<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 26, 1994
REGISTRATION NO. 33-54101
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
AMENDMENT NO. 2
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
ACME METALS INCORPORATED
AND OTHER REGISTRANTS
(SEE TABLE OF ADDITIONAL REGISTRANTS BELOW)
DELAWARE 6719 36-3802419
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL IDENTIFICATION NUMBER)
INCORPORATION OR CLASSIFICATION CODE
ORGANIZATION) NUMBER)
13500 SOUTH PERRY AVENUE
RIVERDALE, ILLINOIS 60627
(708) 849-2500
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------
EDWARD P. WEBER, JR.
VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
ACME METALS INCORPORATED
13500 SOUTH PERRY AVENUE
RIVERDALE, ILLINOIS 60627
(708) 849-2500
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO: DANIEL J. ZUBKOFF
ALTON B. HARRIS, ESQ. CAHILL GORDON & REINDEL
HELEN LEVIN TOAL, ESQ. 80 PINE STREET
JAMES T. EASTERLING, ESQ. NEW YORK, NEW YORK 10005
COFFIELD UNGARETTI & HARRIS (212) 701-3000
3500 THREE FIRST NATIONAL PLAZA
CHICAGO, ILLINOIS 60602
(312) 977-4400 ----------------
<TABLE>
<S> <C> <C>
Name of Additional State or other jurisdiction I.R.S. employer
Registrants of incorporation or organization identification number
- ----------------------------------------- -------------------------------- ----------------------------
Acme Packaging Corporation Delaware 36-3796008
Acme Steel Company Delaware 36-2691236
Acme Steel Company International,
Inc. Barbados 98-0101903
Alabama Metallurgical Corporation Washington 62-0811861
Alpha Tube Corporation Delaware 31-1271541
Alta Slitting Corporation Delaware 36-3718000
Universal Tool and Stamping Company, Inc. Indiana 35-0797817
</TABLE>
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PER UNIT(1) OFFERING PRICE(1) FEE
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
% Senior Secured Notes due 2002
of Acme Metals Incorporated..... $175,000,000 $1,000.00 $175,000,000 $60,345 (2)
- -------------------------------------------------------------------------------------------------
% Senior Secured Discount Notes
due 2004 of Acme Metals
Incorporated.................... $137,884,281 $ 725.24 $100,000,000 $34,483 (2)
- -------------------------------------------------------------------------------------------------
Senior Guarantees of % Senior
Secured Notes due 2002 of
Registrants other than Acme
Metals Incorporated............. ---- ---- ---- None (3)
- -------------------------------------------------------------------------------------------------
Senior Guarantees of % Senior
Secured Discount Notes due 2004
of Registrants other than Acme
Metal Incorporated.............. ---- ---- ---- None (3)
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457 under the Securities Act of 1933.
(2) Previously paid.
(3) Pursuant to Rule 457(a), no separate fee is being paid with respect to
these guarantees.
----------------
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE 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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
ACME METALS INCORPORATED
CROSS REFERENCE SHEET SHOWING LOCATION IN PROSPECTUS
OF INFORMATION REQUIRED ON FORM S-1
(PURSUANT TO ITEM 501(B) OF REGULATION S-K)
<TABLE>
<CAPTION>
FORM S-1 ITEM NUMBER AND HEADING CAPTION OR LOCATION IN PROSPECTUS
-------------------------------- ---------------------------------
<S> <C>
1. Forepart of the Registration Statement
and Outside Front Cover Page of Cover Page of the Registration Statement;
Prospectus................................ Outside Front Cover Page of Prospectus
2. Inside Front Cover and Outside Back Cover
Pages of Prospectus....................... Inside Front Cover and Outside Back Cover
Pages of Prospectus
3. Summary Information, Risk Factors, Ratio
of Earnings to Fixed Charges.............. Prospectus Summary; Risk Factors; The
Company; Pro Forma Selected Consolidated
Financial and Operating Data
4. Use of Proceeds.......................... Use of Proceeds
5. Determination of Offering Price.......... Not Applicable
6. Dilution................................. Not Applicable
7. Selling Security Holders................. Not Applicable
8. Plan of Distribution..................... Outside Front Cover Page of Prospectus;
Underwriting
9. Description of Securities to be Outside Front Cover Page of Prospectus;
Registered................................ Prospectus Summary; Description of Notes
10. Interests of Named Experts and Counsel... Not Applicable
11. Information with Respect to the Prospectus Summary; Risk Factors; The
Registrant................................ Company; Modernization and Expansion
Project; Financing Plan; Use of Proceeds;
Capitalization; Selected Consolidated
Financial and Operating Data; Management's
Discussion and Analysis of Financial
Condition and Results of Operations;
Business; Management; Security Ownership
of Certain Beneficial Owners and
Management; Certain Transactions;
Description of Notes; Certain Federal
Income Tax Considerations Relating to an
Investment in the Senior Secured Discount
Notes; Description of Working Capital
Facility; Financial Statements
12. Disclosure of Commission Position on
Indemnification of Securities Act Not Applicable
Liabilities...............................
</TABLE>
<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. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
PROSPECTUS Subject to Completion, dated July 14, 1994
$
LOGO
$175,000,000 % SENIOR SECURED NOTES DUE 2002
$ % SENIOR SECURED DISCOUNT NOTES DUE 2004
-----------
Acme Metals Incorporated (the "Company") is offering $175,000,000 aggregate
principal amount of its % Senior Secured Notes due 2002 (the "Senior
Secured Notes") and $ aggregate principal amount of its % Senior
Secured Discount Notes due 2004 (the "Senior Secured Discount Notes" and,
together with the Senior Secured Notes, the "Notes").
Interest on the Senior Secured Notes will be payable semi-annually on
and of each year, commencing , 1995. The Senior Secured Notes
have no sinking fund provisions. The Senior Secured Notes may be redeemed at
the option of the Company, in whole or in part, on or after , 1998,
at the redemption prices set forth herein, together with accrued and unpaid
interest to the redemption date.
The Senior Secured Discount Notes will be offered at a substantial discount
from their principal amount and will provide gross proceeds of approximately
$100,000,000 to the Company. The issue price of the Senior Secured Discount
Notes will be $ per $1,000 principal amount at maturity, representing a
yield to maturity of % per annum (computed on a semi-annual bond
equivalent basis), calculated from , 1994. Commencing , 1998, cash
interest on the Senior Secured Discount Notes will be payable on and
of each year at a rate of % per annum. The Senior Secured Discount
Notes have no sinking fund provisions. The Senior Secured Discount Notes may be
redeemed at the option of the Company, in whole or in part, on or after
, 1999, at the redemption prices set forth herein, together with
accrued and unpaid interest to the redemption date.
Upon the occurrence of a Change of Control (as defined herein), each holder
of the Notes may require the Company to repurchase such holder's Notes, in
whole or in part, at a repurchase price equal to (i) in the case of the Senior
Secured Notes, 101% of the principal amount thereof, plus accrued interest to
the date fixed for repurchase or (ii) in the case of the Senior Secured
Discount Notes, 101% of the Accreted Value (as defined herein) thereof on the
date fixed for repurchase if prior to , 1997, and 101% of the principal
amount thereof, plus accrued interest to the date fixed for repurchase, if
thereafter.
The Notes will be senior obligations of the Company secured by a pledge of
all of the capital stock of its direct subsidiaries. The Notes will be
unconditionally guaranteed, jointly and severally, on a senior basis by each of
the Company's subsidiaries (the "Guarantors"). The guarantee of the Notes by
Acme Steel Company ("Acme Steel") will be secured by a first priority lien on
substantially all existing and future real property and equipment of Acme
Steel, including substantially all of the assets acquired in connection with
the Modernization Project (as defined herein). The guarantee of the Notes by
Acme Packaging Corporation ("Acme Packaging") will be secured by a pledge of
all of the capital stock of its subsidiaries. At June 26, 1994, on an adjusted
basis after giving effect to the offering of the Notes and the application of
the net proceeds therefrom, the Company and its subsidiaries would have had an
aggregate of approximately $281.0 million of indebtedness (including the Notes)
outstanding.
Prior to this offering (the "Note Offering"), the Company sold, by means of a
private placement (the "Special Warrant Offering"), $117,600,000 of special
common stock purchase warrants ("Special Warrants"), the net proceeds of which
have been placed in escrow. The Note Offering is conditioned upon and is a
condition to the release from escrow of the net proceeds of the Special Warrant
Offering. See "Financing Plan".
-----------
SEE "RISK FACTORS" FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE
CONSIDERED BY PROSPECTIVE PURCHASERS OF THE NOTES.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Price to Underwriting Proceeds to Company
Public(1) Discounts(2) (1)(3)
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Senior Secured Note............... % % %
Total.................................$ $ $
- ----------------------------------------------------------------------------------------------
Per Senior Secured Discount Note...... % % %
Total.................................$ $ $
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) Plus accrued interest or accretion, if any, from , 1994.
(2) The Company and the Guarantors have agreed, jointly and severally, to
indemnify the Underwriters against certain liabilities, including
liabilities under the Securities Act of 1933. See "Underwriting."
(3) Before deducting expenses payable by the Company, estimated at
$ .
-----------
The Notes offered by this Prospectus are offered by the Underwriters subject
to prior sale, to withdrawal, cancellation or modification of the offer without
notice, to delivery to and acceptance by the Underwriters and to certain
further conditions. It is expected that delivery of the Notes will be made at
the offices of Lehman Brothers Inc., New York, New York, on or about ,
1994.
-----------
LEHMAN BROTHERS
, 1994 BT SECURITIES CORPORATION
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SENIOR SECURED
NOTES AND THE SENIOR SECURED DISCOUNT NOTES OFFERED HEREBY AT LEVELS ABOVE
THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF
COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
----------------
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 and, in accordance therewith, files reports, proxy
material and other information with the Securities and Exchange Commission (the
"Commission"). Reports, proxy material and other information concerning the
Company can be inspected and copied at the offices of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549 or at its regional offices, 500 West
Madison Street, Chicago, Illinois 60661 and 7 World Trade Center, Suite 1300,
New York, New York 10048. Copies of such material can be obtained from the
Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington D.C. 20549 at prescribed rates. Such reports, proxy material and
other information concerning the Company also may be inspected at the offices
of The National Association of Securities Dealers, Inc., 1735 K Street, N.W.,
Washington, D.C. 20006.
The Company and the Guarantors have filed with the Commission a registration
statement (the "Registration Statement") under the Securities Act of 1933, as
amended (the "Securities Act"), with respect to the Notes offered hereby. This
Prospectus, which constitutes a part of the Registration Statement, does not
contain all the information set forth in the Registration Statement, certain
items of which are contained in exhibits to the Registration Statement as
permitted by the rules and regulations of the Commission. Statements made in
this Prospectus as to the contents of any contract, agreement or other document
referred to are not necessarily complete. With respect to each such contract,
agreement or other document filed as an exhibit to the Registration Statement,
reference is made to the exhibit for a more complete description of the matter
involved, and each such statement shall be deemed qualified in its entirety by
such reference.
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and consolidated financial statements and notes thereto appearing
elsewhere in this Prospectus. References to fiscal periods herein are
references to the Company's fiscal periods which end on the last Sunday of the
related calendar period (for example, December 26, 1993 or June 26, 1994).
THE COMPANY
Acme Metals Incorporated (the "Company"), based in Riverdale, Illinois, is a
fully integrated manufacturer and marketer of steel, steel strapping and
strapping tools, steel tubing and automotive and light truck jacks. The
Company's operations are divided into two primary segments, the "Steel Making
Segment" and the "Steel Fabricating Segment." Acme Steel Company ("Acme
Steel"), which is the Company's sole Steel Making Segment operating subsidiary,
accounted for 41% of the Company's consolidated net sales in 1993. The Steel
Fabricating Segment, consisting of Acme Packaging Corporation ("Acme
Packaging"), Alpha Tube Corporation ("Alpha Tube") and Universal Tool &
Stamping Company, Inc. ("Universal"), accounted for the remaining 59% of the
Company's consolidated net sales in 1993.
Over the past eight years, the Company has pursued a downstream integration
strategy, intended to enhance both the value and margins of its steel products.
This strategy, which included the acquisition of Universal and Alpha Tube and
of additional strapping facilities, has helped to moderate the impact of
fluctuating steel demand on Acme Steel's operations by creating captive
businesses that consume approximately 40% to 45% of Acme Steel's steel
production. These businesses allow the Company to sell fabricated steel
products that have a higher value added component. Having implemented its
downstream integration strategy, the Company is now pursuing a business
strategy consisting of the following key elements: reducing production costs,
expanding shipping capability and product range, increasing sales of specialty
products, and improving product quality and customer service.
As the smallest integrated steel producer in the United States, with an
annual shipping capability of approximately 720,000 tons of finished steel,
Acme Steel manufactures and markets flat-rolled sheet and strip steel. Acme
Steel attempts to utilize the flexibility of its small production quantities by
focusing on niche markets and targeting customers with small order sizes and
special metallurgical requirements such as high carbon, special alloy and high-
strength steels. The principal markets served by Acme Steel include the
agricultural equipment, automotive component, industrial equipment, industrial
fastener, pipe and tube, processor and tool manufacturing industries.
Acme Packaging, which represented 33% of the Company's 1993 consolidated net
sales, is one of the two leading U.S. producers of steel strapping and
strapping tools. The Company believes that Acme Packaging's strong market
position is attributable to (i) a broad product line, (ii) high quality, low
cost strapping produced in modern facilities, (iii) the location of its
production facilities in close proximity to a broad customer base and (iv) the
benefits of a close relationship with Acme Steel, which supplies virtually all
of Acme Packaging's steel. Acme Packaging's strapping products are principally
used to unitize (i.e., bind) products for the agricultural, automotive, brick,
construction, fabricated and primary metals, forest products, paper and
wholesale industries.
Alpha Tube, which represented 16% of the Company's 1993 consolidated net
sales, is a leading U.S. producer of high quality welded carbon steel tubing
used for furniture, recreational, construction and automotive applications.
Alpha Tube has developed expertise in certain applications demanding light
gauge tubing and targets customers whose requirements match Alpha Tube's
production capabilities.
3
<PAGE>
Universal, which accounted for 10% of the Company's 1993 consolidated net
sales, produces automotive and light truck jacks, tire wrenches and accessories
for the original equipment manufacturing ("OEM") market. Management estimates
that Universal currently holds a 30% share of the OEM market for auto and light
truck jacks in North America. The Company believes that Universal's strong
market position with U.S. and foreign transplant automotive manufacturers is
principally the result of its product development capability, high quality
products and just-in-time delivery capabilities.
MODERNIZATION AND EXPANSION PROJECT
In 1990 the Company began a study of available business strategies and
technological developments in light of its then operational and competitive
opportunities. In July 1992, the Board of Directors of the Company authorized a
study of the feasibility of constructing a continuous thin slab caster/hot
strip mill complex. In connection with this study, the Company received reports
from the management consulting firm of A.T. Kearney, Inc. Based on the
feasibility study, the Kearney reports and extensive additional analysis
performed by the Company of available technology, market opportunities and
construction requirements, the Board of Directors of the Company has authorized
construction of a new continuous thin slab caster/hot strip mill complex (the
"Modernization Project") at Acme Steel's Riverdale, Illinois plant subject to
the Note Offering.
The Company believes that Acme Steel currently enjoys a position as a low
cost producer of high quality liquid steel. Although Acme Steel sells many of
its products for use in higher-priced specialty applications, its present ingot
pouring and rolling process results in finished steel production costs
significantly above those of certain of its competitors. The Company believes
the Modernization Project will allow Acme Steel to build on its strengths as a
low cost producer of liquid steel by significantly increasing its overall
efficiency and reducing its finished steel production costs, thereby improving
its gross margins. The Modernization Project should also result in finished
steel products with improved physical and metallurgical properties.
Based on the turnkey contract price, without taking into account financing
costs or changes that may be requested by Acme Steel during construction,
management estimates that the cost of the Modernization Project, including
equipment, ancillary facilities, construction, and general contractor fees,
will not exceed $372 million. As a result of the Modernization Project, the
Company expects shipping capability to increase from approximately 720,000 tons
per year to approximately 925,000 tons per year within two years of start-up
and to approximately 970,000 tons per year within four years of start-up. When
the Modernization Project is completed, the Company estimates that it will
provide savings in operating costs, based on full utilization of its expanded
shipping capability of approximately 970,000 tons per year and certain other
material assumptions, of approximately $77 per ton, resulting from the
elimination of many of the production steps utilized in the existing ingot
pouring and rolling process, lower energy consumption, higher labor
productivity and increased production yields. See "Risk Factors--Modernization
and Expansion Project" and "Modernization and Expansion Project--Estimated
Costs and Savings."
FINANCING PLAN
The Company has adopted a plan of financing intended to provide the funds
necessary to complete the Modernization Project, to repay certain indebtedness
currently outstanding and to provide additional liquidity. The Company's plan
of financing includes the following: (i) the Note Offering, (ii) the Special
Warrant Offering, and (iii) the securing of a working capital facility (the
"Working Capital Facility"), which initially will be undrawn. The Special
Warrant Offering occurred prior to the Note Offering, but the net proceeds of
the Special Warrant Offering have been placed in escrow. The Note Offering is
conditioned upon and is a condition to the release from escrow of the net
proceeds of the Special Warrant Offering. For a more complete description of
the material terms of the Notes and the Special Warrants, see "Financing Plan"
and "Description of Notes."
4
<PAGE>
The following table sets forth the Company's sources and immediate uses of
funds as if the foregoing transactions were completed on June 26, 1994:
<TABLE>
<CAPTION>
(DOLLARS
IN
THOUSANDS)
----------
<S> <C>
Sources of Funds
Senior Secured Notes......................................... $175,000
Senior Secured Discount Notes................................ 100,000
Special Warrant Offering(1).................................. 117,600
Working Capital Facility(2).................................. 0
--------
Total...................................................... $392,600
========
Uses of Funds
Increase in cash and cash equivalents(3)..................... $320,600
Repayment of 9.35% Senior Notes.............................. 50,000
Estimated fees and expenses(4)............................... 22,000
--------
Total...................................................... $392,600
========
</TABLE>
- --------
(1) On or before September 14, 1994, the Special Warrants are exercisable on a
one-for-one basis for 5,600,000 shares of the Company's common stock, $1.00
par value ("Common Stock"). Conditions for the Company's receipt of the
proceeds of the sale of the Special Warrants include among other matters
confirmation of the availability of not less than 85% of the remaining
financing needed for construction of the Modernization Project. Successful
completion of the Note Offering will satisfy this condition.
(2) The Company has obtained commitments for an $80 million Working Capital
Facility to provide for additional liquidity. The Working Capital Facility
initially will be undrawn. See "Description of Working Capital Facility."
(3) The increase in cash and cash equivalents, together with cash currently on
hand and cash flow from operations, will be used for the construction and
integration of the Modernization Project. At June 26, 1994 the Company had
cash and cash equivalents of $73.7 million. Sources and Uses of Funds above
do not give effect to the proposed purchase by Raytheon Engineers &
Constructors, Inc. ("Raytheon") of $9 million of newly issued shares of
Common Stock. See "Modernization and Expansion Project--Engineering,
Procurement and Construction Contract."
(4) Estimated fees and expenses include financing fees for the Special Warrant
Offering, the Note Offering, and the registration of 5,600,000 shares of
Common Stock, related offering expenses and a prepayment penalty of $2.5
million, net of taxes, related to repayment of the 9.35% Senior Notes.
NOTE OFFERING
Notes Offered................. $175,000,000 principal amount of % Senior
Secured Notes due 2002 (the "Senior Secured
Notes").
$ principal amount at maturity of
% Senior Secured Discount Notes due 2004
(the "Senior Secured Discount Notes").
SENIOR SECURED NOTES
Interest Rate................. % per annum.
Interest Payment Dates........ and , commencing ,
1995.
Maturity Date................. , 2002.
Sinking Fund.................. None.
5
<PAGE>
Optional Redemption........... The Senior Secured Notes are redeemable at the
option of the Company, in whole or in part, on
or after , 1998, at the redemption
prices set forth herein, together with accrued
and unpaid interest to the redemption date.
SENIOR SECURED DISCOUNT NOTES
Issue Price................... $ per $1,000 principal amount at maturity
(or % of the principal amount at
maturity).
Yield, Interest Rate and
Interest Payment Dates.......
% per annum (computed on a semi-annual
bond equivalent basis) calculated from ,
1994. No cash interest will accrue on the
Senior Secured Discount Notes prior to ,
1997. Thereafter, cash interest on the Senior
Secured Discount Notes will accrue at the rate
of % per annum and will be payable semi-
annually on and , commencing on
, 1998.
Maturity Date................. , 2004.
Sinking Fund.................. None.
Optional Redemption........... The Senior Secured Discount Notes are
redeemable at the option of the Company, in
whole or in part, on or after , 1999,
at the redemption prices set forth herein,
together with accrued and unpaid interest to
the redemption date.
COMMON PROVISIONS OF THE NOTES
Ranking.......................
The Notes will be senior obligations of the
Company. The Notes will be senior to all future
subordinated indebtedness of the Company and
will rank pari passu in right of payment with
all future senior indebtedness of the Company.
At June 26, 1994, on an adjusted basis after
giving effect to the Note Offering and the
application of the proceeds therefrom, the
Company and its subsidiaries would have had an
aggregate of approximately $281.0 million of
indebtedness (including the Notes) outstanding.
Guarantees.................... The Notes will be unconditionally guaranteed,
jointly and severally, on a senior basis (the
"Guarantees") by each of the Company's
subsidiaries (the "Guarantors"). Each of the
Guarantees will be senior to all future
subordinated indebtedness of each of the
Guarantors and will rank pari passu with all
existing and future senior indebtedness of each
of the Guarantors.
6
<PAGE>
Security...................... The Company's obligations under the Notes will
be secured by a pledge of all of the capital
stock of the Company's direct subsidiaries. The
Guarantee of the Notes by Acme Steel will be
secured by a first priority lien on
substantially all existing and future real
property and equipment of Acme Steel, including
substantially all of the assets acquired in
connection with the Modernization Project. The
Guarantee of the Notes by Acme Packaging will
be secured by a pledge of all of the capital
stock of its subsidiaries.
Change of Control.............
Upon the occurrence of a Change of Control (as
defined herein), each holder of Notes will have
the option to cause the Company and its
subsidiaries to repurchase such holder's Notes,
in whole or in part, at a repurchase price
equal to (i) in the case of the Senior Secured
Notes, 101% of the principal amount thereof,
plus accrued interest to the date fixed for
repurchase, or (ii) in the case of the Senior
Secured Discount Notes, 101% of the Accreted
Value thereof on the date fixed for repurchase
if prior to , 1997, and 101% of the
principal amount thereof, plus accrued interest
to the date fixed for repurchase, if
thereafter. There can be no assurance that the
Company and its subsidiaries would have
sufficient funds to satisfy their obligations
to repurchase Notes upon a Change of Control.
See "Description of Notes--Certain Covenants--
Repurchase of Notes Upon Change of Control."
Certain Covenants.............
The Indentures under which the Notes will be
issued will contain certain restrictive
covenants that, among other things, will limit
the ability of the Company and its subsidiaries
to incur additional Indebtedness (as defined
herein), create liens, pay dividends,
repurchase capital stock, make certain other
Restricted Payments (as defined herein), make
Investments (as defined herein) engage in
transactions with affiliates, sell assets,
engage in sale and leaseback transactions and
engage in mergers or consolidations. See
"Description of Notes--Certain Covenants."
Use of Proceeds...............
The net proceeds of the Note Offering, together
with the net proceeds of the Special Warrant
Offering, will be used principally to fund the
construction and integration of the
Modernization Project and for the repayment of
debt. See "Financing Plan" and "Use of
Proceeds."
7
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA
The following table sets forth selected historical consolidated financial
data and operating data for the Company for the periods indicated. The
Consolidated Statements of Operations Data and Consolidated Balance Sheet Data
for, and as of the end of, each of the five years in the period ended December
26, 1993 were derived from the consolidated financial statements of the
Company, which have been audited by Price Waterhouse, independent accountants.
The selected historical consolidated financial data for, and as of the end of,
the six months ended June 27, 1993 and June 26, 1994 were derived from
unaudited financial statements for the Company which, in the opinion of
management, reflect all adjustments which are of a normal recurring nature
necessary for a fair presentation of the results of such periods. Results for
interim periods are not necessarily indicative of the results to be expected
for an entire fiscal year. The following table should be read in conjunction
with Management's Discussion and Analysis of Financial Condition and Results of
Operations and the consolidated financial statements and notes thereto
appearing elsewhere herein.
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS, EXCEPT PER TON DATA)
FISCAL YEAR FIRST HALF
--------------------------------------------------- ------------------
1989 1990 1991 1992 1993 1993 1994
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF
OPERATIONS DATA:
Net sales................. $439,412 $446,042 $376,951 $391,562 $457,406 $225,032 $256,423
Cost of products sold..... 375,902 396,790 335,503 347,624 397,526 198,327 215,341
Depreciation expense...... 11,624 12,540 13,700 14,392 14,657 7,517 7,596
Selling and administrative
expense.................. 25,751 27,916 29,219 28,901 30,633 13,800 15,304
Restructuring/nonrecurring
charge................... -- -- -- 2,700(1) 1,925(2) -- --
-------- -------- -------- -------- -------- -------- --------
Operating income (loss)... 26,135 8,796 (1,471) (2,055) 12,665 5,388 18,182
Interest expense, net..... (2,116) (4,178) (4,211) (3,869) (3,813) (1,993) (1,620)
Unusual income item....... -- 4,005 1,241 1,047 1,210 -- --
Other non-operating
income................... 2,107 765 1,391 355 370 222 861
-------- -------- -------- -------- -------- -------- --------
Income (loss) before
income taxes and
cumulative effect of
changes in accounting
principles............... 26,126 9,388 (3,050) (4,522) 10,432 3,617 17,423
Income tax provision
(credit)................. 9,926 3,755 (732) (1,673) 4,173 1,447 6,969
-------- -------- -------- -------- -------- -------- --------
Income (loss) before
cumulative effect of
changes in accounting
principles............... 16,200 5,633 (2,318) (2,849) 6,259 2,170 10,454
Cumulative effect of
changes in accounting
principles, net of taxes. -- -- -- (50,323)(3) -- -- --
-------- -------- -------- -------- -------- -------- --------
Net income (loss)......... $ 16,200 $ 5,633 $ (2,318) $(53,172) $ 6,259 $ 2,170 $ 10,454
======== ======== ======== ======== ======== ======== ========
OTHER DATA:
CONSOLIDATED:
Ratio of earnings to fixed
charges(4)............... 7.5x 1.9x -- -- 2.5x 2.2x 6.9x
EBITDA(5)................. $ 40,273 $ 22,592 $ 14,144 $ 15,705 $ 30,194 $ 13,542 $ 26,937
Pro forma total interest
expense(6)............... 31,344 15,522
Pro forma cash interest
expense(7)............... 18,828 9,415
Ratio of EBITDA to pro
forma total interest
expense.................. 1.0x 1.7x
Ratio of EBITDA to pro
forma cash interest
expense.................. 1.6x 2.9x
Capital expenditures...... $ 14,960 $ 28,604 $ 10,611 $ 7,557 $ 11,749 $ 4,305 $ 5,071
ACME STEEL COMPANY:
Tons shipped-external
customers................ 506,475 436,123 286,385 320,192 413,645 205,419 238,067
Tons shipped-intersegment. 233,374 259,243 273,177 289,946 284,361 154,219 144,063
-------- -------- -------- -------- -------- -------- --------
Total tons shipped........ 739,849 695,366 559,562 610,138 698,006 359,638 382,130
Average price per ton(8).. $ 417 $ 422 $ 423 $ 413 $ 426 $ 411 $ 444
Average production cost
per ton(8)............... 339 355 354 338 349 338 338
Raw steel to finished
product yield............ 76.1% 77.2% 78.0% 78.7% 78.6% 78.5% 78.6%
</TABLE>
<TABLE>
<CAPTION>
JUNE 26, 1994
-----------------------
ACTUAL AS ADJUSTED(9)
-------- --------------
<S> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents............................... $ 73,651 $394,251
Total assets............................................ 350,628 680,274
Long-term debt (including current portion).............. 56,000 281,000
Stockholders' equity.................................... 96,209 200,309
</TABLE>
(Footnotes on following page)
8
<PAGE>
- --------
(1) See Restructuring Charge in the notes to the consolidated financial
statements.
(2) See Nonrecurring Charge in the notes to the consolidated financial
statements.
(3) Cumulative effect of changes in account principles, net of taxes, includes
the effects of adopting Financial Accounting Standard ("FAS") No. 106
"Accounting for Postretirement Benefits Other Than Pensions" and FAS No.
109 "Accounting for Income Taxes." See Postretirement Benefits Other Than
Pensions and Income Taxes in the notes to the consolidated financial
statements.
(4) The ratio of earnings to fixed charges is computed by dividing (i) the sum
of earnings from continuing operations before income taxes, interest
expense (including amortization of debt issuance costs), the interest
portion of rental expenses and the undistributed income of less than 50
percent owned persons accounted for by the equity method by (ii) fixed
charges, which consist of interest expense (including amortization of debt
issuance costs) and the interest portion of rental expenses. Earnings for
1992 and 1991 were insufficient to cover fixed charges by $4.5 million
($5.5 million if a non-recurring gain of $1 million before income taxes
related to the sale of the Company's interests in coal producing property
is excluded from earnings) and $4.3 million, respectively. Pro forma ratios
of earnings to fixed charges, giving effect solely to the refinancing of
the 9.35% Senior Notes (including the prepayment penalty) with a portion of
the Note Offering would have been 6.0x and 2.2x for the first half of 1994
and the 1993 fiscal year, respectively.
(5) EBITDA is defined as net income plus income taxes, net interest expense,
depreciation and amortization, restructuring and nonrecurring items,
cumulative effect of changes in accounting principles, and less unusual
income. The Company believes EBITDA provides additional information for
determining its ability to meet debt service requirements. EBITDA does not
represent net income or cash flow from operations as determined by
generally accepted accounting principles, and EBITDA is not necessarily an
indication of whether cash flow will be sufficient to fund cash
requirements. EBITDA does not give effect to any investment of the
approximately $394.3 million of cash remaining after application of the net
proceeds of the Note Offering and the Special Warrant Offering to repay
indebtedness and pay related expenses.
(6) Pro forma total interest expense reflects the issuance of the Senior
Secured Notes and the Senior Secured Discount Notes, as follows:
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 26, 1993 JUNE 26, 1994
----------------- ----------------
<S> <C> <C>
Issuance of Senior Secured Notes........ $18,375 $ 9,188
Issuance of Senior Secured Discount
Notes.................................. 11,303 5,500
Existing 6.5% to 6.75% Notes payable.... 453 227
Amortization of financing fees on Notes. 1,213 607
------- -------
$31,344 $15,522
======= =======
</TABLE>
In calculating pro forma interest expense, the Company has utilized an
interest rate of 10.5% on the Senior Secured Notes and an effective interest
rate of 11% on the Senior Secured Discount Notes and has assumed that all
interest is expensed in period incurred. Interest on the Notes and related
financing fees will be capitalized as part of the Modernization Project when
(i) the expenditures for the asset have been made, (ii) activities that are
necessary to get the asset ready for its intended use are in progress and
(iii) interest cost is being incurred.
(7) Pro forma cash interest expense represents total interest expense,
excluding the amortization of financing fees on the Notes and the
amortization of the discount of the Senior Secured Discount Notes.
(8) Average price and average production costs per ton, which can be
significantly affected by Acme Steel's product mix in a given period,
include shipments made to external customers and intersegment shipments.
(9) As adjusted to give effect to the transactions described under "Financing
Plan."
9
<PAGE>
RISK FACTORS
In addition to the other information in this Prospectus, prospective
investors should carefully review the following risk factors before deciding
to make an investment in the Notes.
VARIABILITY OF FINANCIAL RESULTS
The consolidated financial performance of the Company, and in particular of
its subsidiary, Acme Steel, is significantly affected by the cyclical nature
of the steel industry. For the years 1990, 1991, 1992 and 1993, Acme Steel
shipped approximately 695,000, 560,000, 610,000 and 698,000 net tons of steel,
respectively, with an average realized price per ton of approximately $422,
$423, $413 and $426. Principally as a result of the impact of these changes in
shipment volumes and, to a lesser extent, steel prices, the Company's
consolidated net sales for the years 1990, 1991, 1992 and 1993 were $446.0
million, $376.9 million, $391.6 million and $457.4 million, respectively, and
its consolidated operating income (or loss) was $8.8 million, ($1.5) million,
($2.1) million and $12.7 million, respectively. For the six months ended June
26, 1994, Acme Steel shipped approximately 382,000 net tons of steel with an
average realized price per ton of $444, compared to shipments of approximately
360,000 net tons of steel and an average realized price per ton of $411 in the
six months ended June 27, 1993. The Company reported consolidated net sales of
$256.4 million and consolidated operating income of $18.2 million for the six
months ended June 26, 1994, compared to consolidated net sales of $225.0
million and consolidated operating income of $5.4 million for the six months
ended June 27, 1993. No assurance can be given that these trends in the
Company's consolidated financial performance will continue or that other
events likely to have an adverse effect on the steel industry or the Company,
such as an economic downturn or an increase in competition, may not occur.
LEVERAGE AND ACCESS TO CAPITAL
After the Note Offering, the Company and its subsidiaries will have
significant amounts of outstanding indebtedness. The indebtedness of the
Company and its subsidiaries and the restrictive covenants contained in
existing and future debt instruments, including the Indentures relating to the
Notes and the loan documents relating to the Working Capital Facility, could
significantly limit the operating and financial flexibility of the Company.
These factors could also limit the ability of the Company and its subsidiaries
to take action in response to competitive pressures or adverse economic
conditions. The Company currently is, and upon the consummation of the Note
Offering will be, in compliance with the restrictive covenants and tests
contained in its debt instruments.
After giving effect to the issuance of the Notes, the Company's ratios of
EBITDA to pro forma total interest expense and EBITDA to pro forma cash
interest expense would have been 1.0:1 and 1.6:1 for the fiscal year ended
December 26, 1993 and 1.7:1 and 2.9:1 for the six months ended June 26, 1994.
The Company believes that internally generated funds, currently available cash
resources, the net proceeds of the Note Offering and the Special Warrant
Offering, and amounts to be available to the Company and its subsidiaries
under the Working Capital Facility will be sufficient to fund the anticipated
capital and other expenditures (including expenses relating to the
Modernization Project) of the Company and meet its fixed charge requirements
for the foreseeable future, including through the completion of the
Modernization Project. However, there can be no assurance that the amounts
available from such sources will be sufficient for such purposes. The Company
may be required to seek additional capital financing from a variety of
potential sources, including additional bank financing and/or debt or equity
securities offerings. No assurance can be given that such sources of funding
will be available if required or, if available, will be on terms satisfactory
to the Company.
CYCLICALITY, COMPETITION, AND OTHER INDUSTRY FACTORS
The U.S. steel industry is a cyclical business characterized by excess
capacity and intense competition. In the first half of the 1980s, many steel
producers sustained large losses which led to several major bankruptcies and
restructurings. Factors such as production overcapacity, increased U.S. and
international
10
<PAGE>
competition, high labor costs, inefficient plants and reduced levels of steel
demand contributed to these losses. Between 1982 and 1993, U.S. steel producers
reduced their raw steel production capacity by approximately 25%. In addition,
in the late 1980s the U.S. steel industry experienced increased demand, lower
levels of steel imports and increased efficiency through modernization of
production facilities. As a result of these and other factors, industry profits
reached record levels in 1988. However, in the latter half of 1989, steel
prices and demand again began to decline, and a number of U.S. producers
reported losses in 1990, 1991 and 1992 in a sluggish U.S. economic environment.
Although many steel producers reported improved results in 1993 compared to
1992, and the first six months of 1994 compared with the same period in 1993,
there can be no assurance that this recovery will continue or that there will
be any future improvement in U.S. steel industry earnings.
Competition among U.S. steelmakers is intense with respect to price, service
and quality. Integrated steel producers have lost market share to mini-mills in
recent years. Mini-mills are generally smaller volume steel producers that use
ferrous scrap as their basic raw material and employ non-union workers. These
mills have recently expanded their product lines from commodity type items to
include larger-size structural products and flat-rolled products, including
those made with new, continuous thin cast technologies. To date, mini-mills are
the only U.S. producers to utilize these technologies. In addition, certain
U.S. integrated steelmakers have gone through reorganizations under Chapter 11
of the U.S. Bankruptcy Code. Following their reorganizations, these companies
generally have reduced costs and become more effective competitors. U.S. steel
producers also have invested heavily in new plants and equipment that have
enabled many companies to improve efficiency and increase productivity.
Foreign competition, from time to time and product line by product line, has
been a significant competitive factor for U.S. integrated steel producers. The
intensity of foreign competition is substantially affected by fluctuations in
the value of the United States dollar against several other currencies. The
Company believes that the attractiveness of the United States steel markets to
certain foreign producers has been diminished somewhat during recent years by a
substantial decline in the value of the United States dollar relative to these
foreign currencies. However, foreign exchange rates are subject to substantial
fluctuations, and there can be no assurance that this condition will continue
to exist. Further, many foreign steel producers are controlled or subsidized by
foreign governments whose decisions concerning production and exports may be
influenced by political and economic policy considerations as well as by
prevailing market conditions and profit opportunities. As a result, despite
relatively low U.S. steel prices and narrow profit margins, many foreign
producers have continued to ship steel products into the U.S. market. Acme
Steel has experienced little foreign competition in recent years in the markets
it serves. There can be no assurance, however, that foreign competition will
not increase in the future, which could adversely affect the Company's
operating results.
Materials such as aluminum, composites, plastics, and ceramics compete as
substitutes for steel in many of Acme Steel's markets. No assurance can be
given that an increase in use of these or other product substitutes will not
occur or, if such substitutions were to occur, that they would not have a
material adverse effect on the Company.
NEED TO MODERNIZE
Over the past decade, the price of steel, adjusted for inflation, has fallen
significantly. Although a significant portion of this decline is the result of
worldwide steelmaking overcapacity, steel pricing is also influenced by low
cost producers in the U.S. steel industry. Many of Acme Steel's competitors
have implemented steelmaking technologies not utilized by Acme Steel. As a
result, Acme Steel's costs to produce a ton of finished steel are substantially
higher than those of certain of its competitors. The Company believes that
foreign and U.S. steel producers will continue to invest heavily to replace
aging or obsolete facilities and to achieve increased production efficiencies
and improved product quality. These investments are expected to be made in
various aspects of the manufacturing process, including continuous casting and
other mill technologies. The Company believes that it must undertake the
Modernization Project and make the
11
<PAGE>
significant capital investments required if Acme Steel is to achieve levels of
cost, productivity and product quality already attained by certain of its
competitors.
MODERNIZATION AND EXPANSION PROJECT
The Company believes the equipment selected for and design of the
Modernization Project are appropriate and well conceived, but there can be no
assurance that the potential benefits of the Modernization Project, including
the anticipated increase in finished steel shipping capability, will actually
be achieved or that sufficient demand will exist for the additional finished
steel production. In particular, the estimated cost savings per ton expected to
be realized from the Modernization Project are based on numerous assumptions
including operation of Acme Steel's facilities at its full expanded capability
of approximately 970,000 tons per year, which assumptions may not prove to be
accurate. In the event that output is less than that which could be generated
at full capacity, the actual cost savings per ton will likely be lower than
anticipated. In addition, continuous thin slab casting is a relatively new
technology, with the first continuous thin slab casting facilities having been
constructed in 1989. At present, there are only two operating continuous thin
slab casting facilities in North America with an estimated combined capacity of
3.8 million tons per year. Unlike Acme Steel's contemplated operation upon
completion of the Modernization Project, the operator of these facilities uses
ferrous scrap as its basic raw material and does not cast certain of the
specialty steels and grades which Acme Steel intends to produce. There can be
no assurance that the Company can successfully implement these aspects of the
Modernization Project in the manner and for the purposes planned.
The Company has signed a Memorandum of Understanding ("MOU") with Raytheon
Engineers & Constructors, Inc. ("Raytheon") a wholly-owned subsidiary of
Raytheon Corporation, outlining the major terms of the Engineering, Procurement
and Construction Contract. The MOU contemplates the assumption by Raytheon of
responsibility for timely and effective completion of the Modernization
Project. Although the contract proposal provides for liquidated damages, there
can be no assurance that the amount of liquidated damages would be sufficient
to cover the Company's damages in the event of a significant delay in the
construction of the Modernization Project or an inability, for any reason, to
complete successfully the Modernization Project. Furthermore, if the
Modernization Project is not completed in a timely manner or for the amounts
budgeted, or there were to be substantial, unexpected production interruptions
or other start-up difficulties, the consolidated results of operations and
competitive position of the Company and its subsidiaries could be materially
adversely affected. In the event of any such difficulties, senior management
may then have to devote substantial time to these matters which could adversely
affect existing operations. See "Modernization and Expansion Project."
POSSIBLE FLUCTUATIONS IN RAW MATERIAL AND ENERGY COSTS
The Company's operations at its Acme Steel subsidiary are heavily dependent
on the supply of various raw materials including iron ore pellets, coal and
energy. Acme Steel is contractually obligated to purchase, at the higher of
production cost or market price, its proportionate share of the iron ore
produced at Wabush Mines, a joint venture project in which Acme Steel has an
approximate 15.1% interest. See "Business--Raw Materials and Energy." In 1993
Acme Steel acquired approximately 56% of its iron ore pellet requirements from
this venture. Production costs at Wabush Mines currently approximate market
price; however, there can be no assurance that the mines' cost structure will
not result in above world market prices in the future. The balance of Acme
Steel's iron ore pellet needs and all of its coal and energy needs are obtained
at market prices. Supply interruptions or cost increases, to the extent that
Acme Steel could not pass on these costs to its customers, could adversely
affect the future consolidated results of operations of the Company and its
subsidiaries.
ENVIRONMENTAL COMPLIANCE AND ASSOCIATED COSTS
U.S. steel producers, including Acme Steel, are subject to stringent Federal,
state and local environmental laws and regulations concerning, among other
things, air emissions, waste water discharge, and solid and hazardous waste
disposal. U.S. steel producers, including Acme Steel, have spent and can be
expected to spend in the future, substantial amounts for compliance with these
environmental laws and regulations. The costs of environmental compliance may
place U.S. steel producers at a competitive disadvantage (1) to foreign steel
producers, which may not be subject to environmental requirements as
12
<PAGE>
stringent as those in the United States and (2) to producers of materials that
compete with steel, which may not be required to bear equivalent costs in
producing their products.
The Company, on a consolidated basis, has incurred substantial costs in
complying with Federal, state and local environmental laws and regulations. The
Company's capital expenditures related to environmental compliance were $6.6
million in 1991, $0.3 million in 1992 and $3.4 million in 1993. The Company
currently estimates that capital expenditures for environmental compliance will
be approximately $6 million and $7 million in 1994 and 1995, respectively. The
Company believes that it is currently in substantial compliance with the
various environmental regulations applicable to its businesses and, in
particular, that its coke ovens currently are in compliance with Clean Air Act
standards anticipated to be in effect through 2007. Nevertheless, there can be
no assurance that environmental requirements will not change in the future or
that the Company will not incur significant costs in the future to comply with
such requirements. The need to comply with even more stringent environmental
laws and regulations could have a material adverse effect on the Company's
financial condition and results of operations. See "Business--Environmental"
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
CERTAIN INDEMNIFICATION ARRANGEMENTS
In connection with the spinoff of Acme Steel from The Interlake Corporation
("Interlake") in 1986, Interlake entered into cross-indemnification agreements
with Acme Steel relating to certain environmental, tax and other matters. To
date, Interlake has met all of its obligations under such agreements. In the
event that Interlake for any reason were unable to fulfill its obligations
under such agreements, the Company could have significant increased future
liabilities. See "Business--Other Legal Proceedings."
SECURITY FOR THE NOTES
The Notes will be senior obligations of the Company secured by a pledge of
all of the capital stock of its direct subsidiaries. The Guarantee of the Notes
by Acme Steel will be secured by a first priority lien on substantially all of
its existing and future real property and equipment, including the
Modernization Project, and a pledge of all of the capital stock of its
subsidiary. The Guarantee of the Notes by Acme Packaging will be secured by a
pledge of all of the capital stock of its subsidiaries. No appraisals of the
Collateral have been prepared by or on behalf of the Company. The net book
value of the Collateral (without taking into account cash on hand other than
the net proceeds of the Note Offering and the Special Warrant Offering) will be
substantially lower than the principal amount of the Notes offered hereby.
There can be no assurance that the proceeds of any sale of the Collateral
pursuant to the Indentures and the related Security Documents following an
acceleration after an Event of Default would not be substantially less than
that which would be required to satisfy payments due on the Notes. By its
nature, some or all of the Collateral will be illiquid and may have no readily
ascertainable market value. Accordingly, there can be no assurance that the
Collateral will be able to be sold in a short period of time, if at all.
The right of the Collateral Agent under the Indentures (as the secured party
under the various Security Documents) to foreclose upon and sell 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, Acme Steel and/or Acme Packaging. 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 Notes would be made following commencement of and during a
bankruptcy case, (ii) whether or when the Collateral Agent could foreclose upon
or sell the Collateral or (iii) whether or to what extent holders of any
13
<PAGE>
Notes would be compensated for any delay in payment or loss of value of
Collateral securing the 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 Notes is not sufficient to repay all amounts due
on the Notes, the holders of the 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.
A portion of the Collateral securing Acme Steel's Guarantee of the Notes is
comprised of real property. Real property pledged as security to a lender may
be subject to known and unforeseen environmental risks. Under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended
("CERCLA"), even a lender who does not foreclose on a property may be held
liable, in certain limited circumstances, for the costs of remediating or
preventing releases or threatened releases of hazardous substances at a
mortgaged property. There may be similar risks under various state laws and
common law theories. Such liability has seldom been imposed, and finding a
lender liable generally has been based on the lender's having become
sufficiently involved in the operations of the borrower so that its activities
are deemed to constitute "participation in the management." This is the
standard of liability set forth in CERCLA and elaborated on in a number of
court decisions. A lender may also be considered to be a current owner of a
property who can be held liable under CERCLA if the lender takes title to
property by foreclosure, although certain courts have held that mere
foreclosure on the borrower's property, in order to protect the lender's
security interest, does not make the lender liable under CERCLA.
The EPA promulgated a rule which would have allowed lenders to participate in
work-out situations and foreclosure, and to exercise some control over the
borrower's business following foreclosure, without risking liability under
CERCLA as a current owner or operator. That rule was subsequently declared to
be invalid by the Court of Appeals for the District of Columbia on the grounds
that the rule-making was not within the EPA's statutory authority. While a
number of recent court decisions appear to be consistent with the EPA's
interpretation of CERCLA under the rule, the uncertain state of current law
does not provide an assurance that lenders can avoid the risk of liability
under CERCLA if they foreclose on properties or become involved in work-outs or
similar situations that may entail some involvement in, or influence over,
facility operations.
Under the Indentures, the Trustees may, prior to taking certain actions and
exercising certain remedies on behalf of the holders, request that holders of
the Notes provide an indemnification against their costs, expenses and
liabilities. It is possible that CERCLA (or analogous) cleanup costs could
become a liability of the Trustees and cause a loss to any holders that
provided an indemnification. In addition, holders may act directly rather than
through a Trustee, in specified circumstances, in order to pursue a remedy
under the Indentures. If holders exercise that right, they could be deemed to
be lenders that are subject to the risks discussed above.
See "Description of Notes--Security" for a more detailed description of the
security provisions for the Notes.
FRAUDULENT CONVEYANCE ISSUES
Under applicable provisions of the Federal bankruptcy law and comparable
provisions of state fraudulent transfer laws, if it were found that any
Guarantor had incurred the indebtedness represented by its Guarantee with an
intent to hinder, delay or defraud creditors or had received less than a
reasonably equivalent value or fair consideration for such indebtedness and (i)
was insolvent, (ii) was rendered insolvent by reason of such occurrence, (iii)
was engaged or about to engage in a business or transaction for which its
remaining assets constituted unreasonably small capital to carry on its
business, or (iv) intended to incur or believed that it would incur debts
beyond its ability to pay as such debts matured, the obligations of such
Guarantor under its Guarantee could be avoided or claims in respect of such
Guarantee could be subordinated to all other debts of such Guarantor. A legal
challenge of a Guarantee on fraudulent conveyance grounds could, among other
things, focus on the benefits, if any, realized by a Guarantor as a result of
the issuance by the Company of the Notes. To the extent that a Guarantee were
held to be unenforceable as a fraudulent conveyance or for
14
<PAGE>
any other reason, the holders of the Notes would cease to have any direct claim
in respect of a Guarantor and would be solely creditors of the Company and any
other Guarantors whose Guarantees were not avoided or held unenforceable. In
the event a Guarantee were held to be subordinated, the claims of the holders
of the Notes would be subordinated to claims of other creditors of such
Guarantor.
A substantial majority of the net proceeds from the sale of the Notes will be
contributed to Acme Steel and the remainder of such proceeds will be used by
the Company to repay certain of its existing indebtedness. Each Guarantor will
agree, jointly and severally with the other Guarantors, to contribute to the
obligations of any other Guarantor under a Guarantee of the Notes. Further the
Guarantee of each Guarantor will provide that it is limited to an amount that
would not render the Guarantor thereunder insolvent. The Company believes,
therefore, that the Guarantors will receive equivalent value at the time the
indebtedness is incurred under the Guarantees. In addition, the Company
believes that none of the Guarantors (i) is or will be insolvent, (ii) is or
will be engaged in a business or transaction for which its remaining assets
constitute unreasonably small capital, or (iii) intends or will intend to incur
debt beyond its ability to repay such debts as they mature. Since each of the
components of the question of whether a Guarantee is a fraudulent conveyance is
inherently fact based and fact specific, there can be no assurance that a court
passing on such questions would agree with the Company. Neither counsel for the
Company nor counsel for the Underwriter will express any opinion as to Federal
or state laws relating to fraudulent transfers.
ORIGINAL ISSUE DISCOUNT
The Senior Secured Discount Notes will be issued at a substantial discount
from their principal amount. Consequently, the purchasers of the Senior Secured
Discount Notes generally will be required to include amounts in gross income
for Federal income tax purposes prior to receipt of the cash payments to which
the income is attributable. For a more detailed discussion of the Federal
income tax consequences of the purchase, ownership and disposition of the
Senior Secured Discount Notes. See "Certain Federal Income Tax Considerations
Relating to an Investment in the Senior Secured Discount Notes."
If a bankruptcy case is commenced by or against the Company under the United
States Bankruptcy Code (the "Bankruptcy Code") after the issuance of the Senior
Secured Discount Notes, the claim of a holder of the Senior Secured Discount
Notes with respect to the principal amount thereof may be limited to an amount
equal to the sum of (i) the initial public offering price and (ii) that portion
of the original issue discount which is not deemed to constitute "unmatured
interest" for purposes of the Bankruptcy Code. Any original issue discount that
was not amortized as of any such bankruptcy filing would constitute "unmatured
interest."
NO PRIOR MARKET FOR NOTES
There is no existing market for the Notes. The Underwriters have advised the
Company that they currently intend to make a market in the Notes. However, they
are not obligated to do so, and any market making with respect to the Notes may
be discontinued at any time without notice. The Company does not intend to
apply for the listing of the Notes on any securities exchange. Accordingly,
there can be no assurance as to the liquidity of any market that may develop
for the Notes, the ability of holders of the Notes to sell their Notes, or the
price such holders would receive upon the sale of their Notes. If such a market
were to develop, the Notes could trade at prices that may be lower than their
initial offering price as a result of many factors, including prevailing
interest rates, the Company's operating results and the markets for similar
debt securities.
15
<PAGE>
THE COMPANY
GENERAL
The Company is a fully integrated manufacturer and marketer of steel, steel
strapping and strapping tools, steel tubing and automotive and light truck
jacks. The Company's operations are divided into two primary segments, the
"Steel Making Segment" and the "Steel Fabricating Segment." Through these two
segments, the Company is a leader in the production of steel strapping and
automotive and light truck jacks, as well as a leader in the provision of steel
products to certain niche markets.
Based in Riverdale, Illinois, the Company is the successor to the original
Acme Steel Company (founded in 1884 as the Acme Flexible Clasp Company of
Chicago), which merged in 1964 with the Interlake Iron Company (founded in 1905
in New York as the By-Products Coke Corporation) to form Interlake Steel
Corporation. As a result of a reorganization in 1986 (the "1986
Reorganization"), a holding company was formed, The Interlake Corporation ("New
Interlake"), which became the parent company of Interlake, Inc. ("Old
Interlake"). Old Interlake then transferred its non-steel related operations
and assets to New Interlake. Old Interlake retained the iron, steel and U.S.
steel strapping assets and businesses, was renamed Acme Steel Company, and was
spun off as an independent public company in May 1986.
Acme Steel Company undertook a further reorganization in May 1992 (the "1992
Reorganization"), when the Company was formed and became the parent of Acme
Steel and Acme Steel's former operating subsidiaries, Acme Packaging, Alpha
Tube and Universal. Acme Steel and its successor, the Company, have been traded
on the Nasdaq National Market since 1986 under the symbol "ACME."
The Company's principal executive offices are located at 13500 South Perry
Avenue, Riverdale, Illinois 60627, and the Company's telephone number is
708/849-2500. The Company's registered agent in the State of Delaware is The
Corporation Trust Company, and its registered address in Delaware is
Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware 19801.
The following chart depicts the organization of the Company and its
subsidiaries. Each of the subsidiaries will unconditionally guarantee the
Company's obligations under the Notes, and the capital stock of each subsidiary
will be pledged to secure the Company's obligations under the Notes.
ACME METALS
INCORPORATED
-----------------------------------------------
100% 100%
ACME PACKAGING
ACME STEEL CORPORATION
COMPANY
100%
ALABAMA -------------------------------------------------
METALLURGICAL 100% 100% 100% 100%
CORPORATION
UNIVERSAL ALPHA TUBE ALTA ACME STEEL
SLITTING
TOOL & CORPORATION COMPANY
STAMPING CORPORATION INTERNATIONAL,
COMPANY, INC.
INC.
Alabama Metallurgical Corporation presently is not engaged in manufacturing
operations. Acme Steel Company International, Inc. is a foreign sales
corporation, formed for the purpose of processing sales to certain non-U.S.
entities. Alta Slitting Corporation ("Alta") performs slitting services for
Alpha Tube, and references in this prospectus to Alpha Tube will be deemed to
include reference to Alta.
16
<PAGE>
MODERNIZATION AND EXPANSION PROJECT
OBJECTIVES
In 1990 the Company began a study of available business strategies and
technological developments in light of its then operational and competitive
opportunities. In July 1992, the Board of Directors of the Company authorized a
study of the feasibility of constructing a continuous thin slab caster/hot
strip mill complex. In connection with this study, the Company received reports
from the management consulting firm of A.T. Kearney, Inc. Based on the
feasibility study, the Kearney reports and extensive additional analysis
performed by the Company of available technology, market opportunities and
construction requirements, the Board of Directors of the Company has authorized
construction of a new continuous thin slab caster/hot strip mill complex (the
"Modernization Project") at Acme Steel's Riverdale, Illinois plant subject to
the Note Offering.
The Company believes that Acme Steel currently enjoys a position as a low
cost producer of high quality liquid steel. Although Acme Steel sells many of
its products for use in higher-priced specialty applications, its present ingot
pouring and rolling process results in finished steel production costs
significantly above those of certain of its competitors. The Company believes
the Modernization Project will allow Acme Steel to build on its strengths as a
low cost producer of liquid steel by significantly increasing its overall
efficiency and reducing its finished steel production costs, thereby improving
its gross margins. The Modernization Project should also result in finished
steel products with improved physical and metallurgical properties.
Based on the turnkey contract price, without taking into account financing
costs or changes that may be requested by Acme Steel during construction,
management estimates that the cost of the Modernization Project, including
equipment, ancillary facilities, construction, and general contractor fees,
will not exceed $372 million. As a result of the Modernization Project, the
Company expects shipping capability to increase from approximately 720,000 tons
per year to approximately 925,000 tons per year within two years of start-up
and to approximately 970,000 tons per year within four years of start-up. When
the Modernization Project is completed, the Company estimates that it will
provide savings in operating costs, based upon full utilization of its expanded
shipping capability of approximately 970,000 tons per year and certain other
material assumptions, of approximately $77 per ton, resulting from elimination
of many of the production steps utilized in the existing ingot pouring and
rolling process, lower energy consumption, higher labor productivity and
increased production yields.
COMPETITIVE PRESSURES FOR MODERNIZATION
Over the past decade, the average price of all steel products, adjusted for
inflation, has fallen significantly. The forces contributing to this downward
price trend have included industry overcapacity, the growth of low cost U.S.
steel producers that make increased use of continuous casting and other
techniques for improved productivity, and lower priced imports that benefit
from foreign government subsidies. The Company believes that in recent years
steel prices have been significantly influenced by producers with the lowest
costs, and that those costs are, in large part, a function of the level of the
producers' technological advancement.
Many U.S. steel producers have sought to reduce their operating costs
significantly through the modernization and rationalization of their
facilities. One of the principal modernization initiatives has been the
development of continuous casting facilities, first for bar products, then for
thick slabs (more than 6 inches) and most recently for thin slabs (less than 4
inches). Continuous casting is a significantly less expensive method of slab
production than the ingot pouring and rolling process currently employed by
Acme Steel.
According to the American Iron and Steel Institute ("AISI") statistics, over
the past decade the U.S. steel industry has increased its continuous cast steel
production to nearly 85% of flat-rolled steel production. Twelve U.S.
facilities now use a continuous casting process to produce thick slabs. On a
combined basis these facilities have an estimated capability of 39 million tons
of flat-rolled steel per year or, based on an assumed yield of 90%,
approximately 76% of total annual flat-rolled steel shipments. In 1989, the
first continuous
17
<PAGE>
thin slab casting facilities were constructed. More technologically advanced
than thick slab continuous casting facilities, thin slab casting eliminates the
extra heating and rolling necessary to flatten thick slabs. At present there
are two operating continuous thin slab casting facilities in North America with
an estimated combined capability of 3.8 million tons per year or, based on an
assumed yield of 90%, approximately 7% of total annual flat-rolled steel
shipments. Two additional thin slab casting facilities are now under
construction with an estimated combined capacity of 2 million tons. In addition
to continuous casting, advanced steel producers are employing other
technologies, including ladle metallurgy furnaces and computer controlled
equipment, to reduce production costs, improve quality, and improve customer
responsiveness.
EXISTING STEELMAKING PROCESS
Acme Steel currently produces steel through an ingot pouring and rolling
process rather than by continuous casting. Because of the variability in ingots
and the additional conditioning and shaping processes needed to produce flat-
rolled steel from them, the ingot process involves more product defects,
greater yield losses, higher energy consumption and lower labor productivity
than continuous casting. Further, Acme Steel's current rolling mill facilities
cannot produce a steel coil that is large enough (more than 550 pounds per inch
of width) and wide enough (more than 30 inches) to supply all of the needs of
its current customers and many other users of flat-rolled steel. In addition,
the physical limitations of its present mill facilities do not allow Acme Steel
to utilize fully the existing raw steel capacity of its steelmaking facilities.
By means of the Modernization Project, Acme Steel expects to bring its
facilities up to world-class standards and eliminate its competitive
disadvantages with respect to more technologically advanced steel producers.
In primary steelmaking, iron ore, coke, limestone and other raw materials are
processed in blast furnaces to produce molten iron or "hot metal." In Acme
Steel's facilities, this hot metal is converted into raw or liquid steel in a
basic oxygen furnace in which impurities are removed and the chemistry or
metallurgy for end use is determined on a batch-by-batch basis. Acme Steel's
basic oxygen furnace facility employs two vessels, with a steelmaking capacity
of 100 tons per heat.
Liquid steel from the basic oxygen furnace flows into ladles, which are then
positioned via an overhead crane above a line of cast iron ingot molds. A
stream of steel flows through an opening in the bottom of the ladle to "teem"
or fill the cast iron molds. When the steel is solid enough to hold its shape,
a stripper crane lifts away the mold while a plunger holds down the steel
ingot. The "stripped" ingots are then taken to furnaces or "soaking pits" where
they are reheated or "soaked" until they reach a uniform temperature
throughout. The reheated ingots are carried to the primary rolling mill where
they are shaped into semi-finished steel slabs 4 1/2 to 6 1/2 inches thick with
the desired width and length.
The slabs are inspected, conditioned, if needed, by scarfing or mechanical
grinding to remove surface imperfections, and then stored. When scheduled for
production, the slabs are reheated to rolling temperature and finished in Acme
Steel's semi-continuous hot strip mill where they are rolled to final
thickness, tempered, and coiled into hot bands. After further processing to
customer specifications, finished products are shipped to external customers
and to the Company's Steel Fabricating Segment in the form of coils.
In the production process Acme Steel currently uses, the loss of material
between the molten steel in the basic oxygen furnace and the finished coil of
steel results in a yield of approximately 78%. In addition, the process, from
the time steel is teemed into the ingot molds until a hot rolled band is
produced, takes, on average, 10 days.
18
<PAGE>
The flow diagram below illustrates the Company's existing steelmaking process
described above. The processes shown exclude the Company's coking and primary
steelmaking operations which will remain in place after completion of the
Modernization Project.
STEELMAKING PROCESS UPON PROJECT COMPLETION
The Modernization Project will involve construction of a state-of-the-art
continuous thin slab caster ("Caster") and a 60" wide seven-stand hot strip
rolling mill ("Rolling Mill"). The Modernization Project will include several
other technologically advanced facilities. Two ladle metallurgy furnaces
("LMFs") will be constructed. The LMFs will use electric arc heating and an
alloy addition system to achieve a high degree of control over the final
temperature and chemistry of the liquid steel. A tunnel-type roller hearth
furnace will be constructed and used to achieve equalized temperature through
the slab's thickness and width for final rolling into coil form. The Rolling
Mill will be constructed with state-of-the-art, computer-operated features to
precisely control the thickness, profile and flatness of the product to world-
class standards. Together with the Caster, this configuration should allow Acme
Steel to produce products across all steel grades that are wider and thinner,
with superior finish quality, than those it is now able to produce. Major
ancillary facilities in the Modernization Project will include air and water
environmental control facilities, mold/segment repair equipment, a roll
grinding shop, and coil storage and shipping facilities. The Modernization
Project will eliminate the processes Acme Steel now employs for teeming,
processing, heating and rolling ingots into slabs, conditioning and reheating
slabs, and transporting and storing ingots and slabs.
19
<PAGE>
CASTER. The Caster will be supplied with high quality liquid steel from Acme
Steel's existing basic oxygen furnace. The Company believes that the liquid
steel it is able to produce in its basic oxygen furnace, because of its lower
nitrogen content and lower incidence of "tramp" elements, will result in a
superior quality finished steel compared to that produced by steel companies
using thin-slab casting technology in conjunction with ferrous scrap and
electric arc furnaces. From the basic oxygen furnaces, the liquid steel will be
transported in ladles by rubber-tired vehicles to the new casting/mill
facility, which will be approximately a half-mile away. At the Caster, the
ladles of liquid steel will be treated in the new LMFs. After treatment, the
steel will flow from the ladles through a hollow ceramic tube ("shroud") into a
refractory lined reservoir ("tundish"), and from there downward into the
Caster's mold. The mold will be constructed with copper alloy-clad walls
through which water will flow at high velocity for cooling. As the molten steel
passes vertically through the water cooled mold a thin skin will form in a
matter of seconds on the outside of a rectangular slab shell measuring
approximately 2 inches thick by 36 to 61 inches wide.
The skin on the slab or strand will become thicker as the slab emerges from
the mold and will extend inward as the slab descends through the strand guide
and air mist water spray system until the slab is solid throughout. The hot
thin slab then will be gradually bent by a series of bending rollers from a
vertical into a horizontal orientation. At the bottom of the withdrawal unit,
the continuous slab will be straightened and sheared into individual slabs of
different lengths depending on the ordered final coil weight.
As planned, the thin slab casting process will be able to run continuously,
terminating only when the last ladle in a planned sequence is fully drained.
The number of ladles cast in continuous sequence will depend upon the
production schedule being followed at any given point in time. The Company
expects that the Caster will improve Acme Steel's finished product yield,
reduce energy and labor costs, increase production capability and improve the
metallurgical and surface quality of its products.
ROLLING MILL. The Caster will be situated such that the finished slabs will
feed directly into the roller-hearth tunnel furnace. As the slabs travel
continuously through the furnace, their temperature will be equalized to the
optimum uniform exit temperature required for final rolling. From the roller-
hearth furnace the slabs will move through jets of high pressure water to
remove a thin layer of iron oxide ("scale"). Once "descaled," the slabs will
pass through an edger and then move directly to the Rolling Mill, which will be
computer-controlled and configured as seven tandem-coupled rolling stands,
power-rated at 7,000 kW each. Each stand will sequentially reduce the thickness
of the slab being rolled. At the exit of the seventh stand, the slab thickness
will have been reduced from 2 inches to the final gauge required by the
customer's order. The hot rolled strip will then pass through a system of
computer-controlled laminar water sprays to precisely and uniformly cool the
steel to the final temperature required to achieve the customer's specified
physical properties (strength and ductility). Following this final temperature
adjustment, the strip will be coiled into a hot rolled band for shipment to the
customer or to other finishing facilities.
Based on information provided by the primary equipment supplier for the
Modernization Project and the Company's own analysis, the Company believes that
when it is fully operational, the Modernization Project will accomplish the
conversion of liquid steel to coils in approximately 1 1/2 hours, rather than
the 10 days it takes at present, and will increase the material yield from
liquid steel to finished coils from 78% to over 90%. In addition, based on the
various studies and estimates available to the Company and subject to the
assumptions on which these studies and estimates are based, the Company
believes the energy requirements for the process will be reduced by
approximately 59% per ton, and, at full capacity operation, the labor cost per
ton of finished steel will be reduced by approximately 48%. Further, based on
these studies and estimates, the Company believes the finished coils will be
able to be rolled wider and thinner, with physical and mechanical properties
produced to more exacting specifications, than Acme Steel can currently
produce. For a discussion of the assumptions underlying the cost reductions
referred to above, see "Estimated Costs and Savings" below.
20
<PAGE>
The flow diagram below illustrates the Company's planned steelmaking process
after completion of the Modernization Project. The diagram excludes the
Company's coking and primary steelmaking operations, which will not be
significantly changed from the existing operations.
IMPACT ON EXISTING OPERATIONS
The Modernization Project will be constructed on a greenfield site which is
near Acme Steel's current steelmaking facilities but physically separate. The
Company believes steel production at Acme Steel's existing facilities will
continue during the construction of the Modernization Project without
disruption or reduction of product available for supply to customers.
Commencement of the Project will not occur until the Company has entered into
an engineering, procurement and construction contract with a general contractor
of the Modernization Project. The Company anticipates that the Modernization
Project will be completed in approximately 27 months following its
commencement. During the Modernization Project's initial testing and phase-in
period, Acme Steel intends to use the excess capability of its existing melting
operation to produce sufficient hot metal both to maintain existing production
operations and to supply the new continuous caster. The construction of the
Modernization Project and the activities of the general contractor will be
monitored by a project management team composed primarily of existing company
officers and employees. In the event there are significant problems with the
construction of the Modernization Project, senior management may have to devote
substantial time to those problems from time to time and, as a result, may
devote substantially less time than is normal to existing operations, which
could adversely affect existing operations.
EXPANDED CAPABILITY
Acme Steel's current raw steel production capability is greater than its
ability to roll slabs into finished steel coils. In addition, Acme Steel's
existing hot strip mill cannot produce a finished coil of steel more than 30
inches wide. The Company believes, based on equipment specifications and its
own analysis, that the Modernization Project will significantly expand the
Company's shipping capability and also allow Acme Steel
21
<PAGE>
to produce wider sheets and thinner gauges, with physical and mechanical
properties produced to more exacting specifications than Acme Steel can
currently produce. This will expand Acme Steel's product range and allow it to
sell to many markets that it currently cannot penetrate as well as to increase
sales to its existing customer base. Further, as detailed below, the Company
believes that, after completion of the Modernization Project, Acme Steel's
productive yield from raw steel to finished coils will increase from
approximately 78% to over 90%. The improvement in yield, together with the
expanded capability of the Rolling Mill, is expected to increase Acme Steel's
shipping capability from approximately 720,000 tons per year to approximately
925,000 tons within two years of start-up and to approximately 970,000 tons per
year within four years of start-up. This increase is an estimate based on
operating rates, product mix and other factors. No assurance can be given that
Acme Steel's actual steel production will not be less than that or that the
additional amount of finished steel, if produced, can be sold.
ESTIMATED COSTS AND SAVINGS
Steel Making Segment
The following table summarizes the costs and estimated savings in operating
expenses associated with the Modernization Project. These cost savings are
based on an increase in the Company's production capability to approximately
970,000 tons and full utilization of the expanded capability. Certain of the
cost savings are related to allocation of fixed operating costs. As a result,
the cost savings would likely be lower at lower rates of production. The
Company estimates that at a production capability of approximately 925,000
tons, the cost savings will be approximately $71 per ton. There can be no
assurance as to the actual annual production volumes that will be achieved
after completion of the Modernization Project. The estimated operating savings
are based on certain additional assumptions, and are subject to associated
qualifications and limitations, as discussed below.
ESTIMATED AVERAGE COST SAVINGS
PER TON OF FINISHED COILS AT FULL UTILIZATION
<TABLE>
<CAPTION>
ESTIMATED
NEW COST
1993 COSTS STRUCTURE CHANGE
---------- --------- ------
<S> <C> <C> <C>
Productive Yield Loss............................... $ 41 $ 16 $25
Labor............................................... 118 61 57
Utilities........................................... 29 12 17
Other............................................... 172 194 (22)
---- ---- ---
$360 $283 $77
==== ==== ===
</TABLE>
The estimated operating cost savings for the Modernization Project do not
take into account increases or decreases in operating costs that are unrelated
to the Modernization Project, such as changes in wage rates and raw material
costs. In addition, the estimated operating cost savings do not take into
account any increased depreciation (estimated to be $12 million per year) or
interest costs, which will be substantially higher as a result of the
Modernization Project. Consequently, the estimated operating cost savings are
not necessarily indicative of the Company's results of operations or expected
financial performance for any period.
Productive Yield Loss. In its existing steelmaking process, Acme Steel has a
yield loss equal to approximately 22% of the liquid steel produced at the basic
oxygen furnace. The uninterrupted flow of liquid steel through the Caster and
Rolling Mill will eliminate several of the steps currently used to improve the
quality of a finished coil but which generate yield loss. In particular, the
Modernization Project is expected to eliminate the shearing of unusable "ingot
butts" at the primary mill, the grinding and "scarfing" of surface
imperfections on slabs before they are processed at the roughing mill, and the
"cutback loss" on coils due to gauge variations inherent in the existing hot
strip mill. Although the scrap generated by these processes can be reused in
Acme Steel's steelmaking process, the improved yields expected to result from
the Modernization Project will allow Acme Steel to produce more prime material
suitable for shipment rather than scrap. Based on internal engineering studies,
Acme Steel expects its yield loss after completion of the Modernization Project
to decrease from approximately 22% to less than 10%.
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<PAGE>
Labor. The existing steelmaking process is labor intensive. Labor is required
to set-up, condition or handle steel at each step before processing.
Significant labor is required to prepare the ingot molds, pour ingots, strip
ingots, convey ingots to the soaking pits, convey the ingots to the primary
mill and convey the slabs to the existing strip mill. All of these production
steps will be eliminated through the use of a continuous thin slab casting
process. As a result, Acme Steel expects to be able to reduce its hourly work
force by approximately 250 people who are currently assigned to processes that
will be eliminated.
Utilities. The existing steelmaking process is energy intensive. The high use
of energy results from the cooling and reheating of the semi-finished steel to
prepare it for further processing. In particular, the ingots, which are allowed
to cool after pouring are subsequently charged in the soaking pit for an
average of approximately 10 hours to increase the temperature for processing
through the primary mill. Steel slabs are allowed to cool to permit
conditioning and then must be reheated for processing in the roughing and hot
strip mills. These steps consume significant amounts of electricity and natural
gas. Based on internal engineering studies, Acme Steel expects the
Modernization Project to significantly reduce its utility costs by eliminating
the need for multiple cooling and reheating cycles and several rolling
procedures.
Other. The Modernization Project will result in additional costs related to
the operations of the ladle metallurgy furnace facility, the purchase of scrap
to supplement internally generated scrap, and the purchase of additional value
added services, such as pickling, from vendors.
The Modernization Project will involve costs in addition to those incurred in
the construction and operation of the facility itself. Upon the successful
completion of the Financing Plan, the Company will record a $2.3 million non-
cash charge to account for the contractual costs associated with its planned
workforce reduction and a $7.2 million non-cash charge to reflect an impairment
in the value of the existing steel finishing facilities which will be replaced
by the Modernization Project. Further, during the Modernization Project's final
completion phase, including initial testing, the Company anticipates incurring
approximately $15 million of start-up related costs, some of which may be
capitalized as part of the Modernization Project.
Steel Fabricating Segment
The Steel Fabricating Segment is expected to derive certain benefits from the
larger, wider, higher quality, flat-rolled steel coils Acme Steel is expected
to be able to produce as a result of the implementation of the Modernization
Project. Alpha Tube is expected to realize benefits from reduced edge scrap as
well as lower production scrap rates, higher productivity levels and better
yield rates due to more consistent gauge control. Acme Packaging and Universal
are expected to benefit primarily from reduced edge scrap.
ENGINEERING, PROCUREMENT AND CONSTRUCTION CONTRACT
The Company has elected to engage a general contractor to deliver a turnkey
facility subject to a fixed price contract covering engineering, procurement
and construction related to the Modernization Project. The Company has signed a
Memorandum of Understanding ("MOU") with Raytheon Engineers & Constructors,
Inc. ("Raytheon"), a wholly-owned subsidiary of Raytheon Corporation, outlining
the major terms of the Engineering, Procurement and Construction Contract ("EPC
Contract"). The Company and Raytheon expect to execute a final EPC Contract
prior to consummation of the Note Offering.
Pursuant to the MOU, Raytheon will provide design, engineering, site
preparation, procurement, construction, commissioning, start-up, testing and
training for the Modernization Project. In addition, pursuant to the MOU,
subject to certain mutually acceptable adjustments, the total EPC Contract
price shall not exceed $372 million.
Raytheon has also agreed to purchase $9 million of newly issued shares of
Common Stock at market price, on terms to be agreed upon subject to Raytheon's
due diligence review. The Company and Raytheon do not expect to consummate the
sale of common stock by the Company to Raytheon prior to the consummation of
the Note Offering.
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<PAGE>
The Company will rely on Raytheon for on-time completion of a fully
functioning facility. To the extent that there are delays in completion or the
facility is operating at a level of performance below that which is
contractually guaranteed, the Company will have the right to liquidated damages
in the form of a daily penalty fee paid by Raytheon to the Company. This
penalty fee will vary depending upon the nature of the noncompliance but will,
in any case, not be greater in the aggregate than 30% of the total EPC Contract
price.
EQUIPMENT SUPPLIER AND SUPPLY CONTRACT
The Company has selected SMS Schloemann-Siemag AG and its subsidiaries, SMS
Engineering Inc. and SMS Concast Inc. (collectively "SMS"), as the primary
equipment supplier for the Modernization Project. The equipment to be supplied
by SMS includes, but is not limited to, the continuous thin slab caster, the
tunnel roller-hearth furnace and the hot strip rolling mill. The SMS technology
for continuous thin slab casting is currently utilized by Nucor Steel at its
Crawfordsville, Indiana and Hickman, Arkansas facilities and three additional
facilities using this technology currently are under construction.
Although SMS will be engaged by Raytheon to supply the equipment, the Company
expects to negotiate guarantees from SMS via Raytheon, relating to key criteria
for evaluating the equipment in terms of performance and product quality. The
equipment will be subject to an agreed set of performance tests which must be
met in order for SMS to substantiate this contractual performance obligation.
Additionally, SMS will be subject to a liquidated damages charge for any delay
caused by SMS as a result of equipment commissioning or performance.
The Company expects to enter into a separate incentive agreement with SMS
providing it with a monetary incentive to assure that the facility can
successfully produce on a commercial basis certain grades of steel which to
date have only been produced by a continuous thin slab caster pilot plant. This
agreement is expected to provide that in the event that the equipment fails to
produce any of the required grades on a commercial basis, SMS would be liable
to the Company for specified monetary damages.
INDEPENDENT REVIEW OF THE MODERNIZATION PROJECT
On April 20, 1994, Lehman Brothers Inc. retained Hatch Associates Ltd. and
Steltech Ltd. ("Hatch/Steltech"), in their capacity as experts in engineering
and technology, to provide an independent assessment of the Modernization
Project. The scope of this assessment included a review of the Company's market
analysis, the Company's assumptions in arriving at its cost savings estimates,
the existing and proposed technology to be used in connection with the
Modernization Project, the implementation of the project, its integration with
the Company's existing facilities, expected future product quality, project and
start-up costs, project management and environmental issues.
Hatch/Steltech delivered its report (the "Report") in July 1994. The Report
concludes that the Modernization Project is the correct course for the Company
and that, although the time schedule is aggressive, a 27 month implementation
schedule should be achievable. According to the Report, the Company should
attain a shipment capability of 925,000 tons per year in the second full year
after start-up which will probably increase to 969,000 tons by the fourth year
after start-up. Hatch/Steltech calculated the savings per ton (excluding
depreciation expense) from the Company's current cost of goods sold at $71 per
ton at 925,000 tons shipped, increasing to $77 per ton at 969,000 tons shipped.
In addition the Report indicates that there is some risk that the Company may
have difficulty in producing certain of the higher grades of steel. However,
for most of these grades, this risk would be manifested in slower rates of
production and higher production costs, not an inability to produce these
grades.
The foregoing is a summary of certain portions of the Report, and does not
purport to be complete. The Report includes various assumptions, estimates and
assessments, including a review of the risks of the Modernization Project, the
market for various types of steel, competitive factors, the regulatory
environment, raw material availability, technological requirements, the
Company's production plan and other factors in arriving at their conclusions
regarding the Modernization Project in its entirety and particular aspects of
it. The conclusions arrived at by Hatch/Steltech and summarized above reflect
an overall assessment of the various factors considered in the Report.
24
<PAGE>
FINANCING PLAN
The Company has adopted a plan of financing intended to provide the funds
necessary to complete the Modernization Project, to repay certain indebtedness
currently outstanding, and to provide additional liquidity. The Company's plan
of financing includes the following: (i) the Note Offering, (ii) the Special
Warrant Offering and (iii) the Working Capital Facility. The following table
sets forth the Company's sources and immediate uses of funds as if the
foregoing transactions were completed on June 26, 1994:
<TABLE>
<CAPTION>
(DOLLARS
IN
THOUSANDS)
----------
<S> <C>
Sources of Funds
Senior Secured Notes......................................... $175,000
Senior Secured Discount Notes................................ 100,000
Special Warrant Offering(1).................................. 117,600
Working Capital Facility(2).................................. 0
--------
Total...................................................... $392,600
========
Uses of Funds
Increase in cash and cash equivalents(3)..................... $320,600
Repayment of 9.35% Senior Notes.............................. 50,000
Estimated fees and expenses(4)............................... 22,000
--------
Total...................................................... $392,600
========
</TABLE>
- --------
(1) The Special Warrant Offering occurred prior to the Note Offering, but the
net proceeds of the Special Warrant Offering have been placed in escrow.
The Note Offering is conditioned on and is a condition to the release from
escrow of the proceeds of the Special Warrant Offering. On or before
September 14, 1994, the Special Warrants are exercisable on a one-for-one
basis for 5,600,000 shares of the Company's common stock, $1.00 par value
("Common Stock"). Conditions for the Company's receipt of the proceeds of
the sale of the Special Warrants include among other matters confirmation
of the availability of not less than 85% of the remaining financing needed
for construction of the Modernization Project. Successful completion of the
Note Offering will satisfy this condition.
(2) The Company has obtained commitments for an $80 million Working Capital
Facility to provide for additional liquidity. The Working Capital Facility
initially will be undrawn. See "Description of Working Capital Facility."
(3) The increase in cash and cash equivalents, together with cash currently on
hand and cash flow from operations will be used for the construction and
integration of the Modernization Project. At June 26, 1994 the Company had
cash and cash equivalents of $73.7 million. Sources and Uses of Funds above
do not give effect to the proposed purchase by Raytheon of $9 million of
newly issued shares of Common Stock. See "Modernization and Expansion
Project--Engineering, Procurement and Construction Contract."
(4) Estimated fees and expenses includes financing fees for the Special Warrant
Offering, the Note Offering, and the registration of 5,600,000 shares of
Common Stock, related offering expenses and a prepayment penalty of $2.5
million, net of taxes, related to repayment of the 9.35% Senior Notes.
USE OF PROCEEDS
The net proceeds of the Note Offering, estimated at $ , together
with the net proceeds of the Special Warrant Offering, estimated at $112.3
million, will be utilized for the construction of the Modernization Project,
except for approximately $50 million (plus the amount of any prepayment
penalties) which will be used to retire the Company's outstanding Senior Notes.
For information with respect to interest rates and maturity dates of the
Company's indebtedness being retired or refinanced in connection with the
Modernization Project, and certain costs associated with such repayment or
refinancing, see "Capitalization."
25
<PAGE>
CAPITALIZATION
The following table sets forth the consolidated capitalization of the Company
as of June 26, 1994 and as adjusted to give effect to the Note Offering and the
Special Warrant Offering. This presentation should be read in conjunction with
the Consolidated Financial Statements of the Company and the notes thereto, and
other information included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
JUNE 26, 1994
------------------
(DOLLARS IN
THOUSANDS)
AS
ACTUAL ADJUSTED
-------- --------
<S> <C> <C>
Cash and cash equivalents.......................... $ 73,654 $394,254(6)
======== ========
Long-term debt (including current maturities)
9.35% Senior Notes, Series A due 1999............ $ 40,000 $ 0
9.35% Senior Notes, Series B due 1996............ 10,000 0
Notes payable, 6.5% to 6.75%, due 1998-2008(1)... 6,000 6,000
% Senior Secured Notes due 2002.............. 0 175,000
% Senior Secured Discount Notes due 2004 (net
of original issue discount of $ )....... 0 100,000
-------- --------
Total long-term debt........................... 56,000 281,000
-------- --------
Stockholders' equity
Preferred stock, $1 par value, 2,000,000 shares
authorized, no shares issued.................... 0 0
Common stock, $1 par value, 20,000,000 shares
authorized, 5,559,161 issued and outstanding,
actual; 11,159,161 issued and outstanding as
adjusted(2)(5)(6)............................... 5,559 11,159
Retained earnings(3)............................. 61,202 53,002
Additional paid-in capital(4)(6)................. 50,743 157,443
Minimum pension liability(7)..................... (21,295) (21,295)
-------- --------
Total stockholders' equity..................... 96,209 200,309
-------- --------
Total capitalization........................... $152,209 $481,309
======== ========
</TABLE>
- --------
(1) Notes payable, 6.5% to 6.75%, due 1998-2008 reflects amounts due in
connection with an industrial revenue bond financing completed prior to the
1986 Reorganization. The proceeds from the issuance of the notes payable
were used to fund pollution control facilities at Acme Steel's Riverdale,
Illinois plant.
(2) Reflects an additional $5.6 million from the assumed exercise of the
Special Warrants for Common Stock.
(3) Reflects non-recurring charges, net of taxes, of $5.7 million in
contractual severance and asset impairments from the decision to proceed
with the Modernization Project and a $2.5 million extraordinary expense,
net of taxes, associated with the prepayment of the 9.35% Senior Notes,
Series A and B, and the write off of associated unamortized financing fees.
(4) Reflects an additional $106.7 million from the assumed exercise of the
Special Warrants for Common Stock.
(5) As of June 26, 1994, the Company had 543,000 options outstanding, of which
417,000 were exercisable.
(6) Does not give effect to the proposed purchase of $9 million of Common Stock
by Raytheon. See "The Modernization and Expansion Project--Engineering,
Procurement and Construction Contract."
(7) See Retirement Benefit Plans in the notes to the consolidated financial
statements.
26
<PAGE>
SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA
The following table sets forth selected historical consolidated financial
data and operating data for the Company for the periods indicated. The
Consolidated Statements of Operations Data and Consolidated Balance Sheet Data
for, and as of the end of, each of the five years in the period ended December
26, 1993 were derived from the consolidated financial statements of the
Company, which have been audited by Price Waterhouse, independent accountants.
The selected historical consolidated financial data for, and as of the end of,
the six months ended June 27, 1993 and June 26, 1994 were derived from
unaudited financial statements for the Company which, in the opinion of
management, reflect all adjustments which are of a normal recurring nature
necessary for a fair presentation of the results of such periods. Results for
interim periods are not necessarily indicative of the results to be expected
for an entire fiscal year. The following table should be read in conjunction
with Management's Discussion and Analysis of Financial Condition and Results
of Operations and the consolidated financial statements and notes thereto
appearing elsewhere herein.
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS, EXCEPT PER TON DATA)
FISCAL YEAR FIRST HALF
--------------------------------------------------- ------------------
1989 1990 1991 1992 1993 1993 1994
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF
OPERATIONS DATA:
Net sales................. $439,412 $446,042 $376,951 $391,562 $457,406 $225,032 $256,423
Cost of products sold..... 375,902 396,790 335,503 347,624 397,526 198,327 215,341
Depreciation expense...... 11,624 12,540 13,700 14,392 14,657 7,517 7,596
Selling and administrative
expense.................. 25,751 27,916 29,219 28,901 30,633 13,800 15,304
Restructuring/nonrecurring
charge................... -- -- -- 2,700 (1) 1,925(2) -- --
-------- -------- -------- -------- -------- -------- --------
Operating income (loss)... 26,135 8,796 (1,471) (2,055) 12,665 5,388 18,182
Interest expense, net..... (2,116) (4,178) (4,211) (3,869) (3,813) (1,993) (1,620)
Unusual income item....... -- 4,005 1,241 1,047 1,210 -- --
Other non-operating
income................... 2,107 765 1,391 355 370 222 861
-------- -------- -------- -------- -------- -------- --------
Income (loss) before
income taxes and
cumulative effect of
changes in accounting
principles............... 26,126 9,388 (3,050) (4,522) 10,432 3,617 17,423
Income tax provision
(credit)................. 9,926 3,755 (732) (1,673) 4,173 1,447 6,969
-------- -------- -------- -------- -------- -------- --------
Income (loss) before
cumulative effect of
changes in accounting
principles............... 16,200 5,633 (2,318) (2,849) 6,259 2,170 10,454
Cumulative effect of
changes in accounting
principles, net of taxes. -- -- -- (50,323)(3) -- -- --
-------- -------- -------- -------- -------- -------- --------
Net income (loss)......... $ 16,200 $ 5,633 $ (2,318) $(53,172) $ 6,259 $ 2,170 $ 10,454
======== ======== ======== ======== ======== ======== ========
OTHER DATA:
Consolidated:
EBITDA(4)................. $ 40,273 $ 22,592 $ 14,144 $ 15,705 $ 30,194 $ 13,542 $ 26,937
Capital expenditures...... 14,960 28,604 10,611 7,557 11,749 4,305 5,071
Acme Steel Company:
Tons shipped-external
customers................ 506,475 436,123 286,385 320,192 413,645 205,419 238,067
Tons shipped-intersegment. 233,374 259,243 273,177 289,946 284,361 154,219 144,063
-------- -------- -------- -------- -------- -------- --------
Total tons shipped........ 739,849 695,366 559,562 610,138 698,006 359,638 382,130
Average price per ton(5).. $ 417 $ 422 $ 423 $ 413 $ 426 $ 411 $ 444
Average production cost
per ton(5)............... 339 355 354 338 349 338 338
Raw steel to finished
product yield............ 76.1% 77.2% 78.0% 78.7% 78.6% 78.5% 78.6%
CONSOLIDATED BALANCE SHEET
DATA:
Total assets.............. $285,275 $286,603 $290,736 $300,702 $333,869 $310,059 $350,628
Long-term debt (including
current portion)......... 59,500 59,500 59,500 59,500 56,000 56,000 56,000
Stockholders' equity...... 147,106 152,370 150,664 89,295 83,203 91,690 96,209
</TABLE>
- -------
(1) See Restructuring Charge in the notes to the consolidated financial
statements.
(2) See Nonrecurring Charge in the notes to the consolidated financial
statements.
(3) Cumulative effect of changes in accounting principles, net of taxes,
includes the effects of adopting FAS No. 106 "Accounting for
Postretirement Benefits Other Than Pensions" and FAS No. 109 "Accounting
for Income Taxes." See Postretirement Benefits Other Than Pensions and
Income Taxes in the notes to the consolidated financial statements.
(4) EBITDA is defined as net income plus income taxes, net interest expense,
depreciation and amortization, restructuring and nonrecurring items,
cumulative effect of changes in accounting principles, and less unusual
income. The Company believes EBITDA provides additional information for
determining its ability to meet debt service requirements. EBITDA does not
represent net income or cash flow from operations as determined by
generally accepted accounting principles, and EBITDA is not necessarily an
indication of whether cash flow will be sufficient to fund cash
requirements. EBITDA does not give effect to any investment of the
approximately $394.3 million of cash remaining after application of the
net proceeds of the Note Offering and the Special Warrant Offering to
repay indebtedness and pay related expenses.
(5) Average price and average production costs per ton, which can be
significantly affected by Acme Steel's product mix in a given period,
include shipments made to external customers and intersegment shipments.
27
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated the items in the
Consolidated Statement of Operations as a percentage of net sales.
<TABLE>
<CAPTION>
FOR THE SIX
FOR THE FISCAL YEAR ENDED MONTHS ENDED
-------------------------------------- -----------------
DECEMBER 29, DECEMBER 27, DECEMBER 26, JUNE 27, JUNE 26,
1991 1992 1993 1993 1994
------------ ------------ ------------ -------- --------
<S> <C> <C> <C> <C> <C>
Net Sales................... 100.0% 100.0% 100.0% 100.0% 100.0%
----- ----- ----- ----- -----
Costs and Expenses:
Cost of products sold..... 89.0 88.8 86.9 88.1 84.0
Depreciation expense...... 3.6 3.7 3.2 3.4 2.9
----- ----- ----- ----- -----
Gross profit................ 7.4 7.5 9.9 8.5 13.1
Selling and administrative
expense.................. 7.8 7.4 6.7 6.1 6.0
Restructuring/nonrecurring
charge................... 0.0 0.6 0.4 0.0 0.0
----- ----- ----- ----- -----
Operating income (loss)..... (0.4) (0.5) 2.8 2.4 7.1
Interest expense net...... (1.1) (1.0) (0.9) (0.9) (0.6)
Other non-operating income
net...................... 0.4 0.1 0.1 0.1 0.3
Unusual income item....... 0.3 0.3 0.3 0.0 0.0
Income tax provision
(credit)................... (0.2) (0.4) 0.9 0.6 2.7
----- ----- ----- ----- -----
Net income (loss) before
cumulative effect of
changes in accounting
principles................. (0.6) (0.7) 1.4 1.0 4.1
Cumulative effect of changes
in accounting principles
net of taxes............... 0.0 (12.9) 0.0 0.0 0.0
----- ----- ----- ----- -----
Net income (loss)........... (0.6)% (13.6)% 1.4% 1.0% 4.1%
===== ===== ===== ===== =====
</TABLE>
Six Months Ended June 26, 1994 as compared to Six Months Ended June 27, 1993
NET SALES. Consolidated net sales of $256.4 million for the six months ended
June 26, 1994 were $31.4 million, or 14 percent higher than net sales in the
first six months of 1993. Higher shipment volume represented a $16.0 million
increase in sales supplemented by a 7 percent increase in average selling
prices over last year's comparable period. The increased selling prices had a
$15.4 million favorable impact on sales in comparison to the first six months
of 1993.
Steel Making Segment. Net sales for the Steel Making Segment advanced to
$173.5 million in the first six months of 1994, a $22.4 million, or 15 percent,
improvement over last year's comparable period. Sales to unaffiliated customers
increased 24 percent to $111.5 million while intersegment sales of $62.0
million were 2 percent higher than in the first six months of 1993. The
increase in the Steel Making Segment's net sales was the result of a 7 percent
increase in average selling prices and a 22,000 ton increase in shipments.
Steel Fabricating Segment. Steel Fabricating Segment net sales of $144.9
million in the first six months of 1994 were $10.0 million, or 7 percent higher
than the comparable period in the prior year. A 7 percent increase in average
selling prices accounted for substantially all of the sales improvement while
increased shipments generated the remainder of the increase over last year's
first six months.
GROSS PROFIT. The gross profit for the first six months of 1994 of $33.5
million was $14.3 million higher than the gross profit recorded during last
year's comparable period. The increase in gross profit was due to higher
average selling prices for the Company's products and increased shipment
volume. Operating costs, however, were higher in the first six months of 1994.
Higher material costs, increased expenditures and higher insurance and pension
costs ($1.3 million higher than last year's comparable period) were the primary
reasons
28
<PAGE>
for the increased operating costs. The gross profit, as a percentage of net
sales, was 13.1 percent in the first six months of 1994 versus 8.5 percent in
last year's comparable period.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. Selling and administrative
expense totaled $15.3 million (6.0 percent of net sales) and $13.8 million (6.1
percent of net sales) for the first six months of 1994 and 1993, respectively.
OPERATING INCOME. Operating income for the company for the six months ended
June 26, 1994 was $18.2 million as compared to operating income of $5.4 million
in the first six months of 1993.
Steel Making Segment. Operating income for the Steel Making Segment totaled
$9.6 million as compared to the $0.8 million loss recorded in the first six
months of 1993. The earnings improvement was driven by a 7 percent increase in
average selling prices and increased shipments. Shipments to external customers
were 16 percent higher than last year's comparable period while shipments to
the Steel Fabricating Segment were 10,000 tons, or 7 percent, lower than in the
first six months of 1993. Approximately 62 percent of shipments and 64 percent
of gross profit in 1994 was attributable to external customers while the
remainder was generated by sales to the Steel Fabricating Segment. In 1993's
first six months the Steel Making Segment shipped 57 percent and derived 60
percent of its gross profit from external customers. In total, the increased
selling prices generated $10.5 million in increased revenue while the increased
shipments contributed $4.1 million over last year's results. Partially
offsetting the Steel Making Segment's sales-related gains were increased
material costs and higher insurance and pension costs ($1.0 million higher than
last year's comparable period) for the Steel Making Segment's active and
retired employees.
Steel Fabricating Segment. The Steel Fabricating Segment's operating income
of $9.2 million for the first six months of 1994 was $2.7 million higher than
in last year's comparable period with virtually all of the increase derived
from a 7 percent increase in average selling prices. Acme Packaging's operating
income for the first six months of 1994 was 34 percent higher than last year's
comparable period due primarily to a 4 percent increase in average selling
prices for steel strapping. Alpha Tube's results in 1994 more than doubled as a
result of a 14 percent increase in average selling prices for welded tubing,
and Universal's operating income was slightly higher in connection with a 3
percent increase in average selling prices for auto and light truck jacks. The
majority of the price increases for the Steel Fabricating Segment in the first
six months of 1994 was the result of price increases initiated in 1993.
Partially offsetting the Steel Fabricating Segment's sales related gains were
increased raw material costs in the form of higher flat-rolled prices from the
Steel Making Segment and external suppliers.
NON-OPERATING INCOME. Non-operating income in the first six months of 1994
was $0.6 million higher than last year's comparable period due primarily to a
refund of prior years' utility costs recorded in the current period.
INCOME TAX EXPENSE. The income tax expense for the first six months of 1994
totaled $7.0 million based on a 40 percent effective tax rate as compared to
the $1.4 million expense in the first six months of 1993, also based on a 40
percent effective rate.
NET INCOME. The Company recorded earnings of $10.5 million, or $1.84 per
share in the first six months of 1994 versus the $2.2 million, or 40 cents per
share, recorded in the first six months of 1993.
Fiscal 1993 As Compared To Fiscal 1992
NET SALES. In 1993, the Company benefited from the strengthening economy in
terms of increased shipments and higher average selling prices. As a result of
an improving economy and price increases, the Company experienced the highest
quarterly net sales in its history in 1993's fourth quarter, achieving sales of
$120.5 million. For the year, consolidated net sales totaled $457.4 million, up
$65.8 million, or 17 percent, over 1992 sales. Shipments of products were
strong, representing a $57.5 million increase from last year's
29
<PAGE>
shipment volume levels. Average selling prices were 2 percent higher than in
1992 with all of the increase coming in the second half of the year. The
improvement in selling prices added $8.3 million to 1993 net sales.
Steel Making Segment. Total net sales for the Steel Making Segment advanced
to $303.8 million in 1993, a $43.7 million, or 17 percent, improvement over the
prior year. Sales to unaffiliated customers increased 29 percent to $187.8
million while intersegment sales of $116.1 million were 1 percent higher than
in 1992. The increase in total net sales was principally the result of a 13
percent jump in shipments. Steel selling prices, on average, were 3 percent
higher than the prior year. Nearly all of the price increases materialized in
the second half of the year as the Steel Making Segment began to benefit from
two $20 per ton (5 percent) increases initiated in the second and third
quarters of 1993.
Sales of sheet and strip steel, which accounted for 94 percent of the Steel
Making Segment's sales in 1993, advanced $41.8 million, or 17 percent over the
prior year. Semi-finished steel sales increased $3.3 million, or 45 percent
over the prior year, while sales of iron products fell $1.5 million, or 18
percent, as compared to a year earlier.
Steel Fabricating Segment. Steel Fabricating Segment net sales of $271.5
million were $24.6 million, or 10 percent, higher than the prior year. Higher
shipments accounted for $20 million of the improvement while a 2 percent
increase in average selling prices generated the remainder of the increase over
a year earlier.
Sales of steel strapping and strapping tools totaled $154.1 million in 1993,
an $11.7 million, or 8 percent, increase over a year earlier. Increased
shipping volume accounted for $9.4 million, or 80 percent, of the improvement
over the prior year's results. Average selling prices were 2 percent higher
than the prior year's levels with all of the increase coming in the latter part
of the year.
Steel tube sales for 1993 reached $74.3 million, up 17 percent from the prior
year. The $10.8 million improvement in sales was due mainly to increased
shipping volume. Selling prices rose 4 percent during the year with most of the
increase in the last half of 1993.
Sales of jacks and lifting tools for cars and light trucks totaled $43.1
million, 5 percent higher than the prior year. The improvement in sales was due
entirely to increased shipping volume as selling prices, on average, were
slightly below the prior year's levels.
GROSS PROFIT. Gross profit as a percent of consolidated net sales in 1993 was
9.9 percent, the highest percentage since 1989. The gross profit percentage in
1992 was 7.5 percent. Increased sales volume and higher average selling prices
were the primary determinants for the significant increase in gross profit over
last year. Operating costs, however, were higher in 1993. Labor costs increased
due to a combination of higher overtime premiums and incentive bonuses, a
negotiated bonus payment to Acme Steel's and Acme Packaging's union workers at
the Riverdale facilities for ratifying the one year labor contract that ended
August, 1993 of $0.8 million and a union signing bonus and lump sum payments
negotiated as part of the current labor contract resulting in charges of $0.3
million during the year. Unplanned expenditures to repair Acme Steel's basic
oxygen furnace and primary rolling mill also reduced gross profit in 1993.
Pension expense was $1.5 million higher than in 1992 as the Company recorded a
$0.3 million expense in 1993 versus a $1.2 million pension benefit in the prior
year. Depreciation increased $0.5 million over the last year due partially to a
major relining of Acme Steel's blast furnace in 1990.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. Selling and administrative
expenses in 1993 were $1.7 million higher than the prior year. However, on a
percentage of sales basis, selling and administrative expenses improved over
the prior year as expenses totaled 6.7 percent of sales in 1993 versus 7.4
percent in 1992. The Company began to benefit from lower labor costs resulting
from a program, initiated in the 1992 third quarter and substantially completed
by year end, to reduce the Company's salaried employee work-force by 10
percent. The 1993 savings from this program were sufficient to offset higher
medical costs for selling and administrative employees.
30
<PAGE>
RESTRUCTURING CHARGE. During 1992, the Company recorded a $2.7 million
restructuring charge in connection with its 10 percent salaried work force
reduction which was completed during 1993. This charge covered additional
pension liability and extra vacation pay as part of an early retirement offer
and severance payments for involuntary separations. See the note to the
financial statements titled Restructuring Charge for further specific
components of the charge.
NON-RECURRING CHARGE. The Company recorded a $1.9 million non-recurring
charge in 1993 in connection with the $1.3 million write-off of Acme Steel's
No. 3 Hot Strip Mill and Billet Mill and a $0.6 million expense to close Acme
Packaging's Pittsburg-East facility in California and write off a strapping
line at its New Britain, Connecticut, facility.
OPERATING INCOME. Operating income for the Company was $12.7 million in 1993
as compared to an operating loss of $2.1 million in 1992.
Steel Making Segment. Operating income for the Steel Making Segment totaled
$0.7 million, a significant improvement over the $9.3 million loss from
operations recorded in 1992. The earnings improvement was driven by increased
shipments and higher average selling prices. Shipments to external customers in
1993 increased 87,000 tons over the prior year while shipments to the Steel
Fabricating Segment were 5,600 tons lower than in 1992. Approximately 60
percent of 1993's shipments and gross profit was attributable to external
customers while the remaining 40 percent of gross profit was generated by
shipments to the Steel Fabricating Segment. In 1992, the Steel Making Segment
shipped 55 percent of its products to external customers which generated 52
percent of its gross profit while shipments to the Steel Fabricating Segment
produced the remaining 48 percent of gross profit. The increased percentage of
shipments to external customers in 1993 is consistent with the Company's two-
pronged strategy to obtain the highest possible margin on flat-rolled steel and
obtain the highest earnings for the Company as a whole. In total, the increased
shipments generated $8.6 million in increased revenue while a 3 percent
increase in average selling prices contributed $5.9 million to the improvement
over the prior year's results. Partially offsetting the Steel Making Segment's
sales related gains were increased labor costs in connection with overtime and
union negotiated payments, unexpected repairs to its basic oxygen furnace and
primary rolling mill and a $1.3 million write-off of the No. 3 Hot Strip Mill
recorded in the fourth quarter.
Steel Fabricating Segment. Operating income for the Steel Fabricating Segment
of $11.9 million in 1993 was $4.6 million higher than the results recorded in
1992. The Steel Fabricating Segment benefited from the improving economy and
increased average selling prices in 1993.
Partially offsetting the Steel Fabricating Segment's sales and productivity
related gains were increased raw material costs in the form of higher flat-
rolled steel prices and a $0.6 million expense to close Acme Packaging's
Pittsburg-East facility in California and the write-off of a strapping line at
its New Britain, Connecticut facility. Acme Packaging, which sells steel
strapping used to secure various finished products to pallets or within
shipping containers during transportation, was helped by higher demand for its
products in connection with increased U.S. industrial output.
Alpha Tube's results advanced due to the improvement in the housing and
recreational product markets. Alpha Tube's business also benefited from higher
margins due to increased demand for its more technologically advanced products
and gains in product quality and manufacturing productivity.
Despite downward pressure on its selling prices in 1993, Universal's business
achieved record results due to improved manufacturing productivity.
INTEREST EXPENSE AND INCOME. Interest expense was slightly lower than the
prior year. The decrease resulted from a reduced balance on the Companys long-
term debt as the result of a $3.5 million principal payment in May 1993.
Interest income was $0.1 million lower than in 1992 due mainly to reduced
returns on cash balances.
31
<PAGE>
NON-OPERATING INCOME. In 1993, the Company recorded a $1.2 million pre-tax
gain as the result of a settlement of prior claims against LTV Steel Company
(LTV) by Wabush Iron, in an iron ore mine equity interest held by Acme Steel,
pursuant to the finalization of LTV's plan of reorganization. The sale of all
of the Company's interests in a coal producing property located in West
Virginia added approximately $1 million to pre-tax income in 1992.
INCOME TAX EXPENSE. The income tax expense for 1993 equaled $4.2 million
based on a 40 percent effective tax rate. Because of a loss in 1992, the
Company recognized income tax benefits of $1.7 million in 1992, based on a 37
percent effective tax rate.
NET INCOME. For 1993, the Company registered net income of $6.3 million, or
$1.15 per share. In 1992, the Company incurred a net loss of $2.8 million, or
53 cents per share, before the cumulative effect of changes in accounting
principles. The improvement in net income was due primarily to increased
shipments, and to a lesser extent, higher average selling prices for steel,
steel strapping and welded steel tube.
In 1992, the Company adopted both FAS No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions" and FAS No. 109, "Accounting for
Income Taxes." The cumulative effect of adopting FAS No. 106 resulted in a
$42.2 million after tax charge to 1992 earnings. The cumulative effect of the
adoption of FAS No. 109 increased the 1992 net loss by $8.1 million.
Fiscal 1992 As Compared To Fiscal 1991
NET SALES. As a result of the modest economic recovery that began in 1992,
consolidated net sales of $391.6 million were $14.6 million, or 4 percent,
higher than prior year consolidated net sales. Shipments of products rebounded,
representing a $22 million increase from 1991 levels. However, selling prices
on average declined 2 percent from the prior year's prices. The weakness in
selling prices, particularly for steel and steel strapping products, had a $7.4
million negative effect on 1992 sales.
Steel Making Segment. Sales for the Steel Making Segment of $260.1 million in
1992 were up modestly (4 percent) over the year earlier due entirely to
increased shipments as average selling prices were 2 percent lower than 1991
price levels. Sales to unaffiliated customers increased 3 percent to $145.6
million while intersegment sales of $114.5 million were 4 percent higher than
in 1991.
Steel Fabricating Segment. Steel Fabricating Segment sales of $247.0 million
in 1992 were $10.9 million, or 5 percent, higher than the prior year. Steel
strapping sales of $142.3 million in 1992 were unchanged. Sales of steel tubing
amounted to $63.5 million in 1992, up 4 percent from a year earlier while auto
and truck jack sales of $41.2 million increased 20 percent over the 1991
levels.
GROSS PROFIT. Gross profit as a percent of consolidated net sales equaled 7.5
percent in 1992, an improvement over the 7.4 percent registered in 1991. The
improvement in the 1992 gross profit over the prior year was the result of
reduced material costs and lower expenditures in connection with the Company's
aggressive cost control efforts. These cost reduction measures were more than
enough to overcome a combination of unfavorable margin impacts resulting from
lower average selling prices for most of the Company's products, a 12 percent
jump in costs associated with medical and life insurance coverage for the
Company's active and retired employees, increased property and franchise taxes
and expenses for a feasibility study of options for building a new continuous
thin slab caster/hot strip mill complex at Acme Steel's Riverdale facility. The
Company's gross profit margin benefited from a $1 million pension benefit in
1992, compared to no benefit in l991. Depreciation expense increased $0.5
million in 1992 over the prior years' expense partially due to the major
relining of the Company's blast furnace in 1990.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. Selling and administrative
expenses in 1992 were approximately the same as in l991. As a percent of sales,
selling and administrative expenses were 7.4 and 7.8 percent in 1992 and l991,
respectively. The Company began to benefit from lower labor costs resulting
from
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<PAGE>
a program, initiated in the 1992 third quarter and substantially completed by
year end, to reduce its salaried employee work-force by 10 percent. The 1992
savings from this program were sufficient to offset higher medical costs for
selling and administrative employees. Expenses associated with the
reorganization of the Company, completed in June 1992, added about $0.4 million
to selling and administrative costs in 1991.
RESTRUCTURING CHARGE. During 1992, the Company recorded a $2.7 million
restructuring charge in connection with its 10 percent salaried work force
reduction. This charge covered additional pension liability and extra vacation
pay as part of an early retirement offer as well as severance payments in
conjunction with involuntary separations.
OPERATING INCOME (LOSS). The operating loss for the Company was ($2.1)
million in 1992 as compared to a ($1.5) million loss recorded in 1991.
Steel Making Segment. The Steel Making Segment incurred a $9.4 million
operating loss in 1992 as compared to a $4.4 million loss in 1991. The $5.0
million decline in the Steel Making Segment's results was primarily due to a
combination of a two percent decline in average selling prices for sheet, strip
and semifinished steel which decreased sales by $4.8 million partially offset
($2.9 million) by a 9 percent increase in steel shipments, a $2.2 million
reduction in operating income due to a $6 million decline in iron sales as the
result of a one-time spot sale of molten iron to LTV Steel Company, Inc. in
1991 and a $2.7 million restructuring charge in connection with a 10 percent
salaried work force reduction plan. Operating costs, however, were lower than
in 1992 due to reduced material costs and lower expenditures.
Steel Fabricating Segment. Operating income for the Steel Fabricating Segment
of $7.1 million in 1992 was $4.6 million higher than the results recorded in
l991. Acme Packaging's 1992 results were $0.1 million, or 3 percent, lower than
the prior year due almost entirely to a 3 percent drop in average selling
prices. Alpha Tube's results in 1992 were $2.8 million higher than in 1991 as
the result of lower raw material costs and more efficient operations.
Universal's operating income jumped $1.9 million due to a 19 percent increase
in shipments.
INTEREST EXPENSE AND INCOME. Interest expense remained constant from 1991 to
1992. Interest income grew $0.4 million primarily because of higher cash
balances during the year.
NON-OPERATING INCOME. The sale of all of the Company's interests in a coal
producing property located in West Virginia added approximately $1 million to
pre-tax income in 1992. In 1991, pre-tax income benefited from a one-time gain
of $1.2 million in connection with the assignment to a third party of the
Company's rights in claims allowed in the LTV Steel Company, Inc. Bankruptcy.
Other non-operating income dropped by $1 million from a year earlier stemming
principally from lower royalty income from coal properties and a $0.4 million
loss on disposal of fixed assets recorded in 1992.
INCOME TAX EXPENSE. Because of the Company's losses in 1992 and 1991, the
Company recognized income tax benefits of $1.7 million in 1992, based on a 37
percent effective tax rate, and $0.7 million in 1991, based on a 24 percent
effective tax rate. The Company adopted FAS No. 109, "Accounting for Income
Taxes" in 1992. The impact of the adoption of this pronouncement on 1992's
results was to increase the credit for taxes by $0.9 million.
NET (LOSS). For 1992, the Company suffered a net loss of $2.8 million, or 53
cents per share, before the cumulative effect of changes in accounting
principles. In 1991, the Company incurred a net loss of $2.3 million, equal to
43 cents per share. The decline in operating earnings was due primarily to
weaker selling prices for steel and steel strapping.
Like other public companies, the Company was required to change its
accounting for retiree health care and life insurance to conform with FAS No.
106, "Employers' Accounting for Postretirement Benefits other than Pensions."
The Company chose to adopt this accounting standard effective December 30,
1991, the first
33
<PAGE>
day of the Company's 1992 fiscal year. The transition effect of adopting FAS
No. 106 resulted in a $67.6 million charge to 1992 earnings, partially offset
by $25.4 million in income tax effects.
The Company also elected to adopt FAS No. 109, "Accounting for Income Taxes"
in 1992. This accounting standard prescribes a new method of accounting for
deferred income taxes and requires the restatement of prior year deferred
income taxes. The cumulative effect of the adoption of this pronouncement
increased the 1992 net loss by $8.1 million.
LIQUIDITY AND CAPITAL RESOURCES
As of June 26, 1994, the Company's long-term indebtedness (including the
current portion) was $56 million. Following the Note Offering, the Company's
total indebtedness will be $281 million, which equates to a $225 million
increase consisting of $275 million from the Note Offering less $50 million to
repay currently outstanding Senior Notes. The Company currently has an unused
$60 million revolving credit agreement, which is expected to be terminated
concurrently with consummation of the Note Offering and replaced with a new
Working Capital Facility. The Company has obtained commitments for an $80
million Working Capital Facility with an initial term of three years from the
date of consummation of the Note Offering. See "Description of Working Capital
Facility" At June 26, 1994, the Company's ratio of debt to total capitalization
was .37 to 1. After giving effect to the Note Offering and the Special Warrant
Offering, the Company's ratio of debt to total capitalization at that date
would have been .58 to 1.
On March 28, 1994, the Company sold the Special Warrants on a private
placement basis exclusively in Canada and Europe. On or before September 14,
1994, the Special Warrants are exercisable on a one-for-one basis for 5,600,000
shares of the Company's Common Stock (the "Common Stock"). Conditions for the
Company's receipt of the proceeds of the sale of the Special Warrants include
among other matters confirmation of the availability of not less than 85% of
the remaining financing needed for construction of the Modernization Project.
Successful completion of the Note Offering will satisfy this condition.
The Company's shareholders' equity totaled $96.2 million at June 26, 1994. On
a pro forma basis, following the Special Warrant Offering and the Note
Offering, the Company's total shareholders' equity would have been $200.3
million on June 26, 1994, which equates to a $104.1 million increase consisting
of $112.3 million from the Special Warrant Offering less restructuring costs of
$5.7 million net of taxes and a penalty in connection with prepaying currently
outstanding Senior Notes of $2.5 million net of taxes.
The Company's cash balance at June 26, 1994 was $73.7 million. The Company
historically has financed its operating and investing activities principally
with cash from operations. Net cash provided by operations was $26.1 million in
the first half of 1994 and $16.0 million, $24.0 million and $21.7 million for
1993, 1992, and 1991, respectively.
Capital expenditures totalled $5.1 million in the first half of 1994 and
$11.7, $7.6 and $10.6 million in 1993, 1992 and 1991, respectively. Of the
$35.0 million spent on capital expenditures from 1991 through June 26, 1994,
approximately $12.0 million, or 34 percent, was attributable to compliance with
environmental regulations. The majority of the remainder of the capital project
expenditures was for replacement and rehabilitation of production facilities
throughout the Company. Based on the turnkey contract price, without taking
into account financing costs or changes that may be requested by Acme Steel
during construction, management estimates that the cost of the Modernization
Project, including equipment, ancillary facilities, construction, and general
contractor fees, will not exceed $372 million. The Company expects these
expenditures will be financed exclusively from proceeds from the Note and
Special Warrant Offerings, together with cash on hand and operating cash flow.
The Company also plans to spend approximately $23.5 million in 1998 related to
the relining and upgrading of Acme Steel's A blast furnace at its Chicago
facilities, and the Company is continually evaluating opportunities for
incremental capital expenditures which meet certain financial return criteria.
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<PAGE>
BUSINESS
GENERAL
The Company, based in Riverdale, Illinois, is a fully integrated manufacturer
and marketer of steel, steel strapping and strapping tools, steel tubing and
automotive and light truck jacks. The Company's operations are divided into two
primary segments, the Steel Making Segment and the Steel Fabricating Segment.
The Steel Making Segment's sole operating subsidiary is Acme Steel, and the
Steel Fabricating Segment consists of Acme Packaging, Alpha Tube and Universal.
The table below presents the percentage make-up of the Company's net sales by
the products comprising the Company's business segments, for the past five
years.
<TABLE>
<CAPTION>
FISCAL SIX
YEAR MONTHS
---------- ----------
1989 1990 1991 1992 1993 1993 1994
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Sheet and strip steel........................ 44% 37% 32% 33% 37% 36% 38%
Semi-finished steel.......................... 5 4 1 2 2 2 4
Iron products and other...................... 1 1 4 2 2 2 2
--- --- --- --- --- --- ---
Total Steel Making Segment............... 50 42 37 37 41 40 44
Steel strapping and strapping tools.......... 34 34 38 36 33 34 30
Welded steel tube............................ 8 16 16 16 16 16 17
Auto and light truck jacks................... 8 8 9 11 10 10 9
--- --- --- --- --- --- ---
Total Steel Fabricating Segment.......... 50 58 63 63 59 60 56
</TABLE>
Over the past eight years, the Company has pursued a downstream integration
strategy, intended to enhance both the value and margins of its steel products.
This strategy, which included the acquisition of Universal and Alpha Tube and
of additional strapping facilities, has helped to moderate the impact of
fluctuating steel demand on Acme Steel's operations by creating captive
businesses that consume approximately 40 to 45% of Acme Steel's steel
production. These businesses also allow the Company to sell fabricated steel
products that have a higher value added component.
As the smallest integrated steel producer in the United States, with an
annual shipping capability of approximately 720,000 tons of finished steel,
Acme Steel manufactures and markets primarily flat-rolled sheet and strip
steel. Acme Steel attempts to utilize the flexibility of its small production
quantities by focusing on niche markets and targeting customers with small
order sizes and special metallurgical requirements such as high carbon, special
alloy and high-strength steels. The principal markets served by Acme Steel
include the agricultural equipment, automotive component, industrial equipment,
industrial fastener, pipe and tube, processor and tool manufacturing
industries.
BUSINESS STRATEGY
Having implemented its downstream integration strategy, the Company is now
pursuing a business strategy consisting of the following key elements: reducing
production costs, expanding shipping capability and product range, increasing
sales of specialty products and improving product quality and customer service.
Reducing Production Costs. The Company believes that Acme Steel currently
enjoys a position as a low cost producer of liquid steel. Its finished
production costs, however, are significantly above those of certain of its
competitors. The Company believes that the Modernization Project, which will
enable Acme Steel to eliminate many of the production steps utilized in its
current ingot pouring and rolling process will significantly reduce Acme
Steel's finished steel production costs and improve operating efficiency. When
the Modernization Project is completed, the Company estimates that it will
provide savings in operating costs, based on full utilization of its expanded
shipping capability of approximately 970,000 tons per year and certain other
material assumptions, of approximately $77 per ton. The Company's Steel
Fabricating Segment subsidiaries will also be able to reduce their production
costs because the wider, larger coils supplied by Acme
35
<PAGE>
Steel will reduce scrap and changeover costs and improve yields. See
"Modernization and Expansion Project--Estimated Costs and Savings."
Expanding Shipping Capability and Product Range. The new continuous casting
process is expected to increase Acme Steel's yield from raw liquid steel to
finished coils from approximately 78% to over 90%. In addition, the new Rolling
Mill is expected to eliminate the current capacity restraint imposed by Acme
Steel's existing hot strip mill, which has a rolling capability of only
approximately 720,000 tons per year. As a result, management expects the
shipping capability of Acme Steel to increase to approximately 925,000 tons per
year within two years of start-up and to approximately 970,000 tons per year
within four years of start-up. The completion of the Modernization Project will
also allow Acme Steel to produce wider sheets and thinner gauges than it is now
able to produce, thus expanding Acme Steel's product range and allowing the
Company to sell products in many markets which it currently cannot penetrate as
well as to increase sales to its existing customer base. See "Modernization and
Expansion Project--Expanded Capability."
Increasing Sales of Specialty Products. Acme Steel produces only 100 tons of
liquid steel per heat, among the smallest volumes of any integrated steel
producer. Unlike larger integrated steel producers, which generally produce
large quantities of a specific size and grade, Acme Steel, because of its small
heat size, has substantial flexibility in responding to customer orders for
specific metallurgical requirements in smaller product quantities. As a result
of this flexibility, Acme Steel currently produces over 400 grades of steel for
approximately 600 customers, with particular emphasis on specialty grades
including high carbon, alloy and high strength steels. Acme Steel also offers
narrow width strips and slitting and cut-to-length services. Acme Steel
continually seeks to expand its sales of its specialty products, and the
proportion of specialty steel sold by Acme Steel to external customers has
increased from 22.8% of total shipments in 1991 to 27.5% in 1993.
Certain of the Company's Steel Fabricating Segment subsidiaries also focus on
the sale of specialty products in niche markets. Alpha Tube, which has
developed production expertise in thin-walled tubing applications, targets
customers that are well suited to its production expertise and has developed
new products to further expand its sales in value-added segments. Universal
competes in the OEM automotive market primarily through the development of
proprietary new products, especially lighter weight automotive jacks. Both
Alpha Tube and Universal should benefit from the implementation of the
Modernization Project, as access to Acme Steel's more consistent gauge steel
will allow the development of new products that require such precise gauges.
Improving Product Quality and Customer Service. The Company continuously
strives, through application of its Total Quality Improvement Process and Labor
Management Participation Teams (see "Business--Employee Relations"), to offer
high quality products to its customers. However, Acme Steel is currently
constrained by its ingot pouring and rolling process from achieving the
consistent quality offered by continuous casting. Through the implementation of
the Modernization Project, the Company expects to improve Acme Steel's product
quality and eliminate its competitive disadvantage with respect to customers
that demand continuously cast steel products. The proposed seven stand rolling
mill will also improve the finish quality and gauge control of Acme Steel's
products, which in turn will improve the products offered by the Company's
Steel Fabricating Segment subsidiaries. In addition, based on the Company's
internal engineering studies, the implementation of the Modernization Project
is expected to reduce the production time for transforming raw steel into steel
coils from ten days to 1 1/2 hours, thereby improving Acme Steel's ability to
fill customer orders promptly.
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<PAGE>
ACME STEEL
Product Overview. Acme Steel is a fully integrated producer of steel. The
following table sets forth the tonnage of steel shipped by Acme Steel during
the past three years in various product categories:
<TABLE>
<CAPTION>
NET TONS SHIPPED PERCENT OF TOTAL
--------------------------------------- -----------------------------
FISCAL YEAR SIX MONTHS FISCAL YEAR SIX MONTHS
----------------------- --------------- ----------------- -----------
1991 1992 1993 1993 1994 1991 1992 1993 1993 1994
------- ------- ------- ------- ------- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Specialty Products:
High Carbon............ 36,315 41,042 53,021 27,748 28,317 6.5 6.7 7.6 7.7 7.4
Mid Carbon............. 51,707 55,772 84,539 42,083 50,798 9.2 9.1 12.1 11.7 13.3
Alloy.................. 14,280 16,000 21,462 10,312 10,597 2.6 2.6 3.1 2.9 2.8
HSLA................... 25,815 29,007 34,924 16,358 21,011 4.6 4.8 5.0 4.5 5.5
------- ------- ------- ------- ------- ----- ----- ----- ----- -----
128,117 141,821 193,946 96,501 110,723 22.9 23.2 27.8 26.8 29.0
------- ------- ------- ------- ------- ----- ----- ----- ----- -----
Non-Specialty Products:
Low Carbon............. 132,017 139,447 166,400 80,291 86,685 23.6 22.9 23.9 22.3 22.7
Non Prime.............. 9,690 14,327 15,029 7,764 5,992 1.7 2.3 2.2 2.2 1.6
Semi-Finished.......... 16,285 24,597 33,554 16,147 34,667 2.9 4.0 4.8 4.5 9.1
Other.................. 276 -- 4,716 4,716 -- -- -- 0.6 1.3 --
------- ------- ------- ------- ------- ----- ----- ----- ----- -----
158,268 178,371 219,699 108,918 127,344 28.2 29.2 31.5 30.3 33.4
------- ------- ------- ------- ------- ----- ----- ----- ----- -----
Intersegment Sales...... 273,177 289,946 284,361 154,219 144,063 48.9 47.6 40.7 42.9 37.6
------- ------- ------- ------- ------- ----- ----- ----- ----- -----
559,562 610,138 698,006 359,638 382,130 100.0 100.0 100.0 100.0 100.0
======= ======= ======= ======= ======= ===== ===== ===== ===== =====
</TABLE>
Specialty Products. Acme Steel specializes in manufacturing high carbon,
alloy and high strength steels and marketing these products directly to end
users. Specific metallurgical requirements are met by introducing particular
metals such as molybdenum, manganese, chrome and vanadium into the basic oxygen
furnace during the steelmaking process or additionally through other
steelmaking processes such as annealing and controlled rolling.
Non-Specialty Products. Non-specialty products include hot rolled, low carbon
steel sheet and strip products, as well as semi-finished steel, sold to
external customers. Low-carbon steel sheet and strip is a price-sensitive
product used in a broad array of industrial goods. Semi-finished steel
comprises slabs and billets which are sold to steel converters who further
process steel for resale.
Intersegment Sales. Intersegment sales to the subsidiaries comprising the
Company's Steel Fabricating Segment consist primarily of low and mid carbon
products. Approximately 80% of the intersegment sales are to Acme Packaging,
and consist of cold rolled low and mid carbon steel (which has been further
processed to enhance surface characteristics). The remainder of intersegment
sales are made to Alpha Tube and Universal.
Customers. The Company's Steel Fabricating Segment consumes approximately 40%
to 45% of Acme Steel's steel production. The balance of Acme Steel's production
is sold to external customers, principally in the agricultural equipment,
construction, automotive components, industrial equipment, industrial fastener,
conversion, tube and tool manufacturing industries. The majority of these
customers are located within an approximately 500 mile radius of Acme Steel's
steelmaking facilities. In 1993, finished steel products sold to external
customers accounted for approximately 37% of the Company's consolidated net
sales. Acme also supplies semi-finished steel to converters for further
processing. Semi-finished steel accounted for about 2% of the Company's
consolidated net sales in 1993.
Acme Steel's customers generally are serviced by Acme Steel's own internal
sales staff. Acme's top ten external customers accounted for a combined total
of approximately 19% of Acme Steel's net sales in 1993, and no individual
customer accounted for more than 4% of such sales.
Acme Steel focuses on external customers whose demand levels and
metallurgical requirements, as well as requirements for value-added services
such as slitting, pickling, annealing and cutting-to-length, are a good
37
<PAGE>
match for the small production quantities and high service levels available
from Acme Steel's facilities. Given the nature and quality of the products and
services it provides in the niche markets it serves, Acme Steel has developed
strong, long-standing relationships with its customer base.
ACME PACKAGING
Products and Markets. Acme Packaging, which was incorporated as a separate
entity in December 1991, began manufacturing steel strapping in 1905. Acme
Packaging is one of the two leading U.S. producers of steel strapping and
strapping tools. Sales by Acme Packaging constituted 33% of the Company's 1993
consolidated net sales.
Acme Packaging manufacturers three types of steel strapping: regular duty,
high tensile, and SupraMet(R). High tensile strapping is strapping that has
been heat treated to provide greater strength and elasticity for shock
absorption. SupraMet(R) is a high-strength steel strapping that is used to
unitize heavy materials such as concrete blocks, bricks, fabricated metal
products, aluminum or lead ingot, paper, glass, plastic pipe, lumber, hardboard
and particle board.
Customers. Principal markets served by Acme Packaging include the
agricultural, automotive, brick, construction, fabricated and primary metals,
forest products, paper and wholesale industries. Acme Packaging's sales are
primarily in the U.S. Its export sales have recently declined as a result of
the current weakness of many foreign economies and currently account for less
than 5% of Acme Packaging's net sales.
Acme Packaging sells steel strapping through private label distributors,
independent distributors and its own in-house sales force. No one customer
accounted for more than 10% of Acme Packaging's 1993 net sales.
ALPHA TUBE
Products and Markets. Alpha Tube, which was acquired in May 1989, is a
leading producer of high quality welded carbon steel tubing. Sales by Alpha
Tube constituted 16% of the Company's 1993 consolidated net sales.
Customers. Alpha Tube's products are used in the appliance, automotive, truck
exhaust, construction, heating and cooling equipment, household and leisure
furniture, material handling, recreational products and warehouse industries.
Alpha Tube's manufacturing customers generally are serviced by its own in-house
sales force. However, Alpha Tube also uses exclusive distributors in an effort
to increase sales in certain target markets. Alpha Tube's top ten customers
accounted for approximately 34% of its net sales in 1993, and no one customer
accounted for more than 7% of its net sales in 1993.
UNIVERSAL
Products and Markets. Universal, acquired by the Company in May 1987,
produces automotive and light truck jacks, tire wrenches and accessories.
Management estimates that Universal currently holds a 30% share of the OEM
market for automobile and light truck jacks in North America. Sales by
Universal constituted 10% of the Company's 1993 consolidated net sales.
Customers. Universal markets its products to U.S. and foreign transplant
automotive manufacturers and the automotive aftermarket. Universal's four
largest customers are General Motors, Ford, Chrysler and Honda.
The OEM market and aftermarket in the U.S. are experiencing several trends,
including a continuing demand by the automotive industry for product
development capability and leadership among their suppliers; a continuing move
toward global sourcing capability, continuing pressure by customers to reduce
per unit pricing while maintaining or increasing the quality of each unit, and
an increasing need to perform research and development for alternative
materials to be used in product manufacturing. Universal has a strong product
development, engineering, and technical service capability and has recently
instituted an effective
38
<PAGE>
order, manufacturing and inventory control system. Universal intends to
continue to implement productivity improvements, focus on lightweight jack
designs (which are of increasing importance as automobile manufacturers seek to
reduce the weight and thereby improve the fuel economy of their vehicles), and
pursue sales opportunities with foreign OEM's, particularly OEM's with
manufacturing facilities in the U.S. that are seeking to increase the U.S.
content of their vehicles. Universal also seeks to expand after-market sales of
tire accessory products (e.g., tire tools and wheel chocks).
EMPLOYEE RELATIONS
As of May 1994, the Company had a work force of approximately 2,775
employees, including about 650 salaried employees and about 2,125 hourly
employees. The unionized work force totals approximately 1,970, or
approximately 71% of total employment. None of the salaried work force is
unionized and, except for fewer than 30 employees employed in Alpha Tube's
slitting operations, the hourly work force at Alpha Tube is also non-union.
The Company's relationships with its unions are good. There have been no
strikes or work stoppages at any location since the Company's purchase of Alpha
Tube, Universal and the additional strapping plants. The last strike at the
Riverdale and Chicago locations was in 1959 during a major steel industry work
stoppage. The Company instituted Labor Management Participation Teams in 1982
as a vehicle for problem solving in a team environment and a Total Quality
Improvement Process in 1991 to establish standards to maximize product quality
from the existing facilities. Union members participate extensively in these
two processes.
In 1993, the Company reached a new labor agreement with the United
Steelworkers covering operations in Chicago and Riverdale, Illinois. The
agreement is for a six year term and contains a no-strike provision and a wage
reopener in 1996 which is subject to binding arbitration. The contract,
covering approximately 1,500 employees at the Riverdale, Illinois facilities of
Acme Steel and Acme Packaging, was ratified on October 1, 1993. The contract
will permit Acme Steel to fill positions in the new facility to be constructed
in connection with the Modernization Project with existing employees on the
basis of qualifications rather than strict seniority and provides incentives
for senior employees in Acme Steel's existing facilities to defer retirement
while the new facility is under construction. The contract also eliminates
retirement benefits for new employees hired after February 1, 1993 that will be
terminated as a result of the Modernization Project.
PROPERTIES
Acme Steel's principal properties consist of an iron-producing plant in
Chicago, Illinois and a steelmaking plant in Riverdale, Illinois. These
facilities include coke ovens, blast furnaces, pig casting machine, basic
oxygen furnaces, a primary mill, hot strip rolling mill for the production of
flat-rolled steel, a slab grinder, pickle lines, cold mills, annealing
furnaces, slitter lines and cut-to-length lines. Acme Packaging's principal
properties consist of steel strapping plants, which include slitting and
painting equipment, in Riverdale, Illinois; New Britain, Connecticut; Leeds,
Alabama; and Pittsburg, California. Alpha Tube's three facilities are located
in the Toledo, Ohio metropolitan area. Alpha Tube's facilities include two
manufacturing plants equipped with rolling mills for the production of welded
steel tubing, and a third plant at which steel slitting is performed.
Universal's facilities are located in Butler, Indiana and include a
manufacturing and office building, a computer-assisted design and manufacturing
system, and automated forming and assembly lines.
All of the properties of the Company's subsidiaries are owned in fee and are
unmortgaged, other than the facilities of Alpha Tube, which are leased. As a
non-operating holding company, the Company itself does not own or lease any
properties.
RAW MATERIALS AND ENERGY
Steel Making Segment. Acme Steel's principal raw materials are iron ore and
coal, which are used in the steelmaking process. The Company believes Acme
Steel's sources of iron ore, coal and other raw materials are adequate to
provide for its foreseeable needs.
39
<PAGE>
Acme Steel indirectly owns an interest of approximately 15.1% in an iron ore
mining venture, Wabush Mines ("Wabush"), in Newfoundland (Labrador) and Quebec,
Canada. The managing agent of the venture is Cliffs-Mining Company ("Cliffs"),
a subsidiary of Cleveland-Cliffs Inc. ("Cleveland-Cliffs"). Acme Steel is
contractually obligated to purchase iron ore pellets ("pellets") from Wabush at
the higher of production cost or market. Wabush's production cost currently
approximates market price; however, there can be no assurance that Wabush's
cost structure will not result in above market prices in the future. In some
cases, Acme Steel's blast furnace operations require pellets with different
properties and Acme Steel "trades" a portion of its allocated Wabush output for
alternative pellets. This type of transaction is readily accomplished because
Cliffs is the managing agent for several mining joint ventures. During 1993,
Acme Steel acquired approximately 600,000 tons of pellets, or 56% of its pellet
requirements, from Wabush. Acme Steel is obligated to purchase from Cleveland-
Cliffs 75% of its pellet requirements in excess of 680,000 tons, and Cleveland-
Cliffs has the right of first refusal to supply Acme with the remaining 25% of
its needs. The balance of Acme Steel's pellet requirements is satisfied at a
competitive delivered cost.
Currently there is a world-wide surplus of metallurgical coal. Accordingly,
Acme Steel is able to satisfy its coal requirements at competitive prices
through short-term contracts and purchases on the open market.
Acme Steel's steelmaking operations require substantial amounts of both
natural gas and electricity. Acme Steel purchases natural gas in the open
market and reuses blast furnace gas and coke oven gas. Acme Steel purchases
electricity from Commonwealth Edison Company at standard industrial rates and
is in the process of negotiating a long-term electric supply contract which, if
executed, will result in lower electric rates.
Steel Fabricating Segment. Acme Packaging and Universal purchase virtually
all of their flat-rolled steel from Acme Steel. Alpha Tube purchases from Acme
Steel a substantial portion of its steel needs that Acme Steel is able to
supply and purchases the remainder of its steel from other steel suppliers from
time to time when such purchases are deemed advantageous to the Company on a
consolidated basis. The Steel Fabricating Segment subsidiaries' purchases of
steel from Acme Steel are made at prices that approximate market prices.
COMPETITION
General. The Company's operating subsidiaries have a variety of U.S. and, in
some cases, foreign competitors, many of whom are larger, have greater capital
resources and/or have more modern technology. In general, the operating
subsidiaries compete on the basis of price, quality and service, with
particular competitive strategies adapted to the markets and customers they
serve.
Acme Steel. Acme Steel is the smallest integrated steel producer in the U.S.,
with annual shipping capability of approximately 720,000 tons. This compares
with total 1993 U.S. shipments of carbon flat-rolled steel products, as
reported by AISI, of approximately 46.4 million tons. In the specialty market
that Acme Steel targets, its primary competitors are WCI Steel, Inc. and
Bethlehem Steel at its Sparrows Point Plant, whose operations are similar to
those of Acme Steel except for their larger plant sizes and facilities, and
steel service centers, which participate in this market primarily through
larger integrated mills and overseas suppliers.
Acme Steel operates in a cyclical and intensely competitive industry. Over
the past decade the price of steel, adjusted for inflation, has fallen
significantly. Although a significant portion of this decline is the result of
worldwide steelmaking overcapacity, steel pricing is also influenced by low
cost producers in the U.S. steel industry. Many of Acme Steel's competitors
have implemented steelmaking technologies not utilized by Acme Steel. As a
result, Acme Steel's costs to produce a ton of finished steel are substantially
higher than those of certain of its competitors. The Company believes that it
must undertake the Modernization Project and make the significant capital
investments required if Acme Steel is to achieve levels of cost, productivity
and quality already attained by certain of its competitors. See "Risk Factors--
Modernization and Expansion Project" and "Modernization and Expansion Project."
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Acme Packaging. In the steel strapping market, Acme Packaging's primary
competitor is ITW Signode, a division of Illinois Tool Works, Inc., which
management believes has a market share approximating that of Acme Packaging.
The Company believes that Acme Packaging's strong market position is
attributable to (i) a broad product line, (ii) high quality, low cost strapping
produced in modern facilities, (iii) the location of its production facilities
in close proximity to a broad customer base and (iv) the benefits of a close
relationship with Acme Steel, which supplies virtually all of Acme Packaging's
steel. However, the steel strapping market is a mature market that is not
expected to grow significantly in future years. Furthermore, competition from
plastic strapping, especially the higher strength polyester products, is
expected by the Company to intensify in the traditional steel strapping markets
of lumber, paper, textiles, wood and synthetic fibers, primarily due to
improvements in product strength characteristics.
Alpha Tube. Alpha Tube operates in a highly competitive market characterized
by numerous participants with widely varying capabilities. Alpha Tube's
customers are increasingly demanding products with increased formability,
greater gauge control and lighter weight in combination with higher strength
and different steel chemistries. Customers, especially in the automotive
market, also are increasingly demanding just-in-time inventory delivery, which
has the effect of increasing inventory carrying costs at the tubing
manufacturer level. Unlike Alpha Tube, many of its competitors compete only on
price and generally offer little or no technical service.
Universal. Universal's primary competitor in the automobile and light truck
jack market is the Canadian based Seeburn Division of Ventra Group, which has a
market share similar to that of Universal. Universal competes in a limited
market characterized by large purchasers with significant buying power.
ENVIRONMENTAL COMPLIANCE
The operations of the Company and its subsidiary companies are subject to
numerous Federal, state and local laws and regulations providing a
comprehensive program of controlling the discharge of materials into the
environment and remediation of certain waste disposal sites by responsible
parties. In addition, various Federal and state occupational safety and health
laws and regulations apply to the work place environment.
The current environmental control requirements are comprehensive and reflect
a long-term trend towards increasing stringency as environmental laws and
regulations are subject to periodic renewal and revision. The Company expects
this trend will continue and become even more pronounced in future years. The
1990 Federal Clean Air Act amendments, for example, imposed significant
additional environmental control requirements upon Acme Steel's coke plant
facilities.
In prior years, the Company has made substantial capital investments in
environmental control facilities to achieve compliance with environmental laws
and regulations, incurring expenditures of $10.3 million for environmental
projects in the period from 1991 through 1993. The Company anticipates making
further capital expenditures totaling approximately $4.1 million in 1994 for
environmental projects and approximately $7.1 million in 1995 to maintain
compliance with these laws (exclusive of any such expenditures related to the
Modernization Project). In addition, maintenance, depreciation and operating
expenses attributable to installed environmental control facilities are having,
and will continue to have, an adverse effect upon the Company's earnings.
Although all of the Company's subsidiary operating companies are affected by
environmental laws and regulations, such laws and regulations have had, and are
expected to continue to have, a greater impact upon the Company's steel
manufacturing subsidiary than on the Company's other operating subsidiaries.
The United States Environmental Protection Agency (the "U.S. EPA") and the
eight Great Lakes States are currently developing guidelines for discharge
standards in the Great Lakes basin pursuant to the Great Lakes Critical
Programs Act. Although these guidelines were scheduled to be issued in 1991,
due to the complexity of the process and subject matter, they have not yet been
published. When finalized, these guidelines are expected to require
substantially more stringent limitations on industrial discharges into the
water of, or entering, the Great Lakes than those currently applicable to such
discharges. After publication
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of the guidelines, each state is then expected to revise its water discharge
regulations to incorporate the substance of the guidelines.
All of the process waste waters from Acme Steel are discharged to the
Metropolitan Water Reclamation District of Greater Chicago's ("MWRD") sewerage
system for treatment by the MWRD's municipal sewerage plant. Until such time as
the final guidelines are published by the U.S. EPA and specific water effluent
limitations for the MWRD's public sewerage plants are adopted by the Illinois
Environmental Protection Agency ("IEPA"), the Company will be unable to
determine whether or not Acme Steel will be subjected to further restrictions
on its process water discharges to the MWRD's sewerage system or the cost of
implementing such requirements, if any.
The Company (principally through its operating subsidiaries) is from time to
time, and expects that in the future it will be, involved in administrative
proceedings involving the issuance or renewal of environmental permits relating
to the conduct of its business. The issuance of these permits in the past has
been resolved on terms satisfactory to the Company. However, the Company has
been and expects that from time to time in the future it will continue to be
required to pursue administrative and/or judicial appeals prior to achieving a
resolution of the terms of such permits.
From time to time, the Company may be involved in administrative or judicial
proceedings with various regulatory agencies or private parties in connection
with claims that the Company's operations or its disposal of materials at waste
disposal sites have violated certain environmental laws or conditions of
existing permits. The resolution of such matters may involve the payment of
civil penalties, damages, remediation expenses and/or the expenditure of funds
to add or modify pollution control equipment.
Waste Remediation Matters.
Pursuant to the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 ("CERCLA"), as amended by the Superfund Amendments and
Reauthorization Act of 1986, 42 U.S.C., Section 9601 et seq. ("Superfund") and
similar state statutes, liability for remediation of property, including waste
disposal sites contaminated by hazardous materials, may be imposed on present
and former owners or operators of such property and generators or transporters
of waste materials to a waste disposal site (i.e., Potentially Responsible
Parties "PRPs"). The Company and its operating subsidiaries have been named as
PRPs with respect to several such sites. In each instance, the Company's
investigation has evidenced either (i) the Company and its operating
subsidiaries did not dispose of waste materials at the site and was not
properly named as a PRP; or (ii) the Company and such subsidiaries' proportion
of materials disposed of at such sites is of sufficiently small volume and the
material is of such a nature as to qualify them as a de minimis contributor of
waste material at such sites. The Company believes that its de minimis status
has been confirmed at American Chemical Services Site, Griffith, Indiana;
AquaTech Site, Greer, South Carolina; and Thermo-Chem Site, Muskegon County,
Michigan. According to the Company's records, no materials were disposed at
Calumet Containers Site, Hammond, Indiana and PSC Resources Site, Palmer,
Massachusetts. In addition to these Superfund Sites, the Company believes that
claims with respect to U.S. Scrap Site, Chicago, Illinois; 9th Avenue Dump
Site, Gary, Indiana; and the MIDCO I and MIDCO II Site, Gary, Indiana have been
settled. The Company was asked to supply information with respect to U.S. Lead
Refinery Site, East Chicago, Indiana and has not been contacted further about
this site since January 1992.
Although no assurances can be given that new information will not be
uncovered which would cause the Company or its subsidiaries to lose their de
minimis status at these sites, or, that the Company, or its subsidiary
companies would not be named as PRPs at additional sites, the Company presently
believes its total costs for the sites named above will not be material.
Universal Tool & Stamping Company, Inc., ("Universal"), in the 1970's,
contracted with Wayne Waste and Reclamation ("WWR") to dispose of process waste
generated by Universal. Without Universal's knowledge, WWR improperly disposed
of process waste at its facility located in Columbia City, Whitley
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County, Indiana which is now a Superfund site (the "Site"). Universal and many
others entered into a Consent Agreement with the U.S. EPA regarding settlement
for the cost of remediating the contamination at the Site. The Consent
Agreement was approved by the United States District Court for the Northern
District of Indiana, Fort Wayne Division, in July, 1992 in the form of a
Consent Decree which provided de minimis PRPs would extinguish their potential
liability for a definite sum and that certain other major PRPs, including
Universal, would pay a pro rata percentage of the Site clean-up expenses.
Universal agreed to pay 3.59% of the total expense of remediation. While the
Record of Decision describes the work plan for remediation, no assurances can
be made that the work plan will not be reevaluated and that additional
contamination or adjustments to the work plan will not be required to fully
remediate the Site in order for it to be accepted by the U.S. EPA. For this
reason remediation expense could increase. At the present time, Universal's
final expense is estimated at less than $75,000.
Peoples Gas Light and Coke Company ("Peoples") has contacted the Company in
connection with Peoples' voluntary investigation of a site previously used by
it in the refinement of producer's gas. A continuing investigation has
preliminarily revealed the apparent existence of contamination at this
location. Although a portion of this site is currently owned by and had been
used by the Company for the storage of coke oven gas, it is the Company's
belief that the contamination is the result of Peoples' activities on this
site. There can be no assurance, however, that the investigation will not
reveal contamination of the site with additional compounds or that Peoples or
other entities will not seek recovery from the Company with respect to any
remediation activities.
In addition to the foregoing Superfund sites, the following waste remediation
matters relating to the Company's subsidiary companies are currently pending:
Universal Tool and Stamping Company, Inc.--Closure Plan. A hazardous waste
permit application under the Interim Status provision of the Resource Recovery
and Conservation Act ("RCRA") was filed on behalf of Universal with U.S. EPA
and the Indiana Department of Environmental Management ("IDEM") for several
small temporary storage areas utilized to hold hazardous waste prior to
shipment to a permanent, off-site, approved disposal area. A permit was issued
categorizing Universal as a Temporary Storage and/or Disposal facility ("TSD").
RCRA amendments, which were passed following the issuance of the permit,
eliminated the Interim Status classification and Universal attempted to
recategorize itself as a Generator of hazardous waste rather than a TSD
facility, which required the filing of a Closure Plan ("Closure Plan I") for
areas where hazardous materials had been temporarily stored. Closure Plan I was
submitted by Universal to IDEM. Closure of area 1 was separated from closure of
area 2, 3 and 3-Extended. The revised estimated cost of remediation of Area 1
is approximately $25,000.
In 1988 Universal submitted a closure plan ("Closure Plan II") to IDEM
following a Notice of Violation arising out of the storage of hazardous wastes
for longer than ninety (90) days. Closure Plan II was revised in 1992 and again
in 1993. Closure Plan II also provided for remediation of Areas 2, 3 and 3-
Extended. The revised estimated cost of remediation of Closure Areas 2, 3 and
3-Extended is estimated at less than $40,000.
While there are no assurances that the final costs will not exceed these
estimates, they are not expected to be significant.
Environmental Remediation at the Acme Packaging Facility Located at 855 North
Parkside Drive, Pittsburg, California. Litigation related to contamination
discovered prior to the acquisition of the facility located at 855 North
Parkside Drive, Pittsburg, California (the "Pittsburg Facility") was settled in
1990 by agreement among the Company and the prior owners and operators of the
Pittsburg Facility. The settlement required a prior owner to remediate
contamination detected in the groundwater, soil or subsurface soil on, under or
near the Pittsburg Facility and to investigate and remediate other
contamination on, under or near the Pittsburg Facility caused by prior owners
of that facility and to investigate and remove contamination
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brought to the Pittsburg Facility during the remediation program. The prior
owner is responsible for preparation of a remedial action plan and to verify
that the appropriate local, state and Federal agencies have no objection to the
remedial action plan as completed. The remediation levels are subject to local,
state and Federal laws, rules and regulations. Acme Packaging's participation
includes observation of the former owner's actions and to contribute to the
funding of the remedial action plan costs in a non-material amount.
While the Pittsburg Facility has been closed for business reasons, the
remediation continues, principally in the form of a groundwater extraction and
treatment system which discharges the treated water to a nearby sanitary sewer
under permit. Based on the information available to date, Acme Packaging's
level of financial commitment related to this remediation has not been
significant and the balance of its commitment is not anticipated to be
significant.
Leeds, Alabama--Elevated Levels of Lead. In September, 1992, Acme Packaging
hired a consulting engineering firm for the purpose of providing soil sampling
and analysis in connection with an application for a stormwater permit for its
Leeds, Alabama, plant. Pursuant to an investigation conducted by the
consultant, elevated levels of lead were discovered on the property, including
one area of the property wherein buried drums were discovered containing lead.
In January, 1993, Acme Packaging advised the seller of this plant site that
the sampling program was initiated in conjunction with filing a Notice of
Intent for the Plan for Coverage under the Alabama Department of Environmental
Management's General Stormwater Discharge Permit. The seller was advised that
the results of the sampling program showed runoff from the west parking lot
area contained elevated concentrations of lead in the samples. Pursuant to Acme
Packaging's investigation, Acme Packaging advised the seller that all evidence
indicates these conditions were present on the property at the time the seller
owned the property and were present at the time the Leeds, Alabama, facility
was sold to Acme Packaging on March 29, 1989. Pursuant to the terms of the
purchase and sale agreements relating to this property, the seller is
responsible for remediating any lead or other contamination located on this
property. Without admitting or denying its liability, the seller has retained a
consultant to conduct a full investigation, sampling and analysis of the
property.
Acme Packaging is cooperating with the seller regarding the investigation of
the contamination of this property by lead, and/or other substances; however,
Acme Packaging intends to vigorously pursue its remedies under the purchase and
sale agreements with the seller.
Administrative and Litigation Matters.
The Company is currently involved in the following matters relating to
administrative regulations which affect, or may affect, the operations, the
permits or the issuance of permits, or litigation relating to the Company.
Acme Steel Company--NPDES Permit. In 1991, the IEPA issued Acme Steel a
permit pursuant to the National Pollution Discharge Elimination System
("NPDES") regulating non-contact water discharges to the Calumet River from
Acme Steel's coke and blast furnace plant facilities. The NPDES permit contains
strict temperature and stormwater discharge limitations. On March 24, 1994 Acme
Steel filed an appeal (case no. 94-8) of certain conditions of the permit with
the Illinois Pollution Control Board ("IPCB"). Acme Steel is proceeding to
resolve this matter through the administrative proceedings which allow for the
filing of a Petition for an Adjusted Standard and a request for the IPCB to
grant Acme Steel an adjusted standard and relief from the temperature
limitations. Further, through modification of certain provisions in the permit
and the implementation of best management practices, Acme Steel anticipates
achieving control of Acme Steel's stormwater discharge to an extent that it
will achieve compliance with permit conditions.
In the event these matters are not resolved through the administrative
process as outlined above, Acme Steel will petition the IPCB for a variance
from the General Use Water Quality Standards. If issued, a
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variance will provide temporary relief. Future compliance with permit
conditions would be achieved at an estimated capital expenditure of
approximately $4.0 million and operating expenses would be incurred at an
annual rate of approximately $600,000. A request for a hearing on the Petition
for Adjusted Standard has been filed on behalf of local citizens. In the event
Acme Steel's Petition for an Adjusted Standard is denied and a variance is
denied, Acme Steel may be subject to penalties until compliance is achieved.
While the Company believes Acme Steel has demonstrated that it is entitled to
the issuance of an Adjusted Standard, or absent an Adjusted Standard, to a
variance allowing Acme Steel sufficient time to install additional capital
equipment to achieve compliance, there are no assurances that either will be
granted. If such relief is not granted, and penalties are assessed, the Company
does not have sufficient information to estimate its liabilities for such
penalties, if any, which may be assessed.
Removal Credits and Pretreatment. The MWRD is a publicly owned treatment
works ("POTW"). The MWRD applied to the U.S. EPA for authority to revise
categorical pretreatment standards to reflect the actual treatment provided by
the MWRD for waste water discharged to the MWRD's POTW by industrial users
("Removal Credits"). These revised categorical standards, reflecting Removal
Credits are essential for Acme Steel to avoid expenditures for control of 4AAP
phenol found in discharges from its coke by-products plant and for control of
certain other pollutants. In 1987, the MWRD's application was denied by the
U.S. EPA and the denial was upheld by the United States Court of Appeals for
the Seventh Circuit. The U.S. EPA maintained that under the Clean Water Act and
decisions of U.S. District Courts, that it could not approve Removal Credits
until it promulgated "sludge criteria."
In 1993, the U.S. EPA promulgated sludge criteria which included the
possibility of granting Removal Credits for phenols in certain circumstances.
Acme Steel petitioned the MWRD for Removal Credits. Following this petition,
the MWRD again applied to the U.S. EPA for authority to grant Removal Credits.
While this application was denied, the U.S. EPA stated that if the Agency
amends its regulations with respect to 4AAP phenol either as a result of the
petition filed by the MWRD or independently, that the MWRD may then resubmit
its application.
Acme Steel filed Comments and a Request for Reconsideration and Clarification
concerning the U.S. EPA's Standards for Disposal of Sludges with the U.S. EPA
and filed a Petition for Review of the U.S. EPA's decision with the Court of
Appeals for the DC Circuit. The Comments and Request for Reconsideration is
pending. Acme Steel filed a motion to stay the petition for review. Pending a
final determination at the administrative level which is subject to appeal, the
U.S. EPA has responded to the motion to stay and does not oppose a stay of the
proceedings. While Acme Steel continues to challenge the U.S. EPA's denial of
the Removal Credits application and is pursuing administrative and legal
remedies, Acme Steel could be subject to allegations that it is in violation of
currently applicable pretreatment standards and could be required to negotiate
appropriate resolutions with the U.S. EPA and the MWRD which could result in
the payment of penalties. In the event Acme Steel is unsuccessful in its
challenge of the U.S. EPA's actions, capital expenditures required to bring its
discharges to the MWRD into compliance with the current applicable pretreatment
standards are estimated at approximately $6.0 million with annual operating and
maintenance costs estimated at approximately $0.3 million.
Although Acme Steel is vigorously pursuing its administrative and judicial
remedies and would vigorously contest any action to assess civil penalties
against Acme Steel, the Company does not have sufficient information to
estimate its potential liability, if any, if Acme Steel's efforts to obtain
such relief, or contest such penalty assessments, are not successful.
1986 REORGANIZATION
Pursuant to the terms of the 1986 Reorganization, Acme Steel entered into a
Cross-Indemnification Agreement with Interlake (the "Indemnification
Agreement") dated May 29, 1986. Pursuant to the terms of the Indemnification
Agreement, for a period of ten (10) years following the date of the "Spin-Off"
(as said
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term is defined in the 1986 Reorganization documents), Acme Steel undertook to
defend, indemnify and hold Interlake and its affiliates harmless from and
against any and all "Claims," as that term is defined in the Indemnification
Agreement, occurring either before or after the date of the 1986 Reorganization
and which arose out of or are related to the "Acme Steel Business." The Acme
Steel Business is more specifically defined in the Indemnification Agreement as
the iron and steel and domestic U.S. steel strapping business as conducted by
Acme Steel on or about May 29, 1986. The indemnification by Acme Steel of
Interlake with respect to any claims includes, but is not limited to, all
claims asserted in connection with Acme Steel's interests or obligations with
respect to: Wabush Iron Company, Ltd.; Wabush Mines; Erie Mining Company; Olga
Coal Company; assets and liabilities related to qualified welfare and benefit
plans with respect to retired, current and future employees of Acme Steel;
certain environmental matters relating to the Acme Steel Business, whether
brought by a governmental agency or a private entity; workers' compensation
matters and occupational safety, health and administration matters; and product
liability and general liability matters related to the Acme Steel Businesses.
The Agreement designated certain mineral property interests retained by Acme
Steel, including land held for the account of Acme Steel by Syracuse Mining
Company, a subsidiary of Pickands Mather and Company; stock held in Tilden Iron
Mining Company; and, lands owned in Bruce County, Ontario, Canada, as being
within the scope of the indemnification.
Similarly, and for the same period of time, Interlake undertook in the
Indemnification Agreement to defend, indemnify and hold Acme Steel and its
affiliates harmless from and against all "Claims," as that term is defined in
the Indemnification Agreement, occurring either before or after the date of the
1986 Reorganization related to the operation of all businesses and properties
currently owned, directly or indirectly, by Interlake or any subsidiary of
Interlake (other than Acme Steel and its affiliates) and relating to the
Transferred Property, as that term is defined in the Indemnification Agreement
(but excluding the Acme Steel Business), and, any business and properties
discontinued or sold by Interlake or Interlake, Inc. prior to May 29, 1986,
including any discontinued or sold businesses or property which, if continued,
would be part of the Acme Steel Business.
Environmental Indemnification. The indemnification by Interlake with respect
to any Claims incurred in connection with or arising out of or related to
Interlake Business, as the term is defined more specifically in the
Indemnification Agreement, includes but is not limited to: those claims
asserted in connection with certain stock options, rights, awards and programs;
certain deferred compensation matters; certain matters arising under qualified
welfare and benefit plans and post-retirement income plans; and, environmental
matters relating to Interlake Businesses whether brought by governmental
agencies or private entities. These environmental matters include, without
limitation, the lawsuit captioned People of the State of Illinois v. Waste
Management of Illinois, Interlake, Inc. And First National Bank of Western
Springs, Circuit Court of Cook County, Illinois (No. 85 CH 4016); the disposal
of materials at the landfill operated by Conservation Chemical located at Gary,
Indiana, to the extent such materials originated at the plant of Gary Steel
Company; the Port Monroe Landfill site in Monroe County, Michigan, as a site of
environmental contamination as defined by the Michigan Water Resources
Commission Act; operation of facilities (which have been designated as a
Superfund site) by predecessors of Interlake, Inc. at Duluth, Minnesota;
workers' compensation, occupational safety and health matters relating to the
Interlake Business; general products liability and general litigation matters
related to Interlake's Business; and, the matters arising from Lake Mining
Company, Mauthe Mining Company, Odanah Iron Company, Vermillion Mining Company
and Western Mining Company.
Pursuant to the Indemnification Agreement, Interlake has provided the defense
and paid all costs in the matter of City of Toledo v. Beazer Materials and
Services, Inc., successor-in-interest to Koppers Company, Inc., Toledo Coke
Corporation, the Interlake Corporation, successor-in-interest to Interlake,
Inc., The Interlake Companies, Inc., successor-in-interest to Interlake, Inc.,
Acme Steel Company, successor-in-interest to Interlake, Inc., United States
District Court, Northern District of Ohio, Western Division (No. 3:90 CV 7344),
which is an action for declaratory and injunctive relief by the City of Toledo
(the "City") to recover its past and future costs and damages associated with
the presence of and release of hazardous substances,
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hazardous wastes, solid waste, industrial waste and other waste at or about
property located on Front Street in Toledo, Ohio. The City seeks relief
pursuant to CERCLA and RCRA and on the basis of nuisance. The City claims that
the defendants owned and/or operated facilities located on Front Street in
Toledo, Ohio which generated, transported and/or treated, stored or disposed of
hazardous substances, hazardous wastes, solid wastes and industrial wastes or
other wastes which were released at and from the facility by defendants or
successors-in-interest to the entities which owned, operated, generated,
transported and/or treated, stored or disposed of said substances.
Tax Indemnification. Pursuant to the 1986 Reorganization, Acme Steel and
Interlake entered into a tax indemnification agreement ("Tax Indemnification
Agreement"). The Tax Indemnification Agreement generally provides for Interlake
to indemnify Acme Steel for certain tax matters. Under the Tax Indemnification
Agreement, Interlake is solely responsible for any additional income taxes Acme
Steel is assessed related to adjustments relating to all tax years prior to
1982. With respect to any additional income taxes that are finally determined
to be due with respect to the tax years beginning in 1982 through the date of
the "Spin-Off" (as this term is identified in the 1986 Reorganization
documents), Acme Steel is responsible for taxes relating to "Timing
Differences" in connection with Acme Steel's "Continuing Operations." "Timing
Differences" are defined generally as adjustments to income, and deductions or
credits which are required to be reported in a tax year beginning subsequent to
1981 through the Spin-Off, but which will reverse in a subsequent year.
"Continuing Operations" is defined generally as any business and operations
conducted by Acme Steel as of the Spin-Off date. Interlake is principally
responsible for any additional income taxes Acme Steel is assessed relating to
all other adjustments prior to the Spin-Off.
While certain issues have been negotiated and settled among Acme Steel,
Interlake and the Internal Revenue Service for the tax years beginning in 1982
through the date of the Spin-Off, certain significant issues for these tax
years remain unresolved. On March 17, 1994, Acme Steel received a Statutory
Notice of Deficiency ("Notice") in the amount of $16.9 million in tax as a
result of the Internal Revenue Service's examination of the 1982 through 1984
tax years. Interlake has been principally responsible, pursuant to the Tax
Indemnification Agreement, for representing Acme Steel before the Internal
Revenue Service for the 1982 through 1984 tax years. Should the government
sustain its position as proposed for those unresolved issues and those
contained in the Notice, substantial interest would also be due (potentially in
an amount greater than the tax claimed). The taxes claimed relate principally
to adjustments for which Acme Steel is indemnified by Interlake pursuant to the
Tax Indemnification Agreement. Acme Steel has adequate reserves to cover that
portion of the tax for which it believes it may be responsible per the Tax
Indemnification Agreement. Acme Steel is contesting the unresolved issues and
the Notice.
INTERLAKE. To date Interlake has met its obligations under the
Indemnification Agreement and Tax Indemnification Agreement with respect to all
matters covered. In the event that Interlake, for any reason, were unable to
fulfill its obligations under the Indemnification Agreement or Tax
Indemnification Agreement, Acme Steel could have substantially increased future
obligations. Interlake is subject to the informational requirements of the
Securities Exchange Act of 1934 and in accordance therewith files reports,
proxy material and other information concerning Interlake with the Commission.
Interlake's 12 1/8% senior subordinated debentures due 2002 are currently rated
CCC+ by Standard & Poor's Corporation and B3 by Moody's Investors Service, Inc.
LEGAL PROCEEDINGS
In addition to the matters referred to above, the Company and its
subsidiaries have from time to time various other litigation matters pending
which arise out of the ordinary course of their businesses. In the opinion of
management, the ultimate resolution of these matters will not have a material
adverse effect on the financial position of the Company.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of the Company, and their ages as of May
1, 1994 are listed below. Service with Acme Steel Company prior to the 1986
Reorganization and the 1992 Reorganization is considered service with the
Company. All positions described in the table below are with the Company. All
executive officers are elected annually by the Board of Directors of the
Company to serve for a term of one year and until their successors are elected.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Brian W. H. Marsden 62 Chairman and Chief Executive Of-
ficer
Stephen D. Bennett 45 President and Chief Operating Of-
ficer, Director
Richard J. Stefan 57 Vice President--Employee Rela-
tions
Edward P. Weber, Jr. 56 Vice President, General Counsel
and Secretary
Jerry F. Williams 54 Vice President--Finance and
Administration
James W. Hoekwater 47 Treasurer
C.J. Gauthier 72 Director
Edward G. Jordan 64 Director
Andrew R. Laidlaw 47 Director
Frank A. LePage 66 Director
Reynold C. MacDonald 75 Director
Julien L. McCall 73 Director
Carol O'Cleireacain 47 Director
William P. Sovey 60 Director
William R. Wilson 67 Director
</TABLE>
Brian W.H. Marsden. Mr. Marsden, who resides in Palos Heights, Illinois, has
been Chairman since May 1992 and Chief Executive Officer of the Company since
June 1986. From June 1986 to May 1992, Mr. Marsden was also President. He is a
member of the Executive (Chairman) and Finance Committees of the Company's
Board of Directors. Mr. Marsden was President of the Iron and Steel Division of
Interlake from 1981 to 1986 and he joined Interlake in 1976 as Vice President
Steel Operations. Prior to joining Interlake, Mr. Marsden was with Algoma Steel
Corporation in Canada for 24 years, where his last position was Vice President
and Assistant to the President. His current term as a director expires in 1995.
Stephen D. Bennett. Mr. Bennett, who resides in Frankfort, Illinois, has been
President and Chief Operating Officer and a Director of the Company since
January 1, 1993. Prior to that date, he was Group Vice President (from January
1992 through December 1992), and Vice President--Operations (from June 1990
through December 1991). From December 1987 to May 1990, Mr. Bennett was General
Manager of Fairfield Works, USS Division of USX Corporation. Mr. Bennett is a
member of the Company's Executive and Finance Committees. His current term as a
director expires in 1997.
Richard J. Stefan. Mr. Stefan, who resides in Palos Park, Illinois, has been
Vice President--Employee Relations of the Company since June 1986. From 1959 to
1986, Mr. Stefan served in a number of employee relations positions at
Interlake.
Edward P. Weber, Jr. Mr. Weber, who resides in Munster, Indiana, has been
Vice President, General Counsel and Secretary of the Company since June 1986.
Prior to joining Acme in 1986, Mr. Weber held positions in private practice and
elsewhere in the steel industry.
48
<PAGE>
Jerry F. Williams. Mr. Williams, who resides in Hinsdale, Illinois, has been
Vice President--Finance and Administration and Treasurer of the Company since
May of 1986. Mr. Williams also served as Director of Strategic Planning and
Assistant to the Chairman of Interlake from 1981 to 1986. From 1965 to 1981,
Mr. Williams served in a number of financial positions at Interlake.
James W. Hoekwater. Mr. Hoekwater, who resides in Wilton, Connecticut, has
been Treasurer of the Company since July 1, 1994. From December 1989 to October
1993, Mr. Hoekwater served as the Corporate Controller of ITT Rayonier, Inc., a
subsidiary of ITT Corporation having approximately $1 billion in yearly sales.
Mr. Hoekwater is a Certified Public Accountant and a member of the AICPA.
C.J. Gauthier. Mr. Gauthier, who resides in Oak Brook, Illinois, has been a
director of the Company since June 1986. In January 1986, he retired as
Chairman, President and Chief Executive Officer of NICOR Inc. (a public utility
holding company). Mr. Gauthier is a member of the Audit Review, Compensation,
Executive and Nominating Committees of the Company's Board of Directors. His
current term as a director expires in 1996.
Edward G. Jordan. Mr. Jordan, who resides in Carmel, California, has been a
director of the Company since July 1988. From 1982 through 1987, he served as
President and Chief Executive Officer of The American College (a private,
accredited, nontraditional college specializing in financial services and
insurance education) and in 1988 he served as a consultant to its board of
trustees. Mr. Jordan is currently a private investor. He is a director of The
ARA Group, Inc. and The Pittston Company. Mr. Jordan is a member of the Audit
Review, Finance (Chairman) and Nominating Committees of the Company's Board of
Directors. His current term as a director expires in 1995.
Andrew R. Laidlaw. Mr. Laidlaw, who resides in Hinsdale, Illinois, has been a
director of the Company since May 1987. Since 1978, he has been Chairman of the
Executive Committee and a Partner of the law firm of Seyfarth, Shaw,
Fairweather & Geraldson, Chicago, Illinois. Mr. Laidlaw is a member of the
Audit Review (Chairman), Executive and Nominating Committees of the Company's
Board of Directors. His current term as a director expires in 1997.
Frank A. LePage. Mr. LePage, who resides in Palm City, Florida, has been a
director of the Company since May 1987. In 1982, he retired as Director and
Executive Vice President of The Firestone Tire and Rubber Company. He is a
director of Parker-Hannifin Corporation. Mr. LePage is a member of the
Compensation (Chairman), Finance and Nominating Committees of the Company's
Board of Directors. His current term as director expires in 1997.
Reynold C. MacDonald. Mr. MacDonald, who resides in Oak Brook, Illinois, has
been a Director of the Company since June 1986 and was Chairman of the Board of
the Company from June 1986 to May 1992. He is a director of The ARA Group, Inc.
and Kaiser Steel Resources. Mr. MacDonald is a member of the Audit Review,
Executive, Finance and Nominating Committees of the Company's Board of
Directors. His current term as a director expires in 1995.
Julien L. McCall. Mr. McCall, who resides in Hunting Valley, Ohio, has been a
director of the Company since June 1986. In May 1986, he retired as Chairman of
the Board and Chief Executive Officer of National City Corporation (a bank
holding company), positions he held from December 1980 to his retirement. Mr.
McCall is a member of the Compensation, Finance and Nominating Committees of
the Company's Board of Directors. His current term as a director expires in
1996.
Carol O'Cleireacain. Ms. O'Cleireacain, who resides in New York, New York,
has been a director of the Company since April 1994 as a designated union
representative. From September 1976 to February 1990 she was employed as the
Chief Economist for District Counsel 37, American Federation of State, County
and Municipal Employees. From February 1990 to August 1993, she was a
Commissioner of the New York City Department of Finance. From August 1993 to
December 1993, Ms. O'Cleireacain was employed as Director, New York City Office
of Management and Budget. From January 1994 to the present she has worked as a
49
<PAGE>
consultant. Ms. O'Cleireacain is a member of the Company's Audit Review and
Nominating Committees. Her current term as a director expires in 1995.
William P. Sovey. Mr. Sovey, who resides in Rockford, Illinois, has been a
director of the Company since June 1991. He has been Vice Chairman and Chief
Executive Officer of Newell Co. (a manufacturing and marketing company for high
volume hardware and housewares, office and industrial products) since 1992.
From 1986 to 1992, he was President and Chief Operating Officer of Newell Co.
Mr. Sovey is a member of the Compensation, Finance and Nominating (Chairman)
Committees of the Company's Board of Directors. His current term as a director
expires in 1995.
William R. Wilson. Mr. Wilson, who resides in Malvern, Pennsylvania, has been
a director of the Company since July 1992. He served as Chairman and Chief
Executive Officer of Lukens, Inc. from April 1981 until his retirement in
December 1991. Prior to joining Lukens, Inc. he was employed by Inland Steel
Corporation for over 30 years. The last position held with Inland Steel
Corporation was Senior Vice President-Engineering and Corporate Planning. He is
a director of Columbia Gas System, Inc. and Provident Mutual Life Insurance
Company. Mr. Wilson is a member of the Audit Review, Compensation and
Nominating Committees of the Company's Board of Directors. His current term as
a director expires in 1996.
SUMMARY COMPENSATION TABLE
The following table sets forth information with respect to the compensation
of the Company's Chief Executive Officer and each of the four other most highly
compensated executive officers for services in all capacities in fiscal years
1991, 1992 and 1993.
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
------------------- OTHER ---------------------- ALL
ANNUAL RESTRICTED SECURITIES OTHER
COMPEN- STOCK UNDERLYING COMPEN-
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS SATION(1) AWARD(2)(3) OPTIONS SATION(1)(4)
- --------------------------- ---- ------------------- --------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Brian W. H.
Marsden 1993 $380,000 $228,000 $ -0- $ 34,500 15,000 $44,650
Chairman and
Chief Execu-
tive 1992 360,000 -0- -0- -0- 10,000 68,264
Officer 1991 320,000 64,300 -0- 150,000 32,500 -0-
Stephen D.
Bennett 1993 $210,000 $ 94,500 $32,812(5) $ 25,875 10,000 $24,675
President and
Chief Operat-
ing 1992 160,000 -0- -0- 107,250 7,000 25,900
Officer 1991 135,000 25,000 -0- 24,000 7,400 -0-
Richard J.
Stefan 1993 $135,000 $ 60,800 $ -0- $ 17,250 4,000 $15,862
Vice Presi-
dent-- 1992 129,000 -0- -0- 7,375 4,000 20,636
Employee Rela-
tions 1991 122,000 18,400 -0- 30,000 6,500 -0-
Edward P. Web-
er, Jr. 1993 $136,000 $ 61,200 $ -0- $ 17,250 4,000 $15,980
Vice Presi-
dent, General 1992 130,000 -0- 18,972(5) 11,062 4,000 20,776
Counsel and
Secretary 1991 122,000 18,400 -0- 30,000 6,500 -0-
Jerry F. Wil-
liams 1993 $170,000 $ 76,500 $ -0- $ 20,700 5,000 $19,975
Vice Presi-
dent--Finance
and 1992 160,000 -0- 16,448(5) 14,750 5,000 25,564
Administration 1991 150,000 22,600 -0- 37,800 8,200 -0-
</TABLE>
- --------
(1) Amounts of Other Annual Compensation and All Other Compensation have not
been included for fiscal year 1991.
