on transfer applicable
to the Old First Mortgage Notes. Signatures on such Certificates or bond
powers must be guaranteed by an Eligible Institution.
6. Special Issuance and Delivery Instructions. If Exchange Notes are to be
issued in the name of a person other than the signer of this Letter of
Transmittal, or if Exchange Notes are to be sent to someone other than the
signer of this Letter of Transmittal or to an address other than that shown
above, the appropriate boxes on this Letter of Transmittal should be
completed. Certificates for Old First Mortgage Notes not exchanged will be
returned by mail or, if tendered by book-entry transfer, by crediting the
account indicated above maintained at DTC. See Instruction 4.
7. Irregularities. The Company will determine, in its sole discretion, all
questions as to the form of documents, validity, eligibility (including time
of receipt) and acceptance for exchange of any tender of Old First Mortgage
Notes, which determination shall be final and binding on all parties. The
Company reserves the absolute right to reject any and all tenders not in
proper form or the acceptance of which, or exchange for which, may, in the
opinion of counsel to the Company, be unlawful. The Company also reserves the
absolute right, subject to applicable law, to waive any of the conditions of
the Exchange Offer set forth in the Prospectus under "The Exchange Offer--
11
<PAGE>
Conditions to the Exchange Offer" or any defects or irregularities in any
tender of Old First Mortgage Notes of any particular holder whether or not
similar defects or irregularities are waived in the case of other holders. The
Company's interpretation of the terms and conditions of the Exchange Offer
(including this Letter of Transmittal and the instructions hereto) will be
final and binding. No tender of Old First Mortgage Notes will be deemed to
have been validly made until all defects and irregularities with respect to
such tender have been cured or waived. None of the Company, any affiliates or
assigns of the Company, the Exchange Agent, or any other person will be under
any duty to give notification of any irregularities in tenders or incur any
liability for failure to give such notification.
8. Questions, Requests for Assistance and Additional Copies. Questions and
requests for assistance may be directed to the Exchange Agent at its address
and telephone number set forth on the front of this Letter of Transmittal.
Additional copies of the Prospectus, the Notice of Guaranteed Delivery and the
Letter of Transmittal may be obtained from the Exchange Agent or from your
broker, dealer, commercial bank, trust company or other nominee.
9. 31% Backup Withholding; Substitute Form W-9. Under U.S. Federal income
tax law, a holder whose tendered Old First Mortgage Notes are accepted for
exchange is required to provide the Exchange Agent with such holder's correct
taxpayer identification number ("TIN") on Substitute Form W-9 below. If the
Exchange Agent is not provided with the correct TIN, the Internal Revenue
Service (the "IRS") may subject the holder or other payee to a $50 penalty. In
addition, payments to such holders or other payees with respect to Old First
Mortgage Notes exchanged pursuant to the Exchange Offer may be subject to 31%
backup withholding.
The box in Part 3 of the Substitute Form W-9 may be checked if the tendering
holder has not been issued a TIN and has applied for a TIN or intends to apply
for a TIN in the near future. If the box in Part 3 is checked, the holder or
other payee must also complete the Certificate of Awaiting Taxpayer
Identification Number below in order to avoid backup withholding.
Notwithstanding that the box in Part 3 is checked and the Certificate of
Awaiting Taxpayer Identification Number is completed, the Exchange Agent will
withhold 31% of all payments made prior to the time a properly certified TIN
is provided to the Exchange Agent. The Exchange Agent will retain such amounts
withheld during the 60 day period following the date of the Substitute Form
W-9. If the holder furnishes the Exchange Agent with its TIN within 60 days
after the date of the Substitute Form W-9, the amounts retained during the 60
day period will be remitted to the holder and no further amounts shall be
retained or withheld from payments made to the holder thereafter. If, however,
the holder has not provided the Exchange Agent with its TIN within such 60 day
period, amounts withheld will be remitted to the IRS as backup withholding. In
addition, 31% of all payments made thereafter will be withheld and remitted to
the IRS until a correct TIN is provided.
The holder is required to give the Exchange Agent the TIN (e.g., social
security number or employer identification number) of the registered owner of
the Old First Mortgage Notes or of the last transferee appearing on the
transfers attached to, or endorsed on, the Old First Mortgage Notes. If the
Old First Mortgage Notes are registered in more than one name or are not in
the name of the actual owner, consult the enclosed "Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9" for
additional guidance on which number to report.
