<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 25, 1996.
REGISTRATION NO. 333-4513
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
PRE-EFFECTIVE
AMENDMENT NO. 2
TO
FORM S-1
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933
------------------------
RENCO METALS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C> <C>
238 NORTH 2200 WEST, SALT LAKE CITY, UT
84116
DELAWARE 3339 13-3724916 (801) 532-2043
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE
JURISDICTION OF INDUSTRIAL NUMBER,
INCORPORATION OR CLASSIFICATION CODE IDENTIFICATION INCLUDING AREA CODE, OF REGISTRANT'S
ORGANIZATION) NUMBER) NO.) PRINCIPAL EXECUTIVE OFFICES)
</TABLE>
MAGNESIUM CORPORATION OF AMERICA
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C> <C>
238 NORTH 2200 WEST, SALT LAKE CITY, UT
84116
DELAWARE 3339 06-1030566 (801) 532-2043
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE
JURISDICTION OF INDUSTRIAL NUMBER,
INCORPORATION OR CLASSIFICATION CODE IDENTIFICATION INCLUDING AREA CODE, OF REGISTRANT'S
ORGANIZATION) NUMBER) NO.) PRINCIPAL EXECUTIVE OFFICES)
</TABLE>
SABEL INDUSTRIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C> <C>
749 NORTH COURT STREET, MONTGOMERY, AL 36104
ALABAMA 5051 63-0961496 (334) 265-6778
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE
JURISDICTION OF INDUSTRIAL NUMBER,
INCORPORATION OR CLASSIFICATION CODE IDENTIFICATION INCLUDING AREA CODE, OF REGISTRANT'S
ORGANIZATION) NUMBER) NO.) PRINCIPAL EXECUTIVE OFFICES)
</TABLE>
IRA LEON RENNERT
ROGER L. FAY
238 NORTH 2200 WEST, SALT LAKE CITY, UT 84116
(801) 532-2043
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPIES TO:
<TABLE>
<S> <C>
MICHAEL C. RYAN, ESQ. WILLIAM M. HARTNETT, ESQ.
CADWALADER, WICKERSHAM & TAFT CAHILL GORDON & REINDEL
100 MAIDEN LANE, NEW YORK, NY 10038 80 PINE STREET, NEW YORK, NY 10005
(212) 504-6000 (212) 701-3000
</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 securities being registered on this Form are being offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
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 SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
RENCO METALS, INC.
CROSS REFERENCE SHEET
PURSUANT TO ITEM 501 OF REGULATION S-K
<TABLE>
<CAPTION>
S-1 ITEM NUMBER AND HEADING LOCATION IN PROSPECTUS
<C> <S> <C>
1. Forepart of Registration Statement and Outside
Front Cover Page of Prospectus................... Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages of
Prospectus....................................... Inside Front Cover Page; Outside Back
Cover Page
3. Summary of Information, Risk Factors and Ratio of
Earnings to Fixed Charges........................ Prospectus Summary; Risk Factors;
Selected Consolidated Financial 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;
Underwriting
9. Description of Securities to be Registered....... Description of Senior Notes
10. Interests of Named Experts and Counsel........... Not Applicable
11. Information with Respect to the Registrant....... Outside Front Cover Page; Prospectus
Summary; Risk Factors;
Capitalization; Selected Consolidated
Financial Data; Management's
Discussion and Analysis of Financial
Condition and Results of Operations;
Business; Management; Stock Ownership
and Certain Relationships and
Transactions; Description of Senior
Notes; Description of Revolving
Credit Facilities; Index to Financial
Statements
12. Disclosure of Commission Position on
Indemnification for Securities Act Liabilities... Not Applicable
</TABLE>
<PAGE> 3
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED JUNE 25, 1996
PROSPECTUS
, 1996
$150,000,000
RENCO METALS, INC.
% SENIOR NOTES DUE 2003
The % Senior Notes due 2003 (the "Senior Notes") are being offered
(the "Offering") by Renco Metals, Inc. (the "Company"). Interest on the Senior
Notes will be payable semi-annually on and of each year,
commencing on , 199 . The Senior Notes will mature on ,
2003. Except as set forth below, the Senior Notes will not be redeemable prior
to , 2000. Thereafter, the Senior Notes will be redeemable at the
option of the Company, in whole or in part, at the redemption prices set forth
herein plus accrued interest to the date of redemption. In addition, at any time
on or prior to , 1999, the Company may, at its option, redeem up to
33% of the original aggregate principal amount of the Senior Notes with the net
cash proceeds of one or more Public Equity Offerings (as defined), at % of
the principal amount thereof plus accrued interest to the date of redemption;
provided that at least $100.0 million of Senior Notes remain outstanding
immediately after any such redemption. Upon the occurrence of a Change of
Control (as defined), each holder of Senior Notes may require the Company to
repurchase such holder's Senior Notes at 101% of the principal amount thereof
plus accrued interest to the date of repurchase. The Company is obligated in
certain instances to make offers to repurchase Senior Notes at a purchase price
equal to 100% of the principal amount thereof plus accrued interest to the date
of repurchase, with the net cash proceeds of certain sales and other
dispositions of assets. See "Description of Senior Notes."
The Senior Notes will be general unsecured obligations of the Company
ranking senior in right of payment to all existing and future subordinated
indebtedness of the Company and will rank pari passu in right of payment with
other senior indebtedness of the Company. The Senior Notes will be fully and
unconditionally guaranteed, jointly and severally, on a senior unsecured basis
by the Company's subsidiaries (the "Guarantors"). However, the Guarantors may
incur indebtedness of up to $40.0 million under their revolving credit
facilities (the "Revolving Credit Facilities"), which are secured by
substantially all of the non-fixed assets of the respective Guarantors.
Therefore, holders of such secured indebtedness, and any other secured
indebtedness of the Company and the Guarantors, will have claims that
effectively rank prior to those of holders of Senior Notes with respect to the
assets securing such indebtedness. See "Description of Senior
Notes -- Guarantees." The Indenture (as defined) permits the Company and the
Guarantors to incur additional indebtedness, including senior indebtedness and
secured indebtedness, subject to certain limitations. See "Description of Senior
Notes -- Limitation on Additional Indebtedness."
On May 24, 1996, the Company commenced a Tender Offer (as defined) to
purchase for cash up to all of the $75 million aggregate principal amount of the
Company's 12% Senior Notes Due 2000 (the "Existing Notes") and a related Consent
Solicitation (as defined). Consummation of the Offering is conditioned upon the
receipt by the Company of consents representing at least a majority in aggregate
principal amount of the Existing Notes outstanding.
SEE "RISK FACTORS" BEGINNING ON PAGE 8 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE SENIOR 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>
- -----------------------------------------------------------------------------------------------------------
UNDERWRITING
PRICE TO THE DISCOUNTS PROCEEDS TO THE
PUBLIC(1) AND COMMISSIONS(2) COMPANY(3)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Senior Note............................. % % %
Total....................................... $ $ $
- -----------------------------------------------------------------------------------------------------------
</TABLE>
(1) Plus accrued interest, if any, from the date of issuance.
(2) The Company has agreed to indemnify the Underwriter (as defined herein)
against certain liabilities, including liabilities under the Securities Act.
See "Underwriting."
(3) Before deducting expenses related to the Offering payable by the Company,
estimated to be $1,300,000.
The Senior Notes are being offered by the Underwriter, subject to prior
sale, when, as and if delivered to and accepted by it and subject to various
prior conditions, including the right to reject orders in whole or in part. It
is expected that delivery of the Senior Notes will be made in New York, New York
on or about , 1996.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
<PAGE> 4
Photo of Magnesium Corporation of America's ('Magcorp') production facility with
caption 'Magcorp's production facility in Rowley, Utah.'
Photo of magnesium anode ingots with caption, 'Magnesium's light weight, high
strength-to-weight ratio and corrosion resistance has led to increasing
worldwide demand.'
Photo of automobile parts made with magnesium alloy with caption 'Magnesium is
an important product in the automobile industry.'
Photo of aluminum cans with caption 'Primary use of magnesium in the aluminum
alloying market is in the production of two piece beverage cans and aluminum
sheet.'
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SENIOR NOTES AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
2
<PAGE> 5
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and the financial statements
contained elsewhere in this Prospectus. Unless the context otherwise requires,
references to the "Company" mean Renco Metals, Inc., references to "Magcorp"
mean Magnesium Corporation of America, references to "Sabel" mean Sabel
Industries, Inc. and references to "Subsidiaries" and "Guarantors" mean Magcorp
and Sabel, each of which is a wholly-owned subsidiary of the Company. The
Company's fiscal year ends October 31. Therefore, for example, "fiscal year
1995" refers to the fiscal year ended October 31, 1995.
THE COMPANY
The Company is engaged in the production and sale of magnesium and
magnesium alloys through its wholly-owned subsidiary, Magcorp, and diversified
steel service operations through its wholly-owned subsidiary, Sabel. For the
twelve months ended April 30, 1996, the Company had revenues, EBITDA (as
defined) and net income of $197.2 million, $61.8 million and $29.7 million,
respectively.
Magcorp
In 1995, Magcorp was the third largest producer of pure magnesium and
magnesium alloys in North America and the fourth largest producer in the world
outside the Commonwealth of Independent States ("CIS") and People's Republic of
China ("PRC"). Magnesium and magnesium alloys are components in products ranging
from aluminum beverage cans, computer chassis and power tools to complex
castings for the aerospace, automotive and recreation industries. Additionally,
magnesium is used in the production of steel, ductile iron and other metals and
as a reagent in the manufacture of various organic and pharmaceutical products.
Magcorp sells pure magnesium and magnesium alloys to domestic and
international customers. Magcorp's plant, which was constructed in 1972, is
located in Rowley, Utah, and has a nominal annual production capacity of
approximately 41,000 metric tons. Magcorp produced approximately 38,400 metric
tons in fiscal year 1995 and approximately 20,300 metric tons in the six months
ended April 30, 1996. Magcorp accounted for 21% of calendar year 1995 North
American production and 16% of calendar year 1995 global production, excluding
CIS and PRC, according to statistics published by the International Magnesium
Association (the "IMA") and management estimates.
Due to the high-quality brine drawn from the Great Salt Lake and a
proprietary production process, Magcorp is capable of consistently producing
magnesium with a purity level which exceeds the industry standard of 99.8%.
Magcorp offers over 30 different sizes, shapes and weights of primary magnesium
and magnesium alloy products in a range of purity levels to meet customer needs
in all of its major markets.
Limited magnesium supply combined with continued increases in demand
resulted in significant increases in pure magnesium list prices during 1995.
From 1986 to 1995, magnesium demand increased at a compound annual growth rate
("CAGR") of approximately 3.8%. This growth is due to magnesium's inherent
metallurgical properties including its light weight, high strength-to-weight
ratio, excellent corrosion resistance and reactivity with certain elements. As a
result of these characteristics, from 1986 to 1995, the use of magnesium
increased in most of magnesium's largest end markets including aluminum alloying
(3% CAGR), die castings (20% CAGR) and desulfurization in steel production (8%
CAGR).
The increase in demand for magnesium has not resulted in significant
increases in supply. In early 1994, one of the largest domestic producers
significantly reduced its capacity, and that capacity has not been replaced.
North American producers are currently operating at approximately 95% of
capacity. Magcorp's current capacity utilization rate is 96%.
As a result of these industry conditions, list prices for pure magnesium
sold by North American producers in North America increased to record highs in
1995. Pure magnesium list prices increased from $1.43 per pound in 1991 to $1.93
per pound in mid-1995, and have remained stable since such time. Magnesium
regularly sells for prices lower than the list price for pure magnesium, with
price dependent on market segment, chemistry, contract terms, including
negotiated discounts, and quality, with the higher quality magnesium sold by
Magcorp selling at or near list price, and lower quality magnesium, like that
produced in the PRC, selling at substantially below list price. Manufacturers of
lower quality pure magnesium, including those in the PRC, have experienced price
reductions during 1996. Magcorp believes that the price that it will receive for
higher quality pure magnesium sold in the United States may decrease modestly in
the second half of 1996 but remain at levels above 1995.
3
<PAGE> 6
As of March 31, 1996, magnesium producer inventories outside the PRC and
CIS were 30,300 metric tons, which represents approximately five weeks of
supply, compared with normal levels of approximately eight weeks, and up from a
record low of 17,200 metric tons in June 1995. The recent increase in
inventories resulted from slightly higher production of high quality pure
magnesium and an increase in the availability of magnesium produced in the CIS
and PRC.
Management believes that the industry's high capacity utilization rates
will continue through at least the year 2000 due to increasing demand for
magnesium and the high costs and difficulty associated with constructing a new
facility. The magnesium manufacturing process is also highly technical and
proprietary to each company. Management estimates a cost of approximately $500
million to establish a facility with the same production capacity as Magcorp's
facility. One new facility, located in Israel with an estimated annual capacity
of 27,500 metric tons, is expected to begin production in early 1997. The
capacity of the Israeli facility may also be increased, subject to start-up
success, viability and market conditions, from 27,500 to 55,000 metric tons,
with a possible start-up date for the second phase in 1999.
Magcorp's business strategy consists of three principal elements: (i)
maximize sales in markets in which superior margins can be achieved, (ii)
establish and maintain long-term customer relationships through service, product
flexibility and responsiveness and (iii) manage production and overhead costs
aggressively.
In furtherance of its business strategy, Magcorp emphasizes quality,
service and flexibility to meet changing customer specifications. In particular,
management believes that Magcorp's range of products and delivery program has
afforded Magcorp a significant degree of flexibility to meet customer needs
which serves to foster long-term relationships with its core customers.
Additionally, with respect to costs, management has maintained an aggressive
cost management program since 1987 which has resulted in a 28.3% reduction of
direct unit manufacturing costs. Management is committed to pursuing further
efficiencies and cost reductions to maintain its competitive position within the
industry.
To this end, management has developed a capital improvement program
totaling approximately $46 million which encompasses the installation of new
electrolytic cell technology, as well as the installation of a magnesium caster.
The new electrolytic cells are expected to reduce operating costs and improve
manufacturing efficiencies resulting from reductions in: (i) electricity
consumption; (ii) manufacturing labor requirements; (iii) magnesium metal losses
in the manufacturing process; and (iv) chlorine emissions.
The electrolytic cell conversion will commence in early 1997 with the
installation of a prototype cell and, assuming its successful operation, the
conversion of the remaining cells is expected to be completed by 1999.
Management estimates that the magnesium caster will be installed in fiscal year
1997.
Sabel
Sabel is a diversified company primarily involved in the steel service
center, scrap metal and reinforcing bar ("rebar") fabrication businesses.
Through its four steel service centers located in Alabama, Sabel distributes a
full line of hot rolled and cold rolled carbon steel and structural steel to
industrial accounts as well as the general public throughout the Southeast.
Sabel's scrap metal operations process to customer specifications and sell and
transport ferrous and non-ferrous scrap metal to mini- and integrated mills.
Sabel's rebar fabrication operation customizes rebar to sizes and shapes
required for use in building and highway construction. Sabel processes more than
90% of the steel it sells to more than 3,500 customers.
Sabel's business strategy is to maintain and strengthen its presence in
niche markets while emphasizing supplier and customer relationships. Sabel
concentrates on low volume, high margin sales to customers whose order sizes are
not efficiently handled by larger steel service centers and scrap metal
companies. Sabel's ability to provide one-day turnaround service on most
commonly used steel products at competitive prices enables its smaller customers
to implement just in time delivery for material requirements planning. With a
primary focus on the Southeast region, Sabel's geographic proximity to its
customers facilitates this service while minimizing freight costs and delivery
time. Sabel's strong market presence in the region enables it to obtain
contracts for on-site collection of scrap materials from a number of industrial
concerns.
Control of the Company
All of the Company's issued and outstanding capital stock is owned by The
Renco Group, Inc. ("Group"), which is 95.8% owned by Mr. Ira Leon Rennert, the
Chairman and Chief Executive Officer of the Company and Group, and by trusts
established by him for members of his family (but of which he is not a trustee).
As a result of such ownership, Mr. Rennert controls the Company and its
subsidiaries.
4
<PAGE> 7
THE OFFERING
<TABLE>
<S> <C>
SECURITIES OFFERED................. $150,000,000 aggregate principal amount of % Senior
Notes due 2003 (the "Senior Notes").
MATURITY DATE...................... , 2003.
INTEREST PAYMENT DATES............. Interest will accrue from the date of issuance and will
be payable semi-annually on each and
, commencing , 199 .
OPTIONAL REDEMPTION................ The Senior Notes are redeemable, in whole or in part, at
the option of the Company on or after , 2000
at the redemption prices set forth herein plus accrued
interest to the redemption date. See "Description of
Senior Notes -- Optional Redemption." In addition, prior
to , 1999, the Company, at its option, may
redeem up to 33% of the aggregate principal amount of
the Senior Notes originally issued with the net proceeds
of one or more Public Equity Offerings at the redemption
price set forth herein plus accrued interest to the date
of redemption; provided that at least $100.0 million of
Senior Notes remain outstanding immediately after such
redemption. See "Description of Senior Notes -- Optional
Redemption Upon Public Equity Offerings."
CHANGE OF CONTROL.................. Upon a Change of Control, each holder of Senior Notes
will have the right to require the Company to repurchase
all or a portion of such holder's Senior Notes at a
price of 101% of the principal amount thereof plus
accrued interest to the repurchase date. See
"Description of Senior Notes -- Change of Control."
ASSET SALE PROCEEDS................ The Company is obligated in certain instances to make
offers to purchase the Senior Notes at a redemption
price of 100% of the principal amount thereof plus
accrued interest to the repurchase date with the net
cash proceeds of certain sales or other dispositions of
assets. See "Description of Senior Notes -- Certain
Covenants -- Disposition of Proceeds of Asset Sales."
GUARANTEES......................... The Senior Notes are fully and unconditionally
guaranteed, jointly and severally, by the Guarantors on
a senior unsecured basis. See "Description of Senior
Notes -- Guarantees."
RANKING............................ The Senior Notes will be senior obligations of the
Company and will rank pari passu with all senior
indebtedness of the Company, including any Existing
Notes that remain outstanding after the Tender Offer,
and will rank senior to all subordinated indebtedness of
the Company.
USE OF PROCEEDS.................... The Company intends to use the net proceeds from the
Offering of the Senior Notes, together with available
cash of the Company, to (i) retire Existing Notes
validly tendered pursuant to the Tender Offer (as
defined), (ii) redeem the Company's existing 10%
Preferred Stock held by Group, (iii) make certain
contractual compensation payments to certain executives
of Magcorp, (iv) pay a dividend to Group and (v) pay
related fees and expenses. See "Use of Proceeds." The
use of the proceeds and the application of the available
cash, together with certain amendments to the Revolving
Credit Facilities, are collectively referred to herein
as the "Transactions."
</TABLE>
5
<PAGE> 8
<TABLE>
<S> <C>
CERTAIN COVENANTS.................. The Indenture governing the Senior Notes will contain
certain covenants that, among others, limit the type and
amount of additional indebtedness that may be incurred
by the Company or any of its subsidiaries and impose
limitations on investments, loans, advances, the payment
of dividends and the making of certain other payments,
the creation of liens, certain transactions with
affiliates and certain mergers. See "Description of
Senior Notes -- Certain Covenants."
</TABLE>
TENDER OFFER AND CONSENT SOLICITATION
On May 24, 1996, the Company commenced an offer (the "Tender Offer") to
purchase for cash up to all of the Existing Notes and a related solicitation
(the "Consent Solicitation") of consents to delete or modify certain terms of
the indenture under which the Existing Notes were issued. The purchase price to
be paid in respect of the validly tendered (and not withdrawn) Existing Notes
and the related consents is 111% of their principal amount, plus accrued
interest up to, but not including, the date of purchase. On June 18, 1996, the
Company amended the Tender Offer by increasing the purchase price to be paid in
respect of validly tendered (and not withdrawn) Existing Notes and the related
consents to 112.75% of their principal amount, plus accrued interest up to, but
not including, the date of purchase. The Tender Offer expires at midnight, New
York City time, on July 1, 1996. Consummation of the Offering is conditioned
upon the receipt by the Company of consents representing at least a majority in
aggregate principal amount of the Existing Notes outstanding.
RISK FACTORS
Prospective purchasers of the Senior Notes should consider carefully all of
the information set forth in this Prospectus and, in particular, should evaluate
the specific factors set forth under "Risk Factors" for risks involved with an
investment in the Senior Notes.
6
<PAGE> 9
SUMMARY CONSOLIDATED FINANCIAL DATA
The following table sets forth summary financial data of the Company for
the six months ended April 30, 1995 and 1996, and for each of the years in the
five fiscal year period ended October 31, 1995, and as of April 30, 1996
(historical and pro forma to give effect to the Transactions). Such summary
information is qualified by, and should be read in conjunction with, the
detailed information and the financial statements appearing elsewhere herein for
the fiscal years ended October 31, 1993, 1994 and 1995 and the notes related
thereto, and the unaudited results for the six months ended April 30, 1995 and
1996. The summary financial data for the six months ended April 30, 1995 and
1996 are unaudited but, in the opinion of management, include all adjustments
(consisting of normal recurring accruals) necessary for the fair presentation of
the financial and operating data for such periods. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED OCTOBER 31, APRIL 30,
------------------------------------------------------------ --------------------
1991 1992 1993 1994 1995 1995 1996
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales........................... $113,649 $117,262 $131,139 $132,950 $185,806 $87,681 $ 99,110
Cost of sales....................... 92,151 95,501 95,313 106,364 121,189 58,900 56,238
Depreciation, depletion, and
amortization...................... 11,627 10,698 7,135 5,604 5,770 2,878 3,369
Selling, general, and administrative
expenses.......................... 14,411 14,499 14,714 16,352 18,470 8,898 8,967
-------- -------- -------- -------- -------- ------- --------
Operating income (loss)............. (4,540) (3,436) 13,977 4,630 40,377 17,005 30,536
Interest income..................... 4 11 56 186 881 210 830
Interest expense.................... 9,736 7,614 7,414 10,208 10,138 5,056 5,034
Income tax expense (benefit)........ (1,424) (331) 2,503 (1,932) 11,143 5,000 9,447
-------- -------- -------- -------- -------- ------- --------
Income (loss) from continuing
operations........................ (12,848) (10,708) 4,116 (3,460) 19,977 7,159 16,885
Extraordinary item(1)............... -- -- 2,930 -- -- -- --
Cumulative effect of accounting
change............................ -- -- -- 30 -- -- --
Net income (loss)................... $(12,848) $(10,708) $ 7,046 $ (3,430) $ 19,977 $ 7,159 $ 16,885
======== ======== ======== ======== ======== ======= ========
Ratio of earnings to fixed
charges(2)(3)..................... -- -- 1.78x -- 3.81x 3.20x 5.85x
FINANCIAL RATIOS AND OTHER DATA:
EBITDA(4)........................... $ 7,715 $ 7,897 $ 21,450 $ 10,792 $ 47,118 $20,138 $ 34,809
Capital expenditures(5)............. 308 751 2,595 3,227 7,185 3,361 5,042
Cash interest expense(6)............ 8,269 6,217 5,769 9,436 9,366 4,670 4,648
Ratio of EBITDA to cash interest
expense........................... -- 1.27x 3.72x 1.14x 5.03x 4.31x 7.49x
PRO FORMA DATA:(7)
Cash interest expense(6)............ 16,866 8,398
Ratio of EBITDA to cash interest
expense........................... 2.79x 4.14x
</TABLE>
<TABLE>
<CAPTION>
AS OF
APRIL 30, 1996
---------------------
PRO
ACTUAL FORMA(8)
<S> <C> <C>
BALANCE SHEET DATA (at end of
period):
Working capital................... $ 64,517 $ 41,456
Property, plant, and equipment,
net............................. 33,680 33,680
Total assets...................... 122,301 100,042
Total debt........................ 77,520 152,520
Stockholder's equity (deficit).... 11,823 (81,511)
</TABLE>
- ------------------------------
(1) See Note (9) of Notes to Consolidated Financial Statements included
elsewhere herein.
(2) Fixed charges consist of interest expense, amortization of deferred
financing costs and the portion of rental expense that is representative of
interest expense. Earnings consist of income before taxes plus fixed
charges.
(3) Earnings were insufficient to cover fixed charges by $14.3 million, $11.0
million and $5.4 million for the years ended October 31, 1991, 1992 and
1994, respectively.
(4) EBITDA is defined as earnings before interest expense, provision (benefit)
for income taxes, depreciation, depletion and amortization and non-cash post
retirement medical charges. Information regarding EBITDA is presented
because of its use by certain investors as one measure of an issuer's
historical ability to service its debt. EBITDA should not be considered an
alternative to, or more meaningful than, operating income or cash flow as an
indicator of the Company's operating performance.
(5) Capital expenditures does not include ongoing maintenance expenses of $17.9
million, $19.7 million, $20.9 million, $19.9 million, $23.3 million, $11.0
million and $11.7 million for the years ended October 31, 1991, 1992, 1993,
1994 and 1995 and the six months ended April 30, 1995 and 1996,
respectively, which are included in cost of sales.
(6) Cash interest expense consists of interest expense less amortization of loan
origination and financing fees.
(7) Pro forma to give effect to the Transactions as if they occurred as of the
first day of each period presented. See "Use of Proceeds."
(8) Pro forma to give effect to the Transactions as if they occurred as of April
30, 1996. See "Use of Proceeds" and "Capitalization."
7
<PAGE> 10
RISK FACTORS
Prior to purchasing the Senior Notes offered hereby, prospective purchasers
should consider all of the information set forth in this Prospectus and, in
particular, should evaluate the following risk factors:
HIGH LEVERAGE
After consummation of the Offering, the Company will have significant debt
service obligations. As of April 30, 1996, on a pro forma basis after giving
effect to the Transactions, the Company would have had total long-term
indebtedness of $152.5 million (excluding $1.6 million of outstanding undrawn
letters of credit) and a stockholder's deficit of $81.5 million. The Company's
high level of indebtedness presents substantial risks to the holders of the
Senior Notes, including the risk that the Company might not generate sufficient
cash to service the Senior Notes and its other debt obligations. The ability of
the Company to meet its debt service and other obligations will depend upon its
future performance. The Company is engaged in businesses that are substantially
affected by changes in economic cycles and whose revenues and earnings vary with
the level of general economic activity in the markets they serve as well as by
financial, political, business and other factors, many of which are beyond the
Company's control. The Company's ability to meet its debt service obligations
also may be affected by changes in prevailing interest rates, as borrowings
under the Revolving Credit Facilities bear interest at floating rates. See
"Capitalization."
In the event that internally generated funds and amounts available under
the Revolving Credit Facilities are not sufficient to fund the Company's capital
expenditures and its debt service obligations, including the Senior Notes, the
Company would be required to raise additional funds through the sale of equity
securities, the refinancing of all or part of its indebtedness or the sale of
assets. Each of these alternatives is dependent upon financial, business and
other general economic factors affecting the Company, many of which are beyond
the control of the Company, and there can be no assurance that any such
alternatives would be available to the Company, if at all, on satisfactory
terms. While the Company believes that cash flow generated by operations, along
with borrowing availability to the Guarantors under the Revolving Credit
Facilities, will provide adequate sources of long-term liquidity, a significant
drop in operating cash flows resulting from economic conditions, competition or
other uncertainties beyond the Company's control could increase the need for
refinancing or new capital.
The Indenture governing the Senior Notes and the Revolving Credit
Facilities impose restrictions on the operations and activities of the Company.
The most significant restrictions relate to debt incurrence, investments, sales
of assets and cash distributions by the Company and require the Company to
comply with certain financial covenants. The failure to comply with any of these
restrictions or covenants could result in an event of default under the
applicable instrument, which could permit acceleration of the debt under such
instrument and in some cases acceleration of debt under other instruments that
contain cross-acceleration or cross-default provisions. See "Description of
Senior Notes" and "Description of Revolving Credit Facilities."
Accounts receivable and inventory of each Guarantor are pledged to secure
that Guarantor's obligations under its Revolving Credit Facility and are
available to satisfy the Senior Notes only when such Revolving Credit Facility
obligations are discharged. Generally, the property, plant and equipment of each
Guarantor are unencumbered and are available to satisfy general unsecured
obligations of that Guarantor, including its Guarantee (as defined).
HOLDING COMPANY STRUCTURE; POSSIBLE FRAUDULENT CONVEYANCE ISSUES
The Company is a holding company with no operations of its own. All of the
Company's operating income is generated by the Guarantors. As a result, the
Company will rely upon distributions or advances from the Guarantors to provide
the funds necessary to meet its debt service obligations, including the payment
of principal and interest on the Senior Notes.