(2) Values of restricted stock awards are based on the closing price on the
date of grant; $17.25 for January 26, 1993, $14.75 for January 22, 1992,
$18.50 for June 12, 1992, and $12.00 for January 25, 1991.
The vesting schedule for stock awards granted on January 26, 1993 is 20% of
the shares granted on July 27, 1993, 1994, 1995, 1996 and 1997. The total
number of shares granted and the number of shares of each installment
follows: Mr. Marsden, 2,000 shares granted in installments of 400 shares
each; Mr. Bennett, 1,500 shares granted in installments of 300 shares each;
Mr. Stefan, 1,000 shares granted in installments of 200 shares each; Mr.
Weber, 1,000 shares granted in installments of 200 shares each; Mr.
Williams, 1,200 shares granted in installments of 240 shares each.
Dividends, if and when declared by the Board of Directors, are payable on
the unvested portion of this stock award.
50
<PAGE>
The vesting schedule for stock awards granted on January 22, 1992 is 20% of
the shares granted on July 23 of 1992, 1993, 1994, 1995 and 1996. The total
number of shares granted and the number of shares of each installment
follows: Mr. Marsden, none; Mr. Bennett, 1,000 shares granted in
installments of 200 shares each; Mr. Stefan, 500 shares, granted in
installments of 100 shares each; Mr. Weber, 750 shares granted in
installments of 150 shares each; Mr. Williams, 1,000 shares granted in
installments of 200 shares each. Dividends are payable on the unvested
portion of the stock award.
The vesting schedule for the stock award granted to Mr. Bennett on June 12,
1992 is 1,000 shares on December 13, 1992 through 1996 for a total grant of
5,000 shares.
The vesting schedule for stock awards granted on January 25, 1991 is 20% of
the shares granted on January 25 of 1991, 1992, 1993, 1994 and 1995. The
total number of shares granted and the number of shares of each installment
follows: Mr. Marsden, 12,500 shares granted in installments of 2,500 shares
each; Mr. Bennett, 2,000 shares granted in installments of 400 shares each;
Mr. Stefan, 2,500 shares granted in installments of 500 shares each; Mr.
Weber, 2,500 shares granted in installments of 500 shares each; Mr.
Williams, 3,150 shares granted in installments of 630 shares each.
Dividends are payable on the unvested portion of the stock award.
(3) The total number and value of the aggregate unearned restricted stock
holdings at December 26, 1993 were as follows: Mr. Marsden, 4,100 shares,
value $71,750; Mr. Bennett, 5,400 shares, value $94,500; Mr. Stefan, 1,600
shares, value $28,000; Mr. Weber, 1,750 shares, value $30,625; Mr.
Williams, 2,190 shares, value $38,325.
(4) Amounts in this column are Company contributions to the SERSP and ESOP (as
defined below), which are defined contribution plans.
(5) The dollar value of perquisites and other personal benefits for executive
officers other than Mr. Bennett was less than the established reporting
thresholds. The amount reported for Mr. Bennett includes $20,499 for
country club initiation fees and dues which are in excess of 25% of the
total perquisites and other personal benefits reported for Mr. Bennett.
Includes $13,336 and $12,876 for Messrs. Weber and Williams, respectively,
for automobile expense. These amounts are in excess of 25% of the total
perquisite and other personal benefits reported for the named executive
officers.
STOCK OPTION GRANTS IN 1993
The following table sets forth certain information relating to options to
purchase common stock granted in the fiscal year 1993 to the five individuals
named in the Summary Compensation Table.
OPTION GRANTS IN LAST FISCAL YEAR(1)
INDIVIDUAL GRANTS IN 1993
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
NO. OF % OF TOTAL ANNUAL RATE OF
SECURITIES OPTIONS STOCK PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM(4)
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION -----------------------------
NAME GRANTED FISCAL YEAR(2) PER SHARE(3) DATE 5% 10%
---- ---------- -------------- ----------- ---------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
All Shareholders(5)..... N/A N/A N/A N/A $ 48,858,267 $ 123,816,441
B.W.H. Marsden.......... 15,000 16.9% $14.50 5/27/03 136,785 346,639
S.D. Bennett............ 10,000 11.3% 14.50 5/27/03 91,190 231,093
R.J. Stefan............. 4,000 4.5% 14.50 5/27/03 36,476 92,437
E.P. Weber.............. 4,000 4.5% 14.50 5/27/03 36,476 92,437
J.F. Williams........... 5,000 5.6% 14.50 5/27/03 45,595 115,546
Named Executive
Officers' Gains as a %
of All Shareholders'
Gains(6)............... 0.709% 0.709%
</TABLE>
51
<PAGE>
- --------
(1) Stock Appreciation Rights were not granted during 1993. All options were
granted on May 27, 1993. One-half of the options became exercisable on May
27, 1994 and one-half become exercisable on May 27, 1995 unless the vesting
schedule is accelerated so that the options become fully exercisable upon
death, retirement, disability or a change in control as defined in the
Grant of Stock Option Agreement. The options were granted for a term of 10
years, subject to earlier termination in certain events related to
termination of employment.
(2) Based on 88,500 options granted to all employees.
(3) Exercise price is the market value per share on the date of grant,
determined by calculating the average of the high and low prices of the
common stock on the Nasdaq National Market, as reported in The Wall Street
Journal for the date of grant.
(4) Total dollar gains based on the assumed annual rates of appreciation shown
here and calculated on 5,372,505 outstanding shares--the number of shares
outstanding on the date of grant. The dollar amounts in these columns are
the result of calculations at the 5% and 10% rates set by the Commission
and are not intended to forecast future appreciation of the common stock.
As an alternative to the assumed potential realizable values stated in the
5% and 10% columns, SEC rules would permit stating the present value of
such options at the date of grant. Methods of computing present value
suggested by different authorities can produce significantly different
results. Moreover, since stock options granted by the Company are not
transferable, there is no objective criteria by which any computation of
present value can be verified. Consequently, the Company does not believe
there is a reliable method of computing the present value of such stock
options.
(5) "All Shareholders" is shown for comparison purposes only. The potential
realizable value illustrates the gains all shareholders could realize
assuming a hypothetical ten-year option granted at $14.50 per share on May
27, 1993 if the share price of the common stock increases at the assumed
annual rates shown in the table. There can be no assurance that the common
stock will perform at the assumed annual rates shown in the table.
(6) This analysis illustrates the proportion of executive officers' gains as a
percent of all shareholders' gains under the above assumptions.
AGGREGATED OPTION EXERCISES IN 1993 AND FISCAL YEAR END OPTION VALUES
The following table sets forth certain information concerning the exercise of
options in 1993 to purchase common stock by the five individuals named in the
Summary Compensation Table and the unexercised options to purchase common stock
held by such individuals at December 26, 1993.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION
VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED IN-
NUMBER OF UNDERLYING UNEXERCISED THE-MONEY OPTIONS AT
SHARES OPTIONS AT 12/26/93 12/26/93(1)
ACQUIRED VALUE ------------------------- -------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Brian W.H. Marsden...... -0- N/A 79,300 20,000 $205,588 $39,375
Stephen D. Bennett...... -0- N/A 15,900 13,500 26,363 26,250
Richard J. Stefan....... -0- N/A 21,550 6,000 50,544 10,500
Edward P. Weber, Jr..... -0- N/A 21,650 6,000 50,544 10,500
Jerry F. Williams....... -0- N/A 27,250 7,500 63,344 13,125
</TABLE>
- --------
(1) Calculated on the basis of the fair market value of the underlying
securities at fiscal year end, $17.125, minus the exercise price. Options
granted in 1988, 1989 and 1992 were not in-the-money at fiscal year end.
52
<PAGE>
DEFINED BENEFIT PLAN
<TABLE>
<CAPTION>
AVERAGE ANNUAL EARNINGS
FOR THE 5 HIGHEST 12 MONTH PERIODS
DURING THE LAST 10 CONSECUTIVE 12-MONTH ESTIMATED ANNUAL PENSION PAYABLE
PERIODS BASED ON YEARS OF SERVICE INDICATED
--------------------------------------- -----------------------------------
15 YEARS 20 YEARS 25 YEARS 30 YEARS
-------- -------- -------- --------
<S> <C> <C> <C> <C>
$100,000.................................. $ 14,387 $ 22,262 $ 30,137 $ 38,012
150,000.................................. 26,199 38,012 49,824 61,637
200,000.................................. 38,012 53,762 69,512 85,262
250,000.................................. 49,824 69,512 89,199 108,887
300,000.................................. 61,637 85,262 108,887 132,512
350,000.................................. 73,449 101,012 128,574 156,137
400,000.................................. 85,262 116,762 148,262 179,762
450,000.................................. 97,074 132,512 167,949 203,387
500,000.................................. 108,887 148,262 187,637 227,102
</TABLE>
The Company's Salaried Employees' Past Service Pension Plan (the "Past
Service Plan") provides for benefits based on years of credited service with
Acme Steel Company through December 31, 1981 and average annual earnings for
the 5 highest 12-month periods during the 10 consecutive 12-month periods
preceding retirement. The Company and Mr. Marsden are parties to a Deferred
Compensation Agreement which entitles Mr. Marsden to a supplemental pension
benefit equivalent to ten years of additional credited service under the Past
Service Plan unless (i) his employment with the Company is terminated for
"Cause" (as defined in the Deferred Compensation Agreement) or (ii) he engages
in a "competitive activity" (as defined in the Deferred Compensation Agreement)
for the period and under the circumstances provided in such agreement.
Corporate funds, rather than pension trust assets, will be used for payment of
these supplemental benefits to Mr. Marsden and any pension benefits payable in
excess of the maximum amount permitted under the Internal Revenue Code. Mr.
Marsden was deemed to have approximately 15 years of credited service as of
December 31, 1981, Mr. Williams has approximately 17 years of credited service,
and Mr. Stefan has approximately 22 years of credited service. Messrs. Bennett
and Weber joined the Company after December 31, 1981 and, therefore, do not
participate in the Past Service Plan.
The preceding table is based upon retirement at age 65, a pension payable for
the life of the retiree only, and a social security offset of $8,798.40 per
year. Different benefits under the Past Service Plan may be payable for persons
whose employment terminates prior to age 65. For purposes of the table, average
annual earnings include salaries and bonuses paid or deferred during the
twelve-month period.
The Past Service Plan provides for a transition pension for salaried
employees and certain executive officers who were employed on December 31, 1981
if the benefit attributable to contributions by the Company after December 31,
1981 under the Company's Salaried Employees' Retirement Savings Plan (the
"SERSP") is less than the benefit which would be attributable under the Past
Service Plan to continuous service between January 1, 1982 and the earlier of
December 31, 1991 and termination of employment. The amount attributable to
such Company contributions is contributions to the SERSP in excess of 6 1/2
percent of the participant's earnings for each calendar quarter (which, in the
case of executive officers, are the same for purposes of the SERSP as for
purposes of the Past Service Plan) of continuous service from January 1, 1982
until the earlier of December 31, 1991 and termination of employment, together
with amounts which would have been earned had such contributions been invested
and reinvested in the Diversified Investment Fund provided for in the SERSP.
Future performance of the Diversified Investment Fund and the earnings of
participants during the 10 years preceding retirement will determine whether or
not any transition pension will be payable.
Unless a participant becomes entitled to a transition pension as described in
the preceding paragraph, years of credited service after December 31, 1981 will
have no effect on any estimated annual pension payable pursuant to the Past
Service Plan.
53
<PAGE>
CHANGE IN CONTROL ARRANGEMENTS
On May 25, 1992, the Board adopted the Key Executive Severance Pay Plan (the
"Plan") from Acme Steel Company and designated the executive officers of the
Company and certain other individuals as participants. A participant may be
entitled to severance benefits under the Plan if there is a termination of his
employment without cause at any time within three years after a "Change in
Control" of the Company (as defined in the Plan). In addition, following a
Change in Control a participant may elect to terminate his employment without
loss of severance benefits in certain specified contingencies, including
termination of the participant's position as an officer or director; a good
faith determination by the participant that as a result of the Change in
Control, he is unable to carry out the authorities, powers, functions or duties
attached to his position; a significant adverse change in his position, duties
or compensation; the failure of a successor to assume the Company's obligations
under the Plan; excessive travel requirements or the substantial relocation of
his place of work; or the reorganization, dissolution, liquidation,
consolidation or merger of the Company or the sale of a significant portion of
its assets.
Under the Plan, a Change in Control is deemed to have occurred if (i) the
Company is merged or reorganized into or with, or sells all of its assets to,
another company in a transaction in which former shareholders of the Company
own less than 75 percent of the outstanding securities of the surviving or
acquiring company after the transaction, (ii) a filing is made with the
Commission disclosing the beneficial ownership by any person or group of 25
percent or more of the voting power of the Company, (iii) during any period of
two consecutive years individuals who were directors at the beginning of such
period cease to constitute a majority of the Board without the approval of two-
thirds of the remaining Board members, (iv) the shareholders of the Company
approve a plan or proposal for the liquidation or dissolution of the Company,
or (v) any other event, or events, which the Board shall determine to be a
Change in Control.
A participant who is terminated with rights to severance compensation under
the Plan will be entitled to receive in respect of the "Severance Period" (as
defined in the Plan), in lieu of further salary payments to the participant,
the following: (i) a sum equal to (a) three times the participant's highest
annual aggregate base salary in effect at any time within five years prior to
the date the "Notice of Termination of Employment" (as defined in the Plan) is
given, plus (b) an amount equal to the average compensation paid in the two
calendar years prior to the date said Notice is given to the participant under
the Plan, or any successor plan (provided, however, the participant may elect
to receive said sums in thirty-six (36) equal monthly payments, including
interest, after the date of said Notice); (ii) for a period of thirty-six (36)
months following the date of "Termination of Employment" (as defined in the
Plan), or until a participant's death, if earlier, life, health and accident
insurance benefits and other executive benefits the participant was receiving
immediately prior to the date of Termination of Employment; (iii) all benefits
to which the participant is entitled as a participant under the Salaried
Employees' Past Service Pension Plan, the Salaried Employees Retirement Savings
Plan or other plan or agreement relating to retirement benefits; and, (iv) all
legal fees and expenses incurred by a participant, if any, as a result of such
Termination of Employment or enforcing any right or benefit under the Plan. A
letter of credit has been obtained by the Company for the purpose of securing
the payment of such legal fees and expenses.
The net amount payable to any participant under the Plan, taking into account
payments under Other Plans, (as defined in the Plan) as appropriate, may not
exceed 2.99 times the participant's "base amount" (as defined in Section 280G
of the Internal Revenue Code), which, generally, is the average of the
participant's taxable annual income received from the Company during the five-
year period preceding the Change in Control, to avoid the special tax rules
applicable to "excess parachute payments" under Federal income tax legislation
enacted in 1984.
To protect both the Company and any participant, if the severance
compensation under the Plan, either alone or together with other payments to a
participant, would constitute "excess parachute payments", as defined in
Section 280G of the Internal Revenue Code, such severance compensation payment
would be reduced to the largest amount as would result in no portion of such
payments being disallowed as deductions
54
<PAGE>
to the Company under Section 280G of the Internal Revenue Code and no portion
of such payments subjecting a participant to the excise tax imposed by Section
4999 of the Internal Revenue Code. The determination of such reductions will be
made, in good faith, by the Company's independent accountants and will be
conclusively binding upon the Company and such participant.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal 1993 the Compensation Committee of the Board was comprised of
the following non-employee directors: C. J. Gauthier, Andrew R. Laidlaw, Julien
L. McCall, Frank A. LePage (Chairman), William R. Wilson.
Mr. Laidlaw is a partner in the law firm of Seyfarth, Shaw, Fairweather &
Geraldson which provided $101,973 in legal services to the Company in 1993. Mr.
Laidlaw resigned as a member of the Compensation Committee effective January
27, 1994. Mr. LePage is a director of Parker-Hannifin Corporation to which the
Company sold tubing in the amount of $1,800,692 in 1993. Mr. Wilson is a
director of Columbia Gas System, Inc. from which the Company made purchases of
$79,906 for natural gas in 1993.
DIRECTORS' COMPENSATION
Mr. MacDonald entered into an agreement with the Company effective June 1,
1992 to provide consulting services for a three-year period. Mr. MacDonald is
paid an annual fee of $50,000 in addition to any payments to which he may be
entitled as a non-employee director of the Company. Under the terms of the
contract, he is furnished with an office, secretarial and certain other
business office services which were valued by the Company at approximately
$37,000 in 1993.
Directors who are not also officers of the Company are currently paid an
annual director's fee of $18,000, a fee of $1,000 for attending a meeting of
the Board and a fee of $1,000 for attending a meeting of a committee of the
Board, whether or not more than one meeting is held on the same day. The
Chairmen of the Audit Review, Compensation, Finance and Nominating Committees
are paid an additional annual fee of $2,000. The Company provides accidental
death and dismemberment insurance for all outside directors while on the
business of the Company. All Directors are reimbursed for expenses incurred in
connection with Board and committee meetings.
In addition to the remuneration above, the Company paid fees not material in
amount for services rendered by outside directors outside the scope of normal
Board and committee meetings.
In 1992, the Company adopted the Acme Metals Incorporated Non-Employee
Directors Retirement Plan (the "Directors Retirement Plan") which provides for
benefits to directors who are not employees of the Company and who retire from
the Board after attaining 65 years of age. Four years of services as a non-
employee director is required to be eligible for a minimum retirement benefit
of 40% of the annual retainer in effect at the date of retirement. The benefit
increases 10% for each additional year of service to a maximum of 100% of the
annual retainer in effect at the date of retirement. The Directors Retirement
Plan is an unfunded non-qualified plan and all benefits will be paid out of
current earnings. No benefits are payable to the spouse or dependents of a
retired director.
55
<PAGE>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
As of June 3, 1994, there were 5,556,661 shares of the Company's Common Stock
issued and outstanding and 6,780 registered holders of the Company's Common
Stock. Set forth below is certain information as of that date regarding those
entities known to the Company to be the beneficial owners of more than 5
percent of the Common Stock and information with respect to beneficial
ownership of the Company's Common Stock by all directors, each of the executive
officers named in "Management--Summary Compensation Table" and all directors
and executive officers as a group.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT OF CLASS PERCENT OF CLASS AFTER
NAME AND ADDRESS OF COMMON STOCK PRIOR TO SPECIAL SPECIAL
OF BENEFICIAL OWNER BENEFICIALLY OWNED(1)(2) WARRANT OFFERING(3) WARRANT OFFERING(3)(4)
------------------- ------------------------ ------------------- ----------------------
<S> <C> <C> <C>
Dimensional Fund Advisors, 393,514 6.6% 3.3%
Inc.(5).....................
1299 Ocean Avenue
Santa Monica, CA 90401
Brinson Holdings, Inc.(6)... 365,800 6.1% 3.2%
209 South LaSalle Street
Chicago, Illinois 60604
DIRECTORS AND OFFICERS
Stephen D. Bennett(7)....... 37,036 * *
C.J. Gauthier............... 173 * *
Edward G. Jordan............ 1,000 * *
Andrew R. Laidlaw........... 1,000 * *
Frank A. LePage............. 2,500 * *
Reynold C. MacDonald(8)..... 66,301 1.1 *
Brian W.H. Marsden(9)....... 154,360 2.6 1.3
Julien L. McCall............ 1,000 * *
Carol O'Cleireacain......... 0 * *
William P. Sovey............ 1,000 * *
Richard J. Stefan(10)....... 41,756 * *
Edward P. Weber, Jr.(11).... 34,844 * *
Jerry F. Williams(12)....... 59,970 1.0 *
William R. Wilson........... 1,000 * *
All directors and executive
officers
as a group, 15
person(7)(8)(9)(10)(11)(12). 401,940 6.7 3.5
</TABLE>
- --------
*Less than 1% of class
(1) As used in this section, the term beneficial ownership with respect to a
security is defined by Rule 13d-3 under the Securities Exchange Act of 1934
as consisting of sole or shared voting power (including the power to vote
or direct the vote) and/or sole or shared investment power (including the
power to dispose or direct the disposition) with respect to the security
through any contract, arrangement, understanding, relationship or
otherwise. Unless otherwise indicated, beneficial ownership consists of
sole voting and investment power.
(2) On June 3, 1994, Harris Trust & Savings Bank, Trustee for the Company's
Salaried Employees Retirement Savings Plan, the Company's Employee Stock
Ownership Plan, and the Alpha Tube Corporation Employees 401(k) Retirement
Plan, held 873,523 shares, or 15.7%, of Common Stock then outstanding.
Shares held by the Trustee on account of each of the participating
employees will be voted by the Trustee in accordance with written
instructions from the participants and where no instructions are received,
the Trustee will vote in accordance with the recommendations set forth by
the Board in the proxy statement of the Company. In addition, on June 3,
1994 Harris Trust and Savings Bank, as Trustee under the Company's Pension
and Retirement Plans Trust ("Trust"), held 207,092 shares, or 3.7%, of
Common Stock then outstanding. Under the terms of the Trust, absent
direction from the Company, the Trustee is authorized to exercise voting
rights as it deems proper.
56
<PAGE>
(3) The shares owned by each person or entity, or by the group, and the shares
included in the total number of shares outstanding have been adjusted and
the percent owned has been computed in accordance with Rule 13d-3(d)(1)
under the Securities and Exchange Act.
(4) Upon satisfaction of all conditions to the release from escrow of the net
proceeds of the Special Warrant Offering and the deemed exercise of the
Special Warrants, an additional 5,600,000 shares of the Company's Common
Stock will be issued to the warrant holders.
(5) Dimensional Fund Advisors, Inc. ("Dimensional"), a registered investment
advisor, is deemed to have beneficial ownership of 393,514 shares of Common
Stock as of December 31, 1993 by reason of its sole or shared voting power
and sole dispositive power over such shares. All of the shares are held in
portfolios of DFA Investment Dimensions Group, Inc., a registered open-end
investment company, or in series of The DFA Investment Trust Company, a
Delaware business trust, or the DFA Group Trust and the DFA Participating
Group Trust, investment vehicles for qualified employee benefit plans, all
of which Dimensional Fund Advisors Inc. serves as investment manager.
Dimensional disclaims beneficial ownership of all such shares.
(6) The number of shares of Common Stock beneficially owned was determined by a
review of Schedule 13G furnished to the Company which states that Brinson
Holdings, Inc. beneficially owns the shares solely through its ownership of
Brinson Partners, Inc., which owns 178,630 shares, which in turn owns
Brinson Trust Company, which owns 187,170 shares. Brinson Partners, Inc.
and Brinson Trust Company have sole voting power and sole dispositive power
with respect to the shares owned by them.
(7) Includes 24,400 shares which are not now owned but could be acquired by
exercise of stock options, 6,700 shares which are subject to conditions of
forfeiture and restrictions on sale, transfer or other disposition, and
2,140 shares held by the trustee of the Company's Employee Stock Ownership
Plan ("ESOP") which are attributable to Mr. Bennett's account.
(8) Includes 16,301 shares held in a trust to which Mr. MacDonald disclaims
beneficial ownership except to the extent of his pecuniary interest
therein.
(9) Includes 91,800 shares which are not now owned but could be acquired by
exercise of stock options, 4,100 shares which are subject to conditions of
forfeiture and restrictions on sale, transfer or other disposition, 2,500
shares owned by a family member to which Mr. Marsden disclaims beneficial
ownership, and 4,080 shares held by the trustee of the ESOP which are
attributable to Mr. Marsden's account.
(10) Includes 25,550 shares which are not now owned but could be acquired by
exercise of stock options, 1,600 shares which are subject to conditions of
forfeiture and restrictions on sale, transfer or other disposition, 1,789
shares held by the trustee of the Company's Salaried Employees Retirement
Savings Plan (SERSP) which are attributable to Mr. Stefan's account and
2,592 shares held by the trustee of the ESOP which are attributable to Mr.
Stefan's account.
(11) Includes 25,650 shares which are not now owned but could be acquired by
exercise of stock options, 2,750 shares which are subject to conditions of
forfeiture and restrictions on sale, transfer or other disposition, 100
shares held by family members, and 2,669 shares held by the trustee of the
ESOP which are attributable to Mr. Weber's account.
(12) Includes 32,250 shares which are not now owned but could be acquired by
exercise of stock options, 3,390 shares which are subject to conditions of
forfeiture and restriction on sale, transfer or other disposition, 11,287
shares held by the trustee of the SERSP which are attributable to Mr.
Williams' account, and 3,309 shares held by the trustee of the ESOP which
are attributable to Mr. Williams' account.
57
<PAGE>
CERTAIN TRANSACTIONS
The following is a year by year listing of all transactions and any proposed
transactions which have materially affected or will materially affect the
Company and any of its subsidiaries in which the following have or had a
material interest during the fiscal years 1991, 1992 and 1993 and the current
fiscal year to date: directors and senior officers of the Company, any security
holders named in "Security Ownership of Certain Beneficial Owners and
Management," and any associate or affiliate of any of the foregoing persons or
companies. The Company believes that all transactions were in the ordinary
course of business, at competitive prices and terms and at arm's length.
SIX MONTHS 1994
Through June 26, 1994, the Company made sales to and purchases from
corporations (including subsidiaries) certain executive officers and directors
of which are also directors of the Company, as follows: Messrs. MacDonald and
Jordan are directors of The ARA Group, Inc., from which the Company made
purchases of $85,820 for food services; Mr. Laidlaw is a partner of the law
firm of Seyfarth, Shaw, Fairweather and Geraldson, to which firm the Company
paid $38,248 for professional services on behalf of the Company; Mr. LePage is
a director of Parker-Hannifin Corporation, to which the Company made sales of
$1,358,823; and Mr. Wilson is a director of Columbia Gas System, Inc., from
which the Company made purchases of $54,740 for natural gas. There were also
purchases from one other company which did not exceed $50,000.
FISCAL YEAR 1993
In the fiscal year 1993, the Company made sales to and purchases from
corporations (including subsidiaries) certain executive officers and directors
of which are also directors of the Company, as follows: Messrs. MacDonald and
Jordan are directors of The ARA Group, Inc., from which the Company made
purchases of $167,527 for food services; Mr. Laidlaw is a partner in the law
firm of Seyfarth, Shaw, Fairweather and Geraldson, to which firm the Company
paid $101,973 for professional services on behalf of the Company; Mr. LePage is
a director of Parker-Hannifin Corporation, to which the Company made sales of
$1,800,692 for tubing; and Mr. Wilson is a director of Columbia Gas System,
Inc., from which the Company made purchases of $76,906 for natural gas. There
were also sales to one other company which did not exceed $50,000.
FISCAL YEAR 1992
In the fiscal year 1992, the Company made sales to and purchases from
corporations (including subsidiaries) certain executive officers and directors
of which are also directors of the Company, as follows: Messrs. MacDonald and
Jordan are directors of The ARA Group, Inc. from which the Company made
purchases of $182,331; Mr. Laidlaw is a partner in the law firm of Seyfarth,
Shaw, Fairweather and Geraldson, to which firm the Company paid $68,865 for
professional services on behalf of the Company; and Mr. LePage is a director of
Parker-Hannifin Corporation, to which the Company made sales of $1,047,724 for
tubing. There were also purchases from and sales to several other like
companies, the transaction amounts of which, in the aggregate, did not exceed
$50,000.
FISCAL YEAR 1991
In the fiscal year 1991, the Company made sales to and purchases from
corporations (including subsidiaries) certain executive officers and directors
of which are also directors of the Company, as follows: Mr. Gauthier is a
director of Nalco Chemical Company from which the Company made purchases of
$146,315; Messrs. MacDonald and Jordan are directors of The ARA Group, Inc.,
from which the Company made purchases of $161,713; Mr. Laidlaw is a partner in
the law firm of Seyfarth, Shaw, Fairweather & Geraldson, to which the Company
paid $108,096 for professional services performed on behalf of the Company; and
Mr. LePage is a director of Parker-Hannifin Corporation, to which a subsidiary
of Acme sold tubing in the amount of $805,611. There were also purchases from
and sales to several other like companies, the transaction amounts of which, in
the aggregate, did not exceed $50,000.
58
<PAGE>
DESCRIPTION OF NOTES
The Senior Secured Notes will be issued under an indenture (the "Note
Indenture") dated as of , 1994 by and among Acme Metals Incorporated, a
Delaware corporation (for purposes of this Description of Notes, the
"Company"), the Guarantors and Shawmut Bank Connecticut, National Association,
as trustee (the "Note Trustee"). The Senior Secured Discount Notes will be
issued under an indenture (the "Discount Note Indenture"; and together with the
Note Indenture, the "Indentures") dated as of , 1994, by and among the
Company, the Guarantors (as defined below) and Shawmut Bank Connecticut,
National Association, as trustee (the "Discount Note Trustee"; and together
with the Note Trustee, the "Trustees"). The terms of the Notes will include
those stated in the Indentures and those made part of the Indentures by
reference to the Trust Indenture Act of 1939 (the "Trust Indenture Act"), as in
effect on the date of each of the Indentures. The Notes will be subject to all
such terms, and prospective investors are referred to the respective Indenture
and the Trust Indenture Act for a statement of such terms.
The statements under this caption relating to the Notes, the Indentures and
the Security Documents (as defined below) are summaries and do not purport to
be complete. Such summaries make use of certain terms defined in the Indentures
and are qualified in their entirety by express reference to the Indentures,
copies of which are filed as exhibits to the Registration Statement of which
this Prospectus is a part.
General
The Senior Secured Notes will bear interest from the date the Senior Secured
Notes are first issued under the Note Indenture at the rate shown on the cover
page of this Prospectus, payable semiannually on and of each year,
commencing , 1994, to holders of record at the close of business on
or immediately preceding each such interest payment date. The
Senior Secured Notes will be due on , 2002, and will be issued only in
registered form, without coupons, in denominations of $1,000 and integral
multiples thereof. The Senior Secured Notes will be senior obligations of the
Company limited to an aggregate amount of $175 million.
The Senior Secured Discount Notes will bear interest from , 1997 at
the rate shown on the cover page of this Prospectus, payable semiannually on
and of each year, commencing , 1998, to holders of record at
the close of business on or immediately preceding each such interest
payment date. The Senior Secured Discount Notes will be due on , 2004,
and will be issued only in registered form, without coupons, in denominations
of $1,000 and integral multiples thereof. The Senior Secured Discount Notes
will be senior obligations of the Company limited to an aggregate amount of $
million which will produce gross proceeds of $100 million.
The Company may seek to raise up to $50 million of debt which will bear
interest at a floating rate. If the Company is successful in raising such debt,
it would replace a portion of the Notes. Any such debt would be pari passu with
the Notes and would share the same security and guarantees.
The Senior Secured Notes and the Senior Secured Discount Notes will be pari
passu with one another and will be secured ratably by the Collateral in
relation to the outstanding principal amount of the Senior Secured Notes and
the Accreted Value of the Senior Secured Discount Notes. The Notes will be
senior in right of payment to all subordinated indebtedness of the Company and
pari passu in right of payment with all future senior indebtedness of the
Company. At June 26, 1994, on an adjusted basis after giving effect to the
offering of the Notes and the application of the estimated net proceeds
therefrom, the Company and its Subsidiaries would have had an aggregate of
approximately $281 million indebtedness outstanding including the Notes. The
Notes will be guaranteed on a senior basis by the Company's Subsidiaries (the
"Guarantors"). See "-- Guarantee of Notes." In addition, all of the Company's
obligations on the Notes and under the Indentures will be secured by a pledge
of all of the capital stock of the Company's direct Subsidiaries, the Guarantee
by Acme Packaging of the Notes will be secured by a pledge of all of the
capital stock of its Subsidiaries and the Guarantee by Acme Steel of the Notes
will be secured by a pledge of all of the capital stock of its subsidiary and a
mortgage on substantially all of its assets other than inventory and accounts
59
<PAGE>
receivable and certain non-material assets. In addition, to the extent that
Acme Steel finances the acquisition of assets constituting a part of the
Modernization Project out of the proceeds of industrial revenue bonds or
similar governmental authority obligations, such assets shall not constitute
security for its Guarantee. See "--Security." The Company has obtained
commitments for an $80 million Working Capital Facility which will be secured
by inventory and accounts receivable of the Company and its Subsidiaries. See
"Description of Working Capital Facility." The ability of the Company and its
Subsidiaries to incur additional Indebtedness will be limited by the
"Limitations on Indebtedness" covenant of each of the Indentures, and the
ability of the Company and its Subsidiaries to incur additional secured
Indebtedness will be limited by the "Limitations on Liens" covenant of each of
the Indentures.
Redemption
Optional Redemption of the Senior Secured Notes. The Senior Secured Notes may
not be redeemed prior to , 1998. On or after , 1998, the Company
may, at its option, redeem the Senior Secured Notes in whole or in part, from
time to time, at the following redemption prices (expressed in percentages 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 ,
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
</TABLE>
Optional Redemption of the Senior Secured Discount Notes. The Senior Secured
Discount Notes may not be redeemed prior to , 1999. On or after ,
1999, the Company may, at its option, redeem the Senior Secured Discount Notes
in whole or in part, from time to time, at the following redemption prices
(expressed in percentages 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 ,
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
</TABLE>
Selection and Notice of Redemption. In the event that less than all of the
Notes are to be redeemed at any time, selection of Senior Secured Notes or
Senior Secured Discount Notes (or portions thereof) for redemption will be made
by the respective Trustee pro rata, by lot or by any other method such Trustee
shall deem fair and reasonable; provided, however, that no Notes of $1,000 or
less shall be redeemed in part. Notice of redemption to the holders of Notes to
be redeemed in whole or in part shall be given by mailing notice of such
redemption by first-class mail, postage prepaid, at least 30 days and not more
than 60 days prior to the date fixed for redemption to such holders of Notes at
their addresses as they shall appear upon the registry books. On and after the
redemption date, interest ceases to accrue on Notes or portions thereof called
for redemption.
Sinking Fund. There will be no sinking fund for the Senior Secured Notes or
Senior Secured Discount Notes.
60
<PAGE>
Guarantee of Notes
Each Guarantor unconditionally guarantees, jointly and severally, to each
holder and the Trustees, the full and prompt performance of the Company's
obligations under the Indentures and the Notes, including the payment of
principal of and interest on the Notes. The obligations of each Guarantor are
limited to the maximum amount which, after giving effect to all other
contingent and fixed liabilities of such Guarantor and after giving effect to
any collections from or payments made by or on behalf of any other Guarantor in
respect of the obligations of such other Guarantor under its Guarantee or
pursuant to its contribution obligations under the Indentures, will result in
the obligations of such Guarantor under the Guarantee not constituting a
fraudulent conveyance or fraudulent transfer under federal or state law. Each
Guarantor that makes a payment or distribution under a Guarantee shall be
entitled to a contribution from each other Guarantor in an amount pro rata,
based on the net assets of each Guarantor, determined in accordance with GAAP.
Each Guarantor may consolidate with or merge into or sell its assets to the
Company or another Guarantor without limitation, or with other Persons upon the
terms and conditions set forth in the Indentures. See "--Limitations on
Mergers, Consolidations and Sales of Assets." In the event all of the capital
stock of a Guarantor is sold by the Company and the sale complies with the
"Limitation on Disposition of Assets" covenant, the Guarantor's Guarantee will
be released and the pledge of the Guarantor's capital stock as security for the
Notes or a Guarantee, as the case may be, shall also be released.
Separate financial statements of the Guarantors are not included herein
because such Guarantors are jointly and severally liable with respect to the
Company's obligations pursuant to the Notes, and the aggregate net assets,
earnings and equity of the Guarantors and the Company are substantially
equivalent to the net assets, earnings and equity of the Company on a
consolidated basis.
Security
All of the obligations of the Company under the Notes and the Indentures will
be secured by a pledge by the Company of all of the capital stock of its direct
Subsidiaries whether now existing or hereafter acquired, the Guarantee by Acme
Packaging of the Notes will be secured by a pledge by Acme Packaging of all of
the capital stock of its subsidiaries whether now existing or hereafter
acquired, and the Guarantee by Acme Steel of the Notes will be secured by a
pledge by Acme Steel of all of the capital stock of its subsidiaries whether
now existing or hereafter acquired, and a first priority Lien on substantially
all existing and future real property, equipment, intellectual property and
related intangibles of Acme Steel, including the Modernization Project, and the
proceeds thereof, but excluding inventory, accounts receivable, certain non-
material assets and Permitted Liens (collectively including all other property
and assets that are from time to time subject to the Security Documents, the
"Collateral"). Collateral consisting of real property and fixtures will be
mortgaged by Acme Steel pursuant to mortgages or deeds of trust (the
"Mortgages"). Collateral constituting personal property will be pledged by Acme
Steel pursuant to security agreements (the "Security Agreements"). Collateral
constituting capital stock will be pledged by the Company, Acme Steel and Acme
Packaging pursuant to securities pledge agreements (the "Securities Pledge
Agreements"). The Working Capital Facility will be secured by inventory and
accounts receivable of the Company and its Subsidiaries. In addition, to the
extent that Acme Steel finances the acquisition of assets constituting a part
of the Modernization Project out of the proceeds of industrial revenue bonds or
similar governmental authority obligations, such assets shall not constitute
security for its Guarantee.
The collateral release provisions of the Indenture permit the release of
items of Collateral which are the subject of an Asset Sale (as defined below)
and in other circumstances upon compliance with certain conditions. See "--
Possession, Use and Release of Collateral." The Available Proceeds Amount (as
defined below) of any such Asset Sale would be required to be applied to an
Unapplied Proceeds Offer (as defined below) in the circumstances and manner
described under "--Certain Covenants of the Company-- Limitation on Disposition
of Assets." To the extent an Unapplied Proceeds Offer is not fully subscribed
to by
61
<PAGE>
holders of Notes, the unutilized Available Proceeds Amount may be retained by
the Company, free and clear of the Lien of the Indentures and the Security
Documents. See "--Possession, Use and Release of Collateral."
To the extent that third parties enjoy Permitted Liens, such third parties
may have rights and remedies with respect to the Property subject to such Lien
that, if exercised, could adversely affect the value of the Collateral.
No appraisals of the Collateral have been prepared by or on behalf of the
Company. There can be no assurance that the proceeds of any sale of the
Collateral pursuant to the Indentures and the related Security Documents
following an acceleration after an Event of Default under the Indentures would
not be substantially less than that which would be required to satisfy payments
due on the Notes. By its nature, some or all of the Collateral will be illiquid
and may have no readily ascertainable market value. Accordingly, there can be
no assurance that the Collateral will be able to be sold in a short period of
time, if saleable. Pending application of the net proceeds of the Note Offering
as set forth in "Use of Proceeds" above, unused net proceeds of the Note
Offering will be deposited in the Collateral Account and will be released to
the Company in accordance with the terms of the Indentures.
For a discussion of certain risks associated with the ability of the
Collateral Agent to foreclose upon and sell Collateral under applicable
bankruptcy laws if a bankruptcy proceeding were to be commenced by or against
the Company or any of the Guarantors, see "Risk Factors--Security for the
Notes."
Collateral Agency Agreement. Prior to the consummation of the offering of the
Notes, the Note Trustee, the Discount Note Trustee, Shawmut Bank Connecticut,
National Association, as collateral agent (the "Collateral Agent"), the
Company, Acme Steel and Acme Packaging will enter into a collateral agency
agreement (the "Collateral Agency Agreement"). The Collateral Agency Agreement
will provide generally that decisions in respect of (i) administering the
Collateral (not including decisions relating to the release of the Collateral);
(ii) releasing portions of the Collateral in circumstances not otherwise
permitted by the Indentures; and (iii) foreclosing on or otherwise pursuing
remedies with respect to such Collateral generally may be made by the holders
of not less than a majority in aggregate principal amount of any issue of
Indebtedness covered by the Collateral Agency Agreement and secured by the
Collateral. If an Event of Default occurs under the Note Indenture or the
Discount Note Indenture the applicable Trustee will notify the other Trustee.
In the event of a declaration of acceleration of the Senior Secured Notes or
the Senior Secured Discount Notes, as the case may be, occurs as a result
thereof, the Note Trustee or the Discount Note Trustee, as the case may be, on
behalf of their respective holders, in addition to any rights or remedies
available to it under the Note Indenture or Discount Note Indenture, as the
case may be, may, subject to the provisions of the Collateral Agency Agreement,
cause the Collateral Agent to take such action as the Note Trustee or the
Discount Note Trustee, as the case may be, deems advisable to protect and
enforce its rights in the Collateral, including the institution of foreclosure
proceedings. The proceeds received by the Collateral Agent from any foreclosure
will be applied by the Collateral Agent first to pay the expenses of such
foreclosure and fees and other amounts then payable to the Collateral Agent and
the Trustees under the Indentures and the Collateral Agency Agreement, and
thereafter to pay, pro rata, the principal of, premium, if any, and interest on
the Notes or any other Indebtedness covered by the Collateral Agency Agreement
and secured by the Collateral.
Intercreditor Agreement
Prior to the consummation of the Note Offering, the Collateral Agent, on
behalf of the holders of the Notes, will enter into an intercreditor agreement
(the "Intercreditor Agreement") with the Company, Acme Steel, and Harris Trust
and Savings Bank, as agent for the lenders under the Working Capital Facility
(in such capacity, the "Agent"). The Intercreditor Agreement will provide,
among other things, that (i) the Collateral Agent and the Agent will provide
notices to each other with respect to the acceleration of the Notes or the
Indebtedness under the Working Capital Facility, as the case may be, and the
commencement of any action to enforce the rights of the holders of the Notes,
the Collateral Agent, the lenders under the Working Capital Facility, or the
Agent and (ii) for a period following the issuance of a notice of enforcement,
62
<PAGE>
the Agent may enter upon all or any portion of the Company's or Guarantor's
premises, use the Collateral to the extent necessary to complete the
manufacture of inventory, collect accounts and sell or otherwise dispose of the
collateral securing the Indebtedness under the Working Capital Facility.
Certain Covenants
The following is a summary of certain covenants that will be contained in
each of the Indentures. Such covenants will be applicable (unless waived or
amended as permitted by the Indentures) so long as any of the Notes are
outstanding.
Reports to Holders of the Notes. So long as the Company is subject to the
periodic reporting requirements of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), it will continue to furnish the information
required thereby to the Commission and to the Trustees. The Indentures provide
that even if the Company is entitled under the Exchange Act not to furnish such
information to the Commission, it will nonetheless continue to file such
reports with the Commission and the Trustees and mail such reports to holders
of the Notes as if it were subject to such periodic reporting requirements so
long as any of the Notes remain outstanding; provided that the Company shall
not be obligated to furnish such information to the Commission if less than 10%
of the original principal amount of each class of the Notes is then
outstanding.
Repurchase of Notes Upon Change of Control. In the event that there shall
occur a Change of Control, each holder of the Notes shall have the right, at
the holder's option, to require the Company to repurchase all or any part of
such holder's Notes on the date (the "Repurchase Date") that is no later than
60 days after notice of the Change of Control, at a repurchase price equal to,
(i) in the case of the Senior Secured Notes, 101% of the principal amount
thereof, plus accrued interest to the Repurchase Date or (ii) in the case of
the Senior Secured Discount Notes, 101% of the Accreted Value thereof on the
Repurchase Date if repurchased prior to , 1997 and at the principal
amount thereof, plus accrued interest to the Repurchase Date, thereafter.
On or before the thirtieth day after the Change of Control, the Company is
obligated to mail, or cause to be mailed, to all holders of record of such
Notes a notice regarding the Change of Control and the repurchase right. The
notice shall state the Repurchase Date (which shall be the same date for both
the Senior Secured Notes and the Senior Secured Discount Notes), the date by
which the repurchase right must be exercised, the price for such Notes and the
procedure which the holder must follow to exercise such right. Substantially
simultaneously with mailing of the notice, the Company shall cause a copy of
such notice to be published in a newspaper of general circulation in the
Borough of Manhattan, The City of New York. To exercise such right, the holder
of such Note must deliver at least ten days prior to the Repurchase Date
written notice to the Company (or an agent designated by the Company for such
purpose) of the holder's exercise of such right, together with the Note with
respect to which the right is being exercised, duly endorsed for transfer;
provided that, if mandated by applicable tender offer rules and regulations a
holder may be permitted to deliver such written notice nearer to the Repurchase
Date as may be specified by the Company.
The Company will comply with all applicable tender offer rules and
regulations, including Section 14(e) of the Exchange Act and the rules
thereunder, if the Company is required to give a notice of a right of
repurchase as a result of a Change of Control.
"Change of Control" means (i) any sale, lease or other transfer (in one
transaction or a series of related transactions) by the Company or any of its
Subsidiaries of all or substantially all of the consolidated assets of the
Company to any Person (other than a Wholly Owned Subsidiary of the Company);
(ii) a "person" or "group" (within the meaning of Sections 13(d) and 14(d)(2)
of the Exchange Act (other than the Company)) becomes the "beneficial owner"
(as defined in Rule 13d-3 under the Exchange Act) of Capital Stock of the
Company representing 40% or more of the voting power of such Capital Stock;
(iii) Continuing Directors cease to constitute at least a majority of the Board
of Directors of the Company; or (iv) the stockholders of the Company approve
any plan or proposal for the liquidation or dissolution of the Company.
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"Continuing Director" means a director who either was a member of the Board
of Directors of the Company on the Issue Date or who became a director of the
Company subsequent to such date and whose election, or nomination for election
by the Company's stockholders, was duly approved by a majority of the
Continuing Directors then on the Board of Directors of the Company, either by a
specific vote or by approval of the proxy statement issued by the Company on
behalf of the entire Board of Directors of the Company in which such individual
is named as nominee for director.
With respect to the disposition of assets, the phrase "all or substantially
all" as used in the Indentures (including as set forth under "--Limitations on
Mergers, Consolidations and Sales of Assets" below) 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 Notes.
None of the provisions relating to a repurchase upon a Change of Control are
waivable by the Board of Directors of the Company. The Company could, in the
future, enter into certain transactions, including certain recapitalizations of
the Company, that would not constitute a Change of Control with respect to the
Change of Control purchase feature of the Notes, but would increase the amount
of indebtedness outstanding at such time.
The Indentures will require the payment of money for Notes or portions
thereof validly tendered to and accepted for payment by the Company pursuant to
a Change of Control offer. If a Change of Control were to occur, there can be
no assurance that the Company would have sufficient funds to pay the purchase
price for all Notes that the Company is required to repurchase. After giving
effect to the offering of the Notes and the application of the estimated net
proceeds therefrom as set forth under "Use of Proceeds," the Company would not
have sufficient funds available to repurchase all of the outstanding Notes
pursuant to a Change of Control offer. In the event that the Company were
required to repurchase outstanding Notes pursuant to a Change of Control offer,
the Company expects that it would need to seek third-party financing to the
extent it does not have available funds to meet its repurchase obligations.
However, there can be no assurance that the Company would be able to obtain
such financing.
Failure by the Company to repurchase the Notes when required upon a Change of
Control will result in an Event of Default with respect to the Notes.
These provisions could have the effect of deterring hostile or friendly
acquisitions of the Company where the person attempting the acquisition views
itself as unable to finance the repurchase of the principal amount of Notes
which may be tendered to the Company upon the occurrence of a Change of
Control.
Limitations on Indebtedness. The Company will not, and will not permit any of
its Subsidiaries, directly or indirectly, to create, incur, assume, become
liable for or guarantee the payment of (collectively, an "incurrence") any
Indebtedness (including Acquired Indebtedness); provided the Company and its
Subsidiaries may incur Indebtedness, including Acquired Indebtedness, if (i) at
the time of such event and after giving effect thereto, on a pro forma basis,
the ratio of Consolidated Cash Flow Available for Fixed Charges to Consolidated
Fixed Charges for the four full fiscal quarters immediately preceding such
event, taken as one period and calculated using the assumptions and adjustments
set forth in the following sentence, would have been greater than 2.0 to 1.0,
and (ii) no Default or Event of Default shall have occurred and be continuing
at the time of or occur as a consequence of the incurrence of such
Indebtedness. The following assumptions and adjustments shall be used in
calculating the ratio of Consolidated Cash Flow Available for Fixed Charges to
Consolidated Fixed Charges for the four-quarter period preceding the incurrence
of Indebtedness giving rise to such determination: (a) the Indebtedness being
incurred will be assumed to have been incurred on the first day of such four-
quarter period; (b) any other Indebtedness incurred during, and
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remaining outstanding at the end of, such four-quarter period or incurred
subsequent to such four-quarter period will be assumed to have been incurred on
the first day of such four-quarter period; (c) with respect to the incurrence
of Acquired Indebtedness, the related acquisition (whether by means of
purchase, merger or otherwise) and any related repayment of any Indebtedness
will be assumed to have occurred on the first day of such four-quarter period
with the appropriate adjustments with respect to such acquisition and repayment
being included in such pro forma calculations; (d) with respect to Indebtedness
repaid (other than a repayment of revolving credit obligations) during such
four-quarter period (or subsequent thereto) out of the proceeds of sales of
Capital Stock or operating cash flows in such four-quarter period, such
Indebtedness will be assumed to have been repaid on the first day of such four-
quarter period; and (e) any permanent reduction in the committed amount of a
revolving credit facility during such four-quarter period (or subsequent
thereto) will be deemed to have occurred on the first day of such four-quarter
period and interest paid on any amounts drawn on such revolving credit facility
during such four-quarter period in excess of such reduced committed amount
shall, for the period during which such drawn amounts were actually
outstanding, be excluded from such calculation.
The foregoing limitations will not apply to the incurrence of (i) Permitted
Indebtedness, (ii) Refinancing Indebtedness and (iii) additional Indebtedness
of the Company or any of its Subsidiaries the aggregate principal amount of
which does not exceed $35 million outstanding at any one time.
Limitations on Restricted Payments. The Company will not, and will not permit
any of its Subsidiaries to, directly or indirectly, make any Restricted Payment
unless:
(i) no Default or Event of Default shall have occurred and be continuing
at the time of or after giving effect to such Restricted Payment;
(ii) immediately after giving effect to such Restricted Payment, the
Company could incur at least $1.00 of Indebtedness (other than Permitted
Indebtedness) pursuant to the first paragraph of the "Limitations on
Indebtedness" covenant; and
(iii) immediately after giving effect to such Restricted Payment, the
aggregate amount of all Restricted Payments (the fair market value of any
such Restricted Payment if other than cash as determined in good faith by
the Company's Board of Directors and evidenced by a resolution of such
Board) declared or made after the Issue Date does not exceed the sum of (a)
50% of the Consolidated Net Income of the Company on a cumulative basis
during the period (taken as one accounting period) from and including the
first full fiscal quarter of the Company commencing after the Issue Date
and ending on the last day of the Company's last fiscal quarter ending
prior to the date of such Restricted Payment (or in the event such
Consolidated Net Income shall be a deficit, minus 100% of such deficit),
plus (b) 100% of the aggregate net cash proceeds of, and the fair market
value of marketable securities (as determined in good faith by the
Company's Board of Directors and evidenced by a resolution of such Board)
received by the Company from (1) the issue or sale after the Issue Date of
Capital Stock of the Company (other than the issue or sale of (A)
Disqualified Stock or (B) Capital Stock of the Company to any Subsidiary of
the Company or (C) the exercise of the Special Warrants) and (2) the issue
or sale after the Issue Date of any Indebtedness or other securities of the
Company convertible into or exercisable for Capital Stock (other than
Disqualified Stock) of the Company which has been so converted or
exercised, as the case may be.
The foregoing clauses (ii) and (iii) will not prohibit: (A) the payment of
any dividend within 60 days of its declaration if such dividend could have been
made on the date of its declaration without violation of the provisions of the
Indenture; (B) the repurchase, redemption or retirement of any shares of
Capital Stock of the Company or any of its Subsidiaries in exchange for, or out
of the net proceeds of the substantially concurrent sale (other than to a
Subsidiary of the Company) of, other shares of Capital Stock (other than
Disqualified Stock) of the Company; (C) the repurchase, redemption or
retirement of subordinated Indebtedness of the Company or any of its
Subsidiaries in exchange for, by conversion into, or out of the net proceeds
of, a substantially concurrent (x) issue or sale of Capital Stock (other than
Disqualified Stock) of
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the Company or (y) incurrence of Refinancing Indebtedness with respect to such
subordinated Indebtedness; (D) the purchase of options on Common Stock issued
to members of management of the Company pursuant to the terms of their
employment agreements upon termination of employment, death or disability of
any such person in an amount not to exceed $1,000,000 per annum; and (E)
payments to taxing authorities by the Company or any Subsidiary of the Company
on behalf of a holder of Common Stock of the Company (or an option to purchase
such Common Stock) pursuant to certain arrangements in existence on the date of
the Indentures; provided, that, without duplication, each Restricted Payment
described in clauses (A) through (D) (other than subclause (y) of clause (C))
of this sentence shall be taken into account for purposes of computing the
aggregate amount of all Restricted Payments pursuant to clause (iii) of the
immediately preceding paragraph.
The prior sale of the 5,600,000 special stock purchase warrants by the
Company in March 1994, and the subsequent exercise of such warrants for the
Company's common stock, will not be deemed an issuance of Capital Stock for
purposes of calculations made pursuant to this covenant.
Limitations on Investments, Loans and Advances. The Company will not make and
will not permit any of its Subsidiaries to make any Investments in any Person,
except (i) Investments by the Company in or to any Subsidiary (or an entity
which, following and as a result of such Investment, becomes a Subsidiary of
the Company) and Investments in or to the Company or a Subsidiary (or an entity
which, following and as a result of such Investment, becomes a Subsidiary of
the Company) by any Subsidiary, (ii) Investments represented by accounts
receivable created or acquired in the ordinary course of business, (iii)
advances to employees, officers and directors in the ordinary course of
business, (iv) Investments under or pursuant to Interest Protection Agreements,
(v) Permitted Investments, (vi) Restricted Investments made pursuant to the
"Limitations on Restricted Payments" covenant above, (vii) Investments in
Wabush and (viii) other Investments in Persons other than Subsidiaries or
Affiliates of the Company or any of the Company's Subsidiaries not to exceed
$10,000,000 at any one time outstanding. For purposes of calculating the amount
of any outstanding Investment pursuant to clause (viii), any return of capital
or repayment of a loan or advance constituting all or a portion of the original
amount of the Investment shall be deducted.
Limitations on Transactions with Affiliates. The Company will not, and will
not permit any of its Subsidiaries to, make any loan, advance, guarantee or
capital contribution to, or for the benefit of, or sell, lease, transfer or
otherwise dispose of any of its properties or assets to, or for the benefit of,
or purchase or lease any property or assets from, or enter into or amend any
contract, agreement or understanding with, or for the benefit of, any Affiliate
of the Company or any Affiliate of any of the Company's Subsidiaries or any
holder of 10% or more of any class of Capital Stock of the Company (including
any Affiliates of such holders) (each, an "Affiliate Transaction") except for
any Affiliate Transaction the terms of which are fair and reasonable to the
Company or such Subsidiary, as the case may be, and are at least as favorable
as the terms which could be obtained by the Company or such Subsidiary, as the
case may be, in a comparable transaction made on an arm's length basis with
Persons who are not such a holder, an Affiliate of such holder or an Affiliate
of the Company or any of the Company's Subsidiaries.
In addition, the Company will not, and will not permit any Subsidiary of the
Company to, enter into an Affiliate Transaction, or any series of related
Affiliate Transactions, unless with respect to such Transaction or Transactions
involving or having a value of more than $1,000,000, the Company has (x)
obtained the approval of a majority of the Board of Directors of the Company in
the exercise of their fiduciary duties and (y) either obtained the approval of
a majority of the Company's disinterested directors or obtained an opinion of a
qualified independent financial advisor to the effect that such Transaction or
Transactions are fair to the Company or such Subsidiary, as the case may be,
from a financial point of view.
Limitation on Disposition of Assets. Each of the Indentures will provide
that:
(a) the Company will not, and will not cause or permit any of its
Subsidiaries to, consummate any Asset Sale unless (i) the consideration in
respect of such Asset Sale is at least equal to the fair market
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value of the assets subject to such Asset Sale, (ii) at least 75% of the
value of the consideration therefrom received by the Company or such
Subsidiary is in the form of cash or cash equivalents, and (iii) to the
extent such Asset Sale involves Collateral, (x) such Asset Sale is not
between the Company and any of its Subsidiaries or between Subsidiaries of
the Company and (y) the Company shall cause the cash consideration received
in respect thereof to be deposited in the Collateral Account as and when
received by the Company or by any Subsidiary of the Company and shall
otherwise comply with the provisions of the Indentures and the Collateral
Agency Agreement applicable to such Collateral and Asset Sale. The Company
may, for so long as no Default or Event of Default exists under the
applicable Indenture or would be caused thereby, apply Net Cash Proceeds
held by it (or in compliance with the provisions of the applicable
Indenture, direct the Collateral Agent to release Net Cash Proceeds held in
the Collateral Account and the Collateral Agency Agreement for application)
to the acquisition or construction of property constituting a Related
Business Investment; provided, however, that if such application is not
made in the manner and within the times contemplated by the definition of
Available Proceeds Amount, the Company shall be required to make an
Unapplied Proceeds Offer (as defined below) pursuant to paragraph (b)
below.
(b) In the event there shall be any Available Proceeds Amount, the
Company shall make an offer to purchase (the "Unapplied Proceeds Offer") to
all holders of the Notes on the Unapplied Proceeds Offer Payment Date, a
principal amount (expressed as an integral multiple of $1,000) of the
Senior Secured Notes and the Senior Secured Discount Notes equal to their
respective Applicable Portion of such Available Proceeds Amount. In each
case of an Unapplied Proceeds Offer, the purchase price for the Notes shall
be equal to (i) in the case of the Senior Secured Notes, 100% of the
principal amount thereof plus accrued and unpaid interest to the Unapplied
Proceeds Offer Payment Date, or (ii) in the case of the Senior Secured
Discount Notes, 100% of the Accreted Value thereof, if repurchased prior to
, 1997, and of the principal amount thereof plus accrued and unpaid
interest to the Unapplied Proceeds Offer Payment Date if repurchased
thereafter. Notwithstanding the foregoing (A) the Company may defer the
Unapplied Proceeds Offer until there is an aggregate unutilized Available
Proceeds Amount equal to or in excess of $5,000,000 (at which time, the
entire unutilized Available Proceeds Amount, and not just the amount in
excess of $5,000,000, shall be applied as required pursuant to the
Indentures), (B) in connection with any Asset Sale, the Company and its
Subsidiaries will not be required to comply with the requirements of clause
(ii) of paragraph (a) to the extent that the aggregate non-cash
consideration received in connection with such Asset Sale, together with
the sum of all non-cash consideration received in connection with all prior
Asset Sales that has not yet been converted into cash, does not exceed $5
million, provided that when any non-cash consideration is converted into
cash, such cash shall constitute Net Cash Proceeds and be subject to clause
(ii) of paragraph (a) and (C) in connection with any Asset Sale relating to
the Company's interest in Wabush, the Company need not comply with the
provisions of clauses (i) and (ii) of paragraph (a). To the extent the
Unapplied Proceeds Offer is not fully subscribed to by holders, the Company
may, subject to the terms of the Indentures and the Collateral Agency
Agreement, obtain a release of the unutilized portion of the Available
Proceeds Amount relating to such Unapplied Proceeds Offer from the Lien of
the Security Documents.
(c) If at any time any non-cash consideration is received by the Company
or by any Subsidiary of the Company, as the case may be, in connection with
any Asset Sale involving Collateral, such non-cash consideration shall be
made subject to the Lien of the Security Documents in the manner
contemplated in the Indentures and the Collateral Agency Agreement. If and
when any non-cash consideration received from any Asset Sale (whether or
not relating to Collateral) is converted into or sold or otherwise disposed
of for cash, then such conversion or disposition shall be deemed to
constitute an Asset Sale hereunder and the Net Cash Proceeds thereof shall
be applied in accordance with this covenant.
(d) All Net Proceeds and all Net Awards required to be delivered to the
Collateral Agent pursuant to any Security Document shall constitute trust
monies and shall be delivered by the Company to the Collateral Agent
contemporaneously with receipt by the Company and be deposited in the
Collateral Account. Net Proceeds and Net Awards so deposited that are
required to be applied or may be applied
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by the Company to effect a Restoration of the affected Collateral under the
applicable Security Document may be withdrawn from the Collateral Account
under the Indentures and the Collateral Agency Agreement, only in
accordance with the Indentures. Net Proceeds and Net Awards so deposited
that are not required to be applied to effect a Restoration of the affected
Collateral under the applicable Security Document may only be withdrawn in
accordance with the Indentures and the Collateral Agency Agreement.
(e) The Company shall provide the Trustees and the Collateral Agent with
prompt notice of the occurrence of an Unapplied Proceeds Offer. Such notice
shall be accompanied by an Officers' Certificate setting forth (i) a
statement to the effect that (x) the Company or a Subsidiary of the Company
has made an Asset Sale and/or (y) there has occurred a destruction or
condemnation in respect of Collateral resulting in Net Proceeds or Net
Awards which are not required to be applied to effect a Restoration of such
affected Collateral under the applicable Security Document and (ii) the
aggregate principal amount of Senior Secured Notes and Senior Secured
Discount Notes offered to be purchased and the basis of calculation in
determining such aggregate principal amount. The Company is obligated with
respect to the Senior Secured Notes and the Senior Secured Discount Notes
(i) to give notice of an Unapplied Proceeds Offer at the same time and in
the same manner to each holder, (ii) to set the same expiration date for
each Unapplied Proceeds Offer arising out of each event giving rise to an
Available Proceeds Amount and (iii) to establish identical Unapplied
Proceeds Offer Payment Dates for each such Unapplied Proceeds Offer.
In the event of the transfer of substantially all (but not all) of the
Property of the Company and its Subsidiaries as an entirety to a person in
a transaction permitted under "Limitations on Mergers, Consolidations and
Sales of Assets" below, the successor corporation shall be deemed to have
sold the Properties of the Company and its Subsidiaries not so transferred
for purposes of this covenant, and shall comply with the provisions of this
covenant with respect to such deemed sale as if it were an Asset Sale. In
addition, the fair market value of such properties and assets of the
Company or its Subsidiaries deemed to be sold shall be deemed to be Net
Cash Proceeds for purposes of this covenant.
Notice of an Unapplied Proceeds Offer will be sent by first class mail to
all holders of Notes not less than 30 days nor more than 60 days before the
payment date for the Unapplied Proceeds Offer, with a copy to each of the
Trustees and the Collateral Agent, and shall comply with the procedures set
forth in the Indentures. Upon receiving notice of the Unapplied Proceeds
Offer, holders may elect to tender their Notes in whole or in part in
integral multiples of $1,000 principal amount in exchange for cash. Each
Indenture provides that the Applicable Portion to be applied under such
Indenture with respect to any Unapplied Proceeds Offer shall be applied to
the repurchase of the Notes issued thereunder that are validly tendered and
not withdrawn prior to the expiration of such offer pro rata based upon the
amount of such Notes tendered by the holders of such Notes. In the event
that there shall be an Unapplied Proceeds Offer made under an Indenture and
the holders of the Notes under the other Indenture shall have validly
tendered Notes in an amount less than their Applicable Portion, the amount
of such Applicable Portion in excess of the aggregate principal amount of
Notes so tendered shall be added to the Applicable Portion in respect of
the other Notes and applied pursuant to the preceding sentence. An
Unapplied Proceeds Offer shall remain open for a period of 20 business days
or such longer period as may be required by law.
If an offer is made to repurchase the Notes pursuant to an Unapplied
Proceeds Offer, the Company will and will cause its Subsidiaries to comply
with all tender offer rules under state and Federal securities laws,
including, but not limited to, Section 14(e) under the Exchange Act and
Rule 14e-1 thereunder, to the extent applicable to such offer.
Limitations on Liens. The Company will not, and will not permit any
Subsidiary of the Company to, issue, assume, guarantee or suffer to exist any
Indebtedness secured by a Lien (other than a Permitted Lien) of or upon any
Property of the Company or any Subsidiary of the Company or any shares of stock
or debt of any Subsidiary of the Company, whether such Property is owned at the
Issue Date or thereafter acquired.
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Limitations on Sale and Leaseback Transactions. The Company will not, and
will not permit any Subsidiary of the Company to, enter into any sale and
leaseback transaction with respect to any Property (whether now owned or
hereafter acquired) unless (i)(a) the Property that is the subject of such sale
and leaseback transaction does not constitute Collateral and (b) the sale or
transfer of the Property to be leased complies with the requirements of the
"Limitations on Dispositions of Assets" covenant and (ii) the Company or such
Subsidiary would be entitled under the "Limitations on Indebtedness" covenant
to incur any Capitalized Lease Obligations in respect of such sale and
leaseback transaction.
Limitations on Dividend and Other Payment Restrictions Affecting
Subsidiaries. The Company will not, and will not permit any of its Subsidiaries
to, directly or indirectly, create or otherwise cause or suffer to exist or
become effective any consensual encumbrance or restriction on the ability of
any Subsidiary of the Company to (i)(a) pay dividends or make any other
distributions on its Capital Stock, or any other interest or participation in
or measured by its profits, owned by the Company or any other Subsidiary of the
Company, or (b) pay any Indebtedness owed to the Company or any other
Subsidiary of the Company, (ii) make loans or advances to the Company or a
Subsidiary of the Company or (iii) transfer any of its properties or assets to
the Company or any other Subsidiary of the Company, except for Permitted Liens
and such other encumbrances or restrictions existing under or by reason of (a)
any restrictions, with respect to a Subsidiary that is not a Subsidiary of the
Company on the Issue Date, under any agreement in existence at the time such
Subsidiary becomes a Subsidiary of the Company (unless such agreement was
entered into in connection with, or in contemplation of, such entity becoming a
Subsidiary of the Company on or after the Issue Date), (b) any restrictions
under any agreement evidencing any Acquired Indebtedness of a Subsidiary of the
Company incurred pursuant to the provisions of the "Limitations on
Indebtedness" covenant; provided that such restrictions shall not restrict or
encumber any assets of the Company or its Subsidiaries other than such
Subsidiary, (c) terms relating to the non-assignability of any operating lease,
(d) any restrictions under the Working Capital Facility, (e) any encumbrance or
restriction existing under any agreement that refinances or replaces the
agreements containing restrictions described in clauses (a)-(d), provided that
the terms and conditions of any such restrictions are not materially less
favorable to the holders of the Notes than those under the agreement so
refinanced or replaced, or (f) any encumbrance or restriction due to applicable
law.
Limitations on Mergers, Consolidations and Sales of Assets. The Company will
not consolidate or merge with or into any Person, and the Company will not, and
will not permit any of its Subsidiaries to, sell, lease, convey or otherwise
dispose of all or substantially all of the Company's consolidated assets (as an
entirety or substantially an entirety in one transaction or a series of related
transactions, including by way of liquidation or dissolution) to, any Person
unless, in each such case: (i) the entity formed by or surviving any such
consolidation or merger (if other than the Company), or to which sale, lease,
conveyance or other disposition shall have been made (the "Surviving Entity"),
is a corporation organized and existing under the laws of the United States,
any state thereof or the District of Columbia; (ii) the Surviving Entity
assumes by supplemental indenture all of the obligations of the Company on the
Notes and under each of the Indentures and the Security Documents; (iii)
immediately after giving effect to such transaction, no Default or Event of
Default shall have occurred and be continuing; (iv) immediately after giving
effect to such transaction and the use of any net proceeds therefrom on a pro
forma basis, the Consolidated Tangible Net Worth of the Company or the
Surviving Entity, as the case may be, would be at least equal to the
Consolidated Tangible Net Worth of the Company immediately prior to such
transaction; and (v) immediately after giving effect to such transaction and
the use of any net proceeds therefrom on a pro forma basis, the Company or the
Surviving Entity, as the case may be, could incur at least $1.00 of
Indebtedness (other than Permitted Indebtedness) pursuant to the first
paragraph of the "Limitations on Indebtedness" covenant.
Upon any such conveyance, lease or transfer in accordance with the foregoing,
the successor Person to which such conveyance, lease or transfer is made will
succeed to, and be substituted for, and may exercise every right and power of,
the Company under each of the Indentures with the same effect as if such
successor had been named as the Company therein, and thereafter the predecessor
corporation will be relieved of all further obligations and covenants under the
Indentures, the Notes and the Security Documents to which it was a party or
bound.
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Each Guarantor (other than any Guarantor whose Guarantee is to be released in
accordance with the terms of the Guarantee and the Indentures in connection
with any transaction complying with the "Limitation on Disposition of Assets"
covenant) will not, and the Company will not cause or permit any Guarantor to,
consolidate with or merge with or into any Person other than the Company or any
of the Guarantors unless: (i) the entity formed by or surviving any such
consolidation or merger (if other than the Guarantor), or to which sale, lease,
conveyance or other disposition shall have been made, is a corporation
organized and existing under the laws of the United States, any state thereof
or the District of Columbia; (ii) such entity assumes by supplemental indenture
all of the obligations of the Guarantor on the Guarantee and under each of the
Indentures and the Security Documents; (iii) immediately after giving effect to
such transaction, no Default or Event of Default shall have occurred and be
continuing; (iv) immediately after giving effect to such transaction and the
use of any net proceeds therefrom on a pro forma basis, the Consolidated
Tangible Net Worth of the Company and its Subsidiaries would be at least equal
to the Consolidated Tangible Net Worth of the Company and its Subsidiaries
immediately prior to such transaction; and (v) immediately after giving effect
to such transaction and the use of any net proceeds therefrom on a pro forma
basis, the Company could incur at least $1.00 of Indebtedness (other than
Permitted Indebtedness) pursuant to the first paragraph of the "Limitations on
Indebtedness" covenant.
Limitations on Actions Affecting Security for the Notes. The Company shall
not, and shall not permit any Subsidiary of the Company to, take or omit to
take any action, which action or omission would have the result of adversely
affecting or impairing the Liens and security interests in the Collateral in
favor of the Collateral Agent on behalf of the holders of the Notes and the
other secured parties thereunder, nor shall the Company or any such Subsidiary
grant any interest whatsoever in the Collateral except as expressly permitted
by the Indentures and the Security Documents.
Additional Subsidiary Guarantees. If the Company or any of its Subsidiaries
transfers or causes to be transferred, in one of a series of related
transactions, any Property having a book value in excess of $500,000 to any
Subsidiary that is not a Guarantor, or if the Company or any of its
Subsidiaries shall organize, acquire or otherwise invest in another Subsidiary
having total assets with a book value in excess of $500,000, then such
transferee or acquired or other Subsidiary shall (i) execute and deliver to
each of the Trustees a supplemental indenture in form reasonably satisfactory
to each of the Trustees pursuant to which such Subsidiary shall unconditionally
guarantee all of the Company's obligations under the Notes and each of the
Indentures on the terms set forth in the Indentures and (ii) deliver to each of
the Trustees an opinion of counsel that such supplemental indenture has been
duly authorized, executed and delivered by such Subsidiary and constitutes a
legal, valid, binding and enforceable obligation of such Subsidiary.
Thereafter, such Subsidiary shall be a Guarantor for all purposes of the
Indentures.
Insurance. The Company shall maintain, and shall cause its Subsidiaries to
maintain, insurance with responsible carriers against such risks and in such
amounts, and with such deductibles, retentions, self-insured amounts and co-
insurance provisions, as are customarily carried by similar businesses of
similar size, including property and casualty loss, workers' compensation and
interruption of business insurance. The Company shall provide, and shall cause
its Subsidiaries to provide, an Officers' Certificate as to compliance with the
foregoing requirements to each of the Trustees prior to the anniversary or
renewal date of each such policy, together with satisfactory evidence of such
insurance, which certificate shall expressly state such expiration date for
each policy listed.
Certain Definitions
Set forth below is a summary of certain of the defined terms used in each of
the Indentures. Reference is made to the Indentures for the full definition of
all such terms as well as any other capitalized terms used herein for which no
definition is provided.
"Accreted Value" means, as of any date of determination prior to ,
1997, the sum of (a) the initial offering price of each Senior Secured Discount
Note and (b) the portion of the excess of the principal
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amount of each Senior Secured Discount Note over such initial offering price
which shall have been amortized through such date, such amount to be so
amortized on a daily basis and compounded semi-annually on each and
at the rate of % per annum from the date of issuance of the Senior Secured
Discount Notes through the date of determination computed on the basis of a
360-day year of twelve 30-day months.
"Acquired Indebtedness" means (i) with respect to any Person that becomes a
Subsidiary of the Company (or is merged into the Company or any of its
Subsidiaries) after the Issue Date, Indebtedness of, or Preferred Stock issued
by, such Person or any of its Subsidiaries existing at the time such Person
becomes a Subsidiary of the Company (or is merged into the Company or any of
its Subsidiaries) whether or not such Indebtedness was incurred in connection
with, or in contemplation of, such Person becoming a Subsidiary of the Company
(or being merged into the Company or any of its Subsidiaries) and (ii) with
respect to the Company or any of its Subsidiaries, any Indebtedness assumed by
the Company or any of its Subsidiaries in connection with the acquisition of
any assets from another Person (other than the Company or any of its
Subsidiaries), whether or not such Indebtedness was incurred by such other
Person in connection with, or in contemplation of, such acquisition.
"Affiliate" means, when used with reference to a specified Person, any Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with the Person specified. For the purposes of this definition,
"control," when used with respect to any Person, means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
Notwithstanding the foregoing, the term "Affiliate" shall not include, (i) with
respect to the Company, any Subsidiary of the Company, (ii) with respect to any
Subsidiary of the Company, the Company or any other Subsidiary of the Company,
(iii) with respect to the Company or any Subsidiary of the Company, any benefit
plan in existence on the date of the Indentures, or any comparable plans
established subsequent thereto or (iv) Wabush.
"Applicable Portion" with respect to any Available Proceeds Amount shall mean
(i) in the case of the Senior Secured Notes, such Available Proceeds Amount
times a fraction the numerator of which shall be the aggregate principal amount
of Senior Secured Notes then outstanding plus all accrued and unpaid interest
thereon to the Unapplied Proceeds Offer Payment Date and the denominator of
which shall be the sum of (x) such amount and either (y) if the Unapplied
Proceeds Offer Payment Date is prior to , 1997, the Accreted Value of the
then outstanding Senior Secured Discount Notes through such payment date or (z)
on and after , 1997 the aggregate principal amount of the then
outstanding Senior Secured Discount Notes plus all accrued and unpaid interest
thereon to the Unapplied Proceeds Offer Payment Date and (ii) in the case of
the Senior Secured Discount Notes, the excess of such Available Proceeds Amount
over the amount calculated pursuant to clause (i) of this definition.
"Asset Sale" means any sale, transfer, conveyance, lease or other disposition
(including, without limitation, by way of merger, consolidation or sale and
leaseback or sale of shares of Capital Stock in any Subsidiary) of any Property
(each, a "transaction") by the Company or any of its Subsidiaries to any
Person; provided, that, (i) transactions involving Property other than
Collateral between the Company and a Subsidiary of the Company or transactions
involving Property other than Collateral between Subsidiaries of the Company;
and (ii) transactions (including sales or other transfers or dispositions of
receivables relating to the incurrence of Indebtedness otherwise permitted to
be incurred under the Indentures) in the ordinary course of business (including
such a transaction with or between Subsidiaries) shall not constitute "Asset
Sales." In addition, for purposes of this definition, the term "Asset Sale"
shall not include any sale, transfer, conveyance, lease or other disposition of
assets and properties of the Company that is governed by the provisions
relating to "Limitations on Mergers, Consolidations and Sales of Assets"
(except to the extent indicated therein) and "Limitations on Restricted
Payments."
"Available Proceeds Amount" means the amount of funds (whether held in the
Collateral Account or by the Company or any of its Subsidiaries) constituting:
(i) the portion of any Net Award or Net Proceeds that,
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pursuant to the Security Documents, the Company is not required to, or that the
Company has elected not to, apply to a Restoration of the affected Collateral
or (ii) the portion, if any, of the Net Cash Proceeds of an Asset Sale (net, in
the case of an Asset Sale of property that does not constitute Collateral, of
any Indebtedness repaid with the proceeds of such Asset Sale to the extent so
applied within 180 days of such Asset Sale to the repayment of such
Indebtedness; provided, that, Indebtedness subordinated to (a) the Notes or (b)
any other Indebtedness of the Company or any of its Subsidiaries may not be so
repaid; provided, further, that with respect to any Indebtedness so repaid
outstanding under a revolving credit facility there shall be an equivalent
permanent reduction in the committed amount thereof), that have not been
applied by the Company, within 180 days after the date of the Asset Sale giving
rise to such Net Cash Proceeds, to either (x) the acquisition or construction
of property constituting a Related Business Investment, in the case of Net Cash
Proceeds of property not constituting Collateral or (y) the acquisition or
construction of property constituting a Related Business Investment, which
property has been made subject to the Liens of the Security Documents as
contemplated by the Indenture and the Collateral Agency Agreement within such
180-day period, in the case of Net Cash proceeds of property constituting
Collateral; provided, however, that Net Cash Proceeds shall be deemed to have
been so applied, and the Liens contemplated above shall be deemed to have been
granted, within such 180-day period if (A) within such 180-day period, the
board of directors of the Company shall have adopted a capital expenditure plan
contemplating the application of such Net Cash Proceeds in a Related Business
Investment and the Company shall have taken significant steps to implement such
plan, (B) such plan shall have been fully implemented within 180 days after the
date of adoption of such plan and (C) to the extent such plan involves the
acquisition or construction of property required to be made subject to the
Liens of the Security Documents, as contemplated above, such Liens shall have
been granted in accordance with the provisions of the applicable Indenture and
the Collateral Agency Agreement within 180 days after the date of adoption of
such plan.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations, or other equivalents (however designated) of or in
such Person's capital stock, and options, rights or warrants to purchase such
capital stock, whether now outstanding or issued after the Issue Date,
including, without limitation, all Common Stock and Preferred Stock.
"Capitalized Lease Obligations" of any Person means the obligations of such
Person to pay rent or other amounts under a lease that is required to be
capitalized for financial reporting purposes in accordance with GAAP; and the
amount of such obligation shall be the capitalized amount thereof determined in
accordance with GAAP.
"Collateral" means, collectively, all of the property and assets that are
from time to time subject to the Lien of any of the Security Documents.
"Collateral Account" means the collateral account to be established by the
Collateral Agent pursuant to the Indentures.
"Commodity Agreement" of any Person means any option or futures contract or
similar agreement or arrangement designed to protect such Person or any of its
Subsidiaries against fluctuations in commodity prices.
"Consolidated Cash Flow Available for Fixed Charges" means, for any period,
on a consolidated basis for the Company and its Subsidiaries, the sum for such
period of (i) Consolidated Net Income, (ii) income taxes with respect to such
period determined in accordance with GAAP, (iii) interest expense for such
period determined in accordance with GAAP and (iv) depreciation and
amortization expenses (including, without duplication, amortization of debt
discount and debt issue costs and amortization of previously capitalized
interest to cost of sales) and other non-cash charges to earnings which reduced
Consolidated Net Income (excluding any non-cash charge to the extent that such
non-cash charge requires an accrual of or a reserve for cash charges for any
future period), determined in accordance with GAAP.
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"Consolidated Fixed Charges" of the Company for any period means the sum of:
(i) the aggregate amount of interest which, in conformity with GAAP, would be
set forth opposite the caption "interest expense" or any like caption on a
consolidated income statement for the Company and its Subsidiaries (including,
but not limited to, imputed interest included on Capitalized Lease Obligations,
all commissions, discounts and other fees and charges owed with respect to
letters of credit and banker's acceptance financing, the net costs associated
with Commodity Agreements, Currency Agreements and Interest Protection
Agreements, amortization of other financing fees and expenses, the interest
portion of any deferred payment obligation, amortization of discount, premium,
if any, and all other non-cash interest expense other than previously
capitalized interest amortized to cost of sales), plus (ii) interest incurred
during the period and capitalized by the Company and its Subsidiaries, on a
consolidated basis in accordance with GAAP, plus (iii) the amount of Preferred
Stock Dividends declared by the Company and any of its Subsidiaries on any
Disqualified Stock (other than such Preferred Stock Dividends payable to the
Company or any Wholly Owned Subsidiary) whether or not paid during such period;
provided that, in making such computation, the Consolidated Fixed Charges
attributable to interest on any Indebtedness computed on a pro forma basis and
bearing a floating interest rate shall be computed as if the rate in effect
(after giving effect to any Interest Protection Agreement) on the date of
computation will be the applicable rate for the entire period.
"Consolidated Net Income" of the Company for any period means the net income
(or loss) of the Company and its Subsidiaries for such period, determined on a
consolidated basis in accordance with GAAP; provided that there shall be
excluded from the computation of net income (loss) (to the extent otherwise
included therein) without duplication: (i) the net income (or loss) of any
Person (other than a Subsidiary of the Company) in which any Person other than
the Company or any of its Subsidiaries has an ownership interest, except to the
extent that any such income has actually been received by the Company or any of
its Subsidiaries in the form of cash dividends or similar cash distributions
during such period; (ii) the net income (or loss) of any Person that accrued
prior to the date that (a) such Person becomes a Subsidiary of the Company or
is merged into or consolidated with the Company or any of its Subsidiaries or
(b) the assets of such Person are acquired by the Company or any of its
Subsidiaries, except, for purposes of a pro forma calculation pursuant to
clause (c) of the second sentence of the first paragraph of the "Limitations on
Indebtedness" covenant, the net income (or loss) of such Person shall be taken
into account for the full four-quarter period for which the calculation is
being made; (iii) the net income of any Subsidiary of the Company to the extent
that (but only as long as) the declaration or payment of dividends or similar
distributions by such Subsidiary of that income is not permitted by operation
of the terms of its charter or any agreement, instrument, judgment, decree,
order, statute, rule or governmental regulation applicable to the Subsidiary
during such period; (iv) any gain or loss, together with any related provisions
for taxes on any such gain or loss, realized during such period by the Company
or any of its Subsidiaries upon (a) the acquisition of any securities, or the
extinguishment of any Indebtedness, of the Company or any of its Subsidiaries
or (b) any Asset Sale by the Company or any of its Subsidiaries; (v) any
extraordinary gain or loss, together with any related provision for taxes on
any such extraordinary gain or loss, realized by the Company or any of its
Subsidiaries during such period; and (vi) in the case of a successor to the
Company by consolidation, merger or transfer of its assets, any earnings of the
successor prior to such merger, consolidation or transfer of assets.
"Consolidated Tangible Net Worth" means, with respect to any Person, the
consolidated stockholder's equity (including any Preferred Stock that is
classified as equity under GAAP, other than Disqualified Stock) of such Person
and its Subsidiaries, as determined in accordance with GAAP, less the book
value of all Intangible Assets reflected on the consolidated balance sheet of
the Company and its Subsidiaries as of such date.
"Currency Agreement" of any Person means any foreign exchange contract,
currency swap agreement or other similar agreement or arrangement designed to
protect such Person or any of its Subsidiaries against fluctuations in currency
values.
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, (i) matures or is
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mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
is redeemable at the option of the holder thereof, in whole or in part, on or
prior to the final maturity date of the Senior Secured Notes or the Senior
Secured Discount Notes, as the case may be, or (ii) is convertible into or
exchangeable for (whether at the option of the issuer or the holder thereof)
(a) debt securities or (b) any Capital Stock referred to in (i) above, in each
case, at any time prior to the final maturity date of the Senior Secured Notes
or the Senior Secured Discount Notes, as the case may be.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States, as in effect on the Issue Date.
"Guarantor" means each of (i) Acme Steel Company, a Delaware corporation,
Alabama Metallurgical Corporation, a Washington corporation, Acme Packaging
Corporation, a Delaware corporation, Alpha Tube Corporation, a Delaware
corporation, Universal Tool & Stamping Co., Inc., an Indiana corporation, Alta
Slitting Corporation, a Delaware corporation and Acme Steel Company
International, Inc. a Barbados corporation and (ii) each of the Company's
Subsidiaries that becomes a guarantor of the Notes pursuant to the provisions
of the Indentures.
"Indebtedness" of any Person means, without duplication, (i) any liability of
such Person (a) for borrowed money, or under any reimbursement obligation
relating to a letter of credit, (b) evidenced by a bond, note, debenture or
similar instrument (including a purchase money obligation) given in connection
with the acquisition of any businesses, properties or assets of any kind or
with services incurred in connection with capital expenditures, or (c) in
respect of Capitalized Lease Obligations, (ii) any Indebtedness of others that
such Person has guaranteed or that is otherwise its legal liability, (iii) to
the extent not otherwise included, obligations under Currency Agreements,
Commodity Agreements or Interest Protection Agreements, (iv) Disqualified Stock
of such Person and (v) all Indebtedness of others secured by a Lien on any
asset of such Person, and which is not otherwise assumed by such Person,
provided that Indebtedness shall not include accounts payable (including,
without limitation, accounts payable to such Person by any of its Subsidiaries
or to any such Subsidiary by such Person or any of its other Subsidiaries, in
each case, in accordance with customary industry practice) or liabilities to
trade creditors of such Person arising in the ordinary course of business. The
amount of Indebtedness of any Person at any date shall be (a) the outstanding
balance at such date of all unconditional obligations as described above, (b)
the maximum liability of such Person for any contingent obligations under
clause (ii) above at such date and (c) in the case of clause (v) above, the
lesser of (l) the fair market value of any asset subject to a Lien securing the
Indebtedness of others on the date that the Lien attaches and (2) the amount of
the Indebtedness secured.
"Intangible Assets" of any Person means all unamortized debt discount and
expense, unamortized deferred charges, goodwill, patents, trademarks, service
marks, trade names, copyrights, write-ups of assets over their prior carrying
values (other than write-ups which occurred prior to the Issue Date and other
than, in connection with the acquisition of an asset, the write-up of the value
of such asset (within one year of its acquisition) to its fair market value in
accordance with GAAP) and all other items which would be treated as intangibles
on the consolidated balance sheet of the Company and its Subsidiaries prepared
in accordance with GAAP.
"Interest Protection Agreement" of any Person means any interest rate swap
agreement, interest rate collar agreement, option or future contract or other
similar agreement or arrangement designed to protect such Person or any of its
Subsidiaries against fluctuations in interest rates.
"Investment" of any Person means (i) all investments by such Person in any
other Person in the form of loans, advances or capital contributions, (ii) all
guarantees of Indebtedness or other obligations of any other Person by such
Person, (iii) all purchases (or other acquisitions for consideration) by such
Person of
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Indebtedness, Capital Stock or other securities of any other Person and (iv)
all other items that would be classified as investments (including, without
limitation, purchases of assets outside the ordinary course of business) on a
balance sheet of such Person prepared in accordance with GAAP.
"Issue Date" means the date on which the Notes are originally issued under
the Indentures.
"Lien" means, with respect to any Property, any mortgage, deed of trust,
lien, pledge, lease, easement, restriction, covenant, right-of-way, charge,
security interest or encumbrance of any kind or nature in respect of such
Property. For purposes of this definition, the Company shall be deemed to own
subject to a Lien any Property which it has acquired or holds subject to the
interest of a vendor or lessor under any conditional sale agreement, capital
lease or other title retention agreement relating to such Property.
"Net Award" has the meaning assigned to such term in the Security Documents
but generally means the proceeds award or payment from any condemnation or
other eminent domain proceeding regarding all or any portion of the Collateral
less collection expenses.
"Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds in
the form of cash or cash equivalents including payments in respect of deferred
payment obligations when received in the form of cash or cash equivalents
received by the Company or by any of its Subsidiaries from such Asset Sale
(except to the extent that such obligations are sold with recourse to the
Company or to any Subsidiary of the Company) net of (a) reasonable out-of-
pocket expenses and fees relating to such Asset Sale (including, without
limitation, brokerage, legal, accounting and investment banking fees and sales
commissions) to the extent actually paid, (b) taxes paid or payable ((1)
including, without limitation, income taxes reasonably estimated to be actually
payable as a result of any disposition of property within two years of the date
of disposition and (2) after taking into account any reduction in tax liability
due to available tax credits or deductions and any tax sharing arrangements),
(c) in the case of any Asset Sale that does not involve any portion of the
Collateral, repayment of Indebtedness that is required by the terms thereof to
be repaid in connection with such Asset Sale to the extent so repaid in cash
and (d) appropriate amounts to be provided by the Company or by any Subsidiary
of the Company, as the case may be, as a reserve, in accordance with GAAP
consistently applied, against any liabilities associated with such Asset Sale
and retained by the Company or by any Subsidiary of the Company, as the case
may be, after such Asset Sale, including, without limitation, pension and other
post-employment benefit liabilities, liabilities related to environmental
matters and liabilities under any indemnification obligations associated with
such Asset Sale.
"Net Proceeds" has the meaning assigned to such term in the Security
Documents but generally means the insurance proceeds paid as the result of the
destruction or condemnation of all or any portion of the Collateral less
collection expenses.
"Permitted Indebtedness" means (i) Indebtedness of the Company and its
Subsidiaries outstanding immediately following the Issue Date; (ii)
Indebtedness under the Working Capital Facility which does not exceed $80
million principal amount outstanding at any one time; (iii) the Notes; (iv) the
Guarantees; (v) Indebtedness in respect of obligations of the Company to each
of the Trustees under the Indentures; (vi) intercompany debt obligations
(including intercompany notes) of the Company and each of its Subsidiaries;
provided, however, that the obligations of the Company to any of its
Subsidiaries with respect to such Indebtedness shall be subject to a
subordination agreement between the Company and its Subsidiaries providing for
the subordination of such obligations in right of payment from and after such
time as all Notes issued and outstanding shall become due and payable (whether
at stated maturity, by acceleration or otherwise) to the payment and
performance of the Company's obligations under each of the Indentures and the
Notes; provided further, that any Indebtedness of the Company or any of its
Subsidiaries owed to any other Subsidiary of the Company that ceases to be such
a Subsidiary shall be deemed to be incurred and shall be treated as an
incurrence for purposes of the first paragraph of the covenant described under
"Limitations on Indebtedness" at the time the Subsidiary in question ceases to
be a Subsidiary of the Company; and (vii) Indebtedness of the Company or its
Subsidiaries under any Currency Agreements, Commodity Agreements or Interest
Protection Agreements.
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"Permitted Investments" means (a) (i) obligations of or guaranteed by the
U.S. government, its agencies or government-sponsored enterprises; (ii) short-
term commercial bank and corporate obligations that have received the highest
rating from two of the following rating organizations: Standard & Poor's
Corporation ("S&P"), Moody's Investor Services, Inc. ("Moody's"), Duff & Phelps
Credit Rating Co., Fitch Investor Service, Inc., IBCA Inc. and Thomson
Bankwatch, Inc.; (iii) money market preferred stocks which, at the date of
acquisition and at all times thereafter, are accorded ratings of at least AA-
or Aa3 by S&P or Moody's, respectively; (iv) tax-exempt obligations that are
accorded ratings at the time of purchase of at least A or A2 (or equivalent
short-term ratings) by S&P or Moody's, respectively; (v) master repurchase
agreements with foreign or domestic banks having a capital and surplus of not
less than $250,000,000 or primary dealers so long as such agreements are
collateralized with obligations of the U.S. government or its agencies at a
ratio of 102%, or with other collateral rated at least AA or Aa2 by S&P or
Moody's, respectively, at a ratio of 103% and, in either case, marked-to-market
weekly and so long as such securities shall be held by a third-party agent; and
(vi) guaranteed investment contracts and/or agreements of a bank, insurance
company or other institution whose unsecured, uninsured and unguaranteed
obligations (or claims-paying ability) have at the time of purchase ratings of
at least AAA or Aaa by S&P or Moody's, respectively. In no event shall any of
the Permitted Investments described in clauses (i) through (vi) above have a
final maturity more than two years from the date of purchase; provided,
however, that in the event of a Qualified Defeasance Transaction, Permitted
Investments used to defease the defeased Indebtedness may have a final maturity
up to the date of the final maturity of the Indebtedness so defeased.
"Permitted Liens" means (i) (x) with respect to Property other than
Collateral, Liens existing on the Issue Date to the extent and in the manner
such Liens are in effect on the Issue Date and (y) with respect to Collateral,
Liens existing on the Issue Date to the extent specifically permitted in the
appropriate Security Document, (ii) Liens on accounts receivable and inventory
of the Company and its Subsidiaries securing any Indebtedness incurred under
the Working Capital Facility, (iii) Liens securing Indebtedness collateralized
by Property of, or any shares of stock of or debt of, any corporation existing
at the time such corporation becomes a Subsidiary of the Company or at the time
such corporation is merged into the Company or any of its Subsidiaries,
provided that such Liens are not incurred in connection with, or in
contemplation of, such corporation becoming a Subsidiary of the Company or
merging into the Company or any of its Subsidiaries and the Acquired
Indebtedness could have been incurred pursuant to the first paragraph of the
"Limitations on Indebtedness" covenant (other than as Permitted Indebtedness),
(iv) Liens securing Refinancing Indebtedness used to refund, refinance or
extend Indebtedness referred to in the preceding clause (iii) provided that any
such Lien does not extend to or cover any Property, shares or debt other than
the Property, shares or debt securing the Indebtedness so refunded, refinanced
or extended, (v) Liens other than on Collateral in favor of the Company or any
of its Subsidiaries, (vi) Liens on Property (other than Collateral) of the
Company or any of its Subsidiaries acquired after the Issue Date in favor of
governmental bodies to secure progress or advance payments relating to such
Property, (vii) Liens on Property (other than Collateral) of the Company or any
of its Subsidiaries acquired after the Issue Date securing industrial revenue
or pollution control or other tax exempt bonds issued in connection with the
acquisition or refinancing of such Property to the extent the incurrence of
such Indebtedness is permitted pursuant to the provisions of the "Limitations
on Indebtedness" covenant, (viii) Liens to secure certain Indebtedness that is
otherwise permitted under the Indentures and that is used to finance the cost
of Property of the Company or any of its Subsidiaries acquired after the Issue
Date, provided that (a) any such Lien is created solely for the purpose of
securing Indebtedness representing, or incurred to finance, refinance or
refund, the cost (including sales and excise taxes, installation and delivery
charges and other direct costs of, and other direct expenses paid or charged in
connection with, such purchase or construction) of such Property, (b) the
principal amount of the Indebtedness secured by such Lien does not exceed 100%
of such cost, (c) the Indebtedness secured by such Lien is incurred by the
Company or its Subsidiary within 90 days of the acquisition of such Property by
the Company or its Subsidiary, as the case may be, (d) such Lien does not
extend to or cover any Property other than such item of Property and any
improvements on such item, (e) no Net Cash Proceeds derived from Collateral are
used to fund all or any portion of the cost of acquisition of such Property,
(f) prior to completion of the Modernization Project, Acme Steel shall not
incur or permit any Lien otherwise permitted under this clause (viii) and (g)
no Liens at any time may relate to assets which comprise the Modernization
Project, (ix) Liens
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on Property (other than the Collateral) to secure Indebtedness that is
otherwise permitted under each of the Indentures the aggregate principal amount
of which does not exceed $35 million outstanding at any one time, (x) statutory
liens or landlords', carriers', warehousemen's, mechanics', suppliers',
materialmen's, repairmen's or other like Liens arising in the ordinary course
of business and with respect to amounts not yet delinquent or 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 and, with respect to any such Liens arising in respect of any of
the Collateral, only to the extent specifically permitted under the provisions
of the appropriate Security Document, (xi) Liens on the Collateral for the
benefit of (a) holders of the Senior Secured Notes or Senior Secured Discount
Notes, as the case may be, or (b) holders of Indebtedness arising at any time
after retirement of either series of Notes; provided, that the principal amount
of such Indebtedness does not exceed the original principal amount of such
retired series of Notes and the holders of such replacement Indebtedness
(acting through a designated representative) enter into a supplement to the
Collateral Agency Agreement in substantially the form annexed thereto and the
Company and such holders otherwise comply with the applicable provisions
thereof, (xii) Liens on the Collateral for the benefit of the holders of the
Notes and (xiii) easements, restrictions, reservations or rights of others for
right-of-way, sewers, electric lines, telegraph and telephone lines and other
similar purposes and other similar charges or encumbrances not interfering in
any material respect with the conduct of the business of the Company or any of
its Subsidiaries or, in the case of such charges or encumbrances which affect
the Collateral, to the extent permitted by the provisions of the Mortgage.
"Person" means any individual, corporation, limited or general partnership,
joint venture, association, joint stock company, trust, unincorporated
organization or government or any agency or political subdivision thereof.
"Preferred Stock" of any Person means all Capital Stock of such Person which
has a preference in liquidation or a preference with respect to the payment of
dividends.
"Preferred Stock Dividend" of any Person means, for any dividend payable with
regard to Preferred Stock issued by such Person, the amount of such dividend
multiplied by a fraction, the numerator of which is one and the denominator of
which is one minus the maximum statutory combined federal, state and local
income tax rate (expressed as a decimal number between 1 and 0) then applicable
to such Person.
"Property" of any Person means all types of real, personal, tangible,
intangible or mixed property owned by such Person whether or not included in
the most recent consolidated balance sheet of such Person and its Subsidiaries
under GAAP.
"Qualified Defeasance Transaction" means any transaction by the Company or
any of its Subsidiaries in which Indebtedness (and in the case such
Indebtedness is subordinate to any other Indebtedness of such Person the
Company has complied with the "Limitations on Restricted Payments" covenant) is
defeased; provided, however, that in order for such defeasance to be a
Qualified Defeasance Transaction the net present value of the cost of such
defeasance, including but not limited to the actual costs of any Permitted
Investments, the cost of any trustee or agent overseeing such defeasance and
any costs associated with the closing of such transaction, must be less than
the net present value of all present and future payments on the Indebtedness to
be defeased including but not limited to principal, interest and premium, if
any.
"Refinancing Indebtedness" means Indebtedness that refunds, refinances or
extends any Indebtedness of the Company or its Subsidiaries outstanding on the
Issue Date or other Indebtedness permitted to be incurred by the Company or its
Subsidiaries pursuant to the terms of each of the Indentures, but only to the
extent that (i) the Refinancing Indebtedness is subordinated to the Notes to
the same extent as the Indebtedness being refunded, refinanced or extended, if
at all, (ii) the Refinancing Indebtedness is scheduled to mature either (a) no
earlier than the Indebtedness being refunded, refinanced or extended, or (b)
after the maturity date of the Senior Secured Notes or the Senior Secured
Discount Notes as the case may be, (iii) the portion, if any, of the
Refinancing Indebtedness that is scheduled to mature on or prior to the
maturity date of the
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Senior Secured Notes or Senior Secured Discount Notes as the case may be has a
weighted average life to maturity at the time such Refinancing Indebtedness is
incurred that is equal to or greater than the weighted average life to maturity
of the portion of the Indebtedness being refunded, refinanced or extended that
is scheduled to mature on or prior to the maturity date of the Senior Secured
Notes or the Senior Secured Discount Notes, as the case may be, and (iv) such
Refinancing Indebtedness is in an aggregate principal amount that is equal to
or less than the sum of (a) the aggregate principal amount then outstanding
under the Indebtedness being refunded, refinanced or extended, (b) the amount
of accrued and unpaid interest, if any, on such Indebtedness being refunded,
refinanced or extended and (c) the amount of customary fees, expenses and costs
related to the incurrence of such Refinancing Indebtedness; provided, that,
Indebtedness which is in an aggregate principal amount greater than the sum of
(a), (b) and (c) of this clause (iv) shall constitute Refinancing Indebtedness
to the extent of the sum of (a), (b) and (c) if the amount of Indebtedness in
excess of the sum of (a), (b) and (c) could otherwise be incurred under the
"Limitations on Indebtedness" covenant.
"Related Business Investment" means any Investment, capital expenditure or
other expenditure by the Company or any Subsidiary of the Company in Property
or assets (other than the Property or assets subject to any Lien except for (1)
with respect to any Available Proceeds Amount resulting from an Asset Sale
involving Collateral, the Lien of the Security Documents and (2) with respect
to any Available Proceeds Amount resulting from an Asset Sale not involving
Collateral, the Lien of any instruments or documents that secured Indebtedness
that was secured by the assets subject to such Asset Sale) which is related to
the business of the Company and its Subsidiaries as it is conducted on the date
of the Asset Sale giving rise to the Asset Sale Proceeds to be reinvested.
"Restoration" has the meaning assigned to such term in each of the Mortgages
but generally means the restoration of all or any portion of the Collateral in
connection with any destruction or condemnation thereof.
"Restricted Investment" means, with respect to any Person, any Investment by
such Person in any (i) of its Affiliates or in any Person that becomes an
Affiliate as a result of such Investment, (ii) executive officer or director of
such Person, and (iii) executive officer or director of any Affiliate of such
Person; provided that loans or advances made in the ordinary course of business
for travel, relocation or similar purposes, shall not constitute Restricted
Investments.
"Restricted Payment" means any of the following: (i) the declaration or
payment of any dividend or any other distribution on Capital Stock of the
Company or any Subsidiary of the Company or any payment made to the direct or
indirect holders (in their capacities as such) of Capital Stock of the Company
or any Subsidiary of the Company (other than (a) dividends or distributions
payable solely in Capital Stock (other than Disqualified Stock) and (b) in the
case of Subsidiaries of the Company, dividends or distributions payable to the
Company or to a Subsidiary of the Company); (ii) the purchase, redemption or
other acquisition or retirement for value of any Capital Stock, or any option,
warrant or other right to acquire shares of Capital Stock, of the Company or
any of its Subsidiaries; (iii) the making of any principal payment on, or the
purchase, defeasance, repurchase, redemption or other acquisition or retirement
for value, prior to any scheduled maturity, scheduled repayment or scheduled
sinking fund payment, of any Indebtedness of the Company or any of its
Subsidiaries which is subordinated in right of payment to the Notes (including
any guarantees thereof); and (iv) the making of any Restricted Investment or
guarantee of any Restricted Investment in any Person.
"Security Documents" means, collectively, the Security Agreement, the
Mortgage, the Stock Pledge Agreements (described under "Security" above), the
Disbursement Agreement, the Collateral Agency Agreement and the Intercreditor
Agreement and all security agreements, mortgages, deeds of trust, collateral
assignments, or other instruments evidencing or creating any security interest
in favor of the Collateral Agent in all or any portion of the Collateral, in
each case as amended, amended and restated, supplemented or otherwise modified
from time to time.
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"Significant Subsidiary" mean any Subsidiary of the Company which would
constitute a "significant subsidiary" as defined in Rule 1.02 of Regulation S-X
under the Securities Act and the Exchange Act.
"Subsidiary" means, with respect of any Person, any corporation or other
entity of which a majority 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 or controlled by such Person.
"Unapplied Proceeds Offer Payment Date" means, with respect to any Available
Proceeds Amount from an Asset Sale, the earlier of (x) the 180th day following
receipt of such Available Proceeds Amount or (y) such earlier date on which an
Unapplied Proceeds Offer shall expire; provided, however, that to the extent
that the board of directors of the Company shall have adopted a capital
expenditure plan contemplating the application of Net Cash Proceeds from an
Asset Sale to a Related Business Investment and the Company shall have taken
significant steps to implement such plan within 180 days of an Asset Sale, the
Unapplied Proceeds Offer Payment Date with respect thereto shall be the 180th
day after the adoption of such plan.
"Wabush" means the entity called Wabush Mines, a Canadian joint venture,
including Wabush Iron Co. Ltd., an Ohio corporation and one of the joint
venturers of Wabush Mines, which is engaged in the mining, beneficiation and
pelletizing of iron ore or any successor to either such entity, any entity of
approximately equivalent value substituted therefor or any investment of
approximately equivalent value and purpose.
"Wholly Owned Subsidiary" of any Person means, at any time, a Subsidiary all
of the Capital Stock of which (except directors' qualifying shares, if any) are
at the time owned directly or indirectly by such Person.
"Working Capital Facility" means the revolving credit facility, as the same
may be amended or supplemented from time to time, and any refinancing or
replacement of such credit facility or any successor credit facility so long as
the aggregate amount permitted to be borrowed under any such amended,
supplemented, refinanced, replaced or successor credit facility does not exceed
the lesser of (i) $80 million outstanding at any time or (ii) an amount equal
to the sum of 85% of the face value of all "eligible receivables" of the
Company and its Subsidiaries party to such credit facility plus 50% of the
lower of the fair market value or cost of their "eligible inventory" (as such
terms are defined for purposes of such credit facility).
EVENTS OF DEFAULT AND NOTICE THEREOF
The term "Event of Default" when used in each of the Indentures will mean any
one of the following: (1) failure of the Company to pay interest on the
applicable Notes when due and continuance of such failure for 30 days; (ii)
failure of the Company to pay principal of or premium on the applicable Notes
when due, whether at maturity, upon acceleration, redemption or otherwise;
(iii) cessation of any Guarantee to be in full force and effect or the
declaration of any Guarantee to be null and void and unenforceable or the
finding of any Guarantee to be invalid or the denial of any Guarantor of its
liability under its Guarantee (other than by reason of release of a Guarantor
in accordance with the terms of the Indentures); (iv) failure of the Company or
any Guarantor to perform any other covenant in the applicable Indenture or in
any of the Security Documents for 60 days after notice from the applicable
Trustee or the holders of 25% in principal amount of the applicable Notes
outstanding (except in the case of a default with respect to the "Change of
Control" and "Limitations on Mergers, Consolidations and Sales of Assets"
covenants, which will constitute Events of Default with notice but without
passage of time); (v) failure of the Company or any of its Subsidiaries to make
any payment when due (after giving effect to any applicable grace period) under
the Senior Secured Notes or the Senior Secured Discount Notes, as the case may
be, and any other senior Indebtedness in excess of $5,000,000; (vi) failure of
the Company or any of its Subsidiaries to perform any term, covenant, condition
or provision of the Senior Secured Notes or the Senior Secured Discount Notes,
as
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the case may be, or any other Indebtedness in excess of $5,000,000 individually
or $10,000,000 in the aggregate, which failure results in the acceleration of
the maturity of such Indebtedness; (vii) a final judgment or judgments for the
payment of money not fully covered by valid and collectable insurance, which
judgments exceed $5,000,000 individually or $10,000,000 in the aggregate, is
entered against the Company or any of its Subsidiaries and is not satisfied,
stayed, annulled or rescinded within 60 days of being entered; and (viii)
certain events of bankruptcy, insolvency or reorganization of the Company or
any of the Guarantors.
Each of the Indentures will provide that the applicable Trustee shall, within
90 days after the occurrence of any Default (the term "Default" to include the
events specified above without grace or notice) known to it, give to the
holders of the applicable Notes notice of such Default; provided that, except
in the case of a Default in the payment of principal of or interest on any of
the Notes, the applicable Trustee shall be protected in withholding such notice
if it in good faith determines that the withholding of such notice is the
interest of the holders of the applicable Notes. The Indentures will require
the Company to certify to each of the Trustees annually as to whether any
Default occurred during such year.
In case an Event of Default (other than an Event of Default described in
clause (viii) above with respect to the Company and any Significant
Subsidiaries) shall occur and be continuing, the Trustees or the holders of at
least 25% in aggregate principal amount of the applicable Notes then
outstanding, by notice in writing to the Company (and to the applicable Trustee
if given by the holders of Notes), may declare all unpaid principal and accrued
interest on the applicable Notes then outstanding to be due and payable
immediately. Such acceleration may be annulled and past Defaults (except,
unless theretofore cured, a Default in payment of principal of or interest on
the applicable Notes) may be waived by the holder of a majority in principal
amount of the applicable Notes then outstanding, upon the conditions provided
in the applicable Indenture. If an Event of Default described in clause (viii)
above occurs with respect to the Company or any Significant Subsidiaries and is
continuing, then the principal of, premium, if any, and accrued interest on,
all the Notes will be due and payable immediately without any declaration or
other act on the part of either of the Trustees or any holder of a Note.
Each of the Indentures will provide that no holder of a Note may pursue any
remedy under the applicable Indenture unless the applicable Trustee shall have
failed to act after notice of an Event of Default and request by holders of at
least 25% in principal amount of the applicable Notes and the offer to the
applicable Trustee of indemnity satisfactory to it; provided, however, that
such provision does not affect the right to sue for enforcement of any overdue
payment on the Notes.
POSSESSION, USE AND RELEASE OF COLLATERAL
Unless an Event of Default shall have occurred and be continuing, the Company
will have the right to remain in possession and retain exclusive control of the
Collateral, to operate the Collateral and to collect, invest and dispose of any
income thereon (subject to applicable limitations in each of the Indentures).
Upon compliance by the Company with the conditions set forth below in respect
of any Asset Sale, the Collateral Agent will release the Released Interests (as
defined below) from the Lien of the Security Documents and reconvey the
Released Interests to the Company.
The Company will have the right to obtain a release of items of Collateral
(the "Released Interests") subject to an Asset Sale upon compliance with the
condition that the Company deliver to the Collateral Agent the following:
(a) A notice from the Company requesting the release of Released
Interests, (i) describing the proposed Released Interests, (ii) specifying
the value of such Released Interests on a date within 60 days of such
Company notice (the "Valuation Date"), (iii) stating that the purchase
price to be received is at least equal to the fair market value of the
Released Interests, (iv) stating that the release of such Released
Interests will not interfere with the Collateral Agent's ability to realize
the value of the remaining
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Collateral and will not impair the maintenance and operation of the
remaining Collateral, (v) 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, confirming that such sale is made in compliance with
the provisions set forth in the "Limitation on Transactions with
Affiliates" covenant, (vi) certifying that such Asset Sale complies with
the terms and conditions of each of the Indentures with respect thereto,
and (vii) in the event there is to be a substitution of Property for the
Collateral subject to the Asset Sale, specifying the Property intended to
be substituted for the Collateral to be disposed of;
(b) An Officers' Certificate of the Company stating that (i) such Asset
Sale covers only the Released Interests and complies with the terms and
conditions of each of the Indentures with respect to Asset Sales, (ii) all
Net Cash Proceeds from the sale of any of the Released Interests will be
applied pursuant to the provisions of the Indentures in respect of Asset
Sales, (iii) 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, (iv) the release of the Collateral will not result in a Default
or Event of Default under either of the Indentures, and (v) all conditions
precedent in each of the Indentures relating to the release in question
have been complied with; and
(c) All documentation required by the Trust Indenture Act, if any, prior
to the release of Collateral by the Trustee and, in the event there is to
be a substitution of Property for the Collateral subject to the Asset Sale,
all documentation necessary to effect the substitution of such new
Collateral.
So long as no Event of Default shall have occurred and be continuing, the
Company may, without any release or consent by the Collateral Agent, sell or
otherwise dispose of any machinery, equipment, furniture, apparatus, tools or
implements or other similar property subject to the Lien of the Security
Documents, which (i) in any single transaction has a fair market value of
$25,000 or less or (ii) shall have become worn out, obsolete or otherwise in
need of replacement or repair; provided that, in the case of this clause (ii)
such sale or other disposition is in conjunction with a substantially
concurrent transaction whereby additional personal property is made subject to
the Lien of the Security Documents.
MODIFICATION AND WAIVER
Modification and amendment of each of the Indentures or any Security Document
may be made by the Company and the applicable Trustee with the consent of the
holders of not less than a majority in principal amount of the applicable Notes
outstanding, provided that no such modification or amendment may, without the
consent of the holder of each Note affected thereby, (i) reduce the rate, or
change the time or place for payment, of interest on any Note, or reduce any
amount payable on the redemption thereof or upon a Change of Control, (ii)
reduce the principal, or change the fixed maturity or place of payment, of any
Note, (iii) change the currency of payment of principal of or interest on any
Note, (iv) impair the right to institute suit for the enforcement of any
payment on or with respect to any Note, (v) reduce the principal amount of
outstanding Notes necessary to modify or amend the Indenture or any Security
Document, (vi) modify any of the applicable provisions under the "Repurchase of
Notes Upon Change of Control" covenant, (vii) affect adversely the ranking or
security of the Notes, or (viii) modify any of the foregoing provisions or
reduce the principal amount of outstanding Notes necessary to waive any
covenant or past Default. Holders of not less than a majority in principal
amount of the applicable Notes outstanding may waive certain past Defaults. See
"--Events of Default and Notice Thereof".
The Indentures, the Security Documents or the Notes may be amended or
supplemented, without the consent of any holder of the Notes, (i) to cure any
ambiguity, defect or inconsistency, (ii) to give effect to the release of any
Released Interests, (iii) to evidence the succession of another Person to the
Company or any Subsidiary of the Company and the assumption by any such
successor of the covenants of the Company or such Subsidiary, as the case may
be, (iv) to evidence the release and discharge of the obligations of any
Subsidiary of the Company the Capital Stock of which has been sold or otherwise
disposed of in accordance with the applicable provisions of each of the
Indentures or (v) to make any change that does not have a material adverse
effect on the rights of any holder of the Notes.
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DEFEASANCE OR COVENANT DEFEASANCE OF INDENTURE
The Company may, at its option and at any time, elect to have the obligations
of the Company discharged in accordance with the provisions set forth below
with respect to the Senior Secured Notes and/or the Senior Secured Discount
Notes then outstanding. Such defeasance means that the Company shall be deemed
to have paid and discharged the entire indebtedness represented by such
outstanding Notes and to have satisfied all its other obligations under such
Notes, the applicable Indenture and the Security Documents, except for (i) the
rights of holders of such outstanding Notes to receive payments in respect of
the principal of, premium, if any, and interest on such Notes when such
payments are due, (ii) the Company's obligations with respect to such Notes
concerning issuing temporary Notes, registration of Notes, mutilated,
destroyed, lost or stolen Notes and the maintenance of an office or agency for
payment and money for security payments held in trust, (iii) the rights,
powers, trusts, duties and immunities of the applicable Trustee, and (iv) the
defeasance provisions of the applicable Indenture. In addition, the Company
may, at its option and at any time, elect to have the obligations of the
Company released with respect to certain covenants that are described in the
Note Indenture and/or the Discount Note Indenture ("covenant defeasance") and
any omission to comply with such obligations shall not constitute a Default or
an Event of Default with respect to the applicable Notes. In the event covenant
defeasance occurs, certain events (not including non-payment, bankruptcy and
insolvency events) described under "Events of Default and Notice Thereof" will
no longer constitute an Event of Default with respect to such Notes.
In order to exercise either defeasance or covenant defeasance, (i) the
Company must irrevocably deposit with the Trustee, in trust, for the benefit of
the holders of the applicable Notes, cash in U.S. dollars, U.S. Government
Obligations (as defined in the Indenture), or a combination thereof, in such
amounts as will be sufficient, in the opinion of a nationally recognized firm
of independent public accountants, to pay the principal of, premium, if any,
and interest on such outstanding Notes on the stated maturity of such principal
or installment of principal or interest; (ii) in the case of defeasance, the
Company shall have delivered to the applicable Trustee an opinion of counsel in
the United States stating that (A) the Company has received from, or there has
been published by, the Internal Revenue Service a ruling or (B) since the Issue
Date, there has been a change in the applicable federal income tax law, in
either case to the effect that, and based thereon such opinion of counsel shall
confirm that, the holders of the outstanding Notes will not recognize income,
gain or loss for federal income tax purposes as a result of such defeasance and
will be subject to federal income tax on the same amounts, in the same manner
and at the same times as would have been the case if such defeasance had not
occurred; (iii) in the case of covenant defeasance, the Company shall have
delivered to the Trustee an opinion of counsel in the United States to the
effect that the holders of the outstanding Notes will not recognize income,
gain or loss for federal income tax purposes as a result of such covenant
defeasance and will be subject to federal income tax on the same amounts, in
the same manner and at the same times as would have been the case if such
covenant defeasance had not occurred; (iv) no Default or Event of Default shall
have occurred and be continuing on the date of such deposit; (v) such
defeasance or covenant defeasance shall not result in a breach or violation of,
or constitute a default under, the Indentures or any other material agreement
or instrument to which the Company is a party or by which it is bound; (vi) in
the case of defeasance or covenant defeasance, the Company shall have delivered
to the applicable Trustee an opinion of counsel to the effect that after the
91st day following the deposit, the trust funds will not be subject to the
effect of any applicable bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights generally; (vii) the Company shall have delivered
to the applicable Trustee an officers' certificate stating that the deposit was
not made by the Company with the intent of preferring the holders of the
applicable Notes over the other creditors of the Company with the intent of
defecting, hindering, delaying or defrauding creditors of the Company or
others; and (viii) the Company shall have delivered to the applicable Trustee
an officers' certificate and an opinion of counsel, each stating that all
conditions precedent provided for relating to either the defeasance or the
covenant defeasance, as the case may be, have been complied with.
SATISFACTION AND DISCHARGE
Each of the Indentures will cease to be of further effect (except as to
surviving rights of registration of transfer or exchange of the applicable
Notes, as expressly provided for in the applicable Indenture) as to all
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outstanding Notes issued thereunder when (i) either (a) all such Notes
theretofore authenticated and delivered (except lost, destroyed or wrongfully
taken Notes which have been replaced or paid) have been delivered to the
applicable Trustee for cancellation or (b) all such Notes not theretofore
delivered to the applicable 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 applicable Trustee
funds in an amount sufficient to pay and discharge the entire indebtedness for
principal of, premium, if any, and interest to the date of deposit (in the case
of the Notes that have become due and payable) or to maturity or the redemption
date on the Notes not theretofore delivered to the applicable Trustee for
cancellation; (ii) the Company has paid all other sums payable under the
applicable Indenture by the Company; and (iii) the Company has delivered to the
applicable Trustee an officers' certificate and an opinion of counsel each
stating that (A) all conditions precedent under the applicable Indenture
relating to the satisfaction and discharge of such Indenture have been complied
with and (B) such satisfaction and discharge will not result in a breach or
violation of, or constitute a default under, such Indenture or any other
material agreement or instrument to which the Company is a party or by which it
is bound.
CONCERNING THE TRUSTEES
Each of the Indentures will contain certain limitations on the rights of the
Trustees, should it become a creditor of the Company, to obtain payment of
claims in certain cases, or to realize on certain property received in respect
of any such claim as security or otherwise. Each of the Trustees will be
permitted to engage in other transactions; provided, however, if it acquires
any conflicting interest (as defined in Section 310(b) of the Trust Indenture
Act), it must eliminate such conflict or resign.
The holders of a majority in principal amount of all outstanding Senior
Secured Notes or Senior Secured Discount Notes, as the case may be, will have
the right to direct the time, method and place of conducting any proceeding for
exercising any remedy or power available to the applicable Trustee, provided
that such direction does not conflict with any rule of law or with the
applicable Indenture.
In case an Event of Default shall occur (and shall not have been cured or
waived), each of the Trustees will be required to exercise its powers with the
degree of care and skill of a prudent person in the conduct of his own affairs.
Subject to such provisions, each of the Trustees will be under no obligation to
exercise any of its rights or powers under the applicable Indenture at the
request of any of the holders of the applicable Notes, unless they shall have
offered to the applicable Trustee security and indemnity satisfactory to it.
GOVERNING LAW
Each of the Indentures will provide that such Indenture and the Notes issued
thereunder will be governed by and construed in accordance with the internal
laws of the State of New York.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
RELATING TO AN INVESTMENT IN THE SENIOR SECURED DISCOUNT NOTES
The following is a summary of certain United States Federal income tax
consequences of an investment in the Senior Secured Discount Notes. The summary
is based upon the provisions of the Internal Revenue Code of 1986, as amended
(the "Code"), existing and proposed regulations thereunder, published rulings
and judicial decisions, all as in effect and existing on the date hereof, and
all of which are subject to change (including retroactive change) at any time.
Except where noted, the summary deals only with Senior Secured Discount Notes
held as capital assets by initial purchasers who are United States Holders (as
defined) and does not deal with special situations, such as those of dealers in
securities, financial institutions, life insurance companies, holders whose
functional currency is not the U.S. dollar, or special rules with respect to
integrated transactions of which the ownership of the Senior Secured Discount
Notes is a part such as certain hedging transactions, or certain straddle or
conversion transactions.
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PROSPECTIVE PURCHASERS CONSIDERING AN INVESTMENT IN THE SENIOR SECURED
DISCOUNT NOTES ARE URGED TO CONSULT THEIR TAX ADVISORS CONCERNING THE FEDERAL
INCOME TAX CONSIDERATIONS THAT MAY BE SPECIFIC TO THEM AS WELL AS ANY TAX
CONSEQUENCES ARISING UNDER THE LAWS OF ANY OTHER TAXING JURISDICTION.
UNITED STATES HOLDERS
"United States Holder" means a holder of Senior Secured Discount Notes that
is an individual who is a citizen or resident of the United States, a
corporation or partnership created or organized in or under the laws of the
United States or any political subdivision thereof, or an estate or trust the
income of which is includible in gross income for United States Federal income
tax purposes, regardless of source.
PAYMENTS OF INTEREST; ORIGINAL ISSUE DISCOUNT
The Senior Secured Discount Notes will be considered to bear original issue
discount ("OID"). Holders of the Senior Secured Discount Notes will be required
to include OID in gross income on the basis of a constant yield to maturity
over the term of the Senior Secured Discount Notes. As a result, a holder will
generally recognize taxable income with respect to the Senior Secured Discount
Notes as the OID accrues, whether or not cash payments of interest are made and
regardless of the holder's general method of accounting. Cash payments on the
Senior Secured Discount Notes will be treated first as payments of accrued OID
and then as payments of principal.
In accordance with Sections 1271 through 1275 of the Code and certain final
Treasury regulations published thereunder on February 2, 1994 (the "OID
Regulations"), a debt instrument bears OID if its "stated redemption price at
maturity" exceeds its "issue price" by more than a de minimis amount. The issue
price of a Senior Secured Discount Note will be the initial price at which a
substantial portion of the Senior Secured Discount Notes are sold (not
including sales to bond houses, brokers or similar persons or organizations
acting in the capacity of underwriters or wholesalers).
Under the OID Regulations, all payments under a debt instrument are included
in the "stated redemption price at maturity" except those unconditionally
required to be paid at least annually at a single fixed rate over the term of
the instrument ("qualified stated interest"). Because the Company is not
required to make cash interest payments on the Senior Secured Discount Notes
prior to , 1998, all payments thereon (including interest payments) will
be included in the Senior Secured Discount Notes' "stated redemption price at
maturity" as defined in the OID Regulations.
A holder of Senior Secured Discount Notes will be required to include in
gross income an amount equal to the sum of the daily portions of OID for each
day during the taxable year in which the instrument is held. The daily portions
of OID are determined by allocating to each day in an accrual period (any six-
month period, or shorter initial period, that ends on or ) the pro
rata portion of the OID allocable to the accrual period. The OID allocable to a
full accrual period will be the product of (i) the Senior Secured Discount
Notes' adjusted issue price at the beginning of the accrual period (the issue
price determined as described above, increased by prior accruals of OID and
decreased by prior cash payments) and (ii) the Senior Secured Discount Notes'
yield to maturity. In the case of the final accrual period, the allocable OID
is the difference between the amount payable at maturity and the adjusted issue
price at the beginning of the accrual period.
In general, the yield to maturity of a debt obligation is the discount rate
that, when applied to all payments made under the obligation, results in a
present value equal to the issue price of the obligation. In accordance with
the OID Regulations, this determination will be made (1) on the assumption that
the Company will not exercise its option to redeem the Senior Secured Discount
Notes, because this assumption results in a smaller yield to maturity, and (2)
on the assumption that a redemption will not occur as a result of a Change in
Control, because a Change in Control is not an event that is considered more
likely than not to occur. If a partial redemption in fact occurs, the
redemption payment will be treated as a payment in retirement of a portion of
the Senior Secured Discount Notes (as to which holders may recognize capital
gain or loss).
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The Company will furnish annually to the Internal Revenue Service (the "IRS")
and to record holders (other than certain exempt holders, including
corporations) information with respect to OID accruing while they hold the
Senior Secured Discount Notes. Such information will reflect the OID that would
accrue to an original holder of Senior Secured Discount Notes. Subsequent
holders may be required to adjust the OID, if any, they are required to report.
Acquisition Premium. If a holder (including an original purchaser) purchases
a Senior Secured Discount Note at a price that is less than or equal to its
stated redemption price at maturity but in excess of its adjusted issue price
(i.e., its issue price increased by any OID previously includible in the gross
income of prior holders, and reduced by any prior cash payments to prior
holders), the includible OID (as otherwise determined) will be reduced by an
amount equal to the OID multiplied by a fraction, the numerator of which is
such excess and the denominator of which is the OID for the period remaining to
maturity after the holder's purchase.
Election. A holder of a Senior Secured Discount Note, subject to certain
limitations, may elect to include in gross income all interest accruing thereon
under the constant yield method. For this purpose, interest includes stated and
unstated interest, acquisition discount, OID, de minimis OID, market discount
and de minimis market discount, as adjusted by any acquisition premium. If made
for an obligation that has "market discount" (see below), this election will
apply to all market discount obligations acquired by such holder on or after
the first day of the first taxable year to which the election applies.
Market Discount. The market discount provisions of the Code may affect the
tax consequences of holding or disposing of Senior Secured Discount Notes.
Those rules generally provide that if a holder purchases a debt instrument at a
market discount, any gain recognized upon disposition will constitute ordinary
interest income (rather than capital gain) to the extent that such gain does
not exceed the accrued market discount on such debt instrument at the time of
the disposition. "Market discount" generally means the excess, if any, of a
debt instrument's adjusted issue price over the price paid by the holder
therefor, subject to a de minimis exception. In addition, a holder acquiring a
Senior Secured Discount Note at a market discount may be required to defer the
deduction of a portion of the interest paid or accrued during the taxable year
on indebtedness incurred or maintained to purchase or carry such debt
instrument.
Any principal payment on a Senior Secured Discount Note acquired by a holder
at a market discount will constitute ordinary income (generally, interest
income) to the extent that it does not exceed the accrued market discount at
the time of such payment. For purposes of determining the tax treatment of
subsequent payments on, or dispositions of, Senior Secured Discount Notes,
accrued market discount will be reduced by amounts previously treated as
ordinary income.
A holder of a Senior Secured Discount Note acquired at a market discount may
elect to include market discount in gross income as such market discount
accrues, either on a straight-line basis or on a constant interest rate basis.
If made, this current-inclusion election will apply to all market discount
obligations acquired on or after the first day of the first taxable year to
which the election applies, and may not be revoked without the consent of the
IRS. If a holder of a Senior Secured Discount Note makes this election, the
foregoing rules with respect to (i) the recognition of ordinary interest income
on sales and other dispositions of such debt instruments, and (ii) the deferral
of interest deductions on indebtedness incurred or maintained to purchase or
carry such debt instruments, will not apply.
SALE OR OTHER DISPOSITION OF SENIOR SECURED DISCOUNT NOTES
A holder will generally recognize gain or loss upon the sale, exchange,
redemption, retirement or other disposition of a Senior Secured Discount Note
equal to the difference between the amount realized on the disposition and the
holder's adjusted tax basis in the Senior Secured Discount Note. A holder's
adjusted tax basis in a Senior Secured Discount Note generally will be the cost
of the Senior Secured Discount Note, increased by any OID or market discount
previously included in income by such holder, and decreased by cash payments
made to such holder with respect to the Senior Secured Discount Note.
85
<PAGE>
Subject to the market discount rules discussed above, a holder will recognize
long-term capital gain or loss on the disposition of a Senior Secured Discount
Note held for more than one year.
HIGH-YIELD DISCOUNT OBLIGATIONS
Sections 163(e) and 163(i) of the Code provide rules that affect the tax
treatment of certain high-yield debt obligations ("HYDOs"). The Senior Secured
Discount Notes will constitute HYDOs if their yield to maturity exceeds by more
than five percentage points the applicable federal rate (the "AFR") for
instruments with a similar maturity in effect for the calendar month in which
the Senior Secured Discount Notes are issued (7.38% compounded semiannually for
a ten-year debt instrument issued in June, 1994). If the Senior Secured
Discount Notes are HYDOs, the Company may not deduct any OID that accrues with
respect to the Senior Secured Discount Notes until it pays such amounts in
cash.
In addition, to the extent the Senior Secured Discount Notes' yield to
maturity exceeds the relevant AFR by more than six percentage points, some or
all of the OID will be "disqualified." Special rules apply to the "disqualified
portion" of OID: (i) the Company may not deduct such amounts, and (ii)
corporate holders may treat such amounts as a distribution for purposes of the
dividends received deduction provided by Section 243 of the Code (subject to
applicable limitations).
BACKUP WITHHOLDING
Certain holders may be subject to backup withholding at a rate of 31% with
respect to any OID paid on and proceeds derived from the disposition of the
Senior Secured Discount Notes. Backup withholding will apply only if the holder
(i) fails to furnish its taxpayer identification number ("TIN") which, for an
individual would be the holder's Social Security number, (ii) furnishes an
incorrect TIN, (iii) is notified by the IRS that it has failed to properly
report payments of interest and dividends or (iv) under certain circumstances,
fails to certify, under penalty of perjury, that it has furnished a correct TIN
and has not been notified by the IRS that it is subject to backup withholding
for failure to report interest and dividend payments. A holder that does not
provide a correct TIN may be subject to penalties imposed by the IRS. Any
amount withheld under these rules will be creditable against the holder's
United States Federal income tax liability.
DESCRIPTION OF WORKING CAPITAL FACILITY
The Company has accepted, subject to the negotiation and execution of the
final documentation, the principal terms and conditions of the Working Capital
Facility to replace the Company's existing revolving credit facility. It is
intended that final documentation of the Working Capital Facility will be
executed prior to the Note Offering and will contain customary conditions to
closing. Harris Trust and Savings Bank ("HTSB") and Lehman Commercial Paper
Inc., an affiliate of one of the Underwriters, will act as co-agents and HTSB
will act as administrative agent. The Working Capital Facility will provide
Acme Steel, Acme Packaging, Alpha Tube and Universal (the "Borrowers") with up
to $80 million to accommodate their ongoing working capital requirements and
for general corporate purposes. Within this overall limitation, borrowing
availability to each Borrower is limited to an amount equal to the sum of 85%
of the face value of eligible accounts receivable plus 50% of the loan value of
eligible inventory; provided, however, that the total loans outstanding at any
one time to any Borrower against eligible inventory may not exceed 40% of such
amount. The obligations of the Borrowers under the Working Capital Facility
will be guaranteed by the Company and will be secured by a first priority
security interest in all present and future accounts receivable and inventory
of the Borrowers and a negative pledge applicable to all assets of the
Borrowers other than the Collateral. Borrowing under the Working Capital
Facility will bear interest at a floating rate equal to, at the Company's
option, either (a) the greater of the applicable federal funds rate plus 1/2 of
1% or the prime rate announced by HTSB ("Base Rate Loans") or (b) reserve
adjusted LIBOR plus 2% ("LIBOR Rate Loans"). Base Rate Loans will be payable
monthly in arrears and LIBOR Rate Loans will be available for fixed periods of
30, 60, 90 or 180 days, payable on the last day of the applicable period, but
in any case, at least quarterly. The Working Capital facility will continue in
effect for three years after the date of execution thereof, subject to two one-
year extensions upon the agreement of all parties.
86
<PAGE>
The Working Capital Facility will require the Company to maintain a minimum
consolidated tangible net worth. The Company will also be obligated to maintain
at all times a ratio of consolidated current assets (including all funds held
by the Collateral Agent to fund the construction of the Modernization Project)
to consolidated current liabilities of at least 1.5. The Working Capital
Facility will also require the Company to maintain a ratio of funded
Indebtedness to capital of no more than .65 at all times and a ratio of the sum
of EBITDA, project expenses and non-restricted cash to the sum of cash interest
and 30% of the average loans outstanding under the Working Capital Facility of
not less than 1.05 calculated cumulatively on a rolling quarter basis. In
addition, the Working Capital Facility will limit the ability of the Company
and its subsidiaries to incur additional indebtedness, pay dividends or other
distributions or make loans or advances, merge, consolidate or sell assets or
pay dividends on subsidiary stock or make any other distributions or make loans
or advances to the Company in excess of 100% of each Subsidiary's EBITDA (as
defined therein) less maintenance capital expenditures as well as certain other
covenants and agreements typical in such facilities. The Borrowers will be
required to repay all loans outstanding under the Working Capital Facility upon
a change of control (as defined therein).
Events of default under the Working Capital Facility, which would entitle the
lenders thereunder to terminate the facility and to declare all amounts
outstanding thereunder to be immediately due and payable, will include, but not
be limited to, failure to pay any interest, principal or fees when due under
the Working Capital Facility; failure to meet any covenant or other agreement
contained in the Working Capital Facility or the untruth of any representation
or warranty made by the Company or the Borrowers therein; the attachment of
certain involuntary liens pursuant to ERISA, or the entry of certain final
judgments, upon the Company or any Borrowers; certain bankruptcy or other
insolvency proceedings, and certain defaults in other indebtedness of the
Company and the Borrowers. Any such event of default gives HTSB the right to
possess and sell the collateral securing the Borrowers' obligations.
UNDERWRITING
The Underwriters named below (the "Underwriters") have severally agreed,
subject to the terms and conditions of the Underwriting Agreement (the form of
which has been filed as an exhibit to the Registration Statement of which this
Prospectus is a part), to purchase from the Company, and the Company has agreed
to sell to each Underwriter, the respective principal amount of Senior Secured
Notes and Senior Secured Discount Notes set forth opposite their respective
names below:
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
PRINCIPAL AMOUNT OF SENIOR
OF SENIOR SECURED DISCOUNT
UNDERWRITERS SECURED NOTES NOTES
------------ ---------------- ----------------
<S> <C> <C>
Lehman Brothers Inc.................... $ $
BT Securities Corporation..............
------------ ----------
Total.............................. $175,000,000 $
============ ==========
</TABLE>
The Company has been advised that the Underwriters propose to offer the Notes
initially at the public offering prices set forth on the cover page of this
Prospectus, and to certain selected dealers at such public offering prices less
selling concessions of % of the principal amount of the Senior Secured
Notes and % of the principal amount of the Senior Secured Discount Notes.
The selected dealers may reallow concessions to certain dealers of % of the
principal amount of the Senior Secured Notes and % of the principal amount
of the Senior Secured Discount Notes. After the initial public offering of the
Notes, the public offering prices, the concessions to selected dealers and the
reallowances to other dealers may be changed by the Underwriters.
87
<PAGE>
The Company and the Guarantors, jointly and severally, have agreed in the
Underwriting Agreement to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, and to contribute
to payments that the Underwriters may be required to make in respect thereof.
The Company has agreed to reimburse Lehman Brothers Inc. for a portion of the
fees and expenses of Hatch Associates Ltd. and Steltech Ltd. for the
preparation of the Report referred to herein. See "Modernization and Expansion
Project--Independent Review of the Modernization Project."
The Company has no plans to list the Notes on any securities exchange. The
Company has been advised by each Underwriter that it presently intends to make
a market in the Notes, however, they are not obligated to do so. Any such
market-making activity may be discontinued at any time, for any reason, without
notice. If each Underwriter ceases to act as a market maker for the Notes for
any reason, there can be no assurance that an active market for the Notes will
develop or, if a market does develop, at what prices the Notes will trade.
Lehman Brothers Inc. has from time to time provided financial advisory
services to the Company, including in connection with the Modernization
Project, for which it has received customary compensation. The Company has
agreed that Lehman Brothers Inc. may act as the Company's exclusive underwriter
for public offerings of securities of the Company until the second anniversary
of the completion of the Modernization Project. In addition, an affiliate of
Lehman Brothers Inc. will act as co-agent under the Working Capital Facility.
See "Description of Working Capital Facility."
LEGAL MATTERS
The validity of the authorization and issuance of the Notes will be passed
upon for the Company by Coffield Ungaretti & Harris, 3500 Three First National
Plaza, Chicago, Illinois 60602. Certain legal matters will be passed upon for
the Underwriter by Cahill Gordon & Reindel (a partnership including a
professional corporation), 80 Pine Street, New York, New York 10005.
EXPERTS
The audited financial statements included in this Prospectus have been so
included in reliance upon the report of Price Waterhouse, independent
accountants, and upon the authority of said firm as experts in auditing and
accounting. Hatch Associates Ltd. and Steltech Ltd., experts in engineering,
have consented to references to themselves and their Report in this Prospectus.
88
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Accountants' Report.......................................... F-2
Consolidated Statements of Operations for the Six Months Ended June 26,
1994 and June 27, 1993 (Unaudited) and for the Years Ended December 26,
1993, December 27, 1992 and December 29, 1991 (Audited)................. F-3
Consolidated Balance Sheets as of June 26, 1994 (Unaudited), December 26,
1993 and December 27, 1992 (Audited).................................... F-4
Consolidated Statements of Cash Flows for the Six Months Ended June 26,
1994 and June 27, 1993 (Unaudited) and for the Years Ended December 26,
1993, December 27, 1992 and December 29, 1991 (Audited)................. F-5
Consolidated Statements of Changes in Shareholders' Equity for the Six
Months Ended June 26, 1994 (Unaudited) and for the Years Ended December
26, 1993, December 27, 1992, December 29, 1991 and December 30, 1990
(Audited)............................................................... F-6
Notes to Consolidated Financial Statements............................... F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of Acme Metals Incorporated
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of cash flows and of changes in
shareholders' equity present fairly, in all material respects, the financial
position of Acme Metals Incorporated and its subsidiaries at December 26, 1993
and December 27, 1992, and the results of their operations and their cash flows
for each of the three years in the period ended December 26, 1993, in
conformity with generally accepted accounting principles. 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 of these financial statements in accordance
with generally accepted auditing standards which 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, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for the
opinion expressed above.
As discussed in the Notes to the Consolidated Financial Statements, Acme
Metals Incorporated changed its method of accounting for postretirement
benefits other than pensions and income taxes in 1992.
PRICE WATERHOUSE
March 21, 1994
Chicago, Illinois
F-2
<PAGE>
ACME METALS INCORPORATED
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED FOR THE YEARS ENDED
----------------------- --------------------------------------
JUNE 26 JUNE 27, DECEMBER 26, DECEMBER 27, DECEMBER 29,
1994 1993 1993 1992 1991
----------- ----------- ------------ ------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net sales............... $256,423 $225,032 $457,406 $391,562 $376,951
Costs and expenses:
Cost of products sold. 215,341 198,327 397,526 347,624 335,503
Depreciation expense.. 7,596 7,517 14,657 14,392 13,700
-------- -------- -------- -------- --------
Gross profit............ 33,486 19,188 45,223 29,546 27,748
Selling and
administrative
expense.............. 15,304 13,800 30,633 28,901 29,219
Restructuring charge.. 2,700
Nonrecurring charge... 1,925
-------- -------- -------- -------- --------
Operating income (loss). 18,182 5,388 12,665 (2,055) (1,471)
Non-operating income
(expense):
Interest expense...... (2,666) (2,734) (5,384) (5,569) (5,533)
Interest income....... 1,046 741 1,571 1,700 1,322
Unusual income item... 1,210 1,047 1,241
Other--net............ 861 222 370 355 1,391
-------- -------- -------- -------- --------
Income (loss) before
income taxes and
cumulative effect of
changes in accounting
principles............. 17,423 3,617 10,432 (4,522) (3,050)
Income tax provision
(credit)............... 6,969 1,447 4,173 (1,673) (732)
-------- -------- -------- -------- --------
10,454 2,170 6,259 (2,849) (2,318)
Cumulative effect of
changes in accounting
principles:
Retiree health care
and life insurance
benefits, net of
taxes................ (42,246)
Income taxes.......... (8,077)
--------
(50,323)
-------- -------- -------- -------- --------
Net income (loss)....... $ 10,454 $ 2,170 $ 6,259 $(53,172) $ (2,318)
======== ======== ======== ======== ========
Per share:
Income (loss) before
cumulative effect of
changes in accounting
principles........... $ 1.84 $ 0.40 $ 1.15 $ (0.53) $ (0.43)
Cumulative effect of
changes in accounting
principles:
Retiree health care
and life insurance
benefits, net of
taxes.............. (7.82)
Income taxes........ (1.50)
-------- -------- -------- -------- --------
Net income (loss)....... $ 1.84 $ 0.40 $ 1.15 $ (9.85) $ (0.43)
======== ======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-3
<PAGE>
ACME METALS INCORPORATED
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 26, DECEMBER 26, DECEMBER 27,
ASSETS 1994 1993 1992
------ ----------- ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents.............. $ 73,651 $ 50,444 $ 49,224
Receivables, less allowances of $1,234
in 1994 (unaudited), $1,155 in 1993
and $1,081 in 1992.................... 62,327 58,479 47,091
Inventories............................ 41,037 47,867 39,488
Deferred income taxes.................. 12,337 12,337 11,754
Other current assets................... 944 1,267 1,303
--------- --------- ---------
Total current assets................. 190,296 170,394 148,860
--------- --------- ---------
Investments and other assets:
Investments in associated companies.... 14,701 14,701 14,105
Other assets........................... 13,493 13,389 7,197
Deferred income taxes.................. 19,846 19,846 9,851
--------- --------- ---------
Total investments and other assets... 48,040 47,936 31,153
--------- --------- ---------
Property, plant and equipment:
Property, plant and equipment, at cost. 412,945 408,556 405,684
Accumulated depreciation............... (300,653) (293,017) (284,995)
--------- --------- ---------
Total property, plant and equipment.. 112,292 115,539 120,689
--------- --------- ---------
$ 350,628 $ 333,869 $ 300,702
========= ========= =========
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
<S> <C> <C> <C>
Current liabilities:
Accounts payable....................... $ 32,503 $ 32,800 $ 25,985
Accrued expenses....................... 38,334 34,089 28,641
Income taxes payable................... 2,961 3,641 1,299
Current maturities of long-term debt... 6,667 6,667 3,500
--------- --------- ---------
Total current liabilities............ 80,465 77,197 59,425
--------- --------- ---------
Long-term liabilities:
Long-term debt......................... 49,333 49,333 56,000
Other long-term liabilities............ 9,983 10,543 7,951
Postretirement benefits other than
pensions.............................. 83,675 82,630 80,959
Retirement benefit plans............... 30,963 30,963 7,072
--------- --------- ---------
Total long-term liabilities.......... 173,954 173,469 151,982
--------- --------- ---------
Commitments and contingencies (see note
titled Commitments and Contingencies)
Shareholders' equity:
Preferred stock, $1 par value,
2,000,000 shares authorized, no shares
issued................................
Common stock, $1 par value, 20,000,000
shares authorized, 5,559,161,
5,406,387 and 5,357,870 shares issued
in 1994 (unaudited), 1993 and 1992,
respectively.......................... 5,559 5,406 5,358
Additional paid-in capital............. 50,743 48,344 47,679
Retained earnings...................... 61,202 50,748 44,489
Minimum pension liability adjustment... (21,295) (21,295) (8,231)
--------- --------- ---------
Total shareholders' equity........... 96,209 83,203 89,295
--------- --------- ---------
$ 350,628 $ 333,869 $ 300,702
========= ========= =========
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-4
<PAGE>
ACME METALS INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE YEARS ENDED
----------------------- --------------------------------------
JUNE 26, JUNE 27, DECEMBER 26, DECEMBER 27, DECEMBER 29,
1994 1993 1993 1992 1991
----------- ----------- ------------ ------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from
operating activities:
Net income (loss)..... $10,454 $ 2,170 $ 6,259 $(53,172) $ (2,318)
Adjustments to
reconcile net income
(loss) to net cash
provided by (used
for) operating
activities:
Depreciation........ 7,894 7,831 15,234 14,705 14,224
Deferred income
taxes.............. (1,629) (1,848) 1,049
Cumulative effect of
changes in
accounting
principles......... 50,323
Gain on sale of
assets............. (1,047)
Nonrecurring charge. 1,925
Investment in
associated company. (596)
Change in current
assets and
liabilities:
Receivables....... (3,848) (8,608) (11,388) 1,403 741
Inventories....... 6,830 (1,950) (8,379) 1,698 7,922
Accounts payable.. (505) 6,004 6,815 4,843 (2,242)
Other current
accounts......... 4,096 2,380 7,826 3,170 (2,475)
Other, net.......... 1,188 2,198 (26) 3,943 4,820
------- ------- -------- -------- --------
Net cash provided by
(used for) operating
activities........... 26,109 10,025 16,041 24,018 21,721
------- ------- -------- -------- --------
Cash flows from
investing activities:
Capital expenditures.. (5,071) (4,305) (11,749) (7,557) (10,611)
Proceeds from sales of
assets............... 995
------- ------- -------- -------- --------
Net cash used for
investing activities. (5,071) (4,305) (11,749) (6,562) (10,611)
------- ------- -------- -------- --------
Cash flows from
financing activities:
Payment of long-term
debt................. (3,500) (3,500)
Purchase of common
stock for treasury... (79) (462)
Other................. (99) (20) 428 113 19
Proceeds from the
exercise of stock
options.............. 2,268
------- ------- -------- -------- --------
Net cash provided by
(used for) financing
activities........... 2,169 (3,520) (3,072) 34 (443)
------- ------- -------- -------- --------
Net increase
(decrease) in cash
and cash equivalents. 23,207 2,200 1,220 17,490 10,667
Cash and cash
equivalents at
beginning of year.... 50,444 49,224 49,224 31,734 21,067
------- ------- -------- -------- --------
Cash and cash
equivalents at end of
year................. $73,651 $51,424 $ 50,444 $ 49,224 $ 31,734
======= ======= ======== ======== ========
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-5
<PAGE>
ACME METALS INCORPORATED
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON
STOCK, ADDITIONAL MINIMUM
$1 PAR PAID-IN RETAINED PENSION TREASURY
VALUE CAPITAL EARNINGS LIABILITY STOCK
------ ---------- -------- --------- --------
<S> <C> <C> <C> <C> <C>
BALANCE--DECEMBER 30, 1990.... $5,948 $46,813 $115,281 $ 0 $(15,312)
Net loss.................... (2,318)
Stock plans--issuance of
shares..................... 61 646
Tax benefit arising from
stock plan transactions.... 7
Purchase of common stock for
treasury................... (462)
------ ------- -------- -------- --------
BALANCE--DECEMBER 29, 1991.... 6,009 47,466 112,963 0 (15,774)
------ ------- -------- -------- --------
Net loss.................... (53,172)
Stock plans--issuance of
shares..................... 7 191
Tax benefit arising from
stock plan transactions.... 22
Purchase of common stock for
treasury................... (79)
Redemption of stock rights.. (107)
Retirement of treasury
stock...................... (658) (15,195) 15,853
Minimum pension liability... (8,231)
------ ------- -------- -------- --------
BALANCE--DECEMBER 27, 1992.... 5,358 47,679 44,489 (8,231) 0
------ ------- -------- -------- --------
Net income.................. 6,259
Stock plans--issuance of
shares..................... 48 635
Tax benefit arising from
stock plan transactions.... 30
Minimum pension liability... (13,064)
------ ------- -------- -------- --------
BALANCE--DECEMBER 26, 1993.... $5,406 $48,344 $ 50,748 $(21,295) $ 0
------ ------- -------- -------- --------
Net income (unaudited)...... 10,454
Tax benefit arising from
stock plan transactions....
Stock plans--issuance of
shares (unaudited)......... 153 2,399
------ ------- -------- -------- --------
BALANCE--JUNE 26, 1994
(UNAUDITED).................. $5,559 $50,743 $ 61,202 $(21,295) $ 0
====== ======= ======== ======== ========
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-6
<PAGE>
ACME METALS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS AND DISCLOSURES FOR THE SIX MONTHS ENDED JUNE 26, 1994 AND JUNE 27,
1993 ARE UNAUDITED)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Principles of Consolidation
The consolidated financial statements include the accounts of Acme Metals
Incorporated (the Company) and its majority-owned subsidiaries. Investments in
mining ventures are accounted for by the equity method. All intercompany
transactions have been eliminated.
The Company's fiscal year ends on the last Sunday in December.
Interim Financial Data
The interim financial data is unaudited; however, in the opinion of the
Company, the interim data includes all adjustments, consisting only of normal
recurring adjustments, necessary for a fair statement of the results for the
interim period.
Inventories
Inventories are stated at the lower of cost or market. The primary method
used to determine inventory costs is the last-in, first-out (LIFO) method.
Property, Plant and Equipment and Depreciation
Property, plant and equipment are stated at cost. Depreciation of plant and
equipment is computed principally on a straight-line basis over the estimated
useful lives of the assets. Expenditures for maintenance, repairs and minor
renewals and betterments are charged to expense as incurred. Furnace relines
and major renewals and betterments are capitalized.
Upon disposition of property, plant and equipment, the cost and related
accumulated depreciation are removed from the accounts, and the resulting gain
or loss is recognized.
The Company from time to time reviews the carrying value of certain of its
assets and recognizes impairments when appropriate.
Retirement Benefit Plans
Pension costs include service cost, interest cost, return on plan assets and
amortization of the unrecognized initial net asset. The Company's policy is to
fund not less than the minimum funding required under ERISA.
The Company has postretirement health care and life insurance plans. The
provision for postretirement costs in 1991 includes current costs, amortization
of prior service costs over periods not exceeding twenty-five years and
interest on the accrued liability. The provisions for postretirement costs in
1993 and 1992 were determined pursuant to the provisions of Statement of
Financial Accounting Standards (FAS) No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions." Under this statement, the annual
expense represents a combination of interest and service cost provisions of the
annual accrual. The postretirement benefits are not funded.
Income Taxes
The credit for deferred income taxes in 1993 and 1992 was determined pursuant
to the provisions of FAS No. 109, "Accounting for Income Taxes." Under this
statement, the provision for deferred income taxes represents the tax effect of
temporary differences between the financial reporting basis and the tax basis
of the Company's assets and liabilities. In 1991, the provision for deferred
income taxes represents the tax effect of differences in the timing of income
and expense recognition for tax and financial reporting purposes.
F-7
<PAGE>
ACME METALS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(AMOUNTS AND DISCLOSURES FOR THE SIX MONTHS ENDED JUNE 26, 1994 AND JUNE 27,
1993 ARE UNAUDITED)
Per Share Data
Amounts per common share are based on the weighted average number of common
and dilutive common equivalent shares outstanding of 5,678,661 and 5,409,761 in
the first six months of 1994 (unaudited) and 1993 (unaudited), respectively;
5,439,784 in 1993, 5,396,311 in 1992 and 5,373,564 in 1991.
Consolidated Statements of Cash Flows
For purposes of the Consolidated Statements of Cash Flows, the Company
considers all highly liquid investments purchased with a maturity of three
months or less to be cash equivalents.
Reclassifications
Certain prior year amounts have been reclassified to conform to the current
year presentation.
RESTRUCTURING CHARGE:
During 1992, the Company substantially completed its program to reduce its
salaried work force by 10% which was completed during 1993. Voluntary
retirement offers, which included an increased pension benefit and extra
vacation pay, were extended to a number of employees for a limited period of
time. Other employees were terminated with severance pay. The pre-tax reserve
of $2.7 million established by the Company included $1.1 million related to the
increased pension benefits and acceleration of the payment of pension benefits,
a special postretirement termination charge of $1.3 million, a postretirement
plan curtailment gain of $0.4 million and $0.7 million related to increased
vacation benefits, severance pay and a reserve for contingencies related to the
program.
NONRECURRING CHARGE:
The Company recorded a $1.9 million nonrecurring charge in 1993 including
$1.3 million in connection with a decision made during the year to permanently
idle Acme Steel Company's No. 3 Hot Strip Mill and Billet Mill and a $0.6
million charge to close Acme Packaging Corporation's Pittsburg-East facility in
California and the elimination of a strapping line at its New Britain,
Connecticut facility following a determination made during the year to
consolidate production facilities and eliminate unprofitable lines.
UNUSUAL INCOME ITEM:
In 1993, the Company recorded a benefit in connection with its investment in
Wabush Iron Company (WabIron). As a result of the finalization of a plan of
reorganization for LTV Steel Company Inc., a former participant in WabIron, the
Company was awarded $1.2 million (market value) of LTV securities in a
settlement of a bankruptcy claim filed by all of the participants in the Wabush
Mines Project joint venture.
During 1992, the Company sold all of its interests in certain coal producing
property located in West Virginia. This transaction added approximately $1
million of pre-tax income to 1992 results.
In 1991, the Company recorded a benefit from an unusual item related to the
assignment of its rights in claims allowed in the LTV Steel Company, Inc.
bankruptcy to a third party. This transaction added $1.2 million of pre-tax
income to 1991 results.
F-8
<PAGE>
ACME METALS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(AMOUNTS AND DISCLOSURES FOR THE SIX MONTHS ENDED JUNE 26, 1994 AND JUNE 27,
1993 ARE UNAUDITED)
INVENTORIES:
Inventories are summarized as follows:
<TABLE>
<CAPTION>
JUNE 26, DECEMBER 26, DECEMBER 27,
1994 1993 1992
----------- ------------ ------------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C>
Raw materials $ 3,583 $ 6,201 $ 4,594
Semi-finished and finished products....... 29,358 32,364 26,540
Supplies.................................. 8,096 9,302 8,354
------- ------- -------
$41,037 $47,867 $39,488
======= ======= =======
</TABLE>
On December 26, 1993 and December 27, 1992, inventories valued on the LIFO
method were less than the current costs of such inventories by $57.4 million
and $55.4 million, respectively.
In 1992, inventory quantities decreased from the prior year, the effect of
which decreased cost of products sold and net loss by $0.4 million and $0.2
million, respectively.
PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment consisted of the following:
<TABLE>
<CAPTION>
JUNE 26, DECEMBER DECEMBER 27,
1994 26, 1993 1992
----------- --------- ------------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C>
Land........................................ $ 3,786 $ 3,786 $ 3,786
Buildings................................... 49,126 49,578 48,530
Equipment................................... 352,717 352,306 349,494
Construction in progress.................... 7,316 2,886 3,874
--------- --------- ---------
412,945 408,556 405,684
Less accumulated depreciation............... (300,653) (293,017) (284,995)
--------- --------- ---------
$ 112,292 $ 115,539 $ 120,689
========= ========= =========
</TABLE>
The difference between depreciation expense presented in the Consolidated
Statements of Cash Flows and the Consolidated Statements of Operations
represents that portion of depreciation expense that is classified in selling
and administrative expense on the Consolidated Statements of Operations.
RETIREMENT BENEFIT PLANS:
The Company has various retirement benefit plans covering substantially all
salaried and hourly employees. Certain salaried employees with one full
calendar quarter of service are eligible to participate in the Company's
defined contribution plan and employee stock ownership plan (ESOP). Company
contributions to the defined contribution plan and employee stock ownership
plan are based upon 7.5% and 3.5% (the ESOP contribution was reduced from 6.5%
to 3.5% in the second quarter of 1993), respectively, of eligible compensation.
Amounts charged to operations under these plans were $3.4 million in 1993, $4.1
million in 1992 and $3.6 million in 1991.
Salaried employees who joined the Company prior to December 31, 1981 and
certain hourly employees participate in defined benefit retirement plans which
provide benefits based upon either years of service and final average pay or
fixed amounts for each year of service.
F-9
<PAGE>
ACME METALS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(AMOUNTS AND DISCLOSURES FOR THE SIX MONTHS ENDED JUNE 26, 1994 AND JUNE 27,
1993 ARE UNAUDITED)
The net defined benefit pension credit (cost) included the following
components:
<TABLE>
<CAPTION>
1993 1992 1991
-------- -------------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Service cost................................ $ (1,852) $ (1,979) $ (1,984)
Interest cost on projected benefit
obligation................................. (14,526) (14,231) (13,923)
Actual return on plan assets................ 16,094 9,715 28,085
Net amortization and deferral............... 7,662 (12,157)
-------- -------- --------
Net pension credit (cost)................... $ (284) $ 1,167 $ 21
======== ======== ========
</TABLE>
Pension plan curtailment losses of $1.1 million are included in the 1992
restructuring charge.
Actuarial assumptions used to calculate the net defined benefit pension
credit (cost) were:
<TABLE>
<CAPTION>
1993 1992 1991
----- ----- -----
<S> <C> <C> <C>
Weighted average discount rate................................ 8.5% 8.5% 9%
Increase in future compensation levels........................ 5% 5% 5%
Expected rate of return on plan assets........................ 9.75% 9.75% 9.75%
</TABLE>
The following table sets forth the funded status of the Company's defined
benefit retirement plans and amounts recognized in the balance sheet.
<TABLE>
<CAPTION>
1993 1992
---------------------- ----------------------
UNDERFUNDED OVERFUNDED UNDERFUNDED OVERFUNDED
PLANS PLANS PLANS PLANS
----------- ---------- ----------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Actuarial present value
of benefit obligations:
Accumulated benefit
obligation, including
vested benefits of
$182,993 in 1993 and
$155,815 in 1992...... $189,939 $9,648 $138,372 $33,635
Effect of increase in
future compensation
levels................ 4,419 709 4,525 725
-------- ------ -------- -------
Projected benefit
obligation for service
rendered to date...... 194,358 10,357 142,897 34,360
Plan assets at fair
value, primarily U.S.
government bonds and
notes and common stock
of publicly traded
companies............... 158,975 9,860 131,300 37,258
Unrecognized net loss
from past experience
different from that
assumed and effects of
changes in assumptions.. 51,465 2,461 29,367 4,503
Prior service cost not
yet recognized in net
periodic pension cost... 5,539 1,440 192
Unrecognized net asset at
December 30, 1985 being
recognized over 15
years................... (12,879) (604) (11,773) (3,637)
Minimum pension liability
adjustment.............. (39,705) (14,509)
-------- ------ -------- -------
Prepaid (accrued) pension
cost.................... $(30,963) $1,360 $ (7,072) $ 3,956
======== ====== ======== =======
</TABLE>
F-10
<PAGE>
ACME METALS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(AMOUNTS AND DISCLOSURES FOR THE SIX MONTHS ENDED JUNE 26, 1994 AND JUNE 27,
1993 ARE UNAUDITED)
In accordance with FAS No. 87, the Company has recorded an adjustment, as
shown in the table above, to recognize a minimum pension liability relating to
certain underfunded pension plans. The additional $25.2 million adjustment
arose at the end of 1993 primarily as a result of a lowering of the discount
rate to 7.5 percent from 8.5 percent. Accordingly, for pension plans with
accumulated benefits in excess of the fair value of plan assets at December 26,
1993, the accompanying consolidated balance sheets include an additional long-
term pension liability of $40.1 million, a long-term intangible asset of $5.8
million and a charge to shareholders' equity of $21.3 million, net of a
deferred tax benefit, representing the excess of the additional long-term
liability over unrecognized prior service cost.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS:
The Company and its subsidiaries sponsor several unfunded defined benefit
postretirement plans that provide medical, dental, and life insurance for
retirees and eligible dependents.
In 1993 and 1992 the cost for all plans, calculated pursuant to FAS No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions"
amounted to $7.9 million and $7.8 million, respectively. The cost in 1991,
which was calculated under the previous accounting method, totalled $6.4
million.
The net periodic postretirement benefit cost for 1993 and 1992, net of
retiree contributions of approximately 10% of costs, included the following
components:
<TABLE>
<CAPTION>
1993 1992
------ ------
(IN
THOUSANDS)
<S> <C> <C>
Service cost--benefits attributed to service during the
period.................................................. $1,185 $1,109
Interest cost on accumulated postretirement benefit
obligation.............................................. 6,743 6,708
Net amortization and deferral............................ (64)
------ ------
Net periodic postretirement benefit cost................. $7,864 $7,817
====== ======
</TABLE>
The following table sets forth the plans' combined status at December 26,
1993 and December 27, 1992:
<TABLE>
<CAPTION>
1993 1992
------- -------
(IN THOUSANDS)
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees.............................................. $55,687 $57,685
Fully eligible active plan participants............... 9,675 6,751
Other active plan participants........................ 25,619 20,983
------- -------
90,981 85,419
Unrecognized net gain and prior service cost.......... (3,036) (10)
------- -------
Accrued postretirement benefit cost................... $87,945 $85,409
======= =======
</TABLE>
The accrued postretirement obligation was determined by application of the
terms of medical, dental, and life insurance plans, together with relevant
actuarial assumptions and health care cost trend rates projected at annual
rates ranging ratably from 12 percent in 1992 to 5 percent through 1999. The
effect of a 1 percent annual increase in these assumed cost trend rates would
increase the accumulated postretirement benefit obligation by approximately
$10.9 million; the annual service costs would increase by approximately $1.2
million. The obligation for postretirement benefits was remeasured as of
January 1, 1994 using a 7.5% discount rate, as compared to the 8.5% discount
rate used for the January 1, 1993 valuation.
F-11
<PAGE>
ACME METALS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(AMOUNTS AND DISCLOSURES FOR THE SIX MONTHS ENDED JUNE 26, 1994 AND JUNE 27,
1993 ARE UNAUDITED)
The reduction in the discount rate contributed to a net increase in the
obligation of approximately $5 million. As the measurement of net periodic
postretirement benefit cost is based on beginning of the year assumptions, the
higher revalued obligation at the end of fiscal 1993 did not have any impact on
the expense recorded for 1993.
In accordance with the new labor agreement with the hourly workers effective
January 1, 1994, individuals retiring on or after January 1, 1993 will be
covered by a new managed care medical plan (PPO). This new plan is expected to
help control future medical costs to be paid by the Company.
POSTEMPLOYMENT BENEFITS:
In November 1992, the Financial Accounting Standards Board issued Statement
No. 112, "Employers' Accounting for Postemployment Benefits," which requires
accrual basis accounting for postemployment benefits, and must be adopted not
later than fiscal 1994. Postemployment benefits include all benefits paid after
employment but before retirement, such as layoff and disability benefits. The
Company has not yet determined the impact, if any, or the timing of this change
on the financial statements.
ACCRUED EXPENSES:
Included in the Consolidated Balance Sheets caption accrued expenses are the
following:
<TABLE>
<CAPTION>
JUNE 26, DECEMBER 26, DECEMBER 27,
1994 1993 1992
----------- ------------ ------------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Accrued salaries and wages....... $15,620 $16,235 $11,177
Accrued postretirement health
care and life insurance......... 5,328 5,328 4,450
Accrued taxes other than income
taxes........................... 5,354 4,970 4,736
Other current liabilities........ 12,032 7,556 8,278
------- ------- -------
$38,334 $34,089 $28,641
======= ======= =======
</TABLE>
INVESTMENTS IN ASSOCIATED COMPANIES
The Company has a 31.7 percent interest in an iron ore mining venture. In
1993, 1992 and 1991, the Company made iron ore purchases of $18.3 million,
$21.7 million, and $26.8 million, respectively, from the venture. At December
26, 1993, $4.2 million was owed to the venture for iron ore purchases; amounts
owed to the venture for such ore purchases were $3.6 million at December 27,
1992.
The Company has a 37% interest in Olga Coal Company. In 1987, Olga Coal
Company filed for protection under Chapter 11 of the U.S. Bankruptcy Act and
the coal mining operation was idled. The coal mining investment is carried at
no value in the Consolidated Balance Sheets.
INCOME TAXES:
The provision (credit) for taxes consisted of the following:
<TABLE>
<CAPTION>
1993 1992 1991
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Taxes on income:
Current:
Federal.................................. $ 5,399 $ 62 $(1,781)
State.................................... 403 113 --
------- ------- -------
5,802 175 (1,781)
Deferred................................. (1,629) (1,848) 1,049
------- ------- -------
$ 4,173 $(1,673) $ (732)
======= ======= =======
</TABLE>
F-12
<PAGE>
ACME METALS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(AMOUNTS AND DISCLOSURES FOR THE SIX MONTHS ENDED JUNE 26, 1994 AND JUNE 27,
1993 ARE UNAUDITED)
In 1992, the Company adopted FAS No. 109, "Accounting for Income Taxes," and
reported the cumulative effect of the change in the method of accounting for
income taxes as of the beginning of the 1992 fiscal year in the consolidated
statements of operations. The cumulative effect of the change in accounting for
income taxes increased the 1992 net loss by $8.1 million or $1.50 per share and
was reported separately in the consolidated statements of operations for the
year ended December 27, 1992. The change in accounting for income taxes
increased the credit for taxes in 1992 by $0.9 million.
Significant components of the Company's deferred tax liabilities and assets
at December 26, 1993 and December 27, 1992 are summarized below.
<TABLE>
<CAPTION>
LIABILITIES 1993 1992
----------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Property, plant and equipment......................... $21,319 $21,535
------- -------
Gross deferred tax liabilities........................ 21,319 21,535
------- -------
<CAPTION>
ASSETS
------
<S> <C> <C> <C>
Postretirement benefits other than pensions........... 34,381 32,222
Inventory............................................. 4,313 3,185
Reserves.............................................. 670 426
Pensions.............................................. 8,620 565
Other employee benefits............................... 2,712 2,039
Other assets.......................................... 910 736
Miscellaneous......................................... 310 236
Alternative minimum tax credits....................... 1,496 3,005
Other................................................. 90 726
------- -------
Gross deferred tax assets............................. 53,502 43,140
------- -------
Net deferred tax asset................................ $32,183 $21,605
======= =======
</TABLE>
The Company believes it is more likely than not to realize the net deferred
tax asset and accordingly no valuation allowance has been provided. This
conclusion is based on, (i) reversing deductible temporary differences
(excluding postretirement amounts) being offset by reversing taxable temporary
differences, (ii) the extremely long period that is available to realize the
future tax benefits associated with the postretirement related deductible
temporary differences and, (iii) the Company's expected future profitability.
In 1993 and 1992, the change in the deferred income tax liability primarily
represents the effect of changes in the amounts of temporary differences from
December 27, 1992 to December 26, 1993 and December 29, 1991 to December 27,
1992, respectively. For 1991, the deferred income tax liability results from
timing differences, created principally by the use of accelerated tax
depreciation, in the recognition of income and expense for tax and financial
reporting purposes.
The Company's federal tax liability is the greater of its regular tax or
alternative minimum tax. At December 26, 1993, the Company had available
alternative minimum tax credits of $1.5 million. This amount can be carried
forward indefinitely and utilized as a tax credit to reduce, to a certain
extent, regular tax liabilities of future years.
F-13
<PAGE>
ACME METALS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(AMOUNTS AND DISCLOSURES FOR THE SIX MONTHS ENDED JUNE 26, 1994 AND JUNE 27,
1993 ARE UNAUDITED)
The effective income tax rates for 1993, 1992 and 1991 are reconciled to the
federal statutory tax rate in the following table:
<TABLE>
<CAPTION>
1993 1992 1991
---- ----- -----
<S> <C> <C> <C>
Statutory federal income tax rate......................... 34.0% (34.0)% (34.0)%
Change in tax rate due to:
Federal surtax.......................................... 1.9 -- --
Depreciation............................................ -- -- 5.1
Reorganization and restructuring costs.................. -- 1.7 3.9
State taxes--net of federal tax effect.................. 4.7 .8 (2.0)
Reserves no longer required............................. -- (6.4) --
Penalties............................................... .6 2.3 --
Other--net.............................................. (1.2) (1.4) 3.0
---- ----- -----
40.0% (37.0)% (24.0)%
==== ===== =====
</TABLE>
There are currently certain federal tax matters that, upon resolution, could
enable the Company to carryback its entire 1986 net operating loss.
For the first six months of 1994 (unaudited) and 1993 (unaudited), cash flows
were reduced by $7.6 million and $2.6 million for payment of income taxes. In
1993, cash flows were reduced by $4.5 million resulting from income tax
payments of $5.0 million and income tax refunds of $0.5 million in connection
with net operating loss carryback claims. In 1992, cash flows were increased by
$4.8 million resulting from $6.0 million of income tax refunds in connection
with net operating loss carryback claims and income tax payments of $1.2
million. No cash payments for income taxes were made in 1991.
LONG-TERM DEBT AND REVOLVING CREDIT AGREEMENT:
The Company's long-term debt at June 26, 1994 (unaudited), December 26, 1993
and December 27, 1992 is summarized as follows:
<TABLE>
<CAPTION>
JUNE 26, DECEMBER 26, DECEMBER 27,
1994 1993 1992
----------- ------------ ------------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C>
Senior notes, 9.35%, due 1994-1999....... $50,000 $50,000 $50,000
Note payable, 6.50% to 6.75%, due 1998-
2008.................................... 6,000 6,000 9,500
------- ------- -------
56,000 56,000 59,500
Less current portion..................... 6,667 6,667 3,500
------- ------- -------
$49,333 $49,333 $56,000
======= ======= =======
</TABLE>
The maturities during the five years ending December 27, 1998 are $6.7
million in 1994 and 1995, $16.7 million in 1996, $6.7 million in 1997 and $7.2
million in 1998. Cash flows from operating activities were reduced by cash paid
for interest on debt by $5.2 million in 1993 and $5.6 million in 1992 and 1991.
The Company has a revolving credit agreement with a group of banks which
provides aggregate commitments of $60 million. At December 26, 1993 and
December 27, 1992, no amounts were outstanding under the credit agreement. The
Company pays an annual commitment fee ranging from three-eighths to one-half
percent on the unused portion of the credit line. The credit agreement includes
a covenant that restricts the payment of dividends. At December 26, 1993,
retained earnings available for the payment of dividends amounted to $10
million.
F-14
<PAGE>
ACME METALS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(AMOUNTS AND DISCLOSURES FOR THE SIX MONTHS ENDED JUNE 26, 1994 AND JUNE 27,
1993 ARE UNAUDITED)
FAIR VALUE OF FINANCIAL INSTRUMENTS
Cash and Short-term Investments
The carrying amount approximates fair value because of the short maturity of
those instruments.
Long-term Debt
The fair value of the Company's long-term debt is estimated by calculating
the present value of the remaining interest and principal payments on the debt
to maturity. The present value computation uses a discount rate equal to the
prime rate at the end of the reporting period plus or minus the spread between
the prime rate and the rate negotiated on the debt at the inception of the
loan.
<TABLE>
<CAPTION>
JUNE 26, 1994 DECEMBER 26, 1993 DECEMBER 27, 1992
----------------- ----------------- -----------------
(UNAUDITED)
(IN THOUSANDS)
CARRYING FAIR CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE AMOUNT VALUE
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Cash and cash
equivalents............. $ 73,651 $ 73,651 $ 50,444 $ 50,444 $ 49,224 $ 49,224
Long-term debt
. Senior notes, 9.35%,
due 1994-1999.......... 50,000 54,165 50,000 56,130 50,000 57,992
. Note payable, 6.50% to
6.75%, due 1998-2008... 6,000 6,433 6,000 7,021 9,500 10,524
-------- -------- -------- -------- -------- --------
$129,651 $134,249 $106,444 $113,595 $108,724 $117,740
======== ======== ======== ======== ======== ========
</TABLE>
COMMON STOCK:
The Company has a stock incentive program which provides, among other
benefits, for the granting of stock options and stock awards to officers and
key employees. Stock options for the Company's common stock are granted at
prices not less than the market price at date of grant and no option may be
exercised more than ten years from the grant date.