Certain holders (including, among others, corporations, financial
institutions and certain foreign persons) may not be subject to these backup
withholding and reporting requirements. Such holders should nevertheless
complete the attached Substitute Form W-9 below, and write "exempt" on the
face thereof, to avoid possible erroneous backup withholding. A foreign person
may qualify as an exempt recipient by submitting a properly completed IRS Form
W-8, signed under penalties of perjury, attesting to that holder's exempt
status. Please consult the enclosed "Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9" for additional guidance on which
holders are exempt from backup withholding.
12
<PAGE>
Backup withholding is not an additional U.S. Federal income tax. Rather, the
U.S. Federal income tax liability of a person subject to backup withholding
will be reduced by the amount of tax withheld. If withholding results in an
overpayment of taxes, a refund may be obtained.
10. Waiver of Conditions. The Company reserves the absolute right to waive
satisfaction of any or all conditions enumerated in the Prospectus.
11. No Conditional Tenders. No alternative, conditional, irregular or
contingent tenders will be accepted. All tendering holders of Old First
Mortgage Notes, by execution of this Letter of Transmittal, shall waive any
right to receive notice of the acceptance of their Old First Mortgage Notes
for exchanges.
Neither the Company, the Exchange Agent nor any other person is obligated to
give notice of any defect or irregularity with respect to any tender of Old
First Mortgage Notes nor shall any of them incur any liability for failure to
give any such notice.
12. Lost, Destroyed or Stolen Certificates. If any Certificate(s)
representing Old First Mortgage Notes have been lost, destroyed or stolen, the
holder should promptly notify the Exchange Agent. The holder will then be
instructed as to the steps that must be taken in order to replace the
Certificate(s). This Letter of Transmittal and related documents cannot be
processed until the procedures for replacing lost, destroyed or stolen
Certificate(s) have been followed.
13. Security Transfer Taxes. Holders who tender their Old First Mortgage
Notes for exchange will not be obligated to pay any transfer taxes in
connection therewith. If, however, Exchange Notes are to be delivered to, or
are to be issued in the name of, any person other than the registered holder
of the Old First Mortgage Notes tendered, or if a transfer tax is imposed for
any reason other than the exchange of Old First Mortgage Notes in connection
with the Exchange Offer, then the amount of any such transfer tax (whether
imposed on the registered holder or any other persons) will be payable by the
tendering holder. If satisfactory evidence of payment of such taxes or
exemption therefrom is not submitted with the Letter of Transmittal, the
amount of such transfer taxes will be billed directly to such tendering
holder.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR FACSIMILE THEREOF) AND ALL OTHER
REQUIRED DOCUMENTS MUST BE RECEIVED BY THE EXCHANGE AGENT ON OR PRIOR TO THE
EXPIRATION DATE.
13
<PAGE>
TO BE COMPLETED BY ALL TENDERING SECURITY HOLDERS
(SEE INSTRUCTION 9)
PART 1--PLEASE PROVIDE YOUR Social Security Number
TIN IN THE BOX AT RIGHT AND OR Employer
CERTIFY BY SIGNING AND Identification Number
SUBSTITUTE DATING BELOW. -----------------------
--------------------------------------------------------
FORM W-9 PART 2--CERTIFICATION--Under PART 3
penalties of perjury, I certify Awaiting TIN
that: [_]
Please
(1) The number shown on this form complete the
DEPARTMENT OF THE is my correct Taxpayer Certificate of
TREASURY INTERNAL REVENUE Identification Number (or I am Awaiting
SERVICE waiting for a number to be Taxpayer
issued to me) and Identification
Number below.
PAYER'S REQUEST FOR (2) I am not subject to backup
TAXPAYER IDENTIFICATION withholding either because: I
NUMBER ("TIN") have not been notified by the
Internal Revenue Service (the
"IRS") that I am subject to
backup withholding as a result
of failure to report all
interest or dividends, or the
IRS has notified me that I am
no longer subject to backup
withholding.
--------------------------------------------------------
CERTIFICATION INSTRUCTIONS--You must cross out item
(2) above if you have been notified by the IRS that
you are currently subject to backup withholding
because of underreporting interest or dividends on
your tax return. However, if after being notified by
the IRS that you are subject to backup withholding,
you received another notification from the IRS that
you are no longer subject to backup withholding, do
not cross out such item (2).