Under federal or state fraudulent conveyance laws, the Senior Notes might,
under certain circumstances, be subordinated to existing or future indebtedness
of the Company or found not to be enforceable in accordance with their terms.
Under these statutes, if a court were to find that (i) the Senior Notes were
incurred or the guarantees (the "Guarantees") of the Guarantors were entered
into with the intent of
8
<PAGE> 11
hindering, delaying or defrauding creditors or that the Company received less
than a reasonably equivalent value or fair consideration for the Senior Notes
and (ii) the Company or the Guarantors were insolvent immediately prior to the
time the Senior Notes were issued and the Guarantees were incurred, as the case
may be, were rendered insolvent by the issuance of the Senior Notes or the
Guarantees, were engaged in a business or transaction for which the assets
remaining with the Company or the Guarantors constituted unreasonably small
capital, or intended to incur, or believed that it would incur, debts beyond its
ability to pay such debts as they matured, such court could void the Company's
and the Guarantors' obligations under the Senior Notes, or subordinate the
Senior Notes and the Guarantees to all other indebtedness of the Company and the
Guarantors, as the case may be. In that event, there would be no assurance that
any repayment on the Senior Notes would ever be recovered by the holders of the
Senior Notes and the Guarantees. Although the definition of insolvency varies
among the jurisdictions, generally, the Company and the Guarantors would be
considered to have been insolvent at the time the Senior Notes were issued if
the sum of its debts were then greater than all of its property at a fair
valuation, or if the then fair saleable value of its assets was less than the
amount that was then required to pay its probable liability on its existing
debts as they become absolute and matured. There can be no assurance as to what
standard a court would apply in order to determine whether the Company or the
Guarantors were "insolvent" as of the date the Senior Notes were issued, or
that, regardless of the method of valuation, a court would not determine that
the Company or the Guarantors were insolvent on that date. Nor can there be any
assurance that a court would not determine, regardless of whether the Company or
the Guarantors were insolvent on the date the Senior Notes were issued, that the
payments constituted fraudulent transfers on another ground.
VOLATILITY OF MAGNESIUM PRICING
List prices for pure magnesium reached historically high levels in the
markets Magcorp serves in mid-1995 and have remained stable since such time.
Magnesium regularly sells for prices lower than list price for pure magnesium,
with price dependent on market segment, chemistry, contract terms, including
negotiated discounts and quality, with the higher quality magnesium sold by
Magcorp selling at or near list price, and lower quality magnesium, like that
produced in the PRC, selling at substantially below list price. Manufacturers of
lower quality pure magnesium, including these in the PRC, have experienced price
reductions during 1996. Magcorp believes that the price that it will receive for
higher quality pure magnesium sold in the United States may decrease modestly in
the second half of 1996 but remain at levels above 1995. The price that Magcorp
is able to receive for magnesium is particularly sensitive to the availability
of magnesium in the North American market. If there is an increased supply of
magnesium sold in the North American market, prices could decrease. A new
facility, located in Israel with an estimated annual capacity of approximately
27,500 metric tons, is expected to begin producing and selling magnesium by
early 1997 and could result in new imports into the North American marketplace.
The capacity of the Israeli facility may also be increased, subject to start-up
success, viability and market conditions, from 27,500 to 55,000 metric tons,
with a possible start-up date for the second phase of 1999. Increases in
magnesium supplies in the North American marketplace could also result from
increased domestic manufacturing capacity and imports from other magnesium
producing countries, including the PRC. Imports may increase if, among other
things, the antidumping duties against certain Russian Federation imports or
certain Ukrainian imports of pure magnesium, or the antidumping duties and/or
countervailing duties imposed against Canadian imports of pure and alloy
magnesium were removed. See "-- Magnesium Import Issues" below. A material
decrease in the price of magnesium could adversely affect the Company's
operating results. There can be no assurance that current prices will continue.
MAGNESIUM IMPORT ISSUES
There presently exist antidumping duties on certain magnesium imports of
pure magnesium from the Russian Federation, Ukraine and the PRC. On March 30,
1995 the Department of Commerce ("DOC") determined that imports of pure
magnesium from all three countries were dumped in the United States but also
determined that certain Russian producers and traders were not dumping Russian
magnesium. On April 26, 1995, the U.S. International Trade Commission ("ITC")
announced its affirmative determinations that imports from these three countries
were a cause of injury to the domestic magnesium industry.
9
<PAGE> 12
Subsequent to that decision, Magcorp filed an appeal in the U.S. Court of
International Trade ("CIT") of the DOC's determination that certain Russian
producers and traders did not engage in dumping magnesium into the U.S. market.
One of the Ukrainian traders appealed the injury determination entered by the
ITC as to dumped imports of Ukrainian pure magnesium. These appeals have been
fully briefed and have been set for oral argument before the CIT on July 9,
1996. Neither the possible outcome of the appeal process nor the impact of the
determinations or the impact of the appeal process upon the Company's business
can be determined at the present time.
There are antidumping and countervailing duties imposed against imports of
pure and alloy magnesium from Canada. On May 29, 1996, following an
administrative review undertaken by the DOC, the antidumping duty deposit was
reduced to zero on a preliminary basis due to increased pricing levels in the
U.S. market. Any permanent reduction or reversal of such duties could have a
material adverse effect on magnesium pricing in the United States and on
Magcorp's competitive position, depending upon market conditions. See
"Business -- Magcorp -- Legal Proceedings; Pending Trade Issues."
ENVIRONMENTAL MATTERS
The Company and its operations are subject to a variety of federal, state
and local environmental laws and regulations. Such laws relate to, among other
things, the discharge of contaminants into water and air and into and onto land
and the disposal of waste. The Company's cost of compliance with environmental
laws and remediation obligations under such laws has been and is expected to
continue to be significant. Magcorp plans to spend approximately $40 million of
its capital budget by the year 2000 directly or indirectly to meet environmental
regulatory requirements by purchasing new electrolytic cell technology that will
reduce chlorine emissions at the source. See
"Business -- Magcorp -- Environmental Matters."
FLUCTUATIONS IN ENERGY COSTS
Amounts paid by the Company for electricity and natural gas represent the
largest components of the Company's variable costs. The cost of these materials
is subject to market fluctuations caused by factors beyond the Company's
control. Significant increases in the cost of electricity or natural gas, to the
extent not reflected in prices for the Company's products, could materially and
adversely affect the Company's results of operations.
LABOR RELATIONS
Approximately 73% of Magcorp's hourly employees and 20% of Sabel's hourly
employees are covered by collective bargaining or similar agreements that expire
in 1997. The Company believes that it has satisfactory relations with its
employees. There can be no assurance, however, that new labor agreements will be
reached without a work stoppage or strike or will be reached on terms
satisfactory to the Company.
CONTROL BY GROUP
The Company is a wholly owned subsidiary of Group, which is 95.8% owned by
Mr. Ira Leon Rennert and by trusts established by him for members of his family.
Due to its ownership of all the capital stock of the Company, Group will be able
to direct and control the policies of the Company, including mergers, sales of
all or substantially all of the Company's assets and similar transactions, which
transactions may result in a Change of Control under the Indenture governing the
Senior Notes. See "Description of Senior Notes -- Change of Control." The
Company's board of directors has been, and is expected to continue to be,
comprised entirely of designees of Group. Currently, Mr. Rennert is the sole
director of the Company.
LACK OF A PUBLIC MARKET FOR THE SENIOR NOTES
The Senior Notes are new securities for which no market exists. Although
Donaldson, Lufkin & Jenrette Securities Corporation has informed the Company
that it currently intends to make a market in the Senior Notes, it is not
obligated to do so and any such market making may be discontinued at any time
without notice. Accordingly, there can be no assurance as to the development or
liquidity of any market for the Senior Notes.
10
<PAGE> 13
USE OF PROCEEDS
The net proceeds from the Offering will be approximately $144.0 million.
Approximately $84.6 million will be used to provide funds to redeem the Existing
Notes pursuant to the Tender Offer (assuming all of the Existing Notes are
validly tendered) and approximately $8.5 million will be used to redeem the
Company's outstanding 10% Preferred Stock from Group. The balance of the net
proceeds, approximately $50.9 million, plus available cash of the Company of
approximately $25.2 million, will be used to fund a dividend distribution from
the Company to Group and to make certain contractual compensation payments to
certain executives of Magcorp.
The following table summarizes the sources and uses of funds for the
Offering assuming a closing date of July 15, 1996:
<TABLE>
<CAPTION>
(DOLLARS IN MILLIONS)
<S> <C>
Sources:
Senior Notes....................................................... $ 150.0
Estimated available cash(1)........................................ 25.2
------
Total sources.............................................. $ 175.2
======
Uses:
Retire Existing Notes (including premium).......................... $ 84.6
Dividend to Group.................................................. 71.1
Redeem 10% Preferred Stock from Group.............................. 8.5
Contractual compensation payments to Magcorp executives(2)......... 5.0
Transaction fees and expenses...................................... 6.0
------
Total uses................................................. $ 175.2
======
</TABLE>
- ---------------
(1) The amount of the dividend paid to Group and the amount of the contractual
compensation payments to Magcorp executives upon consummation of the
Offering will depend upon available cash.
(2) Upon consummation of the Transactions, certain payments will be made to such
Magcorp executives pursuant to Net Worth Appreciation Agreements. See
"Management -- Executive Compensation -- Net Worth Appreciation Agreements."
11
<PAGE> 14
CAPITALIZATION
The following table sets forth the historical consolidated cash and cash
equivalents and capitalization of the Company as of April 30, 1996, and as
adjusted to give effect to the Transactions. This table should be read in
conjunction with the historical consolidated financial statements of the Company
and notes related thereto presented elsewhere herein.
<TABLE>
<CAPTION>
AS OF APRIL 30, 1996
------------------------
ACTUAL AS ADJUSTED
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents..................................... $32,007 $ 547
======== ========
Long-term debt (including current maturities):
Revolving Credit Facilities(1).............................. $ 2,037 $ 2,037
Existing Notes.............................................. 75,000 --
Senior Notes................................................ -- 150,000
Other....................................................... 483 483
-------- --------
Total long-term debt (including current
maturities)....................................... 77,520 152,520
-------- --------
Stockholder's equity:
10% Preferred Stock, $1,000 par value; 8,500 shares
authorized, issued and outstanding....................... 8,500 --
Common Stock, no par value; 1,000 shares authorized, issued
and outstanding.......................................... 1 1
Additional paid-in-capital.................................. 500 500
Retained earnings (deficit)(2).............................. 3,035 (81,799)
Minimum pension liability adjustment........................ (213) (213)
-------- --------
Total stockholder's equity (deficit)................ $11,823 (81,511)
-------- --------
Total capitalization.......................................... $89,343 $ 71,009
======== ========
</TABLE>
- ------------------------------
(1) At the closing of the Offering, the Revolving Credit Facilities will consist
of two revolving credit facilities of $33.0 million and $7.0 million for
Magcorp and Sabel, respectively, both expiring August 4, 1999. The
outstanding amounts under the Revolving Credit Facilities relate to Sabel
and exclude undrawn amounts under letters of credit issued pursuant to the
Revolving Credit Facilities. See "Description of Revolving Credit
Facilities."
(2) Reflects (i) a non-recurring charge of approximately $9.6 million related to
the premium paid pursuant to the Tender Offer, (ii) a non-recurring charge
of $2.6 million related to the acceleration of unamortized deferred
financing costs associated with the repurchase of the Existing Notes, (iii)
certain contractual compensation payments to Magcorp executives totalling
$5.2 million ($1.4 million of which was previously accrued) and (iv) a
dividend to Group of approximately $70.5 million, net of tax benefits
associated with clauses (i) through (iii) above of $5.7 million. Also
reflects a $4.1 million dividend paid to Group on May 16, 1996. The amount
of the dividend paid to Group and the amount of the contractual compensation
payments to Magcorp executives upon consummation of the Offering will depend
upon available cash.
12
<PAGE> 15
SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth selected financial data of the Company as of
and for the six months ended April 30, 1995 and 1996, and as of and for each of
the years in the five fiscal year period ended October 31, 1995. Such selected
information is qualified by, and should be read in conjunction with, the
detailed information and the financial statements appearing elsewhere herein for
the fiscal years ended October 31, 1993, 1994 and 1995, and the notes related
thereto, and the unaudited results for the six months ended April 30, 1995 and
1996. The selected financial data for the six months ended April 30, 1995 and
1996 are unaudited but, in the opinion of management, include all adjustments
(consisting of normal recurring accruals) necessary for the fair presentation of
the financial and operating data for such periods. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED OCTOBER 31, APRIL 30,
---------------------------------------------------- --------------------
1991 1992 1993 1994 1995 1995 1996
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales.................................. $113,649 $117,262 $131,139 $132,950 $185,806 $87,681 $ 99,110
Cost of sales.............................. 92,151 95,501 95,313 106,364 121,189 58,900 56,238
Depreciation, depletion, and
amortization............................. 11,627 10,698 7,135 5,604 5,770 2,878 3,369
Selling, general, and administrative
expenses................................. 14,411 14,499 14,714 16,352 18,470 8,898 8,967
-------- -------- -------- -------- -------- ------- --------
Operating income (loss).................... (4,540) (3,436) 13,977 4,630 40,377 17,005 30,536
Interest income............................ 4 11 56 186 881 210 830
Interest expense........................... 9,736 7,614 7,414 10,208 10,138 5,056 5,034
Income tax expense (benefit)............... (1,424) (331) 2,503 (1,932) 11,143 5,000 9,447
-------- -------- -------- -------- -------- ------- --------
Income (loss) from continuing operations... (12,848) (10,708) 4,116 (3,460) 19,977 7,159 16,885
Extraordinary item(1)...................... -- -- 2,930 -- -- -- --
Cumulative effect of accounting change..... -- -- -- 30 -- -- --
Net income (loss).......................... $(12,848) $(10,708) $ 7,046 $ (3,430) $ 19,977 $ 7,159 $ 16,885
======== ======== ======== ======== ======== ======= ========
Cash dividends............................. -- -- $ 7,601 -- -- -- $ 9,822
Ratio of earnings to fixed charges(2)(3)... -- -- 1.78x -- 3.81x 3.20x 5.85x
FINANCIAL RATIOS AND OTHER DATA:
EBITDA(4).................................. $ 7,715 $ 7,897 $ 21,450 $ 10,792 $ 47,118 $20,138 $ 34,809
Capital expenditures(5).................... 308 751 2,595 3,227 7,185 3,361 5,042
Cash interest expense(6)................... 8,269 6,217 5,769 9,436 9,366 4,670 4,648
Ratio of EBITDA to cash interest expense... -- 1.27x 3.72x 1.14x 5.03x 4.31x 7.49x
PRO FORMA DATA:(7)
Cash interest expense(6)................... 16,866 8,398
Ratio of EBITDA to cash interest expense... 2.79x 4.14x
BALANCE SHEET DATA (at end of period):
Working capital............................ $ 4,117 $ 16,818 $ 35,186 $ 36,911 $ 58,880 $44,310 $ 64,517
Property, plant, and equipment, net........ 39,568 35,341 32,845 30,862 32,014 31,334 33,680
Total assets............................... 94,066 78,700 90,515 89,038 116,551 99,164 122,301
Total debt................................. 69,644 62,274 75,862 78,839 78,012 78,136 77,520
Stockholder's equity (deficit)............. (8,811) (19,519) (12,000) (15,004) 4,760 (7,845) 11,823
</TABLE>
- ------------------------------
(1) See Note (9) of Notes to Consolidated Financial Statements included
elsewhere herein.
(2) Fixed charges consist of interest expense, amortization of deferred
financing costs and the portion of rental expense that it is representative
of interest expense. Earnings consist of income before taxes plus fixed
charges.
(3) Earnings were insufficient to cover fixed charges by $14.3 million, $11.0
million and $5.4 million for the years ended October 31, 1991, 1992 and
1994, respectively.
(4) EBITDA is defined as earnings before interest expense, provision (benefit)
for income taxes, depreciation, depletion and amortization, and non-cash
post retirement medical charges. Information regarding EBITDA is presented
because of its use by certain investors as one measure of an issuer's
historical ability to service its debt. EBITDA should not be considered an
alternative to, or more meaningful than, operating income or cash flow as an
indicator of the Company's operating performance.
(5) Capital expenditures does not include ongoing maintenance expenses of $17.9
million, $19.7 million, $20.9 million, $19.9 million, $23.3 million, $11.0
million and $11.7 million for the years ended October 31, 1991, 1992, 1993,
1994 and 1995 and the six months ended April 30, 1995 and 1996,
respectively, which are included in cost of sales.
(6) Cash interest expense consists of interest expense less amortization of loan
origination and financing fees.
(7) Pro forma to give effect to the Transactions as if they had occurred as of
the first day of each period presented. See "Use of Proceeds."
13
<PAGE> 16
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Company is a holding company incorporated on July 19, 1993 which has
two wholly-owned operating companies, Magcorp and Sabel. Through Magcorp, the
Company is engaged in the production and sale of magnesium and magnesium alloys
for customers throughout the world. Group acquired Magcorp in August 1989. Sabel
is a diversified company in the southeast United States primarily involved in
the steel service center, scrap metal and rebar businesses. Sabel was acquired
by Group in July 1987.
The following discussion and analysis should be read in conjunction with
the Consolidated Financial Statements and the notes thereto and other financial
information included elsewhere in this Prospectus.
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED OCTOBER 31, APRIL 30,
------------------------------ -----------------
1993 1994 1995 1995 1996
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Sales by business segment:
Magcorp..................................... $ 97,099 $ 90,745 $136,348 $62,649 $77,103
Sabel....................................... 34,040 42,205 49,458 25,032 22,007
-------- -------- -------- ------- -------
Total sales......................... 131,139 132,950 185,806 87,681 99,110
Cost of sales................................. 95,313 106,364 121,189 58,900 56,238
Depreciation, depletion, and amortization..... 7,135 5,604 5,770 2,878 3,369
Selling, general and administrative
expenses.................................... 14,714 16,352 18,470 8,898 8,967
-------- -------- -------- ------- -------
Total operating income.............. 13,977 4,630 40,377 17,005 30,536
Interest income............................... 56 186 881 210 830
Interest expense.............................. (7,414) (10,208) (10,138) (5,056) (5,034)
-------- -------- -------- ------- -------
Income (loss) before income taxes............. 6,619 (5,392) 31,120 12,159 26,332
Income tax expense (benefit).................. 2,503 (1,932) 11,143 5,000 9,447
-------- -------- -------- ------- -------
Income (loss) before extraordinary item and
cumulative effect of change in accounting
for income taxes............................ 4,116 (3,460) 19,977 7,159 16,885
Extraordinary item -- extinguishment of debt,
net of taxes................................ 2,930 -- -- -- --
Cumulative effect of change in accounting for
income taxes................................ -- 30 -- -- --
-------- -------- -------- ------- -------
Net income (loss)............................. $ 7,046 $ (3,430) $ 19,977 $ 7,159 $16,885
======== ======== ======== ======= =======
</TABLE>
SIX MONTHS ENDED APRIL 30, 1996 COMPARED TO SIX MONTHS ENDED APRIL 30, 1995
Sales for the six month period ended April 30, 1996 increased 13.0% over
the prior period. The increase was attributable to a 23.1% increase in Magcorp's
revenues, which was offset by a 12.1% decrease in Sabel's revenues. Magcorp's
magnesium shipments increased 1.3% and the average selling price increased
21.4%. Both selling price and sales volume were impacted by favorable demand
trends in the magnesium market. Magnesium pricing and volume are dependent on
the overall market supply and demand, and there is no assurance that the current
favorable trends will continue. Sabel's sales decrease was due to a general
weakening of prices and volume throughout all the steel markets in which Sabel
operates.
Cost of sales for the six month period ended April 30, 1996 decreased 4.5%
despite higher sales levels. Magcorp's cost of sales decreased 0.3% primarily
due to decreases in certain energy costs when compared to the corresponding
period in 1995. Magcorp's cost of sales is highly sensitive to acquired energy
costs and levels of production; generally unit costs will increase as production
levels decrease. The cost of sales at Sabel
14
<PAGE> 17
decreased 15.7%, which percentage is higher than the sales percentage decrease
discussed above due to lower costs of goods purchased for resale in the current
period.
Depreciation, depletion, and amortization for the six month period ended
April 30, 1996 increased primarily due to increased depreciation of property,
plant and equipment as the result of recent capital equipment additions.
Selling, general and administrative expenses had no significant change for
the six-month period ended April 30, 1996 from the corresponding period in 1995.
Interest income for the six month period ended April 30, 1996 increased
$0.6 million, due to cash and cash equivalent balances on hand that increased to
an average of $31.0 million in the current period from an average of $10.6
million in the corresponding prior period.
Interest expense had no significant change for the six months ended April
30, 1996 from the corresponding period in 1995.
Income tax expense was 35.9% and 41.1% of pre-tax earnings for the six
months ended April 30, 1996 and 1995, respectively. The primary difference in
the effective rate is attributable to depletion credits allowable for Magcorp's
operations in profitable fiscal years, which were not included in the income tax
provision for the period ended April 30, 1995 due to uncertainties at that date
regarding eligibility for such credits for the full fiscal year.
FISCAL YEAR 1995 COMPARED TO FISCAL YEAR 1994
Sales for fiscal year 1995 increased 39.8%. Magcorp's sales increased by
50.3%. Both magnesium sales volume and selling price were favorably affected by
the tight supply conditions in the magnesium market. The increased revenues at
Magcorp were the result of a 27.7% increase in sales volume and a 17.4% increase
in selling price. According to IMA statistics, total worldwide market shipments
in 1995 calendar year increased 5.8% over the comparable period in 1994. Sales
at Sabel increased 17.2%, primarily as a result of a 16% volume increase in its
steel service centers, and to a lesser extent higher prices in the steel and
scrap metal markets.
Cost of sales for fiscal year 1995 increased by 13.9% from fiscal year
1994. Magcorp's cost of sales increased by 11.9%. Magcorp's cost of sales did
not increase in the same proportion as sales volume, however, because of certain
economies of scale achieved with higher production levels, together with
decreases in certain energy costs when compared to the corresponding period in
1994. Magcorp's cost of sales is highly sensitive to acquired energy costs and
levels of production; generally unit costs will increase as production levels
decrease. Cost of sales at Sabel increased 19.1%, due to increases in sales
volume and higher cost of products sold. The increasing costs of steel products
is indicative of pricing pressures facing Sabel in the markets in which it
operates.
Depreciation, depletion, and amortization for fiscal year 1995 increased by
3.0% from fiscal year 1994 primarily due to increased depreciation of property,
plant and equipment as a result of recent capital equipment additions.
Selling, general, and administrative expenses for fiscal year 1995
increased 13.0%. The increased expense is attributable to increased costs
associated with increased sales activity and profitable operations at Magcorp,
including profit sharing accruals, as well as increased ongoing legal costs
associated primarily with the import trade cases. See "Risk Factors -- Magnesium
Import Issues." Sabel also experienced increased labor, labor related costs, and
maintenance costs associated with its increased sales activity.
Interest income for fiscal year 1995 increased $0.7 million from fiscal
year 1994 due to cash and cash equivalent balances on hand that increased from
$7.9 million at the beginning of 1995 to $30.1 million by the end of the fiscal
year.
Interest expense had no significant change for fiscal year 1995 from fiscal
year 1994.
15
<PAGE> 18
Income tax expense (benefit) was 35.8% and (35.8%) of pre-tax earnings
(losses) for fiscal years 1995 and 1994, respectively. The effective rate in
1995 included a $1.5 million depletion credit allowable for Magcorp's operations
in profitable years, partially offset by a $0.4 million valuation allowance
charge for deferred tax assets.
FISCAL YEAR 1994 COMPARED TO FISCAL YEAR 1993
Sales for fiscal year 1994 increased 1.4%. Magcorp's sales decreased 6.5%.
The decreased sales at Magcorp were the result of a 4.5% decline in sales volume
and a 2.1% reduction in selling price. Both sales volume and selling price were
reduced by the effect of low price magnesium imports from the CIS and PRC into
U.S. markets. By-product revenues at Magcorp increased by 103.0%, partially
countering the impact of decreased magnesium sales revenue. Sales at Sabel
increased by 24.0% as a result of recovering steel and scrap metal prices and
increased volume.
Cost of sales for fiscal year 1994 increased 11.6%. Magcorp's cost of sales
increased by 7.5% due to a 13.6% downturn in production rates and increased
acquired energy costs. Magcorp's cost of sales is highly sensitive to acquired
energy costs and levels of production; generally unit costs will increase as
product levels decrease. Sabel's cost of sales increased by 23.8% due to
increased steel costs and increased volume.
Depreciation, depletion, and amortization for fiscal year 1994 decreased by
21.4% from fiscal year 1993. Magcorp accounted for substantially all of the
decrease through a reduction of $1.8 million in the depletion of brine.
Selling, general, and administrative expenses for fiscal year 1994
increased 11.1%, primarily attributable to a 16.1% increase in Sabel's selling,
general and administrative expenses due to increased labor, labor related costs,
and maintenance costs associated with Sabel's higher level of activity.
Interest income had no significant change for fiscal year 1994 from fiscal
year 1993.
Interest expense for fiscal year 1994 increased by 37.7% from fiscal year
1993 primarily as a result of the issuance of the Existing Notes on August 4,
1993, which resulted in a higher average level of debt and a higher average
interest rate. Amortization of financing fees for fiscal year 1994 totaled $0.8
million as compared to $1.6 million in fiscal year 1993.
Income tax expense (benefit) was (35.8%) and 37.8% of pre-tax earnings
(losses) for fiscal years 1994 and 1993, respectively. The effective rate for
fiscal year 1994 included a ($0.7) million adjustment of overaccruals related to
depletion credits from prior years, partially offset by a $0.5 million valuation
allowance charge for deferred tax assets. The Company adopted Statement of
Financial Accounting Standards No. 109, Accounting for Income Taxes, in the
first quarter of fiscal year 1994, as described in Note 2(f) to the Consolidated
Financial Statements. The resulting cumulative effect of this required change in
accounting for income taxes is reported separately in the consolidated
statements of operations for 1994.
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity needs arise from working capital requirements,
capital investments, dividend payments, and interest payment obligations. The
Company's primary available source of liquidity is from cash provided by
operating activities. The Company also has available $23.0 million in Revolving
Credit Facilities that provide for advances by the lender to a maximum of $20.0
million for Magcorp and $3.0 million for Sabel, based on specified percentages
of eligible accounts receivable, supplies inventories, and finished goods
inventories net of outstanding letters of credit. As of April 30, 1996, the
unused amounts available to Magcorp and Sabel were approximately $18.4 million
and $1.0 million, respectively. As part of the Transactions, the Revolving
Credit Facilities will be amended, increasing the maximum availability to $33.0
million for Magcorp and $7.0 million for Sabel. See "Description of Revolving
Credit Facilities."
In the six month period ended April 30, 1996, $17.3 million was provided by
operating activities, of which $5.0 million was used in investing activities,
and $10.4 million was used in financing activities (primarily dividends to
Group), resulting in a net increase in cash for the period of $1.9 million. As
of April 30, 1996, the
16
<PAGE> 19
Company has budgeted approximately $11.0 million for capital expenditures over
the remaining six months of the fiscal year. The Company has budgeted
approximately $17 million, $26 million and $19 million for capital expenditures
for fiscal 1997, 1998, and 1999, respectively, of which an estimated $40 million
is related to magnesium process enhancements that will also improve
environmental compliance.
The declaration and payment of dividends by the Company are restricted by
the Company's debt agreements, which generally allow dividends up to 50% of
consolidated net income. Since the Company's October 31, 1995 fiscal year end,
dividends totaling $13.9 million, consisting of $2.5 million of cash dividends
on the Company's preferred stock and $11.4 million of cash dividends on the
Company's common stock, have been paid to Group (including $4.1 million paid on
May 16, 1996, subsequent to the Company's April 30, 1996 fiscal quarter end). As
part of the Transactions, and with the consent of the Company's existing debt
holders, the Company plans to pay a dividend to Group in the amount of
approximately $71.1 million and redeem the $8.5 million of 10% Preferred Stock
owned by Group. See "Use of Proceeds." Based on profitability and after taking
into account the Company's prospects and liquidity needs, the Company plans to
pay quarterly dividends to the extent allowed by the Company's debt agreements.