Information regarding stock options is summarized below:
<TABLE>
<CAPTION>
OPTION PER SHARE
SHARES OPTION PRICE
-------- ---------------
<S> <C> <C>
OUTSTANDING AT DECEMBER 30, 1990...................... 382,475 $ 8.375-$24.25
Granted............................................. 198,500 $13.563
Exercised........................................... (2,250) $ 8.375
Canceled............................................ (18,700) $ 8.375-$24.25
--------
OUTSTANDING AT DECEMBER 29, 1991...................... 560,025 $ 8.375-$24.25
Granted............................................. 58,000 $18.75
Exercised........................................... (10,100) $ 8.375-$15.625
Canceled............................................ (30,950) $13.563-$24.25
--------
OUTSTANDING AT DECEMBER 27, 1992...................... 576,975
Granted............................................. 88,500 $14.50
Exercised........................................... (39,450) $ 8.375-$17.00
Canceled............................................ (17,675) $13.563-$24.25
--------
OUTSTANDING AT DECEMBER 26, 1993...................... 608,350
Granted (unaudited)................................. 83,500
Exercised (unaudited)............................... (144,300) $ 8.375-$24.25
Canceled (unaudited)................................ (4,550) $17.875-$24.25
--------
OUTSTANDING AT JUNE 26, 1994 (unaudited).............. 543,000
========
</TABLE>
F-15
<PAGE>
ACME METALS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(AMOUNTS AND DISCLOSURES FOR THE SIX MONTHS ENDED JUNE 26, 1994 AND JUNE 27,
1993 ARE UNAUDITED)
At June 26, 1994 (unaudited), 416,750 options were exercisable; at December
26, 1993, 490,850 options were exercisable; at December 27, 1992, 447,650
options were exercisable.
Stock awards granted in 1994 (unaudited) totaled 13,000 at a value of either
$22.88 or $23.19 per share depending on the start date. Stock awards granted in
1993 totaled 15,400 shares at a value of either $16.00 or $16.75 per share
depending on the grant date. Stock awards granted in 1992 totaled 18,650 shares
at a value of either $15.00 or $18.75 per share depending on the grant date.
Stock awards granted in 1991 totaled 60,900 shares at a value of either $11.75
or $13.563 per share depending on the grant date.
COMMITMENTS AND CONTINGENCIES:
The Company's interest in an iron ore mining joint venture requires payment
of its proportionate share of all fixed operating costs, regardless of the
quantity of ore received, plus the variable operating costs of minimum ore
production for the Company's account. Normally, the Company reimburses the
joint venture for these costs through its purchase of ore at the higher of cost
or market prices. During 1993, the Company obtained approximately 56% of its
iron ore needs from the joint venture and purchases during 1993 generally
approximated market prices.
The Company is subject to various federal, state and local environmental
statutes and regulations which provide a comprehensive program for controlling
the release of materials into the environment and require responsible parties
to remediate certain waste disposal sites. In addition, various health and
safety statutes and regulations apply to the work-place environment.
Administrative, civil and criminal penalties may be applicable for failure to
comply with these laws.
These environmental laws and regulations are subject to periodic revision and
modification. The United States Congress, by example, has recently completed a
major overhaul of the federal Clean Air Act which is a major component of the
federal environmental statutes affecting the Company's operations.
Additionally, the U.S. EPA and the eight Great Lakes States are currently
developing guidelines for discharge standards in the Great Lakes basin. These
guidelines, when issued, are expected to require substantially more stringent
limitations than currently in effect for discharges into the Great Lakes basin.
From time to time, the Company is also involved in administrative proceedings
involving the issuance, or renewal, of environmental permits relating to the
conduct of its business. The final issuance of these permits to date has been
resolved on terms satisfactory to the Company; and, in the future, the Company
expects such permits will similarly be resolved on satisfactory terms. However,
if the Company is not successful in obtaining certain variances and revised
regulatory standards for water discharges from its coke and blast furnace
facilities through administrative proceedings as expected, it may be subject to
civil penalties. The Company does not currently have sufficient information to
estimate its potential liabilities, if any, should such actions occur. If the
above matters are not resolved through administrative procedures, the Company
could achieve compliance through capital expenditures approximating $10 million
in the aggregate, with annual estimated operating costs of approximately $.9
million.
Management believes it will be required to make further substantial
expenditures for pollution abatement facilities in future years because of the
continuous revision of these regulatory and statutory requirements. The Company
anticipates making capital expenditures for environmental projects of
approximately $6 million in 1994 and $7 million in 1995 to maintain compliance
with current environmental laws. While such expenditures in future years may be
substantial, management does not presently expect they will have a material
adverse effect on the Company's future ability to compete within its markets.
In those cases where the Company or its subsidiaries have been identified as
a Potentially Responsible Party ("PRP") or are otherwise made aware of a
possible exposure to incur costs associated with an environmental matter,
management determines (i) whether, in fact, the Company or its subsidiaries
have been properly named or are otherwise obligated, (ii) the extent to which
the Company or its subsidiaries may be responsible for costs associated with
the site in question, (iii) an assessment as to whether another party may be
responsible under various indemnification agreements the Company or its
subsidiaries are parties to, and
F-16
<PAGE>
ACME METALS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(AMOUNTS AND DISCLOSURES FOR THE SIX MONTHS ENDED JUNE 26, 1994 AND JUNE 27,
1993 ARE UNAUDITED)
(iv) an estimate, if one can be made, of the costs associated with the clean-up
efforts or settlement costs that are the responsibility of the Company or its
subsidiaries. It is the Company's policy to make provisions for environmental
clean-up costs at the time that a reasonable estimate can be made. Certain of
the Company's operating subsidiaries have been named as PRPs at eleven
Superfund sites. Company investigations have evidenced that in all of these
cases, either the subsidiary had not disposed of waste materials and was
therefore not properly named a PRP, or that the subsidiary's proportion of
materials disposed at such sites was of sufficiently small volume to qualify
the subsidiary as a de minimis contributor. The de minimis status has been
confirmed at essentially all of the applicable sites. The Company believes,
based on all currently available information, that the total costs related to
the eleven Superfund sites will not be material to the Company's financial
position or its results of operations.
At June 26, 1994 (unaudited), the Company had recorded reserves of less than
$0.3 million for environmental clean-up matters. While it is not possible to
predict the ultimate costs of resolving environmental related issues facing the
Company or its subsidiaries, based upon information currently available, they
are currently not expected to have a material effect on the consolidated
financial condition of the Company.
In connection with the spin-off from The Interlake Corporation (Interlake) on
May 29, 1986, Acme Steel Company (a subsidiary of the Company) entered into
certain indemnification agreements with Interlake. Pursuant to the terms of the
indemnification agreements, Interlake undertook to defend, indemnify and hold
Acme Steel Company harmless from any claims, as defined, relating to Acme Steel
Company operations or predecessor operations occurring before May 29, 1986, the
inception of Acme Steel Company. The indemnification agreements cover certain
environmental matters including certain litigation and Superfund sites in
Duluth, Minnesota and Gary, Indiana for which either Interlake or Acme Steel
Company's predecessor operations have been named as defendents or PRPs, as
applicable. To date, Interlake has met its obligations under the
indemnification agreements and has provided the defense and paid all costs
related to these environmental matters. The Company does not have sufficient
information to determine the potential liability, if any, for the matters
covered by the indemnification agreements in the event Interlake fails to meet
its obligations thereunder in the future. In the event that Interlake, for any
reason, were unable to fulfill its obligations under the indemnification
agreements, the Company could have increased future obligations which could be
significant.
Also in connection with the spin-off from Interlake, Acme Steel Company
entered into a Tax Indemnification Agreement (TIA) which generally provides for
Interlake to indemnify Acme Steel Company for certain tax matters. While
certain issues have been negotiated and settled between the Company, Interlake
and the Internal Revenue Service, certain significant issues for the tax years
beginning in 1982 through 1986 remain unresolved.
On March 17, 1994, Acme Steel Company received a Statutory Notice of
Deficiency (Notice) in the amount of $16.9 million in tax as a result of the
Internal Revenue Service's examination of the 1982-1984 tax years. Should the
government sustain its position as proposed for those unresolved issues and
those contained in the Notice, substantial interest would also be due
(potentially in an amount greater than the tax claimed). The taxes claimed
relate principally to adjustments for which Acme Steel Company is indemnified
by Interlake pursuant to the TIA. The Company has adequate reserves to cover
that portion which it believes it may be responsible per the TIA. The Company
is contesting the unresolved issues and the Notice. In the event that
Interlake, for any reason, were unable to fulfill its obligations under the
TIA, the Company could have increased future obligations.
BUSINESS SEGMENTS:
Commencing in 1993, the Company has elected to present its operations in two
segments, Steel Making and Steel Fabricating. Prior year amounts have been
restated for comparison purposes.
F-17
<PAGE>
ACME METALS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(AMOUNTS AND DISCLOSURES FOR THE SIX MONTHS ENDED JUNE 26, 1994 AND JUNE 27,
1993 ARE UNAUDITED)
Steel Making operations include the manufacture of sheet, strip and
semifinished steel in low-, mid-, and high-carbon alloy and special grades.
Principal markets include agricultural, automotive, industrial equipment,
industrial fasteners, welded steel tubing, processor and tool manufacturing
industries.
The Steel Fabricating business segment processes and distributes steel
strapping, strapping tools and industrial packaging (Acme Packaging
Corporation), welded steel tube (Alpha Tube Corporation) and auto and light
truck jacks (Universal Tool & Stamping Company, Inc.). The Steel Fabricating
Segment sells to a number of markets.
All sales between segments are recorded at current market prices. Income from
operations consists of total sales less operating expenses. Operating expenses
include an allocation of expenses incurred at the Corporate Office that are
considered by the Company to be operating expenses of the segments rather than
general corporate expenses. Income (loss) from operations does not include
other non-operating income or expense, interest income or expense, the
cumulative effect of changes in accounting principles, or income taxes.
Identifiable assets are those that are associated with each business segment.
Corporate assets are principally investments in cash equivalents and deferred
income taxes.
The products and services of the Steel Making and Steel Fabricating segments
are distributed through their own respective sales organizations which have
sales offices at various locations in the United States. Export sales are
insignificant for the years presented.
SEGMENT INFORMATION
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED FOR THE YEARS ENDED
----------------------- --------------------------------------------
JUNE 26, JUNE 27, DECEMBER 26, DECEMBER 27, DECEMBER 29,
1994 1993 1993 1992 1991
----------- ----------- ------------ ------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net Sales
Steel Making
Sales to unaffiliated
customers........... $111,510 $ 90,084 $ 187,750 $ 145,627 $ 140,877
Intersegment sales... 62,034 61,108 116,094 114,517 110,184
-------- -------- --------- --------- ---------
173,544 151,192 303,844 260,144 251,061
Steel Fabricating:
Sales to unaffiliated
customers........... 144,913 134,948 269,656 245,935 236,074
Intersegment sales... 968 922 1,873 1,023 --
-------- -------- --------- --------- ---------
145,881 135,870 271,529 246,958 236,074
Eliminations......... (63,002) (62,030) (117,967) (115,540) (110,184)
-------- -------- --------- --------- ---------
Total.............. $256,423 $225,032 $ 457,406 $ 391,562 $ 376,951
======== ======== ========= ========= =========
Income (loss) from
Operations
Steel Making........... $ 9,554 $ (785) $ 736 (1) $ (9,264)(3) $ (4,403)
Steel Fabricating...... 9,238 6,530 11,926 (2) 7,350 (4) 2,561
Eliminations and
adjustments........... (610) (357) 3 (141) 371
-------- -------- --------- --------- ---------
18,182 5,388 12,665 (2,055) (1,471)
======== ======== ========= ========= =========
Identifiable Assets:
Steel Making........... $212,712 $187,407 $ 203,366 $ 185,743 $ 171,389
Steel Fabricating...... 115,209 105,651 108,254 94,514 84,100
Corporate.............. 22,707 17,001 22,249 20,445 35,247
-------- -------- --------- --------- ---------
Total.............. $350,628 $310,059 $ 333,869 $ 300,702 $ 290,736
======== ======== ========= ========= =========
Depreciation:
Steel Making........... $ 5,899 $ 5,705 $ 11,285 $ 10,805 $ 10,010
Steel Fabricating...... 1,942 2,074 3,842 3,804 4,124
Corporate.............. 53 52 107 96 90
-------- -------- --------- --------- ---------
Total.............. $ 7,894 $ 7,831 $ 15,234 $ 14,705 $ 14,224
======== ======== ========= ========= =========
Capital Expenditures:
Steel Making........... $ 4,004 $ 3,268 $ 9,368 $ 5,661 $ 8,402
Steel Fabricating...... 1,040 946 2,283 1,823 2,027
Corporate.............. 27 91 98 73 182
-------- -------- --------- --------- ---------
Total.............. $ 5,071 $ 4,305 $ 11,749 $ 7,557 $ 10,611
======== ======== ========= ========= =========
</TABLE>
F-18
<PAGE>
ACME METALS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(AMOUNTS AND DISCLOSURES FOR THE SIX MONTHS ENDED JUNE 26, 1994 AND JUNE 27,
1993 ARE UNAUDITED)
- --------
(1) Includes a $1.3 million write off of Acme Steel Company's No. 3 Hot Strip
Mill and Billet Mill.
(2) Includes a $0.6 million expense to close Acme Packaging's Pittsburg-East
facility in California and the write-off of a strapping line at its New
Britain, Connecticut facility.
(3) Includes a $2.1 million restructuring charge in connection with a 10%
salaried work force reduction plan.
(4) Includes a $0.3 million restructuring charge in connection with a 10%
salaried work force reduction plan.
SUBSEQUENT EVENT:
On March 11, 1994, Acme Metals Incorporated (the "Company") agreed to sell an
issue of securities on a private placement basis. Within 160 days of the
closing of this transaction (March 28, 1994), the securities will be
exercisable for 5,600,000 common shares of the Company (the "Shares").
Conditions for the release of escrowed proceeds include the approval by the
Board of Directors of the Company of the construction of a continuous thin slab
caster-hot rolled mill, the effectiveness of the Registration Statement for the
Shares and confirmation of the availability of debt financing sufficient for
such construction.
The securities and the underlying common shares have not been registered
under the Securities Act of 1933 (the "Securities Act") and may not be offered
or sold in the United States or to a U.S. person, as defined in Regulation S
under the Securities Act, absent registration or an applicable exemption from
registration requirements.
On a proforma basis, assuming the conditions satisfying the exchange of the
securities occurred at the beginning of the period, earnings per share for the
six month period ended June 26, 1994 would have been $.92 compared to $.20 for
the first six months of 1993 (unaudited).
F-19
<PAGE>
ACME METALS INCORPORATED
QUARTERLY RESULTS (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
-------- -------- -------- --------
<S> <C> <C> <C> <C>
1994
Net sales.............................. $123,560 $132,863
Gross profit........................... 13,519 19,967
Net income............................. 3,598 6,856
Net income per share................... $ 0.64 $ 1.20
-------- -------- -------- --------
1993
Net sales.............................. $107,863 $117,169 $111,919 $120,455
Gross profit........................... 7,518 11,670 9,206 16,829
Net income (loss)...................... 114 2,056 115 3,974
Net income (loss) per share............ $ 0.02 $ 0.38 $ 0.02 $ 0.73
-------- -------- -------- --------
1992
Net sales.............................. $ 98,522 $ 99,993 $ 94,884 $ 98,163
Gross profit........................... 7,967 5,897 6,303 9,379
Net income (loss)(/1/)................. (50,144) (1,288) (2,647) 907
Net income (loss) per share(/1/)....... $ (9.29) $ (0.24) $ (0.49) $ 0.17
Net income before accounting changes... 179 (1,288) (2,647) 907
Net income per share before accounting
changes............................... $ 0.03 $ (0.24) $ (0.49) $ 0.17
-------- -------- -------- --------
1991
Net sales.............................. $ 92,403 $ 91,732 $ 98,545 $ 94,271
Gross profit........................... 6,025 5,642 8,223 7,858
Net income (loss)...................... (1,001) (626) 229 (920)
Net income (loss) per share............ $ (0.19) $ (0.11) $ 0.04 $ (0.17)
-------- -------- -------- --------
</TABLE>
The fourth quarter of 1993 includes a $1.2 million benefit related to Acme's
investment in Wabush Mines, a $1.3 million expense to write-off the Steel
subsidiary's No. 3 Hot Strip Mill and Billet Mill, and $0.6 million of expense
associated with the closure of the Packaging subsidiary's Pittsburg-East
facility in California and the write-off of a strapping line at the Packaging
subsidiary's New Britain, Connecticut facility.
The third quarter of 1992 includes a $3.1 million restructuring charge in
connection with the Company's work force reduction plan.
The fourth quarter of 1992 includes a $1 million gain on the sale of all the
Company's interests in a coal producing property in West Virginia, and a
postretirement plan curtailment gain of $0.4 million related to the
restructuring charge was included in fourth quarter results.
The second quarter of 1991 includes an unusual item related to the assignment
of Acme's rights in claims allowed in the LTV Steel Company, Inc. bankruptcy to
a third party which added the $1.2 million to pre-tax income.
- --------
(1) Reflects the adoption of Financial Accounting Standards (FAS) No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions" and
FAS No. 109, "Accounting for Income Taxes" in the first quarter of 1992.
F-20
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
No dealer, salesperson or other person has been authorized in connection with
the offering made hereby to give any information or to make any representation
not contained in this Prospectus and, if given or made, such information or
representation must not be relied upon as having been authorized by the
Company, any Guarantor or the Underwriters. This Prospectus does not constitute
an offer to sell or a solicitation of an offer to buy any of the securities
offered hereby to any person or by anyone in any jurisdiction where such an
offer or solicitation would be unlawful. Neither the delivery of this
Prospectus nor any sale made hereunder shall, under any circumstances, create
any implication that the information contained herein is correct as of any time
subsequent to the date hereof.
-------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Available Information..................................................... 2
Prospectus Summary........................................................ 3
Risk Factors.............................................................. 10
The Company............................................................... 16
Modernization and Expansion Project....................................... 17
Financing Plan............................................................ 25
Use of Proceeds........................................................... 25
Capitalization............................................................ 26
Selected Consolidated Financial and Operating Data........................ 27
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 28
Business.................................................................. 35
Management................................................................ 48
Security Ownership of Certain Beneficial Owners and Management............ 56
Certain Transactions...................................................... 58
Description of Notes...................................................... 59
Certain Federal Income Tax Considerations Relating to an Investment in the
Senior Secured Discount Notes............................................ 83
Description of Working Capital Facility................................... 86
Underwriting.............................................................. 87
Legal Matters............................................................. 88
Experts................................................................... 88
Index to Consolidated Financial Statements................................ F-1
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
$
LOGO
$175,000,000
% SENIOR SECURED
NOTES DUE 2002
$
% SENIOR SECURED DISCOUNT NOTES DUE 2004
-------------
PROSPECTUS
, 1994
-------------
LEHMAN BROTHERS
BT SECURITIES CORPORATION
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following is a list of the estimated expenses to be incurred by the
Company in connection with the issuance and distribution of the Notes being
registered hereby, other than underwriting discounts and commissions. The
following items are estimated except for the SEC registration fee, the NASD
filing fee.
<TABLE>
<S> <C>
SEC registration fee............................................ $94,828
NASD filing fee................................................. $28,000
Transfer Agent's and Registrar's fees........................... *
Printing costs.................................................. *
Accounting fees and expenses.................................... *
Legal fees and expenses (not including Blue Sky)................ *
Blue Sky fees and expenses...................................... *
Miscellaneous expenses.......................................... *
---------
Total....................................................... $ *
=========
</TABLE>
- --------
*To be provided by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law authorizes a court to
award, or a corporation's board of directors to grant, indemnity to directors
and officers in terms sufficiently broad to permit such indemnification under
certain circumstances for liabilities (including reimbursement for expenses
incurred) arising under the Securities Act of 1933. The Company's Certificate
of Incorporation and By-laws provide for indemnification of its directors,
officers and employees to the maximum extent permitted by the Delaware General
Corporation Law. In addition, the Company has Indemnification Agreements with
its officers and directors.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
On March 28, 1994, the Company sold 5,600,000 special common stock purchase
warrants (the "Special Warrants") on a private placement basis in Canada and
Europe, at a price of U.S. $21.00 per Special Warrant, for an aggregate price
of $117,600,000. Each Special Warrant is exercisable for one share of the
Company's Common Stock without the payment of any additional consideration on
or before August 25, 1994. Nesbitt Thomson Inc. served as the Underwriter for
the Special Warrant Offering and received commissions in the aggregate amount
of $5,292,000.
The sale of the Special Warrants described in the foregoing paragraph is
claimed to be exempt from the registration requirements of the Securities Act
of 1933 by reason of its compliance with Rule 903(b)(2) of Regulation S ("Rules
Governing Offers and Sales Made Outside of the United States Without
Registration Under the Securities Act of 1933"). Concurrently with the filing
of this Registration Statement, the Company has filed a Registration Statement
on Form S-3 relating to the secondary offering of the Common Stock issuable
upon exercise of the Special Warrants.
ITEM 16. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
------- -----------
<S> <C> <C> <C> <C>
1. Underwriting Agreement
**1.1 Form of Underwriting Agreement dated , 1994 among the
Registrants, Lehman Brothers Inc. and BT Securities Corporation
3. Articles of Incorporation and By-Laws
</TABLE>
- --------
*Previously filed.
**Filed herewith.
***To be filed by Amendment.
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
------- -----------
<S> <C> <C> <C>
*3.1 Restated Certificate of Incorporation of the Company. Filed as
Exhibit 3.1 to the Registrant's Annual Report on Form 10-K for the
fiscal year ended December 27, 1992 (the "1992 10-K") and
incorporated by reference herein.
*3.2 Amended and Restated By-Laws of Registrant as adopted May 25, 1992.
Filed as Exhibit 3.2 to the 1992 10-K and incorporated by reference
herein.
*3.3(a) Certificate of Incorporation of Acme Packaging Corporation
*3.3(b) Certificate of Incorporation of Acme Steel Company
*3.3(c) Certificate of Incorporation of Acme Steel Company International,
Inc.
*3.3(d) Articles of Incorporation of Alabama Metallurgical Corporation
*3.3(e) Certificate of Incorporation of Alpha Tube Corporation
*3.3(f) Certificate of Incorporation of Alta Slitting Corporation
*3.3(g) Articles of Incorporation of Universal Tool and Stamping Company,
Inc.
*3.4(a) Bylaws of Acme Packaging Corporation
*3.4(b) Bylaws of Acme Steel Company
*3.4(c) Bylaws of Acme Steel Company International, Inc.
*3.4(d) Bylaws of Alabama Metallurgical Corporation
*3.4(e) Bylaws of Alpha Tube Corporation
*3.4(f) Bylaws of Alta Slitting Corporation
*3.4(g) Bylaws of Universal Tool and Stamping Company, Inc.
4. Instruments defining rights of holders of Notes
**4.1 Form of Indenture dated , 1994 among the Registrants and
Shawmut Bank Connecticut, National Association as trustee, relating
to the % Senior Secured Notes due 2002
**4.2 Form of % Senior Secured Note due 2002 (Included in Exhibit 4.1)
**4.3 Form of Indenture dated , 1994 among the Registrants and
Shawmut Bank Connecticut, National Association as trustee, relating
to the % Senior Secured Discount Notes due 2004
**4.4 Form of % Senior Secured Discount Note due 2004 (Included in
Exhibit 4.3)
**4.5 Form of Collateral Agency Agreement dated , 1994 among the
Company, the Trustees and the Collateral Agent
**4.6 Form of Securities Pledge Agreement dated , 1994 between the
Company and the Collateral Agent
**4.7 Form of Securities Pledge Agreement dated , 1994 among Acme
Steel, Acme Packaging and the Collateral Agent
**4.8 Form of Security Agreement dated , 1994 between Acme Steel and
the Collateral Agent
**4.9 Form of Mortgage dated , 1994 from Acme Steel to the
Collateral Agent
**4.10 Form of Intercreditor Agreement dated , 1994 among Acme Steel,
Harris Trust and Savings Bank and the Collateral Agent
**4.11 Form of Disbursement Agreement dated , 1994 between the Company
and the Collateral Agent
</TABLE>
- --------
*Previously filed.
**Filed herewith.
***To be filed by Amendment.
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
------- -----------
<S> <C> <C> <C>
5. Opinion Regarding Legality
***5.1 Opinion of Coffield Ungaretti & Harris
10. Material contracts
*10.1 Tax Indemnification Agreement between Acme Steel Company (a
subsidiary of the Company) ("Acme") and The Interlake Corporation
dated May 30, 1986 (Filed as Exhibit 10.1 to the 1992 10-K and
incorporated by reference herein)
*10.2 Cross-Indemnification Agreement between Acme and The Interlake
Corporation dated May 29, 1986 (Filed as Exhibit 10.2 to the 1992
10-K and incorporated by reference herein)
*10.3 Agreement between the Registrant and Reynold C. MacDonald dated June
1, 1992 (Filed as Exhibit 10.3 to the 1992 10-K and incorporated by
reference herein)
*10.4 Non-Employee Directors Retirement Plan dated February 22, 1990 as
adopted May 25, 1992 (Filed as Exhibit 10.4 to the 1992 10-K and
incorporated by reference herein)
*10.5 Credit Agreement among the Registrant and Certain Banks and Harris
Trust and Savings Bank, as Agent, dated June 26, 1992 (the "Credit
Agreement") (Filed as Exhibit 10.5 to the 1992 10-K and incorporated
by reference herein)
*10.6 First Amendment to Credit Agreement dated September 15, 1992 (Filed
as Exhibit 10.6 to the 1992 10-K and incorporated by reference
herein)
*10.7 Second Amendment to Credit Agreement dated January 15, 1993 (Filed
as Exhibit 10.7 to the 1992 10-K and incorporated by reference
herein)
*10.8 Third Amendment to credit Agreement dated February 1, 1993 (Filed as
Exhibit 10.8 to the 1992 10-K and incorporated by reference herein)
*10.9 Note agreements dated October 16, 1989 between the Registrant as
Borrower and each of six Financial Institutions as Lender for an
aggregate of $40 million in senior notes due 1999 and $10 million
senior notes due 1996 (the "Note Agreements") (Filed as Exhibit 10.9
to the 1992 10-K and incorporated by reference herein)
*10.10 First Amendment, Consent and Waiver to Note Agreements dated June
26, 1992 (Filed as Exhibit 10.10 to the 1992 10-K and incorporated
by reference herein)
*10.11 Second Amendment to Note Agreements dated February 1, 1993 (Filed as
Exhibit 10.11 to the 1992 10-K and incorporated by reference herein)
*10.12 Assignment and Assumption Agreement dated May 24, 1992 relating to
Indemnification Agreements including Form of Indemnification
Agreement (Filed as Exhibit 10.12 to the 1992 10-K and incorporated
by reference herein)
*10.13 Indemnification Agreement between the Registrant and William R.
Wilson dated July 23, 1992 (Filed as Exhibit 10.13 to the 1992 10-K
and incorporated by reference herein)
*10.14 1986 Executive Incentive Compensation Plan of Acme Metals
Incorporated as adopted May 25, 1992 (Filed as Exhibit 10.14 to the
1992 10-K and incorporated by reference herein)
</TABLE>
- --------
*Previously filed.
**Filed herewith.
***To be filed by Amendment.
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
------- -----------
<S> <C> <C> <C> <C>
*10.15 Deferred Compensation Agreement dated May 24, 1986 between the
Registrant and Brian W. H. Marsden as adopted May 25, 1992 (Filed as
Exhibit 10.15 to the 1992 10-K and incorporated by reference herein)
*10.16 Acme Metals Incorporated Deferred Compensation Plan as Amended and
Restated effective January 1, 1987 as adopted May 25, 1992 (Filed as
Exhibit 10.16 to the 1992 10-K and incorporated by reference herein)
*10.17 Key Executive Severance Pay Plan dated January 22, 1987, as adopted
May 25, 1992, with Exhibit 1 amended through May 25, 1992 (Filed as
Exhibit 10.17 to the 1992 10-K and incorporated by reference herein)
*10.18 Acme Metals Incorporated 1986 Stock Incentive Program, Amended and
Restated as of January 22, 1992 as adopted May 25, 1992 (Filed as
Exhibit 10.18 to the 1992 10-K and incorporated by reference herein)
*10.19 Form of Grant of Stock Option including Form of First Amendment
dated October 30, 1986--10 executive officers, 30 other employees
(Filed as Exhibit 10.19 to the 1992 10-K and incorporated by
reference herein)
*10.20 Form of Grant of Stock Option dated July 22, 1987 including Form of
First Amendment dated October 30, 1986--10 executive officers, 41
other employees (Filed as Exhibit 10.20 to the 1992 10-K and
incorporated by reference herein)
*10.21 Form of Grant of Stock Option dated May 26, 1988--10 executive
officers, 49 other employees (Filed as Exhibit 10.21 to the 1992 10-
K and incorporated by reference herein)
*10.22 Form of Grant of Stock Option dated June 1, 1989--10 executive
officers, 48 other employees (Filed as Exhibit 10.22 to the 1992 10-
K and incorporated by reference herein)
*10.23 Grant of Stock Option Agreement dated June 1, 1990--S.D. Bennett
(Filed as Exhibit 10.23 to the 1992 10-K and incorporated by
reference herein)
*10.24 Form of Grant of Stock Option dated June 7, 1990--9 executive
officers, 50 other employees (Filed as Exhibit 10.24 to the 1992 10-
K and incorporated by reference herein)
*10.25 Form of Grant of Stock Option dated May 20, 1991--10 executive
officers, 54 other employees (Filed as Exhibit 10.24 to the 1992 10-
K and incorporated by reference herein)
*10.26 Form of Grant of Stock Option dated June 12, 1992--5 executive
officers, 10 other employees (Filed as Exhibit 10.26 to the 1992 10-
K and incorporated by reference herein)
*10.27 Form of Grant of Stock Option dated May 27, 1993--5 executive
officers, 26 other employees (Filed as Exhibit 10.27 to the 1992 10-
K and incorporated by reference herein)
*10.28 Stock Award Agreement dated June 1, 1990--S.D. Bennett (Filed as
Exhibit 10.28 to the 1992 10-K and incorporated by reference herein)
*10.29 Form of Grant of Stock Award dated January 25, 1991 including Form
of First Amendment dated January 25, 1991--11 executive officers, 14
other employees (Filed as Exhibit 10.29 to the 1992 10-K and
incorporated by reference herein)
*10.30 Form of Grant of Stock Award dated January 22, 1992--5 executive
officers, 10 other employees (Filed as Exhibit 10.30 to the 1992 10-
K and incorporated by reference herein)
</TABLE>
- --------
* Previously filed.
** Filed herewith.
***To be filed by Amendment.
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
------- -----------
<S> <C> <C> <C> <C>
*10.31 Stock Award Agreement dated June 12, 1992--S.D. Bennett (Filed as
Exhibit 10.31 to the 1992 10-K and incorporated by reference herein)
*10.32 Form of Grant of Stock Award dated January 26, 1993--5 executive
officers, 16 other employees (Filed as Exhibit 10.32 to the 1992 10-
K and incorporated by reference herein)
***10.33 Form of Grant of Stock Award dated January 26, 1994--5 executive
officers, 14 other employees.
*10.34 Acme Metals Incorporated Employee Stock Ownership Plan ("ESOP")
including amendments 1 through 4, as adopted June 1, 1992 (Filed as
Exhibit 10.34 to the 1992 10-K and incorporated by reference herein)
*10.35 Fifth Amendment to the ESOP (Filed as Exhibit 10.35 to the 1993 10-K
and incorporated by reference herein)
*10.36 Acme Metals Incorporated Salaried Employees Retirement Savings Plan
Restated as of January 1, 1990 together with amendments 1 through 4,
as adopted June 1, 1992 (Filed as Exhibit 10.36 to the 1992 10-K and
incorporated by reference herein)
*10.37 Acme Metals Incorporated Salaried Employees' Past Service Pension
Plan ("Past Service Pension Plan") dated June 1, 1992 (Filed as
Exhibit 10.37 to the 1992 10-K and incorporated by reference herein)
*10.38 Amendment No. 1 to the Past Service Pension Plan (Filed as Exhibit
10.38 to the 1993 10-K and incorporated by reference herein)
*10.39 Purchase Agreement dated as of March 11, 1994 between the Registrant
and Nesbitt Thompson Inc. for the purchase of 5.6 million Special
Warrants exercisable for common stock of the Registrant (Filed as
Exhibit 10.39 to the 1993 10-K and incorporated by reference herein)
*10.40 Subscription Agreement for Special Common Stock Purchase Warrants
(Filed as Exhibit 10.40 to the 1993 10-K and incorporated by
reference herein)
11. Statement Regarding Computation of Per Share Earnings
*11.1 Computation of Primary and Fully Diluted Earnings Per Share
12. Statement Regarding Computation of Ratios
*12.1 Computation of Ratio of Earnings to Fixed Charges
21. Subsidiaries of the Registrants
*21.1 Subsidiaries of the Company
*21.2 Subsidiaries of Acme Packaging Corporation
*21.3 Subsidiary of Acme Steel
23. Consent of Experts and Counsel
***23.1 Consent of Coffield Ungaretti & Harris (included in Exhibit 5.1)
*23.2 Consent of Price Waterhouse
*23.3 Consent of Hatch Associates Ltd.
*23.4 Consent of Steltech Ltd.
24. Powers of Attorney
*24.1 Powers of Attorney of Directors of Acme Metals Incorporated
</TABLE>
- --------
* Previously filed.
** Filed herewith.
*** To be filed by Amendment.
II-5
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
------- -----------
<S> <C> <C> <C> <C>
25. Statement of Eligibility of Trustee
**25.1 Statement of Eligibility of Shawmut Bank Connecticut, National
Association to act as Trustee under the Indenture among the
Registrants and as trustee, relating to the % Senior Secured
Notes due 2002 and the % Senior Secured Discount Notes due 2004
</TABLE>
- --------
*Previously filed.
**Filed herewith.
***To be filed by Amendment.
(b) Financial Statement Schedules
The information required by Schedules V, VI, VIII and X for the three years
ended December 26, 1993 is incorporated herein by reference to the Company's
Annual Report on Form 10-K filed with the Securities and Exchange Commission
for the fiscal year ended December 26, 1993.
All other schedules are omitted because they are not applicable or the
required information is shown in the consolidated financial statements or the
notes thereto.
ITEM 17. UNDERTAKINGS
The Registrants hereby undertake that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of a
registration statement in reliance upon Rule 430A and contained in the form of
prospectus filed by the Registrants pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of the registration
statement as of the time it was declared effective.
(2) For purposes of determining any liability under the Securities Act of
1933, each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(3) Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended (the "Securities Act"), may be permitted to directors,
officers and controlling persons of the Registrants pursuant to the foregoing
provisions, or otherwise, the Registrants have been advised that in the opinion
of the Securities and Exchange Commission such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrants of expenses incurred or
paid by a director, officer or controlling person of the Registrants 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 and will be governed
by the final adjudication of such issue.
II-6
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS AMENDMENT NO. 2 TO THE REGISTRATION STATEMENT TO BE SIGNED
ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE VILLAGE OF
RIVERDALE, STATE OF ILLINOIS, ON THE 26TH OF JULY, 1994.
Acme Metals Incorporated
(Registrant)
/s/ Brian W. H. Marsden
By___________________________________
Brian W. H. Marsden
Chairman of the Board of Directors
and Chief Executive Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE
DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<S> <C> <C>
/s/ Brian W. H. Marsden
- ------------------------------------
Brian W. H. Marsden Director, Chairman of the Board of
Directors and Chief Executive
Officer (Principal Executive
Officer) July 26, 1994
/s/ Jerry F. Williams
- ------------------------------------
Jerry F. Williams Vice President/Finance and
Administration (Principal
Financial and Accounting Officer) July 26, 1994
/s/ Stephen D. Bennett
- ------------------------------------
Stephen D. Bennett Director, President and Chief
Operating Officer (Principal
Operating Officer) July 26, 1994
- ------------------------------------
C.J. Gauthier Director July , 1994
/s/ Edward G. Jordan*
- ------------------------------------
Edward G. Jordan Director July 26, 1994
/s/ Andrew R. Laidlaw*
- ------------------------------------
Andrew R. Laidlaw Director July 26, 1994
/s/ Frank A. LePage*
- ------------------------------------
Frank A. LePage Director July 26, 1994
/s/ Reynold C. MacDonald*
- ------------------------------------
Reynold C. MacDonald Director July 26, 1994
/s/ Julien L. McCall*
- ------------------------------------
Julien L. McCall Director July 26, 1994
/s/ Carol O'Cleireacain*
- ------------------------------------
Carol O'Cleireacain Director July 26, 1994
/s/ William P. Sovey*
- ------------------------------------
William P. Sovey Director July 26, 1994
/s/ William R. Wilson*
- ------------------------------------
William R. Wilson Director July 26, 1994
</TABLE>
/s/ Jerry F. Williams
_______________________________
(Attorney-in-Fact) July 26, 1994
*Signed for by the Attorney-in-Fact.
II-7
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS AMENDMENT NO. 2 TO THE REGISTRATION STATEMENT TO BE SIGNED
ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE VILLAGE OF
RIVERDALE, STATE OF ILLINOIS, ON THE 26TH DAY OF JULY, 1994.
Acme Packaging Corporation
(Registrant)
/s/ Brian W. H. Marsden
By:__________________________________
Brian W. H. Marsden
Chairman of the Board of Directors
and Chief Executive Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE
DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<S> <C> <C>
/s/ Brian W. H. Marsden
- ------------------------------------
Brian W. H. Marsden Director, Chairman of the Board of
Directors and Chief Executive
Officer (Principal Executive
Officer) July 26, 1994
/s/ Jerry F. Williams
- ------------------------------------
Jerry F. Williams Director and Treasurer
(Principal Financial Officer) July 26, 1994
/s/ Robert W. Dyke
- ------------------------------------
Robert W. Dyke President (Principal Operating
Officer) July 26, 1994
/s/ William H. Sweeney
- ------------------------------------
William H. Sweeney Vice President--Finance
(Principal Accounting Officer) July 26, 1994
/s/ Stephen D. Bennett
- ------------------------------------
Stephen D. Bennett Director and Vice Chairman July 26, 1994
</TABLE>
II-8
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS AMENDMENT NO. 2 TO THE REGISTRATION STATEMENT TO BE SIGNED
ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE VILLAGE OF
RIVERDALE, STATE OF ILLINOIS, ON THE 26TH DAY OF JULY, 1994.
Acme Steel Company
(Registrant)
/s/ Brian W. H. Marsden
By:__________________________________
Brian W. H. Marsden
Chairman of the Board of Directors
and Chief Executive Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE
DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<S> <C> <C>
/s/ Brian W. H. Marsden
- ------------------------------------
Brian W. H. Marsden Director, Chairman of the Board of
Directors and Chief Executive
Officer (Principal Executive
Officer) July 26, 1994
/s/ Jerry F. Williams
- ------------------------------------
Jerry F. Williams Director and Treasurer
(Principal Financial Officer) July 26, 1994
/s/ Stephen D. Bennett
- ------------------------------------
Stephen D. Bennett Director, President and Chief
Operating Officer (Principal
Operating Officer) July 26, 1994
/s/ Derrick T. Bay
- ------------------------------------
Derrick T. Bay Vice President--Finance
(Principal Accounting Officer) July 26, 1994
</TABLE>
II-9
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS AMENDMENT NO. 2 TO THE REGISTRATION STATEMENT TO BE SIGNED
ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE VILLAGE OF
RIVERDALE, STATE OF ILLINOIS, ON THE 26TH DAY OF JULY, 1994.
Acme Steel Company International,
Inc.
(Registrant)
/s/ Jerry F. Williams
By:__________________________________
Jerry F. Williams
Chairman of the Board of Directors
and Chairman of the Registrant
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE
DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<S> <C> <C>
/s/ Jerry F. Williams
- ------------------------------------
Jerry F. Williams Director, Chairman of the Board of July 26, 1994
Directors and Chairman of the
Registrant (Principal Executive and
Financial Officer)
/s/ George T. Siedlecki
- ------------------------------------
George T. Siedlecki Director
(Principal Accounting Officer) July 26, 1994
/s/ Edward P. Weber, Jr.
- ------------------------------------
Edward P. Weber, Jr. Director July 26, 1994
</TABLE>
II-10
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS AMENDMENT NO. 2 TO THE REGISTRATION STATEMENT TO BE SIGNED
ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE VILLAGE OF
RIVERDALE, STATE OF ILLINOIS, ON THE 26TH DAY OF JULY, 1994.
Alabama Metallurgical Corporation
(Registrant)
/s/ Stephen D. Bennett
By:__________________________________
Stephen D. Bennett
Chairman of the Board of Directors
and Chief Executive Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE
DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<S> <C> <C>
/s/ Stephen D. Bennett
- ------------------------------------
Stephen D. Bennett Director, Chairman of the Board of
Directors and Chief Executive
Officer (Principal Executive
Officer) July 26, 1994
/s/ Jerry F. Williams
- ------------------------------------
Jerry F. Williams President and Director
(Principal Financial Officer) July 26, 1994
/s/ George T. Siedlecki
- ------------------------------------
George T. Siedlecki Director and Treasurer (Principal
Accounting Officer) July 26, 1994
</TABLE>
II-11
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS AMENDMENT NO. 2 TO THE REGISTRATION STATEMENT TO BE SIGNED
ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE VILLAGE OF
RIVERDALE, STATE OF ILLINOIS, ON THE 26TH DAY OF JULY, 1994.
Alpha Tube Corporation
(Registrant)
/s/ Brian W. H. Marsden
By:__________________________________
Brian W. H. Marsden
Chairman of the Board of Directors
and Chief Executive Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE
DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<S> <C> <C>
/s/ Brian W. H. Marsden
- ------------------------------------
Brian W. H. Marsden Director, Chairman of the Board of
Directors and Chief Executive
Officer (Principal Executive
Officer) July 26, 1994
/s/ Jerry F. Williams
- ------------------------------------
Jerry F. Williams Director and Treasurer
(Principal Financial Officer) July 26, 1994
/s/ Edward J. Urbaniak
- ------------------------------------
Edward J. Urbaniak Vice President--Finance
(Principal Accounting Officer) July 26, 1994
/s/ Steven G. Jansto
- ------------------------------------
Steven G. Jansto Director and President
(Principal Operating Officer) July 26, 1994
/s/ Stephen D. Bennett
- ------------------------------------
Stephen D. Bennett Director and Vice Chairman July 26, 1994
</TABLE>
II-12
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS AMENDMENT NO. 2 TO THE REGISTRATION STATEMENT TO BE SIGNED
ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE VILLAGE OF
RIVERDALE, STATE OF ILLINOIS, ON THE 26TH DAY OF JULY, 1994.
Alta Slitting Corporation
(Registrant)
/s/ Brian W. H. Marsden
By:__________________________________
Brian W. H. Marsden
Chairman of the Board of Directors
and Chief Executive Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE
DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<S> <C> <C>
/s/ Brian W. H. Marsden
- ------------------------------------
Brian W. H. Marsden Director, Chairman of the Board of
Directors and Chief Executive
Officer (Principal Executive
Officer) July 26, 1994
/s/ Jerry F. Williams
- ------------------------------------
Jerry F. Williams Director and Treasurer
(Principal Financial Officer) July 26, 1994
/s/ Edward J. Urbaniak
- ------------------------------------
Edward J. Urbaniak Vice President--Finance
(Principal Accounting Officer) July 26, 1994
/s/ Steven G. Jansto
- ------------------------------------
Steven G. Jansto Director and President
(Principal Operating Officer) July 26, 1994
/s/ Stephen D. Bennett
- ------------------------------------
Stephen D. Bennett Director and Vice Chairman July 26, 1994
</TABLE>
II-13
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS AMENDMENT NO. 2 TO THE REGISTRATION STATEMENT TO BE SIGNED
ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE VILLAGE OF
RIVERDALE, STATE OF ILLINOIS, ON THE 26TH DAY OF JULY, 1994.
Universal Tool and Stamping Co.,
Inc.
(Registrant)
/s/ Brian W. H. Marsden
By:__________________________________
Brian W. H. Marsden
Chairman of the Board of Directors
and Chief Executive Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE
DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<S> <C> <C>
/s/ Brian W. H. Marsden
- ------------------------------------
Brian W. H. Marsden Director, Chairman of the Board of
Directors and Chief Executive
Officer (Principal Executive
Officer) July 26, 1994
/s/ Jerry F. Williams
- ------------------------------------
Jerry F. Williams Director and Treasurer
(Principal Financial Officer) July 26, 1994
/s/ Dennis A. Dukes
- ------------------------------------
Dennis A. Dukes Vice President--Finance and
Assistant Secretary
(Principal Accounting Officer) July 26, 1994
/s/ Larry C. Kipp
- ------------------------------------
Larry C. Kipp Director and President
(Principal Operating Officer) July 26, 1994
/s/ Stephen D. Bennett
- ------------------------------------
Stephen D. Bennett Director and Vice Chairman July 26, 1994
</TABLE>
II-14
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
EXHIBITS
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
ACME METALS INCORPORATED
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
------- ----------- ----
<C> <C> <S> <C>
1. Underwriting Agreement
**1.1 Form of Underwriting Agreement dated , 1994
among the Registrants and Lehman Brothers.............
3. Articles of Incorporation and By-Laws
*3.1 Restated Certificate of Incorporation of the Company.
Filed as Exhibit 3.1 to the Registrant's Annual Report
on Form 10-K for the fiscal year ended December 27,
1992 (the "1992 10-K") and incorporated by reference
herein.
*3.2 Amended and Restated By-Laws of Registrant as adopted
May 25, 1992. Filed as Exhibit 3.2 to the 1992 10-K
and incorporated by reference herein..................
*3.3(a) Certificate of Incorporation of Acme Packaging
Corporation...........................................
*3.3(b) Certificate of Incorporation of Acme Steel Company....
*3.3(c) Certificate of Incorporation of Acme Steel Company
International, Inc....................................
*3.3(d) Articles of Incorporation of Alabama Metallurgical
Corporation...........................................
*3.3(e) Certificate of Incorporation of Alpha Tube
Corporation...........................................
*3.3(f) Certificate of Incorporation of Alta Slitting
Corporation...........................................
*3.3(g) Articles of Incorporation of Universal Tool and
Stamping Company Inc..................................
*3.4(a) Bylaws of Acme Packaging Corporation..................
*3.4(b) Bylaws of Acme Steel Company..........................
*3.4(c) Bylaws of Acme Steel Company International, Inc.......
*3.4(d) Bylaws of Alabama Metallurgical Corporation...........
*3.4(e) Bylaws of Alpha Tube Corporation......................
*3.4(f) Bylaws of Alta Slitting Corporation...................
*3.4(g) Bylaws of Universal Tool and Stamping Company Inc.....
4. Instruments defining rights of holders of Notes
**4.1 Form of Indenture dated , 1994 among the
Registrants and Shawmut Bank Connecticut, National
Association as trustee, relating to the % Senior
Secured Notes due 2002................................
**4.2 Form of % Senior Secured Note due 2002 (Included
in Exhibit 4.1).......................................
**4.3 Form of Indenture dated , 1994 among the
Registrants and Shawmut Bank Connecticut, National
Association as trustee, relating to the % Senior
Secured Discount Notes due 2004.......................
**4.4 Form of % Senior Secured Discount Note due 2004
(Included in Exhibit 4.3).............................
**4.5 Form of Collateral Agency Agreement dated , 1994
among the Company, the Trustees and the Collateral
Agent.................................................
**4.6 Form of Securities Pledge Agreement dated , 1994
between the Company and the Collateral Agent..........
</TABLE>
- --------
*Previously filed.
**Filed herewith.
***To be filed by Amendment.
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
------- ----------- ----
<C> <C> <S> <C>
**4.7 Form of Securities Pledge Agreement dated , 1994
among Acme Steel, Acme Packaging and the Collateral
Agent..................................................
**4.8 Form of Security Agreement dated , 1994 between
Acme Steel and the Collateral Agent....................
**4.9 Form of Mortgage dated , 1994 from Acme Steel to
the Collateral Agent...................................
**4.10 Form of Intercreditor Agreement dated , 1994
among Acme Steel, Harris Trust and Savings Bank and the
Collateral Agent.......................................
**4.11 Form of Disbursement Agreement dated , 1994
between the Company and the Collateral Agent...........
5. Opinion Regarding Legality
***5.1 Opinion of Coffield Ungaretti & Harris.................
10. Material contracts
*10.1 Tax Indemnification Agreement between Acme Steel
Company (a subsidiary of the Company) ("Acme") and The
Interlake Corporation dated May 30, 1986 (Filed as
Exhibit 10.1 to the 1992 10-K and incorporated by
reference herein)......................................
*10.2 Cross-Indemnification Agreement between Acme and The
Interlake Corporation dated May 29, 1986 (Filed as
Exhibit 10.2 to the 1992 10-K and incorporated by
reference herein)......................................
*10.3 Agreement between the Registrant and Reynold C.
MacDonald dated June 1, 1992 (Filed as Exhibit 10.3 to
the 1992 10-K and incorporated by reference herein)....
*10.4 Non-Employee Directors Retirement Plan dated February
22, 1990 as adopted May 25, 1992 (Filed as Exhibit 10.4
to the 1992 10-K and incorporated by reference herein).
*10.5 Credit Agreement among the Registrant and Certain Banks
and Harris Trust and Savings Bank, as Agent, dated June
26, 1992 (the "Credit Agreement") (Filed as Exhibit
10.5 to the 1992 10-K and incorporated by reference
herein)................................................
*10.6 First Amendment to Credit Agreement dated September 15,
1992 (Filed as Exhibit 10.6 to the 1992 10-K and
incorporated by reference herein)......................
*10.7 Second Amendment to Credit Agreement dated January 15,
1993( Filed as Exhibit 10.7 to the 1992 10-K and
incorporated by reference herein)......................
*10.8 Third Amendment to credit Agreement dated February 1,
1993 (Filed as Exhibit 10.8 to the 1992 10-K and
incorporated by reference herein)......................
*10.9 Note agreements dated October 16, 1989 between the
Registrant as Borrower and each of six Financial
Institutions as Lender for an aggregate of $40 million
in senior notes due 1999 and $10 million senior notes
due 1996 (the "Note Agreements") (Filed as Exhibit 10.9
to the 1992 10-K and incorporated by reference herein).
</TABLE>
- --------
*Previously filed.
**Filed herewith.
***To be filed by Amendment.
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
------- ----------- ----
<C> <C> <S> <C>
*10.10 First Amendment, Consent and Waiver to Note Agreements
dated June 26, 1992 (Filed as Exhibit 10.10 to the 1992
10-K and incorporated by reference herein)..............
*10.11 Second Amendment to Note Agreements dated February 1,
1993 (Filed as Exhibit 10.11 to the 1992 10-K and
incorporated by reference herein).......................
*10.12 Assignment and Assumption Agreement dated May 24, 1992
relating to Indemnification Agreements including Form of
Indemnification Agreement (Filed as Exhibit 10.12 to the
1992 10-K and incorporated by reference herein).........
*10.13 Indemnification Agreement between the Registrant and
William R. Wilson dated July 23, 1992 (Filed as Exhibit
10.13 to the 1992 10-K and incorporated by reference
herein).................................................
*10.14 1986 Executive Incentive Compensation Plan of Acme
Metals Incorporated as adopted May 25, 1992 (Filed as
Exhibit 10.14 to the 1992 10-K and incorporated by
reference herein).......................................
*10.15 Deferred Compensation Agreement dated May 24, 1986
between the Registrant and Brian W. H. Marsden as
adopted May 25, 1992 (Filed as Exhibit 10.15 to the 1992
10-K and incorporated by reference herein)..............
*10.16 Acme Metals Incorporated Deferred Compensation Plan as
Amended and Restated effective January 1, 1987 as
adopted May 25, 1992 (Filed as Exhibit 10.16 to the 1992
10-K and incorporated by reference herein)..............
*10.17 Key Executive Severance Pay Plan dated January 22, 1987,
as adopted May 25, 1992, with Exhibit 1 amended through
May 25, 1992 (Filed as Exhibit 10.17 to the 1992 10-K
and incorporated by reference herein)...................
*10.18 Acme Metals Incorporated 1986 Stock Incentive Program,
Amended and Restated as of January 22, 1992 as adopted
May 25, 1992 (Filed as Exhibit 10.18 to the 1992 10-K
and incorporated by reference herein)...................
*10.19 Form of Grant of Stock Option including Form of First
Amendment dated October 30, 1986--10 executive officers,
30 other employees (Filed as Exhibit 10.19 to the 1992
10-K and incorporated by reference herein)..............
*10.20 Form of Grant of Stock Option dated July 22, 1987
including Form of First Amendment dated October 30,
1986--10 executive officers, 41 other employees (Filed
as Exhibit 10.20 to the 1992 10-K and incorporated by
reference herein).......................................
*10.21 Form of Grant of Stock Option dated May 26, 1988--10
executive officers, 49 other employees (Filed as Exhibit
10.21 to the 1992 10-K and incorporated by reference
herein).................................................
*10.22 Form of Grant of Stock Option dated June 1, 1989--10
executive officers, 48 other employees (Filed as Exhibit
10.22 to the 1992 10-K and incorporated by reference
herein).................................................
*10.23 Grant of Stock Option Agreement dated June 1, 1990--S.D.
Bennett (Filed as Exhibit 10.23 to the 1992 10-K and
incorporated by reference herein).......................
</TABLE>
- --------
*Previously filed.
**Filed herewith.
***To be filed by Amendment.
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
------- ----------- ----
<C> <C> <S> <C>
*10.24 Form of Grant of Stock Option dated June 7, 1990--9
executive officers, 50 other employees (Filed as
Exhibit 10.24 to the 1992 10-K and incorporated by
reference herein).....................................
*10.25 Form of Grant of Stock Option dated May 20, 1991--10
executive officers, 54 other employees (Filed as
Exhibit 10.24 to the 1992 10-K and incorporated by
reference herein).....................................
*10.26 Form of Grant of Stock Option dated June 12, 1992--5
executive officers, 10 other employees (Filed as
Exhibit 10.26 to the 1992 10-K and incorporated by
reference herein).....................................
*10.27 Form of Grant of Stock Option dated May 27, 1993--5
executive officers, 26 other employees (Filed as
Exhibit 10.27 to the 1992 10-K and incorporated by
reference herein).....................................
*10.28 Stock Award Agreement dated June 1, 1990--S.D. Bennett
(Filed as Exhibit 10.28 to the 1992 10-K and
incorporated by reference herein).....................
*10.29 Form of Grant of Stock Award dated January 25, 1991
including Form of First Amendment dated January 25,
1991--11 executive officers, 14 other employees (Filed
as Exhibit 10.29 to the 1992 10-K and incorporated by
reference herein).....................................
*10.30 Form of Grant of Stock Award dated January 22, 1992--5
executive officers, 10 other employees (Filed as
Exhibit 10.30 to the 1992 10-K and incorporated by
reference herein).....................................
*10.31 Stock Award Agreement dated June 12, 1992--S.D.
Bennett (Filed as Exhibit 10.31 to the 1992 10-K and
incorporated by reference herein).....................
*10.32 Form of Grant of Stock Award dated January 26, 1993--5
executive officers, 16 other employees (Filed as
Exhibit 10.32 to the 1992 10-K and incorporated by
reference herein).....................................
***10.33 Form of Grant of Stock Award dated January 26, 1994--5
executive officers, 14 other employees................
*10.34 Acme Metals Incorporated Employee Stock Ownership Plan
("ESOP") including amendments 1 through 4, as adopted
June 1, 1992 (Filed as Exhibit 10.34 to the 1992 10-K
and incorporated by reference herein).................
*10.35 Fifth Amendment to the ESOP (Filed as Exhibit 10.35 to
the 1993 10-K and incorporated by reference herein)...
*10.36 Acme Metals Incorporated Salaried Employees Retirement
Savings Plan Restated as of January 1, 1990 together
with amendments 1 through 4, as adopted June 1, 1992
(Filed as Exhibit 10.36 to the 1992 10-K and
incorporated by reference herein).....................
*10.37 Acme Metals Incorporated Salaried Employees' Past
Service Pension Plan ("Past Service Pension Plan")
dated June 1, 1992 (Filed as Exhibit 10.37 to the 1992
10-K and incorporated by reference herein)............
*10.38 Amendment No. 1 to the Past Service Pension Plan
(Filed as Exhibit 10.38 to the 1993 10-K and
incorporated by reference herein).....................
</TABLE>
- --------
*Previously filed.
**Filed herewith.
***To be filed by Amendment.
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
------- ----------- ----
<C> <C> <S> <C>
*10.39 Purchase Agreement dated as of March 11, 1994 between
the Registrant and Nesbitt Thompson Inc. for the
purchase of 5.6 million Special Warrants exercisable
for common stock of the Registrant (Filed as Exhibit
10.39 to the 1993 10-K and incorporated by reference
herein)...............................................
*10.40 Subscription Agreement for Special Common Stock
Purchase Warrants (Filed as Exhibit 10.40 to the 1993
10-K and incorporated by reference herein)............
11. Statement Regarding Computation of Per Share Earnings
*11.1 Computation of Primary and Fully Diluted Earnings Per
Share.................................................
12. Statement Regarding Computation of Ratios
*12.1 Computation of Ratio of Earnings to Fixed Charges.....
21. Subsidiaries of the Registrants
*21.1 Subsidiaries of the Company...........................
*21.2 Subsidiaries of Acme Packaging Corporation............
*21.3 Subsidiary of Acme Steel..............................
23. Consent of Experts and Counsel
***23.1 Consent of Coffield Ungaretti & Harris (included in
Exhibit 5.1)..........................................
*23.2 Consent of Price Waterhouse...........................
*23.3 Consent of Hatch Associates Ltd.......................
*23.4 Consent of Steltech Ltd...............................
24. Powers of Attorney
*24.1 Powers of Attorney of Directors of Acme Metals
Incorporated..........................................
25. Statement of Eligibility of Trustee
**25.1 Statement of Eligibility of Shawmut Bank Connecticut,
National Association to act as Trustee under the
Indenture among the Registrants and as trustee,
relating to the % Senior Secured Notes due 2002 and
the % Senior Secured Discount Notes Due 2004.......
</TABLE>
- --------
*Previously filed.
**Filed herewith.
***To be filed by Amendment.
<PAGE>
GRAPHIC MATERIAL CROSS-REFERENCE PAGE
DIAGRAM ILLUSTRATING COMPANY'S EXISTING STEEL-MAKING PROCESS ON
PAGE 19.
DIAGRAM ILLUSTRATING COMPANY'S STEEL-MAKING PROCESS FOLLOWING
COMPLETION OF THE MODERNIZATION PROJECT ON PAGE 21.
<PAGE>
ACME METALS INCORPORATED
$175,000,000 Principal Amount of
____% Senior Secured Notes due 2002
and
$ Principal Amount of
____% Senior Secured Discount Notes due 2004
UNDERWRITING AGREEMENT
----------------------
, 1994
LEHMAN BROTHERS INC.
BT SECURITIES CORPORATION
c/o Lehman Brothers Inc.
3 World Financial Center
New York, New York 10285
Dear Sirs:
Acme Metals Incorporated, a Delaware corporation (the "Company"),
proposes to issue and sell $175,000,000 principal amount of its % Senior
Secured Notes due 2002 (the "Senior Secured Notes") and $ principal
amount of its % Senior Secured Discount Notes due 2004 (the "Senior Secured
Discount Notes" and, together with the Senior Secured Notes, the "Notes") to the
several underwriters (the "Underwriters"). The Senior Secured Notes are to be
issued under an Indenture dated as of , 1994 (the "Note Indenture")
among the Company, the Guarantors (as hereinafter defined) and Shawmut Bank
Connecticut, N.A., as trustee (the "Note Trustee"). The Senior Secured Discount
Notes are to be issued under an Indenture dated as of , 1994 (the
"Discount Note Indenture" and, together with the Note Indenture, the
"Indentures") among the Company, the Guarantors and Shawmut Bank Connecticut,
N.A., as trustee (the "Discount Note Trustee" and, together with the Note
Trustee, the "Trustees"). Pursuant to the terms of the Indentures, the
Company's obligations under the Indentures and the Notes will be unconditionally
guaranteed, jointly and severally, on a senior basis (collectively, the
"Guarantees") by each of Acme Steel Company ("Steel"), Alabama Metallurgical
Corporation ("Metallurgical"), Acme Packaging Corporation ("Packaging"), Alpha
Tube Corporation ("Alpha"), Universal Tool & Stamping Company, Inc.
("Universal"), Alta Slitting Corporation ("Alta") and Acme Steel Company
International,
<PAGE>
-2-
Inc. ("International," and together with Steel, Metallurgical, Packaging, Alpha,
Universal and Alta, the "Guarantors"). The Company and the Guarantors are
referred to herein as the "Registrants" and the Notes and the Guarantees are
hereinafter referred to collectively as the "Securities." This is to confirm the
agreement concerning the purchase of the Securities from the Registrants by the
Underwriters.
1. Representations, Warranties and Agreements of the Registrants.
The Registrants jointly and severally represent, warrant and agree that:
(a) A registration statement on Form S-1 (File No. 33-54101) and one
or more amendments thereto with respect to the Securities have (i) been
prepared by the Registrants in conformity with the requirements of the
Securities Act of 1933, as amended (the "Securities Act"), and the rules
and regulations (the "Rules and Regulations") of the Securities and
Exchange Commission (the "Commission") thereunder, and (ii) been filed with
the Commission under the Securities Act. Copies of such registration
statement and each amendment thereto have been delivered by the Registrants
to the Underwriters. As used in this Agreement, "Effective Time" means the
date and the time as of which such registration statement, or the most
recent post-effective amendment thereto, if any, is or, if such
registration statement was effective at the time of execution of this
Agreement, was declared effective by the Commission; "Effective Date" means
the date of the Effective Time; "Preliminary Prospectus" means each
prospectus included in such registration statement, or amendments thereto,
before it became effective under the Securities Act and any prospectus
filed with the Commission by the Company with the consent of the
Underwriters pursuant to Rule 424(a) of the Rules and Regulations;
"Registration Statement" means such registration statement, as amended at
the Effective Time, including all information, if any, contained in the
final prospectus filed with the Commission pursuant to Rule 424(b) of the
Rules and Regulations in accordance with Section 4(a) hereof and deemed to
be a part of the registration statement as of the Effective Time pursuant
to paragraph (b) of Rule 430A of the Rules and Regulations; and
"Prospectus" means such final prospectus, as first filed with the
Commission pursuant to paragraph (1) or (4) of Rule 424(b) of the Rules and
Regulations or, if no such filing is made, the final prospectus contained
in the Registration Statement at the Effective Time. The Commission has not
issued any order preventing or suspending the use of any
<PAGE>
-3-
Preliminary Prospectus nor instituted any proceeding for such purpose.
(b) The Registration Statement conforms, and the Prospectus and any
further amendments or supplements to the Registration Statement or the
Prospectus will, when they become effective or are filed with the
Commission, as the case may be, conform in all material respects to the
requirements of the Securities Act and the Rules and Regulations; the
Registration Statement and any amendment thereto do not and will not, as of
the applicable effective date, 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; the Prospectus and
any amendment or supplement thereto do not and will not, as of the
applicable filing date, 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, in the light of the circumstances under which
they were made, not misleading; provided that no representation or warranty
is made as to information contained in or omitted from the Registration
Statement or the Prospectus in reliance upon and in conformity with written
information furnished to the Registrants by or on behalf of any Underwriter
with respect to such Underwriter specifically for inclusion therein (as
confirmed in Section 7(e) hereof) or as to that part of the Registration
Statement that constitutes the Statement of Eligibility under the Trust
Indenture Act of the Trustees; and the Indentures conform in all material
respects to the requirements of the Trust Indenture Act and the applicable
rules and regulations thereunder.
(c) The Company and each of its subsidiaries (as defined in Section 13)
have been duly incorporated and are validly existing as corporations in
good standing under the laws of their respective jurisdictions of
incorporation, are duly qualified to do business and are in good standing
as foreign corporations in each jurisdiction in which their respective
ownership or lease of property or the conduct of their respective
businesses requires such qualification except for jurisdictions in which
the failure to so qualify, together with all other such failures, would not
have a material adverse effect upon the business, properties, assets,
rights, operations, condition (financial or otherwise) or prospects of the
Company and its subsidiaries taken as a whole, and have all corporate power
and authority necessary to own or hold their respective properties and to
conduct the businesses as
<PAGE>
-4-
described in the Prospectus; and the Company has no other subsidiaries
other than the Guarantors.
(d) The Company had at the date indicated in the Prospectus a duly
authorized and outstanding capitalization as set forth in the column
entitled "Actual" under the caption "Capitalization" as set forth in the
Prospectus, and, based on the assumptions stated in the Prospectus, the
Company will have on the Delivery Date (as defined below) the adjusted
capitalization as set forth in the column entitled "As Adjusted" under the
caption "Capitalization" as set forth in the Prospectus; all of the Special
Warrants (as defined in the Prospectus) have been duly and validly
authorized and issued, are fully paid and non-assessable and conform to the
description thereof contained in the Prospectus; all of the issued shares
of capital stock of the Company have been duly and validly authorized and
issued, are fully paid and non-assessable; at the Delivery Date, all
conditions to the exercise of the Special Warrants and the release from
escrow of the net proceeds of the sale thereof will have been satisfied or
waived and, upon exercise of the Special Warrants, each share of Common
Stock issuable in respect thereof will be validly issued, fully paid and
non-assessable; and all of the issued shares of capital stock of each
subsidiary of the Company have been duly and validly authorized and issued
and are fully paid and non-assessable and are owned directly or indirectly
by the Company, free and clear of all liens, encumbrances, equities or
claims.
(e) The Indentures, the Security Documents (as defined in the
Indentures), the Notes and the Guarantees have been duly and validly
authorized by the Registrants (to the extent each is a party thereto); and
on the Delivery Date, (i) the Indentures will have been duly and validly
authorized, executed and delivered by each of the Registrants and, when
duly and validly authorized, executed and delivered by the respective
Trustee, will constitute valid and legally binding obligations of each of
the Registrants enforceable against each such Registrant in accordance with
their terms, except as enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium and other similar laws relating to
or affecting creditors' rights generally or by general equitable principles
(regardless of whether such enforceability is considered in a proceeding in
equity or at law); (ii) the Security Agreement (as defined in the
Indentures) will have been duly and validly authorized, executed and
delivered by Acme Steel and, when duly and
<PAGE>
-5-
validly authorized, executed and delivered by the Collateral Agent (as
defined in the Indentures), will constitute valid and legally binding
obligations of Acme Steel enforceable against it in accordance with its
terms, except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and other similar laws relating to or affecting
creditors' rights generally or by general equitable principles (regardless
of whether such enforceability is considered in a proceeding in equity or
at law); (iii) the Mortgage (as defined in the Indentures) will have been
duly and validly authorized, executed and delivered by Acme Steel and will
constitute valid and legally binding obligations of Acme Steel enforceable
against it in accordance with its terms, except as enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium and other
similar laws relating to or affecting creditors' rights generally or by
general equitable principles (regardless of whether such enforceability is
considered in a proceeding in equity or at law); (iv) the Stock Pledge
Agreements (as defined in the Indentures) will have been duly and validly
authorized, executed and delivered by each of the Registrants (to the
extent each is a party thereto) and, when duly and validly authorized,
executed and delivered by the Collateral Agent, will constitute valid and
legally binding obligations of each of the Registrants (to the extent each
is a party thereto) enforceable against each such Registrant in accordance
with their terms, except as enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium and other similar laws relating to
or affecting creditors' rights generally or by general equitable principles
(regardless of whether such enforceability is considered in a proceeding in
equity or at law); (v) the Intercreditor Agreement will have been duly and
validly authorized, executed and delivered by each of the Registrants and,
when duly and validly authorized, executed and delivered by the Collateral
Agent and the Agent (as defined in the Intercreditor Agreement), will
constitute a valid and legally binding obligation of each of the
Registrants enforceable against each Registrant in accordance with its
terms, except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and other similar laws relating to or affecting
creditors' rights generally or by general equitable principles (regardless
of whether such enforceability is considered in a proceeding in equity or
at law); (vi) the Collateral Agency Agreement (as defined in the
Indentures) will have been duly and validly authorized, executed and
delivered by each of the Registrants (to the
<PAGE>
-6-
extent each is a party thereto) and, when duly and validly authorized,
executed and delivered by the Collateral Agent and the Trustees, will
constitute a valid and legally binding obligation of each of the
Registrants (to the extent each is a party thereto) enforceable against
each such Registrant in accordance with its terms, except as enforceability
may be limited by bankruptcy, insolvency, reorganization, moratorium and
other similar laws relating to or affecting creditors' rights generally or
by general equitable principles (regardless of whether such enforceability
is considered in a proceeding in equity or at law); (vii) the Disbursement
Agreement (as defined in the Indentures) will have been duly and validly
authorized, executed and delivered by the Company) and, when duly and
validly authorized, executed and delivered by the Collateral Agent, will
constitute a valid and legally binding obligation of the Company
enforceable against it in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium and other similar laws relating to or affecting creditors'
rights generally or by general equitable principles (regardless of whether
such enforceability is considered in a proceeding in equity or at law);
(viii) the Notes will have been duly and validly authorized for issuance by
the Company and, upon execution, authentication, delivery and payment
therefor as provided in this Agreement and the Indentures, will be validly
issued and outstanding and will constitute valid and legally binding
obligations of the Company entitled to the benefits of the Indentures and
enforceable against the Company in accordance with their terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium and other similar laws relating to or affecting creditors'
rights generally or by general equitable principles (regardless of whether
such enforceability is considered in a proceeding in equity or at law);
(ix) each of the Guarantors will have duly and validly authorized its
Guarantee for issuance and, upon endorsement on the Notes by such Guarantor
and upon execution of the Notes by the Company and authentication, delivery
and payment for the Notes as provided in this Agreement and the Indentures,
its Guarantee will be validly issued and outstanding and will constitute a
valid and legally binding obligation of such Guarantor enforceable against
each such Guarantor in accordance with its terms, except as enforceability
may be limited by bankruptcy, insolvency, reorganization, moratorium and
other similar laws relating to or affecting creditors' rights generally or
by general equitable principles (regardless of whether such enforceability
is considered in a
<PAGE>
-7-
proceeding in equity or at law); and (x) the Indentures, the Security
Documents, the Securities and the Working Capital Facility (as defined
below) will conform in all material respects to the descriptions thereof
contained in the Prospectus.
(f) The execution, delivery and performance of this Agreement by each of
the Registrants and the consummation by each of the Registrants of the
transactions contemplated hereby, the execution and delivery of the
Indentures, the Security Documents, the Notes and the Guarantees by each of
the Registrants (to the extent each is a party thereto) and compliance by
each of the Registrants with all of the provisions hereof and, if
applicable, thereof will not conflict with or result in a breach or
violation of any of the terms or provisions of, or constitute a default
under, any indenture, mortgage, deed of trust, loan agreement (other than
as may arise pursuant to the Company's existing revolving credit agreement
dated as of June 26, 1992 and the Note Agreements, dated as of October 16,
1989, as amended, which will either be terminated or prepaid, as the case
may be) or other agreement or instrument to which the Company or any of its
subsidiaries is a party or by which the Company or any of its subsidiaries
is bound or to which any of the property or assets of the Company or any of
its subsidiaries is subject, nor will such actions result in any violation
of the provisions of the charter or by-laws of the Company or any of its
subsidiaries or any statute or any order, rule or regulation of any court
or governmental agency or body having jurisdiction over the Company or any
of its subsidiaries or any of their properties or assets; and except for
such consents, approvals, authorizations, registrations or qualifications
as may be required under applicable state securities or Blue Sky laws or
filings that may be required by the National Association of Securities
Dealers, Inc. ("NASD") in obtaining from it a written statement that it has
no objections to the terms of this underwriting in connection with the
purchase and distribution of the Securities by the Underwriters, no
consent, approval, authorization or order of, or filing or registration
with, any such court or governmental agency or body is required for the
execution, delivery and performance of this Agreement by each of the
Registrants or the consummation of the transactions contemplated hereby,
the execution and delivery of the Indentures, the Security Documents, the
Intercreditor Agreement, the Collateral Agency Agreement, the Notes and the
Guarantees by each of the Registrants (to the extent each is a party
thereto) or
<PAGE>
-8-
compliance with all of the provisions hereof and, if applicable, thereof.
(g) Each of the Registrants has the requisite corporate power and
authority to execute and deliver this Agreement, the Indentures, the
Security Documents, the Notes and the Guarantees (to the extent each is a
party thereto) and to perform its obligations hereunder and, if applicable,
thereunder; and all corporate action required to be taken for the due and
proper authorization, issuance, sale and delivery of the Securities and the
consummation of the transactions contemplated by the Indentures, the
Security Documents, the Intercreditor Agreement, the Collateral Agency
Agreement, and this Agreement have been duly and validly taken.
(h) This Agreement has been duly and validly authorized, executed and
delivered by each of the Registrants.
(i) Except for the documents relating to the Special Warrants and to the
EPC Contract (as defined in the Prospectus) relating to certain shares of
capital stock of the Company to be issued to Raytheon Engineers &
Contractors, Inc. ("Raytheon") or an affiliate of Raytheon, there are no
contracts, agreements or understandings between any of the Registrants, on
the one hand, and any other person, on the other hand, granting such person
the right to require any of the Registrants to file a registration
statement under the Securities Act with respect to its securities owned or
to be owned by such person or to require any of the Registrants to include
its securities in the securities registered pursuant to the Registration
Statement or in any securities being registered pursuant to any other
registration statement filed by it under the Securities Act.
(j) Neither the Company nor any of its subsidiaries has sustained, since
the date of the latest audited financial statements included in the
Prospectus, any material loss or interference with their respective
businesses from fire, explosion, flood or other calamity, whether or not
covered by insurance, or from any labor dispute or court or governmental
action, order or decree, otherwise than as set forth in the Prospectus;
and, since such date, there has not been any change in the capital stock or
long-term debt of the Company or any of its subsidiaries or any material
adverse change, or any development involving a prospective material adverse
change, in or affecting the general affairs, management, financial
position, stockholders' equity or results of operations of the Company and
its subsidiaries, otherwise than as set forth in the Prospectus.
<PAGE>
-9-
(k) The consolidated financial statements and financial data (including
the related notes and supporting schedules) filed as part of the
Registration Statement or included in the Prospectus present fairly the
financial condition and results of operations of the entities purported to
be shown thereby, at the dates and for the periods indicated, and have been
prepared in conformity with generally accepted accounting principles
applied on a consistent basis throughout the periods involved, except as
indicated therein, and the pro forma financial data filed as part of the
Registration Statement or included in the Prospectus have been prepared in
accordance with the Commission's rules and guidelines with respect to pro
forma financial data and the assumptions used in the preparation thereof
are, in the Registrants' opinion, reasonable.
(l) Price Waterhouse, who have certified the consolidated financial
statements of the Company and its subsidiaries and whose report appears in
the Prospectus, are independent public accountants as required by the
Securities Act and the Rules and Regulations.
(m) The Company and each of its subsidiaries have good and marketable
title in fee simple to all real property and good and marketable title to
all personal property reflected in the financial statements or described in
the Prospectus, in each case free and clear of all liens, encumbrances and
defects except such as are described in the Prospectus or such as do not
materially affect the value of such property as reflected in the Company's
consolidated financial statements and do not materially interfere with the
use made and proposed to be made of such property by the Company and its
subsidiaries; and all real property and buildings held under lease by the
Company and its subsidiaries which are described in the Prospectus are held
by them under valid and binding leases.
(n) The Company and each of its subsidiaries carry, or are covered by,
insurance in such amounts and covering such risks for the conduct of their
respective businesses and the value of their respective properties as is
customary for companies engaged in similar businesses in similar
industries.
(o) Except as described in the Prospectus, there are no legal or
governmental proceedings pending to which the Company or any of its
subsidiaries is a party or of which any property or assets of the Company
or any of its subsidiaries is the
<PAGE>
-10-
subject which, if determined adversely to the Company or any of its
subsidiaries, could reasonably be expected to have a material adverse
effect on the consolidated financial position, stockholders' equity,
results of operations, business or prospects of the Company and its
subsidiaries; and to the best of the Company's knowledge, no such
proceedings are threatened or contemplated by governmental authorities or
threatened by others.
(p) There are no contracts or other documents which are required to be
described in the Prospectus or filed as exhibits to the Registration
Statement by the Securities Act or by the Rules and Regulations which have
not been described to the extent so required in the Prospectus or filed as
exhibits to the Registration Statement.
(q) No relationship, direct or indirect, exists between or among any of
the Registrants on the one hand, and their respective directors, officers,
stockholders, customers or suppliers on the other hand, which is required
to be described in the Prospectus which is not so described.
(r) Except as described in the Prospectus, no labor disturbance by the
employees of the Company or any of the Company's subsidiaries exists or, to
the knowledge of the Company, is imminent which, in either case, could
reasonably be expected to have a material adverse effect on the
consolidated financial position, stockholders' equity, results of
operations, business or prospects of the Company and its subsidiaries.
(s) The Company and each of its subsidiaries are in compliance in all
material respects with all presently applicable provisions of the Employee
Retirement Income Security Act of 1974, as amended, including the
regulations and published interpretations thereunder ("ERISA"); no
"reportable event" (as defined in ERISA) has occurred with respect to any
"pension plan" (as defined in ERISA) for which the Company or any of its
subsidiaries would have any liability under (i) Title IV of ERISA with
respect to termination of, or withdrawal from, any "pension plan" or (ii)
Section 412 or 4971 of the Internal Revenue Code of 1986, as amended,
including the regulations and published interpretations thereunder (the
"Code"); and each "pension plan" for which the Company or any of its
subsidiaries would have any liability that is intended to be qualified
under Section 401(a) of the Code is so qualified and nothing has
<PAGE>
-11-
occurred, whether by action or by failure to act, which would cause the
loss of such qualification.
(t) The Company and each of its subsidiaries have filed all federal,
state and local income and franchise tax returns required to be filed
through the date hereof and have paid all taxes due thereon (other than
those assessments being contested in good faith), and except as described
in the Prospectus, no tax deficiency has been determined adversely to the
Company or any of its subsidiaries which has had (nor does the Company have
any knowledge of any tax deficiency which, if determined adversely to the
Company or any of its subsidiaries, could reasonably have) a material
adverse effect on the consolidated financial position, stockholders'
equity, results of operations, business or prospects of the Company and its
subsidiaries.
(u) Since the date as of which information is given in the Prospectus
through the date hereof, and except as may otherwise be disclosed in the
Prospectus, neither the Company nor any of its subsidiaries has (i) issued
or granted any securities, (ii) incurred any liability or obligation,
direct or contingent, other than liabilities and obligations which were
incurred in the ordinary course of business, (iii) entered into any
transaction not in the ordinary course of business or (iv) declared or paid
any dividend on its capital stock other than, in the case of the
subsidiaries, directly or indirectly, to the Company.
(v) Each of the Company and its subsidiaries (i) makes and keeps
accurate books and records and (ii) maintains internal accounting controls
which provide reasonable assurance that (A) transactions are executed in
accordance with management's authorization, (B) transactions are recorded
as necessary to permit preparation of its financial statements and to
maintain accountability for its assets, (C) access to its assets is
permitted only in accordance with management's authorization and (D) the
reported accountability for its assets is compared with existing assets at
reasonable intervals.
(w) Neither the Company nor any of its subsidiaries (i) is in violation
of its charter or by-laws, (ii) is in default, in any respect material to
the business, properties, assets, rights, operations, condition (financial
or otherwise) or prospects of the Company and its subsidiaries taken as a
whole, and except as set forth in the Prospectus, no event has
<PAGE>
-12-
occurred which, with notice or lapse of time or both, would constitute such
a default, in the due performance or observance of any term, covenant or
condition contained in any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which it is a party or by
which it is bound or to which any of its properties or assets is subject or
(iii) is in violation, in any respect material to the business, properties,
assets, rights, operations condition (financial or otherwise) or prospects
of the Company and its subsidiaries taken as a whole, of any law,
ordinance, governmental rule, regulation or court decree to which it or its
property or assets may be subject or has failed to obtain any material
license, permit, certificate, franchise or other governmental authorization
or permit necessary to the ownership of its property or to the conduct of
its business.
(x) Neither the Company nor any of its subsidiaries, nor any director,
officer, agent, employee or, to the Company's knowledge, any other person
associated with or acting on behalf of the Company or any of its
subsidiaries, has used any corporate funds for any unlawful contribution,
gift, entertainment or other unlawful expense relating to political
activity; made any direct or indirect unlawful payment to any foreign or
domestic government official or employee from corporate funds; violated or
is in violation of any provision of the Foreign Corrupt Practices Act of
1977; or made any bribe, rebate, payoff, influence payment, kickback or
other unlawful payment.
(y) Other than as set forth in the Prospectus, there has been no
storage, disposal, generation, manufacture, refinement, transportation,
handling or treatment of toxic wastes, medical wastes, hazardous wastes or
hazardous substances by the Company or any of its subsidiaries (or, to the
knowledge of the Company, any of their predecessors in interest) at, upon
or from any of the property now or previously owned or leased by the
Company or its subsidiaries in violation of any applicable law, ordinance,
rule, regulation, order, judgment, decree or permit or which would require
remedial action under any applicable law, ordinance, rule, regulation,
order, judgment, decree or permit, except for any violation or remedial
action which would not have, or could not be reasonably likely to have,
singularly or in the aggregate with all such violations and remedial
actions, a material adverse effect on the general affairs, management,
consolidated financial position, stockholders' equity or results of
operations of the Company and its subsidiaries;
<PAGE>
-13-
other than as set forth in the Prospectus, there has been no spill,
discharge, leak, emission, injection, escape, dumping or release of any
kind onto such property or into the environment surrounding such property
of any toxic wastes, medical wastes, solid wastes, hazardous wastes or
hazardous substances due to or caused by the Company or any of its
subsidiaries or with respect to which the Company or any of its
subsidiaries has knowledge, except for any such spill, discharge, leak,
emission, injection, escape, dumping or release which would not have or
would not be reasonably likely to have, singularly or in the aggregate
with all such spills, discharges, leaks, emissions, injections, escapes,
dumpings and releases, a material adverse effect on the general affairs,
management, consolidated financial position, stockholders' equity or
results of operations of the Company and its subsidiaries; and the terms
"hazardous wastes", "toxic wastes", "hazardous substances" and "medical
wastes" shall have the meanings specified in any applicable local, state,
federal and foreign laws or regulations with respect to environmental
protection.
(z) None of the Registrants is an "investment company" within the
meaning of such term under the Investment Company Act of 1940, as amended,
and the rules and regulations of the Commission thereunder.
(aa) Upon execution and delivery by Acme Steel, on the Delivery Date and
assuming due recording, each Mortgage will create and constitute (A) a
valid and enforceable mortgage lien on the real property and fixtures
described therein (the "Real Property"), (B) a valid and enforceable
security interest in such of the Mortgaged Property (as defined in the
Mortgage), other than fixtures, as is subject to the provisions of Article
9 (the "UCC Property") of the Uniform Commercial Code (the "UCC") as in
effect in the state in which such Mortgaged Property is located and (C) a
valid common law lien on or pledge of such of the Mortgaged Property as is
not UCC Property or Real Property (such property, together with the UCC
Property, the "Personal Property"). Each Mortgage will be in proper form
under the laws of the state in which the Mortgaged Property encumbered
thereby is located, to be accepted for recording in the county where such
Mortgaged Property is located.
(bb) Upon execution and delivery by Acme Steel on the Delivery Date and
assuming due filing of the Financing Statements (as hereinafter defined),
each of the Security
<PAGE>
-14-
Agreement will create and constitute a valid and enforceable security
interest in, lien on or pledge of all of the Pledged Collateral (as defined
in each Security Agreement).
(cc) Upon execution and delivery by each of the Registrants (to the
extent each is a party thereto) on the Delivery Date and assuming delivery
of certificates representing the stock constituting the Pledged
Collateral, each of the Stock Pledge Agreements will create and constitute
a valid and enforceable security interest in, lien on or pledge of all of
the Pledged Collateral (as defined in each Stock Pledge Agreement).
(dd) Upon filing of the UCC-1 financing statements (the "Financing
Statements") relating to (A) each Mortgage with the Office of the Secretary
of State in the states in which the Mortgaged Property encumbered by such
Mortgage is located, and with the recorder in the county where real
property on which fixtures are present is located and (B) each Security
Agreement with the Office of the Secretary of State in the states in which
the Pledged Collateral described therein is located and with the recorder
in the county where real property on which fixtures are present is located,
the security interest, lien or pledge created by (x) each Security
Agreement in all of the Pledged Collateral described therein will be a
perfected security interest prior to all other claims or security interests
therein which may be perfected by the filing of a Financing Statement or by
possession, except for prior liens and encumbrances permitted by such
Security Agreement, (y) each Stock Pledge Agreement in all of the Pledged
Collateral described therein will be a perfected security interest prior to
all other claims or security interests therein which may be perfected by
the filing of a Financing Statement or by possession, except for prior
liens and encumbrances permitted by such Stock Pledge Agreement, and (z)
each Mortgage in UCC Property will be a perfected security interest prior
to all other security interests therein which may be perfected by filing a
Financing Statement or by possession, except for prior liens and
encumbrances permitted by such Mortgage.
(ee) (i) The Registrants have delivered to the Underwriters a true,
correct and complete copy of the Working Capital Facility (as defined in
the Prospectus); (ii) each of the representations and warranties in the
Working Capital Facility is true and correct in all respects as of the date
<PAGE>
-15-
hereof and will be true and correct in all respects on and as of the
Delivery Date, except insofar as such representations and warranties speak
only as of a prior date (in which case such representations and warranties
were true and correct in all material respects as of such prior date); and
(iii) there exists as of the date hereof and on and as of the Delivery Date
(after giving effect to the transactions contemplated by this Agreement) no
condition which would constitute a Default or an Event of Default (each as
defined in the Working Capital Facility) under the Working Capital
Facility.
2. Purchase of the Securities by the Underwriters. The Company
agrees to issue and sell to each of the Underwriters, and on the basis of the
representations and warranties contained in, and subject to the terms and
conditions of, this Agreement, each of the Underwriters, severally and not
jointly, agrees to purchase from the Company, the respective principal amount of
the Senior Secured Notes, and the Senior Secured Discount Notes set forth
opposite that Underwriter's name on Schedule 1 hereto, (i) in the case of the
Senior Secured Notes and accompanying Guarantees, at a purchase price of $
per $1,000 principal amount, plus accrued interest, if any, from ,
1994 to the Delivery Date and (ii) in the case of the Senior Secured Discount
Notes and accompanying Guarantees, at a purchase price of $ per $1,000
principal amount, plus accreted discount if any from , 1994 to the
Delivery Date. The Company shall not be obligated to deliver any of the
Securities to be delivered on the Delivery Date except upon payment for all of
the Securities to be purchased on the Delivery Date as provided herein.
3. Delivery of and Payment for the Securities. Delivery of and
payment for the Securities shall be made at A.M., New York City time, on
the fifth full business day following the date of this Agreement or on such
other date as shall be determined by agreement between the Underwriters and the
Company and at such place as shall be determined by agreement between the
Underwriters and the Company. This date and time are sometimes referred to as
the "Delivery Date." On the Delivery Date, the Company shall deliver or cause
to be delivered the Securities to the Underwriters against payment to or upon
the order of the Company of the purchase price by certified or official bank
check or checks payable in New York Clearing House (next-day) funds. Time shall
be of the essence, and delivery at the time and place specified pursuant to this
Agreement is a further condition of the obligation of each Underwriter
hereunder. Certificates representing the Senior Secured Notes and the Senior
Secured Discount Notes, as the case may be, shall be registered in such
<PAGE>
-16-
names and issued in such denominations as the Underwriters shall request not
later than two full business days prior to the Delivery Date. For the purpose
of expediting the checking and packaging of the certificates for the Securities,
the Company shall make the certificates representing the Senior Secured Notes
and the Senior Secured Discount Notes, as the case may be, available for
inspection by the Underwriters in New York, New York, not later than 1:00 P.M.,
New York City time, on the business day prior to the Delivery Date.
4. Further Agreements of the Registrants. The Registrants jointly and
severally agree:
(a) To use their best efforts to cause the Registration Statement to
become effective (if the Registration Statement shall not have been
declared effective prior to the execution hereof) at the earliest possible
time, and to prepare the Prospectus in a form approved by the Underwriters
and to file such Prospectus pursuant to Rule 424(b) under the Securities
Act if required not later than the Commission's close of business on the
second business day following the execution and delivery of this Agreement
or, if applicable, such earlier time as may be required by Rule 430A(a)(3)
under the Securities Act; to make no further amendment or any supplement to
the Registration Statement or to the Prospectus except as permitted herein;
to advise the Underwriters, promptly after they receive notice thereof, of
the time when the Registration Statement becomes effective (if not
effective at the time of execution of this Agreement) or when any amendment
to the Registration Statement has been filed or becomes effective or any
supplement to the Prospectus or any amended Prospectus has been filed and
to furnish the Underwriters with copies thereof; to advise the
Underwriters, promptly after they receive notice thereof, of the issuance
by the Commission of any stop order or of any order preventing or
suspending the use of any Preliminary Prospectus or the Prospectus, of the
suspension of the qualification of the Securities for offering or sale in
any jurisdiction, of the initiation or threatening of any proceeding for
any such purpose, or of any request by the Commission for the amending or
supplementing of the Registration Statement or the Prospectus or for
additional information; and, in the event of the issuance of any stop order
or of any order preventing or suspending the use of any Preliminary
Prospectus or the Prospectus or suspending any such qualification, to use
promptly their best efforts to obtain its withdrawal;
<PAGE>
-17-
(b) To furnish promptly to each of the Underwriters and to counsel for
the Underwriters a signed copy of the Registration Statement as originally
filed with the Commission, and each amendment thereto filed with the
Commission, including all consents and exhibits filed therewith;
(c) To deliver promptly to the Underwriters such number of the following
documents as the Underwriters shall reasonably request: (i) conformed
copies of the Registration Statement as originally filed with the
Commission and each amendment thereto (in each case including exhibits) and
(ii) each Preliminary Prospectus, the Prospectus and any amended or
supplemented Prospectus; and, if the delivery of a prospectus is required
by law at any time in connection with the offering or sale of the
Securities and if at such time any events shall have occurred as a result
of which the Prospectus as then amended or supplemented would include an
untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made when such Prospectus is delivered,
not misleading, or, if for any other reason it shall be necessary to amend
or supplement the Prospectus in order to comply with the Securities Act, to
notify the Underwriters and, upon their request, to prepare and furnish
without charge to the Underwriters and to any dealer in securities as many
copies as the Underwriters may from time to time reasonably request of an
amended Prospectus or a supplement to the Prospectus which will correct
such statement or omission or effect such compliance;
(d) To file promptly with the Commission any amendment to the
Registration Statement or the Prospectus or any supplement to the
Prospectus that may, in the judgment of the Registrants or the
Underwriters, be required by the Securities Act or requested by the
Commission;
(e) That they will not at any time file with the Commission any (i)
amendment to the Registration Statement or supplement to the Prospectus or
(ii) any Prospectus pursuant to Rule 424 of the Rules and Regulations, to
which the Underwriters or their counsel shall reasonably object;
(f) As soon as practicable after the Effective Date, to make generally
available to the Registrants' security holders and to deliver to the
Underwriters a consolidated earnings statement of the Registrants (which
need not be audited)
<PAGE>
-18-
complying with Section 11(a) of the Securities Act and the Rules and
Regulations (including Rule 158);
(g) As long as any of the Securities remain outstanding, to furnish to
the Underwriters copies of all public reports and all reports and financial
statements furnished by the Registrants to the Commission pursuant to the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), or any
rule or regulation of the Commission thereunder, and such other documents,
reports and information as shall be furnished by the Registrants to the
holders of the Securities or to the holders of the Company's publicly
issued securities generally;
(h) Promptly from time to time to take such action as the Underwriters
may reasonably request to qualify the Securities for offering and sale
under the securities laws of such domestic jurisdictions as the
Underwriters may request and to comply with such laws so as to permit the
continuance of sales and dealings therein in such jurisdictions for so long
as may be necessary to complete the distribution of the Securities;
provided that in connection therewith none of the Registrants shall be
required to qualify as a foreign corporation or to file a general consent
to service of process in any jurisdiction;
(i) During the period beginning on the date hereof and continuing
through the Delivery Date, not to offer for sale, sell, contract to sell or
otherwise dispose of, directly or indirectly, any debt securities of the
Company (other than the Notes) without the prior written consent of each of
the Underwriters; and
(j) To apply the net proceeds from the sale of the Securities being sold
by the Registrants as set forth in the Prospectus.
5. Expenses. The Registrants jointly and severally agree to pay
(a) the costs incident to the authorization, issuance, sale and delivery of the
Securities and any taxes payable in that connection; (b) the costs incident to
the preparation, printing and filing under the Securities Act of the
Registration Statement and any amendments and exhibits thereto; (c) the costs of
distributing the Registration Statement as originally filed and each amendment
thereto and any post-effective amendments thereto (including, in each case,
exhibits), any Preliminary Prospectus, the Prospectus and, subject to Section
4(c), any amendment or supplement to the Prospectus, all as provided in this
Agreement; (d) the costs of
<PAGE>
-19-
reproducing and distributing this Agreement, the Security Documents and the
Indentures; (e) the filing fees incident to securing any required review by the
NASD of the terms of sale of the Securities; (f) the fees and expenses of
qualifying the Securities under the securities laws of the several jurisdictions
as provided in Section 4(h) and of preparing, printing and distributing a Blue
Sky Memorandum and a Legal Investment Survey (including related fees and
expenses of counsel to the Underwriters); (g) the fees and expenses of the
Trustees, any agent of the Trustees or counsel to the Trustees; (h) the fees and
expenses charged by investment rating agencies for the rating of the Securities;
(i) the costs of preparing certificates representing the Securities; (j) the
fees and expenses of Hatch Associates, Ltd./Steltech Ltd. (not to exceed $
); and (k) all other costs and expenses incident to the performance of the
obligations of the Registrants under this Agreement; provided that, except as
provided in this Section 5 and in Section 10, the Underwriters shall pay their
own costs and expenses, including the costs and expenses of their counsel, any
transfer taxes on the Securities which it may sell and the expenses of
advertising any offering of the Securities made by the Underwriters.
6. Conditions of Underwriters' Obligations. The respective
obligations of the Underwriters hereunder are subject to the accuracy, when made
and on the Delivery Date, of the representations and warranties of the
Registrants contained herein and in the Security Documents, to the performance
by the Registrants of their obligations hereunder, and to each of the following
additional terms and conditions:
(a) The Registration Statement shall have become effective (or if a
post-effective amendment is required to be filed under the Securities Act,
such post-effective amendment shall have become effective) not later than
1:00 p.m., New York City time, on the date hereof, and the Prospectus shall
have been timely filed with the Commission in accordance with Section 4(a)
if required; no stop order suspending the effectiveness of the
Registration Statement or any part thereof shall have been issued and no
proceeding for that purpose shall have been initiated or threatened by the
Commission; and any request of the Commission for inclusion of additional
information in the Registration Statement or the Prospectus or otherwise
shall have been complied with.
(b) No Underwriter shall have discovered and disclosed to the Company on
or prior to the Delivery Date that the Registration Statement or the
Prospectus or any amendment or
<PAGE>
-20-
supplement thereto contains an untrue statement of a fact which, in the
opinion of Cahill Gordon & Reindel, counsel for the Underwriters, is
material or omits to state a fact which, in the opinion of such counsel, is
material and is required to be stated therein or is necessary to make the
statements therein not misleading.
(c) All corporate proceedings and other legal matters incident to the
authorization, form and validity of this Agreement, the Indentures, the
Security Documents, the Securities, the Registration Statement and the
Prospectus, and all other legal matters relating to this Agreement and the
transactions contemplated hereby shall be reasonably satisfactory in all
respects to counsel for the Underwriters, and the Registrants shall have
furnished to such counsel all documents and information that it may
reasonably request to enable it to pass upon such matters.
(d) Coffield Ungaretti & Harris shall have furnished to the Underwriters
its written opinion, as counsel to the Registrants, addressed to the
Underwriters and dated the Delivery Date, in form and substance
satisfactory to the Underwriters, to the effect that:
(i) The Company and each of its subsidiaries have been duly
incorporated, are validly existing as corporations in good standing
under the laws of their respective jurisdictions of incorporation with
all power and authority necessary to own or hold their respective
properties and conduct their respective businesses as described in the
Prospectus, and are duly qualified to do business and are in good
standing as foreign corporations in each jurisdiction in which the
ownership or leasing of their respective properties or the conduct of
their respective businesses requires it;
(ii) The Indentures have been duly and validly authorized,
executed and delivered by each of the Registrants and duly qualified
under the Trust Indenture Act and, assuming due authorization, execution
and delivery thereof by the respective Trustees, are valid and legally
binding obligations of each of the Registrants enforceable against each
Registrant in accordance with their terms, except as enforceability may
be limited by bankruptcy, insolvency, reorganization, moratorium and
other similar laws relating to or affecting creditors' rights generally
or by general
<PAGE>
-21-
equitable principles (regardless of whether such enforceability is
considered in a proceeding in equity or at law);
(iii) Each of the Security Agreements and the Securities Pledge
Agreements have been duly and validly authorized, executed and
delivered by each of the Registrants (to the extent each is a party
thereto) and, assuming due authorization, execution and delivery
thereof by the Collateral Agent, are valid and legally binding
obligations of each of the Registrants (to the extent each is a party
thereto) enforceable against each such Registrant in accordance with
their respective terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium and other similar
laws relating to or affecting creditors' rights generally or by
general equitable principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law);
(iv) The Intercreditor Agreement has been duly and validly
authorized, executed and delivered by each of the Registrants and,
assuming due authorization, execution and delivery thereof by the
Collateral Agent and the Agent, is a valid and legally binding
obligation of each of the Registrants enforceable against each
Registrant in accordance with its terms, except as enforceability may
be limited by bankruptcy, insolvency, reorganization, moratorium and
other similar laws relating to or affecting creditors' rights
generally or by general equitable principles (regardless of whether
such enforceability is considered in a proceeding in equity or at
law);
(v) The Collateral Agency Agreement has been duly and validly
authorized, executed and delivered by each of the Registrants (to the
extent that each is a party thereto) and, assuming due authorization,
execution and delivery thereof by the Collateral Agent and the
Trustee, is a valid and legally binding obligation of each of the
Registrants (to the extent that each is a party thereto) enforceable
against each such Registrant in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally or by general equitable
principles (regardless of whether such
<PAGE>
-22-
enforceability is considered in a proceeding in equity or at law);
(vi) The Disbursement Agreement has been duly and validly
authorized, executed and delivered by each of the Registrants (to the
extent that each is a party thereto) and, assuming due authorization,
execution and delivery thereof by the Collateral Agent, is a valid and
legally binding obligation of each of the Registrants (to the extent
that each is a party thereto) enforceable against each such Registrant
in accordance with its terms, except as enforceability may be limited
by bankruptcy, insolvency, reorganization, moratorium and other
similar laws relating to or affecting creditors' rights generally or
by general equitable principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law);
(vii) The Senior Secured Notes are in the form contemplated by
the Note Indenture and have been duly and validly authorized and
executed and, assuming the due execution, authentication and delivery
thereof by the Note Trustee pursuant to the Note Indenture (and
payment therefor by the Underwriters in accordance with the terms of
this Agreement), are valid and legally binding obligations of the
Company enforceable against the Company in accordance with their
terms, except as enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium and other similar laws relating
to or affecting creditors' rights generally or by general equitable
principles (regardless of whether such enforceability is considered in
a proceeding in equity or at law);
(viii) The Senior Secured Discount Notes are in the form
contemplated by the Discount Note Indenture and have been duly and
validly authorized and executed and, assuming the due execution,
authentication and delivery thereof by the Discount Note Trustee
pursuant to the Discount Note Indenture (and payment therefor by the
Underwriters in accordance with the terms of this Agreement), are
valid and legally binding obligations of the Company enforceable
against the Company in accordance with their terms, except as
enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally or by general equitable
principles
<PAGE>
-23-
(regardless of whether such enforceability is considered in a
proceeding in equity or at law);
(ix) Each of the Guarantors has duly and validly authorized its
Guarantee for issuance and, upon endorsement on the Senior Secured
Notes and the Senior Secured Discount Notes by such Guarantor and upon
execution of the Senior Secured Notes and the Senior Secured Discount
Notes by the Company and authentication, delivery and payment for the
Senior Secured Notes and the Senior Secured Discount Notes as provided
in this Agreement and the respective Indentures, each such Guarantee
will be validly issued and outstanding and will constitute valid and
legally binding obligations of such Guarantor enforceable against such
Guarantor in accordance with its terms, except as enforceability may
be limited by bankruptcy, insolvency, reorganization, moratorium and
other similar laws relating to or affecting creditors' rights
generally or by general equitable principles (regardless of whether
such enforceability is considered in a proceeding in equity or at
law);
(x) The Indentures, Security Documents, the Intercreditor
Agreement, the Collateral Agency Agreement, the Securities and the
Working Capital Facility conform in all material respects to the
description thereof contained in the Prospectus;
(xi) The Company had at the date indicated in the Prospectus a
duly authorized and outstanding capitalization as set forth in the
column entitled "Actual" under the caption "Capitalization" as set
forth in the Prospectus, and, based on the assumptions stated in the
Prospectus, the Company will have on the Delivery Date the adjusted
capitalization as set forth in the column entitled "As Adjusted" under
the caption "Capitalization" as set forth in the Prospectus; all of
the Special Warrants (as defined in the Prospectus) have been duly and
validly authorized and issued, are fully paid and non-assessable and
conform to the description thereof contained in the Prospectus; all of
the issued shares of capital stock of the Company have been duly and
validly authorized and issued, are fully paid and non-assessable and
conform to the description thereof contained in the Prospectus; all
conditions to the exercise of the Special Warrants and the release
from
<PAGE>
-24-
escrow of the net proceeds of the sale thereof have been satisfied or
waived and, upon exercise of the Special Warrants, each share of
Common Stock issuable in respect thereof will be validly issued, fully
paid and non-assessable; and all of the issued shares of capital stock
of each subsidiary of the Company have been duly and validly
authorized and issued and are fully paid, non-assessable and are owned
directly or indirectly by the Company and, to such counsel's
knowledge, free and clear of all liens, encumbrances, equities or
claims;
(xii) To such counsel's knowledge, there are no legal or
governmental proceedings pending, threatened or contemplated to which
the Company or any of its subsidiaries is or would be a party or of
which any of the property or assets of the Company or any of its
subsidiaries is or would be the subject that are required to be
disclosed in the Registration Statement or the Prospectus, other than
those disclosed therein;
(xiii) The Registration Statement was declared effective under
the Securities Act and the Indentures were qualified under the Trust
Indenture Act as of the date and time specified in such opinion, the
Prospectus was filed with the Commission pursuant to the subparagraph
of Rule 424(b) of the Rules and Regulations specified in such opinion,
if applicable, on the date specified therein; and no stop order
suspending the effectiveness of the Registration Statement has been
issued and, to such counsel's knowledge, no proceeding for that
purpose is pending or threatened by the Commission;
(xiv) The Registration Statement and the Prospectus and any
further amendments or supplements thereto made by the Company prior to
the Delivery Date (other than the financial statements and related
schedules and other financial and statistical information included
therein, as to which such counsel need not express an opinion) comply
as to form in all material respects with the requirements of the
Securities Act and the Rules and Regulations; and the Indentures
conform in all material respects to the requirements of the Trust
Indenture Act and the rules and regulations thereunder;
(xv) To such counsel's knowledge, there are no contracts or
other documents which are required to be
<PAGE>
-25-
described in the Prospectus or filed as exhibits to the Registration
Statement by the Securities Act or by the Rules and Regulations which
have not been described as required or filed as required as exhibits
to the Registration Statement;
(xvi) Each of the Registrants has the requisite corporate power
and authority to execute and deliver this Agreement, the Indenture,
the Security Documents, the Notes, the Guarantees and the Working
Capital Facility (in each case, to the extent it is a party thereto)
and to perform its obligations hereunder and, if applicable,
thereunder; all requisite corporate action required to be taken for
the due and proper authorization, issuance, sale and delivery of the
Securities and the consummation of the transactions contemplated by
this Agreement, the Indentures, the Security Documents, the Notes, the
Guarantees and the Working Capital Facility have been duly and validly
taken; and all requisite corporate action required to be taken for the
due and proper authorization of the Modernization Project (as defined
in the Prospectus) by the Company and its subsidiaries has been duly
and validly taken;
(xvii) This Agreement has been duly and validly authorized,
executed and delivered by each of the Registrants;
(xviii) The issue and sale of the Securities and the compliance
by each of the Registrants with all of the provisions of this
Agreement, the Indentures, the Security Documents, the Notes, the
Guarantees and the Working Capital Facility (to the extent each is a
party thereto) and the consummation of the transactions contemplated
hereby and, if applicable, thereby will not conflict with or result in
a breach or violation of any of the terms or provisions of, or
constitute a default under, any indenture, mortgage, deed of trust,
loan agreement (other than as may arise pursuant to the Company's
existing revolving credit agreement dated as of June 26, 1992 and the
Note Agreements, dated as of October 16, 1989, as amended, which will
either be terminated or prepaid, as the case may be) or other
agreement or instrument of which such counsel has knowledge to which
the Company or any of its subsidiaries is a party or by which the
Company or any of its subsidiaries is bound or to which any of the
property or assets of the Company or any of its subsidiaries is
subject, nor will such actions result in any violation of the
provisions of the charter or by-laws of the Company or any of its
subsidiaries or any violation of any statute or any order, rule or
regulation generally
<PAGE>
-26-
applicable to transactions of the type contemplated hereby or to
financings generally of any court or governmental agency or body
having jurisdiction over the Company or any of its subsidiaries or any
of their properties or assets; and, except for such consents,
approvals, authorizations, registrations or qualifications as may be
required under applicable state securities or Blue Sky laws or filings
that may be required by the NASD in obtaining from it a written
statement that it has no objections to the terms of the underwriting
in connection with the purchase and distribution of the Securities by
the Underwriter, no consent, approval, authorization or order of, or
filing or registration with, any court or governmental agency or body
with respect to any statute, or any order, rule or regulation
generally applicable to transactions of the type contemplated hereby
or to financings generally is required for the issuance and sale of
the Securities by the Registrants, the compliance by the Registrants
with all of the provisions of this Agreement, the Indenture, the
Security Documents, the Notes, the Guarantees and the Working Capital
Facility (to the extent each is a party thereto) or the consummation
of the transactions contemplated hereby and, if applicable, thereby
except such as have been obtained; and
(xix) Except for the documents relating to the Special Warrants
and to the EPC Contract relating to certain shares of capital stock of
the Company to be issued by Raytheon or an affiliate thereof, there
are no contracts, agreements or understandings between any of the
Registrants, on the one hand, and any other person, on the other hand,
granting such person the right to require any of the Registrants to
file a registration statement under the Securities Act with respect to
its securities owned or to be owned by such person or to require any
of the Registrants to include its securities in the securities
registered pursuant to the Registration Statement or in any securities
being registered pursuant to any other registration statement filed by
it under the Securities Act.
Such counsel shall also have furnished to the Underwriters a written
statement, addressed to the Underwriter and dated the Delivery Date, in
form and substance satisfactory to the Underwriters, to the effect that no
facts have come to the attention of such counsel which have caused it to
believe that the Registration Statement, as of the Effective Date,
contained any untrue statement of a material fact or omitted to state a
material fact required to be stated
<PAGE>
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therein or necessary to make the statements therein not misleading, or that
the Prospectus as of the Delivery Date contains any untrue statement of a
material fact or omits to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading (except that such
counsel need not express an opinion as to financial statements, schedules
and other statistical and financial information included therein). In
rendering the foregoing opinion, such counsel may rely as to matters of
fact upon certificates of public officials and officers of any of the
Registrants.
In addition to the foregoing, such counsel shall have furnished to the
Underwriters its written opinion, as counsel to the Registrants, addressed
to the Underwriters and dated the Delivery Date, in form and substance
satisfactory to the Underwriters, to the effect of Exhibit 1 to this
Agreement.
(e) Cahill Gordon & Reindel shall have furnished to the Underwriters
its written opinion, as counsel to the Underwriters, addressed to the
Underwriters and dated the Delivery Date, in form and substance
satisfactory to the Underwriters, relating to this Agreement, the
Indentures, the Securities, the Registration Statement and the Prospectus
and such other related matters as the Underwriters shall reasonably
request, and the Registrants shall have furnished to such counsel such
documents as they reasonably request for the purpose of enabling them to
pass upon such matters.
(f) Cahill Gordon & Reindel shall have furnished to the Underwriters a
Blue Sky Survey for the offering contemplated hereby.
(g) Price Waterhouse shall have furnished to the Underwriters a letter
(the "bring-down letter") addressed to the Underwriters and dated the
Delivery Date (x) confirming that they are independent public accountants
within the meaning of the Securities Act and are in compliance with the
applicable requirements relating to the qualification of accountants under
Rule 2-01 of Regulation S-X of the Commission, (y) stating, as of the date
of the bring-down letter (or, with respect to matters involving changes or
developments since the respective dates as of which specified financial
information is given in the Prospectus, as of a date not more than five
days prior to the date of the bring-down letter), the conclusions and
findings of such firm with
<PAGE>
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respect to the financial information and other matters covered by its
letter (the "initial letter") delivered to the Underwriters concurrently
with the execution of this Agreement and (z) confirming in all material
respects the conclusions and findings set forth in the initial letter.
(h) The Registrants shall have furnished to the Underwriters a
certificate, dated the Delivery Date, of (a) its Chief Executive Officer or
its President and (b) its Vice President-Finance stating that:
(x) The representations and warranties of the Registrants
contained in the Mortgage, the Security Agreement, the Stock Pledge
Agreements, the Intercreditor Agreement, the Collateral Agency
Agreement and the Disbursement Agreement, and the representations,
warranties and agreements of the Registrants in Section 1 of this
Agreement are true and correct as of the Delivery Date; the
Registrants have complied with all of their agreements contained
herein; and the conditions set forth in this Section 6 have been
fulfilled; and
(y) They have carefully examined the Registration Statement and
the Prospectus and, in their opinion (A) as of the Effective Date, the
Registration Statement and Prospectus did not include any untrue
statement of a material fact and did not omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading, and (B) since the Effective Date, no event has
occurred which should have been set forth in a supplement or amendment
to the Registration Statement or the Prospectus.
(i) (x) Neither the Company nor any of its subsidiaries shall have
sustained since the date of the latest audited financial statements
included in the Prospectus any loss or interference with its business from
fire, explosion, flood or other calamity, whether or not covered by
insurance, or from any labor dispute or court or governmental action, order
or decree, otherwise than as set forth in the Prospectus, or (y) since such
date there shall not have been any change in the capital stock or long-term
debt of the Company or any of its subsidiaries or any change, or any
development involving a prospective change, in or affecting the general
affairs, management, consolidated financial position, stockholders' equity
or results of operations of the Company and its subsidiaries, otherwise
than as set forth in the Prospectus,
<PAGE>
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the effect of which, in any such case described in clause (x) or (y), is,
in the judgment of the Underwriters, so material and adverse as to make it
impracticable or inadvisable to proceed with the public offering or the
delivery of the Securities on the terms and in the manner contemplated in
the Prospectus.
(j) Subsequent to the execution and delivery of this Agreement (x) no
downgrading shall have occurred in the rating accorded any of the
Registrants' securities by any "nationally recognized statistical rating
organization", as that term is defined by the Commission for purposes of
Rule 436(g)(2) of the Rules and Regulations and (y) no such organization
shall have publicly announced that it has under surveillance or review,
other than with possible positive implications, its rating of any of the
Registrants' securities.
(k) Subsequent to the execution and delivery of this Agreement there
shall not have occurred any of the following: (w) trading in securities
generally on the New York Stock Exchange, the American Stock Exchange or
the over-the-counter market shall have been suspended or minimum prices
shall have been established on either of such exchanges or such market by
the Commission, by such exchange or by any other regulatory body or
governmental authority having jurisdiction, (x) a banking moratorium shall
have been declared by Federal or state authorities, (y) the United States
shall have become engaged in hostilities, there shall have been an
escalation in hostilities involving the United States or there shall have
been a declaration of a national emergency or war by the United States or
(z) there shall have occurred such a material adverse change in general
economic, political or financial conditions (or the effect of international
conditions on the financial markets in the United States shall be such) as
to make it, in the judgment of the Underwriters, impractical or inadvisable
to proceed with the public offering or delivery of the Securities on the
terms and in the manner contemplated in the Prospectus.
(l) On or before the Delivery Date, each of the Registrants shall have
caused to be delivered to the Underwriters the following documents and
instruments (to the extent each is a party thereto) with regard to each
Mortgaged Property:
(i) Mortgages encumbering each Registrant's interest (to the
extent each is a party thereto) in each
<PAGE>
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such Mortgaged Property, duly executed and acknowledged by the owner
or holder of the fee interest constituting such Mortgaged Property and
otherwise in form for recording in the appropriate recording office of
the political subdivision where such Mortgaged Property is situated,
together with such certificates, affidavits, questionnaires or returns
as shall be required in connection with the recording or filing
thereof and such UCC-1 financing statements and other similar
statements as are contemplated in respect of such Mortgages by the
counsel opinions set forth in Exhibit 1 and required by Section 6(d)
hereto, and any other instruments necessary to grant the interests
purported to be granted by such Mortgages under the laws of any
applicable jurisdiction, which Mortgages and financing statements and
other instruments shall be effective to create a Lien (as defined in
the Indentures) on such Mortgaged Property subject to no Liens other
than Liens permitted to be outstanding pursuant to such Mortgages;
(ii) with respect to each Mortgaged Property, such consents,
approvals, amendments, supplements, estoppels, tenant subordination
agreements or other instruments as shall reasonably be deemed
necessary by the Underwriters in order for the owner or holder of the
fee interest to grant the Lien contemplated by the Mortgages with
respect to such Mortgaged Property;
(iii) with respect to each Mortgage, a policy of title insurance
on ALTA Form B (1990) or equivalent (or a commitment to issue such a
policy) insuring (or committing to insure) the Lien of such Mortgage
as a valid first mortgage Lien on the real property and fixtures
described therein in respect of the Securities in an amount not less
than the fair market value of such real property and fixtures which
policy (or commitment) shall (A) be issued by [First American Title
Insurance Company] or another nationally recognized title insurance
company, (B) include such reinsurance arrangements (with provisions
for direct access) as shall be reasonably acceptable to the
Underwriters, (C) have been supplemented by such endorsements, or,
where such endorsements are not available at commercially reasonable
premium costs, opinion letters of special counsel, architects or other
professionals, which counsel, architects or other professionals shall
be reasonably acceptable to the Underwriters, as shall be reasonably
<PAGE>
-31-
requested by the Underwriters (including, without limitation,
endorsements or opinion letters on matters relating to usury, first
loss, last dollar, zoning, non-imputation, public road access,
contiguity (where appropriate), cluster, survey, variable rate and so-
called comprehensive coverage over covenants and restrictions) and (D)
contain only such exceptions to title as shall be reasonably agreed
to by the Underwriters prior to the Delivery Date with respect to such
Mortgaged Property or as shall be locally customary;
(iv) [with respect to each Mortgaged Property [other than the so-
called "Wildwood" property lying north of and across the Calumet River from the
Riverdale facility, and the so-called Burley Street lots, lying east of the
Chicago Facility], a survey locating the improvements thereon, public streets
and recorded easements affecting those properties in such detail as shall be
sufficient to permit the Title Insurer to delete from the Mortgage Policy of
Title Insurance referred to in clause (iii) above the so-called survey exception
as to the properties so surveyed. The surveys shall be dated not earlier than
six months prior to the date of delivery thereof, and shall be certified to the
Collateral Agent, in its capacity as collateral agent, and the Title Insurer.]
(v) with respect to each Mortgaged Property, policies or
certificates of insurance as required by the Mortgages relating
thereto, which policies or certificates shall bear mortgagee
endorsements of the character required by such Mortgages;
(vi) with respect to each Mortgaged Property, UCC, judgment and
tax lien searches confirming that the personal property comprising a
part of such Mortgaged Property is subject to no Liens other than as
set forth in Schedule B to the Mortgages;
(vii) checks payable to the appropriate public officials in
payment of all recording costs and transfer taxes (or checks or wire
transfers to the title company in respect of such amounts) due in
respect of the execution, delivery or recording of such Mortgages,
together with a check or wire transfer for the title company in
payment of its premium, search and examination charges, survey costs
and any other amounts due in
<PAGE>
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connection with the issuance of its policies (or commitments);
(viii) with respect to each Mortgaged Property, copies of all
Leases (as defined in the Mortgages), all of which Leases shall, to
the extent not previously approved in writing by the Underwriters, be
reasonably satisfactory to the Underwriters; and
(ix) with respect to each Mortgaged Property, a certificate
of an officer of the Company certifying that, as of the date of
delivery of such certificate, there is not outstanding any citation,
violation or similar written notice indicating that such Mortgaged
Property contains conditions which are not in compliance with local
codes or ordinances relating to building or fire safety or structural
soundness (other than any provisions of such codes or ordinances the
validity or applicability of which is being contested in good faith by
appropriate proceedings diligently prosecuted and as to which
enforcement proceedings have not been instituted or, if instituted,
have been stayed).
(m) On or before the Delivery Date, the net proceeds of the sale of
the Special Warrants of approximately $112.3 million shall be released to
the Company from escrow.
(n) On or before the Delivery Date, the Company and its subsidiaries
(to the extent applicable) shall have entered into the Working Capital
Facility.
(o) On or before the Delivery Date, (y) the Company and its
subsidiaries (to the extent applicable) shall have entered into the EPC
Contract and [(z) Raytheon shall have entered into equipment supply
arrangements with SMS Schloemann-Siemag AG and its subsidiaries SMS
Engineering Inc. and SMS Concast Inc. (collectively, "SMS") relating to SMS
acting as primary equipment supplier for the Modernization Project.]
<PAGE>
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All opinions, letters, evidence and certificates mentioned above or
elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if they are in form and substance reasonably satisfactory
to counsel for the Underwriters.
7. Indemnification and Contribution. (a) The Registrants, jointly
and severally, shall indemnify and hold harmless each Underwriter and each
person, if any, who controls the Underwriter within the meaning of the
Securities Act, from and against any loss, claim, damage or liability, joint or
several, or any action in respect thereof (including, but not limited to, any
loss, claim, damage, liability or action relating to purchases and sales of
Securities), to which that Underwriter or any such controlling person may become
subject, under the Securities Act 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
Preliminary Prospectus, the Registration Statement or the Prospectus or in any
amendment or supplement thereto, (ii) the omission or alleged omission to state
in the Registration Statement or in any amendment or supplement thereto a
material fact required to be stated therein or necessary to make the statements
therein not misleading or (iii) the omission or alleged omission to state in any
Preliminary Prospectus, the Prospectus or in any amendment or supplement thereto
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, and shall reimburse each Underwriter and each such controlling
person promptly upon demand for any legal or other expenses incurred by that
Underwriter or controlling person in connection with investigating or defending
or preparing to defend against any such loss, claim, damage, liability or action
as such expenses are incurred; provided, however, that the Registrants 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, any untrue statement or
alleged untrue statement or omission or alleged omission made in any Preliminary
Prospectus, the Registration Statement or the Prospectus or in any such
amendment or supplement in reliance upon and in conformity with written
information furnished to the Registrants by or on behalf of any Underwriter with
respect to such Underwriter specifically for inclusion therein (as confirmed in
Section 7(e) hereof); provided, further, that the indemnification and
contribution agreements contained in this Section 7 with respect to any
Preliminary Prospectus, or the Prospectus after it has been amended or
supplemented, shall not
<PAGE>
-34-
inure to the benefit of any Underwriter (or any person controlling such
Underwriter) from whom the person asserting such loss, claim, damage, liability
or action shall have purchased Securities that are the subject thereof if, after
a sufficient number of copies thereof have been delivered by the Registrants to
such Underwriter, such Underwriter shall have failed to send or give a copy of
the final Prospectus or of the Prospectus as then amended or supplemented, as
the case may be, to such person within the time required by the Securities Act,
and the untrue statement or alleged untrue statement of a material fact or
omission or alleged omission to state a material fact in such Preliminary
Prospectus was corrected in the Prospectus. The foregoing indemnity agreement
is in addition to any liability which the Registrants may otherwise have to any
Underwriter or to any controlling person of that Underwriter.
(b) Each Underwriter, severally and not jointly, shall indemnify and
hold harmless each of the Registrants, each of their directors, each of their
officers who signed the Registration Statement and each person, if any, who
controls any of the Registrants within the meaning of the Securities Act, from
and against any loss, claim, damage or liability, joint or several, or any
action in respect thereof, to which the Registrants or any such director,
officer or controlling person may become subject, under the Securities Act 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 Preliminary Prospectus, the Registration
Statement or the Prospectus 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 to make the statements therein 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 written information furnished to the Registrants by or on behalf
of that Underwriter with respect to such Underwriter specifically for inclusion
therein (as confirmed by Section 7(e) hereof), and shall reimburse the
Registrants and any such director, officer or controlling person for any legal
or other expenses incurred by the Registrants or any such director, officer or
controlling person in connection with investigating or defending or preparing to
defend against any such loss, claim, damage, liability or action as such
expenses are incurred. The foregoing indemnity agreement is in addition to any
liability which any Underwriter may otherwise have to the Registrants or any
such director, officer or controlling person.
<PAGE>
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(c) Promptly after receipt by an indemnified party under this Section
7 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 under this Section 7, 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 7 except to the extent it has
been materially prejudiced 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 7.
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 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 7 for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other than costs of investigation; provided, however, that the
Underwriters shall have the right to employ one counsel (together with any local
counsel) to represent jointly the Underwriters and their respective controlling
persons who may be subject to liability arising out of any claim in respect of
which indemnity may be sought by the Underwriters against the Registrants under
this Section 7 if, in the reasonable judgment of the Underwriters, it is
advisable for the Underwriters and controlling persons to be jointly represented
by separate counsel, and in that event the fees and expenses of such separate
counsel shall be paid by the Registrants. Each indemnified party, as a
condition of the indemnity agreements contained in Sections 7(a) and 7(b), shall
use its best 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 any such action is 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. Notwithstanding the foregoing sentence, if at any time
an indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel, the indemnifying party
agrees that it shall be liable for
<PAGE>
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any settlement of any proceeding effected without its written consent if (i)
such settlement is entered into more than 30 days after receipt by such
indemnifying party of the aforesaid request and (ii) such indemnifying party
shall not have reimbursed the indemnified party in accordance with such request
prior to the date of such settlement.
(d) If the indemnification provided for in this Section 7 shall for
any reason be unavailable to or insufficient to hold harmless an indemnified
party under Section 7(a) or 7(b) in respect of any loss, claim, damage or
liability, or any action in respect thereof, referred to therein, 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 proportions as shall be appropriate to reflect the relative benefits
received by the Registrants on the one hand and the Underwriters on the other
from the offering of the Securities 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 Registrants on the one hand and the
Underwriters on the other with respect to the statements or omissions which
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 Registrants on the one hand and the Underwriters on the other
with respect to such offering shall be deemed to be in the same proportion as
the total net proceeds from the offering of the Securities purchased under this
Agreement (before deducting expenses) received by the Company bear to the total
underwriting discounts and commissions received by the Underwriters with respect
to the Securities purchased under this Agreement, in each case as set forth in
the table on the cover page of the Prospectus. The relative fault shall be
determined by reference to whether the untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact relates
to information supplied by the Registrants or the Underwriters, the intent of
the parties and their relative knowledge, access to information and opportunity
to correct or prevent such statement or omission. The Registrants and the
Underwriters agree that it would not be just and equitable if contribution
pursuant to this Section 7(d) were to be determined by pro rata allocation (even
if the Underwriters were treated as one entity for such purpose) or by any other
method of allocation which 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
<PAGE>
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liability, or action in respect thereof, referred to above in this Section 7(d)
shall be deemed to include, for purposes of this Section 7(d), any legal or
other expenses incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 7(d), no Underwriter shall be required to contribute
any amount in excess of the amount by which the total price at which the
Securities underwritten by it and distributed to the public were offered to the
public exceeds the amount of any damages which such Underwriter 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. The Underwriters' obligations to contribute as
provided in this Section 7(d) are several in proportion to their respective
underwriting obligations.
(e) The Underwriters severally confirm that the statements with
respect to the public offering of the Securities set forth in the last paragraph
on the cover page of the Prospectus and in the second paragraph, the second
sentence of the fourth paragraph, and the first sentence of the fifth paragraph
under the caption "Underwriting" in the Prospectus are accurate and constitute
the only information furnished in writing to the Registrants by or on behalf of
the Underwriters with respect to the Underwriters specifically for inclusion in
the Registration Statement and the Prospectus.
8. Defaulting Underwriters. If, on the Delivery Date, an
Underwriter defaults in the performance of its obligations under this Agreement,
the remaining non-defaulting Underwriter shall have the right, but shall not be
obligated, to purchase all the Securities to be purchased on the Delivery Date.
If the remaining Underwriter does not elect to purchase the Securities which the
defaulting Underwriter agreed but failed to purchase on the Delivery Date, this
Agreement shall terminate without liability on the part of the non-defaulting
Underwriter or the Registrants, except that the Registrants will continue to be
liable for the payment of expenses to the extent set forth in Sections 5 and 10.
Nothing contained herein shall relieve a defaulting Underwriter of any
liability it may have to the Registrants for damages caused by its default. If
the non-defaulting Underwriter agrees to purchase the Securities of a defaulting
or withdrawing Underwriter, either the non-defaulting Underwriter or the Company
may postpone the Delivery Date for up to seven full business days
<PAGE>
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in order to effect any changes that in the opinion of counsel for the
Registrants or counsel for the Underwriters may be necessary in the Registration
Statement, the Prospectus or in any other document or arrangement.
9. Termination. The obligations of the Underwriters hereunder may
be terminated by the Underwriters by notice given to and received by the
Registrants prior to delivery of and payment for the Securities if, prior to
that time, any of the events described in Section 6(i), 6(j) or 6(k) shall have
occurred or if the Underwriters shall decline to purchase the Securities for any
reason permitted under this Agreement.
10. Reimbursement of Underwriters' Expenses. If (a) the Company
shall fail to tender the Securities for delivery to the Underwriters for any
reason or (b) the Underwriters shall decline to purchase the Securities for any
reason permitted under this Agreement (including the termination of this
Agreement pursuant to Section 9), the Registrants shall reimburse the
Underwriters for the fees and expenses of its counsel and for such other out-of-
pocket expenses as shall have been incurred by them in connection with this
Agreement and the proposed purchase of the Securities, and upon demand the
Registrants shall pay the full amount thereof to the Underwriters. If this
Agreement is terminated pursuant to Section 8 by reason of the default of one of
the Underwriters, the Company shall not be obligated to reimburse the defaulting
Underwriter on account of those expenses.
11. Notices, etc. All statements, requests, notices and agreements
hereunder shall be in writing and:
(a) if to the Underwriters, shall be delivered or sent by mail, telex
or facsimile transmission to Lehman Brothers Inc., 3 World Financial
Center, New York, New York 10285, Attention: Syndicate Department
(facsimile: 212-528-8822); and
(b) if to the Registrants, shall be delivered or sent by mail, telex
or facsimile transmission to the address of the Company set forth in the
Registration Statement, Attention: Vice President, General Counsel and
Secretary (facsimile: 708-841-6010);
provided, however, that any notice to an Underwriter pursuant to Section 7(c)
shall be delivered or sent by mail, telex or facsimile transmission to such
Underwriter at its address set forth in its acceptance telex to the
Underwriters, which address will be
<PAGE>
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supplied to any other party hereto by the Underwriters upon request. Any such
statements, requests, notices or agreements shall take effect at the time of
receipt thereof. The Company shall be entitled to act and rely upon any
request, consent, notice or agreement given or made on behalf of the
Underwriters by Lehman Brothers Inc.
12. Persons Entitled to Benefit of Agreement. This Agreement shall
inure to the benefit of and be binding upon the Underwriters, the Registrants
and their respective successors. This Agreement and the terms and provisions
hereof are for the sole benefit of only those persons, except that (a) the
representations, warranties, indemnities and agreements of the Registrants
contained in this Agreement shall also be deemed to be for the benefit of the
person or persons, if any, who control any Underwriter within the meaning of
Section 15 of the Securities Act and (b) the indemnity agreement of the
Underwriters contained in Section 7(b) of this Agreement shall be deemed to be
for the benefit of the directors of the respective Registrants, officers of the
respective Registrants who have signed the Registration Statement and any person
controlling any of the Registrants within the meaning of Section 15 of the
Securities Act. Nothing in this Agreement is intended or shall be construed to
give any person, other than the persons referred to in this Section 11, any
legal or equitable right, remedy or claim under or in respect of this Agreement
or any provision contained herein.
13. Survival. The respective indemnities, representations,
warranties and agreements of the Registrants and the Underwriters contained in
this Agreement or made by or on behalf of them, respectively, pursuant to this
Agreement, shall survive the delivery of and payment for the Securities and
shall remain in full force and effect, regardless of any investigation made by
or on behalf of any of them or any person controlling any of them.
14. Definition of the Terms "Business Day" and "Subsidiary". For
purposes of this Agreement, (a) "business day" means any day on which the New
York Stock Exchange, Inc. is open for trading and (b) "subsidiary" has the
meaning set forth in Rule 405 of the Rules and Regulations.
15. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW.
<PAGE>
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16. Counterparts. This Agreement may be executed in one or more
counterparts and, if executed in more than one counterpart, the executed
counterparts shall each be deemed to be an original but all such counterparts
shall together constitute one and the same instrument.
17. Headings. The headings herein are inserted for convenience of
reference only and are not intended to be part of, or to affect the meaning or
interpretation of, this Agreement.
<PAGE>
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If the foregoing correctly sets forth the agreement among the
Registrants and the Underwriter, please indicate your acceptance in the space
provided for that purpose below.
Very truly yours,
ACME METALS INCORPORATED
By
--------------------------
Title:
ACME STEEL COMPANY
By
--------------------------
Title:
ACME PACKAGING CORPORATION
By
--------------------------
Title:
ALPHA TUBE CORPORATION
By
--------------------------
Title:
UNIVERSAL TOOL AND STAMPING
COMPANY, INC.
By
--------------------------
Title:
ALTA SLITTING CORPORATION
By
--------------------------
Title:
<PAGE>
-42-
ALABAMA METALLURGICAL
CORPORATION
By
--------------------------
Title:
ACME STEEL COMPANY
INTERNATIONAL, INC.
By
--------------------------
Title:
Accepted:
LEHMAN BROTHERS INC.
BT SECURITIES CORPORATION
By: LEHMAN BROTHERS INC.
By ____________________________
Authorized Representative
<PAGE>
SCHEDULE 1
Principal Amount
of Senior
Underwriters Secured Notes
- ------------ ---------------
Lehman Brothers Inc................. $
BT Securities Corporation........... $
----------
Total.......................... $__________
Principal Amount
of Senior Secured
Underwriters Discount Notes
- ------------ --------------
Lehman Brothers Inc................. $
BT Securities Corporation........... $
----------
Total.......................... $
----------
<PAGE>
ACME METALS INCORPORATED
AND GUARANTORS
$175,000,000
% Senior Secured Notes due 2002
_________________
INDENTURE
Dated as of , 1994
_________________
SHAWMUT BANK CONNECTICUT, National Association
, Trustee
<PAGE>
CROSS-REFERENCE TABLE
=====================
<TABLE>
<CAPTION>
Indenture
Trust Indenture Act Section Section
- --------------------------- ---------
<S> <C>
(S) 310(a)(1) 7.10
(a)(2) 7.10
(a)(3) N.A.
(a)(4) N.A.
(a)(5) N.A.
(b) 7.08; 7.10; 12.02
(c) N.A.
(S) 311(a) 7.11
(b) 7.11
(c) N.A.
(S) 312(a) 2.05
(b) 12.03
(c) 12.03
(S) 313(a) 7.06
(b)(1) N.A.
(b)(2) 7.06
(c) 7.06; 12.02
(d) 7.06
(S) 314(a) 4.13; 12.02
(b) 10.02
(c)(1) 12.04
(c)(2) 12.04
(c)(3) N.A.
(d) 10.02
(e) 12.05
(f) N.A.
(S) 315(a) 7.01(b)
(b) 7.05; 12.02
(c) 7.01(a)
(d) 7.01(c)
(e) 6.11
(S) 316(a)(last sentence) 2.09
(a)(1)(A) 6.05
(a)(1)(B) 6.04
(a)(2) N.A.
(b) 6.07
(c) N.A.
(S) 317(a)(1) 6.08
(a)(2) 6.09
(b) 2.04
(S) 318(a) 12.01
- --------------------
</TABLE>
N.A. means Not Applicable.
NOTE: This Cross-Reference Table shall not, for any purpose, be deemed to be a
part of the Indenture.
<PAGE>
TABLE OF CONTENTS
-----------------
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
Page
----
SECTION 1.01. Definitions
SECTION 1.02. Other Definitions
SECTION 1.03. Incorporation by Reference of
Trust Indenture Act
SECTION 1.04. Rules of Construction
ARTICLE TWO
THE SECURITIES
SECTION 2.01. Form and Dating
SECTION 2.02. Execution and Authentication
SECTION 2.03. Registrar and Paying Agent
SECTION 2.04. Paying Agent To Hold Money in
Trust
SECTION 2.05. Securityholder Lists
SECTION 2.06. Transfer and Exchange
SECTION 2.07. Replacement Securities
SECTION 2.08. Outstanding Securities
SECTION 2.09. Treasury Securities
SECTION 2.10. Temporary Securities
SECTION 2.11. Cancellation
SECTION 2.12. Defaulted Interest
ARTICLE THREE
REDEMPTION
SECTION 3.01. Notices to Trustee
SECTION 3.02. Selection of Securities To Be
Redeemed
SECTION 3.03. Notice of Redemption
SECTION 3.04. Effect of Notice of Redemption
SECTION 3.05. Deposit of Redemption Price
SECTION 3.06. Securities Redeemed in Part
ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Securities
SECTION 4.02. Maintenance of Office or Agency
<PAGE>
SECTION 4.03. Limitation on Transactions with
Affiliates
SECTION 4.04. Limitation on Indebtedness
SECTION 4.05. Limitation on Liens
SECTION 4.06. Limitation on Disposition of
Assets
SECTION 4.07. Limitation on Restricted Payments
SECTION 4.08. Corporate Existence
SECTION 4.09. Payment of Taxes and Other Claims
SECTION 4.10. Notice of Defaults
SECTION 4.11. Maintenance of Properties,
Insurance
SECTION 4.12. Compliance Certificate
SECTION 4.13. Reports
SECTION 4.14. Waiver of Stay, Extension or
Usury Laws
SECTION 4.15. Repurchase of Securities upon
Change of Control
SECTION 4.16. Limitation on Sale and Leaseback
Transactions
SECTION 4.17. Limitation on Dividend and Other
Payment Restrictions Affecting
Subsidiaries
SECTION 4.18. Limitation on Actions Affecting
Security
SECTION 4.19. Inspection and Confidentiality
SECTION 4.20. Limitations on Investments, Loans
and Advances
SECTION 4.21. Additional Subsidiary Guarantors
ARTICLE FIVE
MERGERS; SUCCESSOR CORPORATION
SECTION 5.01. Restriction on Mergers and
Consolidations and Sales of
Assets
SECTION 5.02. Successor Corporation Substituted
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. Events of Default
SECTION 6.02. Acceleration
SECTION 6.03. Other Remedies
SECTION 6.04. Waiver of Past Default
SECTION 6.05. Control by Majority
SECTION 6.06. Limitation on Suits
<PAGE>
SECTION 6.07. Rights of Holders To Receive
Payment
SECTION 6.08. Collection Suit by Trustee
SECTION 6.09. Trustee May File Proofs of Claim
SECTION 6.10. Priorities
SECTION 6.11. Undertaking for Costs
SECTION 6.12. Trustee Election Not to Foreclose
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. Duties of Trustee
SECTION 7.02. Rights of Trustee
SECTION 7.03. Individual Rights of Trustee
SECTION 7.04. Trustee's Disclaimer
SECTION 7.05. Notice of Defaults
SECTION 7.06. Reports by Trustee to Holders
SECTION 7.07. Compensation and Indemnity
SECTION 7.08. Replacement of Trustee
SECTION 7.09. Successor Trustee by Merger, etc.
SECTION 7.10. Eligibility; Disqualification
SECTION 7.11. Preferential Collection of Claims
Against Company
SECTION 7.12. Appointment of Co-Trustee
ARTICLE EIGHT
DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 8.01. Satisfaction and Discharge
SECTION 8.02. Defeasance and Covenant
Defeasance
SECTION 8.03. Application of Trust Money
SECTION 8.04. Repayment to Company
SECTION 8.05. Reinstatement
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. Without Consent of Holders
SECTION 9.02. With Consent of Holders
SECTION 9.03. Compliance with Trust Indenture
Act
SECTION 9.04. Revocation and Effect of Consents
SECTION 9.05. Notation on or Exchange of
Securities
SECTION 9.06. Trustee To Sign Amendments, etc.
<PAGE>
ARTICLE TEN
COLLATERAL AND SECURITY
SECTION 10.01. Collateral and Security Documents
SECTION 10.02. Opinions of Counsel; TIA
Requirements
SECTION 10.03. Disposition of Collateral Without
Release
SECTION 10.04. Authorization of Actions To Be
Taken by the Collateral Agent
Under the Security Documents
SECTION 10.05. Collateral Agency Agreement
ARTICLE ELEVEN
SENIOR GUARANTEE OF SECURITIES
SECTION 11.01. Unconditional Guarantee
SECTION 11.02. Severability
SECTION 11.03. Release of a Subsidiary Guarantor
SECTION 11.04. Limitation of Guarantor's
Liability
SECTION 11.05. Subsidiary Guarantors May
Consolidate, etc., on Certain
Terms
SECTION 11.06. Contribution
SECTION 11.07. Waiver of Subrogation
SECTION 11.08. Execution of Guarantee
ARTICLE TWELVE
MISCELLANEOUS
SECTION 12.01. Trust Indenture Act Controls
SECTION 12.02. Notices
SECTION 12.03. Communications by Holders with
Other Holders
SECTION 12.04. Certificate and Opinion as to
Conditions Precedent
SECTION 12.05. Statements Required in Certificate
or Opinion
SECTION 12.06. Rules by Trustee, Paying Agent,
Registrar
SECTION 12.07. Governing Law
SECTION 12.08. No Recourse Against Others
SECTION 12.09. Successors
SECTION 12.10. Counterpart Originals
SECTION 12.11. Severability
<PAGE>
SECTION 12.12. No Adverse Interpretation of Other
Agreements
SECTION 12.13. Legal Holidays
<TABLE>
<CAPTION>
SIGNATURES
<S> <C> <C>
EXHIBIT A - Form of Security.......... A-1
EXHIBIT B - Form of Security Agreement B-1
EXHIBIT C - Form of Mortgage.......... C-1
EXHIBIT D - Form of Stock Pledge
Agreement................. D-1
EXHIBIT E - Form of Disbursement
Agreement................. E-1
EXHIBIT F - Form of Collateral Agency
Agreement................. F-1
EXHIBIT G - Form of Intercreditor
Agreement................. G-1
- --------------------
</TABLE>
NOTE: This Table of Contents shall not, for any purpose, be deemed to be a
part of the Indenture.
<PAGE>
INDENTURE dated as of , 1994 among ACME METALS INCORPORATED, a
Delaware corporation (the "Company"), each of the Guarantors named on the
signature page hereto and Shawmut Bank Connecticut, National Association, a
national banking association, as Trustee (the "Trustee").
Intending to be legally bound hereby, all parties agree as follows for
the benefit of the others and for the equal and ratable benefit of the Holders
of the Company's % Senior Secured Notes due 2002 (the "Securities").
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions.
"Accreted Value" means, as of any date of determination prior
to , 1997, the sum of (a) the initial offering price of each Senior Secured
Discount Note and (b) the portion of the excess of the principal amount of each
Senior Secured Discount Note over such initial offering price which shall have
been amortized through such date, such amount to be so amortized on a daily
basis and compounded semi-annually on each and at the
rate of % per annum from the date of issuance of the Senior Secured Discount
Notes through the date of determination computed on the basis of a 360-day year
of twelve 30-day months.
"Acme Packaging" means Acme Packaging corporation, a Delaware
corporation, and a Wholly Owned Subsidiary of the Company.
"Acme Steel" means Acme Steel Company, a Delaware corporation, and a
Wholly Owned Subsidiary of the Company.
"Acquired Indebtedness" means (i) with respect to any Person that
becomes a Subsidiary of the Company (or is merged into the Company or any of its
Subsidiaries) after the Issue Date, Indebtedness of, or Preferred Stock issued
by, such Person or any of its Subsidiaries existing at the time such Person
becomes a Subsidiary of the Company (or is merged into the Company or any of its
Subsidiaries), whether or not such Indebtedness was incurred in connection with,
or in contemplation of, such Person becoming a Subsidiary of the Company (or
being merged into the Company or any of its Subsidiaries), and (ii) with respect
to the Company or any of its Subsidiaries, any Indebtedness assumed by the
Company or any of its Subsidiaries in connection with the acquisition of any
assets from another Person (other than the Company or any of its Subsidiaries),
whether or
<PAGE>
not such Indebtedness was incurred by such other Person in connection with, or
in contemplation of, such acquisition.
"Affiliate" means, when used with reference to a specified Person, any
Person directly or indirectly controlling or controlled by or under direct or
indirect common control with the Person specified. For the purposes of this
definition, "control," when used with respect to any Person, means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing. Notwithstanding the foregoing, the term "Affiliate" shall not
include, (i) with respect to the Company, any Subsidiary of the Company, (ii)
with respect to any Subsidiary of the Company, the Company or any other
Subsidiary of the Company, (iii) with respect to the Company or any Subsidiary
of the Company, [benefit plan list] or any other benefit plan now or in the
future equivalent thereto or (iv) Wabush.
"Agent" means any Registrar, Paying Agent or co-Registrar.
"Applicable Portion" with respect to any Available Proceeds Amount shall
mean such Available Proceeds Amount times a fraction the numerator of which
shall be the aggregate principal amount of Securities then outstanding plus all
accrued and unpaid interest thereon to the Unapplied Proceeds Offer Payment Date
and the denominator of which shall be the sum of (x) such amount and either (y)
if the Unapplied Proceeds Offer Payment Date is prior to , 1997,
the Accreted Value of the then outstanding Senior Secured Discount Notes through
such payment date or (z) on and after , 1997 the aggregate principal
amount of the then outstanding Senior Secured Discount Notes plus all accrued
and unpaid interest thereon to the Unapplied Proceeds Offer Payment Date.
"Asset Sale" means any sale, transfer, conveyance, lease or other
disposition (including, without limitation, by way of merger, consolidation or
sale and leaseback or sale of shares of Capital Stock in any Subsidiary) of any
Property (each, a "transaction") by the Company or any of its Subsidiaries to
any Person; provided, that (i) transactions involving Property other than
Collateral between the Company and a Subsidiary of the Company or transactions
involving Property other than Collateral between Subsidiaries of the Company;
and (ii) transactions (including sales or other transfers or dispositions of
receivables relating to the incurrence of Indebtedness permitted pursuant to
Section 4.04 hereof) in the ordinary course of business (including such a
transaction with or between
<PAGE>
Subsidiaries) shall not constitute Asset Sales. For purposes of this
definition, the term "Asset Sale" shall not include any sale, transfer,
conveyance, lease or other disposition of assets and properties of the Company
that is governed by Section 4.07 or Section 5.01 (except to the extent indicated
therein).
"Available Proceeds Amount" means the amount of funds (whether held in
the Collateral Account or by the Company or any of its Subsidiaries)
constituting: (i) the portion of any Net Award or Net Proceeds that, pursuant
to the Security Documents, the Company is not required to, or that the Company
has elected not to, apply to a Restoration of the affected Collateral or (ii)
the portion, if any, of the Net Cash Proceeds of an Asset Sale (net, in the case
of an Asset Sale of property that does not constitute Collateral, of any
Indebtedness repaid with the proceeds of such Asset Sale to the extent so
applied within 180 days of such Asset Sale to the repayment of such
Indebtedness; provided, that Indebtedness subordinated to (a) the Securities or
(b) any other Indebtedness of the Company or any of its Subsidiaries may not be
so repaid; provided, further, that with respect to any Indebtedness so repaid
outstanding under a revolving credit facility there shall be an equivalent
permanent reduction in the committed amount thereof) that has not been applied
by the Company, within 180 days after the date of the Asset Sale giving rise to
such Net Cash Proceeds, to either (x) the acquisition or construction of
property constituting a Related Business Investment, in the case of Net Cash
Proceeds of property not constituting Collateral, or (y) the acquisition or
construction of property constituting a Related Business Investment, which
property has been made subject to the Liens of the Security Documents as
contemplated by Section 4.06 hereof and the applicable provisions of the
Collateral Agency Agreement within such 180-day period, in the case of Net Cash
Proceeds of property constituting Collateral; provided, however, that Net Cash
Proceeds shall be deemed to have been so applied, and the Liens contemplated
above shall be deemed to have been granted, within such 180-day period if (A)
within such 180-day period, the Board of Directors of the Company shall have
adopted a capital expenditure plan contemplating the application of such Net
Cash Proceeds to a Related Business Investment and the Company shall have taken
significant steps to implement such plan, (B) such plan shall have been fully
implemented within 180 days after the date of adoption of such plan and (C) to
the extent such plan involves the acquisition or construction of property
required to be made subject to the Liens of the Security Documents, as
contemplated above, such Liens shall have been granted in accordance with the
provisions hereof and the applicable provisions of the Collateral Agency
Agreement within 180 days after the date of adoption of such plan.
<PAGE>
"Board of Directors" means the Board of Directors of the Company or any
authorized committee of that Board.
"Board Resolution" means, with respect to any Person, a duly adopted
resolution of the Board of Directors of such Person.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday that is not a day on which banking institutions in the City of New York
or in the city of the Corporate Trust Office of the Trustee are authorized or
obligated by law, resolution or executive order to close.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations, or other equivalents (however designated) of or in
such Person's capital stock, and options, rights or warrants to purchase such
capital stock, whether outstanding on or issued after the Issue Date, including,
without limitation, all Common Stock and Preferred Stock.
"Capitalized Lease Obligations" of any Person means the obligations of
such Person to pay rent or other amounts under a lease that is required to be
capitalized for financial reporting purposes in accordance with GAAP; and the
amount of such obligation shall be the capitalized amount thereof determined in
accordance with GAAP.
"Cash Equivalents" means (i) United States Government Obligations, (ii)
commercial paper rated the highest grade by Moody's Investors Service, Inc.
("Moody's") and Standard & Poor's Corporation ("S & P") and maturing not more
than one year from the date of creation thereof, (iii) time deposits with, and
certificates of deposit and banker's acceptances issued by, any bank having
capital surplus and undivided profits aggregating at least $500,000,000 and
maturing not more than one year from the date of creation thereof, (iv)
repurchase agreements that are secured by a perfected security interest in an
obligation described in clause (i) and are with any bank described in clause
(iii), and (v) readily marketable direct obligations issued by any state of the
United States of America or any political subdivision thereof having one of the
two highest rating categories obtainable from either Moody's or S & P.
"Change of Control" means (i) any sale, lease or other transfer (in one
transaction or a series of related transactions) by the Company or any of its
Subsidiaries of all or substantially all of the consolidated assets of the
Company to any Person (other than a Wholly Owned Subsidiary of the Company);
(ii) a "person" or "group" (within the meaning of Sections 13(d) and 14(d)(2) of
the Exchange Act (other than the Company)) becomes
<PAGE>
the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act) of
Capital Stock of the Company representing 40% or more of the voting power of
such Capital Stock; (iii) Continuing Directors cease to constitute at least a
majority of the Board of Directors of the Company; or (iv) the stockholders of
the Company approve any plan or proposal for the liquidation or dissolution of
the Company.
"Collateral" means, collectively, all of the property and assets that
are from time to time subject to the Lien of any of the Security Documents.
"Collateral Account" means the collateral account established pursuant
to the Collateral Agency Agreement.
"Collateral Agency Agreement" means the Collateral Agency Agreement
dated as of the date hereof between the Company, Acme Steel, Acme Packaging, the
Trustee, the Discount Note Trustee and the Collateral Agent in substantially the
form attached hereto as Exhibit F as the same may be amended, amended and
restated, supplemented or otherwise modified from time to time in accordance
with its terms.
"Collateral Agent" means Shawmut Bank Connecticut, National Association,
as collateral agent under the Collateral Agency Agreement and the other Security
Documents until a successor replaces it in accordance with the provisions of the
Collateral Agency Agreement, this Indenture and the other Security Documents and
thereafter means such successor.
"Company" means the Person named as the "Company" in the first paragraph
of this Indenture until a successor shall have become such pursuant to the
applicable provisions of this Indenture, and thereafter "Company" shall mean
such successor.
"Company Order" means a written order or request signed in the name of
the Company by its President or Vice President, and by its Treasurer, Assistant
Treasurer, Secretary or Assistant Secretary, and delivered to the Trustee.
"Commodity Agreement" of any Person means any option or futures contract
or similar agreement or arrangement designed to protect such Person or any of
its Subsidiaries against fluctuations in commodity prices.
"Common Stock" means, with respect to any Person, any and all shares,
interests or other participations in, and other equivalents (however designated
and whether voting or nonvoting) of, such Person's common stock, whether
outstanding on the Issue
<PAGE>
Date or issued after the Issue Date, and includes, without limitation, all
series and classes of such common stock.
"Consolidated Cash Flow Available for Fixed Charges" means, for any
period, on a consolidated basis for the Company and its Subsidiaries, the sum
for such period of (i) Consolidated Net Income, (ii) income taxes with respect
to such period determined in accordance with GAAP, (iii) interest expense for
such period determined in accordance with GAAP and (iv) depreciation and
amortization expenses (including, without duplication, amortization of debt
discount and debt issue costs and amortization of previously capitalized
interest to cost of sales) and other non-cash charges to earnings which reduced
Consolidated Net Income (excluding any non-cash charge to the extent that such
non-cash charge requires an accrual of or a reserve for cash charges for any
future period), determined in accordance with GAAP.
"Consolidated Fixed Charges" of the Company for any period means the sum
of: (i) the aggregate amount of interest which, in conformity with GAAP, would
be set forth opposite the caption "interest expense" or any like caption on a
consolidated income statement for the Company and its Subsidiaries (including,
but not limited to, imputed interest included on Capitalized Lease Obligations,
all commissions, discounts and other fees and charges owed with respect to
letters of credit and banker's acceptance financing, the net costs associated
with Commodity Agreements, Currency Agreements and Interest Protection
Agreements, amortization of other financing fees and expenses, the interest
portion of any deferred payment obligation, amortization of discount, premium,
if any, and all other non-cash interest expense other than previously
capitalized interest amortized to cost of sales), plus (ii) interest incurred
during the period and capitalized by the Company and its Subsidiaries, on a
consolidated basis in accordance with GAAP, plus (iii) the amount of Preferred
Stock Dividends declared by the Company and any of its Subsidiaries on
Disqualified Stock (other than such Preferred Stock Dividends payable to the
Company or any Wholly Owned Subsidiary), whether or not paid during such period,
provided that, in making such computation, the Consolidated Fixed Charges
attributable to interest on any Indebtedness computed on a pro forma basis and
bearing a floating interest rate shall be computed as if the rate in effect
(after giving effect to any Interest Protection Agreement) on the date of
computation will be the applicable rate for the entire period.
"Consolidated Net Income" of the Company for any period means the net
income (or loss) of the Company and its Subsidiaries for such period, determined
on a consolidated basis in accordance with GAAP; provided that there shall be
excluded
<PAGE>
from the computation of net income (loss) (to the extent otherwise included
therein) without duplication: (i) the net income (or loss) of any Person (other
than a Subsidiary of the Company) in which any Person other than the Company or
any of its Subsidiaries has an ownership interest, except to the extent that any
such income has actually been received by the Company or any of its Subsidiaries
in the form of cash dividends or similar cash distributions during such period;
(ii) the net income (or loss) of any Person that accrued prior to the date that
(a) such Person becomes a Subsidiary of the Company or is merged into or
consolidated with the Company or any of its Subsidiaries or (b) the assets of
such Person are acquired by the Company or any of its Subsidiaries, except for
purposes of a pro forma calculation pursuant to clause (c) of the second
sentence of the first paragraph of Section 4.04, the net income (or loss) of
such Person shall be taken into account for the full four-quarter period for
which the calculation is being made; (iii) the net income of any Subsidiary of
the Company to the extent that (but only as long as) the declaration or payment
of dividends or similar distributions by such Subsidiary of that income is not
permitted by operation of the terms of its charter or any agreement, instrument,
judgment, decree, order, statute, rule or governmental regulation applicable to
the Subsidiary during such period; (iv) any gain or loss, together with any
related provisions for taxes on any such gain or loss, realized during such
period by the Company or any of its Subsidiaries upon (a) the acquisition of any
securities, or the extinguishment of any Indebtedness, of the Company or any of
its Subsidiaries or (b) any Asset Sale by the Company or any of its
Subsidiaries; (v) any extraordinary gain or loss, together with any related
provision for taxes on any such extraordinary gain or loss, realized by the
Company or any of its Subsidiaries during such period; and (vi) in the case of a
successor to the Company by consolidation, merger or transfer of its assets, any
earnings of the successor prior to such merger, consolidation or transfer of
assets.
"Consolidated Tangible Net Worth" means, with respect to any Person, the
consolidated stockholder's equity (including any Preferred Stock that is
classified as equity under GAAP, other than Disqualified Stock) of such Person
and its Subsidiaries, as determined in accordance with GAAP, less the book value
of all Intangible Assets reflected on the consolidated balance sheet of the
Company and its Subsidiaries as of such date.
"Construction Contract" means the engineering, procurement and
construction contract dated __________, 1994 among [the Company, Acme Steel and
Raytheon Engineers & Contractors, Inc., pursuant to which the Modernization
Project shall be constructed.
<PAGE>
"Continuing Director" means a director who either was a member of the
Board of Directors of the Company on the Issue Date or who became a director of
the Company subsequent to such date and whose election, or nomination for
election by the Company's stockholders, was duly approved by a majority of the
Continuing Directors then on the Board of Directors of the Company, either by a
specific vote or by approval of the proxy statement issued by the Company on
behalf of the entire Board of Directors of the Company in which such individual
is named as nominee for director.
"Corporate Trust Office of the Trustee" shall be at the address of the
Trustee specified in Section 12.02 or such other address as the Trustee may give
notice to the Company.
"Currency Agreement" of any Person means any foreign exchange contract,
currency swap agreement or other similar agreement or arrangement designed to
protect such Person or any of its Subsidiaries against fluctuations in currency
values.
"Default" means any event which is, or after notice or passage of time
or both would be, an Event of Default.
"Disbursement Agreement" means the Disbursement Agreement dated as of
the date hereof between the Company, Acme Steel and the Collateral Agent,
substantially in the form attached hereto as Exhibit E, as the same may be
amended, amended and restated, supplemented or otherwise modified from time to
time in accordance with its terms.
"Discount Note Indenture" means the indenture under which the Senior
Secured Discount Notes are issued as it may be amended, amended and restated,
supplemented or otherwise modified from time to time.
"Discount Note Trustee" means the party named as trustee in the Discount
Note Indenture until a successor replaces it in accordance with the provisions
of the Discount Note Indenture and thereafter means such successor.
"Disqualified Stock" means any Capital Stock that, by its terms (or by
the terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, (i) matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable
at the option of the holder thereof, in whole or in part, on or prior to the
final maturity date of the Securities or (ii) is convertible into or
exchangeable for (whether at the option of the issuer or the holder thereof) (a)
debt securities
<PAGE>
or (b) any Capital Stock referred to in clause (i) above, in each case, at any
time prior to the Maturity Date.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated by the SEC thereunder.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States, as in effect on the Issue Date.
"Guarantee" means the guarantee of each Guarantor set forth in Article
Eleven and any additional guarantee of the Securities executed by any Subsidiary
of the Company.
"Guarantor" means each of (i) Acme Steel, Alabama Metallurgical
Corporation, a Washington corporation, Acme Packaging, Alpha Tube Corporation, a
Delaware corporation, Universal Tool & Stamping Co., Inc., an Indiana
corporation, Alta Slitting Corporation, a Delaware corporation, and Acme Steel
Company International, Inc. a Barbados corporation, and (ii) each of the
Company's Subsidiaries that becomes a guarantor of the Securities pursuant to
the provisions of Section 4.21 hereof.
"Holder" or "Securityholder" means the Person in whose name a Security
is registered on the books of the Registrar or any co-Registrar.
"Indebtedness" of any Person means, without duplication, (i) any
liability of such Person (a) for borrowed money, or under any reimbursement
obligation relating to a letter of credit, (b) evidenced by a bond, note,
debenture or similar instrument (including a purchase money obligation) given in
connection with the acquisition of any businesses, properties or assets of any
kind or with services incurred in connection with capital expenditures, or (c)
in respect of Capitalized Lease Obligations, (ii) any Indebtedness of others
that such person has guaranteed or that is otherwise its legal liability, (iii)
to the extent not otherwise included, obligations under Currency Agreements,
Commodity Agreements or Interest Protection Agreements, (iv) Disqualified Stock
of such Person and (v) all Indebtedness of others secured by a Lien on any asset
of such Person, and which is not otherwise assumed by such Person, provided that
Indebtedness shall not include accounts payable (including, without limitation,
accounts payable to such Person by any of its
<PAGE>
Subsidiaries or to any such Subsidiary by such Person or any of its other
Subsidiaries, in each case, in accordance with customary industry practice) or
liabilities to trade creditors of such Person arising in the ordinary course of
business. The amount of Indebtedness of any Person at any date shall be (a) the
outstanding balance at such date of all unconditional obligations as described
above, (b) the maximum liability of such Person for any contingent obligations
under clause (ii) above at such date and (c) in the case of clause (v) above,
the lesser of (1) the fair market value of any asset subject to a Lien securing
the Indebtedness of others on the date that the Lien attaches and (2) the amount
of the Indebtedness secured.
"Indenture" means this Indenture as amended, amended and restated,
supplemented or otherwise modified from time to time.
"Intangible Assets" of any Person means all unamortized debt discount
and expense, unamortized deferred charges, goodwill, patents, trademarks,
service marks, trade names, copyrights, write-ups of assets over their prior
carrying values (other than write-ups which occurred prior to the Issue Date and
other than, in connection with the acquisition of an asset, the write-up of the
value of such asset (within one year of its acquisition) to its fair market
value in accordance with GAAP) and all other items which would be treated as
intangibles on the consolidated balance sheet of the Company and its
Subsidiaries prepared in accordance with GAAP.
"Intercreditor Agreement" means the Intercreditor Agreement dated as of
the date hereof among the Collateral Agent (on behalf of the Holders of
Securities, the holders of the Senior Secured Discount Notes and the holders of
Permitted Replacement Financing, if any, incurred in accordance with the
provisions hereof), the agent under the Working Capital Facility (and any
successor or successors thereto or assignee or assignees therefrom), the Company
and Acme Steel, in substantially the form attached hereto as Exhibit G, as the
same may be amended, amended and restated, supplemented or otherwise modified
from time to time in accordance with its terms.
"Interest Payment Date" means the Stated Maturity of an installment of
interest on the Securities.
"Interest Protection Agreement" of any Person means any interest rate
swap agreement, interest rate collar agreement, option or future contract or
other similar agreement or arrangement designed to protect such Person or any of
its Subsidiaries against fluctuations in interest rates.
<PAGE>
"Investment" of any Person means (i) all investments by such Person in
any other Person in the form of loans, advances or capital contributions, (ii)
all guarantees of Indebtedness or other obligations of any other Person by such
Person, (iii) all purchases (or other acquisitions for consideration) by such
Person of Indebtedness, Capital Stock or other securities of any other Person
and (iv) all other items that would be classified as investments (including,
without limitation, purchases of assets outside the ordinary course of business)
on a balance sheet of such Person prepared in accordance with GAAP.
"Issue Date" means the date on which the Securities are originally
issued under this Indenture.
"Lien" means, with respect to any Property, any mortgage, deed of trust,
lien, pledge, lease, easement, restriction, covenant, right-of-way, charge,
security interest or encumbrance of any kind or nature in respect of such
Property. For purposes of this definition, the Company shall be deemed to own
subject to a Lien any Property which it has acquired or holds subject to the
interest of a vendor or lessor under any conditional sale agreement, capital
lease or other title retention agreement relating to such Property.
"Maturity Date" means the date, which is set forth on the face of the
Securities, on which the Securities will mature.
"Modernization Project" means the continuous thin slab castor/hot strip
mill complex to be constructed at Acme Steel's Riverdale, Illinois plant
pursuant to the Construction Contract and all architectural, engineering and
construction plans, utility and other installations and permits together with
all land, improvements, additions, furniture, fixtures and equipment associated
with such project.
"Mortgage" means the mortgage (or deed of trust) dated as of the date
hereof between Acme Steel and the Collateral Agent, in substantially the form of
Exhibit C hereto, as the same may be amended, amended and restated, supplemented
or otherwise modified from time to time in accordance with its terms.
"Net Award" has the meaning assigned to such term in the Security
Documents.
"Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds
in the form of cash or Cash Equivalents including payments in respect of
deferred payment obligations when received in the form of cash or Cash
Equivalents received by the Company or by any of its Subsidiaries from such
Asset Sale (except to the extent that such obligations are sold with
<PAGE>
recourse to the Company or to any Subsidiary of the Company) net of (a)
reasonable out-of-pocket expenses and fees relating to such Asset Sale
(including, without limitation, brokerage, legal, accounting and investment
banking fees and sales commissions) to the extent actually paid, (b) taxes paid
or payable ((1) including, without limitation, income taxes reasonably estimated
to be actually payable as a result of any disposition of property within two
years of the date of disposition and (2) after taking into account any reduction
in tax liability due to available tax credits or deductions and any tax sharing
arrangements), (c) in the case of any Asset Sale that does not involve any
portion of the Collateral, repayment of Indebtedness that is required by the
terms thereof to be repaid in connection with such Asset Sale to the extent so
repaid in cash and (d) appropriate amounts to be provided by the Company or by
any Subsidiary of the Company, as the case may be, as a reserve, in accordance
with GAAP consistently applied, against any liabilities associated with such
Asset Sale and retained by the Company or by any Subsidiary of the Company, as
the case may be, after such Asset Sale, including without limitation, pension
and other post-employment benefit liabilities, liabilities related to
environmental matters and liabilities under any indemnification obligations
associated with such Asset Sale.
"Net Proceeds" has the meaning assigned to such term in the Security
Documents.
"Obligations" means any principal, premiums, interest, penalties, fees
and other liabilities payable under the documentation governing any
Indebtedness.
"Officer" means the Chairman, the President, any Vice President, the
Chief Financial Officer, the Treasurer, or the Secretary of the Company.
"Officers' Certificate" means a certificate signed by two Officers or by
an Officer and an Assistant Treasurer or Assistant Secretary of the Company
complying with Sections 12.04 and 12.05.
"Opinion of Counsel" means a written opinion from legal counsel who
may be an employee of or counsel to the Company or the Trustee.
"Permitted Additional Lender" means a lender to the Company or a
Guarantor under any Permitted Replacement Financing.
"Permitted Indebtedness" means (i) Indebtedness of the Company and its
Subsidiaries outstanding immediately following the Issue Date; (ii) Indebtedness
under the Working Capital
<PAGE>
Facility which does not exceed $80 million principal amount outstanding at any
one time; (iii) the Securities and the Senior Secured Discount Notes; (iv) the
Guarantees and the guarantees of the Senior Secured Discount Notes; (v)
Indebtedness in respect of obligations of the Company to the Trustee under this
Indenture and to the trustee under the Discount Note Indenture; (vi)
intercompany debt obligations (including intercompany notes) of the Company and
each of its Subsidiaries; provided, however, that the obligations of the Company
to any of its Subsidiaries with respect to such Indebtedness shall be subject to
a subordination agreement between the Company and its Subsidiaries providing for
the subordination of such obligations in right of payment from and after such
time as all Securities issued and outstanding shall become due and payable
(whether at stated maturity, by acceleration or otherwise) to the payment and
performance of the Company's obligations under this Indenture and the
Securities; provided, further, that any Indebtedness of the Company or any of
its Subsidiaries owed to any other Subsidiary of the Company that ceases to be
such a Subsidiary shall be deemed to be incurred and shall be treated as an
incurrence for purposes of the first paragraph of Section 4.04 at the time the
Subsidiary in question ceases to be a Subsidiary of the Company; and (vii)
Indebtedness of the Company or its Subsidiaries under any Currency Agreements,
Commodity Agreements or Interest Protection Agreements.
"Permitted Investments" means (i) obligations of or guaranteed by the
U.S. government, its agencies or government-sponsored enterprises; (ii) short-
term commercial bank and corporate obligations that have received the highest
short-term rating from two of the following rating organizations: Standard &
Poor's Corporation ("S&P"), Moody's Investors Service, Inc. ("Moody's"), Duff &
Phelps Credit Rating Co., Fitch Investor Service, Inc., IBCA Ltd. and Thomson
Bankwatch Inc.; (iii) money market preferred stocks which, at the date of
acquisition and at all times thereafter, are accorded ratings of at least AA- or
Aa3 by S&P or Moody's, respectively; (iv) tax-exempt obligations that are
accorded the highest short-term rating by S&P or Moody's or a long-term rating
of at least A- or A3 by S&P or Moody's respectively, at the time of purchase;
(v) master repurchase agreements with foreign or domestic banks having a capital
and surplus of not less than $250,000,000 or primary dealers so long as such
agreements are collateralized with obligations of the U.S. government or its
agencies at a ratio of 102%, or with other collateral rated at least AA or Aa2
by S&P or Moody's, respectively, at a ratio of 103% and, in either case, marked-
to-market weekly and so long as such securities shall be held by a third-party
agent; and (vi) guaranteed investment contracts and/or agreements of a bank,
insurance company or other institution whose unsecured, uninsured and
unguaranteed obligations (or claims-paying ability) have at the time of
<PAGE>
purchase ratings of AAA or Aaa by S&P or Moody's, respectively. In no event
shall any of the Permitted Investments described in clauses (i) through (vi)
above have a final maturity more than two years from the date of purchase;
provided, however, that in the event of a Qualified Defeasance Transaction,
Permitted Investments used to defease the defeased Indebtedness may have a final
maturity up to the date of the final maturity of the Indebtedness so defeased.
"Permitted Liens" means (i)(x) with respect to Property other than
Collateral, Liens existing on the Issue Date to the extent and in the manner
such Liens are in effect on the Issue Date and (y) with respect to Collateral,
Liens existing on the Issue Date to the extent specifically permitted in the
appropriate Security Document, (ii) Liens on accounts receivable and inventory
of the Company and its Subsidiaries securing Indebtedness incurred under the
Working Capital Facility, (iii) Liens securing Indebtedness collateralized by
Property of, or any shares of stock of or debt of, any corporation existing at
the time such corporation becomes a Subsidiary of the Company or at the time
such corporation is merged into the Company or any of its Subsidiaries, provided
that such Liens are not incurred in connection with, or in contemplation of,
such corporation becoming a Subsidiary of the Company or merging into the
Company or any of its Subsidiaries and the Acquired Indebtedness could have been
incurred pursuant to the first paragraph of Section 4.04 hereof (other than as
Permitted Indebtedness), (iv) Liens securing Refinancing Indebtedness used to
refund, refinance or extend Indebtedness referred to in the preceding clause
(iii), provided that any such Lien does not extend to or cover any Property,
shares or debt other than the Property, shares or debt securing the
Indebtedness so refunded, refinanced or extended, (v) Liens other than on
Collateral in favor of the Company or any of its Subsidiaries, (vi) Liens on
Property (other than Collateral) of the Company or any of its Subsidiaries
acquired after the Issue Date in favor of governmental bodies to secure progress
or advance payments relating to such Property, (vii) Liens on Property (other
than the Collateral) of the Company or any of its Subsidiaries acquired after
the Issue Date securing industrial revenue or pollution control or other tax
exempt bonds issued in connection with the acquisition or refinancing of such
Property to the extent the incurrence of such Indebtedness is permitted pursuant
to the provisions of Section 4.04 hereof, (viii) Liens to secure certain
Indebtedness that is otherwise permitted under this Indenture and that is used
to finance the cost of Property of the Company or any of its Subsidiaries
acquired after the Issue Date, provided that (a) any such Lien is created solely
for the purpose of securing Indebtedness representing, or incurred to finance,
refinance or refund, the cost (including sales and excise taxes, installation
<PAGE>
and delivery charges and other direct costs of, and other direct expenses paid
or charged in connection with, such purchase or construction) of such Property,
(b) the principal amount of the Indebtedness secured by such Lien does not
exceed 100% of such cost, (c) the Indebtedness secured by such Lien is incurred
by the Company or its Subsidiary within 90 days of the acquisition of such
Property by the Company or its Subsidiary, as the case may be, (d) such Lien
does not extend to or cover any Property other than such item of Property and
any improvements on such item, (e) no Net Cash Proceeds derived from Collateral
are used to fund all or any portion of the cost of acquisition of such Property,
and (f) prior to completion of the Modernization Project, Acme Steel shall not
incur or permit any Lien otherwise permitted under this clause (viii) and no
Liens at any time may encumber assets which comprise the Modernization Project,
(ix) Liens on Property (other than Collateral) to secure Indebtedness that is
otherwise permitted under this Indenture the aggregate principal amount of which
does not exceed $35 million outstanding at any one time, (x) statutory liens or
landlords', carriers', warehousemen's, mechanics', suppliers', materialmen's,
repairmen's or other like Liens arising in the ordinary course of business and
with respect to amounts not yet delinquent or 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 and,
with respect to any such Liens arising in respect of any of the Collateral, only
to the extent specifically permitted under the provisions of the appropriate
Security Document, (xi) Liens on the Collateral for the benefit of (a) holders
of the Senior Secured Discount Notes or (b) holders of Indebtedness arising at
any time after retirement of the Senior Secured Discount Notes; provided, that
the principal amount of such Indebtedness does not exceed the original principal
amount of such Senior Secured Discount Notes and the holders of such replacement
Indebtedness (acting through a designated representative) enter into a
supplement to the Collateral Agency Agreement in substantially the form annexed
thereto and the Company and such holders otherwise comply with the applicable
provisions thereof, (xii) Liens on the Collateral for the benefit of the holders
of the Securities and (xiii) easements, restrictions, reservations or rights of
others for right-of-way, sewers, electric lines, telegraph and telephone lines
and other similar purposes and other similar charges or encumbrances not
interfering in any material respect with the conduct of the business of the
Company or any of its Subsidiaries or, in the case of such charges or
encumbrances which affect the Collateral, to the extent permitted by the
provisions of the Mortgage.