Signature _________________________________Date, 1998
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE EXCHANGE
OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF
TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL
DETAILS.
14
<PAGE>
YOU MUST COMPLETE THE FOLLOWING CERTIFICATION IF YOU CHECKED
THE BOX IN PART 3 OF SUBSTITUTE FORM W-9
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (a) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or
(b) I intend to mail or deliver an application in the near future. I
understand that if I do not provide a taxpayer identification number within
60 days, 31% of all reportable payments made to me thereafter will be
withheld until I provide a number.
______________________________, 1998
------------------------------------- Date
Signature
CERTIFICATE FOR FOREIGN RECORD HOLDERS
Under penalties of perjury, I certify that I am not a United States citizen
or resident (or I am signing for a foreign corporation, partnership, estate
or trust).
------------------------------------- ______________________________, 1998
Signature Date
15
<PAGE>
NOTICE OF GUARANTEED DELIVERY
FOR TENDER OF
ANY AND ALL OUTSTANDING
9 1/2% FIRST MORTGAGE NOTES DUE 2008
(PRINCIPAL AMOUNT $1,000 PER FIRST MORTGAGE NOTE)
OF
BAYOU STEEL CORPORATION
This Notice of Guaranteed Delivery, or one substantially equivalent to this
form, must be used to accept the Exchange Offer (as defined below) if (i)
certificates for the Company's (as defined below) 9 1/2% First Mortgage Notes
due 2008 (the "Old First Mortgage Notes") are not immediately available, (ii)
Old First Mortgage Notes, the Letter of Transmittal and all other required
documents cannot be delivered to First National Bank of Commerce (the
"Exchange Agent") on or prior to 5:00 p.m., New York City time, on the
Expiration Date (as defined in the Prospectus referred to below) or (iii) the
procedures for delivery by book-entry transfer cannot be completed on a timely
basis. This Notice of Guaranteed Delivery may be delivered by hand, overnight
courier or mail, or transmitted by facsimile transmission, to the Exchange
Agent. See "The Exchange Offer--Exchange Offer Procedures" in the Prospectus.
In addition, in order to utilize the guaranteed delivery procedure to tender
Old First Mortgage Notes pursuant to the Exchange Offer, a completed, signed
and dated Letter of Transmittal relating to Old First Mortgage Notes (or
facsimile thereof) must also be received by the Exchange Agent prior to 5:00
p.m., New York City time, on the Expiration Date. Capitalized terms not
defined herein have the meanings assigned to them in the Prospectus.
The Exchange Agent For The Exchange Offer Is:
First National Bank of Commerce
In New York: By Hand By Registered or
Delivery/Overnight Certified Mail:
Delivery:
First National Bank of First National Bank of First National Bank of
Commerce Commerce Commerce
c/o First Chicago Trust Corporate Trust Services Corporate Trust Services
Company Department Department
14 Wall Street, 8th 210 Baronne Street, P.O. Box 60030
Floor, Suite 4607 Basement Level New Orleans, Louisiana
New York, New York 10002 New Orleans, Louisiana 70160-0030
70112 Attn: Teri Lucas
Attn: Teri Lucas
Via Facsimile:
(504) 623-1095
Confirm by telephone:
(504) 623-7579
For Information Call:
(504) 623-1640
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE OR TRANSMISSION OF THIS NOTICE OF GUARANTEED DELIVERY VIA
FACSIMILE TO A NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A
VALID DELIVERY.
THIS NOTICE OF GUARANTEED DELIVERY IS NOT TO BE USED TO GUARANTEE
SIGNATURES. IF A SIGNATURE ON A LETTER OF TRANSMITTAL IS REQUIRED TO BE
GUARANTEED BY AN "ELIGIBLE INSTITUTION" UNDER THE INSTRUCTIONS THERETO, SUCH
SIGNATURE GUARANTEE MUST APPEAR IN THE APPLICABLE SPACE PROVIDED IN THE
SIGNATURE BOX ON THE LETTER OF TRANSMITTAL.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to Bayou Steel Corporation, a Delaware
company (the "Company"), upon the terms and subject to the conditions set
forth in the Prospectus dated , 1998 (as the same may be amended or
supplemented from time to time, the "Prospectus"), and the related Letter of
Transmittal (which together constitute the "Exchange Offer"), receipt of which
is hereby acknowledged, the aggregate principal amount of Old First Mortgage
Notes set forth below pursuant to the guaranteed delivery procedures set forth
in the Prospectus under the caption "The Exchange Offer--Exchange Offer
Procedures."