Management anticipates that existing cash balances and cash generated from
operations, particularly in light of current favorable magnesium pricing trends,
and availability under its Revolving Credit Facilities will be sufficient to
finance the Company's liquidity needs for the foreseeable future.
SEASONALITY AND BACKLOG
In general, the Company's cost of sales and selling, general and
administrative expenses are affected by inflation and the effects of inflation
may be experienced by the Company in future periods. Management believes,
however, that such effects have not been material to the Company during the past
three years. The Company's businesses generally are not seasonal and do not
involve significant sales order backlog.
ENVIRONMENTAL MATTERS
The Company and its operations are subject to an increasing number of
federal, state, and local environmental laws and regulations governing, among
other things, air emissions, waste water discharge, and solid and hazardous
waste disposal. Environmental laws and regulations continue to change rapidly
and it is likely that the Company will be subject to increasingly stringent
environmental standards. Compliance with such laws and regulations is a
significant factor in the Company's operations as it is with all domestic
industrial facilities. The Company believes that it has to date materially
complied with all federal, state, and local environmental regulations and is
committed to maintaining its compliance with these laws. See "Business --
Environmental Matters."
17
<PAGE> 20
BUSINESS
The Company is a holding company with two wholly-owned operating companies,
Magcorp and Sabel. Through Magcorp, the Company is engaged in the production and
sale of magnesium and magnesium alloys for customers throughout the world. Group
acquired Magcorp in August 1989. Sabel is a diversified company in the southeast
United States primarily involved in the steel service center, scrap metal and
rebar businesses. Sabel was acquired by Group in July 1987.
The following table summarizes the percentage of sales attributable to
Magcorp and Sabel during each of the three years ended October 31, 1995 and the
six months ended April 30, 1995 and 1996.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED OCTOBER 31, APRIL 30,
----------------------------- ------------------
1993 1994 1995 1995 1996
<S> <C> <C> <C> <C> <C>
Magcorp............................. 74.0% 68.3% 73.4% 71.5% 77.8%
Sabel............................... 26.0% 31.7% 26.6% 28.5% 22.2%
------- ------- ------- ------- -------
Total..................... 100.0% 100.0% 100.0% 100.0% 100.0%
====== ====== ====== ====== ======
</TABLE>
MAGCORP
Overview
In 1995, Magcorp was the third largest producer of pure magnesium and
magnesium alloys in North America and the fourth largest producer in the world
outside the CIS and PRC. Magnesium and magnesium alloys are components in
products ranging from aluminum beverage cans, computer chassis and power tools
to complex castings for the aerospace, automotive and recreation industries.
Additionally, magnesium is used in the production of steel, ductile iron and
other metals and as a reagent in the manufacture of various organic and
pharmaceutical products.
Magcorp sells pure magnesium and magnesium alloys to domestic and
international customers. Magcorp's plant, which was constructed in 1972, is
located in Rowley, Utah, and has a nominal annual production capacity of
approximately 41,000 metric tons. Magcorp produced approximately 38,400 metric
tons in fiscal year 1995 and approximately 20,300 metric tons for the six months
ended April 30, 1996. Magcorp accounted for 21% of calendar year 1995 North
American production and 16% of calendar year 1995 global production, excluding
CIS and PRC, according to statistics published by the IMA and management
estimates.
Due to the high-quality brine drawn from the Great Salt Lake and a
proprietary production process, Magcorp is capable of consistently producing
magnesium with a purity level which exceeds the industry standard of 99.8%.
Magcorp offers over 30 different sizes, shapes and weights of primary magnesium
and magnesium alloy products in a range of purity levels to meet customer needs
in all of its major markets.
Primary Magnesium Industry
The seven primary magnesium producers outside the CIS and PRC produced
shipments of 248,700 metric tons of magnesium in calendar year 1995 according to
the IMA. In addition, 55,300 metric tons of magnesium produced in the CIS and
PRC were consumed in markets outside of the CIS and PRC. The Company estimates
that these combined shipments of 304,000 metric tons generated revenues of
approximately $1.0 billion.
The seven producers outside the CIS and PRC include four major producers,
Magcorp, Dow Chemical, Norsk Hydro and Northwest Alloys, that account for
approximately 87% of available production capacity outside the CIS and PRC. Like
Magcorp, Dow Chemical and Norsk Hydro market magnesium products to all the key
end-user markets. Magcorp management estimates that Northwest Alloys, a wholly
owned subsidiary of Alcoa, supplies an estimated 70% of its production capacity
to its parent, Alcoa, and markets the balance of its capacity directly to end
users and through an agency. Northwest Alloys participates primarily in the
aluminum alloying and desulfurization markets and does not participate in the
casting, electro-chemical and
18
<PAGE> 21
metal reduction markets. A Norsk Hydro plant in Canada (one of their two
production facilities) has limited its participation in the U.S. market to the
casting segment in part due to the effect of antidumping and countervailing
duties on their pure magnesium imports to the United States. Magnesium imports
also affect competition and are more fully discussed under "-- Recent Industry
Developments" below.
According to the IMA, North American markets accounted for the majority of
the consumption of magnesium outside the CIS and PRC, accounting for 165,400
metric tons, or 54%, of total consumption in 1995. In addition, Western Europe
and Asia accounted for 24% and 15%, respectively.
The following table presents magnesium consumption in North America
according to the IMA by customer category with the typical end uses of each
category for the calendar years 1991 through 1995:
NORTH AMERICAN CONSUMPTION OF PRIMARY MAGNESIUM
<TABLE>
<CAPTION>
1991
TO 1995
CUSTOMER CATEGORY 1991 1992 1993 1994 1995 CAGR END USES
<S> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS OF METRIC TONS)
Aluminum Alloying...... 61.3 66.2 64.7 73.0 77.6 6.1% Beverage cans, truck panels, home siding,
aircraft and marine alloys.
Desulfurization........ 19.4 24.6 29.3 26.2 22.2 3.4% Steel production from iron.
Die Casting............ 15.2 21.2 22.7 30.6 42.7 29.5% Automotive, electronics and hand tools.
Ductile Iron........... 5.0 6.2 7.4 6.9 6.5 6.8% Pipe production, automotive components and
heavy-earth moving equipment.
Metal Reduction........ 4.4 5.5 3.9 2.4 2.6 (12.3)% Production of titanium, zirconium, beryllium
and uranium. Uses include aerospace, chemical
processing and nuclear products.
Electro-Chemical....... 7.6 6.2 6.3 6.4 6.8 (2.7)% Cast anodes for cathodic protection of
underground steel pipelines.
Others................. 8.4 9.6 8.8 7.2 7.0 (4.5)% Sheet and plate and extrusion stock, gravity
castings for aerospace applications, powder
for flares, chemicals and exotic
pharmaceuticals and perfumes.
----- ----- ----- ----- ----- -----
Total.............. 121.3 139.5 143.1 152.7 165.4 8.1%
===== ===== ===== ===== ===== =====
</TABLE>
The aluminum alloying industry is the single largest user of magnesium and
has accounted for approximately one-half of the magnesium consumption in North
America for the past ten years. In the aluminum alloying process, magnesium is
added to aluminum to improve the rigidity and corrosion resistance of aluminum.
Primary use of magnesium in the aluminum alloying market is in the production of
two piece beverage cans and aluminum sheet, which is used in truck panels, home
siding, aircraft and marine alloy applications.
Magnesium used for the desulfurization of iron in steel production is
effective in reducing steel's sulfur content to very low levels, allowing the
production of uniform, high quality steel with reduced treatment times. As a
result of magnesium use, steel producers enjoy higher productivity and quality
with lower production costs.
Die casting is the fastest growing segment of the domestic magnesium
industry with a CAGR of 29.5% for North America since 1991. In the automotive
industry, the largest end user of die cast magnesium alloys, magnesium is
presently used in the production of clutch housings, valve covers, engine
brackets, steering columns, dashboard frames, seat frames and crash related
energy-absorbing applications, with potential new growth in the electric vehicle
industry.
Magnesium is an important element in the production of ductile iron which
is used on a limited basis in the production of light and heavy trucks,
passenger cars and the production of pipes, valves and fittings. Ductile iron
has replaced gray irons and steel castings in a variety of automotive, light
truck, farm equipment and construction machinery applications including
knuckles, spindles, control arms, brakes and suspension systems. Magnesium is
also used as a reducing agent in the production of titanium, zirconium,
beryllium and uranium.
19
<PAGE> 22
Magnesium cast anodes are value-added products used for cathodic protection
in underground gas and water system pipelines as well as tanks. The anodes
generate an electric current thus protecting the steel from corrosion. As a
result, anodes are gradually consumed and their replacement represents a stable
market.
Other end-use markets which require magnesium include wrought products in
the form of sheet and plate for applications in tooling fixtures and aerospace,
extrusions for luggage and automotive applications, gravity castings, such as
sand castings for airplanes, helicopters, wheels and other structural castings.
Magnesium is also used by producers of perfumes and exotic pharmaceuticals.
Recent Industry Developments
Limited magnesium supply combined with continued increases in demand
resulted in significant increases in pure magnesium list prices during 1995.
From 1986 to 1995, magnesium demand increased at a CAGR of approximately 3.8%.
This growth is due to magnesium's inherent metallurgical properties including
its light weight, high strength-to-weight ratio, excellent corrosion resistance
and reactivity with certain elements. The introduction of corrosion-resistant
high purity alloys in the 1980s allowed magnesium to compete more aggressively
with other metals in structural applications and has led to an increased number
of proven applications for magnesium as well as a greater confidence in
magnesium's performance. As a result of these characteristics and factors, from
1986 to 1995, the use of magnesium increased in most of magnesium's largest end
markets including: aluminum alloying (3% CAGR), die castings (20% CAGR) and
desulfurization in steel production (8% CAGR).
The increase in demand for magnesium has not resulted in significant
increases in supply. In early 1994, one of the largest domestic producers
significantly reduced its capacity, and that capacity has not been replaced.
North American producers are currently operating at approximately 95% of
capacity. Magcorp's current capacity utilization rate is 96%.
As a result of these industry conditions, list prices for pure magnesium
sold by North American producers in North America increased to record highs in
1995. Pure magnesium list prices increased from $1.43 per pound in 1991 to $1.93
per pound in mid-1995, and have remained stable since such time. Magnesium
regularly sells for prices lower than the list price for pure magnesium, with
price dependent on market segment, chemistry, contract terms, including
negotiated discounts, and quality, with the higher quality magnesium sold by
Magcorp selling at or near list price, and lower quality magnesium, like that
produced in the PRC, selling at substantially below list price. Manufacturers of
lower quality pure magnesium, including those in the PRC, have experienced price
reductions during 1996. Magcorp believes that the price that it will receive for
higher quality pure magnesium sold in the United States may decrease modestly in
the second half of 1996 but remain at levels above 1995.
As of March 31, 1996, magnesium producer inventories outside the PRC and
CIS were 30,300 metric tons, which represents approximately five weeks of
supply, compared with normal levels of approximately eight weeks, and up from a
record low of 17,200 metric tons in June 1995. The recent increase in
inventories resulted from slightly higher production of high quality pure
magnesium and an increase in the availability of magnesium produced in the CIS
and PRC.
Management believes that the industry's high capacity utilization rates
will continue through at least the year 2000 due to increasing demand for
magnesium and the high costs associated with constructing a new facility. The
magnesium manufacturing process is also highly technical and proprietary to each
company. Management estimates a cost of approximately $500 million to establish
a facility with the same production capacity as Magcorp's facility. One new
facility, located in Israel with an estimated annual capacity of 27,500 metric
tons, is expected to begin production in early 1997. The capacity of the Israeli
facility may also be increased, subject to start-up success, viability and
market conditions, from 27,500 to 55,000 metric tons, with a possible start-up
date for the second phase in 1999. In addition to the Israeli facility, three
other potential manufacturers have announced their intent to build a facility in
Canada, Australia and Iceland, respectively. Pilot and feasibility studies have
not been completed for any of these facilities and production is not expected to
begin until at least the year 2000.
Manufacturers in the PRC also have recently become significant exporters of
magnesium. In response to the rise in the price of magnesium, many small
magnesium factories were established in the PRC, many of
20
<PAGE> 23
which produce low quality magnesium. Estimated annual capacity has increased to
approximately 40,000 to 60,000 metric tons. Magcorp believes that increased
capacity may result in an increase in exports, although there is also a belief
that internal PRC consumption of domestically produced magnesium may increase.
Business Strategy
Magcorp's business strategy consists of three principal elements: (i)
maximize sales in markets in which superior margins can be achieved, (ii)
establish and maintain long-term customer relationships through service, product
flexibility and responsiveness and (iii) manage production and overhead costs
aggressively.
In furtherance of its business strategy, Magcorp emphasizes quality,
service and flexibility to meet changing customer specifications. In particular,
management believes that Magcorp's range of products and delivery program has
afforded Magcorp a significant degree of flexibility to meet customer needs
which serves to foster long-term relationships with its core customers.
Additionally, with respect to costs, management has maintained an aggressive
cost management program since 1987 which has resulted in a 28.3% reduction of
direct unit manufacturing costs. Management is committed to pursuing further
efficiencies and cost reductions to maintain its competitive position within the
industry.
Specialty Markets. An integral part of Magcorp's business strategy is to
maximize sales in markets where superior margins can be achieved. These include
the specialty segments such as anodes. Magcorp also focuses on taking advantage
of its production flexibility to maximize sales of special sizes and shapes.
Management believes that there will be significant growth in industry demand in
future years, particularly in the aluminum alloying segment as aluminum is used
more in automotive applications, in desulfurization as more magnesium is used to
promote productivity and in the structural casting segment. Management believes
that Magcorp is strategically well positioned to take advantage of this growth
through its wide product line and superior service. Additionally, Magcorp's size
and production flexibility permit it to respond to changes in market demand
across its end use markets thereby maximizing capacity utilization and
profitability.
Customer Relationships. Magcorp seeks to establish and maintain long-term
relationships with its customers through frequent contacts, flexible delivery,
hands-on technical service, high product performance and a thorough
understanding of the application of the product in the customer's process.
Management believes that its emphasis on customer service is unique in the
industry and serves to foster strong relationships with its core customers.
Cost Management Program. Magcorp management recognizes that product
quality and manufacturing costs must be continually monitored and improved in
order to remain competitive. Magcorp operates with the philosophy of continual
focus on improvement in efficiencies, manufacturing costs and product quality.
Over the past nine years, these efforts have resulted in a reduction in direct
unit manufacturing costs of 28.3%. Unit manufacturing cost reductions realized
since 1987 in three major cost categories are summarized below.
Labor. Labor costs, which include both hourly and salaried staff,
have been reduced by 27.9% per pound. This reduction was achieved through a
combination of staff reduction and economies of scale realized through
increased plant production rates at the facility.
Energy. Energy costs have been reduced by 30.3% per pound. This
reduction resulted from the low cost supply contract entered into with a
local utility, as well as recent favorable pricing due to abundant
inexpensive hydroelectricity generated in the Pacific Northwest region of
the United States. The contract for interruptable power will be in effect
until January 1, 2002. Over the same period, Magcorp has managed to obtain
natural gas price reductions by buying directly from producers and paying
local utilities for transportation and distribution. Recent natural gas
wellhead pricing has also been favorable in the area in which Magcorp
operates.
Maintenance Materials and Cell Rebuild. Maintenance materials and
cell rebuild costs have been reduced by 27.8% per pound. Improved equipment
maintenance techniques, improved electrolytic cell construction and
operation, and changes in maintenance management have contributed to the
cost reduction.
The combination of labor, energy, maintenance materials and cell rebuilds
currently account for 78% of Magcorp's manufacturing costs and, thus, these
major cost categories account for the bulk of the manufacturing cost reductions
over the last nine years.
21
<PAGE> 24
Management has developed a capital improvement program totaling
approximately $46 million which encompasses the installation of new electrolytic
cell technology, as well as the installation of a magnesium caster. The new
electrolytic cells are expected to reduce operating costs and improve
manufacturing efficiencies resulting from reductions in: (i) electricity
consumption, (ii) manufacturing labor requirements, (iii) magnesium metal losses
in the manufacturing process and (iv) chlorine emissions. Additionally, the
magnesium caster is expected to improve product quality, reduce labor
requirements and permit the Company to produce some of the various sizes, shapes
and weights of magnesium ingots at lower cost.
The electrolytic cell conversion will commence in early 1997 with the
installation of a prototype cell and, assuming its successful operation, the
conversion of the remaining cells is expected to be completed by 1999. As a
result, the associated cost reductions and related manufacturing efficiencies
are expected to be realized in the Company's operating results beginning in
fiscal year 1999. Management estimates that the caster will be installed in
fiscal year 1997.
With respect to chlorine emissions, the electrolytic cell conversion is
expected to significantly reduce the Company's emissions, thereby addressing
anticipated regulations imposed under amendments to the Clean Air Act of 1990
(the "Clean Air Act"). See "-- Environmental Matters."
Customers and Markets
Magcorp sells pure magnesium and magnesium alloys to domestic and
international customers in the key end-use markets, including its three largest
segments, aluminum alloying, desulfurization and die castings. Magcorp offers
over 30 different sizes, shapes and weights of primary magnesium and magnesium
alloy products in a range of purity levels to meet customer specifications. All
established and prospective new domestic accounts are handled by Magcorp's staff
of two direct salespersons and four field representatives who receive technical
assistance from plant personnel. Accounts in Europe are handled through a
division of CLIMAX Molybdenum. In Japan, accounts are handled by an agent of
KOHSEI Company, and other agency arrangements handle accounts in Australia and
other parts of the world.
Approximately 83% of Magcorp's annual volume is sold pursuant to contracts
with select customers. In calendar year 1995, Magcorp's 31 largest customers
represented 86% of its total magnesium sales. No customer accounted for more
than 10% of the Company's annual sales on a consolidated basis, and
substantially all of its foreign sales are attributable to Magcorp. The
following table summarizes certain financial information relating to Magcorp's
sales to various geographic areas.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED OCTOBER 31, APRIL 30,
----------------------------- ----------------------
1993 1994 1995 1995 1996
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net Export Sales:
Europe......................... $4,909 $5,804 $ 8,357 $3,507 $4,154
Japan.......................... 3,300 2,826 5,988 2,811 2,142
Canada......................... 463 545 1,050 299 781
Other.......................... 235 104 798 260 922
------ ------ ------- -------- --------
$8,907 $9,279 $16,913 $6,877 $7,999
</TABLE>
Production Process
Magnesium is produced in both pure magnesium and magnesium alloy form. Pure
magnesium metal generally contains a minimum of 99.8% magnesium whereas
magnesium alloys contain other metals such as aluminum or zinc. Magnesium is
produced through either the electrolysis of molten magnesium chloride or the
thermal reduction of magnesium oxide. The electrolysis process utilizes
magnesium chloride feedstock which is obtained from seawater, brine rich in
magnesium chloride, residual bitterns from the processing of potash, dolomite or
magnesium oxide ores. The magnesium oxide furnace feed for the thermal reduction
process can be obtained from magnesium bearing minerals such as dolomite,
brucite or magnesite, which are widely distributed in the earth's crust. The raw
material reserves for either process are virtually inexhaustible. In the United
States, 69% of magnesium production capacity, including Magcorp's, uses the
electrolytic process where seawater or brines are used as the feedstock.
22
<PAGE> 25
Magcorp's production process uses the electrolysis of molten magnesium
chloride to produce magnesium metal. The magnesium chloride feedstock for the
electrolytic process is obtained from the Great Salt Lake, which has a higher
magnesium concentration than seawater.
In the first step of the process, solar evaporation ponds concentrate Great
Salt Lake waters into high grade magnesium chloride brine. The concentrated
brine is further processed to remove impurities such as boron, potassium and
sulfates. Purified brine is spray dried to form a magnesium chloride powder. The
powder is subsequently melted and purified with chlorine and fed into
electrolytic cells, which use direct electrical current to separate the
magnesium metal and chlorine. The chlorine is either recycled for use in the
production process or sold. The magnesium metal is recovered from the cells and
cast into ingots or further processed to produce specialty products.
As part of Magcorp's production of magnesium, Magcorp produces by-products
such as chlorine, calcium chloride and iron chlorides which Magcorp sells into
commercial markets for incremental revenue and cost reduction. By-products not
sold are disposed of pursuant to environmental regulations.
Raw Materials
Magcorp's natural gas requirements are purchased from gas producers or
marketers, transported by a gas transportation company and delivered to the
Rowley facility by a local gas distribution company. Management has negotiated
favorable gas pricing due to the volume of Magcorp's requirements.
Magcorp purchases its electrical requirements from a local utility pursuant
to a contract in effect until January 1, 2002. As is the case with other
industrial facilities, the terms of the contract grant the utility the right to
interrupt electrical power to Magcorp under certain limited circumstances and
with reasonable notice while providing Magcorp with advantageous electricity
rates. If the utility exercises such right, upon any such interruption, Magcorp
can purchase available electricity at market rate. Additionally, Magcorp is able
to produce on average 25% of its electrical power needs through the gas turbines
located at the Rowley facility. The utility has requested a reopening of the
contract. Magcorp has challenged the utility's billing practices under the
contract and is currently pursuing programs to reduce its electricity usage.
Other raw materials critical to plant operations include graphite anodes,
special refractory bricks and sulfuric acid. Magcorp maintains alternative
sources of these raw materials to ensure a secure supply at competitive prices.
Facilities
Magcorp's main facilities include its headquarters located in Salt Lake
City, Utah and its production plant located in Rowley, Utah, approximately 60
miles outside Salt Lake City. Magcorp's senior management, sales and marketing
and administrative functions are based at the Salt Lake City headquarters. All
production takes place at the Rowley facility. Inventory is stored at the Rowley
facility and at a third party leased warehouse space in Utah, as well as
locations throughout the world.
Magcorp's production facilities are located on 4,525 acres of land
immediately adjacent to the Great Salt Lake which is the long-term raw material
source. The brine from the Great Salt Lake is concentrated through one or both
of two solar pond concentrating systems, the Stansbury Basin Pond System and the
Knolls Pond System, to provide the final high grade brine feedstock for the
magnesium plant. The Stansbury System is located about 15 miles and the Knolls
System about 45 miles from the plant site. Both pond systems are capable of
providing high grade brine feedstock to the plant to facilitate nameplate plant
production rates under normal operating conditions.
Magcorp's production facility in Rowley, Utah was constructed in 1972. From
1993 to the present, management has implemented an aggressive cost reduction and
productivity improvement program to increase the facility's output at lower
costs. In 1995, as a result of the cost and productivity initiatives, the
capacity rating of the facility was increased to 40,823 metric tons per year.
This figure corresponds to the ceiling established by the Company's operating
permit with the State of Utah Department of Environmental Quality. Magcorp is
presently operating at 99% of capacity. Magcorp has submitted a request to the
State of Utah to
23
<PAGE> 26
permit annual production of up to 43,545 metric tons, although certain process
equipment modifications would be required to operate consistently at this rate.
Magcorp owns its Salt Lake City administrative offices and Rowley
production facilities. The Knolls Pond Systems is located on land leased from
the State of Utah for a term expiring on December 31, 2016 and on Federal land
under a right-of-way from the Bureau of Land Management of the Department of
Interior which expires in 2023. The Stansbury Pond System is located primarily
on land leased from the State of Utah for a term expiring on March 8, 2010.
Magcorp also holds other easements, rights-of-way and water rights primarily
from the Bureau of Land Management and the State of Utah. Magcorp pays a royalty
to the State of Utah based on its production of magnesium from Great Salt Lake
brine. The Rowley facility is readily accessible by truck and rail.
Employees
As of October 31, 1995, Magcorp had 563 employees, 152 of whom were
salaried and 411 of whom were hourly workers. Approximately 73% of the hourly
employees are represented by the United Steelworkers of America and employed
under a three year collective bargaining contract that expires November 1, 1997
and automatically renews for additional one-year periods (unless written notice
of termination by either party is given). Magcorp believes that its relations
with employees are satisfactory.
Environmental Matters
Magcorp's most significant long-term environmental issue is compliance with
the Clean Air Act. Title III of the Clean Air Act will establish, on a published
schedule, new emission standards for previously unregulated air toxins. These
national emission standards for hazardous air pollutants ("NESHAPS") will be
technology based and will be designed to achieve the maximum control as
determined by a comparison of installations at similar facilities in specific
industry categories.
It is expected that Magcorp will be required to make substantial reductions
in chlorine and hydrogen chloride emissions to meet NESHAPS for primary
magnesium refineries that will be promulgated by the year 2000. In response to
the anticipated regulations imposed under amendments to the Clean Air Act,
Magcorp is planning on acquiring new electrolytic cell technology that will
reduce chlorine emissions at the source. The new cells are also expected to
significantly reduce costs since they have much higher throughput and are more
energy efficient. A prototype cell will be installed and operated in early
calendar year 1997 and, assuming its successful operation, the conversion of the
remaining cells is expected to be completed by 1999. With respect to hydrogen
chloride, Magcorp will install scrubbers to reduce emissions.
Magcorp plans to spend $40 million of its capital budget, including the
capital required for the prototype cell, by the year 2000 directly or indirectly
to meet environmental regulatory requirements, primarily for NESHAPS, and for
anticipated other future requirements. Magcorp believes that these expenditures
required to comply with environmental standards are substantial.
Under Title V of the Clean Air Act, Magcorp will be required to conduct
additional air monitoring and record keeping and will pay operating fees based
on emission levels. The enhanced emission monitoring will require initial
capitalization of about $120,000 and annual operating costs of $100,000. Annual
operating fees are approximately $120,000 and future increases are likely.
Magcorp will close its existing landfill and will open a new landfill in
time to comply with new regulations anticipated to be in effect in three to five
years. The estimated cost of closing the existing landfill and opening the new
landfill is $450,000 given Magcorp's present interpretation of what the new
regulations would require.
In August 1994, the Utah Solid and Hazardous Waste Control Board presented
a proposed Stipulation and Consent Order to Magcorp for resolution of a Notice
of Violation and Compliance Order (the "NOVCO") issued in August 1992 concerning
certain alleged violations of the Utah Solid and Hazardous Waste Act and the
Utah Administrative Code. Magcorp has contested the NOVCO and has requested a
hearing on the alleged violations. Among the issues to be resolved is whether
the wastes being sent to the Rowley facility's industrial wastewater pond are
subject to regulation by the State of Utah, and if so, whether a
24
<PAGE> 27
waste management plan, groundwater management plan and closure plan for the pond
must be developed and implemented. In addition, an issue exists as to whether
piles of material generated in the electrolytic process, which cover an
extensive land area at the Rowley facility, can be classified as a hazardous or
solid waste, and if so, what measures might be required to investigate and
address these piles. If these wastes are ultimately deemed subject to State
regulation and corrective action is required, the costs of compliance could be
material.
Legal Proceedings; Pending Trade Issues
Magnesium Imports from the Russian Federation, Ukraine and PRC
In 1994, Magcorp filed an antidumping petition with the Department of
Commerce ("DOC") and the U.S. International Trade Commission ("ITC") for
imposition of antidumping duties against imports of magnesium from the Russian
Federation, Ukraine and the PRC. In its petition, Magcorp alleged that imports
of pure and alloy magnesium from producers in these countries were being sold in
the United States at less than fair value and had injured the U.S. magnesium
industry with resultant negative financial results, loss of markets, and layoffs
of workers at U.S. magnesium producers. The antidumping duties sought in the
petition generally exceeded 100%, reflecting the level of dumping and impact on
domestic producers. Two unions representing workers at Magcorp and Dow Chemical
were co-petitioners in the filing. Dow Chemical subsequently joined the petition
as a co-petitioner.
On March 30, 1995, the DOC determined that pure magnesium imports from all
three countries were dumped in the United States, but also determined that
certain Russian producers and traders were not dumping Russian magnesium
products. On April 26, 1995, the ITC announced its affirmative determinations
that imports of pure magnesium from those three countries were a cause of injury
to the domestic magnesium industry. The DOC and ITC decisions, taken together,
resulted in the imposition of antidumping duties against imports of pure
magnesium from each of the three countries at the following rates (subject to
revision in future administrative reviews, that can be requested annually
beginning May 1996):
<TABLE>
<CAPTION>
PURE
<S> <C>
Russian Federation................................. 0-100%
Ukraine............................................ 80-104%
PRC................................................ 108%
</TABLE>
No antidumping duties were assessed against magnesium alloys.