"Permitted Replacement Financing" means Indebtedness of the Company or a
Guarantor incurred in compliance with this
<PAGE>
Indenture which may, in accordance with the provisions of clause (xi) of the
definition of Permitted Liens take a security interest in certain of the
Collateral upon the execution and delivery by each Permitted Additional Lender
(or a representative thereof) of a supplement to the Collateral Agency Agreement
as contemplated therein and upon satisfaction of the other conditions set forth
in the Collateral Agency Agreement relating thereto.
"Person" means any individual, corporation, limited or general
partnership, joint venture, association, joint stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"Preferred Stock" of any Person means all Capital Stock of such Person
which has a preference in liquidation or a preference with respect to the
payment of dividends.
"Preferred Stock Dividend" of any Person means, for any dividend payable
with regard to Preferred Stock issued by such Person, the amount of such
dividend multiplied by a fraction, the numerator of which is one and the
denominator of which is one minus the maximum statutory combined federal, state
and local income tax rate (expressed as a decimal number between 1 and 0) then
applicable to such Person.
"Principal" of a debt security means the principal of the security plus,
when appropriate, the premium, if any, on the security.
"Property" of any Person means all types of real, personal, tangible,
intangible or mixed property owned by such Person whether or not included in the
most recent consolidated balance sheet of such Person and its Subsidiaries under
GAAP.
"Qualified Defeasance Transaction" means any transaction by the Company
or any of its Subsidiaries in which Indebtedness (and in the case such
Indebtedness is subordinate to any other Indebtedness of such Person the Company
has complied with Section 4.07 hereof) is defeased; provided, however, that in
order for such defeasance to be a Qualified Defeasance Transaction the net
present value of the cost of such defeasance, including but not limited to the
actual costs of any Permitted Investments, the cost of any trustee or agent
overseeing such defeasance and any costs associated with the closing of such
transaction, must be less than the net present value of all present and future
payments on the Indebtedness to be defeased including but not limited to
principal, interest and premium, if any.
<PAGE>
"Redemption Date," when used with respect to any Security to be
redeemed, means the date fixed for such redemption pursuant to this Indenture.
"Redemption Price," when used with respect to any Security to be
redeemed, means the price fixed for such redemption pursuant to this Indenture
as set forth in the form of Security annexed as Exhibit A.
"Refinancing Indebtedness" means Indebtedness that refunds, refinances
or extends any Indebtedness of the Company or its Subsidiaries outstanding on
the Issue Date or other Indebtedness permitted to be incurred by the Company or
its Subsidiaries pursuant to the terms of this Indenture, but only to the extent
that (i) the Refinancing Indebtedness is subordinated to the Securities to the
same extent as the Indebtedness being refunded, refinanced or extended, if at
all, (ii) the Refinancing Indebtedness is scheduled to mature either (a) no
earlier than the Indebtedness being refunded, refinanced or extended, or (b)
after the Maturity Date, (iii) the portion, if any, of the Refinancing
Indebtedness that is scheduled to mature on or prior to the Maturity Date has a
weighted average life to maturity at the time such Refinancing Indebtedness is
incurred that is equal to or greater than the weighted average life to maturity
of the portion of the Indebtedness being refunded, refinanced or extended that
is scheduled to mature on or prior to the Maturity Date, and (iv) such
Refinancing Indebtedness is in an aggregate principal amount that is equal to or
less than the sum of (a) the aggregate principal amount then outstanding under
the Indebtedness being refunded, refinanced or extended, (b) the amount of
accrued and unpaid interest, if any, on such Indebtedness being refunded,
refinanced or extended and (c) the amount of customary fees, expenses and costs
related to the incurrence of such Refinancing Indebtedness; provided that
Indebtedness which is in an aggregate principal amount greater than the sum of
(a), (b) and (c) of this clause (iv) shall constitute Refinancing Indebtedness
to the extent of the sum of (a), (b) and (c) if the amount of Indebtedness in
excess of the sum of (a), (b) and (c) could otherwise be incurred pursuant to
Section 4.04.
"Related Business Investment" means any Investment, capital expenditure
or other expenditure by the Company or any Subsidiary of the Company in Property
or assets (other than the Property or assets subject to any Lien except for (1)
with respect to any Available Proceeds Amount resulting from an Asset Sale
involving Collateral, the Lien of the Security Documents and (2) with respect to
any Available Proceeds Amount resulting from an Asset Sale not involving
Collateral, the Lien of any instruments or documents that secured Indebtedness
that was
<PAGE>
secured by the assets subject to such Asset Sale) which is related to the
business of the Company and its Subsidiaries as it is conducted on the date of
the Asset Sale giving rise to the Asset Sale Proceeds to be reinvested.
"Released Interests" has the meaning assigned to such term in the
Collateral Agency Agreement.
"Restoration" has the meaning assigned to such term in each of the
Mortgages.
"Restricted Investment" means, with respect to any Person, any
Investment by such Person in any (i) of its Affiliates or in any Person that
becomes an Affiliate as a result of such Investment, (ii) executive officer or
director of such Person and (iii) executive officer or director of any Affiliate
of such Person; provided that loans or advances made in the ordinary course of
business for travel, relocation or similar purposes shall not constitute
Restricted Investments.
"Restricted Payment" means any of the following: (i) the declaration or
payment of any dividend or any other distribution on Capital Stock of the
Company or any Subsidiary of the Company or any payment made to the direct or
indirect holders (in their capacities as such) of Capital Stock of the Company
or any Subsidiary of the Company (other than (a) dividends or distributions
payable solely in Capital Stock (other than Disqualified Stock) and (b) in the
case of Subsidiaries of the Company, dividends or distributions payable to the
Company or to a Subsidiary of the Company); (ii) the purchase, redemption or
other acquisition or retirement for value of any Capital Stock, or any option,
warrant, or other right to acquire shares of Capital Stock, of the Company or
any of its Subsidiaries; (iii) the making of any principal payment on, or the
purchase, defeasance, repurchase, redemption or other acquisition or retirement
for value, prior to any scheduled maturity, scheduled repayment or scheduled
sinking fund payment, of any Indebtedness of the Company or any of its
Subsidiaries which is subordinated in right of payment to the Securities
(including any Guarantees thereof); and (iv) the making of any Restricted
Investment or guarantee of any Restricted Investment in any Person.
"SEC" means the Securities and Exchange Commission.
"Secured Parties" has the meaning assigned to such term in the
Collateral Agency Agreement.
"Securities" means the % Senior Secured Notes due 2002, as amended or
supplemented from time to time pursuant to the terms of this Indenture, that are
issued under this Indenture.
<PAGE>
"Security Agreement" means the Security Agreement dated as of the date
hereof between Acme Steel and the Collateral Agent, in substantially the form
attached hereto as Exhibit B, as the same may be amended, amended and restated,
supplemented or otherwise modified from time to time in accordance with its
terms.
"Security Documents" means, collectively, the Security Agreement, the
Mortgage, the Stock Pledge Agreements, the Disbursement Agreement, the
Collateral Agency Agreement and the Intercreditor Agreement and all security
agreements, mortgages, deeds of trust, collateral assignments, or other
instruments evidencing or creating any security interest in favor of the
Collateral Agent in all or any portion of the Collateral in each case, as
amended, amended and restated, supplemented or otherwise modified from time to
time.
"Senior Secured Discount Notes" means the % Senior Secured Discount
Notes due 2004, as amended or supplemented from time to time pursuant to the
terms of the Discount Note Indenture, that are issued under the Discount Note
Indenture.
"Significant Subsidiary" means any Subsidiary of the Company which would
constitute a "significant subsidiary" as defined in Rule 1.02 of Regulation S-X
under the Securities Act of 1933, as amended, and the Exchange Act.
"Special Stock Purchase Warrants" means the 5,600,000 special stock
purchase warrants issued and sold by the Company in March 1994 and the Common
Stock for which they can be exercised.
"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.
"Stock Pledge Agreements" means, collectively, the Stock Pledge
Agreement dated the date hereof between (i) the Company or (ii) Acme Steel and
Acme Packaging, and, in each case, the Collateral Agent, in substantially the
form attached hereto as Exhibit D, as each may be amended, amended and restated,
supplemented or otherwise modified from time to time in accordance with its
terms.
"Subsidiary" means, with respect of any Person, any corporation or other
entity of which a majority 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 or controlled by such Person.
<PAGE>
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code (S)(S) 77aaa-
77bbbb) as in effect on the date of this Indenture, except as provided in
Section 9.03.
"Trustee" means the party named as such in this Indenture until a
successor replaces it in accordance with the provisions of this Indenture and
thereafter means such successor.
"Trust Officer" means any officer within the corporate trust
administration department (or any successor group of the Trustee), including any
vice president, assistant vice president, assistant secretary or any other
officer or assistant officer of the Trustee customarily performing functions
similar to those performed by the persons who at that time shall be such
officers, and also means, with respect to a particular corporate trust matter,
any other officer to whom such trust matter is referred because of his or her
knowledge of and familiarity with the particular subject.
"Unapplied Proceeds Offer Payment Date" means, with respect to any
Available Proceeds Amount from an Asset Sale, the earlier of (x) the 180th day
following receipt of such Available Proceeds Amount or (y) such earlier date on
which an Unapplied Proceeds Offer shall expire; provided, however, that to the
extent that the Board of Directors of the Company shall have adopted a capital
expenditure plan contemplating the application of Net Cash Proceeds from an
Asset Sale to a Related Business Investment and the Company shall have taken
significant steps to implement such plan within 180 days of an Asset Sale, the
Unapplied Proceeds Offer Payment Date with respect thereto shall be the 180th
day after the adoption of such plan.
"United States Government Obligations" means securities which are direct
obligations of (i) the United States or (ii) an agency or instrumentality of the
United States, the payment of which is unconditionally guaranteed by the United
States, which, in either case, are full faith and credit obligations of the
United States and are not callable or redeemable at the option of the issuer
thereof, and shall also include a depository receipt issued by a bank or trust
company as custodian with respect to any such United States Government
Obligations or a specific payment of interest on or principal of any such United
States Government Obligations held by such custodian for the account of the
holder of a depository receipt; provided that (except as required by law) such
custodian is not authorized to make any deduction from the amount received by
the custodian in respect of the United States Government Obligations for the
specific payment of interest or principal of the United States Government
Obligations evidenced by such depository receipt.
<PAGE>
"Valuation Date" has the meaning assigned to such term in the Collateral
Agency Agreement.
"Wabush" means the entity called Wabush Mines, a Canadian joint venture,
including Wabush Iron Co. Ltd., an Ohio corporation and one of the joint
venturers of Wabush Mines, which is engaged in the mining, beneficiation and
pelletizing of iron ore or any successor to either such entity, any entity of
approximately equivalent value substituted therefor or any investment of
approximately equivalent value and purpose.
"Wholly Owned Subsidiary" of any Person means, at any time, a Subsidiary
all of the Capital Stock of which (except director's qualifying shares, if any)
are at the time owned directly or indirectly by such Person.
"Working Capital Facility" means the revolving credit facility, as the
same may be amended or supplemented from time to time, and any refinancing or
replacement of such credit facility or any successor credit facility so long as
the aggregate amount permitted to be borrowed under any such amended,
supplemented, refinanced, replaced or successor credit facility does not exceed
the lesser of (i) $80 million outstanding at any time or (ii) an amount equal to
the sum of 85% of the face value of all "eligible receivables" of the Company
and its Subsidiaries party to such credit facility plus 50% of the lower of the
fair market value or cost of their "eligible inventory" (as such terms are
defined for purposes of such credit facility).
SECTION 1.02. Other Definitions.
<TABLE>
<CAPTION>
Term Defined in Section
- ----------------------------------------------------- ------------------
<S> <C>
"Affiliate Transaction" 4.03
"Bankruptcy Law" 6.01
"Collateral Account" 11.01
"covenant defeasance" 8.02
"Custodian" 6.01
"defeasance" 8.02
"Event of Default" 6.01
"incurrence" 4.04
"Paying Agent" 2.03
"Registrar" 2.03
"Released Trust Moneys" 11.04
"Repurchase Date" 4.15
"Repurchase Right" 4.15
"Required Filing Dates" 4.13
"Surviving Entity" 5.01
"Trust Moneys" 11.01
"Unapplied Proceeds Offer" 4.06
</TABLE>
<PAGE>
SECTION 1.03. Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following meanings:
"Commission" means the SEC.
"indenture securities" means the Securities.
"indenture security holder" means a Securityholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Company or any
other obligor on the Securities.
All other TIA terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by Commission rule
and not otherwise defined herein have the meanings assigned to them therein.
SECTION 1.04. Rules of Construction.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned
to it in accordance with generally accepted accounting principles in effect
on the Issue Date, and any other reference in this Indenture to "generally
accepted accounting principles" refers to GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and words in the plural
include the singular;
(5) provisions apply to successive events and transactions; and
<PAGE>
(6) "herein," "hereof" and other words of similar import refer to this
Indenture as a whole and not to any particular Article, Section or other
subdivision.
ARTICLE TWO
THE SECURITIES
SECTION 2.01. Form and Dating.
The Securities, the notation thereon relating to the Guarantees and
the Trustee's certificates of authentication shall be substantially in the form
of Exhibit A. The Securities may have notations, legends or endorsements
required by law, securities exchange rule or usage. Any notations, legends or
endorsements not contained in the form of Security contained in Exhibit A shall
be delivered in writing to the Trustee. The Company shall approve the form of
the Securities and any notation, legend or endorsement on them. Each Security
shall be dated the date of its authentication.
The terms and provisions contained in the form of the Securities,
annexed hereto as Exhibit A, shall constitute, and are hereby expressly made, a
part of this Indenture.
SECTION 2.02. Execution and Authentication.
Two Officers shall sign the Securities for the Company by manual or
facsimile signature. The Company's seal shall appear on the Securities and may
be reproduced manually or by facsimile.
If an Officer whose signature is on a Security no longer holds that
office at the time the Trustee authenticates the Security, the Security shall be
valid nevertheless.
A Security shall not be valid until the Trustee manually signs the
certificate of authentication on the Security. The signature shall be
conclusive evidence that the Security has been authenticated under this
Indenture.
The Trustee shall authenticate Securities for original issue in the
aggregate principal amount of up to $175,000,000, upon a written order of the
Company signed by two Officers or by an Officer and an Assistant Treasurer or
Assistant Secretary of the Company. The order shall specify the amount of
Securities to be authenticated and the date on which the original issue of
Securities is to be authenticated. The aggregate principal amount of Securities
outstanding at any time may not exceed $175,000,000 except as provided in
Section 2.07.
<PAGE>
The Trustee may appoint an authenticating agent acceptable to the
Company and eligible to qualify as a Trustee hereunder pursuant to Section 7.10
to authenticate Securities other than upon original issuance. Any such
appointment shall be evidenced by an instrument in writing signed by a Trust
Officer of the Trustee, and a copy of such instrument shall be promptly
furnished to the Company. The Company shall pay all fees payable to the
authenticating agent. Any authenticating agent appointed hereunder shall be
entitled to the benefits of Section 7.07. Unless limited by the terms of such
appointment, any authenticating agent may authenticate Securities whenever the
Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such agent. An authenticating agent has the
same rights as an Agent to deal with the Company or an Affiliate as provided in
Section 7.03. The provisions of Sections 7.08, 7.09 and 7.10 shall apply to any
authenticating agent appointed hereunder with the same effect as if such
authenticating agent were the Trustee hereunder.
The Securities shall be issuable only in registered form without
coupons and only in denominations of $1,000 and any integral multiple thereof.
SECTION 2.03. Registrar and Paying Agent.
The Company shall maintain an office or agency where Securities may be
presented for registration of transfer or for exchange ("Registrar") and an
office or agency where Securities may be presented for payment ("Paying Agent").
The Company may have one or more co-Registrars and one or more additional paying
agents. The term "Paying Agent" includes any additional paying agent.
The Company shall enter into an appropriate agency agreement with any
Agent not a party to this Indenture. The agreement shall implement the
provisions of this Indenture that relate to such Agent and shall, if required,
incorporate the provisions of the TIA. The Company shall notify the Trustee of
the name and address of any such Agent. If the Company fails to maintain a
Registrar or Paying Agent, the Trustee shall act as such and shall be entitled
to appropriate compensation in accordance with the provisions of Section 7.07.
The Company initially appoints the Trustee as Registrar and Paying
Agent. The Company shall give written notice to the Trustee in the event that
the Company decides to act as Registrar or Paying Agent.
<PAGE>
SECTION 2.04. Paying Agent To Hold Money in Trust.
The Company shall require each Paying Agent to agree in writing to
hold in trust for the benefit of Securityholders or the Trustee all money held
by the Paying Agent for the payment of principal of or interest on the
Securities (whether such money has been paid to it by the Company or any other
obligor on the Securities), and the Company and the Paying Agent shall each
notify the Trustee of any default by the Company (or any other obligor on the
Securities) in making any such payment. If the Company or a Subsidiary of the
Company acts as Paying Agent, it shall segregate the money and hold it as a
separate trust fund. The Company at any time may require a Paying Agent to pay
all money held by it to the Trustee and account for any funds disbursed and the
Trustee may at any time during the continuance of any payment default, upon
written request to a Paying Agent, require such Paying Agent to pay all money
held by it to the Trustee and to account for any funds disbursed. Upon making
such payment the Paying Agent shall have no further liability for the money
delivered to the Trustee.
SECTION 2.05. Securityholder Lists.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
Securityholders. If the Trustee is not the Registrar, the Company shall furnish
to the Trustee at least five Business Days before each Interest Payment Date and
at such other times as the Trustee may request in writing a list in such form
and as of such date as the Trustee may reasonably require of the names and
addresses of Securityholders.
Every Holder of a Security, 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 the
disclosure of any information as to the names and addresses of the Holders
required by Section 312 of the TIA, and that the Trustee shall not be held
accountable by reason of mailing any material required to be disclosed pursuant
to a request made under Section 312(b) of the TIA.
SECTION 2.06. Transfer and Exchange.
When Securities are surrendered to the Registrar or a co-Registrar
with a request to register the transfer or to exchange them for an equal
principal amount of Securities of other authorized denominations, the Registrar
shall register the transfer or make the exchange as requested if its
requirements for such transactions are met. Every Security surrendered for
<PAGE>
registration of transfer or exchange shall (if so required by the Company or the
Registrar) be duly endorsed by or be accompanied by a written instrument of
transfer in form satisfactory to the Company and the Registrar duly executed by
the Holder thereof or such Holder's attorney duly authorized in writing. To
permit registrations of transfers and exchanges, the Company shall execute and
the Trustee shall authenticate Securities at the Registrar's request. The date
of any Security issued pursuant to this Section 2.06 shall be the date of such
transfer or exchange. No service charge shall be made to the Securityholder for
any registration of transfer or exchange, but the Company may require from the
Securityholder payment of a sum sufficient to cover any transfer tax or similar
governmental charge payable in connection therewith (other than any such
transfer tax or similar governmental charge payable upon exchanges not involving
any transfer pursuant to Section 2.10, 3.06 or 9.05, in which event the Company
shall be responsible for the payment of such taxes).
The Company shall not be required (i) to register the transfer of or
exchange Securities during a period beginning at the opening of business 15 days
before the day of the selection for redemption of Securities under Section 3.02
and ending at the close of business on the day of the mailing of the relevant
notice of redemption, (ii) to register the transfer of or exchange any Security
so selected for redemption in whole or in part, except the unredeemed portion of
any Security being redeemed in part, or (iii) to register the transfer of or
exchange any Security which has been surrendered for payment or repayment at the
option of the Holder pursuant to Section 4.06 or Section 4.15, except the
portion, if any, of such Security not to be so paid or repaid.
SECTION 2.07. Replacement Securities.
If a mutilated Security is surrendered to the Trustee or if the Holder
of a Security claims that the Security has been lost, destroyed or wrongfully
taken, then, in the absence of notice to the Company or the Trustee that such
lost, destroyed or wrongfully taken Security has been acquired by a bona fide
purchaser, the Company shall issue and the Trustee shall authenticate a
replacement Security if the requirements of the Company and the Trustee are met.
The Company and the Trustee may require (i) evidence to their satisfaction of
the loss, destruction or wrongful taking of a Security and (ii) such security or
indemnity in an amount sufficient in the judgment of the Company and the Trustee
to protect the Company, the Trustee and any Agent from any loss which any of
them may suffer if such Security is replaced. The Company and the Trustee each
may charge such Holder for its expenses in replacing such Security.
<PAGE>
Every replacement Security is an additional obligation of the Company.
SECTION 2.08. Outstanding Securities.
Securities outstanding at any time are all Securities that have been
authenticated by the Trustee except for those cancelled by it, those delivered
to it for cancellation and those described in this Section or Section 2.09 as
not outstanding. Subject to Section 2.09, a Security does not cease to be
outstanding because the Company or one of its Affiliates holds the Security.
If a Security is replaced pursuant to Section 2.07, it ceases to be
outstanding unless the Trustee receives proof satisfactory to it that the
replaced Security is held by a bona fide purchaser.
Securities with respect to which the Company has effected defeasance
and/or covenant defeasance as provided in Article Eight shall cease to be
outstanding on and after the date of such defeasance and/or covenant defeasance,
except to the extent provided in Section 8.02.
If the Paying Agent (other than the Company, a Subsidiary of the
Company or an Affiliate of the Company) holds on a redemption date, a Purchase
Date, a Repurchase Date or Maturity Date (or in the event that the Company, a
Subsidiary of the Company or an Affiliate is acting as Paying Agent, if the
Company, such Subsidiary or Affiliate sets aside and segregates in trust on a
redemption date, a Purchase Date, a Repurchase Date or Maturity Date) money
sufficient to pay the principal of and interest on Securities payable on that
date, then on and after that date such Securities cease to be outstanding and
interest on them ceases to accrue.
SECTION 2.09. Treasury Securities.
In determining whether the Holders of the required principal amount of
Securities have concurred in any direction, request, waiver or consent,
Securities owned by the Company, any Subsidiary of the Company or an Affiliate
of the Company shall be disregarded and not treated as outstanding, except that
for the purposes of determining whether the Trustee shall be protected in
relying on any such direction, request, waiver or consent, only Securities which
the Trustee actually knows are so owned shall be so disregarded and treated.
<PAGE>
The Trustee may require an Officers' Certificate listing securities
owned by the Company, a Subsidiary of the Company or an Affiliate of the
Company.
SECTION 2.10. Temporary Securities.
Until definitive Securities are ready for delivery, the Company may
prepare and the Trustee shall authenticate temporary Securities. Temporary
Securities shall be substantially in the form of definitive Securities but may
have variations that the Company considers appropriate for temporary Securities.
Without unreasonable delay, the Company shall prepare and the Trustee shall
authenticate definitive Securities in exchange for temporary Securities upon
surrender of such temporary securities. Until such exchange, temporary
Securities shall be entitled to the same rights, benefits and privileges as
definitive Securities.
SECTION 2.11. Cancellation.
The Company at any time may deliver Securities to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Trustee
for cancellation any Securities surrendered to them for transfer, exchange,
repayment, redemption or payment. The Trustee and no one else shall promptly
cancel all Securities so delivered to the Trustee or surrendered for transfer,
exchange, repayment, redemption, payment or cancellation. The Company may not
issue and the Trustee shall not authenticate new Securities to replace or
reissue or resell Securities which the Company has redeemed, paid, purchased,
repurchased, purchased on the open market or otherwise, or otherwise acquired or
have been delivered to the Trustee for cancellation. The Trustee (subject to
the record-retention requirements of the Exchange Act) shall destroy all
cancelled Securities and promptly deliver a certificate of destruction to the
Company.
SECTION 2.12. Defaulted Interest.
If the Company defaults in a payment of interest on the Securities, it
shall pay the defaulted interest, plus any interest payable on the defaulted
interest pursuant to Section 4.01 hereof, to the persons who are Securityholders
on a subsequent special record date, and such term, as used in this Section 2.12
with respect to the payment of any defaulted interest, shall mean the fifteenth
day next preceding the date fixed by the Company for the payment of defaulted
interest, whether or not such day is a Business Day. At least 15 days before
such special record date, the Company shall mail to each Securityholder and to
the Trustee, or the Trustee in the name and
<PAGE>
at the expense of the Company shall mail to each Securityholder, a notice that
states such special record date, the payment date and the amount of defaulted
interest to be paid.
Alternatively, in lieu of paying such defaulted interest pursuant to
the preceding paragraph, the Company may make payment of such defaulted interest
in any other lawful manner not inconsistent with the requirements of any
securities exchange on which the Securities may be listed, and upon such notice
as may be required by such securities exchange, if, after notice given by the
Company to the Trustee of the proposed payment pursuant to this paragraph, such
manner of payment shall be deemed practicable by the Trustee.
ARTICLE THREE
REDEMPTION
SECTION 3.01. Notices to Trustee.
If the Company wants to redeem Securities pursuant to paragraph 5 of
the Securities at the applicable redemption price set forth thereon, it shall
notify the Trustee in writing of the redemption date and the principal amount of
Securities to be redeemed.
The Company shall give the notice provided for in this Section at
least 45 days before the redemption date (unless a shorter notice shall be
agreed to by the Trustee in writing), together with an Officers' Certificate
stating that such redemption will comply with the conditions contained herein.
SECTION 3.02. Selection of Securities To Be Redeemed.
If less than all of the Securities are to be redeemed pursuant to
paragraph 5 thereof, the Trustee shall select the Securities to be redeemed by
any method that complies with the requirements of the principal national
securities exchange, if any, on which the Securities being redeemed are listed,
at the discretion of the Trustee, or, if the Securities are not so listed, by
lot, pro rata or in such other manner as the Trustee shall deem fair and
reasonable; provided that no Security with a principal amount of $1,000 or less
shall be redeemed in part. The Trustee shall make the selection from the
Securities then outstanding, subject to redemption and not previously called for
redemption. 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 Trustee shall promptly notify the Company
in writing of the Securities selected for redemption and, in the case of any
<PAGE>
Securities selected for partial redemption, the principal amount thereof to be
redeemed. Provisions of this Indenture that apply to Securities called for
redemption also apply to portions of Securities called for redemption.
SECTION 3.03. Notice of Redemption.
At least 30 days but not more than 60 days before a redemption date,
the Company shall mail a notice of redemption by first class mail, postage
prepaid, to each Holder whose Securities are to be redeemed.
The notice shall identify the Securities to be redeemed and shall
state:
(1) the redemption date;
(2) the redemption price;
(3) the CUSIP number of the Securities;
(4) the name and address of the Paying Agent to which the Securities
are to be surrendered for redemption;
(5) that Securities called for redemption must be surrendered to the
Paying Agent to collect the redemption price;
(6) that, unless the Company defaults in making the redemption
payment, interest on Securities called for redemption ceases to accrue on
and after the redemption date and the only remaining right of the Holders
is to receive payment of the redemption price upon surrender to the Paying
Agent; and
(7) if any Security is being redeemed in part, the portion of the
principal amount of such Security to be redeemed and that, after the
redemption date, upon surrender of such Security, a new Security or
Securities in principal amount equal to the unredeemed portion thereof will
be issued.
At the Company's request made at least 45 days before the redemption
date (unless a shorter time period shall be agreed to by the Trustee in
writing), the Trustee shall give the notice of redemption on behalf of the
Company, in the Company's name and at the Company's expense.
<PAGE>
SECTION 3.04. Effect of Notice of Redemption.
Once a notice of redemption is mailed, Securities called for
redemption become due and payable on the redemption date and at the redemption
price and from and after the redemption date (unless the Company defaults in
making the redemption payment) such Securities shall cease to accrue interest.
Upon surrender to the Paying Agent, such Securities shall be paid at the
redemption price, plus accrued interest thereon to the redemption date, but
interest installments whose maturity is on or prior to such redemption date
shall be payable to the Holders of record at the close of business on the
relevant record dates referred to in the Securities. The Trustee shall not be
required to (i) issue, authenticate, register the transfer of or exchange any
Security during a period beginning 15 days before the date a notice of
redemption is mailed and ending at the close of business on the date the
redemption notice is mailed, or (ii) register the transfer or exchange of any
Security so selected for redemption in whole or in part, except the unredeemed
portion of any Security being redeemed in part.
SECTION 3.05. Deposit of Redemption Price.
At least one Business Day before the redemption date, the Company
shall deposit with the Paying Agent (or if the Company is its own Paying Agent,
shall, on or before the redemption date, segregate and hold in trust) money
sufficient to pay the redemption price of and accrued interest on all Securities
to be redeemed on that date other than Securities or portions thereof called for
redemption on that date which have been delivered by the Company to the Trustee
for cancellation.
SECTION 3.06. Securities Redeemed in Part.
Upon surrender of a Security that is redeemed in part (with, if so
required by the Company or the Trustee, due endorsement by, or accompanied by a
written instrument of transfer in form satisfactory to the Company and the
Trustee duly executed by, the Holder thereof or such Holder's attorney duly
authorized in writing), the Trustee shall authenticate for the Holder a new
Security in principal amount equal to and in exchange for the unredeemed portion
of the Security surrendered.
<PAGE>
ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Securities.
The Company shall pay the principal of and interest on the Securities
in the manner provided in the Securities. An installment of principal or
interest shall be considered paid on the date due if the Trustee or Paying Agent
(other than the Company, a Subsidiary of the Company or an Affiliate of the
Company) holds on that date money designated for and sufficient to pay the
installment in full.
The Company shall pay interest on overdue principal at the same rate
per annum borne by the Securities. The Company shall pay interest on overdue
installments of interest at the same rate per annum borne by the Securities, to
the extent lawful.
SECTION 4.02. Maintenance of Office or Agency.
The Company shall maintain in the Borough of Manhattan, The City of
New York, 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 set forth in Section 12.02. The Company hereby initially
designates the office or agency of [the Trustee] located at ,
as its office or agency in the Borough of Manhattan, The City of New York, to
receive all such presentations, surrenders, notices or demands until changed as
permitted in this Indenture.
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 that no such designation or rescission shall in any manner relieve the
Company of its obligation to maintain an office or agency in the Borough of
Manhattan, The City of New York, for such purposes. The Company shall give
prompt written notice to the Trustee of any such designation or rescission and
of any change in the location of any such other office or agency.
<PAGE>
SECTION 4.03. Limitation on Transactions with Affiliates.
The Company will not, and will not permit any of its Subsidiaries to,
make any loan, advance, guarantee or capital contribution to, or for the benefit
of, or sell, lease, transfer or otherwise dispose of any of its properties or
assets to, or for the benefit of, or purchase or lease any property or assets
from, or enter into or amend any contract, agreement or understanding with, or
for the benefit of, any Affiliate of the Company or any Affiliate of any of the
Company's Subsidiaries or any holder of 10% or more of any class of Capital
Stock of the Company (including any Affiliates of such holders) (each, an
"Affiliate Transaction") except for any Affiliate Transaction the terms of which
are fair and reasonable to the Company or such Subsidiary, as the case may be,
and are at least as favorable as the terms which could be obtained by the
Company or such Subsidiary, as the case may be, in a comparable transaction made
on an arm's length basis with Persons who are not such a holder, an Affiliate of
such holder or an Affiliate of the Company or any of the Company's Subsidiaries.
In addition, the Company will not, and will not permit any Subsidiary
of the Company to, enter into an Affiliate Transaction, or any series of related
Affiliate Transactions, unless with respect to such transaction or transactions
involving or having a value of more than $1,000,000, the Company has (x)
obtained the approval of a majority of the Board of Directors in the exercise of
their fiduciary duties and (y) either obtained the approval of a majority of the
members of the full Board of Directors not having any interest in such
transaction or transactions or obtained an opinion of a qualified independent
financial advisor to the effect that such transaction or transactions are fair
to the Company or such Subsidiary, as the case may be, from a financial point of
view.
SECTION 4.04. Limitation on Indebtedness.
The Company will not, and will not permit any of its Subsidiaries,
directly or indirectly, to, create, incur, assume, become liable for or
guarantee the payment of (collectively, an "incurrence") any Indebtedness
(including Acquired Indebtedness); provided the Company and its Subsidiaries may
incur Indebtedness, including Acquired Indebtedness, if (i) at the time of such
event and after giving effect thereto, on a pro forma basis, the ratio of
Consolidated Cash Flow Available for Fixed Charges to Consolidated Fixed Charges
for the four full fiscal quarters immediately preceding such event, taken as one
period and calculated using the assumptions and adjustments set forth in the
following sentence, would have been greater than 2.0 to 1.0, and (ii) no
Default or Event of Default shall have occurred and be
<PAGE>
continuing at the time of or occur as a consequence of the incurrence of such
Indebtedness. The following assumptions and adjustments shall be used in
calculating the ratio of Consolidated Cash Flow Available for Fixed Charges to
Consolidated Fixed Charges for the four-quarter period preceding the incurrence
of Indebtedness giving rise to such determination: (a) the Indebtedness being
incurred will be assumed to have been incurred on the first day of such four-
quarter period; (b) any other Indebtedness incurred during, and remaining
outstanding at the end of, such four-quarter period or incurred subsequent to
such four-quarter period will be assumed to have been incurred on the first day
of such four-quarter period; (c) with respect to the incurrence of Acquired
Indebtedness, the related acquisition (whether by means of purchase, merger or
otherwise) and any related repayment of any Indebtedness will be assumed to have
occurred on the first day of such four-quarter period with the appropriate
adjustments with respect to such acquisition and repayment being included in
such pro forma calculations; (d) with respect to Indebtedness repaid (other than
a repayment of revolving credit obligations) during such four-quarter period (or
subsequent thereto) out of the proceeds of sales of Capital Stock or operating
cash flows in such four-quarter period, such Indebtedness will be assumed to
have been repaid on the first day of such four-quarter period; and (e) any
permanent reduction in the committed amount of a revolving credit facility
during such four-quarter period (or subsequent thereto) will be deemed to have
occurred on the first day of such four-quarter period and interest paid on any
amounts drawn on such revolving credit facility during such four-quarter period
in excess of such reduced committed amount shall, for the period during which
such drawn amounts were actually outstanding, be excluded from such calculation.
The foregoing limitations shall not apply to the incurrence of (i)
Permitted Indebtedness, (ii) Refinancing Indebtedness and (iii) additional
Indebtedness of the Company or any of its Subsidiaries the aggregate principal
amount of which does not exceed $35 million outstanding at any one time.
SECTION 4.05. Limitation on Liens.
The Company will not, and will not permit any Subsidiary of the
Company to, issue, assume, guarantee or suffer to exist any Indebtedness secured
by a Lien (other than a Permitted Lien) of or upon any Property of the Company
or any Subsidiary of the Company or any shares of stock or debt of any
Subsidiary of the Company, whether such Property is owned at the Issue Date or
thereafter acquired.
<PAGE>
SECTION 4.06. Limitation on Disposition of Assets.
(a) The Company will not, and will not cause or permit any of its
Subsidiaries to, consummate any Asset Sale unless (i) the consideration in
respect of such Asset Sale is at least equal to the fair market value of the
assets subject to such Asset Sale, (ii) at least 75% of the value of the
consideration therefrom received by the Company or such Subsidiary is in the
form of cash or Cash Equivalents, and (iii) to the extent such Asset Sale
involves Collateral, (x) such Asset Sale is not between the Company and any of
its Subsidiaries or between Subsidiaries of the Company and (y) the Company
shall cause the cash consideration received in respect thereof to be deposited
in the Collateral Account as and when received by the Company or by any
Subsidiary of the Company and shall otherwise comply with the provisions hereof
and of the Collateral Agency Agreement applicable to such Collateral and Asset
Sale. The Company may, for so long as no Default or Event of Default exists
hereunder or would be caused thereby, apply Net Cash Proceeds held by it (or in
compliance with the provisions hereof and the Collateral Agency Agreement,
direct the Collateral Agent to release Net Cash Proceeds held in the Collateral
Account for application) to the acquisition or construction of Property
constituting a Related Business Investment; provided, however, that if such
application is not made in the manner and within the times contemplated by the
definition of Available Proceeds Amount, the Company shall be required to make
an Unapplied Proceeds Offer (as defined below) pursuant to paragraph (b) below.
(b) In the event there shall be any Available Proceeds Amount, the
Company shall make an offer to purchase (the "Unapplied Proceeds Offer") to all
Holders of the Securities on the Unapplied Proceeds Offer Payment Date a
principal amount (expressed as an integral multiple of $1,000) of the Securities
equal to the Applicable Portion of such Available Proceeds Amount (as such
amount may be increased in accordance with clause (vii) of paragraph (f)
hereof). In each case of an Unapplied Proceeds Offer, the purchase price for
the Securities shall be equal to 100% of the principal amount thereof plus
accrued and unpaid interest to the Unapplied Proceeds Offer Payment Date.
Notwithstanding the foregoing (A) the Company may defer the Unapplied Proceeds
Offer until there is an aggregate unutilized Available Proceeds Amount equal to
or in excess of $5,000,000 (at which time, the entire unutilized Available
Proceeds Amount, whether or not withdrawn by the Company pursuant to Section 3.4
of the Collateral Agency Agreement, and not just the amount in excess of
$5,000,000, shall be applied as required pursuant hereto), (B) in connection
with any Asset Sale, the Company and its Subsidiaries will not be required to
comply with the requirements of clause (ii) of paragraph (a) to the extent that
the aggregate non-cash consideration received in connection with such Asset
Sale, together with the sum of all
<PAGE>
non-cash consideration received in connection with all prior Asset Sales that
has not yet been converted into cash, does not exceed $5 million, provided that
when any non-cash consideration is converted into cash, such cash shall
constitute Net Cash Proceeds and be subject to clause (ii) of paragraph (a), and
(C) in connection with any Asset Sale relating to the Company's interest in
Wabush, the Company need not comply with the provisions of clauses (i) and (ii)
of paragraph (a). To the extent the Unapplied Proceeds Offer is not fully
subscribed to by Holders of Securities, the Company may, subject to the terms
hereof and of the Collateral Agency Agreement, obtain a release of the
unutilized portion of the Available Proceeds Amount relating to such Unapplied
Proceeds Offer from the Lien of the Security Documents.
(c) If at any time any non-cash consideration is received by the
Company or by any Subsidiary of the Company, as the case may be, in connection
with any Asset Sale involving Collateral, such non-cash consideration shall be
made subject to the Lien of the Security Documents in the manner contemplated
hereby and the Collateral Agency Agreement. If and when any non-cash
consideration received from any Asset Sale (whether or not relating to
Collateral) is converted into or sold or otherwise disposed of for cash, then
such conversion or disposition shall be deemed to constitute an Asset Sale
hereunder and the Net Cash Proceeds thereof shall be applied in accordance with
this Section.
(d) All Net Proceeds and all Net Awards required to be delivered to
the Collateral Agent pursuant to any Security Document shall constitute Trust
Moneys and shall be delivered by the Company to the Collateral Agent
contemporaneously with receipt by the Company and be deposited in the Collateral
Account. Net Proceeds and Net Awards so deposited that are required to be
applied or may be applied by the Company to effect a Restoration of the affected
Collateral under the applicable Security Document may be withdrawn from the
Collateral Account, only in accordance with the provisions of this Indenture
and the Collateral Agency Agreement. Net Proceeds and Net Awards so deposited
that are not required to be applied to effect a Restoration of the affected
Collateral under the applicable Security Document may be withdrawn only in
accordance with the provisions of this Indenture and the Collateral Agency
Agreement.
(e) The Company shall provide the Trustee and the Collateral Agent
with prompt notice of the occurrence of an Unapplied Proceeds Offer. Such
notice shall be accompanied by an Officers' Certificate setting forth (i) a
statement to the effect that (x) the Company or a Subsidiary of the Company has
made an Asset Sale and/or (y) there has occurred a destruction or
<PAGE>
condemnation in respect of Collateral resulting in Net Proceeds or Net Awards
which are not required to be applied to effect a Restoration of such affected
Collateral under the applicable Security Document and (ii) the aggregate
principal amount of Securities offered to be purchased and the basis of
calculation in determining such aggregate principal amount. The Company is
obligated with respect to the Securities and the Senior Secured Discount Notes
(i) to give notice of an Unapplied Proceeds Offer and the equivalent offer
pursuant to the Discount Note Indenture at the same time and in the same manner
to each holder of the Securities and the Senior Secured Discount Notes, (ii) to
set the same expiration date for the Unapplied Proceeds Offer and the equivalent
offer pursuant to the Discount Note Indenture arising out of each event giving
rise to an Available Proceeds Amount and (iii) to establish identical dates as
the Unapplied Proceeds Offer Payment Date and the equivalent date pursuant to
the Discount Note Indenture for each such offer referred to in clauses (i) and
(ii).
In the event of the transfer of substantially all (but not all) of the
Property of the Company and its Subsidiaries as an entirety to a Person in a
transaction permitted under Section 5.01 hereof, the successor corporation shall
be deemed to have sold the Properties of the Company and its Subsidiaries not so
transferred for purposes of this Section, and shall comply with the provisions
of this Section with respect to such deemed sale as if it were an Asset Sale.
In addition, the fair market value of such properties and assets of the Company
or its Subsidiaries deemed to be sold shall be deemed to be Net Cash Proceeds
for purposes of this Section.
(f) The Company shall provide the Trustee and the Collateral Agent
with written notice of the Unapplied Proceeds Offer at least 45 days before any
notice of any Unapplied Proceeds Offer is mailed to Holders of the Securities
(unless shorter notice is acceptable to the Trustee). Notice of an Unapplied
Proceeds Offer shall be mailed by the Company, or by the Trustee in the name of
and at the expense of the Company, to all Holders of Securities not less than 30
days nor more than 60 days before the Unapplied Proceeds Offer Payment Date at
their last registered address with a copy to the Trustee and the Paying Agent.
The Unapplied Proceeds Offer shall remain open from the time of mailing for at
least 20 Business Days and until at least 4:00 p.m., New York City time, on the
Business Day next preceding the Unapplied Proceeds Offer Payment Date. The
notice, which shall govern the terms of the Unapplied Proceeds Offer, shall
include such disclosures as are required by law and shall state:
(i) that the Unapplied Proceeds Offer is being made pursuant to
this Section 4.06;
<PAGE>
(ii) the purchase price (including the amount of accrued interest,
if any) for each Security and the Unapplied Proceeds Offer Payment Date;
(iii) that any Security not tendered or accepted for payment will
continue to accrue interest in accordance with the terms thereof;
(iv) that, unless the Company defaults in making the payment, any
Security accepted for payment pursuant to the Unapplied Proceeds Offer
shall cease to accrue interest after the Unapplied Procees Offer Payment
Date;
(v) that Holders electing to have Securities purchased pursuant to
an Unapplied Proceeds Offer will be required to surrender their Securities
to the Paying Agent at the address specified in the notice prior to 4:00
p.m., New York City time, on the business day next preceding the Unapplied
Proceeds Offer 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 will be entitled to withdraw their election if
the Paying Agent receives, not later than 4:00 p.m., New York City time, on
the business day next preceding the Unapplied Proceeds Offer Payment Date,
a tested telex, 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 or her election to have such Securities
purchased;
(vii) that if Securities in a principal amount in excess of the
Applicable Portion plus the excess, if any, of (x) the Applicable Portion
(as defined in the Discount Note Indenture) over (y) Senior Secured
Discount Notes validly tendered pursuant to Section 4.06 of the Discount
Note Indenture in each case arising as a result of the Asset Sale giving
rise to the Unapplied Proceeds Offer are tendered pursuant to the Unapplied
Proceeds Offer, the Company shall purchase Securities 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
will be issued new Securities equal in principal amount to the unpurchased
portion of the Securities surrendered; and
<PAGE>
(ix) the instructions that Holders must follow in order to tender
their Securities.
On the business day prior to the Unapplied Proceeds Payment Date, the
Company shall (i) deposit, or cause to be deposited, the Applicable Portion plus
any additional amounts determined pursuant to clause (vii) of this paragraph (f)
(which amount may consist of Trust Moneys already held by the Collateral Agent)
in immediately available funds with the Paying Agent, (ii) accept for payment,
on a pro rata basis among the Securities tendered in the event that Securities
in a principal amount in excess of the amount set forth in clause (vii) of this
paragraph (f) are tendered pursuant to the Unapplied Proceeds Offer (and in any
event 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 purchased), Securities or portions thereof tendered for purchase pursuant to
the Unapplied Proceeds Offer and (iii) deliver to the Paying Agent the
Securities so accepted together with an Officers' Certificate setting forth the
Securities or portions thereof tendered for purchase and accepted for payment by
the Company. The Paying Agent shall promptly mail or deliver to Holders of
Securities so accepted payment in an amount equal to the purchase price, and the
Trustee shall promptly authenticate and mail or deliver to such Holders a new
Security equal in principal amount to any unpurchased portion of the Security
surrendered. Any Securities not so accepted shall be promptly mailed or
delivered by the Company to the Holders thereof. The Paying Agent shall promptly
deliver to the Company the balance of such Available Proceeds Amount held by the
Paying Agent after payment to the Holders of Securities as aforesaid. For
purposes of this Section 4.06, so long as the Collateral Agent is also the
Trustee, the Collateral Agent shall act as Paying Agent and, otherwise, the
Trustee shall act as Paying Agent.
The Company will and will cause its Subsidiaries to 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 Unapplied Proceeds Offer. To the extent that the
provisions of any securities laws or regulations conflict with provisions of
this Section 4.06, the Company shall comply with the applicable securities laws
and regulations and shall not be deemed to have breached its obligations under
this Section 4.06 by virtue thereof.
<PAGE>
SECTION 4.07. Limitation on Restricted Payments.
The Company will not, and will not permit any of its Subsidiaries to,
directly or indirectly, make any Restricted Payment unless:
(i) no Default or Event of Default shall have occurred and be
continuing at the time of or after giving effect to such Restricted
Payment;
(ii) immediately after giving effect to such Restricted Payment,
the Company could incur at least $1.00 of Indebtedness (other than
Permitted Indebtedness) pursuant to the first paragraph of Section 4.04;
and
(iii) immediately after giving effect to such Restricted Payment,
the aggregate amount of all Restricted Payments (the fair market value of
any such Restricted Payment if other than cash as determined in good faith
by the Board of Directors and evidenced by a Board Resolution) declared or
made after the Issue Date does not exceed the sum of (a) 50% of the
Consolidated Net Income of the Company on a cumulative basis during the
period (taken as one accounting period) from and including the first full
fiscal quarter of the Company commencing after the Issue Date and ending on
the last day of the Company's last fiscal quarter ending prior to the date
of such Restricted Payment (or in the event such Consolidated Net Income
shall be a deficit, minus 100% of such deficit), plus (b) 100% of the
aggregate net cash proceeds of, and the fair market value of marketable
securities (as determined in good faith by the Board of Directors and
evidenced by a Board Resolution) received by the Company from (1) the issue
or sale after the Issue Date of Capital Stock of the Company (other than
the issue or sale of (A) Disqualified Stock, (B) Capital Stock of the
Company to any Subsidiary of the Company or (C) the exercise of the Special
Stock Purchase Warrants); and (2) the issue or sale after the Issue Date of
any Indebtedness or other securities of the Company convertible into or
exercisable for Capital Stock (other than Disqualified Stock) of the
Company which has been so converted or exercised, as the case may be.
The foregoing clauses (ii) and (iii) will not prohibit: (A) the
payment of any dividend within 60 days of its declaration if such dividend could
have been made on the date of its declaration without violation of the
provisions of this Indenture; (B) the repurchase, redemption or retirement of
any shares of Capital Stock of the Company or any of its Subsidiaries in
exchange for, or out of the net proceeds of the substantially concurrent sale
(other than to a Subsidiary of the Company) of, other shares of Capital Stock
(other than Disqualified Stock) of
<PAGE>
the Company; (C) the repurchase, redemption or retirement of subordinated
Indebtedness of the Company or any of its Subsidiaries in exchange for, by
conversion into, or out of the net proceeds of, a substantially concurrent (x)
issue or sale of Capital Stock (other than Disqualified Stock) of the Company or
(y) incurrence of Refinancing Indebtedness with respect to such subordinated
Indebtedness; (D) the purchase of options or Capital Stock issued to members of
management of the Company pursuant to the terms of their employment agreements
upon termination of employment, death or disability of any such Person in an
amount not to exceed $1,000,000 per annum; and (E) payments to taxing
authorities by the Company or a Subsidiary of the Company on behalf of a holder
of Capital Stock of The Company (or an option to purchase such Capital Stock)
pursuant to Section 4 of the Company's [Grant of Stock Award] dated January 29,
1994; provided, that each Restricted Payment described in clauses (A) through
(D) (other than subclause (y) of clause (C)) of this sentence shall be taken
into account for purposes of computing the aggregate amount of all Restricted
Payments pursuant to clause (iii) of the immediately preceding paragraph.
SECTION 4.08. Corporate Existence.
Subject to Article Five, the Company shall do or cause to be done all
things necessary to preserve and keep in full force and effect its corporate
existence and the corporate, partnership or other existence of each of its
Subsidiaries in accordance with the respective organizational documents of each
Subsidiary and the rights (charter and statutory) and material franchises of the
Company and each of its Subsidiaries; provided, that the Company shall not be
required to preserve any such right or franchise, or the corporate existence of
any Subsidiary, if the Board of Directors shall determine that the preservation
thereof is no longer desirable in the conduct of the business of the Company and
each of its Subsidiaries, taken as a whole, and that the loss thereof is not,
and will not be, adverse in any material respect to the Holders.
SECTION 4.09. Payment of Taxes and Other Claims.
The Company shall pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (1) all material taxes, assessments and
governmental charges (including any penalties, interest and additions to taxes)
levied or imposed upon the Company or any of its Subsidiaries or upon the
income, profits or property of the Company or any of its Subsidiaries and (2)
all lawful claims for labor, materials and supplies which, in each case, if
unpaid, might by law become a material liability, or Lien upon the Property, of
the Company or any of its Subsidiaries; provided, that, subject to the
applicable
<PAGE>
provisions of the 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 promptly instituted and diligently conducted
and an adequate reserve has been established therefor to the extent required by
GAAP.
SECTION 4.10. Notice of Defaults.
(1) In the event that any Indebtedness of the Company or any of its
Subsidiaries is declared due and payable before its maturity because of the
occurrence of any default (or any event which, with notice or lapse of time, or
both, would constitute such a default) under such Indebtedness, the Company
shall promptly give written notice to the Trustee of such declaration, the
status of such default or event and what action the Company is taking or
proposes to take with respect thereto.
(2) Upon becoming aware of any Default or Event of Default, the
Company shall promptly deliver an Officers' Certificate to the Trustee
specifying the Default or Event of Default.
SECTION 4.11. Maintenance of Properties, Insurance.
(a) Subject to the applicable provisions of the Security Documents,
the Company shall cause all material Properties owned by or leased to it or any
of its Subsidiaries and used or useful in the conduct of its business or the
business of any of its Subsidiaries to be maintained and kept in normal
condition, repair and working order and supplied with all necessary equipment
and shall cause to be made all necessary repairs, renewals, replacements,
betterments and improvements thereof, all as in the judgment of the Company may
be necessary, so that the business carried on in connection therewith may be
properly and advantageously conducted at all times; provided, that nothing in
this Section shall prevent the Company or any of its Subsidiaries from
discontinuing the use, operation or maintenance of any of such properties (other
than Properties constituting items of Collateral except to the extent permitted
by Section 10.03), or disposing of any of them (other than Properties
constituting items of collateral except to the extent permitted by Section
10.03) if such discontinuance or disposal is, in the reasonable good faith
judgment of the Board of Directors or of the board of directors of any
Subsidiary of the Company concerned, or of an officer (or other agent employed
by the Company or of any of its Subsidiaries) of the Company or any of its
Subsidiaries having managerial responsibility for any such Property, desirable
in the conduct of the business of the Company
<PAGE>
or any Subsidiary of the Company, and if such discontinuance or disposal is not
adverse in any material respect to the Holders.
(b) Subject to the applicable provisions of the Security Documents,
the Company shall maintain, and shall cause its Subsidiaries to maintain,
insurance with responsible carriers against such risks and in such amounts, and
with such deductibles, retentions, self-insured amounts and co-insurance
provisions, as are customarily carried by similar businesses of similar size,
including property and casualty loss, workers' compensation and interruption of
business insurance. The Company shall provide, and shall cause its Subsidiaries
to provide, an Officers' Certificate as to compliance with the foregoing
requirements to the Trustee prior to the anniversary or renewal date of each
such policy, together with satisfactory evidence of such insurance, which
certificate shall expressly state such expiration date for each policy listed.
SECTION 4.12. Compliance Certificate.
The Company shall deliver to the Trustee within 100 days after the
close of each fiscal year an Officers' Certificate stating that a review of the
activities of the Company has been made under the supervision of the signing
officers with a view to determining whether a Default or Event of Default has
occurred and whether or not the signers know of any Default or Event of Default
by the Company that occurred during such fiscal quarter or fiscal year, as the
case may be. If they do know of such a Default or Event of Default, the
certificate shall describe all such Defaults or Events of Default, their status
and the action the Company is taking or proposes to take with respect thereto.
The first certificate to be delivered by the Company pursuant to this Section
4.12 shall be for the fiscal year ending December , 1994.
SECTION 4.13. Reports.
So long as at least 10% of the initial aggregate principal amount of
the Securities are outstanding, whether or not the Company is subject to Section
13(a) or 15(d) of the Exchange Act, the Company shall file with the SEC the
annual reports, quarterly reports and other documents which the Company would
have been required to file with the SEC pursuant to such Sections 13(a) and
15(d) if the Company were so subject, such documents to be filed with the SEC on
or prior to the respective dates (the "Required Filing Dates") by which the
Company would have been required so to file such documents if the Company were
so subject. The Company shall also in any event (x) within 15 days after each
Required Filing Date file with the Trustee copies of the annual reports,
quarterly reports and other documents
<PAGE>
which the Company would have been required to file with the SEC pursuant to
Sections 13(a) and 15(d) of the Exchange Act if the Company were subject to such
Sections and (y) if filing such documents by the Company with the SEC is not
permitted under the Exchange Act, promptly upon written request supply copies of
such documents to any prospective Holder. The Company shall also comply with
the other provisions of TIA Section 314(a).
SECTION 4.14. 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, which would prohibit or forgive the Company from paying all or any
portion of the principal of and/or interest on the Securities as contemplated
herein, wherever enacted, now or at any time hereafter in force, or which 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 4.15. Repurchase of Securities upon Change of Control.
(a) Upon the occurrence of a Change of Control, each Holder of the
Securities shall have the right (the "Repurchase Right"), at such Holder's
option, to require the Company to repurchase all or any part of such Holder's
Securities on a date specified in the notice referred to below (the "Repurchase
Date") that is the same date as the equivalent repurchase date under the
Discount Note Indenture and is no later than 60 days after notice of the Change
of Control, at 101% of the principal amount thereof, plus accrued interest to
the Repurchase Date.
(b) On or before the thirtieth day after the Change of Control, the
Company shall deliver, or cause to be delivered, by first-class mail, to all
holders of record of such Securities and the Trustee (or the Trustee, in the
name and at the expense of the Company, shall deliver) a notice regarding the
Change of Control and the Repurchase Right. Each such notice shall state
(i) the Repurchase Date;
(ii) the date by which the Repurchase Right must be exercised;
<PAGE>
(iii) the price (including the amount of accrued interest, if any)
for such Securities; and
(iv) the procedure which the Holder of Securities must follow to
exercise the Repurchase Right.
Substantially simultaneously with mailing of the notice, the Company
shall cause a copy of such notice to be published in a newspaper of general
circulation in the Borough of Manhattan, The City of New York.
(c) To exercise the Repurchase Right, the Holder of a Security must
deliver at least ten days prior to the Repurchase Date written notice to the
Company (or any agent designated by the Company for such purpose) of such
Holder's exercise of the Repurchase Right, together with the Security with
respect to which such Repurchase Right is being exercised, duly endorsed for
transfer; provided that, if mandated by applicable tender offer rules and
regulations, a Holder may be permitted to deliver such written notice nearer to
the Repurchase Date, as may be specified by the Company.
(d) In the event a Repurchase Right shall be exercised in accordance
with the terms hereof, the Company shall pay or cause to be paid the price
payable with respect to the Securities as to which the Repurchase Right has been
exercised in cash to the Holder of such Securities, on the Repurchase Date. In
the event that a Repurchase Right is exercised with respect to less than the
entire principal amount of a surrendered Security, the Company shall execute and
deliver to the Trustee and the Trustee shall authenticate for issuance in the
name of the Holder a new Security or Securities in the aggregate principal
amount of that portion of such surrendered Security not repurchased.
(e) The Company shall comply with all applicable tender offer rules
and regulations, including Section 14(e) of the Exchange Act and the rules
thereunder, if the Company is required to give a notice of the Repurchase Right
as a result of a Change of Control. To the extent that the provisions of any
securities laws or regulations conflict with provisions of this Section 4.15,
the Company shall comply with the applicable securities laws and regulations and
shall not be deemed to have breached its obligations under this Section 4.15 by
virtue thereof.
(f) No repurchase of Securities under this Section 4.15 shall occur
until the Trustee shall have received, prior to the Repurchase Date, an
Officers' Certificate and an Opinion of Counsel as to (i) the Company's
compliance with this
<PAGE>
Section 4.15 and (ii) the fulfillment of all conditions precedent to such
repurchase.
SECTION 4.16. Limitation on Sale and Leaseback Transactions.
The Company will not, and will not permit any Subsidiary of the
Company to, enter into any sale and leaseback transaction with respect to any
Property (whether now owned or hereafter acquired) unless (i) (a) the Property
that is subject of such sale and leaseback transaction does not constitute
Collateral and (b) the sale or transfer of the Property to be leased complies
with the requirements of Section 4.06 and (ii) the Company or such Subsidiary
would be entitled under Section 4.04 to incur any Capitalized Lease Obligations
in respect of such sale and leaseback transaction.
SECTION 4.17. Limitation on Dividend and Other Payment
Restrictions Affecting Subsidiaries.
The Company will not, and will not permit any of its Subsidiaries to,
directly or indirectly, create or otherwise cause or suffer to exist or become
effective any consensual encumbrance or restriction on the ability of any
Subsidiary of the Company to (i) (a) pay dividends or make any other
distributions on its Capital Stock, or any other interest or participation in or
measured by its profits, owned by the Company or any other Subsidiary of the
Company, or (b) pay any Indebtedness owed to the Company or any other Subsidiary
of the Company, (ii) make loans or advances to the Company or a Subsidiary of
the Company or (iii) transfer any of its properties or assets to the Company or
any other Subsidiary of the Company, except for Permitted Liens and such other
encumbrances or restrictions existing under or by reason of (a) any
restrictions, with respect to a Subsidiary that is not a Subsidiary of the
Company on the Issue Date, under any agreement in existence at the time such
Subsidiary becomes a Subsidiary of the Company (unless such agreement was
entered into in connection with, or in contemplation of, such entity becoming a
Subsidiary of the Company on or after the Issue Date), (b) any restrictions
under any agreement evidencing any Acquired Indebtedness of a Subsidiary of the
Company incurred pursuant to the provisions of Section 4.04; provided that such
restrictions shall not restrict or encumber any assets of the Company or its
Subsidiaries other than such Subsidiary, (c) terms relating to the
nonassignability of any operating lease, (d) any restrictions under the Working
Capital Facility, (e) any encumbrance or restriction existing under any
agreement that refinances or replaces the agreements containing restrictions
described in clauses (a) through (d), provided that the terms and conditions of
any such restrictions are not materially less favorable to the Holders of the
<PAGE>
Securities than those under the agreement so refinanced or replaced, or (f) any
encumbrance or restriction due to applicable law.
SECTION 4.18. Limitation on Actions Affecting Security.
The Company shall not, and shall not permit any Subsidiary of the
Company to, take or omit to take any action, which action or omission would have
the result of materially adversely affecting or impairing the Liens and security
interests in the Collateral in favor of the Collateral Agent on behalf of the
Holders of the Securities and the other secured parties thereunder, nor shall
the Company or any such Subsidiary grant any interest whatsoever in the
Collateral except as expressly permitted by this Indenture and the Security
Documents.
SECTION 4.19. Inspection and Confidentiality.
(a) 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 and 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.
(b) The Trustee and the Collateral Agent and their respective
authorized representatives referred to in Section 4.19(a) agree not to use any
information obtained pursuant to this Section 4.19 for any unlawful purpose and,
prior to the occurrence of an Event of Default, to keep confidential any
proprietary information identified to the Trustee, the Collateral Agent or such
representative (as applicable) as proprietary information and not to disclose
any such proprietary information to any Person except that (i) the recipient of
the information may disclose any information that becomes publicly available
other than as a result of disclosure by such recipient, (ii) the recipient of
the information may disclose any information that its counsel reasonably
concludes is necessary to be disclosed by law, pursuant to any court or
administrative order or ruling or in any pending legal or administrative
proceeding or investigation after prior written notice, reasonable under the
circumstances, to the Company, and (iii) the recipient of the information may
disclose any information necessary to be disclosed pursuant to any provision of
the TIA.
<PAGE>
SECTION 4.20. Limitations on Investments, Loans and Advances.
The Company will not make and will not permit any of its Subsidiaries
to make any Investments in any Person, except (i) Investments by the Company in
or to any Subsidiary (or an entity which, following and as a result of such
Investment, becomes a Subsidiary of the Company) and Investments in or to the
Company or a Subsidiary (or an entity which, following and as a result of such
Investment, becomes a Subsidiary of the Company) by any Subsidiary, (ii)
Investments represented by accounts receivable created or acquired in the
ordinary course of business, (iii) advances to employees, officers and directors
in the ordinary course of business, (iv) Investments under or pursuant to
Interest Protection Agreements, (v) Permitted Investments, (vi) Restricted
Investments made pursuant to Section 4.07 hereof, (vii) Investments in Wabush
and (viii) other Investments in Persons other than Subsidiaries or Affiliates of
the Company or any of the Company's Subsidiaries not to exceed $10,000,000 at
any one time outstanding. For purposes of calculating the amount of any
outstanding Investment pursuant to clause (viii), any return of capital or
repayment of a loan or advance constituting all or a portion of the original
amount of the Investment shall be deducted.
SECTION 4.21. Additional Subsidiary Guarantees.
If the Company or any of its Subsidiaries transfers or causes to be
transferred, in one or a series of related transactions, any Property having a
book value in excess of $500,000 to any Subsidiary that is not a Guarantor, or
if the Company or any of its Subsidiaries shall organize, acquire or otherwise
invest in another Subsidiary having total assets with a book value in excess of
$500,000, then such transferee or acquired or other Subsidiary shall (i) execute
and deliver to the Trustee a supplemental indenture in form reasonably
satisfactory to the Trustee pursuant to which such Subsidiary shall
unconditionally guarantee all of the Company's obligations under the Securities
and the Indenture on the terms set forth in the Indenture and (ii) deliver to
the Trustee an Opinion of Counsel that such supplemental indenture has been duly
authorized, executed and delivered by such Subsidiary and constitutes the legal,
valid, binding and enforceable obligation of such Subsidiary. Thereafter, such
Subsidiary shall be a Guarantor for all purposes hereof.
<PAGE>
ARTICLE FIVE
MERGERS; SUCCESSOR CORPORATION
SECTION 5.01. Restriction on Mergers and
Consolidations and Sales of Assets.
The Company shall not consolidate or merge with or into any Person,
and the Company will not, and will not permit any of its Subsidiaries to, sell,
lease, convey or otherwise dispose of all or substantially all of the Company's
consolidated assets (as an entirety or substantially an entirety in one
transaction or a series of related transactions, including by way of liquidation
or dissolution) to, any Person unless, in each such case:
(i) the entity formed by or surviving any such consolidation or
merger (if other than the Company), or to which sale, lease, conveyance or
other disposition shall have been made (the "Surviving Entity"), is a
corporation organized and existing under the laws of the United States, any
state thereof or the District of Columbia;
(ii) the Surviving Entity assumes by supplemental indenture all of
the obligations of the Company on the Securities and under this Indenture
and the Security Documents;
(iii) immediately after giving effect to such transaction, no
Default or Event of Default shall have occurred and be continuing;
(iv) immediately after giving effect to such transaction and the
use of any net proceeds therefrom on a pro forma basis, the Consolidated
Tangible Net Worth of the Company or the Surviving Entity, as the case may
be, would be at least equal to the Consolidated Tangible Net Worth of the
Company immediately prior to such transaction; and
(v) immediately after giving effect to such transaction and the
use of any net proceeds therefrom on a pro forma basis, the Company or the
Surviving Entity, as the case may be, could incur at least $1.00 of
Indebtedness (other than Permitted Indebtedness) pursuant to the first
paragraph of Section 4.04.
SECTION 5.02. Successor Corporation Substituted.
Upon any conveyance, lease or transfer in accordance with Section
5.01, the surviving Person to which such conveyance, lease or transfer is made
will succeed to, and be substituted
<PAGE>
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 and thereafter the predecessor corporation will be relieved of all
further obligations and covenants under this Indenture, the Securities and the
Security Documents to which it was a party or bound.
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. Events of Default.
An "Event of Default" occurs if:
(i) the Company fails to pay interest on any Securities when the
same becomes due and payable and such failure continues for a period of 30
days;
(ii) the Company fails to pay the principal of or premium on any
Securities when the same becomes due and payable whether at maturity, upon
acceleration, redemption or otherwise;
(iii) any Guarantee ceases to be in full force and effect or is
declared to be null and void and unenforceable or is found to be invalid or
any Guarantor denies its liability under its Guarantee (other than by
reason of release of a Guarantor in accordance with the terms hereof);
(iv) the Company or any Guarantor fails to observe or perform any
other covenant in this Indenture or in any of the Security Documents for 60
days after notice from the Trustee, the Collateral Agent or the holders of
25% in principal amount of the Securities outstanding (except in the case
of a default with respect to Section 4.15 and Section 5.01, which will
constitute Events of Default with such notice but without passage of time);
(v) the Company or any of its Subsidiaries fails to make any
payment when due (after giving effect to any applicable grace period) under
the Senior Secured Discount Notes or any other Indebtedness in excess of $5
million which is not subordinated to the Securities (including, without
limitation, Indebtedness under the Working Capital Facility);
(vi) the Company or any of its Subsidiaries fails to perform any
term, covenant, condition or provision of the Senior Secured Discount Notes
or any other Indebtedness in
<PAGE>
excess of $5 million individually or $10 million in the aggregate, which
failure results in the acceleration of the maturity of such Indebtedness;
(vii) a final judgment or judgments for the payment of money not
fully covered by insurance, which judgments exceed $5 million individually
or $10 million in the aggregate, is entered against the Company or any of
its Subsidiaries and is not satisfied, stayed, annulled or rescinded within
60 days of being entered;
(viii) any Person, after the occurrence of an event of default
under any instrument evidencing Indebtedness secured by Collateral, shall
commence judicial proceedings to foreclose any material portion of the
Collateral or shall exercise any legal or contractual right to the
ownership of any material portion of the Collateral in lieu of foreclosure;
(ix) the Company or any Guarantor 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, or
(D) makes a general assignment for the benefit of its creditors;
or
(x) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that:
(A) is for relief against the Company or any Guarantor in an
involuntary case or proceeding,
(B) appoints a Custodian of the Company or any Guarantor or for
all or substantially all of its property, or
(C) orders the liquidation of the Company or any Guarantor,
and in each case the order or decree remains unstayed and in effect for 30
days; provided that if the entry of such order or decree is appealed and
dismissed on appeal then the Event of Default hereunder by reason of the
entry of such order or decree shall be deemed to have been cured.
<PAGE>
The term "Bankruptcy Law" means Title 11, U.S. Code or any similar
Federal, state or foreign law for the relief of debtors. The term "Custodian"
means any receiver, trustee, assignee, liquidator, sequestrator or similar
official under any Bankruptcy Law.
The Trustee shall, within 90 days after the occurrence of any Default
known to it, give to the holders of Securities notice of such Default; provided
that, except in the case of a Default in the payment of principal of or interest
on any of the Securities, the Trustee shall be protected in withholding such
notice if it in good faith determines that the withholding of such notice is in
the interest of the Holders of Securities.
SECTION 6.02. Acceleration.
In case an Event of Default (other than an Event of Default described
in clause (ix) or (x) of Section 6.01 above with respect to the Company and any
Significant Subsidiaries) shall occur and be continuing, the Trustee or the
holders of at least 25% in aggregate principal amount of the Securities then
outstanding, by notice in writing to the Company (and to the Trustee if given by
the holders of Securities), may declare all unpaid principal and accrued
interest on the Securities then outstanding to be due and payable immediately.
Any such declaration with respect to the Securities may be annulled by the
Holders of not less than a majority in principal amount of the outstanding
Securities in accordance with Section 6.04.
If an Event of Default specified in clause (ix) or (x) of Section 6.01
occurs with respect to the Company or any Significant Subsidiary and is
continuing, then all unpaid principal of, premium, if any, and accrued interest
on the outstanding Securities shall ipso facto become immediately due and
payable without any declaration or other act on the part of the Trustee or any
Holder thereof.
SECTION 6.03. Other Remedies.
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy by proceeding at law or in equity to collect the
payment of principal of or interest on the Securities or to enforce the
performance of any provision of the Securities, this Indenture or the Security
Documents.
The Trustee may maintain a proceeding even if it does not possess any
of the Securities or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Securityholder in exercising any right or remedy
maturing upon an Event of Default shall not impair the right or remedy or
<PAGE>
constitute a waiver of or acquiescence in the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are cumulative to the
extent permitted by law.
Each Securityholder, 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 6.10 hereof.
SECTION 6.04. Waiver of Past Default.
Subject to Sections 2.09, 6.07 and 9.02, the Holders of not less than
a majority in aggregate principal amount of the outstanding Securities by
written notice to the Trustee may waive an existing Default or Event of Default
and its consequences, except, unless theretofore cured, a Default in the payment
of principal of or interest on any Security as specified in clauses (i) and (ii)
of Section 6.01. The Company shall deliver to the Trustee an Officers'
Certificate stating that the requisite percentage of Holders have consented to
such waiver and attaching copies of such consents. When a Default or Event of
Default is so waived, it is cured.
SECTION 6.05. Control by Majority.
Subject to Section 2.09, the Holders of not less than a majority in
principal amount of the outstanding Securities may 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 it. However, the Trustee may refuse
to follow any direction that conflicts with law or this Indenture, that the
Trustee determines may be unduly prejudicial to the rights of another
Securityholder, or that may involve the Trustee in personal liability; provided
that the Trustee may take any other action deemed proper by the Trustee which is
not inconsistent with such direction. In the event the Trustee takes any action
or follows any direction pursuant to this Indenture, the Trustee shall be
entitled to indemnification satisfactory to it in its sole discretion against
any loss or expense caused by taking such action or following such direction.
SECTION 6.06. Limitation on Suits.
A Securityholder may not pursue any remedy with respect to this
Indenture or the Securities unless:
(1) the Holder gives to the Trustee written notice of a continuing
Event of Default;
<PAGE>
(2) the Holders of at least 25% in principal amount of the outstanding
Securities make a written request to the Trustee to pursue a remedy;
(3) such Holder or Holders offer and, if requested, provide to the
Trustee indemnity satisfactory to the Trustee against any loss, liability
or expense;
(4) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer and, if requested, the provision of
indemnity; and
(5) during such 60-day period the Holders of a majority in principal
amount of the outstanding Securities do not give the Trustee a direction
which, in the opinion of the Trustee, is inconsistent with the request.
A Securityholder may not use this Indenture to prejudice the rights of
another Securityholder or to obtain a preference or priority over such other
Securityholder.
SECTION 6.07. Rights of Holders To Receive Payment.
Notwithstanding any other provision of this Indenture, the right of
any Holder to receive payment of principal of and interest on the Security, on
or after the respective due dates expressed in the Security, or to bring suit
for the enforcement of any such payment on or after such respective dates, shall
not be impaired or affected without the consent of the Holder except to the
extent that the institution or prosecution of such suit or entry of judgment
therein would, under applicable law, result in the surrender, impairment or
waiver of the Lien of this Indenture and the Security Documents upon the
Collateral.
SECTION 6.08. Collection Suit by Trustee.
If an Event of Default in payment of interest or principal specified
in Section 6.01(i) or (ii) occurs and is continuing, the Trustee may recover
judgment in its own name and as trustee of an express trust against the Company
or any other obligor on the Securities for the whole amount of principal and
accrued interest remaining unpaid, together with interest overdue on principal
and to the extent that payment of such interest is lawful, interest on overdue
installments of interest, in each case at the rate per annum borne by the
Securities and such further amount as shall be sufficient to cover the costs and
expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.
<PAGE>
SECTION 6.09. Trustee May File Proofs of Claim.
The Trustee may file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Securityholders allowed in any judicial proceedings relative to the Company (or
any other obligor upon the Securities), its creditors or its property and shall
be entitled and empowered to collect and receive any monies or other property
payable or deliverable on any such claims and to distribute the same, and any
custodian in any such judicial proceedings is hereby authorized by each
Securityholder 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
Securityholders, to pay to the Trustee any amount due to it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agent and
counsel, and any other amounts due the Trustee under Section 7.07. Nothing
herein contained shall be deemed to authorize the Trustee to authorize or
consent to or accept or adopt on behalf of any Securityholder any plan of
reorganization, arrangement, adjustment or composition affecting the Securities
or the rights of any Holder thereof, or to authorize the Trustee to vote in
respect of the claim of any Securityholder in any such proceeding.
SECTION 6.10. Priorities.
If the Trustee collects any money or property pursuant to this Article
Six, it shall pay out the money or property in the following order:
First: to the Trustee for amounts due under Section 7.07;
Second: to Holders for amounts due and unpaid on the Securities for
principal and interest, ratably, without preference or priority of any
kind, according to the amounts due and payable on the Securities for
principal and interest, respectively; and
Third: to the Company.
The Trustee, upon prior written notice to the Company, may fix a
record date and payment date for any payment to Securityholders pursuant to this
Section 6.10.
<PAGE>
SECTION 6.11. 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 or omitted by
it as Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section 6.11 shall not apply to a suit by the Trustee, a suit by Holders of
more than 10% in aggregate principal amount of the outstanding Securities, or to
any suit instituted by any Holder for the enforcement or the payment of the
principal or interest on any Securities on or after the respective due dates
expressed in the Security.
SECTION 6.12. Trustee Election Not To Foreclose.
Notwithstanding anything to the contrary contained in this Indenture,
the Mortgage or any of the other Security Documents, in the event the Trustee is
entitled or required to commence an action to foreclose the Mortgage or
otherwise exercise its remedies to acquire control or possession of the
Mortgaged Property, the Trustee shall not be required to commence any such
action or exercise any such remedy if the Trustee has determined in good faith
that the Trustee may incur liability under the Environmental Laws (as defined in
the Mortgage) as the result of the presence at, or release on or from, the
Facility of any Hazardous Materials (as defined in the Mortgage) unless the
Trustee has received security or indemnity, from a Holder or Holders, in an
amount and in a form all satisfactory to the Trustee in its sole discretion,
protecting the Trustee from all such liability.
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. Duties of Trustee.
(a) If an Event of Default actually known to the Trustee has occurred
and is continuing, the Trustee shall exercise such of the rights and powers
vested in it by this Indenture and use the same degree of care and skill in
their exercise as a prudent person would exercise or use under the circumstances
in the conduct of his or her own affairs. Subject to such provisions, the
Trustee will be under no obligation to exercise any of its rights or powers
under this Indenture at the request of any of the holders of Securities, unless
they shall have offered to the Trustee security and indemnity satisfactory to
it.
(b) Except during the continuance of an Event of Default actually
known to the Trustee:
(1) The Trustee need perform only those duties as are specifically set
forth herein and no others and no implied covenants or obligations shall be
read into this Indenture against the Trustee.
(2) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions and such
other documents delivered to it pursuant to Section 12.04 hereof furnished
to the Trustee and conforming to the requirements
<PAGE>
of this Indenture. However, the Trustee shall examine the certificates and
opinions to determine whether or not they conform to the requirements of
this Indenture.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(1) This paragraph does not limit the effect of paragraph (b) of this
Section 7.01.
(2) The Trustee shall not be liable for any error of judgment made in
good faith by a Trust Officer, unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts.
(3) The Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.05.
(d) 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 to take or omit to take any action
under this Indenture or take any action at the request or direction of Holders
if it shall have reasonable grounds for believing that repayment of such funds
is not assured to it or it does not receive an indemnity satisfactory to it in
its sole discretion against such risk, liability, loss, fee or expense
(including without limitation, liability relating in any way to Environmental
Laws and/or Hazardous Materials, as such terms are defined in the Mortgage)
which might be incurred by it in compliance with such request or direction.
(e) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b), (c) and (d) of this Section 7.01.
(f) The Trustee shall not be liable for interest on any money received
by it except as the Trustee may agree in writing with the Company. Money held
in trust by the Trustee need not be segregated from other funds except to the
extent required by law.
(g) The Trustee shall not be responsible in any way for monitoring or
managing the Company's policies, practices or compliance with Environmental
Laws or Hazardous Materials relating to the Mortgaged Property (as such terms
are defined in the Mortgage).
SECTION 7.02. Rights of Trustee.
Subject to Section 7.01:
(a) The Trustee may rely on any document believed by it to be genuine
and to have been signed or presented by the proper person. The Trustee
need not investigate any fact or matter stated in the document.
<PAGE>
(b) Before the Trustee acts or refrains from acting, it may require an
Officers' Certificate and an Opinion of Counsel, which shall conform to the
provisions of Section 12.05. The Trustee shall not be liable for any
action it takes or omits to take in good faith in reliance on such
certificate or opinion.
(c) The Trustee may act through its attorneys and agents and shall not
be responsible for the misconduct or negligence of any agent (other than an
agent who is an employee of the Trustee) appointed with due care.
(d) The Trustee shall not be liable for any action it takes or omits
to take in good faith which it reasonably believes to be authorized or
within its rights or powers.
(e) The Trustee may consult with counsel and the advice or opinion of
such counsel as to matters of law shall be full and complete authorization
and protection from liability in respect of any action taken, omitted or
suffered by it hereunder in good faith and in accordance with the advice or
opinion of such counsel.
(f) Subject to Section 9.02 hereof, the Trustee may (but shall not be
obligated to), without the consent of the Holders, give any consent, waiver
or approval required under the Security Documents or by the terms hereof
with respect to the Collateral, but shall not without the consent of the
Holders of not less than a majority in aggregate principal amount of the
Securities at the time outstanding (i) give any consent, waiver or approval
or (ii) agree to any amendment or modification of the Security Documents,
in each case, that shall have a material 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 a material adverse effect on
the interests of any Holder.
SECTION 7.03. Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Securities and may otherwise deal with the Company or its
Affiliates with the same rights it would have if it were not Trustee. Any Agent
may do the same with like rights. However, the Trustee is subject to Sections
7.10 and 7.11.
<PAGE>
SECTION 7.04. Trustee's Disclaimer.
The Trustee shall not be responsible for and makes no representation
as to the value or condition of the Collateral or any part thereof, or as to the
title of the Company thereto, or as to the security afforded thereby or hereby,
or as to the validity or genuineness of any Collateral pledged and deposited
with the Trustee, or as to the validity or adequacy of this Indenture or the
Securities, it shall not be accountable for the Company's use of the proceeds
from the Securities, and it shall not be responsible for any statement of the
Company in this Indenture or any document issued in connection with the sale of
Securities or any statement in the Securities other than the Trustee's
certificate of authentication. The Trustee makes no representations with
respect to the effectiveness or adequacy of this Indenture or the Security
Documents, or the validity or perfection, if any, of Liens granted under this
Indenture or the Security Documents. The Trustee shall not be responsible for
independently ascertaining or maintaining such validity or perfection, if any,
and shall be fully protected in relying upon certificates and opinions delivered
to it in accordance with the terms of this Indenture or the Security Documents.
SECTION 7.05. Notice of Defaults.
If a Default or an Event of Default occurs and is continuing and the
Trustee receives actual notice of such event, the Trustee shall mail to each
Securityholder notice of the Default or Event of Default within 90 days after
receipt of such notice. Except in the case of a Default or an Event of Default
in payment of principal of or interest on any Security, the Trustee may withhold
the notice if and so long as a committee of its Trust Officers in good faith
determines that withholding the notice is in the interest of Securityholders.
SECTION 7.06. Reports by Trustee to Holders.
If required by TIA (S) 313(a) within 60 days after each May 15
beginning with the May 15 following the date of this Indenture, the Trustee
shall mail to each Securityholder a report dated as of such May 15 that complies
with TIA (S) 313(a). The Trustee also shall comply with TIA (S) 313(b), (c) and
(d).
A copy of each such report at the time of its mailing to
Securityholders shall be filed with the SEC and each securities exchange, if
any, on which the Securities are listed.
The Company shall promptly notify the Trustee in writing if the
Securities become listed on any securities exchange or of any delisting thereof.
<PAGE>
SECTION 7.07. Compensation and Indemnity.
The Company shall pay to the Trustee from time to time reasonable
compensation for its services rendered hereunder and under the Security
Documents. The Trustee's compensation shall not be limited by any law on
compensation of a trustee of an express trust. The Company shall reimburse the
Trustee upon request for all reasonable disbursements, expenses and advances
(including fees and expenses of counsel) incurred or made by it in addition to
the compensation for its services, except any such disbursements, expenses and
advances as may be attributable to the Trustee's negligence or bad faith. Such
expenses shall include the reasonable compensation, disbursements and expenses
of the Trustee's agents, accountants, experts and counsel and any taxes or other
expenses incurred by a trust created pursuant to Section 8.01 hereof.
The Company shall indemnify the Trustee for, and hold it harmless
against, any loss or liability incurred by the Trustee without negligence or bad
faith on its part in connection with the administration of this trust and its
duties under this Indenture and the Security Documents, including the reasonable
expenses and attorneys' fees of defending itself against any claim of liability
arising hereunder. Without limiting the foregoing sentence in any way, the
Company shall also indemnify the Trustee for, and hold it harmless against, any
loss or liability incurred by the Trustee (including reasonable attorneys' and
consultants' fees and court costs) arising from or relating to any Environmental
Laws or Hazardous Materials (as such terms are defined in the Mortgage)
concerning the Mortgaged Property (as such term is defined in the Indenture) or
any breach or alleged breach by the Company of any representation, warranty or
covenant in the Mortgage, provided such is not due to the Trustee's willful
violation of any Environmental Laws. The Trustee shall notify the Company
promptly of any claim asserted against the Trustee for which it may seek
indemnity. However, the failure by the Trustee to so notify the Company shall
not relieve the Company of its obligations hereunder. The Company shall defend
the claim and the Trustee shall cooperate in the defense (and may employ its own
counsel) at the Company's expense. The Company need not pay for any settlement
made without its written consent, which consent shall not be unreasonably
withheld. The Company need not reimburse any expense or indemnify against any
loss or liability incurred by the Trustee as a result of the violation of this
Indenture by the Trustee if such violation arose from the Trustee's negligence
or bad faith.
To secure the Company's payment obligations in this Section 7.07, the
Trustee shall have a senior claim prior to the Securities against all money or
property held or collected by the Trustee, in its capacity as Trustee, except
money or property held in trust to pay principal of or interest on particular
Securities.
When the Trustee incurs expenses or renders services after an Event of
Default specified in clause (viii) or (ix) of Section 6.01 occurs, the expenses
(including the reasonable fees and expenses of its agents and counsel) and the
compensation for the services shall be preferred over the status of the Holders
in a proceeding under any Bankruptcy Law and are intended to
<PAGE>
constitute expenses of administration under any Bankruptcy Law. The Company's
obligations under this Section 7.07 and any claim arising hereunder shall
survive the resignation or removal of any Trustee, the discharge of the
Company's obligations pursuant to Article Eight and any rejection or termination
under any Bankruptcy Law.
SECTION 7.08. Replacement of Trustee.
(a) The Trustee may resign at any time by so notifying the Company in
writing. The Holders of a majority in principal amount of the outstanding
Securities may remove the Trustee by so notifying the Trustee in writing and may
appoint a successor Trustee with the Company's consent. The Company may remove
the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged a bankrupt or an insolvent;
(3) a receiver or other public officer takes charge of the Trustee or
its property; or
(4) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason (the Trustee in such event being referred to
herein as the retiring Trustee), the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in principal amount of the Securities may appoint a successor
Trustee to replace the successor Trustee appointed by the Company.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Immediately after that,
the retiring Trustee shall transfer, after payment of all sums then owing to the
Trustee pursuant to Section 7.07, all property held by it as Trustee to the
successor Trustee, subject to the senior claim provided in Section 7.07, the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have the rights, powers and duties of the Trustee under
this Indenture. A successor Trustee shall mail notice of its succession to each
Securityholder.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Holders of at least 10% in
<PAGE>
principal amount of the outstanding Securities may petition any court of
competent jurisdiction for the appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any Securityholder
may petition any court of competent jurisdiction for the removal of the Trustee
and the appointment of a successor Trustee.
(b) If the Trustee, at the time of any resignation, removal or
disqualification:
(i) is also then acting as the Discount Note Trustee and is
simultaneously resigning or otherwise ceasing to act as Discount Note
Trustee under the Discount Note Indenture; and
(ii) is also then acting as Collateral Agent and is
simultaneously resigning or otherwise ceasing to act as Collateral Agent
then, any appointment of a successor Trustee pursuant to the
terms hereof who is simultaneously appointed successor Discount Note
Trustee pursuant to the terms of the Discount Note Indenture shall
automatically and without further action on the part of the holders of the
Securities be appointed as Collateral Agent under each of the Security
Documents.
(c) Notwithstanding replacement of the Trustee pursuant to this
Section 7.08, the Company's obligations under Section 7.07 shall continue for
the benefit of the retiring Trustee.
SECTION 7.09. Successor Trustee by Merger, etc.
If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust business to, another
corporation or banking corporation, the resulting, surviving or transferee
corporation or banking corporation without any further act shall be the
successor Trustee (and successor Collateral Agent, if then so acting, under the
Security Documents).
SECTION 7.10. Eligibility; Disqualification.
This Indenture shall always have a Trustee which shall be eligible to
act as Trustee under TIA (S)(S) 310(a)(1) and 310(a)(2). The Trustee shall have
a combined capital and surplus of at least $100,000,000 as set forth in its most
recent
<PAGE>
published annual report of condition. If the Trustee has or shall acquire any
"conflicting interest" within the meaning of TIA (S) 310(b), the Trustee and the
Company shall comply with the provisions of TIA (S) 310(b). If at any time the
Trustee shall cease to be eligible in accordance with the provisions of this
Section, the Trustee shall resign immediately in the manner and with the effect
hereinafter specified in this Article Seven.
SECTION 7.11. Preferential Collection of Claims
Against Company.
The Trustee, in its capacity as Trustee hereunder and in its capacity
as Collateral Agent under the Security Documents, shall comply with TIA (S)
311(a), excluding any creditor relationship listed in TIA (S) 311(b). A Trustee
who has resigned or been removed shall be subject to TIA (S) 311(a) to the
extent indicated therein.
SECTION 7.12. Appointment of Co-Trustee.
If the Trustee deems it necessary or desirable in connection with the
Collateral and/or the enforcement of the Security Documents, the Trustee may
appoint a co-Trustee with such powers of the Trustee as may be designated by the
Trustee at the time of such appointment, and the Company shall, on request,
execute and deliver to such co-Trustee any deeds, conveyances or other
instruments required by such co-Trustee so appointed by the Trustee to more
fully and certainly vest in and confirm to such co-Trustee its rights, powers,
trusts, duties and obligations hereunder.
ARTICLE EIGHT
DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 8.01. Satisfaction and Discharge.
This Indenture shall cease to be of further effect (except as to
surviving rights of registration of transfer or exchange of the Securities, as
expressly provided for in Section 2.06, and except as to Section 7.07) as to all
outstanding Securities when (i) either (a) all such Securities theretofore
authenticated and delivered (except (1) lost, destroyed or wrongfully taken
Securities which have been replaced or paid as provided in Section 2.07 and (2)
Securities for whose payment money has theretofore been deposited with the
Trustee or any Paying Agent and thereafter repaid to the Company as provided in
Section 8.04) have been delivered to the Trustee for cancellation or (b) all
such Securities not theretofore delivered to the Trustee for cancellation either
have become due and
<PAGE>
payable, will become due and payable at their Stated Maturity within one year or
are redeemable at the option of the Company and are to be called for redemption
within one year under arrangements satisfactory to the Trustee for the giving of
notice of redemption by the Trustee in the name and at the expense of the
Company, and, in any event, the Company has irrevocably deposited or caused to
be deposited with the Trustee funds in an amount sufficient to pay and discharge
the entire indebtedness for principal of, premium, if any and interest to the
date of such deposit (in the case of Securities that have become due and
payable) or to the Maturity Date or redemption date, as the case may be, on the
Securities not theretofore delivered to the Trustee for cancellation; (ii) the
Company has paid or caused to be paid all other sums payable under this
Indenture by the Company; and (iii) the Company has delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel each stating that (A) all
conditions precedent under this Indenture relating to the satisfaction and
discharge of this Indenture have been complied with and (B) such satisfaction
and discharge will not result in a breach or violation of, or constitute a
default under, this Indenture or any other material agreement or instrument to
which the Company is a party or by which it is bound.
After such delivery or irrevocable deposit and delivery of an
Officers' Certificate and Opinion of Counsel, the Trustee upon request shall
acknowledge in writing the discharge of the Company's obligations under the
Securities and this Indenture except for those surviving obligations specified
above.
Notwithstanding the satisfaction and discharge of this Indenture, if
money shall have been deposited with the Trustee pursuant to subclause (b) of
clause (i) of the first paragraph of this Section 8.01, the obligations of the
Trustee under Sections 8.03 and 8.04 shall survive.
SECTION 8.02. Defeasance and Covenant Defeasance.
(a) The Company may, at its option and at any time, elect to have the
obligations of the Company discharged with respect to the outstanding Securities
(a "defeasance") by fulfilling the applicable conditions of Section 8.02(b).
Such defeasance means that the Company shall be deemed to have paid and
discharged the entire Indebtedness represented by the outstanding Securities,
and to have satisfied all its other obligations under such Securities, this
Indenture and the Security Documents (and the Trustee, at the expense of the
Company, shall execute proper instruments acknowledging the same), except for
the following which shall survive unless otherwise terminated or discharged
hereunder: (i) the rights of Holders of outstanding Securities to receive,
solely from the
<PAGE>
trust fund described in Sections 8.02(b) and 8.03, payments in respect of the
principal of, premium, if any, and interest on such Securities when such
payments are due, (ii) the Company's obligations with respect to the Securities
concerning issuing temporary Securities (Section 2.10), registration of transfer
or exchange of Securities (Section 2.06), mutilated, destroyed, lost or stolen
Securities (Section 2.07) and the maintenance of an office or agency for payment
(Section 4.02) and money for security payments held in trust (Section 2.04),
(iii) the rights, powers, trusts, duties and immunities of the Trustee set forth
in Article Seven and (iv) the defeasance provisions this Article Eight. In
addition, the Company may, at its option and at any time, elect to have the
obligations of the Company released with respect to any covenants contained in
Sections 4.03, 4.04, 4.05, 4.06, 4.07, 4.13, 4.15, 4.16, 4.17, 4.18, 4.19, 4.20,
4.21 and 5.01 (a "covenant defeasance") by fulfilling the applicable provisions
of Section 8.02(b) and such Securities shall thereafter be deemed not to be
outstanding for the purposes of any direction, waiver, consent, declaration or
any other act or action of the Holders (and the consequences of any thereof)
taken or to be taken in connection with any of such covenants, but shall
continue to be deemed outstanding for all other purposes hereunder. For this
purpose such covenant defeasance means with respect to such outstanding
Securities 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 or
by reason of reference in any such Section to any other provision herein or in
any other document, and such omission to comply with any such term, condition or
limitation shall not constitute a Default or an Event of Default with respect to
the Securities. In the event covenant defeasance occurs, the events described
in clauses (iii) (as it applies to the covenants listed in the foregoing
sentence), (v), (vi) and (vii) of Section 6.01 shall no longer constitute Events
of Default with respect to the Securities. Except as specified above, the
remainder of this Indenture and such Securities shall be unaffected by such
covenant defeasance.
(b) The following shall be the conditions to application of this
Section 8.02:
(i) the Company shall have deposited or caused to be deposited
irrevocably with the Trustee as trust funds, in trust for the benefit of
the Holders of the Securities, cash in U.S. dollars, United States
Government Obligations, or a combination thereof, in an amount sufficient,
in the opinion of a nationally recognized firm of independent public
accountants expressed in a written certification thereof delivered to the
Trustee, to pay the principal of and interest on the outstanding Securities
on the Stated
<PAGE>
Maturity of such principal or installment of principal or interest;
(ii) in the case of defeasance, the Company shall have delivered to
the Trustee an Opinion of Counsel in the United States stating that (A) the
Company has received from, or there has been published by, the Internal
Revenue Service a ruling or (B) since the date of this Indenture, there has
been a change in the applicable federal income tax law, in either case to
the effect that, and based thereon such Opinion of Counsel shall confirm
that, the Holders of the outstanding Securities will not recognize income,
gain or loss for federal income tax purposes as a result of such defeasance
and will be subject to federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such
defeasance had not occurred;
(iii) in the case of covenant defeasance, the Company shall have
delivered to the Trustee an Opinion of Counsel in the United States to the
effect that the Holders of the outstanding Securities will not recognize
income, gain or loss for federal income tax purposes as a result of such
covenant defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the
case if such covenant defeasance had not occurred;
(iv) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit or, insofar as clauses (viii) and
(ix) of Section 6.01 are concerned, at any time during the period ending on
the 91st day after the date of such deposit (it being understood that this
condition shall not be deemed satisfied until the expiration of such
period);
(v) such defeasance or covenant defeasance shall not result in a
breach or violation of, or constitute a default under, this Indenture or
any other material agreement or instrument to which the Company is a party
or by which it is bound;
(vi) in the case of defeasance or covenant defeasance, the Company
shall have delivered to the Trustee an Opinion of Counsel to the effect
that after the 91st day following the deposit, the trust funds will not be
subject to the effect of any applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally;
<PAGE>
(vii) the Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the
intent of preferring the Holders of Securities over the other creditors of
the Company with the intent of defeating, hindering, delaying or defrauding
creditors of the Company or others; and
(viii) the Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that all
conditions precedent provided for relating to either the defeasance or the
covenant defeasance, as the case may be, have been complied with.
(c) Notwithstanding defeasance or covenant defeasance in accordance
with this Section 8.02, the obligations of the Trustee under Sections 8.03 and
8.04 shall survive.
SECTION 8.03. Application of Trust Money.
Subject to Section 8.04, the Trustee shall hold in trust all money or
United States Government Obligations deposited with it pursuant to Sections 8.01
or 8.02, and shall apply the deposited money and the money from United States
Government Obligations in accordance with this Indenture to the payment of
principal of and interest on the Securities.
SECTION 8.04. Repayment to Company.
Subject to Sections 7.07, 8.01 and 8.02, the Trustee shall promptly
pay to the Company upon written request any excess money and/or United States
Government Obligations held by it at any time. The Trustee shall pay to the
Company upon written request any money held by it for the payment of principal,
premium or interest that remains unclaimed for two years; provided that the
Trustee before being required to make any payment may at the expense of the
Company cause to be published once in a newspaper of general circulation in the
City of New York or mail to each Holder entitled to such money notice that such
money remains unclaimed and that, after a date specified therein which shall be
at least 30 days from the date of such publication or mailing, any unclaimed
balance of such money then remaining shall be repaid to the Company. After
payment to the Company, Securityholders entitled to money must look to the
Company for payment as general creditors unless an applicable abandoned property
law designates another person and all liability of the Trustee or Paying Agent
with respect to such money shall thereupon cease.
<PAGE>
SECTION 8.05. Reinstatement.
If the Trustee is unable to apply any money or United States
Government Obligations in accordance with Sections 8.01 or 8.02 by reason of any
legal proceeding or by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, the Company's obligations under this Indenture and the Securities
shall be revived and reinstated as though no deposit had occurred pursuant to
Sections 8.01 or 8.02 until such time as the Trustee is permitted to apply all
such money or United States Government Obligations in accordance with Sections
8.01 or 8.02; provided that if the Company has made any payment of interest on
or principal of any Securities because of the reinstatement of its obligations,
the Company shall be subrogated to the rights of the Holders of such Securities
to receive such payment from the money or United States Government Obligations
held by the Trustee.
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. Without Consent of Holders.
The Company, when authorized by a Board Resolution, and the Trustee or
the Collateral Agent, as applicable, may amend or supplement this Indenture, the
Security Documents or the Securities without notice to or consent of any
Securityholder:
(1) to cure any ambiguity, defect or inconsistency;
(2) to give effect to the release of any Released Interests or any
other item of Collateral or of any Lien, in each case pursuant to this
Indenture and the Collateral Agency Agreement;
(3) to evidence the succession of another Person to the Company or any
Subsidiary of the Company and the assumption by any such successor of the
covenants of the Company or such Subsidiary, as the case may be;
(4) to evidence the release and discharge of the obligations of any
Subsidiary of the Company the Capital Stock of which has been sold or
otherwise disposed of in accordance with the applicable provisions of this
Indenture; or
(5) to make any change that does not have a material adverse effect on
the rights of any Securityholder.
<PAGE>
SECTION 9.02. With Consent of Holders.
Subject to Section 6.07, the Company, when authorized by a Board
Resolution, and the Trustee or the Collateral Agent, as applicable, may amend or
supplement this Indenture, the Security Documents or the Securities with the
written consent of the Holders of at least a majority in principal amount of
the outstanding Securities. Subject to Section 6.07, the Holders of not less
than a majority in principal amount of the outstanding Securities may waive
compliance by the Company with any provision of this Indenture, the Security
Documents or the Securities. However, without the consent of each
Securityholder affected thereby, an amendment, supplement or waiver, including a
waiver pursuant to Section 6.04, may not:
(i) reduce the rate, or change the time or place for payment, of
interest on any Security, or reduce any amount payable on the redemption
thereof or upon a Change of Control;
(ii) reduce the principal, or change the fixed maturity or place of
payment, of any Security;
(iii) change the currency of payment of principal of or interest
on any Security;
(iv) impair the right to institute suit for the enforcement of any
payment on or with respect to any Security;
(v) reduce the principal amount of outstanding Securities necessary
to modify or amend this Indenture or any Security Document;
(vi) modify any of the provisions of Section 4.15;
(vii) subject to clauses (2), (4) and (5) of Section 9.01, affect
adversely the ranking or security of the Securities; or
(viii) modify any of the foregoing provisions or reduce the
principal amount of outstanding Securities necessary to waive any covenant
or past Default.
It shall not be necessary for the consent of the Holders under this
Section to approve the particular form of any proposed amendment, supplement or
waiver, but it shall be sufficient if such consent approves the substance
thereof.
<PAGE>
After an amendment, supplement or waiver under this Section becomes
effective, the Company shall mail to the Holders affected thereby a notice
briefly describing the amendment, supplement or waiver. Any failure of the
Company to mail such notice, or any defect therein, shall not, however, in any
way impair or affect the validity of any such supplemental indenture.
SECTION 9.03. Compliance with Trust Indenture Act.
Every amendment to or supplement of this Indenture or the
Securities shall comply with the TIA as then in effect.
SECTION 9.04. Revocation and Effect of Consents.
Until an amendment, supplement or waiver becomes effective, a consent
to it by a Holder is a continuing consent by the Holder and every subsequent
Holder of that Security or portion of that Security that evidences the same debt
as the consenting Holder's Security, even if notation of the consent is not made
on any Security. However, except as provided in the succeeding paragraph, any
such Holder or subsequent Holder may revoke the consent as to his Security or
portion of a Security. Such revocation shall be effective only if the Trustee
receives written notice of such revocation before the date the amendment,
supplement or waiver becomes effective.
The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the Holders entitled to consent to any amendment,
supplement or waiver. If a record date is fixed, then, notwithstanding the last
two sentences of the immediately preceding paragraph, those Persons who were
Holders at such record date (or their duly designated proxies), and only those
Persons, shall be entitled to consent to such amendment, supplement or waiver or
to revoke by written notice received by the Trustee any consent previously
given, whether or not such Persons continue to be Holders after such record
date. No such consent shall be valid or effective for more than 90 days after
such record date, unless the relevant amendment, supplement or waiver to which
such consent relates has become effective, in which event such Persons who were
Holders at such record date shall no longer be entitled to revoke any consent
previously given and such consent shall continue to be valid and effective.
After an amendment, supplement or waiver becomes effective, it shall
form a part of this Indenture for all purposes and bind every Securityholder,
unless it makes a change described in any of clauses (i) through (viii) of
Section 9.02. In that case, the amendment, supplement or waiver shall form a
part of this Indenture for all purposes and bind each Holder of a Security who
has consented to it and every subsequent Holder of
<PAGE>
a Security or portion of a Security that evidences the same debt as the
consenting Holder's Security.
SECTION 9.05. Notation on or Exchange of Securities.
If an amendment, supplement or waiver changes the terms of a Security,
the Trustee may require the Holder of the Security to deliver it to the Trustee.
The Trustee may place an appropriate notation on the Security about the changed
terms and return it to the Holder. Alternatively, if the Company or the Trustee
so determines, the Company in exchange for the Security shall issue and the
Trustee shall authenticate a new Security that reflects the changed terms.
Failure to make the appropriate notation or issue a new Security shall not
affect the validity and effect of such amendment, supplement or waiver.
SECTION 9.06. Trustee To Sign Amendments, etc.
The Trustee shall be entitled to receive, and shall be fully protected
in relying upon, an Opinion of Counsel stating that the execution of any
amendment, supplement or waiver authorized pursuant to this Article Nine is
authorized or permitted by this Indenture and that such amendment, supplement or
waiver, constitutes the legal, valid and binding obligation of the Company,
enforceable in accordance with its terms (subject to customary exceptions). The
Trustee may, but shall not be obligated to, execute any such amendment,
supplement or waiver which affects the Trustee's own rights, duties or
immunities under this Indenture or otherwise. In signing any amendment,
supplement or waiver, the Trustee shall be entitled to receive an indemnity
satisfactory to it in its sole discretion.
ARTICLE TEN
COLLATERAL AND SECURITY
SECTION 10.01. Collateral and Security Documents.
(a) In order to secure the due and punctual payment of the principal
of and interest on the Securities, the Senior Secured Discount Notes and, under
certain circumstances, Permitted Replacement Financing when and as the same
shall be due and payable, whether on an Interest Payment Date, at maturity, by
acceleration, purchase, repurchase, redemption or otherwise, and interest on the
overdue principal of and interest (to the extent permitted by law), if any, on
the Securities, the Senior Secured Discount Notes and, under certain
circumstances, Permitted Replacement Financing and the performance of all other
obligations of the Company and the Guarantors to the Holders or the Trustee
under this Indenture and the Securities, the holders
<PAGE>
of the Senior Secured Discount Notes or the Discount Note Trustee under the
Discount Note Indenture and the Senior Secured Discount Notes or, under certain
circumstances, the Permitted Additional Lenders under the documents governing
the Permitted Replacement Financing, the Company, Acme Steel, Acme Packaging,
the Collateral Agent, the Trustee and the Discount Note Trustee have
simultaneously with the execution of this Indenture entered into the Collateral
Agency Agreement and the Collateral Agent, the Company, Acme Steel and/or Acme
Packaging have entered into the other Security Documents to which they are a
party pursuant to which the Company, Acme Steel and Acme Packaging have granted
to the Collateral Agent for the benefit of the Secured Parties a first priority
Lien on and security interest in the Collateral. The Trustee and the Company
hereby agree that the Collateral Agent holds the Collateral in trust for the
benefit of the Secured Parties pursuant to the terms of the Security Documents.
(b) The Trustee is authorized and directed to enter into the
Collateral Agency Agreement and the Collateral Agent is authorized and directed
to enter into the Security Documents. In the event that pursuant to clause
(xi)(b) of the definition of "Permitted Liens" the Company shall elect to grant
additional Liens on assets that comprise Collateral to secure Permitted
Replacement Financing, the Trustee and the Collateral Agent are authorized and
directed to execute and deliver a supplement to the Collateral Agency Agreement
as contemplated therein. In addition, in the event of any Permitted Bank
Refinancing (as defined in the Intercreditor Agreement) the Collateral Agent is
authorized to execute and deliver a supplement to the Intercreditor Agreement as
contemplated therein. Each Securityholder, 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 10.02. Opinions of Counsel; TIA Requirements.
(a) Promptly after the execution and delivery of this Indenture, the
Company shall deliver the opinion(s) required by Section 3.14(b) of the TIA and
Section 5.8(b) of the Collateral Agency Agreement to the Trustee and the
Collateral Agent. In addition, the Company shall furnish to the Collateral
Agent and the Trustee on in each year, beginning with ,
1995, 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, continuation statements and other documents as is
necessary to maintain the Lien of the Security Documents and reciting with
respect to such Liens on the Collateral the details
<PAGE>
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, continuation statements
and other documents have been executed and filed that are necessary as of such
date and during the succeeding 24 months fully to maintain the security interest
of the Collateral Agent, the Securityholders 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.
(b) The release of any Collateral from the terms of the Security
Documents shall not be deemed to impair the security under this Indenture in
contravention of the provisions hereof if and to the extent the Collateral is
released pursuant to the Security Documents. To the extent applicable, the
Company shall cause TIA Section 314(d) 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 TIA Section 314(d) may be
made by an Officer of the Company, except in cases where TIA Section 314(d)
requires that such certificate or opinion be made by an independent Person,
which Person shall be an independent engineer, appraiser or other expert
selected or approved by the Trustee in the exercise of reasonable care.
SECTION 10.03.Disposition of Collateral Without Release.
So long as no Default or Event of Default shall have occurred and be
continuing and subject to the requirements of Section 314 of the TIA, the
Company or any subsidiary may, without any release or consent by the Collateral
Agent or the Trustee, sell or otherwise dispose of any machinery, equipment,
furniture, apparatus, tools or implements or other similar property which is
subject to the Lien of the Security Documents, which (i) in any single
transaction has a fair market value of $25,000 or less or (ii) shall have become
worn out, obsolete or otherwise in need of replacement or repair; provided that,
in the case of this clause (ii) such sale or other disposition is in conjunction
with a substantially concurrent transaction whereby additional personal property
is made subject to the Lien of the Security Documents and the Property so sold
pursuant to (i) and (ii) above shall be conclusively deemed to be free and clear
of the Lien of the Security Documents without further action by the Collateral
Agent.
SECTION 10.04. Authorization of Actions To Be
Taken by the Collateral Agent
Under the Security Documents.
Subject to the provisions of the Security Documents, (a) the
Collateral Agent may, in its sole discretion and without
<PAGE>
the consent of the Securityholders, take all actions it deems necessary or
appropriate in order to (i) enforce any of the terms of the Security Documents
and (ii) collect and receive any and all amounts payable in respect of the
obligations of the Company thereunder and hereunder and (b) the Collateral Agent
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 act that
may be unlawful or in violation of the Security Documents or this Indenture, and
such suits and proceedings as the Collateral Agent may deem expedient to
preserve or protect its interests and the interests of the Securityholders 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 Securityholders or of the Collateral Agent.)
SECTION 10.05. Collateral Agency Agreement.
Simultaneously with the issuance of the Securities, the Trustee, the
Discount Note Trustee, the Collateral Agent, the Company, Acme Steel and Acme
Packaging will enter into the Collateral Agency Agreement. The Collateral
Agency Agreement will provide the terms under which the Collateral Agent will
hold the Collateral as security for, among other things, the Company's and the
Guarantors' obligations on the Securities and under this Indenture. It will
provide generally that decisions in respect of administering the Collateral and
releasing portions of the Collateral in circumstances permitted by the
Indenture, the Discount Note Indenture and the Security Documents may be made by
the Collateral Agent without the further consent of the Holders. It will also
provide that decisions in respect of releasing portions of the Collateral in
circumstances not permitted in the Indenture, Discount Note Indenture or the
Security Documents and foreclosing on or otherwise pursuing remedies with
respect to such Collateral generally may be made by the holders of not less than
a majority in aggregate principal amount of the Securities and the Senior
Secured Discount Notes voting separately. If an Event of Default occurs under
this Indenture the Trustee will notify the Discount Note Trustee simultaneously
with any notifications to the Company or the holders of the Senior Secured
Discount Notes. In the event a declaration of acceleration of the Securities
occurs as a result thereof, the Trustee on behalf of the Holders, in addition to
any rights or remedies available to it under this Indenture may, subject to the
provisions of the Collateral Agency Agreement, cause the Collateral Agent to
take such action as the Trustee deems advisable to protect its rights
<PAGE>
in the Collateral. The proceeds received by the Collateral Agent from any
foreclosure will be applied by the Collateral Agent first to pay the expenses of
such foreclosure and fees and other amounts then payable to the Collateral Agent
and the Trustees under the Indenture, the Discount Note Indenture and the
Collateral Agency Agreement, and thereafter to pay, pro rata, the principal of,
premium, if any, and interest on the Securities and the Senior Secured Discount
Notes or any Permitted Replacement Financing pursuant to the terms of the
Collateral Agency Agreement.
ARTICLE ELEVEN
SENIOR GUARANTEE OF SECURITIES
SECTION 11.01. Unconditional Guarantee.
Each Guarantor hereby unconditionally, jointly and severally,
guarantees (such guarantee to be referred to herein as the "Guarantee") to each
Holder of a Security authenticated and delivered by the Trustee and to the
Trustee and the Collateral Agent and their successors and assigns that: (i) the
principal of and interest on the Securities will be promptly paid in full when
due, subject to any applicable grace period, whether at maturity, by
acceleration or otherwise, and interest on the overdue principal, if any, and
interest on any interest, to the extent lawful, of the Securities and all other
obligations of the Company to the Holders, the Trustee or the Collateral Agent
hereunder, under the Indenture or the Security Documents will be promptly paid
in full or performed, all in accordance with the terms hereof and thereof; and
(ii) in case of any extension of time of payment or renewal of any Securities or
of any such other obligations, the same will be promptly paid in full when due
or performed in accordance with the terms of the extension or renewal, subject
to any applicable grace period, whether at stated maturity, by acceleration or
otherwise, subject, however, in the case of clauses (i) and (ii) above, to the
limitations set forth in Section 11.04. Each Guarantor hereby agrees that its
obligations hereunder shall be unconditional, irrespective of the validity,
regularity or enforceability of the Securities or this Indenture, the absence of
any action to enforce the same, any waiver or consent by any Holder of the
Securities with respect to any provisions hereof or thereof, the recovery of any
judgment against the Company, any action to enforce the same or any other
circumstance which might otherwise constitute a legal or equitable discharge or
defense of a guarantor. Each Guarantor hereby waives diligence, presentment,
demand of payment, filing of claims with a court in the event of insolvency or
bankruptcy of the Company, any right to require a proceeding first against the
Company, protest, notice and all demands whatsoever and
<PAGE>
covenants that this Guarantee will not be discharged except by complete
performance of the obligations contained in the Securities, this Indenture and
this Guarantee. If any Securityholder or the Trustee is required by any court
or otherwise to return to the Company, any Guarantor, or any custodian, trustee,
liquidator or other similar official acting in relation to the Company or any
Guarantor, any amount paid by the Company or any Guarantor to the Trustee or
such Securityholder, this Guarantee, to the extent theretofore discharged, shall
be reinstated in full force and effect. Each Guarantor further agrees that, as
between each Guarantor, on the one hand, and the Holders and the Trustee, on the
other hand, (x) the maturity of the obligations guaranteed hereby may be
accelerated as provided in Article Six for the purpose of this Guarantee,
notwithstanding any stay, injunction or other prohibition preventing such
acceleration in respect of the obligations guaranteed hereby, and (y) in the
event of any acceleration of such obligations as provided in Article Six, such
obligations (whether or not due and payable) shall forthwith become due and
payable by each Guarantor for the purpose of this Guarantee.
SECTION 11.02. Severability.
In case any provision of this Guarantee 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 11.03. Release of a Subsidiary Guarantor.
Upon the sale or disposition (by merger, sale of stock of such
Guarantor or the parent of such Guarantor or otherwise) of a Guarantor (or all
or substantially all its assets) to an entity which is not either the Company or
another Guarantor and which sale or disposition is otherwise in compliance with
the terms of this Indenture (including, but not limited to, Section 4.06
hereof), such Guarantor shall be deemed released from all obligations under this
Article Eleven without any further action required on the part of the Trustee or
any Holder. In the event such Guarantor is Acme Packaging, it shall be released
from its obligations under the Stock Purchase Agreement to which it is a party
following execution of an amendment to such Stock Purchase Agreement in
accordance with its terms. In addition, if the stock of such Guarantor has been
pledged pursuant to a Stock Pledge Agreement, such stock shall be released by
the Collateral Agent from the Lien of such Stock Pledge Agreement pursuant to
the terms thereof. The Trustee and the Collateral Agent shall, at the sole cost
and expense of the Company, deliver an appropriate instrument evidencing such
release upon receipt of a
<PAGE>
request by the Company accompanied by an Officers' Certificate certifying as to
the compliance with this Section 11.03. Any Guarantor not so released remains
liable for the full amount of principal of and interest on the Securities as
provided in this Article Eleven.
SECTION 11.04. Limitation of Guarantor's Liability.
Each Guarantor, and by its acceptance hereof each Holder, hereby
confirms that it is the intention of all such parties that the guarantee by such
Guarantor pursuant to its Guarantee not constitute a fraudulent transfer or
conveyance for purposes of the Bankruptcy Law, the Uniform Fraudulent Conveyance
Act, the Uniform Fraudulent Transfer Act or any similar Federal or state law.
To effectuate the foregoing intention, the Holders and such Guarantor hereby
irrevocably agree that the obligations of such Guarantor under the Guarantee
shall be limited to the maximum amount as will, after giving effect to all other
contingent and fixed liabilities of such Guarantor and after giving effect to
any collections from or payments made by or on behalf of any other Guarantor in
respect of the obligations of such other Guarantor under its Guarantee or
pursuant to Section 11.06, result in the obligations of such Guarantor under the
Guarantee not constituting such fraudulent transfer or conveyance.
SECTION 11.05. Subsidiary Guarantors May Consolidate,
etc., on Certain Terms.
(a) Nothing contained in this Indenture or in any of the Securities
shall prevent any consolidation or merger of a Guarantor with or into the
Company or another Guarantor or shall prevent any sale or conveyance of the
property of a Guarantor as an entirety or substantially as an entirety to the
Company or another Guarantor, which consolidation, merger, sale or conveyance is
otherwise in accordance with the terms of this Indenture and the Security
Documents. Upon any such consolidation, merger, sale or conveyance, the
Guarantee given by such Guarantor shall no longer have any force or effect.
(b) Other than as set forth in Sections 11.03 and 11.05(a) above, each
Guarantor will not, and the Company will not cause or permit any Guarantor to,
consolidate with or merge with or into any Person unless: (i) the entity formed
by or surviving any such consolidation or merger (if other than the Guarantor),
or to which sale, lease, conveyance or other disposition shall have been made,
is a corporation organized and existing under the laws of the United States, any
state thereof or the District of Columbia; (ii) such entity assumes by
supplemental indenture all of the obligations of the Guarantor on the Guarantee
and under
<PAGE>
this Indenture and the Security Documents; (iii) immediately after giving effect
to such transaction, no Default or Event of Default shall have occurred and be
continuing; (iv) immediately after giving effect to such transaction and the use
of any net proceeds therefrom on a pro forma basis, the Consolidated Tangible
Net Worth of the Company and its Subsidiaries would be at least equal to the
Consolidated Tangible Net Worth of the Company and its Subsidiaries immediately
prior to such transaction; and (v) immediately after giving effect to such
transaction and the use of any net proceeds therefrom on a pro forma basis, the
Company could incur at least $1.00 of Indebtedness (other than Permitted
Indebtedness) pursuant to the first paragraph of Section 4.04 hereof.
SECTION 11.06. Contribution.
In order to provide for just and equitable contribution among the
Guarantors, the Guarantors agree, inter se, that in the event any payment or
distribution is made by any Guarantor (a "Funding Guarantor") under the
Guarantee, such Funding Guarantor shall be entitled to a contribution from all
other Guarantors in a pro rata amount, based on the net assets of each Guarantor
(including the Funding Guarantor), determined in accordance with GAAP, subject
to Section 11.04, for all payments, damages and expenses incurred by that
Funding Guarantor in discharging the Company's obligations with respect to the
Securities or any other Guarantor's obligations with respect to the Guarantee.
SECTION 11.07. Waiver of Subrogation.
Each Guarantor hereby irrevocably waives any claim or other rights
which it may now or hereafter acquire against the Company that arise from the
existence, payment, performance or enforcement of such Guarantor's obligations
under the Guarantee, this Indenture and the Security Documents, including,
without limitation, any right of subrogation, reimbursement, exoneration or
indemnification, and any right to participate in any claim or remedy of any
Holder of Securities against the Company, whether or not such claim, remedy or
right arises in equity, or under contract, statute or common law, including,
without limitation, the right to take or receive from the Company, directly or
indirectly, in cash or other property or by set-off or in any other manner,
payment or security on account of such claim or other rights. If any amount
shall be paid to any Guarantor in violation of the preceding sentence and the
Securities shall not have been paid in full, such amount shall be deemed to have
been paid to such Guarantor for the benefit of, and held in trust for the
benefit of, the Holders of the Securities, and shall forthwith be paid to the
Trustee for the benefit of such Holders to be credited and applied upon the
Securities, whether matured
<PAGE>
or unmatured, in accordance with the terms of this Indenture. Each Guarantor
acknowledges that it will receive direct and indirect benefits from the
financing arrangements contemplated by this Indenture and that the waiver set
forth in this Section 11.07 is knowingly made in contemplation of such benefits.
SECTION 11.08. Execution of Guarantee.
To evidence their guarantee to the Securityholder specified in Section
11.01, the Guarantors hereby agree to execute the Guarantee in substantially the
form of Exhibit A recited to be endorsed on each Security ordered to be
authenticated and delivered by the Trustee. Each Guarantor hereby agrees that
its Guarantee set forth in Section 11.01 shall remain in full force and effect
notwithstanding any failure to endorse on each Security a notation of such
Guarantee. Each such Guarantee shall be signed on behalf of each Guarantor by
an Officer prior to the authentication of the Security on which it is endorsed,
and the delivery of such Security by the Trustee, after the authentication
thereof hereunder, shall constitute due delivery of such Guarantee on behalf of
such Guarantor. Such signature upon the Guarantee may be by manual or facsimile
signature of such Officer and may be imprinted or otherwise reproduced on the
Guarantee, and in case such Officer who shall have signed the Guarantee shall
cease to be such Officer before the Security on which such Guarantee is endorsed
shall have been authenticated and delivered by the Trustee or disposed of by the
Company, such Security nevertheless may be authenticated and delivered or
disposed of as though the person who signed the Guarantee had not ceased to be
such Officer of the Guarantor.
ARTICLE TWELVE
MISCELLANEOUS
SECTION 12.01. Trust Indenture Act Controls.
If any provision of this Indenture limits, qualifies, or conflicts
with another provision which is required to be included in this Indenture by
the TIA, the required provision shall control.
SECTION 12.02. Notices.
Any notice or communication shall be sufficiently given if in writing
and delivered in person, by facsimile and confirmed by overnight courier, or
mailed by first-class mail addressed as follows:
<PAGE>
if to the Company or any of the Guarantors:
Acme Steel Incorporated
13500 South Perry Avenue
Riverdale, Illinois 60627
Attention:
Facsimile:
Telephone:
with copies to:
Coffield Ungaretti & Harris
3500 Three First National Plaza
Chicago, Illinois 60602
Attention:
Facsimile:
Telephone:
if to the Trustee:
Attention: Corporate Trust Department
Facsimile:
Telephone:
The Company or the Trustee by notice to the other may designate
additional or different addresses for subsequent notices or communications.
Any notice or communication mailed, first class, postage prepaid, to a
Securityholder, including any notice delivered in connection with TIA (S)
310(b), TIA (S) 313(c), TIA (S) 314(a) and TIA (S) 315(b), shall be mailed to
him or her at his or her address as set forth on the registration books of the
Registrar and shall be sufficiently given to him or her if so mailed within the
time prescribed.
Any notice or other communication to the Company or to the Trustee
shall be deemed given only when such notice or other communication is actually
received by the Company or the Trustee, as the case may be. Any notice or other
communication mailed to a Holder in the manner prescribed above shall be
conclusively deemed to have been received by such Holder, whether or not such
Holder actually receives such notice or other communication. Failure to mail a
notice or communication to a Securityholder or
<PAGE>
any defect in it shall not affect its sufficiency with respect to other
Securityholders.
In the event that, by reason of the suspension of or irregularities in
regular mail service or by reason of any other cause, it shall be impractical to
mail notice of any event to Holders when such notice is required to be given
pursuant to any provision of this Indenture, then any manner of giving such
notice as shall be satisfactory to the Trustee shall be deemed sufficient giving
of such notice for every purpose hereunder.
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 latest date for the giving of such notice, and such waiver
shall be deemed to constitute 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.
SECTION 12.03. Communications by Holders with Other Holders.
Securityholders may communicate pursuant to TIA (S) 312(b) with other
Securityholders with respect to their rights under this Indenture or the
Securities. The Company, the Trustee, the Registrar and any other person shall
have the protection of TIA (S) 312(c).
SECTION 12.04. Certificate and Opinion as to Conditions
Precedent.
Upon any request or application by the Company to the Trustee to take
or refrain from taking any action under this Indenture, the Company shall
furnish to the Trustee at the request of the Trustee:
(1) an Officers' Certificate in form and substance satisfactory to the
Trustee stating that, in the opinion of the signers, all conditions
precedent, if any, provided for in this Indenture relating to the proposed
action or inaction have been complied with; and
(2) an Opinion of Counsel in form and substance satisfactory to the
Trustee stating that, in the opinion of such counsel, all such conditions
precedent, if any, provided for in this Indenture relating to the proposed
action or inaction have been complied with.
<PAGE>
SECTION 12.05. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than pursuant to
Section 4.12) shall include:
(1) a statement that the person making such certificate or opinion has
read such covenant or condition;
(2) 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;
(3) a statement that, in the opinion of such person, he or she has
made such examination or investigation as is necessary to enable him or her
to express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(4) a statement as to whether or not, in the opinion of such person,
such condition or covenant has been complied with; provided that with
respect to matters of fact an Opinion of Counsel may rely on an Officers'
Certificate or certificates of public officials.
SECTION 12.06. Rules by Trustee, Paying Agent, Registrar.
The Trustee may make reasonable rules for action by or at a meeting of
Securityholders. The Paying Agent or Registrar may make reasonable rules for
its functions.
SECTION 12.07. Governing Law.
The laws of the State of New York shall govern this Indenture and the
Securities without regard to principles of conflicts of law.
SECTION 12.08. No Recourse Against Others.
No recourse under or upon any obligation, covenant or agreement of
this Indenture, or of any Security, or for any claim based thereon or otherwise
in respect thereof, shall be had against any incorporator, stockholder, officer,
director or employee, as such, past, present or future, of the Company, either
directly or through the Company, whether by virtue of any constitution, statute
or rule of law, or by the enforcement of any assessment or penalty or otherwise;
it being expressly understood that this Indenture and the Securities are solely
corporate obligations of the Company, and that no such personal
<PAGE>
liability whatever shall attach to, or is or shall be incurred by, the
incorporators, stockholders, officers, directors or employees, as such, of the
Company, or any of them, because of the creation of the indebtedness hereby
authorized, or under or by reason of the obligations, covenants or agreements
contained in this Indenture or in the Securities or implied therefrom; and each
Securityholder by its acceptance of a Security, as consideration for and as a
condition of the execution of this Indenture and the issue of the Securities,
hereby expressly waives and releases any and all such personal liability (either
at common law or in equity or by constitution or statute) of, and any and all
such rights and claims against, every such incorporator, stockholder, officer,
director or employee, as such, because of the creation of the indebtedness
hereby authorized, or under or by reason of the obligations, covenants or
agreements contained in this Indenture or in the Securities or implied
therefrom.
SECTION 12.09. Successors.
All agreements of the Company in this Indenture and the Securities
shall bind its successor. All agreements of the Trustee in this Indenture shall
bind its successor.
SECTION 12.10. Counterpart Originals.
The parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all of them together represent the same
agreement.
SECTION 12.11. Severability.
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,
and a Holder shall have no claim therefor against any party hereto.
SECTION 12.12. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture, loan or
debt agreement of the Company or a Subsidiary of the Company. Any such
indenture, loan or debt agreement may not be used to interpret this Indenture.
SECTION 12.13. Legal Holidays.
In any case where any Interest Payment Date, redemption date, Maturity
Date, Stated Maturity, Unapplied Proceeds Offer Payment Date or Repurchase Date
shall not be a Business Day, then
<PAGE>
(notwithstanding any other provision of this Indenture or the Securities)
payment of principal of and premium, if any, and interest on the Securities 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,
redemption date, Maturity Date, Stated Maturity, Unapplied Proceeds Offer
Payment Date or Repurchase Date; provided that if such payment is so made, no
interest shall accrue for the period from and after such Interest Payment Date,
redemption date, Maturity Date, Stated Maturity, Unapplied Proceeds Offer
Payment Date or Repurchase Date, as the case may be.
<PAGE>
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, and their respective corporate seals to be hereunto affixed
and attested, all as of the date first written above.
ACME METALS INCORPORATED
By:
Name:
Title:
Attest:___________________
By:
Name:
Title:
GUARANTORS:
ACME PACKAGING CORPORATION
ACME STEEL COMPANY
ACME STEEL COMPANY INTERNATIONAL,
INC.
ALABAMA METALLURGICAL CORPORATION
ALPHA TUBE CORPORATION
ALTA SLITTING CORPORATION
UNIVERSAL TOOL AND STAMPING COMPANY,
INC.
By:
Name:
(for each of the above-listed
Guarantors)
Attest:_______________________
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION
By:
Name:
Title:
Attest:___________________
<PAGE>
EXHIBIT A
ACME METALS INCORPORATED
No. $
% SENIOR SECURED NOTE DUE 2002
Acme Metals Incorporated promises to pay to
or registered assigns the principal sum of
Dollars on the Maturity Date of , 2002.
Interest Payment Dates: and
Record Dates: and
IN WITNESS WHEREOF, ACME METALS INCORPORATED has caused this
instrument to be executed in its corporate name by a facsimile signature of its
President and its Secretary and has caused the facsimile of its corporate seal
to be affixed hereunto or imprinted hereon.
Dated: ACME METALS INCORPORATED
By______________________________
Title:
By______________________________
Title:
Certificate of Authentication:
This is one of the % Senior Secured Notes due 2002 referred to in
the within-mentioned Indenture.
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION
By____________________ Date:
Authorized Signature
<PAGE>
(REVERSE OF SECURITY)
ACME METALS INCORPORATED
% Senior Secured Note due 2002
1. Interest.
Acme Metals Incorporated, a Delaware corporation (the "Company"),
promises to pay interest at the rate of % per annum on the principal amount of
this Security semiannually commencing on , 1995, until the principal
hereof is paid or made available for payment. Interest on the Securities will
accrue from and including the most recent date to which interest has been paid
or, if no interest has been paid, from and including , 1994, through
but excluding the date on which interest is paid. If an Interest Payment Date
falls on a day that is not a Business Day, the interest payment to be made on
such Interest Payment Date will be made on the next succeeding Business Day with
the same force and effect as if made on such Interest Payment Date, and no
additional interest will accrue as a result of such delayed payment. Interest
will be computed on the basis of a 360-day year of twelve 30-day months.
2. Method of Payment.
The interest payable on the Securities, and punctually paid or duly
provided for, on any Interest Payment Date will, as provided in the Indenture,
be paid to the person in whose name this Security is registered at the close of
business on the regular record date, which shall be the or
(whether or not a Business Day) next preceding such Interest Payment Date. Any
such interest not so punctually paid or duly provided for, and any interest
payable on such defaulted interest (to the extent lawful), will forthwith cease
to be payable to the Holder on such regular record date and shall be paid to the
person in whose name this Security is registered at the close of business on a
special record date for the payment of such defaulted interest to be fixed by
the Company, notice of which shall be given to Holders not less than 15 days
prior to such special record date. Payment of the principal of and interest on
this Security will be made at the agency of the Company maintained for that
purpose in New York, New York and at any other office or agency maintained by
the Company for such purpose, in such coin or currency of the United States of
America as at the time of payment is legal tender for payment of public and
private debts; provided 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.
<PAGE>
3. Paying Agent and Registrar.
Initially, Shawmut Bank Connecticut, National Association (the
"Trustee"), will act as Paying Agent and Registrar. The Company may change any
Paying Agent, Registrar or co-Registrar without notice to the Holders of
Securities. The Company or any of its Subsidiaries may act as Registrar, co-
Registrar or, except in certain circumstances specified in the Indenture, Paying
Agent.
4. Indenture.
This Security is one of a duly authorized issue of Securities of the
Company, designated as its % Senior Secured Notes due 2002 (the "Securities"),
limited in aggregate principal amount to $175,000,000 (except for Securities
issued in substitution for destroyed, lost or stolen Securities) issuable under
an indenture dated as of , 1994 (the "Indenture"), between the
Company and the Trustee. The terms of the Securities include those stated in
the Indenture and those made part of the Indenture by the Trust Indenture Act of
1939 (the "Act") (15 U.S. Code (S)(S) 77aaa-77bbbb) as in effect on the date of
the Indenture and the date the Indenture is qualified under the Act. The
Securities are subject to all such terms, and Holders of Securities are referred
to the Indenture and the Act for a statement of them. Payment on each Security
is guaranteed on a senior basis, jointly and severally, by the Guarantors
pursuant to Article Thirteen of the Indenture.
Capitalized terms contained in this Security to the extent not defined
herein shall have the meanings assigned to them in the Indenture.
5. Optional Redemption.
The Securities may not be redeemed prior to , 1998. On or
after , 1998, the Company may, at its option, redeem the Securities in
whole or in part, from time to time, at the following redemption prices
(expressed in percentages 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 ,
YEAR PERCENTAGE
<PAGE>
6. Repurchase upon Change of Control.
By the date specified for repurchase, which shall be within 60 days
after giving notice of a Change of Control, each Holder shall have the right, at
its option, to require the Company to purchase all or any part of such Holder's
Securities at 101% of the principal amount thereof plus accrued interest to the
purchase date.
7. Notice of Redemption.
Notice of redemption will be mailed by first class mail at least 30
days but not more than 60 days before the redemption date to each Holder of
Securities to be redeemed at his or her registered address. Securities in
denominations larger than $1,000 may be redeemed in part. On and after the
redemption date, interest ceases to accrue on those Securities or portion of
them called for redemption.
8. Security Documents.
In order to secure the due and punctual payment of the principal of
and interest on the Securities and all other amounts payable by the Company
under the Indenture and the Securities when and as the same will be due and
payable, whether at maturity, by acceleration or otherwise, according to the
terms of the Securities and the Indenture, the Company has granted security
interests in and Liens on the Collateral owned by it to the Collateral Agent for
the benefit of the Holders of Securities pursuant to the Indenture and the
Security Documents. The Securities will be secured by Liens on and security
interests in the Collateral that are subject only to certain permitted
encumbrances. The Collateral will also secure the Company's obligations under
the Senior Secured Discount Notes and the Discount Note Indenture and, in
certain circumstances, amounts under Permitted Replacement Financing. Proceeds
from the Collateral will be shared among the parties secured thereby pursuant to
the terms of the Collateral Agency Agreement.
The Trustee and each Holder acknowledge that a release of any of the
Collateral or any Lien strictly in accordance with the terms and provisions of
the Security Documents and the terms and provisions of the Indenture will not be
deemed for any purpose to be an impairment of the security under the Indenture.
9. Denominations; Transfer; Exchange.
The Securities are in registered form without coupons in denominations
of $1,000 and integral multiples of $1,000. A Holder may transfer or exchange
Securities in accordance with the Indenture. The Registrar may require a
Holder, among other
<PAGE>
things, to furnish appropriate endorsements and transfer documents and to pay
any taxes and fees required by law or permitted by the Indenture. The Registrar
need not transfer or exchange any Securities selected for redemption.
10. Persons Deemed Owners.
The registered Holder of a Security may be treated as the owner of it
for all purposes.
11. Unclaimed Funds.
If funds for the payment of principal or interest remain unclaimed for
two years, the Trustee or Paying Agent will repay the funds to the Company at
its request. After such repayment Holders of Securities entitled to such funds
must look to the Company for payment unless an abandoned property law designates
another person.
12. Discharge Prior to Redemption or Maturity.
The Indenture will be discharged and cancelled except for certain
Sections thereof, subject to the terms of the Indenture, upon the payment of all
the Securities or upon the irrevocable deposit with the Trustee of funds or
United States Government Obligations sufficient for such payment or redemption.
13. Defeasance and Covenant Defeasance.
The Company may be discharged from its obligations under the
Indenture, the Securities and the Security Documents, except for certain
provisions thereof ("defeasance"), and may be discharged from its obligations to
comply with certain covenants contained in the Indenture, the Securities and the
Security Documents ("covenant defeasance"), in each case upon satisfaction of
certain conditions specified in the Indenture.
14. Amendment; Supplement; Waiver.
Subject to certain exceptions, the Indenture, the Security Documents
or the Securities may be amended or supplemented with the consent of the Holders
of at least a majority in principal amount of the outstanding Securities, and
any past default or compliance with any provision may be waived with the consent
of the Holders of at least a majority in principal amount of the outstanding
Securities. Without the consent of any Holder, the Company and the Trustee may
amend or supplement the Indenture, the Security Documents or the Securities to
cure any ambiguity, defect or inconsistency, to give effect to specified
transactions or permitted releases, or
<PAGE>
to make any change that does not materially and adversely affect the rights of
any Holder of Securities.
15. Restrictive Covenants.
The Securities are secured obligations of the Company limited to the
aggregate principal amount of $175,000,000. The Indenture restricts the ability
of the Company or any of its Subsidiaries to permit any Liens to be imposed on
their assets other than certain Permitted Liens, restricts the ability of the
Company or any of its Subsidiaries to make certain payments, limits the
Indebtedness which the Company and its Subsidiaries may incur and limits the
terms on which the Company may engage in Asset Sales. The Company is also
obligated under certain circumstances to make an offer to purchase Securities
with the net cash proceeds of certain Asset Sales. The Company must report
annually to the Trustee on compliance with certain covenants in the Indenture.
16. Successor Corporation.
Pursuant to the Indenture, the ability of the Company to consolidate
with, merge with or into or transfer its assets to another person is conditioned
upon certain requirements, including certain financial requirements applicable
to the surviving Person.
17. Defaults and Remedies.
An Event of Default consists of: a default for 30 days in payment of
interest on the Securities or a default in payment of principal of or premium on
the Securities when due, whether at maturity, upon acceleration, redemption or
otherwise; a cessation of any Guarantee to be in full force and effect or a
declaration of any Guarantee to be null and void and unenforceable or a finding
of any Guarantee to be invalid or a denial by any Guarantor of its liability
under its Guarantee; a failure by the Company to comply with any other covenant
in the Indenture or in any of the Security Documents for 60 days after notice
from the Trustee or the holders of 25% in principal amount of the outstanding
Securities (except in the case of a default with respect to provisions relating
to the repurchase of Securities upon a Change of Control or the merger,
consolidation or sale of all or substantially all of the assets of the Company,
which will constitute Events of Default with notice but without passage of
time); failure of the Company or any of its Subsidiaries to make any payment
when due (after giving effect to any applicable grace period) under the Senior
Secured Discount Notes or any other senior Indebtedness in excess of $5 million;
failure of the Company or any of its Subsidiaries to perform any term, covenant,
condition or provision of the Senior Secured Discount Notes or
<PAGE>
any other Indebtedness in excess of $5 million individually or $10 million in
the aggregate, which failure results in the acceleration of the maturity of such
Indebtedness; a final judgment or judgments for the payment of money not fully
covered by insurance, which judgments exceed $5 million individually or $10
million in the aggregate, is entered against the Company or any of its
Subsidiaries and is not satisfied, stayed, annulled or rescinded within 60 days
of being entered; a party, after an event of default under any Indebtedness
secured by Collateral, commences foreclosure proceedings, or exercises rights to
ownership in lieu thereof, on any portion of the Collateral and certain events
of bankruptcy, insolvency or reorganization of the Company or any of its
Significant Subsidiaries. If an Event of Default occurs and is continuing, the
Trustee or the Holders of at least 25% in principal amount of the outstanding
Securities may declare all the outstanding Securities to be due and payable
immediately. Holders may not enforce the Indenture or the Securities except as
provided in the Indenture. The Trustee may require indemnity satisfactory to
it before it enforces the Indenture or the Securities. Subject to certain
limitations, Holders of a majority in principal amount of the outstanding
Securities may direct the Trustee in its exercise of any trust or power. The
Trustee may withhold from Holders notice of a continuing Default (except a
Default in payment of principal or interest) if it determines that withholding
notice is in their interests. The Company is required to file periodic reports
with the Trustee as to the absence of Default and to notify the Trustee promptly
after it becomes aware of any Default.
18. Trustee Dealings with Company.
The Trustee in its individual or any other capacity, may make loans
to, accept deposits from, and perform services for the Company or its
Affiliates, and may otherwise deal with the Company or its Affiliates, as if it
were not Trustee.
19. 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 the Security Documents or for any claim based on,
in respect of or by reason of such obligations or their creation. Each Holder
of a Security by accepting a Security waives and releases all such liability.
The waiver and release are part of the consideration for the issue of the
Securities.
20. Authentication.
<PAGE>
This Security shall not be valid until the Trustee signs the
certificate of authentication on the other side of this Security.
21. Indenture and Security Documents.
Each Securityholder, by accepting a Security, agrees to be bound to
all of the terms and provisions of the Indenture and the Security Documents, as
the same may be amended from time to time.
22. Abbreviations.
Customary abbreviations may be used in the name of Securityholder or
an assignee, such as TEN COM (= tenants in common), TEN ENT (= tenants by the
entireties), JT TEN (= joint tenants with right of survivorship and not as
tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors
Act).
23. 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 the Securities and has directed the Trustee to use CUSIP numbers in
notices of redemption as a convenience to Securityholders. No representation is
made as to the accuracy of such numbers either as printed on the Securities or
as contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
The Company will furnish to any Holder of record of Securities upon
written request and without charge a copy of the Indenture.
<PAGE>
[FORM OF NOTATION OF NOTE RELATING TO GUARANTEE]
SENIOR GUARANTEE
The Guarantors (as defined in the Indenture referred to in the
Security upon which this notation is endorsed) have unconditionally guaranteed
on a senior basis (such guarantee by each Guarantor being referred to herein as
the "Guarantee") (i) the due and punctual payment of the principal of and
interest on the Securities, whether at maturity, by acceleration or otherwise,
the due and punctual payment of interest on the overdue principal and interest,
if any, on the Securities, to the extent lawful, and the due and punctual
performance of all other obligations of the Company to the Holders or the
Trustee, all in accordance with the terms set forth in Article Thirteen of the
Indenture and (ii) in the case of any extension of time of payment or renewal of
any Securities or any of such other obligations, that the same will be promptly
paid in full when due or performed in accordance with the terms of the extension
or renewal, whether at stated maturity, by acceleration or otherwise.
The Guarantee shall not be valid or obligatory for any purpose until
the certificate of authentication on the Securities upon which the Guarantee is
noted shall have been executed by the Trustee under the Indenture by the manual
signature of one of its authorized officers.
GUARANTORS:
ACME PACKAGING CORPORATION
ACME STEEL COMPANY
ACME STEEL COMPANY INTERNATIONAL,
INC.
ALABAMA METALLURGICAL CORPORATION
ALPHA TUBE CORPORATION
ALTA TUBE CORPORATION
ALTA SLITTING CORPORATION
UNIVERSAL TOOL AND STAMPING CO.,
INC.
By: ________________________
Name:
(for each of the above-listed Guarantors)
<PAGE>
ASSIGNMENT FORM
If you the Holder want to assign this Security, fill in the form below
and have your signature guaranteed:
I or we assign and transfer this Security to:
(Print or type name, address and zip code and
social security or tax ID number of assignee)
and irrevocably appoint ______________________________________, agent to
transfer this Security on the books of the Company. The agent may substitute
another to act for him.
Dated: __________________ Signed: ______________________
(Sign exactly as
name appears on the
other side of this
Security)
Signature Guarantee: ___________________________________________
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you the Holder want to elect to have this Security purchased by the Company,
check the box: [_]
If you want to elect to have only part of this Security purchased by the
Company, state the amount: $___________
Date: ____________ Your signature: _____________________
(Sign exactly as your
name appears on the
other side of this
Security)
Signature Guarantee: _________________________________________
<PAGE>
_______________________________________________________________________________
_______________________________________________________________________________
ACME METALS INCORPORATED
AND GUARANTORS
$
% Senior Secured Discount Notes due 2004
_________________
INDENTURE
Dated as of , 1994
_________________
SHAWMUT BANK CONNECTICUT, National Association, Trustee
_______________________________________________________________________________
_______________________________________________________________________________
<PAGE>
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
Indenture
Trust Indenture Act Section Section
- --------------------------- ---------
<S> <C>
(S) 310(a)(1) 7.10
(a)(2) 7.10
(a)(3) N.A.
(a)(4) N.A.
(a)(5) N.A.
(b) 7.08; 7.10; 12.02
(c) N.A.
(S) 311(a) 7.11
(b) 7.11
(c) N.A.
(S) 312(a) 2.05
(b) 12.03
(c) 12.03
(S) 313(a) 7.06
(b)(1) N.A.
(b)(2) 7.06
(c) 7.06; 12.02
(d) 7.06
(S) 314(a) 4.13; 12.02
(b) 10.02
(c)(1) 12.04
(c)(2) 12.04
(c)(3) N.A.
(d) 10.02
(e) 12.05
(f) N.A.
(S) 315(a) 7.01(b)
(b) 7.05; 12.02
(c) 7.01(a)
(d) 7.01(c)
(e) 6.11
(S) 316(a)(last sentence) 2.09
(a)(1)(A) 6.05
(a)(1)(B) 6.04
(a)(2) N.A.
(b) 6.07
(c) N.A.
(S) 317(a)(1) 6.08
(a)(2) 6.09
(b) 2.04
(S) 318(a) 12.01
- --------------------
</TABLE>
N.A. means Not Applicable.
NOTE: This Cross-Reference Table shall not, for any purpose, be deemed to be
a part of the Indenture.
<PAGE>
TABLE OF CONTENTS
-----------------
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
Page
----
SECTION 1.01. Definitions
SECTION 1.02. Other Definitions
SECTION 1.03. Incorporation by Reference of
Trust Indenture Act
SECTION 1.04. Rules of Construction
ARTICLE TWO
THE SECURITIES
SECTION 2.01. Form and Dating
SECTION 2.02. Execution and Authentication
SECTION 2.03. Registrar and Paying Agent
SECTION 2.04. Paying Agent To Hold Money in Trust
SECTION 2.05. Securityholder Lists
SECTION 2.06. Transfer and Exchange
SECTION 2.07. Replacement Securities
SECTION 2.08. Outstanding Securities
SECTION 2.09. Treasury Securities
SECTION 2.10. Temporary Securities
SECTION 2.11. Cancellation
SECTION 2.12. Defaulted Interest
ARTICLE THREE
REDEMPTION
SECTION 3.01. Notices to Trustee
SECTION 3.02. Selection of Securities To Be
Redeemed
SECTION 3.03. Notice of Redemption
SECTION 3.04. Effect of Notice of Redemption
SECTION 3.05. Deposit of Redemption Price
SECTION 3.06. Securities Redeemed in Part
ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Securities
SECTION 4.02. Maintenance of Office or Agency
SECTION 4.03. Limitation on Transactions with
Affiliates
SECTION 4.04. Limitation on Indebtedness
SECTION 4.05. Limitation on Liens
<PAGE>
SECTION 4.06. Limitation on Disposition of Assets
SECTION 4.07. Limitation on Restricted Payments
SECTION 4.08. Corporate Existence
SECTION 4.09. Payment of Taxes and Other Claims
SECTION 4.10. Notice of Defaults
SECTION 4.11. Maintenance of Properties,
Insurance
SECTION 4.12. Compliance Certificate
SECTION 4.13. Reports
SECTION 4.14. Waiver of Stay, Extension or Usury
Laws
SECTION 4.15. Repurchase of Securities upon
Change of Control
SECTION 4.16. Limitation on Sale and Leaseback
Transactions
SECTION 4.17. Limitation on Dividend and Other
Payment Restrictions Affecting
Subsidiaries
SECTION 4.18. Limitation on Actions Affecting
Security
SECTION 4.19. Inspection and Confidentiality
SECTION 4.20. Limitations on Investments, Loans
and Advances
SECTION 4.21. Additional Subsidiary Guarantors
ARTICLE FIVE
MERGERS; SUCCESSOR CORPORATION
SECTION 5.01. Restriction on Mergers and
Consolidations and Sales
of Assets
SECTION 5.02. Successor Corporation Substituted
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. Events of Default
SECTION 6.02. Acceleration
SECTION 6.03. Other Remedies
SECTION 6.04. Waiver of Past Default
SECTION 6.05. Control by Majority
SECTION 6.06. Limitation on Suits
SECTION 6.07. Rights of Holders To Receive
Payment
SECTION 6.08. Collection Suit by Trustee
SECTION 6.09. Trustee May File Proofs of Claim
SECTION 6.10. Priorities
SECTION 6.11. Undertaking for Costs
SECTION 6.12. Trustee Election Not to Foreclose
<PAGE>
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. Duties of Trustee
SECTION 7.02. Rights of Trustee
SECTION 7.03. Individual Rights of Trustee
SECTION 7.04. Trustee's Disclaimer
SECTION 7.05. Notice of Defaults
SECTION 7.06. Reports by Trustee to Holders
SECTION 7.07. Compensation and Indemnity
SECTION 7.08. Replacement of Trustee
SECTION 7.09. Successor Trustee by Merger, etc.
SECTION 7.10. Eligibility; Disqualification
SECTION 7.11. Preferential Collection of Claims
Against Company
SECTION 7.12. Appointment of Co-Trustee
ARTICLE EIGHT
DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 8.01. Satisfaction and Discharge
SECTION 8.02. Defeasance and Covenant Defeasance
SECTION 8.03. Application of Trust Money
SECTION 8.04. Repayment to Company
SECTION 8.05. Reinstatement
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. Without Consent of Holders
SECTION 9.02. With Consent of Holders
SECTION 9.03. Compliance with Trust Indenture
Act
SECTION 9.04. Revocation and Effect of Consents
SECTION 9.05. Notation on or Exchange of
Securities
SECTION 9.06. Trustee To Sign Amendments, etc.
ARTICLE TEN
COLLATERAL AND SECURITY
SECTION 10.01. Collateral and Security Documents
SECTION 10.02. Opinions of Counsel; TIA
Requirements
SECTION 10.03. Disposition of Collateral Without
Release
SECTION 10.04. Authorization of Actions To Be
<PAGE>
Taken by the Collateral Agent
Under the Security Documents
SECTION 10.05. Collateral Agency Agreement
ARTICLE ELEVEN
SENIOR GUARANTEE OF SECURITIES
SECTION 11.01. Unconditional Guarantee
SECTION 11.02. Severability
SECTION 11.03. Release of a Subsidiary Guarantor
SECTION 11.04. Limitation of Guarantor's Liability
SECTION 11.05. Subsidiary Guarantors May
Consolidate, etc., on
Certain Terms
SECTION 11.06. Contribution
SECTION 11.07. Waiver of Subrogation
SECTION 11.08. Execution of Guarantee
ARTICLE TWELVE
MISCELLANEOUS
SECTION 12.01. Trust Indenture Act Controls
SECTION 12.02. Notices
SECTION 12.03. Communications by Holders with
Other Holders
SECTION 12.04. Certificate and Opinion as to
Conditions Precedent
SECTION 12.05. Statements Required in Certificate
or Opinion
SECTION 12.06. Rules by Trustee, Paying Agent,
Registrar
SECTION 12.07. Governing Law
SECTION 12.08. No Recourse Against Others
SECTION 12.09. Successors
SECTION 12.10. Counterpart Originals
SECTION 12.11. Severability
SECTION 12.12. No Adverse Interpretation of
Other Agreements
SECTION 12.13. Legal Holidays
<TABLE>
<CAPTION>
SIGNATURES
<S> <C> <C>
EXHIBIT A - Form of Security......... A-1
EXHIBIT B - Form of Security
Agreement B-1
EXHIBIT C - Form of Mortgage......... C-1
</TABLE>
<PAGE>
<TABLE>
<S> <C>
EXHIBIT D - Form of Stock Pledge
Agreement................ D-1
EXHIBIT E - Form of Disbursement
Agreement................ E-1
EXHIBIT F - Form of Collateral Agency
Agreement................ F-1
EXHIBIT G - Form of Intercreditor
Agreement................ G-1
- --------------------
</TABLE>
NOTE: This Table of Contents shall not, for any purpose, be deemed to be a
part of the Indenture.
<PAGE>
INDENTURE dated as of , 1994 among ACME METALS INCORPORATED,
a Delaware corporation (the "Company"), each of the Guarantors named on the
signature page hereto and Shawmut Bank Connecticut, National Association, a
national banking association, as Trustee (the "Trustee").
Intending to be legally bound hereby, all parties agree as follows for
the benefit of the others and for the equal and ratable benefit of the Holders
of the Company's % Senior Secured Discount Notes due 2004 (the "Securities").
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions.
"Accreted Value" means, as of any date of determination prior to
, 1997, the sum of (a) the initial offering price of each Security and (b) the
portion of the excess of the principal amount of each Security over such initial
offering price which shall have been amortized through such date, such amount to
be so amortized on a daily basis and compounded semi-annually on each
and at the rate of % per annum from the date of issuance of the
Securities through the date of determination computed on the basis of a 360-day
year of twelve 30-day months.
"Acme Packaging" means Acme Packaging corporation, a Delaware
corporation, and a Wholly Owned Subsidiary of the Company.
"Acme Steel" means Acme Steel Company, a Delaware corporation, and a
Wholly Owned Subsidiary of the Company.
"Acquired Indebtedness" means (i) with respect to any Person that
becomes a Subsidiary of the Company (or is merged into the Company or any of its
Subsidiaries) after the Issue Date, Indebtedness of, or Preferred Stock issued
by, such Person or any of its Subsidiaries existing at the time such Person
becomes a Subsidiary of the Company (or is merged into the Company or any of its
Subsidiaries), whether or not such Indebtedness was incurred in connection with,
or in contemplation of, such Person becoming a Subsidiary of the Company (or
being merged into the Company or any of its Subsidiaries), and (ii) with respect
to the Company or any of its Subsidiaries, any Indebtedness assumed by the
Company or any of its Subsidiaries in connection with the acquisition of any
assets from another Person (other than the Company or any of its Subsidiaries),
whether or not such Indebtedness was incurred by such other Person in connection
with, or in contemplation of, such acquisition.
<PAGE>
"Affiliate" means, when used with reference to a specified Person, any
Person directly or indirectly controlling or controlled by or under direct or
indirect common control with the Person specified. For the purposes of this
definition, "control," when used with respect to any Person, means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing. Notwithstanding the foregoing, the term "Affiliate" shall not
include, (i) with respect to the Company, any Subsidiary of the Company, (ii)
with respect to any Subsidiary of the Company, the Company or any other
Subsidiary of the Company, (iii) with respect to the Company or any Subsidiary
of the Company, any benefit Plan in existence on the Issue Date of the
Indentures, or any comparable plans established subsequent thereto or (iv)
Wabush.
"Agent" means any Registrar, Paying Agent or co-Registrar.
"Applicable Portion" with respect to any Available Proceeds Amount
shall mean such Available Proceeds Amount times a fraction the numerator of
which shall be (a) if the Unapplied Proceeds Offer Payment Date is prior to
, 1997, the Accreted Value of the then outstanding securities through such
payment date or (b) on and after , 1997 the aggregate principal
amount of Securities then outstanding plus all accrued and unpaid interest
thereon to the Unapplied Proceeds Offer Payment Date and the denominator of
which shall be the sum of such amount in either (a) or (b) as applicable and the
aggregate principal amount of the then outstanding Senior Secured Notes plus all
accrued and unpaid interest thereon to the Unapplied Proceeds Offer Payment
Date.
"Asset Sale" means any sale, transfer, conveyance, lease or other
disposition (including, without limitation, by way of merger, consolidation or
sale and leaseback or sale of shares of Capital Stock in any Subsidiary) of any
Property (each, a "transaction") by the Company or any of its Subsidiaries to
any Person; provided, that (i) transactions involving Property other than
Collateral between the Company and a Subsidiary of the Company or transactions
involving Property other than Collateral between Subsidiaries of the Company;
and (ii) transactions (including sales or other transfers or dispositions of
receivables relating to the incurrence of Indebtedness permitted pursuant to
Section 4.04 hereof) in the ordinary course of business (including such a
transaction with or between Subsidiaries) shall not constitute Asset Sales. For
purposes of this definition, the term "Asset Sale" shall not include any
<PAGE>
sale, transfer, conveyance, lease or other disposition of assets and properties
of the Company that is governed by Section 4.07 or Section 5.01 (except to the
extent indicated therein).
"Available Proceeds Amount" means the amount of funds (whether held in
the Collateral Account or by the Company or any of its Subsidiaries)
constituting: (i) the portion of any Net Award or Net Proceeds that, pursuant
to the Security Documents, the Company is not required to, or that the Company
has elected not to, apply to a Restoration of the affected Collateral or (ii)
the portion, if any, of the Net Cash Proceeds of an Asset Sale (net, in the case
of an Asset Sale of property that does not constitute Collateral, of any
Indebtedness repaid with the proceeds of such Asset Sale to the extent so
applied within 180 days of such Asset Sale to the repayment of such
Indebtedness; provided, that Indebtedness subordinated to (a) the Securities or
(b) any other Indebtedness of the Company or any of its Subsidiaries may not be
so repaid; provided, further, that with respect to any Indebtedness so repaid
outstanding under a revolving credit facility there shall be an equivalent
permanent reduction in the committed amount thereof) that has not been applied
by the Company, within 180 days after the date of the Asset Sale giving rise to
such Net Cash Proceeds, to either (x) the acquisition or construction of
property constituting a Related Business Investment, in the case of Net Cash
Proceeds of property not constituting Collateral, or (y) the acquisition or
construction of property constituting a Related Business Investment, which
property has been made subject to the Liens of the Security Documents as
contemplated by Section 4.06 hereof and the applicable provisions of the
Collateral Agency Agreement within such 180-day period, in the case of Net Cash
Proceeds of property constituting Collateral; provided, however, that Net Cash
Proceeds shall be deemed to have been so applied, and the Liens contemplated
above shall be deemed to have been granted, within such 180-day period if (A)
within such 180-day period, the Board of Directors of the Company shall have
adopted a capital expenditure plan contemplating the application of such Net
Cash Proceeds to a Related Business Investment and the Company shall have taken
significant steps to implement such plan, (B) such plan shall have been fully
implemented within 180 days after the date of adoption of such plan and (C) to
the extent such plan involves the acquisition or construction of property
required to be made subject to the Liens of the Security Documents, as
contemplated above, such Liens shall have been granted in accordance with the
provisions hereof and the applicable provisions of the Collateral Agency
Agreement within 180 days after the date of adoption of such plan.
<PAGE>
"Board of Directors" means the Board of Directors of the Company or
any authorized committee of that Board.
"Board Resolution" means, with respect to any Person, a duly adopted
resolution of the Board of Directors of such Person.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday that is not a day on which banking institutions in the City of New York
or in the city of the Corporate Trust Office of the Trustee are authorized or
obligated by law, resolution or executive order to close.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations, or other equivalents (however designated) of or in
such Person's capital stock, and options, rights or warrants to purchase such
capital stock, whether outstanding on or issued after the Issue Date, including,
without limitation, all Common Stock and Preferred Stock.
"Capitalized Lease Obligations" of any Person means the obligations of
such Person to pay rent or other amounts under a lease that is required to be
capitalized for financial reporting purposes in accordance with GAAP; and the
amount of such obligation shall be the capitalized amount thereof determined in
accordance with GAAP.
"Cash Equivalents" means (i) United States Government Obligations,
(ii) commercial paper rated the highest grade by Moody's Investor Services, Inc.
("Moody's") and Standard & Poor's Corporation ("S&P") and maturing not more than
one year from the date of creation thereof, (iii) time deposits with, and
certificates of deposit and banker's acceptances issued by, any bank having
capital surplus and undivided profits aggregating at least $500,000,000 and
maturing not more than one year from the date of creation thereof, (iv)
repurchase agreements that are secured by a perfected security interest in an
obligation described in clause (i) and are with any bank described in clause
(iii), and (v) readily marketable direct obligations issued by any state of the
United States of America or any political subdivision thereof having one of the
two highest rating categories obtainable from either Moody's or S&P.
"Change of Control" means (i) any sale, lease or other transfer (in
one transaction or a series of related transactions) by the Company or any of
its Subsidiaries of all or substantially all of the consolidated assets of the
Company to any Person (other than a Wholly Owned Subsidiary of the Company);
(ii) a "person" or "group" (within the meaning of Sections 13(d) and
<PAGE>
14(d)(2) of the Exchange Act (other than the Company)) becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act) of Capital Stock of the
Company representing 40% or more of the voting power of such Capital Stock;
(iii) Continuing Directors cease to constitute at least a majority of the Board
of Directors of the Company; or (iv) the stockholders of the Company approve any
plan or proposal for the liquidation or dissolution of the Company.
"Collateral" means, collectively, all of the property and assets that
are from time to time subject to the Lien of any of the Security Documents.
"Collateral Account" means the collateral account established pursuant
to the Collateral Agency Agreement.
"Collateral Agency Agreement" means the Collateral Agency Agreement
dated as of the date hereof between the Company, Acme Steel, Acme Packaging, the
Trustee, the Note Trustee and the Collateral Agent in substantially the form
attached hereto as Exhibit F as the same may be amended, amended and restated,
supplemented or otherwise modified from time to time in accordance with its
terms.
"Collateral Agent" means Shawmut Bank Connecticut, National
Association, as collateral agent under the Collateral Agency Agreement and the
other Security Documents until a successor replaces it in accordance with the
provisions of the Collateral Agency Agreement, this Indenture and the other
Security Documents and thereafter means such successor.
"Company" means the Person named as the "Company" in the first
paragraph of this Indenture until a successor shall have become such pursuant to
the applicable provisions of this Indenture, and thereafter "Company" shall mean
such successor.
"Company Order" means a written order or request signed in the name of
the Company by its President or Vice President, and by its Treasurer, Assistant
Treasurer, Secretary or Assistant Secretary, and delivered to the Trustee.
"Commodity Agreement" of any Person means any option or futures
contract or similar agreement or arrangement designed to protect such Person or
any of its Subsidiaries against fluctuations in commodity prices.
"Common Stock" means, with respect to any Person, any and all shares,
interests or other participations in, and other equivalents (however designated
and whether voting or nonvoting)
<PAGE>
of, such Person's common stock, whether outstanding on the Issue Date or issued
after the Issue Date, and includes, without limitation, all series and classes
of such common stock.
"Consolidated Cash Flow Available for Fixed Charges" means, for any
period, on a consolidated basis for the Company and its Subsidiaries, the sum
for such period of (i) Consolidated Net Income, (ii) income taxes with respect
to such period determined in accordance with GAAP, (iii) interest expense for
such period determined in accordance with GAAP and (iv) depreciation and
amortization expenses (including, without duplication, amortization of debt
discount and debt issue costs and amortization of previously capitalized
interest to cost of sales) and other non-cash charges to earnings which reduced
Consolidated Net Income (excluding any non-cash charge to the extent that such
non-cash charge requires an accrual of or a reserve for cash charges for any
future period), determined in accordance with GAAP.
"Consolidated Fixed Charges" of the Company for any period means the
sum of: (i) the aggregate amount of interest which, in conformity with GAAP,
would be set forth opposite the caption "interest expense" or any like caption
on a consolidated income statement for the Company and its Subsidiaries
(including, but not limited to, imputed interest included on Capitalized Lease
Obligations, all commissions, discounts and other fees and charges owed with
respect to letters of credit and banker's acceptance financing, the net costs
associated with Commodity Agreements, Currency Agreements and Interest
Protection Agreements, amortization of other financing fees and expenses, the
interest portion of any deferred payment obligation, amortization of discount,
premium, if any, and all other non-cash interest expense other than previously
capitalized interest amortized to cost of sales), plus (ii) interest incurred
during the period and capitalized by the Company and its Subsidiaries, on a
consolidated basis in accordance with GAAP, plus (iii) the amount of Preferred
Stock Dividends declared by the Company and any of its Subsidiaries on
Disqualified Stock (other than such Preferred Stock Dividends payable to the
Company or any Wholly Owned Subsidiary), whether or not paid during such period,
provided that, in making such computation, the Consolidated Fixed Charges
attributable to interest on any Indebtedness computed on a pro forma basis and
bearing a floating interest rate shall be computed as if the rate in effect
(after giving effect to any Interest Protection Agreement) on the date of
computation will be the applicable rate for the entire period.
"Consolidated Net Income" of the Company for any period means the net
income (or loss) of the Company and its
<PAGE>
Subsidiaries for such period, determined on a consolidated basis in accordance
with GAAP; provided that there shall be excluded from the computation of net
income (loss) (to the extent otherwise included therein) without duplication:
(i) the net income (or loss) of any Person (other than a Subsidiary of the
Company) in which any Person other than the Company or any of its Subsidiaries
has an ownership interest, except to the extent that any such income has
actually been received by the Company or any of its Subsidiaries in the form of
cash dividends or similar cash distributions during such period; (ii) the net
income (or loss) of any Person that accrued prior to the date that (a) such
Person becomes a Subsidiary of the Company or is merged into or consolidated
with the Company or any of its Subsidiaries or (b) the assets of such Person are
acquired by the Company or any of its Subsidiaries, except for purposes of a pro
forma calculation pursuant to clause (c) of the second sentence of the first
paragraph of Section 4.04, the net income (or loss) of such Person shall be
taken into account for the full four-quarter period for which the calculation is
being made; (iii) the net income of any Subsidiary of the Company to the extent
that (but only as long as) the declaration or payment of dividends or similar
distributions by such Subsidiary of that income is not permitted by operation of
the terms of its charter or any agreement, instrument, judgment, decree, order,
statute, rule or governmental regulation applicable to the Subsidiary during
such period; (iv) any gain or loss, together with any related provisions for
taxes on any such gain or loss, realized during such period by the Company or
any of its Subsidiaries upon (a) the acquisition of any securities, or the
extinguishment of any Indebtedness, of the Company or any of its Subsidiaries or
(b) any Asset Sale by the Company or any of its Subsidiaries; (v) any
extraordinary gain or loss, together with any related provision for taxes on any
such extraordinary gain or loss, realized by the Company or any of its
Subsidiaries during such period; and (vi) in the case of a successor to the
Company by consolidation, merger or transfer of its assets, any earnings of the
successor prior to such merger, consolidation or transfer of assets.
"Consolidated Tangible Net Worth" means, with respect to any Person,
the consolidated stockholder's equity (including any Preferred Stock that is
classified as equity under GAAP, other than Disqualified Stock) of such Person
and its Subsidiaries, as determined in accordance with GAAP, less the book value
of all Intangible Assets reflected on the consolidated balance sheet of the
Company and its Subsidiaries as of such date.
<PAGE>
"Construction Contract" means the engineering procurement and
construction contract dated , 1994 among [the Company, Acme Steel and
Raytheon Engineers & Contractors, Inc., pursuant to which the Modernization
Project shall be constructed.
"Continuing Director" means a director who either was a member of the
Board of Directors of the Company on the Issue Date or who became a director of
the Company subsequent to such date and whose election, or nomination for
election by the Company's stockholders, was duly approved by a majority of the
Continuing Directors then on the Board of Directors of the Company, either by a
specific vote or by approval of the proxy statement issued by the Company on
behalf of the entire Board of Directors of the Company in which such individual
is named as nominee for director.
"Corporate Trust Office of the Trustee" shall be at the address of the
Trustee specified in Section 12.02 or such other address as the Trustee may give
notice to the Company.
"Currency Agreement" of any Person means any foreign exchange
contract, currency swap agreement or other similar agreement or arrangement
designed to protect such Person or any of its Subsidiaries against fluctuations
in currency values.
"Default" means any event which is, or after notice or passage of time
or both would be, an Event of Default.
"Disbursement Agreement" means the Disbursement Agreement dated as of
the date hereof between the Company, Acme Steel and the Collateral Agent,
substantially in the form attached hereto as Exhibit E, as the same may be
amended, amended and restated, supplemented or otherwise modified from time to
time in accordance with its terms.
"Disqualified Stock" means any Capital Stock that, by its terms (or by
the terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, (i) matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable
at the option of the holder thereof, in whole or in part, on or prior to the
final maturity date of the Securities or (ii) is convertible into or
exchangeable for (whether at the option of the issuer or the holder thereof) (a)
debt securities or (b) any Capital Stock referred to in clause (i) above, in
each case, at any time prior to the Maturity Date.
<PAGE>
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated by the SEC thereunder.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States, as in effect on the Issue Date.
"Guarantee" means the guarantee of each Guarantor set forth in Article
Eleven and any additional guarantee of the Securities executed by any Subsidiary
of the Company.
"Guarantor" means each of (i) Acme Steel, Alabama Metallurgical
Corporation, a Washington corporation, Acme Packaging, Alpha Tube Corporation, a
Delaware corporation, Universal Tool & Stamping Co., Inc., an Indiana
corporation, Alta Slitting Corporation, a Delaware corporation, and Acme Steel
Company International, Inc. a Barbados corporation, and (ii) each of the
Company's Subsidiaries that becomes a guarantor of the Securities pursuant to
the provisions of Section 4.21 hereof.
"Holder" or "Securityholder" means the Person in whose name a Security
is registered on the books of the Registrar or any co-Registrar.
"Indebtedness" of any Person means, without duplication, (i) any
liability of such Person (a) for borrowed money, or under any reimbursement
obligation relating to a letter of credit, (b) evidenced by a bond, note,
debenture or similar instrument (including a purchase money obligation) given in
connection with the acquisition of any businesses, properties or assets of any
kind or with services incurred in connection with capital expenditures, or (c)
in respect of Capitalized Lease Obligations, (ii) any Indebtedness of others
that such person has guaranteed or that is otherwise its legal liability, (iii)
to the extent not otherwise included, obligations under Currency Agreements,
Commodity Agreements or Interest Protection Agreements, (iv) Disqualified Stock
of such Person and (v) all Indebtedness of others secured by a Lien on any asset
of such Person, and which is not otherwise assumed by such Person, provided that
Indebtedness shall not include accounts payable (including, without limitation,
accounts payable to such Person by any of its Subsidiaries or to any such
Subsidiary by such Person or any of its other Subsidiaries, in each case, in
<PAGE>
accordance with customary industry practice) or liabilities to trade creditors
of such Person arising in the ordinary course of business. The amount of
Indebtedness of any Person at any date shall be (a) the outstanding balance at
such date of all unconditional obligations as described above, (b) the maximum
liability of such Person for any contingent obligations under clause (ii) above
at such date and (c) in the case of clause (v) above, the lesser of (1) the fair
market value of any asset subject to a Lien securing the Indebtedness of others
on the date that the Lien attaches and (2) the amount of the Indebtedness
secured.
"Indenture" means this Indenture as amended, amended and restated,
supplemented or otherwise modified from time to time.
"Intangible Assets" of any Person means all unamortized debt discount
and expense, unamortized deferred charges, goodwill, patents, trademarks,
service marks, trade names, copyrights, write-ups of assets over their prior
carrying values (other than write-ups which occurred prior to the Issue Date and
other than, in connection with the acquisition of an asset, the write-up of the
value of such asset (within one year of its acquisition) to its fair market
value in accordance with GAAP) and all other items which would be treated as
intangibles on the consolidated balance sheet of the Company and its
Subsidiaries prepared in accordance with GAAP.
"Intercreditor Agreement" means the Intercreditor Agreement dated as
of the date hereof among the Collateral Agent (on behalf of the Holders of
Securities, the holders of the Senior Secured Notes and the holders of Permitted
Replacement Financing, if any, incurred in accordance with the provisions
hereof), the agent under the Working Capital Facility (and any successor or
successors thereto or assignee or assignees therefrom), the Company and Acme
Steel, in substantially the form attached hereto as Exhibit G, as the same may
be amended, amended and restated, supplemented or otherwise modified from time
to time in accordance with its terms.
"Interest Payment Date" means the Stated Maturity of an installment of
interest on the Securities.
"Interest Protection Agreement" of any Person means any interest rate
swap agreement, interest rate collar agreement, option or future contract or
other similar agreement or arrangement designed to protect such Person or any of
its Subsidiaries against fluctuations in interest rates.
<PAGE>
"Investment" of any Person means (i) all investments by such Person in
any other Person in the form of loans, advances or capital contributions, (ii)
all guarantees of Indebtedness or other obligations of any other Person by such
Person, (iii) all purchases (or other acquisitions for consideration) by such
Person of Indebtedness, Capital Stock or other securities of any other Person
and (iv) all other items that would be classified as investments (including,
without limitation, purchases of assets outside the ordinary course of business)
on a balance sheet of such Person prepared in accordance with GAAP.
"Issue Date" means the date on which the Securities are originally
issued under this Indenture.
"Lien" means, with respect to any Property, any mortgage, deed of
trust, lien, pledge, lease, easement, restriction, covenant, right-of-way,
charge, security interest or encumbrance of any kind or nature in respect of
such Property. For purposes of this definition, the Company shall be deemed to
own subject to a Lien any Property which it has acquired or holds subject to the
interest of a vendor or lessor under any conditional sale agreement, capital
lease or other title retention agreement relating to such Property.
"Maturity Date" means the date, which is set forth on the face of the
Securities, on which the Securities will mature.