The undersigned understands and acknowledges that the Exchange Offer will
expire at 5:00 p.m., New York City time, on , 1998, unless
extended by the Company. With respect to the Exchange Offer, "Expiration Date"
means such time and date, or if the Exchange Offer is extended, the latest
time and date to which the Exchange Offer is so extended by the Issuer.
All authority herein conferred or agreed to be conferred by this Notice of
Guaranteed Delivery shall survive the death or incapacity of the undersigned
and every obligation of the undersigned under this Notice of Guaranteed
Delivery shall be binding upon the heirs, personal representatives, executors,
administrators, successors, assigns, trustees in bankruptcy and other legal
representatives of the undersigned.
DESCRIPTION OF OLD FIRST MORTGAGE NOTES TENDERED
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CERTIFICATE NUMBER(S) (IF KNOWN)
OF OLD FIRST MORTGAGE NOTES OR AGGREGATE PRINCIPAL AMOUNT
ACCOUNT NUMBER AT THE BOOK- REPRESENTED BY
ENTRY TRANSFER FACILITY OLD FIRST MORTGAGE NOTES PRINCIPAL AMOUNT TENDERED
<S> <C>
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
</TABLE>
TOTAL:
- -------------------------------------------------------------------------------
PLEASE SIGN AND COMPLETE
- -------------------------------------------------------------------------------
Signature(s): _____________________
Name(s): ____________________________
___________________________________ _____________________________________
Address: __________________________ Capacity (full title), if signing in
___________________________________ a representative capacity: __________
(Zip Code)
Area Code and Telephone Number: Taxpayer Identification or Social
___________________________________ Security Number: ____________________
Dated: ____________________________
- -------------------------------------------------------------------------------
<PAGE>
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm or other entity identified in Rule 17Ad-15 under the
Securities Exchange Act of 1934, as amended, as an "eligible guarantor
institution," including (as such terms are defined therein): (i) a bank; (ii)
a broker, dealer, municipal securities broker, municipal securities dealer,
government securities broker, government securities dealer; (iii) a credit
union; (iv) a national securities exchange, registered securities association
or learning agency; or (v) a savings association that is a participant in a
Securities Transfer Association recognized program (each of the foregoing
being referred to as an "Eligible Institution"), hereby guarantees to deliver
to the Exchange Agent, at one of its addresses set forth above, either the Old
First Mortgage Notes tendered hereby in proper form for transfer, or
confirmation of the book-entry transfer of such Old First Mortgage Notes to
the Exchange Agent's account at The Depository Trust Company, pursuant to the
procedures for book-entry transfer set forth in the Prospectus, in either case
together with one or more properly completed and duly executed Letter(s) of
Transmittal (or facsimile thereof) and any other required documents within
three New York Stock Exchange trading days after the date of execution of this
Notice of Guaranteed Delivery.
The undersigned acknowledges that it must deliver the Letter(s) of
Transmittal and the Old First Mortgage Notes tendered hereby to the Exchange
Agent within the time period set forth above and that failure to do so could
result in a financial loss to the undersigned.
_____________________________________
(Name of Firm)
Sign here: __________________________
(Authorized Signature)
Name: _______________________________
(Please type or print)
Title: ______________________________
_____________________________________
(Area Code and Telephone Number)
_____________________________________
_____________________________________
Dated: ________________________, 1998 Address _____________________ Zip Code
NOTE: DO NOT SEND CERTIFICATES FOR OLD FIRST MORTGAGE NOTES WITH THIS FORM.
CERTIFICATES FOR OLD FIRST MORTGAGE NOTES SHOULD ONLY BE SENT WITH YOUR LETTER
OF TRANSMITTAL.
<PAGE>
BAYOU STEEL CORPORATION
OFFER TO EXCHANGE ALL OUTSTANDING UNREGISTERED
9 1/2% FIRST MORTGAGE NOTES DUE 2008
FOR REGISTERED 9 1/2% FIRST MORTGAGE NOTES DUE 2008
To Registered Holders and Depository Trust Company Participants:
Enclosed for your consideration is a Prospectus dated , 1998 (as the same
may be amended or supplemented from time to time, the "Prospectus") and a form
of Letter of Transmittal (the "Letter of Transmittal") relating to the offer
(the "Exchange Offer") by Bayou Steel Corporation (the "Company") to exchange
each outstanding 9 1/2% First Mortgage Note due 2008 issued and sold in
reliance upon an exemption from registration under the Securities Act of 1933,
as amended (collectively, the "Old First Mortgage Notes"), for one 9 1/2%
First Mortgage Note due 2008.