On June 7, 1995, one of the traders of Ukrainian magnesium appealed to the
U.S. Court of International Trade the ITC's determination that imports of pure
magnesium from the Ukraine had injured domestic magnesium producers; if the
trader's appeal is successful, the 80-104% antidumping duty determination could
be lifted against Ukrainian imports of pure magnesium. On June 12, 1995, Magcorp
appealed to the U.S. Court of International Trade for review of the DOC's
determination that certain producers and traders of Russian Federation magnesium
had not sold at less than fair value. The cases have been fully briefed and are
set for oral arguments on July 9, 1996. None of the possible outcomes of the
appeal process or the impact of the determinations or the impact of the appeal
process upon the Company's business can be determined at the present time.
Magnesium Imports from Canada
In 1991, Magcorp filed a petition with the DOC and the ITC for imposition
of countervailing and antidumping duties against Canadian and Norwegian
magnesium producers. No duties were imposed on Norwegian imports. In 1993, final
duties for magnesium imported into the United States from Canada (except
magnesium from Timminco) were imposed by the DOC after appeals to panels
established by the U.S.-Canada Free Trade Agreement as follows:
<TABLE>
<S> <C>
Countervailing duties on pure and alloy magnesium imports............ 7.6%
Antidumping duties on pure magnesium imports......................... 21.0%
</TABLE>
25
<PAGE> 28
Administrative reviews initiated by the DOC in September 1993 and 1995 to
determine if the duties should be adjusted are currently ongoing. The final
results of the administrative review covering the time period August 1, 1993
through July 31, 1994, which upheld the final 21.0% antidumping duty, was issued
in September, 1995. On May 29, 1996, the DOC issued the preliminary results of
the antidumping administrative review for the period August 1, 1994 through July
31, 1995. The DOC preliminarily determined that the Canadian producer
demonstrated that it sold pure magnesium at fair value in the United States
during the review period, and reduced the antidumping deposit to zero on the
sale of pure magnesium by Norsk Hydro Canada Inc. ("NHCI" or "the Canadian
producer"). Interested parties will have the opportunity to comment on the
preliminary results and the final results will be issued by October 8, 1996. If
the preliminary results are upheld, then the antidumping duty deposit rate for
NHCI for imports of pure magnesium thereafter will be reduced to zero, subject
to future administrative reviews. If this result becomes final, it could
constitute the first year of a three-year qualifying process in which the
Canadian producer has the opportunity to demonstrate through administrative
reviews that it has sold pure magnesium in the United States at fair value. In
connection with the third consecutive review resulting in a determination that
NHCI has not sold below fair value, NHCI could seek revocation of the
antidumping order. An elimination of or a substantial decrease in these duties
could have a material and adverse impact on magnesium prices, depending upon
market conditions.
The Canadian producer has been selling pure and alloy magnesium in the
United States subject to the 7.6% countervailing duty deposit rate.
Approximately 16,300 metric tons of magnesium alloy were imported into the
United States in 1995, approximately 85% of which was from Canada. These trends
continue into early 1996, although the Canadian market share of such imports
increased. In March 1996, the DOC issued the preliminary results of the
countervailing duty administrative review for the period December 6, 1991
through December 31, 1992. The preliminary countervailing duty rate for pure and
alloy magnesium exported by NHCI was 9.9%. If the preliminary results are
upheld, then the countervailing duty deposit rate for exports of pure and alloy
magnesium by NHCI will be 9.9%.
SABEL
Overview
Sabel, founded in 1869, is a diversified company primarily involved in the
steel service center, scrap metal and rebar fabrication businesses. Sabel's
steel service center facilities distribute and process new carbon steel for
large and small industrial accounts as well as the general public. Sabel's scrap
metal operations process to customer specifications and sell and transport
ferrous and non-ferrous scrap metal to mini- and integrated steel mills,
foundries and other related metal companies. Sabel's rebar fabrication operation
customizes rebar to shapes and sizes required for use in building and highway
construction. Additionally, Sabel operates a full-service wholesale center which
sells a variety of tools and plumbing, sprinkler, building and general supplies.
Sabel also operates a plastics recycling service on a customer's premises which
buys and sells all types of commodity and engineering thermoplastics to
bottlers, crate manufacturers and molders.
Business Strategy
Sabel's business strategy is to focus on niche products and services and
emphasize long-term customer and supplier relationships within its served
markets.
Diverse Businesses. Sabel management believes that Sabel operates at a
competitive advantage by maintaining a presence in the scrap metal, rebar and
service center markets. Specifically, Sabel's diverse operations provide it
access to timely information across its served markets prior to its competitors
which generally operate in only one market. This information enables Sabel to
manage its inventory and price changes in a manner which benefits Sabel's
financial performance.
Niche Markets. Sabel also focuses on small volume, high-margin sales to
customers whose order sizes are not efficiently handled by larger steel service
centers and scrap metal companies. Management believes that Sabel's flexibility
to service these customers, enhanced by its ability to provide one-day
turnaround service on most commonly used steel products at competitive prices,
is a unique facet of Sabel's strategy.
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<PAGE> 29
Sabel's relationship with larger customers enables Sabel to maintain a specific
inventory of steel products. As a result, Sabel's smaller customers benefit from
such inventory and are able to implement "just-in-time" delivery for material
requirements planning objectives.
Customer and Supplier Relationships. With a primary focus on the Southeast
region, management believes Sabel's geographic proximity to its customers and
suppliers facilities a high level of customer service while minimizing freight
costs and delivery time. Management believes Sabel's strong market presence in
the region has enabled it to obtain contracts for on-site collection of scrap
materials from a number of industrial concerns.
Description of Products and Markets Served
Steel Service Center. Sabel's steel service center division ("SSC") is
comprised of four facilities located in Montgomery, Dothan, Mobile and
Tuscaloosa, Alabama. This geographic coverage allows Sabel to cost-effectively
service most of Alabama, the Gulf Coast, the panhandle of Florida, Southern
Mississippi, West Georgia and the Atlanta metropolitan area. In fiscal year
1995, SSC accounted for 69% of Sabel's revenues.
SSC specializes in stocking, reprocessing and delivering hot rolled and
cold rolled carbon steel in a variety of sizes and shapes. Purchases of new
steel for reprocessing are spread across approximately 15 steel mills including
both integrated mills and mini-mills, thereby ensuring favorable prices and
availability of product. SSC processes more than 60% of the steel it sells. SSC
has an extensive customer list comprised of approximately 3,000 customers
ranging from large industrial companies to small welding shops. As a result, no
single customer represents in excess of 5% of the division's total sales.
The sales and marketing team at SSC consist of 16 direct salespeople and
six sales representatives covering the Southeast region. All orders are entered
and recorded through SSC's computerized system which facilitates order
processing and delivery. Sabel continually works to improve the efficiency of
this system to provide greater accuracy and speed in order entry.
Scrap Metal. Management believes Sabel's 127 years of experience in the
scrap metal business has fostered a strong reputation for quality and service.
The scrap metal division of Sabel is a full-service scrap metal dealer with two
large scrap yards located in Montgomery. Scrap metal in those yards is collected
from approximately 250 suppliers, primarily industrial suppliers along with
dealers and individual consumers. The scrap metal division sells to
approximately 45 customers, including mini- and integrated steel mills,
foundries and specialized manufacturing entities. As a freight-sensitive
business, a majority of Sabel's scrap is sold to customers within its geographic
area. In fiscal year 1995, the scrap metal division accounted for 18% of Sabel's
revenues.
All scrap processed in the scrap metal division is inspected prior to
shipment to ensure quality and compliance with customer specifications. As a
result, management believes Sabel enjoys a high quality reputation and has an
acceptance rate in excess of 99% for all scrap sold to customers.
Rebar Fabrication Division. Sabel's rebar fabrication division ("RFD"),
also located in Montgomery, purchases stock 60 ft. bars from various rebar
manufacturers and customizes the length, shape and bend according to
construction blueprint plans. Structural bars and wire are widely used in the
construction of buildings and highways. In 1995, RFD contributed 11% of Sabel's
revenues.
Since its formation, RFD has focused on construction projects from dams to
driveways in its markets. Sabel's management believes RFD has established a
strong track record for accuracy of shape and size and for prompt delivery due
to the efficient design of the RFD facility. Orders for RFD's products are
affected by the levels of activity in the construction and building sectors as
well as the conditions in the overall economy.
Other Operations. Other businesses operated by Sabel consist of a
wholesale center which sells a variety of tools and plumbing, sprinkler,
building and general supplies and a plastics recycling service which operates a
portable grinder. These other operations represented 2% of Sabel's fiscal year
1995 revenues.
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<PAGE> 30
Competition
Each of the principal fields in which Sabel is engaged -- steel service
centers, scrap metal and rebar fabrication -- is highly competitive. Sabel
competes with numerous other concerns, some of which are much larger. Sabel is
unable to estimate its competitive position in its market place but believes
that no other company in its trading area offers the same range of services.
Facilities
Sabel's operations are carried out in eight facilities covering
approximately 315,000 square feet across the Southeast region which include four
steel service centers, two scrap metal yards, a rebar fabricating plant and a
wholesale equipment supply center. Most of Sabel's facilities are leased from
entities controlled by the Sabel family. The steel service centers are equipped
to process steel from stock for their customers' needs and the rebar fabricating
plant is equipped to fabricate bars to customer specifications.
Employees
As of October 31, 1995, Sabel had 228 employees, 64 of whom were salaried
and 164 of whom were hourly workers. Of the hourly employees, 33 are represented
by the United Steelworkers of America. The current three year bargaining
contract expires on June 20, 1997. Sabel believes that its relations with
employees are satisfactory.
Environmental Matters
The most significant long-term environmental issue at Sabel's facilities
concerns compliance with storm water regulations under the Clean Water Act that
became effective in 1991. Sabel is actively pursuing a program of compliance,
and it is expected that costs associated with this program will not have a
material adverse effect on the Company's financial position or on future results
of operations.
28
<PAGE> 31
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information regarding the directors
and executive officers of the Company, Magcorp and Sabel:
<TABLE>
<CAPTION>
NAME AGE POSITION
<S> <C> <C>
Ira Leon Rennert................. 61 Chairman, Director, and Chief Executive
Officer
Roger L. Fay..................... 50 Vice President, Finance
Michael H. Legge................. 49 President and Chief Executive Officer of
Magcorp
Keith Sabel...................... 45 Director, President and Chief Executive
Officer of Sabel
Justin W. D'Atri................. 68 Director of Sabel
Howard I. Kaplan................. 51 Vice President of Sales and Marketing of
Magcorp
Ron L. Thayer.................... 36 Vice President of Operations of Magcorp
Lee R. Brown..................... 49 Vice President of Human Resources and Public
and Governmental Affairs of Magcorp
Todd R. Ogaard................... 40 Vice President of Finance and Administration
of Magcorp
</TABLE>
IRA LEON RENNERT has been the Chairman, Chief Executive Officer and sole
member of the Board of Directors of the Company since its inception and has been
the Chairman, CEO and principal shareholder of Group since its first acquisition
in 1975. In addition, Mr. Rennert is the Chairman of the Board of all of Group's
subsidiaries including WCI Steel, Inc. and AM General Corporation. Group was the
majority stockholder of Covert Marine, Inc., a wholesale distributor of
recreational boating equipment in Kansas City, Missouri, in respect of which an
order for relief was entered on October 23, 1992 under Chapter 11 of the
Bankruptcy Code by the U.S. Bankruptcy Court for the Western District of
Missouri. The Company has never had any business relationship with Covert
Marine, Inc.
ROGER L. FAY has been Vice President, Finance for the Company since its
inception and has been Vice President, Finance for Group since 1983. Mr. Fay is
a certified public accountant. Before joining Group, Mr. Fay served for twelve
years as a controller of one of Group's subsidiaries.
MICHAEL H. LEGGE was appointed President and Chief Executive Officer of
Magcorp on January 1, 1993. He was most recently Vice President of Operations at
the Rowley facility and has served in several managerial and technical positions
since joining NL Industries, Inc., a predecessor of Magcorp, in 1979.
KEITH SABEL has served in his present position as President and Chief
Executive Officer of Sabel since 1990 and is also a director of Sabel. Mr. Sabel
has been with Sabel in various positions for the past 21 years.
JUSTIN W. D'ATRI has been a practicing attorney in New York, N.Y. since
1952, legal counsel for Group since its inception and Secretary of the Company
since its incorporation. Mr. D'Atri has been the Secretary and a director of
Sabel since 1987, and Secretary of Magcorp since August 1989. Mr. D'Atri was a
director of Covert Marine, Inc. which is discussed under Mr. Rennert's biography
above.
HOWARD I. KAPLAN has served in his present position as Vice President of
Sales and Marketing of Magcorp since 1986. Dr. Kaplan joined AMAX Magnesium, the
former name of Magcorp, in 1981 and served as Manager of Technical Market
Development, Process Control Superintendent and Electrolytics and Cast House
Superintendent. Dr. Kaplan has a Ph.D. from the University of Pennsylvania in
Metallurgy and Materials Science.
RON L. THAYER has served in his present position since January 1, 1993. He
was most recently Operations Superintendent at the Rowley facility and has
served in several managerial and technical positions since
29
<PAGE> 32
joining AMAX Magnesium, the former name of, Magcorp in 1988. Prior to joining
AMAX Magnesium, Mr. Thayer was with Williams Resources, a chemical company in
Denver, Colorado.
LEE R. BROWN has been Vice President of Human Resources at Magcorp since
1984. Mr. Brown joined NL Industries, Inc., a predecessor of Magcorp, in 1978.
Prior to joining NL Industries, he spent 2 years with Kennecott Copper.
TODD R. OGAARD first served as Manager-Public Compliance after joining
Magcorp in February 1994, and assumed Vice President of Finance responsibilities
effective February, 1995. Mr. Ogaard is a certified public accountant. Prior to
joining Magcorp, he served as a Senior Manager with KPMG Peat Marwick, where he
was employed for 12 years.
EXECUTIVE COMPENSATION
The following table sets forth certain information concerning compensation
of the Company's Chief Executive Officer and the four most highly compensated
officers of Magcorp and Sabel:
<TABLE>
<CAPTION>
ANNUAL COMPENSATION(1)
---------------------------------------
(A) (B) (C) (D) (E)
NAME AND OTHER ANNUAL
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(5)
<S> <C> <C> <C> <C>
Ira Leon Rennert(2).................... 1995 $ -- $ -- $ 1,200,000(2)
Chairman and Chief Executive Officer 1994 -- -- 1,200,000(2)
1993 -- -- 1,248,000(2)
Michael H. Legge....................... 1995 120,756 200,000 16,491(3)
President and Chief Executive Officer 1994 120,756 35,000 11,291(3)
of Magcorp 1993 114,645 110,000 10,385(3)
Keith Sabel............................ 1995 124,061 21,000 8,050(4)
President and Chief Executive Officer 1994 120,890 14,000 4,466(4)
of Sabel 1993 116,808 7,000 --
Howard I. Kaplan....................... 1995 94,723 100,000 18,678(3)
Vice President of Sales and Marketing 1994 94,723 25,000 8,288(3)
of Magcorp 1993 87,547 80,000 7,400(3)
Ron L. Thayer.......................... 1995 85,550 125,000 6,064(3)
Vice President of Operations of 1994 81,688 25,000 2,647(3)
Magcorp 1993 78,618 50,000 2,347(3)
</TABLE>
- ------------------------------
(1) Value of perquisites per individual did not exceed the lesser of $50,000 or
10% of total salary.
(2) Mr. Rennert receives no cash compensation directly from the Company. He is
Chairman of the Board. All of the Company's issued and outstanding capital
stock is owned by Group, which is 95.8% owned by Mr. Rennert and by trusts
established by him for himself and members of his family (but of which he is
not a trustee). Group receives a management fee from the Company pursuant to
a management agreement. The amount shown is the management fee payable by
the Company to Group for each year. See "Stock Ownership and Certain
Relationships and Transactions."
Since the Company's October 31, 1995 fiscal year end, the Board of
Directors has declared dividends totaling $13.9 million, consisting of $2.5
million of cash dividends on the Company's preferred stock and $11.4
million of cash dividends on the Company's common stock, which was paid to
Group. The payment of and amounts of dividends are restricted by the
Company's debt agreements.
(3) Consists of an employer contribution to a defined contribution pension plan.
(4) Consists of an employer contribution to a noncontributory profit sharing
plan.
(5) See also "-- Net Worth Appreciation Agreements" below.
30
<PAGE> 33
Compensation Committee Interlocks and Insider Participation
The Company had no compensation committee during the fiscal year ended
October 31, 1995. The sole member of the Board of Directors was Ira Leon
Rennert. The compensation for the executive officers is fixed by negotiations
between such executive officers and Mr. Rennert acting on behalf of Group.
Employment Agreements
Mr. Legge is employed by Magcorp pursuant to an employment agreement
effective as of January 1, 1993 which continues until December 31, 1995 and for
additional one-year periods thereafter unless terminated by either party by
written notice given 30 days prior to then current expiration date. Pursuant to
such employment agreement, Mr. Legge will receive a base minimum annual salary
of $120,000 and a bonus of at least $35,000 for each fiscal year in which
Magcorp is profitable.
Dr. Kaplan is employed by Magcorp pursuant to an employment agreement
effective as of June 1, 1994 which continues until October 31, 1999 and for
additional one-year periods thereafter unless terminated by either party by
written notice given 6 months prior to the then current expiration date.
Pursuant to such employment agreement, Mr. Kaplan will receive a base minimum
annual salary of $94,723 and a bonus of at least $25,000 for each fiscal year in
which Magcorp is profitable.
Mr. Thayer is employed by Magcorp pursuant to an employment agreement
effective as of January 1, 1993 which continues until December 31, 1995 and for
additional one-year periods unless terminated by either party by written notice
given 30 days prior to the then current expiration date. Pursuant to such
employment agreement, Mr. Thayer will receive a base minimum annual salary of
$80,000 and a bonus of at least $20,000 for each fiscal year in which Magcorp is
profitable. Mr. Thayer's current base annual salary is $85,500.
Net Worth Appreciation Agreements
Mr. Legge, Dr. Kaplan, Mr. Thayer and two other officers of Magcorp are
each parties to Net Worth Appreciation Agreements ("NWAP Agreements") with
Magcorp, under which (as amended upon the sale of the Senior Notes and the
payment to such persons of the amounts referred to under "Use of Proceeds"), he
will be entitled to receive a fixed percentage of the increase in the net worth
of Magcorp from August 1, 1996 until the end of the fiscal quarter preceding the
date of the termination of his employment or, if the employee leaves voluntarily
following the expiration of 30 days after his giving notice of resignation. Such
amount is payable without interest in 40 equal quarterly installments commencing
on the employee's termination, or, if later, the earlier of June 11, 2011 or his
attaining the age 62 (or his prior death or disability), and so long as he has
not engaged in any business competitive with that of Magcorp subsequent to
leaving his employment. The maximum aggregate percentage payable to the five
executives is 7% of such increase in the net worth of Magcorp.
Mr. Sabel and one other officer of Sabel are each parties to NWAP
Agreements with Sabel entitling them upon leaving the employment of Sable to
receive a fixed percentage of the increase in the net worth of Sabel from August
1, 1993 until the end of the fiscal quarter preceding the date of termination,
payable without interest in 40 quarterly installments.
The NWAP Agreements also provide that, if while employed by Magcorp or
Sabel, the respective company pays any cash dividend on its common stock, the
respective company will make a cash payment to the applicable executive officer
equal to the total amount of the cash dividend multiplied by their applicable
fully vested participation percentage. Since the Company's October 31, 1995
fiscal year end, prior to and in conjunction with the Company's dividends to
Group, Magcorp's Board of Directors declared dividends totaling $13.9 million,
which have been paid to the Company. Accordingly, an aggregate of $974,505 have
been paid to the five Magcorp executive officers who are covered by Magcorp's
NWAP Agreements and the discounted value of such payments was removed from the
liability for the NWAP Agreements. Upon consummation of the Transactions,
approximately $5.0 million will be paid to such Magcorp executive officers
pursuant to the NWAP Agreements. See "Use of Proceeds."
31
<PAGE> 34
STOCK OWNERSHIP AND CERTAIN RELATIONSHIPS AND TRANSACTIONS
The following table sets forth the beneficial ownership of the outstanding
equity securities of the Company as of May 1, 1996:
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT
TITLE OF CLASS BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS
<S> <C> <C> <C>
10% preferred stock, $1,000 par value........ Group(1) 8,500 shares, Direct 100%
Common stock, no par value................... Group 1,000 shares, Direct 100%
</TABLE>
- ------------------------------
(1) All of the Company's issued and outstanding capital stock is owned by Group,
which is 95.8% owned by Mr. Rennert and by trusts established by him for
himself and members of his family (but of which he is not a trustee). Mr.
Rennert may be deemed to be the beneficial owner of the Company's capital
stock. Roger L. Fay, Vice President, Finance of the Company, is Vice
President, Finance and a minority stockholder of Group. Justin W. D'Atri,
Secretary of the Company and the Subsidiaries, is Secretary and a director
and a minority stockholder of Group and one of the trustees of the trusts
mentioned in the preceding paragraph. No other executive officer of the
Company or the Subsidiaries has any interest in Group.
The preferred stock of the Company held by Group, which is to be redeemed
as part of the Transactions, accrues cumulative dividends at the rate of 10%
($850,000) per year.
There were no dividends declared on the Company's preferred or common stock
in fiscal year 1995 or 1994. Since the Company's October 31, 1995 fiscal year
end, the Board of Directors has declared dividends totaling $13.9 million,
consisting of a $2.5 million cash dividends on the Company's preferred stock and
$11.4 million cash dividends on the Company's common stock, which was paid to
Group. The payment of and amounts of dividends are restricted by the Company's
debt agreements.
Management Agreement
Group provides management services to the Company under a management
agreement (the "Management Agreement"). Such services include operational
consulting, budget review, income tax consulting and contracting for insurance
under master policies. Pursuant to the Management Agreement, Group provides such
services to the Company for an annual management fee equal to $1.2 million. The
Management Agreement expires on October 31, 2000. The Company paid management
fees to Group of approximately $1.6 million, $1.2 million and $1.2 million for
the fiscal years ended October 31, 1993, 1994 and 1995, respectively.
Insurance Sharing Program
To obtain the advantages of volume, Group purchases certain categories of
property and casualty insurance for a number of its subsidiaries, including the
Company and its subsidiaries, and the actual cost of such insurance, without
markup, is reimbursed by the covered subsidiaries. In fiscal year 1995, the
Company incurred costs of approximately $1.7 million under the Group insurance
program. The Company believes that its insurance costs under this program were
less than it would have incurred if it had obtained its insurance directly.
Tax Sharing Agreement
Pursuant to a tax sharing agreement between the Company and Group, the
Company pays to Group an amount equal to the amount the Company would have been
required to pay for taxes on a stand-alone basis to the Internal Revenue Service
and the applicable state taxing authority, as the case may be, except that the
Company will not have the benefit of any of its tax loss carryforwards unless
such tax losses were a result of timing differences between the Company's
accounting for tax and financial reporting purposes, which agreement also
provides that transactions between the Company and Group and its other
subsidiaries are accounted for on a cash basis and not on an accrual basis.
32
<PAGE> 35
Transactions with Sabel Family
Sabel leases certain of its facilities from an affiliate of the Sabel
family under a lease running to July 31, 1997, which may be extended for two
additional terms of five years each. Total rent payments during fiscal year 1995
were $0.3 million.
DESCRIPTION OF SENIOR NOTES
The Senior Notes will be issued under an indenture to be dated as of
, 1996 (the "Indenture") among the Company, the Guarantors and Fleet
National Bank, as trustee (the "Trustee"). The following summary of certain
provisions of the Indenture does not purport to be complete and is subject to,
and is qualified in its entirety by reference to, the Trust Indenture Act of
1939, as amended (the "Trust Indenture Act"), and to all of the provisions of
the Indenture, including the definitions of certain terms therein and those
terms made a part of the Indenture by reference to the Trust Indenture Act, as
in effect on the date of the Indenture. A copy of the proposed form of Indenture
has been filed as an exhibit to the Registration Statement of which this
Prospectus is a part. The definitions of certain capitalized terms used in the
following summary are set forth below under "Certain Definitions."
GENERAL
The Senior Notes will be issued only in registered form, without coupons,
in denominations of $1,000 and integral multiples of $1,000. Principal of,
premium, if any, and interest on the Senior Notes will be payable, and the
Senior Notes will be transferable, at the corporate trust office or agency of
the Trustee in the City of New York maintained for such purposes at Fleet
National Bank, c/o First Chicago Trust Company, 14 Wall Street, 8th Floor,
Window No. 2, New York, New York 10005. In addition, interest may be paid by
wire transfer or check mailed to the person entitled thereto as shown on the
register for the Senior Notes. No service charge will be made for any
registration of transfer or exchange of the Senior Notes, except for any tax or
other governmental charge that may be imposed in connection therewith.
The Senior Notes will be general unsecured obligations of the Company,
limited to $150,000,000 aggregate principal amount, and will mature on
, 2003. The Senior Notes will be fully and unconditionally
guaranteed, jointly and severally, by each of the Guarantors.
Interest on the Senior Notes will accrue at the rate of % per annum
and will be payable semi-annually on each and ,
commencing , 1996, to the holders of record of Senior Notes at the
close of business on and immediately preceding such
interest payment date. Interest on the Senior Notes will accrue or, if no
interest has been paid, from the original date of issuance (the "Issue Date").
Interest will be computed on the basis of a 360-day year comprised of twelve
30-day months. Interest on overdue principal and (to the extent permitted by
law) on overdue installments of interest will accrue at a rate equal to %
per annum.
REDEMPTION
Optional Redemption. The Senior Notes will be subject to redemption, in
whole or in part, at the option of the Company, at any time on or after
, 2000, at the redemption prices (expressed as percentages of
principal amount) set forth plus accrued interest to the redemption date, if
redeemed during the 12-month period beginning on of the years
indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
<S> <C>
2000..............................................
2001..............................................
2002.............................................. 100.00%
</TABLE>
Optional Redemption Upon Public Equity Offerings. In addition, at any time
prior to , 1999, the Company may redeem up to 33% of the aggregate
principal amount of the Senior Notes originally issued with the proceeds of one
or more Public Equity Offerings at a redemption price (expressed as a percentage
of
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<PAGE> 36
principal amount) of % plus accrued interest to the redemption date;
provided that at least $100.0 million aggregate principal amount of Senior Notes
remains outstanding immediately after any such redemption. In order to effect
the foregoing redemption with the proceeds of any Public Equity Offering, the
Company shall make such redemption not more than 120 days after the consummation
of any such Public Equity Offering. "Public Equity Offering" means an
underwritten public offering of Capital Stock (other than Disqualified Stock)
pursuant to a registration statement filed with the Commission in accordance
with the Act.
Selection and Notice. In the event that less than all of the Senior Notes
are to be redeemed at any time, selection of Senior Notes for redemption will be
made by the Trustee in compliance with the requirements of the principal
national securities exchange, if any, on which the Senior Notes are listed or,
if the Senior Notes are not listed on a national securities exchange, on a pro
rata basis, by lot or by such method as the Trustee shall deem fair and
appropriate; provided, however, that no Senior Note of $1,000 or less shall be
redeemed in part; provided, further, that if a redemption is to be made with the
proceeds of a Public Equity Offering pursuant to the immediately preceding
paragraph, selection of the Senior Notes for redemption shall be made by the
Trustee only on a pro rata basis unless such method is otherwise prohibited.
Notice of redemption shall be mailed by first-class mail at least 30 but not
more than 60 days before the redemption date to each Holder of Senior Notes to
be redeemed at its registered address. If any Senior Note is to be redeemed in
part only, the notice of redemption that relates to such Senior Note shall state
the portion of the principal amount thereof to be redeemed. A new Senior Note in
a principal amount equal to the unredeemed portion thereof will be issued in the
name of the holder thereof upon cancellation of the original Senior Note. On and
after the redemption date, interest will cease to accrue on Senior Notes or
portions thereof called for redemption.
CHANGE OF CONTROL
In the event of a Change of Control (the date of such occurrence being the
"Change of Control Date"), the Company shall notify the holders of Senior Notes
in writing of such occurrence and shall make an offer to purchase (the "Change
of Control Offer"), on a business day (the "Change of Control Payment Date") not
later than 60 days following the Change of Control Date, all Senior Notes then
outstanding at a purchase price equal to 101% of the principal amount thereof
plus accrued interest to the Change of Control Payment Date.