"Modernization Project" means the continuous thin slab castor/hot
strip mill complex to be constructed at Acme Steel's Riverdale, Illinois plant
pursuant to the Construction Contract and all architectural, engineering and
construction plans, utility and other installations and permits together with
all land, improvements, additions, furniture, fixtures and equipment associated
with such project.
"Mortgage" means the mortgage (or deed of trust) dated as of the date
hereof between Acme Steel and the Collateral Agent, in substantially the form of
Exhibit C hereto, as the same may be amended, amended and restated, supplemented
or otherwise modified from time to time in accordance with its terms.
"Net Award" has the meaning assigned to such term in the Security
Documents.
"Net Cash Proceeds" means, with respect to any Asset Sale, the
proceeds in the form of cash or Cash Equivalents including payments in respect
of deferred payment obligations when received in the form of cash or Cash
Equivalents received by the Company or by any of its Subsidiaries from such
Asset Sale
<PAGE>
(except to the extent that such obligations are sold with recourse to the
Company or to any Subsidiary of the Company) net of (a) reasonable out-of-pocket
expenses and fees relating to such Asset Sale (including, without limitation,
brokerage, legal, accounting and investment banking fees and sales commissions)
to the extent actually paid, (b) taxes paid or payable ((1) including, without
limitation, income taxes reasonably estimated to be actually payable as a result
of any disposition of property within two years of the date of disposition and
(2) after taking into account any reduction in tax liability due to available
tax credits or deductions and any tax sharing arrangements), (c) in the case of
any Asset Sale that does not involve any portion of the Collateral, repayment of
Indebtedness that is required by the terms thereof to be repaid in connection
with such Asset Sale to the extent so repaid in cash and (d) appropriate amounts
to be provided by the Company or by any Subsidiary of the Company, as the case
may be, as a reserve, in accordance with GAAP consistently applied, against any
liabilities associated with such Asset Sale and retained by the Company or by
any Subsidiary of the Company, as the case may be, after such Asset Sale,
including without limitation, pension and other post-employment benefit
liabilities, liabilities related to environmental matters and liabilities under
any indemnification obligations associated with such Asset Sale.
"Net Proceeds" has the meaning assigned to such term in the Security
Documents.
"Note Indenture" means the indenture under which the Senior Secured
Notes are issued as it may be amended, amended and restated, supplemented or
otherwise modified from time to time.
"Note Trustee" means the party named as trustee in the Note Indenture
until a successor replaces it in accordance with the provisions of the Note
Indenture and thereafter means such successor.
"Obligations" means any principal, premiums, interest, penalties, fees
and other liabilities payable under the documentation governing any
Indebtedness.
"Officer" means the Chairman, the President, any Vice President, the
Chief Financial Officer, the Treasurer, or the Secretary of the Company.
"Officers' Certificate" means a certificate signed by two Officers or
by an Officer and an Assistant Treasurer or Assistant Secretary of the Company
complying with Sections 12.04 and 12.05.
<PAGE>
"Opinion of Counsel" means a written opinion from legal counsel who
may be an employee of or counsel to the Company or the Trustee.
"Permitted Additional Lender" means a lender to the Company or a
Guarantor under any Permitted Replacement Financing.
"Permitted Indebtedness" means (i) Indebtedness of the Company and its
Subsidiaries outstanding immediately following the Issue Date; (ii) Indebtedness
under the Working Capital Facility which does not exceed $80 million principal
amount outstanding at any one time; (iii) the Securities and the Senior Secured
Notes; (iv) the Guarantees and the guarantees of the Senior Secured Notes; (v)
Indebtedness in respect of obligations of the Company to the Trustee under this
Indenture and to the trustee under the Note Indenture; (vi) intercompany debt
obligations (including intercompany notes) of the Company and each of its
Subsidiaries; provided, however, that the obligations of the Company to any of
its Subsidiaries with respect to such Indebtedness shall be subject to a
subordination agreement between the Company and its Subsidiaries providing for
the subordination of such obligations in right of payment from and after such
time as all Securities issued and outstanding shall become due and payable
(whether at stated maturity, by acceleration or otherwise) to the payment and
performance of the Company's obligations under this Indenture and the
Securities; provided, further, that any Indebtedness of the Company or any of
its Subsidiaries owed to any other Subsidiary of the Company that ceases to be
such a Subsidiary shall be deemed to be incurred and shall be treated as an
incurrence for purposes of the first paragraph of Section 4.04 at the time the
Subsidiary in question ceases to be a Subsidiary of the Company; and (vii)
Indebtedness of the Company or its Subsidiaries under any Currency Agreements,
Commodity Agreements or Interest Protection Agreements.
"Permitted Investments" means (a)(i) obligations of or guaranteed by
the U.S. government, its agencies or government-sponsored enterprises; (ii)
short-term commercial bank and corporate obligations that have received the
highest rating from two of the following rating organizations: Standard &
Poor's Corporation ("S&P"), Moody's Investor Services, Inc. ("Moody's"), Duff &
Phelps Credit Rating Co., Fitch Investor Service, Inc., IBCA Inc. and
Thomson Bankwatch Inc.; (iii) money market preferred stocks which, at the date
of acquisition and at all times thereafter, are accorded ratings of at least AA-
or Aa3 by S&P or Moody's, respectively; (iv) tax-exempt obligations that are
accorded the highest short-term rating by S&P or Moody's or a long-term rating
of at least A- or A3 by S&P or Moody's respectively at the time of purchase; (v)
master repurchase
<PAGE>
agreements with foreign or domestic banks having a capital and surplus of not
less than $250,000,000 or primary dealers so long as such agreements are
collateralized with obligations of the U.S. government or its agencies at a
ratio of 102%, or with other collateral rated at least AA or Aa2 by S&P or
Moody's, respectively, at a ratio of 103% and, in either case, marked-to-market
weekly and so long as such securities shall be held by a third-party agent; and
(vi) guaranteed investment contracts and/or agreements of a bank, insurance
company or other institution whose unsecured, uninsured and unguaranteed
obligations (or claims-paying ability) have at the time of purchase ratings of
at least AAA or Aaa by S&P or Moody's, respectively. In no event shall any of
the Permitted Investments described in clauses (i) through (vi) above have a
final maturity more than two years from the date of purchase; provided, however,
that in the event of a Qualified Defeasance Transaction, Permitted Investments
used to defease the defeased Indebtedness may have a final maturity up to the
date of the final maturity of the Indebtedness so defeased.
"Permitted Liens" means (i)(x) with respect to Property other than
Collateral, Liens existing on the Issue Date to the extent and in the manner
such Liens are in effect on the Issue Date and (y) with respect to Collateral,
Liens existing on the Issue Date to the extent specifically permitted in the
appropriate Security Document, (ii) Liens on accounts receivable and inventory
of the Company and its Subsidiaries securing Indebtedness incurred under the
Working Capital Facility, (iii) Liens securing Indebtedness collateralized by
Property of, or any shares of stock of or debt of, any corporation existing at
the time such corporation becomes a Subsidiary of the Company or at the time
such corporation is merged into the Company or any of its Subsidiaries, provided
that such Liens are not incurred in connection with, or in contemplation of,
such corporation becoming a Subsidiary of the Company or merging into the
Company or any of its Subsidiaries and the Acquired Indebtedness could have been
incurred pursuant to the first paragraph of Section 4.04 hereof (other than as
Permitted Indebtedness), (iv) Liens securing Refinancing Indebtedness used to
refund, refinance or extend Indebtedness referred to in the preceding clause
(iii), provided that any such Lien does not extend to or cover any Property,
shares or debt other than the Property, shares or debt securing the Indebtedness
so refunded, refinanced or extended, (v) Liens other than on Collateral in favor
of the Company or any of its Subsidiaries, (vi) Liens on Property (other than
Collateral) of the Company or any of its Subsidiaries acquired after the Issue
Date in favor of governmental bodies to secure progress or advance payments
relating to such Property, (vii) Liens on Property (other than the Collateral)
of the
<PAGE>
Company or any of its Subsidiaries acquired after the Issue Date securing
industrial revenue or pollution control or other tax exempt bonds issued in
connection with the acquisition or refinancing of such Property to the extent
the incurrence of such Indebtedness is permitted pursuant to the provisions of
Section 4.04 hereof, (viii) Liens to secure certain Indebtedness that is
otherwise permitted under this Indenture and that is used to finance the cost of
Property of the Company or any of its Subsidiaries acquired after the Issue
Date, provided that (a) any such Lien is created solely for the purpose of
securing Indebtedness representing, or incurred to finance, refinance or refund,
the cost (including sales and excise taxes, installation and delivery charges
and other direct costs of, and other direct expenses paid or charged in
connection with, such purchase or construction) of such Property, (b) the
principal amount of the Indebtedness secured by such Lien does not exceed 100%
of such cost, (c) the Indebtedness secured by such Lien is incurred by the
Company or its Subsidiary within 90 days of the acquisition of such Property by
the Company or its Subsidiary, as the case may be, (d) such Lien does not extend
to or cover any Property other than such item of Property and any improvements
on such item, (e) no Net Cash Proceeds derived from Collateral are used to fund
all or any portion of the cost of acquisition of such Property, and (f) prior to
completion of the Modernization Project, Acme Steel shall not incur or permit
any Lien otherwise permitted under this clause (viii) and no Liens at any time
may encumber assets which comprise the Modernization Project, (ix) Liens on
Property (other than Collateral) to secure Indebtedness that is otherwise
permitted under this Indenture the aggregate principal amount of which does not
exceed $35 million outstanding at any one time, (x) statutory liens or
landlords', carriers', warehousemen's, mechanics', suppliers', materialmen's,
repairmen's or other like Liens arising in the ordinary course of business and
with respect to amounts not yet delinquent or 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 and,
with respect to any such Liens arising in respect of any of the Collateral, only
to the extent specifically permitted under the provisions of the appropriate
Security Document, (xi) Liens on the Collateral for the benefit of (a) holders
of the Senior Secured Notes or (b) holders of Indebtedness arising at any time
after retirement of the Senior Secured Notes; provided, that the principal
amount of such Indebtedness does not exceed the original principal amount of
such Senior Secured Notes and the holders of such replacement Indebtedness
(acting through a designated representative) enter into a supplement to the
Collateral Agency Agreement in substantially the form annexed thereto and the
Company and such holders otherwise comply with the
<PAGE>
applicable provisions thereof, (xii) Liens on the Collateral for the benefit of
the holders of the Securities and (xiii) easements, restrictions, reservations
or rights of others for right-of-way, sewers, electric lines, telegraph and
telephone lines and other similar purposes and other similar charges or
encumbrances not interfering in any material respect with the conduct of the
business of the Company or any of its Subsidiaries or, in the case of such
charges or encumbrances which affect the Collateral, to the extent permitted by
the provisions of the Mortgage.
"Permitted Replacement Financing" means Indebtedness of the Company or
a Guarantor incurred in compliance with this Indenture which may, in accordance
with the provisions of clause (xi) of the definition of Permitted Liens take a
security interest in certain of the Collateral upon the execution and delivery
by each Permitted Additional Lender (or a representative thereof) of a
supplement to the Collateral Agency Agreement as contemplated therein and upon
satisfaction of the other conditions set forth in the Collateral Agency
Agreement relating thereto.
"Person" means any individual, corporation, limited or general
partnership, joint venture, association, joint stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"Preferred Stock" of any Person means all Capital Stock of such Person
which has a preference in liquidation or a preference with respect to the
payment of dividends.
"Preferred Stock Dividend" of any Person means, for any dividend
payable with regard to Preferred Stock issued by such Person, the amount of such
dividend multiplied by a fraction, the numerator of which is one and the
denominator of which is one minus the maximum statutory combined federal, state
and local income tax rate (expressed as a decimal number between 1 and 0) then
applicable to such Person.
"Principal" of a debt security means the principal of the security
plus, when appropriate, the premium, if any, on the security.
"Property" of any Person means all types of real, personal, tangible,
intangible or mixed property owned by such Person whether or not included in the
most recent consolidated balance sheet of such Person and its Subsidiaries under
GAAP.
<PAGE>
"Qualified Defeasance Transaction" means any transaction by the
Company or any of its Subsidiaries in which Indebtedness is defeased; provided,
however, that in the case of Indebtedness which is subordinate to any other
Indebtedness of such Person, such Indebtedness is being defeased in compliance
with Section 4.07 hereof; and provided, further, that in order for such
defeasance to be a Qualified Defeasance Transaction the net present value of the
cost of such defeasance, including but not limited to the actual costs of any
Permitted Investments, the cost of any trustee or agent overseeing such
defeasance and any costs associated with the closing of such transaction, must
be less than the net present value of all present and future payments on the
Indebtedness to be defeased including but not limited to principal, interest and
premium, if any.
"Redemption Date," when used with respect to any Security to be
redeemed, means the date fixed for such redemption pursuant to this Indenture.
"Redemption Price," when used with respect to any Security to be
redeemed, means the price fixed for such redemption pursuant to this Indenture
as set forth in the form of Security annexed as Exhibit A.
"Refinancing Indebtedness" means Indebtedness that refunds, refinances
or extends any Indebtedness of the Company or its Subsidiaries outstanding on
the Issue Date or other Indebtedness permitted to be incurred by the Company or
its Subsidiaries pursuant to the terms of this Indenture, but only to the extent
that (i) the Refinancing Indebtedness is subordinated to the Securities to the
same extent as the Indebtedness being refunded, refinanced or extended, if at
all, (ii) the Refinancing Indebtedness is scheduled to mature either (a) no
earlier than the Indebtedness being refunded, refinanced or extended, or (b)
after the Maturity Date, (iii) the portion, if any, of the Refinancing
Indebtedness that is scheduled to mature on or prior to the Maturity Date has a
weighted average life to maturity at the time such Refinancing Indebtedness is
incurred that is equal to or greater than the weighted average life to maturity
of the portion of the Indebtedness being refunded, refinanced or extended that
is scheduled to mature on or prior to the Maturity Date, and (iv) such
Refinancing Indebtedness is in an aggregate principal amount that is equal to or
less than the sum of (a) the aggregate principal amount then outstanding under
the Indebtedness being refunded, refinanced or extended, (b) the amount of
accrued and unpaid interest, if any, on such Indebtedness being refunded,
refinanced or extended and (c) the amount of customary fees, expenses and costs
related to the incurrence of such Refinancing Indebtedness; provided that
<PAGE>
Indebtedness which is in an aggregate principal amount greater than the sum of
(a), (b) and (c) of this clause (iv) shall constitute Refinancing Indebtedness
to the extent of the sum of (a), (b) and (c) if the amount of Indebtedness in
excess of the sum of (a), (b) and (c) could otherwise be incurred pursuant to
Section 4.04.
"Related Business Investment" means any Investment, capital
expenditure or other expenditure by the Company or any Subsidiary of the Company
in Property or assets (other than the Property or assets subject to any Lien
except for (1) with respect to any Available Proceeds Amount resulting from an
Asset Sale involving Collateral, the Lien of the Security Documents and (2) with
respect to any Available Proceeds Amount resulting from an Asset Sale not
involving Collateral, the Lien of any instruments or documents that secured
Indebtedness that was secured by the assets subject to such Asset Sale) which is
related to the business of the Company and its Subsidiaries as it is conducted
on the date of the Asset Sale giving rise to the Asset Sale Proceeds to be
reinvested.
"Released Interests" has the meaning assigned to such term in the
Collateral Agency Agreement.
"Restoration" has the meaning assigned to such term in each of the
Mortgages.
"Restricted Investment" means, with respect to any Person, any
Investment by such Person in any (i) of its Affiliates or in any Person that
becomes an Affiliate as a result of such Investment, (ii) executive officer or
director of such Person and (iii) executive officer or director of any Affiliate
of such Person; provided that loans or advances made in the ordinary course of
business for travel, relocation or similar purposes shall not constitute
Restricted Investments.
"Restricted Payment" means any of the following: (i) the declaration
or payment of any dividend or any other distribution on Capital Stock of the
Company or any Subsidiary of the Company or any payment made to the direct or
indirect holders (in their capacities as such) of Capital Stock of the Company
or any Subsidiary of the Company (other than (a) dividends or distributions
payable solely in Capital Stock (other than Disqualified Stock) and (b) in the
case of Subsidiaries of the Company, dividends or distributions payable to the
Company or to a Subsidiary of the Company); (ii) the purchase, redemption or
other acquisition or retirement for value of any Capital Stock, or any option,
warrant, or other right to acquire shares of Capital Stock, of the Company or
any of its Subsidiaries;
<PAGE>
(iii) the making of any principal payment on, or the purchase, defeasance
(including a Qualified Defeasance Transaction), repurchase, redemption or other
acquisition or retirement for value, prior to any scheduled maturity, scheduled
repayment or scheduled sinking fund payment, of any Indebtedness of the Company
or any of its Subsidiaries which is subordinated in right of payment to the
Securities (including any Guarantees thereof); and (iv) the making of any
Restricted Investment or guarantee of any Restricted Investment in any Person.
"SEC" means the Securities and Exchange Commission.
"Secured Parties" has the meaning assigned to such term in the
Collateral Agency Agreement.
"Securities" means the % Senior Secured Discount Notes due 2004, as
amended or supplemented from time to time pursuant to the terms of this
Indenture, that are issued under this Indenture.
"Security Agreement" means the Security Agreement dated as of the date
hereof between Acme Steel and the Collateral Agent, in substantially the form
attached hereto as Exhibit B, as the same may be amended, amended and restated,
supplemented or otherwise modified from time to time in accordance with its
terms.
"Security Documents" means, collectively, the Security Agreement, the
Mortgage, the Stock Pledge Agreements, the Disbursement Agreement, the
Collateral Agency Agreement and the Intercreditor Agreement and all security
agreements, mortgages, deeds of trust, collateral assignments, or other
instruments evidencing or creating any security interest in favor of the
Collateral Agent in all or any portion of the Collateral in each case, as
amended, amended and restated, supplemented or otherwise modified from time to
time.
"Senior Secured Notes" means the % Senior Secured Notes due 2002, as
amended or supplemented from time to time pursuant to the terms of the Note
Indenture, that are issued under the Note Indenture.
"Significant Subsidiary" means any Subsidiary of the Company which
would constitute a "significant subsidiary" as defined in Rule 1.02 of
Regulation S-X under the Securities Act of 1933, as amended, and the Exchange
Act.
<PAGE>
"Special Stock Purchase Warrants" means the 5,600,000 special stock
purchase warrants issued and sold by the Company in March 1994 and the Common
Stock for which they can be exercised.
"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.
"Stock Pledge Agreements" means, collectively, the Stock Pledge
Agreement dated the date hereof between (i) the Company or (ii) Acme Steel and
Acme Packaging, and, in each case, the Collateral Agent, in substantially the
form attached hereto as Exhibit D, as each may be amended, amended and restated,
supplemented or otherwise modified from time to time in accordance with its
terms.
"Subsidiary" means, with respect of any Person, any corporation or
other entity of which a majority 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 or controlled by such Person.
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code (S)(S)
77aaa-77bbbb) as in effect on the date of this Indenture, except as provided in
Section 9.03.
"Trustee" means the party named as such in this Indenture until a
successor replaces it in accordance with the provisions of this Indenture and
thereafter means such successor.
"Trust Officer" means any officer within the corporate trust
administration department (or any successor group of the Trustee), including any
vice president, assistant vice president, assistant secretary or any other
officer or assistant officer of the Trustee customarily performing functions
similar to those performed by the persons who at that time shall be such
officers, and also means, with respect to a particular corporate trust matter,
any other officer to whom such trust matter is referred because of his or her
knowledge of and familiarity with the particular subject.
"Unapplied Proceeds Offer Payment Date" means, with respect to any
Available Proceeds Amount from an Asset Sale, the earlier of (x) the 180th day
following receipt of such Available Proceeds Amount or (y) such earlier date on
which an Unapplied Proceeds Offer shall expire; provided, however, that to the
<PAGE>
extent that the Board of Directors of the Company shall have adopted a capital
expenditure plan contemplating the application of Net Cash Proceeds from an
Asset Sale to a Related Business Investment and the Company shall have taken
significant steps to implement such plan within 180 days of an Asset Sale, the
Unapplied Proceeds Offer Payment Date with respect thereto shall be the 180th
day after the adoption of such plan.
"United States Government Obligations" means securities which are
direct obligations of (i) the United States or (ii) an agency or instrumentality
of the United States, the payment of which is unconditionally guaranteed by the
United States, which, in either case, are full faith and credit obligations of
the United States and are not callable or redeemable at the option of the issuer
thereof, and shall also include a depository receipt issued by a bank or trust
company as custodian with respect to any such United States Government
Obligations or a specific payment of interest on or principal of any such United
States Government Obligations held by such custodian for the account of the
holder of a depository receipt; provided that (except as required by law) such
custodian is not authorized to make any deduction from the amount received by
the custodian in respect of the United States Government Obligations for the
specific payment of interest or principal of the United States Government
Obligations evidenced by such depository receipt.
"Valuation Date" has the meaning assigned to such term in the
Collateral Agency Agreement.
"Wabush" means the entity called Wabush Mines, a Canadian joint
venture, including Wabush Iron Co. Ltd., an Ohio corporation and one of the
joint venturers of Wabush Mines, which is engaged in the mining, beneficiation
and pelletizing of iron ore or any successor to either such entity, any entity
of approximately equivalent value substituted therefor or any investment of
approximately equivalent value and purpose.
"Wholly Owned Subsidiary" of any Person means, at any time, a
Subsidiary all of the Capital Stock of which (except director's qualifying
shares, if any) are at the time owned directly or indirectly by such Person.
"Working Capital Facility" means the revolving credit facility, as the
same may be amended or supplemented from time to time, and any refinancing or
replacement of such credit facility or any successor credit facility so long as
the aggregate amount permitted to be borrowed under any such amended,
supplemented, refinanced, replaced or successor credit facility does not exceed
the lesser of (i) $80 million outstanding at any time or (ii) an
<PAGE>
amount equal to the sum of 85% of the face value of all "eligible receivables"
of the Company and its Subsidiaries party to such credit facility plus 50% of
the lower of the fair market value or cost of their "eligible inventory" (as
such terms are defined for purposes of such credit facility).
SECTION 1.02. Other Definitions.
<TABLE>
<CAPTION>
Term Defined in Section
- ---------------------------- ------------------
<S> <C>
"Affiliate Transaction" 4.03
"Bankruptcy Law" 6.01
"Collateral Account" 11.01
"covenant defeasance" 8.02
"Custodian" 6.01
"defeasance" 8.02
"Event of Default" 6.01
"incurrence" 4.04
"Paying Agent" 2.03
"Registrar" 2.03
"Released Trust Moneys" 11.04
"Repurchase Date" 4.15
"Repurchase Right" 4.15
"Required Filing Dates" 4.13
"Surviving Entity" 5.01
"Trust Moneys" 11.01
"Unapplied Proceeds Offer" 4.06
</TABLE>
SECTION 1.03. Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following meanings:
"Commission" means the SEC .
"indenture securities" means the Securities.
"indenture security holder" means a Securityholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Company or any
other obligor on the Securities.
<PAGE>
All other TIA terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by Commission rule
and not otherwise defined herein have the meanings assigned to them therein.
SECTION 1.04. Rules of Construction.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned
to it in accordance with generally accepted accounting principles in effect on
the Issue Date, and any other reference in this Indenture to "generally
accepted accounting principles" refers to GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and words in the
plural include the singular;
(5) provisions apply to successive events and transactions; and
(6) "herein," "hereof" and other words of similar import refer to this
Indenture as a whole and not to any particular Article, Section or other
subdivision.
ARTICLE TWO
THE SECURITIES
SECTION 2.01. Form and Dating.
The Securities, the notation thereon relating to the Guarantees and
the Trustee's certificates of authentication shall be substantially in the form
of Exhibit A. The Securities may have notations, legends or endorsements
required by law, securities exchange rule or usage. Any notations, legends or
endorsements not contained in the form of Security contained in Exhibit A shall
be delivered in writing to the Trustee. The Company shall approve the form of
the Securities and any notation, legend or endorsement on them. Each Security
shall be dated the date of its authentication.
The terms and provisions contained in the form of the Securities,
annexed hereto as Exhibit A, shall constitute, and are hereby expressly made, a
part of this Indenture.
<PAGE>
SECTION 2.02. Execution and Authentication.
Two Officers shall sign the Securities for the Company by manual or
facsimile signature. The Company's seal shall appear on the Securities and may
be reproduced manually or by facsimile.
If an Officer whose signature is on a Security no longer holds that
office at the time the Trustee authenticates the Security, the Security shall be
valid nevertheless.
A Security shall not be valid until the Trustee manually signs the
certificate of authentication on the Security. The signature shall be
conclusive evidence that the Security has been authenticated under this
Indenture.
The Trustee shall authenticate Securities for original issue in the
aggregate principal amount of up to $ , upon a written order of the
Company signed by two Officers or by an Officer and an Assistant Treasurer or
Assistant Secretary of the Company. The order shall specify the amount of
Securities to be authenticated and the date on which the original issue of
Securities is to be authenticated. The aggregate principal amount of Securities
outstanding at any time may not exceed $ except as provided in
Section 2.07.
The Trustee may appoint an authenticating agent acceptable to the
Company and eligible to qualify as a Trustee hereunder pursuant to Section 7.10
to authenticate Securities other than upon original issuance. Any such
appointment shall be evidenced by an instrument in writing signed by a Trust
Officer of the Trustee, and a copy of such instrument shall be promptly
furnished to the Company. The Company shall pay all fees payable to the
authenticating agent. Any authenticating agent appointed hereunder shall be
entitled to the benefits of Section 7.07. Unless limited by the terms of such
appointment, any authenticating agent may authenticate Securities whenever the
Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such agent. An authenticating agent has the
same rights as an Agent to deal with the Company or an Affiliate as provided in
Section 7.03. The provisions of Sections 7.08, 7.09 and 7.10 shall apply to any
authenticating agent appointed hereunder with the same effect as if such
authenticating agent were the Trustee hereunder.
The Securities shall be issuable only in registered form without
coupons and only in denominations of $1,000 and any integral multiple thereof.
<PAGE>
SECTION 2.03. Registrar and Paying Agent.
The Company shall maintain an office or agency where Securities may be
presented for registration of transfer or for exchange ("Registrar") and an
office or agency where Securities may be presented for payment ("Paying Agent").
The Company may have one or more co-Registrars and one or more additional paying
agents. The term "Paying Agent" includes any additional paying agent.
The Company shall enter into an appropriate agency agreement with any
Agent not a party to this Indenture. The agreement shall implement the
provisions of this Indenture that relate to such Agent and shall, if required,
incorporate the provisions of the TIA. The Company shall notify the Trustee of
the name and address of any such Agent. If the Company fails to maintain a
Registrar or Paying Agent, the Trustee shall act as such and shall be entitled
to appropriate compensation in accordance with the provisions of Section 7.07.
The Company initially appoints the Trustee as Registrar and Paying
Agent. The Company shall give written notice to the Trustee in the event that
the Company decides to act as Registrar or Paying Agent.
SECTION 2.04. Paying Agent To Hold Money in Trust.
The Company shall require each Paying Agent to agree in writing to
hold in trust for the benefit of Securityholders or the Trustee all money held
by the Paying Agent for the payment of principal of or interest on the
Securities (whether such money has been paid to it by the Company or any other
obligor on the Securities), and the Company and the Paying Agent shall each
notify the Trustee of any default by the Company (or any other obligor on the
Securities) in making any such payment. If the Company or a Subsidiary of the
Company acts as Paying Agent, it shall segregate the money and hold it as a
separate trust fund. The Company at any time may require a Paying Agent to pay
all money held by it to the Trustee and account for any funds disbursed and the
Trustee may at any time during the continuance of any payment default, upon
written request to a Paying Agent, require such Paying Agent to pay all money
held by it to the Trustee and to account for any funds disbursed. Upon making
such payment the Paying Agent shall have no further liability for the money
delivered to the Trustee.
<PAGE>
SECTION 2.05. Securityholder Lists.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
Securityholders. If the Trustee is not the Registrar, the Company shall furnish
to the Trustee at least five Business Days before each Interest Payment Date and
at such other times as the Trustee may request in writing a list in such form
and as of such date as the Trustee may reasonably require of the names and
addresses of Securityholders.
Every Holder of a Security, 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 the
disclosure of any information as to the names and addresses of the Holders
required by Section 312 of the TIA, and that the Trustee shall not be held
accountable by reason of mailing any material required to be disclosed pursuant
to a request made under Section 312(b) of the TIA.
SECTION 2.06. Transfer and Exchange.
When Securities are surrendered to the Registrar or a co-Registrar
with a request to register the transfer or to exchange them for an equal
principal amount of Securities of other authorized denominations, the Registrar
shall register the transfer or make the exchange as requested if its
requirements for such transactions are met. Every Security surrendered for
registration of transfer or exchange shall (if so required by the Company or the
Registrar) be duly endorsed by or be accompanied by a written instrument of
transfer in form satisfactory to the Company and the Registrar duly executed by
the Holder thereof or such Holder's attorney duly authorized in writing. To
permit registrations of transfers and exchanges, the Company shall execute and
the Trustee shall authenticate Securities at the Registrar's request. The date
of any Security issued pursuant to this Section 2.06 shall be the date of such
transfer or exchange. No service charge shall be made to the Securityholder for
any registration of transfer or exchange, but the Company may require from the
Securityholder payment of a sum sufficient to cover any transfer tax or similar
governmental charge payable in connection therewith (other than any such
transfer tax or similar governmental charge payable upon exchanges not involving
any transfer pursuant to Section 2.10, 3.06 or 9.05, in which event the Company
shall be responsible for the payment of such taxes).
The Company shall not be required (i) to register the transfer of or
exchange Securities during a period beginning at
<PAGE>
the opening of business 15 days before the day of the selection for redemption
of Securities under Section 3.02 and ending at the close of business on the day
of the mailing of the relevant notice of redemption, (ii) to register the
transfer of or exchange any Security so selected for redemption in whole or in
part, except the unredeemed portion of any Security being redeemed in part, or
(iii) to register the transfer of or exchange any Security which has been
surrendered for payment or repayment at the option of the Holder pursuant to
Section 4.06 or Section 4.15, except the portion, if any, of such Security not
to be so paid or repaid.
SECTION 2.07. Replacement Securities.
If a mutilated Security is surrendered to the Trustee or if the Holder
of a Security claims that the Security has been lost, destroyed or wrongfully
taken, then, in the absence of notice to the Company or the Trustee that such
lost, destroyed or wrongfully taken Security has been acquired by a bona fide
purchaser, the Company shall issue and the Trustee shall authenticate a
replacement Security if the requirements of the Company and the Trustee are met.
The Company and the Trustee may require (i) evidence to their satisfaction of
the loss, destruction or wrongful taking of a Security and (ii) such security or
indemnity in an amount sufficient in the judgment of the Company and the Trustee
to protect the Company, the Trustee and any Agent from any loss which any of
them may suffer if such Security is replaced. The Company and the Trustee each
may charge such Holder for its expenses in replacing such Security.
Every replacement Security is an additional obligation of the Company.
SECTION 2.08. Outstanding Securities.
Securities outstanding at any time are all Securities that have been
authenticated by the Trustee except for those cancelled by it, those delivered
to it for cancellation and those described in this Section or Section 2.09 as
not outstanding. Subject to Section 2.09, a Security does not cease to be
outstanding because the Company or one of its Affiliates holds the Security.
If a Security is replaced pursuant to Section 2.07, it ceases to be
outstanding unless the Trustee receives proof satisfactory to it that the
replaced Security is held by a bona fide purchaser.
<PAGE>
Securities with respect to which the Company has effected defeasance
and/or covenant defeasance as provided in Article Eight shall cease to be
outstanding on and after the date of such defeasance and/or covenant defeasance,
except to the extent provided in Section 8.02.
If the Paying Agent (other than the Company, a Subsidiary of the
Company or an Affiliate of the Company) holds on a redemption date, a Purchase
Date, a Repurchase Date or Maturity Date (or in the event that the Company, a
Subsidiary of the Company or an Affiliate is acting as Paying Agent, if the
Company, such Subsidiary or Affiliate sets aside and segregates in trust on a
redemption date, a Purchase Date, a Repurchase Date or Maturity Date) money
sufficient to pay the principal of and interest on Securities payable on that
date, then on and after that date such Securities cease to be outstanding and
interest on them ceases to accrue.
SECTION 2.09. Treasury Securities.
In determining whether the Holders of the required principal amount of
Securities have concurred in any direction, request, waiver or consent,
Securities owned by the Company, any Subsidiary of the Company or an Affiliate
of the Company shall be disregarded and not treated as outstanding, except that
for the purposes of determining whether the Trustee shall be protected in
relying on any such direction, request, waiver or consent, only Securities which
the Trustee actually knows are so owned shall be so disregarded and treated.
The Trustee may require an Officers' Certificate listing securities
owned by the Company, a Subsidiary of the Company or an Affiliate of the
Company.
SECTION 2.10 Temporary Securities.
Until definitive Securities are ready for delivery, the Company may
prepare and the Trustee shall authenticate temporary Securities. Temporary
Securities shall be substantially in the form of definitive Securities but may
have variations that the Company considers appropriate for temporary Securities.
Without unreasonable delay, the Company shall prepare and the Trustee shall
authenticate definitive Securities in exchange for temporary Securities upon
surrender of such temporary securities. Until such exchange, temporary
Securities shall be entitled to the same rights, benefits and privileges as
definitive Securities.
<PAGE>
SECTION 2.11 Cancellation.
The Company at any time may deliver Securities to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Trustee
for cancellation any Securities surrendered to them for transfer, exchange,
repayment, redemption or payment. The Trustee and no one else shall promptly
cancel all Securities so delivered to the Trustee or surrendered for transfer,
exchange, repayment, redemption, payment or cancellation. The Company may not
issue and the Trustee shall not authenticate new Securities to replace or
reissue or resell Securities which the Company has redeemed, paid, purchased,
repurchased, purchased on the open market or otherwise, or otherwise acquired or
have been delivered to the Trustee for cancellation. The Trustee (subject to
the record-retention requirements of the Exchange Act) shall destroy all
cancelled Securities and promptly deliver a certificate of destruction to the
Company.
SECTION 2.12 Defaulted Interest.
If the Company defaults in a payment of interest on the Securities, it
shall pay the defaulted interest, plus any interest payable on the defaulted
interest pursuant to Section 4.01 hereof, to the persons who are Securityholders
on a subsequent special record date, and such term, as used in this Section 2.12
with respect to the payment of any defaulted interest, shall mean the fifteenth
day next preceding the date fixed by the Company for the payment of defaulted
interest, whether or not such day is a Business Day. At least 15 days before
such special record date, the Company shall mail to each Securityholder and to
the Trustee, or the Trustee in the name and at the expense of the Company shall
mail to each Securityholder, a notice that states such special record date, the
payment date and the amount of defaulted interest to be paid.
Alternatively, in lieu of paying such defaulted interest pursuant to
the preceding paragraph, the Company may make payment of such defaulted interest
in any other lawful manner not inconsistent with the requirements of any
securities exchange on which the Securities may be listed, and upon such notice
as may be required by such securities exchange, if, after notice given by the
Company to the Trustee of the proposed payment pursuant to this paragraph, such
manner of payment shall be deemed practicable by the Trustee.
<PAGE>
ARTICLE THREE
REDEMPTION
SECTION 3.01 Notices to Trustee.
If the Company wants to redeem Securities pursuant to paragraph 5 of
the Securities at the applicable redemption price set forth thereon, it shall
notify the Trustee in writing of the redemption date and the principal amount of
Securities to be redeemed.
The Company shall give the notice provided for in this Section at
least 45 days before the redemption date (unless a shorter notice shall be
agreed to by the Trustee in writing), together with an Officers' Certificate
stating that such redemption will comply with the conditions contained herein.
SECTION 3.02 Selection of Securities To Be Redeemed.
If less than all of the Securities are to be redeemed pursuant to
paragraph 5 thereof, the Trustee shall select the Securities to be redeemed by
any method that complies with the requirements of the principal national
securities exchange, if any, on which the Securities being redeemed are listed,
at the discretion of the Trustee, or, if the Securities are not so listed, by
lot, pro rata or in such other manner as the Trustee shall deem fair and
reasonable; provided that no Security with a principal amount of $1,000 or less
shall be redeemed in part. The Trustee shall make the selection from the
Securities then outstanding, subject to redemption and not previously called for
redemption. 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 Trustee shall promptly notify the Company
in writing of the Securities selected for redemption and, in the case of any
Securities selected for partial redemption, the principal amount thereof to be
redeemed. Provisions of this Indenture that apply to Securities called for
redemption also apply to portions of Securities called for redemption.
SECTION 3.03 Notice of Redemption.
At least 30 days but not more than 60 days before a redemption date,
the Company shall mail a notice of redemption by first class mail, postage
prepaid, to each Holder whose Securities are to be redeemed.
<PAGE>
The notice shall identify the Securities to be redeemed and shall
state:
(1) the redemption date;
(2) the redemption price;
(3) the CUSIP number of the Securities;
(4) the name and address of the Paying Agent to which the Securities
are to be surrendered for redemption;
(5) that Securities called for redemption must be surrendered to the
Paying Agent to collect the redemption price;
(6) that, unless the Company defaults in making the redemption
payment, interest on Securities called for redemption ceases to accrue on and
after the redemption date and the only remaining right of the Holders is to
receive payment of the redemption price upon surrender to the Paying Agent;
and
(7) if any Security is being redeemed in part, the portion of the
principal amount of such Security to be redeemed and that, after the
redemption date, upon surrender of such Security, a new Security or Securities
in principal amount equal to the unredeemed portion thereof will be issued.
At the Company's request made at least 45 days before the redemption
date (unless a shorter time period shall be agreed to by the Trustee in
writing), the Trustee shall give the notice of redemption on behalf of the
Company, in the Company's name and at the Company's expense.
SECTION 3.04 Effect of Notice of Redemption.
Once a notice of redemption is mailed, Securities called for
redemption become due and payable on the redemption date and at the redemption
price and from and after the redemption date (unless the Company defaults in
making the redemption payment) such Securities shall cease to accrue interest.
Upon surrender to the Paying Agent, such Securities shall be paid at the
redemption price, plus accrued interest thereon to the redemption date, but
interest installments whose maturity is on or prior to such redemption date
shall be payable to the Holders of record at the close of business on the
relevant record dates referred to in the Securities. The Trustee shall
<PAGE>
not be required to (i) issue, authenticate, register the transfer of or exchange
any Security during a period beginning 15 days before the date a notice of
redemption is mailed and ending at the close of business on the date the
redemption notice is mailed, or (ii) register the transfer or exchange of any
Security so selected for redemption in whole or in part, except the unredeemed
portion of any Security being redeemed in part.
SECTION 3.05 Deposit of Redemption Price.
At least one Business Day before the redemption date, the Company
shall deposit with the Paying Agent (or if the Company is its own Paying Agent,
shall, on or before the redemption date, segregate and hold in trust) money
sufficient to pay the redemption price of and accrued interest on all Securities
to be redeemed on that date other than Securities or portions thereof called for
redemption on that date which have been delivered by the Company to the Trustee
for cancellation.
SECTION 3.06 Securities Redeemed in Part.
Upon surrender of a Security that is redeemed in part (with, if so
required by the Company or the Trustee, due endorsement by, or accompanied by a
written instrument of transfer in form satisfactory to the Company and the
Trustee duly executed by, the Holder thereof or such Holder's attorney duly
authorized in writing), the Trustee shall authenticate for the Holder a new
Security in principal amount equal to and in exchange for the unredeemed portion
of the Security surrendered.
ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Securities.
The Company shall pay the principal of and interest on the Securities
in the manner provided in the Securities. An installment of principal or
interest shall be considered paid on the date due if the Trustee or Paying Agent
(other than the Company, a Subsidiary of the Company or an Affiliate of the
Company) holds on that date money in immediately available funds designated for
and sufficient to pay the installment in full.
The Company shall pay interest on overdue principal at the same rate
per annum borne by the Securities. The Company shall pay interest on overdue
installments of interest at the same rate per annum borne by the Securities, to
the extent lawful.
<PAGE>
SECTION 4.02. Maintenance of Office or Agency.
The Company shall maintain in the Borough of Manhattan, The City of
New York, 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 set forth in Section 12.02. The Company hereby initially
designates the office of Shawmut Trust Company located at 14 Wall Street, 8th
Floor, New York, New York 10005, as its office or agency in the Borough of
Manhattan, The City of New York, to receive all such presentations, surrenders,
notices or demands until changed as permitted in this Indenture.
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 that no such designation or rescission shall in any manner relieve the
Company of its obligation to maintain an office or agency in the Borough of
Manhattan, The City of New York, for such purposes. The Company shall give
prompt written notice to the Trustee of any such designation or rescission and
of any change in the location of any such other office or agency.
SECTION 4.03. Limitation on Transactions with Affiliates.
The Company will not, and will not permit any of its Subsidiaries to,
make any loan, advance, guarantee or capital contribution to, or for the benefit
of, or sell, lease, transfer or otherwise dispose of any of its properties or
assets to, or for the benefit of, or purchase or lease any property or assets
from, or enter into or amend any contract, agreement or understanding with, or
for the benefit of, any Affiliate of the Company or any Affiliate of any of the
Company's Subsidiaries or any holder of 10% or more of any class of Capital
Stock of the Company (including any Affiliates of such holders) (each, an
"Affiliate Transaction") except for any Affiliate Transaction the terms of which
are fair and reasonable to the Company or such Subsidiary, as the case may be,
and are at least as favorable as the terms which could be obtained by the
Company or such Subsidiary, as the case may be, in a comparable transaction made
on an arm's length basis with Persons who are not such a holder,
<PAGE>
an Affiliate of such holder or an Affiliate of the Company or any of the
Company's Subsidiaries.
In addition, the Company will not, and will not permit any Subsidiary
of the Company to, enter into an Affiliate Transaction, or any series of related
Affiliate Transactions, unless with respect to such transaction or transactions
involving or having a value of more than $1,000,000, the Company has (x)
obtained the approval of a majority of the Board of Directors in the exercise of
their fiduciary duties and (y) either obtained the approval of a majority of the
members of the full Board of Directors not having any interest in such
transaction or transactions or obtained an opinion of a qualified independent
financial advisor to the effect that such transaction or transactions are fair
to the Company or such Subsidiary, as the case may be, from a financial point of
view.
SECTION 4.04. Limitation on Indebtedness.
The Company will not, and will not permit any of its Subsidiaries,
directly or indirectly, to, create, incur, assume, become liable for or
guarantee the payment of (collectively, an "incurrence") any Indebtedness
(including Acquired Indebtedness); provided the Company and its Subsidiaries may
incur Indebtedness, including Acquired Indebtedness, if (i) at the time of such
event and after giving effect thereto, on a pro forma basis, the ratio of
Consolidated Cash Flow Available for Fixed Charges to Consolidated Fixed Charges
for the four full fiscal quarters immediately preceding such event, taken as one
period and calculated using the assumptions and adjustments set forth in the
following sentence, would have been greater than 2.0 to 1.0, and (ii) no
Default or Event of Default shall have occurred and be continuing at the time of
or occur as a consequence of the incurrence of such Indebtedness. The following
assumptions and adjustments shall be used in calculating the ratio of
Consolidated Cash Flow Available for Fixed Charges to Consolidated Fixed Charges
for the four-quarter period preceding the incurrence of Indebtedness giving rise
to such determination: (a) the Indebtedness being incurred will be assumed to
have been incurred on the first day of such four-quarter period; (b) any other
Indebtedness incurred during, and remaining outstanding at the end of, such
four-quarter period or incurred subsequent to such four-quarter period will be
assumed to have been incurred on the first day of such four-quarter period; (c)
with respect to the incurrence of Acquired Indebtedness, the related acquisition
(whether by means of purchase, merger or otherwise) and any related repayment of
any Indebtedness will be assumed to have occurred on the first day of such four-
quarter period with the appropriate adjustments with respect to such acquisition
and
<PAGE>
repayment being included in such pro forma calculations; (d) with respect to
Indebtedness repaid (other than a repayment of revolving credit obligations)
during such four-quarter period (or subsequent thereto) out of the proceeds of
sales of Capital Stock or operating cash flows in such four-quarter period, such
Indebtedness will be assumed to have been repaid on the first day of such four-
quarter period; and (e) any permanent reduction in the committed amount of a
revolving credit facility during such four-quarter period (or subsequent
thereto) will be deemed to have occurred on the first day of such four-quarter
period and interest paid on any amounts drawn on such revolving credit facility
during such four-quarter period in excess of such reduced committed amount
shall, for the period during which such drawn amounts were actually outstanding,
be excluded from such calculation.
The foregoing limitations shall not apply to the incurrence of (i)
Permitted Indebtedness, (ii) Refinancing Indebtedness and (iii) additional
Indebtedness of the Company or any of its Subsidiaries the aggregate principal
amount of which does not exceed $35 million outstanding at any one time.
SECTION 4.05. Limitation on Liens.
The Company will not, and will not permit any Subsidiary of the
Company to, issue, assume, guarantee or suffer to exist any Indebtedness secured
by a Lien (other than a Permitted Lien) of or upon any Property of the Company
or any Subsidiary of the Company or any shares of stock or debt of any
Subsidiary of the Company, whether such Property is owned at the Issue Date or
thereafter acquired.
SECTION 4.06. Limitation on Disposition of Assets.
(a) The Company will not, and will not cause or permit any of its
Subsidiaries to, consummate any Asset Sale unless (i) the consideration in
respect of such Asset Sale is at least equal to the fair market value of the
assets subject to such Asset Sale, (ii) at least 75% of the value of the
consideration therefrom received by the Company or such Subsidiary is in the
form of cash or Cash Equivalents, and (iii) to the extent such Asset Sale
involves Collateral, (x) such Asset Sale is not between the Company and any of
its Subsidiaries or between Subsidiaries of the Company and (y) the Company
shall cause the cash consideration received in respect thereof to be deposited
in the Collateral Account as and when received by the Company or by any
Subsidiary of the Company and shall otherwise comply with the provisions hereof
and of the Collateral Agency Agreement applicable to such Collateral and Asset
Sale. The Company may,
<PAGE>
for so long as no Default or Event of Default exists hereunder or would be
caused thereby, apply Net Cash Proceeds held by it (or in compliance with the
provisions hereof and the Collateral Agency Agreement, direct the Collateral
Agent to release Net Cash Proceeds held in the Collateral Account for
application) to the acquisition or construction of Property constituting a
Related Business Investment; provided, however, that if such application is not
made in the manner and within the times contemplated by the definition of
Available Proceeds Amount, the Company shall be required to make an Unapplied
Proceeds Offer (as defined below) pursuant to paragraph (b) below.
(b) In the event there shall be any Available Proceeds Amount, the
Company shall make an offer to purchase (the "Unapplied Proceeds Offer") to all
Holders of the Securities on the Unapplied Proceeds Offer Payment Date an amount
of the Securities equal to the Applicable Portion of such Available Proceeds
Amount (as such amount may be increased in accordance with clause (vii) of
paragraph (f) hereof) expressed, prior to , 1997, in multiples of
the Accreted Amount and therefor in multiples of $1,000. In each case of an
Unapplied Proceeds Offer, the purchase price for the Securities shall be equal
to 100% of the Accreted Value thereof at the repurchase date, if repurchased
prior to , 1997, and of the principal amount thereof plus accrued
and unpaid interest to the Unapplied Proceeds Offer Payment Date if repurchased
thereafter. Notwithstanding the foregoing (A) the Company may defer the
Unapplied Proceeds Offer until there is an aggregate unutilized Available
Proceeds Amount equal to or in excess of $5,000,000 (at which time, the entire
unutilized Available Proceeds Amount whether or not withdrawn by the Company
pursuant to Section 3.4 of the Collateral Agency Agreement, and not just the
amount in excess of $5,000,000, shall be applied as required pursuant hereto),
(B) in connection with any Asset Sale, the Company and its Subsidiaries will not
be required to comply with the requirements of clause (ii) of paragraph (a) to
the extent that the aggregate non-cash consideration received in connection with
such Asset Sale, together with the sum of all non-cash consideration received in
connection with all prior Asset Sales that has not yet been converted into cash,
does not exceed $5 million, provided that when any non-cash consideration is
converted into cash, such cash shall constitute Net Cash Proceeds and be subject
to clause (ii) of paragraph (a), and (C) in connection with any Asset Sale
relating to the Company's interest in Wabush, the Company need not comply with
the provisions of clauses (i) and (ii) of paragraph (a). To the extent the
Unapplied Proceeds Offer is not fully subscribed to by Holders of Securities,
the Company may, subject to the terms hereof and of the Collateral Agency
Agreement, obtain a release of the unutilized portion of the Available Proceeds
Amount
<PAGE>
relating to such Unapplied Proceeds Offer from the Lien of the Security
Documents.
(c) If at any time any non-cash consideration is received by the
Company or by any Subsidiary of the Company, as the case may be, in connection
with any Asset Sale involving Collateral, such non-cash consideration shall be
made subject to the Lien of the Security Documents in the manner contemplated
hereby and the Collateral Agency Agreement. If and when any non-cash
consideration received from any Asset Sale (whether or not relating to
Collateral) is converted into or sold or otherwise disposed of for cash, then
such conversion or disposition shall be deemed to constitute an Asset Sale
hereunder and the Net Cash Proceeds thereof shall be applied in accordance with
this Section.
(d) All Net Proceeds and all Net Awards required to be delivered to
the Collateral Agent pursuant to any Security Document shall constitute Trust
Moneys and shall be delivered by the Company to the Collateral Agent
contemporaneously with receipt by the Company and be deposited in the Collateral
Account. Net Proceeds and Net Awards so deposited that are required to be
applied or may be applied by the Company to effect a Restoration of the
affected Collateral under the applicable Security Document may be withdrawn from
the Collateral Account, only in accordance with the provisions of this Indenture
and the Collateral Agency Agreement. Net Proceeds and Net Awards so deposited
that are not required to be applied to effect a Restoration of the affected
Collateral under the applicable Security Document may be withdrawn only in
accordance with the provisions of this Indenture and the Collateral Agency
Agreement.
(e) The Company shall provide the Trustee and the Collateral Agent
with prompt notice of the occurrence of an Unapplied Proceeds Offer. Such
notice shall be accompanied by an Officers' Certificate setting forth (i) a
statement to the effect that (x) the Company or a Subsidiary of the Company has
made an Asset Sale and/or (y) there has occurred a destruction or condemnation
in respect of Collateral resulting in Net Proceeds or Net Awards which are not
required to be applied to effect a Restoration of such affected Collateral under
the applicable Security Document and (ii) the aggregate Accreted Value of
principal amount, as the case may be, of Securities offered to be purchased and
the basis of calculation in determining such aggregate principal amount. The
Company is obligated with respect to the Securities and the Senior Secured Notes
(i) to give notice of an Unapplied Proceeds Offer and the equivalent offer
pursuant to the Note Indenture at the same time and in the same manner to each
holder of the Securities and the Senior
<PAGE>
Secured Notes, (ii) to set the same expiration date for the Unapplied Proceeds
Offer and the equivalent offer pursuant to the Note Indenture arising out of
each event giving rise to an Available Proceeds Amount and (iii) to establish
identical dates as the Unapplied Proceeds Offer Payment Date and the equivalent
date pursuant to the Note Indenture for each such offer referred to in clauses
(i) and (ii).
In the event of the transfer of substantially all (but not all) of the
Property of the Company and its Subsidiaries as an entirety to a Person in a
transaction permitted under Section 5.01 hereof, the successor corporation shall
be deemed to have sold the Properties of the Company and its Subsidiaries not so
transferred for purposes of this Section, and shall comply with the provisions
of this Section with respect to such deemed sale as if it were an Asset Sale.
In addition, the fair market value of such properties and assets of the Company
or its Subsidiaries deemed to be sold shall be deemed to be Net Cash Proceeds
for purposes of this Section.
(f) The Company shall provide the Trustee and the Collateral Agent
with written notice of the Unapplied Proceeds Offer at least 45 days before any
notice of any Unapplied Proceeds Offer is mailed to Holders of the Securities
(unless shorter notice is acceptable to the Trustee). Notice of a Unapplied
Proceeds Offer shall be mailed by the Company, or by the Trustee in the name of
and at the expense of the Company, to all Holders of Securities not less than 30
days nor more than 60 days before the Unapplied Proceeds Offer Payment Date at
their last registered address with a copy to the Trustee and the Paying Agent.
The Unapplied Proceeds Offer shall remain open from the time of mailing for at
least 20 Business Days and until at least 4:00 p.m., New York City time, on the
Business Day next preceding the Unapplied Proceeds Offer Payment Date. The
notice, which shall govern the terms of the Unapplied Proceeds Offer, shall
include such disclosures as are required by law and shall state:
(i) that the Unapplied Proceeds Offer is being made pursuant to
this Section 4.06;
(ii) the purchase price (including the amount of accrued interest,
if any) for each Security and the Unapplied Proceeds Offer Payment Date;
(iii) that any Security not tendered or accepted for payment will
continue to accrete or accrue interest, as the case may be, in accordance
with the terms thereof;
<PAGE>
(iv) that, unless the Company defaults in making the payment, any
Security accepted for payment pursuant to the Unapplied Proceeds Offer
shall cease to accrete or accrue interest, as the case may be, after the
Unapplied Procees Offer Payment Date;
(v) that Holders electing to have Securities purchased pursuant
to an Unapplied Proceeds Offer will be required to surrender their
Securities to the Paying Agent at the address specified in the notice prior
to 4:00 p.m., New York City time, on the business day next preceding the
Unapplied Proceeds Offer 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 will be entitled to withdraw their election if
the Paying Agent receives, not later than 4:00 p.m., New York City time, on
the business day next preceding the Unapplied Proceeds Offer Payment Date,
a tested telex, 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 or her election to have such Securities
purchased;
(vii) that if Securities in an Accreted Value or principal amount,
as the case may be, in excess of the Applicable Portion plus the excess, if
any, of (x) the Applicable Portion (as defined in the Note Indenture) over
(y) Senior Secured Notes validly tendered pursuant to Section 4.06 of the
Note Indenture in each case arising as a result of the Asset Sale giving
rise to the Unapplied Proceeds Offer are tendered pursuant to the Unapplied
Proceeds Offer, the Company shall purchase Securities 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 will
be issued new Securities equal in principal amount to the unpurchased
portion of the Securities surrendered; and
(ix) the instructions that Holders must follow in order to tender
their Securities.
<PAGE>
On the business day prior to the Unapplied Proceeds Payment Date, the
Company shall (i) deposit, or cause to be deposited, the Applicable Portion plus
any additional amounts determined pursuant to clause (vii) of this paragraph (f)
(which amount may consist of Trust Moneys already held by the Collateral Agent)
in immediately available funds with the Paying Agent, (ii) accept for payment,
on a pro rata basis among the Securities tendered in the event that Securities
in an Accreted Value or a principal amount, as the case may be, in excess of the
amount set forth in clause (vii) of this paragraph (f) are tendered pursuant to
the Unapplied Proceeds Offer (and in any event 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 purchased), Securities or
portions thereof tendered for purchase pursuant to the Unapplied Proceeds Offer
and (iii) deliver to the Paying Agent the Securities so accepted together with
an Officers' Certificate setting forth the Securities or portions thereof
tendered for purchase and accepted for payment by the Company. The Paying Agent
shall promptly mail or deliver to Holders of Securities so accepted payment in
an amount equal to the purchase price, and the Trustee shall promptly
authenticate and mail or deliver to such Holders a new Security equal in
principal amount to any unpurchased portion of the Security surrendered. Any
Securities not so accepted shall be promptly mailed or delivered by the Company
to the Holders thereof. The Paying Agent shall promptly deliver to the Company
the balance of such Available Proceeds Amount held by the Paying Agent after
payment to the Holders of Securities as aforesaid. For purposes of this Section
4.06, so long as the Collateral Agent is also the Trustee, the Collateral Agent
shall act as Paying Agent and, otherwise, the Trustee shall act as Paying Agent.
The Company will and will cause its Subsidiaries to 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 Unapplied Proceeds Offer. To the extent that the
provisions of any securities laws or regulations conflict with provisions of
this Section 4.06, the Company shall comply with the applicable securities laws
and regulations and shall not be deemed to have breached its obligations under
this Section 4.06 by virtue thereof.
<PAGE>
SECTION 4.07. Limitation on Restricted Payments.
The Company will not, and will not permit any of its Subsidiaries to,
directly or indirectly, make any Restricted Payment unless:
(i) no Default or Event of Default shall have occurred and be
continuing at the time of or after giving effect to such Restricted
Payment;
(ii) immediately after giving effect to such Restricted Payment,
the Company could incur at least $1.00 of Indebtedness (other than
Permitted Indebtedness) pursuant to the first paragraph of Section 4.04;
and
(iii) immediately after giving effect to such Restricted Payment,
the aggregate amount of all Restricted Payments (the fair market value of
any such Restricted Payment if other than cash as determined in good faith
by the Board of Directors and evidenced by a Board Resolution) declared or
made after the Issue Date does not exceed the sum of (a) 50% of the
Consolidated Net Income of the Company on a cumulative basis during the
period (taken as one accounting period) from and including the first full
fiscal quarter of the Company commencing after the Issue Date and ending on
the last day of the Company's last fiscal quarter ending prior to the date
of such Restricted Payment (or in the event such Consolidated Net Income
shall be a deficit, minus 100% of such deficit), plus (b) 100% of the
aggregate net cash proceeds of, and the fair market value of marketable
securities (as determined in good faith by the Board of Directors and
evidenced by a Board Resolution) received by the Company from (1) the issue
or sale after the Issue Date of Capital Stock of the Company (other than
the issue or sale of (A) Disqualified Stock, (B) Capital Stock of the
Company to any Subsidiary of the Company or (C) the exercise of the Special
Stock Purchase Warrants); and (2) the issue or sale after the Issue Date of
any Indebtedness or other securities of the Company convertible into or
exercisable for Capital Stock (other than Disqualified Stock) of the
Company which has been so converted or exercised, as the case may be.
The foregoing clauses (ii) and (iii) will not prohibit: (A) the
payment of any dividend within 60 days of its declaration if such dividend could
have been made on the date of its declaration without violation of the
provisions of this Indenture; (B) the repurchase, redemption or retirement of
any shares of Capital Stock of the Company or any of its Subsidiaries
<PAGE>
in exchange for, or out of the net proceeds of the substantially concurrent sale
(other than to a Subsidiary of the Company) of, other shares of Capital Stock
(other than Disqualified Stock) of the Company; (C) the repurchase, redemption
or retirement of subordinated Indebtedness of the Company or any of its
Subsidiaries in exchange for, by conversion into, or out of the net proceeds of,
a substantially concurrent (x) issue or sale of Capital Stock (other than
Disqualified Stock) of the Company or (y) incurrence of Refinancing Indebtedness
with respect to such subordinated Indebtedness; (D) the purchase of options or
Capital Stock issued to members of management of the Company pursuant to the
terms of their employment agreements upon termination of employment, death or
disability of any such Person in an amount not to exceed $1,000,000 per annum;
and (E) payments to taxing authorities by the Company or a Subsidiary of the
Company on behalf of a holder of Capital Stock of the Company (or an option to
purchase such Capital Stock pursuant to Section 4 of the Company's [Grant of
Stock Award] dated January 29, 1994; provided, that each Restricted Payment
described in clauses (A) through (D) (other than subclause (y) of clause (C)) of
this sentence shall be taken into account for purposes of computing the
aggregate amount of all Restricted Payments pursuant to clause (iii) of the
immediately preceding paragraph.
SECTION 4.08. Corporate Existence.
Subject to Article Five, the Company shall do or cause to be done all
things necessary to preserve and keep in full force and effect its corporate
existence and the corporate, partnership or other existence of each of its
Subsidiaries in accordance with the respective organizational documents of each
Subsidiary and the rights (charter and statutory) and material franchises of the
Company and each of its Subsidiaries; provided, that the Company shall not be
required to preserve any such right or franchise, or the corporate existence of
any Subsidiary, if the Board of Directors shall determine that the preservation
thereof is no longer desirable in the conduct of the business of the Company and
each of its Subsidiaries, taken as a whole, and that the loss thereof is not,
and will not be, adverse in any material respect to the Holders.
SECTION 4.09. Payment of Taxes and Other Claims.
The Company shall pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (1) all material taxes, assessments and
governmental charges (including any penalties, interest and additions to taxes)
levied or imposed upon the Company or any of its Subsidiaries or upon the
income, profits or property of the Company or any of its Subsidiaries and
<PAGE>
(2) all lawful claims for labor, materials and supplies which, in each case, if
unpaid, might by law become a material liability, or Lien upon the Property, of
the Company or any of its Subsidiaries; provided, that, subject to the
applicable provisions of the 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 promptly instituted and
diligently conducted and an adequate reserve has been established therefor to
the extent required by GAAP.
SECTION 4.10. Notice of Defaults.
(1) In the event that any Indebtedness of the Company or any of its
Subsidiaries is declared due and payable before its maturity because of the
occurrence of any default (or any event which, with notice or lapse of time, or
both, would constitute such a default) under such Indebtedness, the Company
shall promptly give written notice to the Trustee of such declaration, the
status of such default or event and what action the Company is taking or
proposes to take with respect thereto.
(2) Upon becoming aware of any Default or Event of Default, the
Company shall promptly deliver an Officers' Certificate to the Trustee
specifying the Default or Event of Default.
SECTION 4.11. Maintenance of Properties, Insurance.
(a) Subject to the applicable provisions of the Security Documents,
the Company shall cause all material Properties owned by or leased to it or any
of its Subsidiaries and used or useful in the conduct of its business or the
business of any of its Subsidiaries to be maintained and kept in normal
condition, repair and working order and supplied with all necessary equipment
and shall cause to be made all necessary repairs, renewals, replacements,
betterments and improvements thereof, all as in the judgment of the Company may
be necessary, so that the business carried on in connection therewith may be
properly and advantageously conducted at all times; provided, that nothing in
this Section shall prevent the Company or any of its Subsidiaries from
discontinuing the use, operation or maintenance of any of such properties (other
than Properties constituting items of Collateral except to the extent permitted
by Section 10.03), or disposing of any of them (other than Properties
constituting items of collateral except to the extent permitted by Section
10.03) if such discontinuance or disposal is, in the reasonable good faith
judgment of the Board of
<PAGE>
Directors or of the board of directors of any Subsidiary of the Company
concerned, or of an officer (or other agent employed by the Company or of any of
its Subsidiaries) of the Company or any of its Subsidiaries having managerial
responsibility for any such Property, desirable in the conduct of the business
of the Company or any Subsidiary of the Company, and if such discontinuance or
disposal is not adverse in any material respect to the Holders.
(b) Subject to the applicable provisions of the Security Documents,
the Company shall maintain, and shall cause its Subsidiaries to maintain,
insurance with responsible carriers against such risks and in such amounts, and
with such deductibles, retentions, self-insured amounts and co-insurance
provisions, as are customarily carried by similar businesses of similar size,
including property and casualty loss, workers' compensation and interruption of
business insurance. The Company shall provide, and shall cause its Subsidiaries
to provide, an Officers' Certificate as to compliance with the foregoing
requirements to the Trustee prior to the anniversary or renewal date of each
such policy, together with satisfactory evidence of such insurance, which
certificate shall expressly state such expiration date for each policy listed.
SECTION 4.12. Compliance Certificate.
The Company shall deliver to the Trustee within 100 days after the
close of each fiscal year an Officers' Certificate stating that a review of the
activities of the Company has been made under the supervision of the signing
officers with a view to determining whether a Default or Event of Default has
occurred and whether or not the signers know of any Default or Event of Default
by the Company that occurred during such fiscal quarter or fiscal year, as the
case may be. If they do know of such a Default or Event of Default, the
certificate shall describe all such Defaults or Events of Default, their status
and the action the Company is taking or proposes to take with respect thereto.
The first certificate to be delivered by the Company pursuant to this Section
4.12 shall be for the fiscal year ending December , 1994.
SECTION 4.13. Reports.
So long as at least 10% of the initial aggregate principal amount of
the Securities are outstanding, whether or not the Company is subject to Section
13(a) or 15(d) of the Exchange Act, the Company shall file with the SEC the
annual reports, quarterly reports and other documents which the Company would
have been required to file with the SEC pursuant to such Sections 13(a) and
15(d) if the Company were so subject, such
<PAGE>
documents to be filed with the SEC on or prior to the respective dates (the
"Required Filing Dates") by which the Company would have been required so to
file such documents if the Company were so subject. The Company shall also in
any event (x) within 15 days after each Required Filing Date file with the
Trustee copies of the annual reports, quarterly reports and other documents
which the Company would have been required to file with the SEC pursuant to
Sections 13(a) and 15(d) of the Exchange Act if the Company were subject to such
Sections and (y) if filing such documents by the Company with the SEC is not
permitted under the Exchange Act, promptly upon written request supply copies of
such documents to any prospective Holder. The Company shall also comply with
the other provisions of TIA Section 314(a).
SECTION 4.14. 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, which would prohibit or forgive the Company from paying all or any
portion of the principal of and/or interest on the Securities as contemplated
herein, wherever enacted, now or at any time hereafter in force, or which 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 4.15. Repurchase of Securities upon Change of Control.
(a) Upon the occurrence of a Change of Control, each Holder of the
Securities shall have the right (the "Repurchase Right"), at such Holder's
option, to require the Company to repurchase all or any part of such Holder's
Securities on a date specified in the notice referred to below (the "Repurchase
Date") that is the same date as the equivalent repurchase date under the Note
Indenture and is no later than 60 days after notice of the Change of Control, at
101% of the Accreted Value thereof at the Repurchase Date, if repurchased prior
to , 1997, and of the principal amount thereof, plus accrued
interest to the Repurchase Date if repurchased thereafter.
(b) On or before the thirtieth day after the Change of Control, the
Company shall deliver, or cause to be delivered, by first-class mail, to all
holders of record of such Securities and the Trustee (or the Trustee, in the
name and at the expense of
<PAGE>
the Company, shall deliver) a notice regarding the Change of Control and the
Repurchase Right. Each such notice shall state
(i) the Repurchase Date;
(ii) the date by which the Repurchase Right must be exercised;
(iii) the price (including the amount of accrued interest, if any)
for such Securities; and
(iv) the procedure which the Holder of Securities must follow to
exercise the Repurchase Right.
Substantially simultaneously with mailing of the notice, the Company
shall cause a copy of such notice to be published in a newspaper of general
circulation in the Borough of Manhattan, The City of New York.
(c) To exercise the Repurchase Right, the Holder of a Security must
deliver at least ten days prior to the Repurchase Date written notice to the
Company (or any agent designated by the Company for such purpose) of such
Holder's exercise of the Repurchase Right, together with the Security with
respect to which such Repurchase Right is being exercised, duly endorsed for
transfer; provided that, if mandated by applicable tender offer rules and
regulations, a Holder may be permitted to deliver such written notice nearer to
the Repurchase Date, as may be specified by the Company.
(d) In the event a Repurchase Right shall be exercised in accordance
with the terms hereof, the Company shall pay or cause to be paid the price
payable with respect to the Securities as to which the Repurchase Right has been
exercised in cash to the Holder of such Securities, on the Repurchase Date. In
the event that a Repurchase Right is exercised with respect to less than the
entire principal amount of a surrendered Security, the Company shall execute and
deliver to the Trustee and the Trustee shall authenticate for issuance in the
name of the Holder a new Security or Securities in the aggregate principal
amount of that portion of such surrendered Security not repurchased.
(e) The Company shall comply with all applicable tender offer rules
and regulations, including Section 14(e) of the Exchange Act and the rules
thereunder, if the Company is required to give a notice of the Repurchase Right
as a result of a Change of Control. To the extent that the provisions of any
securities laws or regulations conflict with provisions of this Section 4.15,
the Company shall comply with the applicable
<PAGE>
securities laws and regulations and shall not be deemed to have breached its
obligations under this Section 4.15 by virtue thereof.
(f) No repurchase of Securities under this Section 4.15 shall occur
until the Trustee shall have received, on or prior to the Repurchase Date, an
Officers' Certificate and an Opinion of Counsel as to (i) the Company's
compliance with this Section 4.15 and (ii) the fulfillment of all conditions
precedent to such repurchase.
SECTION 4.16. Limitation on Sale and Leaseback Transactions.
The Company will not, and will not permit any Subsidiary of the
Company to, enter into any sale and leaseback transaction with respect to any
Property (whether now owned or hereafter acquired) unless (i) (a) the Property
that is subject of such sale and leaseback transaction does not constitute
Collateral and (b) the sale or transfer of the Property to be leased complies
with the requirements of Section 4.06 and (ii) the Company or such Subsidiary
would be entitled under Section 4.04 to incur any Capitalized Lease Obligations
in respect of such sale and leaseback transaction.
SECTION 4.17. Limitation on Dividend and Other Payment
Restrictions Affecting Subsidiaries.
The Company will not, and will not permit any of its Subsidiaries to,
directly or indirectly, create or otherwise cause or suffer to exist or become
effective any consensual encumbrance or restriction on the ability of any
Subsidiary of the Company to (i) (a) pay dividends or make any other
distributions on its Capital Stock, or any other interest or participation in or
measured by its profits, owned by the Company or any other Subsidiary of the
Company, or (b) pay any Indebtedness owed to the Company or any other Subsidiary
of the Company, (ii) make loans or advances to the Company or a Subsidiary of
the Company or (iii) transfer any of its properties or assets to the Company or
any other Subsidiary of the Company, except for Permitted Liens and such other
encumbrances or restrictions existing under or by reason of (a) any
restrictions, with respect to a Subsidiary that is not a Subsidiary of the
Company on the Issue Date, under any agreement in existence at the time such
Subsidiary becomes a Subsidiary of the Company (unless such agreement was
entered into in connection with, or in contemplation of, such entity becoming a
Subsidiary of the Company on or after the Issue Date), (b) any restrictions
under any agreement evidencing any Acquired Indebtedness of a Subsidiary of the
Company incurred pursuant to the provisions of
<PAGE>
Section 4.04; provided that such restrictions shall not restrict or encumber any
assets of the Company or its Subsidiaries other than such Subsidiary, (c) terms
relating to the nonassignability of any operating lease, (d) any restrictions
under the Working Capital Facility, (e) any encumbrance or restriction existing
under any agreement that refinances or replaces the agreements containing
restrictions described in clauses (a) through (d), provided that the terms and
conditions of any such restrictions are not materially less favorable to the
Holders of the Securities than those under the agreement so refinanced or
replaced, or (f) any encumbrance or restriction due to applicable law.
SECTION 4.18. Limitation on Actions Affecting Security.
The Company shall not, and shall not permit any Subsidiary of the
Company to, take or omit to take any action, which action or omission would have
the result of materially adversely affecting or impairing the Liens and security
interests in the Collateral in favor of the Collateral Agent on behalf of the
Holders of the Securities and the other secured parties thereunder, nor shall
the Company or any such Subsidiary grant any interest whatsoever in the
Collateral except as expressly permitted by this Indenture and the Security
Documents.
SECTION 4.19. Inspection and Confidentiality.
(a) 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 and 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.
(b) The Trustee and the Collateral Agent and their respective
authorized representatives referred to in Section 4.19(a) agree not to use any
information obtained pursuant to this Section 4.19 for any unlawful purpose
and, prior to the occurrence of an Event of Default, to keep confidential any
proprietary information identified to the Trustee, the Collateral Agent or such
representative (as applicable) as proprietary information and not to disclose
any such proprietary information to any Person except that (i) the recipient of
the information may disclose any information that becomes publicly available
other than as a result of disclosure by such recipient, (ii) the recipient of
the information may disclose any
<PAGE>
information that its counsel reasonably concludes is necessary to be disclosed
by law, pursuant to any court or administrative order or ruling or in any
pending legal or administrative proceeding or investigation after prior written
notice, reasonable under the circumstances, to the Company, and (iii) the
recipient of the information may disclose any information necessary to be
disclosed pursuant to any provision of the TIA.
SECTION 4.20. Limitations on Investments, Loans and Advances.
The Company will not make and will not permit any of its Subsidiaries
to make any Investments in any Person, except (i) Investments by the Company in
or to any Subsidiary (or an entity which, following and as a result of such
Investment, becomes a Subsidiary of the Company) and Investments in or to the
Company or a Subsidiary (or an entity which, following and as a result of such
Investment, becomes a Subsidiary of the Company) by any Subsidiary, (ii)
Investments represented by accounts receivable created or acquired in the
ordinary course of business, (iii) advances to employees, officers and directors
in the ordinary course of business, (iv) Investments under or pursuant to
Interest Protection Agreements, (v) Permitted Investments, (vi) Restricted
Investments made pursuant to Section 4.07 hereof, (vii) Investments in Wabush
and (viii) other Investments in Persons other than Subsidiaries or Affiliates of
the Company or any of the Company's Subsidiaries not to exceed $10,000,000 at
any one time outstanding. For purposes of calculating the amount of any
outstanding Investment pursuant to clause (viii), any return of capital or
repayment of a loan or advance constituting all or a portion of the original
amount of the Investment shall be deducted.
SECTION 4.21. Additional Subsidiary Guarantees.
If the Company or any of its Subsidiaries transfers or causes to be
transferred, in one or a series of related transactions, any Property having a
book value in excess of $500,000 to any Subsidiary that is not a Guarantor, or
if the Company or any of its Subsidiaries shall organize, acquire or otherwise
invest in another Subsidiary having total assets with a book value in excess of
$500,000, then such transferee or acquired or other Subsidiary shall (i) execute
and deliver to the Trustee a supplemental indenture in form reasonably
satisfactory to the Trustee pursuant to which such Subsidiary shall
unconditionally guarantee all of the Company's obligations under the Securities
and the Indenture on the terms set forth in the Indenture and (ii) deliver to
the Trustee an Opinion of Counsel that such supplemental indenture has been duly
authorized, executed and delivered by such Subsidiary and constitutes the
<PAGE>
legal, valid, binding and enforceable obligation of such Subsidiary.
Thereafter, such Subsidiary shall be a Guarantor for all purposes hereof.
ARTICLE FIVE
MERGERS; SUCCESSOR CORPORATION
SECTION 5.01. Restriction on Mergers and
Consolidations and Sales of Assets.
The Company shall not consolidate or merge with or into any Person,
and the Company will not, and will not permit any of its Subsidiaries to, sell,
lease, convey or otherwise dispose of all or substantially all of the Company's
consolidated assets (as an entirety or substantially an entirety in one
transaction or a series of related transactions, including by way of liquidation
or dissolution) to, any Person unless, in each such case:
(i) the entity formed by or surviving any such consolidation or
merger (if other than the Company), or to which sale, lease, conveyance or
other disposition shall have been made (the "Surviving Entity"), is a
corporation organized and existing under the laws of the United States, any
state thereof or the District of Columbia;
(ii) the Surviving Entity assumes by supplemental indenture all of
the obligations of the Company on the Securities and under this Indenture
and the Security Documents;
(iii) immediately after giving effect to such transaction, no
Default or Event of Default shall have occurred and be continuing;
(iv) immediately after giving effect to such transaction and the
use of any net proceeds therefrom on a pro forma basis, the Consolidated
Tangible Net Worth of the Company or the Surviving Entity, as the case may
be, would be at least equal to the Consolidated Tangible Net Worth of the
Company immediately prior to such transaction; and
(v) immediately after giving effect to such transaction and the
use of any net proceeds therefrom on a pro forma basis, the Company or the
Surviving Entity, as the case may be, could incur at least $1.00 of
Indebtedness (other than Permitted Indebtedness) pursuant to the first
paragraph of Section 4.04.
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SECTION 5.02. Successor Corporation Substituted.
Upon any conveyance, lease or transfer in accordance with Section
5.01, the surviving Person to which such conveyance, lease or transfer is made
will 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 and thereafter the predecessor
corporation will be relieved of all further obligations and covenants under this
Indenture, the Securities and the Security Documents to which it was a party or
bound.
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. Events of Default.
An "Event of Default" occurs if:
(i) the Company fails to pay interest on any Securities when the
same becomes due and payable and such failure continues for a period of 30
days;
(ii) The Company fails to pay the principal of or premium on any
Securities when the same becomes due and payable whether at maturity, upon
acceleration, redemption or otherwise;
(iii) any Guarantee ceases to be in full force and effect or is
declared to be null and void and unenforceable or is found to be invalid or
any Guarantor denies its liability under its Guarantee (other than by
reason of release of a Guarantor in accordance with the terms hereof);
(iv) the Company or any Guarantor fails to observe or perform any
other covenant in this Indenture or in any of the Security Documents for 60
days after notice from the Trustee, the Collateral Agent or the holders of
25% in principal amount of the Securities outstanding (except in the case
of a default with respect to Section 4.15 and Section 5.01, which will
constitute Events of Default with such notice but without passage of time);
(v) the Company or any of its Subsidiaries fails to make any
payment when due (after giving effect to any applicable grace period) under
the Senior Secured Notes or any other Indebtedness in excess of $5 million
which is not subordinated to the Securities (including, without
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limitation, Indebtedness under the Working Capital Facility);
(vi) the Company or any of its Subsidiaries fails to perform any
term, covenant, condition or provision of the Senior Secured Notes or any
other Indebtedness in excess of $5 million individually or $10 million in
the aggregate, which failure results in the acceleration of the maturity of
such Indebtedness;
(vii) a final judgment or judgments for the payment of money not
fully covered by insurance, which judgments exceed $5 million individually
or $10 million in the aggregate, is entered against the Company or any of
its Subsidiaries and is not satisfied, stayed, annulled or rescinded within
60 days of being entered;
(viii) any Person, after the occurrence of an event of default under
any instrument evidencing Indebtedness secured by Collateral, shall
commence judicial proceedings to foreclose any material portion of the
Collateral or shall exercise any legal or contractual right to the
ownership of any material portion of the Collateral in lieu of foreclosure;
(ix) the Company or any Guarantor 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, or
(D) makes a general assignment for the benefit of its creditors; or
(x) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that:
(A) is for relief against the Company or any Guarantor in an
involuntary case or proceeding,
(B) appoints a Custodian of the Company or any Guarantor or for all or
substantially all of its property, or
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(C) orders the liquidation of the Company or any Guarantor,
and in each case the order or decree remains unstayed and in effect
for 30 days; provided that if the entry of such order or decree is appealed and
dismissed on appeal then the Event of Default hereunder by reason of the entry
of such order or decree shall be deemed to have been cured.
The term "Bankruptcy Law" means Title 11, U.S. Code or any similar
Federal, state or foreign law for the relief of debtors. The term "Custodian"
means any receiver, trustee, assignee, liquidator, sequestrator or similar
official under any Bankruptcy Law.
The Trustee shall, within 90 days after the occurrence of any Default
known to it, give to the holders of Securities notice of such Default; provided
that, except in the case of a Default in the payment of principal of or interest
on any of the Securities, the Trustee shall be protected in withholding such
notice if it in good faith determines that the withholding of such notice is in
the interest of the Holders of Securities.
SECTION 6.02. Acceleration.
In case an Event of Default (other than an Event of Default described
in clause (ix) or (x) of Section 6.01 above with respect to the Company and any
Significant Subsidiaries) shall occur and be continuing, the Trustee or the
holders of at least 25% in aggregate principal amount of the Securities then
outstanding, by notice in writing to the Company (and to the Trustee if given by
the holders of Securities), may declare, prior to , 1997 the
Accreted Value and thereafter all unpaid principal and accrued interest on the
Securities then outstanding to be due and payable immediately. Any such
declaration with respect to the Securities may be annulled by the Holders of not
less than a majority in principal amount of the outstanding Securities in
accordance with Section 6.04.
If an Event of Default specified in clause (ix) or (x) of Section 6.01
occurs with respect to the Company or any Significant Subsidiary and is
continuing, then, prior to , 1997 the Accreted Value and thereafter
all unpaid principal of, premium, if any, and accrued interest on the
outstanding Securities shall ipso facto become immediately due and payable
without any declaration or other act on the part of the Trustee or any Holder
thereof.
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SECTION 6.03. Other Remedies.
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy by proceeding at law or in equity to collect the
payment of principal of or interest on the Securities or to enforce the
performance of any provision of the Securities, this Indenture or the Security
Documents.
The Trustee may maintain a proceeding even if it does not possess any
of the Securities or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Securityholder in exercising any right or remedy
maturing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are cumulative to the
extent permitted by law.
Each Securityholder, 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 6.10 hereof.
SECTION 6.04. Waiver of Past Default.
Subject to Sections 2.09, 6.07 and 9.02, the Holders of not less than
a majority in aggregate principal amount of the outstanding Securities by
written notice to the Trustee may waive an existing Default or Event of Default
and its consequences, except, unless theretofore cured, a Default in the payment
of principal of or interest on any Security as specified in clauses (i) and (ii)
of Section 6.01. The Company shall deliver to the Trustee an Officers'
Certificate stating that the requisite percentage of Holders have consented to
such waiver and attaching copies of such consents. When a Default or Event of
Default is so waived, it is cured.
SECTION 6.05. Control by Majority.
Subject to Section 2.09, the Holders of not less than a majority in
principal amount of the outstanding Securities may 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 it. However, the Trustee may refuse
to follow any direction that conflicts with law or this Indenture, that the
Trustee determines may be unduly prejudicial to the rights of another
Securityholder, or that may involve the Trustee in personal liability; provided
that the Trustee may take any
<PAGE>
other action deemed proper by the Trustee which is not inconsistent with such
direction. In the event the Trustee takes any action or follows any direction
pursuant to this Indenture, the Trustee shall be entitled to indemnification
satisfactory to it in its sole discretion against any loss or expense caused by
taking such action or following such direction.
SECTION 6.06. Limitation on Suits.
A Securityholder may not pursue any remedy with respect to this
Indenture or the Securities unless:
(1) the Holder gives to the Trustee written notice of a continuing
Event of Default;
(2) the Holders of at least 25% in principal amount of the outstanding
Securities make a written request to the Trustee to pursue a remedy;
(3) such Holder or Holders offer and, if requested, provide to the
Trustee indemnity satisfactory to the Trustee against any loss, liability
or expense;
(4) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer and, if requested, the provision of
indemnity; and
(5) during such 60-day period the Holders of a majority in principal
amount of the outstanding Securities do not give the Trustee a direction
which, in the opinion of the Trustee, is inconsistent with the request.
A Securityholder may not use this Indenture to prejudice the rights of
another Securityholder or to obtain a preference or priority over such other
Securityholder.
SECTION 6.07. Rights of Holders To Receive Payment.
Notwithstanding any other provision of this Indenture, the right of
any Holder to receive payment of principal of and interest on the Security, on
or after the respective due dates expressed in the Security, or to bring suit
for the enforcement of any such payment on or after such respective dates, shall
not be impaired or affected without the consent of the 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.
<PAGE>
SECTION 6.08. Collection Suit by Trustee.
If an Event of Default in payment of interest or principal specified
in Section 6.01(i) or (ii) occurs and is continuing, the Trustee may recover
judgment in its own name and as trustee of an express trust against the Company
or any other obligor on the Securities for the whole amount of principal and
accrued interest remaining unpaid, together with interest overdue on principal
and to the extent that payment of such interest is lawful, interest on overdue
installments of interest, in each case at the rate per annum borne by the
Securities and such further amount as shall be sufficient to cover the costs
and expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.
SECTION 6.09. Trustee May File Proofs of Claim.
The Trustee may file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Securityholders allowed in any judicial proceedings relative to the Company (or
any other obligor upon the Securities), its creditors or its property and shall
be entitled and empowered to collect and receive any monies or other property
payable or deliverable on any such claims and to distribute the same, and any
custodian in any such judicial proceedings is hereby authorized by each
Securityholder 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
Securityholders, to pay to the Trustee any amount due to it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agent and
counsel, and any other amounts due the Trustee under Section 7.07. Nothing
herein contained shall be deemed to authorize the Trustee to authorize or
consent to or accept or adopt on behalf of any Securityholder any plan of
reorganization, arrangement, adjustment or composition affecting the Securities
or the rights of any Holder thereof, or to authorize the Trustee to vote in
respect of the claim of any Securityholder in any such proceeding.
<PAGE>
SECTION 6.10. Priorities.
If the Trustee collects any money or property pursuant to this Article
Six, it shall pay out the money or property in the following order:
First: to the Trustee for amounts due under Section 7.07;
Second: to Holders for amounts due and unpaid on the Securities for
principal and interest, ratably, without preference or priority of any kind,
according to the amounts due and payable on the Securities for principal and
interest, respectively; and
Third: to the Company.
The Trustee, upon prior written notice to the Company, may fix a
record date and payment date for any payment to Securityholders pursuant to this
Section 6.10.
SECTION 6.11. 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 or omitted by
it as Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section 6.11 shall not apply to a suit by the Trustee, a suit by Holders of
more than 10% in aggregate principal amount of the outstanding Securities, or to
any suit instituted by any Holder for the enforcement or the payment of the
principal or interest on any Securities on or after the respective due dates
expressed in the Security.
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. Duties of Trustee.
(a) If an Event of Default actually known to the Trustee has occurred
and is continuing, the Trustee shall exercise such of the rights and powers
vested in it by this
<PAGE>
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 such provisions, the Trustee will be under
no obligation to exercise any of its rights or powers under this Indenture at
the request of any of the holders of Securities, unless they shall have offered
to the Trustee security and indemnity satisfactory to it.
(b) Except during the continuance of an Event of Default actually
known to the Trustee:
(1) The Trustee need perform only those duties as are specifically set
forth herein and no others and no implied covenants or obligations shall be
read into this Indenture against the Trustee.
(2) In the absence of bad faith on its part, the Trustee may conclusively
rely, as to the truth of the statements and the correctness of the opinions
expressed therein, upon certificates or opinions and such other documents
delivered to it pursuant to Section 12.04 hereof furnished to the Trustee and
conforming to the requirements of this Indenture. However, the Trustee shall
examine the certificates and opinions to determine whether or not they conform
to the requirements of this Indenture.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(1) This paragraph does not limit the effect of paragraph (b) of this
Section 7.01.
(2) The Trustee shall not be liable for any error of judgment made in good
faith by a Trust Officer, unless it is proved that the Trustee was negligent
in ascertaining the pertinent facts.
(3) The Trustee shall not be liable with respect to any action it takes or
omits to take in good faith in accordance with a direction received by it
pursuant to Section 6.05.
(d) 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 to take or omit to take any action
under this Indenture or take any action at the request or direction of
<PAGE>
Holders if it shall have reasonable grounds for believing that repayment of such
funds is not assured to it or it does not receive an indemnity satisfactory to
it in its sole discretion against such risk, liability, loss, fee or expense
(including without limitation, liability relating in any way to Environmental
Laws and/or Hazardous Materials, as such terms are defined in the mortgage)
which might be incurred by it in compliance with such request or direction.
(e) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b), (c) and (d) of this Section 7.01.
(f) The Trustee shall not be liable for interest on any money received
by it except as the Trustee may agree in writing with the Company. Money held
in trust by the Trustee need not be segregated from other funds except to the
extent required by law.
SECTION 7.02. Rights of Trustee.
Subject to Section 7.01:
(a) The Trustee may rely on any document believed by it to be genuine
and to have been signed or presented by the proper person. The Trustee need
not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require an
Officers' Certificate and an Opinion of Counsel, which shall conform to the
provisions of Section 12.05. The Trustee shall not be liable for any action
it takes or omits to take in good faith in reliance on such certificate or
opinion.
(c) The Trustee may act through its attorneys and agents and shall not
be responsible for the misconduct or negligence of any agent (other than an
agent who is an employee of the Trustee) appointed with due care.
(d) The Trustee shall not be liable for any action it takes or omits
to take in good faith which it reasonably believes to be authorized or
within its rights or powers.
(e) The Trustee may consult with counsel and the advice or opinion of
such counsel as to matters of law shall be full and complete authorization
and protection from liability in respect of any action taken, omitted or
suffered by it hereunder in good faith and in accordance with the advice or
opinion of such counsel.
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(f) Subject to Section 9.02 hereof, the Trustee may (but shall not be
obligated to), without the consent of the Holders, give any consent, waiver
or approval required under the Security Documents or by the terms hereof
with respect to the Collateral, but shall not without the consent of the
Holders of not less than a majority in aggregate principal amount of the
Securities at the time outstanding (i) give any consent, waiver or approval
or (ii) agree to any amendment or modification of the Security Documents,
in each case, that shall have a material 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 a material adverse effect on
the interests of any Holder.
(g) The Trustee shall not be responsible in any way for monitoring or
managing the Company's policies, practices, or compliance with
Environmental Laws or Hazardous Materials relating to the Mortgaged
Property (as such terms are defined in the Mortgage).
SECTION 7.03. Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Securities and may otherwise deal with the Company or its
Affiliates with the same rights it would have if it were not Trustee. Any Agent
may do the same with like rights. However, the Trustee is subject to Sections
7.10 and 7.11.
SECTION 7.04. Trustee's Disclaimer.
The Trustee shall not be responsible for and makes no representation
as to the value or condition of the Collateral or any part thereof, or as to the
title of the Company thereto, or as to the security afforded thereby or hereby,
or as to the validity or genuineness of any Collateral pledged and deposited
with the Trustee, or as to the validity or adequacy of this Indenture or the
Securities, it shall not be accountable for the Company's use of the proceeds
from the Securities, and it shall not be responsible for any statement of the
Company in this Indenture or any document issued in connection with the sale of
Securities or any statement in the Securities other than the Trustee's
certificate of authentication. The Trustee makes no representations with
respect to the effectiveness or adequacy of this Indenture or the Security
Documents, or the validity or perfection, if any, of Liens granted under this
Indenture or the Security Documents. The Trustee shall not be responsible for
independently ascertaining or maintaining such validity or perfection, if any,
and shall be fully protected in relying upon certificates and opinions delivered
to it in accordance with the terms of this Indenture or the Security Documents.
<PAGE>
SECTION 7.05. Notice of Defaults.
If a Default or an Event of Default occurs and is continuing and the
Trustee receives actual notice of such event, the Trustee shall mail to each
Securityholder notice of the Default or Event of Default within 90 days after
receipt of such notice. Except in the case of a Default or an Event of Default
in payment of principal of or interest on any Security, the Trustee may
withhold the notice if and so long as a committee of its Trust Officers in good
faith determines that withholding the notice is in the interest of
Securityholders.
SECTION 7.06. Reports by Trustee to Holders.
If required by TIA (S) 313(a) within 60 days after each May 15
beginning with the May 15 following the date of this Indenture, the Trustee
shall mail to each Securityholder a report dated as of such May 15 that complies
with TIA (S) 313(a). The Trustee also shall comply with TIA (S) 313(b), (c) and
(d).
A copy of each such report at the time of its mailing to
Securityholders shall be filed with the SEC and each securities exchange, if
any, on which the Securities are listed.
The Company shall promptly notify the Trustee in writing if the
Securities become listed on any securities exchange or of any delisting thereof.
SECTION 7.07. Compensation and Indemnity.
The Company shall pay to the Trustee from time to time reasonable
compensation for its services rendered hereunder and under the Security
Documents. The Trustee's compensation shall not be limited by any law on
compensation of a trustee of an express trust. The Company shall reimburse the
Trustee upon request for all reasonable disbursements, expenses and advances
(including fees and expenses of counsel) incurred or made by it in addition to
the compensation for its services, except any such disbursements, expenses and
advances as may be attributable to the Trustee's negligence or bad faith. Such
expenses shall include the reasonable compensation, disbursements and expenses
of the Trustee's agents, accountants, experts and counsel and any taxes or other
expenses incurred by a trust created pursuant to Section 8.01 hereof.
The Company shall indemnify the Trustee for, and hold it harmless
against, any loss or liability incurred by the Trustee without negligence or bad
faith on its part in connection with the administration of this trust and its
duties under this
<PAGE>
Indenture and the Security Documents, including the reasonable expenses and
attorneys' fees of defending itself against any claim of liability arising
hereunder. Without limiting the foregoing sentence in any way, the Company
shall also indemnify the Trustee for, and hold it harmless against, any loss or
liability incurred by the Trustee (including reasonable attorneys' and
consultants' fees and court costs) arising from or relating to any Environmental
Laws or Hazardous Materials (as such terms are defined in the Mortgage)
concerning the Mortgaged Property (as such term is defined in the Indenture) or
any breach or alleged breach by the Company of any representation, warranty or
covenant in the Mortgage, provided such is not due to the Trustee's willful
violation of any Environmental Laws. The Trustee shall notify the Company
promptly of any claim asserted against the Trustee for which it may seek
indemnity. However, the failure by the Trustee to so notify the Company shall
not relieve the Company of its obligations hereunder. The Company shall defend
the claim and the Trustee shall cooperate in the defense (and may employ its own
counsel) at the Company's expense. The Company need not pay for any settlement
made without its written consent, which consent shall not be unreasonably
withheld. The Company need not reimburse any expense or indemnify against any
loss or liability incurred by the Trustee as a result of the violation of this
Indenture by the Trustee if such violation arose from the Trustee's negligence
or bad faith.
To secure the Company's payment obligations in this Section 7.07, the
Trustee shall have a senior claim prior to the Securities against all money or
property held or collected by the Trustee, in its capacity as Trustee, except
money or property held in trust to pay principal of or interest on particular
Securities.
When the Trustee incurs expenses or renders services after an Event of
Default specified in clause (viii) or (ix) of Section 6.01 occurs, the expenses
(including the reasonable fees and expenses of its agents and counsel) and the
compensation for the services shall be preferred over the status of the Holders
in a proceeding under any Bankruptcy Law and are intended to constitute expenses
of administration under any Bankruptcy Law. The Company's obligations under
this Section 7.07 and any claim arising hereunder shall survive the resignation
or removal of any Trustee, the discharge of the Company's obligations pursuant
to Article Eight and any rejection or termination under any Bankruptcy Law.
SECTION 7.08. Replacement of Trustee.
(a) The Trustee may resign at any time by so notifying the Company in
writing. The Holders of a majority in principal amount of the outstanding
Securities may remove the Trustee by so notifying the Trustee in writing and may
appoint a successor Trustee with the Company's consent. The Company may remove
the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged a bankrupt or an insolvent;
<PAGE>
(3) a receiver or other public officer takes charge of the Trustee or its
property; or
(4) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason (the Trustee in such event being referred to
herein as the retiring Trustee), the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in principal amount of the Securities may appoint a successor
Trustee to replace the successor Trustee appointed by the Company.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Immediately after that,
the retiring Trustee shall transfer, after payment of all sums then owing to the
Trustee pursuant to Section 7.07, all property held by it as Trustee to the
successor Trustee, subject to the senior claim provided in Section 7.07, the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have the rights, powers and duties of the Trustee under
this Indenture. A successor Trustee shall mail notice of its succession to each
Securityholder.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Holders of at least 10% in principal amount of the outstanding Securities may
petition any court of competent jurisdiction for the appointment of a successor
Trustee.
If the Trustee fails to comply with Section 7.10, any Securityholder
may petition any court of competent jurisdiction for the removal of the Trustee
and the appointment of a successor Trustee.
(b) If the Trustee, at the time of any resignation, removal or
disqualification:
(i) is also then acting as the Note Trustee and is simultaneously
resigning or otherwise ceasing to act as Note Trustee under the Note
Indenture; and
(ii) is also then acting as Collateral Agent and is simultaneously
resigning or otherwise ceasing to act as Collateral Agent
<PAGE>
then, any appointment of a successor Trustee pursuant to the terms
hereof who is simultaneously appointed successor Note Trustee pursuant to the
terms of the Note Indenture shall automatically and without further action on
the part of the holders of the Securities be appointed as Collateral Agent
under each of the Security Documents.
(c) Notwithstanding replacement of the Trustee pursuant to this
Section 7.08, the Company's obligations under Section 7.07 shall continue for
the benefit of the retiring Trustee.
SECTION 7.09. Successor Trustee by Merger, etc.
If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust business to, another
corporation or banking corporation, the resulting, surviving or transferee
corporation or banking corporation without any further act shall be the
successor Trustee (and successor Collateral Agent, if then so acting, under the
Security Documents).
SECTION 7.10. Eligibility; Disqualification.
This Indenture shall always have a Trustee which shall be eligible to
act as Trustee under TIA (S)(S) 310(a)(1) and 310(a)(2). The Trustee shall have
a combined capital and surplus of at least $100,000,000 as set forth in its most
recent published annual report of condition. If the Trustee has or shall
acquire any "conflicting interest" within the meaning of TIA (S) 310(b), the
Trustee and the Company shall comply with the provisions of TIA (S) 310(b). If
at any time the Trustee shall cease to be eligible in accordance with the
provisions of this Section, the Trustee shall resign immediately in the manner
and with the effect hereinafter specified in this Article Seven.
SECTION 7.11. Preferential Collection of Claims
Against Company.
The Trustee, in its capacity as Trustee hereunder and in its capacity
as Collateral Agent under the Security Documents, shall comply with TIA (S)
311(a), excluding any creditor relationship listed in TIA (S) 311(b). A Trustee
who has resigned or been removed shall be subject to TIA (S) 311(a) to the
extent indicated therein.
<PAGE>
SECTION 7.12. Appointment of Co-Trustee.
If the Trustee deems it necessary or desirable in connection with the
Collateral and/or the enforcement of the Security Documents, the Trustee may
appoint a co-Trustee with such powers of the Trustee as may be designated by the
Trustee at the time of such appointment, and the Company shall, on request,
execute and deliver to such co-Trustee any deeds, conveyances or other
instruments required by such co-Trustee so appointed by the Trustee to more
fully and certainly vest in an confirm to such co-Trustee its rights, powers,
trusts, duties and obligations hereunder.
ARTICLE EIGHT
DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 8.01. Satisfaction and Discharge.
This Indenture shall cease to be of further effect (except as to
surviving rights of registration of transfer or exchange of the Securities, as
expressly provided for in Section 2.06, and except as to Section 7.07) as to all
outstanding Securities when (i) either (a) all such Securities theretofore
authenticated and delivered (except (1) lost, destroyed or wrongfully taken
Securities which have been replaced or paid as provided in Section 2.07 and (2)
Securities for whose payment money has theretofore been deposited with the
Trustee or any Paying Agent and thereafter repaid to the Company as provided in
Section 8.04) have been delivered to the Trustee for cancellation or (b) all
such Securities not theretofore delivered to the Trustee for cancellation either
have become due and payable, will become due and payable at their Stated
Maturity within one year or are redeemable at the option of the Company and are
to be called for redemption within one year under arrangements satisfactory to
the Trustee for the giving of notice of redemption by the Trustee in the name
and at the expense of the Company, and, in any event, the Company has
irrevocably deposited or caused to be deposited with the Trustee funds in an
amount sufficient to pay and discharge the entire indebtedness for principal of,
premium, if any and interest to the date of such deposit (in the case of
Securities that have become due and payable) or to the Maturity Date or
redemption date, as the case may be, on the Securities not theretofore delivered
to the Trustee for cancellation; (ii) the Company has paid or caused to be paid
all other sums payable under this Indenture by the Company; and (iii) the
Company has delivered to the Trustee an Officers' Certificate and an Opinion of
Counsel each stating that (A) all conditions precedent under this Indenture
relating to the
<PAGE>
satisfaction and discharge of this Indenture have been complied with and (B)
such satisfaction and discharge will not result in a breach or violation of, or
constitute a default under, this Indenture or any other material agreement or
instrument to which the Company is a party or by which it is bound.
After such delivery or irrevocable deposit and delivery of an
Officers' Certificate and Opinion of Counsel, the Trustee upon request shall
acknowledge in writing the discharge of the Company's obligations under the
Securities and this Indenture except for those surviving obligations specified
above.
Notwithstanding the satisfaction and discharge of this Indenture, if
money shall have been deposited with the Trustee pursuant to subclause (b) of
clause (i) of the first paragraph of this Section 8.01, the obligations of the
Trustee under Sections 8.03 and 8.04 shall survive.
SECTION 8.02. Defeasance and Covenant Defeasance.
(a) The Company may, at its option and at any time, elect to have the
obligations of the Company discharged with respect to the outstanding Securities
(a "defeasance") by fulfilling the applicable conditions of Section 8.02(b).
Such defeasance means that the Company shall be deemed to have paid and
discharged the entire Indebtedness represented by the outstanding Securities,
and to have satisfied all its other obligations under such Securities, this
Indenture and the Security Documents (and the Trustee, at the expense of the
Company, shall execute proper instruments acknowledging the same), except for
the following which shall survive unless otherwise terminated or discharged
hereunder: (i) the rights of Holders of outstanding Securities to receive,
solely from the trust fund described in Sections 8.02(b) and 8.03, payments in
respect of the principal of, premium, if any, and interest on such Securities
when such payments are due, (ii) the Company's obligations with respect to the
Securities concerning issuing temporary Securities (Section 2.10), registration
of transfer or exchange of Securities (Section 2.06), mutilated, destroyed,
lost or stolen Securities (Section 2.07) and the maintenance of an office or
agency for payment (Section 4.02) and money for security payments held in trust
(Section 2.04), (iii) the rights, powers, trusts, duties and immunities of the
Trustee set forth in Article Seven and (iv) the defeasance provisions this
Article Eight. In addition, the Company may, at its option and at any time,
elect to have the obligations of the Company released with respect to any
covenants contained in Sections 4.03, 4.04, 4.05, 4.06, 4.07, 4.13, 4.15, 4.16,
4.17, 4.18, 4.19, 4.20, 4.21 and 5.01 (a "covenant defeasance") by fulfilling
the applicable
<PAGE>
provisions of Section 8.02(b) and such Securities shall thereafter be deemed not
to be outstanding for the purposes of any direction, waiver, consent,
declaration or any other act or action of the Holders (and the consequences of
any thereof) taken or to be taken in connection with any of such covenants, but
shall continue to be deemed outstanding for all other purposes hereunder. For
this purpose such covenant defeasance means with respect to such outstanding
Securities 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 or
by reason of reference in any such Section to any other provision herein or in
any other document, and such omission to comply with any such term, condition or
limitation shall not constitute a Default or an Event of Default with respect to
the Securities. In the event covenant defeasance occurs, the events described
in clauses (iii) (as it applies to the covenants listed in the foregoing
sentence), (v), (vi) and (vii) of Section 6.01 shall no longer constitute Events
of Default with respect to the Securities. Except as specified above, the
remainder of this Indenture and such Securities shall be unaffected by such
covenant defeasance.
(b) The following shall be the conditions to application of this
Section 8.02:
(i) the Company shall have deposited or caused to be deposited
irrevocably with the Trustee as trust funds, in trust for the benefit of the
Holders of the Securities, cash in U.S. dollars, United States Government
Obligations, or a combination thereof, in an amount sufficient, in the opinion
of a nationally recognized firm of independent public accountants expressed in
a written certification thereof delivered to the Trustee, to pay the principal
of and interest on the outstanding Securities on the Stated Maturity of such
principal or installment of principal or interest;
(ii) in the case of defeasance, the Company shall have delivered to the
Trustee an Opinion of Counsel in the United States stating that (A) the
Company has received from, or there has been published by, the Internal
Revenue Service a ruling or (B) since the date of this Indenture, there has
been a change in the applicable federal income tax law, in either case to the
effect that, and based thereon such Opinion of Counsel shall confirm that, the
Holders of the outstanding Securities will not recognize income, gain or loss
for federal income tax purposes as a result of such defeasance and will be
subject to federal income tax on the same amounts, in the same manner and at
the same times as
<PAGE>
would have been the case if such defeasance had not occurred;
(iii) in the case of covenant defeasance, the Company shall have
delivered to the Trustee an Opinion of Counsel in the United States to the
effect that the Holders of the outstanding Securities will not recognize
income, gain or loss for federal income tax purposes as a result of such
covenant defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the case
if such covenant defeasance had not occurred;
(iv) no Default or Event of Default shall have occurred and be continuing
on the date of such deposit or, insofar as clauses (viii) and (ix) of Section
6.01 are concerned, at any time during the period ending on the 91st day after
the date of such deposit (it being understood that this condition shall not be
deemed satisfied until the expiration of such period);
(v) such defeasance or covenant defeasance shall not result in a breach
or violation of, or constitute a default under, this Indenture or any other
material agreement or instrument to which the Company is a party or by which
it is bound;
(vi) in the case of defeasance or covenant defeasance, the Company shall
have delivered to the Trustee an Opinion of Counsel to the effect that after
the 91st day following the deposit, the trust funds will not be subject to the
effect of any applicable bankruptcy, insolvency, reorganization or similar
laws affecting creditors' rights generally;
(vii) the Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the
intent of preferring the Holders of Securities over the other creditors of the
Company with the intent of defeating, hindering, delaying or defrauding
creditors of the Company or others; and
(viii) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for relating to either the defeasance or the covenant
defeasance, as the case may be, have been complied with.
<PAGE>
(c) Notwithstanding defeasance or covenant defeasance in accordance with
this Section 8.02, the obligations of the Trustee under Sections 8.03 and 8.04
shall survive.
SECTION 8.03. Application of Trust Money.
Subject to Section 8.04, the Trustee shall hold in trust all money or
United States Government Obligations deposited with it pursuant to Sections 8.01
or 8.02, and shall apply the deposited money and the money from United States
Government Obligations in accordance with this Indenture to the payment of
principal of and interest on the Securities.
SECTION 8.04. Repayment to Company.
Subject to Sections 7.07, 8.01 and 8.02, the Trustee shall promptly pay
to the Company upon written request any excess money and/or United States
Government Obligations held by it at any time. The Trustee shall pay to the
Company upon written request any money held by it for the payment of principal,
premium or interest that remains unclaimed for two years; provided that the
Trustee before being required to make any payment may at the expense of the
Company cause to be published once in a newspaper of general circulation in the
City of New York or mail to each Holder entitled to such money notice that such
money remains unclaimed and that, after a date specified therein which shall be
at least 30 days from the date of such publication or mailing, any unclaimed
balance of such money then remaining shall be repaid to the Company. After
payment to the Company, Securityholders entitled to money must look to the
Company for payment as general creditors unless an applicable abandoned property
law designates another person and all liability of the Trustee or Paying Agent
with respect to such money shall thereupon cease.
SECTION 8.05. Reinstatement.
If the Trustee is unable to apply any money or United States Government
Obligations in accordance with Sections 8.01 or 8.02 by reason of any legal
proceeding or by reason of any order or judgment of any court or governmental
authority enjoining, restraining or otherwise prohibiting such application, the
Company's obligations under this Indenture and the Securities shall be revived
and reinstated as though no deposit had occurred pursuant to Sections 8.01 or
8.02 until such time as the Trustee is permitted to apply all such money or
United States Government Obligations in accordance with Sections 8.01 or 8.02;
provided that if the Company has made any payment of interest on or principal of
any Securities because of the reinstatement of its
<PAGE>
obligations, the Company shall be subrogated to the rights of the Holders of
such Securities to receive such payment from the money or United States
Government Obligations held by the Trustee.
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. Without Consent of Holders.
The Company, when authorized by a Board Resolution, and the Trustee or
the Collateral Agent, as applicable, may amend or supplement this Indenture, the
Security Documents or the Securities without notice to or consent of any
Securityholder:
(1) to cure any ambiguity, defect or inconsistency;
(2) to give effect to the release of any Released Interests or any other
item of Collateral or of any Lien, in each case pursuant to this Indenture and
the Collateral Agency Agreement;
(3) to evidence the succession of another Person to the Company or any
Subsidiary of the Company and the assumption by any such successor of the
covenants of the Company or such Subsidiary, as the case may be;
(4) to evidence the release and discharge of the obligations of any
Subsidiary of the Company the Capital Stock of which has been sold or
otherwise disposed of in accordance with the applicable provisions of this
Indenture; or
(5) to make any change that does not have a material adverse effect on
the rights of any Securityholder.
SECTION 9.02. With Consent of Holders.
Subject to Section 6.07, the Company, when authorized by a Board
Resolution, and the Trustee or the Collateral Agent, as applicable, may amend or
supplement this Indenture, the Security Documents or the Securities with the
written consent of the Holders of at least a majority in principal amount of the
outstanding Securities. Subject to Section 6.07, the Holders of not less than a
majority in principal amount of the outstanding Securities may waive compliance
by the Company with any provision of this Indenture, the Security Documents or
the Securities. However, without the consent of each Securityholder affected
<PAGE>
thereby, an amendment, supplement or waiver, including a waiver pursuant to
Section 6.04, may not:
(i) reduce the rate, or change the time or place for payment, of
interest on any Security, or reduce any amount payable on the redemption
thereof or upon a Change of Control;
(ii) reduce the principal, or change the fixed maturity or place
of payment, of any Security;
(iii) change the currency of payment of principal of or interest on
any Security;
(iv) impair the right to institute suit for the enforcement of any
payment on or with respect to any Security;
(v) reduce the principal amount of outstanding Securities
necessary to modify or amend this Indenture or any Security Document;
(vi) modify any of the provisions of Section 4.15;
(vii) subject to clauses (2), (4) and (5) of Section 9.01, affect
adversely the ranking or security of the Securities; or
(viii) modify any of the foregoing provisions or reduce the
principal amount of outstanding Securities necessary to waive any covenant
or past Default.
It shall not be necessary for the consent of the Holders under this
Section to approve the particular form of any proposed amendment, supplement or
waiver, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment, supplement or waiver under this Section becomes
effective, the Company shall mail to the Holders affected thereby a notice
briefly describing the amendment, supplement or waiver. Any failure of the
Company to mail such notice, or any defect therein, shall not, however, in any
way impair or affect the validity of any such supplemental indenture.
<PAGE>
SECTION 9.03. Compliance with Trust Indenture Act.
Every amendment to or supplement of this Indenture or the Securities
shall comply with the TIA as then in effect.
SECTION 9.04. Revocation and Effect of Consents.
Until an amendment, supplement or waiver becomes effective, a consent to
it by a Holder is a continuing consent by the Holder and every subsequent Holder
of that Security or portion of that Security that evidences the same debt as the
consenting Holder's Security, even if notation of the consent is not made on any
Security. However, except as provided in the succeeding paragraph, any such
Holder or subsequent Holder may revoke the consent as to his Security or portion
of a Security. Such revocation shall be effective only if the Trustee receives
written notice of such revocation before the date the amendment, supplement or
waiver becomes effective.
The Company may, but shall not be obligated to, fix a record date for the
purpose of determining the Holders entitled to consent to any amendment,
supplement or waiver. If a record date is fixed, then, notwithstanding the last
two sentences of the immediately preceding paragraph, those Persons who were
Holders at such record date (or their duly designated proxies), and only those
Persons, shall be entitled to consent to such amendment, supplement or waiver
or to revoke by written notice received by the Trustee any consent previously
given, whether or not such Persons continue to be Holders after such record
date. No such consent shall be valid or effective for more than 90 days after
such record date, unless the relevant amendment, supplement or waiver to which
such consent relates has become effective, in which event such Persons who were
Holders at such record date shall no longer be entitled to revoke any consent
previously given and such consent shall continue to be valid and effective.
After an amendment, supplement or waiver becomes effective, it shall form
a part of this Indenture for all purposes and bind every Securityholder, unless
it makes a change described in any of clauses (i) through (viii) of Section
9.02. In that case, the amendment, supplement or waiver shall form a part of
this Indenture for all purposes and bind each Holder of a Security who has
consented to it and every subsequent Holder of a Security or portion of a
Security that evidences the same debt as the consenting Holder's Security.
<PAGE>
SECTION 9.05. Notation on or Exchange of Securities.
If an amendment, supplement or waiver changes the terms of a Security,
the Trustee may require the Holder of the Security to deliver it to the Trustee.
The Trustee may place an appropriate notation on the Security about the changed
terms and return it to the Holder. Alternatively, if the Company or the Trustee
so determines, the Company in exchange for the Security shall issue and the
Trustee shall authenticate a new Security that reflects the changed terms.
Failure to make the appropriate notation or issue a new Security shall not
affect the validity and effect of such amendment, supplement or waiver.
SECTION 9.06. Trustee To Sign Amendments, etc.
The Trustee shall be entitled to receive, and shall be fully protected in
relying upon, an Opinion of Counsel stating that the execution of any amendment,
supplement or waiver authorized pursuant to this Article Nine is authorized or
permitted by this Indenture and that such amendment, supplement or waiver,
constitutes the legal, valid and binding obligation of the Company, enforceable
in accordance with its terms (subject to customary exceptions). The Trustee
may, but shall not be obligated to, execute any such amendment, supplement or
waiver which affects the Trustee's own rights, duties or immunities under this
Indenture or otherwise. In signing any amendment, supplement or waiver, the
Trustee shall be entitled to receive an indemnity satisfactory to it in its sole
discretion.
ARTICLE TEN
COLLATERAL AND SECURITY
SECTION 10.01. Collateral and Security Documents.
(a) In order to secure the due and punctual payment of the principal of
and interest on the Securities, the Senior Secured Notes and, under certain
circumstances, Permitted Replacement Financing when and as the same shall be due
and payable, whether on an Interest Payment Date, at maturity, by acceleration,
purchase, repurchase, redemption or otherwise, and interest on the overdue
principal of and interest (to the extent permitted by law), if any, on the
Securities, the Senior Secured Notes and, under certain circumstances, Permitted
Replacement Financing and the performance of all other obligations of the
Company and the Guarantors to the Holders or the Trustee under this Indenture
and the Securities, the holders of the Senior Secured Notes or the Note Trustee
under the Note Indenture and the Senior Secured Notes or, under certain
circumstances, the
<PAGE>
Permitted Additional Lenders under the documents governing the Permitted
Replacement Financing, the Company, Acme Steel, Acme Packaging, the Collateral
Agent, the Trustee and the Note Trustee have simultaneously with the execution
of this Indenture entered into the Collateral Agency Agreement and the
Collateral Agent, the Company, Acme Steel and/or Acme Packaging have entered
into the other Security Documents to which they are a party pursuant to which
the Company, Acme Steel and Acme Packaging have granted to the Collateral Agent
for the benefit of the Secured Parties a first priority Lien on and security
interest in the Collateral. The Trustee and the Company hereby agree that the
Collateral Agent holds the Collateral in trust for the benefit of the Secured
Parties pursuant to the terms of the Security Documents.
(b) The Trustee is authorized and directed to enter into the Collateral
Agency Agreement and the Collateral Agent is authorized and directed to enter
into the Security Documents. In the event that pursuant to clause (xi)(b) of
the definition of "Permitted Liens" the Company shall elect to grant additional
Liens on assets that comprise Collateral to secure Permitted Replacement
Financing, the Trustee and the Collateral Agent are authorized and directed to
execute and deliver a supplement to the Collateral Agency Agreement as
contemplated therein. In addition, in the event of any Permitted Bank
Refinancing (as defined in the Intercreditor Agreement) the Collateral Agent is
authorized to execute and deliver a supplement to the Intercreditor Agreement as
contemplated therein. Each Securityholder, 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 10.02. Opinions of Counsel; TIA Requirements.
(a) Promptly after the execution and delivery of this Indenture, the
Company shall deliver the opinion(s) required by Section 3.14(b) of the TIA and
Section 5.8(b) of the Collateral Agency Agreement to the Trustee and the
Collateral Agent. In addition, the Company shall furnish to the Collateral
Agent and the Trustee on in each year, beginning with ,
1995, 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, continuation statements and other documents as is
necessary to maintain the Lien of the Security Documents and reciting with
respect to such Liens on 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
<PAGE>
laws as in effect on the date of such Opinion of Counsel, all financing
statements, continuation statements and other documents have been executed and
filed that are necessary as of such date and during the succeeding 24 months
fully to maintain the security interest of the Collateral Agent, the
Securityholders 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.
(b) The release of any Collateral from the terms of the Security
Documents shall not be deemed to impair the security under this Indenture in
contravention of the provisions hereof if and to the extent the Collateral is
released pursuant to the Security Documents. To the extent applicable, the
Company shall cause TIA Section 314(d) 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 TIA Section 314(d) may be
made by an Officer of the Company, except in cases where TIA Section 314(d)
requires that such certificate or opinion be made by an independent Person,
which Person shall be an independent engineer, appraiser or other expert
selected or approved by the Trustee in the exercise of reasonable care.
SECTION 10.03. Disposition of Collateral Without Release.
So long as no Default or Event of Default shall have occurred and be
continuing and subject to the requirements of Section 314 of the TIA, the
Company or any subsidiary may, without any release or consent by the Collateral
Agent or the Trustee, sell or otherwise dispose of any machinery, equipment,
furniture, apparatus, tools or implements or other similar property which is
subject to the Lien of the Security Documents, which (i) in any single
transaction has a fair market value of $25,000 or less or (ii) shall have become
worn out, obsolete or otherwise in need of replacement or repair; provided that,
in the case of this clause (ii) such sale or other disposition is in conjunction
with a substantially concurrent transaction whereby additional personal property
is made subject to the Lien of the Security Documents and the Property so sold
pursuant to (i) and (ii) above shall be conclusively free and clear of the Lien
of the Security Documents without further action by the Collateral Agent.
<PAGE>
SECTION 10.04. Authorization of Actions To Be
Taken by the Collateral Agent
Under the Security Documents.
Subject to the provisions of the Security Documents, (a) the Collateral
Agent may, in its sole discretion and without the consent of the
Securityholders, take all actions it deems necessary or appropriate in order to
(i) enforce any of the terms of the Security Documents and (ii) collect and
receive any and all amounts payable in respect of the obligations of the Company
thereunder and hereunder and (b) the Collateral Agent 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 act that may be unlawful or in
violation of the Security Documents or this Indenture, and such suits and
proceedings as the Collateral Agent may deem expedient to preserve or protect
its interests and the interests of the Securityholders 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 Securityholders or of the Collateral Agent.)
SECTION 10.05. Collateral Agency Agreement.
Simultaneously with the issuance of the Securities, the Trustee, the Note
Trustee, the Collateral Agent, the Company, Acme Steel and Acme Packaging will
enter into the Collateral Agency Agreement. The Collateral Agency Agreement
will provide the terms under which the Collateral Agent will hold the Collateral
as security for, among other things, the Company's and the Guarantors'
obligations on the Securities and under this Indenture. It will provide
generally that decisions in respect of administering the Collateral and
releasing portions of the Collateral in circumstances permitted by the
Indenture, the Note Indenture and the Security Documents may be made by the
Collateral Agent without the further consent of the Holders. It will also
provide that decisions in respect of releasing portions of the Collateral in
circumstances not permitted in the Indenture, Note Indenture or the Security
Documents and foreclosing on or otherwise pursuing remedies with respect to such
Collateral generally may be made by the holders of not less than a majority in
aggregate principal amount of the Securities and the Senior Secured Notes voting
separately. If an Event of Default occurs under this Indenture the Trustee will
notify the Note Trustee simultaneously with any notifications to the Company
<PAGE>
or the holders of the Senior Secured Notes. In the event a declaration of
acceleration of the Securities occurs as a result thereof, the Trustee on behalf
of the Holders, in addition to any rights or remedies available to it under this
Indenture may, subject to the provisions of the Collateral Agency Agreement,
cause the Collateral Agent to take such action as the Trustee deems advisable to
protect its rights in the Collateral. The proceeds received by the Collateral
Agent from any foreclosure will be applied by the Collateral Agent first to pay
the expenses of such foreclosure and fees and other amounts then payable to the
Collateral Agent and the Trustees under the Indenture, the Note Indenture and
the Collateral Agency Agreement, and thereafter to pay, pro rata, the principal
of, premium, if any, and interest on the Securities and the Senior Secured Notes
or any Permitted Replacement Financing pursuant to the terms of the Collateral
Agency Agreement.
ARTICLE ELEVEN
SENIOR GUARANTEE OF SECURITIES
SECTION 11.01. Unconditional Guarantee.
Each Guarantor hereby unconditionally, jointly and severally, guarantees
(such guarantee to be referred to herein as the "Guarantee") to each Holder of a
Security authenticated and delivered by the Trustee and to the Trustee and the
Collateral Agent and their successors and assigns that: (i) the principal of
and interest on the Securities will be promptly paid in full when due, subject
to any applicable grace period, whether at maturity, by acceleration or
otherwise, and interest on the overdue principal, if any, and interest on any
interest, to the extent lawful, of the Securities and all other obligations of
the Company to the Holders, the Trustee or the Collateral Agent hereunder, under
the Indenture or the Security Documents will be promptly paid in full or
performed, all in accordance with the terms hereof and thereof; and (ii) in case
of any extension of time of payment or renewal of any Securities or of any such
other obligations, the same will be promptly paid in full when due or performed
in accordance with the terms of the extension or renewal, subject to any
applicable grace period, whether at stated maturity, by acceleration or
otherwise, subject, however, in the case of clauses (i) and (ii) above, to the
limitations set forth in Section 11.04. Each Guarantor hereby agrees that its
obligations hereunder shall be unconditional, irrespective of the validity,
regularity or enforceability of the Securities or this Indenture, the absence of
any action to enforce the same, any waiver or consent by any Holder of the
Securities with respect to any provisions hereof or thereof, the recovery of any
judgment
<PAGE>
against the Company, any action to enforce the same or any other circumstance
which might otherwise constitute a legal or equitable discharge or defense of a
guarantor. Each Guarantor hereby waives diligence, presentment, demand of
payment, filing of claims with a court in the event of insolvency or bankruptcy
of the Company, any right to require a proceeding first against the Company,
protest, notice and all demands whatsoever and covenants that this Guarantee
will not be discharged except by complete performance of the obligations
contained in the Securities, this Indenture and this Guarantee. If any
Securityholder or the Trustee is required by any court or otherwise to return to
the Company, any Guarantor, or any custodian, trustee, liquidator or other
similar official acting in relation to the Company or any Guarantor, any amount
paid by the Company or any Guarantor to the Trustee or such Securityholder,
this Guarantee, to the extent theretofore discharged, shall be reinstated in
full force and effect. Each Guarantor further agrees that, as between each
Guarantor, on the one hand, and the Holders and the Trustee, on the other hand,
(x) the maturity of the obligations guaranteed hereby may be accelerated as
provided in Article Six for the purpose of this Guarantee, notwithstanding any
stay, injunction or other prohibition preventing such acceleration in respect of
the obligations guaranteed hereby, and (y) in the event of any acceleration of
such obligations as provided in Article Six, such obligations (whether or not
due and payable) shall forthwith become due and payable by each Guarantor for
the purpose of this Guarantee.
SECTION 11.02. Severability.
In case any provision of this Guarantee 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 11.03. Release of a Subsidiary Guarantor.
Upon the sale or disposition (by merger, sale of stock of such Guarantor
or the parent of such Guarantor or otherwise) of a Guarantor (or all or
substantially all its assets) to an entity which is not either the Company or
another Guarantor and which sale or disposition is otherwise in compliance with
the terms of this Indenture (including, but not limited to, Section 4.06
hereof), such Guarantor shall be deemed released from all obligations under this
Article Eleven without any further action required on the part of the Trustee or
any Holder. In the event such Guarantor is Acme Packaging, it shall be released
from its obligations under the Stock Purchase Agreement to which it is a
<PAGE>
party following execution of an amendment to such Stock Purchase Agreement in
accordance with its terms. In addition, if the stock of such Guarantor has been
pledged pursuant to a Stock Pledge Agreement, such stock shall be released by
the Collateral Agent from the Lien of such Stock Pledge Agreement pursuant to
the terms thereof. The Trustee and the Collateral Agent shall, at the sole cost
and expense of the Company, deliver an appropriate instrument evidencing such
release upon receipt of a request by the Company accompanied by an Officers'
Certificate certifying as to the compliance with this Section 11.03. Any
Guarantor not so released remains liable for the full amount of principal of
and interest on the Securities as provided in this Article Eleven.
SECTION 11.04. Limitation of Guarantor's Liability.
Each Guarantor, and by its acceptance hereof each Holder, hereby confirms
that it is the intention of all such parties that the guarantee by such
Guarantor pursuant to its Guarantee not constitute a fraudulent transfer or
conveyance for purposes of the Bankruptcy Law, the Uniform Fraudulent Conveyance
Act, the Uniform Fraudulent Transfer Act or any similar Federal or state law.
To effectuate the foregoing intention, the Holders and such Guarantor hereby
irrevocably agree that the obligations of such Guarantor under the Guarantee
shall be limited to the maximum amount as will, after giving effect to all other
contingent and fixed liabilities of such Guarantor and after giving effect to
any collections from or payments made by or on behalf of any other Guarantor in
respect of the obligations of such other Guarantor under its Guarantee or
pursuant to Section 11.06, result in the obligations of such Guarantor under the
Guarantee not constituting such fraudulent transfer or conveyance.
SECTION 11.05. Subsidiary Guarantors May Consolidate,
etc., on Certain Terms.
(a) Nothing contained in this Indenture or in any of the Securities shall
prevent any consolidation or merger of a Guarantor with or into the Company or
another Guarantor or shall prevent any sale or conveyance of the property of a
Guarantor as an entirety or substantially as an entirety to the Company or
another Guarantor, which consolidation, merger, sale or conveyance is otherwise
in accordance with the terms of this Indenture and the Security Documents. Upon
any such consolidation, merger, sale or conveyance, the Guarantee given by such
Guarantor shall no longer have any force or effect.
<PAGE>
(b) Other than as set forth in Sections 11.03 and 11.05(a) above, each
Guarantor will not, and the Company will not cause or permit any Guarantor to,
consolidate with or merge with or into any Person unless: (i) the entity formed
by or surviving any such consolidation or merger (if other than the Guarantor),
or to which sale, lease, conveyance or other disposition shall have been made,
is a corporation organized and existing under the laws of the United States, any
state thereof or the District of Columbia; (ii) such entity assumes by
supplemental indenture all of the obligations of the Guarantor on the Guarantee
and under this Indenture and the Security Documents; (iii) immediately after
giving effect to such transaction, no Default or Event of Default shall have
occurred and be continuing; (iv) immediately after giving effect to such
transaction and the use of any net proceeds therefrom on a pro forma basis, the
Consolidated Tangible Net Worth of the Company and its Subsidiaries would be at
least equal to the Consolidated Tangible Net Worth of the Company and its
Subsidiaries immediately prior to such transaction; and (v) immediately after
giving effect to such transaction and the use of any net proceeds therefrom on a
pro forma basis, the Company could incur at least $1.00 of Indebtedness (other
than Permitted Indebtedness) pursuant to the first paragraph of Section 4.04
hereof.
SECTION 11.06. Contribution.
In order to provide for just and equitable contribution among the
Guarantors, the Guarantors agree, inter se, that in the event any payment or
distribution is made by any Guarantor (a "Funding Guarantor") under the
Guarantee, such Funding Guarantor shall be entitled to a contribution from all
other Guarantors in a pro rata amount, based on the net assets of each Guarantor
(including the Funding Guarantor), determined in accordance with GAAP, subject
to Section 11.04, for all payments, damages and expenses incurred by that
Funding Guarantor in discharging the Company's obligations with respect to the
Securities or any other Guarantor's obligations with respect to the Guarantee.
SECTION 11.07. Waiver of Subrogation.
Each Guarantor hereby irrevocably waives any claim or other rights which
it may now or hereafter acquire against the Company that arise from the
existence, payment, performance or enforcement of such Guarantor's obligations
under the Guarantee, this Indenture and the Security Documents, including,
without limitation, any right of subrogation, reimbursement, exoneration or
indemnification, and any right to participate in any claim or remedy of any
Holder of Securities against the Company, whether or not such claim, remedy or
right arises in equity, or under
<PAGE>
contract, statute or common law, including, without limitation, the right to
take or receive from the Company, directly or indirectly, in cash or other
property or by set-off or in any other manner, payment or security on account of
such claim or other rights. If any amount shall be paid to any Guarantor in
violation of the preceding sentence and the Securities shall not have been paid
in full, such amount shall be deemed to have been paid to such Guarantor for the
benefit of, and held in trust for the benefit of, the Holders of the Securities,
and shall forthwith be paid to the Trustee for the benefit of such Holders to be
credited and applied upon the Securities, whether matured or unmatured, in
accordance with the terms of this Indenture. Each Guarantor acknowledges that
it will receive direct and indirect benefits from the financing arrangements
contemplated by this Indenture and that the waiver set forth in this Section
11.07 is knowingly made in contemplation of such benefits.
SECTION 11.08. Execution of Guarantee.
To evidence their guarantee to the Securityholder specified in Section
11.01, the Guarantors hereby agree to execute the Guarantee in substantially the
form of Exhibit A recited to be endorsed on each Security ordered to be
authenticated and delivered by the Trustee. Each Guarantor hereby agrees that
its Guarantee set forth in Section 11.01 shall remain in full force and effect
notwithstanding any failure to endorse on each Security a notation of such
Guarantee. Each such Guarantee shall be signed on behalf of each Guarantor by
an Officer prior to the authentication of the Security on which it is endorsed,
and the delivery of such Security by the Trustee, after the authentication
thereof hereunder, shall constitute due delivery of such Guarantee on behalf of
such Guarantor. Such signature upon the Guarantee may be by manual or facsimile
signature of such Officer and may be imprinted or otherwise reproduced on the
Guarantee, and in case such Officer who shall have signed the Guarantee shall
cease to be such Officer before the Security on which such Guarantee is endorsed
shall have been authenticated and delivered by the Trustee or disposed of by the
Company, such Security nevertheless may be authenticated and delivered or
disposed of as though the person who signed the Guarantee had not ceased to be
such Officer of the Guarantor.
<PAGE>
ARTICLE TWELVE
MISCELLANEOUS
SECTION 12.01. Trust Indenture Act Controls.
If any provision of this Indenture limits, qualifies, or conflicts with
another provision which is required to be included in this Indenture by the
TIA, the required provision shall control.
SECTION 12.02. Notices.
Any notice or communication shall be sufficiently given if in writing and
delivered in person, by facsimile and confirmed by overnight courier, or mailed
by first-class mail addressed as follows:
if to the Company or any of the Guarantors:
Acme Metals Incorporated
13500 South Perry Avenue
Riverdale, Illinois 60627
Attention: Corporate Secretary and Treasurer
Facsimile: 708-841-6010
Telephone: 708-849-2500
with copies to:
Coffield Ungaretti & Harris
3500 Three First National Plaza
Chicago, Illinois 60602
Attention: Alton B. Harris
Facsimile: 312-977-4405
Telephone: 312-977-4400
if to the Trustee:
Shawmut Bank Connecticut, National
Association
777 Main Street
Hartford, CT 06115
Attention: Corporate Trust Administration
Facsimile: 203-986-7920
Telephone: 203-986-4424
The Company or the Trustee by notice to the other may designate
additional or different addresses for subsequent notices or communications.
<PAGE>
Any notice or communication mailed, first class, postage prepaid, to a
Securityholder, including any notice delivered in connection with TIA (S)
310(b), TIA (S) 313(c), TIA (S) 314(a) and TIA (S) 315(b), shall be mailed to
him or her at his or her address as set forth on the registration books of the
Registrar and shall be sufficiently given to him or her if so mailed within the
time prescribed.
Any notice or other communication to the Company or to the Trustee shall
be deemed given only when such notice or other communication is actually
received by the Company or the Trustee, as the case may be. Any notice or other
communication mailed to a Holder in the manner prescribed above shall be
conclusively deemed to have been received by such Holder, whether or not such
Holder actually receives such notice or other communication. Failure to mail a
notice or communication to a Securityholder or any defect in it shall not affect
its sufficiency with respect to other Securityholders.
In the event that, by reason of the suspension of or irregularities in
regular mail service or by reason of any other cause, it shall be impractical to
mail notice of any event to Holders when such notice is required to be given
pursuant to any provision of this Indenture, then any manner of giving such
notice as shall be satisfactory to the Trustee shall be deemed sufficient giving
of such notice for every purpose hereunder.
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 latest date for the giving of such notice, and such waiver
shall be deemed to constitute 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.
SECTION 12.03. Communications by Holders with Other Holders.
Securityholders may communicate pursuant to TIA (S) 312(b) with other
Securityholders with respect to their rights under this Indenture or the
Securities. The Company, the Trustee, the Registrar and any other person shall
have the protection of TIA (S) 312(c).
<PAGE>
SECTION 12.04. Certificate and Opinion as to Conditions
Precedent.
Upon any request or application by the Company to the Trustee to take or
refrain from taking any action under this Indenture, the Company shall furnish
to the Trustee at the request of the Trustee:
(1) an Officers' Certificate in form and substance satisfactory to the
Trustee stating that, in the opinion of the signers, all conditions precedent,
if any, provided for in this Indenture relating to the proposed action or
inaction have been complied with; and
(2) an Opinion of Counsel in form and substance satisfactory to the
Trustee stating that, in the opinion of such counsel, all such conditions
precedent, if any, provided for in this Indenture relating to the proposed
action or inaction have been complied with.
SECTION 12.05. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a condition
or covenant provided for in this Indenture (other than pursuant to Section 4.12)
shall include:
(1) a statement that the person making such certificate or opinion has
read such covenant or condition;
(2) 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;
(3) a statement that, in the opinion of such person, he or she has made
such examination or investigation as is necessary to enable him or her to
express an informed opinion as to whether or not such covenant or condition
has been complied with; and
(4) a statement as to whether or not, in the opinion of such person, such
condition or covenant has been complied with; provided that with respect to
matters of fact an Opinion of Counsel may rely on an Officers' Certificate or
certificates of public officials.
<PAGE>
SECTION 12.06. Rules by Trustee, Paying Agent, Registrar.
The Trustee may make reasonable rules for action by or at a meeting of
Securityholders. The Paying Agent or Registrar may make reasonable rules for
its functions.
SECTION 12.07. Governing Law.
The laws of the State of New York shall govern this Indenture and the
Securities without regard to principles of conflicts of law.
SECTION 12.08. No Recourse Against Others.
No recourse under or upon any obligation, covenant or agreement of this
Indenture, or of any Security, or for any claim based thereon or otherwise in
respect thereof, shall be had against any incorporator, stockholder, officer,
director or employee, as such, past, present or future, of the Company, either
directly or through the Company, whether by virtue of any constitution, statute
or rule of law, or by the enforcement of any assessment or penalty or otherwise;
it being expressly understood that this Indenture and the Securities are solely
corporate obligations of the Company, and that no such personal liability
whatever shall attach to, or is or shall be incurred by, the incorporators,
stockholders, officers, directors or employees, as such, of the Company, or any
of them, because of the creation of the indebtedness hereby authorized, or under
or by reason of the obligations, covenants or agreements contained in this
Indenture or in the Securities or implied therefrom; and each Securityholder by
its acceptance of a Security, as consideration for and as a condition of the
execution of this Indenture and the issue of the Securities, hereby expressly
waives and releases any and all such personal liability (either at common law or
in equity or by constitution or statute) of, and any and all such rights and
claims against, every such incorporator, stockholder, officer, director or
employee, as such, because of the creation of the indebtedness hereby
authorized, or under or by reason of the obligations, covenants or agreements
contained in this Indenture or in the Securities or implied therefrom.
SECTION 12.09. Successors.
All agreements of the Company in this Indenture and the Securities shall
bind its successor. All agreements of the Trustee in this Indenture shall bind
its successor.
<PAGE>
SECTION 12.10. Counterpart Originals.
The parties may sign any number of copies of this Indenture. Each signed
copy shall be an original, but all of them together represent the same
agreement.
SECTION 12.11. Severability.
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,
and a Holder shall have no claim therefor against any party hereto.
SECTION 12.12. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture, loan or
debt agreement of the Company or a Subsidiary of the Company. Any such
indenture, loan or debt agreement may not be used to interpret this Indenture.
SECTION 12.13. Legal Holidays.
In any case where any Interest Payment Date, redemption date, Maturity
Date, Stated Maturity, Unapplied Proceeds Offer Payment Date or Repurchase Date
shall not be a Business Day, then (notwithstanding any other provision of this
Indenture or the Securities) payment of principal of and premium, if any, and
interest on the Securities 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, redemption date, Maturity Date, Stated Maturity,
Unapplied Proceeds Offer Payment Date or Repurchase Date; provided that if such
payment is so made, no interest shall accrue for the period from and after such
Interest Payment Date, redemption date, Maturity Date, Stated Maturity,
Unapplied Proceeds Offer Payment Date or Repurchase Date, as the case may be.
<PAGE>
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, and their respective corporate seals to be hereunto affixed and
attested, all as of the date first written above.
ACME METALS INCORPORATED
By:
Name:
Title:
Attest:_________________
By:
Name:
Title:
GUARANTORS:
ACME PACKAGING CORPORATION
ACME STEEL COMPANY
ACME STEEL COMPANY INTERNATIONAL,
INC.
ALABAMA METALLURGICAL CORPORATION
ALPHA TUBE CORPORATION
ALTA SLITTING CORPORATION
UNIVERSAL TOOL AND STAMPING COMPANY,
INC.
By:
Name:
(for each of the above-listed
Guarantors)
Attest:_________________
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION
By:
Name:
Title:
Attest:_________________
<PAGE>
EXHIBIT A
ACME METALS INCORPORATED
No. $
% SENIOR SECURED DISCOUNT NOTE DUE 2004
Acme Metals Incorporated promises to pay to
or registered assigns the principal sum of
Dollars on the Maturity Date of , 2004.
Interest Payment Dates: and , commencing ,
1998
Record Dates: and
IN WITNESS WHEREOF, ACME METALS INCORPORATED has caused this instrument
to be executed in its corporate name by a facsimile signature of its President
and its Secretary and has caused the facsimile of its corporate seal to be
affixed hereunto or imprinted hereon.
Dated: ACME METALS INCORPORATED
By______________________________
Title:
By______________________________
Title:
Certificate of Authentication:
This is one of the % Senior Secured Discount Notes due 2004 referred to
in the within-mentioned Indenture.
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION
By____________________ Date:
Authorized Signature
<PAGE>
(REVERSE OF SECURITY)
ACME METALS INCORPORATED
% Senior Secured Discount Note due 2004
1. Interest.
Acme Metals Incorporated, a Delaware corporation (the "Company"),
promises to pay interest at the rate of % per annum on the principal amount of
this Security semiannually commencing on , 1998, until the principal
hereof is paid or made available for payment. Interest on the Securities will
accrue from and including the most recent date to which interest has been paid
or, if no interest has been paid, from and including , 1997, through
but excluding the date on which interest is paid. If an Interest Payment Date
falls on a day that is not a Business Day, the interest payment to be made on
such Interest Payment Date will be made on the next succeeding Business Day with
the same force and effect as if made on such Interest Payment Date, and no
additional interest will accrue as a result of such delayed payment. Interest
will be computed on the basis of a 360-day year of twelve 30-day months.
2. Method of Payment.
The interest payable on the Securities, and punctually paid or duly
provided for, on any Interest Payment Date will, as provided in the Indenture,
be paid to the person in whose name this Security is registered at the close of
business on the regular record date, which shall be the or
(whether or not a Business Day) next preceding such Interest Payment Date. Any
such interest not so punctually paid or duly provided for, and any interest
payable on such defaulted interest (to the extent lawful), will forthwith cease
to be payable to the Holder on such regular record date and shall be paid to the
person in whose name this Security is registered at the close of business on a
special record date for the payment of such defaulted interest to be fixed by
the Company, notice of which shall be given to Holders not less than 15 days
prior to such special record date. Payment of the principal of and interest on
this Security will be made at the agency of the Company maintained for that
purpose in New York, New York and at any other office or agency maintained by
the Company for such purpose, in such coin or currency of the United States of
America as at the time of payment is legal tender for payment of public and
private debts; provided that at the option of the Company payment of interest
may be made by check mailed to the address of
<PAGE>
the person entitled thereto as such address shall appear in the Security
register.
3. Paying Agent and Registrar.
Initially, Shawmut Bank Connecticut, National Association (the
"Trustee"), will act as Paying Agent and Registrar. The Company may change any
Paying Agent, Registrar or co-Registrar without notice to the Holders of
Securities. The Company or any of its Subsidiaries may act as Registrar, co-
Registrar or, except in certain circumstances specified in the Indenture, Paying
Agent.
4. Indenture.
This Security is one of a duly authorized issue of Securities of the
Company, designated as its % Senior Secured Discount Notes due 2004 (the
"Securities"), limited in aggregate principal amount to $ (except for
Securities issued in substitution for destroyed, lost or stolen Securities)
issuable under an indenture dated as of , 1994 (the "Indenture"),
between the Company and the Trustee. The terms of the Securities include those
stated in the Indenture and those made part of the Indenture by the Trust
Indenture Act of 1939 (the "Act") (15 U.S. Code (S)(S) 77aaa-77bbbb) as in
effect on the date of the Indenture and the date the Indenture is qualified
under the Act. The Securities are subject to all such terms, and Holders of
Securities are referred to the Indenture and the Act for a statement of them.
Payment on each Security is guaranteed on a senior basis, jointly and severally,
by the Guarantors pursuant to Article Thirteen of the Indenture.
Capitalized terms contained in this Security to the extent not defined
herein shall have the meanings assigned to them in the Indenture.
5. Optional Redemption.
The Securities may not be redeemed prior to , 1998. On or
after , 1999, the Company may, at its option, redeem the Securities in
whole or in part, from time to time, at the following redemption prices
(expressed in percentages of the principal amount thereof), in each case
together with accrued interest, if any, to the date of redemption.
<PAGE>
If redeemed during the twelve-month period beginning ,
YEAR PERCENTAGE
6. Repurchase upon Change of Control.
By the date specified for repurchase, which shall be within 60 days after
giving notice of a Change of Control, each Holder shall have the right, at its
option, to require the Company to purchase all or any part of such Holder's
Securities at 101% of the Accreted Value thereof at the purchase date as
purchased prior to , 1997 and of the principal amount thereof plus
accrued interest to the purchase date if purchased thereafter.
7. Notice of Redemption.
Notice of redemption will be mailed by first class mail at least 30 days
but not more than 60 days before the redemption date to each Holder of
Securities to be redeemed at his or her registered address. Securities in
denominations larger than $1,000 may be redeemed in part. On and after the
redemption date, interest ceases to accrue on those Securities or portion of
them called for redemption.
8. Security Documents.
In order to secure the due and punctual payment of the principal of and
interest on the Securities and all other amounts payable by the Company under
the Indenture and the Securities when and as the same will be due and payable,
whether at maturity, by acceleration or otherwise, according to the terms of the
Securities and the Indenture, the Company has granted security interests in and
Liens on the Collateral owned by it to the Collateral Agent for the benefit of
the Holders of Securities pursuant to the Indenture and the Security Documents.
The Securities will be secured by Liens on and security interests in the
Collateral that are subject only to certain permitted encumbrances. The
Collateral will also secure the Company's obligations under the Senior Secured
Notes and the Note Indenture and, in certain circumstances, amounts under
Permitted Replacement Financing. Proceeds from the Collateral will be shared
among the parties secured thereby pursuant to the terms of the Collateral Agency
Agreement.
<PAGE>
The Trustee and each Holder acknowledge that a release of any of the
Collateral or any Lien strictly in accordance with the terms and provisions of
the Security Documents and the terms and provisions of the Indenture will not be
deemed for any purpose to be an impairment of the security under the Indenture.
9. Denominations; Transfer; Exchange.
The Securities are in registered form without coupons in denominations of
$1,000 and integral multiples of $1,000. A Holder may transfer or exchange
Securities in accordance with the Indenture. The Registrar may require a
Holder, among other things, to furnish appropriate endorsements and transfer
documents and to pay any taxes and fees required by law or permitted by the
Indenture. The Registrar need not transfer or exchange any Securities selected
for redemption.
10. Persons Deemed Owners.
The registered Holder of a Security may be treated as the owner of it for
all purposes.
11. Unclaimed Funds.
If funds for the payment of principal or interest remain unclaimed for
two years, the Trustee or Paying Agent will repay the funds to the Company at
its request. After such repayment Holders of Securities entitled to such funds
must look to the Company for payment unless an abandoned property law designates
another person.
12. Discharge Prior to Redemption or Maturity.
The Indenture will be discharged and cancelled except for certain
Sections thereof, subject to the terms of the Indenture, upon the payment of all
the Securities or upon the irrevocable deposit with the Trustee of funds or
United States Government Obligations sufficient for such payment or redemption.
13. Defeasance and Covenant Defeasance.
The Company may be discharged from its obligations under the Indenture,
the Securities and the Security Documents, except for certain provisions thereof
("defeasance"), and may be discharged from its obligations to comply with
certain covenants contained in the Indenture, the Securities and the Security
Documents ("covenant defeasance"), in each case upon satisfaction of certain
conditions specified in the Indenture.
<PAGE>
14. Amendment; Supplement; Waiver.
Subject to certain exceptions, the Indenture, the Security Documents or
the Securities may be amended or supplemented with the consent of the Holders of
at least a majority in principal amount of the outstanding Securities, and any
past default or compliance with any provision may be waived with the consent of
the Holders of at least a majority in principal amount of the outstanding
Securities. Without the consent of any Holder, the Company and the Trustee may
amend or supplement the Indenture, the Security Documents or the Securities to
cure any ambiguity, defect or inconsistency, to give effect to specified
transactions or permitted releases, or to make any change that does not
materially and adversely affect the rights of any Holder of Securities.
15. Restrictive Covenants.
The Securities are secured obligations of the Company limited to the
aggregate principal amount of $ . The Indenture restricts the ability
of the Company or any of its Subsidiaries to permit any Liens to be imposed on
their assets other than certain Permitted Liens, restricts the ability of the
Company or any of its Subsidiaries to make certain payments, limits the
Indebtedness which the Company and its Subsidiaries may incur and limits the
terms on which the Company may engage in Asset Sales. The Company is also
obligated under certain circumstances to make an offer to purchase Securities
with the net cash proceeds of certain Asset Sales. The Company must report
annually to the Trustee on compliance with certain covenants in the Indenture.
16. Successor Corporation.
Pursuant to the Indenture, the ability of the Company to consolidate
with, merge with or into or transfer its assets to another person is conditioned
upon certain requirements, including certain financial requirements applicable
to the surviving Person.
17. Defaults and Remedies.
An Event of Default consists of: a default for 30 days in payment of
interest on the Securities or a default in payment of principal of or premium on
the Securities when due, whether at maturity, upon acceleration, redemption or
otherwise; a cessation of any Guarantee to be in full force and effect or a
declaration of any Guarantee to be null and void and unenforceable or a finding
of any Guarantee to be invalid or a denial by any
<PAGE>
Guarantor of its liability under its Guarantee; a failure by the Company to
comply with any other covenant in the Indenture or in any of the Security
Documents for 60 days after notice from the Trustee or the holders of 25% in
principal amount of the outstanding Securities (except in the case of a default
with respect to provisions relating to the repurchase of Securities upon a
Change of Control or the merger, consolidation or sale of all or substantially
all of the assets of the Company, which will constitute Events of Default with
notice but without passage of time); failure of the Company or any of its
Subsidiaries to make any payment when due (after giving effect to any applicable
grace period) under the Senior Secured Notes or any other senior Indebtedness in
excess of $5 million; failure of the Company or any of its Subsidiaries to
perform any term, covenant, condition or provision of the Senior Secured Notes
or any other Indebtedness in excess of $5 million individually or $10 million in
the aggregate, which failure results in the acceleration of the maturity of such
Indebtedness; a final judgment or judgments for the payment of money not fully
covered by insurance, which judgments exceed $5 million individually or $10
million in the aggregate, is entered against the Company or any of its
Subsidiaries and is not satisfied, stayed, annulled or rescinded within 60 days
of being entered; a party, after an event of default under any Indebtedness
secured by Collateral, commences foreclosure proceedings, or exercises rights to
ownership in lieu thereof, on any portion of the Collateral and certain events
of bankruptcy, insolvency or reorganization of the Company or any of its
Significant Subsidiaries. If an Event of Default occurs and is continuing, the
Trustee or the Holders of at least 25% in principal amount of the outstanding
Securities may declare all the outstanding Securities to be due and payable
immediately. Holders may not enforce the Indenture or the Securities except as
provided in the Indenture. The Trustee may require indemnity satisfactory to it
before it enforces the Indenture or the Securities. Subject to certain
limitations, Holders of a majority in principal amount of the outstanding
Securities may direct the Trustee in its exercise of any trust or power. The
Trustee may withhold from Holders notice of a continuing Default (except a
Default in payment of principal or interest) if it determines that withholding
notice is in their interests. The Company is required to file periodic reports
with the Trustee as to the absence of Default and to notify the Trustee promptly
after it becomes aware of any Default.
18. Trustee Dealings with Company.
The Trustee in its individual or any other capacity, may make loans to,
accept deposits from, and perform services for
<PAGE>
the Company or its Affiliates, and may otherwise deal with the Company or its
Affiliates, as if it were not Trustee.
19. 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 the Security Documents or for any claim based on,
in respect of or by reason of such obligations or their creation. Each Holder
of a Security by accepting a Security waives and releases all such liability.
The waiver and release are part of the consideration for the issue of the
Securities.
20. Authentication.
This Security shall not be valid until the Trustee signs the certificate
of authentication on the other side of this Security.
21. Indenture and Security Documents.
Each Securityholder, by accepting a Security, agrees to be bound to all
of the terms and provisions of the Indenture and the Security Documents, as the
same may be amended from time to time.
22. Abbreviations.
Customary abbreviations may be used in the name of Securityholder or an
assignee, such as TEN COM (= tenants in common), TEN ENT (= tenants by the
entireties), JT TEN (= joint tenants with right of survivorship and not as
tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors
Act).
23. 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 the Securities and has directed the Trustee to use CUSIP numbers in
notices of redemption as a convenience to Securityholders. No representation is
made as to the accuracy of such numbers either as printed on the Securities or
as contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
<PAGE>
The Company will furnish to any Holder of record of Securities upon
written request and without charge a copy of the Indenture.
<PAGE>
[FORM OF NOTATION OF NOTE RELATING TO GUARANTEE]
SENIOR GUARANTEE
The Guarantors (as defined in the Indenture referred to in the Security
upon which this notation is endorsed) have unconditionally guaranteed on a
senior basis (such guarantee by each Guarantor being referred to herein as the
"Guarantee") (i) the due and punctual payment of the principal of and interest
on the Securities, whether at maturity, by acceleration or otherwise, the due
and punctual payment of interest on the overdue principal and interest, if any,
on the Securities, to the extent lawful, and the due and punctual performance of
all other obligations of the Company to the Holders or the Trustee, all in
accordance with the terms set forth in Article Thirteen of the Indenture and
(ii) in the case of any extension of time of payment or renewal of any
Securities or any of such other obligations, that the same will be promptly paid
in full when due or performed in accordance with the terms of the extension or
renewal, whether at stated maturity, by acceleration or otherwise.
The Guarantee shall not be valid or obligatory for any purpose until the
certificate of authentication on the Securities upon which the Guarantee is
noted shall have been executed by the Trustee under the Indenture by the manual
signature of one of its authorized officers.
GUARANTORS:
ACME PACKAGING CORPORATION
ACME STEEL COMPANY
ACME STEEL COMPANY INTERNATIONAL,
INC.
ALABAMA METALLURGICAL CORPORATION
ALPHA TUBE CORPORATION
ALTA TUBE CORPORATION
ALTA SLITTING CORPORATION
UNIVERSAL TOOL AND STAMPING COMPANY,
INC.
By: ________________________
Name:
(for each of the above-listed Guarantors)
<PAGE>
ASSIGNMENT FORM
If you the Holder want to assign this Security, fill in the form below
and have your signature guaranteed:
I or we assign and transfer this Security to:
(Print or type name, address and zip code and
social security or tax ID number of assignee)
and irrevocably appoint ______________________________________, agent to
transfer this Security on the books of the Company. The agent may substitute
another to act for him.
Dated: __________________ Signed: ______________________
(Sign exactly as name
appears on the
other side of this
Security)
Signature Guarantee: ___________________________________________
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you the Holder want to elect to have this Security purchased by the Company,
check the box: [_]
If you want to elect to have only part of this Security purchased by the
Company, state the amount: $___________
Date: ____________ Your signature: _____________________
(Sign exactly as your
name appears on the
other side of this
Security)
Signature Guarantee: _________________________________________
<PAGE>
COLLATERAL AGENCY AGREEMENT
---------------------------
COLLATERAL AGENCY AGREEMENT ("Agreement"), dated as of ________, 1994,
by and among ACME METALS INCORPORATED, a Delaware corporation, having its
principal place of business at 13500 South Perry Avenue, Riverdale, Illinois
60627 (together with its successors and assigns, the "Company"), ACME STEEL
COMPANY, a Delaware corporation, having its principal place of business at 13500
South Perry Avenue, Riverdale, Illinois 60627 (together with its successors and
assigns, "Acme Steel"), ACME PACKAGING CORPORATION, a Delaware corporation,
having its principal place of business at 13500 South Perry Avenue, Riverdale,
Illinois 60627 (together with its successors and assigns, "Acme Packaging,"
together with the Company and Acme Steel, the "Obligors"), Shawmut Bank
Connecticut, National Association, a national banking association, having an
address at 777 Main Street, Hartford, Connecticut, 06115, as collateral agent
(in such capacity and together with its successors and assigns in such capacity,
the "Collateral Agent") and the Secured Parties (as hereinafter defined).
R E C I T A L S :
- - - - - - - -
A. Pursuant to that certain indenture (as amended, amended and
restated, supplemented or otherwise modified from time to time, the "Note
Indenture"), dated as of ________, 1994, by and among the Company, the
subsidiaries of the Company, as guarantors (the "Guarantors") and Shawmut Bank
Connecticut, National Association, as trustee (in such capacity and together
with its successors and assigns in such capacity, the "Note Trustee") for the
holders of the Senior Secured Notes (as hereinafter defined), the Company is
issuing its ___% senior secured notes due 2002 (as amended, amended and
restated, supplemented or otherwise modified from time to time, the "Senior
Secured Notes") in the aggregate principal amount of $175,000,000.
B. Pursuant to that certain indenture (as amended, amended and
restated, supplemented or otherwise modified from time to time, the "Discount
Note Indenture"; together with the Note Indenture, the "Indentures"), dated as
of ________, 1994, by and among the Company, the Guarantors and Shawmut Bank
Connecticut, National Association, as trustee (in such capacity and together
with its successors and assigns in such capacity, the "Discount Note Trustee";
together with the Note Trustee, the "Trustees") for the holders of the Senior
Secured Discount Notes (as hereinafter defined), the Company is issuing its __%
senior secured discount notes due 2004 (as amended, amended and restated,
supplemented or otherwise modified from time to time, the "Senior Secured
Discount
<PAGE>
-2-
Notes"; together with the Senior Secured Notes, the "Notes") in the aggregate
principal amount of $______.
C. To secure the payment and performance by the Company of its
obligations under the Debt Instruments (as hereinafter defined), it has executed
and delivered to the Collateral Agent, for the benefit of the Secured Parties,
(a) a certain company stock pledge agreement (as amended, amended and restated,
supplemented or otherwise modified from time to time, the "Company Stock
Pledge"), dated as of the date hereof, pursuant to which the Company granted to
the Collateral Agent, for the benefit of the Secured Parties, a first priority
lien on and security interest in the Pledged Collateral (as defined in the
Company Stock Pledge) and (b) a certain disbursement agreement (as amended,
amended and restated, supplemented or otherwise modified from time to time, the
"Disbursement Agreement"), dated as of the date hereof, pursuant to which the
Company granted to the Collateral Agent, for the benefit of the Secured Parties
(other than the Permitted Additional Lenders (as hereinafter defined), if any),
a first priority lien on and security interest in the Collateral (as defined in
the Disbursement Agreement).
D. To secure the payment and performance by Acme Steel of its
obligations under the Debt Instruments it has executed and delivered to the
Collateral Agent, for the benefit of the Secured Parties, (a) a certain mortgage
(as amended, amended and restated, supplemented or otherwise modified from time
to time, the "Mortgage"), dated as of the date hereof, pursuant to which Acme
Steel granted to the Collateral Agent, for the benefit of the Secured Parties, a
first priority mortgage lien on and security interest in the Mortgaged Property
(as defined in the Mortgage), (b) a certain security agreement (as amended,
amended and restated, supplemented or otherwise modified from time to time, the
"Security Agreement"), dated as of the date hereof, pursuant to which Acme Steel
granted to the Collateral Agent, for the benefit of the Secured Parties, a first
priority lien on and security interest in the Pledged Collateral (as defined in
the Security Agreement) and (c) a certain subsidiary stock pledge agreement (as
amended, amended and restated, supplemented or otherwise modified from time to
time, the "Subsidiary Stock Pledge"), dated as of the date hereof, pursuant to
which Acme Steel granted to the Collateral Agent, for the benefit of the Secured
Parties, a first priority lien on and security interest in the Pledged
Collateral (as defined in the Subsidiary Stock Pledge) purported to be owned or
held by it under the Subsidiary Stock Pledge.
E. To secure the payment and performance by Acme Packaging of its
obligations under the Debt Instruments it has
<PAGE>
-3-
executed and delivered to the Collateral Agent, for the benefit of the Secured
Parties, the Subsidiary Stock Pledge pursuant to which Acme Packaging granted to
the Collateral Agent, for the benefit of the Secured Parties, a first priority
lien on and security interest in the Pledged Collateral (as defined in the
Subsidiary Stock Pledge) purported to be owned or held by it under the
Subsidiary Stock Pledge.
F. Certain other parties which may from time to time become
additional lenders to the Obligors (each such lender, a "Permitted Additional
Lender" and collectively, the "Permitted Additional Lenders") may, in accordance
with the provisions of clause (xi) of the definition of "Permitted Liens" in
each Indenture as in effect on the date hereof, take a lien on and security
interest in the Shared Collateral (as hereinafter defined) to secure the
Indebtedness (as defined in each Indenture as in effect on the date hereof) and
other obligations due such Permitted Additional Lenders (such Indebtedness, the
"Permitted Replacement Financing") upon the execution and delivery by the
Permitted Additional Lenders of a supplement to this Agreement in the form of
Exhibit A hereto and upon satisfaction of the other conditions relating thereto
contemplated herein.
G. The parties hereto are executing and delivering this
instrument to evidence their agreement in respect of the Collateral (as
hereinafter defined).
A G R E E M E N T :
- - - - - - - - -
The parties agree as follows:
ARTICLE 1
DEFINITIONS
Definitions. (a) Capitalized terms that are not otherwise defined
herein are used herein with the meanings given thereto in the Indentures, as in
effect on the date of execution of this Agreement.
(b) The following terms shall have the respective meanings set forth
below:
"Accreted Amount" means, with respect to the Senior Secured Discount
Notes, the Accreted Value and, with respect to any Permitted Replacement
Financing issued at a discount, the
<PAGE>
-4-
then accreted amount, based upon the original issue price, determined in
accordance with GAAP.
"Acme Steel" has the meaning set forth in the introductory paragraph
hereto.
"Acme Packaging" has the meaning set forth in the introductory
paragraph hereto.
"Additional Security Documents" means any and all instruments or
documents delivered by the Obligors evidencing or creating a Lien in favor of
the Collateral Agent on all or any portion of the assets acquired by any of the
Obligors after the date hereof which shall be of the type pledged, mortgaged,
granted or collaterally assigned to the Collateral Agent by the Obligors on the
date hereof pursuant to the Security Documents and on all or any portion of the
assets acquired by any of the Obligors in connection with any Related Business
Investment.
"Additional Undertaking" has the meaning set forth in Section 3.8.
"Agreement" has the meaning set forth in the introductory paragraph
hereto.
"Architect's Certificate" has the meaning set forth in Section 3.8.
"CAA Supplement" has the meaning set forth in Section 8.11.
"Collateral" means the Shared Collateral and the Disbursement
Collateral, collectively.
"Collateral Account" has the meaning set forth in Section 3.1(a).
"Collateral Agent" has the meaning set forth in the introductory
paragraph hereto.
"Collateral Agent's Fees" means all fees, costs and expenses of the
Collateral Agent of the type described in Sections 5.3, 5.4, 5.5 and 5.6.
"Collateral Proceeds Accounts" has the meaning set forth in Section
3.2.
<PAGE>
-5-
"Company" has the meaning set forth in the introductory paragraph
hereto.
"Company Stock Pledge" has the meaning set forth in recital C.
"Debt Instrument" means each of (i) the Note Indenture and the Senior
Secured Notes and any related instruments or agreements, (ii) the Discount Note
Indenture and the Senior Secured Discount Notes and any related instruments or
agreements and (iii) the notes, agreements and/or instruments which, at any
time, collectively evidence or comprise any Permitted Replacement Financing.
"Denied Holder" has the meaning set forth in the definition of "Pro
Rata Share."
"Directing Holders" means, at any time, the holders of Notes which
constitute at least (i) 50%, or such greater amount as may be required under the
applicable circumstances by the Note Indenture, in principal amount of Senior
Secured Notes, and (ii) 50%, or such greater amount as may be required under the
applicable circumstances by the Discount Note Indenture, in principal amount of
Senior Secured Discount Notes; provided, however, that for purposes of
calculating the percentages set forth in this definition there shall not be
counted the principal amount of any Notes (A) for which (and to the extent that)
there are at such time on deposit with the Collateral Agent amounts to be
applied to the payment of principal of or interest or premium on or with respect
thereto, (B) which are owned or held by or on behalf of the Company or any of
its Affiliates, or (C) which have been defeased or in respect of which the
Company's and each of its subsidiaries' (if applicable) obligations have been
terminated in each case pursuant to the provisions of Article Eight of each
Indenture.
"Disbursement Agreement" has the meaning set forth in recital C.
"Disbursement Collateral" means the "Collateral" as defined in the
Disbursement Agreement.
"Discount Note Indenture" has the meaning set forth in recital B
hereto.
"Discount Note Trustee" has the meaning set forth in recital B hereto.
<PAGE>
-6-
"Distribution Date" means the date on which any funds are distributed
by the Collateral Agent in accordance with the provisions of Section 4.1.
"Enforcement Notice" has the meaning set forth in Section 2.2.
"Estimate" has the meaning set forth in Section 3.8.
"Event of Default" means an Event of Default under the Note Indenture
or the Discount Note Indenture or any event, act or circumstance which would
permit or result in the acceleration of any Permitted Replacement Financing or
the institution in respect thereof of any remedy by the Secured Party
thereunder.
"Guarantors" has the meaning set forth in recital A hereto.
"Indentures" has the meaning set forth in recital B hereto.
"Majority Holders of an Applicable Class" means, at any time, the
holders of the Senior Secured Notes, the Senior Secured Discount Notes or
interests in any other Debt Instrument constituting Permitted Replacement
Financing which in principal amount constitute more than 50% of the Total Amount
of Secured Obligations of an Applicable Class; provided, however, that for
purposes of calculating the percentage set forth in this definition there shall
not be counted the principal amount of any Notes and/or interests in any Debt
Instrument constituting Permitted Replacement Financing (A) for which (and to
the extent that) there are at such time on deposit with the Collateral Agent
amounts to be applied to the payment of principal of or interest or premium on
or with respect thereto, (B) which are owned or held by or on behalf of the
Company or any of its Affiliates, (C) which are owned or held by or on behalf of
any Denied Holder or (D) which have been defeased or in respect of which the
Company's and each of its subsidiaries' (if applicable) obligations have been
terminated in each case pursuant to the provisions of Article Eight of each
Indenture or of any comparable provisions set forth in any Debt Instrument
constituting Permitted Replacement Financing.
"Mortgaged Property" has the meaning set forth in recital D hereto and
any other "Mortgaged Property" as defined in any other Mortgage.
<PAGE>
-7-
"Mortgage" has the meaning set forth in recital D hereto and any other
mortgage, deed of trust or other instrument substantially in the form of the
Mortgage described in recital D hereto executed and delivered pursuant to the
provisions of this Agreement.
"Note Indenture" has the meaning set forth in recital A hereto.
"Note Trustee" has the meaning set forth in recital A hereto.
"Noteholders" means the Senior Secured Noteholders and the Senior
Secured Discount Noteholders, collectively.
"Notes" has the meaning set forth in recital B hereto.
"Obligors" has the meaning set forth in the introductory paragraph
hereto.
"Permitted Additional Lender" has the meaning set forth in recital F
hereto.
"Permitted Replacement Financing" has the meaning set forth in recital
F hereto.
"Pro Rata Share" with respect to any Secured Party means, at any date
of determination thereof, the percentage derived by dividing (i) the total,
without duplication, of all amounts owed to such Secured Party (whether by
virtue of acceleration or otherwise) under or in respect of the Debt Instrument
held or administered by such Secured Party (it being expressly understood that
in the case of any Debt Instrument issued at a discount, the principal amount
thereof at any time shall be limited to the Accreted Amount thereof), less the
amount on deposit in the relevant Collateral Proceeds Account with respect
thereto, by (ii) the Total Amount of Secured Obligations; provided, however,
that (A) with respect to any Secured Party representing an issue of Permitted
Replacement Financing, if any holder of such issue of Permitted Replacement
Financing pursuant to Section 8.11 shall not be entitled to the benefits of this
Agreement (a "Denied Holder"), then the amount calculated under clause (i) of
this definition with respect to such Secured Party shall exclude the total
amount of Secured Obligations owing to each and every such Denied Holder at the
relevant time of calculation hereunder and (B) for purposes of clause (i) of
this definition, there shall not be counted any Notes and/or interests in any
Debt Instrument constituting Permitted Replacement
<PAGE>
-8-
Financing which (I) have been defeased or in respect of which the Company's and
each of its subsidiaries' (if applicable) obligations have been terminated
pursuant to the provisions of Article Eight of each Indenture or of any
comparable provisions set forth in any Debt Instrument constituting Permitted
Replacement Financing and (II) are owned or held by or on behalf of the Company
or any of the Company's Affiliates; and provided, further, that for purposes of
clause SECOND of Section 4.1, the Total Amount of Secured Obligations in clause
(ii) above shall include only amounts then outstanding under or in respect of
(x) the Note Indenture and the Senior Secured Notes and any related instruments
and agreements and (y) the Discount Note Indenture and the Senior Secured
Discount Notes and any related instruments and agreements.
"Secured Obligations" means, at any time, the obligations of the
Company and/or its subsidiaries from time to time under or in respect of the
Debt Instruments (calculated, in the case of any Debt Instrument issued at a
discount, as the Accreted Amount thereof).
"Secured Party" means (i) the Note Trustee, in respect of the
applicable Debt Instruments including the Senior Secured Notes and the Note
Indenture, (ii) the Discount Note Trustee, in respect of the applicable Debt
Instruments including the Senior Secured Discount Notes and the Discount Note
Indenture, (iii) the Collateral Agent, in respect of the Security Documents and
(iv) with respect to Secured Obligations under or in respect of any Debt
Instrument constituting Permitted Replacement Financing, the trustee, agent or
fiduciary in respect thereof and, if no such trustee, agent or fiduciary exists
in respect thereof, the holders thereof collectively whose identities and
addresses are actually known to the Collateral Agent; provided, however, that
with respect to clause (iv), such entities or their legal representative on
their behalf, shall have executed and delivered a CAA Supplement and the other
conditions set forth in Section 8.11 hereof shall have been satisfied.
"Security Agreement" has the meaning set forth in recital D hereto.
"Security Documents" means the Intercreditor Agreement, the Company
Stock Pledge, the Mortgage, the Security Agreement, the Subsidiary Stock Pledge,
the Disbursement Agreement, the Indentures (to the extent the Indentures
constitute security agreements under the UCC) and all other instruments or
documents delivered by the Obligors evidencing or creating any Lien in favor of
the Collateral Agent in all or any portion of the
<PAGE>
-9-
Collateral (including, without limitation, any Additional Security Documents),
in each case, as amended, amended and restated, supplemented or otherwise
modified from time to time.
"Senior Secured Discount Noteholders" means holders of the Senior
Secured Discount Notes.
"Senior Secured Discount Notes" has the meaning set forth in recital B
hereto.
"Senior Secured Noteholders" means holders of the Senior Secured
Notes.
"Senior Secured Notes" has the meaning set forth in recital A hereto.
"Shared Collateral" means the Pledged Collateral (as defined in each
of the Company Stock Pledge, the Subsidiary Stock Pledge and the Security
Agreement), the Mortgaged Property (as defined in the Mortgage) and the
Collateral Account hereunder and any other property which may from time to time
be subject to one or more of the Liens evidenced or created by any of the
Security Documents (other than the Disbursement Agreement).
"Subsidiary Stock Pledge" has the meaning set forth in recital D.
"Survey" means a survey of any parcel of real property (and all
improvements thereon): (i) prepared by a surveyor or engineer licensed to
perform surveys in the state in which such property is located, (ii) dated (or
redated) not earlier than six months prior to the date of delivery thereof
(unless there shall have occurred within six months prior to such date of
delivery any exterior construction on the site of such property, in which event
such survey shall be dated (or redated) to a date after the completion of such
construction, (iii) certified by the surveyor (in a manner reasonably
acceptable to the title company providing title insurance in respect of the
Liens of the Security Documents) and (iv) complying in all respects with the
minimum detail requirements of the American Land Title Association, or local
equivalent, as such requirements are in effect on the date of preparation of
such survey.
"Title Policies" means any mortgagee policies of title insurance
delivered to the Collateral Agent in connection with the issuance of the Notes
and any other mortgagee policies of title insurance delivered to the Collateral
Agent under the
<PAGE>
-10-
applicable Debt Instrument in connection with any Permitted Replacement
Financing.
"Total Amount of Secured Obligations" means, at any time, the total,
without duplication, of all amounts then outstanding under or in respect of each
of the Debt Instruments (calculated, in the case of Debt Instruments issued at a
discount, as the Accreted Amount thereof), less, in each case, (A) the amount of
cash collateral on deposit in the Collateral Proceeds Accounts with respect
thereto and (B) the principal amount of any Notes and/or interests in any Debt
Instrument constituting Permitted Replacement Financing (I) which are owned or
held by the Company or any of its Affiliates, (II) which are owned or held by or
on behalf of any Denied Holder and (III) which have been defeased or in respect
of which the Company's and each of its subsidiaries' (if applicable) obligations
have been terminated in each case pursuant to the provisions of Article Eight of
each Indenture or of any comparable provisions set forth in any Debt Instrument
constituting Permitted Replacement Financing.
"Total Amount of Secured Obligations of an Applicable Class" means, at
any time, the total, without duplication, of all amounts then outstanding under
or in respect of the Senior Secured Notes, the Senior Secured Discount Notes or
any issue of Permitted Replacement Financing, less, in each case (A) the amount
of cash collateral on deposit in the Collateral Proceeds Account with respect
thereto and (B) the principal amount of any Notes and/or interests in any Debt
Instrument constituting Permitted Replacement Financing (I) which are owned or
held by or on behalf of the Company or any of its Affiliates, (II) which are
owned or held by or on behalf of any Denied Holder and (III) which have been
defeased or in respect of which the Company's and each of its subsidiaries' (if
applicable) obligations have been terminated in each case pursuant to the
provisions of Article Eight of each Indenture or of any comparable provisions
set forth in any Debt Instrument constituting Permitted Replacement Financing.