We are asking you to contact your clients for whom you hold Old First
Mortgage Notes registered in your name or in the name of your nominee. In
addition, we ask you to contact your clients who, to your knowledge, hold Old
First Mortgage Notes registered in their own name. The Company will not pay
any fees or commissions to any broker, dealer or other person in connection
with the solicitation of tenders pursuant to the Exchange Offer. You will,
however, be reimbursed by the Company for customary mailing and handling
expenses incurred by you in forwarding any of the enclosed materials to your
clients.
Enclosed are copies of the following documents:
1. The Prospectus;
2. A Letter of Transmittal for your use in connection with the tender of
Old First Mortgage Notes and for the information of your clients;
3. A form of letter that may be sent to your clients for whose accounts you
hold Old First Mortgage Notes registered in your name or the name of
your nominee, with space provided for obtaining the clients'
instructions with regard to the Exchange Offer;
4. A form of Notice of Guaranteed Delivery; and
5. Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
YOUR PROMPT ACTION IS REQUESTED. THE EXCHANGE OFFER WILL EXPIRE AT 5:00
P.M., NEW YORK CITY TIME, ON , 1998, UNLESS EXTENDED BY THE COMPANY (THE
"EXPIRATION DATE"). OLD FIRST MORTGAGE NOTES TENDERED PURSUANT TO THE EXCHANGE
OFFER MAY BE WITHDRAWN, SUBJECT TO THE PROCEDURES DESCRIBED IN THE PROSPECTUS,
AT ANY TIME PRIOR TO THE EXPIRATION DATE.
To tender Old First Mortgage Notes, certificates for Old First Mortgage
Notes or a Book-Entry Confirmation, a duly executed and properly completed
Letter of Transmittal or a facsimile thereof, and any other required
documents, must be received by the Exchange Agent as provided in the
Prospectus and the Letter of Transmittal.
If a holder desires to accept the Exchange Offer and time will not permit a
Letter of Transmittal or Old First Mortgage Notes to reach the Exchange Agent
before the Expiration Date or the procedure for book-entry transfer cannot be
completed on a timely basis, a tender may be effected by delivery of a Notice
of Guaranteed Delivery by an Eligible Institution.
<PAGE>
Additional copies of the enclosed material may be obtained from the Exchange
Agent, First National Bank of Commerce, by calling the telephone number set
forth in the Prospectus.
Very truly yours,
NOTHING HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY PERSON
AS AN AGENT OF THE ISSUER OR THE EXCHANGE AGENT, OR AUTHORIZE YOU OR ANY OTHER
PERSON TO MAKE ANY STATEMENTS ON BEHALF OF ANY OF THEM WITH RESPECT TO THE
EXCHANGE OFFER, EXCEPT FOR STATEMENTS EXPRESSLY MADE IN THE PROSPECTUS AND THE
LETTER OF TRANSMITTAL
<PAGE>
BAYOU STEEL CORPORATION
OFFER TO EXCHANGE ALL OUTSTANDING UNREGISTERED
9 1/2% FIRST MORTGAGE NOTES DUE 2008
FOR REGISTERED 9 1/2% FIRST MORTGAGE NOTES DUE 2008
To Our Clients:
Enclosed for your consideration is a Prospectus dated , 1998 (as the
same may be amended or supplemented from time to time, the "Prospectus") and a
form of Letter of Transmittal (the "Letter of Transmittal") relating to the
offer (the "Exchange Offer") by Bayou Steel Corporation (the "Company") to
exchange each outstanding 9 1/2% First Mortgage Note due 2008 issued and sold
in reliance upon an exemption from registration under the Securities Act of
1933, as amended (collectively, the "Old First Mortgage Notes"), for one
9 1/2% First Mortgage Note due 2008.
The material is being forwarded to you as the beneficial owner of Old First
Mortgage Notes carried by us for your account or benefit but not registered in
your name. A tender of any Old First Mortgage Notes may be made only by us as
the registered holder and pursuant to your instructions. Therefore, the
Company urges beneficial owners of Old First Mortgage Notes registered in the
name of a broker, dealer, commercial bank, trust company or other nominee to
contact such registered holder promptly if they wish to tender Old First
Mortgage Notes in the Exchange Offer.