Notice of a Change of Control Offer shall be mailed by the Company to the
holders of Senior Notes not less than 30 days nor more than 45 days before the
Change of Control Payment Date. The Change of Control Offer is required to
remain open for at least 20 business days and until the close of business on the
business day next preceding the Change of Control Payment Date.
The Company will comply with any tender offer rules under the Securities
Exchange Act of 1934, as amended, which may then be applicable, including but
not limited to Rule 14e-1, in connection with any Change of Control Offer
required to be made by the Company to repurchase the Senior Notes as a result of
a Change of Control.
GUARANTEES
The Company's obligations under the Senior Notes will be unconditionally
and fully guaranteed, jointly and severally, by each of the Guarantors (the
"Guarantees") on a senior basis. Separate financial statements of the Guarantors
are not presented because in management's opinion such financial statements
would not be material to investors because the Company has no independent
operations and its only assets are cash and its investments in its wholly-owned
subsidiaries, Magcorp and Sabel. Under federal or state fraudulent conveyance
statutes or other legal principles, the Guarantees might be subordinated to
existing or future indebtedness of the Guarantors, or voided or found not to be
enforceable in accordance with their terms. If a court in a lawsuit on behalf of
an unpaid creditor of a Guarantor or a representative of creditors, such as a
trustee in bankruptcy, were to find that the Guarantor issued its Guarantee with
actual intent to hinder, delay or defraud creditors, or received less than a
reasonably equivalent value or fair consideration for such Guarantee and at the
time of such incurrence or issuance (a) was insolvent, (b) was rendered
insolvent by reason of such incurrence or issuance, (c) 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 (d) intended to
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<PAGE> 37
incur, or believed that it would incur, debts (including contingent obligations)
beyond its ability to pay such debts as they matured, such court might permit
such Guarantee, and prior payments thereon, to be voided by such creditor or
representative and permit such prior payments to be recovered from the holders
of the Senior Notes.
The measure of insolvency for purposes of the foregoing will vary depending
upon the law of the jurisdiction which is being applied. Generally, however, a
Guarantor would be considered insolvent if, at the time it issued its Guarantee
either the fair market value (or fair saleable value) of its assets was less
than the amount required to pay its total debts and liabilities (including
contingent liabilities) as they become absolute and matured or it had incurred
debts (including contingent obligations) beyond its ability to repay such debts
as they mature. Among other things, a legal challenge to a Guarantee on
fraudulent conveyance grounds may focus on the benefits, if any, realized by the
Guarantor as a result of the issuance by the Company of the Senior Notes. To the
extent a Guarantee of a Guarantor was voided as a fraudulent conveyance or held
unenforceable for any other reason, the holders of the Senior Notes would cease
to have any claim in respect of such Guarantee and would be solely creditors of
the Company and the other Guarantor, and may be required to return all amounts
received pursuant to such Guarantor's Guarantee. In such event, the claims of
the holders of the Senior Notes would be subject to the prior payment of all
liabilities of the Guarantor. There can be no assurance that, after providing
for all prior claims, there would be sufficient assets to satisfy the claims of
the holders of the Senior Notes.
The Company believes, and each Guarantor believes, that the Guarantees are
being incurred for proper purposes and in good faith, that the Guarantors
received fair consideration for the issuance of the Guarantees, that each
Guarantor is and will be solvent under the foregoing standards and that it had,
has and will have sufficient capital for carrying on its businesses and was, is
and will be able to pay its debts as they mature. There can be no assurance,
however, that a court would reach the same conclusions.
CERTAIN COVENANTS
Set forth below are certain covenants which will be contained in the
Indenture.
Limitation on Additional Indebtedness. The Indenture will provide that the
Company shall not, and shall not permit any of its Subsidiaries to, Incur any
Indebtedness (including Acquired Indebtedness) except for:
(a) Indebtedness of the Company and the Guarantors under the Senior
Notes, the Guarantees and the Indenture;
(b) Indebtedness of the Company and the Guarantors outstanding (plus
interest, premium, fees and other obligations associated therewith)
pursuant to the Credit Facilities (or pursuant to letters of credit) not to
exceed $40.0 million at any one time outstanding, less any Indebtedness
under the Credit Facilities required to be repaid and repaid with the Net
Cash Proceeds of an Asset Sale in accordance with the "Disposition of
Proceeds of an Asset Sale" covenant;
(c) Indebtedness of the Company and Guarantors not otherwise referred
to in this covenant outstanding on the Issue Date, including but not
limited to, the Existing Notes;
(d) Indebtedness of the Company and the Guarantors if, immediately
after giving pro forma effect to the incurrence thereof, the Fixed Charge
Coverage Ratio of the Company would be greater than or equal to 3.0:1;
(e) Indebtedness of the Company and the Guarantors in respect of
Interest Rate Protection Obligations incurred in the ordinary course of
business;
(f) Indebtedness of a Subsidiary issued to and held by the Company or
a Wholly-Owned Subsidiary or Indebtedness of the Company to a Wholly-Owned
Subsidiary in respect of intercompany advances or transactions;
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<PAGE> 38
(g) Indebtedness of the Company and the Guarantors Incurred after the
Issue Date in connection with or arising out of Capitalized Lease
Obligations and purchase money Indebtedness not to exceed $5.0 million at
any one time outstanding;
(h) Indebtedness of the Company and the Guarantors Incurred after the
Issue Date in connection with the acquisition or licensing of technology
and other assets relating to the implementation of new cell technology not
to exceed $6.0 million at any one time outstanding; and
(i) any deferrals, renewals, extensions, replacements, refinancings,
or refundings of, or amendments, modifications or supplements to,
Indebtedness incurred under clauses (b) and (c) above, whether involving
the same or any other lender or creditor or group of lenders or creditors,
provided that any such deferrals, renewals, extensions, replacements,
refinancings, refundings, amendments, modifications or supplements (x)
shall not provide for any mandatory redemption, amortization or sinking
fund requirement in an amount greater than or at a time prior to the
amounts and times specified in the Indebtedness being deferred, renewed,
extended, replaced, refinanced, refunded, amended, modified or
supplemented, (y) shall not exceed the principal amount (plus accrued
interest and prepayment premium, if any) of the Indebtedness being
replaced, renewed, refunded, refinanced or extended and (z) shall be
subordinated to the Senior Notes at least to the extent and in the manner,
if at all, that the Indebtedness being replaced, renewed, refunded,
refinanced or extended is subordinate to the Senior Notes.
The Company shall not, directly or indirectly, Incur any Indebtedness which
by its terms (or by the terms of any agreement governing such Indebtedness) is
subordinated to any other Indebtedness of the Company unless such Indebtedness
is also by its terms (or by the terms of any agreement governing such
Indebtedness) made expressly subordinated to the Senior Notes to the same extent
and in the same manner as such Indebtedness is subordinated to such other
Indebtedness of the Company. The Guarantors shall not, directly or indirectly,
in any event Incur any Indebtedness which by its terms (or by the terms of any
agreement governing such Indebtedness) is subordinated to any other Indebtedness
of such Guarantor unless such Indebtedness is also by its terms (or by the terms
of any agreement governing such Indebtedness) made expressly subordinated to the
Guarantee of the Senior Notes by such Guarantor to the same extent and in the
same manner as such Indebtedness is subordinated to such other Indebtedness of
such Guarantor.
Limitation on Investments, Loans and Advances. The Indenture will provide
that the Company shall not make and shall not permit any of its Subsidiaries to
make any capital contributions, advances or loans to (including any guarantees
of loans to), or investment or purchases of Capital Stock in, any Person
(collectively, "Investments"), except: (i) Investments by the Company in any
Wholly-Owned Subsidiary and Investments in or to the Company or a Subsidiary by
any Subsidiary, (ii) Investments represented by accounts receivable created or
acquired in the ordinary course of business, (iii) advances to employees in the
ordinary course of business not to exceed an aggregate of $250,000 outstanding
at any one time; (iv) Investments under or pursuant to Interest Rate Protection
Obligations, (v) Cash Equivalents, (vi) Investments in joint ventures not to
exceed $10.0 million in the aggregate and (vii) Investments permitted to be made
under the "Limitation on Restricted Payments" covenant described below.
Limitation on Restricted Payments. The Indenture will provide that the
Company shall not make, and shall not permit any of its Subsidiaries to,
directly or indirectly, make, any Restricted Payment, unless:
(a) no Default or Event of Default shall have occurred and be
continuing at the time of or after giving effect to such Restricted
Payment; and
(b) immediately after giving effect to such Restricted Payment, the
aggregate of all Restricted Payments declared or made after the Issue Date
through and including the date of such Restricted Payment (the "Base
Period") does not exceed the sum of (1) 50% of the Company's Consolidated
Net Income (or in the event such Consolidated Net Income shall be a
deficit, minus 100% of such deficit) during the Base Period, and (2) 100%
of the aggregate Net Proceeds and the Fair Market Value of marketable
securities and property received by the Company from the issue or sale,
during the Base Period, of Capital Stock (other than Disqualified Stock) of
the Company or any Indebtedness or other
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<PAGE> 39
securities of the Company convertible into or exercisable or exchangeable
for Capital Stock (other than Disqualified Stock) of the Company which has
been so converted, exercised or exchanged, as the case may be. For purposes
of determining under this clause (b) the amount expended for Restricted
Payments, cash distributed shall be valued at the face amount thereof and
property other than cash shall be valued at its Fair Market Value.
The provisions of this covenant will not prohibit (i) the payment of any
dividend within 60 days after the date of declaration thereof, if at such date
of declaration such payment would comply with the provisions of the Indenture;
(ii) the retirement of any shares of Capital Stock or subordinated Indebtedness
of the Company in exchange for, by conversion into, 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 of the Company (other than Disqualified Stock);
(iii) the redemption or retirement of subordinated Indebtedness of the Company
in exchange for, by conversion into, or out of the Net Proceeds of the
substantially concurrent incurrence of subordinated Indebtedness of the Company
(other than any such subordinated Indebtedness owing to a Subsidiary of the
Company) that is contractually subordinated in right of payment to the Senior
Notes and that is permitted to be incurred in accordance with the covenant
described under "Limitation on Additional Indebtedness" above; (iv) a management
fee payable to Group not to exceed $1.2 million in any one year; (v) the making
of payments by the Company to Group (A) no earlier than ten days prior to the
date on which Group is required to make its payments to the Internal Revenue
Service or the applicable state taxing authority, as the case may be, pursuant
to a tax sharing agreement between the Company and Group (which tax sharing
agreement provides that the payments thereunder shall not exceed the amount the
Company would have been required to pay for taxes on a stand-alone basis, except
that the Company will not have the benefit of any of its tax loss carryforwards
unless such tax losses were a result of timing differences between the Company's
accounting for tax and financial reporting purposes, and which tax sharing
agreement also provides that transactions between the Company and Group and its
other subsidiaries are accounted for on a cash basis and not on an accrual
basis) and (B) to reimburse Group for out of pocket insurance payments made by
Group on behalf of the Company and its Subsidiaries; (vi) the payment of a
dividend to Group on the Issue Date of approximately $71.1 million; and (vii)
the redemption on the Issue Date of the 8,500 outstanding shares of the
Company's 10% Preferred Stock, $1,000 par value per share, held by Group plus
accrued dividends thereon.
In determining the amount of Restricted Payments permissible under
subparagraph (b) above, amounts expended pursuant to clauses (i) and (ii) above
shall be included as Restricted Payments and amounts expended pursuant to
clauses (iii), (iv), (v), (vi) and (vii) above shall not be so included.
Limitation on Liens. The Indenture will provide that the Company shall
not, and shall not permit, cause or suffer any of its Subsidiaries to, create,
incur, assume or suffer to exist any Lien of any kind upon any of its property
or assets now owned or hereafter acquired by it except for:
(a) Liens existing as of the Issue Date;
(b) Permitted Liens;
(c) Liens on the assets or property of a Subsidiary of the Company
existing at the time such Subsidiary became a Subsidiary of the Company and
not incurred as a result (or in connection with or in anticipation of) such
Subsidiary's becoming a Subsidiary of the Company; provided that such Liens
do not extend to or cover any property or assets of the Company or any of
its Subsidiaries (other than the property or assets of the Subsidiary so
acquired);
(d) Liens securing inventory, accounts receivable, contract rights,
documents, instruments and general intangibles in respect of the Credit
Facilities (or letters of credit);
(e) any Lien securing Capitalized Lease Obligations and purchase money
obligations, provided that such Capitalized Lease Obligations and purchase
money obligations are incurred in compliance with the "Limitation on
Additional Indebtedness" covenant and provided that such Liens do not
extend to or cover any property or assets owned by the Company or any of
its Subsidiaries as of the Issue Date or extend to any property or assets
other than the property or assets subject to such Capitalized Lease
Obligations and purchase money obligations;
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<PAGE> 40
(f) Liens pursuant to leases and subleases of real property which do
not interfere with the ordinary conduct of business of the Company or any
of its Subsidiaries and which are made on customary and usual terms
applicable to similar properties;
(g) Liens securing Indebtedness which is incurred to refinance or
replace Indebtedness which has been secured by a Lien permitted under the
Indenture and is permitted to be refinanced or replaced under the
Indenture, provided that such Liens do not extend to or cover any property
or assets of the Company or any of its Subsidiaries not securing the
Indebtedness so refinanced or replaced; and
(h) Liens securing reimbursement obligations under letters of credit
but only in or upon the goods the purchase of which was financed by such
letters of credit.
Limitation on Dividends and Other Payment Restrictions Affecting
Subsidiaries. The Indenture will provide that the Company shall not, and shall
not permit any Subsidiary of the Company to, directly or indirectly, create or
otherwise cause or suffer to exist or become effective or enter into any
agreement with any Person that would cause or create any consensual encumbrance
or restriction of any kind on the ability of any Subsidiary of the Company to
(a) pay dividends, in cash or otherwise, 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 a Subsidiary of the Company, (b) make any loans
or advances to, or pay any Indebtedness owed to, the Company or any Subsidiary
of the Company or (c) transfer any of its properties or assets to the Company or
to any Subsidiary of the Company, except, in each case, for such encumbrances or
restrictions existing under or contemplated by or by reason of (i) the Senior
Notes or the Indenture, (ii) any restrictions existing under or contemplated by
agreements in effect on the Issue Date, including, without limitation,
restrictions under the Credit Facilities as in effect on the Issue Date, (iii)
any restrictions with respect to a Subsidiary of the Company that is not a
Subsidiary of the Company on the Issue Date, in existence at the time such
Person becomes a Subsidiary of the Company (but not created in contemplation of
such Person becoming a Subsidiary) or created after the Issue Date, so long as
such restrictions are not materially less favorable to the holders of the Senior
Notes than those under the Credit Facilities as in effect on the Issue Date, and
(iv) any restrictions existing under any agreement that refinances or replaces
an agreement containing a restriction permitted by clause (i), (ii) or (iii)
above, provided that the terms and conditions of any such restrictions are not
materially less favorable in the aggregate to the holders of the Senior Notes
than those under or pursuant to the agreement being replaced or the agreement
evidencing the Indebtedness refinanced or replaced.
Limitation on Sale-Leaseback Transactions. The Indenture will provide that
the Company shall not, and shall not permit any of its Subsidiaries to, enter
into any Sale-Leaseback Transaction. Notwithstanding the foregoing, the Company
and its Subsidiaries may enter into Sale-Leaseback Transactions if (i) after
giving pro forma effect to any such Sale-Leaseback Transaction, the Company
shall be in compliance with the "Limitation on Additional Indebtedness" covenant
described above, (ii) the sale price in such Sale-Leaseback Transaction is at
least equal to the Fair Market Value of such property, and (iii) the Company or
such Subsidiary shall apply the Net Cash Proceeds of the sale as provided under
"Disposition of Proceeds of Asset Sales" below, to the extent required by such
provision.
Disposition of Proceeds of Asset Sales. The Indenture will provide that
the Company shall not, and shall not permit any of its Subsidiaries to, make any
Asset Sale unless (a) such Asset Sale is for Fair Market Value, (b) the net
proceeds therefrom consist of at least 85% cash or Cash Equivalents and (c) the
Company shall commit to apply or to cause its Subsidiaries to apply the Net Cash
Proceeds of such Asset Sale within 180 days of receipt thereof, and shall apply
such Net Cash Proceeds within 270 days of receipt thereof, as follows:
(i) first, to satisfy all mandatory repayment obligations under the
Credit Facilities arising by reason of such Asset Sale to the extent that
such repayment permanently reduces the amount that may be borrowed under
the Credit Facilities;
(ii) second, to repurchase Existing Notes required to be repurchased
pursuant to the Indenture governing the Existing Notes; and
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<PAGE> 41
(iii) third, out of any Net Cash Proceeds remaining after application
of Net Cash Proceeds pursuant to the preceding paragraphs (i) and (ii) (the
"Available Amount"), the Company shall make an offer to purchase (the
"Asset Sale Offer") from all Holders of Senior Notes, up to a maximum
principal amount (expressed as a multiple of $1,000) of Senior Notes equal
to the Available Amount at a purchase price of 100% of the principal amount
thereof plus accrued interest thereon to the date of purchase; provided
that the Company will not be required to apply pursuant to this paragraph
(iii) Net Cash Proceeds received from any Asset Sale if, and only to the
extent that, such Net Cash Proceeds are committed in writing to be applied
to acquire or construct property or assets in lines of business related to
the Company's and its Subsidiaries' businesses within 180 days after the
consummation of such Asset Sale and are so applied within 270 days after
the consummation of such Asset Sale; and provided, further, that the
Company may defer the Asset Sale Offer until there is an aggregate
unutilized Available Amount equal to or in excess of $2.5 million (at which
time the entire unutilized Available Amount and not just the amount in
excess of $2.5 million shall be applied as required pursuant to this
paragraph). The Asset Sale Offer shall remain open for a period of 20
business days or such longer period as may be required by law. To the
extent the Asset Sale Offer is not fully subscribed to by the holders of
the Senior Notes, the Company may retain such unutilized portion of the Net
Cash Proceeds.
Limitation on Preferred Stock Issuances by Subsidiaries. The Indenture
will prohibit the Company from causing or permitting the issuance by any
Subsidiary of any Capital Stock other than common stock or causing or permitting
any Subsidiary to at any time have outstanding any shares of Capital Stock other
than common stock, except issuances of Capital Stock to the Company or a
Wholly-Owned Subsidiary of the Company that is a Guarantor; provided, however,
that the Company or such Wholly-Owned Subsidiary of the Company, as the case may
be, is at all times the sole beneficial and record owner of such Capital Stock.
Additional Subsidiary Guarantors. The Indenture will provide that if the
Company or any of its Subsidiaries shall transfer or cause to be transferred, in
one or a series of related transactions, any assets, businesses, divisions, real
property or equipment having a book value in excess of $100,000 to any
Subsidiary that is not a Guarantor, the Company shall, prior to such transfer,
(1) cause such transferee Subsidiary to become a Guarantor and execute a
Guarantee, and (2) deliver an opinion of counsel in accordance with the terms of
the Indenture.
Special Covenants of the Guarantors. The Indenture will provide that each
Guarantor of the Senior Notes issued under the Indenture will covenant to comply
with each covenant of the Company contained in such Indenture, to the extent
applicable.
Limitation on Transactions with Affiliates. The Indenture will provide
that the Company shall not, and the Company shall not permit, cause, or suffer
any Subsidiary of the Company to, conduct any business or enter into any
transaction or series of transactions with or for the benefit of any Affiliate
of the Company or any of its Subsidiaries or any holder of 10% or more of any
class of Capital Stock of the Company (each an "Affiliate Transaction"), except
in good faith and on terms that are, in the aggregate, no less favorable to the
Company or such Subsidiary, as the case may be, than those that could have been
obtained in a comparable transaction on an arm's-length basis from a Person not
an Affiliate of the Company or such Subsidiary. All Affiliate Transactions (and
each series of related Affiliate Transactions which are similar or part of a
common plan) involving aggregate payments or other market value in excess of
$500,000 shall be approved by the Board of Directors of the Company, such
approval to be evidenced by a Board Resolution stating that such Board of
Directors has, in good faith, determined that such transaction complies with the
foregoing provisions. Notwithstanding the foregoing, the restrictions set forth
in this covenant shall not apply to (i) customary directors' fees, consulting
fees, indemnification and similar arrangements, and employee salaries and
bonuses, (ii) transactions between the Company and any of its Subsidiaries or
among Subsidiaries of the Company, (iii) the payment of a management fee to
Group and (iv) the making of payments by the Company to Renco pursuant to
subsections (v), (vi) and (vii) of clause (b) of the "Limitation on Restricted
Payments" covenant above.
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<PAGE> 42
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
The Indenture will provide that neither the Company nor any Guarantor shall
consolidate with or merger with or into or sell, assign, convey, lease or
transfer all or substantially all of its properties and assets as an entirety to
any Person or group of affiliated Persons in a single transaction or through a
series of transactions, unless after giving effect thereto: (a) the Company or
such Guarantor, as the case may be, shall be the continuing Person or the
resulting, surviving or transferee Person (the "surviving entity") shall be a
corporation organized and existing under the laws of the United States or any
State thereof or the District of Columbia; (b) the surviving entity shall
expressly assume, by a supplemental indenture executed and delivered to the
Trustee, in form and substance reasonably satisfactory to the Trustee, all of
the obligations of the Company or such Guarantor, as the case may be, under the
Senior Notes, the Guarantees and the Indenture; (c) immediately before and
immediately after giving effect to such transaction or series of transactions
(including, without limitation, any Indebtedness incurred or anticipated to be
incurred in connection with or in respect of such transaction or series of
transactions), no Default or Event of Default shall have occurred and be
continuing; (d) the Company, such Guarantor or the surviving entity, as the case
may be, shall immediately before and immediately after giving effect to such
transaction or series of transactions (including, without limitation, any
Indebtedness incurred or anticipated to be incurred in connection with or in
respect of the transaction or series of transactions) have a Consolidated Net
Worth equal to or greater than the Consolidated Net Worth of the Company or such
Guarantor immediately prior to such transaction or series of transactions; (e)
immediately after giving effect to such transaction or series of transactions,
the Company, such Guarantor or the surviving entity, as the case may be, could
incur $1.00 of Indebtedness pursuant to clause (d) of the "Limitation on
Additional Indebtedness" covenant above; (f) the Company, such Guarantor or the
surviving entity shall have delivered to the Trustee an Officer's Certificate
stating that such consolidation, merger, conveyance, transfer or lease and, if a
supplemental indenture is required in connection with such transaction or series
of transactions, such supplemental indenture complies with this covenant and
that all conditions precedent in the Indenture relating to the transaction or
series of transactions have been satisfied; and (g) neither the Company nor any
Subsidiary would thereupon become obligated with respect to any Indebtedness,
nor any of its property become subject to any Lien, unless the Company or such
Subsidiary could incur such Indebtedness or create such Lien under the
Indenture. The foregoing provisions shall not be applicable with respect to a
transaction involving the consolidation or merger of a Guarantor with or into
any Person (other than the Company or an Affiliate of the Company) that results
in such Guarantor being released from its Guarantee as provided under "Release
of a Guarantor" below.
RELEASE OF A GUARANTOR
Upon the sale or disposition of all of the Capital Stock of a Guarantor by
the Company or a Subsidiary of the Company, or upon the consolidation or merger
of a Guarantor with or into any Person (in each case, other than to the Company
or an Affiliate of the Company), such Guarantor will be automatically and
unconditionally released from all obligations under its Guarantee; provided that
(i) immediately before and after giving effect to such transactions, no Default
or Event of Default shall have occurred and be continuing and (ii) the proceeds
received by the Company or any Subsidiary of the Company from such transaction
shall be applied as provided under "Disposition of Proceeds of Asset Sales"
above.
SEC REPORTS AND REPORTS TO HOLDERS
Pursuant to the Indenture, whether or not required by the rules and
regulations of the Commission, so long as any Senior Notes are outstanding, the
Company will file with the Commission and distribute or cause to be distributed
to holders of the Senior Notes copies of the financial information that would
have been contained in such annual reports and quarterly reports that the
Company would have been required to file with the Commission pursuant to Section
13 or 15(d) of the Exchange Act. Such financial information shall include annual
reports containing consolidated financial statements and notes thereto, together
with an opinion thereon expressed by an independent public accounting firm,
management's discussion and analysis of financial condition and results of
operations as well as quarterly reports containing unaudited condensed
consolidated financial statements for the first three quarters of each fiscal
year.
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EVENTS OF DEFAULT
The following are Events of Default under the Indenture:
(i) default in the payment of any interest on the Senior Notes when it
becomes due and payable and continuance of such default for a period of 30
days; or
(ii) default in the payment of the principal of or premium, if any, on
the Senior Notes when due (including by reason of a default in payment upon
an offer to purchase); or
(iii) default in the performance, or breach, of any covenant in the
Indenture (other than defaults specified in clause (i) or (ii) above) and
continuance of such default or breach for a period of 30 days after written
notice thereof has been given to the Company by the Trustee or to the
Company and the Trustee by the holders of at least 25% in aggregate
principal amount of the outstanding Senior Notes; or
(iv) failure by the Company or any of its Subsidiaries to perform any
term, covenant, condition or provision of one or more classes or issues of
other Indebtedness in an aggregate principal amount of $2.0 million or
more, which failure results in an acceleration of the maturity thereof; or
(v) one or more judgments, orders or decrees for the payment of money
in excess of $2.0 million, either individually or in an aggregate amount,
shall be entered against the Company, any of its Subsidiaries or any of
their respective properties and shall not be discharged, and there shall
have been a period of 60 days during which a stay of enforcement of such
judgment or order, by reason of a pending appeal or otherwise, shall not be
in effect; or
(vi) certain events of bankruptcy or insolvency with respect to the
Company or any Subsidiary shall have occurred; or
(viii) any Guarantee shall be found to be unenforceable or invalid by
any final judgment, order or decree of any court.
If an Event of Default occurs and is continuing, then the holders of at
least 25% in principal amount of the outstanding Senior Notes may, by written
notice, and the Trustee upon the request of the holders of not less than 25% in
principal amount of the outstanding Senior Notes shall, declare the principal
of, premium, if any, and accrued interest on all the Senior Notes to be due and
payable immediately. Upon any such declaration such principal, premium, if any,
and accrued interest shall become due and payable immediately. If an Event of
Default specified in (vi) occurs with respect to the Company and is continuing,
then the principal of, premium, if any, and accrued interest on all the Senior
Notes shall ipso facto become and be immediately due and payable without any
declaration or other act on the part of the Trustee or any holder.
After a declaration of acceleration, the holders of a majority in aggregate
principal amount of outstanding Senior Notes may, by notice to the Trustee,
rescind such declaration of acceleration if all existing Events of Default have
been cured or waived, other than nonpayment of principal of, premium, if any,
and accrued interest on the Senior Notes that has become due solely as a result
of such acceleration, and if the rescission of acceleration would not conflict
with any judgment or decree. The holders of a majority in principal amount of
the outstanding Senior Notes also have the right to waive past defaults under
the Indenture except a default in the payment of the principal of, premium, if
any, or interest on any Senior Note or in respect of a covenant or a provision
which cannot be modified or amended without the consent of all holders.
No holder of any of the Senior Notes has any right to institute any
proceeding with respect to the Indenture or any remedy thereunder unless the
holders of at least 25% in principal amount of the outstanding Senior Notes have
made written request, and offered reasonable indemnity, to the Trustee to
institute such proceeding as Trustee, the Trustee has failed to institute such
proceeding within fifteen days after receipt of such notice and the Trustee has
not within such fifteen-day period received directions inconsistent with such
written request from holders of a majority in principal amount of the
outstanding Senior Notes. Such limitations do not apply, however, to a suit
instituted by a holder of a Senior Note for the enforcement of the payment of
the principal of or premium, if any, or accrued interest on such Senior Note on
or after the due date expressed in such Senior Note.
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During the existence of an Event of Default, the Trustee is required to
exercise such rights and powers vested in it under the Indenture and use the
same degree of care and skill in its exercise thereof as a prudent Person would
exercise under the circumstances in the conduct of such Person's own affairs.
Subject to the provisions of the Indenture relating to the duties of the
Trustee, in case an Event of Default shall occur and be continuing, the Trustee
is not under any obligation to exercise any of its rights or powers under the
Indenture at the request or direction of any of the holders unless such holders
shall have offered the Trustee reasonable security or indemnity. Subject to
certain provisions concerning the rights of the Trustee, the holders of a
majority in principal amount of the outstanding Senior Notes have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee or exercising any trust or power conferred on the
Trustee.