"Trust Estate" means (i) the right, title and interest of the
Collateral Agent in, to and under each of the Security Documents, (ii) the
right, title and interest of the Collateral Agent in, to and under each of the
Title Policies and (iii) the amounts from time to time held in the Collateral
Proceeds Accounts.
"Trustees" has the meaning set forth in recital B hereto.
<PAGE>
-11-
"Trust Moneys" has the meaning set forth in Section 3.3 hereof.
(c) The words "hereof," "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement, and section references are to
this Agreement unless otherwise specified.
ARTICLE 2
DECLARATION OF TRUST; REMEDIES
2.1 Declaration and Acceptance of Trust. The Collateral Agent
hereby declares, and the Obligors agree, that the Collateral Agent holds the
Trust Estate as trustee in trust under this Agreement for the equal and ratable
benefit of the Secured Parties (and the Persons for whom the Secured Parties act
as trustee, agent or fiduciary, as applicable) as provided herein. By
acceptance of the benefits of this Agreement and the Security Documents each
Secured Party and each Person for whom such Secured Party acts as trustee, agent
or fiduciary, as applicable, (i) consents to the appointment of the Collateral
Agent as agent hereunder and grants the Collateral Agent all rights and powers
necessary for the Collateral Agent to perform its obligations hereunder, (ii)
confirms that the Collateral Agent shall have the authority to act as the
exclusive agent of such Secured Party (or Person, as applicable) to make claims
under and otherwise act in all respects as the beneficiary of the Title Policies
and for enforcement of any remedies under or with respect to any Security
Document (including, without limitation, the Intercreditor Agreement) and the
giving or withholding of any consent or approval relating to any Collateral or
the Security Documents (including, without limitation, the Intercreditor
Agreement) or any obligations with respect thereto or otherwise take any action
on behalf of the Secured Parties contemplated in the Security Documents
(including, without limitation, to receive opinions, maintain collateral
accounts and exercise remedies), (iii) agrees that, except as provided in this
Agreement, such Secured Party (or Person, as applicable) shall not take any
action to enforce any of such remedies or give any such consents or approvals
relating to any Collateral or the Security Documents or itself make any claim
under the Title Policies, and (iv) agrees that such Secured Party (or Person, as
applicable) shall not bring any suit, action or proceeding to enforce such
Secured Party's Debt Instrument or any interest therein (including any
individual bond, note or similar instrument comprising a portion of a Debt
<PAGE>
-12-
Instrument) if doing so could, under the laws of any applicable jurisdiction,
cause to be applicable any "one action rule" or other law or defense which could
adversely affect any Secured Party's rights and remedies in respect of any
Collateral.
2.2 Remedies. Upon the occurrence and during the continuance of
an Event of Default in respect of any Debt Instrument, the Majority Holders of
an Applicable Class in respect of such Debt Instrument (or, if the Secured Party
in respect of such Debt Instrument is a trustee, agent or fiduciary, such
Secured Party) shall in one or more writings addressed to the Collateral Agent
specify that an Event of Default has occurred and is continuing and shall state
the nature thereof (each such writing, an "Enforcement Notice"). Such
Enforcement Notice may also indicate what rights or remedies available to the
Collateral Agent or the Secured Parties with respect to the Collateral the
Secured Party requests be exercised by the Collateral Agent on behalf of all
Secured Parties. Each Enforcement Notice shall generally describe the nature of
and relevant facts relating to such Event of Default and that such notice is
being delivered by the Majority Holders of an Applicable Class of a Debt
Instrument or by the Secured Party in respect of a Debt Instrument who is a
trustee, agent or fiduciary and is authorized by and entitled to bind such
holders. Upon the receipt of an Enforcement Notice by the Collateral Agent, the
Collateral Agent shall, within three Business Days thereafter, notify each
Secured Party and the Company in writing that the Collateral Agent has received
such Enforcement Notice, enclosing a copy of such Enforcement Notice. An
Enforcement Notice shall be deemed to be in effect hereunder only if such notice
shall have been given and not rescinded, annulled or withdrawn in writing by
the applicable Secured Party. In the event an Enforcement Notice is
inconsistent with any previously delivered Enforcement Notice, the Collateral
Agent shall, as soon as practicable, but in any event within three Business Days
of obtaining knowledge of such inconsistency, give notice thereof to all Secured
Parties. Thereafter, subject to the provisions hereof relating to
indemnification of the Collateral Agent, the Collateral Agent shall exercise the
right or remedy directed by the Directing Holders as reported to the Collateral
Agent in writing by the Directing Holders as contemplated in Section 2.6 of this
Agreement and any other actions not inconsistent with such direction.
2.3 Determinations Relating to Collateral. Prior to the
occurrence and continuance of an Event of Default and receipt of an Enforcement
Notice from the Majority Holders of an Applicable Class or a Secured Party, in
the event (i) the
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Collateral Agent shall receive any written request from the any Obligor under
any Security Document (other than the Indentures) for consent or approval with
respect to any matter or thing relating to any Collateral or such Obligor's
obligations with respect thereto (including, without limitation, consent to
amendment of the documents relating to the Modernization Project as required by
Section ___ of the Security Agreement) and which matter or thing is, under the
terms of any applicable Security Document, of a nature such that the Collateral
Agent shall not be entitled to respond thereto or determines not to respond
thereto or (ii) there shall be due to or from the Collateral Agent under the
provisions of any Security Document (other than the Indentures) any material
performance or the delivery of any material instrument or (iii) the Collateral
Agent shall become aware of any nonperformance by any Obligor of any covenant or
any breach of any representation or warranty of such Obligor set forth in any
Security Document (other than the Indentures), then, in each such event, the
Collateral Agent shall, within three Business Days, advise all Secured Parties
in writing of the matter or thing as to which consent has been requested or the
performance or instrument required to be delivered or the nonperformance or
breach of which the Collateral Agent has become aware. The Directing Holders
shall have the exclusive authority to direct the Collateral Agent's response to
any of the circumstances contemplated in clauses (i), (ii) and (iii) above. In
the event the Collateral Agent shall be required to respond to any of the
circumstances contemplated in this Section 2.3, the Collateral Agent shall be
entitled, at the sole cost and expense of the Company, to hire experts,
consultants, agents and attorneys to advise the Collateral Agent on the manner
in which the Collateral Agent shall respond thereto. The Collateral Agent shall
be fully protected in the taking of any action recommended or approved by any
such expert, consultant, agent or attorney or agreed to by the Directing
Holders.
2.4 Right to Make Advances. If an advance of funds shall at any
time be required for the preservation or maintenance of any Collateral, subject
to Section 6.4(c), the Collateral Agent, any Secured Party or any Person for
whom a Secured Party acts as trustee, agent or fiduciary shall be entitled to
make, but not be obligated to make, such advance. Each such advance shall be
reimbursed, with interest accrued from the date such advance was made at the
rate borne by the Senior Secured Discount Notes, by the Obligors upon demand by
the Collateral Agent or such Secured Party or Person, as the case may be, and if
the Obligors fail to comply with any such demand, out of the proceeds of any
sale of or other realization upon any Collateral distributed pursuant to clause
FIRST of Section 4.1.
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In the event any Secured Party shall receive any funds which, under this Section
2.4, belong to the Collateral Agent or any other Secured Party (or Person for
whom a Secured Party acts as trustee, agent or fiduciary), such Secured Party
shall remit such funds promptly to the Collateral Agent for distribution to the
Collateral Agent or such other Secured Party (or Person), as the case may be,
and prior to such remittance shall hold such funds in trust for the Collateral
Agent or such other Secured Party (or Person), as the case may be.
2.5 Nature of Secured Parties' Rights. All of the Secured Parties
(and each Person for whom a Secured Party acts as trustee, agent or fiduciary)
shall be bound by any instruction or direction given by the Directing Holders
pursuant to this Agreement to the extent any such instruction or direction is
within the powers or rights granted to such group under this Agreement.
2.6 Voting. In each case where any vote or consent of the
Directing Holders is required or desired to be made or determined hereunder or
under the Intercreditor Agreement, each Secured Party shall, in accordance with
the provisions of its Debt Instrument, advise in reasonable detail in writing
the Persons for whom it acts as trustee, agent or fiduciary of the matters or
things to which such vote or consent pertain and afford such Persons an
opportunity to indicate (which may be accomplished by affirmative act or failure
to act within a reasonably prescribed time period) a response to the matters or
things set forth in such writing. The results of such voting or consent
solicitation shall be promptly reported in writing to the Collateral Agent and
shall be certified as correct to the best knowledge of such Secured Party. Any
determination as to whether a vote or consent of the Directing Holders has been
obtained shall be made by the Collateral Agent on the basis of such written
information, which information may be conclusively relied upon by the Collateral
Agent. The Collateral Agent shall not be liable for errors in such
determinations unless the Collateral Agent shall have been grossly negligent or
shall have acted in bad faith in connection therewith.
ARTICLE 3
COLLATERAL ACCOUNT; COLLATERAL PROCEEDS ACCOUNTS;
WITHDRAWALS FROM COLLATERAL ACCOUNT
3.1 Collateral Account. (a) On the date hereof there shall be
established and, at all times hereafter until this
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Agreement shall have terminated, there shall be maintained with the Collateral
Agent, a single collateral account which shall be entitled the "Collateral
Account" (the "Collateral Account"). The Collateral Account shall be
established and maintained by the Collateral Agent at its corporate trust
offices. All Trust Moneys which are received by the Collateral Agent shall be
deposited in the Collateral Account and thereafter shall be held, applied and/or
disbursed by the Collateral Agent as part of the Trust Estate in accordance with
the provisions of this Agreement.
(b) Each of the Note Trustee and the Discount Note Trustee hereby
appoints and constitutes the Collateral Agent as its agent for the
administration of the Collateral Account. In the event there shall be any
Permitted Replacement Financing in effect, the Secured Party in respect thereof
hereby appoints and constitutes the Collateral Agent as its agent for the
administration of the Collateral Account in respect thereof.
(c) The Collateral Agent shall take such actions with respect to the
Collateral Account as shall be directed in writing by the Directing Holders and
shall hold, apply and release funds held in the Collateral Account in accordance
with the provisions hereof as directed by the Directing Holders to the extent
not inconsistent with this Agreement and the Debt Instruments; provided,
however, that notwithstanding the foregoing, so long as no Event of Default is
continuing and no Enforcement Notice is in effect, application of Trust Moneys
held in the Collateral Account by the Collateral Agent pursuant to the direction
of the Company shall not require the consent of any Secured Party, holder of
Notes or holder of Permitted Replacement Financing if and to the extent such
direction is made by the Company in compliance with all of the terms and
provisions hereof and each Debt Instrument and if all of the conditions
precedent herein and therein for the effectiveness of such direction have been
satisfied in full all of which shall be certified to the Collateral Agent as
required herein and therein.
3.2 Collateral Proceeds Accounts. The Collateral Agent shall
establish and maintain, at the office of its corporate trust division, a
separate collateral trust account (each, a "Collateral Proceeds Account"), which
may be sub accounts or notional accounts of one account, for each of the Secured
Parties in respect of its Debt Instrument until the earlier of (i) the
termination of this Agreement or (ii) the indefeasible payment in full, in cash,
to all Secured Parties of all Obligations owing to such Secured Parties. All
funds on deposit in the Collateral Proceeds Accounts shall be held, applied and
disbursed by the
<PAGE>
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Collateral Agent as part of the Trust Estate in accordance with the terms of
this Agreement.
3.3 "Trust Moneys" Defined. All cash or Cash Equivalents received
by the Collateral Agent:
(i) upon the release of Property from the Lien of the Security
Documents; or
(ii) as proceeds of insurance upon any, all or part of the Collateral
(other than any liability insurance proceeds payable to the Collateral
Agent for any loss, liability or expense incurred by it) including, without
limitation, proceeds of any insurance received pursuant to Section 1.13 of
any Mortgage; or
(iii) 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
(including any proceeds received pursuant to Section 1.13 of any Mortgage
in respect of the sale or other disposition of all or any part of the
Collateral taken by eminent domain or purchased by, or sold pursuant to any
order of a governmental authority) or any collection, recovery, receipt,
appropriation or other realization of or from all or any part of the
Collateral pursuant to the Security Documents or otherwise; or
(iv) for application hereunder, in the Indentures, in the Debt
Instruments constituting Permitted Replacement Financing or the Security
Documents, or whose disposition is not elsewhere otherwise specifically
provided for herein or therein;
(all such moneys being herein sometimes called "Trust Moneys"); shall be held by
the Collateral Agent for the benefit of the Secured Parties as a part of the
Trust Estate and, upon any entry upon or sale or other disposition of the
Collateral or any part thereof pursuant to enforcement of the Security
Documents, said Trust Moneys shall be applied in accordance with Section 4.1
hereof; but, prior to any such entry, sale or other disposition, all or any part
of the Trust Moneys may be withdrawn, and shall be released, paid or applied by
the Collateral Agent, from time to time as provided herein.
3.4 Withdrawal of Certain Net Cash Proceeds Aggregating Less Than $5
Million. In accordance with Section 4.06(b)(A) of each of the Indentures and
any analogous provisions of any Debt Instrument evidencing Permitted Replace-
<PAGE>
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ment Financing, to the extent that any Trust Moneys consist of Available
Proceeds Amounts and the aggregate amount of all Available Proceeds Amounts
(whether derived from one or more Asset Sales, insurance or eminent domain or
similar proceedings) received by the Company or the Collateral Agent to date is
less than $5 million, such Trust Moneys may be withdrawn by the Company and
shall be paid by the Collateral Agent upon a request by a Company Order and upon
receipt by the Secured Parties of (i) an Officers' Certificate certifying that
such Trust Moneys constitute Available Proceeds Amounts described above and that
all such amounts received to date are less than $5 million and (ii) all
opinions, certificates and other documentation required by the TIA, if any as
certified to the Collateral Agent by the Company.
Upon compliance with the foregoing provisions of this Section 3.4, the
Collateral Agent shall apply the Trust Moneys as directed and specified in such
Company Order.
3.5 Withdrawal of Trust Moneys Following an Unapplied Proceeds Offer.
To the extent that any Trust Moneys consist of Net Cash Proceeds received by the
Collateral Agent as a result of an Asset Sale and an Unapplied Proceeds Offer
has been made in accordance with Section 4.06 of each of the Indentures and the
analogous provisions of any Debt Instrument evidencing Permitted Replacement
Financing, such Trust Moneys may be withdrawn by the Company and shall be paid
by the Collateral Agent to the Company (or as otherwise directed by the Company)
upon a Company Order to the Collateral Agent and upon receipt by the Secured
Parties of the following:
(a) An Officers' Certificate, dated not more than five days prior to
the Purchase Date certifying:
(i) that no Default or Event of Default exists and that the
release of the Trust Moneys will not result in a Default or Event of
Default;
(ii) (A) that such Trust Moneys constitute Net Cash Proceeds, (B)
that pursuant to and in accordance with Section 4.06 of each of the
Indentures and the analogous provisions of any Debt Instrument
evidencing Permitted Replacement Financing, the Company has made an
Unapplied Proceeds Offer, (C) the amount of Trust Moneys to be applied
to the repurchase of the Notes and any Debt Instruments evidencing
Permitted Replacement Financing pursuant to the Unapplied Proceeds
Offer, (D) the amount of Trust Moneys to be released to the
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Company, and (E) the Unapplied Proceeds Offer Payment Date; and
(iii) that all conditions precedent and covenants provided for
in the Debt Instruments and this Agreement relating to such
application of Trust Moneys have been complied with; and
(b) All opinions, certificates and other documentation required under
the TIA, if any as certified to the Collateral Agent by the Company.
Upon compliance with the foregoing provisions of this Section 3.5, the
Collateral Agent shall apply the Trust Moneys as directed and specified by such
Company Order.
3.6 Withdrawal of Trust Moneys for Reinvestment. To the extent that
any Trust Moneys consist of Net Cash Proceeds received by the Collateral Agent
as the result of an Asset Sale and the Company intends to invest such Net Cash
Proceeds in a Related Business Investment (the "Released Trust Moneys"), such
Trust Moneys may be withdrawn by the Company and shall be paid by the
Collateral Agent to the Company (or as otherwise directed by the Company) upon a
Company Order to the Collateral Agent and upon receipt by the Secured Parties of
the following:
(a) An Officers' Certificate certifying that (i) the release of the
Released Trust Moneys complies with the terms and conditions of Section
4.06 of each of the Indentures and the analogous provisions of any Debt
Instrument evidencing Permitted Replacement Financing, (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, (iv) the parties executing any and all
documents required under the provisions of this Section were duly
authorized to do so, and (v) all conditions precedent and covenants
provided for in the Debt Instruments and this Agreement relating to such
release have been complied with;
(b) If the Related Business Investment to be made is an investment in
real property:
(i) a Mortgage or other instrument or instruments in recordable
form sufficient to grant to the Collateral Agent for the benefit of
the Secured Parties (A) substantially the same rights and remedies in
respect of such real property as granted thereto
<PAGE>
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under the Mortgage executed and delivered on the Issue Date and (B) a
valid first priority mortgage Lien on such real property subject to no
Liens other than Prior Liens of the types permitted under the Mortgage
delivered on the Issue Date and, if the real property is a leasehold
or easement interest, such Mortgage or other instrument or instruments
shall include normal and customary provisions with respect thereto, in
each case together with evidence of the filing of all such financing
statements and other instruments as may be necessary to perfect such
Lien;
(ii) a Title Policy (or a commitment to issue title insurance)
insuring that the Lien of the instruments delivered pursuant to clause
(i) above constitutes a valid and perfected first priority mortgage
Lien on such real property in an aggregate amount equal to the fair
market value of the real property, together with an Officers'
Certificate stating that any specific exceptions to such title
insurance are Permitted Liens, together with such endorsements and
other opinions of the type included in the Title Policy or otherwise
delivered to the Collateral Agent on the Issue Date with respect to
the Mortgaged Property;
(iii) in the event such real property has a fair value in excess
of $250,000, a Survey with respect thereto;
(iv) evidence of payment or a closing statement indicating
payments to be made by the Company of all title premiums, recording
charges, transfer taxes and other costs and expenses, including
reasonable legal fees and disbursements of counsel for the Collateral
Agent (and any local counsel), that may be incurred to validly and
effectively subject the real property to the Lien of any applicable
Security Document and to perfect such Lien;
(v) an Officers' Certificate stating that the Company has caused
there to be conducted by a reputable expert a review and analysis of
the environmental conditions relating to such real property and that,
in the reasonable and good faith judgment of the issuer thereof such
real property does not contain any conditions which would cause a
prudent institutional lender to decline to fund loans secured by such
real
<PAGE>
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property, together with a copy of the written report of such expert;
and
(vi) such further documents, opinions, certificates or
instruments (including, without limitation (A) policies or
certificates of insurance, (B) UCC, judgment and tax lien searches,
(C) consents, approvals, estoppels and tenant subordination agreements
and (D) Officers' Certificates in respect of compliance with local
codes or ordinances relating to building or fire safety or structural
soundness and the adequacy of utility services) as are customarily
provided to institutional mortgage lenders;
(c) If the Related Business Investment is not an investment in real
property:
(i) an instrument sufficient to grant to the Collateral Agent,
for the benefit of the Secured Parties (A) substantially the same
rights and remedies in respect of such personal property interest as
granted thereto under the Security Agreement, the Company Stock Pledge
or the Subsidiary Stock Pledge, as the case may be, executed and
delivered on the Issue Date and (B) a valid first priority Lien on
such personal property interest subject to no Liens other than Liens
permitted under such instrument, together with evidence of the filing
of such financing statements and other instruments as may be necessary
to perfect such Liens; and
(ii) evidence of payment or a closing statement indicating
payments to be made by the Company of all filing fees, recording
charges, transfer taxes and other costs and expenses, including
reasonable legal fees and disbursements of counsel for the Collateral
Agent (and any local counsel), that may be incurred to validly and
effectively subject the Related Business Investment to the Lien of any
Security Document; and
(d) An Opinion of Counsel substantially stating:
(i) that the instruments that have been or are therewith
delivered to the Collateral Agent conform to the requirements of this
Agreement and the Security Documents, and that, upon the basis of such
request of the Company and the accompanying documents specified in
this Section 3.6, all conditions precedent herein
<PAGE>
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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 3.6;
(ii) that the Collateral Agent has a valid and perfected Lien on
such Related Business Investments, that the same and every part
thereof are subject to no Liens prior to the Lien of the Security
Documents, except Liens permitted under the Security Documents; and
(iii) that all of such Obligor's right, title and interest in
and to said Related Business Investments, are then subject to the Lien
of the Security Documents;
(e) All certificates, opinions and other documentation required under
the TIA, if any as certified to the Collateral Agent by the Company.
Upon compliance with the foregoing provisions of this Section 3.6, the
Collateral Agent shall apply the Released Trust Moneys as directed and specified
by such Company Order.
3.7 Withdrawal of Trust Moneys on Basis of Retirement of Securities.
Trust Moneys may be withdrawn by the Company to be applied to the redemption and
retirement of the Notes and shall be paid by the Collateral Agent to the Company
(or as otherwise directed by the Company) upon a Company Order to the Collateral
Agent and upon receipt by the Secured Parties of the following:
(a) A Board Resolution requesting the withdrawal and payment of a
specified amount of Trust Moneys; and
(b) An Officers' Certificate, dated not more than 30 days prior to the
date of the application for the withdrawal and payment of such Trust
Moneys, certifying that (i) there is no Default or Event of Default in
effect or continuing on the date thereof and (ii) all conditions precedent
and covenants provided for in the Debt Instruments and this Agreement
relating to such withdrawal and application have been complied with.
Upon compliance with the foregoing provisions of this Section 3.7, the
Collateral Agent shall apply the Trust Moneys as directed and specified by such
Company Order.
<PAGE>
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3.8 Withdrawal of Net Proceeds and Net Awards For Restoration. To
the extent that any Trust Moneys consist of either Net Proceeds or Net Awards
received by the Collateral Agent pursuant to Section 1.13 of any Mortgage and
such Net Proceeds or Net Awards are required to be applied or may be applied by
the Obligor thereunder to effect a Restoration of the affected Collateral, such
Trust Moneys may be withdrawn by the Company and shall be paid by the Collateral
Agent upon a request by a Company Order to reimburse such Obligor for
expenditures made, or to pay costs incurred, by such Obligor to repair, rebuild
or replace the property destroyed, damaged or taken, upon receipt by the Secured
Parties of the following:
(a) An Officers' Certificate of the Company, dated not more than 30
days prior to the date of the application for the withdrawal and payment of
such Trust Moneys stating:
(i) that expenditures have been made, or costs incurred, by such
Obligor 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 market value thereof at the
date of the expenditure or incurrence thereof by such Obligor;
(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 3.8;
(iii) that there is no outstanding Indebtedness, other than
costs for which payment is being requested, for the purchase price or
construction of such repairs, rebuildings or replacements, or for
labor, wages, materials or supplies in connection with the making
thereof, which, if unpaid, might become the basis of a vendor's,
mechanic's, laborer's, materialman's, statutory or other similar Lien
upon any Collateral;
(iv) that the property to be repaired, rebuilt or replaced is
necessary or desirable in the conduct of such Obligor's business;
(v) whether any part of such repairs, rebuildings or replacements
within six months before the date of acquisition thereof by such
Obligor has been used or operated by any Person other than such
Obligor in a
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business similar to that in which such property has been or is to be
used or operated by such Obligor, and whether the fair value to such
Obligor, at the date of such acquisition, of such part of such
repairs, rebuildings or replacement is at least $25,000, or at least
1% of the aggregate principal amount of the outstanding Notes;
(vi) that no Default or Event of Default under any Debt
Instrument shall have occurred and be continuing; and
(vii) that all conditions precedent herein and in the Debt
Instruments relating to such withdrawal and payment have been complied
with;
(b) An Opinion of Counsel substantially stating:
(i) that the instruments that have been or are therewith
delivered to the Collateral Agent conform to the requirements of this
Agreement and the Security Documents, and that, upon the basis of such
request of the Company and the accompanying documents specified in
this Section 3.8, 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 3.8;
(ii) that the Collateral Agent has a valid and perfected Lien on
such repairs, rebuildings and replacements, that the same and every
part thereof are subject to no Liens prior to the Lien of the Security
Documents, except Liens permitted under the Security Documents to
which the property so destroyed or damaged shall have been subject at
the time of such destruction or damage; and
(iii) that all of such Obligor's right, title and interest in
and to said repairs, rebuildings or replacements, or combination
thereof, are then subject to the Lien of the Security Documents;
(c) An Architect's Certificate (as defined in the applicable Mortgage)
stating:
(i) that all Restoration work to which such request relates has
been done in compliance with the
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approved Plans and Specifications and in accordance with all
provisions of law;
(ii) the sums requested are required to reimburse such Obligor
for payments by such Obligor to, or are due to, the contractors,
subcontractors, materialmen, laborers, engineers, architects or other
persons rendering services or materials for the Restoration, and that,
when added to the sums, if any, previously paid out by Collateral
Agent, such sums do not exceed the cost of the Restoration to the date
of such Architect's Certificate;
(iii) whether or not the Estimate (as defined in the applicable
Mortgage) continues to be accurate, and if not, what the entire cost
of such Restoration is then estimated to be; and
(iv) that the amount of the Net Proceeds or Net Awards, as the
case may be, plus any amount received by Collateral Agent under an
Additional Undertaking (as defined in the applicable Mortgage)
remaining after giving effect to such payment, will be sufficient on
completion of the Restoration to pay for the same in full (including,
in detail, an estimate by trade of the remaining costs of completion);
(d) If such request is the final request for any payment, in
addition to the documentation required by (a), (b) and (c) above, such
request shall be accompanied by:
(i) an Opinion of Counsel or a title insurance policy, binder or
endorsement satisfactory to Collateral Agent confirming that there has
not been filed with respect to all or any part of the Mortgaged
Property any Lien which is not either discharged of record or bonded
and which could have priority over the Lien of the applicable
Mortgage; and
(ii) an Officers' Certificate stating that all occupancy
certificates, operating and other permits, licenses, waivers, other
documents, or any combination of the foregoing required by law in
connection with or as a result of such Restoration have been obtained;
and
(e) All other documentation required under TIA (S) 314(d), if any.
<PAGE>
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Upon compliance with the foregoing provisions of this Section 3.8, the
Collateral Agent shall pay on the written request of the Company 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 3.8, or the fair value to such Obligor of such
repairs, rebuildings and replacements stated in such Officers' Certificate,
whichever is less.
3.9 Investment of Trust Moneys. (a)All or any part of any Trust
Moneys held by the Collateral Agent shall from time to time be invested or
reinvested by or on behalf of the Collateral Agent 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 on such Cash Equivalents (in
excess of any accrued interest paid at the time of purchase) that may be
received by the Collateral Agent shall be forthwith paid to the Company. Such
Cash Equivalents shall be held by the Collateral Agent as a part of the Trust
Estate, subject to the same provisions hereof as the cash used by it to purchase
such Cash Equivalents.
(b) The Collateral Agent shall not be liable or responsible for any
loss resulting from such investments or sales except only for its own
negligent action, its own negligent failure to act or its own willful
misconduct in complying with this Section 3.9.
ARTICLE 4
APPLICATION OF CERTAIN AMOUNTS
4.1 Application of Proceeds. In the event that there shall have
occurred an Event of Default, and by virtue of the exercise of remedies in
respect thereof or in connection therewith, the Collateral Agent receives any
amount or proceeds from the sale or disposition of or realization upon any
Collateral (including, without limitation, proceeds of any claim under the Title
Policies), the Collateral Agent shall apply such amount or proceeds as soon as
practicable after receipt as follows:
FIRST: To the Collateral Agent in an amount equal to the Collateral
Agent's fees and expenses, including reasonable attorney's fees and expenses
which are unpaid as of the applicable Distribution Date and to any Secured Party
or other Person which has theretofore advanced or paid any such Collateral
<PAGE>
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Agent's Fees in an amount equal to the amount thereof so advanced or paid by
such Secured Party or Person and to reimburse to the Collateral Agent and any
Secured Party or other Person the amount of any advance made pursuant to
Section 2.4 (with interest thereon at a rate per annum equal to two percent (2%)
in excess of the highest rate payable under the Notes);
SECOND: (a) With respect to the Shared Collateral to each Secured
Party in an amount equal to the product of (i) the total amount available for
distribution on such Distribution Date under this clause SECOND attributable to
such Shared Collateral and (ii) such Secured Party's Pro Rata Share and (b) with
respect to the Disbursement Collateral, to the Note Trustee and the Discount
Note Trustee in an amount equal to the product of (i) the total amount available
for distribution on such Disbursement Date under this clause SECOND attributable
to such Disbursement Collateral and (ii) such Secured Party's Pro Rata Share;
and
THIRD: After payment in full of all Secured Obligations in accordance
with the provisions of clause SECOND above, to the Company or the successors or
assigns of the Company as their interests may appear, or to such Person who may
be lawfully entitled to receive the same.
4.2 Release of Amounts in Collateral Proceeds Accounts. Amounts on
deposit in a Collateral Proceeds Account with respect to Secured Obligations
shall be paid to the applicable Secured Party as contemplated in Section 4.1
hereof upon receipt by the Collateral Agent of a certificate from such Secured
Party setting forth the name of the Person to whom payment should be made and
the amount owing to such Secured Party and stating that such amount will be
applied to the payment of Secured Obligations.
4.3 Payment Provisions. For the purposes of Section 4.1, all
interest to be paid on any of the Secured Obligations pursuant to the terms of
any Debt Instrument shall, as among the Secured Parties and irrespective of
whether recognized or allowed by any bankruptcy proceeding, be treated as due
and owing on the Secured Obligations; provided, however, that no default rate of
interest in excess of 2% per annum in excess of the rate borne by such Secured
Obligations in the event there would have been no default shall be taken into
account for purposes of Section 4.1.
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ARTICLE 5
AGREEMENTS WITH COLLATERAL AGENT
5.1 Delivery of Debt Instruments. On the date hereof, the Company
shall deliver to the Collateral Agent a true and complete copy of each of the
Debt Instruments to which it and/or any other Obligor is a party as in effect on
the date hereof. Promptly upon the execution thereof, the Company shall deliver
to the Collateral Agent a true and complete copy of any and all amendments,
modifications or supplements of or to any Debt Instrument to which it and/or any
other Obligor is a party and copies of any Debt Instrument it and/or any other
Obligor hereafter delivers.
5.2 Information as to Holders. The Company shall deliver to the
Collateral Agent by January 15 in each year, and from time to time upon request
of the Collateral Agent, a list setting forth, by each Debt Instrument, (i) the
aggregate principal amount outstanding thereunder, (ii) the interest rate or
rates then in effect thereunder, and (iii) to the extent known to the Company
and/or the other Obligors, the names of the Secured Parties and the unpaid
principal amount thereof owing to each Secured Party (or the Persons for whom
such Secured Party acts as trustee, agent or fiduciary). The Company shall
furnish to the Collateral Agent within thirty days after the date hereof a list
setting forth the name and address of each party to whom notices must be sent
under the Debt Instruments to which it and/or any other Obligor is a party and
the Company shall furnish promptly to the Collateral Agent any changes or
additions to such list.
5.3 Compensation and Expenses. The Obligors shall pay to the
Collateral Agent, from time to time upon demand, (i) compensation (which shall
be reasonable and not in excess of the Collateral Agent's customary compensation
for similar services and shall not be limited by any provision of law in regard
to compensation of a trustee of an express trust) for its services hereunder and
for administering the Trust Estate and (ii) all of the fees, costs and expenses
of the Collateral Agent (including, without limitation, the fees and
disbursements of its counsel and such financial or investment advisor and
special counsel as the Collateral Agent elects to retain) (a) arising in
connection with the preparation, execution, delivery, modification and
termination of this Agreement, and the enforcement of any provisions hereof, or
(b) incurred or required to be advanced in connection with the administration
of the Trust Estate, the investment of the Trust Monies, and the preservation,
protection
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or defense of the Collateral Agent's rights under this Agreement and in and to
the Collateral and the Trust Estate. The obligations of the Obligors under this
Section 5.3 shall survive the termination of the other provisions of this
Agreement.
5.4 Stamp and Other Similar Taxes. The Obligors shall indemnify and
hold harmless the Collateral Agent and each Secured Party (and each Person for
whom any Secured Party acts as trustee, agent or fiduciary) from any present or
future claim for liability for any mortgage, stamp, recording, intangibles or
other similar tax and any penalties or interest with respect thereto, which may
be assessed, levied or collected by any jurisdiction in connection with this
Agreement, any Security Document or any Secured Obligation. The obligations of
the Obligors under this Section 5.4 shall survive the termination of the other
provisions of this Agreement.
5.5 Filing Fees, Excise Taxes, etc. The Obligors shall pay or
reimburse the Collateral Agent for any and all amounts in respect of all search,
filing, intangible, transfer, recording and registration fees, taxes, excise
taxes and other similar imposts which may be payable or determined to be payable
in respect of the execution, delivery, performance and enforcement of this
Agreement, any Security Document or any Secured Obligation to the extent the
same may be paid or reimbursed by the Obligors without subjecting the Collateral
Agent or any Secured Party to any civil or criminal liability. The obligations
of the Obligors under this Section 5.5 shall survive the termination of the
other provisions of this Agreement.
5.6 Indemnification. (a) Each Obligor agrees to, jointly and
severally, pay, indemnify, and hold the Collateral Agent harmless from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever with respect to the execution, delivery, enforcement,
performance and administration of this Agreement and the Security Documents
unless arising from the gross negligence or willful misconduct of the Collateral
Agent. Without limiting the foregoing sentence in any way, the Obligors shall
also indemnify the Collateral Agent for, and hold it harmless against, any loss
or liability incurred by the Collateral Agent (including reasonable attorneys'
and consultants' fees and court costs) arising from or relating to any
Environmental Laws or Hazardous Materials (as such terms are defined in the
Mortgage) concerning the Mortgaged Property (as such term is defined in the
Mortgage) or any breach or alleged breach by the Obligors of any representation,
warranty or
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covenant in the Mortgage, provided such is not due to the Collateral Agent's
willful violation of any Environmental Laws.
(b) In any suit, proceeding or action brought by the Collateral Agent
with respect to the Collateral or for any sum owing in respect of Secured
Obligations, or to enforce the provisions of any Security Document, the
Obligors shall, jointly and severally, save, indemnify and keep the
Collateral Agent and each of the Secured Parties (and each Person for whom
any Secured Party acts as trustee, agent or fiduciary) harmless from and
against all expense, loss or damage suffered by reason of any defense, set-
off, counterclaim, recoupment or reduction of liability whatsoever incurred
or suffered by the Collateral Agent or such Secured Party (or Person), as
the case may be, arising out of a breach by the Obligors of any obligation
set forth in this Agreement, and all such obligations of the Obligors shall
be and remain enforceable against and only against the Obligors. The
provisions of this Section 5.6 shall survive the termination of the other
provisions of this Agreement.
5.7 Recording and Opinions; Further Assurance. (a) Each Obligor
shall take or cause to be taken all action required to perfect, maintain,
preserve and protect the Lien on and security interest in the Collateral 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 Secured Parties and the Collateral Agent
under this Agreement and the other Security Documents to all property comprising
the Collateral. The Obligors shall from time to time promptly pay all financing
and continuation statement recording and/or filing fees, charges and taxes
relating to this Agreement and the other Security Documents, any amendments
thereto and any other instruments of further assurance required pursuant to the
Security Documents.
(b) The Company shall furnish to the Collateral Agent and the
Trustees, at the time of execution and delivery hereof, Opinion(s) of Counsel
either (a) substantially to the effect that, in the opinion of such counsel,
this Agreement 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
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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
(b) to the effect that, in the opinion of such counsel, no such action is
necessary to perfect such security interests. Promptly after execution and
delivery of this Agreement, the Company shall deliver the opinion(s) required by
Section 314(b) of the TIA. The Company shall furnish to the Secured Parties, at
the time of execution and delivery of any Additional Security Document(s),
Opinion(s) of Counsel either substantially to the effect set forth in clause (a)
of the immediately preceding sentence (but relating only to such Additional
Security Documents and the Collateral secured thereby) or to the effect set
forth in clause (b) thereof.
(c) The Company shall furnish to the Collateral Agent yearly,
simultaneous with its delivery to the Trustees, the Opinion of Counsel called
for in Section 10.02 of the Indentures.
(d) At any time and from time to time, upon the written request of the
Collateral Agent, and at the expense of the Obligors, the Obligors shall
promptly execute and deliver any and all such further instruments and documents
and take such further action as the Collateral Agent reasonably deems necessary
or desirable in obtaining the full benefits intended to be provided by this
Agreement.
ARTICLE 6
COLLATERAL AGENT
6.1 Acceptance of Trust. The Collateral Agent, for itself and its
successors, hereby accepts the trust created by this Agreement upon the terms
and conditions hereof, including those contained in Article 5 and in this
Article 6. The Collateral Agent's duties in respect of the Trust Estate shall
include, without limitation, the review of applications of the Obligors or
others for consents, waivers, releases or other matters relating to the Trust
Estate or the Collateral and the prosecution following any Event of Default of
any action or proceeding or the taking of any nonjudicial remedial action as
shall be determined to be required pursuant to the provisions of Sections 2.2
and 2.3.
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6.2 Exculpatory Provisions. (a) The Collateral Agent shall not be
responsible in any manner whatsoever for the correctness of any recitals,
statements, representations or warranties herein contained, all of which are
made solely by the Obligors. The Collateral Agent makes no representations as
to the value or condition of the Trust Estate or any part thereof, or as to the
title of the Obligors thereto or as to the security afforded by the Security
Documents or this Agreement or as to the validity, execution (except its own
execution thereof), enforceability, legality or sufficiency of the Security
Documents or this Agreement or of the Secured Obligations, and the Collateral
Agent shall incur no liability or responsibility in respect of any such matters.
The Collateral Agent shall not be responsible for insuring the Trust Estate or
for the payment of taxes, charges, assessments or Liens upon the Trust Estate,
except that, subject to the provisions of Section 6.4(c), in the event the
Collateral Agent enters into possession of a part or all of the Collateral, the
Collateral Agent shall use reasonable efforts to preserve the part in its
possession.
(b) The Collateral Agent shall not be required to ascertain or inquire
as to the performance by the Obligors of any of the covenants or agreements
contained herein, in any Security Document or in any Debt Instrument. Whenever
it is necessary, or in the opinion of the Collateral Agent advisable, for the
Collateral Agent to ascertain the amount of Secured Obligations then held by a
Secured Party (or any Person for whom a Secured Party acts as trustee, agent or
fiduciary), the Collateral Agent may rely on a certificate as to such amount
from any trustee, agent or fiduciary constituting or representing such Secured
Party and if any such Secured Party shall not provide such information to the
Collateral Agent, such Secured Party shall not be entitled to receive payments
hereunder (in which case the amounts otherwise payable to such Secured Party
shall be held in trust for such Secured Party in the applicable Collateral
Proceeds Account) until such Secured Party has provided such information to the
Collateral Agent.
(c) The Collateral Agent shall not be personally liable for any action
taken or omitted to be taken by it in accordance with this Agreement or any
Security Document or any Debt Instrument except for its own gross negligence or
willful misconduct.
(d) Notwithstanding anything to the contrary contained in this
Agreement, the Indentures, the Mortgage or any of the other Security Documents,
in the event the Collateral Agent is entitled or required to commence an action
to foreclose the
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Mortgage or otherwise exercise its remedies to acquire control or possession of
the Mortgaged Property, the Collateral Agent shall not be required to commence
any such action or exercise any such remedy if the Collateral Agent has
determined in good faith that the Collateral Agent may incur liability under the
Environmental Laws (as defined in the Mortgage) as the result of the presence
at, or release on or from, the Facility of any Hazardous Materials (as defined
in the Mortgage) unless the Collateral Agent has received security or indemnity,
from a Holder or Holders, in an amount and in a form all satisfactory to the
Collateral Agent in its sole discretion, protecting the Collateral Agent from
all such liability.
6.3 Delegation of Duties. The Collateral Agent may execute any of
the trusts or powers hereof and perform any duty hereunder either directly or by
or through agents or attorneys-in-fact. The Collateral Agent shall be entitled
to advice of counsel concerning all matters pertaining to such trusts, powers
and duties. The Collateral Agent shall not be responsible for the negligence or
misconduct of any agents or attorneys-in-fact selected by it without gross
negligence or willful misconduct in the employment of such agents or attorneys-
in-fact.
6.4 Reliance by the Collateral Agent. (a) The Collateral Agent may
consult with counsel, and any opinion of such counsel (who shall not be
employees of the Obligors) shall be full and complete authorization and
protection in respect of any action taken or suffered by it hereunder in
accordance therewith. The Collateral Agent shall have the right at any time to
seek instructions concerning the administration of the Trust Estate from any
court of competent jurisdiction.
(b) The Collateral Agent may rely, and shall be fully protected in
acting, upon any Enforcement Notice, resolution, statement, certificate,
instrument, opinion, direction, instruction, report, notice, request, consent,
order, bond or other paper or document as to which it has no reason to believe
to be other than genuine and to have been signed or presented by the proper
party or parties or, in the case of cables, telecopies and telexes, to have
been sent by the proper party or parties. In the absence of its gross
negligence or willful misconduct, the Collateral Agent may conclusively rely, as
to the truth of the statements and the correctness of the opinions expressed
therein, upon any certificates or opinions furnished to the Collateral Agent and
conforming to the requirements of this Agreement or any Security Document.
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(c) The Collateral Agent shall not be under any obligation to exercise
any of the rights or powers vested in the Collateral Agent by this Agreement
unless the Collateral Agent shall have been provided adequate security and
indemnity against the costs, expenses and liabilities that may be incurred by it
in compliance with such request or direction, including, without limitation,
such reasonable advances as may be requested by the Collateral Agent, and
liability relating in any way to Environmental Law and/or Hazardous Materials,
as such terms are defined in the Mortgage.
(d) The Collateral Agent shall not be responsible in any way for, nor
shall it have a duty or obligation to, monitor, manage or perform the Company's
policies, practices or compliance with Environmental Laws or Hazardous Materials
relating to Mortgaged Property (as such terms are defined in the Mortgage).
6.5 Resignation or Removal of the Collateral Agent. (a)The
Collateral Agent may at any time, (i) by giving written notice to the Secured
Parties, resign and be discharged of the responsibilities hereby created, such
resignation to become effective upon the appointment of a successor collateral
agent or collateral agents pursuant to the terms of paragraph (b) hereof or (ii)
be removed from its capacity as the Collateral Agent by the Directing Holders.
If no successor collateral agent or collateral agents shall be appointed and
approved within sixty days from the date of the giving of the aforesaid notice
of resignation or within sixty days from the date of such removal, the
Collateral Agent (notwithstanding the termination of all of its other duties and
obligations hereunder by reason of such resignation or such removal) shall, or
any Secured Party may, apply to any court of competent jurisdiction to appoint a
successor collateral agent or collateral agents (which may be an individual or
individuals) to act hereunder. Any successor collateral agent or collateral
agents so appointed by such court shall immediately and without further act be
superseded by any successor collateral agent or collateral agents appointed
pursuant to the terms of paragraph (b) hereof.
(b) If at any time the Collateral Agent shall resign or otherwise
become incapable of acting, or if at any time a vacancy shall occur in the
office of the Collateral Agent by virtue of the removal of the Collateral Agent
or for any other cause, a successor collateral agent or collateral agents may be
appointed (i) automatically under the circumstances provided by Section 7.08(b)
of each of the Indentures or (ii) in all other cases, by the Directing Holders,
and in each of the cases described in clauses (i) and (ii) of this paragraph
(b), the
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powers, duties, authority and title of the predecessor collateral agent or
collateral agents shall be terminated and cancelled without procuring the
resignation of such predecessor collateral agent or collateral agents, and
without any other formality (except as may be required by applicable law).
(c) The appointment and designation referred to in subsection 6.5(b)
shall, after any required filing, be full evidence of the right and authority to
make the same and of all the facts therein recited, and this Agreement shall
vest in such successor collateral agent or collateral agents, without any
further act, deed or conveyance, all of the estate and title of its predecessor
or their predecessors, and upon such filing for record the successor collateral
agent or collateral agents shall become fully vested with all the estates,
properties, rights, powers, trusts, duties, authority and title of its
predecessor or their predecessors; but such predecessor or predecessors shall,
nevertheless, on the written request of the Directing Holders, the Obligors or
its or their successor collateral agent or collateral agents, execute and
deliver an instrument transferring to such successor or successors all the
estates, properties, rights, powers, trusts, duties, authority and title of such
predecessor or predecessors hereunder. Each such predecessor or predecessors
shall deliver all securities and moneys held by it or them to such successor
collateral agent or collateral agents.
(d) Any required filing for record of the instrument appointing a
successor collateral agent or collateral agents as hereinabove provided shall be
at the expense of the Obligors. The resignation of any collateral agent or
collateral agents and the instrument or instruments removing any collateral
agent or collateral agents, together with all other instruments, deeds and
conveyances provided for in this Article 6 shall, if required by law, be
forthwith recorded, registered and filed by and at the expense of the Obligors,
wherever this Agreement is recorded, registered and filed.
6.6 Status of Successors to the Collateral Agent. Except as
permitted by Section 6.5, every successor to the Collateral Agent appointed
pursuant to Section 6.5 shall be a bank or trust company in good standing and
having power so to act, incorporated under the laws of the United States or any
State thereof or the District of Columbia, and having its principal corporate
trust office within the forty-eight contiguous States, and shall also have
capital, surplus and undivided profits of not less than $100,000,000, if there
be such an institution with such capital, surplus and undivided profits willing,
qualified and able to accept the trust upon reasonable or customary terms.
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6.7 Merger of the Collateral Agent. Any corporation into which the
Collateral Agent may be merged, or with which it may be consolidated, or any
corporation resulting from any merger or consolidation to which the Collateral
Agent shall be a party, shall be the Collateral Agent under this Agreement
without the execution or filing of any paper or any further act on the part of
the parties hereto.
6.8 Appointment of Additional and Separate Collateral Agent.
Whenever (i) the Collateral Agent shall deem it necessary or prudent (in
accordance with the advice or opinion of its counsel) in order to conform to any
law of any jurisdiction in which all or any part of the Collateral shall be
situated or to make any claim or bring any suit with respect to or in connection
with the Collateral, or (ii) the Collateral Agent shall be advised by counsel
satisfactory to it that it is so necessary or prudent in the interest of the
Secured Parties, then in any such case, the Collateral Agent shall execute and
deliver from time to time all instruments and agreements necessary or proper to
constitute another bank or trust company or one or more persons approved by the
Collateral Agent either to act as additional trustee or trustees of all or any
part of the Trust Estate, jointly with the Collateral Agent, or to act as
separate trustee or trustees of all or any part of the Trust Estate, in any such
case with such powers as may be provided in such instruments or agreements, and
to vest in such bank, trust company or person as such additional trustee or
separate trustee, as the case may be, any property, title, right or power of the
Collateral Agent deemed necessary or advisable by the Collateral Agent. The
Obligors and the Secured Parties hereby consent to all actions taken by the
Collateral Agent under the foregoing provisions of this Section 6.8.
ARTICLE 7
TERMINATION; RELEASES OF COLLATERAL;
EXPIRATION OF CERTAIN RIGHTS
7.1 Termination. This Agreement shall terminate when all amounts
owing in respect of the Secured Obligations under or in respect of (i) the Note
Indenture and the Senior Secured Notes and any related instruments and
agreements and (ii) the Discount Note Indenture and the Senior Secured Discount
Notes and any related instruments and agreements shall have been indefeasibly
paid in full in cash or at such time as such Secured Obligations otherwise have
been defeased in accordance with the applicable Debt Instrument and the Obligors
and its subsidiaries are
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discharged of their obligations under each such Debt Instrument in accordance
with its terms; provided, however, that if such Debt Instrument is subject to
reinstatement as provided in Section 8.05 of the Indentures, this Agreement
shall likewise be reinstated.
7.2 Releases of Collateral. (a) The Company shall be entitled to
obtain a full release of all of the Collateral from the Liens of the Security
Documents upon compliance with the conditions precedent set forth in Section
8.01 of each of the Indentures for satisfaction and discharge of the Indentures
or for defeasance pursuant to Section 8.02(b) of each of the Indentures and of
the analogous provisions of the Debt Instruments evidencing any Permitted
Replacement Financing. Upon delivery by the Company to the Secured Parties of
an Officers' Certificate and an 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 Article Eight of each
of the Indentures), the Collateral Agent shall forthwith take all necessary
action (at the request of and the expense of the Obligors) to release and
reconvey to the appropriate Obligors all of the Collateral, and shall deliver
such Collateral in its possession to the appropriate Obligors including, without
limitation, the execution and delivery of releases and satisfactions wherever
required.
(b) The Company shall be entitled to obtain a release of, and the
Collateral Agent shall release, items of Collateral (other than Trust Moneys)
(the "Released Interests") subject to an Asset Sale upon compliance with the
condition precedent that the Company shall have delivered to the Secured Parties
the following:
(i) A Company Order requesting release of Released Interests,
such Company Order (A) specifically describing the proposed Released
Interests, (B) specifying the value of such Released Interests on a
date within 60 days of the Company Order (the "Valuation Date"), (C)
stating that the purchase price to be received is at least equal to
the fair market value of the Released Interests, (D) stating that the
release of such Released Interests will not interfere with or impede
the Collateral Agent's ability to realize the value of the remaining
Collateral and will not impair the maintenance and operation of the
remaining Collateral, (E) confirming the sale of, or an agreement to
sell, such Released Interests is a bona fide sale to a Person that is
not an Affiliate of the
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Company or, in the event that such sale is to a Person that is such an
Affiliate, confirming that such sale is being made in accordance with
Section 4.03 of each of the Indentures and the analogous provisions of
the Debt Instruments evidencing any Permitted Replacement Financing,
(F) certifying that such Asset Sale complies with the terms and
conditions of Section 4.06 of each of the Indentures and the analogous
provisions of the Debt Instruments evidencing any Permitted
Replacement Financing, (G) in the event that there is to be a
substitution of Property for the Collateral subject to the Asset Sale,
specifying the Property intended to be substituted for the Collateral
to be disposed of and (H) shall be accompanied by a counterpart of the
instruments proposed to give effect to the release fully executed and
acknowledged (if applicable) by all parties thereto other than the
Collateral Agent;
(ii) 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 4.06 of each of the
Indentures and the analogous provisions of the Debt Instruments
evidencing any Permitted Replacement Financing, (B) all Net Cash
Proceeds from the sale of any of the Released Interests will be
applied pursuant to Section 4.06 of each of the Indentures and the
analogous provisions of the Debt Instruments evidencing any Permitted
Replacement Financing, (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 Released Interest
will not result in a Default or Event of Default hereunder and (E) all
conditions precedent to such release have been complied with;
(iii) The Net Cash Proceeds and other non-cash consideration
received from the Asset Sale required to be delivered to the
Collateral Agent pursuant to Section 4.06 of each of the Indentures
and the analogous provisions of the Debt Instruments evidencing any
Permitted Replacement Financing and, if any property other than cash
or cash equivalents is included in such consideration, such
instruments of conveyance, assignment and transfer, if any, as may be
necessary, in the opinion of counsel reasonably satisfactory to the
Collateral Agent (which may include counsel to the Company), to
subject to the Lien of the
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Security Documents all the right, title and interest of the Company or
its Subsidiary, as the case may be, in and to such property;
(iv) If any Released Interest is only a portion of a discrete
parcel of real property, evidence that a title company shall have
committed to issue an endorsement to the Title Policy relating to the
affected Mortgaged Property confirming that after such release, the
Lien of the applicable Mortgage continues unimpaired as a first
priority perfected Lien upon the remaining Mortgaged Property subject
only to Prior Liens (as defined in the applicable Mortgage); and
(v) All certificates, opinions and other documentation required
by the TIA, if any as certified to the Collateral Agent by the
Company.
Upon compliance with the foregoing provisions of this Section 7.2(b),
the Collateral Agent shall cause to be released and reconveyed to the
appropriate Obligor, the Released Interests.
(c) The Company shall be entitled to obtain a release of, and the
Collateral Agent shall release, items of Collateral taken by eminent domain
or sold pursuant to the exercise by the United States of America or any
State, municipality or other governmental authority of any right which it
may then have to purchase, or to designate a purchaser or to order a sale
of, all of any part of the Collateral, upon compliance with the condition
precedent that the Company shall have delivered to the Secured Parties the
following:
(i) An Officers' Certificate certifying that (A) such Property
has been taken by eminent domain and the amount of the award therefor,
or that such Property has been sold pursuant to a right vested in the
United States of America, or a State, municipality or other
governmental authority to purchase, or to designate a purchaser, or
order a sale of such Property and the amount of the proceeds of such
sale, and (B) all conditions precedent to such release have been
complied with;
(ii) Subject to the requirements of any Prior Lien (as defined in
the applicable Mortgage) on the Collateral so taken, cash equal to the
amount of the
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award for such property or the proceeds of such sale, to be held as
Trust Moneys subject to the disposition thereof pursuant to Article
Three hereof; and
(iii) All opinions, certificates and other documentation
required by the TIA, if any as certified to the Collateral Agent by
the Company.
Upon compliance with the foregoing provisions of this Section 7.2(c),
the Collateral Agent shall cause to be released and reconveyed to the
appropriate Obligor, the aforementioned items of Collateral.
(d) Subject to paragraphs (a), (b) and (c) above, so long as no Event
of Default is continuing and no Enforcement Notice is in effect, in each
case where any Security Document or Debt Instrument specifically permits
the Company to obtain a release of Collateral upon compliance with the
provisions set forth therein (it being expressly understood that if there
shall not exist any Event of Default and no Enforcement Notice is in
effect, then no consent from any party to this Agreement is necessary for
such compliance), the Collateral Agent shall, upon receipt of evidence from
the Company of such compliance, and subject to the next sentence, release
from the Lien of such Security Document such Collateral (it being expressly
understood that this sentence of this Section 7.2 shall not be construed as
in any way limiting, amending, supplementing or waiving any of the
procedures to be followed under such Security Document or Debt Instrument
or any of the conditions precedent (including, without limitation, delivery
of instruments, Officers' Certificates and Opinions of Counsel) to be
satisfied thereunder). In each case where any Debt Instrument
specifically permits the Company to obtain a release of Collateral upon
compliance with the provisions set forth therein, the Collateral Agent
shall, upon receipt of a written direction from all Secured Parties
confirming that such proposed release complies with the provisions of the
Debt Instruments, release such Collateral from the Lien of the Security
Documents. In the event that neither the Debt Instruments nor any Security
Document specifically contemplates the Company's right to obtain a
particular release of Collateral which shall be requested by the Company,
the Lien of any instrument comprising a portion of the Trust Estate shall
be released in whole or in part by the Collateral Agent acting solely at
the direction and with the consent of the Directing Holders.
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7.3 Form and Sufficiency of Release. In the event that the Company
has or has caused to be 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 7.2 may be sold, exchanged or otherwise disposed of by
the Company, and the Company requests the Collateral Agent to furnish a written
disclaimer, release or quit-claim of any interest in such property under this
Agreement and the Security Documents, the Collateral Agent shall execute,
acknowledge and deliver to the Company (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 Collateral
Agent hereunder as sufficient for the purpose of this Agreement and as
constituting a good and valid release of the property therein described from the
Lien of the Security Documents.
7.4 Purchaser Protected. In no event shall any purchaser in good
faith of any property purported to be released hereunder be bound to ascertain
the authority of the Collateral Agent to execute the release or to inquire as to
the satisfaction of any conditions required by the provisions hereof for the
exercise of such authority or to see to the application of any consideration
given by such purchaser or other transferee; nor shall any purchaser or other
transferee of any property or rights permitted to be sold in accordance herewith
be under any obligation to ascertain or inquire into the authority of the
Company to make or cause to be made any such sale or other transfer.
7.5 Amendment of Collateral Documents. The Directing Holders shall
have the exclusive authority to direct the Collateral Agent to amend, supplement
or waive any provision of any Title Policy or any Security Document (other than
the Indentures, or any of the provisions of any Debt Instrument constituting
Permitted Replacement Financing), in each case without any consent or approval,
or prior notice, to any other Secured Party; provided, however, that (A) to the
extent any amendment, supplement or waiver releases the Collateral, the same
shall be governed by the provisions of Section 7.2 and not this Section 7.5 and
(B) no such amendment, supplement or waiver shall affect the right of any
Secured Party (or any Person for whom a Secured Party acts as trustee, agent or
fiduciary) not consenting thereto in writing to equal and ratable security to
the extent and for the periods contemplated by this Agreement; and provided,
<PAGE>
-41-
further, that the consent of no Secured Party signatory hereto or of any holder
of Notes or of Permitted Replacement Financing shall in any event be required to
amend, supplement or modify any Security Document (other than the Indentures) to
make any customary, technical and/or conforming changes thereto to the extent
necessary to secure, and provide for the rights, remedies and Obligations of,
any issue of Permitted Replacement Financing thereunder in the manner
contemplated herein and therein.
ARTICLE 8
MISCELLANEOUS
8.1 Amendments, Supplements and Waivers. The Directing Holders, the
Collateral Agent and the Obligors may, from time to time, amend, supplement or
waive any provision hereof; provided, however, that no such amendment,
supplement or waiver shall adversely affect the rights of any Secured Party to
equal and ratable security to the extent and for the periods contemplated by
this Agreement unless consented to by all holders of the Senior Secured Notes,
Senior Secured Discount Notes or interests in any other Debt Instrument
constituting Permitted Replacement Financing affected thereby. Any amendment,
supplement or waiver made in compliance with the provisions of the preceding
sentence of this Section shall be binding upon the Secured Parties and their
respective successors and assigns. Notwithstanding the foregoing, the Obligors,
the Collateral Agent and any Secured Party in respect of any Permitted
Replacement Financing may, without the consent of any Secured Party signatory
hereto, make any customary, technical and/or conforming amendments to this
Agreement to the extent necessary to make such Secured Party a party hereto and
to give effect to the ratable proceeds distribution provisions contemplated
herein.
8.2 Notices, Distributions and Payments. (a) In each case herein or
in any Security Document where any payment or distribution is to be made or
notice is to be given to Secured Parties, (i) such payments, distributions and
notices in respect of the Senior Secured Notes shall be made to the Note Trustee
for the benefit of the Senior Secured Noteholders, (ii) such payments,
distributions and notices in respect of the Senior Secured Discount Notes shall
be made to the Discount Note Trustee for the benefit of the Senior Secured
Discount Noteholders and (iii) such payments, distributions and notices in
respect of the holders of any Permitted Replacement Financing shall be made to
the Secured Party in respect thereof.
<PAGE>
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(b) All notices, requests, demands and other communications provided
for or permitted hereunder shall be in writing (including telex and telecopy
communications) and shall be sent by mail, telex, telecopier or hand delivery:
(i) If to the Obligors, to them at the Company's address at:
13500 South Perry Avenue
Riverdale, Illinois, 60627
Attention: Corporate Secretary and Treasurer
Telephone No.: (708) 849-2500
Telecopier No.: (708) 841-6010
(ii) If to the Collateral Agent, to it at its address at:
777 Main Street
Hartford, Connecticut 06115
Attention: Corporate Trust Administration
Telephone No.: (203) 986-4424
Telecopier No.: (203) 986-7920
(iii) If to the Note Trustee, to it at its address at:
777 Main Street
Hartford, Connecticut 06115
Attention: Corporate Trust Administration
Telephone No.: (203) 986-4424
Telecopier No.: (203) 986-7920
(iv) If to the Discount Note Trustee, to it, at its address at:
777 Main Street
Hartford, Connecticut 06115
Attention: Corporate Trust Administration
Telephone No.: (203) 986-4424
Telecopier No.: (203) 986-7920
(v) If to holders of Permitted Replacement Financing, to it or
them, at the address(es) set forth in Exhibit A hereto.
<PAGE>
-43-
All such notices, requests, demands and communications shall be deemed to have
been duly given or made, when delivered by hand or five business days after
being deposited in the mail, postage prepaid, when telexed, answer back received
and when telecopied, receipt acknowledged.
8.3 Headings. Headings used in this Agreement are for convenience
only and shall not affect the construction of this Agreement.
8.4 Severability. Any provision of this Agreement that is prohibited
or unenforceable in any jurisdiction shall not invalidate the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
8.5 Dealings with the Company. Upon any application or demand by the
Company to the Collateral Agent to take or permit any action under any of the
provisions of this Agreement or under any Security Document, the Company shall
furnish to the Collateral Agent an Officers' Certificate and Opinion of Counsel
stating that all conditions precedent, if any, provided for in this Agreement or
such Security Document, as the case may be, relating to the proposed action
have been complied with, except that in the case of any such application or
demand as to which the furnishing of such documents is specifically required by
any provision of this Agreement or any Security Document relating to such
particular application or demand, no additional certificate or opinion need be
furnished.
8.6 Binding Effect. This Agreement shall be binding upon and inure
to the benefit of each of the parties hereto and shall inure to the benefit of
the Secured Parties and their respective successors and assigns and nothing
herein or in any Security Document is intended or shall be construed to give any
other person any right, remedy or claim under, to or in respect of this
Agreement, the Collateral or the Trust Estate.
8.7 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK
WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS.
8.8 CONSENT TO JURISDICTION AND SERVICE OF PROCESS. ALL JUDICIAL
PROCEEDINGS BROUGHT AGAINST THE OBLIGORS WITH RESPECT TO THIS AGREEMENT MAY BE
BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE BOROUGH
OF MANHATTAN,
<PAGE>
-44-
STATE OF NEW YORK AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT THE OBLIGORS
ACCEPT FOR THEMSELVES AND IN CONNECTION WITH THEIR PROPERTIES, GENERALLY AND
UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS, AND
IRREVOCABLY AGREE TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION
WITH THIS AGREEMENT. THE OBLIGORS DESIGNATE AND APPOINT CT CORPORATION SYSTEM,
WITH AN ADDRESS AT 1633 BROADWAY, NEW YORK, NEW YORK 10019 AND SUCH OTHER
PERSONS AS MAY HEREAFTER BE SELECTED BY THE COMPANY IRREVOCABLY AGREEING IN
WRITING TO SO SERVE, AS THEIR AGENT TO RECEIVE ON THEIR BEHALF, SERVICE OF ALL
PROCESS IN ANY SUCH PROCEEDINGS IN ANY SUCH COURT, SUCH SERVICE BEING HEREBY
ACKNOWLEDGED BY THE OBLIGORS TO BE EFFECTIVE AND BINDING SERVICE IN EVERY
RESPECT. A COPY OF SUCH PROCESS SO SERVED SHALL BE MAILED BY REGISTERED MAIL TO
THE OBLIGORS C/O THE COMPANY AT ITS ADDRESS PROVIDED FOR IN PARAGRAPH (D) ABOVE
EXCEPT THAT UNLESS OTHERWISE PROVIDED BY APPLICABLE LAW, ANY FAILURE TO MAIL
SUCH COPY SHALL NOT AFFECT THE VALIDITY OF SERVICE OF PROCESS. IF ANY AGENT
APPOINTED BY THE OBLIGORS REFUSES TO RECEIVE AND FORWARD SUCH SERVICE, THE
OBLIGORS HEREBY AGREE THAT SERVICE UPON THEM BY MAIL SHALL CONSTITUTE SUFFICIENT
NOTICE. NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS IN ANY OTHER
MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF THE COLLATERAL AGENT TO
BRING PROCEEDINGS AGAINST THE OBLIGORS IN THE COURTS OF ANY OTHER JURISDICTION.
8.9 Counterparts. This Agreement may be executed in separate
counterparts, each of which shall be an original and all of which taken together
shall constitute one and the same instrument.
8.10 Certain References. Wherever in this Agreement the Collateral
Agent is permitted or required to take any action or make any election only upon
the direction and with the consent of the Directing Holders, the Collateral
Agent shall not be required to account to the Obligors to prove the direction
and consent of the Directing Holders to take such action or make such election,
and the taking of such action or the making of such election by the Collateral
Agent shall be deemed conclusive proof, as between the Obligors, on the one
hand, and the Collateral Agent and Secured Parties, on the other hand, that such
action or election was authorized. The Obligors shall not raise as a defense to
any action, claim, counterclaim or proceeding involving this Agreement or any
Security Document, any claim that any action taken or election made by the
Collateral Agent was not authorized by the Directing Holders if such action or
election was taken or made after the giving of a notice referred to in Section
2.2(a), if applicable, and after any such direction to the Collateral Agent.
<PAGE>
-45-
8.11 Permitted Additional Lenders.
----------------------------
(a) Permitted Additional Lenders shall not be deemed Secured Parties
hereunder until such time as the following conditions shall have been
satisfied: (A) the Permitted Additional Lenders, or the agent, trustee or
other representative acting on its or their behalf, shall,
contemporaneously with the incurrence of such Permitted Replacement
Financing, execute and deliver a supplement or amendment to this Agreement
(the "CAA Supplement") substantially in the form of Exhibit A annexed
hereto, and shall have delivered such opinions, title insurance and other
instruments and documents as the Collateral Agent shall reasonably require
in accordance with an Opinion of Counsel (upon which the Collateral Agent
may conclusively rely) to comply with (B) hereof; (B) there is delivered to
the Collateral Agent an Opinion of Counsel confirming that (1) such
Permitted Replacement Financing ranks pari passu in right of payment with
the Notes and each issue of Permitted Replacement Financing and is being
incurred pursuant to an instrument (the "Permitted Replacement Financing
Indenture") that includes provisions which are substantially identical to
Sections 4.06 and 4.15 and Article Ten of each of the Indentures and to the
defined terms relating to or used in each of such Sections 4.06 and 4.15
and Article Ten of each of the Indentures; (2) based on the results of
searches of Uniform Commercial Code filings and the real estate records in
the applicable jurisdictions, as of the effective date of the CAA
Supplement pursuant to which the Permitted Additional Lenders expressly
become parties to this Agreement (the "New Party Date"), there are no
intervening Liens since the Issue Date of the type which require filing to
perfect a Lien under the Uniform Commercial Code or real property law in
the applicable jurisdictions (an "Intervening Lien") or, in lieu of such
opinion, the applicable CAA Supplement shall expressly provide that such
Permitted Additional Lenders shall indemnify any other Person who was a
party to this Agreement prior to the New Party Date in question and who
shall remain a party thereto after the New Party Date in question (any such
party an "Existing Party") against any diminution in the value to be
received by each Existing Party upon the disposition of any Collateral that
would arise due to the pro rata allocation of rights provisions of this
Agreement and the existence of such Intervening Lien and of any other
Intervening Lien arising since the Issue Date and on or prior to the New
Party Date in question, with the form and substance of such indemnity to be
reasonably acceptable to the Trustee of the
<PAGE>
-46-
Indebtedness secured by the Collateral immediately prior to the relevant
New Party Date; (3) each of the Security Documents continues to be
effective and enforceable in accordance with its terms (subject to
customary bankruptcy and limitations of creditors' rights exceptions) and
the incurrence of the Indebtedness evidenced by the Permitted Replacement
Financing in question will not affect the validity or perfection of the
security interest of the Collateral Agent for the benefit of the Secured
Parties and will not affect the priority of the security interest of the
Collateral Agent for the benefit of the Existing Parties who were Existing
Parties on the Issue Date or with respect to any Existing Party who became
an Existing Party prior to any Intervening Lien arising after the date such
party became an Existing Party; (4) the Collateral Agent has title
insurance in customary form for all amounts outstanding under the Debt
Instruments; and (5) the execution and delivery of such CAA Supplement, and
the performance by the Obligors of their obligations thereunder, will not
cause any default or event of default under any of the Security Documents
or under any other material agreement of the Obligors; (C) such Person
proposing to become a Permitted Additional Lender shall expressly agree
pursuant to an express provision of the CAA Supplement to indemnify each
Existing Party against any diminution in value to be received by each
Existing Party upon the disposition of any Collateral that would arise due
to the pro rata allocation of rights provisions of this Agreement and the
existence of any Lien arising since the Issue Date and prior to the New
Party Date in question and not the subject of the Opinion of Counsel
referred to in clause (B)(2) above, with the form and substance of such
indemnity to be reasonably acceptable to the Trustee of the Indebtedness
secured by the Collateral immediately prior to the relevant New Party Date;
and (D) the Company shall have delivered to the Collateral Agent
contemporaneously with the execution and delivery of such CAA Supplement,
an Officers' Certificate stating that no default or event of default has
occurred or is continuing under any of the Security Documents or under any
of the Debt Instruments.
(b) In the event that any holder of Permitted Replacement Financing
shall deny, contest or otherwise refuse or fail to, or shall for any reason
be unable to, perform in a full and timely manner each and every of its
obligations hereunder (including, without limitation, its obligations to
indemnify any Existing Party against any diminution in the value to be
received thereby upon the disposition of any Collateral by virtue of the
existence of
<PAGE>
-47-
any Intervening Lien as contemplated in paragraph (a) of this Section 8.11
or shall attempt in any manner to seize or foreclose on the Collateral or
in any other way attempt to enforce a security interest in the Collateral
other than through the mechanism provided herein, such holder of Permitted
Replacement Financing shall not be entitled to have any of the benefits or
exercise any of the rights which would otherwise be available to it
hereunder.
8.12 Powers Exercisable by Receiver or Trustee. In case the
Collateral shall be in the possession of a receiver or trustee, lawfully
appointed, the powers conferred in this Agreement upon the Company with respect
to the release, sale or other disposition of such property may be exercised by
such receiver or trustee, and an instrument signed by such receiver or trustee
shall be deemed the equivalent of any similar instrument of the Company or of
any officer or officers thereof required by the provisions of this Agreement.
8.13 Possession and Use of Collateral. Subject to and in accordance
with the provisions of the Debt Instruments and the Security Documents, so long
as no Default or Event of Default shall have occurred and be continuing, each
Obligor shall have the right to remain in possession and retain exclusive
control of the Collateral owned or held by it (other than Trust Moneys,
securities and other personal property held by, or required to be deposited or
pledged with, the Collateral Agent under the Security Documents), to operate,
manage, develop, use and enjoy such Collateral (other than Trust Moneys) to
alter or repair any such Collateral consisting of 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, rates, interest, rents, issues, profits,
revenues, proceeds and other income thereof (other than Trust Moneys).
8.14 No Waiver; Discontinuance of Proceeding. (i) No failure on the
part of Collateral Agent to exercise, no course of dealing with respect to, and
no delay in exercising, any right, power or remedy hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise by the Collateral Agent
of any right, power or remedy hereunder preclude any other or further exercise
thereof or the exercise of any other right, power or remedy. The remedies
herein provided are to the fullest extent permitted by the law cumulative and
are not exclusive of any remedies provided by law.
<PAGE>
-48-
(ii) In the event the Collateral Agent shall have instituted any
proceeding to enforce any right, power or remedy under this Agreement by
foreclosure, sale, entry or otherwise, and such proceeding shall have been
discontinued or abandoned for any reason or shall have been determined adversely
to the Collateral Agent, then and in every such case the Obligors, the
Collateral Agent and each Secured Party shall be restored to their respective
former positions and rights hereunder with respect to the Collateral, and all
rights, remedies and powers of the Collateral Agent and the Secured Parties
shall continue as if no such proceeding had been instituted.
8.15 Obligations Absolute. All obligations of the Obligors hereunder
shall be absolute and unconditional irrespective of:
(i) any bankruptcy, insolvency, reorganization, arrangement,
readjustment, composition, liquidation or the like of any Obligor;
(ii) any lack of validity or enforceability of any Note, any Debt
Instrument governing Permitted Replacement Financing or any other
agreement or instrument relating thereto;
(iii) any change in the time, manner or place of payment of, or
in any other term of, all or any of the Secured Obligations, or any
other amendment or waiver of or any consent to any departure from any
Debt Instrument governing Secured Obligations, or any other agreement
or instrument relating thereto;
(iv) any exchange, release or non-perfection of any other
collateral, or any release or amendment or waiver of or consent to any
departure from any guarantee, for all or any of the Secured
Obligations;
(v) any exercise or non-exercise, or any waiver of any right,
remedy, power or privilege under or in respect of this Agreement, any
Debt Instrument governing Secured Obligations except as specifically
set forth in a waiver granted pursuant to the provisions of Section
8.1; or
(vi) any other circumstances which might otherwise constitute a
defense available to, or a discharge of, any Obligor.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement or
caused this Agreement to be duly executed by their respective officers thereunto
duly authorized as of the day and year first above written.
ACME METALS INCORPORATED
By:___________________________
Name:
Title:
ACME STEEL COMPANY
By:___________________________
Name:
Title:
ACME PACKAGING CORPORATION
By:___________________________
Name:
Title:
<PAGE>
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION, as
Collateral Agent
By:___________________________
Name:
Title:
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION, as
Note Trustee
By:___________________________
Name:
Title:
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION, as
Discount Notes Trustee
By:___________________________
Name:
Title:
<PAGE>
EXHIBIT A
[date]
[address of Collateral Agent]
Dear Sirs:
We will become lenders to one or more of the Obligors (this, and all
other capitalized terms used herein without definition, as so defined in that
certain Collateral Agency Agreement, dated as of ____________, 1994 to which
this letter is an exhibit) today and wish to become Permitted Additional Lenders
with the benefits granted to such Permitted Additional Lenders pursuant to the
Security Documents. [We are acting as duly appointed representatives for all
such Permitted Additional Lenders under the terms of an agreement, dated the
date hereof, attached hereto as Exhibit I.] Until indicated in writing to the
contrary to the Collateral Agent, the Trustees, and the Obligors, our address
for purposes of Section 8.2(b) of the Collateral Agency Agreement is [give
address for notices.]
We hereby acknowledge that we have been provided with copies of all
the Security Documents and have been given sufficient time to review them. By
signing this letter we hereby agree, in exchange for the security interest in
the Shared Collateral described in such Collateral Agency Agreement and the
other Security Documents, to abide by all of the terms and conditions of such
Security Documents and expressly acknowledge that (i) all decisions with respect
to the Collateral will be made by holders of a majority in principal amount of
the then outstanding Notes, (ii) that we will have no rights under such Security
Documents other than to receive our Pro Rata Share of the Shared Collateral
under the circumstances set forth in such Security Documents and (iii) that
should we seek to challenge such provisions or seek in any way to foreclose or
otherwise enforce the Lien in the Security Documents or in any other way seek to
enforce a security interest in the Collateral or seek an interest in the
Disbursement Collateral whether through judicial, quasi-judicial or independent
action that we will lose all rights hereunder and under the Security Documents
to the benefit of the Collateral. We understand that before we become Permitted
Additional Lenders the Company must certify that it will not be in default as a
result of the incurrence of the Indebtedness to be incurred by one or more of
the Obligors under the Debt Instrument which is intended to be Permitted
Replacement
<PAGE>
-2-
Financing and we are not aware of any facts that lead us to conclude that the
Company can not so certify.
____________________________________
as Permitted Additional Lenders
By:_________________________________
Name:
Title:
We hereby certify as follows:
That the Company is not, and will not be as the result of the
incurrence of the Indebtedness contemplated by this letter, in default under the
Indentures.
ACME METALS INCORPORATED
By:_________________________________
Name:
Title:
ACME STEEL COMPANY
By:_________________________________
Name:
Title:
ACME PACKAGING CORPORATION
By:_________________________________
Name:
Title:
<PAGE>
-3-
Accepted and Acknowledged:
____________________________
as Collateral Agent
By:_________________________
Name:
Title:
____________________________
as Note Trustee
By:_________________________
Name:
Title:
____________________________
as Discount Note Trustee
By:_________________________
Name:
Title:
<PAGE>
COMPANY STOCK PLEDGE AGREEMENT
COMPANY STOCK PLEDGE AGREEMENT (the "Agreement"), dated as of ___________,
1994, made by ACME METALS INCORPORATED, a Delaware corporation(together with its
successors and assigns, "Pledgor"), in favor of SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION, a national banking association, as collateral agent (in
such capacity and together with its successors and assigns in such capacity,
"Collateral Agent") pursuant to the Collateral Agency Agreement (as hereinafter
defined).
R E C I T A L S :
---------------
1. Pledgor is the legal and beneficial owner of the Pledged Shares (as
hereinafter defined) set forth on Schedule A attached hereto.
2. Pursuant to that certain indenture (as amended, amended and restated,
supplemented or otherwise modified from time to time, the "Note Indenture"),
dated as of ________, 1994, by and among Pledgor, the subsidiaries of Pledgor
and Shawmut Bank Connecticut, National Association, as trustee (in such capacity
and together with its successors and assigns in such capacity, the "Note
Trustee") for the holders of the Senior Secured Notes (as hereinafter defined),
Pledgor is issuing its ___% senior secured notes due 2002 (as amended, amended
and restated, supplemented or otherwise modified from time to time, the "Senior
Secured Notes") in the aggregate principal amount of $175,000,000.
3. Pursuant to that certain indenture (as amended, amended and restated,
supplemented or otherwise modified from time to time, the "Discount Note
Indenture"; together with the Note Indenture, the "Indentures"), dated as of
________, 1994, by and among Pledgor, the subsidiaries of Pledgor and Shawmut
Bank Connecticut, National Association, as trustee (in such capacity and
together with its successors and assigns in such capacity, the "Discount Note
Trustee"; together with the Note Trustee, the "Trustees") for the holders of the
Senior Secured Discount Notes (as hereinafter defined), Pledgor is issuing its
__% senior secured discount notes due 2004 (as amended, amended and restated,
supplemented or otherwise modified from time to time, the "Senior Secured
Discount Notes"; together with the Senior Secured Notes, the "Notes") in the
aggregate principal amount of $______.
<PAGE>
-2-
4. Collateral Agent is the collateral agent under that certain collateral
agency agreement (the "Collateral Agency Agreement"), dated as of ________,
1994, for the Trustees (for the benefit of the holders of the Notes) and such
other parties which may from time to time become additional lenders to Pledgor
and/or its subsidiaries (each such lender, a "Permitted Additional Lender" and
collectively, the "Permitted Additional Lenders"; together with the Trustees and
Collateral Agent, the "Secured Parties") which may, in accordance with the
provisions of clause (xi) of the definition of "Permitted Liens" in each
Indenture as in effect on the date hereof, take a security interest in the
Collateral (as defined in the Collateral Agency Agreement) to secure the
financing provided by the Permitted Additional Lenders (such financing, the
"Permitted Replacement Financing") upon the execution and delivery by the
Permitted Additional Lenders of a supplement to the Collateral Agency Agreement
as contemplated therein.
5. This Agreement is given by Pledgor in favor of Collateral Agent for its
benefit and the benefit of the other Secured Parties to secure the payment and
performance of the Secured Obligations (as hereinafter defined).
A G R E E M E N T :
-----------------
NOW, THEREFORE, in consideration of the foregoing premises and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Pledgor and Collateral Agent hereby agree as follows:
SECTION 1. Definitions. Capitalized terms used herein but not otherwise
defined herein shall have the meanings assigned to such terms in the Indentures
as in effect on the date hereof. The following terms shall have the following
meanings. Such definitions shall be equally applicable to the singular and
plural forms of the terms defined.
"Additional Shares" shall mean all additional shares of stock of any of the
issuers set forth on Schedule A attached hereto from time to time acquired by
Pledgor in any manner (which to the extent permitted by law are, and shall
remain at all times until this Agreement terminates, certificated securities)
and, if incorporated in a jurisdiction that permits certificates, the
certificates representing such additional shares and in all cases any interest
of Pledgor in the entries on the books of any financial intermediary pertaining
to such additional shares.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time hereafter, and any successor statute.
"Distributions" shall mean all dividends, cash, options, warrants, rights,
instruments, distributions, returns of capital, income, profits and other
property interests or proceeds from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or all of the shares
of stock held by Pledgor.
<PAGE>
-3-
"Future Shares" shall mean all shares of stock owned or held by Pledgor of
any Person which, after the date of this Agreement, is or becomes, as a result
of any occurrence, a Subsidiary of Pledgor (which to the extent permitted by law
are, and shall remain at all times until this Agreement terminates, certificated
securities) and, if incorporated in a jurisdiction that permits certificates,
the certificates representing such additional shares and in all cases any
interest of Pledgor in the entries on the books of any financial intermediary
pertaining to such additional shares.
"Pledged Shares" shall mean the shares of capital stock of each Person
listed in Schedule A annexed hereto issued by the Persons identified therein
(which to the extent permitted by law are, and shall remain at all times until
this Agreement terminates, certificated securities) and, if incorporated in a
jurisdiction which permits certificates, the certificates representing the
pledged shares and in all cases any interest of Pledgor in the entries on the
books of any financial intermediary pertaining to such pledged shares.
"Proceeds" shall have the meaning assigned to the term "proceeds" under the
UCC and, in any event, shall include, without limitation, any and all (i)
proceeds of any insurance, indemnity, warranty or guarantee payable to
Collateral Agent or to Pledgor from time to time with respect to any of the
Pledged Collateral, (ii) payments (in any form whatsoever) made or due and
payable to Pledgor from time to time in connection with any requisition,
confiscation, condemnation, seizure or forfeiture of all or any part of the
Pledged Collateral by any governmental authority (or any person acting under
color of a governmental authority), (iii) products of the Pledged Collateral and
(iv) other amounts from time to time paid or payable under or in connection with
any of the Pledged Collateral.
"UCC" shall mean the Uniform Commercial Code as in effect in any relevant
jurisdiction.
SECTION 2. Pledge. As collateral security for the payment and performance
when due of all the Secured Obligations, Pledgor hereby pledges to Collateral
Agent and grants to Collateral Agent for the benefit of the Secured Parties a
continuing first priority security interest in and pledge of all of Pledgor's
right, title and interest in, to and under the following property, whether now
existing or hereafter acquired (collectively, the "Pledged Collateral"):
(i) all Pledged Shares;
(ii) all Additional Shares;
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(iii) all Future Shares;
(iv) all Distributions; and
(v) all Proceeds of any of the property specified in clauses (i)
through (iv) of this Section 2.
SECTION 3. Delivery of Pledged Collateral. All certificates or
instruments representing or evidencing the Pledged Collateral shall, to the
extent not previously delivered to Collateral Agent, be delivered to and held by
or on behalf of Collateral Agent pursuant hereto and shall be in suitable form
for transfer by delivery, or shall be accompanied by duly executed instruments
of transfer or assignment in blank, all in form and substance satisfactory to
Collateral Agent. Collateral Agent shall have the right, at any time and without
notice to Pledgor, to transfer to or to register in the name of Collateral Agent
or any of its nominees any or all of the Pledged Collateral. If any issuer of
Pledged Collateral is incorporated in a jurisdiction which does not permit the
use of certificates to evidence equity ownership, then Pledgor shall, to the
extent permitted by applicable law, record such pledge on the stock register of
the issuer, execute any customary stock pledge forms or other documents
necessary or appropriate to complete the pledge and give Collateral Agent the
right to transfer such Pledged Collateral under the terms hereof and provide to
Collateral Agent an Opinion of Counsel, in form and substance satisfactory to
it, confirming such pledge. In addition, Collateral Agent shall have the right
at any time to exchange certificates representing or evidencing Pledged
Collateral for certificates of smaller or larger denominations.
SECTION 4. Secured Obligations. This Agreement secures, and the
Pledged Collateral is collateral security for, the payment and performance in
full when due, whether at stated maturity, by acceleration or otherwise
(including, without limitation, the payment of interest and other amounts which
would accrue and become due but for the filing of a petition in bankruptcy or
the operation of the automatic stay under Section 362(a) of the Bankruptcy Code,
11 U.S.C. (S) 362(a)), of (i) all of the obligations, liabilities and
indebtedness of Pledgor now or hereafter existing under or in respect of each
Indenture, the Notes and the notes, agreements and/or other instruments which
collectively evidence any Permitted Replacement Financing (such notes,
agreements and/or other instruments, together with the Indentures and the Notes,
the "Debt Instruments") (including, without limitation, the obligations of
Pledgor to pay principal of, premium, if any, and interest on any Debt
Instruments when due and payable) and all other charges, fees, expenses,
commissions, reimbursements, premiums, indemnities and all other amounts due or
to become due under or in connection with each Debt Instrument and (ii) without
duplication of the amounts described in clause (i) of this Section 4, all
obligations,
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indebtedness and liabilities of Pledgor now existing or hereafter arising under
or in respect of this Agreement, including, without limitation, with respect to
all charges, fees, expenses, commissions, reimbursements, premiums, indemnities
and other payments related to or in respect of the obligations contained in this
Agreement (the obligations described in clauses (i) and (ii) of this Section 4,
collectively, the "Secured Obligations").
SECTION 5. No Release. Nothing set forth in this Agreement shall
relieve Pledgor from the performance of any term, covenant, condition or
agreement on Pledgor's part to be performed or observed under or in respect of
any Pledged Collateral or from any liability to any Person under or in respect
of any Pledged Collateral or shall impose any obligation on Collateral Agent or
any other Secured Party to perform or observe any such term, covenant, condition
or agreement on Pledgor's part to be so performed or observed or impose any
liability on Collateral Agent or any other Secured Party for any act or omission
on the part of Pledgor relating thereto or for any breach of any representation
or warranty on the part of Pledgor contained in this Agreement, or in respect of
the Pledged Collateral or made in connection herewith or therewith. The
obligations of Pledgor contained in this Section 5 shall survive the termination
of this Agreement and the discharge of Pledgor's other obligations hereunder.
SECTION 6. Representations, Warranties and Covenants. Pledgor
represents, warrants and covenants as follows:
(a) Ownership. With respect to the Pledged Collateral existing on the
date hereof, Pledgor is, and, as to the Pledged Collateral acquired by it
from time to time after the date hereof, Pledgor will be, the legal and
beneficial owner thereof free from any Lien or other right, title or
interest of any Person other than the Lien and security interest granted by
Pledgor to Collateral Agent in the Pledged Collateral pursuant to this
Agreement. The Lien and security interest created by this Agreement shall
not at any time be subject to any Lien other than the Lien and security
interest granted by Pledgor to Collateral Agent hereunder. Except as
otherwise permitted by the appropriate provisions of the Debt Instruments,
Pledgor at all times will be the sole beneficial owner of the Pledged
Collateral. Pledgor has not performed any acts which might prevent
Collateral Agent from enforcing any of the terms of this Agreement or that
would limit Collateral Agent in any such enforcement and Pledgor shall
defend the Pledged Collateral against all claims and demands of all Persons
at any time claiming any interest therein adverse to Collateral Agent or
any other Secured Party.
(b) Shares Validly Issued. All of the Pledged Shares have been, and
to the extent hereafter issued the Additional Shares and Future Shares will
be upon such
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issuance, duly authorized and validly issued and fully paid and non-
assessable.
(c) Necessary Filings; Delivery of Shares. No filings, registrations
or recordings are necessary or appropriate to create, preserve, protect and
perfect the security interest granted by Pledgor to Collateral Agent
pursuant to this Agreement. Upon the delivery of the Pledged Collateral to
Collateral Agent in accordance with Section 3 hereof, Collateral Agent will
have a valid and perfected first priority Lien on and security interest in
the Pledged Collateral subject to no prior Liens.
(d) Government Regulations. The pledge of the Pledged Collateral
pursuant to this Agreement does not violate Regulations G, T, U or X of the
Federal Reserve Board.
(e) Authorization; Enforceability. Pledgor has full power, authority
and legal right to pledge and grant a security interest in all the Pledged
Collateral pursuant to this Agreement. This Agreement constitutes the
legal, valid and binding obligation of Pledgor, enforceable against Pledgor
in accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, fraudulent transfer, moratorium and similar laws affecting
creditors' rights generally and to general equitable principles.
(f) No Consents. No consent of any other party (including, without
limitation, stockholders or creditors of Pledgor) and no consent,
authorization, approval, or other action by, and no notice to or filing
with, any governmental authority or regulatory body is required either (i)
for the execution, delivery or performance of this Agreement by Pledgor or
(ii) for the exercise by Collateral Agent of the voting or other rights
provided for in this Agreement or the remedies in respect of the Pledged
Collateral pursuant to this Agreement.
(g) No Conflicts. The execution, delivery and performance by Pledgor
of this Agreement do not (or with notice or lapse of time or both, will
not) violate, conflict with or constitute a default under, or result in the
termination of, or accelerate the performance required by, or result in
there being declared void, voidable or without further binding effect any
provision of any other agreement, instrument or document to which Pledgor
is a party.
(h) Accuracy of Information. All information set forth herein
(including, without limitation, the information set forth in the Schedules
annexed hereto) relating to the Pledged Collateral is accurate and complete
in all respects.
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(i) Additional Equity Interests. Pledgor shall (i) cause each issuer of
the Pledged Shares not to issue any securities in addition to or in
substitution for the Pledged Shares issued by such issuer, except to
Pledgor and (ii) pledge hereunder, immediately upon its acquisition
(directly or indirectly) thereof, any and all Additional Shares and Future
Shares.
(j) Chief Executive Office; Records. The chief executive office of
Pledgor is located at 13500 South Perry Avenue, Riverdale, Illinois 60627.
Pledgor shall not move such office, except to such new location as Pledgor
may establish in accordance with the last sentence of this subsection 6(j).
Pledgor shall not establish a new location for such office nor shall it
change its name until (i) it shall have given Collateral Agent not less
than thirty (30) days' prior written notice of its intention so to do,
clearly describing such new location or name and providing such other
information in connection therewith as Collateral Agent may request and
(ii) with respect to such new location or name, Pledgor shall have taken
all action satisfactory to Collateral Agent to maintain the perfection and
proof of the security interest of Collateral Agent for the benefit of the
Secured Parties in the Pledged Collateral intended to be granted hereby.
SECTION 7. Supplements, Further Assurances. Pledgor agrees that at
any time and from time to time, at the expense of Pledgor, Pledgor will promptly
execute and deliver all further instruments and documents, and take all further
action, that may be necessary or that Collateral Agent may request, in order to
perfect and protect the Lien granted or purported to be granted hereby or to
enable Collateral Agent to exercise and enforce its rights and remedies
hereunder with respect to any Pledged Collateral.
SECTION 8. Voting Rights; Distributions; Etc.
(a) For so long as no Event of Default shall have occurred and be
continuing:
(i) Pledgor shall be entitled to exercise any and all voting and
other consensual rights pertaining to the Pledged Collateral or any part
thereof for any purpose not inconsistent with the terms or purpose of this
Agreement.
(ii) Pledgor shall be entitled to receive and retain any and all
Distributions, but only if and to the extent made in accordance with the
provisions of the Indentures as in effect on the date hereof; provided,
however, that any and all such Distributions other than in the form of
cash, and any and all such Distributions in the form of cash paid or
payable in connection with a partial or total liquidation or dissolution or
in connection
<PAGE>
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with a reduction of capital, capital surplus or paid-in-surplus shall be,
and shall be forthwith delivered to Collateral Agent to hold as, Pledged
Collateral and shall, if received by Pledgor, be received in trust for the
benefit of Collateral Agent, be segregated from the other property or funds
of Pledgor, and be forthwith delivered to Collateral Agent as Pledged
Collateral in the same form as so received (with any necessary
endorsement).
(iii) Collateral Agent hereby authorizes Pledgor to exercise the
voting and other rights which it is entitled to exercise pursuant to
subsection 8(a)(i) hereof and to receive the Distributions which it is
authorized to receive and retain pursuant to subsection 8(a)(ii) hereof.
(b) Upon the occurrence and during the continuance of an Event of
Default, all rights of Pledgor to exercise the voting and other consensual
rights it would otherwise be entitled to exercise pursuant to subsection 8(a)(i)
and to receive the Distributions which it would otherwise be authorized to
receive and retain pursuant to subsection 8(a)(ii) without any action or the
giving of any notice shall cease, and all such rights shall thereupon become
vested in Collateral Agent, and Collateral Agent shall thereupon have the sole
right, but not the duty or obligation, to exercise such voting and other
consensual rights and the sole right to receive and hold as Pledged Collateral
such Distributions.
(c) Pledgor shall, at Pledgor's sole cost and expense, from time to
time execute and deliver to Collateral Agent appropriate instruments as
Collateral Agent may request in order to permit Collateral Agent to exercise the
voting and other rights which it may be entitled to exercise pursuant to
subsection 8(b) hereof and to receive all Distributions which it may be entitled
to receive under subsection 8(b) hereof.
(d) All Distributions which are received by Pledgor contrary to the
provisions of subsection 8(a)(ii) hereof shall be received in trust for the
benefit of Collateral Agent, shall be segregated from other funds of Pledgor and
shall immediately be paid over to Collateral Agent as Pledged Collateral in the
same form as so received (with any necessary endorsement).
SECTION 9. Transfers and Other Liens. Pledgor shall not (i) except
as permitted by the appropriate provisions of the Debt Instruments, sell,
convey, assign or otherwise dispose of, or grant any option or warrant with
respect to, any of the Pledged Collateral or (ii) create or permit to exist any
Lien upon or with respect to any of the Pledged Collateral except for the Lien
and security interest granted by Pledgor to Collateral Agent pursuant to this
Agreement.
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SECTION 10. Reasonable Care. Collateral Agent shall be deemed to
have exercised reasonable care in the custody and preservation of the Pledged
Collateral in its possession if such Pledged Collateral is accorded treatment
substantially equivalent to that which Collateral Agent, in its individual
capacity, accords its own property consisting of negotiable securities, it being
understood that Collateral Agent shall not have responsibility for (i)
ascertaining or taking action with respect to calls, conversions, exchanges,
maturities, tenders or other matters relative to any Pledged Collateral, whether
or not Collateral Agent or any other Secured Party has or is deemed to have
knowledge of such matters or (ii) taking any necessary steps to preserve rights
against any Person with respect to any Pledged Collateral.
SECTION 11. Events of Default; Remedies.
(a) Event of Default. It shall be an Event of Default hereunder if
there shall occur an "Event of Default" as defined in the Collateral Agency
Agreement.
(b) Dispositions of Pledged Collateral. If an Event of Default shall
have occurred and be continuing, Collateral Agent may exercise in respect of the
Pledged Collateral, in addition to other rights and remedies provided for herein
or otherwise available to it, all the rights and remedies of a secured party on
default under the UCC, and the Collateral Agent may also in its sole discretion,
without notice except as specified below, sell the Pledged Collateral or any
part thereof in one or more parcels at public or private sale or at any exchange
or broker's board for cash, on credit or for future delivery, and at such price
or prices and upon such other terms as Collateral Agent may deem commercially
reasonable, irrespective of the impact of any such sales on the market price of
the Pledged Collateral. Collateral Agent or any other Secured Party may be the
purchaser of any or all of the Pledged Collateral at any such sale and shall be
entitled, for the purpose of bidding and making settlement or payment of the
purchase price for all or any portion of the Pledged Collateral sold at such
sale, to use and apply any of the Secured Obligations owed to such Secured Party
as a credit on account of the purchase price of any Pledged Collateral payable
by such Secured Party at such sale. Each purchaser at any such sale shall hold
the property sold absolutely free from any claim or right on the part of
Pledgor, and Pledgor hereby waives (to the extent permitted by law) all rights
of redemption, stay and/or appraisal which it now has or may at any time in the
future have under any rule of law or statute now existing or hereafter enacted.
Collateral Agent shall give Pledgor not less than five days' prior written
notice of the time and place of any sale or other intended disposition of any of
the Pledged Collateral, except any Pledged Collateral which is of a type
customarily sold on a recognized market. The notice of such sale shall (i) in
the case of a public sale, state the time and place fixed for such sale and (ii)
in the case of a private sale, state the day after which such sale may be
consummated. Pledgor agrees that such notice constitutes
<PAGE>
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reasonable notice. Collateral Agent shall not be obligated to make any sale of
Pledged Collateral regardless of notice of sale having been given. Collateral
Agent may adjourn any public or private sale from time to time by announcement
at the time and place fixed therefor, and such sale may, without further notice,
be made at the time and place to which it was so adjourned. Pledgor hereby
waives any claims against Collateral Agent arising by reason of the fact that
the price at which any Pledged Collateral may have been sold at such a private
sale was less than the price which might have been obtained at a public sale,
even if Collateral Agent accepts the first offer received and does not offer
such Pledged Collateral to more than one offeree.
(c) Securities Laws Limitations. Pledgor recognizes that, by reason
of certain prohibitions contained in the Securities Act of 1933, as amended (the
"Securities Act"), and applicable state securities laws, Collateral Agent may be
compelled, with respect to any sale of all or any part of the Pledged
Collateral, to limit purchasers to those who will agree, among other things, to
acquire the Pledged Collateral for their own account, for investment and not
with a view to the distribution or resale thereof. Pledgor acknowledges that
any such private sales may be at prices and on terms less favorable to
Collateral Agent than those obtainable through a public sale without such
restrictions (including, without limitation, a public offering made pursuant to
a registration statement under the Securities Act), and, notwithstanding such
circumstances, agrees that any such private sale shall be deemed to have been
made in a commercially reasonable manner and that Collateral Agent shall have no
obligation to engage in public sales and no obligation to delay the sale of any
Pledged Collateral for the period of time necessary to permit the issuer thereof
to register it for a form of public sale requiring registration under the
Securities Act or under applicable state securities laws, even if Pledgor would
agree to do so.
(d) Additional Information. If Collateral Agent determines to
exercise its right to sell any or all of the Pledged Collateral, upon written
request, Pledgor shall, and shall cause each issuer of any Pledged Collateral to
be sold hereunder from time to time to, furnish to Collateral Agent all such
information as Collateral Agent may request in order to determine the number of
shares and other instruments included in the Pledged Collateral which may be
sold by Collateral Agent as exempt transactions under the Securities Act and the
rules of the Securities and Exchange Commission thereunder, as the same are from
time to time in effect.
(e) Waivers. Pledgor hereby waives, to the extent permitted by
applicable law, notice or judicial hearing in connection with Collateral Agent's
taking possession or Collateral Agent's disposition of any Pledged Collateral,
including, without limitation, any and all prior notice and hearing for any
prejudgment remedy or remedies and any such right which Pledgor would otherwise
have under law, and Pledgor hereby further waives: (i) all damages
<PAGE>
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occasioned by such taking of possession; (ii) all other requirements as to the
time, place and terms of sale or other requirements with respect to the
enforcement of Collateral Agent's rights hereunder; and (iii) all rights of
redemption, appraisal, valuation, stay, extension or moratorium now or hereafter
in force under any applicable law. Any sale of, or the grant of options to
purchase, or any other realization upon, any Pledged Collateral shall operate to
divest all right, title, interest, claim and demand, either at law or in equity,
of Pledgor therein and thereto, and shall be a perpetual bar both at law and in
equity against Pledgor and against any and all Persons claiming or attempting to
claim the Pledged Collateral so sold, optioned or realized upon, or any part
thereof, from, through and under Pledgor.
(f) Deficiency. Notwithstanding any other provision of this Agreement
to the contrary, if, after giving effect to any sale, transfer or other
disposition of any or all of the Pledged Collateral pursuant hereto and after
the application of the proceeds hereunder and any Pledged Collateral sold,
transferred or otherwise disposed of pursuant to any other Security Document to
the Secured Obligations, any Secured Obligations remain unpaid or unsatisfied,
Pledgor shall remain liable for the unpaid and unsatisfied amount of such
Secured Obligations.
SECTION 12. Application of Proceeds. The proceeds received by
Collateral Agent in respect of any sale of, collection from or other realization
upon all or any part of the Pledged Collateral pursuant to the exercise by
Collateral Agent of its remedies as a secured creditor as provided in Section 11
hereof, together with any other sums then held by Collateral Agent pursuant to
this Agreement, shall be applied promptly by Collateral Agent in the manner set
forth in the Collateral Agency Agreement.
SECTION 13. Expenses. Pledgor will upon demand pay to Collateral
Agent the amount of any and all expenses, including the reasonable fees and
expenses of its counsel and the allocated fees and expenses of staff counsel and
the fees and expenses of any experts and agents which Collateral Agent may incur
in connection with (i) the collection of the Secured Obligations, (ii) the
enforcement and administration of this Agreement, (iii) the custody or
preservation of, or the sale of, collection from, or other realization upon, any
of the Pledged Collateral, (iv) the exercise or enforcement of any of the rights
of Collateral Agent hereunder or (v) the failure by Pledgor to perform or
observe any of the provisions hereof. All amounts payable by Pledgor under this
Section 13 shall be due upon demand and shall be part of the Secured
Obligations. Pledgor's obligations under this Section shall survive the
termination of this Agreement and the discharge of Pledgor's other obligations
hereunder.
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SECTION 14. No Waiver; Discontinuance of Proceeding.
(a) No Waiver. No failure on the part of Collateral Agent to
exercise, no course of dealing with respect to, and no delay in exercising, any
right, power or remedy hereunder shall operate as a waiver thereof; nor shall
any single or partial exercise by Collateral Agent of any right, power or remedy
hereunder preclude any other or further exercise thereof or the exercise of any
other right, power or remedy. The remedies herein provided are to the fullest
extent permitted by the law cumulative and are not exclusive of any remedies
provided by law.
(b) Discontinuance of Proceeding. In the event Collateral Agent shall
have instituted any proceeding to enforce any right, power or remedy under this
Agreement by foreclosure, sale, entry or otherwise, and such proceeding shall
have been discontinued or abandoned for any reason or shall have been determined
adversely to Collateral Agent, then and in every such case Pledgor, Collateral
Agent and each Secured Party shall be restored to their respective former
positions and rights hereunder with respect to the Pledged Collateral, and all
rights, remedies and powers of Collateral Agent and the Secured Parties shall
continue as if no such proceeding had been instituted.
SECTION 15. Collateral Agent. (a) Collateral Agent has been
appointed as collateral agent pursuant to the Collateral Agency Agreement and
shall have the right hereunder to make demands, to give notices, to exercise or
refrain from exercising any rights, and to take or refrain from taking action
(including, without limitation, the release or substitution of Pledged
Collateral) in accordance with the provisions of the Collateral Agency
Agreement. The actions of Collateral Agent hereunder are subject to the
provisions of the Collateral Agency Agreement. Collateral Agent may resign and
a successor Collateral Agent may be appointed in the manner provided in the
Indenture. Upon the acceptance of any appointment as Collateral Agent by a
successor Collateral Agent, that successor Collateral Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring Collateral Agent under this Agreement, and the retiring
Collateral Agent shall thereupon be discharged from its duties and obligations
under this Agreement in accordance with the Collateral Agency Agreement. After
any retiring Collateral Agent's resignation, the provisions of this Agreement
shall inure to its benefit as to any actions taken or omitted to be taken by it
under this Agreement while it was Collateral Agent.
(b) Notwithstanding anything to the contrary contained in this
Agreement, the Indenture, the Mortgage or any of the other Security Documents,
in the event the Collateral Agent is entitled or required to commence an action
to exercise voting rights hereunder or otherwise exercise its remedies to
acquire control or possession of the Mortgaged Property, the Collateral Agent
shall not be required to commence any such action or exercise any such remedy
<PAGE>
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if the Collateral Agent has determined in good faith that the Collateral Agent
may incur liability under the Environmental Laws (as defined in the Mortgage) as
the result of the presence at, or release on or from, the Facility of any
Hazardous Materials (as defined in the Mortgage) unless the Collateral Agent has
received security or indemnity, from a Holder or Holders, in an amount and in a
form all satisfactory to the Collateral Agent in its sole discretion,
protecting the Collateral Agent from all such liability.
SECTION 16. Collateral Agent May Perform; Collateral Agent Appointed
Attorney-in-Fact. If Pledgor shall fail to do any act or thing that it has
covenanted to do hereunder or if any warranty on the part of Pledgor contained
herein shall be breached, Collateral Agent or any Secured Party may (but shall
have no duty or obligation to) do the same or cause it to be done or remedy any
such breach, and may reasonably expend funds for such purpose. Any and all
amounts so expended by Collateral Agent or such Secured Party shall be paid by
Pledgor promptly upon demand therefor, with interest at the Default Rate during
the period from and including the date on which such funds were so expended to
the date of repayment. Pledgor's obligations under this Section 16 shall
survive the termination of this Agreement and the discharge of Pledgor's other
obligations under this Agreement. Pledgor hereby appoints Collateral Agent its
attorney-in-fact with an interest, with full authority in the place and stead of
Pledgor and in the name of Pledgor, or otherwise, from time to time in
Collateral Agent's discretion, to take any action and to execute any instrument
consistent with the terms of this Agreement, any Debt Instrument, the Collateral
Agency Agreement and the Intercreditor Agreement which Collateral Agent may deem
necessary or advisable to accomplish the purposes of this Agreement. The
foregoing grant of authority is a power of attorney coupled with an interest and
such appointment shall be irrevocable for the term of this Agreement. Pledgor
hereby ratifies all that such attorney shall lawfully do or cause to be done by
virtue and in accordance with the terms hereof.
SECTION 17. Indemnity.
(a) Indemnity. Pledgor agrees to indemnify, pay and hold harmless
Collateral Agent and the officers, directors, employees, agents and affiliates
of Collateral Agent (collectively, the "Indemnitees") from and against any and
all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, claims, costs (including, without limitation, settlement costs and claims
for strict liability in tort and environmental or hazardous waste claims of any
sort), expenses or disbursements of any kind or nature whatsoever (including,
without limitation, the fees and disbursements of counsel for such Indemnitees
in connection with any investigative, administrative or judicial proceeding
commenced or threatened, whether or not such Indemnitee shall be designated a
party thereto), which may be imposed on, incurred by, or asserted against
<PAGE>
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such Indemnitee, in any manner relating to or arising out of this Agreement, the
Intercreditor Agreement, the Collateral Agency Agreement or the Debt Instruments
(including, without limitation, any misrepresentation by Pledgor in this
Agreement) (the "Indemnified Liabilities"); provided, however, that Pledgor
shall have no obligation to an Indemnitee hereunder with respect to Indemnified
Liabilities if it has been determined by a final decision (after all appeals and
the expiration of time to appeal) by a court of competent jurisdiction that such
Indemnified Liability arose from the negligence or willful misconduct of such
Indemnitee or, in the case of environmental laws, the willful violation of such
laws. To the extent that the undertaking to indemnify, pay and hold harmless
set forth in the preceding sentence may be unenforceable because it is violative
of any law or public policy, Pledgor shall contribute the maximum portion which
it is permitted to pay and satisfy under applicable law, to the payment and
satisfaction of all Indemnified Liabilities incurred by the Indemnitees or any
of them.
(b) Survival. The obligations of Pledgor contained in this Section 17
shall survive the termination of this Agreement and the discharge of Pledgor's
other obligations under this Agreement.
(c) Reimbursement. Any amounts paid by any Indemnitee as to which
such Indemnitee has the right to reimbursement shall constitute Secured
Obligations secured by the Pledged Collateral.
SECTION 18. Modification in Writing. No amendment, modification,
supplement, termination or waiver of or to any provision of this Agreement, nor
consent to any departure by Pledgor therefrom, shall be effective unless the
same shall be done in accordance with the terms of the Collateral Agency
Agreement and unless in writing and signed by Collateral Agent and Pledgor. Any
amendment, modification or supplement of or to any provision of this Agreement,
any waiver of any provision of this Agreement, and any consent to any departure
by Pledgor from the terms of any provision of this Agreement, shall be effective
only in the specific instance and for the specific purpose for which made or
given. Except where notice is specifically required by this Agreement or any
Debt Instrument, no notice to or demand on Pledgor in any case shall entitle
Pledgor to any other or further notice or demand in similar or other
circumstances.
SECTION 19. Termination; Release.
(a) Except as otherwise provided herein, this Agreement shall
terminate upon compliance by Pledgor with the applicable provisions of the
Collateral Agency Agreement. Upon termination of this Agreement or any release
of Pledged Collateral in accordance with the
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provisions of the Collateral Agency Agreement, Collateral Agent shall, upon the
request and at the sole cost and expense of Pledgor, forthwith assign, transfer
and deliver to Pledgor, against receipt and without recourse to or warranty by
Collateral Agent, such of the Pledged Collateral as may be in possession of
Collateral Agent and as shall not have been sold or otherwise applied pursuant
to the terms hereof on the order of and at the sole cost and expense of Pledgor,
and proper instruments (including UCC termination statements on Form UCC-3)
acknowledging the termination of this Agreement or the release of such Pledged
Collateral, as the case may be.
(b) In the event that any Asset Sale made by Pledgor in accordance
with applicable provisions of the Debt Instruments involves the sale of an asset
which constitutes Pledged Collateral, Pledgor shall deliver all Net Cash
Proceeds received in respect of such item of Pledged Collateral to Collateral
Agent to be held by Collateral Agent as Trust Moneys and applied in accordance
with the provisions of the Collateral Agency Agreement.
SECTION 20. Notices. Unless otherwise provided herein, any notice or
other communication herein shall be given in the manner set forth in the
Collateral Agency Agreement and at the addresses set forth in the Collateral
Agency Agreement, or at such other address as shall be designated by any party
in a written notice to the other party.
SECTION 21. Continuing Security Interest; Assignment. This Agreement
shall create a continuing security interest in the Pledged Collateral and shall
(i) be binding upon the Pledgor, its successors and assigns, and (ii) inure,
together with the rights and remedies of Collateral Agent hereunder, to the
benefit of Collateral Agent and the other Secured Parties and each of their
respective successors, transferees and assigns; no other Persons (including,
without limitation, any other creditor of the Pledgor) shall have any interest
herein or any right or benefit with respect hereto. Without limiting the
generality of the foregoing clause (ii), any Secured Party may assign or
otherwise transfer any Debt Instrument held by it secured by this Agreement to
any other Person, and such other Person shall thereupon become vested with all
the benefits in respect thereof granted to such Secured Party, herein or
otherwise, subject however, to the applicable provisions of the Debt
Instruments.
SECTION 22. GOVERNING LAW; TERMS. THIS AGREEMENT SHALL BE GOVERNED
BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS, EXCEPT TO
THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER,
OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR PROPERTY ARE GOVERNED BY THE
LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK.
<PAGE>
-16-
SECTION 23. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. ALL
JUDICIAL PROCEEDINGS BROUGHT AGAINST PLEDGOR WITH RESPECT TO THIS AGREEMENT MAY
BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE
BOROUGH OF MANHATTAN, STATE OF NEW YORK AND BY EXECUTION AND DELIVERY OF THIS
AGREEMENT PLEDGOR ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES,
GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID
COURTS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN
CONNECTION WITH THIS AGREEMENT. PLEDGOR DESIGNATES AND APPOINTS CT CORPORATION
SYSTEM, WITH AN ADDRESS AT 1633 BROADWAY, NEW YORK, NEW YORK 10019 AND SUCH
OTHER PERSONS AS MAY HEREAFTER BE SELECTED BY PLEDGOR IRREVOCABLY AGREEING IN
WRITING TO SO SERVE, AS ITS AGENT TO RECEIVE ON ITS BEHALF, SERVICE OF ALL
PROCESS IN ANY SUCH PROCEEDINGS IN ANY SUCH COURT, SUCH SERVICE BEING HEREBY
ACKNOWLEDGED BY PLEDGOR TO BE EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT. A
COPY OF SUCH PROCESS SO SERVED SHALL BE MAILED BY REGISTERED MAIL TO PLEDGOR AT
ITS ADDRESS PROVIDED FOR IN SECTION 20 HEREOF EXCEPT THAT UNLESS OTHERWISE
PROVIDED BY APPLICABLE LAW, ANY FAILURE TO MAIL SUCH COPY SHALL NOT AFFECT THE
VALIDITY OF SERVICE OF PROCESS. IF ANY AGENT APPOINTED BY PLEDGOR REFUSES TO
RECEIVE AND FORWARD SUCH SERVICE, PLEDGOR HEREBY AGREES THAT SERVICE UPON IT BY
MAIL SHALL CONSTITUTE SUFFICIENT NOTICE. NOTHING HEREIN SHALL AFFECT THE RIGHT
TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT
OF COLLATERAL AGENT TO BRING PROCEEDINGS AGAINST PLEDGOR IN THE COURTS OF ANY
OTHER JURISDICTION.
SECTION 24. Severability of Provisions. Any provision of this
Agreement which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.
SECTION 25. Execution in Counterparts. This Agreement and any
amendments, waivers, consents or supplements hereto may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed and delivered
<PAGE>
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shall be deemed to be an original, but all such counterparts together shall
constitute one and the same Agreement.
SECTION 26. Headings. The Section and subsection headings used in
this Agreement are for convenience of reference only and shall not affect the
construction of this Agreement.
SECTION 27. Obligations Absolute. All obligations of Pledgor
hereunder shall be absolute and unconditional irrespective of:
(a) any bankruptcy, insolvency, reorganization, arrangement,
readjustment, composition, liquidation or the like of Pledgor;
(b) any lack of validity or enforceability of any Debt Instrument, or
any other agreement or instrument relating thereto;
(c) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Secured Obligations, or any other
amendment or waiver of or any consent to any departure from any Debt
Instrument, or any other agreement or instrument relating thereto;
(d) any exchange, release or non-perfection of any other collateral,
or any release or amendment or waiver of or consent to any departure from
any guarantee, for all or any of the Secured Obligations;
(e) any exercise or non-exercise, or any waiver of any right, remedy,
power or privilege under or in respect of this Agreement or any Debt
Instrument except as specifically set forth in a waiver granted pursuant to
the provisions of Section 18; or
(f) any other circumstances which might otherwise constitute a defense
available to, or a discharge of, Pledgor.
<PAGE>
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IN WITNESS WHEREOF, each party hereto has caused this Agreement to
be duly executed and delivered by its duly authorized officer as of the date
first above written.
ACME METALS INCORPORATED,
as Pledgor
By: _______________________________
Name:
Title:
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION,
as Collateral Agent
By: _______________________________
Name:
Title:
<PAGE>
SCHEDULE A
PLEDGED SHARES
--------------
Percentage of
All Capital or
Other Equity
Class of Par Certificate Number Interests of
Issuer Stock Value Numbers of Shares Issuer
------ -------- ----- ----------- --------- --------------
Acme Steel
Company
Acme Pack-
aging Cor-
poration
<PAGE>
SUBSIDIARY STOCK PLEDGE AGREEMENT
SUBSIDIARY STOCK PLEDGE AGREEMENT (the "Agreement"), dated as of
___________, 1994, among ACME STEEL COMPANY, a Delaware corporation (together
with its successors and assigns, "Acme Steel") and ACME PACKAGING CORPORATION, a
Delaware corporation (together with its successors and assigns, "Acme
Packaging"; Acme and Acme Packaging, collectively the "Pledgors" and each
individually a "Pledgor") in favor of SHAWMUT BANK CONNECTICUT, NATIONAL
ASSOCIATION, a national banking association, having an office at 777 Main
Street, Hartford, Connecticut 06115, as collateral agent (in such capacity and
together with its successors and assigns in such capacity, "Collateral Agent")
pursuant to the Collateral Agency Agreement (as hereinafter defined).
R E C I T A L S :
---------------
1. Pledgors are the legal and beneficial owner of the Pledged Shares (as
hereinafter defined) set forth on Schedule A attached hereto.
2. Pursuant to that certain indenture (as amended, amended and restated,
supplemented or otherwise modified from time to time, the "Note Indenture"),
dated as of ________, 1994, by and among Acme Metals Incorporated ("Acme
Metals"), the subsidiaries of Acme Metals and Shawmut Bank Connecticut, National
Association, as trustee (in such capacity and together with its successors and
assigns in such capacity, the "Note Trustee") for the holders of the Senior
Secured Notes (as hereinafter defined), Acme Metals is issuing its ___% senior
secured notes due 2002 (as amended, amended and restated, supplemented or
otherwise modified from time to time, the "Senior Secured Notes") in the
aggregate principal amount of $175,000,000.
3. Pursuant to that certain indenture (as amended, amended and restated,
supplemented or otherwise modified from time to time, the "Discount Note
Indenture"; together with the Note Indenture, the "Indentures"), dated as of
________, 1994, by and among Acme Metals, the subsidiaries of Acme Metals and
Shawmut Bank Connecticut, National Association, as trustee (in such capacity and
together with its successors and assigns in such capacity, the "Discount Note
Trustee"; together with the Note Trustee, the "Trustees") for the holders of the
Senior Secured Discount Notes (as hereinafter defined), Acme Metals is issuing
its __% senior secured discount notes due 2004 (as amended, amended and
restated, supplemented or otherwise modified from time to time, the "Senior
Secured Discount Notes"; together with the Senior Secured Notes, the "Notes") in
the aggregate principal amount of $______.
<PAGE>
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4. Collateral Agent is the collateral agent under that certain collateral
agency agreement (the "Collateral Agency Agreement"), dated as of ________,
1994, for the Trustees (for the benefit of the holders of the Notes) and such
other parties which may from time to time become additional lenders to Pledgors
and/or their subsidiaries (each such lender, a "Permitted Additional Lender" and
collectively, the "Permitted Additional Lenders"; together with the Trustees and
Collateral Agent, the "Secured Parties") which may, in accordance with the
provisions of clause (xi) of the definition of "Permitted Liens" in each
Indenture as in effect on the date hereof, take a security interest in the
Collateral (as defined in the Collateral Agency Agreement) to secure the
financing provided by the Permitted Additional Lenders (such financing, the
"Permitted Replacement Financing") upon the execution and delivery by the
Permitted Additional Lenders of a supplement to the Collateral Agency Agreement
as contemplated therein.
5. This Agreement is given by Pledgors in favor of Collateral Agent for
its benefit and the benefit of the other Secured Parties to secure the payment
and performance of the Secured Obligations (as hereinafter defined).
A G R E E M E N T :
-----------------
NOW, THEREFORE, in consideration of the foregoing premises and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Pledgors and Collateral Agent hereby agree as follows:
SECTION 1. Definitions. Capitalized terms used herein but not otherwise
defined herein shall have the meanings assigned to such terms in the Indentures
as in effect on the date hereof. The following terms shall have the following
meanings. Such definitions shall be equally applicable to the singular and
plural forms of the terms defined.
"Additional Shares" shall mean all additional shares of stock of any of the
issuers set forth on Schedule A attached hereto from time to time acquired by
each Pledgor in any manner (which to the extent permitted by law are, and shall
remain at all times until this Agreement terminates, certificated securities)
and, if incorporated in a jurisdiction that permits certificates, the
certificates representing such additional shares and in all cases any interest
of Pledgors in the entries on the books of any financial intermediary pertaining
to such additional shares.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time hereafter, and any successor statute.
<PAGE>
-3-
"Distributions" shall mean all dividends, cash, options, warrants, rights,
instruments, distributions, returns of capital, income, profits and other
property interests or proceeds from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or all of the shares
of stock held by each Pledgor.
"Future Shares" shall mean all shares of stock owned or held by any Pledgor
of any Person which, after the date of this Agreement, is or becomes, as a
result of any occurrence, a Subsidiary of either Pledgor (which to the extent
permitted by law are, and shall remain at all times until this Agreement
terminates, certificated securities) and, if incorporated in a jurisdiction that
permits certificates, the certificates representing such additional shares and
in all cases any interest of Pledgors in the entries on the books of any
financial intermediary pertaining to such additional shares.
"Pledged Shares" shall mean the shares of capital stock of each Person
listed in Schedule A annexed hereto issued by the Persons identified therein
(which to the extent permitted by law are, and shall remain at all times until
this Agreement terminates, certificated securities) and, if incorporated in a
jurisdiction which permits certificates, the certificates representing the
pledged shares and in all cases any interest of Pledgors in the entries on the
books of any financial intermediary pertaining to such pledged shares.
"Proceeds" shall have the meaning assigned to the term "proceeds" under the
UCC and, in any event, shall include, without limitation, any and all (i)
proceeds of any insurance, indemnity, warranty or guarantee payable to
Collateral Agent or to any Pledgor from time to time with respect to any of the
Pledged Collateral, (ii) payments (in any form whatsoever) made or due and
payable to any Pledgor from time to time in connection with any requisition,
confiscation, condemnation, seizure or forfeiture of all or any part of the
Pledged Collateral by any governmental authority (or any person acting under
color of a governmental authority), (iii) products of the Pledged Collateral and
(iv) other amounts from time to time paid or payable under or in connection with
any of the Pledged Collateral.
"UCC" shall mean the Uniform Commercial Code as in effect in any relevant
jurisdiction.
SECTION 2. Pledge. As collateral security for the payment and performance
when due of all the Secured Obligations, each Pledgor hereby pledges to
Collateral Agent and grants to Collateral Agent for the benefit of the Secured
Parties a continuing first priority security interest in and pledge of all such
Pledgor's right, title and interest in, to and under the following property,
whether now existing or hereafter acquired (collectively, the "Pledged
Collateral"):
<PAGE>
-4-
(i) all Pledged Shares;
(ii) all Additional Shares;
(iii) all Future Shares;
(iv) all Distributions; and
(v) all Proceeds of any of the property specified in clauses (i)
through (iv) of this Section 2.
SECTION 3. Delivery of Pledged Collateral. All certificates or
instruments representing or evidencing the Pledged Collateral shall, to the
extent not previously delivered to Collateral Agent, be delivered to and held by
or on behalf of Collateral Agent pursuant hereto and shall be in suitable form
for transfer by delivery, or shall be accompanied by duly executed instruments
of transfer or assignment in blank, all in form and substance satisfactory to
Collateral Agent. Collateral Agent shall have the right, at any time and
without notice to Pledgors, to transfer to or to register in the name of
Collateral Agent or any of its nominees any or all of the Pledged Collateral.
If any issuer of Pledged Collateral is incorporated in a jurisdiction which does
not permit the use of certificates to evidence equity ownership, then such
Pledgor shall, to the extent permitted by applicable law, record such pledge on
the stock register of the issuer, execute any customary stock pledge forms or
other documents necessary or appropriate to complete the pledge and give
Collateral Agent the right to transfer such Pledged Collateral under the terms
hereof and provide to Collateral Agent an Opinion of Counsel, in form and
substance satisfactory to it, confirming such pledge. In addition, Collateral
Agent shall have the right at any time to exchange certificates representing or
evidencing Pledged Collateral for certificates of smaller or larger
denominations.
SECTION 4. Secured Obligations. This Agreement secures, and the Pledged
Collateral is collateral security for, the payment and performance in full when
due, whether at stated maturity, by acceleration or otherwise (including,
without limitation, the payment of interest and other amounts which would accrue
and become due but for the filing of a petition in bankruptcy or the operation
of the automatic stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. (S)
362(a)), of (i) all of the obligations, liabilities and indebtedness of each
Pledgor now or hereafter existing under or in respect of each Indenture, the
Notes and the notes, agreements and/or other instruments which collectively
evidence any Permitted Replacement
<PAGE>
-5-
Financing (such notes, agreements and/or other instruments, together with the
Indentures and the Notes, the "Debt Instruments") (including, without
limitation, the obligations of each Pledgor to pay principal of, premium, if
any, and interest on any Debt Instruments when due and payable) and all other
charges, fees, expenses, commissions, reimbursements, premiums, indemnities and
all other amounts due or to become due under or in connection with each Debt
Instrument and (ii) without duplication of the amounts described in clause (i)
of this Section 4, all obligations, indebtedness and liabilities of each Pledgor
now existing or hereafter arising under or in respect of this Agreement,
including, without limitation, with respect to all charges, fees, expenses,
commissions, reimbursements, premiums, indemnities and other payments related to
or in respect of the obligations contained in this Agreement (the obligations
described in clauses (i) and (ii) of this Section 4, collectively, the "Secured
Obligations").
SECTION 5. No Release. Nothing set forth in this Agreement shall relieve
any Pledgor from the performance of any term, covenant, condition or agreement
on any Pledgor's part to be performed or observed under or in respect of any
Pledged Collateral or from any liability to any Person under or in respect of
any Pledged Collateral or shall impose any obligation on Collateral Agent or any
other Secured Party to perform or observe any such term, covenant, condition or
agreement on any Pledgor's part to be so performed or observed or impose any
liability on Collateral Agent or any other Secured Party for any act or omission
on the part of each Pledgor relating thereto or for any breach of any
representation or warranty on the part of any Pledgor contained in this
Agreement, or in respect of the Pledged Collateral or made in connection
herewith or therewith. The obligations of each Pledgor contained in this
Section 5 shall survive the termination of this Agreement and the discharge of
each Pledgor's other obligations hereunder.
SECTION 6. Representations, Warranties and Covenants. Each Pledgor
represents, warrants and covenants as follows:
(a) Ownership. With respect to the Pledged Collateral existing on the
date hereof, each Pledgor is, and, as to the Pledged Collateral acquired by
it from time to time after the date hereof, each Pledgor will be, the legal
and beneficial owner thereof free from any Lien or other right, title or
interest of any Person other than the Lien and security interest granted by
each Pledgor to Collateral Agent in the Pledged Collateral pursuant to this
Agreement. The Lien and security interest created by this Agreement shall
not at any time be subject to any Lien other than the Lien and security
interest granted by each Pledgor to Collateral Agent hereunder. Except as
otherwise permitted by the appropriate provisions of the Debt Instruments,
each Pledgor will at all times be the sole beneficial owner of the Pledged
Collateral. Pledgors have not performed any acts which
<PAGE>
-6-
might prevent Collateral Agent from enforcing any of the terms of this
Agreement or that would limit Collateral Agent in any such enforcement and
each Pledgor shall defend the Pledged Collateral against all claims and
demands of all Persons at any time claiming any interest therein adverse to
Collateral Agent or any other Secured Party.
(b) Shares Validly Issued. All of the Pledged Shares have been, and to
the extent hereafter issued the Additional Shares and Future Shares will be
upon such issuance, duly authorized and validly issued and fully paid and
non-assessable.
(c) Necessary Filings; Delivery of Shares. No filings, registrations
or recordings are necessary or appropriate to create, preserve, protect and
perfect the security interest granted by each Pledgor to Collateral Agent
pursuant to this Agreement. Upon the delivery of the Pledged Collateral to
Collateral Agent in accordance with Section 3 hereof, Collateral Agent will
have a valid and perfected first priority Lien on and security interest in
the Pledged Collateral subject to no prior Liens.
(d) Government Regulations. The pledge of the Pledged Collateral
pursuant to this Agreement does not violate Regulations G, T, U or X of the
Federal Reserve Board.
(e) Authorization; Enforceability. Each Pledgor has full power,
authority and legal right to pledge and grant a security interest in all
the Pledged Collateral pursuant to this Agreement. This Agreement
constitutes the legal, valid and binding obligation of each Pledgor,
enforceable against each Pledgor in accordance with its terms, subject to
applicable bankruptcy, insolvency, reorganization, fraudulent transfer,
moratorium and similar laws affecting creditors' rights generally and to
general equitable principles.
(f) No Consents. No consent of any other party (including, without
limitation, stockholders or creditors of each Pledgor) and no consent,
authorization, approval, or other action by, and no notice to or filing
with, any governmental authority or regulatory body is required either (i)
for the execution, delivery or performance of this Agreement by each
Pledgor or (ii) for the exercise by Collateral Agent of the voting or other
rights provided for in this Agreement or the remedies in respect of the
Pledged Collateral pursuant to this Agreement.
(g) No Conflicts. The execution, delivery and performance by each
Pledgor of this Agreement do not (or with notice or lapse of time or both,
will not) violate, conflict with or constitute a default under, or result
in the termination of, or accelerate the performance required by, or result
in there being declared void, voidable or without
<PAGE>
-7-
further binding effect any provision of any other agreement, instrument or
document to which each Pledgor is a party.
(h) Accuracy of Information. All information set forth herein
(including, without limitation, the information set forth in the Schedules
annexed hereto) relating to the Pledged Collateral is accurate and
complete in all respects.
(i) Additional Equity Interests. Each Pledgor shall (i) cause each
issuer of the Pledged Shares not to issue any securities in addition to or
in substitution for the Pledged Shares issued by such issuer, except to
such Pledgor and (ii) pledge hereunder, immediately upon its acquisition
(directly or indirectly) thereof, any and all Additional Shares and Future
Shares.
(j) Chief Executive Office; Records. The Pledgor's chief executive
office is located at 13500 Perry Avenue, Riverdale, Illinois 60627. No
Pledgor will move such office, except to such new location as such Pledgor
may establish in accordance with the last sentence of this subsection 6(j).
No Pledgor will establish a new location for such office nor shall it
change its name until (i) it shall have given Collateral Agent not less
than thirty (30) days' prior written notice of its intention so to do,
clearly describing such new location or name and providing such other
information in connection therewith as Collateral Agent may request and
(ii) with respect to such new location or name, such Pledgor shall have
taken all action satisfactory to Collateral Agent to maintain the
perfection and proof of the security interest of Collateral Agent for the
benefit of the Secured Parties in the Pledged Collateral intended to be
granted hereby.
SECTION 7. Supplements, Further Assurances. Each Pledgor agrees that at
any time and from time to time, at the expense of such Pledgor, to promptly
execute and deliver all further instruments and documents, and take all further
action, that may be necessary or that Collateral Agent may request, in order to
perfect and protect the Lien granted or purported to be granted hereby or to
enable Collateral Agent to exercise and enforce its rights and remedies
hereunder with respect to any Pledged Collateral.
<PAGE>
-8-
SECTION 8. Voting Rights; Distributions; Etc.
(a) For so long as no Event of Default shall have occurred and be
continuing:
(i) Each Pledgor shall be entitled to exercise any and all voting and other
consensual rights pertaining to the Pledged Collateral or any part thereof for
any purpose not inconsistent with the terms or purpose of this Agreement.
(ii) Each Pledgor shall be entitled to receive and retain any and all
Distributions, but only if and to the extent made in accordance with the
provisions of the Indentures as in effect on the date hereof; provided,
however, that any and all such Distributions other than in the form of cash,
and any and all such Distributions in the form of cash paid or payable in
connection with a partial or total liquidation or dissolution or in connection
with a reduction of capital, capital surplus or paid-in-surplus shall be, and
shall be forthwith delivered to Collateral Agent to hold as, Pledged Collateral
and shall, if received by each Pledgor, be received in trust for the benefit of
Collateral Agent, be segregated from the other property or funds of each
Pledgor, and be forthwith delivered to Collateral Agent as Pledged Collateral
in the same form as so received (with any necessary endorsement).
(iii) Collateral Agent hereby authorizes any Pledgor to exercise the
voting and other rights which it is entitled to exercise pursuant to subsection
8(a)(i) hereof and to receive the Distributions which it is authorized to
receive and retain pursuant to subsection 8(a)(ii) hereof.
(b) Upon the occurrence and during the continuance of an Event of
Default, all rights of any Pledgor to exercise the voting and other
consensual rights it would otherwise be entitled to exercise pursuant to
subsection 8(a)(i) and to receive the Distributions which it would
otherwise be authorized to receive and retain pursuant to subsection
8(a)(ii) without any action or the giving of any notice shall cease, and
all such rights shall thereupon become vested in Collateral Agent, and
Collateral Agent shall thereupon have the sole right, but not the duty or
obligation, to exercise such voting and other consensual rights and the
sole right to receive and hold as Pledged Collateral such Distributions.
(c) Each Pledgor shall, at Pledgor's sole cost and expense, from time
to time execute and deliver to Collateral Agent appropriate instruments as
Collateral Agent may request in order to permit Collateral Agent to
exercise the voting and other rights which it may be entitled to exercise
pursuant to subsection 8(b) hereof and to receive all Distributions which
it may be entitled to receive under subsection 8(b) hereof.
<PAGE>
-9-
(d) All Distributions which are received by any Pledgor contrary to
the provisions of subsection 8(a)(ii) hereof shall be received in trust for
the benefit of Collateral Agent, shall be segregated from other funds of
such Pledgor and shall immediately be paid over to Collateral Agent as
Pledged Collateral in the same form as so received (with any necessary
endorsement).
SECTION 9. Transfers and Other Liens. Each Pledgor shall not (i) except as
permitted by the appropriate provisions of the Debt Instruments, sell, convey,
assign or otherwise dispose of, or grant any option or warrant with respect to,
any of the Pledged Collateral or (ii) create or permit to exist any Lien upon or
with respect to any of the Pledged Collateral except for the Lien and security
interest granted by each Pledgor to Collateral Agent pursuant to this Agreement.
SECTION 10. Reasonable Care. Collateral Agent shall be deemed to have
exercised reasonable care in the custody and preservation of the Pledged
Collateral in its possession if such Pledged Collateral is accorded treatment
substantially equivalent to that which Collateral Agent, in its individual
capacity, accords its own property consisting of negotiable securities, it being
understood that Collateral Agent shall not have responsibility for (i)
ascertaining or taking action with respect to calls, conversions, exchanges,
maturities, tenders or other matters relative to any Pledged Collateral, whether
or not Collateral Agent or any other Secured Party has or is deemed to have
knowledge of such matters or (ii) taking any necessary steps to preserve rights
against any Person with respect to any Pledged Collateral.
SECTION 11. Events of Default; Remedies.
(a) Event of Default. It shall be an Event of Default hereunder
if there shall occur an "Event of Default" as defined in the Collateral
Agency Agreement.
(b) Dispositions of Pledged Collateral. If an Event of Default
shall have occurred and be continuing, Collateral Agent may exercise in
respect of the Pledged Collateral, in addition to other rights and remedies
provided for herein or otherwise available to it, all the rights and
remedies of a secured party on default under the UCC, and the Collateral
Agent may also in its sole discretion, without notice except as specified
below, sell the Pledged Collateral or any part thereof in one or more
parcels at public or private sale or at any exchange or broker's board for
cash, on credit or for future delivery, and at such price or prices and
upon such other terms as Collateral Agent may deem commercially reasonable,
irrespective of the impact of any such sales on the market price of the
Pledged Collateral. Collateral Agent or any other Secured Party may be the
purchaser of any or all of the Pledged Collateral at any such sale and
shall be entitled,
<PAGE>
-10-
for the purpose of bidding and making settlement or payment of the purchase
price for all or any portion of the Pledged Collateral sold at such sale,
to use and apply any of the Secured Obligations owed to such Secured Party
as a credit on account of the purchase price of any Pledged Collateral
payable by such Secured Party at such sale. Each purchaser at any such
sale shall hold the property sold absolutely free from any claim or right
on the part of any Pledgor, and each Pledgor hereby waives (to the extent
permitted by law) all rights of redemption, stay and/or appraisal which it
now has or may at any time in the future have under any rule of law or
statute now existing or hereafter enacted. Collateral Agent shall give
each Pledgor not less than five days' prior written notice of the time and
place of any sale or other intended disposition of any of the Pledged
Collateral, except any Pledged Collateral which is of a type customarily
sold on a recognized market. The notice of such sale shall (i) in the case
of a public sale, state the time and place fixed for such sale and (ii) in
the case of a private sale, state the day after which such sale may be
consummated. Each Pledgor agrees that such notice constitutes reasonable
notice. Collateral Agent shall not be obligated to make any sale of
Pledged Collateral regardless of notice of sale having been given.
Collateral Agent may adjourn any public or private sale from time to time
by announcement at the time and place fixed therefor, and such sale may,
without further notice, be made at the time and place to which it was so
adjourned. Each Pledgor hereby waives any claims against Collateral Agent
arising by reason of the fact that the price at which any Pledged
Collateral may have been sold at such a private sale was less than the
price which might have been obtained at a public sale, even if Collateral
Agent accepts the first offer received and does not offer such Pledged
Collateral to more than one offeree.
(c) Securities Laws Limitations. Each Pledgor recognizes that,
by reason of certain prohibitions contained in the Securities Act of 1933,
as amended (the "Securities Act"), and applicable state securities laws,
Collateral Agent may be compelled, with respect to any sale of all or any
part of the Pledged Collateral, to limit purchasers to those who will
agree, among other things, to acquire the Pledged Collateral for their own
account, for investment and not with a view to the distribution or resale
thereof. Each Pledgor acknowledges that any such private sales may be at
prices and on terms less favorable to Collateral Agent than those
obtainable through a public sale without such restrictions (including,
without limitation, a public offering made pursuant to a registration
statement under the Securities Act), and, notwithstanding such
circumstances, agrees that any such private sale shall be deemed to have
been made in a commercially reasonable manner and that Collateral Agent
shall have no obligation to engage in public sales and no obligation to
delay the sale of any Pledged Collateral for the period of time necessary
to permit the issuer thereof to register it for a form of public
<PAGE>
-11-
sale requiring registration under the Securities Act or under applicable
state securities laws, even if each Pledgor would agree to do so.
(d) Additional Information. If Collateral Agent determines to
exercise its right to sell any or all of the Pledged Collateral, upon
written request, each Pledgor shall, and shall cause each issuer of any
Pledged Collateral to be sold hereunder from time to time to, furnish to
Collateral Agent all such information as Collateral Agent may request in
order to determine the number of shares and other instruments included in
the Pledged Collateral which may be sold by Collateral Agent as exempt
transactions under the Securities Act and the rules of the Securities and
Exchange Commission thereunder, as the same are from time to time in
effect.
(e) Waivers. Each Pledgor hereby waives, to the extent
permitted by applicable law, notice or judicial hearing in connection with
Collateral Agent's taking possession or Collateral Agent's disposition of
any Pledged Collateral, including, without limitation, any and all prior
notice and hearing for any prejudgment remedy or remedies and any such
right which each Pledgor would otherwise have under law, and each Pledgor
hereby further waives: (i) all damages occasioned by such taking of
possession; (ii) all other requirements as to the time, place and terms of
sale or other requirements with respect to the enforcement of Collateral
Agent's rights hereunder; and (iii) all rights of redemption, appraisal,
valuation, stay, extension or moratorium now or hereafter in force under
any applicable law. Any sale of, or the grant of options to purchase, or
any other realization upon, any Pledged Collateral shall operate to divest
all right, title, interest, claim and demand, either at law or in equity,
of each Pledgor therein and thereto, and shall be a perpetual bar both at
law and in equity against each Pledgor and against any and all Persons
claiming or attempting to claim the Pledged Collateral so sold, optioned or
realized upon, or any part thereof, from, through and under each Pledgor.
(f) Deficiency. Notwithstanding any other provision of this
Agreement to the contrary, if, after giving effect to any sale, transfer or
other disposition of any or all of the Pledged Collateral pursuant hereto
and after the application of the proceeds hereunder and any Pledged
Collateral sold, transferred or otherwise disposed of pursuant to any other
Security Document to the Secured Obligations, any Secured Obligations
remain unpaid or unsatisfied, each Pledgor shall remain liable for the
unpaid and unsatisfied amount of such Secured Obligations.
<PAGE>
-12-
SECTION 12. Application of Proceeds. The proceeds received by
Collateral Agent in respect of any sale of, collection from or other realization
upon all or any part of the Pledged Collateral pursuant to the exercise by
Collateral Agent of its remedies as a secured creditor as provided in Section 11
hereof, together with any other sums then held by Collateral Agent pursuant to
this Agreement, shall be applied promptly by Collateral Agent in the manner set
forth in the Collateral Agency Agreement.
SECTION 13. Expenses. Each Pledgor will upon demand pay to Collateral
Agent the amount of any and all expenses, including the reasonable fees and
expenses of its counsel and the allocated fees and expenses of staff counsel and
the fees and expenses of any experts and agents which Collateral Agent may incur
in connection with (i) the collection of the Secured Obligations, (ii) the
enforcement and administration of this Agreement, (iii) the custody or
preservation of, or the sale of, collection from, or other realization upon, any
of the Pledged Collateral, (iv) the exercise or enforcement of any of the rights
of Collateral Agent hereunder or (v) the failure by any Pledgor to perform or
observe any of the provisions hereof. All amounts payable by any Pledgor under
this Section 13 shall be due upon demand and shall be part of the Secured
Obligations. Each Pledgor's obligations under this Section shall survive the
termination of this Agreement and the discharge of each Pledgor's other
obligations hereunder.
SECTION 14. No Waiver; Discontinuance of Proceeding.
(a) No Waiver. No failure on the part of Collateral Agent to exercise,
no course of dealing with respect to, and no delay in exercising, any right,
power or remedy hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise by Collateral Agent of any right, power or remedy
hereunder preclude any other or further exercise thereof or the exercise of any
other right, power or remedy. The remedies herein provided are to the fullest
extent permitted by the law cumulative and are not exclusive of any remedies
provided by law.
(b) Discontinuance of Proceeding. In the event Collateral Agent shall
have instituted any proceeding to enforce any right, power or remedy under this
Agreement by foreclosure, sale, entry or otherwise, and such proceeding shall
have been discontinued or abandoned for any reason or shall have been determined
adversely to Collateral Agent, then and in every such case each Pledgor,
Collateral Agent and each Secured Party shall be restored to their respective
former positions and rights hereunder with respect to the Pledged Collateral,
and all rights, remedies and powers of Collateral Agent and the Secured Parties
shall continue as if no such proceeding had been instituted.
<PAGE>
-13-
SECTION 15. Collateral Agent.
(a) Collateral Agent has been appointed as collateral agent
pursuant to the Collateral Agency Agreement and shall have the right hereunder
to make demands, to give notices, to exercise or refrain from exercising any
rights, and to take or refrain from taking action (including, without
limitation, the release or substitution of Pledged Collateral) in accordance
with the provisions of the Collateral Agency Agreement. The actions of
Collateral Agent hereunder are subject to the provisions of the Collateral
Agency Agreement. Collateral Agent may resign and a successor Collateral Agent
may be appointed in the manner provided in the Indenture. Upon the acceptance
of any appointment as Collateral Agent by a successor Collateral Agent, that
successor Collateral Agent shall thereupon succeed to and become vested with all
the rights, powers, privileges and duties of the retiring Collateral Agent under
this Agreement, and the retiring Collateral Agent shall thereupon be discharged
from its duties and obligations under this Agreement in accordance with the
Collateral Agency Agreement. After any retiring Collateral Agent's resignation,
the provisions of this Agreement shall inure to its benefit as to any actions
taken or omitted to be taken by it under this Agreement while it was Collateral
Agent.
(b) Notwithstanding anything to the contrary contained in this
Agreement, the Indenture, the Mortgage or any of the other Security Documents,
in the event the Collateral Agent is entitled or required to commence an action
to exercise voting rights hereunder or otherwise exercise its remedies to
acquire control or possession of the Mortgaged Property, the Collateral Agent
shall not be required to commence any such action or exercise any such remedy if
the Collateral Agent has determined in good faith that the Collateral Agent may
incur liability under the Environmental Laws (as defined in the Mortgage) as the
result of the presence at, or release on or from, the Facility of any Hazardous
Materials (as defined in the Mortgage) unless the Collateral Agent has received
security or indemnity, from a Holder or Holders, in an amount and in a form all
satisfactory to the Collateral Agent in its sole discretion, protecting the
Collateral Agent from all such liability.
SECTION 16. Collateral Agent May Perform; Collateral Agent Appointed
Attorney-in-Fact. If Pledgors shall fail to do any act or thing that it has
covenanted to do hereunder or if any warranty on the part of any Pledgor
contained herein shall be breached, Collateral Agent or any Secured Party may
(but shall have no duty or obligation to) do the same or cause it to be done or
remedy any such breach, and may reasonably expend funds for such purpose. Any
and all amounts so expended by Collateral Agent or such Secured Party shall be
<PAGE>
-14-
paid by Pledgors promptly upon demand therefor, with interest at the Default
Rate during the period from and including the date on which such funds were so
expended to the date of repayment. Each Pledgor's obligations under this
Section 16 shall survive the termination of this Agreement and the discharge of
each Pledgor's other obligations under this Agreement. Each Pledgor hereby
appoints Collateral Agent its attorney-in-fact with an interest, with full
authority in the place and stead of each Pledgor and in the name of each
Pledgor, or otherwise, from time to time in Collateral Agent's discretion, to
take any action and to execute any instrument consistent with the terms of this
Agreement, any Debt Instrument, the Collateral Agency Agreement and the
Intercreditor Agreement which Collateral Agent may deem necessary or advisable
to accomplish the purposes of this Agreement. The foregoing grant of authority
is a power of attorney coupled with an interest and such appointment shall be
irrevocable for the term of this Agreement. Each Pledgor hereby ratifies all
that such attorney shall lawfully do or cause to be done by virtue and in
accordance with the terms hereof.
SECTION 17. Indemnity.
(a) Indemnity. Each Pledgor agrees to indemnify, pay and hold
harmless Collateral Agent and the officers, directors, employees, agents and
affiliates of Collateral Agent (collectively, the "Indemnitees") from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, claims, costs (including, without limitation,
settlement costs and claims for strict liability in tort and environmental or
hazardous waste claims of any sort), expenses or disbursements of any kind or
nature whatsoever (including, without limitation, the fees and disbursements of
counsel for such Indemnitees in connection with any investigative,
administrative or judicial proceeding commenced or threatened, whether or not
such Indemnitee shall be designated a party thereto), which may be imposed on,
incurred by, or asserted against such Indemnitee, in any manner relating to or
arising out of this Agreement, the Intercreditor Agreement, the Collateral
Agency Agreement or the Debt Instruments (including, without limitation, any
misrepresentation by each Pledgor in this Agreement) (the "Indemnified
Liabilities"); provided, however, that no Pledgor shall have any obligation to
an Indemnitee hereunder with respect to Indemnified Liabilities if it has been
determined by a final decision (after all appeals and the expiration of time to
appeal) by a court of competent jurisdiction that such Indemnified Liability
arose from the negligence or willful misconduct of such Indemnitee or, in the
case of environmental laws, the willful violation of such laws. To the extent
that the undertaking to indemnify, pay and hold harmless set forth in the
preceding sentence may be unenforceable because it is violative of any law or
public policy, the Pledgor shall contribute the maximum portion which it is
permitted to pay and satisfy under applicable law, to the payment and
satisfaction of all Indemnified Liabilities incurred by the Indemnitees or any
of them.
<PAGE>
-15-
(b) Survival. The obligations of each Pledgor contained in this
Section 17 shall survive the termination of this Agreement and the discharge of
each Pledgor's other obligations under this Agreement.
(c) Reimbursement. Any amounts paid by any Indemnitee as to which
such Indemnitee has the right to reimbursement shall constitute Secured
Obligations secured by the Pledged Collateral.
SECTION 18. Modification in Writing. No amendment, modification,
supplement, termination or waiver of or to any provision of this Agreement, nor
consent to any departure by any Pledgor therefrom, shall be effective unless the
same shall be done in accordance with the terms of the Collateral Agency
Agreement and unless in writing and signed by Collateral Agent and each Pledgor.
Any amendment, modification or supplement of or to any provision of this
Agreement, any waiver of any provision of this Agreement, and any consent to any
departure by any Pledgor from the terms of any provision of this Agreement,
shall be effective only in the specific instance and for the specific purpose
for which made or given. Except where notice is specifically required by this
Agreement or any Debt Instrument, no notice to or demand on any Pledgor in any
case shall entitle any Pledgor to any other or further notice or demand in
similar or other circumstances.
SECTION 19. Termination; Release.
(a) Except as otherwise provided herein, this Agreement shall
terminate upon compliance by each Pledgor with the applicable provisions of the
Collateral Agency Agreement. Upon termination of this Agreement or any release
of Pledged Collateral in accordance with the provisions of the Collateral Agency
Agreement, Collateral Agent shall, upon the request and at the sole cost and
expense of each Pledgor, forthwith assign, transfer and deliver to each Pledgor,
against receipt and without recourse to or warranty by Collateral Agent, such of
the Pledged Collateral as may be in possession of Collateral Agent and as shall
not have been sold or otherwise applied pursuant to the terms hereof on the
order of and at the sole cost and expense of each Pledgor, and proper
instruments (including UCC termination statements on Form UCC-3) acknowledging
the termination of this Agreement or the release of such Pledged Collateral, as
the case may be.
(b) In the event that any Asset Sale made by any Pledgor in
accordance with applicable provisions of the Debt Instruments involves the sale
of an asset which constitutes Pledged Collateral, such Pledgor shall deliver all
Net Cash Proceeds received in respect of such item of Pledged Collateral to
Collateral Agent to be held by Collateral Agent as Trust Moneys
<PAGE>
-16-
and applied in accordance with the provisions of the Collateral Agency
Agreement.
SECTION 20. Notices. Unless otherwise provided herein, any notice or
other communication herein shall be given in the manner set forth in the
Collateral Agency Agreement and at the addresses set forth in the Collateral
Agency Agreement, or at such other address as shall be designated by any party
in a written notice to the other party.
SECTION 21. Continuing Security Interest; Assignment. This Agreement
shall create a continuing security interest in the Pledged Collateral and shall
(i) be binding upon each Pledgor, its successors and assigns, and (ii) inure,
together with the rights and remedies of Collateral Agent hereunder, to the
benefit of Collateral Agent and the other Secured Parties and each of their
respective successors, transferees and assigns; no other Persons (including,
without limitation, any other creditor of the Pledgors) shall have any interest
herein or any right or benefit with respect hereto. Without limiting the
generality of the foregoing clause (ii), any Secured Party may assign or
otherwise transfer any Debt Instrument held by it secured by this Agreement to
any other Person, and such other Person shall thereupon become vested with all
the benefits in respect thereof granted to such Secured Party, herein or
otherwise, subject however, to the applicable provisions of the Debt
Instruments.
SECTION 22. GOVERNING LAW; TERMS. THIS AGREEMENT SHALL BE GOVERNED
BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS, EXCEPT TO
THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER,
OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR PROPERTY ARE GOVERNED BY THE
LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK.
SECTION 23. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. ALL
JUDICIAL PROCEEDINGS BROUGHT AGAINST PLEDGOR WITH RESPECT TO THIS AGREEMENT MAY
BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE
BOROUGH OF MANHATTAN, STATE OF NEW YORK AND BY EXECUTION AND DELIVERY OF THIS
AGREEMENT PLEDGOR ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES,
GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID
COURTS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN
CONNECTION WITH THIS AGREEMENT. PLEDGOR DESIGNATES AND APPOINTS CT CORPORATION
SYSTEM, WITH AN ADDRESS AT
<PAGE>
-17-
1633 BROADWAY, NEW YORK, NEW YORK 10019 AND SUCH OTHER PERSONS AS MAY HEREAFTER
BE SELECTED BY PLEDGOR IRREVOCABLY AGREEING IN WRITING TO SO SERVE, AS ITS AGENT
TO RECEIVE ON ITS BEHALF, SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDINGS IN ANY
SUCH COURT, SUCH SERVICE BEING HEREBY ACKNOWLEDGED BY PLEDGOR TO BE EFFECTIVE
AND BINDING SERVICE IN EVERY RESPECT. A COPY OF SUCH PROCESS SO SERVED SHALL BE
MAILED BY REGISTERED MAIL TO PLEDGOR AT ITS ADDRESS PROVIDED FOR IN SECTION 20
HEREOF EXCEPT THAT UNLESS OTHERWISE PROVIDED BY APPLICABLE LAW, ANY FAILURE TO
MAIL SUCH COPY SHALL NOT AFFECT THE VALIDITY OF SERVICE OF PROCESS. IF ANY
AGENT APPOINTED BY PLEDGOR REFUSES TO RECEIVE AND FORWARD SUCH SERVICE, PLEDGOR
HEREBY AGREES THAT SERVICE UPON IT BY MAIL SHALL CONSTITUTE SUFFICIENT NOTICE.
NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF COLLATERAL AGENT TO BRING
PROCEEDINGS AGAINST PLEDGOR IN THE COURTS OF ANY OTHER JURISDICTION.
SECTION 24. Severability of Provisions. Any provision of this
Agreement which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.
SECTION 25. Execution in Counterparts. This Agreement and any
amendments, waivers, consents or supplements hereto may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed and delivered shall be deemed to be an original,
but all such counterparts together shall constitute one and the same Agreement.
SECTION 26. Headings. The Section and subsection headings used in
this Agreement are for convenience of reference only and shall not affect the
construction of this Agreement.
SECTION 27. Obligations Absolute. All obligations of each Pledgor
hereunder shall be absolute and unconditional irrespective of:
(a) any bankruptcy, insolvency, reorganization, arrangement,
readjustment, composition, liquidation or the like of any Pledgor;
<PAGE>
(b) any lack of validity or enforceability of any Debt Instrument, or
any other agreement or instrument relating thereto;
(c) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Secured Obligations, or any other amendment or
waiver of or any consent to any departure from any Debt Instrument, or any other
agreement or instrument relating thereto;
(d) any exchange, release or non-perfection of any other collateral,
or any release or amendment or waiver of or consent to any departure from any
guarantee, for all or any of the Secured Obligations;
(e) any exercise or non-exercise, or any waiver of any right, remedy,
power or privilege under or in respect of this Agreement or any Debt Instrument
except as specifically set forth in a waiver granted pursuant to the provisions
of Section 18; or
(f) any other circumstances which might otherwise constitute a
defense available to, or a discharge of, any Pledgor.
<PAGE>
IN WITNESS WHEREOF, each party hereto has caused this Agreement to be
duly executed and delivered by its duly authorized officer as of the date first
above written.
ACME STEEL COMPANY,
as Pledgor
By: _______________________________
Name:
Title:
ACME PACKAGING CORPORATION,
as Pledgor
By: _______________________________
Name:
Title:
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION,
as Collateral Agent
By: _______________________________
Name:
Title:
<PAGE>
SCHEDULE A
PLEDGED SHARES
--------------
Percentage of
All Capital or
Other Equity
Class of Par Certificate Number Interests of
Pledgor: Acme Steel Stock Value Numbers of Shares Issuer
------- ----- ----------- --------- --------------
Issuer
- ------
Alabama Metallurgical
Corporation
Pledgor: Acme Packaging
Issuer
- ------
Universal Tool and
Stamping Company, Inc.
Alpha Tube Corporation
Alta Slitting Corporation
Acme Steel Company
International, Inc.
<PAGE>
SECURITY AGREEMENT
SECURITY AGREEMENT (the "Agreement"), dated as of ________, 1994, made by
ACME STEEL COMPANY, a Delaware corporation having an office at 13500 South Perry
Avenue, Riverdale, Illinois 60627 (together with its successors and assigns,
"Pledgor"), in favor of SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION, a
national banking association, having an office at 777 Main Street, Hartford,
Connecticut 06115, as collateral agent (in such capacity and together with its
successors and assigns in such capacity, "Collateral Agent") (for its benefit
and for the benefit of the other Secured Parties (as hereinafter defined)).
R E C I T A L S :
- - - - - - - -
1. Pursuant to that certain indenture (as amended, amended and restated,
supplemented or otherwise modified from time to time, the "Note Indenture"),
dated as of ________, 1994, by and among Acme Metals Incorporated (the
"Company"), Pledgor, as subsidiary guarantor of the Company's obligations, each
of the other subsidiaries of the Company, as guarantors (collectively, the
"Guarantors") of the Company's obligations, and Shawmut Bank Connecticut,
National Association, as trustee (in such capacity and together with its
successors and assigns in such capacity, the "Note Trustee") for the holders of
the Senior Secured Notes (as hereinafter defined), the Company is issuing its
___% senior secured notes due 2002 (as amended, amended and restated,
supplemented or otherwise modified from time to time, the "Senior Secured
Notes") in the aggregate principal amount of $175,000,000.
2. Pursuant to that certain indenture (as amended, amended and restated,
supplemented or otherwise modified from time to time, the "Discount Note
Indenture"; together with the Note Indenture, the "Indentures"), dated as of
________, 1994, by and among the Company, the Guarantors and Shawmut Bank
Connecticut, National Association, as trustee (in such capacity and together
with its successors and assigns in such capacity, the "Discount Note Trustee";
together with the Note Trustee, the "Trustees") for the holders of the Senior
Secured Discount Notes (as hereinafter defined), the Company is issuing its __%
senior secured discount notes due 2004 (as amended, amended and restated,
supplemented or otherwise modified from time to time, the "Senior Secured
Discount Notes"; together with the Senior Secured Notes, the "Notes") in the
aggregate principal amount of $______.
3. Collateral Agent is the collateral agent under that certain collateral
agency agreement (the "Collateral Agency Agreement"), dated as of ________,
1994, for the
<PAGE>
-2-
Trustees (for the benefit of the holders of the Notes) and such other parties
which may from time to time become additional lenders to the Company and/or the
Guarantors (each such lender, a "Permitted Additional Lender" and collectively,
the "Permitted Additional Lenders"; together with the Trustees and Collateral
Agent, the "Secured Parties") which may, in accordance with the provisions of
clause (xi) of the definition of "Permitted Liens" in each Indenture as in
effect on the date hereof, take a security interest in the Collateral (as
defined in the Collateral Agency Agreement) to secure the financing provided by
the Permitted Additional Lenders (such financing, the "Permitted Replacement
Financing") upon the execution and delivery by the Permitted Additional Lenders
of a supplement to the Collateral Agency Agreement as contemplated therein.
4. Pledgor is the owner of the Pledged Collateral (as hereinafter
defined).
5. This Agreement is given by Pledgor in favor of Collateral Agent for its
benefit and the benefit of the other Secured Parties to secure the payment and
performance of the Secured Obligations (as hereinafter defined).
A G R E E M E N T :
- - - - - - - - -
NOW, THEREFORE, in consideration of the foregoing premises and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Pledgor and Collateral Agent hereby agree as follows:
SECTION 1. Definitions. Unless otherwise defined herein, capitalized
terms used herein but not otherwise defined shall have the meanings assigned to
such terms in the Indentures as in effect on the date hereof. The following
terms shall have the following meanings. Such definitions shall be applicable
equally to the singular and plural forms of the terms defined.
"Collateral Account" shall mean the collateral account established and
maintained under Section 3.1 of the Collateral Agency Agreement.
"Collateral Account Funds" shall mean all funds from time to time on
deposit in the Collateral Account; all investments (including, without
limitation, Cash Equivalents) and all certificates and instruments from time to
time representing or evidencing such investments; all notes, certificates of
deposit, checks and other instruments from time to time hereafter delivered to
or otherwise possessed by Collateral Agent for or on behalf of Pledgor in
substitution for, or in addition to, any or all of the Pledged Collateral; and
all interest, dividends, cash, instruments and other property from time to time
received, receivable or
<PAGE>
-3-
otherwise distributed in respect of or in exchange for any or all of the items
constituting Pledged Collateral.
"Contested Liens" shall have the meaning assigned to such term in
subsection 7(e) of this Agreement.
"Copyrights" shall mean all copyrights of the United States or any other
country, and all registrations and recordings thereof, including, without
limitation, applications, registrations and recordings in the United States
Copyright Office or in any similar office or agency of the United States, or in
any similar office or agency of any other country or any political subdivision
thereof including, without limitation, those described in Schedule A annexed
hereto and all copyrights in derivative works, extensions or renewals thereof.
"Indemnification Documents" shall mean, collectively, (i) that certain
cross-indemnification agreement dated as of May 29, 1986, by and between The
Interlake Corporation ("Interlake") and Pledgor and (ii) that certain tax
indemnification agreement made and entered into as of May 30, 1986, by and
between Interlake and Pledgor.
"Intangibles" shall mean all contract rights relating to Pledged Collateral
(including, without limitation, Pledgor's rights under the Modernization Project
Documents and the Indemnification Documents), and all goodwill, descriptions,
name plates, choses-in-action, causes of action, catalogs, confidential
information, consulting agreements, engineering contracts, and such other assets
which relate to the goodwill of the business of Pledgor and rights to refund or
indemnification to the extent the foregoing relate to Pledged Collateral,
deposit accounts, letters of credit, documents, instruments, chattel paper and
income tax refunds to the extent relating to Pledged Collateral, claims for tax
or other refunds against any city, county, state, or federal government, or any
agency or authority or other subdivision thereof relating to Pledged Collateral,
lease agreements relating to Pledged Collateral, corporate or other business
records relating to Pledged Collateral, and all other general intangibles of
every kind and description relating to Pledged Collateral.
"Intellectual Property" shall mean, collectively, all Copyrights, Patents
and Trademarks and all licenses therefor and all licenses under the patents,
trademarks, copyrights and trade secrets of third parties to Pledgor.
"Modernization Project" means the continuous thin slab cluster/hot strip
mill complex to be constructed at Acme Steel's Riverdale, Illinois plant
pursuant to the Construction Contract and all architectural, engineering and
construction plans, utility and other installations and permits together with
all land, improvements, additions, furniture, fixtures and equipment associated
with such project.
<PAGE>
-4-
"Modernization Project Documents" shall mean, collectively, the following
agreements, each as amended, amended and restated, supplemented or otherwise
modified from time to time: [INSERT DOCUMENT DESCRIPTIONS] and any and all other
agreements of a similar nature relating to feasibility, engineering,
procurement, performance guarantees and/or incentive arrangements relating to
performance in respect of the conception, design, construction and timely
completion of the Modernization Project.
"Patents" shall mean all letters patent of the United States or any other
country, and all patent applications therefor, including, without limitation,
patents and patent applications in the United States Patent and Trademark Office
(the "PTO") or in any similar office or agency of the United States, or in any
similar office or agency of any other country or any political subdivision
thereof including, without limitation, those described in Schedule B annexed
hereto and all reissues, re-examinations, continuations, divisionals,
continuations-in-part or extensions thereof and all associated priority rights.
"Permitted Liens" shall have the meaning assigned to such term pursuant to
subsection 6(b) of this Agreement.
"Prior Liens" shall have the meaning assigned to such term pursuant to
subsection 6(a) of this Agreement.
"Proceeds" shall have the meaning assigned to the term "proceeds" under the
UCC and, in any event, shall include, without limitation, any and all (i)
proceeds of any insurance, indemnity, warranty or guarantee payable to
Collateral Agent or to Pledgor from time to time with respect to any of the
Pledged Collateral, (ii) payments (in any form whatsoever) made or due and
payable to Pledgor from time to time in connection with any requisition,
confiscation, condemnation, seizure or forfeiture of all or any part of the
Pledged Collateral by any governmental authority (or any person acting under
color of a governmental authority), (iii) products of the Pledged Collateral and
(iv) other amounts from time to time paid or payable under or in connection with
any of the Pledged Collateral; provided, however, that Proceeds shall not
include property constituting Bank Primary Collateral (as defined in the
Intercreditor Agreement).
"Trademarks" shall mean all trademarks, trade names, trade styles, service
marks, designs and general intangibles of like nature, and all registrations and
recordings thereof, including, without limitation, applications, registrations
and recordings in the PTO or in any similar office or agency of the United
States or any State thereof, or in any similar office or agency of any other
country or any political subdivision thereof, together with the goodwill
associated therewith including, without limitation, those described in Schedule
C annexed hereto and all reissues, amendments, extensions or renewals thereof.
<PAGE>
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"UCC" shall mean the Uniform Commercial Code as in effect in any
relevant jurisdiction.
SECTION 2. Pledge and Grant of Security Interest. As collateral
security for the payment and performance when due of all the Secured
Obligations, Pledgor hereby pledges, assigns, transfers and grants to Collateral
Agent for the benefit of the Secured Parties a continuing first priority
security interest in and pledge of, the right, title and interest of Pledgor in,
to and under the following property, whether now owned or hereafter acquired
(collectively, the "Pledged Collateral"):
(i) the Collateral Account and all Collateral Account Funds;
(ii) all Intangibles;
(iii) all Intellectual Property; and
(iv) all Proceeds of any of the property specified in clauses (i)
through (iii) of this Section 2.
SECTION 3. Secured Obligations. This Agreement secures, and the
Pledged Collateral is collateral security for, the payment and performance in
full when due, whether at stated maturity, by acceleration or otherwise
(including, without limitation, the payment of interest and other amounts which
would accrue and become due but for the filing of a petition in bankruptcy or
the operation of the automatic stay under Section 362(a) of the Bankruptcy Code,
11 U.S.C. (S) 362(a)), of (i) all of the obligations, liabilities and
indebtedness of Pledgor now or hereafter existing under or in respect of each
Indenture, the Notes and the notes, agreements and/or other instruments which
collectively evidence any Permitted Replacement Financing (such notes,
agreements and/or other instruments, together with the Indentures and the Notes,
the "Debt Instruments") (including, without limitation, the obligations of
Pledgor to pay principal of, premium, if any, and interest on any Debt
Instruments when due and payable) and all other charges, fees, expenses,
commissions, reimbursements, premiums, indemnities and all other amounts due or
to become due under or in connection with each Debt Instrument and (ii) without
duplication of the amounts described in clause (i) of this Section 3, all
obligations, indebtedness and liabilities of Pledgor now existing or hereafter
arising under or in respect of this Agreement, including, without limitation,
with respect to all charges, fees, expenses, commissions, reimbursements,
premiums, indemnities and other payments related to or in respect of the
obligations contained in this Agreement (the obligations described in clauses
(i) and (ii) of this Section 3, collectively, the "Secured Obligations").
<PAGE>
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SECTION 4. No Release. Nothing set forth in this Agreement shall
relieve Pledgor from the performance of any term, covenant, condition or
agreement on Pledgor's part to be performed or observed under or in respect of
any of the Pledged Collateral constituting general intangibles, accounts or
contract rights or from any liability to any Person under or in respect of any
of such Pledged Collateral or shall impose any obligation on Collateral Agent or
any other Secured Party to perform or observe any such term, covenant, condition
or agreement on Pledgor's part to be so performed or observed or shall impose
any liability on Collateral Agent or any other Secured Party for any act or
omission on the part of Pledgor relating thereto or for any breach of any
representation or warranty on the part of Pledgor contained in this Agreement,
or under or in respect of the Pledged Collateral or made in connection herewith
or therewith. The obligations of Pledgor contained in this Section 4 shall
survive the termination of this Agreement and the discharge of Pledgor's other
obligations under this Agreement.
SECTION 5. Supplements; Further Assurances. Pledgor agrees that, at
any time and from time to time, it will execute and file and refile such
financing statements, continuation statements, amendments thereto and other
documents (including, without limitation, this Agreement) in such offices
(including, without limitation, the PTO and the United States Copyright Office)
required or permitted by law in order to perfect, protect and preserve the
rights and interests granted to Collateral Agent hereunder. Without limiting
Pledgor's obligation to make such filings, and without imposing any obligation
on the Collateral Agent to make such filings, Pledgor hereby authorizes
Collateral Agent and appoints Collateral Agent as its attorney-in-fact to file
such financing statements, continuation statements, amendments thereto and other
documents without the signature of Pledgor to the fullest extent permitted by
applicable law, and Pledgor agrees to do such further acts and things, and to
execute and deliver to Collateral Agent such additional assignments, agreements,
powers and instruments, as Collateral Agent may, but shall not be under
obligation to, request to carry into effect the purposes of this Agreement or to
assure and confirm unto Collateral Agent its rights, powers and remedies
hereunder. All of the foregoing shall be at the sole cost and expense of
Pledgor.
SECTION 6. Representations, Warranties and Covenants. Pledgor
represents, warrants and covenants as follows:
(a) Necessary Filings. The filings, registrations and recordings
described in Schedule D hereto constitute the only filings, registrations
and recordings necessary and appropriate to create, preserve, protect and
perfect the security interest granted by Pledgor to Collateral Agent
pursuant to this Agreement in respect of the Pledged Collateral. All such
filings, registrations and recordings shall, to the extent not previously
made, be made immediately after the execution hereof. Upon such filings,
registrations and recordings, the Lien granted to Collateral Agent for the
benefit of
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the Secured Parties pursuant to this Agreement constitutes and hereafter
will constitute as to the Pledged Collateral, a perfected Lien superior and
prior to the rights of all other Persons therein other than the holders of
the (i) Liens described in Schedule E annexed hereto (collectively, the
"Prior Liens") and (ii) Contested Liens solely to the extent contemplated
by the last sentence of subsection 7(e) of this Agreement.
(b) No Liens. With respect to the Pledged Collateral existing on the
date hereof, Pledgor is, and, as to the Pledged Collateral acquired by it
from time to time after the date hereof, Pledgor will be the owner thereof,
free from any Lien or other right, title or interest of any Person other
than (i) Prior Liens, (ii) the Lien and security interest granted by
Pledgor to Collateral Agent in the Pledged Collateral pursuant to this
Agreement and (iii) Contested Liens (the Liens described in clauses (i)
through (iii) of this sentence, collectively, the "Permitted Liens").
Pledgor shall defend the Pledged Collateral against all claims and demands
of all Persons at any time claiming any interest therein adverse to
Collateral Agent or any other Secured Party.
(c) Other Financing Statements. There is no financing statement (or
similar statement or instrument of registration under the law of any
jurisdiction) covering or purporting to cover any interest of any kind in
the Pledged Collateral (other than such statements or instruments in
respect of Permitted Liens) and for so long as any of the Secured
Obligations remain unpaid, Pledgor shall not execute or authorize to be
filed in any public office any financing statement (or similar statement or
instrument of registration under the law of any jurisdiction) or statements
relating to the Pledged Collateral, other than financing statements or
similar statements or instruments filed or to be filed in respect of and
covering the security interest granted by Pledgor to Collateral Agent
pursuant to this Agreement.
(d) Chief Executive Office; Records. The chief executive office of
Pledgor is located at 13500 South Perry Avenue, Riverdale, Illinois 60627.
Pledgor shall not move such office, except to such new location as Pledgor
may establish in accordance with the last sentence of this subsection 6(d).
Pledgor shall not establish a new location for such office nor shall it
change its name until (i) it shall have given Collateral Agent not less
than thirty (30) days' prior written notice of its intention so to do,
clearly describing such new location or name and providing such other
information in connection therewith as Collateral Agent may request and
(ii) with respect to such new location or name, Pledgor shall have taken
all action necessary to maintain the perfection and proof of the security
interest of Collateral Agent for the benefit of the Secured Parties in the
Pledged Collateral intended to be granted hereby, including, without
limitation, obtaining waivers of landlord's or warehouseman's liens with
respect to such new location.
<PAGE>
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(e) Authorization; Enforceability. Pledgor has full corporate power,
authority and legal right to pledge and grant a security interest in all
the Pledged Collateral pursuant to this Agreement, and this Agreement
constitutes the legal, valid and binding obligation of Pledgor, enforceable
against Pledgor in accordance with its terms.
(f) No Consents. No consent of any party (including, without
limitation, stockholders or creditors of Pledgor) and no consent,
authorization, approval, or other action by, and no notice to or filing
with, any governmental authority or regulatory body or other Person is
required either (i) for the pledge by Pledgor of the Pledged Collateral
pursuant to this Agreement or for the execution, delivery or performance of
this Agreement by Pledgor, (ii) except as may be provided in the
Intercreditor Agreement and/or the Collateral Agency Agreement, for the
exercise by Collateral Agent of the voting or other rights provided for in
this Agreement or (iii) except as may be provided in the Intercreditor
Agreement and/or the Collateral Agency Agreement, for the exercise by
Collateral Agent of the remedies in respect of the Pledged Collateral
pursuant to this Agreement.
(g) Pledged Collateral. All information set forth herein (including,
without limitation, the information set forth in the Schedules annexed
hereto) relating to the Pledged Collateral is accurate and complete in all
respects.
(h) Intellectual Property. All of the registered, issued or material
Intellectual Property and all applications and licenses therefor which are
in existence on the date hereof are described on Schedules A, B and C
annexed hereto. Pledgor has the right to use all such Intellectual
Property and all computer programs and other similar rights free from
burdensome restrictions. There is not pending or, to the best of Pledgor's
knowledge, threatened any claim or litigation against or affecting Pledgor
contesting the validity of any of the Intellectual Property or such
computer programs or other rights.