Accordingly, we request instructions as to whether you wish us to tender any
or all Old First Mortgage Notes, pursuant to the terms and conditions set
forth in the Prospectus and Letter of Transmittal. We urge you to read
carefully the Prospectus and Letter of Transmittal before instructing us to
tender your Old First Mortgage Notes.
The Exchange Offer will expire at 5:00 p.m., New York City Time, on ,
1998, unless extended by the Company (as so extended, the "Expiration Date").
Old First Mortgage Notes tendered pursuant to the Exchange Offer may be
withdrawn, subject to the procedures described in the Prospectus, at any time
prior to the Expiration Date.
The Exchange Offer is not being made to nor will exchanges be accepted from
or on behalf of holders of Old First Mortgage Notes in any jurisdiction in
which the making of the Exchange Offer or the acceptance thereof would not be
in compliance with the laws of such jurisdiction.
If you wish to have us tender any or all of your Old First Mortgage Notes
held by us for your account or benefit, please so instruct us by completing,
executing and returning to us the instruction form that appears below. The
accompanying Letter of Transmittal is furnished to you for informational
purposes only and may not be used by you to tender Old First Mortgage Notes
held by us and registered in our name for your account or benefit.
Very truly yours,
YOUR INSTRUCTIONS TO US SHOULD BE FORWARDED AS PROMPTLY AS POSSIBLE IN ORDER
TO PERMIT US TO TENDER OLD FIRST MORTGAGE NOTES ON YOUR BEHALF IN ACCORDANCE
WITH THE PROVISIONS OF THE EXCHANGE OFFER.
<PAGE>
INSTRUCTIONS
The undersigned acknowledge(s) receipt of your letter and the enclosed
material referred to therein relating to the Exchange Offer of the Company.
This will instruct you to tender the principal amount of Old First Mortgage
Notes indicated below held by you for the account or benefit of the
undersigned pursuant to the terms of and conditions set forth in the
Prospectus and the Letter of Transmittal.
The aggregate face amount of the Old First Mortgage Notes held by you for
the account of the undersigned is (FILL IN AMOUNT):
$ of the 9 1/2% First Mortgage Notes due 2008.
With respect to the Exchange Offer, the undersigned hereby instructs
you (CHECK APPROPRIATE BOX):
[_] To TENDER the following Old First Mortgage Notes held by you for
the account of the undersigned (INSERT PRINCIPAL AMOUNT OF OLD
FIRST MORTGAGE NOTES TO BE TENDERED) (IF ANY): $ .
[_] NOT to TENDER any Old First Mortgage Notes held by you for the
account of the undersigned.
If the undersigned instructs you to tender the Old First Mortgage Notes held
by you for the account of the undersigned, it is understood that you are
authorized to make, on behalf of the undersigned (and the undersigned by its
signature below, hereby makes to you), the representations and warranties
contained in the Letter of Transmittal that are to be made with respect to the
undersigned as a beneficial owner, including but not limited to the
representations, that (i) the Exchange Notes acquired in exchange for Old
First Mortgage Notes pursuant to the Exchange Offer are being acquired in the
ordinary course of business of the person receiving such Exchange Notes,
whether or not the undersigned, (ii) neither the undersigned nor any such
other person has any arrangement or understanding with any person to
participate in the distribution of the Exchange Notes, and (iii) neither the
undersigned nor any such other person is an "affiliate" (within the meaning of
Rule 405 under the Securities Act of 1933, as amended) of the Company, or if
it is an affiliate, it will comply with the registration and prospectus
delivery requirements of the Securities Act to the extent applicable. If the
undersigned is not a broker-dealer, the undersigned represents that it is not
engaged in, and does not intend to engage in, a distribution of Exchange
Notes. If the undersigned is a broker-dealer that will receive Exchange Notes
for its own account in exchange for Old First Mortgage Notes, it acknowledges
that it will deliver a prospectus in connection with any resale of such
Exchange Notes.
SIGN HERE
Dated: __________, 1998 _____________________________________
Signature(s)
Name: _______________________________
Address: ____________________________
_____________________________________
_____________________________________
Social Security or Taxpayer ID No.:
_____________________________________