TRANSFER
The Senior Notes will be issued in registered form and will be transferable
only upon the surrender of the Senior Notes being transferred for registration
of transfer. The Company may require payment of a sum sufficient to cover any
tax, assessment or other governmental charge payable in connection with certain
transfers and exchanges.
DEFEASANCE
The Company may at any time terminate all of its obligations with respect
to the Senior Notes ("defeasance"), except for certain obligations, including
those regarding any trust established for a defeasance and obligations to
register the transfer or exchange of the Senior Notes, to replace mutilated,
destroyed, lost or stolen Senior Notes and to maintain agencies in respect of
the Senior Notes. The Company may at any time terminate its obligations under
certain covenants set forth in the Indenture, some of which are described under
"Certain Covenants" above, and any omission to comply with such obligations
shall not constitute a Default or an Event of Default with respect to the Senior
Notes issued under the Indenture ("covenant defeasance"). In order to exercise
either defeasance or covenant defeasance, the Company must irrevocably deposit
in trust with the Trustee, for the benefit of the holders of the Senior Notes,
money or U.S. government obligations, or a combination thereof, in such amounts
as will be sufficient to pay the principal of, premium, if any, and interest on
the Senior Notes to redemption or maturity and comply with certain other
conditions, including the delivery of an opinion as to certain tax matters.
SATISFACTION AND DISCHARGE
The Indenture will be discharged and will cease to be of further effect
(except as to surviving rights or registration of transfer or exchange of Senior
Notes) as to all outstanding Senior Notes when either (a) all such Senior Notes
theretofore authenticated and delivered (except lost, stolen or destroyed Senior
Notes which have been replaced or paid and Senior Notes for whose payment money
has theretofore been deposited in trust or segregated and held in trust by the
Company and thereafter repaid to the Company or discharged from such trust) have
been delivered to the Trustee for cancellation or (b)(i) all such Senior Notes
not theretofore delivered to the Trustee for cancellation have become due and
payable and the Company has irrevocably deposited or caused to be deposited with
the Trustee as trust funds in the trust for the purpose an amount of money
sufficient to pay and discharge the entire indebtedness on the Senior Notes not
theretofore delivered to the Trustee for cancellation, for principal, premium,
if any, and accrued interest to the date of such deposit; (ii) the Company has
paid all sums payable by it under the Indenture; and (iii) the Company has
delivered irrevocable instructions to the Trustee to apply the deposited money
toward the payment of the Senior Notes at maturity or redemption, as the case
may be. In addition, the Company must deliver an Officers' Certificate and an
Opinion of Counsel stating that all conditions precedent to satisfaction and
discharge have been complied with.
AMENDMENTS AND WAIVERS
From time to time the Company and the Guarantors, when authorized by
resolutions of their respective Boards of Directors, and the Trustee may,
without the consent of the holders of the Senior Notes, amend,
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waive or supplement the Indenture or the Senior Notes for certain specified
purposes, including, among other things, curing ambiguities, defects or
inconsistencies, maintaining the qualification of the Indenture under the Trust
Indenture Act or making any change that does not adversely affect the rights of
any holder. Other amendments and modifications of the Indenture or the Senior
Notes may be made by the Company and the Guarantors and the Trustee with the
consent of the holders of not less than a majority of the aggregate principal
amount of the outstanding Senior Notes; provided, however, that no such
modification or amendment may, without the consent of the holder of each
outstanding Senior Note affected thereby, (i) reduce the principal amount
outstanding, extend the fixed maturity, or alter the redemption provisions of
the Senior Notes, (ii) change the currency in which any Senior Notes or any
premium or accrued interest thereon is payable, (iii) reduce the percentage in
principal amount outstanding of Senior Notes necessary for consent to an
amendment, supplement or waiver or consent to take any action under the
Indenture or the Senior Notes, (iv) impair the right to institute suit for the
enforcement of any payment on or with respect to the Senior Notes, (v) waive a
default in payment with respect to the Senior Notes, (vi) reduce the rate or
extend the time for payment of interest on the Senior Notes, (vii) change the
Company's obligation to purchase Senior Notes upon the occurrence of a Change of
Control (or change the definition thereof) or an Asset Sale in accordance with
the Indenture or waive any default in the performance thereof, (viii) release
any Guarantor from its obligations under its Guarantee except as provided under
"Release of a Guarantor" above, or (ix) affect the ranking of the Senior Notes
or the Guarantees.
CERTAIN DEFINITIONS
Set forth below is a summary of certain defined terms used in the
Indenture. Reference is made to the Indenture for the full definition of all
such terms, as well as any other capitalized terms used herein for which no
definition is provided.
"Acquired Indebtedness" means Indebtedness of a Person existing at the time
such Person becomes a Subsidiary of the Company or assumed in connection with an
Asset Acquisition of such Person, including, without limitation, Indebtedness
incurred in connection with, or in anticipation of, such Person's becoming a
Subsidiary of the Company or such acquisition.
"Affiliate" of any specified Person means any other Person which, directly
or indirectly, controls, is controlled by or is under direct or indirect common
control with such specified Person. 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.
"Asset Acquisition" means (i) any capital contribution (by means of
transfers of cash or other property to others or payments for property or
services for the account or use of others, or otherwise) or purchase or
acquisition of Capital Stock by the Company or any of its Subsidiaries to or in
any other Person, in either case as a result of which such Person shall become a
Subsidiary of the Company or any of its Subsidiaries or shall be merged with or
into the Company or any of its Subsidiaries or (ii) any acquisition by the
Company or any of its Subsidiaries of the assets of any Person which constitute
substantially all of an operating unit or business of such Person.
"Asset Sale" means any direct or indirect sale, conveyance, transfer, lease
(including by means of sale-leaseback) or other disposition to any Person other
than the Company or a Subsidiary of the Company, in one transaction or a series
of related transactions, of (i) any Capital Stock of any Subsidiary of the
Company or (ii) any other property or asset of the Company or any Subsidiary of
the Company, in each case other than in the ordinary course of business and
other than isolated transactions which do not exceed $250,000 individually. For
the purposes of this definition, the term "Asset Sale" shall not include sales
of receivables not a part of a sale of the business from which they arose or any
disposition of all or substantially all of the properties and assets of the
Company that is governed under and complies with the "Consolidation, Merger,
Conveyance, Transfer or Lease" covenant described above.
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"Board Resolution" means a copy of a resolution certified by the Secretary
or an Assistant Secretary of the Company to have been duly adopted by the Board
of Directors of the Company and to be in full force and effect on the date of
such certification and delivered to the Trustee.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations, rights in or other equivalents (however designated
and whether voting or non-voting) of such Person's capital stock, whether
outstanding on the Issue Date or issued after the Issue Date, and any and all
rights, warrants or options exchangeable for or convertible into such capital
stock.
"Capitalized Lease Obligation" means any obligation to pay rent or other
amounts under a lease of (or other agreement conveying the right to use) any
property (whether real, personal or mixed) that is required to be classified and
accounted for as a capital lease obligation under GAAP, and, for the purpose of
the Indenture, the amount of such obligation at any date shall be the
capitalized amount thereof at such date, determined in accordance with GAAP.
"Cash Equivalents" means, at any time, (i) any evidence of Indebtedness
with a maturity of 180 days or less issued or directly and fully guaranteed or
insured by the United States of America or any agency or instrumentality thereof
(provided that the full faith and credit of the United States of America is
pledged in support thereof); (ii) certificates of deposit or acceptances with a
maturity of 180 days or less of any financial institution that is a member of
the Federal Reserve System having combined capital and surplus and undivided
profits of not less than $250.0 million; (iii) commercial paper with a maturity
of 180 days or less issued by a corporation (except an Affiliate of the Company)
organized under the laws of any state of the United States or the District of
Columbia and rated at least A-1 by Standard & Poor's Ratings Group or at least
P-1 by Moody's Investors Service, Inc.; and (iv) repurchase agreements and
reverse repurchase agreements relating to marketable direct obligations issued
or unconditionally guaranteed by the United States of America or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within one year from the date of acquisition; provided,
however, that the terms of such agreements comply with the guidelines set forth
in the Federal Financial Agreements of Depository Institutions with Securities
Dealers and Others, as adopted by the Comptroller of the Currency.
"Change of Control" means (i) the direct or indirect sale, lease, exchange
or other transfer of all or substantially all of the assets of the Company or
Group to any Person or entity or group of Persons or entities acting in concert
as a partnership or other group (a "Group of Persons") other than an Affiliate
of the Company, (ii) the merger or consolidation of the Company or Group with or
into another corporation with the effect that the then existing shareholders of
the Company or Group, as the case may be, hold less than 50% of the combined
voting power of the then outstanding securities of the surviving corporation of
such merger or the corporation resulting from such consolidation ordinarily (and
apart from rights arising under special circumstances) having the right to vote
in the election of directors, (iii) the replacement of a majority of the Board
of Directors of Group, over a two-year period, from the directors who
constituted the Board of Directors at the beginning of such period, and such
replacement shall not have been approved by a vote of at least a majority of the
Board of Directors then still in office who either were members of the Board of
Directors at the beginning of such period or whose election as a member of the
Board of Directors was previously so approved, or (iv) a Person or Group of
Persons (other than Group and its Affiliates) shall, as a result of a tender or
exchange offer, open market purchases, privately negotiated purchases or
otherwise, have become the direct or indirect beneficial owner (within the
meaning of Rule 13d-3 under the Exchange Act) of securities of the Company or
Group representing 50% or more of the combined voting power of the then
outstanding securities of the Company or Group ordinarily (and apart from rights
accruing under special circumstances) having the right to vote in the election
of directors.
"Consolidated Cash Flow" means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period increased (to the
extent deducted in determining Consolidated Net Income) by the sum of: (i) all
United States Federal, state and foreign income taxes of such Person paid or
accrued according to GAAP for such period (other than income taxes attributable
to extraordinary, unusual or non-recurring gains or losses); (ii) all interest
expense of such Person paid or accrued in accordance with GAAP (net of any
interest income) for such period (including amortization of original issue
discount and the
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interest portion of deferred payment obligations); (iii) depreciation and
depletion; (iv) amortization including, without limitation, amortization of
capitalized debt issuance costs; and (v) any other non-cash charges to the
extent deducted from Consolidated Net Income (including non-cash expenses
recognized in accordance with Financial Accounting Standards Bulletin Number
106).
"Consolidated Net Income" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Subsidiaries for such
period, on a consolidated basis, determined in accordance with GAAP; provided,
however, that (a) the Net Income of any Person (the "Other Person") in which the
Person in question or one of its Subsidiaries has a joint interest with a third
party (which interest does not allow the net income of such Other Person to be
consolidated into the net income of the Person in question in accordance with
GAAP) shall be included only to the extent of the amount of dividends or
distributions paid to the Person in question or the Subsidiary, (b) the Net
Income of any Subsidiary of the Person in question that is subject to any
contractual restriction or limitation on the payment of dividends or the making
of other distributions shall be excluded to the extent of such restriction or
limitation (provided that this clause (b) shall not apply to any such
restrictions or limitations with respect to the Guarantors contained in the
Credit Facilities as such restrictions or limitations are in effect on the Issue
Date), (c)(i) the Net Income (or loss) of any Person acquired in a pooling of
interests transaction for any period prior to the date of such acquisition and
(ii) any net gain (but not loss) resulting from an Asset Sale by the Person in
question or any of its Subsidiaries other than in the ordinary course of
business shall be excluded and (d) extraordinary gains and losses shall be
excluded.
"Consolidated Net Worth" means, with respect to any Person at any date of
determination, the consolidated stockholders' equity represented by the shares
of such Person's Capital Stock (other than Disqualified Stock) outstanding at
such date, as determined on a consolidated basis in accordance with GAAP.
"Credit Facilities" means (i) the revolving credit facility as in effect as
of the Issue Date between Magcorp and Congress Financial Corporation and (ii)
the revolving credit facility as in effect as of the Issue Date between Sabel
and Congress Financial Corporation, in each case as the same may at any time be
amended, amended and restated, supplemented or otherwise modified, including any
refinancing, refunding, replacement or extension thereof and whether by the same
or any other lender or group of lenders.
"Default" means any event that is, or after notice or passage of time or
both would be, an Event of Default.
"Disqualified Stock" means, with respect to any Person, any Capital Stock
which, by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or is exchangeable for Indebtedness, or is redeemable
at the option of the holder thereof, in whole or in part, in each case on or
prior to the maturity date of the Senior Notes.
"Fair Market Value" or "fair value" means, with respect to any asset or
property, the price which could be negotiated in an arm's-length free market
transaction, for cash, between a willing seller and a willing buyer, neither of
whom is under undue pressure or compulsion to complete the transaction. Fair
Market Value shall be determined by the Board of Directors of the Company acting
in good faith and shall be evidenced by a Board Resolution delivered to the
Trustee.
"Fixed Charge Coverage Ratio" means, with respect to any Person, the ratio
of (i) Consolidated Cash Flow of such Person for the four full fiscal quarters
for which financial statements are available that immediately precede the date
of the transaction or other circumstances giving rise to the need to calculate
the Fixed Charge Coverage Ratio (the "Transaction Date") to (ii) all cash and
non-cash interest expense (including capitalized interest) of such Person and
its Subsidiaries determined in accordance with GAAP (net of any interest income
of such Person and its Subsidiaries and exclusive of deferred financing fees of
such Person and its Subsidiaries) and the aggregate amount of cash dividends or
other distributions declared or paid on Capital Stock (other than Common Stock)
of such Person and its Subsidiaries, in each case for such four full fiscal
quarter period. For purposes of this definition, if the Transaction Date occurs
prior to the date on which the Company's consolidated
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financial statements for the four full fiscal quarters subsequent to the Issue
Date are first available, then "Consolidated Cash Flow" and the items referred
to in the preceding clause (ii) shall be calculated, in the case of the Company,
after giving effect on a pro forma basis as if the Senior Notes outstanding on
the Transaction Date were issued on the first day of such four full fiscal
quarter period. In addition to and without limitation of the foregoing two
sentences, for purposes of this definition, "Consolidated Cash Flow" and the
items referred to in the preceding clause (ii) shall be calculated after giving
effect on a pro forma basis for the period of such calculation to (i) the
Incurrence or repayment of any Indebtedness of such Person or any of its
Subsidiaries (other than Indebtedness for working capital) at any time during
the period (the "Reference Period") (A) commencing on the first day of the four
full fiscal quarter period for which financial statements are available that
precedes the Transaction Date and (B) ending on and including the Transaction
Date, including, without limitation, the Incurrence or repayment of the
Indebtedness giving rise to the need to make such calculation, as if such
Incurrence or repayment occurred on the first day of the Reference Period;
provided that if such Person or any of its Subsidiaries directly or indirectly
guarantees Indebtedness of a third Person, the above clause shall give effect to
the Incurrence of such guaranteed Indebtedness as if such Person or Subsidiary
had directly Incurred such guaranteed Indebtedness and (ii) any Asset Sales or
Asset Acquisitions (including, without limitation, any Asset Acquisition giving
rise to the need to make such calculation as a result of the Company or any of
its Subsidiaries (including any Person who becomes a Subsidiary as a result of
the Asset Acquisition) incurring Acquired Indebtedness) occurring during the
Reference Period and any retirement of Indebtedness in connection with such
Asset Sales, as if such Asset Sale or Asset Acquisition and/or retirement
occurred on the first day of the Reference Period. Furthermore, in calculating
the denominator (but not the numerator) of this "Fixed Charge Coverage Ratio,"
(1) subject to clause (3) below, interest on Indebtedness determined on a
fluctuating basis as of the Transaction Date and which will continue to be so
determined thereafter shall be deemed to accrue at a fixed rate per annum equal
to the rate of interest on such Indebtedness in effect on the Transaction Date;
(2) if interest on any Indebtedness actually incurred on the Transaction Date
may optionally be determined at an interest rate based upon a factor of a prime
or a similar rate, a eurocurrency interbank offered rate, or other rates, then
the interest rate based upon a factor of a prime or similar rate shall be deemed
to have been in effect; and (3) notwithstanding clause (1) above, interest on
Indebtedness determined on a fluctuating basis, to the extent such interest is
covered by agreements relating to Interest Rate Protection Obligations, shall be
deemed to accrue at the rate per annum resulting after giving effect to the
operation of such agreements.
"GAAP" means generally accepted accounting principles in effect on the
Issue Date as 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.
"Guarantee" means the full and unconditional, joint and several, guarantee
of the Senior Notes by each Guarantor.
"Guarantor" means (i) Magcorp and Sabel and (ii) each of the Company's
Subsidiaries which becomes a guarantor of the Senior Notes pursuant to the
"Additional Subsidiary Guarantors" covenant described above.
"Incur" means, with respect to any Indebtedness, to incur, create, issue,
assume, guarantee or otherwise become liable for or with respect to the payment
of, contingently or otherwise, such Indebtedness; provided that neither the
accrual of interest nor the accretion of original issue discount shall be
considered an Incurrence of Indebtedness.
"Indebtedness" means, with respect to any Person, without duplication, (i)
any liability, contingent or otherwise, of such Person (A) for borrowed money
(whether or not the recourse of the lender is to the whole of the assets of such
Person or only to a portion thereof), (B) evidenced by a note, debenture or
similar instrument, letter of credit or draft accepted (including a purchase
money obligation) representing extensions of credit whether or not representing
obligations for borrowed money or (C) for the payment of money relating to a
Capitalized Lease Obligation or other obligation relating to the deferred
purchase price of any
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property or services (other than property or services purchased on ordinary
trade terms therefor) which purchase price is payable over a period in excess of
six months or is evidenced by a note, invoice or similar written instrument with
a maturity in excess of six months; (ii) any liability of others of the kind
described in the preceding clause (i) which the Person has guaranteed or which
is otherwise its legal liability; (iii) any obligation secured by a lien to
which the property or assets of such Person are subject, whether or not the
obligations secured thereby shall have been assumed by or shall otherwise be
such Person's legal liability; and (iv) any and all deferrals, renewals,
extensions, replacements, refinancings, and refundings of, or amendments,
modifications or supplements to, any liability of the kind described in any of
the preceding clauses (i), (ii) or (iii).
"Interest Rate Protection Obligations" means the obligations of any Person
pursuant to any arrangement with any other Person whereby, directly or
indirectly, such Person is entitled to receive from time to time periodic
payments calculated by applying either a floating or a fixed rate of interest on
a stated notional amount in exchange for periodic payments made by such Person
calculated by applying a fixed or a floating rate of interest on the same
notional amount and shall include, without limitation, interest rate swaps,
caps, floors, collars and similar agreements.
"Lien" means any mortgage, lien (statutory or other), pledge, security
interest, encumbrance, hypothecation, assignment for security or other security
agreement of any kind or nature whatsoever. For purposes of the Indenture, a
Person 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 Person.
"Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds
thereof 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 (except to the extent that such obligations with respect to
Indebtedness are financed or sold with recourse to the Company or any of its
Subsidiaries) net of (i) brokerage commissions and other reasonable fees and
expenses (including fees and expenses of counsel and investment bankers) related
to such Asset Sale; (ii) provisions for all taxes payable as a result of such
Asset Sale; (iii) payments made to retire Indebtedness secured by the assets
subject to such Asset Sale (including retirements of Indebtedness under the
Credit Facilities) to the extent required pursuant to the terms of such
Indebtedness; and (iv) appropriate amounts to be provided by the Company or any
of its Subsidiaries, as the case may be, as a reserve, in accordance with GAAP,
against any liabilities associated with such Asset Sale and retained by the
Company or any of its Subsidiaries, 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 Income" means, with respect to any Person for any period, the net
income (loss) of such Person determined in accordance with GAAP.
"Net Proceeds" means (a) in the case of any sale of Capital Stock (other
than Disqualified Stock) by the Company, the aggregate net proceeds received by
the Company, after payment of expenses, commissions and the like incurred in
connection therewith, whether such proceeds are in cash or in property (valued
at the Fair Market Value thereof, as determined in good faith by the Board of
Directors of the Company, at the time of receipt), (b) in the case of any
exchange, exercise, conversion or surrender of outstanding securities of any
kind of the Company for or into shares of Capital Stock of the Company which is
not Disqualified Stock, the net book value of such outstanding securities on the
date of such exchange, exercise, conversion or surrender (plus any additional
amount required to be paid by the holder to the Company upon such exchange,
exercise, conversion or surrender, less any and all payments made to the
holders, e.g., on account of fractional shares, and less all expenses incurred
by the Company in connection therewith) and (c) in the case of the issuance of
any Indebtedness by the Company, the aggregate net cash proceeds received by the
Company, after payment of expenses, commissions and the like incurred therewith.
"Permitted Liens" means, with respect to any Person, any lien arising by
reason of (a) any attachment, judgment, decree or order of any court, so long as
such lien is being contested in good faith and is either adequately bonded or
execution thereon has been stayed pending appeal or review, and any appropriate
legal
47
<PAGE> 50
proceedings which may have been duly initiated for the review of such
attachment, judgment, decree or order shall not have been finally terminated or
the period within which such proceedings may be initiated shall not have
expired; (b) taxes, assessments or governmental charges not yet delinquent or
which are being contested in good faith; (c) security for payment of workers'
compensation or other insurance; (d) security for the performance of tenders,
bids, leases and contracts (other than contracts for the payment of money); (e)
deposits to secure public or statutory obligations or in lieu of surety or
appeal bonds or to secure permitted contracts for the purchase or sale of any
currency entered into in the ordinary course of business; (f) operation of law
in favor of carriers, warehousemen, landlords, mechanics, materialmen, laborers,
employees or suppliers, incurred in the ordinary course of business for sums
which are not yet delinquent or are being contested in good faith by
negotiations or by appropriate proceedings which suspend the collection thereof;
(g) any interest or title of a lessor under any lease; (h) security for surety
or appeal bonds; and (i) easements, rights-of-way, zoning and similar covenants
and restrictions and other similar encumbrances or title defects which, in the
aggregate, are not substantial in amount and which do not in any case materially
interfere with the ordinary conduct of the business of the Company or any of its
Subsidiaries.
"Person" means any individual, corporation, partnership, joint venture,
trust, unincorporated organization or government or any agency or political
subdivision thereof.
"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 (x) dividends or distributions
payable solely in Capital Stock (other than Disqualified Stock) or in options,
warrants or other rights to purchase Capital Stock (other than Disqualified
Stock), and (y) 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 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
which is subordinated in right of payment to the Senior Notes (other than
Indebtedness acquired in anticipation of satisfying a sinking fund obligation,
principal installment or final maturity, in each case due within one year of the
date of acquisition) and (iv) the making of any Investment in any Person other
than pursuant to clauses (i) through (vii) of the "Limitation on Investments,
Loans and Advances" covenant described above.
"Sale-Leaseback Transaction" means any arrangement with any Person
providing for the leasing by the Company or any Subsidiary of the Company of any
real or tangible personal property, which property has been or is to be sold or
transferred by the Company or such Subsidiary to such Person in contemplation of
such leasing.
"Subsidiary" means, with respect to any Person, (i) any corporation of
which the outstanding Capital Stock having at least a majority of the votes
entitled to be cast in the election of directors shall at the time be owned,
directly or indirectly, by such Person, by a Subsidiary of such Person or by
such Person and a Subsidiary of such Person, or (ii) any other Person (other
than a corporation) of which at least a majority of voting interest is at the
time, directly or indirectly, owned by such Person, by a Subsidiary of such
Person or by such Person and a Subsidiary of such Person.
"Wholly-Owned Subsidiary" means any Subsidiary all of the outstanding
Capital Stock of which (other than directors' qualifying shares) is owned,
directly or indirectly, by the Company.
DESCRIPTION OF REVOLVING CREDIT FACILITIES
Simultaneous with the consummation of the Offering, Magcorp and Sabel will
enter into amendments to the Loan and Security Agreements (the "Revolving Credit
Facilities") with Congress Financial Corporation ("Congress") pursuant to which
Congress will make revolving credit loans in its discretion to Magcorp and
Sabel, up to a maximum of $33.0 million and $7.0 million, respectively, at any
one time outstanding. The
48
<PAGE> 51
following description of the Revolving Credit Facilities does not purport to be
complete, and is subject to, and qualified in its entirety by reference to, all
of the provisions of the Revolving Credit Facilities, which have been filed as
exhibits to the Registration Statement of which this Prospectus is part.
GENERAL
Under the Revolving Credit Facilities, Congress will, in its discretion,
lend on a revolving basis to Magcorp and Sabel not more than the sum of (i) 85%
of the Net Amount of Eligible Accounts (as defined) plus (ii) 60% (30% in the
case of Supplies (as defined)) of the Value of Eligible Inventory (as defined)
of Magcorp and 50% of the Value of Eligible Inventory (as defined) of Sabel up
to the aforementioned limits of $33.0 million and $7.0 million, for each of
Magcorp and Sabel, respectively. Congress may extend up to $5.0 million and $1.5
million of letter of credit accommodations to Magcorp and Sabel, respectively,
within the limits set forth above.
INTEREST
Interest on the Company's loan balance is payable monthly at a rate 1% per
annum in excess of the Prime Rate publicly announced by Philadelphia National
Bank, changing monthly with each change in such prime rate. In the event of a
default by either Magcorp or Sabel under the Revolving Credit Facilities, the
interest rate on its borrowings would be 3% per annum in excess of such prime
rate.
SECURITY
As security for the indebtedness of Magcorp and Sabel to Congress, Magcorp
and Sabel have granted to Congress a first security interest in all of their
inventory (including raw materials, work in process, semi-finished and finished
goods and supplies) and accounts, contract rights, documents, instruments and
general intangibles.
TERM
The Revolving Credit Facilities will continue until August 4, 1999 and from
year to year thereafter, provided that either Magcorp or Sabel, as the case may
be, or Congress may terminate either of the Revolving Credit Facilities as of
August 4, 1999 or any subsequent anniversary date on 60 days advance written
notice.
FEES
The Revolving Credit Facilities will also provide for a monthly unused line
fee and an early termination fee if the agreements are terminated prior to
August 4, 1999.
CERTAIN COVENANTS
In addition to customary covenants, the Revolving Credit Facilities will
require that Magcorp and Sabel be subject to certain covenants including, but
not limited to, a restriction on the incurrence of additional indebtedness, a
restriction on the creation of additional liens, the compliance with certain
financial covenants and certain restrictions on dividends, loans and
investments.
EVENTS OF DEFAULT
The Revolving Credit Facilities will each contain certain events of
default, including, without limitation, the following: (i) the failure of the
applicable borrower or its subsidiaries to pay any of its obligations to the
lenders when due or within three days after the due date; (ii) certain failures
by the applicable borrower or its subsidiaries to pay principal or interest on
any indebtedness or contingent obligation, after any applicable grace period, or
breaches or default by the applicable borrower or its subsidiaries of any term
of any indebtedness or contingent obligation; (iii) any default by the
applicable borrower or its subsidiaries in the performance or observance of the
conditions and covenants of the applicable credit agreement or related
agreements, beyond any applicable cure period; (iv) the falsity in any material
respect of any representation or warranty made by the applicable borrower to the
lenders under the Revolving Credit Facilities; (v) certain judgments against the
applicable borrower or any of its subsidiaries; (vi) certain events of
bankruptcy or insolvency of the applicable borrower; and (vii) the occurrence of
certain change of control events.
49
<PAGE> 52
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement (the
"Underwriting Agreement") among the Company, the Guarantors and Donaldson,
Lufkin & Jenrette Securities Corporation (the "Underwriter"), the Underwriter
has agreed to purchase from the Company and the Company has agreed to sell to
the Underwriter, $150.0 million aggregate principal amount of Senior Notes.
The Underwriting Agreement provides that the obligations of the Underwriter
thereunder are subject to certain conditions precedent. The Underwriting
Agreement also provides that the Company and the Guarantors will indemnify,
jointly and severally, the Underwriter and its controlling persons against
certain liabilities and expenses, including liabilities under the Securities
Act, or to contribute to payments that the Underwriter may be required to make
in respect thereof. The nature of the Underwriter's obligation is such that it
is required to purchase all of the Senior Notes if any Senior Notes are
purchased by the Underwriter.
The Underwriter has advised the Company that it proposes initially to offer
the Senior Notes directly to the public at the public offering price set forth
on the cover of this Prospectus and to certain dealers at such price less a
concession not in excess of % per Senior Note. The Underwriter may allow,
and such dealers may reallow, a discount not in excess of % per Senior Note
to certain other dealers. After the initial public offering of the Senior Notes,
the offering price and other selling terms may be changed by the Underwriter.