(i) Modernization Project Documents. Pledgor shall perform and
comply with the terms and conditions of all Modernization Project
Documents. Pledgor shall not without the consent of Collateral Agent (i)
cancel or terminate any of the Modernization Project Documents or consent
to or accept any cancellation or termination thereof, (ii) amend,
supplement or otherwise modify any of the Modernization Project Documents
(in each case as in effect on the date hereof) which could have a material
adverse effect on the Modernization Project, the other Mortgaged Property
(as defined in the Mortgage) or impair the Lien granted to Collateral Agent
under this Agreement, (iii) waive any default under or breach of any of the
Modernization Project Documents or waive, fail to enforce, forgive or
release
<PAGE>
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any right, interest, or entitlement of any kind, howsoever arising, under
or in respect of such Modernization Project Documents or, vary or agree to
the variation of any of the provisions of any of such Modernization Project
Documents or of the performance of any other Person under any of such
Modernization Project Documents, or (iv) petition, request or take any
other legal or administrative action which seeks, or may be expected, to
rescind, terminate or suspend, any of the Modernization Project Documents
or amend or modify any thereof. Pledgor shall notify Collateral Agent in
the event it receives any notice or communication with respect to the
Modernization Project Documents including, without limitation, notices of
default, and shall forward promptly copies of any such notices or
communications to Collateral Agent. In the event of Pledgor's default
under any of the Modernization Project Documents, the parties thereto shall
permit Collateral Agent to cure such default and thereafter perform any of
Pledgor's obligations thereunder and such performance by Collateral Agent
will not constitute a default under any such Modernization Project
Document.
SECTION 7. Provisions Concerning Pledged Collateral.
(a) Insurance. Pledgor shall at all times keep the Pledged Collateral
insured in favor of Collateral Agent, at Pledgor's own expense, against all
risks to which the Pledged Collateral may be subject, in such amounts and
with such deductibles as from time to time would be maintained by a prudent
operator of a business similar to the business of Pledgor. Each policy or
certificates with respect to such insurance shall be endorsed to Collateral
Agent's satisfaction for the benefit of Collateral Agent (including,
without limitation, by naming Collateral Agent as an additional named
insured or loss payee as its interest may appear) and such policy or
certificate shall be delivered to Collateral Agent. Each such policy shall
state that it cannot be cancelled without thirty (30) days' prior written
notice to Collateral Agent. At least thirty (30) days prior to the
expiration of any such policy of insurance, a policy or policies renewing
or extending such expiring policy or renewal or extension certificates or
other evidence of renewal or extension shall be delivered to Collateral
Agent. If Pledgor shall fail to insure such Pledged Collateral with
insurers which would be utilized by a prudent operator of a business
similar to the business of Pledgor and in such amounts and with such
deductibles as contemplated herein or if Pledgor shall fail to so endorse
and deposit, or to extend or renew, all such insurance policies or
certificates with respect thereto, Collateral Agent shall have the right
(but shall be under no obligation), to advance funds to procure or renew or
extend such insurance and Pledgor agrees to reimburse Collateral Agent for
any and all costs and expenses thereof, with interest on all such funds
from the date advanced at the rate per annum (the "Default Rate") equal to
two percent (2%) in excess of the highest rate payable under the Notes.
Any proceeds of insurance in respect of the Pledged Collateral are hereby
assigned to Collateral Agent. Subject to the provisions of the
<PAGE>
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Intercreditor Agreement and the Collateral Agency Agreement, in case of any
loss or damage to any of the Pledged Collateral, all proceeds of insurance
maintained by Pledgor shall be paid to Collateral Agent as Trust Moneys
and shall be subject to retention and disbursement by Collateral Agent in
accordance with the terms of the Collateral Agency Agreement.
(b) Further Actions. Pledgor shall, at its sole cost and expense,
make, execute, endorse, acknowledge, file and/or deliver to Collateral
Agent from time to time such lists, descriptions and designations of the
Pledged Collateral, copies of warehouse receipts, receipts in the nature of
warehouse receipts, bills of lading, documents of title, vouchers, invoices
and schedules relating to the Pledged Collateral.
(c) Notation on Books and Records. Pledgor shall place on its books
and records with respect to the Pledged Collateral a notation stating that
Collateral Agent has a security interest therein.
(d) Protection of Collateral Agent's Security. Pledgor shall properly
maintain and protect the Pledged Collateral and shall not take any action
that impairs the rights of Collateral Agent or any other Secured Party in
the Pledged Collateral.
(e) Payment of Taxes; Claims. Pledgor shall pay promptly when due all
property and other taxes, assessments and governmental charges or levies
imposed upon, and all claims (including claims for labor, materials,
supplies and warehousing) against, the Pledged Collateral. Notwithstanding
the foregoing, Pledgor may at its own expense contest the amount or
applicability of any such taxes, assessments, governmental charges or
levies or claims by appropriate legal proceedings; provided, however, that
(i) any such contest shall be conducted in good faith by appropriate
proceedings promptly instituted and diligently conducted and (ii) in
connection with such contest, Pledgor shall have (x) made provision for the
payment of such contested amount on Pledgor's books if and to the extent
required by generally accepted accounting principles then used by Pledgor
in the preparation of its financial statements or (y) deposited with
Collateral Agent a sum sufficient to pay and discharge such obligation and
Collateral Agent's estimate of all interest and penalties related thereto.
Notwithstanding the foregoing provisions of this subsection 7(e), (x) no
contest of any such obligation may be pursued by Pledgor if such contest
would expose Collateral Agent or any other Secured Party to (A) any
possible criminal liability or, (B) unless Pledgor shall have furnished a
bond or other security therefor satisfactory to Collateral Agent or any
other Secured Party, any additional civil liability for failure to comply
with such obligation and (y) if at any time payment of any obligation
imposed upon Pledgor by this subsection 7(e) shall become necessary to
prevent the imposition of remedies because of non-payment, Pledgor shall
pay the
<PAGE>
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same in sufficient time to prevent the imposition of remedies in respect of
such default or prospective default. Any Liens incurred in respect of the
taxes, assessments, governmental charges or levies or claims contemplated
by this subsection 7(e) (such Liens, to the extent the amounts owing in
respect thereof are not yet due or are being contested and otherwise comply
with the provisions of this subsection 7(e), the "Contested Liens") shall
in all respects be subject and subordinate in priority to the Lien and
security interest created and evidenced by this Agreement, except if and to
the extent that the law or regulation creating or authorizing such Lien
provides that such Lien must be superior to the Lien and security interest
created and evidenced hereby.
(f) As to Copyrights, Patents and Trademarks. Pledgor shall:
(i) Advise Collateral Agent of all material Copyrights, Patents and
Trademarks and applications or licenses for or registration of the
same, created or obtained by Pledgor on or after the date of this
Agreement.
(ii) Take all steps necessary to maintain and enforce the
Copyrights, Patents and Trademarks (and licenses therefor) including,
without limitation, (x) payment of all fees, (y) prosecuting infringers
and (z) diligently pursuing any application or registration related
thereto.
SECTION 8. Transfers and Other Liens. Except as permitted by the
appropriate provisions of the Debt Instruments, Pledgor shall not sell, convey,
assign or otherwise dispose of, or grant any option with respect to, any of the
Pledged Collateral. Pledgor shall not create or permit to exist any Lien upon
or with respect to any of the Pledged Collateral other than Permitted Liens.
SECTION 9. Reasonable Care. Collateral Agent shall be deemed to have
exercised reasonable care in the custody and preservation of the Pledged
Collateral in its possession if such Pledged Collateral is accorded treatment
substantially equivalent to that which Collateral Agent, in its individual
capacity, accords its own property, it being understood that Collateral Agent
shall not have responsibility for taking any necessary steps to preserve rights
against any Person with respect to any Pledged Collateral.
<PAGE>
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SECTION 10. Remedies Upon Event of Default.
(a) Obtaining Possession of Pledged Collateral. If an Event of
Default (as defined in the Collateral Agency Agreement) shall have occurred and
be continuing, then and in every such case, Collateral Agent may:
(i) personally, or by agents or attorneys, immediately take
possession of the Pledged Collateral or any part thereof, from Pledgor
or any other Person who then has possession of any part thereof with
or without notice or process of law, and for that purpose may enter
upon Pledgor's premises where any of the Pledged Collateral is located
and remove such Pledged Collateral and use in connection with such
removal any and all services, supplies, aids and other facilities of
Pledgor;
(ii) sell, assign, grant a license to use or otherwise
liquidate, or direct Pledgor to sell, assign, grant a license to use
or otherwise liquidate, any or all investments made in whole or in
part with the Pledged Collateral or any part thereof, and take
possession of the proceeds of any such sale, assignment, license or
liquidation;
(iii) take possession of the Pledged Collateral or any part
thereof, by directing Pledgor in writing to deliver the same to
Collateral Agent at any place or places designated by Collateral
Agent, in which event Pledgor shall at its own expense: (x) forthwith
cause the same to be moved to the place or places so designated by
Collateral Agent and there delivered to Collateral Agent; (y) store
and keep any Pledged Collateral so delivered to Collateral Agent at
such place or places pending further action by Collateral Agent and
(z) while the Pledged Collateral shall be so stored and kept, provide
such guards and maintenance services as shall be necessary to protect
the same and to preserve and maintain them in good condition.
Pledgor's obligation to deliver the Pledged Collateral is of the
essence of this Agreement. Upon application to a court of equity
having jurisdiction, Collateral Agent shall be entitled to a decree
requiring specific performance by Pledgor of such obligation;
(iv) instruct the obligor or obligors on any agreement,
instrument or other obligation (including, without limitation, the
Modernization Project Documents and/or the Indemnification Agreements)
constituting the Pledged Collateral to make any payment required by
the terms of such agreement, instrument or other obligation directly
to Collateral Agent; provided, however, that in the event any such
payments are made directly to Pledgor prior to
<PAGE>
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receipt by any such obligor of such instruction, Pledgor shall
segregate all amounts received pursuant thereto in a separate account
and pay same promptly to Collateral Agent; and
(v) substitute itself for Pledgor as a party to the
Modernization Project Documents and/or the Indemnification Agreements
and exercise all rights and remedies of Pledgor thereunder in
accordance with the terms thereof.
(b) Disposition of Pledged Collateral. Upon the occurrence and
during the continuance of an Event of Default, Collateral Agent may exercise in
respect of the Pledged Collateral, in addition to the other rights and remedies
provided for herein or otherwise available to it, without notice except as
specified below, sell the Pledged Collateral or any part thereof in one or more
parcels at public or private sale, at any exchange, broker's board or at any of
Collateral Agent's offices or elsewhere, for cash, on credit or for future
delivery, and at such price or prices and upon such other terms as Collateral
Agent may deem commercially reasonable. Collateral Agent or any Secured Party
may bid for and be the purchaser of any or all of the Pledged Collateral at any
such sale and shall be entitled, for the purpose of bidding and making
settlement or payment of the purchase price for all or any portion of the
Pledged Collateral sold at such sale, to deliver any outstanding Note or claims
for interest thereon in lieu of cash, which Note or claims for interest thereon
shall be applied to the payment of such purchase price. In the event that the
amount payable in respect of the purchase price of the Pledged Collateral
purchased at any such sale shall be less than the amount due on such Note, such
Note shall be returned to the Secured Party after being appropriately stamped
to show partial payment. Each purchaser at any such sale shall acquire the
property sold absolutely free from any claim or right on the part of Pledgor,
and Pledgor hereby waives, to the fullest extent permitted by law, all rights of
redemption, stay or appraisal hereafter enacted. Collateral Agent shall not be
obligated to make any sale of Pledged Collateral regardless of notice of sale
having been given. Collateral Agent may adjourn any public or private sale from
time to time by announcement at the time and place fixed therefor, and such sale
may, without further notice, be made at the time and place to which it was so
adjourned. Pledgor hereby waives, to the fullest extent permitted by law, any
claims against Collateral Agent arising by reason of the fact that the price at
which any Pledged Collateral may have been sold at such a private sale was less
than the price which might have been obtained at a public sale, even if
Collateral Agent accepts the first offer received and does not offer such
Pledged Collateral to more than one offeree. Pledgor agrees that, to the extent
notice of sale shall be required by law, five (5) days' notice from Collateral
Agent of the time and place of any public sale or of the time after which a
private sale or other intended disposition is to take place shall be
commercially reasonable notification of such matters. No notification need be
given to Pledgor if it has signed, after the occurrence of an Event of Default,
a statement renouncing or modifying any right to notification of sale or other
intended disposition.
<PAGE>
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(c) Remedies Under UCC. In addition to the rights and remedies
provided in this Agreement or otherwise available to it, Collateral Agent shall
have all the rights and remedies of a secured party under the UCC and any other
similar law in any applicable jurisdiction.
(d) Waiver of Claims. Except as otherwise provided herein, Pledgor
hereby waives, to the fullest extent permitted by applicable law, notice or
judicial hearing in connection with Collateral Agent's taking possession or
Collateral Agent's disposition of any of the Pledged Collateral, including,
without limitation, any and all prior notice and hearing for any prejudgment
remedy or remedies and any such right which Pledgor would otherwise have under
law, and Pledgor hereby further waives, to the fullest extent permitted by
applicable law: (i) all damages occasioned by such taking of possession; (ii)
all other requirements as to the time, place and terms of sale or other
requirements with respect to the enforcement of Collateral Agent's rights
hereunder and (iii) all rights of redemption, appraisal, valuation, stay,
extension or moratorium now or hereafter in force under any applicable law. Any
sale of, or the grant of options to purchase, or any other realization upon, any
Pledged Collateral shall operate to divest all right, title, interest, claim and
demand, either at law or in equity, of Pledgor therein and thereto, and shall be
a perpetual bar both at law and in equity against Pledgor and against any and
all Persons claiming or attempting to claim the Pledged Collateral so sold,
optioned or realized upon, or any part thereof, from, through or under Pledgor.
(e) Certain Sales of Pledged Collateral. Pledgor recognizes that, by
reason of certain prohibitions contained in law, rules, regulations or orders of
any foreign governmental authority, Collateral Agent may be compelled, with
respect to any sale of all or any part of the Pledged Collateral, to limit
purchasers to those who meet the requirements of such foreign governmental
authority. Pledgor acknowledges that any such sales may be at prices and on
terms less favorable to Collateral Agent than those obtainable through a public
sale without such restrictions, and, notwithstanding such circumstances, agrees
that any such restricted sale shall be deemed to have been made in a
commercially reasonable manner.
SECTION 11. Application of Proceeds. The proceeds received by
Collateral Agent in respect of any sale of, collection from or other realization
upon all or any part of the Pledged Collateral pursuant to the exercise by
Collateral Agent of its remedies as a secured creditor as provided in Section 10
hereof shall be applied, together with any other sums then held by Collateral
Agent pursuant to this Agreement, promptly by Collateral Agent in the manner set
forth in the Collateral Agency Agreement.
SECTION 12. Expenses. Pledgor will upon demand pay to Collateral
Agent the amount of any and all expenses, including the fees and expenses of
Collateral Agent's counsel and the allocated costs of Collateral Agent's
internal counsel and the fees and
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expenses of any experts and agents which Collateral Agent may incur in
connection with (i) the collection of the Secured Obligations, (ii) the
enforcement and administration of this Agreement, (iii) the custody or
preservation of, or the sale of, collection from, or other realization upon, any
of the Pledged Collateral, (iv) the exercise or enforcement of any of the rights
of Collateral Agent or any other Secured Party hereunder or (v) the failure by
Pledgor to perform or observe any of the provisions hereof. All amounts
payable by Pledgor under this Section 12 shall be due upon demand and shall be
part of the Secured Obligations. Pledgor's obligations under this Section 12
shall survive the termination of this Agreement and the discharge of Pledgor's
other obligations hereunder.
SECTION 13. No Waiver; Cumulative Remedies.
(a) No failure on the part of Collateral Agent to exercise, no course
of dealing with respect to, and no delay on the part of Collateral Agent in
exercising, any right, power or remedy hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise of any such right, power or
remedy hereunder preclude any other or further exercise thereof or the exercise
of any other right, power or remedy. The remedies herein provided are
cumulative and are not exclusive of any remedies provided by law.
(b) In the event Collateral Agent shall have instituted any
proceeding to enforce any right, power or remedy under this Agreement by
foreclosure, sale, entry or otherwise, and such proceeding shall have been
discontinued or abandoned for any reason or shall have been determined adversely
to Collateral Agent, then and in every such case, Pledgor, Collateral Agent and
each holder of any of the Secured Obligations shall be restored to their
respective former positions and rights hereunder with respect to the Pledged
Collateral, and all rights, remedies and powers of Collateral Agent and the
Secured Parties shall continue as if no such proceeding had been instituted.
SECTION 14. Actions by Collateral Agent; Successor Collateral Agent.
The actions of Collateral Agent hereunder are subject to the provisions of the
Collateral Agency Agreement. Collateral Agent shall have the right hereunder to
make demands, to give notices, to exercise or refrain from exercising any
rights, and to take or refrain from taking action (including, without
limitation, the release or substitution of Pledged Collateral), in accordance
with the provisions of the Collateral Agency Agreement. Collateral Agent may
resign and a successor Collateral Agent may be appointed in the manner provided
in the Collateral Agency Agreement. Upon the acceptance of any appointment as
Collateral Agent by a successor Collateral Agent, that successor Collateral
Agent shall thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Collateral Agent under this Agreement,
and the retiring Collateral Agent shall thereupon be discharged from its duties
and obligations under this Agreement. After any retiring Collateral Agent's
<PAGE>
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resignation, the provisions of this Agreement shall inure to its benefit as to
any actions taken or omitted to be taken by it under this Agreement while it was
Collateral Agent.
SECTION 15. Collateral Agent May Perform; Collateral Agent Appointed
Attorney-in-Fact. If Pledgor shall fail to do any act or thing that it has
covenanted to do hereunder or if any warranty on the part of Pledgor contained
herein shall be breached, Collateral Agent or any Secured Party may (but shall
not be obligated to) do the same or cause it to be done or remedy any such
breach, and may expend funds for such purpose. Any and all amounts so expended
by Collateral Agent or such Secured Party shall be paid by Pledgor promptly upon
demand therefor, with interest at the Default Rate during the period from and
including the date on which such funds were so expended to the date of
repayment. Pledgor's obligations under this Section 15 shall survive the
termination of this Agreement and the discharge of Pledgor's other obligations
under this Agreement. Pledgor hereby appoints Collateral Agent its attorney-in-
fact with an interest, with full authority in the place and stead of Pledgor and
in the name of Pledgor, or otherwise, from time to time in Collateral Agent's
discretion, to take any action and to execute any instrument consistent with the
terms of this Agreement, any Debt Instrument, the Collateral Agency Agreement
and the Intercreditor Agreement which Collateral Agent may deem necessary or
advisable to accomplish the purposes of this Agreement. The foregoing grant of
authority is a power of attorney coupled with an interest and such appointment
shall be irrevocable for the term of this Agreement. Pledgor hereby ratifies
all that such attorney shall lawfully do or cause to be done by virtue and in
accordance with the terms hereof.
SECTION 16. Indemnity.
(a) Indemnity. Pledgor agrees to indemnify, pay and hold harmless
Collateral Agent and the officers, directors, employees, agents and affiliates
of Collateral Agent (collectively, the "Indemnitees") from and against any and
all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, claims, costs (including, without limitation, settlement costs), expenses
or disbursements of any kind or nature whatsoever (including, without
limitation, the fees and disbursements of counsel for such Indemnitees in
connection with any investigative, administrative or judicial proceeding
commenced or threatened, whether or not such Indemnitee shall be designated a
party thereto), which may be imposed on, incurred by, or asserted against such
Indemnitee, in any manner relating to or arising out of this Agreement or the
Intercreditor Agreement (including, without limitation, any misrepresentation by
Pledgor in this Agreement) (the "Indemnified Liabilities"); provided, however,
that Pledgor shall have no obligation to an Indemnitee hereunder with respect to
Indemnified Liabilities if it has been determined by a final decision (after all
appeals and the expiration of time to appeal) by a court of competent
jurisdiction that such Indemnified Liability arose from the gross negligence or
willful misconduct of such Indemnitee. To the extent that the undertaking to
indemnify, pay and hold harmless set forth in the preceding
<PAGE>
-17-
sentence may be unenforceable because it is violative of any law or public
policy, Pledgor shall contribute the maximum portion which it is permitted to
pay and satisfy under applicable law, to the payment and satisfaction of all
Indemnified Liabilities incurred by the Indemnitees or any of them.
(b) Survival. The obligations of Pledgor contained in this Section
16 shall survive the termination of this Agreement and the discharge of
Pledgor's other obligations under this Agreement.
(c) Reimbursement. Any amounts paid by any Indemnitee as to which
such Indemnitee has the right to reimbursement shall constitute Secured
Obligations secured by the Pledged Collateral.
SECTION 17. Modification in Writing. No amendment, modification,
supplement, termination or waiver of or to any provision of this Agreement, nor
consent to any departure by Pledgor therefrom, shall be effective unless the
same shall be in writing and signed by Collateral Agent and Pledgor. Any
amendment, modification or supplement of or to any provision of this Agreement,
any waiver of any provision of this Agreement, and any consent to any departure
by Pledgor from the terms of any provision of this Agreement, shall be effective
only in the specific instance and for the specific purpose for which made or
given. Except where notice is specifically required by this Agreement or any
Debt Instrument, no notice to or demand on Pledgor in any case shall entitle
Pledgor to any other or further notice or demand in similar or other
circumstances.
SECTION 18. Termination; Release.
(a) Except as otherwise provided herein, this Agreement shall
terminate at such time as all of the Secured Obligations shall have been
indefeasibly paid in full and have been terminated. Upon termination of this
Agreement or any release of Pledged Collateral in accordance with the provisions
of the Collateral Agency Agreement, Collateral Agent shall, upon the request and
at the sole cost and expense of Pledgor, forthwith assign, transfer and deliver
to Pledgor, against receipt and without recourse to or warranty by Collateral
Agent, such of the Pledged Collateral as may be in possession of Collateral
Agent and as shall not have been sold or otherwise applied pursuant to the terms
hereof or the terms of the Intercreditor Agreement, on the order of and at the
sole cost and expense of Pledgor, and proper instruments (including UCC
termination statements on Form UCC-3) acknowledging the termination of this
Agreement or the release of such Pledged Collateral, as the case may be.
(b) In the event that any Asset Sale made by Pledgor in accordance
with applicable provisions of the Debt Instruments involves the sale of an asset
which constitutes
<PAGE>
-18-
Pledged Collateral, Pledgor shall deliver all Net Cash Proceeds received in
respect of such item of Pledged Collateral to Collateral Agent to be held by
Collateral Agent as Trust Moneys and applied in accordance with the provisions
of the Collateral Agency Agreement.
SECTION 19. Notices. Unless otherwise provided herein, any notice or
other communication herein shall be given in the manner set forth in the
Collateral Agency Agreement and at the addresses set forth in the Collateral
Agency Agreement, or at such other address as shall be designated by any party
in a written notice to the other party.
SECTION 20. Continuing Security Interest; Assignment. This Agreement
shall create a continuing security interest in the Pledged Collateral and shall
(i) be binding upon Pledgor, its successors and assigns, and (ii) inure,
together with the rights and remedies of Collateral Agent hereunder, to the
benefit of Collateral Agent and the other Secured Parties and each of their
respective successors, transferees and assigns; no other Persons (including,
without limitation, any other creditor of Pledgor) shall have any interest
herein or any right or benefit with respect hereto. Without limiting the
generality of the foregoing clause (ii), any Secured Party may assign or
otherwise transfer any Debt Instrument held by it secured by this Agreement to
any other Person, and such other Person shall thereupon become vested with all
the benefits in respect thereof granted to such Secured Party, herein or
otherwise, subject however, to the applicable provisions of the Debt
Instruments.
SECTION 21. GOVERNING LAW; TERMS. THIS AGREEMENT SHALL BE GOVERNED
BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS, EXCEPT TO
THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER,
OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR PROPERTY ARE GOVERNED BY THE
LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK.
SECTION 22. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. ALL
JUDICIAL PROCEEDINGS BROUGHT AGAINST PLEDGOR WITH RESPECT TO THIS AGREEMENT MAY
BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE
BOROUGH OF MANHATTAN, STATE OF NEW YORK AND BY EXECUTION AND DELIVERY OF THIS
AGREEMENT PLEDGOR ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES,
GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID
COURTS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN
CONNECTION WITH THIS AGREEMENT. PLEDGOR DESIGNATES AND APPOINTS CT CORPORATION
SYSTEM, WITH AN ADDRESS AT 1633 BROADWAY, NEW YORK, NEW YORK
<PAGE>
-19-
10019 AND SUCH OTHER PERSONS AS MAY HEREAFTER BE SELECTED BY PLEDGOR IRREVOCABLY
AGREEING IN WRITING TO SO SERVE, AS ITS AGENT TO RECEIVE ON ITS BEHALF, SERVICE
OF ALL PROCESS IN ANY SUCH PROCEEDINGS IN ANY SUCH COURT, SUCH SERVICE BEING
HEREBY ACKNOWLEDGED BY PLEDGOR TO BE EFFECTIVE AND BINDING SERVICE IN EVERY
RESPECT. A COPY OF SUCH PROCESS SO SERVED SHALL BE MAILED BY REGISTERED MAIL TO
PLEDGOR AT ITS ADDRESS PROVIDED FOR IN THE COLLATERAL AGENCY AGREEMENT EXCEPT
THAT UNLESS OTHERWISE PROVIDED BY APPLICABLE LAW, ANY FAILURE TO MAIL SUCH COPY
SHALL NOT AFFECT THE VALIDITY OF SERVICE OF PROCESS. IF ANY AGENT APPOINTED BY
PLEDGOR REFUSES TO RECEIVE AND FORWARD SUCH SERVICE, PLEDGOR HEREBY AGREES THAT
SERVICE UPON IT BY MAIL SHALL CONSTITUTE SUFFICIENT NOTICE. NOTHING HEREIN
SHALL AFFECT THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR
SHALL LIMIT THE RIGHT OF COLLATERAL AGENT TO BRING PROCEEDINGS AGAINST PLEDGOR
IN THE COURTS OF ANY OTHER JURISDICTION.
SECTION 23. Severability of Provisions. Any provision of this
Agreement which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.
SECTION 24. Execution in Counterparts. This Agreement and any
amendments, waivers, consents or supplements hereto may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed and delivered shall be deemed to be an original,
but all such counterparts together shall constitute one and the same Agreement.
SECTION 25. Headings. The Section and subsection headings used in
this Agreement are for convenience of reference only and shall not affect the
construction of this Agreement.
SECTION 26. Obligations Absolute. All obligations of Pledgor
hereunder shall be absolute and unconditional irrespective of:
(a) any bankruptcy, insolvency, reorganization, arrangement,
readjustment, composition, liquidation or the like of Pledgor;
(b) any lack of validity or enforceability of any Debt
Instrument, or any other agreement or instrument relating thereto;
<PAGE>
-20-
(c) any change in the time, manner or place of payment of, or in
any other term of, all or any of the Secured Obligations, or any other
amendment or waiver of or any consent to any departure from any Debt
Instrument, or any other agreement or instrument relating thereto;
(d) any exchange, release or non-perfection of any other
collateral, or any release or amendment or waiver of or consent to any
departure from any guarantee, for all or any of the Secured Obligations;
(e) any exercise or non-exercise, or any waiver of any right,
remedy, power or privilege under or in respect of this Agreement or any
Debt Instrument except as specifically set forth in a waiver granted
pursuant to the provisions of Section 17; or
(f) any other circumstances which might otherwise constitute a
defense available to, or a discharge of, Pledgor.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed and delivered by its duly authorized officer as of the date first
above written.
ACME STEEL COMPANY,
as Pledgor
By: ____________________________
Name:
Title:
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION
as Collateral Agent,
By: ____________________________
Name:
Title:
<PAGE>
SCHEDULE A
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TO
--
SECURITY AGREEMENT
------------------
COPYRIGHTS
----------
<PAGE>
SCHEDULE B
----------
TO
--
SECURITY AGREEMENT
------------------
PATENTS
-------
<PAGE>
SCHEDULE C
----------
TO
--
SECURITY AGREEMENT
------------------
TRADEMARKS
----------
<PAGE>
SCHEDULE D
----------
TO
--
SECURITY AGREEMENT
------------------
REQUIRED FILINGS
----------------
<PAGE>
SCHEDULE E
----------
TO
--
SECURITY AGREEMENT
------------------
PRIOR LIENS
-----------
<PAGE>
MORTGAGE, ASSIGNMENT OF LEASES,
SECURITY AGREEMENT AND FIXTURE FILING
BY
ACME STEEL COMPANY,
Mortgagor,
TO
__________________________________,
Mortgagee;
Securing Principal Indebtedness of: $__________;
Relating to Premises in:
Illinois
Dated as of: ____________, 1994
After recording,
please return to:
Cahill Gordon & Reindel
80 Pine Street
New York, New York 10005
Attention: _______________
<PAGE>
TABLE OF CONTENTS
PAGE
----
INTRODUCTION ...........................................
RECITALS ...............................................
GRANTING CLAUSES .......................................
COVENANTS ..............................................
ARTICLE I WARRANTIES, REPRESENTATIONS AND
COVENANTS OF MORTGAGOR .................................
Section 1.1 Payment and Performance .................
Section 1.2 Authority and Validity ..................
Section 1.3 Good Title ..............................
Section 1.4 Recording Documentation To Assure
Security Interest; Fees and
Expenses ...............................
Section 1.5 Payment of Taxes, Insurance Premiums,
Assessments; Compliance with Law
and Insurance Requirements .............
Section 1.6 Certain Tax Law Changes .................
Section 1.7 Required Insurance Policies .............
Section 1.8 Failure To Make Certain Payments ........
Section 1.9 Inspection ..............................
Section 1.10 Mortgagor To Maintain
Improvements ...........................
Section 1.11 Mortgagor's Obligations with
Respect to Leases ......................
Section 1.12 Transfer Restrictions ...................
Section 1.13 Destruction; Condemnation ...............
Section 1.14 Alterations .............................
Section 1.15 Hazardous Material ......................
Section 1.16 Asbestos ................................
Section 1.17 Books and Records; Reports ..............
Section 1.18 No Claims Against Mortgagee .............
Section 1.19 Utility Services ........................
-i-
<PAGE>
PAGE
----
ARTICLE II ASSIGNMENT OF RENTS; SECURITY
AGREEMENT ..............................
Section 2.1 Assignment of Leases, Rents,
Issues and Profits .....................
Section 2.2 Security Interest in Personal
Property ...............................
ARTICLE III EVENTS OF DEFAULT AND REMEDIES ..........
Section 3.1 Remedies in Case of an Event of
Default ................................
Section 3.2 Sale of Mortgaged Property If
Event of Default Occurs;
Proceeds of Sale .......................
Section 3.3 Additional Remedies in Case of an
Event of Default .......................
Section 3.4 Legal Proceedings After an
Event of Default .......................
Section 3.5 Remedies Not Exclusive ..................
ARTICLE IV CERTAIN DEFINITIONS .....................
ARTICLE V MISCELLANEOUS ...........................
Section 5.1 Severability ............................
Section 5.2 Notices .................................
Section 5.3 Covenants To Run with the Land ..........
Section 5.4 Captions; Gender and Number .............
Section 5.5 Limitation on Interest Payable ..........
Section 5.6 Indemnification; Reimbursement ..........
Section 5.7 Choice of Law ...........................
Section 5.8 Changes in Writing ......................
Section 5.9 No Merger ...............................
Section 5.10 Concerning Mortgagee ....................
Section 5.11 Waiver of Stay ..........................
Section 5.12 No Credit for Payment of Taxes
or Impositions .........................
Section 5.13 Stamp and Other Taxes ...................
Section 5.14 Estoppel Certificates ...................
-ii-
<PAGE>
PAGE
----
Section 5.15 Additional Security .....................
Section 5.16 Release .................................
Section 5.17 Expenses of Collection ..................
Section 5.18 Business Days ...........................
SIGNATURE PAGE .........................................
SCHEDULE A LEGAL DESCRIPTION ..........................
SCHEDULE B PRIOR LIENS ................................
-iii-
<PAGE>
MORTGAGE, ASSIGNMENT OF LEASES,
SECURITY AGREEMENT AND FIXTURE FILING
-------------------------------------
MORTGAGE, ASSIGNMENT OF LEASES, SECURITY AGREEMENT AND FIXTURE FILING
("Mortgage"), dated as of __________, 1994, made by ACME STEEL COMPANY, a
Delaware corporation, having an office at 13500 South Perry Avenue, Riverdale,
Illinois 60627, as mortgagor, assignor and debtor (together with its successors
and assigns, "Mortgagor"), in favor of _________________________________, a
__________________________ having an office at __________
______________________, as collateral agent pursuant to the Collateral Agency
Agreement (as hereinafter defined), as mortgagee, assignee and secured party (in
such capacity and together with its successors and assigns in such capacity,
"Mortgagee").
R E C I T A L S :
- - - - - - - -
1. Mortgagor is the owner of the land described in Schedule A annexed
----------
hereto and all the improvements situated thereon.
2. Pursuant to that certain indenture (as amended, amended and restated,
supplemented or otherwise modified from time to time, the "Note Indenture"),
dated as of ________, 1994, by and among Acme Metals Incorporated (the
"Company"), Mortgagor, as subsidiary guarantor of the Company's obligations,
each of the other subsidiaries of the Company, as guarantors (collectively,
the "Guarantors") of the Company's obligations, and ____________________, as
trustee (in such capacity and together with its successors and assigns in such
capacity, the "Note Trustee") for the holders of the Senior Secured Notes (as
hereinafter defined), the Company is issuing its _____% senior secured notes
due 2002 (as amended, amended and restated, supplemented or otherwise modified
from time to time, the "Senior Secured Notes") in the aggregate principal
amount of $175,000,000.
3. Pursuant to that certain indenture (as amended, amended and restated,
supplemented or otherwise modified from time to time, the "Discount Note
Indenture"; together with the Note Indenture, the "Indentures"), dated as of
_______, 1994, by and among the Company, Mortgagor, the Guarantors and
_____________, as trustee (in such capacity and together with its successors
and assigns in such capacity, the "Discount Note Trustee"; together with the
Note Trustee, the "Trustees") for the holders of the Senior Secured Discount
Notes (as hereinafter defined), the Company is issuing its ____% senior
secured discount notes due 2004 (as amended, amended and restated,
supplemented or otherwise modified from time to time, the "Senior Secured
Discount Notes"; together with
<PAGE>
-2-
the Senior Secured Notes, the "Notes") in the aggregate principal amount of
$_________.
4. Mortgagee is the collateral agent under that certain collateral agency
agreement (the "Collateral Agency Agreement"), dated as of _______, 1994, for
the Trustees (for the benefit of the holders of the Notes) and such other
parties which may from time to time, become additional lenders to the Company,
Mortgagor and/or the Guarantors (each such lender, a "Permitted Additional
Lender" and collectively, the "Permitted Additional Lenders"; together with
the Trustees and Mortgagee, the "Secured Parties") which may, in accordance
with the provisions of clause (xi) of the definition of "Permitted Liens" in
each Indenture as in effect on the date hereof, take a security interest in
and/or Lien on the Collateral (as defined in the Collateral Agency Agreement)
to secure the financing provided by the Permitted Additional Lenders (such
financing, the "Permitted Replacement Financing") upon the execution and
delivery by the Permitted Additional Lenders of a supplement to the Collateral
Agency Agreement as contemplated therein.
5. This Mortgage is given by Mortgagor in favor of Mortgagee to secure
the payment and performance in full when due, whether at stated maturity, by
redemption, repurchase, acceleration or otherwise (including, without
limitation, the payment of interest and other amounts which would accrue and
become due but for the filing of a petition in bankruptcy or the operation of
the automatic stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. (S)
362(a)), of (i) all of the obligations, liabilities and indebtedness of
Mortgagor now or hereafter existing under or in respect of each Indenture, the
Notes and the notes, agreements and/or other instruments which collectively
evidence any Permitted Replacement Financing (such notes, agreements and/or
other instruments, together with the Indentures and the Notes, the "Debt
Instruments") (including, without limitation, the obligations of Mortgagor to
pay principal of, premium, if any, and interest on any Debt Instruments when
due and payable) and all other charges, fees, premiums, indemnities and other
amounts due or to become due under or in connection with each Debt Instrument
and (ii) without duplication of the amounts described in clause (i), all
obligations, indebtedness and liabilities of Mortgagor pursuant to the terms
of this Mortgage, in each case whether now existing or hereafter arising, and
whether in the regular course of business or otherwise (collectively, the
"Secured Obligations").
G R A N T I N G C L A U S E S :
- - - - - - - - - - - - - - -
For and in consideration of the sum of Ten Dollars ($10.00) and other
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Mortgagor hereby grants, mortgages, bargains, sells, assigns and
conveys to Mortgagee and hereby grants to Mortgagee a security interest in and
first Lien (as defined in each Indenture as in effect on the date hereof)
upon, all Mortgagor's right, title and interest in and to the
<PAGE>
-3-
following property whether now owned or held or hereafter acquired
(collectively, the "Mortgaged Property"):
A. Any and all present estates or interests of Mortgagor in the land
described in Schedule A, together with all Mortgagor's reversionary rights in
----------
and to any and all easements, rights-of-way, sidewalks, strips and gores of
land, drives, roads, curbs, streets, ways, alleys, passages, passageways, sewer
rights, waters, water courses, water rights, mineral, gas and oil rights, power,
air, light and other rights, estates, titles, interests, privileges, liberties,
servitudes, licenses, tenements, hereditaments and appurtenances whatsoever, in
any way belonging, relating or appertaining thereto, or any part thereof, or
which hereafter shall in any way belong, relate or be appurtenant thereto
(collectively, the "Land");
B. Any and all estates or interests of Mortgagor in the buildings,
structures and other improvements and any and all Alterations (as hereinafter
defined) now or hereafter located or erected on the Land, including, without
limitation, attachments, walks and ways (collectively, the "Improvements";
together with the Land, the "Premises");
C. Any and all permits, licenses, franchises, certificates, consents,
approvals and authorizations, however characterized, issued or in any way
furnished, whether necessary or not for the operation and use of the Premises,
including, without limitation, building permits, certificates of occupancy,
environmental certificates, industrial permits, or licenses and certificates of
operation;
D. Any and all interest of Mortgagor in all machinery, apparatus,
equipment, fittings, fixtures, improvements and articles of personal property of
every kind and nature whatsoever (other than Mortgagor's inventory) attached or
affixed to, or located on, the Premises or used in connection with the use and
enjoyment of the Premises or the maintenance or preservation thereof, including,
without limitation, all equipment comprising the Modernization Project (as
defined in each Indenture as in effect on the date hereof), all manufacturing,
storage, handling and other equipment utilized in connection with the production
and marketing of steel, semi-finished steel, steel ingots, slabs, steel strips
and coils, tools, utility systems, fire sprinkler and alarm systems, HVAC
equipment, boiler, electronic data processing, telecommunications or computer
equipment, refrigeration, electronic monitoring, water or lighting systems,
power, sanitation, waste removal, pollution abatement or control, elevators,
window cleaning, maintenance or other systems or equipment, all indoor or
outdoor furniture, appliances or supplies, and all other articles used or useful
in connection with the use, operation, maintenance or repair of any part of the
Premises, together with any and all parts, improvements, additions,
replacements, accessions and substitutions thereto or therefor (collectively,
the "Equipment");
<PAGE>
-4-
E. All Mortgagor's right, title and interest, as landlord,
franchisor, licensor or grantor, in all leases and subleases of space, oil, gas
and mineral leases, franchise agreements, licenses, occupancy or concession
agreements now existing or hereafter entered into relating in any manner to the
Premises or the Equipment and any and all amendments, modifications, supplements
and renewals of any thereof (each such lease, license or agreement, together
with any such amendment, modification, supplement or renewal, a "Lease"),
whether now in effect or hereafter coming into effect including, without
limitation, all rents, additional rents, management fees payable by tenants,
cash, guarantees, letters of credit, bonds, sureties or securities deposited
thereunder to secure performance of the lessee's, franchisee's, licensee's or
obligee's obligations thereunder, revenues, earnings, profits and income,
advance rental payments, payments incident to assignment, sublease or surrender
of a Lease, claims for forfeited deposits and claims for damages, now due or
hereafter to become due, with respect to any Lease (collectively, the "Rents");
F. All general intangibles and contract rights relating to the
Premises or the Equipment and all reserves, deferred payments, deposits,
refunds and claims of every kind or character relating thereto (collectively,
the "Contract Rights");
G. All surveys, title insurance policies, drawings, plans,
specifications, construction contracts, file materials, operating and
maintenance records, catalogues, tenant lists, correspondence, advertising
materials, operating manuals, warranties, guaranties, appraisals, studies and
data relating to the Premises or the Equipment or the construction of any
Alteration or the maintenance of any Permit (as hereinafter defined); and
H. All proceeds of the conversion, voluntary or involuntary, of any
of the foregoing into cash or liquidated claims, including, without limitation,
proceeds of insurance and condemnation or other awards or payments with respect
thereto (including, without limitation, any Net Proceeds or Net Award (each as
hereinafter defined)) and interest thereon (collectively, the "Proceeds");
TO HAVE AND TO HOLD the Mortgaged Property unto Mortgagee and Mortgagee's
successors and assigns forever (subject to the Prior Liens but not to
extensions or replacements of Prior Liens), for the purpose of securing the
payment and performance of the Secured Obligations.
Notwithstanding the foregoing, the Mortgaged Property shall not include
property or assets hereafter acquired by Mortgagor and financed by Mortgagor
with Indebtedness permitted to be incurred under each of the Indentures as in
effect on the date hereof, which Indebtedness is secured only by such property
or assets as permitted pursuant to clause (viii) of the definition of
"Permitted Liens" contained in each Indenture as in effect
<PAGE>
-5-
on the date hereof; provided, however, that at such time as such property or
-------- -------
assets shall no longer be subject to such Permitted Lien, such property or
assets shall, without any act or delivery by any Person (as defined in each
Indenture as in effect on the date hereof), constitute Mortgaged Property
hereunder.
C O V E N A N T S :
- - - - - - - - -
Mortgagor warrants, represents and covenants to and for the benefit of
Mortgagee as follows:
ARTICLE I
WARRANTIES, REPRESENTATIONS AND
-------------------------------
COVENANTS OF MORTGAGOR
----------------------
SECTION 1.1 Payment and Performance. Mortgagor shall pay and perform in
-----------------------
full as and when the same shall become due all of the Secured Obligations.
SECTION 1.2 Authority and Validity. Mortgagor represents, warrants and
----------------------
covenants that (i) Mortgagor is duly authorized to execute and deliver this
Mortgage, the Debt Instruments (other than Debt Instruments evidencing Permitted
Replacement Financing), the Collateral Agency Agreement and the other documents
evidencing or securing the Secured Obligations (this Mortgage, the Debt
Instruments, the Collateral Agency Agreement and such other documents,
collectively, the "Indenture Documents"), and all corporate and governmental
actions, consents, authorizations and approvals necessary or required therefor
have been duly and effectively taken or obtained, (ii) this Mortgage and the
other Indenture Documents (other than Debt Instruments evidencing Permitted
Replacement Financing) are legal, valid, binding and enforceable obligations of
Mortgagor and (iii) Mortgagor has full power and lawful authority to execute and
deliver this Mortgage and the other Indenture Documents (other than Debt
Instruments evidencing Permitted Replacement Financing) and to mortgage and
grant a security interest in the Mortgaged Property as contemplated herein.
With respect to Debt Instruments evidencing Permitted Replacement Financing,
Mortgagor represents, warrants and covenants that (x) Mortgagor will, at such
time as such Debt Instruments shall be executed, be duly authorized to execute
and deliver such Debt Instruments, and all corporate and governmental actions,
consents, authorizations and approvals necessary or required therefor shall have
been duly and effectively taken or obtained, (y) such Debt Instruments will, at
such time as such Debt Instruments shall be executed, be legal, valid, binding
and enforceable obligations of Mortgagor and (z) Mortgagor will, at such time as
such Debt Instruments shall be executed, have full power
<PAGE>
-6-
and lawful authority to execute and deliver such Debt Instruments and to
mortgage and grant a security interest in the property as contemplated therein.
SECTION 1.3 Good Title.
----------
1.3.1 Mortgagor represents, warrants and covenants that (i) Mortgagor
has good and marketable title to the Premises and the landlord's interest and
estate under or in respect of the Leases and good title to the interest it
purports to own or lease in and to each of the Permits, the Equipment and the
Contract Rights, in each case subject to no Liens, except for those Liens
identified on Schedule B annexed hereto (collectively, "Prior Liens"), (ii)
----------
Mortgagor will keep in effect all rights and appurtenances to or that constitute
a part of the Mortgaged Property, (iii) Mortgagor will protect, preserve and
defend its interest in the Mortgaged Property and title thereto, (iv) Mortgagor
will comply with each of the terms, conditions and provisions of any obligation
of Mortgagor (x) which constitutes a part of the Mortgaged Property, (y) which
is secured by the Mortgaged Property or (z) the noncompliance with which could
be expected to result in the imposition of a Lien on the Mortgaged Property, (v)
Mortgagor will appear and defend the Lien and security interests created and
evidenced hereby and the validity and priority of this Mortgage in any action or
proceeding affecting or purporting to affect the Mortgaged Property or any of
the rights of Mortgagee hereunder, (vi) this Mortgage creates and constitutes a
valid and enforceable first Lien on the Mortgaged Property, and, to the extent
any of the Mortgaged Property shall consist of personalty, a first security
interest in the Mortgaged Property, which first Lien and first security interest
are and will be subject only to (a) Prior Liens (but not to extensions or
replacements of Prior Liens) and (b) Liens hereafter created which, pursuant to
the provisions of Section 1.12, are permitted to be superior to the Lien and
security interests created and evidenced hereby, and Mortgagor does now and
shall warrant and defend to Mortgagee and all its successors and assigns such
title and the validity and priority of the Lien and security interests created
and evidenced hereby against the claims of all Persons, (vii) there has been
issued and there remain in effect each and every certificate of occupancy or use
or other Permit currently required for the existing use and occupancy by
Mortgagor and its tenants of the Premises and (viii) the Premises comply with
all local zoning, land use, setback or other development and use requirements of
Governmental Authorities (as hereinafter defined).
1.3.2 Mortgagor, immediately upon obtaining knowledge of the pendency
of any proceedings for the eviction of Mortgagor from the Mortgaged Property or
any part thereof by paramount title or otherwise questioning Mortgagor's title
to the Mortgaged Property as warranted in this Mortgage, or of any condition
that might be expected to give rise to any such proceeding, shall notify
Mortgagee in writing thereof. Mortgagee may participate in such proceedings,
and Mortgagor shall deliver or cause to be
<PAGE>
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delivered to Mortgagee all instruments requested by Mortgagee to permit such
participation. In any such proceedings Mortgagee may be represented by counsel
satisfactory to Mortgagee at the expense of Mortgagor. If, upon the resolution
of such proceedings, Mortgagor shall suffer a loss of the Mortgaged Property or
any part thereof or interest therein and title insurance proceeds shall be
payable to Mortgagor in connection therewith, such proceeds are hereby assigned
to and shall be paid to Mortgagee and applied as contemplated by Section 1.13 of
this Mortgage.
SECTION 1.4 Recording Documentation To Assure Security Interest; Fees
---------------------------------------------------------
and Expenses.
- ------------
1.4.1 Mortgagor shall, forthwith after the execution and delivery of
this Mortgage and thereafter, from time to time, cause this Mortgage and any
financing statement, continuation statement or similar instrument relating to
any thereof or to any property intended to be subject to the Lien of this
Mortgage to be filed, registered and recorded in such manner and in such places
as may be required by any present or future law in order to publish notice of
and fully to protect the validity and priority thereof or the Lien hereof
purported to be created upon the Mortgaged Property and the interest and rights
of Mortgagee therein. Mortgagor shall pay or cause to be paid all taxes and
fees incident to such filing, registration and recording, and all expenses
incident to the preparation, execution and acknowledgement thereof, and of any
instrument of further assurance, and all Federal or state stamp taxes or other
taxes, duties and charges arising out of or in connection with the execution and
delivery of such instruments.
1.4.2 Mortgagor shall, at the sole cost and expense of Mortgagor, do,
execute, acknowledge and deliver all and every such further acts, deeds,
conveyances, mortgages, assignments, notices of assignment, transfers, financing
statements, continuation statements and assurances as Mortgagee shall from time
to time request which may be necessary in the Mortgagee's judgment to assure,
perfect, convey, assign, mortgage, transfer and confirm unto Mortgagee the
property and rights hereby conveyed or assigned, or which Mortgagor may be or
may hereafter become bound to convey or assign to Mortgagee or which may
facilitate the performance of the terms of this Mortgage or the filing,
registering or recording of this Mortgage. In the event Mortgagor shall fail to
execute any instrument required to be executed by Mortgagor under this
subsection 1.4.2, Mortgagee may execute the same as the attorney-in-fact for
Mortgagor, such power of attorney being coupled with an interest and
irrevocable.
<PAGE>
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SECTION 1.5 Payment of Taxes, Insurance Premiums, Assessments; Compliance
-------------------------------------------------------------
with Law and Insurance Requirements.
- -----------------------------------
1.5.1 Unless contested in accordance with the provisions of
subsection 1.5.5 hereof, Mortgagor shall pay and discharge or cause to be paid
and discharged, from time to time when the same shall become due, all real
estate and other taxes, special assessments, levies, permits, inspection and
license fees, all premiums for insurance, all water and sewer rents and charges,
and all other public charges imposed upon or assessed against the Mortgaged
Property or any part thereof or upon the revenues, rents, issues, income and
profits of the Mortgaged Property, including, without limitation, those arising
in respect of the occupancy, use or possession thereof.
1.5.2 Upon the occurrence and during the continuance of an Event of
Default, Mortgagor shall deposit with Mortgagee, on the first day of each month,
an amount estimated by Mortgagor to be equal to one-twelfth (1/12th) of the
annual taxes, assessments and other items required to be discharged by Mortgagor
under subsection 1.5.1 and amounts reasonably estimated by Mortgagor to be
necessary to maintain the insurance coverages contemplated in Section 1.7, which
estimates shall not be less than one-twelfth (1/12th) of the annual taxes,
assessments, insurance premiums and other items required to be discharged by
Mortgagor during the year immediately preceding the year during which such Event
of Default occurred. Such amounts shall be held by Mortgagee without interest
to Mortgagor and applied to the payment of each obligation in respect of which
such amounts were deposited, in such order or priority as Mortgagee shall
determine, on or before the date on which such obligation would become
delinquent. If at any time the amounts so deposited by Mortgagor shall, in
Mortgagee's judgment, be insufficient (when added to the installments
anticipated to be paid thereafter) to discharge any of such obligations when
due, Mortgagor shall immediately upon demand, deposit with Mortgagee such
additional amounts as may be requested by Mortgagee. Nothing contained in this
Section 1.5 shall affect any right or remedy of Mortgagee under any provision of
this Mortgage or of any statute or rule of law to pay any such amount from its
own funds and to add the amount so paid, together with interest at a rate
("Default Rate") per annum equal to two percent (2%) in excess of the highest
rate payable under the Notes to the other amounts outstanding in respect of the
Secured Obligations or relieve Mortgagor of its obligations to make or provide
for the payment of the annual taxes, assessments and other charges required to
be discharged by Mortgagor under subsection 1.5.1. Mortgagor hereby grants to
Mortgagee a security interest in all sums held pursuant to this subsection 1.5.2
to secure payment and performance of the Secured Obligations. During the
continuance of any Event of Default, Mortgagee may apply all or any part of the
sums held pursuant to this subsection 1.5.2 to payment and performance of the
Secured Obligations in accordance with the appropriate provisions of the
Indenture Documents. Mortgagor shall redeposit with Mortgagee an amount equal
to all
<PAGE>
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amounts so applied as a condition to the cure, if any, of such Event of Default
in addition to fulfillment of any other required conditions.
1.5.3 Unless contested in accordance with the provisions of
subsection 1.5.5, Mortgagor shall timely pay (or obtain a bond in the amount
of), or cause to be paid, all lawful claims and demands of mechanics,
materialmen, laborers, employees, suppliers, government agencies administering
worker's compensation insurance, old age pensions and social security benefits
and all other claims, judgments, demands or amounts of any nature which, if
unpaid, or not bonded, could result in or permit the creation of a Lien on the
Mortgaged Property or any part thereof or the Rents arising therefrom, or which
might result in forfeiture of all or any part of the Mortgaged Property.
1.5.4 Mortgagor shall maintain, or cause to be maintained, in full
force and effect, all permits, certificates, authorizations, consents,
approvals, licenses, franchises or other instruments now or hereafter required
by any federal, state, municipal or local government or quasi-governmental
agency or authority (each of the foregoing, a "Governmental Authority") to
operate or use and occupy the Premises and the Equipment for its intended uses
(collectively, the "Permits;" each, a "Permit"). Mortgagor represents that none
of the Permits will be subject to cancellation, forfeiture or any limitation on
the scope thereof solely by virtue of the execution of this Mortgage or the
foreclosure of the Lien hereof. Unless contested in accordance with the
provisions of subsection 1.5.5, Mortgagor shall comply promptly with, or cause
prompt compliance with, all requirements set forth in the Permits and all
requirements of any law, ordinance, rule, regulation or similar statute or case
law (collectively, "Legal Requirements") or any Governmental Authority
applicable to all or any part of the Mortgaged Property or the condition, use
or occupancy of all or any part thereof or any recorded deed of restriction,
declaration, covenant running with the land or otherwise, now or hereafter in
force. Mortgagor shall not initiate or consent to any change in the zoning,
subdivision or any other use classification of the Land, if such action could
have an adverse effect on the Lien of this Mortgage or diminish the value of the
Mortgaged Property or impair the Mortgagee's rights or benefits hereunder,
without the prior written consent of Mortgagee.
1.5.5 Mortgagor may at its own expense contest the amount or
applicability of any of the obligations described in subsections 1.5.1, 1.5.3,
1.5.4 and 1.19 by appropriate legal proceedings, prosecution of which operates
to prevent the collection or enforcement thereof and the sale or forfeiture of
the Mortgaged Property or any part thereof to satisfy such obligations;
provided, however, that (i) any such contest shall be conducted in good faith by
- -------- -------
appropriate legal proceedings promptly instituted and diligently conducted and
(ii) in connection with such contest, Mortgagor shall have made provision for
the payment or performance of such contested obligation on Mortgagor's books if
and to the extent required
<PAGE>
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by generally accepted accounting principles, or shall have deposited with
Mortgagee a sum sufficient to pay and discharge such obligation and Mortgagee's
estimate of all interest and penalties related thereto. Notwithstanding the
foregoing provisions of this subsection 1.5.5, (i) no contest of any such
obligations may be pursued by Mortgagor if such contest would expose Mortgagee
or any other Secured Party to any possible criminal liability or, unless
Mortgagor shall have furnished an Additional Undertaking (as hereinafter
defined) therefor satisfactory to Mortgagee or such other Secured Party, as the
case may be, any additional civil liability for failure to comply with such
obligations and (ii) if at any time payment or performance of any obligation
contested by Mortgagor pursuant to this subsection 1.5.5 shall become necessary
to prevent the delivery of a tax or similar deed conveying the Mortgaged
Property or any portion thereof because of nonpayment or nonperformance,
Mortgagor shall pay or perform the same in sufficient time to prevent the
delivery of such tax or similar deed.
1.5.6 Mortgagor shall not in its use and occupancy of the Premises or
the Equipment (including, without limitation, in the making of any Alteration)
take any action that could be the basis for termination, revocation or denial of
any insurance coverage required to be maintained under this Mortgage or that
could be the basis for a defense to any claim under any insurance policy
maintained in respect of the Premises or the Equipment and Mortgagor shall
otherwise comply in all respects with the requirements of any insurer that
issues a policy of insurance in respect of the Premises or the Equipment.
1.5.7 Mortgagor shall, promptly upon receipt of any written notice
regarding any failure by Mortgagor to pay or discharge any of the obligations
described in subsection 1.5.1, 1.5.3, 1.5.4 or 1.5.6, furnish a copy of such
notice to Mortgagee.
SECTION 1.6 Certain Tax Law Changes. In the event of the passage
-----------------------
after the date of this Mortgage of any law deducting from the value of real
property, for the purpose of taxation, amounts in respect of any Lien thereon or
changing in any way the laws for the taxation of mortgages or debts secured by
mortgages for state or local purposes or the manner of the collection of any
such taxes, and imposing a new tax, either directly or indirectly, on this
Mortgage, any other Indenture Document or the interest of Mortgagee in any of
the Mortgaged Property, Mortgagor shall promptly pay to Mortgagee such amount or
amounts as may be necessary from time to time to pay such tax.
SECTION 1.7 Required Insurance Policies.
---------------------------
1.7.1 Mortgagor shall maintain or cause to be maintained in full
force and effect the following insurance coverages in respect of the Premises
and the Equipment:
<PAGE>
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(i) Physical hazard insurance on an "all risk" basis covering, without
limitation, hazards commonly covered by fire and extended coverage,
lightning, windstorm, civil commotion, hail, riot, strike, water damage,
sprinkler leakage, collapse and malicious mischief, in an amount equal to
the full replacement cost of the Improvements and all Equipment, with such
deductibles as Mortgagee may from time to time require, and, if Mortgagee
shall not have imposed any such requirements, with such deductibles and per
occurrence limitations as would be maintained by a prudent operator of
property similar in use and configuration to the Premises and located in
the locality where the Premises are located. "Full replacement cost" means
the Cost of Construction (as hereinafter defined) to replace the
Improvements and the Equipment, exclusive of depreciation, excavation,
foundation and footings, as determined from time to time (but not less
frequently than once every twelve (12) months) by a proper officer of
Mortgagor in consultation with its insurance company or insurance agent, as
appropriate;
(ii) Comprehensive general liability insurance against claims for bodily
injury, death or property damage occurring on, in or about the Premises and
any adjoining streets, sidewalks and passageways and covering any and all
claims, including, without limitation, all legal liability, subject to
customary exclusions, to the extent insurable, imposed upon Mortgagee and all
court costs and attorneys' fees, arising out of or connected with the
possession, use, leasing, operation or condition of the Premises, with policy
limits and deductibles in such amounts as Mortgagee may from time to time
reasonably require, and, if Mortgagee shall not have imposed any such
requirements, in such amounts as would be maintained by a prudent operator of
property similar in use and configuration to the Premises and located in the
locality where the Premises are located;
(iii) Workers' compensation insurance as required by the laws of the state
in which the Premises are located, which may include being self-insured to
the extent permitted by law to protect Mortgagor against claims for injuries
sustained in the course of employment at the Premises;
(iv) Boiler and machinery insurance in respect of any boilers and similar
apparatus located on the Premises or comprising any Equipment, with policy
limits and deductibles in such amounts as Mortgagee may from time to time
reasonably require, and, if Mortgagee shall not have imposed any such
requirements, in such amounts as would be maintained by a prudent operator of
property similar in use and configuration to the Premises and the Equipment
and located in the locality where the Premises and the Equipment are located;
<PAGE>
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(v) During the performance of any alterations, renovations, repairs,
restorations or construction, broad form Builders Risk Insurance on an all-
risk completed value basis;
(vi) Such other insurance, against such risks and with policy limits and
deductibles in such amounts as Mortgagee may from time to time reasonably
require, and, if Mortgagee shall not have imposed any such requirements, in
such amounts as would be maintained by a prudent operator of property
similar in use and configuration to the Premises and located in the
locality in which the Premises are located; and
(vii) If the Premises are located in an area designated by the Secretary
of Housing and Urban Development as an area having special flood hazards
and in which flood insurance has been made available under the National
Flood Insurance Act of 1968, as amended, flood insurance in such amounts
as, in the opinion of Mortgagee, would be maintained by a prudent operator
of property similar in use and configuration to the Premises and located in
the locality where the Premises are located.
1.7.2 Mortgagor may maintain or cause to be maintained the coverages
required by this Section 1.7 under blanket policies covering the Premises and
other locations owned or operated by Mortgagor if the terms of such blanket
policies otherwise comply with the provisions of this Section 1.7 and contain
specific coverage allocations in respect of the Premises determined in
accordance with the provisions of this Section 1.7. All insurance policies in
respect of the coverages required by subsections 1.7.1(i), 1.7.1(iv), 1.7.1(v)
and, if applicable, 1.7.1(vi) shall be in amounts at least sufficient to prevent
coinsurance liability and all losses thereunder shall be payable to Mortgagee,
as sole loss payee with respect to any casualty involving any of the Mortgaged
Property pursuant to a standard noncontributory New York mortgagee endorsement
or local equivalent, and each such policy shall (i) include effective waivers
(whether under the terms of such policy or otherwise) by the insurer of all
claims for insurance premiums against all loss payees and named insureds other
than Mortgagor and all rights of subrogation against any named insured, and (ii)
provide that any losses thereunder shall be payable notwithstanding (a) any act,
failure to act, negligence of, or violation or breach of warranties,
declarations or conditions contained in such policy by Mortgagor or Mortgagee or
any other named insured or loss payee, (b) the occupation or use of the Premises
for purposes more hazardous than permitted by the terms of the policy, (c) any
foreclosure or other proceeding or notice of sale relating to the Premises or
the Equipment or (d) any change in the title to or ownership or possession of
the Premises or the Equipment; provided, however, that (with respect to items
-------- -------
contemplated in clauses (c) and (d) above) any notice requirements of the
applicable policies are satisfied. All insurance policies in respect of the
coverages required by subsections 1.7.1(ii) and, if applicable,
<PAGE>
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1.7.1(vi) and 1.7.1(vii) shall name Mortgagee as an additional insured. Each
policy of insurance required under this Section 1.7 shall provide that (i)
notices of any failure by Mortgagor to pay any insurance premium in respect of
any insurance policy required to be maintained under this Section 1.7 be
furnished to Mortgagee contemporaneously with any notice given to Mortgagor and
(ii) it may not be cancelled or otherwise terminated without at least thirty
(30) days' prior written notice to Mortgagee and shall permit Mortgagee to pay
any premium therefor within thirty (30) days after receipt of any notice stating
that such premium has not been paid when due. The policy or policies of such
insurance or certificates of insurance evidencing the required coverages and all
renewals or extensions thereof shall be delivered to Mortgagee. Settlement of
any claim under any of the insurance policies referred to in this Section 1.7
shall require the prior approval of Mortgagee and Mortgagor shall use its best
efforts to cause each such insurance policy to contain a provision to such
effect.
1.7.3 At least thirty (30) days prior to the expiration of any
insurance policy required by subsections 1.7.1(i), (ii), (iv), (v) and, if
applicable, 1.7.1(vi) and 1.7.1(vii), a policy or policies renewing or extending
such expiring policy or renewal or extension certificates or other evidence of
renewal or extension shall be delivered to Mortgagee.
1.7.4 Mortgagor shall not purchase separate insurance policies
concurrent in form or contributing in the event of loss with those policies
required to be maintained under this Section 1.7, unless Mortgagee is included
thereon as a named insured and, if applicable, with loss payable to Mortgagee
under an endorsement containing the provisions described in subsection 1.7.2.
Mortgagor immediately shall notify Mortgagee whenever any such separate
insurance policy is obtained and promptly shall deliver to Mortgagee the policy
or certificate evidencing such insurance.
1.7.5 Mortgagor shall, immediately upon receipt of any written notice
of any failure by Mortgagor to pay any insurance premium in respect of any
insurance policy required to be maintained under this Section 1.7, furnish a
copy of such notice to Mortgagee.
1.7.6 Mortgagor shall maintain, or cause to be maintained, the
insurance described in this Section 1.7 with primary insurers rated (for claims
paying purposes) in one of the two highest generic categories by each Rating
Agency (as hereinafter defined). All insurers under policies required hereunder
shall be licensed and authorized to issue insurance in the state in which the
Land is located.
<PAGE>
-14-
SECTION 1.8 Failure To Make Certain Payments. If Mortgagor shall fail to
perform any of the covenants contained in this Mortgage, including, without
limitation, Mortgagor's covenants to (i) pay the premiums in respect of all
required insurance coverages, (ii) pay taxes and assessments, (iii) make
repairs, (iv) discharge Liens or (v) pay or perform any obligations of Mortgagor
under the Leases, Mortgagee may, but shall not be obligated to, make advances to
perform such covenant on Mortgagor's behalf and all sums so advanced shall be
included in the Secured Obligations and shall be secured hereby. Mortgagor
shall repay on demand all sums so advanced by Mortgagee on behalf of Mortgagor,
with interest at the Default Rate. Neither the provisions of this Section 1.8
nor any action taken by Mortgagee pursuant to the provisions of this Section 1.8
shall prevent any such failure to observe any covenant contained in this
Mortgage from constituting an Event of Default.
SECTION 1.9 Inspection. Mortgagor shall permit Mortgagee, by its
agents, accountants and attorneys, to visit and inspect the Mortgaged Property
at such times as may be requested by Mortgagee.
SECTION 1.10 Mortgagor To Maintain Improvements. Mortgagor shall not
commit any waste on the Premises or with respect to any Equipment or make any
change in the use of the Premises or any Equipment. Mortgagor represents and
warrants that (i) the Premises are served by all utilities required or necessary
for the current use thereof, (ii) all streets necessary to serve the Premises
are completed and serviceable and have been dedicated and accepted as such by
the appropriate Governmental Authorities and (iii) Mortgagor has access to the
Premises from public roads or by reason of private contractual rights sufficient
to allow Mortgagor and its tenants and invitees to conduct its and their
businesses at the Premises in accordance with sound commercial and industrial
practices. Mortgagor shall, at all times, maintain the Premises and the
Equipment in good operating order, condition and repair and shall make all
repairs, structural or nonstructural, when necessary. [Other than, following
[substantial] completion of the modernization project, the elimination of the
existing facilities which will become unnecessary and which were covered by the
$8.3 million non-cash charge recorded concurrently with the issuance of the
Notes as set forth in the Prospectus, Mortgagor shall (a) not alter materially
the occupancy or use of all or any part of the Premises without the prior
written consent of Mortgagee, and (b) do all other acts which from the character
or use of the Premises and the Equipment may be necessary or appropriate to
maintain and preserve their value. No Improvements comprising a portion of the
Premises may be demolished nor shall any Equipment be removed, except in
accordance with the appropriate provisions of the Indenture Documents].
<PAGE>
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SECTION 1.11 Mortgagor's Obligations with Respect to Leases.
1.11.1 Mortgagor shall manage and operate the Mortgaged Property or
cause the Mortgaged Property to be managed and operated in a reasonably prudent
manner and, except as otherwise permitted under Section 1.12, will not without
the written consent of Mortgagee, enter into any Lease (or any amendment or
modification thereof) or other agreement subsequent to the date hereof with any
Person which would (i) interefere with the present or future operations of
Mortgagor with respect to the Mortgaged Property or (ii) decrease the value or
utility of the Mortgaged Property.
1.11.2 If Mortgagor shall be permitted to enter into any Leases under
this Mortgage or any Leases exist on the date hereof, Mortgagor shall not in
respect of such Leases:
(i) receive or collect, or permit the receipt or collection of, any rental
or other payments under any Lease more than one (1) month in advance of the
respective period in respect of which they are to accrue, except that (a) in
connection with the execution and delivery of any Lease or of any amendment to
any Lease, rental payments thereunder may be collected and received in advance
in an amount not in excess of one (1) month's rent and (b) Mortgagor may receive
and collect escalation and other charges in accordance with the terms of each
Lease;
(ii) assign, transfer or hypothecate (other than to Mortgagee hereunder or
as otherwise permitted under Section 1.12 of this Mortgage) any rental or other
payment under any Lease whether then due or to accrue in the future, the
interest of Mortgagor as lessor under any Lease or the rents, issues, revenues,
profits or other income of the Mortgaged Property;
(iii) enter into any Lease after the date hereof that does not contain
terms to the effect as follows:
(a) such Lease and the rights of the tenant thereunder shall be subject
and subordinate to the rights of Mortgagee under and the Lien of this Mortgage;
(b) such Lease has been assigned as collateral security by Mortgagor as
landlord thereunder to Mortgagee under this Mortgage;
(c) in the case of any foreclosure hereunder, the rights and remedies of
the tenant in respect of any obligations of any successor landlord thereunder
shall be limited to the equity interest of such successor landlord in the
Premises and any successor landlord shall not (1) be liable for any act,
omission or default of any prior landlord under the Lease or (2) be required to
make or complete any tenant improvements or capital improvements or repair,
restore,
<PAGE>
-16-
rebuild or replace the demised premises or any part thereof in the event of
damage, casualty or condemnation or (3) be required to pay any amounts to tenant
arising under the Lease prior to such successor landlord taking possession;
(d) the tenant's obligation to pay rent and any additional rent shall not
be subject to any abatement, deduction, counterclaim or setoff as against any
mortgagee or purchaser upon the foreclosure of any of the Premises or the giving
or granting of a deed in lieu thereof by reason of a landlord default occurring
prior to such foreclosure and such mortgagee or purchaser will not be bound by
any advance payments of rent in excess of one month or any security deposits
unless such security was actually received; and
(e) the tenant agrees to attorn, at the option of Mortgagee or any
purchaser of the Premises, upon a foreclosure of the Premises or the giving or
granting of a deed in lieu thereof; and
(iv) terminate or permit the termination of any Lease of space, accept
surrender of all or any portion of the space demised under any Lease prior to
the end of the term thereof or accept assignment of any Lease to Mortgagor
unless:
(a) Mortgagor determines in its reasonable business judgment
that such termination, surrender or assignment would not result in
a material adverse effect on the value or utility of the Mortgaged
Property or the lien on such property; or
(b) Mortgagor shall deliver to Mortgagee an Officers'
Certificate (as defined in each Indenture as in effect on the date
hereof).
1.11.3 Mortgagor timely shall perform and observe all the terms,
covenants and conditions required to be performed and observed by Mortgagor
under each Lease such that there will be no impairment of the fair market
value of the Premises and will not engage in any conduct in respect of any
Lease which would impair the fair market value of the Mortgaged Property or
the Lien of this Mortgage or the security interest created hereby. Mortgagor
promptly shall notify Mortgagee of the receipt of any notice from any lessee
under any Lease claiming that Mortgagor is in default in the performance or
observance of any of the terms, covenants or conditions thereof to be
performed or observed by Mortgagor and will cause a copy of each such notice
to be delivered promptly to Mortgagee.
1.11.4 Mortgagor shall deliver to Mortgagee, within thirty (30)
days after the end of each calendar year ending after the date of this
Mortgage, an
<PAGE>
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Officers' Certificate, dated as of the last day of such year, (i) containing
a list of names of all tenants under Leases and the property location of such
leased space and the annual rental currently payable by each of them, (ii)
stating for which, if any, Leases then in force Mortgagor has issued a notice
of default and the nature of such default and (iii) stating that, to the best
of such officers' knowledge, each Lease complies with the provisions of this
Mortgage. Mortgagor shall deliver to Mortgagee within thirty (30) days after
the end of each calendar quarter copies, certified by an officer of
Mortgagor, of all Leases not theretofore delivered to Mortgagee.
SECTION 1.12 Transfer Restrictions. Mortgagor may not, without
the prior written consent of Mortgagee, further mortgage, encumber,
hypothecate, sell, convey or assign all or any part of the Mortgaged Property
or suffer any of the foregoing to occur by operation of law or otherwise.
Notwithstanding the provisions of the foregoing sentence, Mortgagor shall
have the right to grant or suffer the following Liens or conveyances, in
respect of the Mortgaged Property:
(i) Liens in respect of amounts payable by Mortgagor pursuant to
Section 1.5 if and to the extent such amounts are not yet due and
payable or are being bonded in accordance with the provisions of
subsection 1.5.3 or are being contested in accordance with the
provisions of subsection 1.5.5;
(ii) Liens of the type described in clause _____ of the definition
of Permitted Liens in each Indenture as in effect on the date hereof;
provided, however, that such Liens shall in no event interfere in any
material respect with the use or operation of the Mortgaged Property or
diminish the value thereof or impair the Lien of this Deed of Trust
thereon; and
(iii) Any permitted disposition of Mortgaged Property by Mortgagor
in accordance with the appropriate provisions of the Indenture
Documents.
Each of the Liens and other transfers permitted by this Section
1.12 shall in all respects be subject and subordinate in priority to the Lien
and security interest created and evidenced by this Mortgage except (x) any
Lien permitted by clause (i) of this Section if and to the extent the law or
regulation creating or authorizing such Lien provides that such Lien must be
superior to the Lien and security interest created and evidenced by this
Mortgage and (y) transfers permitted under clause (iii) of this Section,
which shall be made free of the Lien and security interest created and
evidenced hereby.
<PAGE>
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SECTION 1.13 Destruction; Condemnation.
1.13.1 Destruction; Insurance Proceeds. If there shall occur any
damage to, or loss or destruction of, the Improvements and Equipment, or any
part of any thereof (each, a "Destruction"), Mortgagor shall promptly send to
Mortgagee a notice setting forth the nature and extent of such Destruction.
The proceeds of any insurance payable in respect of any such Destruction are
hereby assigned and shall be paid to Mortgagee. All insurance and other
proceeds, less the amount of any expenses incurred in litigating,
arbitrating, compromising or settling any claim arising out of such
Destruction or claim resulting in Title Loss (the "Net Proceeds"), shall
constitute Trust Moneys and be applied in accordance with the provisions of
subsections 1.13.3, 1.13.4 and 1.13.5.
1.13.2 Condemnation; Assignment of Award. If there shall occur
any taking of the Mortgaged Property or any part thereof, in or by
condemnation or other eminent domain proceedings pursuant to any law, general
or special, or by reason of the temporary requisition of the use or occupancy
of the Mortgaged Property or any part thereof, by any governmental authority,
civil or military (each, a "Taking"), Mortgagor immediately shall notify
Mortgagee upon receiving notice of such Taking or commencement of proceedings
therefor. Mortgagee may participate in any proceedings or negotiations which
might result in any Taking. Mortgagee may be represented by counsel
satisfactory to it at the expense of Mortgagor. Mortgagor shall deliver or
cause to be delivered to Mortgagee all instruments requested by it to permit
such participation. Mortgagor shall in good faith and with due diligence
file and prosecute what would otherwise be Mortgagor's claim for any such
award or payment and cause the same to be collected and paid over to
Mortgagee, and hereby irrevocably authorizes and empowers Mortgagee, in the
name of Mortgagor as its true and lawful attorney-in-fact or otherwise, to
collect and to receipt for any such award or payment, and, in the event
Mortgagor fails so to act or is otherwise in default hereunder, to file and
prosecute such claim. Mortgagor shall pay all costs, fees and expenses
incurred by Mortgagee in connection with any Taking and seeking and obtaining
any award or payment on account thereof. Any proceeds, award or payment in
respect of any Taking are hereby assigned and shall be paid to Mortgagee.
Mortgagor shall take all steps necessary to notify the condemning authority
of such assignment. Such award or payment, less the amount of any expenses
incurred in litigating, arbitrating, compromising or settling any claim
arising out of such Taking ("Net Award"), shall be applied in accordance with
the provisions of subsections 1.13.3, 1.13.4 and 1.13.5.
1.13.3 Restoration. So long as no Event of Default shall have
occurred and be continuing, in the event there shall be a Net Award or Net
Proceeds in an amount less than or equal to $1,000,000, Mortgagor shall have
the right, at Mortgagor's option, to apply such Net Award or Net Proceeds to
the payment of the
<PAGE>
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Secured Obligations in accordance with the appropriate provisions of the
Indenture Documents or to perform a restoration (each, a "Restoration") of
the Premises and the Equipment. In the event that Mortgagor elects to make
such payment, such Net Award or Net Proceeds shall be delivered to Mortgagee
to be held as Trust Moneys subject to withdrawal and application by Mortgagor
in accordance with the appropriate provisions of the Indenture Documents. In
the event Mortgagor elects to perform a Restoration, Mortgagor shall give
written notice ("Restoration Election Notice") of such election to Mortgagee
within ten (10) days after the date that Mortgagee receives the applicable
Net Proceeds or Net Award, as the case may be. In the event Mortgagee does
not receive a Restoration Election Notice within such ten (10) day period,
Mortgagor shall deposit such Net Proceeds or Net Award with Mortgagee to be
held as Trust Moneys and Mortgagee shall be authorized to apply such Net
Proceeds or Net Award to the payment of the Secured Obligations in accordance
with the appropriate provisions of the Indenture Documents. Mortgagor shall,
within thirty (30) days following the date of delivery of a Restoration
Election Notice, commence and diligently continue to perform the Restoration
of that portion or portions of the Premises and Equipment subject to such
Destruction or affected by such Taking or Title Loss so that, upon the
completion of the Restoration, the Mortgaged Property will be in the same
condition and shall be of at least equal value and utility for its intended
purposes as the Mortgaged Property was immediately prior to such Destruction,
Taking or Title Loss. Mortgagor shall so complete such Restoration with its
own funds to the extent that the amount of any Net Award or Net Proceeds is
insufficient for such purpose.
1.13.4 Major Restoration. In the event there shall be a Net Award
-----------------
or Net Proceeds other than as described in subsection 1.13.3, Mortgagee shall
require Restoration of the Mortgaged Property unless there shall have
occurred and be continuing an Event of Default, in which case such Net Award
or Net Proceeds shall constitute Trust Moneys and be applied by Mortgagor to
the payment of the Secured Obligations in accordance with the appropriate
provisions of the Indenture Documents. In the event a Restoration is to be
performed under this subsection 1.13.4, Mortgagee shall not release any part
of the Net Award or the Net Proceeds except in accordance with the provisions
of subsection 1.13.5 and Mortgagor shall, prior to commencing any work to
effect a Restoration of the Premises and the Equipment, promptly (but in no
event later than ninety (90) days following any Destruction, Taking or Title
Loss) furnish to Mortgagee:
(a) complete plans and specifications (the "Plans and
Specifications") for the Restoration;
(b) an Officers' Certificate stating that all permits and approvals
required by law to commence work in connection with the Restoration have
been
<PAGE>
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obtained;
(c) a certificate (an "Architect's Certificate") of an independent,
reputable architect or engineer acceptable to Mortgagee and licensed in
the state where the Premises are located (A) stating that the Plans and
Specifications have been reviewed and approved by the signatory thereto,
(B) containing such signatory's estimate (an "Estimate") of the costs of
completing the Restoration, and (C) upon completion of such Restoration
in accordance with the Plans and Specifications, the value and utility
of the Premises and the Equipment will be equal to or greater than the
value and utility thereof immediately prior to the Destruction or Taking
relating to such Restoration; and
(d) if the Estimate exceeds the Net Proceeds or the Net Award, as
the case may be, by $______ or more, an Additional Undertaking in an
amount equal to not less than the Estimate less the amount of the Net
Proceeds or the Net Award, as the case may be, then held by Mortgagee
for application toward the cost of such Restoration.
Upon receipt by Mortgagee of each of the items required pursuant to
clauses (a) through (d) above, Mortgagee shall acknowledge receipt of the
Plans and Specifications. Promptly upon such acknowledgment of receipt by
Mortgagee, Mortgagor shall commence and diligently continue to perform the
Restoration in accordance with such approved Plans and Specifications.
Mortgagor shall so complete such Restoration with its own funds to the extent
that the amount of any Net Award or Net Proceeds is insufficient for such
purpose.
1.13.5 Restoration Advances Following Destruction or Taking of
-------------------------------------------------------
Mortgaged Property. In the event Mortgagor shall be required to perform a
------------------
Restoration of the Premises and Equipment as provided in subsection 1.13.4,
Mortgagee shall apply any Net Proceeds or the Net Award held by Mortgagee on
account of the Destruction, Taking or Title Loss to the payment of the cost
of performing such Restoration and shall pay portions of the same, from time
to time, to Mortgagor or, at Mortgagor's direction, directly to the
contractors, subcontractors, materialmen, laborers, engineers, architects,
and other persons rendering services or material for such Restoration,
subject to the conditions set forth in the appropriate provisions of the
Indenture Documents. In the event there shall be any surplus after
application of the Net Award or the Net Proceeds to Restoration of the
Premises and the Equipment, such surplus shall be paid to Mortgagor;
provided, however, that if an Event of Default shall have occurred and be
-------- -------
continuing, such surplus shall be applied to the payment of the Secured
Obligations in accordance with the appropriate provisions of the Indenture
Documents or, at the option of Mortgagee,
<PAGE>
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held by Mortgagee as additional collateral to secure the performance by
Mortgagor of the Secured Obligations.
SECTION 1.14 Alterations. In the event Mortgagor shall make any
-----------
structural addition, modification or change (each, an "Alteration") to the
Premises or the Equipment, Mortgagor shall (a) complete each Alteration
promptly, in a good and workmanlike manner and in compliance with all
applicable local laws, ordinances and requirements and (b) pay when due all
claims for labor performed and materials furnished in connection with such
Alteration, unless contested in accordance with the provisions of subsection
1.5.5.
SECTION 1.15 Hazardous Material.
------------------
1.15.1 Except as otherwise disclosed in the Prospectus Mortgagor
represents and warrants that (i) it has obtained all Permits which are
currently required with respect to the ownership and operation of its
business at the Mortgaged Property under any and all federal, state, local
and foreign laws or regulations, codes, orders, decrees, judgments or
injunctions issued, promulgated, approved or entered thereunder relating to
pollution or protection of the environment, including, without limitation,
laws relating to handling, use, storage, treatment, disposal, removal,
emission, discharge or release of pollutants, contaminants, chemicals, or
industrial, toxic or hazardous substances or wastes ("Hazardous Materials")
into the environment (including, without limitation, ambient air, surface
water, ground water, land surface or subsurface strata) or otherwise relating
to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials (collectively,
"Environmental Laws") as they relate to the Premises; (ii) it is in
compliance with all terms and conditions of all such Permits as they relate
to the Premises, and also is in compliance with Environmental Laws,
including, without limitation, all other limitations, restrictions,
conditions, standards, prohibitions, requirements, obligations, schedules and
timetables contained in the Environmental Laws as they relate to the
Premises, except where such noncompliance could not result in a material
adverse effect on the value or utility of the Premises; (iii) there is no
civil, criminal or administrative action, suit, demand, claim, hearing,
notice of violation, governmental investigation, proceeding, notice of demand
letter pending or, to its knowledge, threatened against it or any subsidiary
under the Environmental Laws relating to the Premises which could be expected
to result in a fine, penalty or other cost or expense (collectively,
"Liabilities"), except where such Liabilities could not result in a material
adverse effect on the value or utility of the Premises; (iv) to the knowledge
of Mortgagor after reasonable inquiry there are no past or present events,
conditions, circumstances, activities, practices, incidents, actions or plans
which are expected to interfere with or prevent compliance with the
Environmental Laws relating to
<PAGE>
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the Premises, or which are expected to give rise to any common law or legal
liability, including, without limitation, liability under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended,
or similar state, local or foreign laws, or otherwise form the basis of any
claim, action, demand, suit, proceeding, hearing or notice of violation,
governmental study or investigation, based on or related to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling, or the emission, discharge, release or threatened release into the
environment of any Hazardous Material.
1.15.2 Mortgagor shall (i) comply with any and all applicable
present and future Environmental Laws relating to the Premises; (ii) pay in a
timely fashion the cost of any removal, response measure or corrective action
relating to any Hazardous Materials required by any Environmental Law or by
any order, regulation, consent decree or similar agreement or instrument;
(iii) not release, discharge or dispose of any Hazardous Materials on, under
or from the Mortgaged Property in violation of any Environmental Law; (iv)
shall apply any insurance proceeds or other sums received by it in respect of
the removal of any Hazardous Material or any other corrective action relating
to any Hazardous Material to such removal or corrective action; and (v) not
take, or fail to take, any action with respect to any Environmental Laws or
in connection with any Hazardous Materials that could be expected to result
in the incurrence of any obligation or liability of the holders of the Notes
or the Mortgagee. In the event Mortgagor fails to comply with the covenants
in the preceding sentence, Mortgagee may, in addition to any other remedies
set forth herein, but shall not be obligated to, as trustee for and at
Mortgagor's sole cost and expense cause to be taken, any necessary
remediation, removal, response or corrective action relating to Hazardous
Materials. Any costs or expenses incurred by Mortgagee for such purpose
shall be immediately due and payable by Mortgagor and shall bear interest at
the Default Rate. Mortgagor shall provide to Mortgagee and its agents and
employees access to the Mortgaged Property and hereby specifically grants to
Mortgagee a license to remove any Hazardous Material located thereon, or to
take any action with respect to any Environmental Laws or in connection with
any Hazardous Materials that could be expected to result in the incurrence of
any obligation or liability of the holders of the Notes or Mortgagee if
Mortgagor fails to do so and such action or removal is required under any
Environmental Laws as provided above. Upon written request by Mortgagee,
which shall include a reasonably specific statement of the basis thereof
(which shall be specific to the condition of the Mortgaged Property) and
which shall be made not more frequently than once in any twelve-month period
or at any time that Mortgagee is exercising its remedies under this Mortgage,
Mortgagee shall have the right, but shall not be obligated, at the sole cost
and expense of Mortgagor, to conduct an environmental audit or review of the
Mortgaged Property relating to the specific items as required in writing or
relating to the remedy that the Mortgagee is exercising under this
<PAGE>
-23-
Mortgage by such persons or firms appointed by Mortgagee, and Mortgagor shall
cooperate in all respects in the conduct of such environmental audit or
review, including, without limitation, by providing access to the Mortgaged
Property and to all records relating thereto. Mortgagor shall indemnify and
hold Mortgagee harmless from and against all loss, cost, damage or expense
(including, without limitation, attorneys' fees) that Mortgagee may sustain
by reason of the assertion against Mortgagee by any party of any claim
relating to such Hazardous Materials or actions taken with respect thereto as
authorized hereunder. Nothing contained herein or in any other Document
shall result in Mortgagee being deemed an "owner" or "operator" under
applicable Environmental Law.
SECTION 1.16 Asbestos. Mortgagor shall not install nor permit to
--------
be installed in the Mortgaged Property friable asbestos or any asbestos-
containing material (collectively, "ACM") except in compliance with all
applicable federal, state or local laws or regulations or orders respecting
such material. With respect to any ACM currently present in the Mortgaged
Property, Mortgagor shall comply in all respects with all federal, state or
local laws, regulations or orders applicable to ACM located on the Premises,
all at Mortgagor's sole cost and expense. If Mortgagor shall fail so to
comply with such laws or regulations, Mortgagee may, but shall not be
obligated to, in addition to any other remedies set forth herein, take
whatever steps it deems necessary or appropriate to comply with applicable
law, regulations or orders. Any costs or expenses incurred by Mortgagee for
such purpose shall be immediately due and payable by Mortgagor and bear
interest at the Default Rate. Mortgagor shall provide to Mortgagee and its
agents and employees access to the Mortgaged Property and hereby specifically
grants to Mortgagee a license to remove such ACM if Mortgagor fails to do so
and removal is required under any law as provided for above; provided,
--------
however, that nothing contained herein shall obligate Mortgagee to exercise
-------
any rights under such license. Mortgagor shall indemnify and hold Mortgagee
harmless from and against all loss, cost, damage and expense that Mortgagee
may sustain as a result of the presence of any ACM and any removal thereof or
compliance with any applicable laws, regulations or orders.
SECTION 1.17 Books and Records; Reports. Mortgagor shall keep
--------------------------
proper books of record and account, which shall accurately represent the
financial condition of Mortgagor and the business and affairs of Mortgagor
relating to the Mortgaged Property. Mortgagee and its authorized
representatives shall have the right from time to time, to examine the books
and records of Mortgagor relating to the operation of the Mortgaged Property.
SECTION 1.18 No Claims Against Mortgagee. Nothing contained in
---------------------------
this Mortgage shall constitute any consent or request by Mortgagee, express
or implied, for the performance of any labor or services or the furnishing of
any materials or other
<PAGE>
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property in respect of the Premises or any part thereof, nor as giving
Mortgagor any right, power or authority to contract for or permit the
performance of any labor or services or the furnishing of any materials or
other property in such fashion as would permit the making of any claim
against Mortgagee in respect thereof or any claim that any Lien based on the
performance of such labor or services or the furnishing of any such materials
or other property is prior to the Lien of this Mortgage.
SECTION 1.19 Utility Services.
----------------
Mortgagor shall pay, or cause to be paid, when due all charges for
all public or private utility services, all public or private rail and
highway services, all public or private communication services, all sprinkler
systems, and all protective services, any other services of whatever kind or
nature at any time rendered to or in connection with the Premises or any part
thereof, shall comply with all contracts relating to any such services, and
shall do all other things required for the maintenance and continuance of all
such services to the extent required to fulfill the obligations set forth in
Section 1.10 unless contested in accordance with the provisions of subsection
1.5.5.
ARTICLE II
ASSIGNMENT OF RENTS; SECURITY AGREEMENT
---------------------------------------
SECTION 2.1 Assignment of Leases, Rents, Issues and Profits.
-----------------------------------------------
2.1.1 Mortgagor absolutely, presently and irrevocably assigns,
transfers and sets over to Mortgagee and grants to Mortgagee, subject to the
terms and conditions hereof, all Mortgagor's estate, right, title, interest
(the "Mortgagor's Interest") in the Leases including, without limitation, as
follows:
(i) the immediate and continuing right to receive and collect
Rents payable by all tenants or other parties pursuant to the
Leases;
(ii) all claims, rights, powers, privileges and remedies of
Mortgagor, whether provided for in any Lease or arising by
statute or at law or in equity or otherwise, consequent on any
failure on the part of any tenant to perform or comply with any
term of any Lease;
(iii) all rights to take all actions upon the happening of a
default under any Lease as shall be permitted by such Lease or by
law,
<PAGE>
-25-
including, without limitation, the commencement, conduct and
consummation of proceedings at law or in equity; and
(iv) the full power and authority, in the name of Mortgagor
or otherwise, to enforce, collect, receive and receipt for any
and all of the foregoing and to do any and all other acts and
things whatsoever which Mortgagor or any landlord is or may be
entitled to do under the Leases.
2.1.2 Any Rents receivable by Mortgagee hereunder, after
payment of all proper costs and charges, shall be applied to all amounts
due and owing under and as provided in this Mortgage and the Indenture.
Mortgagee shall be accountable to Mortgagor only for Rents actually
received by Mortgagee pursuant to this assignment. The collection of such
Rents and the application thereof shall not cure or waive any Event of
Default or waive, modify or affect notice of Event of Default or invalidate
any act done pursuant to such notice.
2.1.3 So long as no Event of Default shall have occurred and
be continuing, Mortgagor shall have a license to collect and apply the
Rents and to enforce the obligations of tenants under the Leases.
Immediately upon the occurrence and during the continuance of any Event of
Default, the license granted in the immediately preceding sentence shall
cease and terminate, with or without any notice, action or proceeding. Upon
such Event of Default and during the continuance thereof, Mortgagee may, to
the fullest extent permitted by the Leases (i) exercise any of Mortgagor's
rights under the Leases, (ii) enforce the Leases, (iii) demand, collect,
sue for, attach, levy, recover, receive, compromise and adjust, and make,
execute and deliver receipts and releases for all Rents or other payments
that may then be or may thereafter become due, owing or payable with
respect to the Leases and (iv) generally do, execute and perform any other
act, deed, matter or thing whatsoever that ought to be done, executed and
performed in and about or with respect to the Leases, as fully as allowed
or authorized by Mortgagor's Interest.
2.1.4 Mortgagor hereby irrevocably authorizes and directs
the tenant under each Lease to pay directly to, or as directed by,
Mortgagee all Rents accruing or due under its Lease. Mortgagor hereby
authorizes the tenant under each Lease to rely upon and comply with any
notice or demand from Mortgagee for payment of Rents to Mortgagee and
Mortgagor shall have no claim against any tenant for Rents paid by such
tenant to Mortgagee pursuant to such notice or demand.
2.1.5 Mortgagor at its sole cost and expense shall enforce
the Leases in accordance with their terms. Neither this Mortgage nor any
action or inaction
<PAGE>
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on the part of Mortgagee shall release any tenant under any Lease, any
guarantor of any Lease or Mortgagor from any of their respective obligations
under the Leases or constitute an assumption of any such obligation on the
part of Mortgagee. No action or failure to act on the part of Mortgagor shall
adversely affect or limit the rights of Mortgagee under this Mortgage or,
through this Mortgage, under the Leases.
2.1.6 All rights, powers and privileges of Mortgagee herein set forth
are coupled with an interest and are irrevocable, subject to the terms and
conditions hereof, and Mortgagor shall not take any action under the Leases or
otherwise which is inconsistent with this Mortgage or any of the terms hereof
and any such action inconsistent herewith or therewith shall be void.
Mortgagor shall, from time to time, upon request of Mortgagee, execute all
instruments and further assurances and all supplemental instruments and take
all such action as Mortgagee from time to time may request in order to
perfect, preserve and protect the interests intended to be assigned to
Mortgagee hereby.
2.1.7 Mortgagor shall not, unilaterally or by agreement, subordinate,
amend, modify, extend, discharge, terminate, surrender, waive or otherwise
change any term of any of the Leases in any manner which would violate this
Mortgage. If the Leases shall be amended as permitted hereby, they shall
continue to be subject to the provisions hereof without the necessity of any
further act by any of the parties hereto.
2.1.8 Nothing contained herein shall operate or be construed to (i)
obligate Mortgagee to perform any of the terms, covenants or conditions
contained in the Leases or otherwise to impose any obligation upon Mortgagee
with respect to the Leases (including, without limitation, any obligation
arising out of any covenant of quiet enjoyment contained in the Leases in the
event that any tenant under a Lease shall have been joined as a party
defendant in any action by which the estate of such tenant shall be
terminated) or (ii) place upon Mortgagee any responsibility for the operation,
control, care, management or repair of the Premises.
SECTION 2.2 Security Interest in Personal Property.
--------------------------------------
2.2.1 This Mortgage shall constitute a security agreement and shall
create and evidence a security interest or common law Lien in all the
Equipment and in all the other items of Mortgaged Property in which a security
interest may be granted or a common law pledge created pursuant to the Uniform
Commercial Code as in effect in the state in which the Premises are located or
under the common law in such state (collectively, "Personal Property").
<PAGE>
-27-
2.2.2 Upon the occurrence of any Event of Default, in addition to the
remedies set forth in Article III, Mortgagee shall have the power to sell the
Personal Property in accordance with the Uniform Commercial Code as enacted in
the state in which the Premises are located or under other applicable law. It
shall not be necessary that any Personal Property offered be physically
present at any such sale or constructively in the possession of Mortgagee or
the person conducting the sale.
2.2.3 Upon the occurrence of any Event of Default, Mortgagee may sell
the Personal Property or any part thereof at public or private sale with
notice to Mortgagor as hereinafter provided. The Proceeds of any such sale,
after deducting all expenses of Mortgagee in taking, storing, repairing and
selling the Personal Property (including, without limitation, attorneys' fees)
shall be applied in the manner set forth in subsection 3.3.3. At any sale,
public or private, of the Personal Property or any part thereof, Mortgagee may
purchase any or all of the Personal Property offered at such sale.
2.2.4 Mortgagee shall give Mortgagor notice of any sale of any of the
Personal Property pursuant to the provisions of this Section 2.2.
Notwithstanding the provisions of Section 5.2, any such notice shall
conclusively be deemed to be reasonable and effective if such notice is mailed
at least ten (10) days prior to any sale, by first class or certified mail,
postage prepaid to Mortgagor at its address determined in accordance with the
provisions of Section 5.2.
ARTICLE III
EVENTS OF DEFAULT AND REMEDIES
------------------------------
SECTION 3.1 Remedies in Case of an Event of Default. If an Event of
---------------------------------------
Default (as defined in the Collateral Agency Agreement) shall have occurred,
Mortgagee may, but shall not be obligated to, in addition to any other action
permitted by law (and not limited in any manner by the remedies contained in
the Debt Instruments or other Security Documents), take one or more of the
following actions:
3.1.1 by written notice to Mortgagor, declare the entire principal
amount of the Secured Obligations to be due and payable immediately;
3.1.2 personally, or by its agents or attorneys, (i) enter into and
upon all or any part of the Mortgaged Property and exclude Mortgagor, its
agents and servants wholly therefrom, (ii) use, operate, manage and control
the Premises and the Equipment and conduct the business thereof, (iii)
maintain and restore the Mortgaged Property, (iv) make all reasonably
necessary or proper repairs, renewals and replacements
<PAGE>
-28-
and such useful Alterations thereto and thereon as Mortgagee may deem
advisable, (v) manage, lease and operate the Mortgaged Property and carry on
the business thereof and exercise all rights and powers of Mortgagor with
respect thereto either in the name of Mortgagor or otherwise, or (vi) collect
and receive all earnings, revenues, rents, issues, profits and income of the
Mortgaged Property and any or every part thereof;
3.1.3 with or without entry, personally or by its agents or
attorneys, (i) sell the Mortgaged Property and all estate, right, title and
interest, claim and demand therein at one or more sales in one or more
parcels, in accordance with the provisions of Section 3.2 or (ii) institute
and prosecute proceedings for the complete or partial foreclosure of the Lien
and security interests created and evidenced hereby; or
3.1.4 take such steps to protect and enforce its rights whether by
action, suit or proceeding at law or in equity for the specific performance of
any covenant, condition or agreement in any Indenture Document or in aid of
the execution of any power granted in this Mortgage, or for any foreclosure
hereunder, or for the enforcement of any other appropriate legal or equitable
remedy or otherwise as Mortgagee shall elect.
SECTION 3.2 Sale of Mortgaged Property If Event of Default Occurs;
Proceeds of Sale.
3.2.1 If any Event of Default shall have occurred, Mortgagee may
institute an action to foreclose this Mortgage or take such other action as may
be permitted and available to Mortgagee at law or in equity for the enforcement
of the Debt Instruments and realization on the Mortgaged Property and proceeds
thereon through power of sale or to final judgment and execution thereof for the
Secured Obligations, and in furtherance thereof Mortgagee may sell the Mortgaged
Property at one or more sales, as an entirety or in parcels, at such time and
place, upon such terms and after such notice thereof as may be required or
permitted by law or statute or in equity. Mortgagee may execute and deliver to
the purchaser at such sale a conveyance of the Mortgaged Property in fee simple
and an assignment or conveyance of all Mortgagor's interest in the Leases and
the Mortgaged Property, each of which conveyances and assignments shall contain
recitals as to the Event of Default upon which the execution of the power of
sale herein granted depends and Mortgagor hereby constitutes and appoints
Mortgagee the true and lawful attorney-in-fact of Mortgagor to make any such
recitals, sale, assignment and conveyance, and all of the acts of Mortgagee as
such attorney-in-fact are hereby ratified and confirmed. Mortgagor agrees that
such recitals shall be binding and conclusive upon Mortgagor and that any
assignment or conveyance to be made by Mortgagee shall divest Mortgagor of all
right, title, interest, equity and right of redemption, including any statutory
redemption, in and to the Mortgaged Property. The power and agency hereby
<PAGE>
-29-
granted are coupled with an interest and are irrevocable by death or
dissolution, or otherwise, and are in addition to any and all other remedies
which Mortgagee may have hereunder, at law or in equity. So long as the
Secured Obligations, or any part thereof, remain unpaid, Mortgagor agrees that
possession of the Mortgaged Property by Mortgagor, or any person claiming
under Mortgagor, shall be as tenant and, in case of a sale under power or upon
foreclosure as provided in this Mortgage, Mortgagor and any person in
possession under Mortgagor, as to whose interest such sale was not made
subject, shall, at the option of the purchaser at such sale, then become and
be tenants holding over, and shall forthwith deliver possession to such
purchaser, or be summarily dispossessed in accordance with the laws applicable
to tenants holding over. In case of any sale under this Mortgage by virtue of
the exercise of the powers herein granted, or pursuant to any order in any
judicial proceeding or otherwise, the Mortgaged Property may be sold as an
entirety or in separate parcels in such manner or order as Mortgagee in its
sole discretion may elect. One or more exercises of powers herein granted
shall not extinguish or exhaust such powers, until the entire Mortgaged
Property is sold or all amounts secured hereby are paid in full.
3.2.2 In the event of any sale made under or by virtue of this
Article III, the entire principal of and interest in respect of the Secured
Obligations, if not previously due and payable, shall, at the option of
Mortgagee, immediately become due and payable, anything in this Mortgage to
the contrary notwithstanding.
3.2.3 The proceeds of any sale made under or by virtue of this
Article III, together with any other sums which then may be held by Mortgagee
under this Mortgage, whether under the provisions of this Article III or
otherwise, shall be applied in accordance with the provisions of the
Indenture.
3.2.4 Mortgagee may bid for and acquire the Mortgaged Property or any
part thereof at any sale made under or by virtue of this Article III and, in
lieu of paying cash therefor, may make settlement for the purchase price by
crediting against the purchase price the unpaid amounts outstanding to
Mortgagee whether or not then due and owing in respect of the Secured
Obligations, after deducting from the sales price the expense of the sale and
the reasonable costs of the action or proceedings and any other sums that
Mortgagee is authorized to deduct under this Mortgage.
3.2.5 Mortgagee may adjourn from time to time any sale by it to be
made under or by virtue of this Mortgage by announcement at the time and place
appointed for such sale or for such adjourned sale or sales and Mortgagee,
without further notice or publication, may make such sale at the time and
place to which the same shall be so adjourned.
<PAGE>
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SECTION 3.3 Additional Remedies in Case of an Event of Default.
--------------------------------------------------
3.3.1 Mortgagee shall be entitled to recover judgment as aforesaid
either before, after or during the pendency of any proceedings for the
enforcement of the provisions of this Mortgage, and the right of Mortgagee to
recover such judgment shall not be affected by any entry or sale hereunder, or
by the exercise of any other right, power or remedy for the enforcement of the
provisions of this Mortgage, or the foreclosure of, or absolute conveyance
pursuant to, this Mortgage. In case of proceedings against Mortgagor in
insolvency or bankruptcy or any proceedings for its reorganization or
involving the liquidation of its assets, Mortgagee shall be entitled to prove
the whole amount of principal and interest and other payments, charges and
costs due in respect of the Secured Obligations to the full amount thereof
without deducting therefrom any proceeds obtained from the sale of the whole
or any part of the Mortgaged Property; provided, however, that in no case
-------- -------
shall Mortgagee receive a greater amount than the aggregate of such principal,
interest and such other payments, charges and costs (with interest at the
Default Rate) from the proceeds of the sale of the Mortgaged Property and the
distribution from the estate of Mortgagor.
3.3.2 Any recovery of any judgment by Mortgagee and any levy of any
execution under any judgment upon the Mortgaged Property shall not affect in
any manner or to any extent the Lien and security interest created and
evidenced hereby upon the Mortgaged Property or any part thereof, or any
conveyances, powers, rights and remedies of Mortgagee hereunder, but such
conveyances, powers, rights and remedies shall continue unimpaired as before.
3.3.3 Any moneys collected by Mortgagee under this Section 3.3 shall
be applied in accordance with the provisions of subsection 3.2.3.
SECTION 3.4 Legal Proceedings After an Event of Default.
-------------------------------------------
3.4.1 After the occurrence of any Event of Default and immediately
upon the commencement of any action, suit or legal proceedings to obtain
judgment for the Secured Obligations or any part thereof, or of any
proceedings to foreclose the Lien and security interest created and evidenced
hereby or otherwise enforce the provisions of this Mortgage or of any other
proceedings in aid of the enforcement of this Mortgage, Mortgagor shall enter
its voluntary appearance in such action, suit or proceeding.
3.4.2 Upon the occurrence of an Event of Default, Mortgagee shall be
entitled forthwith as a matter of right, concurrently or independently of any
other right or remedy hereunder either before or after declaring the Secured
Obligations or any part
<PAGE>
-31-
thereof to be due and payable, to the appointment of a receiver or other
custodian ex parte and without giving notice to any party and without regard
to the adequacy or inadequacy of any security for the Secured Obligations or
the solvency or insolvency of any person or entity then legally or equitably
liable for the Secured Obligations or any portion thereof. Mortgagor hereby
consents to the appointment of such receiver. Notwithstanding the appointment
of any receiver or other custodian, Mortgagee shall be entitled as pledgee to
the possession and control of any cash, deposits or instruments at the time
held by or payable or deliverable under the terms of the Indenture to
Mortgagee.
3.4.3 Mortgagor shall not (i) at any time insist upon or plead or in
any manner whatsoever claim or take any benefit or advantage of any stay or
extension or moratorium law, any exemption from execution or sale of the
Mortgaged Property or any part thereof, wherever enacted, now or at any time
hereafter in force, which may affect the covenants and terms of performance of
this Mortgage, (ii) claim, take or insist on any benefit or advantage of any
law now or hereafter in force providing for the valuation or appraisal of the
Mortgaged Property, or any part thereof, prior to any sale or sales of the
Mortgaged Property which may be made pursuant to this Mortgage, or pursuant to
any decree, judgment or order of any court of competent jurisdiction or (iii)
after any such sale or sales, claim or exercise any right under any statute
heretofore or hereafter enacted to redeem the property so sold or any part
thereof. Mortgagor hereby expressly (i) waives all benefit or advantage of any
such law or laws, including, without limitation, any statute of limitations
applicable to this Mortgage, (ii) waives and Mortgagee by acceptance of this
Mortgage waives any and all rights to trial by jury in any action or
proceeding related to the enforcement of this Mortgage, (iii) waives any
objection which it may now or hereafter have to the laying of venue of any
action, suit or proceeding brought in connection with this Mortgage and
further waives and agrees not to plead that any such action, suit or
proceeding brought in any such court has been brought in an inconvenient forum
and (iv) covenants not to hinder, delay or impede the execution of any power
granted or delegated to Mortgagee by this Mortgage, but to suffer and permit
the execution of every such power as though no such law or laws had been made
or enacted. Mortgagor, for itself and all who may claim under it, waives all
rights to have the Mortgaged Property marshalled on any foreclosure of this
Mortgage.
SECTION 3.5 Remedies Not Exclusive. No remedy conferred upon or reserved
----------------------
to Mortgagee by this Mortgage is intended to be exclusive of any other remedy
or remedies, and each and every such remedy shall be cumulative and shall be
in addition to every other remedy given under this Mortgage or now or
hereafter existing at law or in equity. Any delay or omission of Mortgagee to
exercise any right or power accruing on any Event of Default shall not impair
any such right or power and shall not be construed to be a waiver of or
acquiescence in any such Event of Default. Every power and remedy
<PAGE>
-32-
given by this Mortgage may be exercised from time to time concurrently or
independently, when and as often as may be deemed expedient by Mortgagee in
such order and manner as Mortgagee, in its sole discretion, may elect. If
Mortgagee accepts any moneys required to be paid by Mortgagor under this
Mortgage after the same become due, such acceptance shall not constitute a
waiver of the right either to require prompt payment, when due, of all other
sums secured by this Mortgage or to declare an Event of Default with regard to
subsequent defaults. If Mortgagee accepts any moneys required to be paid by
Mortgagor under this Mortgage in an amount less than the sum then due, such
acceptance shall be deemed an acceptance on account only and on the condition
that it shall not constitute a waiver of the obligation of Mortgagor to pay
the entire sum then due, and Mortgagor's failure to pay the entire sum then
due shall be and continue to be a default hereunder notwithstanding acceptance
of such amount on account.
ARTICLE IV
CERTAIN DEFINITIONS
-------------------
The following terms shall have the following respective meanings:
"Additional Undertaking" means (a) cash or Cash Equivalents (as
----------------------
defined in each Indenture as in effect on the date hereof) or (b) a Surety
Bond, Guaranty or Letter of Credit which is (i) provided by a Person, (ii)
whose long-term unsecured debt is rated at least AA (or equivalent) and (iii)
is otherwise satisfactory to Mortgagee. Additional Undertakings shall be
addressed directly to Mortgagee and shall name Mortgagee as the beneficiary
thereof and the party entitled to make claims thereunder.
"Cost of Construction" means the sum, so far as it relates to the
--------------------
reconstructing, renewing, restoring or replacing of the Improvements, of (i)
obligations incurred or assumed by Mortgagor or undertaken by tenants pursuant
to the terms of the Leases for labor, materials and other expenses and to
contractors, builders and materialmen; (ii) the cost of contract bonds and of
insurance of all kinds that may reasonably be deemed by Mortgagor to be
necessary during the course of construction; (iii) the expenses incurred or
assumed by Mortgagor (or tenant under the Lease performing such Restoration)
for test borings, surveys, estimates, any Plans and Specifications and
preliminary investigations therefor, and for supervising construction, as well
as for the performance of all other duties required by or reasonably necessary
for proper construction; (iv) ad valorem property taxes levied upon the
Premises during performance of any Restoration and (v) any costs or other
charges in connection with obtaining title insurance and counsel opinions that
may be required or necessary in connection with a Restoration.
<PAGE>
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"Guaranty" means the unconditional guarantee of payment of any
--------
corporation or partnership organized and existing under the laws of the United
States of America or any State or the District of Columbia or Canada or
province thereof that has a long-term unsecured debt rating (as determined by
each Rating Agency) at the time such guarantee is delivered equal to or higher
than the then current rating of the Notes, given to Mortgagee, accompanied by
an opinion of counsel to such guarantor to the effect that such guarantee has
been duly authorized, executed and delivered by such guarantor and constitutes
the legal, valid and binding obligation of such guarantor enforceable against
such guarantor by Mortgagee in accordance with its terms subject to customary
exceptions at the time for opinions for such instruments, together with an
opinion of counsel to the effect that, taking into account the purpose under
this Mortgage for which such guarantee will be given, such guarantee and
accompanying opinion are responsive to the requirements of this Mortgage.
"Letter of Credit" means a clean, irrevocable, unconditional letter
----------------
of credit in favor of Mortgagee and entitling Mortgagee to draw thereon in The
City of New York issued by a bank with a letter of credit evaluation
determined by each Rating Agency, at the time such letter of credit is
delivered, in one of the three highest generic rating categories of such
Rating Agency, accompanied by an opinion of counsel to such bank to the effect
that such letter of credit has been duly authorized, executed and delivered by
such bank and constitutes the legal, valid and binding obligation of such bank
enforceable against such bank by Mortgagee in accordance with its terms
subject to customary exceptions at the time for opinions for such instruments,
together with an Opinion of Counsel to the effect that, taking into account
the purpose under this Mortgage for which such letter of credit will be given,
such letter of credit and accompanying opinion are responsive to the
requirements of this Mortgage.
"Prospectus" means the final prospectus with respect to the Notes
----------
filed with the SEC pursuant to paragraph (1) or (4) of Rule 424(b) of the
rules and regulations under the Securities Act or, if no such filing is made,
the final prospectus contained in the registration statement relating to the
Notes.
"Rating Agency" means A.M. Best Company, if such Person shall then be
-------------
rating corporate obligations, or, if such Person shall be rating corporate
obligations, then any other organization of generally recognized standing,
selected by Mortgagee.
"rated or rating" in connection with long-term unsecured debt, means
---------------
that the Person in question has, or has been determined to be qualified for,
the rating in question by the Rating Agency.
<PAGE>
-34-
"Surety Bond" means a clean irrevocable surety bond or credit
-----------
insurance policy in favor of Mortgagee issued by an insurance company the
claims paying ability rating of which at the time such surety bond or credit
insurance policy is delivered is in one of the three highest generic rating
categories of each Rating Agency, accompanied by an opinion of counsel to such
insurance company to the effect that such surety bond or credit insurance
policy has been duly authorized, executed and delivered by such insurance
company and constitutes the legal, valid and binding obligation of such
insurance company enforceable against such insurance company by Mortgagee in
accordance with its terms subject to customary exceptions at the time for
opinions for such instruments, together with an Opinion of Counsel to the
effect that, taking into account the purpose under this Mortgage for which
such surety bond will be given, such surety bond and accompanying opinion are
responsive to the requirements of this Mortgage.
ARTICLE V
MISCELLANEOUS
-------------
SECTION 5.1 Severability. In the event any one or more of the provisions
------------
contained in this Mortgage shall for any reason be held to be invalid, illegal
or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision of this Mortgage, but
this Mortgage shall be construed as if such invalid, illegal or unenforceable
provision had never been contained herein or therein. The invalidity of any
provision of this Mortgage in any one jurisdiction shall not affect or impair
in any manner the validity of such provision in any other jurisdiction.
SECTION 5.2 Notices. Unless otherwise provided herein, any notice or
-------
other communication herein shall be given in the manner and at the address set
forth in the Collateral Agency Agreement, or as to any party at such other
address as shall be designated by such party in a written notice to the other
party.
SECTION 5.3 Covenants To Run with the Land. All of the grants, covenants,
------------------------------
terms, provisions and conditions in this Mortgage shall run with the land and
shall apply to, and bind the successors and assigns of Mortgagor.
SECTION 5.4 Captions; Gender and Number. The captions and section
---------------------------
headings of this Mortgage are for convenience only and are not to be used to
define the provisions hereof. All terms contained herein shall be construed,
whenever the context of this Mortgage requires, so that the singular includes
the plural and so that the masculine includes the feminine.
<PAGE>
-35-
SECTION 5.5 Limitation on Interest Payable. It is the intention of the
------------------------------
parties to conform strictly to the usury laws, whether state or federal, that
are applicable to the transaction of which this Mortgage is a part. All
agreements between Mortgagor and the Mortgagee, whether now existing or
hereafter arising and whether oral or written, are hereby expressly limited so
that in no contingency or event whatsoever shall the amount paid or agreed to
be paid by Mortgagor for the use, forbearance or detention of the money to be
loaned or advanced under any Indenture Document, or for the payment or
performance of any covenant or obligation contained herein or in any Indenture
Document, exceeds the maximum amount permissible under applicable federal or
state usury laws. If under any circumstances whatsoever fulfillment of any
such provision, at the time performance of such provision shall be due, shall
involve exceeding the limit of validity prescribed by law, then the obligation
to be fulfilled shall be reduced to the limit of such validity. If under any
circumstances Mortgagor shall have paid an amount deemed interest by
applicable law, which would exceed the highest lawful rate, such amount that
would be excessive interest under applicable usury laws shall be applied to
the reduction of the principal amount owing in respect of the Secured
Obligations and not to the payment of interest, or if such excessive interest
exceeds the unpaid balance of principal and any other amounts due hereunder,
the excess shall be refunded to Mortgagor. All sums paid or agreed to be paid
for the use, forbearance or detention of the principal under any extension of
credit or advancement of funds by Mortgagee shall, to the extent permitted by
applicable law, and to the extent necessary to preclude exceeding the limit of
validity prescribed by law, be amortized, prorated, allocated and spread from
the date of this Mortgage until payment in full of the Secured Obligations so
that the actual rate of interest on account of such principal amounts is
uniform throughout the term hereof.
SECTION 5.6 Indemnification; Reimbursement. Each and every obligation of
------------------------------
Mortgagor to indemnify and hold harmless the Trustees under the Indentures,
contained in Section ____ of each Indenture as in effect on the date hereof is
incorporated herein mutatis mutandis as an obligation of Mortgagor hereunder
------- --------
to indemnify Mortgagee and the officers, directors, employees, agents and
affiliates of Mortgagee (each, an "Indemnified Party") in each and every
matter relating to or arising out of this Mortgage and the Mortgaged Property.
In addition to the foregoing, Mortgagor shall reimburse Mortgagee, upon
demand, for all costs and expenses incurred by Mortgagee in connection with
the administration and enforcement of this Mortgage. If any action or
proceeding, including, without limitation, bankruptcy or insolvency
proceedings, is commenced to which action or proceeding Mortgagee is made a
party or in which it becomes necessary to defend or uphold the Lien or
validity of this Mortgage, Mortgagor shall, upon demand, reimburse Mortgagee
for all expenses (including, without limitation, attorneys' and agents' fees
and disbursements) incurred by Mortgagee in such action or proceeding. In any
action or proceeding to foreclose this Mortgage or to
<PAGE>
-36-
recover or collect the Secured Obligations, the provisions of law relating to
the recovery of costs, disbursements and allowances shall prevail unaffected
by this covenant. Mortgagor's obligations under this Section 5.6 shall survive
the satisfaction of this Mortgage and the discharge of Mortgagor's other
obligations hereunder.
SECTION 5.7 Choice of Law. The terms and provisions of this Mortgage and
-------------
the enforcement hereof shall be governed by and construed in accordance with
the laws of the state where the Land is located.
SECTION 5.8 Changes in Writing. This Mortgage may not be modified,
------------------
amended, discharged or waived in whole or in part except by an instrument in
writing signed by Mortgagor and Mortgagee, in accordance with the provisions
of the Collateral Agency Agreement.
SECTION 5.9 No Merger. The rights and estate created by this Mortgage
---------
shall not, under any circumstances, be held to have merged into any other
estate or interest now owned or hereafter acquired by Mortgagee unless
Mortgagee shall have consented to such merger in writing.
SECTION 5.10 Concerning Mortgagee.
--------------------
5.10.1 Mortgagee shall be entitled to rely upon any written notice,
statement, certificate, order or other document believed by it to be genuine
and correct and to have been signed, sent or made by the proper person, and,
with respect to all matters pertaining to this Mortgage and its duties
hereunder, upon advice of counsel selected by it.
5.10.2 Mortgagor shall recognize as the mortgagee under this
instrument any party who has succeeded to the interest of Mortgagee under the
Collateral Agency Agreement.
5.10.3 If any item of Mortgaged Property also constitutes collateral
granted to Mortgagee under any other mortgage, security agreement, pledge or
instrument of any type, in the event of any conflict between the provisions of
this Mortgage and the provisions of such other mortgage, security agreement,
pledge or instrument of any type in respect of such collateral, Mortgagee, in
its sole discretion, shall select which provision or provisions shall control.
5.10.4 Mortgagee may resign from the performance of all its functions
and duties hereunder at any time by giving ten (10) days' prior written notice
to
<PAGE>
-37-
Mortgagor. Such resignation shall take effect upon the appointment of a
successor Mortgagee pursuant to the provisions of the Collateral Agency
Agreement.
SECTION 5.11 Waiver of Stay.
--------------
5.11.1 Mortgagor agrees that in the event that Mortgagor or any
property or assets of Mortgagor shall hereafter become the subject of a
voluntary or involuntary proceeding under the Bankruptcy Code or Mortgagor
shall otherwise be a party to any federal or state bankruptcy, insolvency,
moratorium or similar proceeding to which the provisions relating to the
automatic stay under Section 362 of the Bankruptcy Code or any similar
provision in any such law is applicable, then, in any such case, whether or
not Mortgagee has commenced foreclosure proceedings under this Mortgage,
Mortgagee shall be entitled to relief from any such automatic stay as it
relates to the exercise of any of the rights and remedies (including, without
limitation, any foreclosure proceedings) available to Mortgagee as provided in
this Mortgage or in any other document evidencing or securing the Secured
Obligations.
5.11.2 Mortgagee shall have the right to petition or move any court
having jurisdiction over any proceeding described in subsection 5.12.1 for the
purposes provided therein, and Mortgagor agrees (i) not to oppose any such
petition or motion and, (ii) at Mortgagor's sole cost and expense, to assist
and cooperate with Mortgagee, as may be requested by Mortgagee from time to
time, in obtaining any relief requested by Mortgagee, including, without
limitation, by filing any such petitions, supplemental petitions, requests for
relief, documents, instruments or other items from time to time requested by
Mortgagee or any such court.
SECTION 5.12 No Credit for Payment of Taxes or Impositions. Mortgagor
---------------------------------------------
shall not be entitled to any credit against the principal, premium, if any, or
interest payable on the Notes, and Mortgagor shall not be entitled to any
credit against any other sums which may become payable under the terms thereof
or hereof by reason of the payment of any tax or other impositions on the
Mortgaged Property or any part thereof.
SECTION 5.13 Stamp and Other Taxes. Subject to the provisions of
---------------------
subsection 1.5.5 relating to permitted contests, Mortgagor shall pay any
United States documentary stamp taxes, with interest and fines and penalties,
and any mortgage recording taxes or fees, with interest and fines and
penalties, that may hereafter be levied, imposed or assessed under or upon or
by reason of this Mortgage or the Secured Obligations or any instrument or
transaction affecting or relating to either thereof and in default thereof
Mortgagee may advance the same and the amount so advanced shall be payable by
Mortgagor to Mortgagee within ten (10) days after demand therefor, together
with interest thereon at the
<PAGE>
-38-
Default Rate.
SECTION 5.14 Estoppel Certificates. Mortgagor shall, from time to time,
upon twenty (20) days' prior written request by Mortgagee, execute,
acknowledge and deliver to the Mortgagee a certificate signed by an authorized
officer or officers stating that this Mortgage and the other Indenture
Documents are unmodified and in full force and effect (or, if there have been
modifications, that this Mortgage and such other Indenture Documents, as
applicable, are in full force and effect as modified and setting forth such
modifications) and stating the date to which payments have been made in
respect of the Secured Obligations.
SECTION 5.15 Additional Security. Without notice to or consent of
Mortgagor and without impairment of the Lien and rights created by this
Mortgage, Mortgagee may accept (but Mortgagor shall not be obligated to
furnish) from Mortgagor or from any other Person or Persons, additional
security for the Secured Obligations. Neither the giving of this Mortgage nor
the acceptance of any such additional security shall prevent Mortgagee from
resorting, first, to such additional security, and, second, to the security
created by this Mortgage without affecting Mortgagee's Lien and rights under
this Mortgage.
SECTION 5.15 Release. The Lien of this Mortgage shall be released from
the Mortgaged Property in accordance with the provisions of the Collateral
Agency Agreement. Mortgagee, on the written request and at the expense of
Mortgagor, will execute and deliver such proper instruments of release and
satisfaction or assignment as may reasonably be requested to evidence such
release or assignment, and any such instrument, when duly executed by
Mortgagee and duly recorded by Mortgagor in the places where this Mortgage is
recorded, shall conclusively evidence the release or assignment of this
Mortgage.
SECTION 5.17 Expenses of Collection. In the event this Mortgage or any
other instrument evidencing the Secured Obligations is placed in the hands of
counsel for collection of any amount payable hereunder or thereunder or for
the enforcement of any of the provisions hereof or thereof, Mortgagor agrees
to pay all costs associated therewith incurred by Mortgagee, either with or
without the institution of an action, suit or other proceeding, in addition to
all costs, disbursements and allowances provided by law, all such costs to be
paid upon demand, together with interest thereon at the Default Rate from the
date of notice or incurring thereof, and the same shall be deemed to be
secured hereby.
SECTION 5.18 Business Days. In the event any time period or any date
provided in this Mortgage ends or falls on a day other than a Business Day (as
defined in each Indenture as in effect on the date hereof), then such time
period shall be deemed to end and such date shall be deemed to fall on the
next succeeding Business Day, and performance herein may be made on such
Business Day, with the same force and effect as if made on such other day.
<PAGE>
IN WITNESS WHEREOF, this Mortgage has been duly executed by Mortgagor as
of the date first written above.
ACME STEEL COMPANY, as Mortgagor
By:
_____________________________
Name:
Title:
<PAGE>
[ACKNOWLEDGMENT]
<PAGE>
SCHEDULE A
----------
LEGAL DESCRIPTION
<PAGE>
SCHEDULE B
----------
PRIOR LIENS
<PAGE>
INTERCREDITOR AGREEMENT
INTERCREDITOR AGREEMENT (the ``Agreement''), dated as of ___________, 1994,
by and among ACME METALS INCORPORATED, a Delaware corporation, having its
principal place of business at 13500 South Perry Avenue, Riverdale, Illinois
60627 (together with its successors and assigns, ``AMI''), ACME STEEL COMPANY, a
Delaware corporation having its principal place of business at 13500 South Perry
Avenue, Riverdale, Illinois 60627 (together with its successors and assigns, the
``Company''), ____________ ______________________, a national banking
association with its chief executive office in ________________, as agent (in
such capacity and together with its successors and assigns in such capacity, the
``Agent'') for the banks (collectively, the ``Banks'') from time to time lenders
to the Company under a working capital facility dated ________, 1994, and
Shawmut Bank Connecticut, National Association, a national banking association,
having an address at 777 Main Street, Hartford, Connecticut 06115, as collateral
agent (in such capacity and together with its successor and assigns in such
capacity, the ``Collateral Agent'') for the Senior Note Secured Parties (as
hereinafter defined).
R E C I T A L S :
- - - - - - - -
1. Pursuant to that certain [Receivable and Inventory Financing Agreement]
dated as of __________, 1994, among the Agent, the Banks, AMI, the Company,
[Acme Packaging Corporation, a Delaware corporation, Alpha Tube Corporation, a
Delaware corporation, Alta Slitting Corporation, a Delaware corporation, and
Universal Tool and Stamping Co., Inc., an Indiana corporation] (together with
the other agreements executed in connection with the working capital facility
referred to above among such entities, and as amended, amended and restated,
supplemented or otherwise modified from time to time, the ``Working Capital
Facility''), the Banks agreed to make certain loans and advances from time to
time to the borrowers under the Working Capital Facility.
2. Pursuant to that certain indenture (as amended, amended and restated,
supplemented or otherwise modified from time to time, the ``Note Indenture''),
dated as of ________, 1994, by and among AMI, the Company, as subsidiary
guarantor of AMI's obligations, each of the other subsidiaries of AMI, as
guarantors (collectively, the ``Guarantors'') of AMI's obligations, and Shawmut
Bank Connecticut, National Association, as trustee (in such capacity and
together with its successors and assigns in such capacity, the ``Note Trustee'')
for the holders of the Senior Secured Notes (as hereinafter defined), AMI is
issuing its ___% senior secured notes due 2002 (as amended, amended and
restated,
<PAGE>
-2-
supplemented or otherwise modified from time to time, the ``Senior Secured
Notes'') in the aggregate principal amount of $175,000,000.
3. Pursuant to that certain indenture (as amended, amended and restated,
supplemented or otherwise modified from time to time, the ``Discount Note
Indenture''; together with the Note Indenture, the ``Indentures''), dated as of
________, 1994, by and among AMI, the Company, the Guarantors and Shawmut Bank
Connecticut, National Association, as trustee (in such capacity and together
with its successors and assigns in such capacity, the ``Discount Note Trustee'';
together with the Note Trustee, the ``Trustees'') for the holders of the Senior
Secured Discount Notes (as hereinafter defined), Pledgor is issuing its __%
senior secured discount notes due 2004 (as amended, amended and restated,
supplemented or otherwise modified from time to time, the ``Senior Secured
Discount Notes''; together with the Senior Secured Notes, the ``Notes'') in the
aggregate principal amount of $______.
4. The Collateral Agent is the collateral agent under that certain
collateral agency agreement (the ``Collateral Agency Agreement''), dated as of
________, 1994, for the Trustees (for the benefit of the holders of the Notes)
and such other parties which may from time to time become additional lenders to
AMI, the Company and/or the Guarantors (each such lender, a ``Permitted
Additional Lender'' and collectively, the ``Permitted Additional Lenders'';
together with the Trustees and the Collateral Agent, the ``Senior Note Secured
Parties'') which may, in accordance with the provisions of clause (xi) of the
definition of ``Permitted Liens'' in each Indenture as in effect on the date
hereof, take a security interest in the Shared Collateral (as defined in the
Collateral Agency Agreement) to secure the financing provided by the Permitted
Additional Lenders (such financing, the ``Permitted Replacement Financing'')
upon the execution and delivery by each Permitted Additional Lender of a
supplement to the Collateral Agency Agreement as contemplated therein.
5. To secure the payment and performance of the Noteholder Claim (as
hereinafter defined), the Company has granted mortgage liens on and security
interests in the Noteholder Collateral (as hereinafter defined) to the
Collateral Agent for the benefit of the Senior Note Secured Parties.
6. To secure the payment and performance of the Bank Claim (as hereinafter
defined), the Company has granted security interests in and liens on the Bank
Collateral (as hereinafter defined) to the Agent for the benefit of the Banks.
7. It is contemplated in the Indentures that the Company may from time to
time enter into Permitted Replacement
<PAGE>
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Financings and/or Permitted Bank Refinancings (as hereinafter defined).
8. The parties hereto are executing and delivering this instrument to
evidence their agreement in respect of their relative rights with respect to the
Collateral (as hereinafter defined) and certain other rights, priorities and
interests under the Working Capital Facility and the Indentures and the other
documents executed in connection therewith.
A G R E E M E N T :
- - - - - - - - -
In consideration of the foregoing and the mutual covenants herein
contained, and for other good and valuable consideration, the parties hereby
agree as follows:
I. DEFINITIONS
-----------
Definitions. Unless otherwise defined herein, the following terms shall
have the meanings specified below:
``Accounts'' shall mean all of the Company's presently existing and
hereafter arising or acquired accounts, accounts receivable, margin accounts,
futures positions, book debts, instruments, documents, contracts, contract
rights, choses in action, notes, drafts, acceptances, chattel paper, and other
forms of obligations and receivables now or hereafter owned or held by or
payable to the Company relating in any way to Inventory or arising from the sale
of Inventory or the rendering of services by the Company, including the right to
payment of any interest or finance charge with respect thereto, together with
all merchandise represented by any of the accounts; all such merchandise that
may be reclaimed or repossessed or returned to the Company; all of the Company's
rights as an unpaid vendor, including stoppage in transit, reclamation, replevin
and sequestration; all pledged assets and all letters of credit, guaranty
claims, liens, and security interests held by or granted to the Company to
secure payment of any accounts and which are delivered for or on behalf of any
account debtor; all accessions to all of the foregoing described properties and
interests in properties; all guarantees, endorsements and indemnifications on,
or of, any of the foregoing; and all customer lists, invoices, ledgers, books of
account, records, files (whether in printed form or stored electronically),
computer programs, computer disks or tape files, computer printouts, computer
runs and other computer-prepared information relating to any of the foregoing.
``Bank Claim'' shall mean all obligations of the Company to the Agent as
set forth in the Working Capital Facility or in the
<PAGE>
-4-
documents evidencing or securing any Permitted Bank Refinancing, all sums
loaned, advanced to or for the benefit of the borrowers thereunder at any time,
any interest thereon, any future advances, any costs of collection or
enforcement, including, without limitation, reasonable attorneys' and
paralegals' costs and fees, and any prepayment fees with respect thereto.
``Bank Collateral'' shall mean the Collateral in which the Agent has a lien
or security interest as described in and provided by subsection 2.1(a).
``Bank Intangibles'' shall mean all of the Company's now owned or hereafter
acquired contract rights relating to Bank Collateral, goodwill, descriptions,
name plates, choses-in-action, causes of action, catalogs, confidential
information, consulting agreements, engineering contracts, and such other assets
which relate to the goodwill of the business of the Company and rights to
refunds or indemnification to the extent the foregoing relate to Bank
Collateral, deposit accounts, letters of credit, documents, instruments, chattel
paper, and income tax refunds to the extent relating to Bank Collateral, claims
for tax or other refunds against any city, county, state, or federal government,
or any agency or authority or other subdivision thereof relating to Bank
Collateral, lease agreements relating to Bank Collateral, corporate or other
business records relating to Bank Collateral and all other general intangibles
of every kind and description relating to Bank Collateral; provided, however,
that Bank Intangibles shall in no event include Intellectual Property.
``Bank Primary Collateral'' shall mean, collectively, the Accounts,
Inventory and Bank Intangibles.
``Collateral'' shall mean all of the Noteholder Collateral and Bank
Collateral.
``Copyrights'' shall mean all of the Company's now owned or hereafter
acquired copyrights of the United States or any other country, and all
registrations and recordings thereof, including, without limitation,
applications, registrations and recordings in the United States Copyright Office
or in any similar office or agency of the United States or in any similar office
or agency of any other country or any political subdivision thereof and all
copyrights in derivative works, extensions or renewals thereof.
``Enforcement'' shall mean, collectively or individually, for either of the
Agent or the Collateral Agent to make demand for payment or accelerate the
indebtedness of the Company (other than any acceleration which may occur
automatically upon the filing of a bankruptcy petition by the Company) held by
such person,
<PAGE>
-5-
repossess any Collateral or commence the judicial or other enforcement of any of
the rights and remedies of the Secured Party under the Indentures, the Working
Capital Facility, the instruments evidencing any Permitted Replacement Financing
or any Permitted Bank Refinancing or any related mortgages, guarantees or
agreements or under applicable law.
``Enforcement Notice'' shall mean a written notice delivered, at a time
when an ``Event of Default'' (as defined in the Indentures or the Working
Capital Facility, as applicable) or any event of default as set forth in the
documents evidencing or securing a Permitted Replacement Financing or Permitted
Bank Refinancing has occurred and is continuing, by either the Collateral Agent
or the Agent to the other Secured Party announcing that an Enforcement Period
has commenced, specifying the relevant Event of Default (as defined in the
Indentures or the Working Capital Facility, as applicable) or event of default
(as set forth in the documents evidencing or securing such Permitted Replacement
Financing or Permitted Bank Refinancing, as applicable), stating the current
amount of the Noteholder Claim or Bank Claim and requesting the current amount
of the others' claims.
``Enforcement Period'' shall mean the period of time following the giving
by a Secured Party of an Enforcement Notice to the other Secured Party until
either (i) the final payment or satisfaction in full of either the Noteholder
Claim or the Bank Claim, or (ii) the Collateral Agent and the Agent agree in
writing to terminate the Enforcement Period.
``Equipment'' shall mean all of the Company's now owned or hereafter
acquired machinery, apparatus, equipment, fittings, fixtures, improvements and
articles of personal property of every kind and nature whatsoever attached or
affixed to, or located on, the Real Property or used in connection with the use
and enjoyment of the Real Property or the maintenance or preservation thereof,
including, without limitation, all equipment comprising the Modernization
Project (as defined in each Indenture), all manufacturing, storage, handling and
other equipment utilized in connection with the production and marketing of
steel, semi-finished steel, steel ingots, slabs, steel strips and coils, tools,
utility systems, fire sprinkler and alarm systems, HVAC equipment, boiler,
electronic data processing, telecommunications or computer equipment,
refrigeration, electronic monitoring, water or lighting systems, power,
sanitation, waste removal, pollution abatement or control, elevators, window
cleaning, maintenance or other systems or equipment, all indoor or outdoor
furniture, appliances or supplies, and all other articles used or useful in
connection with the use, operation, maintenance or repair of any part of the
Real Property, together with any and all parts, improvements, additions,
<PAGE>
-6-
replacements, accessions, and substitutions thereto or therefor, and all
licenses and other rights of the Company relating thereto, whether in the
possession and control of the Company, or in the possession and control of a
third party for the account of the Company and all maintenance and warranty
records relating thereto.
``Intellectual Property'' shall mean, collectively, all Copyrights, Patents
and Trademarks and all licenses therefor and all licenses under the patents,
trademarks, copyrights and trade secrets of third parties to the Company.
``Inventory'' shall mean all now owned or hereafter acquired inventory of
the Company including, without limitation, all goods, merchandise, raw
materials, work-in-process and finished goods intended for sale or lease, of
every kind and description now or at any time hereafter owned by the Company,
together with all the containers, packing, packaging, shipping and similar
materials related thereto, and including such inventory as is temporarily out of
the Company's custody or possession and items in transit and including any
returns and repossessions upon any accounts, documents, instruments or chattel
paper relating to or arising from the sale of inventory (as such documents,
instruments or chattel paper relate to the sale of such inventory) and
including, without limitation, all other classes of merchandise, materials,
parts, supplies, work- in-process, inventories and finished products intended
for sale by the Company and all substitutions therefor or replacements thereof,
and all additions and accessions thereto, and all invoices, ledgers, books of
account, records, files (whether in printed form or stored electronically),
computer programs, computer disks or tape files, computer printouts, computer
runs and other computer-prepared information relating to any of the foregoing.
``Noteholder Claim'' shall mean all obligations of the Company to the
Collateral Agent and the other Senior Note Secured Parties under the Indentures,
the Notes, any instruments evidencing or securing a Permitted Replacement
Financing and any mortgages or other security instruments securing the Company's
obligations in respect of its guarantee of the Notes, including in each case,
without limitation, all principal and interest owing by AMI, any future
advances, any costs of collection or enforcement, and reasonable attorneys' and
paralegals' costs and fees.
``Noteholder Collateral'' shall mean the Collateral in which the Collateral
Agent and the Secured Parties have a lien or security interest as described in
and provided by subsection 2.1(b).
``Noteholder Intangibles'' shall mean all of the Company's now owned or
hereafter acquired contract rights relating to
<PAGE>
-7-
Noteholder Collateral, goodwill, descriptions, name plates, choses-in-action,
causes of action, catalogs, confidential information, consulting agreements,
engineering contracts, and such other assets which relate to the goodwill of the
business of the Company and rights to refund or indemnification to the extent
the foregoing relate to Noteholder Collateral, deposit accounts, letters of
credit, documents, instruments, chattel paper, and income tax refunds to the
extent relating to Noteholder Collateral, claims for tax or other refunds
against any city, county, state, or federal government, or any agency or
authority or other subdivision thereof relating to Noteholder Collateral, lease
agreements relating to Noteholder Collateral, corporate or other business
records relating to Noteholder Collateral and all other general intangibles of
every kind and description relating to Noteholder Collateral.
``Noteholder Primary Collateral'' shall mean, collectively, the Real
Property, Equipment, Noteholder Intangibles, Securities and Intellectual
Property.
``Patents'' shall mean all of the Company's now owned or hereafter acquired
letters patent of the United States or any other country, and all patent
applications therefor, including, without limitation, patents and patent
applications in the United States Patent and Trademark Office (the ``PTO'') or
in any similar office or agency of the United States or in any similar office or
agency of any other country or any political subdivision thereof, and all
reissues, re-examinations, continuations, divisionals, continuations-in-part or
extensions thereof and all associated priority rights.
``Permitted Bank Refinancing'' means any amendment, supplement, refinancing
or replacement of the Working Capital Facility as permitted by the Indentures in
accordance with the definition of ``Working Capital Facility'' therein that is
secured by a lien on the Bank Collateral; provided, however, that a
representative of the lenders thereunder executes a supplement to this Agreement
under which it becomes the ``Agent'' for all purposes hereunder, and agrees to
comply with all the terms hereof.
``Proceeds'' shall have the meaning assigned to the term ``proceeds'' under
the UCC and, in any event, shall include, without limitation, any and all (i)
proceeds of any insurance, indemnity, warranty or guarantee payable to the
Collateral Agent, to the Agent or to the Company from time to time with respect
to any of the Collateral, (ii) payments (in any form whatsoever) made or due and
payable to the Company from time to time in connection with any requisition,
confiscation, condemnation, seizure or forfeiture of all or any part of the
Collateral by any governmental
<PAGE>
-8-
authority (or any person acting under color of a governmental authority), (iii)
products of the Collateral and (iv) other amounts from time to time paid or
payable under or in connection with any of the Collateral.
``Real Property'' shall mean the real property described on Schedule I
hereto and mortgaged to the Collateral Agent pursuant to a certain mortgage to
be recorded as soon as practicable following the execution and delivery of this
Agreement and all other real property mortgaged to the Collateral Agent, and all
improvements and fixtures on and interests in such real property, including,
without limitation, such improvements and fixtures on and interests in such real
property as to which security interests are perfected by UCC-1 financing
statements for fixtures.
``Secured Party'' shall mean any of the Collateral Agent (for the benefit
of the Senior Note Secured Parties) or the Agent (for the benefit of the Banks).
``Securities'' shall mean all present and future securities owned by the
Company, including but not limited to, the capital stock of Alabama
Metallurgicel Corporation, a Washington corporation, held by the Collateral
Agent pursuant to a certain stock pledge agreement dated as of the date hereof
and all dividends, cash, options, warrants, rights, instruments, distributions,
returns of capital, income, profits and other property or interests from time to
time received, receivable or otherwise distributed to the Company in respect of
or in exchange for any or all of the foregoing.
``Trademarks'' shall mean all of the Company's now owned or hereafter
acquired trademarks, trade names, trade styles, service marks, designs and
general intangibles of like nature, and all registrations and recordings
thereof, including, without limitation, applications, registrations and
recordings in the PTO or in any similar office or agency of the United States or
any State thereof, or in any similar office or agency of any other country or
any political subdivision thereof, together with the goodwill associated
therewith, and all reissues, amendments, extensions or renewals thereof.
``UCC'' shall mean the Uniform Commercial Code as in effect in any relevant
jurisdiction.
II. INTERCREDITOR PROVISIONS
------------------------
2.1. Liens. Notwithstanding the date, manner or order of perfection of
the security interests and liens granted to the Agent or the Collateral Agent,
and notwithstanding any provisions of the
<PAGE>
-9-
UCC, or any applicable law or decision or the Working Capital Facility, the
Indentures or any instruments evidencing any Permitted Replacement Financing or
Permitted Bank Refinancing, or whether the Agent or the Collateral Agent holds
possession of all or any part of the Collateral, or the granting provisions of
any mortgage or security instrument or the provisions of any financing
statement, the following, as between the Agent and the Collateral Agent, shall
be the relative rights with respect to the various security interests and liens
of the Agent and the Collateral Agent in the Collateral:
(a) The Agent shall have a first and prior security interest in or
lien on the Bank Primary Collateral and Proceeds thereof to the extent
such Proceeds do not constitute Noteholder Primary Collateral and the
Collateral Agent shall have no lien thereon or security interest therein.
(b) The Collateral Agent shall have a first and prior security
interest in or mortgage lien on the Noteholder Primary Collateral and
Proceeds thereof to the extent such Proceeds do not constitute Bank Primary
Collateral and the Agent shall have no lien thereon or security interest
therein.
2.2. Distribution of Proceeds of Collateral. All Proceeds of
Collateral shall be distributed in accordance with the following procedure:
(a) Proceeds of the Noteholder Collateral shall be applied to the
Noteholder Claim (to be distributed pro rata among the Trustees and any
Permitted Additional Lender to the extent that such Noteholder Collateral
secures Permitted Replacement Financing of such Permitted Additional
Lender, on the basis of the respective outstanding principal amounts of the
Notes and the applicable Permitted Replacement Financing or as may be
otherwise determined pursuant to the Collateral Agency Agreement). After
the Noteholder Claim is paid in full or otherwise satisfied, any remaining
proceeds of the Noteholder Collateral shall be paid over to the Company or
as otherwise required by applicable law.
(b) Proceeds of the Bank Collateral shall be applied to the Bank
Claim. After the Bank Claim is paid in full or otherwise satisfied, any
remaining proceeds of the Bank Collateral shall be paid over to the Company
or as otherwise required by applicable law.
2.3. Enforcement Actions. The Agent agrees not to commence
Enforcement with respect to the Working Capital Facility and/or any security
instrument relating thereto or any instrument
<PAGE>
-10-
evidencing or securing any Permitted Bank Refinancing until an Enforcement
Notice has been given to and received by the Collateral Agent. The Collateral
Agent agrees not to commence Enforcement with respect to the Indentures, the
Notes and/or any security instrument relating thereto or any instrument
evidencing or securing any Permitted Replacement Financing until an Enforcement
Notice has been given to and received by the Agent. The Agent, on the one hand,
and the Collateral Agent, on the other hand, agree that during an Enforcement
Period:
(a) The Agent may, at its option, take any action to accelerate payment
of the Bank Claim and to foreclose or realize upon or enforce any of its
rights with respect to the Bank Collateral, without the prior written
consent of the Collateral Agent.
(b) The Collateral Agent may, at its option, take any action to
accelerate payment of the Noteholder Claim and to foreclose or realize upon
or enforce any of its rights with respect to the Noteholder Collateral,
without the prior written consent of the Agent.
(c) For up to one-hundred and twenty (120) days following the issuance
of an Enforcement Notice, the Agent may (i) enter upon any or all of the
Company's premises, whether leased or owned, without force or process of
law and without obligation to pay rents, royalties or compensation to the
Collateral Agent or the Company (except that the Agent shall pay rents
payable to lessors of leased Real Property used or occupied by the Agent);
and (ii) use the Equipment, Intellectual Property, Noteholder Intangibles
and the Real Property to the extent necessary to complete the manufacture
of the Inventory, collect the Accounts and sell or otherwise dispose of the
Bank Collateral. During such 120-day period and thereafter, as applicable,
if the Agent has entered upon the Company's premises as provided herein,
the Agent shall use its best efforts to complete the manufacture of the
Inventory and sell or otherwise dispose of the Bank Collateral, and the
Collateral Agent and their designees shall have unrestricted access to the
Noteholder Collateral for the purpose of evaluating the Noteholder
Collateral and showing it to potential purchasers.
2.4. Additional Credit Extensions. Subject to any restrictions on
the Company contained in the Indentures, the Working Capital Facility or the
instruments evidencing or securing any Permitted Replacement Financing or any
Permitted Bank Refinancing, any Secured Party shall have the right, without the
consent of the other, to extend credit to the Company in excess of
<PAGE>
-11-
the maximum amounts set forth in the Working Capital Facility, the Indentures or
the instruments evidencing or securing any Permitted Replacement Financing or
any Permitted Bank Refinancing, as applicable, and whether under such agreements
or under any other agreements with the Company, secured by the Bank Collateral
or the Noteholder Collateral, as the case may be, and otherwise having the same
rights as herein contained. Notwithstanding the foregoing, if any such
advance(s) are secured by collateral other than the Collateral, the Secured
Party making such advances shall have no obligation to marshal the assets of the
Company before enforcing its rights in the Collateral hereunder. Each Secured
Party shall use its best efforts to give to the others notice of its intent to
extend credit, but the failure to do so shall not affect the validity of the
extension of credit, create a cause of action against the party failing to give
such notice or create any claim or right on behalf of any third party.
2.5. Notices of Default. The Agent, on the one hand, and the
Collateral Agent, on the other hand, agree to use their best efforts to give to
the other copies of any notice of the occurrence or existence of an Event of
Default or any event of default under the instruments evidencing or securing any
Permitted Replacement Financing or any Permitted Bank Refinancing sent to the
Company and/or AMI simultaneously with the sending of such notice to the Company
and/or AMI, but the failure to do so shall not affect the validity of such
notice or create a cause of action against the Secured Party failing to give
such notice or create any claim or right on behalf of any third party. The
sending of such notice shall not give the recipient the obligation to cure such
Event of Default or event of default.
2.6. Agent for Perfection; Actions With Respect to Collateral.
The Agent and the Collateral Agent hereby appoint each other as agent for
purposes of perfecting their respective security interests in and liens on
Collateral which is of a type such that perfection of a security interest
therein may be accomplished only by possession thereof by the secured party. To
the extent that either the Collateral Agent, on the one hand, or the Agent, on
the other hand, obtains possession of the other's Collateral, the Secured Party
having possession shall notify the other Secured Party of such fact and shall
deliver such Collateral to the Secured Party having the claims in respect
thereof under Section 2.1 upon request of such Secured Party.
2.7. Insurance. Notwithstanding anything to the contrary herein or
in any agreement referred to herein, the Company shall obtain satisfactory
lender's loss payable endorsements naming the Secured Parties, as their
interests may appear, with respect to policies which insure Collateral, or with
such other designation as
<PAGE>
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the Agent, on the one hand, and the Collateral Agent, on the other hand, may
agree. Each of the Agent, on the one hand, and the Collateral Agent, on the
other hand, shall have the sole and exclusive right, as against the other, to
adjust settlement of such insurance policy in the event of any loss to its
Collateral and to exercise the rights provided in any security instrument to
waive or amend insurance requirements or to give consents relating to the
application of any proceeds of insurance, including, without limitation,
consents relating to restoration of Collateral following a casualty. All
proceeds of such policy shall be paid to the Secured Party named in the
applicable loss payable endorsement and having the claim as set forth herein and
disbursed in accordance with the applicable provisions of the relevant governing
documents.
2.8. UCC Notices. In the event that any Secured Party shall be
required by the UCC or any other applicable law to give notice to any other
Secured Party of any intended disposition of Collateral, such notice shall be
given in accordance with Section 3.1 hereof and ten (10) days' notice shall be
deemed to be commercially reasonable.
III. MISCELLANEOUS
-------------
3.1. Notices. All notices hereunder shall be effective upon
receipt, and shall be in writing and sent by certified mail, return receipt
requested, courier service guaranteeing next day delivery, telegram or telex,
to: (a) the Company or AMI, at the address set forth above, Attention:
__________________, (b) the Agent, at the address set forth above, Attention:
_________________________________, or (c) the Collateral Agent, at the address
set forth above, Attention: Corporate Trust Administration or to such other
address or person as any of the parties hereto may designate in writing to the
other parties.
3.2. Contesting Liens or Security Interest. Neither the Agent, on
the one hand, nor the Collateral Agent, on the other hand, shall contest the
validity, perfection or enforceability of any lien or security interest granted
to the other or others and each shall cooperate in the defense of any action
contesting the validity, perfection or enforceability of such liens or security
interests brought by the Company or any third party; provided, however, that
such cooperation shall not include the expenditure of amounts other than de
minimis amounts; and provided, further, that the cooperating Secured Party
shall, upon the reasonable request of the other Secured Party, continue to
cooperate in the defense of any such action notwithstanding that such
cooperation shall include the expenditure of amounts in excess of de minimis
amounts so long as the requesting Secured Party advances to the cooperating
Secured
<PAGE>
-13-
Party sufficient amounts, in cash, to cover any and all costs and expenses
reasonably incurred by the cooperating Secured Party in compliance with such
request. Each Secured Party shall also use its best efforts to notify the other
Secured Party of any change in the location of any of the Collateral or the
business operations of the Company or of any change in law which would make it
necessary or advisable for any other Secured Party to file additional financing
statements in another location as against the Company, but the failure to do so
shall not create a cause of action against the Secured Party failing to give
such notice or create any claim or right on behalf of any third party.
3.3. No Additional Rights for Company Hereunder. If any Secured
Party shall enforce its rights or remedies in violation of the terms of this
agreement, the Company agrees that it shall not raise such violation as a
defense to the enforcement by any other Secured Party under the Working Capital
Facility, the Indentures and/or any instrument evidencing or securing any
Permitted Replacement Financing or Permitted Bank Refinancing, nor assert such
violation as a counterclaim or basis for setoff or recoupment against any
Secured Party.
3.4. Independent Credit Investigations. None of the Agent, the
Collateral Agent, any Permitted Additional Lender and their respective
directors, officers, agents or employees, shall be responsible to the other or
to any other person, firm or corporation, for the Company's solvency, financial
condition or ability to repay the Bank Claim or the Noteholder Claim, or for
statements of the Company, oral or written, or for the validity, sufficiency or
enforceability of the Bank Claim, the Noteholder Claim, the Working Capital
Facility, the Indentures, the instruments evidencing any Permitted Replacement
Financing or Permitted Bank Refinancing or any liens or security interests
granted by the Company in connection therewith. Each Secured Party has entered
into its respective financing agreements with the Company based upon its own
independent investigation, and makes no warranty or representation to the other
Secured Party nor does it rely upon any representation of any other Secured
Party with respect to matters identified or referred to in this Section.
3.5. Limitation of Liability. Except as provided in this
Agreement, neither the Agent, on the one hand, nor the Collateral Agent, on the
other hand, shall have any liability to the other or others except for gross
negligence or willful misconduct.
3.6. Amendments to Financing Arrangements or to This Agreement.
The Agent, on the one hand, and the Collateral Agent, on the other hand, shall
each use their best efforts to notify the other of any amendment or modification
to the Working Capital
<PAGE>
-14-
Facility or any related security instrument or the Indentures or any related
security instrument or the instruments evidencing or securing any Permitted
Replacement Financing or Permitted Bank Refinancing, but the failure to do so
shall not create a cause of action against the party failing to give such notice
or create any claim or right on behalf of any third party. The Agent, on the one
hand, and the Collateral Agent, on the other hand, shall, upon request of the
other or others, provide copies of all such modifications or amendments and
copies of all other documentation relevant to the Collateral except as
prohibited by the Indentures. All modifications or amendments of this agreement
must be in writing and duly executed by an authorized officer of each party to
be binding and enforceable.
3.7. Marshalling of Assets. The Agent hereby waives any and all
rights to have the Noteholder Collateral, or any part thereof, marshalled upon
any foreclosure of any liens of the Collateral Agent. The Collateral Agent
hereby waives any and all rights to have the Bank Collateral, or any part
thereof, marshalled upon any foreclosure of any liens of the Agent.
3.8. Successors and Assigns. This agreement shall be binding upon
and inure to the benefit of the respective successors and assigns of each of the
parties hereto, but does not otherwise create, and shall not be construed as
creating, any rights enforceable by any other person not a party to this
agreement.
3.9. Information. Upon the request of either the Agent, on the one
hand, or the Collateral Agent, on the other hand, each of the Secured Parties
shall use its best efforts to provide the others with all information relating
to the transactions contemplated by the Working Capital Facility and the
Indentures and any Permitted Replacement Financing or Permitted Bank Refinancing
and with any credit or other information with respect to any of the Collateral
except as prohibited by the Indenture.
3.10. Permitted Bank Refinancing. The Company shall have the right
from time to time to effect a Permitted Bank Refinancing. Each of the Agent and
the Collateral Agent shall cooperate in all reasonable respects upon request
made from time to time by the Company to accomplish and document any Permitted
Bank Refinancing. Such cooperation shall include, in the case of the Collateral
Agent, without limitation, (i) the execution and delivery of estoppel letters
and counsel opinions, in customary form, as may be reasonably requested by the
Company or the counterparty to any Permitted Bank Refinancing or any title
insurer in connection therewith, (ii) the execution and delivery of an
appropriate amendment and/or supplement to this Agreement (including, without
limitation, to the extent reasonably required,
<PAGE>
-15-
amendments to the definitions of ``Bank Claim'' and the ``Agent''), and of any
related certificates, notices or other instruments reasonably requested to be
executed in connection with such Permitted Bank Refinancing and (iii) attendance
at meetings related to, and any closing of, a Permitted Bank Refinancing.
Notwithstanding the foregoing, no action requested and no document required to
be executed and delivered hereunder shall adversely affect the Collateral
Agent's substantive rights hereunder. All reasonable expenses incurred by any
Secured Party in complying with the provisions of this Section shall be
reimbursed by the Company.
3.11. Permitted Replacement Financings. The Company shall have the
right from time to time to effect Permitted Replacement Financings and
refinancings thereof. The Agent shall cooperate in all reasonable respects to
accomplish and document any Permitted Replacement Financing requested by the
Company. Such cooperation shall include, without limitation, (i) the execution
and delivery of estoppel letters and counsel opinions in customary form, as may
reasonably be requested by the Company, the Collateral Agent or the counterparty
to any Permitted Replacement Refinancing or any title insurer in connection
therewith, (ii) the execution and delivery of supplements or amendments to this
Agreement and the delivery of any related certificates, notices or other
instruments reasonably requested to be executed in connection with such
Permitted Replacement Financing or refinancing thereof and (iii) attendance at
meetings relating to, and any closing of, a Permitted Replacement Financing.
Notwithstanding the foregoing, no action requested and no document required to
be executed and delivered hereunder shall adversely affect the Agent's
substantive rights hereunder. All reasonable expenses incurred by any Secured
Party in complying with the provisions of this Section shall be reimbursed by
the Company.
3.12. Termination. The Agreement will terminate contemporaneously
with the earlier to occur of (i) the termination of the Collateral Agency
Agreement, when all of the Notes have been repaid in full and all of the
obligations of the Company under the Indentures and its guarantee of the Notes
have terminated or (ii) all of the Company's obligations now or hereafter
evidenced by the Working Capital Facility or the documents evidencing or
securing any Permitted Bank Refinancing shall have been repaid in full and
terminated in accordance with the terms thereof.
3.13. Further Assurances. Each of the parties hereto shall execute
and file all such further documents and instruments, and perform such other
acts, as may be necessary or advisable to effectuate the purposes of this
Agreement.
<PAGE>
-16-
3.14. Inconsistent Provisions. If any provision of this Agreement
shall be inconsistent with, or contrary to, any provision in the Working Capital
Facility, the Indenture, the Notes, the documents evidencing or securing any
Permitted Replacement Financing or Permitted Bank Refinancing or any other
instrument delivered in connection with the transactions contemplated thereby,
the applicable provision in this Agreement shall be controlling and shall
supersede such inconsistent provision to the extent necessary to give full
effect to all provisions contained in this Agreement.
3.15. CONSENT TO JURISDICTION. THE PARTIES HERETO HEREBY CONSENT TO
THE EXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN NEW YORK
COUNTY, STATE OF NEW YORK AND IRREVOCABLY AGREE THAT, SUBJECT TO THE COLLATERAL
AGENT'S OR THE AGENT'S ELECTION, ALL ACTIONS OR PROCEEDINGS RELATING TO THIS
AGREEMENT SHALL BE LITIGATED IN SUCH COURTS. EACH PARTY HERETO ACCEPTS FOR AND
IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, IN ANY SUCH
ACTIONS OR PROCEEDINGS THE EXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND
WAIVES ANY DEFENSE OF FORUM NON CONVENIENS, AND IRREVOCABLY AGREES TO BE BOUND
BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT, WITH ANY
JUDGMENT SUBJECT TO RIGHTS OF APPEAL IN THE JURISDICTIONS SET FORTH ABOVE.
3.16. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW.
3.17. Authority. Each of the parties represents and warrants to all
other parties hereto that the execution, delivery and performance by or on
behalf of such party to this Agreement has been duly authorized by all necessary
action, corporate or otherwise, does not violate any provision of law,
governmental regulation, or any Agreement or instrument by which such party is
bound, and requires no governmental or other consent that has not been obtained
and is not in full force and effect.
3.18. Counterparts. This Agreement may be executed in any number of
counterparts, each counterpart, when so executed and delivered, shall be deemed
to be an original and all of which counterparts, taken together, shall
constitute one and the same Agreement.
3.19. Severability of Provisions. Any provision of this Agreement
that is unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such unenforceability, without invalidating the
remaining provisions
<PAGE>
-17-
hereof or affecting the validity or enforceability of such provision in any
other jurisdiction.
3.20. Headings. The article and section headings used in this
Agreement are for convenience of reference only and shall not affect the
construction of this Agreement.
3.21. Concerning Collateral Agent. Notwithstanding anything to the
contrary set forth herein, no provision of this Agreement shall require the
Collateral Agent to expend or risk its own funds or otherwise incur any
financial liability in the performance of its duties hereunder, or in the
exercise of any of its powers, if it shall have reasonable grounds for believing
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it including, without limitation, liability relating
in any way to Environmental Laws or Hazardous Materials (as such terms are
defined in the mortgage relating to the Real Property).
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this agreement as
an instrument under seal as of the date and year first above written.
____________________________________,
as Agent
By: _______________________________
Name:
Title:
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION,
as Collateral Agent
By: _______________________________
Name:
Title:
<PAGE>
The undersigned hereby acknowledge and agree to the foregoing terms
and provisions. By executing this agreement, the undersigned agree to be bound
by the provisions hereof as they relate to the relative rights of the Collateral
Agent, any Permitted Additional Lender and the Agent as among such parties;
provided, however, that nothing in this agreement shall amend, modify, change or
supersede the respective terms of the Indentures or the Working Capital Facility
or the documents evidencing or securing any Permitted Replacement Financing or
Permitted Bank Refinancing (or any other document to which the undersigned may
be parties) as between each party and the undersigned as a borrower and/or
guarantor, and in the event of any conflict or inconsistency between the terms
of this Agreement and the Indentures or the Working Capital Facility or the
documents evidencing or securing any Permitted Replacement Financing or
Permitted Bank Refinancing (or any such other documents as the case may be), the
terms of the Indentures, the Working Capital Facility or the documents
evidencing or securing any Permitted Replacement Financing or Permitted Bank
Refinancing, as the case may be, shall govern the relationship between each such
party and the undersigned, as borrower and/or guarantor. The undersigned
further agree that the terms of this Agreement shall not give the undersigned
any substantive rights vis-a-vis the holders of the Notes, any Permitted
Additional Lender, the Collateral Agent, the Banks or the Agent.
ACME METALS INCORPORATED
By: _______________________________
Name:
Title:
ACME STEEL COMPANY
By: _______________________________
Name:
Title:
<PAGE>
DISBURSEMENT AGREEMENT
DISBURSEMENT AGREEMENT ("Agreement"), dated as of ___________, 1994,
between Shawmut Bank Connecticut, National Association, a national banking
association, as collateral agent (in such capacity and together with its
successors and assigns in such capacity, the "Collateral Agent") and Acme Metals
Incorporated, a Delaware corporation (together with its successors and assigns,
the "Company").
R E C I T A L S
---------------
A. Pursuant to an indenture, dated as of the date hereof (as amended,
amended and restated, supplemented or otherwise modified from time to time, the
"Note Indenture"), among the Company, its subsidiaries as guarantors, and the
Trustee, as defined therein (the "Note Trustee"), the Company has issued
$_______________ aggregate principal amount of its ___% Senior Secured Notes due
2002 (as amended, amended and restated, supplemented or otherwise modified from
time to time, the "Senior Secured Notes").
B. Pursuant to an indenture, dated as of the date hereof (as amended,
amended and restated, supplemented or otherwise modified from time to time, the
"Discount Note Indenture" and, together with the Note Indenture, the
"Indentures") among the Company, its subsidiaries as guarantors, and the
Trustee, as defined therein (the "Discount Note Trustee" and, together with the
Note Trustee, the "Trustees"), the Company has issued $______ aggregate
principal amount of its ___% Senior Secured Discount Notes due 2004 (as amended,
amended and restated, supplemented of otherwise modified from time to time, the
"Senior Secured Discount Notes" and, together with the Senior Secured Notes, the
"Notes").
C. As security for the Secured Obligations (as hereinafter defined), the
Company is granting to the Collateral Agent hereunder, as collateral agent for
the benefit of the Secured Parties (as hereinafter defined), a security interest
in the proceeds of the Notes and other amounts held in the Disbursement Account
(as hereinafter defined).
D. The parties hereto are entering into this Agreement in order to set
forth the conditions upon which, and the manner in which, funds will be
disbursed from the
<PAGE>
-2-
Disbursement Account and released from the security interest and lien described
above.
A G R E E M E N T
-----------------
In consideration of the foregoing and the mutual covenants herein
contained, and for good and valuable consideration, the parties hereto agree as
follows:
1. Defined Terms. As used in this Agreement the following terms
shall have the meanings specified below:
"Available Funds" means (A) the sum of (i) the Net Proceeds and (ii)
interest earned or dividends paid on the funds in the Disbursement Account
(including holdings of Permitted Investments), less (B) the aggregate
disbursements pursuant to this Agreement.
"Collateral" shall have the meaning given in Section 5(a) hereof.
"Collateral Agency Agreement" means the collateral agency agreement
dated as of the date hereof, among the Collateral Agent, as collateral agent
thereunder, the Trustees, the Company and the Company's subsidiaries, as the
same may be amended, amended and restated, supplemented or otherwise modified
from time to time in accordance with its terms.
"Default" shall have the meaning set forth in the Indentures.
"Disbursement Request" means a request by the Company for disbursement
of funds from the Disbursement Account in substantially the form of Exhibit A
hereto. Each Disbursement Request shall be signed by two officers of the
Company, one of which shall be the Treasurer.
"Disbursement Account" means an account established by the Collateral
Agent and maintained by it at the office of the Collateral Agent or as may be
directed by the Company in accordance with the provisions of Section 2(b)(iv)
hereof at the office of the Disbursement Agent and, in each case, entitled the
"Disbursement Account".
"Disbursement Account Statement" shall have the meaning given in
Section 2(c) hereof.
<PAGE>
-3-
"Disbursement Agent" means the agent of the Collateral Agent which is
unaffiliated with the Company, and which, pursuant to a written direction from
the Company, maintains at its offices the Disbursement Account.
"Event of Default" shall have the meaning set forth in the Indentures.
"Modernization Project" shall have the meaning set forth in the
Indentures.
"Mortgage" shall have the meaning set forth in the Indentures.
"Net Proceeds" means the gross proceeds from the offering of the Notes
minus (i) $ representing the principal and premium of the existing
9.35% Senior Notes of the Company being repaid on the date hereof together with
associated closing expenses, (ii) $ to be paid to Raytheon Engineers
& Contractors Inc. as the initial payment on the Construction Contract and
(iii) underwriting discounts and all other out-of-pocket expenses incurred by
the Company in connection with the offering of the Notes, including, without
limitation, fees and expenses of counsel, accountants and other professionals,
closing costs with respect to the Mortgage, and accompanying title insurance,
printing expenses, registration and qualification fees and the Trustees' fees.
"Permitted Investments" means (i) obligations of or guaranteed by
the U.S. government, its agencies or government-sponsored enterprises; (ii)
short-term commercial bank and corporate obligations that have received the
highest short-term rating from two of the following rating organizations:
Standard & Poor's Corporation ("S&P"), Moody's Investors Service, Inc.
("Moody's"), Duff & Phelps Credit Rating Co., Fitch Investor Service, Inc., IBCA
Ltd. and Thomson Bankwatch Inc.; (iii) money market preferred stocks which, at
the date of acquisition and at all times thereafter, are accorded ratings of at
least AA- or Aa3 by S&P or Moody's, respectively; (iv) tax-exempt obligations
that are accorded the highest short-term rating by S&P or Moody's or a long-term
rating of at least A- or A3 by S&P or Moody's, respectively at the time of
purchase; (v) master repurchase agreements with foreign or domestic banks having
a capital and surplus of not less than $250,000,000 or primary dealers so long
as such agreements are collateralized with obligations of the U.S. government or
its agencies at a ratio of 102%, or with other
<PAGE>
-4-
collateral rated at least AA or Aa2 by S&P or Moody's, respectively, at a ratio
of 103% and, in either case, marked-to-market weekly and so long as such
securities shall be held by a third-party agent; and (vi) guaranteed investment
contracts and/or agreements of a bank, insurance company or other institution
whose unsecured, uninsured and unguaranteed obligations (or claims-paying
ability) have at the time of purchase ratings of AAA or Aaa by S&P or Moody's,
respectively. In no event shall any of the Permitted Investments described in
clauses (i) through (vi) above have a final maturity more than two years from
the date of purchase.
"Person" shall have the meaning set forth in the Indentures.
"Secured Parties" means the Collateral Agent, in its capacity as
such, the Trustees, in their capacities as such, and the holders of the Notes.
"Secured Obligations" means the Company's obligations, liabilities
and indebtedness with respect to the payment and performance in full when due,
whether at stated maturity, by acceleration or otherwise (including, without
limitation, the payment of interest and other amounts which would accrue and
become due but for the filing of a petition in bankruptcy or the operation of
the automatic stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. (S)
362(a)) of (i) all obligations, liabilities and indebtedness now or hereafter
existing under or in respect of each Indenture and the Notes and all other
charges, fees, expenses, commissions, reimbursements, premiums, indemnities and
all other amounts due or to become due under or in connection with the
Indentures and the Notes and (ii) without duplication of amounts described in
clause (i), all obligations, indebtedness and liabilities of the Company now
existing or hereafter arising under or in respect of this Agreement including,
without limitation, with respect to all charges, fees, expenses, commissions,
reimbursements, premiums, indemnities and other payments related to or in
respect of the obligations contained in this Agreement
"Title Insurer" means First American Title Insurance Company, by its
agent Neer North National Title Corporation.
<PAGE>
-5-
2. Disbursement Account; Delivery of Net Proceeds.
(a) Establishment of Disbursement Account. Concurrently with the
execution and delivery hereof, the Collateral Agent shall establish the
Disbursement Account at its offices or, at the direction of the Company in
accordance with the provisions of Section 2(b)(iv) hereof at the offices of the
Disbursement Agent. Subject to the other terms and conditions of this
Agreement, all funds accepted by the Collateral Agent or the Disbursement Agent,
as the case may be, pursuant to this Agreement shall be held in the Disbursement
Account in trust for the benefit of the Secured Parties and shall not be
commingled with any other account. All such funds shall be held in the
Disbursement Account until disbursed in accordance with the terms hereof.
Concurrently with the execution and delivery hereof, the Company shall deliver
to the Collateral Agent (i) a certificate stating the amount of the Net Proceeds
(including good faith estimates of any expenses incurred but not yet paid) and
(ii) all of the Net Proceeds for deposit into the Disbursement Account against
the Collateral Agent's written acknowledgment and receipt of such Net Proceeds.
(b) Investment of Funds in Disbursement Account. Funds deposited in
the Disbursement Account shall be invested and reinvested upon the following
terms and conditions:
(i) Acceptable Investments. To the extent funds are available, all
such funds shall be invested and reinvested by the Collateral Agent in
Permitted Investments in accordance with the Company's written instructions
to the Collateral Agent, which instructions shall specify the type of
Permitted Investments. After an initial investment pursuant to the
Company's written instructions, the Collateral Agent shall reinvest such
funds (and all interest earned and dividends paid thereon) after maturity
of any Permitted Investment initially designated by the Company, in
Permitted Investments in accordance with the Company's written instruction
or, in the absence of any written instructions from the Company, in [a
money market fund registered under the Investment Company Act of 1940, as
amended, the portfolio of which is limited to U.S. government obligations
and obligations of U.S. agencies or instrumentalities]. All such Permitted
Investments shall be assigned to and held in the possession of, or, in the
case of Permitted Investments maintained in book entry form with the
Federal Reserve Bank, transferred to a book entry
<PAGE>
-6-
account in the name of the Collateral Agent for the benefit of the Secured
Parties subject to the other terms and conditions of this Agreement, with
such guarantees as are customary, except that Permitted Investments
maintained in book entry form with the Federal Reserve Bank shall be
transferred to a book entry account in the name of the Collateral Agent at
the Federal Reserve Bank that includes only Permitted Investments held by
the Collateral Agent for its customers and segregated by separate
recordation in the books and records of the Collateral Agent.
(ii) Interest and Dividends. All interest earned and dividends paid
on funds invested in such Permitted Investments shall be deposited in the
Disbursement Account for the benefit of the Secured Parties, subject to the
other terms and conditions of this Agreement.
(iii) Limitation on Collateral Agent's Responsibilities. The
Collateral Agent's sole responsibilities under this Section 2 shall be (A)
to retain possession of certificated Permitted Investments (except,
however, that Collateral Agent may surrender possession to the issuer of
any such Permitted Investment for the purposes of effecting assignment,
crediting interest, or reinvesting or reducing to cash) and to be the
registered or designated owner of Permitted Investments which are not
certificated, (B) to follow the Company's instructions given in accordance
with Section 2(b)(i) hereof, (C) to invest and reinvest funds pursuant to
this Section 2(b) and (D) to use reasonable efforts to reduce to cash such
Permitted Investments as may be required to fund any disbursement in
accordance with Section 3 hereof. In connection with clause (A) above, the
Collateral Agent will maintain continuous possession of certificated
Permitted Investments and money included in the Collateral and will cause
uncertificated Permitted Investments to be registered in the book-entry
system of, and transferred to an account of the Collateral Agent at, the
Federal Reserve Bank.