The Senior Notes are a new issue of securities. There is no active public
trading market for the Senior Notes. The Underwriter has advised the Company
that it currently intends to make a market in the Senior Notes, but it is not
obligated to do so and may discontinue such market making at any time. There can
be no assurance as to the liquidity of any market that may develop for the
Senior Notes, the ability of holders to sell their Senior Notes or the price at
which holders would be able to sell their Senior Notes. The Company does not
intend to apply for listing of the Senior Notes on any securities exchange.
The Underwriter has provided investment banking services to a subsidiary of
Group in the past. The Underwriter is acting as a dealer manager for the Tender
Offer and Consent Solicitation. The Company has agreed to pay the expenses of
the Underwriter incurred in connection with the Tender Offer and the Offering.
LEGAL MATTERS
The validity of the Senior Notes being offered hereby and certain other
legal matters relating to the Offering are being passed upon for the Company by
Cadwalader, Wickersham & Taft, New York, New York. Certain legal matters will be
passed upon for the Underwriter by Cahill Gordon & Reindel (a partnership
including a professional corporation), New York, New York.
EXPERTS
The consolidated financial statements and schedule of the Company and
subsidiaries as of October 31, 1994 and 1995 and for each of the years in the
three year period ended October 31, 1995 included herein and elsewhere in the
Registration Statement have been included herein and in the Registration
Statement in reliance upon the reports of KPMG Peat Marwick LLP, independent
certified public accountants, appearing elsewhere herein, and upon the authority
of said firm as experts in accounting and auditing.
50
<PAGE> 53
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-1 (together with all
amendments, exhibits, schedules and supplements thereto, the "Registration
Statement") under the Securities Act with respect to the Senior Notes offered
hereby. This Prospectus, which forms a part of the Registration Statement, does
not contain all the information set forth in the Registration Statement, certain
parts of which have been omitted in accordance with the rules and regulations of
the Commission. For further information with respect to the Company, and the
Senior Notes offered hereby, reference is made to the Registration Statement.
Statements contained in this Prospectus as to the contents of certain documents
filed as exhibits to the Registration Statement are not necessarily complete,
and, in each instance, reference is made to the copy of the document so filed.
Each such statement is qualified in its entirety by such reference. In addition,
pursuant to the Indenture governing the Existing Notes, the Company files
periodic reports and other information required to be filed pursuant to the
Securities and Exchange Act of 1934, as amended. The Registration Statement and
such periodic reports and other information can be inspected and copied at the
public reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549; and at the Commission's regional offices
at 500 West Madison Street, Suite 1400, Chicago, Illinois 60661, and 7 World
Trade Center, 13th Floor, New York, New York 10048. Copies of such material may
be obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. The Registration
Statement can also be reviewed through the Commission's Electronic Data
Gathering, Analysis, and Retrieval System which is publicly available through
the Commission's Web site (http://www.sec.gov).
The Company intends to furnish to each holder of the Senior Notes annual
reports containing audited financial statements and quarterly reports containing
unaudited information for the first three quarters of each fiscal year. The
Company will also furnish to each holder of the Senior Notes such other reports
as may be required by law. The Company has agreed to make periodic filings with
the Commission for so long as the Senior Notes remain outstanding, whether or
not it is required to do so by the rules and regulations of the Commission.
The principal executive offices of the Company are located at 238 North
2200 West, Salt Lake City, Utah 84116 and its telephone number is (801)
532-2043.
51
<PAGE> 54
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----------
<S> <C>
Independent Auditors' Report.................................................... F-2
Consolidated Balance Sheets as of October 31, 1994 and 1995 and unaudited as of
April 30, 1996................................................................ F-3
Consolidated Statements of Operations for the years ended October 31, 1993, 1994
and 1995 and unaudited for the six months ended April 30, 1995 and 1996....... F-4
Consolidated Statements of Stockholder's Equity (Deficit) for the years ended
October 31, 1993, 1994 and 1995 and unaudited for the six months ended April
30, 1996...................................................................... F-5
Consolidated Statements of Cash Flows for the years ended October 31, 1993, 1994
and 1995 and unaudited for the six months ended April 30, 1995 and 1996....... F-6
Notes to Consolidated Financial Statements...................................... F-7 to F-21
</TABLE>
F-1
<PAGE> 55
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholder
Renco Metals, Inc. and Subsidiaries:
We have audited the accompanying consolidated balance sheets of Renco
Metals, Inc. and subsidiaries as of October 31, 1994 and 1995, and the related
consolidated statements of operations, stockholder's equity (deficit), and cash
flows for each of the years in the three-year period ended October 31, 1995.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Renco
Metals, Inc. and subsidiaries as of October 31, 1994 and 1995, and the results
of their operations and their cash flows for each of the years in the three-year
period ended October 31, 1995, in conformity with generally accepted accounting
principles.
As discussed in note 2(f) to the consolidated financial statements, the
Company changed its method of accounting for income taxes as of November 1, 1993
to adopt the provisions of Statement of Financial Accounting Standards No. 109,
Accounting for Income Taxes.
KPMG PEAT MARWICK LLP
Salt Lake City, Utah
December 1, 1995
F-2
<PAGE> 56
RENCO METALS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
OCTOBER 31,
---------------------
1994 1995 APRIL 30,
-----------
1996
(unaudited)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................... $ 7,881 30,091 32,007
Accounts receivable, less allowance for doubtful
accounts of $491 and $514 at October 31, 1994 and
1995, respectively, and $570 at April 30, 1996....... 22,757 27,854 27,710
Income tax refund receivable............................ 967 575 432
Inventories, net........................................ 21,851 21,631 24,293
Prepaid expenses........................................ 530 801 945
-------- -------- --------
Total current assets............................ 53,986 80,952 85,387
-------- -------- --------
Property, plant, and equipment, net....................... 30,862 32,014 33,680
Deferred income taxes..................................... 321 -- --
Other assets, net......................................... 3,869 3,585 3,234
-------- -------- --------
$ 89,038 116,551 122,301
======== ======== ========
<Caption
LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)
<S> <C> <C> <C>
Current liabilities:
Current installments of long-term debt.................. $ -- 15 15
Accounts payable........................................ 8,057 7,511 6,394
Accrued expenses........................................ 8,697 14,327 14,216
Deferred income taxes payable........................... 321 219 245
-------- -------- --------
Total current liabilities....................... 17,075 22,072 20,870
-------- -------- --------
Long-term debt, excluding current installments............ 78,839 77,997 77,505
Postretirement medical benefits........................... 6,408 6,477 6,545
Deferred income taxes payable............................. -- 1,646 1,844
Other liabilities......................................... 1,720 3,599 3,714
-------- -------- --------
Total liabilities............................... 104,042 111,791 110,478
-------- -------- --------
Stockholder's equity (deficit):
10% preferred stock, $1,000 par value. Authorized,
issued, and outstanding 8,500 shares................. 8,500 8,500 8,500
Common stock, no par value. Authorized, issued, and
outstanding 1,000 shares............................. 1 1 1
Additional paid-in capital.............................. 500 500 500
Retained earnings (deficit)............................. (24,005) (4,028) 3,035
Minimum pension liability adjustment.................... -- (213) (213)
-------- -------- --------
Net stockholder's equity (deficit).............. (15,004) 4,760 11,823
Commitments and contingencies (notes 8, 11 and 12)........
-------- -------- --------
$ 89,038 116,551 122,301
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE> 57
RENCO METALS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED OCTOBER 31, APRIL 30,
---------------------------------- -------------------
1993 1994 1995 1995 1996
(unaudited)
<S> <C> <C> <C> <C> <C>
Sales................................. $131,139 132,950 185,806 87,681 99,110
Costs and expenses:
Cost of sales....................... 95,313 106,364 121,189 58,900 56,238
Depreciation, depletion, and
amortization..................... 7,135 5,604 5,770 2,878 3,369
Selling, general, and administrative
expenses......................... 14,714 16,352 18,470 8,898 8,967
-------- -------- -------- ------- -------
Income from operations........... 13,977 4,630 40,377 17,005 30,536
Interest income....................... 56 186 881 210 830
Interest expense...................... (7,414) (10,208) (10,138) (5,056) (5,034)
-------- -------- -------- ------- -------
Income (loss) before income
taxes, extraordinary item, and
cumulative effect of change in
accounting principle........... 6,619 (5,392) 31,120 12,159 26,332
Income tax expense (benefit).......... 2,503 (1,932) 11,143 5,000 9,447
-------- -------- -------- ------- -------
Income (loss) before
extraordinary item and
cumulative effect of change in
accounting principle........... 4,116 (3,460) 19,977 7,159 16,885
Extraordinary item -- extinguishment
of debt (less applicable income
taxes of $1,595) (note 9)........... 2,930 -- -- -- --
Cumulative effect of change in
accounting for income taxes......... -- 30 -- -- --
-------- -------- -------- ------- -------
Net income (loss)........... $ 7,046 (3,430) 19,977 7,159 16,885
======== ======== ======== ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 58
RENCO METALS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY (DEFICIT)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
MINIMUM NET
ADDITIONAL PENSION STOCKHOLDER'S
PREFERRED COMMON PAID-IN ACCUMULATED LIABILITY EQUITY
STOCK STOCK CAPITAL DEFICIT ADJUSTMENT (DEFICIT)
<S> <C> <C> <C> <C> <C> <C>
Balances at October 31, 1992...... $ -- 1 500 (20,020) -- (19,519)
Issuance of preferred stock..... 8,500 -- -- -- -- 8,500
Dividend to Group............... -- -- -- (5,658) -- (5,658)
Distribution to Group........... -- -- -- (1,943) -- (1,943)
Minimum pension liability
adjustment................... -- -- -- -- (426) (426)
Net income...................... -- -- -- 7,046 -- 7,046
--
------ --- ------- ---- -------
Balances at October 31, 1993...... 8,500 1 500 (20,575) (426) (12,000)
Minimum pension liability
adjustment................... -- -- -- -- 426 426
Net loss........................ -- -- -- (3,430) -- (3,430)
--
------ --- ------- ---- -------
Balances at October 31, 1994...... 8,500 1 500 (24,005) -- (15,004)
Minimum pension liability
adjustment................... -- -- -- -- (213) (213)
Net income...................... -- -- -- 19,977 -- 19,977
--
------ --- ------- ---- -------
Balances at October 31, 1995...... 8,500 1 500 (4,028) (213) 4,760
Dividend to Group (unaudited)... -- -- -- (9,822) -- (9,822)
Net income (unaudited).......... -- -- -- 16,885 -- 16,885
--
------ --- ------- ---- -------
Balances at April 30, 1996
(unaudited)..................... $ 8,500 1 500 3,035 (213) 11,823
====== == === ======= ==== =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 59
RENCO METALS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED OCTOBER 31, APRIL 30,
---------------------------- -----------------
1993 1994 1995 1995 1996
(unaudited)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss).................................................. $ 7,046 $(3,430) $19,977 $ 7,159 $16,885
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Depreciation, depletion, and amortization........................ 7,135 5,604 5,770 2,878 3,369
Extraordinary gain on debt restructure, net of income taxes...... (2,930) -- -- -- --
Amortization of financing fees................................... 1,645 772 772 386 386
Cumulative effect of accounting change........................... -- (30) -- -- --
Loss (gain) on sale of equipment................................. 16 (1) 78 2 (13)
Deferred income taxes............................................ 1,018 (430) 1,865 649 224
Provision for bad debts.......................................... 176 93 188 108 56
Postretirement medical benefits.................................. 282 372 90 45 74
Deferred compensation plans...................................... -- 114 1,202 393 846
Decrease (increase) in operating assets:
Accounts receivable............................................ (1,443) (4,083) (5,285) (5,362) 88
Income tax refund receivable................................... (978) (518) 392 1,219 143
Inventories.................................................... (6,040) 1,284 220 (606) (2,662)
Prepaid expenses............................................... (8) 1,184 (271) 100 (144)
Other assets................................................... (24) 31 (20) (37) 15
Increase (decrease) in operating liabilities:
Accounts payable............................................... (506) 662 (546) 1,250 (1,117)
Accrued expenses............................................... 2,106 (1,326) 5,630 1,396 (111)
Other liabilities.............................................. (1,623) 135 (25) -- (737)
-------- ------- ------- ------- -------
Net cash provided by operating activities................... 5,872 433 30,037 9,580 17,302
-------- ------- ------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures............................................... (2,595) (3,227) (7,185) (3,361) (5,042)
Proceeds from sale of equipment.................................... 137 9 185 9 20
-------- ------- ------- ------- -------
Net cash used in investing activities....................... (2,458) (3,218) (7,000) (3,352) (5,022)
-------- ------- ------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (repayments) under revolving credit agreements...... (20,374) 3,085 (1,317) (1,199) (484)
Repayment of long-term debt........................................ (30,071) (108) (10) (1) (8)
Payment of debt origination and financing fees..................... (5,671) -- -- -- (50)
Borrowings of long-term debt....................................... 75,000 -- 500 500 --
Dividends to Group................................................. (5,658) -- -- -- (9,822)
Distribution to Group.............................................. (1,943) -- -- -- --
Long-term borrowings from Group.................................... 485 -- -- -- --
Repayment of subordinated note payable............................. (7,967) -- -- -- --
-------- ------- ------- ------- -------
Net cash provided by (used in) financing activities......... 3,801 2,977 (827) (700) (10,364)
-------- ------- ------- ------- -------
Increase in cash and cash equivalents................................ 7,215 192 22,210 5,528 1,916
Cash and cash equivalents, beginning of year......................... 474 7,689 7,881 7,881 30,091
-------- ------- ------- ------- -------
Cash and cash equivalents, end of year............................... $ 7,689 $ 7,881 $30,091 $13,409 $32,007
======== ======= ======= ======= =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year for interest............................... $ 3,692 $ 8,986 $ 9,366 $ 4,657 $ 4,648
Cash paid (refunds received) during the year for income taxes........ 2,648 (984) 8,888 3,132 9,346
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Conversion of debt to Group to preferred stock....................... $ 8,500 $ -- $ -- $ -- $ --
Minimum pension liability adjustment to other assets................. 468 (401) 469 -- --
Minimum pension liability adjustment to other liabilities............ (894) 827 (682) -- --
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE> 60
RENCO METALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 1993, 1994, AND 1995
(DOLLARS IN THOUSANDS)
(1) PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION
Renco Metals, Inc. (Renco Metals) is a holding company incorporated in the
State of Delaware on July 19, 1993, and is a 100 percent owned subsidiary of The
Renco Group, Inc. (Group). On August 4, 1993, in connection with the sale of
senior notes (the Refinancing), Renco Metals acquired from Group the outstanding
common shares of Renmag, Inc., the holding company which owned Magnesium
Corporation of America (collectively Magcorp) and Sabel Industries, Inc.
(Sabel), which were both indirectly wholly owned by Group. The transaction has
been accounted for as a reorganization of entities under common control.
Accordingly, the accompanying consolidated financial statements have been
presented based on historical amounts in a manner similar to a pooling of
interests. The excess of the amount paid by Renco Metals over the net book value
of Sabel has been deemed to be a dividend to Group.
The proceeds of the Refinancing were used to retire substantially all the
previously outstanding long-term debt of Magcorp and Sabel. In addition, Group
agreed to exchange certain of its receivables from Magcorp for Renco Metals
preferred stock.
The accompanying consolidated financial statements include the accounts of
Renco Metals and both of its subsidiaries, Magcorp and Sabel, each of which is
wholly-owned (collectively the Company). Renco Metals is a holding company that
has no independent operations, and its only assets are cash and its investments
in Magcorp and Sabel. Magcorp owns and operates a magnesium production plant on
the Great Salt Lake at Rowley, Utah that sells pure magnesium and magnesium
alloys to domestic and international customers. Sabel is engaged principally in
the wholesaling and fabrication of steel in Alabama. Its customers consist of
industrial accounts and the general public.
Renco Metal's senior notes are unconditionally and fully guaranteed,
jointly and severally, by both of its subsidiaries, Magcorp and Sabel (the
Guarantors). Separate financial statements of the Guarantors are not presented
because, in management's opinion, such financial statements would not be
material to investors because Renco Metals has no independent operations and its
only assets are cash and its investment in Magcorp and Sabel. Summarized
financial information on the combined Guarantors is presented below:
SUMMARIZED COMBINED GUARANTOR FINANCIAL INFORMATION
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED OCTOBER 31, APRIL 30,
-------------------------------- ------------------
1993 1994 1995 1995 1996
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Combined Guarantor statement of operations
data:
Net sales............................... $131,139 $132,950 $185,806 $87,681 $99,110
Cost of sales........................... 95,313 106,364 121,189 58,900 56,328
Income (loss) before extraordinary items
and accounting change................ 4,073 (3,597) 19,787 7,053 16,817
Net income (loss)....................... 7,003 (3,567) 19,787 7,053 16,817
</TABLE>
F-7
<PAGE> 61
RENCO METALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
(1) PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION -- (CONTINUED)
<TABLE>
<CAPTION>
OCTOBER 31, APRIL 30,
------------------- ------------
1994 1995 1996
(UNAUDITED)
<S> <C> <C> <C>
Combined Guarantor balance sheet data:
Current assets............................................ $48,387 $75,163 $ 79,529
Noncurrent assets......................................... 35,052 35,599 36,914
Current liabilities....................................... 14,274 19,434 18,232
Noncurrent liabilities.................................... 11,967 14,719 14,608
</TABLE>
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Cash and Cash Equivalents
For purposes of reporting cash flows, the Company considers all highly
liquid financial instruments purchased with a maturity of three months or less
to be cash equivalents. Cash equivalents consist of the following:
<TABLE>
<CAPTION>
1994 1995
<S> <C> <C>
Money market funds......................................... $5,461 $5,132
Certificates of deposit.................................... 134 140
------ ------
$5,595 $5,272
====== ======
</TABLE>
(b) Inventories
Inventories are stated at the lower of cost or market, using either
weighted averaging last-in, first-out (LIFO) or first-in, first-out (FIFO).
(c) Property, Plant, and Equipment
Property, plant, and equipment are carried at cost. Maintenance and repairs
are charged to expense. Expenditures for major improvements are capitalized.
Depreciation is computed primarily on the straight-line method over the
estimated useful lives (ranging from 5 to 31 years) of the related assets.
(d) Other Assets
Other assets include financing costs associated with the long-term debt.
The costs are being amortized using the straight-line method over the period of
the related long-term debt. Other assets consist of the following:
<TABLE>
<CAPTION>
1994 1995
<S> <C> <C>
Loan origination and financing fees........................ $4,738 $4,738
Unrecognized pension prior service cost.................... 68 536
Deposits and other......................................... 28 48
------ -----
4,834 5,322
Less accumulated amortization.............................. 965 1,737
------ -----
$3,869 $3,585
====== =====
</TABLE>
F-8
<PAGE> 62
RENCO METALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
(e) Other Liabilities
Postretirement Health Care Benefits
Magcorp provides postretirement health care benefits to substantially all
of its salaried employees. The liability is accrued over the employee's
estimated period of employment based on actuarially determined amounts in
accordance with Statement of Financial Accounting Standard No. 106. Benefits are
funded as costs are actually incurred.
Environmental Compliance Costs
Industrial companies such as Magcorp and Sabel have in recent years become
subject to increasingly demanding environmental standards imposed by federal,
state, and local environmental laws and regulations. It is the policy of the
Company to endeavor to comply with applicable environmental laws and
regulations. The Company considers current information, environmental laws and
regulations, and adjusts its related accruals as considered necessary.
(f) Income Taxes
The Company and Group file a consolidated federal income tax return and
have a tax sharing agreement which requires that the operating companies provide
for federal and state income taxes as if they were filing separate income tax
returns except that generally, no carryforward of net operating losses is
permitted, unless such losses are generated by net tax timing differences. Under
the terms of the agreement, each subsidiary is required to remit to Group the
amount of federal income taxes provided.
Effective November 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, Accounting for Income Taxes (Statement 109). The
cumulative effect of this change in accounting for income taxes of $30 is
reported separately in the consolidated statement of operations for 1994.
Statement 109 requires the recognition of deferred tax liabilities and assets
for the temporary differences between the financial reporting bases and tax
bases of the Company's assets and liabilities at enacted rates expected to be in
effect when such amounts are realized or settled. Prior years' consolidated
financial statements have not been restated to apply the provisions of Statement
109.
Pursuant to the deferred method under APB Opinion 11, which was applied in
1993 and prior years, deferred income taxes are recognized for income and
expense items that are reported in different years for financial reporting
purposes and income tax purposes using the tax rate applicable in the year of
the calculation. Under the deferred method, deferred taxes are not adjusted for
subsequent changes in tax rates.
(g) Deferred Compensation
The Company has deferred compensation agreements with certain key employees
in the form of net worth appreciation participation agreements. The deferred
compensation is based on the performance of the Company over the period of the
employee's employment. The aforementioned agreements have been accounted for as
deferred compensation in the accompanying consolidated financial statements.
(h) Use of Estimates
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these financial
F-9
<PAGE> 63
RENCO METALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
statements in conformity with generally accepted accounting principles. Actual
results could differ from those estimates.
(i) Unaudited Interim Financial Statements
In the opinion of management, the interim consolidated financial statements
contain all adjustments, consisting of normal recurring accruals, necessary to
present fairly the consolidated financial position and results of operations for
the periods presented herein. Interim periods are not necessarily indicative of
results to be expected for the year.
(3) INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
OCTOBER 31,
--------------------- APRIL 30,
1994 1995 1996
(unaudited)
<S> <C> <C> <C>
Finished goods.......................... $16,162 $12,600 $14,800
Brine in ponds.......................... 1,349 2,677 2,126
Spare parts and supplies................ 5,182 5,897 6,759
Raw materials and work-in-process....... 760 798 908
------- ------- -------
23,453 21,972 24,593
Less LIFO reserve....................... 1,602 341 300
------- ------- -------
$21,851 $21,631 $24,293
======= ======= =======
</TABLE>
LIFO inventory was reduced in 1994 and 1995. This reduction resulted in
charging lower inventory costs prevailing in previous years to cost of sales,
thus reducing cost of sales by approximately $1,337 and $570, below the amount
that would have resulted from replacing the liquidated inventory at October 31,
1994 and 1995 prices, respectively.
(4) PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment are summarized as follows:
<TABLE>
<CAPTION>
1994 1995
<S> <C> <C>
Land................................................... $ 317 $ 390
Buildings.............................................. 4,693 4,986
Equipment.............................................. 49,464 54,187
Leasehold improvements................................. 614 755
Construction-in-process................................ 1,038 2,400
------- -------
56,126 62,718
Less accumulated depreciation and amortization......... 25,264 30,704
------- -------
$30,862 $32,014
======= =======
</TABLE>
F-10
<PAGE> 64
RENCO METALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
(5) LONG-TERM DEBT
Long-term debt is summarized as follows:
<TABLE>
<CAPTION>
1994 1995
<S> <C> <C>
For Renco Metals:
12% senior notes (a)................................. $75,000 $75,000
For Magcorp:
Revolving credit facility (b)........................ 1,214 --
For Sabel:
Revolving credit facility (b)........................ 2,625 2,522
9.7% mortgage note................................... -- 490
------- -------
Total long-term debt......................... 78,839 78,012
Less current installments.............................. -- 15
------- -------
Long-term debt, excluding current
installments............................... $78,839 $77,997
======= =======
</TABLE>
The aggregate maturities of long-term debt for each of the twelve-month
periods subsequent to October 31, 1995 are as follows: 1996, $15; 1997, $18;
1998, $2,542; 1999, $22; and 2000, $75,415.
(a) Senior Notes
In August 1993, Renco Metals issued $75,000 aggregate principal amount of
12 percent Senior Notes (the Notes) due July 15, 2000. The Notes were registered
under the Securities Act of 1933, as amended, effective December 3, 1993. The
Notes are general unsecured obligations of Renco Metals, but are unconditionally
and fully guaranteed, jointly and severally, by the Guarantors. Secured
indebtedness of Renco Metals and the Guarantors, including borrowings under the
Revolving Credit Facilities described below, is senior in right of payments to
the Notes with respect to the assets securing such indebtedness. Interest on the
Notes is payable semiannually on January 15 and July 15 of each year, at the
rate of 12 percent per annum. The notes are redeemable, in whole or in part, at
the option of Renco Metals, on or after July 15, 1998, at the following
redemption prices (expressed as percentages of the principal amount), together
with accrued interest to the redemption date, if redeemed during the 12-month
period beginning on July 15 of the years indicated below:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
<S> <C>
1998.............................................. 104%
1999 and thereafter............................... 100%
</TABLE>
In addition, prior to July 15, 1998, upon a change in control of Renco
Metals, as defined in the indenture governing the Notes, the Notes are
redeemable, in whole but not in part, at the option of Renco Metals, at the
principal amount thereof plus accrued interest plus an applicable premium. Upon
the occurrence of a change in control, Renco Metals is obligated to make offers
to purchase all outstanding Notes at a purchase price in cash equal to 101
percent of the principal amount plus accrued interest.
The indenture governing the Notes contains certain covenants that, among
others, limit the type and amount of additional indebtedness that may be
incurred by Renco Metals and impose limitations on investments, loans, advances,
the payment of dividends and the making of certain other payments, the creation
of liens, certain transactions with affiliates, and certain mergers. At October
31, 1995, Renco Metals was in compliance with all applicable covenants.
F-11
<PAGE> 65
RENCO METALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
(5) LONG-TERM DEBT -- (CONTINUED)
(b) Revolving Credit Facilities
In connection with the Refinancing, Magcorp and Sabel have each entered
into revolving credit facility agreements. The agreements provide for advances
by the lender based on specified percentages of eligible accounts receivable,
supplies inventories, and finished goods inventory to a maximum of $20,000 for
Magcorp and $3,000 for Sabel. Advances bear interest at the prime rate plus 1.75
percent, payable monthly, and are secured primarily by all receivables and
inventories of the borrower. In addition, the lender may extend up to $3,000 and
$1,500 of letter of credit accommodations to Magcorp and Sabel, respectively,
within the limits set forth above. Outstanding letters of credit under the
agreements at October 31, 1995 total $1,600 for Magcorp and $300 for Sabel.
Based on these criteria as of October 31, 1995, the unused amounts available to
Magcorp and Sabel were approximately $18,400 and $478, respectively. The
revolving credit facilities will continue until August 1998 and from year to
year thereafter, provided that either Magcorp or Sabel, as the case may be, or
the lender may terminate either of the facilities as of August 31, 1998, or any
subsequent anniversary date on 60 days advance written notice.
The revolving credit facilities contain various covenants and restrictions
including financial covenants that specify Magcorp and Sabel maintain specified
ratios or minimum financial amounts with regard to net worth and working
capital, as well as restrictions regarding additional indebtedness, liens,
loans, dividends, and transactions with affiliates. At October 31, 1995, Magcorp
and Sabel were in compliance with all applicable covenants.
(6) PREFERRED STOCK
The Company has authorized 8,500 shares of preferred stock, which were
issued August 4, 1993 in connection with the Refinancing in exchange for debt
previously owed to Group by Magcorp. Holders of preferred stock are entitled to
receive cumulative, preferential quarterly cash dividends at a rate of ten
percent per annum, if and when declared by the Board of Directors. The shares
have no voting rights on any matter, except as specifically required by law.
The preferred shares are redeemable by Renco Metals at its option, subject
to compliance with long-term debt covenants, at any time after January 1, 1994
at the par value thereof plus any accrued and unpaid dividends. Preferred shares
have preference in liquidation or dissolution of Renco Metals over common shares
to the extent of the par value of the preferred shares plus any accrued and
unpaid dividends thereon.