(iv) Disbursement Agent. The Company may, from time to time, in a
written notice (each, a "Notice") to the Collateral Agent direct that the
Disbursement Account be established at or transferred to the offices of the
Disbursement Agent. In the Notice, the Company shall indicate the identity
of the Disbursement Agent, specifically acknowledging that the Disbursement
Agent will
<PAGE>
-7-
have the benefits provided for in this clause (iv) and shall certify that
the Disbursement Agent is not an affiliate of the Company [and otherwise
conform to the requirements set forth in the definition of "Disbursement
Agent"]. The Notice shall be accompanied by (i) such instruments and
documents as shall be necessary or appropriate in connection with the
establishment of the Disbursement Account with the Disbursement Agent and
the transfer of all funds for deposit therein in order to maintain, protect
and preserve the security interest in and lien on the Collateral granted to
the Collateral Agent hereunder and (ii) an opinion of counsel confirming
that all action in connection with the establishment of the Disbursement
Account with the Disbursement Agent and the transfer of all funds for
deposit therein has been taken as is necessary to maintain, protect and
preserve the security interest in and lien on the Collateral granted to the
Collateral Agent hereunder. Upon receipt of the Notice and the
instruments, documents and opinion contemplated in the immediately
preceding sentence, the Collateral Agent shall establish the Disbursement
Account with the Disbursement Agent, as agent for the Collateral Agent, and
transfer all funds on deposit or delivered to the Collateral Agent for
deposit, as the case may be, in the Disbursement Account to the
Disbursement Agent. The Disbursement Agent shall thereafter receive copies
of all instructions and notices sent by the Company and/or the Collateral
Agent under this Agreement. After its appointment and until the Collateral
Agent has received a Notice from the Company requesting a retransfer of the
Disbursement Account to the Collateral Agent or another Disbursement Agent,
the Disbursement Agent shall be entitled to the rights and protections
afforded the Collateral Agent by this Agreement under Sections 2(b)(iii),
3(d), 4 and 7(a); provided, however, that the benefits of Sections 4 and
7(a) (and any claims thereunder existing at the time) shall survive the
retransfer of such Disbursement Account. Other than with respect to
Section 2(b)(i) where the Disbursement Agent may act upon the written
instructions of the Company, the Disbursement Agent shall act solely on the
written instructions of the Collateral Agent and shall be entitled to rely
on such written instructions without any responsibility to independently
verify any information or request contained therein. The Company and the
Collateral Agent shall have no claim against the Disbursement Agent for any
action taken by the Disbursement Agent consistent with such written
instructions.
<PAGE>
-8-
(c) Disbursement Account Statement. Each month the Collateral Agent
shall deliver or cause to be delivered to the Company a statement signed by the
Collateral Agent or the Disbursement Agent, as the case may be, substantially in
the form attached hereto as Exhibit B completed with reasonable particularity
(such statement, the "Disbursement Account Statement"). The Company irrevocably
instructs the Collateral Agent that on the first date upon which the balance in
the Disbursement Account (including the holdings of all Permitted Investments)
is reduced to zero, the Collateral Agent shall deliver or cause to be delivered
to the Company and to the Trustees a notice stating that the balance in the
Disbursement Account has been reduced to zero.
3. Disbursements.
(a) Review of Disbursement Requests; Disbursements. The Company shall
have the right from time to time during the term of this Agreement (but no more
than two times per month, exclusive of resubmittals made pursuant to the final
sentence of this Section 3(a), to submit to the Collateral Agent a completed
Disbursement Request. The Collateral Agent shall approve such Disbursement
Request if the Company has satisfied the applicable conditions set forth in
Section 3(c) hereof. Provided such Disbursement Request is not disapproved, the
Collateral Agent, within five (5) business days following submission of such
Disbursement Request, shall disburse or cause to be disbursed the funds
requested in such Disbursement Request in the manner requested by the Company in
a writing accompanying the Disbursement Request or by wire transfer of
immediately available funds to the account of the Company if not otherwise so
indicated. The Collateral Agent shall notify the Company as soon as reasonably
possible (but not later than two (2) business days from the date of receipt of
the Disbursement Request) if any Disbursement Request is disapproved and the
reason(s) therefor, but the failure to so notify the Company shall not affect
any of the rights of the Trustees, the Collateral Agent or the holders of the
Notes. The Company may thereupon resubmit the Disbursement Request with
appropriate changes.
(b) Commercially Reasonable Efforts. The Collateral Agent shall
exercise commercially reasonable efforts and utilize commercially prudent
practices in the performance of its duties hereunder.
<PAGE>
-9-
(c) Conditions Precedent to Disbursement. The disbursement of funds
from the Disbursement Account to the Company pursuant to each and every
Disbursement Request shall be subject to the satisfaction of each of the
following conditions.
(i) The Company shall have submitted a Disbursement Request as
provided for herein to the Collateral Agent and the Disbursement Request on
its face shall have been completed as to the information required therein
and the required attachments as stated in the Disbursement Request, shall
have been attached thereto.
(ii) The Collateral Agent shall not have received any written notice
from the Trustees or the Company that any Default or Event of Default has
occurred and is continuing.
(iii) To the extent the Disbursement Request is for funds as
certified under paragraph 1(a) of the form of such Disbursement Request,
the Collateral Agent shall have received a commitment from the Title
Insurer, attached to the Disbursement Request, evidencing the Title
Insurer's unconditional commitment to issue an endorsement to Title
Insurance Policy No. _____ insuring the continuing priority of the lien of
the Mortgage insured thereunder as security for each advance of funds from
the Disbursement Account.
In the event that the Collateral Agent has received a notice from
either or both of the Trustees of a Default or an Event of Default pursuant to
clause (ii) above, the Collateral Agent shall not disburse or cause to be
disbursed any additional funds from the Disbursement Account until notified in
writing by the Trustee or Trustees, as the case may be, that such disbursements
may continue.
Upon each submission of a Disbursement Request, the Company will be
deemed to have represented, warranted and agreed as set forth in such
Disbursement Request.
(d) Limitation of Collateral Agent's Liability; Responsibilities of
Collateral Agent.
(i) The Collateral Agent's responsibility and liability under this
Agreement shall be limited as follows: (A) the Collateral Agent does not
represent, warrant or guaranty to the holders of the Notes from time to
time the performance of the Company or any of the Company's
<PAGE>
-10-
contracting counterparties; (B) the Collateral Agent shall have no
responsibility to the Company or the holders of the Notes from time to time
as a consequence of performance by the Collateral Agent hereunder, except
for any gross negligence or wilful misconduct of the Collateral Agent; (C)
the Company shall remain solely responsible for all aspects of the
Company's business and conduct; and (D) the Collateral Agent is not
obligated to supervise, inspect or inform the Company or any third party of
any aspect of the Modernization Project or any other matter referred to
above.
(ii) No implied covenants or obligations shall be inferred from this
Agreement against the Collateral Agent, nor shall the Collateral Agent be
bound by the provisions of any agreement beyond the specific terms hereof.
Specifically and without limiting the foregoing, the Collateral Agent shall
in no event have any liability in connection with its investment,
reinvestment or liquidation, in good faith and in accordance with the terms
hereof, of any funds or Permitted Investments held by it hereunder
including, without limitation, any liability for any delay not resulting
from gross negligence or willful misconduct in such investment,
reinvestment or liquidation, or for any loss of income incident to any such
delay.
(iii) The Collateral Agent shall be entitled to rely upon any
judicial order or judgment, upon any written opinion of counsel or upon any
certification, instruction, notice, or other writing delivered to it by the
Company or either of the Trustees in compliance with the provisions of this
Agreement without being required to determine the authenticity or the
correctness of any fact stated therein or the propriety or validity of
service thereof. The Collateral Agent may act in reliance upon any
instrument complying with the provisions of this Agreement or signature
believed by it to be genuine and may assume that any Person purporting to
give notice or receipt or advice or make any statement or execute any
documents in connection with the provisions hereof has been duly authorized
to do so.
(iv) At any time the Collateral Agent may request in writing an
instruction in writing from the Company, and may at its own option include
in such request the course of action it proposes to take and the date on
which it proposes to act, regarding any matter arising in connection with
its duties and obligations hereunder; provided, however, that
<PAGE>
-11-
the Collateral Agent shall state in such request that it believes in good
faith that such proposed course of action is consistent with another,
identified provision of this Agreement. The Collateral Agent shall not be
liable to the Company for acting without the Company's consent in
accordance with such a proposal on or after the date specified therein,
provided that the specified date shall be at least two (2) business days
after the Company receives the Collateral Agent's request for instructions
and its proposed course of action, and provided, further, that prior to so
acting, the Collateral Agent has not received the written instructions
requested.
(v) The Collateral Agent may act pursuant to the written advice of
counsel chosen by it with respect to any matter relating to this Agreement
and (subject to Section 3(d)(ii)) shall not be liable for any action taken
or omitted in accordance with such advice.
(vi) The Collateral Agent shall not be called upon to advise any party
as to selling or retaining, or taking or refraining from taking any action
with respect to, any securities or other property deposited hereunder.
(vii) In the event of any ambiguity in the provisions of this
Agreement with respect to any funds or property deposited hereunder, the
Collateral Agent shall be entitled, at its sole option, to refuse to comply
with any and all claims, demands or instructions with respect to such
property or funds, and the Collateral Agent shall not be or become liable
for its failure or refusal to comply with conflicting claims, demands or
instructions. The Collateral Agent shall be entitled to refuse to act
until, at its sole option, either any conflicting or adverse claims or
demands shall have been finally determined by a court of competent
jurisdiction or settled by agreement between the conflicting claimants as
evidenced in a writing, satisfactory to the Collateral Agent, or the
Collateral Agent shall have received security or an indemnity satisfactory
to the Collateral Agent sufficient to save the Collateral Agent harmless
from and against any and all loss, cost, liability or expense which the
Collateral Agent may incur by reason of its acting. The Collateral Agent
may in addition elect in its sole option to commence an interpleader action
or seek other judicial relief or orders as the Collateral Agent may deem
necessary.
<PAGE>
-12-
(viii) The Company hereby grants to the Collateral Agent a lien on the
property in the Disbursement Account such that, in the event that any and
all charges payable under Section 2 and Section 4 shall not be timely paid
by the Company, the Collateral Agent shall have the right to pay itself
from the property in the Disbursement Account the full amount owed,
provided that written notice of the Collateral Agent's intent to proceed
under this clause be given at least five business days in advance of such
action.
(ix) No provision of this Agreement shall require the Collateral Agent
to expend or risk its own funds or otherwise incur any financial liability
in the performance of any of its duties hereunder (including, without
limitation, liability relating in any way to Environmental Laws and/or
Hazardous Materials, as such terms are defined in the Mortgage).
4. Indemnity.
(a) Indemnity. The Company agrees to indemnify, pay and hold harmless
the Collateral Agent and the officers, directors, employees, agents and
affiliates of the Collateral Agent (collectively, the "Indemnitees") from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, claims, costs (including, without limitation,
settlement costs and claims for strict liability in tort and environmental or
hazardous waste claims of any nature), expenses or disbursements of any kind or
nature whatsoever (including, without limitation, the fees and disbursements of
counsel for such Indemnitees in connection with any investigative,
administrative or judicial proceeding commenced or threatened, whether or not
such Indemnitee shall be designated a party thereto), which may be imposed on,
incurred by, or asserted against such Indemnitee, in any manner relating to or
arising out of this Agreement, the Collateral Agency Agreement, the Indentures
or the Notes (including, without limitation, any misrepresentation by the
Company in this Agreement) (the "Indemnified Liabilities"); provided, however,
that the Company shall have no obligation to an Indemnitee hereunder with
respect to Indemnified Liabilities if it has been determined by a final decision
(after all appeals and the expiration of time to appeal) by a court of competent
jurisdiction that such Indemnified Liability arose from the gross negligence or
willful misconduct of such Indemnitee, or, in the case of environmental laws,
the willful violation of such laws. To the extent that the
<PAGE>
-13-
undertaking to indemnify, pay and hold harmless set forth in the preceding
sentence may be unenforceable because it is violative of any law or public
policy, the Company shall contribute the maximum portion which it is permitted
to pay and satisfy under applicable law, to the payment and satisfaction of all
Indemnified Liabilities incurred by the Indemnities or any of them.
(b) Survival. The obligations of the Company contained in this
Section 4 shall survive the termination of this Agreement and the discharge of
the Company's other obligations under this Agreement.
(c) Reimbursement. Any amounts paid by any Indemnitee as to which
such Indemnitee has the right to reimbursement shall constitute Secured
Obligations secured by the Collateral.
5. Grant of Security Interest; Instructions to Collateral Agent.
(a) The Company hereby irrevocably grants a first priority security
interest in, pledges, assigns and sets over to the Collateral Agent, as
collateral agent for the Secured Parties, all of its respective right, title and
interest in, to and under the Disbursement Account, all funds held therein and
all Permitted Investments held by (or otherwise maintained in the name of) the
Collateral Agent pursuant to Section 2 hereof (collectively, the "Collateral"),
in order to secure the prompt payment and performance of the Secured
Obligations. The Company shall take all actions necessary to insure the
continuation of a first priority security interest in the Collateral in favor of
the Collateral Agent, as collateral agent for the the Secured Parties, in order
to secure all Secured Obligations.
(b) In addition to the rights provided under Section 5(c)(ii) hereof,
upon an Event of Default and for so long as such Event of Default continues the
Collateral Agent may exercise in respect of the Collateral, in addition to other
rights and remedies provided for herein or otherwise available to it, all the
rights and remedies of a secured party under the New York Uniform Commercial
Code ("UCC") or other applicable law, and the Collateral Agent may also upon
obtaining possession of the Collateral as set forth herein, without notice to
the Company except as specified below, sell the Collateral or any part thereof
in one or more parcels at public or private sale, at any exchange, broker's
board or at any of the Collateral Agent's
<PAGE>
-14-
offices or elsewhere, for cash, on credit or for future delivery, and upon such
other terms as the Collateral Agent may deem commercially reasonable. The
Company acknowledges and agrees that any such private sale may result in prices
and other terms less favorable to the seller than if such sale were a public
sale. The Company agrees that, to the extent notice of sale shall be required
by law, at least ten (10) days' notice to the Company of the time and place of
any public sale or the time after which any private sale is to be made shall
constitute reasonable notification. The Collateral Agent shall not be obligated
to make any sale regardless of notice of sale having been given. The Collateral
Agent may adjourn any public or private sale from time to time by announcement
at the time and place fixed therefor, and such sale may, without further notice,
be made at the time and place to which it was so adjourned.
(c) The Company hereby irrevocably instructs the Collateral Agent to,
and the Collateral Agent will (i) take all actions necessary to (A) maintain
dominion and control over funds in the Disbursement Account sufficient for the
Collateral Agent to enjoy a continuous first priority security interest therein
under the law of the State of New York, (B) maintain possession of all
certificated Permitted Investments purchased hereunder that are physically
possessed by the Collateral Agent in order for the Collateral Agent to enjoy a
continuing perfected first priority security interest therein (the Company
hereby agreeing that in the event any certificated Permitted Investments are in
the possession of the Company or a third party, the Company shall deliver or
cause to be delivered promptly all such certificates to the Collateral Agent)
and (C) cause the Collateral Agent to enjoy a continuous perfected first
priority security interest under the UCC and any applicable law of the State of
New York in all Permitted Investments purchased hereunder that are not
certificated all as instructed in an opinion of counsel provided to the
Collateral Agent by the Company; and (ii) upon receipt of notice from either of
the Trustees of the acceleration of the maturity of the Senior Secured Notes
and/or the Senior Secured Discount Notes, as the case may be, or the failure by
the Company to pay principal at maturity or upon redemption or mandatory
repurchase of all or any portion of the Senior Secured Notes and/or the Senior
Secured Discount Notes, and direction from either of the Trustees, as promptly
as practicable disburse all funds held in the Disbursement Account to the
Collateral Agent (in its capacity as such under the Collateral Agency Agreement)
and transfer title to all Permitted Investments held by the Collateral Agent
hereunder to the Collateral Agent (in its
<PAGE>
-15-
capacity as such under the Collateral Agency Agreement), in each case for the
benefit of Secured Parties. The lien and security interest provided for by this
Section 5(c) shall automatically terminate and cease as to, and shall not extend
or apply to, and the Collateral Agent shall have no security interest in, any
funds disbursed by the Collateral Agent to the Company.
(d) Any proceeds collected by the Collateral Agent pursuant to Section
5(b) and/or 5(c) shall be applied in the following order:
First: To the payment of all amounts due the Collateral Agent, in its
capacity as such under this Agreement; and
Second: To the Collateral Agent, in its capacity as collateral agent
under the Collateral Agency Agreement for payment of the other Secured
Obligations in the priority and pursuant to the terms set forth in the
Collateral Agency Agreement.
(e) Upon demand, the Company will execute and deliver to the
Collateral Agent such instruments and documents as are necessary or advisable to
confirm or perfect the rights of the Collateral Agent under this Agreement and
the Collateral Agent's interest in the Collateral. Subject to the terms and
conditions of the Collateral Agency Agreement and the Indentures, the Collateral
Agent will take all necessary action to preserve and protect the security
interest created hereby as a lien and encumbrance upon the Collateral.
(f) If the Company shall fail to do any act or thing that it has
covenanted to do hereunder or if any warranty on the part of the Company
contained herein shall be breached, the Collateral Agent or any Secured Party
may (but shall not be obligated to) do the same or cause it to be done or remedy
any such breach, and may reasonably expend funds for such purpose. Any and all
amounts so expended by the Collateral Agent or such Secured Party shall be paid
by the Company promptly upon demand therefor, with interest at the Default Rate
(as defined in the Indentures) during the period from and including the date on
which such funds were so expanded to the date of repayment. The Company's
obligations under this paragraph shall survive the termination of this Agreement
and the discharge of the Company's other obligations under this Agreement. The
Company hereby appoints the Collateral Agent as its attorney-in-fact with an
<PAGE>
-16-
interest, with full authority in the place and stead of the Company and in the
name of the Company, or otherwise, from time to time in the Collateral Agent's
discretion, to take any action and to execute any instrument consistent with the
terms of this Agreement, the Collateral Agency Agreement, the Indentures and the
Notes which the Collateral Agent may deem necessary or advisable to accomplish
the purposes of this Agreement. The foregoing grant of authority is a power of
attorney coupled with an interest and such appointment shall be irrevocable for
the term of this Agreement. The Company hereby ratifies all that such attorney
shall lawfully do or cause to be done by virtue and in accordance with the terms
hereof.
6. Termination. This Agreement shall terminate automatically ten
(10) days following disbursement of all funds remaining in the Disbursement
Account (including Permitted Investments), unless sooner terminated by agreement
of the parties hereto; provided, however, that the obligations of the Company
under Sections 4, 5(f) and 7(a) (and any existing claims hereunder) shall
survive termination of this Agreement or the resignation of the Collateral
Agent.
7. Miscellaneous.
(a) Expenses. The Company will upon demand pay to the Collateral
Agent the amount of any and all expenses, including the reasonable fees and
expenses of its counsel and the allocated fees and expenses of staff counsel and
the fees and expenses of any experts and agents (including, without limitation,
the Disbursement Agent) which the Collateral Agent may incur in connection with
(i) the collection of the Secured Obligations, (ii) the enforcement and
administration of this Agreement, (iii) the custody or preservation of, or the
sale of, collection from, or other realization upon, any of the Collateral, (iv)
the exercise or enforcement of any of the rights of Collateral Agent hereunder
or (v) the failure by the Company to perform or observe any of the provisions
hereof. All amounts payable by the Company under this the Section 7 (a) shall
be due upon demand and shall be part of the Secured Obligations. The Company's
obligations under this paragraph shall survive the termination of this
Agreement and the discharge of the Company's other obligations hereunder.
<PAGE>
-17-
(b) No Waiver; Discontinuance of Proceeding.
(i) No Waiver. No failure on the part of Collateral Agent to
exercise, no course of dealing with respect to, and no delay in exercising, any
right, power or remedy hereunder shall operate as a waiver thereof; nor shall
any single or partial exercise by the Collateral Agent of any right, power or
remedy hereunder preclude any other or further exercise thereof or the exercise
of any other right, power or remedy. The remedies herein provided are to the
fullest extent permitted by the law cumulative and are not exclusive of any
remedies provided by law.
(ii) Discontinuance of Proceeding. In the event the Collateral Agent
shall have instituted any proceeding to enforce any right, power or remedy under
this Agreement by foreclosure, sale, entry or otherwise, and such proceeding
shall have been discontinued or abandoned for any reason or shall have been
determined adversely to the Collateral Agent, then and in every such case the
Company, the Collateral Agent and each Secured Party shall be restored to their
respective former positions and rights hereunder with respect to the Collateral,
and all rights, remedies and powers of the Collateral Agent and the Secured
Parties shall continue as if no such proceeding had been instituted.
(c) Modification in Writing. No amendment, modification, supplement,
termination or waiver of or to any provision of this Agreement, nor consent to
any departure by the Company therefrom, shall be effective unless the same shall
be done in accordance with the terms of the Collateral Agency Agreement and
unless in writing and signed by Collateral Agent and the Company. Any
amendment, modification or supplement of or to any provision of this Agreement,
any waiver of any provision of this Agreement, and any consent to any departure
by the Company from the terms of any provision of this Agreement, shall be
effective only in the specific instance and for the specific purpose for which
made or given. Except where notice is specifically required by this Agreement
or the Indentures, no notice to or demand on the Company in any case shall
entitle the Company to any other or further notice or demand in similar or other
circumstances.
(d) Notices. Unless otherwise provided herein, any notice or other
communication herein shall be given in the manner set forth in the Collateral
Agency Agreement and at the addresses
<PAGE>
-18-
set forth in the Collateral Agency Agreement, or at such other address as shall
be designated by any party in a written notice to the other party.
(e) Continuing Security Interest; Assignment. This Agreement shall
create a continuing security interest in the Collateral and shall (i) be binding
upon the the Company, its successors and assigns, and (ii) inure, together with
the rights and remedies of the Collateral Agent hereunder, to the benefit of the
Collateral Agent and the other Secured Parties and each of their respective
successors, transferees and assigns; no other persons (including, without
limitation, any other creditor of the Company) shall have any interest herein or
any right or benefit with respect hereto other than the Disbursement Agent, if
any. Without limiting the generality of the foregoing clause (ii), any holder
of the Notes may assign or otherwise transfer any Note held by it secured by
this Agreement to any other Person, and such other Person shall thereupon become
vested with all the benefits in respect thereof granted to such herein, herein
or otherwise, subject however, to the applicable provisions of the Notes and the
Indentures.
(f) GOVERNING LAW; TERMS. THIS AGREEMENT SHALL BE GOVERNED BY, AND
SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.
(g) CONSENT TO JURISDICTION AND SERVICE OF PROCESS. ALL JUDICIAL
PROCEEDINGS BROUGHT AGAINST THE COMPANY WITH RESPECT TO THIS AGREEMENT MAY BE
BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE BOROUGH
OF MANHATTAN, STATE OF NEW YORK AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT
THE COMPANY ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY
AND UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS, AND
IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION
WITH THIS AGREEMENT. THE COMPANY DESIGNATES AND APPOINTS CT CORPORATION SYSTEM,
WITH AN ADDRESS AT 1633 BROADWAY, NEW YORK, NEW YORK 10019 AND SUCH OTHER
PERSONS AS MAY HEREAFTER BE SELECTED BY THE COMPANY IRREVOCABLY AGREEING IN
WRITING TO SO SERVE, AS ITS AGENT TO RECEIVE ON ITS BEHALF, SERVICE OF ALL
PROCESS IN ANY SUCH PROCEEDINGS IN ANY SUCH COURT, SUCH SERVICE BEING HEREBY
ACKNOWLEDGED BY THE COMPANY TO BE EFFECTIVE AND BINDING SERVICE IN EVERY
RESPECT. A COPY OF SUCH PROCESS SO SERVED SHALL BE MAILED BY REGISTERED MAIL TO
THE COMPANY AT ITS ADDRESS PROVIDED FOR IN PARAGRAPH (d) ABOVE EXCEPT THAT
UNLESS OTHERWISE PROVIDED BY APPLICABLE LAW, ANY FAILURE TO
<PAGE>
-19-
MAIL SUCH COPY SHALL NOT AFFECT THE VALIDITY OF SERVICE OF PROCESS. IF ANY
AGENT APPOINTED BY THE COMPANY REFUSES TO RECEIVE AND FORWARD SUCH SERVICE, THE
COMPANY HEREBY AGREES THAT SERVICE UPON IT BY MAIL SHALL CONSTITUTE SUFFICIENT
NOTICE. NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS IN ANY OTHER
MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF THE COLLATERAL AGENT TO
BRING PROCEEDINGS AGAINST THE COMPANY IN THE COURTS OF ANY OTHER JURISDICTION.
(h) Severability of Provisions. Any provision of this Agreement which
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.
(i) Execution in Counterparts. This Agreement and any amendments,
waivers, consents or supplements hereto may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed to be an original, but all
such counterparts together shall constitute one and the same Agreement.
(j) Headings. The Section and subsection headings used in this
Agreement are for convenience of reference only and shall not affect the
construction of this Agreement.
(k) Obligations Absolute. All obligations of the Company hereunder
shall be absolute and unconditional irrespective of:
(i) any bankruptcy, insolvency, reorganization, arrangement,
readjustment, composition, liquidation or the like of the Company;
(ii) any lack of validity or enforceability of any Note, or any other
agreement or instrument relating thereto;
(iii) any change in the time, manner or place of payment of, or in
any other term of, all or any of the Secured Obligations, or any other
amendment or waiver of or any consent to any departure from either of the
Indentures or the Notes, or any other agreement or instrument relating
thereto;
<PAGE>
-20-
(iv) any exchange, release or non-perfection of any other collateral,
or any release or amendment or waiver of or consent to any departure from
any guarantee, for all or any of the Secured Obligations;
(v) any exercise or non-exercise, or any waiver of any right, remedy,
power or privilege under or in respect of this Agreement, either Indenture
or the Notes except as specifically set forth in a waiver granted pursuant
to the provisions of paragraph (c) of this Section 7; or
(vi) any other circumstances which might otherwise constitute a
defense available to, or a discharge of, the Company.
(1) Substitution of Collateral Agent or Resignation. The Trustees
shall have the right, upon the expiration of thirty (30) days following delivery
of written notice of substitution to the Collateral Agent and the Company, to
cause the Collateral Agent to be relieved of its duties hereunder and to select
a substitute Collateral Agent to serve hereunder. The Collateral Agent may
resign at any time upon 30 days' written notice to all parties hereto. Such
resignation shall take effect upon receipt by the Collateral Agent of an
instrument of acceptance executed by a successor collateral agent and consented
to by the other parties hereto. Upon selection of such substitute Collateral
Agent, the Trustees, the Company and the substitute Collateral Agent shall enter
into an agreement substantially identical to this Agreement and, thereafter, the
original Collateral Agent shall be relieved of its duties and obligations to
perform hereunder, except that the Collateral Agent shall transfer to the
substitute Collateral Agent upon request therefor copies of all books, records
and other documents in the Collateral Agent's possession relating to this
Agreement and all funds in the Disbursement Account.
<PAGE>
-21-
IN WITNESS WHEREOF, the parties have executed and delivered this
Disbursement Agreement as of the day first above written.
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION,
as Collateral Agent
By: ______________________
Name:
Title:
ACME METALS INCORPORATED
By: ______________________
Name:
Title:
<PAGE>
EXHIBIT A TO DISBURSEMENT AGREEMENT
Form of Disbursement Request
----------------------------
[Letterhead of the Company]
[Date]
Re: Disbursement Request No. ____
[indicate whether revised]
Ladies and Gentlemen:
We refer to the Disbursement Agreement ("Agreement") dated as of
_____________, 1994 between you ("Collateral Agent") and Acme Metals
Incorporated, a Delaware corporation (the "Company"). Capitalized terms used
herein shall have the meanings assigned to such terms in the Agreement.
This letter constitutes a Disbursement Request under the Agreement.
The undersigned Company hereby requests a disbursement of funds
contained in the Disbursement Account in the amount of $ ___.
In connection with the requested disbursement, the undersigned Company
hereby represents, warrants, certifies and agrees as follows:
1. (a) Funds comprising this Disbursement Request will be promptly,
in accordance with prudent commercial practice, used for the payment of
amounts due but not yet paid to contractors, materialmen or other parties
for services rendered or supplies delivered in connection with the
construction of the Modernization Project or for the reimbursement of
payments previously made to such contractors, materialmen or other parties;
or
(b) Funds comprising the Disbursement Request will be promptly paid
to the Note Trustee for the payment of interest on the ___% Senior Secured
Notes due 2002, which scheduled interest payment is to be made no more than
5 business days from the date hereof; or
(c) A Change of Control has occurred; pursuant and in accordance with
Section 4.15(b) of each of the Indentures notices have been sent to the
holders of the Notes; the
<PAGE>
-2-
Repurchase Date is within 5 business days of the date hereof; the Company
reasonably believes that the amount requested in this Disbursement Request
does not exceed the amount necessary to repurchase Notes pursuant to the
terms of such sections 4.15; and funds comprising this Disbursement Request
will be promptly (i) paid to the Trustees for the repurchase of the Notes
pursuant to Section 4.15(d) of each of the Indentures or (ii) returned to
the Collateral Agent for deposit in the Disbursement Account.
2. All prior disbursements from the Disbursement Account have been,
or will be promptly; (a) in accordance with prudent commercial practice;
expended for the payment of amounts due but not yet paid to contractors,
materialmen or other parties for services rendered or supplies delivered in
connection with the construction of the Modernization Project or for the
reimbursement of payments previously made to such contractors, materialmen
or other parties or (b) used to pay interest on the Notes or (c) used to
repurchase Notes following a Change of Control.
3. It has taken all actions deemed necessary or advisable to be taken
by the Company to cause the Collateral Agent to continue to have a first
priority perfected security interest in the Collateral.
4. No Event of Default has occurred and is continuing and, to the
best of the Company's knowledge, no event, omission or failure of a
condition has occurred which would constitute an Event of Default after
notice or lapse of time or both.
5. The construction performed as of the date hereof is in substantial
accordance with the plans for the Modernization Project and the
disbursement is appropriate in light of the percentage of construction
completed and the amount of stored materials.
6. Appropriate evidence of lien releases or title insurance
endorsements have been received for all work, materials and/or services
performed and/or delivered in connection with the Modernization Project.
To the extent required, the commitment from the Title Insurer required by
Section 3(c)(iii) of the Disbursement Agreement are attached hereto.
<PAGE>
-3-
The foregoing representations, warranties and certifications are true
and correct and the Collateral Agent is entitled to rely on the foregoing in
disbursing funds relating to this Disbursement Request.
ACME METALS INCORPORATED
By: ___________________________
Name:
Title:
I certify that to the best of my knowledge after due inquiry the foregoing
representations, warranties and certifications are true and correct.
___________________________
Name:
Title: Treasurer
<PAGE>
UNITED STATES
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)
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION
------------------------------------------------------------------------
(Exact name of trustee as specified in its charter)
Not applicable 06-0850628
- -------------------------- -------------------
(State of incorporation if (I.R.S. Employer
not a national bank) Identification No.)
777 Main Street, Hartford, Connecticut 06115
------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Patricia Beaudry, 777 Main Street, Hartford, CT (203) 728-2065
------------------------------------------------------------------------
(Name, address and telephone number of agent for service)
------------------------------------------------------------------------
(Exact name of obligor as specified in its charter)
Delaware 36-3802419
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
13500 South Perry Avenue, Riverdale, Illinois 60627
------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Senior Secured Notes due 2002
Senior Secured Notes due 2004
------------------------------------------------------------------------
(Title of the indenture securities)
<PAGE>
Item 1. General Information
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to
which it is subject:
The Comptroller of the Currency,
Washington, D.C.
Federal Reserve Bank of Boston
Boston, Massachusetts
Federal Deposit Insurance Corporation
Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers:
The trustee is so authorized.
Item 2. Affiliations with obligor. If the obligor is an affiliate of the
trustee, describe each such affiliation.
None with respect to the trustee; none with respect to Hartford
National Corporation, Shawmut Corporation, Shawmut Service Corporation and
Shawmut National Corporation (the "affiliates").
Item 16. List of exhibits. List below all exhibits filed as a part of
this statement of eligibility and qualification.
1. A copy of the Articles of Association and By-Laws of the
trustee as now in effect.
2. A copy of the Certificate of Authority of the trustee to
do Business.
3. A copy of the Certification of Fiduciary Powers of the
trustee.
4. A copy of the By-laws of the trustee are provided in
Exhibit 1 referenced above.
5. Consent of the trustee required by Section 321(b) of the
Act.
6. A copy of the latest Consolidated Reports of Condition
and Income of the trustee, published pursuant to law or the requirements
of its supervising or examining authority.
-2-
<PAGE>
NOTES
Inasmuch as this Form T-1 is filed prior to the ascertainment by the
trustee of all facts on which to base its answer to Item 2, the answer to said
Item is based upon incomplete information. Said Item may, however, be considered
correct unless amended by an amendment to this Form T-1.
-3-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the
trustee, Shawmut Bank Connecticut, National Association, a national banking
association organized and existing under the laws of the United States, 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
Hartford, and State of Connecticut, on the ____ day of July, 1994.
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION
Trustee
By /s/ Susan Freedman
------------------
Susan Freedman
Vice President
-4-
<PAGE>
ARTICLES OF ASSOCIATION
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION
FIRST. The title of this Association, which shall carry on the business of
banking under the laws of the United States, shall be "Shawmut Bank Connecticut,
National Association".
SECOND. The main office of the Association shall be in Hartford, County of
Hartford, State of Connecticut. The general business of the Association shall be
conducted at its main office and its branches.
THIRD. The board of directors of this Association shall consist of not less than
five (5) nor more than twenty-five (25) shareholders, the exact number of
directors within such minimum and maximum limits to be fixed and determined from
time to time by resolution of a majority of the full board of directors or by
resolution of the shareholders at any annual or special meeting thereof. Unless
otherwise provided by the laws of the United States, any vacancy in the board of
directors for any reason, including an increase in the number thereof, may be
filled by action of the board of directors.
FOURTH. The annual meeting of the shareholders for the election of directors and
the transaction of whatever other business may be brought before said meeting
shall be held at the main office or such other place as the board of directors
may designate, on the day of each year specified therefor in the bylaws, but if
no election is held on that day, it may be held on any subsequent day according
to the provisions of law; and all elections shall be held according to such
lawful regulations as may be prescribed by the board of directors.
FIFTH. The authorized amount of capital stock of this Association shall be three
million five hundred thousand (3,500,000) shares of common stock of the par
value of six and 25/100 dollars ($6.25) each, but said capital stock may be
increased or decreased from time to time, in accordance with the provisions of
the laws of the United States.
No holder of shares of the capital stock of any stock of any class of the
corporation shall have any pre-emptive or preferential right of subscription to
any shares of any class of stock of the corporation, whether now or hereafter
authorized, or to any obligations convertible into stock of the corporation,
issued or sold, nor any right of subscription to any thereof other than such, if
any, as the board of directors, in its discretion, may from time to time
determine and at such price as the board of directors may from time to time fix.
The Association, at any time and from time to time, may authorize and issue debt
obligations, whether or not subordinated, without the approval of the
shareholders.
<PAGE>
SIXTH. The board of directors shall appoint one of its members president of this
Association, who shall be chairman of the board, unless the board appoints
another director to be the chairman. The board of directors shall have the power
to appoint one or more vice presidents; and to appoint a secretary and such
other officers and employees as may be required to transact the business of this
Association.
The board of directors shall have the power to define the duties of the officers
and employees of the Association; to fix the salaries to be paid to them; to
dismiss them; to require bonds from them and to fix the penalty thereof; to
regulate the manner in which any increase of the capital of the Association
shall be made; to manage and administer the business and affairs of the
Association; to make all bylaws that it may be lawful for them to make; and
generally to do and perform all acts that it may be legal for a board of
directors to do and perform.
SEVENTH. The board of directors shall have the power to change the location of
the main office to any other place within the limits of the City of Hartford,
Connecticut, without the approval of the shareholders but subject to the
approval of the Comptroller of the Currency; and shall have the power to
establish or change the location of any branch or branches of the Association to
any other location, without the approval of the shareholders but subject to the
approval of the Comptroller of the Currency.
EIGHTH. The corporate existence of this Association shall continue until
terminated in accordance with the laws of the United States.
NINTH. The board of directors of this Association, or any three or more
shareholders owning, in the aggregate, not less than ten percent (10%) of the
stock of this Association, may call a special meeting of shareholders at any
time. Unless otherwise provided by the laws of the United States, a notice of
the time, place and purpose of every annual and special meeting of the
shareholders shall be given by first class mail, postage prepaid, mailed at
least ten (10) days prior to the date of such meeting to each shareholder of
record at his address as shown upon the books of this Association.
TENTH. Any person, his heirs, executors, or administrators may be indemnified or
reimbursed by the Association for reasonable expenses actually incurred in
connection with any action, suit, or proceeding, civil or criminal, to which he
or they shall be made a party by reason of his being or having been a director,
officer, or employee of the Association or any firm, corporation, or
organization which he served in any such capacity at the request of the
Association: provided, that no person shall be so indemnified or reimbursed in
relation to any matter in such action, suit, or proceeding as to which he shall
finally be adjudged to have been guilty of or liable for gross negligence,
willful misconduct or criminal acts in the performance of his duties to the
Association: and, provided further, that no person shall be so indemnified or
reimbursed in relation to any matter in such action, suit, or proceeding which
has been made the subject of a compromise settlement except with the approval of
a court of competent jurisdiction, or the holders of record of a majority of the
outstanding shares of the Association, or the board of directors, acting by vote
of directors not parties to the same or substantially the same action, suit, or
proceeding, constituting a majority of the whole number of directors. The
foregoing right of indemnification or reimbursement shall not be exclusive of
other rights to which such person, his heirs, executors, or administrators may
be entitled as a matter of law.
<PAGE>
The Association may, upon the affirmative vote of a majority of its board of
directors, purchase insurance for the purpose of indemnifying its directors,
officers and other employees to the extent that such indemnification is allowed
in the preceding paragraph. Such insurance may, but need not, be for the benefit
of all directors, officers, or employees.
ELEVENTH. These articles of association may be amended at any regular or special
meeting of the shareholders by the affirmative vote of the holders of a majority
of the stock of this Association, unless the vote of the holders of greater
amount of stock is required by law, and in that case by the vote of the holders
of such greater amount. The notice of any shareholders' meeting at which an
amendment to the articles of association of this Association is to be considered
shall be given as hereinabove set forth.
I hereby certify that the articles of association of this Association, in their
entirety, are listed above in items first through eleventh.
___________________________________________________Secretary/Assistant Secretary
Dated at __________________________________________, as of ____________________.
Revision of January 11, 1993
7792L/3
<PAGE>
BYLAWS
OF
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION
ARTICLE I
MEETINGS OF SHAREHOLDERS
Section 1.1 Annual Meeting. The regular annual meeting of the shareholders to
elect directors and transact whatever other business may properly come before
the meeting, shall be held at the main office of the association, city of
Hartford, state of Connecticut or such other places as the board of directors
may designate, at 1:00 o'clock, on the third Wednesday of April of each year, or
if that date falls on a legal holiday in the state in which the association is
located, on the next following banking day. If, for any cause, an election of
directors is not made on that date, or in the event of a legal holiday, on the
next following banking day, an election may be held on any subsequent day within
60 days of the date fixed, to be designated by the board directors, or, if the
directors fail to fix the date, by shareholders representing two-thirds of the
shares.
Section 1.2. Special Meetings. Except as otherwise specifically provided by
statute, special meetings of the shareholders may be called for any purpose at
any time by the board of directors or upon call of the Chairman or at the
written request of shareholders owning, in the aggregate, not less than ten (10)
percent of the stock of the association.
Section 1.3. Notice of Meetings. Unless otherwise provided by the laws of the
United States, a notice of the time, place and purpose of every regular annual
meeting or special meeting of shareholders shall be given by first-class mail,
postage pre-paid, mailed at least ten (10) days prior to the date of such
meeting to each shareholder of record at his address as shown upon the books of
the association. If an annual or special shareholders' meeting is adjourned to a
different date, time, or place, notice need not be given of the new date, time
or place, if the new date, time or place is announced at the meeting before
adjournment, unless any additional items of business are to be considered, or
the association becomes aware of an intervening event materially affecting any
matter to be voted on more than 10 days prior to the date to which the meeting
is adjourned. If a new record date for the adjourned meeting is fixed, however,
notice of the adjourned meeting must be given to persons who are shareholders as
of the new record date.
Section 1.4. Proxies. Shareholders may vote at any meeting of the shareholders
by proxies duly authorized in writing. Proxies shall be valid only for one
meeting, to be specified therein, and any adjournments of such meeting. Proxies
shall be dated and filed with the records of the meeting. Proxies with rubber-
stamped facsimile signatures may be used and unexecuted proxies may be counted
upon receipt of a confirming telegram from the shareholder. Proxies meeting the
above requirements submitted at any time during a meeting shall be accepted.
<PAGE>
Section 1.5. Quorum. A majority of the outstanding capital stock, represented in
person or by proxy, shall constitute a quorum at any meeting of shareholders,
but less than a quorum may adjourn any meeting, from time to time, and the
meeting may be held, as adjourned, without further notice.
Section 1.6. Voting. In deciding on questions at meetings of shareholders,
except in the election of directors, each shareholder shall be entitled to one
vote for each share of stock held. A majority of votes cast shall decide each
matter submitted to the shareholders at the meeting except in cases where by law
a larger vote is required.
ARTICLE II
DIRECTORS
Section 2.1. Board of Directors. The board of directors shall manage and
administer the business and affairs of the association. Except as expressly
limited by law, all corporate powers of the association shall be vested in and
may be exercised by the board.
Section 2.2. Number. The board shall consist of not less than five nor more than
twenty-five shareholders, the exact number within such minimum and maximum
limits to be fixed and determined from time to time by resolution of a majority
of the full board or by resolution of a majority of the shareholders at any
meeting thereof.
Section 2.3. Term. The directors of this association shall hold office for one
year and until their successors are elected and have qualified.
Section 2.4. Oath. Each person elected or appointed a director of this
association must take the oath of such office as prescribed by the laws of the
United States. No person elected or appointed a director of this association
shall exercise the functions of such office until he has taken such oath.
Section 2.5. Honorary Directors. There may not be more than five honorary
directors of the association who shall be entitled to attend meetings of the
board and take part in its proceedings but without the right to vote. Honorary
directors shall be appointed at the annual meeting of the board of directors to
hold office until the next annual meeting provided, however, that the board may
at any regularly constituted meeting between annual meetings of the board of
directors appoint honorary directors within the limitations imposed by this
bylaw.
Section 2.6. Vacancies. Any vacancies occurring in the board of directors for
any reason, including an increase in the number thereof, may be filled, in
accordance with the laws of the United States, by appointment by the remaining
directors, and any director so appointed shall hold office until the next annual
meeting and until his successor is elected and has qualified.
-2-
<PAGE>
Section 2.7. Organization Meeting. The annual meeting of the board of directors
shall be held at the main office of the association to organize the new board
and appoint committees of the board and officers of the association for the
succeeding year, and for transacting such other business as properly may come
before the meeting. Such meeting shall be held on the day of the election of
directors or as soon thereafter as practicable, and, in any event, within 30
days thereof. If, at the time fixed for such meeting, there shall not be a
quorum, the directors present may adjourn the meeting, from time to time, until
a quorum is obtained.
Section 2.8. Regular Meetings. The regular meetings of the board of directors
shall be held, without notice, at the main office, or at such other place as has
been duly authorized by the board, on such day and at such time as the board
shall determine. When any regular meeting of the board falls upon a holiday, the
meeting shall be held on the next banking business day unless the board shall
designate another day.
Section 2.9. Special Meetings. Special meetings of the board of directors may be
called by the chairman, the president, or at the request of seven or more
directors. Each member of the board of directors shall be given notice stating
the time and place by telegram, letter, or in person, of each special meeting.
Section 2.10. Quorum. A majority of the members of the board shall constitute a
quorum at any meeting. If the number of directors is reduced below the number
that would constitute a quorum, no business may be transacted, except selecting
directors to fill vacancies in conformance with these bylaws. If a quorum is
present, the board of directors may take action through the vote of a majority
of the directors who are in attendance.
Section 2.11. Record Time. The board of directors may fix a day and hour, not
exceeding fifty (50) days preceding the date fixed for the payment of any
dividend or for any meeting of the shareholders as a record time for the
determination of shareholders entitled to receive such dividend, or as the time
as of which shareholders entitled to notice of and to vote as such meeting shall
be determined, as the case may be, and only shareholders of record at the time
so fixed shall be entitled to receive such dividend or to notice of and to vote
at such meeting.
Section 12.2. Fees. All directors other than directors who are officers of the
association or its affiliates shall be entitled to reasonable fees for their
services as such directors and as members of committees of the board, said fees
to be fixed by vote of the board.
ARTICLE III
COMMITTEES OF THE BOARD
Section 3.1. Executive Committee. The board of directors may establish an
executive committee consisting of the chairman, not less than five directors,
not officers, who are appointed by the board, and such other directors as the
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<PAGE>
board may appoint. The board shall designate the chairman thereof. The Executive
Committee shall possess and may exercise such powers as are provided in
these bylaws and all other delegable powers of the board and shall meet at the
call of any member thereof. All action of said committee shall be reported to
the board at the next regular board meeting thereafter. Four members of the
Committee, of whom not less than three shall be directors who are not officers,
shall be necessary to constitute a quorum.
Section 3.2. Loan and Investment Committee. The board of directors shall
establish a loan and investment committee consisting of the chairman, the
president, not less than four directors, not officers, who are appointed by the
board, and such other directors as the board may appoint. The committee shall
ensure that the association's credit and investment policies are adequate and
that lending and investment activities are conducted in accordance with the
association's policies and with applicable laws and regulations. The committee
shall exercise oversight and receive reports with respect to lending activities
and credit risk management. The committee shall also exercise oversight and
receive reports with respect to the association's securities portfolio and
securities portfolio activities to ensure appropriate portfolio diversification,
asset quality, liquidity, and profitability. The committee shall also have
oversight responsibilities with respect to the association's investment policy,
liquidity policy, liquidity contingency planning and interest rate risk
exposure. All action by the committee shall be reported to the board at the next
regular board meeting thereafter. Four members of the committee, of whom not
less than two shall be directors who are not officers, shall be necessary to
constitute a quorum.
Section 3.3. Trust Committee. The board of directors shall establish a trust
committee consisting of the president and not less than four directors, not
officers, who are appointed by the board, and such other directors as the board
may appoint. The trust committee shall have authority, between meetings of the
board, to discharge the responsibilities of the association with respect to the
exercise of fiduciary powers, except as the board may by resolution or other
appropriate action otherwise from time to time determine. All action by said
committee shall be reported to the board at the next regular board meeting
thereafter. Four members of the trust committee, of whom at least two shall
be directors who are not officers, shall be necessary to constitute a quorum.
Section 3.4. Audit Committee. The audit committee of Shawmut National
Corporation, no member of whom is an officer of the association, is designated
to oversee the audit affairs of the association. Members of the association's
board of directors, none of whom may be officers of the association, may serve
on the audit committee of Shawmut National Corporation. In addition, the board
may, from time to time, appoint an audit committee consisting of not less than
four members of the board, no one of whom shall be an executive officer of the
association, to perform such audit functions as may be assigned by the board.
The duty of the audit committee shall be to examine at least once during each
calendar year and within 15 months of the last examination of affairs of the
association or cause suitable examination to be made by auditors responsible
only to the board of directors and to report the result of such examination in
writing to the board at the next regular meeting
-4-
<PAGE>
thereafter. Such report shall state whether the association is in a sound
condition, whether fiduciary powers have been administered according to law and
sound fiduciary principles, whether adequate internal controls and procedures
are being maintained, and shall recommend to the board of directors such changes
in the manner of conducting the affairs of the association as shall be deemed
advisable.
Section 3.5. Community Affairs Committee. The board of directors shall
establish a community affairs committee consisting of not less than four
directors and such other persons as shall be appointed by the board. The
community affairs committee shall oversee compliance by the association with the
policies and provisions of the Community Reinvestment Act of 1978, as amended;
shall establish and supervise policies relating to voluntary corporate
contributions and other matters of business and community conduct, all as the
board or the chairman may from time to time specify or request. All actions by
said committee shall be reported to the board at the next regular board meeting
thereafter. Three members of the committee, of whom at least two shall be
directors who are not officers, shall be necessary to constitute a quorum.
Section 3.6. Substitute Committee Members. In the case of the absence of any
member of any committee of the board from any meeting of such committee, the
directors who are not officers and are present at such meeting, or the senior
officer present if no such directors are there, may designate a substitute to
serve in lieu of such absent member. Such substitute need not be a director
unless such absent member is a director, but in any case when the board of
directors shall have designated one or more alternate members for such
committee, the substitute shall be selected from such of said alternates as are
then available.
Section 3.7. Additional Committees. The board of directors may be resolution
designate one or more additional committees, each consisting of two or more of
the directors. Any such additional committee shall have and may exercise such
powers as the board may from time to time prescribe for furthering the business
and affairs of the association.
ARTICLE IV
WAIVER OF NOTICE; WRITTEN CONSENT; PARTICIPATION BY TELEPHONE
Section 4.1. Waiver of Notice. Notice of the time, place and purpose of any
regular meeting of the board of directors or a committee thereof may be waived
in writing by any director or member of such committee, as the case may be,
either before or after such meeting. Attendance in person at a meeting of the
board of directors or a committee thereof shall be deemed to constitute a waiver
of notice thereof.
Section 4.2. Written Consent. Unless otherwise restricted by the articles of
association or these bylaws, any action required or permitted to be taken at any
meeting of the board of directors or a committee thereof may be taken without a
meeting if a consent in writing, setting forth the action to so be
-5-
<PAGE>
taken, shall be signed before or after such action by all of the directors, or
all of the members of a committee thereof, as the case may be. Such written
consent shall be filed with the records of the association.
Section 4.3. Participation by Telephone. One or more directors may participate
in a meeting of the board of directors, of a committee of the board, or of the
shareholders, by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other. Participation in this manner shall constitute presence in person at
such meeting.
ARTICLE V
OFFICERS AND EMPLOYEES
Section 5.1. Officers. The officers of the association shall consist of a
chairman, a president, one or more vice chairmen, one or more executive vice
presidents, one or more senior vice presidents, one or more vice presidents, a
secretary, an auditor and such other officers as may be appropriate for the
prompt and orderly transaction of the business of the association. Any officer
may hold more than one office, except that the chairman and president may not
also serve as secretary. The chairman, the president, any vice chairman, and the
auditor shall be elected annually by the board of directors to serve for one
year and until his successor is elected and qualifies. All other officers shall
be appointed to hold office during the pleasure of the board, which may in its
discretion delegate the authority to appoint and remove any officer or officers
(other than the auditor) below the ranks of president and vice chairman.
Section 5.2. Chairman. The chairman shall preside or designate the presiding
officer at all meetings of the board of directors and shareholders. The chairman
shall be the chief executive officer of the association unless otherwise
designated by the board, and may have an exercise such further powers and duties
as from time to time may be conferred upon or assigned to the chairman by the
board of directors. The chairman may establish advisory committees for any
branch, region, or division of the association to advise on the affairs of such
branch, region, or division; provided that such advisory committee members shall
not attend meetings of the board of directors or any committee thereof, and
shall not participate in the management of the association. If at any time the
office of chairman shall be vacant, the powers and duties of that office shall
devolve upon the president; if the office of president shall be vacant, the
powers and duties of that office shall devolve upon the chairman; and if the
office of the chairman and president are vacant, the board shall designate one
or more officers of the association to perform the duties of chairman until such
time as a new chairman is appointed.
Section 5.3. President. The president shall have general executive powers and
may also have and exercise such further powers and duties as may be conferred
upon or assigned by the board or the chairman.
-6-
<PAGE>
Section 5.4. Vice Chairman. Each Vice Chairman shall perform such duties as may
be assigned from time to time by the board of directors or the chairman.
Section 5.5. Secretary. The secretary of the association, or other designated
officer of the association, shall keep accurate minutes of all meetings of the
board of directors; shall attend to the giving of all notices required by these
bylaws; shall be custodian of the corporate seal, records, documents and papers
of the association; shall provide for the keeping of proper records of all
transactions of the association; shall have and may exercise any and all other
powers and duties pertaining by law, regulation or practice, or imposed by the
bylaws; and shall also perform such other duties as may be assigned from time to
time, by the board of directors or the chairman.
Section 5.6. Auditor. The general auditor of the association, or his designee,
shall be the officer in charge of auditing. Said officer shall be responsible
for the conduct of a program of continuous audits of the association and all of
its departments and shall make, or cause to be made, further examinations as he
deems necessary or are required from time to time by the responsible audit
committee or the board. Said officer shall report the results of audit
activities periodically to the responsible audit committee or the board.
Section 5.7. Other Officers. All other officers shall perform such duties and
exercise such powers as shall pertain to their respective offices, or as shall
be imposed by law, or as may be conferred upon, or assigned to them by the board
of directors or the chairman.
Section 5.8. Resignation. An officer may resign at any time by delivering notice
to the association. A resignation is effective when the notice is given unless
the notice specifies a later effective date.
ARTICLE VI
SIGNING AUTHORITY
Section 6.1. Signing Authority. Each officer of this association, excluding the
auditor and each other officer whose primary duties are auditing in nature,
shall have authority for and on behalf of this association to execute, deliver,
sign and endorse checks, drafts, pledges, certificates, receipts for money,
warehouse receipts, bills of lading or similar documents, contracts arising in
the ordinary course of the business of the association, bankers' acceptances
made by the association, commercial credits of the association, securities and
property received in trust or for deposit, proxies to vote stock held by the
association in any capacity, petitions, foreclosures and other deeds, powers,
leases, assignments, discharges, releases, extensions, purchase agreements,
conveyances, and other written instruments pertaining to real estate or interest
therein and, where indicated, to affix the corporate seal of the association to
any of the foregoing; to guarantee and witness signatures upon securities,
documents or other written
-7-
<PAGE>
instruments; to purchase, sell, assign, pledge or transfer funds or other
securities of the association or within its control as a fiduciary; and, subject
to the approval of such officer or committee as the board may designate, to
accept trusts and appointments and to execute trust indentures and any other
instruments establishing trusts or making appointments. Each officer at the
level of senior vice president or above, shall be empowered to authorize another
person or persons, whether or not such other person or persons are officers or
employees of the association, to sign or endorse any of the foregoing documents
on behalf of the association in a particular transaction; but such officer shall
by signed entry personally note the fact of such authorization on the records of
the association relating to such transaction. The officer in charge of the
international division of the association, or in his absence his designee, shall
be empowered to authorize another person or persons, whether or not such other
person or persons are officers or employees of the association, to execute
documents and do such other acts and things as may be required in connection
with a particular loan or extension of credit, proceeding before a court or
other judicial or administrative body, or other transaction; but such officer
shall by signed entry personally note the fact of such authorization on the
records of the association relating to such act or transaction. Any one officer
at the level of senior vice president or above shall have authority for and on
behalf of the association to borrow money. The chairman, the president, any vice
chairman, any executive vice president, and the senior vice president or other
officer in charge of investment administration or such other officers as may be
designated by the chairman may each, acting singly, authorize borrowings and
request advances from any Federal Reserve Bank or any Federal Home Loan Bank, as
the case may be, and may agree with said bank upon appropriate terms and
collateral for such transactions. The officers and other employees of the
association shall have such further signature powers as may be specified by the
board of directors or by the chairman or his designee.
ARTICLE VII
STOCK AND STOCK CERTIFICATES
Section 7.1. Transfers. Shares of stock shall be transferable on the books of
the association, and a transfer book shall be kept in which all transfers of
stock shall be recorded. Every person becoming a shareholder by such transfer
shall in proportion to his or her shares, succeed to all rights of the prior
holder of such shares. The board of directors may impose conditions upon the
transfer of the stock reasonably calculated to simplify the work of the
association with respect to stock transfer, voting shareholder meetings, and
related matters and to protect it against fraudulent transfer.
Section 7.2. Stock Certificates. Certificates of stock shall bear the signature
of the chairman or president (which may be engraved, printed or impressed), and
shall be signed manually or by facsimile process by the secretary or assistant
secretary, and the seal of the association shall be engraved thereon. Each
certificate shall recite on its face that the stock represented thereby is
transferable only upon the books of the association properly endorsed.
-8-
<PAGE>
ARTICLE VIII
CORPORATE SEAL
Section 8. Corporate Seal. The board of directors shall provide a seal for the
association. The secretary shall have custody thereof and may designate such
other officers as may have counterparts.
ARTICLE IX
MISCELLANEOUS PROVISIONS
Section 9.1. Fiscal Year. The fiscal year of the association shall be the
calendar year.
Section 9.2. Records. The articles of association, the bylaws and the
proceedings of all meetings of the shareholders, the board of directors, and
standing committees of the board, shall be recorded in appropriate minute books
provided for that purpose. The minutes of each meeting shall be signed by the
secretary or other officer appointed to act as secretary of the meeting.
ARTICLE X
BYLAWS
Section 10. Amendments. These bylaws may be altered, amended, or added to or
repealed by a vote of a majority of the members of the board then in office at
any meeting, provided that notice thereof shall have been given in the notice of
such meeting.
A true copy
Attest:
- -----------------------------------Secretary/Assistant Secretary
Dated at ------------------------------------, as of -----------------------.
Revision of January 11, 1993
-9-
<PAGE>
SCHEDULE A
----------
(Attached to the Trustee's Certificates)
of
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION
Part I. Officer of Shawmut Bank Connecticut, National Association:
Name Title Signature
---- ----- ---------
Arthur Blakeslee Assistant Vice President /s/ Arthur Blakeslee
-------------------------
Bryan R. Calder Senior Vice President /s/ Bryan R. Calder
-------------------------
Steven Cimalore Vice President /s/ Steven Cimalore
-------------------------
Alan B. Coffey Assistant Vice President /s/ Alan B. Coffey
-------------------------
Debra A. Colon Corporate Trust Officer /s/ Debra A. Colon
-------------------------
Mari-Elna DeGuia Securities Operations Officer /s/ Mari-Elna DeGuia
-------------------------
Pablo de la Canal Corporate Trust Officer /s/ Pablo de la Canal
-------------------------
Anthony L. Eafano Vice President /s/ Anthony L. Eafano
-------------------------
Rinette Elovecky Vice President /s/ Rinette Elovecky
-------------------------
Mark A. Forgetta Vice President /s/ Mark A. Forgetta
-------------------------
Joseph E. Fortuna Assistant Vice President /s/ Joseph E. Fortuna
-------------------------
Susan Freedman Vice President /s/ Susan Freedman
-------------------------
Gilman N. Gauvin Vice President /s/ Gilman N. Gauvin
-------------------------
Lynnette Hamilton Assistant Vice President /s/ Lynnette Hamilton
-------------------------
Elizabeth C. Hammer Vice President /s/ Elizabeth C. Hammer
-------------------------
Michael M. Hopkins Vice President /s/ Michael M. Hopkins
-------------------------
Vito J. Iacovazzi Vice President /s/ Vito J. Iacovazzi
-------------------------
Debra A. Johnson Corporate Trust Officer /s/ Debra A. Johnson
-------------------------
Philip G. Kane, Jr. Vice President /s/ Philip G. Kane, Jr.
-------------------------
Susan T. Keller Vice President /s/ Susan T. Keller
-------------------------
Kathy A. Larimore Assistant Vice President /s/ Kathy A. Larimore
-------------------------
Jacqueline Levesque Corporate Trust Officer /s/ Jacqueline Levesque
-------------------------
Jeffrey D. Masi Operations Officer /s/ Jeffrey D. Masi
-------------------------
Deborah L. McDonald Vice President /s/ Deborah L. McDonald
-------------------------
Frank McDonald, Jr. Vice President /s/ Frank McDonald, Jr.
-------------------------
Susan C. Merker Assistant Vice President /s/ Susan C. Merker
-------------------------
Jacqueline A. Mulhall Vice President /s/ Jacqueline A. Mulhall
-------------------------
William R. Munroe Assistant Vice President /s/ William R. Munroe
-------------------------
Robert L. Reynolds Assistant Vice President /s/ Robert L. Reynolds
-------------------------
Rockwell J. Spalding Assistant Vice President /s/ Rockwell J. Spalding
-------------------------
Andrea F. Turlo Vice President /s/ Andrea F. Turlo
-------------------------
Kathleen D. Woods Vice President /s/ Kathleen D. Woods
-------------------------
<PAGE>
SCHEDULE A
----------
(Attached to the Trustee's Certificates)
of
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION
Part II. Trustee Administrators (authorized only to attest the Seal of Shawmut
Bank Connecticut, National Association and signature of any officer named in
Part I hereof:
Name Title Signature
---- ----- ---------
Michelle K. Blezard Trustee Administrator /s/ Michelle K. Blezard
--------------------------
Michelle M. Fitzgerald Trustee Administrator /s/ Michelle M. Fitzgerald
--------------------------
Shelley Hassett Trustee Administrator /s/ Shelley Hassett
--------------------------
Cheryl Sowers Trustee Administrator /s/ Cheryl Sowers
--------------------------
Donnee C. Taylor Trustee Administrator /s/ Donnee C. Taylor
--------------------------
Anna M. Vignuolo Trustee Administrator /s/ Anna M. Vignuolo
--------------------------
<PAGE>
PART III. Authorized Persons (authorized only to attest the seal of Shawmut
- -------- Bank Connecticut, National Association and the signature of any
officer named in Part I hereof):
Name Title Signature
---- ----- ---------
DANIEL P. BROWN, JR. AUTHORIZED PERSON /s/ DANIEL P. BROWN, JR.
------------------------
SCOTT L. MURPHY AUTHORIZED PERSON /s/ SCOTT L. MURPHY
------------------------
THOMAS F. TRESSELT AUTHORIZED PERSON /s/ THOMAS F. TRESSELT
------------------------
WILLIAM G. ROCK AUTHORIZED PERSON /s/ WILLIAM G. ROCK
------------------------
DEBORAH SMITH FRISONE AUTHORIZED PERSON /s/ DEBORAH SMITH FRISONE
-------------------------
PAUL R. PESCATELLO AUTHORIZED PERSON /s/ PAUL R. PESCATELLO
-------------------------
LESLIE L. DAVENPORT AUTHORIZED PERSON /s/ LESLIE L. DAVENPORT
-------------------------
THOMAS P. FLYNN AUTHORIZED PERSON /s/ THOMAS P. FLYNN
-------------------------
CARRIE A. BRODZINSKI AUTHORIZED PERSON /s/ CARRIE A. BRODZINSKI
-------------------------
9027_1C.DOC
<PAGE>
EXHIBIT 2
________________________________________________________________________________
Comptroller of the Currency
Administrator of National Banks
________________________________________________________________________________
Washington, D.C. 20219
CERTIFICATE
I, Eugene A. Ludwig, Comptroller of the Currency, do hereby certify that:
1. The Comptroller of the Currency, pursuant to Revised Statutes 324, et seq.,
as amended, 12 U.S.C. 1, et seq., as amended, has possession, custody and
control of all records pertaining to the chartering, regulation and supervision
of all National Banking Associations.
2. "Shawmut Bank Connecticut, National Association", Hartford, Connecticut,
(Charter No. 1338), is a National Banking Association formed under the laws of
the United States and is authorized thereunder to transact the business of
banking on the date of this Certificate.
IN TESTIMONY WHEREOF, I have hereunto
subscribed my name and caused my seal
of office to be affixed to these presents
at the Treasury Department, in the City
of Washington and District of Columbia,
this 9th day of March, 1994.
/s/ EUGENE A. LUDWIG
_____________________________________
Comptroller of the Currency
<PAGE>
[LOGO OF COMPTROLLER OF THE CURRENCY]
- --------------------------------------------------------------------------------
COMPTROLLER OF THE CURRENCY
ADMINISTRATOR OF NATIONAL BANKS
- --------------------------------------------------------------------------------
Washington, D.C. 20219
Certification of Fiduciary Powers
---------------------------------
I, Eugene A. Ludwig, Comptroller of the Currency, do hereby certify the
records in this Office evidence "Shawmut Bank Connecticut, National
Association", Hartford, Connecticut, (Charter No. 1338), was granted, under
the hand and seal of the Comptroller, the right to act in all fiduciary
capacities authorized under the provisions of The Act of Congress approved
September 28, 1962, 76 Stat. 668, 12 U.S.C. 92a. I further certify the
authority so granted remains in full force and effect.
IN TESTIMONY WHEREOF, I have hereunto
subscribed my name and caused my seal of
Office of the Comptroller of the
Currency to be affixed to these presents
at the Treasury Department, in the City
of Washington and District of Columbia,
this 9th day of March, 1994.
/s/ Eugene A. Ludwig
------------------------------
Comptroller of the Currency
<PAGE>
EXHIBIT 5
CONSENT OF THE TRUSTEE
REQUIRED BY SECTION 321(b)
OF THE TRUST INDENTURE ACT OF 1939
----------------------------------
The undersigned, as Trustee under an Indenture to be entered into between
Acme Metals Incorporated and Shawmut Bank Connecticut, National Association,
Trustee, does hereby consent that, pursuant to Section 321(b) of the Trust
Indenture Act of 1939, reports of examinations with respect to the undersigned
by Federal, State, Territorial or District authorities may be furnished by such
authorities to the Securities and Exchange Commission upon request therefor.
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION
Trustee
/s/ Susan Freedman
By ________________________________
Susan Freedman
Vice President
Dated: July , 1994
5347_1C.DOC
<PAGE>
EXHIBIT 6
Board of Governors of the Federal Reserve System
OMB Number: 7100-0036
Federal Deposit Insurance Corporation
OMB Number: 3064-0052
Office of the Comptroller of the Currency
OMB Number: 1557-0081
Expires February 28, 1995
Federal Financial Institutions Examination Council
________________________________________________________________________________
[ACME STEEL LOGO]
Please refer to page i, /1/
Table of Contents, for
the required disclosure
of estimated burden.
________________________________________________________________________________
Consolidated Reports of Condition and Income for
A Bank With Domestic and Foreign Offices--FFIEC 031
Report at the close of business March 31, 1994 (940331)
--------
(RCRI 9999)
This report is required by law: 12 U.S.C. (S)324 (State member banks); 12 U.S.C.
(S)1817 (State nonmember banks); and 12 U.S.C. (S)161 (National banks).
This report form is to be filed by banks with branches and consolidated
subsidiaries in U.S. territories and possessions, Edge or Agreement
subsidiaries, foreign branches, consolidated foreign subsidiaries, or
International Banking Facilities.
______________________________________________________________________________
NOTE: The Reports of Condition and Income must be signed by an authorized
officer and the Report of Condition must be attested to by not less than two
directors (trustees) for State nonmember banks and three directors for State
member and National banks.
I, Romolo C. Santarosa, SVP and Controller
---------------------------------------
Name and Title of Officer Authorized to Sign Report
of the named bank do hereby declare that these Reports of Condition and Income
(including the supporting schedules) have been prepared in conformance with the
instructions issued by the appropriate Federal regulatory authority and are true
to the best of my knowledge and belief.
/s/ Romolo C. Santarosa
- ----------------------------------------------
Signature of Officer Authorized to Sign Report
April 29, 1994
- ----------------------------------------------
Date of Signature
The Reports of Condition and Income are to be prepared in accordance with
Federal regulatory authority instructions. NOTE: These instructions may in some
cases differ from generally accepted accounting principles.
We, the undersigned directors (trustees), attest to the correctness of this
Report of Condition (including the supporting schedules) and declare that it has
been examined by us and to the best of our knowledge and belief has been
prepared in conformance with the instructions issued by the appropriate Federal
regulatory authority and is true and correct.
/s/
- ----------------------------------------------
Director (Trustee)
/s/
- ----------------------------------------------
Director (Trustee)
/s/
- ----------------------------------------------
Director (Trustee)
________________________________________________________________________________
For Banks Submitting Hard Copy Report Forms:
State Member Banks: Return the original and one copy to the appropriate Federal
Reserve District Bank.
State Nonmember Banks: Return the original only in the special return address
envelope provided. If express mail is used in lieu of the special return address
envelope, return the original only to the FDIC c/o Quality Data Systems, 2139
Espey Court, Crofton, MD 21114.
National Banks: Return the original only in the special return address envelope
provided. If express mail is used in lieu of the special return address
envelope, return the original only to the FDIC, c/o Quality Data Systems, 2139
Espey Court, Crofton, MD 21114.
________________________________________________________________________________
FDIC Certificate Number ___________
(RCRI 9050)
Board of Governors of the Federal Reserve System, Federal Deposit Insurance
Corporation, Office of the Comptroller of the Currency
<PAGE>
/2/
Consolidated Reports of Condition and Income for
A Bank With Domestic and Foreign Offices
________________________________________________________________________________
TABLE OF CONTENTS
SIGNATURE PAGE COVER
REPORT OF INCOME
Schedule RI--Income Statement....................................... RI-1, 2, 3
Schedule RI-A--Changes in Equity Capital.................................. RI-3
Schedule RI-B--Charge-offs and Recoveries and
Changes in Allowance for Loan and Lease
Losses............................................................... RI-4, 5
Schedule RI-C--Applicable Income Taxes by
Taxing Authority........................................................ RI-5
Schedule RI-D--Income from
International Operations................................................ RI-6
Schedule RI-E--Explanations............................................ RI-7, 8
Disclosure of Estimated Burden
The estimated average burden associated with this information collection is 30.7
hours per respondent and is estimated to vary from 15 to 200 hours per response,
depending on individual circumstances. Burden estimates include the time for
reviewing instructions, gathering and maintaining data in the required form, and
completing the information collection, but exclude the time for compiling and
maintaining business records in the normal course of a respondent's activities.
Comments concerning the accuracy of this burden estimate and suggestions for
reducing this burden should be directed to the Office of Information and
Regulatory Affairs, Office of Management and Budget, Washington, D.C. 20503, and
to one of the following:
Secretary
Board of Governors of the Federal Reserve System
Washington, D.C. 20551
Legislative and Regulatory Analysis Division
Office of the Comptroller of the Currency
Washington, D.C. 20219
Assistant Executive Secretary
Federal Deposit Insurance Corporation
Washington, D.C. 20429
REPORT OF CONDITION
Schedule RC--Balance Sheet............................................. RC-1, 2
Schedule RC-A--Cash and Balances Due
From Depository Institutions............................................ RC-3
Schedule RC-B--Securities.............................................. RC-4, 5
Schedule RC-C--Loans and Lease Financing
Receivables:
Part I. Loans and Leases........................................... RC-6, 7
Part II. Loans to Small Businesses and
Small Farms (included in the forms for
June 30 only).................................................. RC-7a, 7b
Schedule RC-D--Assets Held in Trading Accounts
in Domestic Offices Only (to be completed only
by banks with $1 billion or more in total assets)....................... RC-8
Schedule RC-E--Deposit Liabilities.................................... RC-9, 10
Schedule RC-F--Other Assets.............................................. RC-11
Schedule RC-G--Other Liabilities......................................... RC-11
Schedule RC-H--Selected Balance Sheet Items for
Domestic Offices....................................................... RC-12
Schedule RC-I--Selected Assets and Liabilities
of IBFs................................................................ RC-13
Schedule RC-K--Quarterly Averages........................................ RC-13
Schedule RC-L--Off-Balance Sheet Items................................ RC-14,15
Schedule RC-M--Memoranda.............................................. RC-16,17
Schedule RC-N--Past Due and Nonaccrual Loans
Leases, and Other Assets.............................................. RC-18, 19
Schedule RC-O--Other Data for Deposit
Insurance Assessments............................................... RC-20, 21
Schedule RC-R--Risk-Based Capital..................................... RC-22, 23
Optional Narrative Statement Concerning the
Amounts Reported in the Reports of
Condition and Income.................................................... RC-24
Special Report (TO BE COMPLETED BY ALL BANKS)
Schedule RC-J--Repricing Opportunities (sent only to
and to be completed only by savings banks)
For information or assistance, national and state nonmember banks should contact
the FDIC's Call Reports Analysis Unit, 550 17th Street, NW, Washington, D.C.
20429, toll free on (800) 688-FDIC (3342), Monday through Friday between 8:00
a.m. and 5:00 p.m., Eastern time. State member banks should contact their
Federal Reserve District Bank.
<PAGE>
Call Date: 3/31/94 ST-BK: 00-0590 FFIEC 031
Page RI-1
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION
Address: 777 MAIN STREET
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: 02499
Consolidated Report of Income
for the period January 1, 1994-March 31, 1994
All Report of Income schedules are to be reported on a calendar year-to-date
basis in thousands of dollars.
Schedule RI--Income Statement
<TABLE>
<CAPTION>
1480
Dollar Amounts in Thousands RIAD Bil Mil Thou
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Interest income:
a. Interest and fee income on loans:
(1) In domestic offices:
(a) Loans secured by real estate........................................ 4011 82,308 1.a.(1)(a)
(b) Loans to depository institutions.................................... 4019 75 1.a.(1)(b)
(c) Loans to finance agricultural production and other loans to
farmers............................................................. 4024 23 1.a.(1)(c)
(d) Commercial and industrial loans..................................... 4012 36,347 1.a.(1)(d)
(e) Acceptances of other banks.......................................... 4026 2 1.a.(1)(e)
(f) Loans to individuals for household, family, and other personal
expenditures:
(1) Credit cards and related plans.................................. 4054 859 1.a.(1)(f)(1)
(2) Other........................................................... 4055 7,181 1.a.(1)(f)(2)
(g) Loans to foreign governments and official institutions.............. 4056 0 1.a.(1)(g)
(h) Obligations (other than securities and leases) of states and
political subdivisions in the U.S.:
(1) Taxable obligations............................................. 4503 8 1.a.(1)(h)(1)
(2) Tax-exempt obligations.......................................... 4504 670 1.a.(1)(h)(2)
(i) All other loans in domestic offices................................. 4058 8,572 1.a.(1)(i)
(2) In foreign offices, Edge and Agreement subsidiaries, and IBFs........... 4059 0 1.a.(2)
b. Income from lease financing receivables:
(1) Taxable leases.......................................................... 4505 41 1.b(1)
(2) Tax-exempt leases....................................................... 4307 0 1.b(2)
c. Interest income on balances due from depository institutions:(1)
(1) In domestic offices..................................................... 4105 0 1.c.(1)
(2) In foreign offices, Edge and Agreement subsidiaries, and IBFs........... 4106 793 1.c.(2)
d. Interest and dividend income on securities:
(1) U.S. Treasury securities and U.S. Government agency and corporation
obligations............................................................. 4027 51,410 1.d.(1)
(2) Securities issued by states and political subdivisions in the U.S.:
(a) Taxable securities.................................................. 4506 0 1.d.(2)(a)
(b) Tax-exempt securities............................................... 4507 0 1.d.(2)(b)
(3) Other domestic debt securities.......................................... 3657 13,170 1.d.(3)
(4) Foreign debt securities................................................. 3658 46 1.d.(4)
(5) Equity securities (including investments in mutual funds)............... 3659 373 1.d.(5)
e. Interest income from assets held in trading accounts........................ 4069 0 1.e.
</TABLE>
- ------------
(1) Includes interest income on time certificates of deposit not held in trading
accounts.
3
<PAGE>
Call Date: 3/31/94 ST-BK: 00-0590 FFIEC 031
Page R1-2
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION
Address: 777 MAIN STREET
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: 02499
Schedule RI--Continued
<TABLE>
<CAPTION>
Year-to-date
Dollar Amounts in Thousands RIAD Bil Mil Thou
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Interest income (continued)
f. Interest income on federal funds sold and securities purchased under
agreements to resell in domestic offices of the bank and of its Edge and
Agreement subsidiaries, and in IBFs.......................................... 4020 145 1.f.
g. Total interest income (sum of items 1.a through 1.f)......................... 4107 202,023 1.g.
2. Interest expense:
a. Interest on deposits:
(1) Interest on deposits in domestic offices:
(a) Transaction accounts (NOW accounts, ATS accounts, and telephone
and preauthorized transfer accounts)................................. 4508 2,508 2.a.(1)(a)
(b) Nontransaction accounts:
(1) Money market deposit accounts (MMDAs)............................ 4509 2,449 2.a.(1)(b)(1)
(2) Other savings deposits........................................... 4511 8,765 2.a.(1)(b)(2)
(3) Time certificates of deposit of $100,000 or more................. 4174 4,234 2.a.(1)(b)(3)
(4) All other time deposits.......................................... 4512 13,673 2.a.(1)(b)(4)
(2) Interest on deposits in foreign offices, Edge and Agreement
subsidiaries, and IBFs................................................... 4172 1,199 2.a.(2)
b. Expense of federal funds purchased and securities sold under agreements
to repurchase in domestic offices of the bank and of its Edge and
Agreement subsidiaries, and in IBFs.......................................... 4180 36,607 2.b.
c. Interest on demand notes issued to the U.S. Treasury and on other borrowed
money........................................................................ 4185 2,565 2.c.
d. Interest on mortgage indebtedness and obligations under capitalized leases... 4072 220 2.d.
e. Interest on subordinated notes and debentures................................ 4200 0 2.e.
f. Total interest expense (sum of items 2.a through 2.e)........................ 4073 72,220 2.f.
3. Net interest income (item 1.g minus 2.f)........................................ RIAD 4074 129,803 3.
4. Provisions:
a. Provisions for loan and lease losses......................................... RIAD 4243 (1,258) 4.a.
b. Provisions for allocated transfer risk....................................... RIAD 4243 0 4.b
5. Noninterest income:
a. Income from fiduciary activities............................................. 4070 17,690 5.a
b. Service charges on deposit accounts in domestic offices...................... 4080 16,395 5.b
c. Trading gains (losses) and fees from foreign exchange transactions........... 4075 (186) 5.c
d. Other foreign transaction gains (losses)..................................... 4076 0 5.d.
e. Gains (losses) and fees from assets held in trading accounts................. 4077 498 5.e.
f. Other noninterest income:
(1) Other fee income......................................................... 5407 11,415 5.f.(1)
(2) All other noninterest income*............................................ 5408 14,673 5.f.(2)
g. Total noninterest income (sum of items 5.a through 5.f)...................... RIAD 4079 60,485 5.g.
6. a. Realized gains (losses) on held-to-maturity securities....................... RIAD 3521 290 6.a.
b. Realized gains (losses) on available-for-sale securities..................... RIAD 3196 (1,010) 6.b.
7. Noninterest expense:
a. Salaries and employee benefits............................................... 4135 67,849 7.a.
b. Expenses of premises and fixed assets (net of rental income) (excluding
salaries and employee benefits and mortgage interest)........................ 4217 20,811 7.b.
c. Other noninterest expense*................................................... 4092 40,091 7.c.
d. Total noninterest expense (sum of items 7.a through 7.c)..................... RIAD 4093 128,751 7.d.
8. Income (loss before income taxes and extraordinary items and other
adjustments (items 3 plus or minus items 4.a, 4.b, 5.g, 6.a, 6.b, and 7.d)...... RIAD 4301 62,075 8.
9. Applicable income taxes (on item 8)............................................. RIAD 4302 21,131 9.
10. Income (loss) before extraordinary items and other adjustments (item 8
minus 9)........................................................................ RIAD 4300 40,944 10.
</TABLE>
*Describe on Schedule RI-E--Explanations.
- ------------
(1) Includes interest income on time certificates of deposit not held in trading
accounts.
4
<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Call Date: 3/31/94 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RI-3
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: 02499
Schedule RI--Continued
Year-to-date
--------------------
Dollar Amounts in Thousands RIAD Bil Mil Thou
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
11. Extraordinary items and other adjustments:
a. Extraordinary items and other adjustments, gross of income taxes*..... 4310 0 11.a.
b. Applicable income taxes (on item 11.a)*............................... 4315 0 11.b.
-------------------------
c. Extraordinary items and other adjustments, net of income taxes
(item 11.a minus 11.b)................................................ RIAD 4320 0 11.c.
12. Net income (loss) (sum of items 10 and 11.c)............................. RIAD 4340 40,944 12.
---------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Memoranda Year-to-date
--------------
Dollar Amounts in Thousands RIAD Bil Mil Thou
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Interest expense incurred to carry tax-exempt securities, loans, and leases acquired after
August 7, 1986, that is not deductible for federal income tax purposes............................. 4513 2 M.1.
2. Fee income from the sale and servicing of mutual funds and annuities in domestic offices
(included in Schedule RI, item 5.g)................................................................ 8431 388 M.2.
3. Estimated foreign tax credit included in applicable income taxes, items 9 and 11.b above........... 4309 0 M.3.
4. To be completed only by banks with $1 billion or more in total assets:
Taxable equivalent adjustment to "Income (loss) before income taxes and extraordinary
items and other adjustments" (item 8 above)........................................................ 1244 466 M.4.
5. Number of full-time equivalent employees on payroll at end of current period (round to Number
nearest whole number).............................................................................. 4150 5,705 M.5.
</TABLE>
Schedule RI-A--Changes in Equity Capital
Indicate decreases and losses in parentheses.
<TABLE>
<CAPTION>
I483
------
Dollar Amounts in Thousands RIAD Bil Mil Thou
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Total equity capital originally reported in the December 31, 1993, Reports of Condition
and Income......................................................................................... 3215 1,131,626 1.
2. Equity capital adjustments from amended Reports of Income, net*.................................... 3216 0 2.
3. Amended balance end of previous calendar year (sum of items 1 and 2)............................... 3217 1,131,626 3.
4. Net income (loss) (must equal Schedule RI, item 12)................................................ 4340 40,944 4.
5. Sale, conversion, acquisition, or retirement of capital stock, net................................. 4346 0 5.
6. Changes incident to business combinations, net..................................................... 4356 0 6.
7. LESS: Cash dividends declared on preferred stock................................................... 4470 0 7.
8. LESS: Cash dividends declared on common stock...................................................... 4460 21,500 8.
9. Cumulative effect of changes in accounting principles from prior years* (see instructions
for this schedule)................................................................................. 4411 0 9.
10. Corrections of material accounting errors from prior years* (see instructions for this schedule)... 4412 0 10.
11. Change in net unrealized holding gains (losses) on available-for-sale securities................... 8433 (14,105) 11.
12. Foreign currency translation adjustments........................................................... 4414 0 12.
13. Other transactions with parent holding company* (not included in items 5, 7, or 8 above)........... 4415 0 13.
14. Total equity capital end of current period (sum of items 3 through 13) (must equal Schedule RC,
item 28)........................................................................................... 3210 1,136,965 14.
---------------------
- -----------
*Describe on Schedule RI-E--Explanations.
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION CALL DATE: 3/31/94 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RI-4
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: 02499
Schedule RI-B--Charge-offs and Recoveries and Changes
in Allowance for Loan and Lease Losses
Part I. Charge-offs and Recoveries on Loans and Leases
Part I excludes charge-offs and recoveries through
the allocated transfer risk reserve.
1486
---------------------------------------------------
(Column A) (Column B)
Charge-offs Recoveries
---------------------------------------------------
calendar year-to-date
---------------------------------------------------
Dollar Amounts in Thousands RIAD Bil Mil Thou RIAD Bil Mil Thou
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1. Loans secured by real estate:
a. To U.S. addressees (domicile)............................. 4651 13,681 4661 1,899 1.a.
b. To non-U.S. addressees (domicile)......................... 4652 0 4662 0 1.b.
2. Loans to depository institutions and acceptances of other
banks:
a. To U.S. banks and other U.S. depository institutions...... 4653 0 4663 0 2.a.
b. To foreign banks.......................................... 4654 0 4664 0 2.b.
3. Loans to finance agricultural production and other loans
to farmers................................................... 4655 0 4665 1 3.
4. Commercial and industrial loans:
a. To U.S. addressees (domicile)............................. 4645 4,567 4617 1,539 4.a.
b. To non-U.S. addressees (domicile)......................... 4646 0 4618 0 4.b.
5. Loans to individuals for household, family, and other
personal expenditures:
a. Credit cards and related plans............................ 4656 354 4666 86 5.a.
b. Other (includes single payment, installment, and all
student loans)............................................ 4657 600 4667 1,225 5.b.
6. Loans to foreign governments and official instructions....... 4643 0 4627 0 6.
7. All other loans.............................................. 4644 852 4628 45 7.
8. Lease financing receivables:
a. Of U.S. addressees (domicile)............................. 4658 0 4668 0 8.a.
b. Of non-U.S. addressees (domicile)......................... 4659 0 4669 0 8.b.
9. Total (sum of items 1 through 8)............................. 4635 20,054 4605 4,795 9.
---------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
---------------------------------------------------
Cumulative Cumulative
Charge-offs Recoveries
Jan. 1, 1986 Jan. 1, 1986
Memoranda through through
Dollar Amounts in Thousands Dec. 31, 1989 Report Date
- ----------------------------------------------------------------------------------------------------------------------
RIAD Bil Mil Thou RIAD Bil Mil Thou
----------------------------------------------------
<S> <C> <C> <C> <C>
To be completed by national banks only.
1. Charge-offs and recoveries of Special-Category Loans,
as defined for this Call Report by the Comptroller
of the Currency.............................................. 4784 644 M.1.
---------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
---------------------------------------------------
(Column A) (Column B)
Charge-offs Recoveries
---------------------------------------------------
calendar year-to-date
---------------------------------------------------
RIAD Bil Mil Thou RIAD Bil Mil Thou
---------------------------------------------------
<S> <C> <C> <C> <C>
Memorandum items 2 and 3 are to be completed by all banks.
2. Loans to finance commercial real estate, construction,
and land development activities (not secured by real
estate) included in Schedule RI-B, part I, items 4 and
7, above..................................................... 5409 515 5410 138 M.2.
3. Loans secured by real estate in domestic offices
(included in Schedule RI-B, part I, item 1, above):
a. Construction and land development......................... 3582 570 3583 23 M.3.a.
b. Secured by farmland....................................... 3584 0 3585 13 M.3.b.
c. Secured by 1-4 family residential properties:
(1) Revolving, open-end loans secured by 1-4 family
residential properties and extended under lines
of credit............................................. 5411 319 5412 11 M.3.c.(1)
(2) All other loans secured by 1-4 family residential
properties............................................ 5413 4,638 5414 534 M.3.c.(2)
d. Secured by multifamily (5 or more) residential properties. 3588 2,252 3589 6 M.3.d.
e. Secured by nonfarm nonresidential properties.............. 3590 5,902 3591 1,311 M.3.e.
---------------------------------------------------
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Call Date: 3/31/94 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RI-5
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: 02499
Schedule RI-B--Continued
Part II. Changes in Allowance for Loan and
Lease Losses and in Allocated
Transfer Risk Reserve
(Column A) (Column B)
Allowance for Allocated
Loan and Lease Transfer Risk
Losses Reserve
------------------ ------------------
Dollar Amounts in Thousands RIAD Bil Mil Thou RIAD Bil Mil Thou
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. Balance originally reported in the December 31, 1993, Reports of
Condition and Income....................................................... 3124 350,900 3131 0 1.
2. Recoveries (column A must equal part I, item 9, column B above)............ 4605 4,795 3132 0 2.
3. LESS: Charge-offs (column A must equal part I, item 9, column A above)..... 4635 20,054 3133 0 3.
4. Provision (column A must equal Schedule RI, item 4.a; column B must
equal Schedule RI, item 4.b)............................................... 4230 (1,258) 4243 0 4.
5. Adjustments* (see instructions for this schedule).......................... 4815 0 3134 0 5.
6. Balance end of current period (sum of items 1 through 5) (column A must
equal Schedule RC, item 4.b; column B must equal Schedule RC,
item 4.c).................................................................. 3123 334,383 3128 0 6.
</TABLE>
- ------------
*Describe on Schedule RI-E--Explanations.
Schedule RI-C--Applicable Income Taxes by Taxing Authority
Schedule RI-C is to be reported with the December Report of Income.
<TABLE>
<CAPTION>
I489
Dollar Amounts in Thousands RIAD Bil Mil Thou
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. Federal............................................................................................. 4780 N/A 1.
2. State and Local..................................................................................... 4790 N/A 2.
3. Foreign............................................................................................. 4795 N/A 3.
4. Total (sum of items 1 through 3) (must equal sum of Schedule RI, items
9 and 11.b)......................................................................................... 4770 N/A 4.
5. Deferred portion of item 4...................................................... RIAD 4772 N/A 5.
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Call Date: 3/31/94 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RI-6
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: 02499
Schedule RI-D--Income from International Operations
For all banks with foreign offices, Edge or Agreement subsidiaries, or IBFs where international operations
account for more than 10 percent of total revenues, total assets, or net income.
Part I. Estimated Income from International Operations
I492
Year-to-date
------------------
Dollar Amounts in Thousands RIAD Bil Mil Thou
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. Interest income and expense booked at foreign offices, Edge and Agreement subsidiaries,
and IBFs:
a. Interest income booked .......................................................................... 4837 N/A 1.a.
b. Interest expense booked ......................................................................... 4838 N/A 1.b.
c. Net interest income booked at foreign offices, Edge and Agreement subsidiaries, and IBFs
(item 1.a minus 1.b) ............................................................................ 4839 N/A 1.c.
2. Adjustments for booking location of international operations:
a. Net interest income attributable to international operations booked at domestic offices ......... 4840 N/A 2.a.
b. Net interest income attributable to domestic business booked at foreign offices ................. 4841 N/A 2.b.
c. Net booking location adjustment (item 2.a minus 2.b) ............................................ 4842 N/A 2.c.
3. Noninterest income and expense attributable to international operations:
a. Noninterest income attributable to international operations ..................................... 4097 N/A 3.a.
b. Provision for loan and lease losses attributable to international operations .................... 4235 N/A 3.b.
c. Other noninterest expense attributable to international operations .............................. 4239 N/A 3.c.
d. Net noninterest income (expense) attributable to international operations (item 3.a
minus 3.b and 3.c) .............................................................................. 4843 N/A 3.d.
4. Estimated pretax income attributable to international operations before capital allocation
adjustment (sum of items 1.c, 2.c, and 3.d) ........................................................ 4844 N/A 4.
5. Adjustments to pretax income for internal allocations to international operations to reflect
the effects of equity capital on overall bank funding costs ........................................ 4845 N/A 5.
6. Estimated pretax income attributable to international operations after capital allocation
adjustment (sum of items 4 and 5) .................................................................. 4846 N/A 6.
7. Income taxes attributable to income from international operations as estimated in item 6 ........... 4797 N/A 7.
8. Estimated net income attributable to international operations (item 6 minus 7) ..................... 4341 N/A 8.
</TABLE>
Memoranda
- ------------
<TABLE>
<CAPTION>
Dollar Amounts in Thousands RIAD Bil Mil Thou
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. Intracompany interest income included in item 1.a above ............................................ 4847 N/A M.1.
2. Intracompany interest expense included in item 1.b above ........................................... 4848 N/A M.2.
</TABLE>
Part II. Supplementary Details on Income from International Operations Required
by the Departments of Commerce and Treasury for Purposes of the U.S.
International Accounts and the U.S. National Income and Product Accounts
<TABLE>
<CAPTION>
Year-to-date
Dollar Amounts in Thousands RIAD Bil Mil Thou
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. Interest income booked at IBFs ..................................................................... 4849 N/A 1.
2. Interest expense booked at IBFs .................................................................... 4850 N/A 2.
3. Noninterest income attributable to international operations booked at domestic offices
(excluding IBFs):
a. Gains (losses) and extraordinary items .......................................................... 5491 N/A 3.a.
b. Fees and other noninterest income ............................................................... 5492 N/A 3.b.
4. Provision for loan and lease losses attributable to international operations booked at
domestic offices (excluding IBFs) .................................................................. 4852 N/A 4.
5. Other noninterest expense attributable to international operations booked at domestic offices
(excluding IBFs) ................................................................................... 4853 N/A 5.
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Call Date: 3/31/94 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RI-7
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: 02499
Schedule RI-E--Explanations
Schedule RI-E is to be completed each quarter on a calendar year-to-date basis.
Detail all adjustments in Schedules RI-A and RI-B, all extraordinary items and
other adjustments in Schedule RI, and all significant items of other noninterest
income and other noninterest expense in Schedule RI. (See instructions for
details.)
[1495]
Year-to-date
------------------
Dollar Amounts in Thousands RIAD Bil Mil Thou
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. All other noninterest income (from Schedule RI, item 5.f.(2))
Report amounts that exceed 10% of Schedule RI, item 5.f.(2):
a. Net gains on other real estate owned.......................................................... 5415 0 1.a.
b. Net gains on sales of loans................................................................... 5416 0 1.b.
c. Net gains on sales of premises and fixed assets............................................... 5417 0 1.c.
Itemize and describe the three largest other amounts that exceed 10% of
Schedule RI, item 5.f.(2):
d. [TEXT 4461] Chargeback to affiliates 4461 8,494 1.d.
e. [TEXT 4462] 4462 1.e.
f. [TEXT 4463] 4463 1.f.
2. Other noninterest expense (from Schedule RI, item 7.c):
a. Amortization expense of intangible assets..................................................... 4531 2,450 2.a.
Report amounts that exceed 10% of Schedule RI, item 7.c:
b. Net losses on other real estate owned......................................................... 5418 0 2.b.
c. Net losses on sales of loans.................................................................. 5419 0 2.c.
d. Net losses on sales of premises and fixed assets.............................................. 5420 0 2.d.
Itemize and describe the three largest other amounts that exceed 10% of Schedule RI, item 7.c:
e. [TEXT 4464] 4464 2.e.
f. [TEXT 4467] 4467 2.f.
g. [TEXT 4468] 4468 2.g.
3. Extraordinary items and other adjustments (from Schedule RI, item 11.a) and applicable income
tax effect (from Schedule RI, item 11.b) (itemize and describe all extraordinary items
and other adjustments):
a. (1) [TEXT 4469] 4469 3.a.(1)
(2) Applicable income tax effect [RIAD 4486] 3.a.(2)
b. (1) [TEXT 4487} 4487 3.b.(1)
(2) Applicable income tax effect [RIAD 4488] 3.b.(2)
c. (1) [TEXT 4489] 4489 3.c.(1)
(2) Applicable income tax effect [RIAD 4491] 3.c.(2)
4. Equity capital adjustments from amended Reports of Income (from Schedule RI-A,
item 2) (itemize and describe all adjustments):
a. [TEXT 4492] 4492 4.a.
b. [TEXT 4493] 4493 4.b.
5. Cumulative effect of changes in accounting principles from prior years (from Schedule RI-A,
item 9) (itemize and describe all changes in accounting principles):
a. [TEXT 4494] 4494 5.a.
b. [TEXT 4495] 4495 5.b.
6. Corrections of material accounting errors from prior years (from Schedule RI-A, item 10)
(itemize and describe all corrections):
a. [TEXT 4496] 4496 6.a.
b. [TEXT 4497] 4497 6.b.
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Call Date: 3/31/94 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RI-8
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: 02499
Schedule RI-E--Continued
Year-to-date
------------------
Dollar Amounts in Thousands RIAD Bil Mil Thou
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
7. Other transactions with parent holding company (from Schedule RI-A, item 13)
(itemize and describe all such transactions):
a. [TEXT 4498] 4498 7.a.
b. [TEXT 4499] 4499 7.b.
8. Adjustments to allowance for loan and lease losses (from Schedule RI-B, part II, item 5)
(itemize and describe all adjustments):
a. [TEXT 4521] 4521 8.a.
b. [TEXT 4522] 4522 8.b.
------------------
1498 1499
------------------
9. Other explanations (the space below is provided for the bank to briefly describe, at its
option, any other significant items affecting the Report of Income):
No comment [_] (RIAD 4769)
Other explanations (please type or print clearly):
(TEXT 4769)
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Call Date: 3/31/94 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-1
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: 02499
Consolidated Report of Condition for Insured Commercial and State-Chartered
Savings Bank for March 31, 1994
All schedules are to be reported in thousands of dollars. Unless otherwise
indicated, report the amount outstanding as of the last business day of the
quarter.
Schedule RC--Balance Sheet
C400
-------------------
Dollar Amounts in Thousands RCFD Bil Mil Thou
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
1. Cash and balances due from depository institutions (from Schedule RC-A):
a. Noninterest-bearing balances and currency and coin(1)............................................. 0081 904,815 1.a.
b. Interest-bearing balances(2)...................................................................... 0071 200,000 1.b.
2. Securities:
a. Held-to-maturity securities (from Schedule RC-B, column A)........................................ 1754 3,503,554 2.a.
b. Available-for-sale securities (from Schedule RC-B, column D)...................................... 1773 1,011,545 2.b.
3. Federal funds sold and securities purchased under agreements to resell in domestic offices
of the bank and of its Edge and Agreement subsidiaries, and in IBFs:
a. Federal funds sold................................................................................ 0276 0 3.a.
b. Securities purchased under agreements to resell................................................... 0277 0 3.b.
4. Loans and lease financing receivables:
a. Loans and leases, net of unearned income (from Schedule RC-C) RCFD 2122 8,266,522 4.a.
b. LESS: Allowance for loan and lease losses................................. RCFD 3123 334,383 4.b.
c. LESS: Allocated transfer risk reserve..................................... RCFD 3128 0 4.c.
d. Loans and leases, net of unearned income,
allowance, and reserve (item 4.a minus 4.b and 4.c)............................................... 2125 7,932,139 4.d.
5. Assets held in trading accounts...................................................................... 3545 0 5.
6. Premises and fixed assets (including capitalized leases)............................................. 2145 168,167 6.
7. Other real estate owned (from Schedule RC-M)......................................................... 2150 20,657 7.
8. Investments in unconsolidated subsidiaries and associated companies (from Schedule RC-M)............. 2130 0 8.
9. Customers' liability to this bank on acceptances outstanding......................................... 2155 31,157 9.
10. Intangible assets (from Schedule RC-M)............................................................... 2143 72,849 10.
11. Other assets (from Schedule RC-F).................................................................... 2160 648,388 11.
12. Total assets (sum of items 1 through 11)............................................................. 2170 14,493,271 12.
</TABLE>
- -----------
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held in trading accounts.
11
<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Call Date: 3/31/94 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-2
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: 02499
Schedule RC--Continued
Dollar Amounts in Thousands Bil Mil Thou
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LIABILITIES
13. Deposits:
a. In domestic offices (sum of totals of columns A and C from Schedule RC-E, part I)............ RCON 2200 7,548,837 13.a.
(1) Noninterest-bearing(1)........................................... RCON 6631 2,344,664 13.a.(1)
(2) Interest-bearing................................................. RCON 6636 5,204,193 13.a.(2)
b. In foreign offices, Edge and Agreement subsidiaries, and IBFs (from Schedule RC-E,
part II)..................................................................................... RCFN 2200 243,933 13.b.
(1) Noninterest-bearing.............................................. RCFN 6631 0 13.b.(1)
(2) Interest-bearing................................................. RCFN 6636 243,933 13.b.(2)
14. Federal funds purchased and securities sold under agreements to repurchase in domestic
offices of the bank and of its Edge and Agreement subsidiaries, and in IBFs:
a. Federal funds purchased...................................................................... RCFD 0278 1,824,426 14.a.
b. Securities sold under agreements to repurchase............................................... RCFD 0279 3,162,509 14.b.
15. a. Demand notes issued to the U.S. Treasury..................................................... RCON 2840 168,554 15.a.
b. Trading liabilities.......................................................................... RCFD 3548 7,085 15.b.
16. Other borrowed money:
a. With original maturity of one year or less................................................... RCFD 2332 279,380 16.a.
b. With original maturity of more than one year................................................. RCFD 2333 0 16.b.
17. Mortgage indebtedness and obligations under capitalized leases.................................. RCFD 2910 9,880 17.
18. Bank's liability on acceptances executed and outstanding........................................ RCFD 2920 31,157 18.
19. Subordinated notes and debentures............................................................... RCFD 3200 0 19.
20. Other liabilities (from Schedule RC-G).......................................................... RCFD 2930 80,525 20.
21. Total liabilities (sum of items 13 through 20).................................................. RCFD 2948 13,356,306 21.
22. Limited-Life preferred stock and related surplus................................................ RCFD 3282 0 22.
EQUITY CAPITAL
23. Perpetual preferred stock and related surplus................................................... RCFD 3838 0 23.
24. Common stock.................................................................................... RCFD 3230 19,489 24.
25. Surplus (exclude all surplus related to preferred stock)........................................ RCFD 3839 849,190 25.
26. a. Undivided profits and capital reserves....................................................... RCFD 3632 281,158 26.a.
b. Net unrealized holding gains (losses) on available-for-sale securities....................... RCFD 8434 (12,872) 26.b.
27. Cumulative foreign currency translation adjustments............................................. RCFD 3284 0 27.
28. Total equity capital (sum of items 23 through 27)............................................... RCFD 3210 1,136,965 28.
29. Total liabilities, limited-life preferred stock, and equity capital (sum of items 21, 22,
and 28)......................................................................................... RCFD 3300 14,493,271 29.
Memorandum
To be reported only with the March Report of Condition.
1. Indicate in the box at the right the number of the statement below that best describes the
most comprehensive level of auditing work performed for the bank by independent external Number
auditors as of any date during 1993............................................................. RCFD 6724 2 M.1.
</TABLE>
1 = Independent audit of the bank conducted in accordance with generally
accepted auditing standards by a certified public accounting firm which
submits a report on the bank
2 = Independent audit of the bank's parent holding company conducted in
accordance with generally accepted auditing standards by a certified public
accounting firm which submits a report on the consolidated holding company
(but not on the bank separately)
3 = Directors' examination of the bank conducted in accordance with generally
accepted auditing standards by a certified public accounting firm (may be
required by state chartering authority)
4 = Directors' examination of the bank performed by other external auditors
(may be required by state chartering authority)
5 = Review of the bank's financial statements by external auditors
6 = Compilation of the bank's financial statements by external auditors
7 = Other audit procedures (excluding tax preparation work)
8 = No external audit work
- ----------
(1) Includes total demand deposits and noninterest-bearing time and savings
deposits.
12
<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Call Date: 3/31/94 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-3
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: 02499
Schedule RC-A--Cash and Balances Due From Depository Institutions
Exclude assets held in trading accounts.
C405
(Column A) (Column B)
Consolidated Domestic
Bank Offices
------------------ ------------------
Dollar Amounts in Thousands RCFD Bil Mil Thou RCON Bil Mil Thou
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1. Cash items in process of collection, unposted debits, and currency and
coin ...................................................................... 0022 596,851 1.
a. Cash items in process of collection and unposted debits ................ 0020 483,959 1.a.
b. Currency and coin ...................................................... 0080 112,892 1.b.
2. Balances due from depository institutions in the U.S. ..................... 0082 86,207 2.
a. U.S. branches and agencies of foreign banks (including their IBFs) ..... 0083 0 2.a.
b. Other commercial banks in the U.S. and other depository institutions
in the U.S. (including their IBFs) ..................................... 0085 86,207 2.b.
3. Balances due from banks in foreign countries and foreign central banks .... 0070 204,415 3.
a. Foreign branches of other U.S. banks ................................... 0073 0 3.a.
b. Other banks in foreign countries and foreign central banks ............. 0074 204,415 3.b.
4. Balances due from Federal Reserve Banks ................................... 0090 217,342 0090 217,342 4.
5. Total (sum of items 1 through 4) (total of column A must equal
Schedule RC, sum of items 1.a and 1.b) .................................... 0010 1,104,815 0010 1,104,815 5.
</TABLE>
<TABLE>
<CAPTION>
Memorandum Dollar Amounts in Thousands RCON Bil Mil Thou
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. Noninterest-bearing balances due from commercial banks in the U.S. (included in item 2,
column B above) .................................................................................... 0050 86,207 M.1.
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Call Date: 3/31/94 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-4
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: 02499
Schedule RC-B--Securities
Exclude assets held in trading accounts.
C410
Held-to-maturity Available-for-sale
--------------------------------------- ---------------------------------------
(Column A) (Column B) (Column C) (Column D)
Amortized Cost Fair Value Amortized Cost Fair Value(1)
------------------ ------------------ ------------------ ------------------
Dollar Amounts in Thousands RCFD Bil Mil Thou RCFD Bil Mil Thou RCFD Bil Mil Thou RCFD Bil Mil Thou
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1. U.S. Treasury securities ........... 0211 1,048,235 0213 1,011,643 1286 758,370 1287 741,321 1.
2. U.S. Government agency
and corporation obligations
(exclude mortgage-backed
securities):
a. Issued by U.S. Govern-
ment agencies(2) ................. 1289 0 1290 0 1291 0 1293 0 2.a.
b. Issued by U.S.
Government-sponsored
agencies(3) ...................... 1294 0 1295 0 1297 0 1298 0 2.b.
3. Securities issued by states
and political subdivisions
in the U.S.:
a. General obligations .............. 1676 0 1677 0 1678 138 1679 142 3.a.
b. Revenue obligations .............. 1681 0 1686 0 1690 0 1691 0 3.b.
c. Industrial development
and similar obligations .......... 1694 0 1695 0 1696 0 1697 0 3.c.
4. Mortgage-backed
securities (MBS):
a. Pass-through securities:
(1) Guaranteed by
GNMA ......................... 1698 0 1699 0 1701 91,023 1702 94,713 4.a.(1)
(2) Issued by FNMA
and FHLMC .................... 1703 1,669,092 1705 1,656,370 1706 0 1707 0 4.a.(2)
(3) Privately-issued ............. 1709 20,194 1710 19,468 1711 0 1713 0 4.a.(3)
b. CMOs and REMICs:
(1) Issued by FNMA
and FHLMC .................... 1714 0 1715 0 1716 0 1717 0 4.b.(1)
(2) Privately-issued
and collateralized
by MBS issued or
guaranteed by
FNMA, FHLMC, or
GNMA ......................... 1718 0 1719 0 1731 0 1732 0 4.b.(2)
(3) All other privately-
issued ....................... 1733 37,690 1734 37,382 1735 155,019 1736 148,784 4.b.(3)
5. Other debt securities:
a. Other domestic debt
securities ....................... 1737 725,093 1738 726,925 1739 0 1741 0 5.a.
b. Foreign debt
securities ....................... 1742 3,250 1743 3,264 1744 0 1746 0 5.b.
- ---------------
(1) Includes equity securities without readily determinable fair values at historical cost in item 6.c, column D.
(2) Includes Small Business Administration "Guaranteed Loan Pool Certificates," U.S. Maritime Administration obligations, and
Export-Import Bank participation certificates.
(3) Includes obligations (other than pass-through securities, CMOs, and REMICs) issued by the Farm Credit System, the Federal Home
Loan Bank System, the Federal Home Loan Mortgage Corporation, the Federal National Mortgage Association, the Financing
Corporation, Resolution Funding Corporation, the Student Loan Marketing Association, and the Tennessee Valley Authority.
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Call Date: 3/31/94 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-5
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: 02499
Schedule RC-B--Continued
--------------------------------------------------------------------------------------------
Held-to-maturity Available-for-sale
--------------------------------------------------------------------------------------------
(Column A) (Column B) (Column C) (Column D)
Amortized Cost Fair Value Amortized Cost Fair Value (1)
--------------------------------------------------------------------------------------------
Dollar Amounts in Thousands RCFD Bil Mil Thou RCFD Bil Mil Thou RCFD Bil Mil Thou RCFD Bil Mil Thou
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
6. Equity securities:
a. Investments in mutual
funds................. 1747 0 1748 0 6.a.
b. Other equity securi-
ties with readily
determinable fair
values................ 1749 0 1751 0 6.b.
c. All other equity
securities(1)......... 1752 26,585 1753 26,585 6.c.
7. Total (sum of items 1
through 6) (total of
column A must equal
Schedule RC, item 2.a)
(total of column D must
equal Schedule RC,
item 2.b)................ 1754 3,503,554 1771 3,455,052 1772 1,031,135 1773 1,011,545 7.
--------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Memoranda C412
--------------------
Dollar Amounts in Thousands RCFD Bil Mil Thou
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. Pledged securities(2)...................................................................... 0416 3,719,888 M.1.
2. Maturity and repricing data for debt securities(2)(3)(4) (excluding those in nonaccrual
status):
a. Fixed rate debt securities with a remaining maturity of:
(1) Three months or less................................................................ 0343 16,585 M.2.a.(1)
(2) Over three months through 12 months................................................. 0344 0 M.2.a.(2)
(3) Over one year through five years.................................................... 0345 2,062,474 M.2.a.(3)
(4) Over five years..................................................................... 0346 2,236,321 M.2.a.(4)
(5) Total fixed rate debt securities (sum of Memorandum items 2.a.(1) through 2.a.(4)).. 0347 4,315,380 M.2.a.(5)
b. Floating rate debt securities with a repricing frequency of:
(1) Quarterly or more frequently........................................................ 4544 20,194 M.2.b.(1)
(2) Annually or more frequently, but less frequently than quarterly..................... 4545 152,940 M.2.b.(2)
(3) Every five years or more frequently, but less frequently than annually.............. 4551 0 M.2.b.(3)
(4) Less frequently than every five years............................................... 4552 0 M.2.b.(4)
(5) Total floating rate debt securities (sum of Memorandum items 2.b.(1)
through 2.b.(4)).................................................................... 4553 173,134 M.2.b.(5)
c. Total debt securities (sum of Memorandum items 2.a.(5) and 2.b.(5)) (must equal
total debt securities from Schedule RC-B, sum of items 1 through 5, columns A
and D, minus nonaccrual debt securities included in Schedule RC-N, item 9, column C).... 0393 4,488,514 M.2.c.
3. Not applicable
4. Held-to-maturity debt securities restructured and in compliance with modified terms
(included in Schedule RC-8, items 3 through 5, column A, above)........................... 5365 0 M.4.
5. Not applicable
6. Floating rate debt securities with a remaining maturity of one year or less(2) (included
in Memorandum item 2.b.(5) above).......................................................... 5519 2,000 M.6.
7. Amortized cost of held-to-maturity securities sold or transferred to available-for-sale
or trading securities during the calendar year-to-date..................................... 1778 0 M.7.
--------------------
</TABLE>
- --------------------
(1) Includes equity securities without readily determinable fair values
at historical cost in item 6.c, column D.
(2) Includes held-for-maturity securities at amortized cost and available-
for-sale securities at fair value.
(3) Exclude equity securities, e.g., investments in mutual funds, Federal
Reserve stock, common stock, and preferred stock.
(4) Memorandum item 2 is not applicable to savings banks that must complete
supplemental Schedule RC-J.
15
<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION CALL DATE: 3/31/94 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-6
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: 02499
Schedule RC-C--Loans and Lease Financing Receivables
Part I. Loans and Leases
Do not deduct the allowance for loan and lease losses from amounts
reported in this schedule. Report total loans and leases, net of unearned
income. Exclude assets held in trading accounts.
C415
---------------------------------------------------
(Column A) (Column B)
Consolidated Domestic
Bank Offices
---------------------------------------------------
Dollar Amounts in Thousands RCFD Bil Mil Thou RCON Bil Mil Thou
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1. Loans secured by real estate................................. 1410 4,370,884 1.
a. Construction and land development......................... 1415 89,497 1.a.
b. Secured by farmland (including farm residential and other
improvements)............................................. 1420 1,482 1.b.
c. Secured by 1-4 family residential properties:
(1) Revolving, open-end loans secured by 1-4 family
residential properties and extended under lines of
credit................................................ 1797 394,116 1.c.(1)
(2) All other loans secured by 1-4 family residential
properties:
(a) Secured by first liens............................ 5367 2,536,461 1.c.(2)(a)
(b) Secured by junior liens........................... 5368 179,781 1.c.(2)(b)
d. Secured by multifamily (5 or more) residential properties. 1460 84,769 1.d.
e. Secured by nonfarm nonresidential properties.............. 1480 1,084,778 1.e.
2. Loans to depository institutions:
a. To commercial banks in the U.S............................ 1505 6,581 2.a.
(1) To U.S. branches and agencies of foreign banks........ 1506 0 2.a.(1)
(2) To other commercial banks in the U.S. ................ 1507 6,581 2.a.(2)
b. To other depository institutions in the U.S. ............. 1517 0 1517 0 2.b.
c. To banks in foreign countries............................. 1510 0 2.c.
(1) To foreign branches of other U.S. banks............... 1513 0 2.c.(1)
(2) To other banks in foreign countries................... 1516 0 2.c.(2)
3. Loans to finance agricultural production and other loans
to farmers................................................... 1590 1,259 1590 1,259 3.
4. Commercial and industrial loans:
a. To U.S. addressees (domicile)............................. 1763 2,625,120 1763 2,625,120 4.a.
b. To non-U.S. addressees (domicile)......................... 1764 0 1764 0 4.b.
5. Acceptances of other banks:
a. Of U.S. banks............................................. 1756 154 1756 154 5.a.
b. Of foreign banks.......................................... 1757 0 1757 0 5.b.
6. Loans to individuals for household, family, and other
personal expenditures (i.e., consumer loans) (includes
purchased paper)............................................. 1975 389,666 6.
a. Credit cards and related plans (includes check credit
and other revolving credit plans)......................... 2008 27,099 6.a.
b. Other (includes single payment, installment, and all
student loans)............................................ 2011 362,567 6.b.
7. Loans to foreign governments and official institutions
(including foreign central banks)............................ 2081 0 2081 0 7.
8. Obligations (other than securities and leases) of states and
political subdivisions in the U.S. (includes nonrated
industrial development obligations).......................... 2107 53,771 2107 53,771 8.
9. Other loans.................................................. 1563 820,827 9.
a. Loans for purchasing or carrying securities (secured and
unsecured)................................................ 1545 268,502 9.a.
b. All other loans (exclude consumer loans).................. 1564 552,325 9.b.
10. Lease financing receivables (net of unearned income)........ 2165 2,653 10.
a. Of U.S. addressees (domicile)............................ 2182 2,653 10.a.
b. Of non-U.S. addressees (domicile)........................ 2183 0 10.b.
11. LESS: Any unearned income on loans reflected in items
1-9 above................................................... 2123 4,393 2123 4,393 11.
12. Total loans and leases, net of unearned income (sum of
items 1 through 10 minus item 11) (total of column A must
equal Schedule RC, item 4.a)................................ 2122 8,266,522 2122 8,266,522 12.
---------------------------------------------------
</TABLE>
16
<PAGE>
CALL DATE: 3/31/94 ST-BK: 09-0590 FFIEC 031
Page RC-7
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION
Address: 777 MAIN STREET
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: 02499
Schedule RC-C--Continued
Part I. Continued
<TABLE>
<CAPTION>
------------------------------------
(Column A) (Column B)
Consolidated Domestic
Memoranda Bank Offices
------------------------------------
Dollar Amounts in Thousands RCFD Bil Mil Thou RCON Bil Mil Thou
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Commercial paper included in Schedule RC-C, part I, above.................. 1496 0 1496 0 M.1.
2. Loans and leases restructured and in compliance with modified terms
(included in Schedule RC-C, part I, above):
a. Loans secured by real estate:
(1) To U.S. addressees (domicile)....................................... 1687 29,848 M.2.a.(1)
(2) To non-U.S. addresses (domicile).................................... 1689 0 M.2.a.(2)
b. Loans to finance agricultural production and other loans to farmers..... 1613 0 M.2.b.
c. Commercial and industrial loans:
(1) To U.S. addressees (domicile)....................................... 1758 1,579 M.2.c.(1)
(2) To non-U.S. addressees (domicile)................................... 1759 0 M.2.c.(2)
d. All other loans (exclude loans to individuals for household, family,
and other personal expenditures......................................... 1615 0 M.2.d.
e. Lease financing receivables:
(1) Of U.S. addressees (domicile)....................................... 1789 0 M.2.e.(1)
(2) Of non-U.S. addressees (domicile)................................... 1790 0 M.2.e.(2)
f. Total (sum of Memorandum items 2.a through 2.e.......................... 1616 31,427 M.2.f.
3. Maturity and repricing data for loans and leases(1) (excluding those in
nonaccrual status):
a. Fixed rate loans and leases with a remaining maturity of:
(1) Three months or less................................................ 0348 411,426 M.3.a.(1)
(2) Over three months through 12 months................................. 0349 57,005 M.3.a.(2)
(3) Over one year through five years.................................... 0356 721,559 M.3.a.(3)
(4) Over five years..................................................... 0357 1,994,884 M.3.a.(4)
(5) Total fixed rate loans and leases (sum of Memorandum items
3.a.(1) through 3.a.(4))............................................ 0358 3,184,874 M.3.a.(5)
b. Floating rate loans with a repricing frequency of:
(1) Quarterly or more frequently........................................ 4554 4,434,366 M.3.b.(1)
(2) Annually or more frequently, but less frequently than quarterly..... 4555 310,256 M.3.b.(2)
(3) Every five years or more frequently, but less frequently than
annually............................................................ 4561 182,904 M.3.b.(3)
(4) Less frequently than every five years............................... 4564 0 M.3.b.(4)
(5) Total floating rate loans (sum of Memorandum items 3.b.(1) through
3.b.(4))............................................................ 4567 4,927,526 M.3.b.(5)
c. Total loans and leases (sum of Memorandum items 3.a.(5) and 3.b.(5))
(must equal the sum of total loans and leases, net, from Schedule RC-C,
part I, item 12, plus unearned income from Schedule RC-C, part I,
item 11, minus total nonaccrual loans and leases from Schedule RC-N,
sum of items 1 through 8, column C)..................................... 1479 8,112,400 M.3.c.
4. Loans to finance commercial real estate, construction, and land development
activities (not secured by real estate) included in Schedule RC-C, part I,
items 4 and 9, column A, page RC-6(2)...................................... 2746 40,590 M.4.
5. Loans and leases held for sale (included in Schedule RC-C, part I, above).. 5369 233,342 M.5.
6. Adjustable rate closed-end loans secured by first liens on 1-4 family
residential properties (included in Schedule RC-C, part I, item 1.c.(2)(a), RCON Bil Mil Thou
column B, page RC-6)....................................................... 5370 981,320 M.6.
</TABLE>
- -------------
(1) Memorandum item 3 is not applicable to savings banks that must complete
supplemental Schedule RC-J.
(2) Exclude loans secured by real estate that are included in Schedule RC-C,
part 1, item 1, column A.
17
<PAGE>
Call Date: 3/31/94 ST-BK: 09-0590 FFIEC 031
Page RC-8
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION
Address: 777 MAIN STREET
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: 02499
Schedule RC-D--Trading Assets and Liabilities
Schedule RC-D is to be completed only by banks with $1 billion or more in total
assets or with $2 billion or more in par/notional amount of interest rate,
foreign exchange rate, and other commodity and equity contracts (as reported in
Schedule RC-L, items 11, 12, and 13).
<TABLE>
<CAPTION>
C420
Dollar Amounts in Thousands Bil Mil Thou
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
1. U.S. Treasury securities in domestic offices......................... RCON 3531 0 1.
2. U.S. Government agency and corporation obligations in domestic
offices (exclude mortgage-backed securities)......................... RCON 3532 0 2.
3. Securities issued by states and political subdivisions in the U.S.
in domestic offices.................................................. RCON 3533 0 3.
4. Mortgage-basked securities in domestic offices:
a. Pass-through securities issued or guaranteed by FNMA, FHLMC, or
GNMA.............................................................. RCON 3534 0 4.a.
b. CMOs and REMICs issued by FNMA or FHLMC........................... RCON 3535 0 4.b.
c. All other......................................................... RCON 3536 0 4.c.
5. Other debt securities in domestic offices............................ RCON 3537 0 5.
6. Certificates of deposit in domestic offices.......................... RCON 3538 0 6.
7. Commercial paper in domestic offices................................. RCON 3539 0 7.
8. Bankers acceptances in domestic offices.............................. RCON 3540 0 8.
9. Other trading assets in domestic offices............................. RCON 3541 0 9.
10. Trading assets in foreign offices.................................... RCON 3542 0 10.
11. Revaluation gains on interest rate, foreign exchange rate, and other
commodity and equity contracts:
a. In domestic offices............................................... RCON 3543 0 11.a.
b. In foreign offices................................................ RCFN 3544 0 11.b.
12. Total trading assets (sum of items 1 through 11) (must equal Schedule
RC, item 5).......................................................... RCFD 3545 0 12.
LIABILITIES Bil Mil Thou
- -------------------------------------------------------------------------------------------------
13. Liability for short positions........................................ RCFD 3546 0 13.
14. Revaluation losses on interest rate, foreign exchange rate, and
other commodity and equity contracts................................. RCFD 3547 7,085 14.
15. Total trading liabilities (sum of items 13 and 14) (must equal
Schedule RC, item 15.b).............................................. RCFD 3548 7,085 15.
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Call Date: 3/31/94 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-9
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: 02499
Schedule RC-E--Deposit Liabilities
Part I. Deposits in Domestic Offices
[C425]
Nontransaction
Transaction Accounts Accounts
---------------------------------------- ------------------
(Column A) (Column B) (Column C)
Total transaction Memo: Total Total
accounts (including demand deposits nontransaction
total demand (included in accounts
deposits) column A) (including MMDAs)
-------------------------------------------------------------
Dollar Amounts in Thousands RCON Bil Mil Thou RCON Bil Mil Thou RCON Bil Mil Thou
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Deposits of:
1. Individuals, partnerships, and corporations........... 2201 2,834,904 2240 1,894,010 2346 4,012,928 1.
2. U.S. Government....................................... 2202 6,768 2280 6,768 2520 0 2.
3. States and political subdivisions in the U.S.......... 2203 175,226 2290 150,389 2530 224,034 3.
4. Commercial banks in the U.S........................... 2206 144,590 2310 144,590 4.
a. U.S. branches and agencies of foreign banks........ 2347 0 4.a.
b. Other commercial banks in the U.S.................. 2348 1,500 4.b.
5. Other depositary institutions in the U.S.............. 2207 102,800 2312 102,800 2349 0 5.
6. Banks in foreign countries............................ 2213 1,633 2320 1,633 6.
a. Foreign branches of other U.S. banks............... 2367 0 6.a.
b. Other banks in foreign countries................... 2373 0 6.b.
7. Foreign governments and official institutions
(including foreign central banks)..................... 2216 298 2300 298 2377 0 7.
8. Certified and official checks......................... 2330 44,176 2330 44,176 8.
9. Total (sum of items 1 through 8) (sum of columns
A and C must equal Schedule RC, item 13.a)............ 2215 3,310,395 2210 2,344,664 2385 4,238,462 9.
-------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Memoranda Dollar Amounts in Thousands RCON Bil Mil Thou
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. Selected components of total deposits (i.e., sum of item 9, columns A and C):
a. Total Individual Retirement Accounts (IRAs) and Keogh Plan accounts........................... 6835 785,416 M.1.a.
b. Total brokered deposits....................................................................... 2365 19,857 M.1.b.
c. Fully insured brokered deposits (included in Memorandum item 1.b above):
(1) Issued in denominations of less than $100,000............................................. 2343 48 M.1.c.(1)
(2) Issued either in denominations of $100,000 or in denominations greater than $100,000
and participated out by the broker in shares of $100,000 or less.......................... 2344 13,357 M.1.c.(2)
d. Total deposits denominated in foreign currencies.............................................. 3776 0 M.1.d.
e. Preferred deposits (uninsured deposits of states and political subdivisions in the U.S.
reported in item 3 above which are secured or collateralized as required under state law)..... 5590 399,259 M.1.e.
2. Components of total nontransaction accounts (sum of Memoranda items 2.a through 2.d must
equal item 9, column C above):
a. Savings deposits:
(1) Money market deposit accounts (MMDAs)..................................................... 6810 533,488 M.2.a.(1)
(2) Other savings deposits (excludes MMDAs)................................................... 0352 2,040,291 M.2.a.(2)
b. Total time deposits of less than $100,000..................................................... 6648 1,332,962 M.2.b.
c. Time certificates of deposit of $100,000 or more.............................................. 6645 331,721 M.2.c.
d. Open-account time deposits of $100,000 or more................................................ 6646 0 M.2.d.
3. All NOW accounts (included in column A above).................................................... 2398 965,731 M.3.
------------------
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Call Date: 3/31/94 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-10
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: 02499
Schedule RC-E--Continued
Part I. Continued
Memoranda (continued)
Deposit Totals for FDIC Insurance Assessments(1)
Dollar Amounts in Thousands RCON Bil Mil Thou
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
4. Total deposits in domestic offices (sum of item 9, column A and item 9, column C)
(must equal Schedule RC, item 13.a).............................................................. 2200 7,548,857 M.4.
a. Total demand deposits (must equal item 9, column B)........................................... 2210 2,344,664 M.4.a.
b. Total time and savings deposits(2) (must equal item 9, column A plus item 9, column C
minus item 9, column B)....................................................................... 2350 5,204,193 M.4.b.
</TABLE>
- -----------------
(1) An amended Certified Statement should be submitted to the FDIC if the
deposit totals reported in this item are amended after semiannual Certified
Statement originally covering this report date has been filed with the FDIC.
(2) For FDIC insurance assessment purposes, "total time and savings deposits"
consists of nontransaction accounts and all transaction accounts other than
demand deposits.
<TABLE>
<CAPTION>
Dollar Amounts in Thousands RCON Bil Mil Thou
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
5. Time deposits of less than $100,000 and open-account time deposits of $100,000 or more
(included in Memorandum items 2.b and 2.d above) with a remaining maturity or repricing
frequency of:(1)
a. Three months or less.......................................................................... 0359 565,968 M.5.a.
b. Over three months through 12 months (but not over 12 months).................................. 3644 322,670 M.5.b.
6. Maturity and repricing data for time certificates of deposit of $100,000 or more:(1)
a. Fixed rate time certificates of deposit of $100,000 or more with a remaining maturity of:
(1) Three months or less...................................................................... 2761 226,799 M.6.a.(1)
(2) Over three months through 12 months....................................................... 2762 52,027 M.6.a.(2)
(3) Over one year through five years.......................................................... 2763 48,528 M.6.a.(3)
(4) Over five years........................................................................... 2765 4,367 M.6.a.(4)
(5) Total fixed rate time certificates of deposit of $100,000 or more (sum of
Memorandum items 6.a.(1) through 6.a.(4))................................................. 2767 331,721 M.6.a.(5)
b. Floating rate time certificates of deposit of $100,000 or more with a repricing frequency of:
(1) Quarterly or more frequently.............................................................. 4568 0 M.6.b.(1)
(2) Annually or more frequently, but less frequently than quarterly........................... 4569 0 M.6.b.(2)
(3) Every five years or more frequently, but less frequently than annually.................... 4571 0 M.6.b.(3)
(4) Less frequently than every five years..................................................... 4572 0 M.6.b.(4)
(5) Total floating rate time certificates of deposit of $100,000 or more (sum of
Memorandum items 6.b.(1) through 6.b.(4))................................................. 4573 0 M.6.b.(5)
c. Total time certificates of deposit of $100,000 or more (sum of Memorandum items 6.a.(5)
and 6.b.(5)) (must equal Memorandum item 2.c. above).......................................... 6645 331,721 M.6.c.
------------------
</TABLE>
- ------------------
(1) Memorandum items 5 and 6 are not applicable to savings banks that must
complete supplemental Schedule RC-J.
20
<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Call Date: 3/31/94 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-11
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: 02499
Schedule RC-E--Continued
Part II. Deposits in Foreign Offices (including Edge and
Agreement subsidiaries and IBFs)
Dollar Amounts in Thousands RCFN Bil Mil Thou
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Deposits of:
1. Individuals, partnerships, and corporations........................................................ 2621 243,933 1.
2. U.S. banks (including IBFs and foreign branches of U.S. banks)..................................... 2623 0 2.
3. Foreign banks (including U.S. branches and agencies of foreign banks, including their IBFs)........ 2625 0 3.
4. Foreign governments and official institutions (including foreign central banks).................... 2650 0 4.
5. Certified and official checks...................................................................... 2330 0 5.
6. All other deposits................................................................................. 2668 0 6.
7. Total (sum of items 1 through 6) (must equal Schedule RC, item 13.b)............................... 2200 243,933 7.
</TABLE>
Schedule RC-F--Other Assets
<TABLE>
<CAPTION>
[C430]
Dollar Amounts in Thousands Bil Mil Thou
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. Income earned, not collected on loans........................................................ RCFD 2164 37,243 1.
2. Net deferred tax assets(1)................................................................... RCFD 2148 120,018 2.
3. Excess residential mortgage servicing fees receivable........................................ RCFD 5371 39,725 3.
4. Other (itemize amounts that exceed 25% of this item)......................................... RCFD 2168 451,402 4.
a. [TEXT 3549] [RCFD 3549] 4.a.
b. [TEXT 3550] [RCFD 3550] 4.b.
c. [TEXT 3551] [RCFD 3551] 4.c.
5. Total (sum of items 1 through 4) must equal Schedule RC, item 11)............................ RCFD 2160 648,388 5.
Memorandum Dollar Amounts in Thousands Bil Mil Thou
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. Deferred tax assets disallowed for regulaory capital purposes................................ RCFD 5610 8,491 M.1.
</TABLE>
Schedule RC-G--Other Liabilities
<TABLE>
<CAPTION>
[C435]
Dollar Amounts in Thousands Bil Mil Thou
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. a. Interest accrued and unpaid on deposits in domestic offices(2)............................ RCON 3645 6,556 1.a.
b. Other expenses accrued and unpaid (includes accrued income taxes payable)................. RCFD 3646 58,026 1.b.
2. Net deferred tax liabilities(1).............................................................. RCFD 3049 0 2.
3. Minority interest in consolidated subsidiaries............................................... RCFD 3000 0 3.
4. Other (itemize amounts that exceed 25% of this item)......................................... RCFD 2938 15,943 4.
a. [TEXT 3552] [RCFD 3552] 4.a.
b. [TEXT 3553] [RCFD 3553] 4.b.
a. [TEXT 3554] [RCFD 3554] 4.c.
5. Total (sum of items 1 through 4) must equal Schedule RC, item 20)............................ RCFD 2930 80,525 5.
</TABLE>
- -----------
(1) See discussion of deferred income taxes in Glossary entry on "income
taxes."
(2) For savings banks, include "dividends" accrued and unpaid on deposits.
21
<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Call Date: 3/31/94 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-12
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: 02499
Schedule RC-H-Selected Balance Sheet Items for Domestic Offices
C440
Domestic Offices
Dollar Amounts in Thousands RCON Bil Mil Thou
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. Customers' liability to this bank on acceptances outstanding....................................... 2155 31,157 1.
2. Bank's liability on acceptances executed and outstanding........................................... 2920 31,157 2.
3. Federal funds sold and securities purchased under agreements to resell............................. 1350 0 3.
4. Federal funds purchased and securites sold under agreements to repurchase.......................... 2800 4,986,935 4.
5. Other borrowed money............................................................................... 2850 279,380 5.
EITHER
6. Net due from own foreign offices, Edge and Agreement subsidiaries, and IBFs........................ 2163 N/A 6.
OR
7. Net due to own foreign offices, Edge and Agreement subsidiaries, and IBFs.......................... 2941 43,933 7.
8. Total assets (excludes net due from foreign offices, Edge and Agreement subsidiaries, and IBFs).... 2192 14,293,271 8.
9. Total liabilities (excludes net due to foreign offices, Edge and Agreement subsidiaries, and IBFs). 3129 13,112,371 9.
</TABLE>
<TABLE>
<CAPTION>
Items 10-17 include held-to-maturity and available-for-sale securities in domestic offices.
RCON Bil Mil Thou
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
10. U.S. Treasury securities.......................................................................... 1779 1,789,556 10.
11. U.S. Government agency and corporation obligations (exclude mortgage-backed securities)........... 1785 0 11.
12. Securities issued by states and political subdivisions in the U.S. ............................... 1786 142 12.
13. Mortgage-backed securities:
a. Pass-through securities:
(1) Issued or guaranteed by FNMA, FHLMC, or GNMA............................................... 1787 1,763,805 13.a.(1)
(2) Privately-issued........................................................................... 1869 20,194 13.a.(2)
b. CMOs and REMICs:
(1) Issued by FNMA and FHLMC................................................................... 1877 0 13.b.(1)
(2) Privately-issued........................................................................... 2253 186,474 13.b.(2)
14. Other domestic debt securities.................................................................... 3159 725,093 14.
15. Foreign debt securities........................................................................... 3160 3,250 15.
16. Equity securities:
a. Investments in mutual funds.................................................................... 3161 0 16.a.
b. Other equity securities with readily determinable fair values.................................. 3162 0 16.b.
c. All other equity securities.................................................................... 3169 26,585 16.c.
17. Total held-to-maturity and available-for-sale securities (sum of items 10 through 16)............. 3170 4,515,099 17.
</TABLE>
<TABLE>
<CAPTION>
Memorandum (to be completed only by banks with IBFs and other "foreign" offices)
Dollar Amounts in Thousands RCON Bil Mil Thou
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
EITHER
1. Net due from the IBF of the domestic offices of the reporting bank................................ 3051 N/A M.1.
OR
2. Net due to the IBF of the domestic offices of the reporting bank................................... 3059 N/A M.2.
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Call Date: 3/31/94 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-13
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: 02499
Schedule RC-I--Selected Assets and Liabilities of IBFs
To be completed only by banks with IBFs and other "foreign" offices.
[C445]
Dollar Amounts in Thousands RCFN Bil Mil Thou
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. Total IBF assets of the consolidated bank (component of Schedule RC, item 12)................. 2133 N/A 1.
2. Total IBF loans and lease financing receivables (component of Schedule RC-C, part I, item 12,
column A)..................................................................................... 2076 N/A 2.
3. IBF commercial and industrial loans (component of Schedule RC-C, part I, item 4, column A).... 2077 N/A 3.
4. Total IBF liabilities (component of Schedule RC, item 21)..................................... 2898 N/A 4.
5. IBF deposit liabilities due to banks, including other IBFs (component of Schedule RC-E,
part II, items 2 and 3)....................................................................... 2379 N/A 5.
6. Other IBF deposit liabilities (component of Schedule RC-E, part II, items 1, 4, 5, and 6)..... 2381 N/A 6.
Schedule RC-K--Quarterly Averages (1)
[C455]
Dollar Amounts in Thousands Bil Mil Thou
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
1. Interest-bearing balances due from depository institutions.................................... RCFD 3381 88,889 1.
2. U.S. Treasury securities and U.S. Government agency and corporation obligations(2)............ RCFD 3382 3,684,324 2.
3. Securities issued by states and political subdivisions in the U.S.(2)......................... RCFD 3383 145 3.
4. a. Other debt securities(2)................................................................... RCFD 3647 897,639 4.a.
b. Equity securities(3) (includes investments in mutual funds and Federal Reserve stock)...... RCFD 3648 25,573 4.b.
5. Federal funds sold and securities purchased under agreements to resell in domestic offices
of the bank and of its Edge and Agreement subsidiaries, and in IBFs........................... RCFD 3365 18,750 5.
6. Loans:
a. Loans in domestic offices:
(1) Total loans............................................................................ RCON 3360 8,044,221 6.a.(1)
(2) Loans secured by real estate........................................................... RCON 3385 4,291,796 6.a.(2)
(3) Loans to finance agricultural production and other loans to farmers.................... RCON 3386 1,446 6.a.(3)
(4) Commercial and industrial loans........................................................ RCON 3387 2,468,743 6.a.(4)
(5) Loans to individuals for household, family, and other personal expenditures............ RCON 3388 377,364 6.a.(5)
(6) Obligations (other than securities and leases) of states and political subdivisions
in the U.S. ........................................................................... RCON 3389 54,847 6.a.(6)
b. Total loans in foreign offices, Edge and Agreement subsidiaries, and IBFs.................. RCFN 3360 0 6.b.
7. Assets held in trading accounts............................................................... RCFD 3401 0 7.
8. Lease financing receivables (net of unearned income).......................................... RCFD 3484 2,425 8.
9. Total assets.................................................................................. RCFD 3368 14,016,825 9.
LIABILITIES
10. Interest-bearing transaction accounts in domestic offices (NOW accounts, ATS accounts,
and telephone and preauthorized transfer accounts) (exclude demand deposits).................. RCON 3485 950,655 10.
11. Nontransaction accounts in domestic offices:
a. Money market deposit accounts (MMDAs)...................................................... RCON 3486 525,558 11.a.
b. Other savings deposits..................................................................... RCON 3487 2,008,424 11.b.
c. Time certificates of deposit of $100,000 or more........................................... RCON 3345 431,476 11.c.
d. All other time deposits.................................................................... RCON 3469 1,354,641 11.d.
12. Interest-bearing deposits in foreign offices, Edge and Agreement subsidiaries, and IBFs....... RCFN 3404 152,789 12.
13. Federal funds purchased and securities sold under agreements to repurchase in domestic
offices of the bank and of its Edge and Agreement subsidiaries, and in IBFs................... RCFD 3353 4,537,597 13.
14. Other borrowed money.......................................................................... RCFD 3355 124,995 14.
</TABLE>
- ----------
(1) For all items, banks have the option of reporting either (1) an average of
daily figures for the quarter, or (2) an average of weekly figures (i.e.,
the Wednesday of each week of the quarter).
(2) Quarterly averages for all debt securities should be based on amortized
cost.
(3) Quarterly averages for all equity securities should be based on historical
cost.
23
<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Call Date: 3/31/94 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-14
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: 02499
Schedule RC-L--Off-Balance Sheet Items
Please read carefully the instructions for the preparation of Schedule RC-L.
Some of the amounts reported in Schedule RC-L are regarded as volume indicators
and not necessarily as measures of risk.
[C460]
Dollar Amounts in Thousands RCFD Bil Mil Thou
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. Unused commitments:
a. Revolving, open-end lines secured by 1-4 family residential properties, e.g., home
equity lines............................................................................... 3814 402,918 1.a.
b. Credit card lines.......................................................................... 3815 0 1.b.
c. Commercial real estate, construction, and land development:
(1) Commitments to fund loans secured by real estate....................................... 3816 51,143 1.c.(1)
(2) Commitments to fund loans not secured by real estate................................... 6550 24,282 1.c.(2)
d. Securities underwriting.................................................................... 3817 0 1.d.
e. Other unused commitments................................................................... 3818 4,258,577 1.e.
2. Financial standby letters of credit and foreign office guarantees............................. 3819 663,706 2.
a. Amount of financial standby letters of credit conveyed to others RCFD 3820 1,877 2.a.
3. Performance standby letters of credit and foreign office guarantees.......................... 3821 43,317 3.
a. Amount of performance standby letters of credit conveyed to
others............................................................ RCFD 3822 0 3.a.
4. Commercial and similar letters of credit...................................................... 3411 7,243 4.
5. Participations in acceptances (as described in the instructions) conveyed to others by
the reporting bank............................................................................ 3428 0 5.
6. Participations in acceptances (as described in the instructions) acquired by the reporting
(nonaccepting) bank........................................................................... 3429 0 6.
7. Securities borrowed........................................................................... 3432 0 7.
8. Securities lent (including customers' securities lent where the customer is indemnified
against loss by the reporting bank)........................................................... 3433 0 8.
9. Mortgages transferred (i.e., sold or swapped) with recourse that have been treated as sold
for Call Report purposes:
a. FNMA and FHLMC residential mortgage loan pools:
(1) Outstanding principal balance of mortgages transferred as of the report date........... 3650 146,238 9.a.(1)
(2) Amount of recourse exposure on these mortgages as of the report date................... 3651 146,238 9.a.(2)
b. Private (nongovernment-issued or -guaranteed) residential mortgage loan pools:
(1) Outstanding principal balance of mortgages transferred as of the report date........... 3652 0 9.b.(1)
(2) Amount of recourse exposure on these mortgages as of the report date................... 3653 0 9.b.(2)
c. Farmer Mac agricultural mortgage loan pools:
(1) Outstanding principal balance of mortgages transferred as of the report date........... 3654 0 9.c.(1)
(2) Amount of recourse exposure on these mortgages as of the report date................... 3655 0 9.c.(2)
10. When-issued securities:
a. Gross commitments to purchase.............................................................. 3434 0 10.a.
b. Gross commitments to sell.................................................................. 3435 0 10.b.
11. Interest rate contracts (exclude when-issued securities):
a. Notional value of interest rate swaps...................................................... 3450 2,206,000 11.a.
b. Futures and forward contracts.............................................................. 3823 4,144,000 11.b.
c. Option contracts (e.g., options on Treasuries):
(1) Written option contracts............................................................... 3824 1,293,000 11.c.(1)
(2) Purchased option contracts............................................................. 3825 2,108,000 11.c.(2)
12. Foreign exchange rate contracts:
a. Notional value of exchange swaps (e.g., cross-currency swaps).............................. 3826 0 12.a.
b. Commitments to purchase foreign currencies and U.S. dollar exchange (spot, forward,
and futures)............................................................................... 3415 6,711,984 12.b.
c. Option contracts (e.g., options on foreign currency):
(a) Written option contracts............................................................... 3827 0 12.c.(1)
(b) Purchased option contracts............................................................. 3828 0 12.c.(2)
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Call Date: 3/31/94 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-15
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: 02499
Schedule RC-L--Continued
C-461
Dollar Amounts in Thousands RCFD Bil Mil Thou
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
13. Contracts on other commodities and equities:
a. Notional value of other swaps (e.g., oil swaps) ............................................. 3829 0 13.a.
b. Futures and forward contracts (e.g., stock index and commodity--precious metals,
wheat, cotton, livestock--contracts) ........................................................ 3830 0 13.b.
c. Option contracts (e.g., options on commodities, individual stocks and stock indexes):
(1) Written option contracts ................................................................ 3831 0 13.c.(1)
(2) Purchased option contracts .............................................................. 3832 0 13.c.(2)
14. All other off-balance sheet liabilities (itemize and describe each component of this item
over 25% of Schedule RC, item 28, "Total equity capital" ....................................... 3430 0 14.
a. [TEXT 3555] [RCFD 3555] 14.a.
b. [TEXT 3556] [RCFD 3556] 14.b.
c. [TEXT 3557] [RCFD 3557] 14.c.
d. [TEXT 3558] [RCFD 3558] 14.d.
15. All other off-balance sheet assets (itemize and describe each component of this item
over 25% of Schedule RC, item 28, "Total equity capital") ...................................... 5591 0 15.
a. [TEXT 5592] [RCFD 5592] 15.a.
b. [TEXT 5593] [RCFD 5593] 15.b.
c. [TEXT 5594] [RCFD 5594] 15.c.
d. [TEXT 5595] [RCFD 5595] 15.d.
</TABLE>
<TABLE>
<CAPTION>
Memoranda Dollar Amounts in Thousands RCFD Bil Mil Thou
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. Not applicable
2. Not applicable
3. Unused commitments with an original maturity exceeding one year that are reported in
Schedule RC-L, items 1.a through 1.e, above (report only the unused portions of commitments
that are fee paid or otherwise legally binding) ................................................. 3833 2,544,660 M.3.
a. Participations in commitments with an original maturity
exceeding one year conveyed to others ................................[RCFD 3834] [20,453] M.3.a.
4. To be completed only by banks with $1 billion or more in total assets:
Standby letters of credit and foreign office guarantees (both financial and performance) issued
to non-U.S. addressees (domicile) included in Schedule RC-L, items 2 and 3, above ............... 3377 213,815 M.4.
5. To be completed for the September report only:
Installment loans to individuals for household, family, and other personal expenditures that
have been securitized and sold without recourse (with servicing retained), amounts
outstanding by type of loan:
a. Loans to purchase private passenger authomobiles ............................................. 2741 N/A M.5.a.
b. Credit cards and related plans ............................................................... 2742 N/A M.5.b.
c. All other consumer installment credit (including mobile home loans) .......................... 2743 N/A M.5.c.
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Call Date: 3/31/94 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-16
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: 02499
Schedule RC-M--Memoranda
C-465
Dollar Amounts in Thousands RCFD Bil Mil Thou
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. Extensions of credit by the reporting bank to its executive officers, directors, principal
shareholders, and their related interests as of the report date:
a. Aggregate amount of all extensions of credit to all executive officers, directors, principal
shareholders, and their related interests .................................................... 6164 2,987 1.a.
b. Number of executive officers, directors, and principal shareholders to whom the amount of all
extensions of credit by the reporting bank (including extensions of credit to
related interests) equals or exceeds the lesser of $500,000 or 5 percent Number
of total capital as defined for this purpose in agency regulations. [RCFD 6165] [.........7] 1.b.
2. Federal funds sold and securities purchased under agreements to resell with U.S. branches
and agencies of foreign banks(1) (included in Schedule RC, items 3.a and 3.b) ................... 3405 0 2.
3. Not applicable.
4. Outstanding principal balance of 1-4 family residential mortgage loans serviced for others
(include both retained servicing and purchased servicing):
a. Mortgages serviced under a GNMA contract ..................................................... 5500 28,003 4.a.
b. Mortgages serviced under a FHLMC contract:
(1) Serviced with recourse to servicer ....................................................... 5501 87,828 4.b.(1)
(2) Serviced without recourse to servicer .................................................... 5502 730,620 4.b.(2)
c. Mortgages serviced under a FNMA contract:
(1) Serviced under a regular option contract ................................................. 5503 61,256 4.c.(1)
(2) Serviced under a special option contract ................................................. 5504 2,231,506 4.c.(2)
d. Mortgages serviced under other servicing contracts ........................................... 5505 4,324,582 4.d.
5. To be completed only by banks with $1 billion or more in total assets:
Customers' liability to this bank on acceptances outstanding (sum of items 5.a and 5.b must
equal Schedule RC, item 9):
a. U.S. addressees (domicile) ................................................................... 2103 31,157 5.a.
b. Non-U.S. addressees (domicile) ............................................................... 2104 0 5.b.
6. Intangible assets:
a. Mortgage servicing rights .................................................................... 3164 18,622 6.a.
b. Other identifiable intangible assets:
(1) Purchased credit card relationships ...................................................... 5506 0 6.b.(1)
(2) All other identifiable intangible assets ................................................. 5507 0 6.b.(2)
c. Goodwill ..................................................................................... 3163 54,227 6.c.
d. Total (sum of items 6.a through 6.c) (must equal Schedule RC, item 10) ....................... 2143 72,849 6.d.
e. Intangible assets that have been grandfathered for regulatory capital purposes ............... 6442 0 6.e.
YES NO
7. Does your bank have any mandatory convertible debt that is part of your Tier 2 capital? ......... 6167 X 7.
If yes, complete items 7.a through 7.e: RCFD Bil Mil Thou
------------------
a. Total equity contract notes, gross ........................................................... 3290 N/A 7.a.
b. Common or perpetual preferred stock dedicated to redeem the above notes ...................... 3291 N/A 7.b.
c. Total equity commitment notes, gross ......................................................... 3293 N/A 7.c.
d. Common or perpetual preferred stock dedicated to redeem the above notes ...................... 3294 N/A 7.d.
e. Total (item 7.a minus 7.b plus 7.c minus 7.d) ................................................ 3295 N/A 7.e.
</TABLE>
- ---------------
(1) Do not report federal funds sold and securities purchased under agreements
to resell with other commercial banks in the U.S. in this item.
26
<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Call Date: 3/31/94 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-17
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: 02499
Schedule RC-M--Continued
Dollar Amounts in Thousands Bil Mil Thou
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
8. a. Other real estate owned:
(1) Direct and indirect investments in real estate ventures........................... RCFD 5372 0 8.a.(1)
(2) All other real estate owned:
(a) Construction and land development in domestic offices......................... RCON 5508 6,855 8.a.(2)(a)
(b) Farmland in domestic offices.................................................. RCON 5509 0 8.a.(2)(b)
(c) 1-4 family residential properties in domestic offices......................... RCON 5510 4,044 8.a.(2)(c)
(d) Multifamily (5 or more) residential properties in domestic offices............ RCON 5511 83 8.a.(2)(d)
(e) Nonfarm nonresidential properties in domestic offices......................... RCON 5512 9,675 8.a.(2)(e)
(f) In foreign offices............................................................ RCFN 5513 0 8.a.(2)(f)
(3) Total (sum of items 8.a.(1) and 8.a.(2)) (must equal Schedule RC, item 7)......... RCFD 2150 20,657 8.a.(3)
b. Investments in unconsolidated subsidiaries and associated companies:
(1) Direct and indirect investments in real estate ventures........................... RCFD 5374 0 8.b.(1)
(2) All other investments in unconsolidated subsidiaries and associated companies..... RCFD 5375 0 8.b.(2)
(3) Total (sum of items 8.b.(1) and 8.b.(2)) (must equal Schedule RC, item 8)......... RCFD 2130 0 8.b.(3)
c. Total assets of unconsolidated subsidiaries and associated companies.................. RCFD 5376 0 8.c.
9. Noncumulative perpetual preferred stock and related surplus included in Schedule RC,
item 23, "Perpetual preferred stock and related surplus"................................. RCFD 3778 0 9.
10. Mutual fund and annuity sales in domestic offices during the quarter (include
proprietary, private label, and third party mutual funds):
a. Money market funds.................................................................... RCON 6441 41,284 10.a.
b. Equity securities funds............................................................... RCON 8427 8,380 10.b.
c. Debt securities funds................................................................. RCON 8428 3,841 10.c.
d. Other mutual funds.................................................................... RCON 8429 0 10.d.
e. Annuities............................................................................. RCON 8430 0 10.e.
------------------------
</TABLE>
<TABLE>
Memorandum Dollar Amounts in Thousands RCFD Bil Mil Thou
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. Interbank holdings of capital instruments (to be completed for the December report only):
a. Reciprocal holdings of banking organizations' capital instruments........................... 3836 N/A M.1.a
b. Nonreciprocal holdings of banking organizations' capital instruments........................ 3837 N/A M.1.b.
------------------
</TABLE>
27
<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Call Date: 3/31/94 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-18
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: 02499
Schedule RC-N--Past Due and Nonaccrual Loans, Leases,
and Other Assets
The FFIEC regards the information reported in
all of Memorandum item 1, in items 1 through 10,
column A, and in Memorandum items 2 through 4,
column A, as confidential.
[C470]
(Column A) (Column B) (Column C)
Past due Past due 90
30 through 89 days or more
days and still and still
accruing accruing Nonaccrual
------------------------------------------------------------
Dollar Amounts in Thousands RCFD Bil Mil Thou RCFD Bil Mil Thou RCFD Bil Mil Thou
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1. Loans secured by real estate:
a. To U.S. addressees (domicile)....................... 1246 12,517 1247 127,407 1.a.
b. To non-U.S. addressees (domicile)................... 1249 0 1250 0 1.b.
2. Loans to depository institutions and C
acceptances of other banks: O
a. To U.S. banks and other U.S. depository N
institutions........................................ F 5378 0 5379 0 2.a.
b. To foreign banks.................................... I 5381 0 5382 0 2.b.
3. Loans to finance agricultural production and D
other loans to farmers................................. E 1597 0 1583 114 3.
4. Commercial and industrial loans: N
a. To U.S. addressees (domicile)....................... T 1252 2,064 1253 26,122 4.a.
b. To non-U.S. addressees (domicile)................... I 1255 0 1256 0 4.b.
5. Loans to individuals for household, family, and A
other personal expenditures: L
a. Credit cards and related plans...................... 5384 97 5385 588 5.a.
b. Other (includes single payment, installment,
and all student loans).............................. 5387 303 5388 2,546 5.b.
6. Loans to foreign governments and official
institutions........................................... 5390 0 5391 0 6.
7. All other loans........................................ 5460 1,252 5461 1,738 7.
8. Lease financing receivables:
a. Of U.S. addressees (domicile)....................... 1258 0 1259 0 8.a.
b. Of non-U.S. addressees (domicile)................... 1272 0 1791 0 8.b.
9. Debt securities and other assets (exclude other
real estate owned and other repossessed assets)........ 3506 0 3507 0 9.
---------------------------------------
</TABLE>
===============================================================================
Amounts reported in items 1 through 8 above include guaranteed and unguaranteed
portions of past due and nonaccrual loans and leases. Report in item 10 below
certain guaranteed loans and leases that have already been included in the
amounts reported in items 1 through 8.
<TABLE>
<CAPTION>
------------------------------------------------------------
RCFD Bil Mil Thou RCFD Bil Mil Thou RCFD Bil Mil Thou
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
10. Loans and leases reported in items 1 through 8
above which are wholly or partially guaranteed
by the U.S. Government................................ CONFIDENTIAL 5613 85 5614 268 10.
a. Guaranteed portion of loans and leases
included in item 10 above.......................... 5616 69 5617 253 10.a.
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Call Date: 3/31/94 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-19
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: 02499
Schedule RC-N--Continued
C473
(Column A) (Column B) (Column C)
Past due Past due 90 Nonaccrual
30 through 89 days or more
days and still and still
accruing accruing
Memoranda -----------------------------------------------------------------
Dollar Amounts in Thousands RCFD Bil Mil Thou RCFD Bil Mil Thou RCFD Bil Mil Thou
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1. Restructured loans and leases included in
Schedule RC-N, items 1 through 8, above............... C O N F I D E N T I A L M.1.
2. Loans to finance commercial real estate, C
construction, and land development activities O
(not secured by real estate) included in N
Schedule RC-N, items 4 and 7, above................... F M.2.
3. Loans secured by real estate in domestic offices I RCON Bil Mil Thou RCON Bil Mil Thou
(included in Schedule RC-N, item 1, above): D
a. Construction and land development.................. E 2769 200 3492 21,589 M.3.a.
b. Secured by farmland................................ N 3494 0 3495 391 M.3.b.
c. Secured by 1-4 family residential properties: T
(1) Revolving, open-end loans secured by I
1-4 family residential properties and A
extended under lines of credit................. L 5399 91 5400 1,102 M.3.c.(1)
(2) All other loans secured by 1-4 family
residential properties......................... 5402 4,550 5403 23,130 M.3.c.(2)
d. Secured by multifamily (5 or more)
residential properties............................. 3500 715 3501 8,630 M.3.d.
e. Secured by nonfarm nonresidential properties....... 3503 6,961 3504 72,565 M.3.e.
(Column A) (Column B)
Past due 30 Past due 90
through 89 days or more
----------------------------------------
RCFD Bil Mil Thou RCFD Bil Mil Thou
-----------------------------------------
4. Interest rate, foreign exchange rate, and other
commodity and equity contracts:
a. Book value of amounts carried as assets............ 3522 0 3528 0 M.4.a.
b. Replacement cost of contracts with a
positive replacement cost.......................... 3529 0 3530 0 M.4.b.
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Call Date: 3/31/94 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-20
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: 02499
Schedule RC-O--Other Data for Deposit Insurance Assessments
An amended Certified Statement should be submitted to the FDIC if the amounts
reported in items 1 through 10 of this schedule are amended after the semiannual
Certified Statement originally covering this report date has been filed with the
FDIC.
[C475]
Dollar Amounts in Thousands RCON Bil Mil Thou
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. Unposted debits (see instructions):
a. Actual amount of all unposted debits........................................................ 0030 N/A 1.a.
OR
b. Separate amount of unposted debits:
(1) Actual amount of unposted debits to demand deposits..................................... 0031 0 1.b.(1)
(2) Actual amount of unposted debits to time and savings deposits(1)........................ 0032 0 1.b.(2)
2. Unposted credits (see instructions):
a. Actual amount of all unposted credits....................................................... 3510 N/A 2.a.
OR
b. Separate amount of unposted credits:
(1) Actual amount of unposted credits to demand deposits.................................... 3512 160,725 2.b.(1)
(2) Actual amount of unposted credits to time and savings deposits(1)....................... 3514 0 2.b.(2)
3. Uninvested trust funds (cash) held in bank's own trust department (not included in total
deposits in domestic offices).................................................................. 3520 0 3.
4. Deposits of consolidated subsidiaries in domestic offices and in insured branches in
Puerto Rico and U.S. territories and possessions (not included in total deposits):
a. Demand deposits of consolidated subsidiaries................................................ 2211 7,943 4.a.
b. Time and savings deposits(1) of consolidated subsidiaries................................... 2351 0 4.b.
c. Interest accrued and unpaid on deposits of consolidated subsidiaries........................ 5514 0 4.c.
5. Deposits in insured branches in Puerto Rico and U.S. territories and possessions:
a. Demand deposits in insured branches (included in Schedule RC-E, Part II).................... 2229 0 5.a.
b. Time and savings deposits(1) in insured branches (included in Schedule RC-E, Part II)....... 2383 0 5.b.
c. Interest accrued and unpaid on deposits in insured branches
(included in Schedule RC-G, item 1.b)....................................................... 5515 0 5.c.
Item 6 is not applicable to state nonmember banks that have not been authorized
by the Federal Reserve to act as pass-through correspondents.
6. Reserve balances actually passed through to the Federal Reserve by the reporting bank on
behalf of its respondent depository institutions that are also reflected as deposit liabilities
of the reporting bank:
a. Amount reflects in demand deposits (included in Schedule RC-E, Part I,
Memorandum item 4.a)........................................................................ 2314 0 6.a.
b. Amount reflected in time and savings deposits(1) (included in Schedule RC-E, Part I,
Memorandum item 4.b)........................................................................ 2315 0 6.b.
7. Unamortized premiums and discounts on time and savings deposits:(1)
a. Unamortized premiums........................................................................ 5516 0 7.a.
b. Unamortized discounts....................................................................... 5517 0 7.b.
8. To be completed by banks with "Oakar deposits."
Total "Adjusted Attributable Deposits'' of all institutions acquired under Section 5(d)(3) of
the Federal Deposit Insurance Act (from most recent FDIC Oakar Transaction Worksheet(s))....... 5518 N/A 8.
9. Deposits in lifeline accounts.................................................................. 5596 9.
10. Benefit-responsive "Depository Institution Investment Contracts'' (included in total
deposits in domestic offices).................................................................. 8432 0 10.
- ----------
(1) For FDIC insurance assessment purposes, "time and savings deposits"
consists of nontransaction accounts and all transaction accounts
other than demand deposits.
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Call Date: 3/31/94 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-21
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: 02499
Schedule RC-O--Continued
Memoranda (to be completed each quarter except as noted)
Dollar Amounts in Thousands RCON Bil Mil Thou
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. Total deposits in domestic offices of the bank (sum of Memorandum items 1.a.(1) and 1.b.(1)
must equal Schedule RC, item 13.a):
a. Deposit accounts of $100,000 or less:
(1) Amount of deposit accounts of $100,000 or less............................................. 2702 4,413,942 M.1.a.(1)
(2) Number of deposit accounts of $100,000 or less (to be Number
completed for the June report only)...................................[RCON 3779] N/A M.1.a.(2)
b. Deposit accounts of more than $100,000:
(1) Amount of deposit accounts of more than $100,000...................... Number 2710 3,134,915 M.1.b.(1)
(2) Number of deposit accounts of more than $100,000......................[RCON 2722] 7,096 M.1.b.(2)
2. Estimated amount of uninsured deposits in domestic offices of the bank:
a. An estimate of your bank's uninsured deposits can be determined by multiplying the number of
deposit accounts of more than $100,000 reported in Memorandum item 1.b.(2) above by
$100,000 and subtracting the result from the amount of deposit accounts of more than
$100,000 reported in Memorandum item 1.b.(1) above.
Indicate in the appropriate box at the right whether your bank has a method or procedure for YES NO
determining a better estimate of uninsured deposits than the estimate described above........... 6861 X M.2.a.
b. If the box marked YES has been checked, report the estimate of uninsured deposits RCON Bil Mil Thou
determined by using your bank's method or procedure............................................. 5597 N/A M.2.b.
- ---------------------------------------------------------------------------------------------------------------------------------
Person to whom questions about the Reports of Condition and Income should be directed: [C477]
ROBERT DUFF, ASSISTANT VICE PRESIDENT (203) 986-2474
- ------------------------------------------------------------------------------------ ---------------------------------------
Name and Title (TEXT 8901) Area code and phone number (TEXT 8902)
</TABLE>
31
<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Call Date: 3/31/94 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-22
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: 02499
Schedule RC-R--Risk-Based Capital
This schedule must be completed by all banks as follows: Banks that reported total assets of $1 billion or more in Schedule RC,
item 12, for June 30, 1993, must complete items 2 through 9 and Memorandum item 1. Banks with assets of less than
$1 billion must complete items 1 through 3 below or Schedule RC-R in its entirety, depending on their response to item 1 below.
1. Test for determining the extent to which Schedule RC-R must be completed. To be completed
only by banks with total assets of less than $1 billion. Indicate in the appropriate C480
box at the right whether the bank has total capital greater than or equal to eight percent Yes No
of adjusted total assets.................................................................. RCFD 6056 1.
For purposes of this test, adjusted total assets equals total assets less cash, U.S. Treasuries, U.S. Government
agency obligations, and 80 percent of U.S. Government-sponsored agency obligations plus the allowance for loan
and lease losses and selected off-balance sheet items as reported on Schedule RC-L (see instructions).
If the box marked YES has been checked, then the bank only has to complete items 2 and 3 below. If the box marked
NO has been checked, the bank must complete the remainder of this schedule.
A NO reponse to item 1 does not necessarily mean that the bank's actual risk-based capital ratio is less than eight
percent or that the bank is not in compliance with the risk-based capital guidelines.
(Column A) (Column B)
Subordinated Debt(1) Other
and Intermediate Limited-
Items 2 and 3 are to be completed by all banks. Term Preferred Life Capital
Stock Instruments
--------------------- ---------------------
Dollar Amounts in Thousands RCFD Bil Mil Thou RCFD Bil Mil Thou
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
2. Subordinated debt(1) and other limited-life capital instruments (original
weighted average maturity of at least five years) with a remaining
maturity of:
a. One year or less...................................................... 3780 0 3786 0 2.a.
b. Over one year through two years....................................... 3781 0 3787 0 2.b.
c. Over two years through three years.................................... 3782 0 3788 0 2.c.
d. Over three years through four years................................... 3783 0 3789 0 2.d.
e. Over four years through five years.................................... 3784 0 3790 0 2.e.
f. Over five years....................................................... 3785 0 3791 0 2.f.
3. Total qualifying capital (i.e., Tier 1 and Tier 2 capital) allowable under the risk-based RCFD Bil Mil Thou
capital guidelines.............................................................................. 3792 1,235,505 3.
(Column A) (Column B)
Items 4-9 and Memorandum item 1 are to be completed Assets Credit Equiv-
by banks that answered NO to item 1 above and Recorded alent Amount
by banks with total assets of $1 billion or more. on the of Off-Balance
Balance Sheet Sheet Items(2)
--------------------- --------------------
4. Assets and credit equivalent amounts of off-balance sheet items assigned RCFD Bil Mil Thou RCFD Bil Mil Thou
to the Zero percent risk category:
a. Assets recorded on the balance sheet:
(1) Securities issued by, other claims on, and claims unconditionally
guaranteed by, the U.S. Government and its agencies and other
OECD central governments.......................................... 3794 1,997,407 4.a.(1)
(2) All other......................................................... 3795 356,343 4.a.(2)
b. Credit equivalent amount of off-balance sheet items.................... 3796 0 4.b.
</TABLE>
- -------------
(1) Exclude mandatory convertible debt reported in Schedule RC-M, item 7.e,
"Total."
(2) Do not report in column B the risk-weighted amount of assets reported in
column A.
32
<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION CALL DATE: 3/31/94 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-23
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: 02499
Schedule RC-R--Continued
---------------------------------------------------
(Column A) (Column B)
Assets Credit Equiv-
Recorded alent Amount
on the of Off-Balance
Balance Sheet Sheet Items(1)
---------------------------------------------------
Dollar Amounts in Thousands RCFD Bil Mil Thou RCFD Bil Mil Thou
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
5. Assets and credit equivalent amounts of off-balance sheet
items assigned to the 20 percent risk category:
a. Assets recorded on the balance sheet:
(1) Claims conditionally guaranteed by the U.S. Govern-
ment and its agencies and other OECD central
governments........................................... 3798 19,894 5.a.(1)
(2) Claims collateralized by securities issued by the
U.S. Government and its agencies and other OECD central
governments; by securities issued by U.S. Government-
sponsored agencies; and by cash on deposit............ 3799 0 5.a.(2)
(3) All other............................................. 3800 2,450,545 5.a.(3)
b. Credit equivalent amount of off-balance sheet items....... 3801 124,572 5.b.
6. Assets and credit equivalent amounts of off-balance sheet
items assigned to the 50 percent risk category:
a. Assets recorded on the balance sheet...................... 3802 2,701,931 6.a.
b. Credit equivalent amount of off-balance sheet items....... 3803 215,248 6.b.
7. Assets and credit equivalent amounts of off-balance sheet
items assigned to the 100 percent risk category:
a. Assets recorded on the balance sheet...................... 3804 7,321,123 7.a.
b. Credit equivalent amount of off-balance sheet items....... 3805 1,947,040 7.b.
8. On-balance sheet asset values excluded from the calculation
of the risk-based capital ratio(2)........................... 3806 (19,589) 8.
9. Total assets recorded on the balance sheet (sum of items
4.a, 5.a, 6.a, 7.a, and 8, column A) (must equal Schedule
RC, item 12 plus items 4.b and 4.c).......................... 3807 14,827,654 9.
---------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
---------------------------------------------------
(Column A) (Column B)
Notional Replacement
Principal Cost
Memorandum Value (Market Value)
----------------------------------------------------
Dollar Amounts in Thousands RCFD Bil Mil Thou RCFD Bil Mil Thou
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1. Notional principal value and replacement cost of interest
rate and foreign exchange rate contracts (in column B,
report only those contracts with a positive replacement cost):
a. Interest rate contracts (exclude futures contracts)....... 3808 20,463 M.1.a.
(1) With a remaining maturity of one year or less......... 3809 1,903,000 M.1.a.(1)
(2) With a remaining maturity of over one year............ 3810 2,396,000 M.1.a.(2)
b. Foreign exchange rate contracts (exclude contracts with
an original maturity of 14 days or less and futures
contracts)................................................ 3811 87,721 M.1.b.
(1) With a remaining maturity of one year or less......... 3812 6,131,499 M.1.b.(1)
(2) With a remaining maturity of over one year............ 3813 0 M.1.b.(2)
---------------------------------------------------
</TABLE>
- --------------------------
(1) Do not report in column B the risk-weighted amount of assets reported
in Column A.
(2) Until a final rule on the regulatory capital treatment of net unrealized
holding gains (losses) on available-for-sale securities that is applicable
to the reporting bank has taken effect, a bank that has adopted FASB
Statement No. 115 should include the difference between the fair value and
the amortized cost of its available-for-sale securities in item 8 and
report the amortized cost of these securities in items 4 through 7 above.
Item 8 also includes on-balance sheet asset values (or portions thereof)
of off-balance sheet interest rate, foreign exchange rate, and commodity
contracts and those contracts (e.g., futures contracts) not subject to
risk-based capital. Exclude from item 8 margin accounts and accrued
receivables as well as any portion of the allowance for loan and lease
losses in excess of the amount that may be included in Tier 2 capital.
33
<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Call Date: 3/31/94 ST-BK: 09-0590 FFIEC O31
Address: 777 MAIN STREET Page RC-24
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
Optional Narrative Statement Concerning the Amounts
Reported in the Reports of Condition and Income
at close of business on March 31, 1994
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION HARTFORD , Connecticut
- ---------------------------------------------- --------------------------- --------------------------------
<S> <C> <C>
Legal Title of Bank City State
</TABLE>
The management of the reporting bank may, if it wishes, submit a brief narrative
statement on the amounts reported in the Reports of Condition and Income. This
optional statement will be made available to the public, along with the publicly
available data in the Reports of Condition and Income, in response to any
request for individual bank report data. However, the information reported in
column A and in all of Memorandum item 1 of Schedule RC-N is regarded as
confidential and will not be released to the public. BANKS CHOOSING TO SUBMIT
THE NARRATIVE STATEMENT SHOULD ENSURE THAT THE STATEMENT DOES NOT CONTAIN THE
NAMES OR OTHER IDENTIFICATIONS OF INDIVIDUAL BANK CUSTOMERS, REFERENCES TO THE
AMOUNTS REPORTED IN THE CONFIDENTIAL ITEMS IN SCHEDULE RC-N, OR ANY OTHER
INFORMATION THAT THEY ARE NOT WILLING TO HAVE MADE PUBLIC OR THAT WOULD
COMPROMISE THE PRIVACY OF THEIR CUSTOMERS. Banks choosing not to make a
statement may check the "No comment" box below and should make no entries of any
kind in the space provided for the narrative statement; i.e., DO NOT enter in
this space such phrases as "No statement," "Not applicable," "N/A," "No
comment," and "None."
The optional statement must be entered on this sheet. The statement should not
exceed 100 words. Further, regardless of the number of words, the statement must
not exceed 750 characters, including punctuation, indentation, and standard
spacing between words and sentences. If any submission should exceed 750
characters, as defined, it will be truncated at 750 characters with no notice to
the submitting bank and the truncated statement will appear as the bank's
statement both on agency computerized records and in computer-file releases to
the public.
All information furnished by the bank in the narrative statement must be
accurate and not misleading. Appropriate efforts shall be taken by the
submitting bank to ensure the statement's accuracy. The statement must be
signed, in the space provided below, by a senior officer of the bank who thereby
attests to its accuracy.
If, subsequent to the original submission, material changes are submitted for
the data reported in the Reports of Condition and Income, the existing narrative
statement will be deleted from the files, and from disclosure; the bank, at its
option, may replace it with a statement, under signature, appropriate to the
amended data.
The optional narrative statement will appear in agency records and in release to
the public exactly as submitted (or amended as described in the preceding
paragraph) by the management of the bank (except for the truncation of
statements exceeding the 750-character limit described above). THE STATEMENT
WILL NOT BE EDITED OR SCREENED IN ANY WAY BY THE SUPERVISORY AGENCIES FOR
ACCURACY OR RELEVANCE. DISCLOSURE OF THE STATEMENT SHALL NOT SIGNIFY THAT ANY
FEDERAL SUPERVISORY AGENCY HAS VERIFIED OR CONFIRMED THE ACCURACY OF THE
INFORMATION CONTAINED THEREIN. A STATEMENT TO THIS EFFECT WILL APPEAR ON ANY
PUBLIC RELEASE OF THE OPTIONAL STATEMENT SUBMITTED BY THE MANAGEMENT OF THE
REPORTING BANK.
- --------------------------------------------------------------------------------
No comment [X] (RCON 6979) C471 C472
--- -------------------
BANK MANAGEMENT STATEMENT (please type or print clearly):
(TEXT 6980)
______________________________________ _________________
Signature of Executive Officer of Bank Date of Signature
34