F-12
<PAGE> 66
RENCO METALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
(7) INCOME TAXES
Components of income tax expense (benefit) follow, allocated to income from
continuing operations:
<TABLE>
<CAPTION>
CURRENT DEFERRED TOTAL
<S> <C> <C> <C>
1993:
Federal.............................................. $ 1,560 $ 825 $ 2,385
State................................................ 77 41 118
------- ------ -------
$ 1,637 $ 866 $ 2,503
======= ====== =======
1994:
Federal.............................................. $(1,578) $ (392) $(1,970)
State................................................ 76 (38) 38
------- ------ -------
$(1,502) $ (430) $(1,932)
======= ====== =======
1995:
Federal.............................................. $ 8,988 $ 530 $ 9,518
State................................................ 290 1,335 1,625
------- ------ -------
$ 9,278 $1,865 $11,143
======= ====== =======
</TABLE>
The statutory federal income tax rate is reconciled to the effective income
tax rate as follows:
<TABLE>
<CAPTION>
1993 1994 1995
<S> <C> <C> <C>
Computed "expected" tax expense (benefit).............. $2,250 $(1,893) $10,892
State and local tax, net of federal benefit............ 48 64 1,400
Depletion.............................................. -- (792) (1,505)
Change in deferred tax asset valuation allowance....... -- 543 350
Other.................................................. 205 146 6
------ ------- -------
Income tax provision (benefit)............... $2,503 $(1,932) $11,143
====== ======= =======
</TABLE>
For the year ended October 31, 1993 deferred income tax expense of $866
resulted from timing differences in the recognition of income and expense for
income tax and financial reporting purposes in accordance with APB Opinion 11
which was in effect for that year. The sources and tax effects of those timing
difference are presented below:
<TABLE>
<CAPTION>
1993
<S> <C>
Depreciation.......................................................... $281
Inventories -- uniform capitalization................................. (46)
Success fee to former term lender..................................... 622
Other, net............................................................ 9
----
Deferred income tax expense................................. $866
====
</TABLE>
F-13
<PAGE> 67
RENCO METALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
(7) INCOME TAXES -- (CONTINUED)
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at October 31,
1994 and 1995, presented in accordance with Statement 109, follow:
<TABLE>
<CAPTION>
1994 1995
<S> <C> <C>
Deferred tax assets:
Bad debt reserves.............................................. $ 186 $ 194
Inventories-uniform capitalization............................. 280 239
Vacation accruals.............................................. 86 80
Payable to Group............................................... 122 122
Deferred compensation.......................................... 51 511
Miscellaneous accruals......................................... 42 95
Net operating loss carryforwards............................... 4,209 2,685
Alternative minimum tax credit carryforward.................... 340 --
Postretirement medical benefit................................. 966 993
Environmental reserve.......................................... 459 459
------- -------
Total gross deferred tax assets........................ 6,741 5,378
Less valuation allowance............................... 543 893
------- -------
Net deferred tax assets................................ 6,198 4,485
------- -------
Deferred tax liabilities:
Inventory basis difference..................................... (962) (827)
Accumulated depreciation....................................... (5,236) (5,523)
------- -------
Total gross deferred tax liabilities................... (6,198) (6,350)
------- -------
Net deferred tax liability............................. $ -- $(1,865)
======= =======
Deferred income taxes -- current................................. $ (321) $ (219)
Deferred income taxes -- noncurrent.............................. 321 (1,646)
------- -------
Net deferred tax liability............................. $ -- $(1,865)
======= =======
</TABLE>
The valuation allowance for deferred tax assets as of November 1, 1993 was
$-0-. The net change in the total valuation allowance for the years ended
October 31, 1994 and 1995 was an increase of $543 and $350, respectively.
Management believes that existing taxable temporary differences, net of the
established valuation allowance, will more likely than not reverse within the
applicable carryforward periods to allow future realization of existing deferred
tax assets.
(8) RELATED PARTY TRANSACTIONS
Magcorp has $318 payable to Group at October 31, 1994 and 1995, that is
noninterest bearing. The payable is included in other liabilities in the
accompanying consolidated balance sheet and is subordinated to the liabilities
described in note 5.
Effective August 1993, Renco Metals has a management agreement with Group
to receive management services through October 31, 2000. In exchange for such
services, the Company is committed to pay $1,200 per year or ten percent of a
defined earnings amount, whichever is greater. Payment of the fees for
consulting services is subject to compliance with covenants with its lending
institutions. For the years ended October 31,
F-14
<PAGE> 68
RENCO METALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
(8) RELATED PARTY TRANSACTIONS -- (CONTINUED)
1993, 1994, and 1995, Renco Metals expensed $300, $1,200, and $1,200,
respectively, for such management services provided by Group. Prior to the
Refinancing in 1993, Magcorp and Sabel expensed $888 and $60, respectively,
under similar management agreements.
During 1993, Renco Metals paid to Group a dividend in the amount of $5,658
and paid a distribution equal to the net book value of Sabel at the date of the
Refinancing.
To obtain the advantages of volume, Group purchases certain categories of
property and casualty insurance for a number of its subsidiaries, including the
Company, and the actual cost of such insurance, without markup, is reimbursed by
the covered subsidiaries. For the years ended October 31, 1993, 1994, and 1995,
the Company incurred costs of approximately $2,000, $2,000, and $1,700,
respectively, under the Group insurance program. The Company believes that its
insurance costs under this program were less than it would have incurred if it
had obtained its insurance directly.
(9) TRANSACTIONS WITH THE PREVIOUS OWNER OF MAGCORP
At the time of its acquisition by Group, August 31, 1989, Magcorp entered
into a technical service agreement (retainer) with the previous owner. The
retainer was in effect through the date of the Refinancing, when a settlement
and release agreement was entered into whereby the seller agreed to cancel all
obligations owed by Magcorp under the retainer and a subordinated note payable
in exchange for a discounted cash settlement. The resultant gain on
extinguishment of debt is reflected as an extraordinary item in the accompanying
1993 consolidated statement of operations.
(10) EMPLOYEE BENEFIT PLANS
(a) PENSION AND PROFIT SHARING PLANS
Magcorp
Magcorp has a defined benefit plan for hourly employees, a defined
contribution plan for salaried employees, and thrift plans for all employees.
All of Magcorp's plans have fiscal year-ends of December 31.
Pension benefits for Magcorp's defined benefit plan are generally based on
a flat dollar amount times years of credited service, including years of
employment with the previous owner. Magcorp's funding policy is to contribute
amounts sufficient to satisfy regulatory funding standards, based upon
independent actuarial
F-15
<PAGE> 69
RENCO METALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
(10) EMPLOYEE BENEFIT PLANS -- (CONTINUED)
valuations. Net pension cost for the defined benefit plan for the years ended
October 31, 1993, 1994, and 1995, includes the following components:
<TABLE>
<CAPTION>
1993 1994 1995
<S> <C> <C> <C>
Service cost -- benefits earned during the year............. $ 168 $184 $ 143
Interest cost on projected benefit obligations.............. 201 235 232
Return on assets............................................ (347) (64) (381)
Net amortization and deferral............................... 236 (99) 182
----- ---- -----
Net pension cost.................................. $ 258 $256 $ 176
===== ==== =====
</TABLE>
The plan's funded status at each October 31, was as follows:
<TABLE>
<CAPTION>
1993 1994 1995
<S> <C> <C> <C>
Actuarial present value of benefit obligations:
Vested benefits...................................... $ 2,909 $2,449 $ 3,562
Nonvested benefits................................... 472 387 471
------- ------- -------
Accumulated benefit obligations.............. $ 3,381 $2,836 $ 4,033
======= ======= =======
Plan's assets at fair value, principally listed
securities........................................... $ 2,501 $2,720 $ 3,169
Actuarial present value of projected benefit
obligations.......................................... (3,381) (2,836) (4,033)
------- ------- -------
Projected benefit obligations in excess of
plan assets................................ (880) (116) (864)
Unrecognized prior service cost........................ 426 397 536
Unrecognized net loss (gain) from past experience and
effects of changes in assumptions.................... 468 (329) 213
------- ------- -------
Net prepaid (accrued) pension cost prior to
adjustment for minimum liability........... 14 (48) (115)
Adjustment for additional minimum liability............ (894) (68) (749)
------- ------- -------
Net accrued minimum liability..................... $ (880) $ (116) $ (864)
======= ======= =======
</TABLE>
Assumptions used above for Magcorp's defined benefit plan as of October 31,
1993, 1994, and 1995 include:
<TABLE>
<CAPTION>
1993 1994 1995
<S> <C> <C> <C>
Discount rates for determining estimated obligations
and interest cost.................................... 7.00% 8.25% 7.25%
Expected aggregate average long-term change in
compensation......................................... n/a n/a n/a
Expected long-term return on assets.................... 7.75% 8.25% 8.25%
</TABLE>
Contributions for Magcorp's defined contribution plan are based upon age,
years of service, and gross compensation for each salaried employee, and totaled
approximately $501, $585, and $612, for the years ended October 31, 1993, 1994,
and 1995, respectively.
Magcorp has a salaried thrift plan and an hourly thrift plan that qualify
under the Internal Revenue Code Section 401(k). The plans are available to
substantially all employees. Magcorp may make discretionary matching
contributions of 50 percent of each hourly employee's contribution, and 75
percent of each salaried employee's contribution up to the first six percent of
each employee's compensation. Matching contributions for 1993 and 1995 were $323
and $310, respectively. There were no matching contributions during fiscal year
1994.
F-16
<PAGE> 70
RENCO METALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
(10) EMPLOYEE BENEFIT PLANS -- (CONTINUED)
Sabel
Under an agreement with the United Steelworkers' Union, which covers
certain production employees, Sabel contributes to a pension plan based on a set
amount per hour worked for covered employees. The contributions to the plan were
$61, $59, and $78 for 1993, 1994, and 1995, respectively.
Sabel has a noncontributory profit sharing plan for management and
administrative employees. The amount of the annual contribution, if any, is at
the discretion of Sabel and is not to exceed 15 percent of the compensation of
the eligible employees. The contributions for 1994 and 1995 were $98 and $191,
respectively. Sabel did not make a profit sharing plan contribution for 1993.
(b) Postretirement Medical Benefit Plan
Magcorp sponsors a self-insured, fee-for-service health care plan that
provides postretirement medical benefits to salaried retirees who retire from
active employment status on or after age 55 with ten or more years of service.
Qualified retirees will receive lifetime benefits for themselves and their
spouses. Employees who retire on or after age 55 with less than ten years but at
least five years or more of service, will receive benefits paid by Magcorp only
after age 65.
The following table presents the plan's funded status reconciled with
amounts recognized in the Company's consolidated balance sheets at October 31,
1994 and 1995:
<TABLE>
<CAPTION>
1994 1995
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees............................................... $ 425 $ 425
Fully eligible active plan participants................ 711 900
Other active plan participants......................... 1,263 1,636
------ ------
2,399 2,961
Plan assets at fair value................................ -- --
------ ------
Accumulated postretirement benefit obligation in
excess of plan assets............................. 2,399 2,961
Unrecognized net gain.................................... 4,009 3,516
------ ------
Accrued postretirement benefit obligation........... $6,408 $6,477
====== ======
</TABLE>
The unrecognized net gain is being amortized over a period of approximately
fifteen years, which represents the average future working lifetime of the plan
participants. The amortization of the gain is offset against actual service cost
and interest cost over the period of amortization.
Net period postretirement benefit cost for 1993, 1994, and 1995 includes
the following components:
<TABLE>
<CAPTION>
1993 1994 1995
<S> <C> <C> <C>
Service cost....................................... $ 189 $ 232 $ 137
Interest cost...................................... 246 264 196
Amortization of gain............................... (153) (124) (243)
----- ----- -----
Net periodic postretirement benefit cost...... $ 282 $ 372 $ 90
===== ===== =====
</TABLE>
For measurement purposes, an 7.8 percent annual rate of increase in the per
capita cost of covered benefits (i.e., health care cost trend rate) was assumed
for 1995; the rate was assumed to decrease gradually to
F-17
<PAGE> 71
RENCO METALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
(10) EMPLOYEE BENEFIT PLANS -- (CONTINUED)
5.5 percent by the year 2017 and remain at that level thereafter. The health
care cost trend rate assumption has a significant effect on the amounts
reported. For example, increasing the assumed health care cost trend rates by
one percentage point in each year would increase the accumulated postretirement
benefit obligation as of October 31, 1995 by $271 and the aggregate of the
service and interest cost components of net periodic postretirement benefit cost
for the year ended October 31, 1995 by $33.
The weighted-average discount rate used in determining the accumulated
postretirement benefit obligation was 7.25 percent at October 31, 1995.
(11) LEASES
The Company has several noncancelable operating leases, primarily for
office and warehouse space, and machinery and equipment. These leases generally
contain renewal options. Future minimum lease payments under noncancelable
operating leases (with initial or remaining lease terms in excess of one year)
as of October 31, 1995 are listed below:
<TABLE>
<S> <C>
Year ending October 31:
1996.............................................. $2,124
1997.............................................. 1,644
1998.............................................. 1,106
1999.............................................. 915
2000.............................................. 433
Thereafter........................................ 322
------
Total minimum lease payments................... $6,544
======
</TABLE>
Rent expense aggregated, $3,083, $3,126, and $2,867 for 1993, 1994, and
1995, respectively. Included in rental expense was contingent rental expense of
approximately $148, $106, and $122 for 1993, 1994, and 1995, respectively.
Additionally, included in rental expense are leases of certain office and
warehouse space from entities in which the president of Sabel holds an indirect
material interest. Rent expense for such leases aggregated approximately $300,
$342, and $339 for 1993, 1994, and 1995, respectively.
(12) COMMITMENTS AND CONTINGENCIES
(a) Litigation
The Company and its subsidiaries are involved in litigation arising in the
normal course of business. It is not possible to state the ultimate liability,
if any, in these matters. In the opinion of management, based upon the advice of
outside counsel, such litigation will not have any material effect on the
Company.
(b) Other Agreements
Magcorp assumed from its previous owner certain agreements with unrelated
corporations (Nominal Lessor) under which tax benefits were transferred to the
unrelated corporations as allowed under a provision of the Economic Recovery Tax
Act of 1981. Included in the terms of the agreements are various covenants,
including a promise not to dispose of the property covered by the agreements,
and also indemnification of the Nominal Lessor against any losses which might
result from a breach of Magcorp's warranties and covenants. The seller also
holds a $1,000 irrevocable letter of credit as collateral for performance by
Magcorp on the Nominal Lessor agreements.
F-18
<PAGE> 72
RENCO METALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
(12) COMMITMENTS AND CONTINGENCIES -- (CONTINUED
Magcorp and Sabel both have net worth appreciation participation agreements
with certain executives wherein these individuals are entitled to receive a
specified percentage of cumulative net income, less any common stock dividends,
of their respective companies commencing at specified dates in the agreements,
through the date of the individual's termination based on a specified vesting
schedule. Payment will be made in 40 equal quarterly installments, without
interest, commencing three months after termination of employment. If while
employed by Magcorp or Sabel, the respective company pays any cash dividend on
its common stock, the respective company will make a cash payment to the
applicable executives equal to the total amount of the cash dividend multiplied
by their applicable fully-vested participation percentage. Amounts are accrued
as earned.
(c) Environmental Matters
The Company and its operations are subject to an increasing number of
federal, state, and local environmental laws and regulations governing, among
other things, air emissions, waste water discharge, and solid and hazardous
waste disposal. It is expected that Magcorp will be required to make substantial
reductions in chlorine and hydrogen chloride emissions to meet regulations
expected to be promulgated by the year 2000. Magcorp is exploring several
options at this time to reduce such emissions, including the development of new
electrolytic cell technology to reduce chlorine emissions and the use of
scrubbers for hydrogen chloride emissions. Depending on the final form of the
standard and the outcome of the cell technology development programs, Magcorp
plans to spend approximately $40,000 of its capital budget by the year 2000
directly or indirectly to meet environmental regulatory requirements, and for
estimates of other future requirements. Magcorp believes that these expenditures
required to comply with environmental standards are substantial and to that
degree will affect its earnings.
In August 1994, the Utah Solid and Hazardous Waste Control Board presented
a proposed Stipulation and Consent Order to Magcorp for resolution of a Notice
of Violation and Compliance Order (the "NOVCO") issued in August 1992 concerning
certain alleged violations of the Utah Solid and Hazardous Waste Act and the
Utah Administrative Code. Magcorp has contested the NOVCO and has requested a
hearing on the alleged violations. Among the issues to be resolved is whether
the wastes being sent to the Rowley facility's industrial wastewater pond are
subject to regulation by the State of Utah, and if so, whether a waste
management plan, groundwater management plan and closure plan for the pond must
be developed and implemented. In addition, an issue exists as to whether piles
of material (so-called "smut") generated in the electrolytic process, which
cover an extensive land area at the Rowley facility, can be classified as a
hazardous or solid waste, and if so, what measures might be required to
investigate and address these piles. If these wastes are ultimately deemed
subject to State regulation and corrective action is required, the costs of
compliance could be material.
F-19
<PAGE> 73
RENCO METALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
(13) ACCRUED EXPENSES
Accrued expenses consist of:
<TABLE>
<CAPTION>
1994 1995
<S> <C> <C>
Salaries, bonuses, vacation, and other related accruals........... $1,309 $ 5,494
Utilities......................................................... 1,685 3,069
Interest.......................................................... 2,638 2,638
Taxes, other than income.......................................... 673 481
Other............................................................. 2,392 2,645
------ -------
$8,697 $14,327
====== =======
</TABLE>
(14) SEGMENT INFORMATION
The Company classifies its operations into two business segments: magnesium
production and steel fabrication and wholesaling. There are no intersegment
sales. Summarized financial information by business segment is as follows:
<TABLE>
<CAPTION>
1993 1994 1995
<S> <C> <C> <C>
Net sales:
Magnesium........................................ $ 97,099 $ 90,745 $136,348
Steel............................................ 34,040 42,205 49,458
-------- -------- --------
$131,139 $132,950 $185,806
======== ======== ========
Income from operations:
Magnesium........................................ $ 13,002 $ 2,723 $ 37,993
Steel............................................ 975 1,979 2,467
Corporate........................................ -- (72) (83)
-------- -------- --------
$ 13,977 $ 4,630 $ 40,377
======== ======== ========
Identifiable assets:
Magnesium........................................ $ 71,275 $ 67,904 $ 94,849
Steel............................................ 13,552 15,535 15,913
Corporate........................................ 5,688 5,599 5,789
-------- -------- --------
$ 90,515 $ 89,038 $116,551
======== ======== ========
Capital expenditures:
Magnesium........................................ $ 2,300 $ 2,574 $ 6,051
Steel............................................ 295 653 1,134
-------- -------- --------
$ 2,595 $ 3,227 $ 7,185
======== ======== ========
Depreciation, depletion, and amortization:
Magnesium........................................ $ 6,814 $ 5,263 $ 5,397
Steel............................................ 321 341 373
-------- -------- --------
$ 7,135 $ 5,604 $ 5,770
======== ======== ========
</TABLE>
F-20
<PAGE> 74
RENCO METALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
(15) SIGNIFICANT CUSTOMERS AND EXPORT SALES
During fiscal 1994 and 1995, sales to any single customer did not exceed
ten percent of total consolidated revenues. During 1993, sales to Alumax, a
division of AMAX, approximated ten percent of total revenues. Sales to Alumax in
1994 and 1995, were less than ten percent of total consolidated revenues, but
Alumax continues to be a significant account for Magcorp. The following table
summarizes export sales to various geographic areas:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
-----------------------------
1993 1994 1995
<S> <C> <C> <C>
Net export sales:
Europe................................................ $4,909 $5,804 $ 8,357
Japan................................................. 3,300 2,826 5,988
Canada................................................ 463 545 1,050
Other................................................. 235 104 798
------ ------ -------
$8,907 $9,279 $16,193
====== ====== =======
</TABLE>
(16) SUBSEQUENT EVENT (PER SHARE FIGURES NOT IN THOUSANDS)
On December 1, 1995, the Board of Directors declared dividends totaling
$6,122, consisting of a $241.67 per share cumulative cash dividend on each share
of preferred stock, and a $4,067.33 per share cash dividend on each share of
common stock, which is payable to Group December 8, 1995 on all outstanding
shares.
F-21
<PAGE> 75
------------------------------------------------------
------------------------------------------------------
NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY 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, THE GUARANTORS OR BY THE
UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY SECURITY OTHER THAN THE SENIOR NOTES OFFERED
HEREBY, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY ANY OF THE SECURITIES OFFERED HEREBY TO ANY PERSON IN ANY JURISDICTION IN
WHICH IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION TO SUCH PERSON.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER
ANY CIRCUMSTANCE CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED IS
CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 8
Use of Proceeds....................... 11
Capitalization........................ 12
Selected Consolidated Financial
Data................................ 13
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 14
Business.............................. 18
Management............................ 29
Stock Ownership and Certain
Relationships and Transactions...... 32
Description of Senior Notes........... 33
Description of Revolving Credit
Facilities.......................... 48
Underwriting.......................... 50
Legal Matters......................... 50
Experts............................... 50
Available Information................. 51
Index to Consolidated Financial
Statements.......................... F-1
</TABLE>
UNTIL , 1996 (FORTY DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE SENIOR NOTES, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN
ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
$150,000,000
RENCO METALS, INC.
% SENIOR NOTES DUE 2003
-----------------------
PROSPECTUS
-----------------------
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
, 1996
------------------------------------------------------
------------------------------------------------------
<PAGE> 76
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated expenses in connection with
the issuance and distribution of the Senior Notes, other than underwriting
discounts and commissions:
<TABLE>
<S> <C>
SEC Registration Fee............................................. $ 51,724
NASD Fee......................................................... 15,500
Blue Sky Fees and Expenses....................................... 25,000
Printing and Engraving Fees...................................... 100,000
Legal Fees and Expenses.......................................... 700,000
Accounting Fees and Expenses..................................... 36,000
Trustee Fees and Expenses........................................ 10,000
Rating Agency Fees............................................... 60,000
Miscellaneous.................................................... 300,000
=======
Total.................................................. $1,298,224
=======
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under the Underwriting Agreement filed as an exhibit to this Registration
Statement, the Underwriter is obligated under certain circumstances to indemnify
certain controlling persons of the Company against certain liabilities,
including liabilities under the Securities Act of 1933.
The Company's By-laws and Certificate of Incorporation provide for
indemnification of directors and officers of the Company to the full extent
permitted by Delaware law and the power to purchase and maintain insurance on
behalf of directors and officers against any liability asserted against them and
incurred by them in such capacities. The Certificate of Incorporation further
provides that no director of the Company shall be personally liable to the
Company or to its stockholders for monetary damages for any breach of such
director's fiduciary duty as a director of the Company, provided that such
limitation on a director's liability shall not eliminate or limit the liability
of a director (i) for any breach of the director's duty of loyalty to the
Company or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the Delaware General Corporation Law, or (iv) for any transaction
from which the director derived an improper personal benefit.
Section 145 of the Delaware General Corporation Law provides, in substance,
that Delaware corporations shall have the power, under specified circumstances,
to indemnify their directors, officers, employees and agents in connection with
actions, suits or proceedings brought against them by a third party or in the
right of the corporation, by reason of the fact that they are or were such
directors, officers, employees or agents, against expenses incurred in any such
action, suit or proceeding.
The Indenture provides that no director, officer, employee, stockholder or
beneficiary of the Company is liable for any obligations of the Company under
the Indenture.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
On August 4, 1993, the Company issued and sold $75,000,000 aggregate
principal amount of 12% Senior Notes due 2000. The placement agent was Citicorp
Securities, Inc. The aggregate offering price was $75,000,000 and the placement
agent's fee was $4,500,000. The 12% Senior Notes were sold to various qualified
institutional buyers in a transaction satisfying the requirements of Rule 144A
of the Securities Act of 1933, as amended.
II-1
<PAGE> 77
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER IDENTIFICATION OF EXHIBITS
<S> <C> <C>
1.1 -- Form of Underwriting Agreement
3.1 -- Certificate of Incorporation of Renco Metals, Inc.(1)
3.2 -- Certificate of Incorporation of Magnesium Corporation of America(1)
3.3 -- Certificate of Incorporation of Sabel Industries, Inc.(1)
3.4 -- By-laws of Renco Metals, Inc.(1)
3.5 -- By-laws of Magnesium Corporation of America(1)
3.6 -- By-laws of Sabel Industries, Inc.(1)
4.1 -- Form of Indenture
4.2 -- Specimen Note (included in Exhibit 4.1)
4.3 -- Form of Guarantee (included in Exhibit 4.1)
4.4 -- Indenture dated as of August 1, 1993 among Renco Metals, Inc., Issuer, Magnesium
Corporation of America and Sabel Industries, Inc., Guarantors, and Shawmut Bank
Connecticut National Association (a/k/a Fleet National Bank), Trustee, relating to
12% Senior Notes Due 2000 (with form of Note annexed)(1)
5.1 -- Opinion of Cadwalader, Wickersham & Taft
10.1 -- Employment Agreements between Magnesium Corporation of America and:
a) Michael H. Legge, dated September 24, 1992 effective January 1, 1993(1)
b) Ron L. Thayer effective June 1, 1994(2)
c) Howard I. Kaplan dated June 10, 1994(2)
d) Lee R. Brown, dated September 1, 1989(1)
e) Todd R. Ogaard, dated December 1, 1994(2)
10.2 -- Net Worth Appreciation Agreements between Magnesium Corporation of America and:
a) Michael H. Legge, dated September 24, 1992(1)
b) Ron L. Thayer, dated September 24, 1992(1)
c) Lee R. Brown, dated July 30, 1993(1)
d) Howard I. Kaplan, dated June 10, 1994(2)
e) Todd R. Ogaard, dated May 19, 1995(3)
10.3 -- Form of amendments to Net Worth Appreciation Agreements between Magnesium
Corporation of America and:
a) Michael H. Legge
b) Ron L. Thayer
c) Lee R. Brown
d) Todd R. Ogaard
e) Howard I. Kaplan
10.4 -- Management Consultant Agreement dated August 4, 1993 between The Renco Group, Inc.
and Renco Metals, Inc.(1)
10.5 -- Amendment No. 1 to Management Consultant Agreement dated May 17, 1996 between The
Renco Group, Inc. and Renco Metals, Inc.(4)
10.6 -- Amended and Restated Loan and Security Agreement between Congress Financial
Corporation and Magnesium Corporation of America dated August 4, 1993(1)
</TABLE>
II-2
<PAGE> 78
<TABLE>
<CAPTION>
EXHIBIT
NUMBER IDENTIFICATION OF EXHIBITS
<S> <C> <C>
10.7 -- Amendment No. 1 dated January 31, 1996 to Amended and Restated Loan and Security
Agreement dated as of August 4, 1993, between Congress Financial Corporation and
Magnesium Corporation of America, extending the term thereof to August 4, 1998(5)
10.8 -- Form of Amendment No. 2 to Amended and Restated Loan and Security Agreement dated
as of August 4, 1993, between Congress Financial Corporation and Magnesium
Corporation of America
10.9 -- Loan and Security Agreement between Congress Financial Corporation and Sabel
Industries, Inc. dated August 4, 1993(1)
10.10 -- Amendment No. 1 dated January 31, 1996 to Loan and Security Agreement dated as of
August 4, 1993, between Congress Financial Corporation and Sabel Industries, Inc.,
extending the term thereof to August 4, 1998(5)
10.11 -- Form of Amendment No. 2 to Loan and Security Agreement dated as of August 4, 1993,
between Congress Financial Corporation and Sabel Industries, Inc.
10.12 -- Agreement dated July 31, 1969 between the State of Utah, acting by and through the
State Land Board, and National Lead Company, as amended by Addendum dated March 7,
1970, Second Addendum dated March 7, 1972 and Assignment to Amax Magnesium
Corporation dated October 31, 1980 (ML 18779)(1)
10.13 -- Special Use Lease Agreement 711 dated July 14, 1987 between the State of Utah,
Division of State Lands and Forestry and Amax Magnesium Corporation(1)
10.14 -- Amended Rights of Way No. U-54897, dated June 21, 1993 issued by the United States
Department of the Interior Bureau of Land Management, Salt Lake District Office to
Magnesium Corporation of America(1)
10.15 -- Lease dated May 13, 1991 between Sabel Industries, Inc. as tenant and Janis Sabel,
the Estate of Mark Sabel, Marcelle Sabel Moers a/k/a Marcel Sabel Moers, Dorothy
Anne Bell and Lee Altheimer as successors to the Estate of Dorothy Altheimer with
respect to premises known as Theodore Highway 90, County of Mobile, Alabama(1)
10.16 -- Lease dated July 1, 1977 between Dewey Emfinger and his wife, Bea Emfinger, to
Sabel Steel Service Incorporated with respect to premises known at 599 Ross Clark
Circle, Dothan, Alabama and the sublease thereof to Sabel Industries, Inc. then
known as Ren Alabama Inc. dated July 30, 1987(1)
10.17 -- Lease dated July 30, 1987 between Mark Sabel, Janis Sabel, Marcel Moers and Dorothy
Altheimer, owner of an undivided 50% interest and Ted Cohen, owner of an undivided
50% interest, all as tenants in common, to Sabel Industries, Inc. (name
subsequently changed to JiMark Investment Company, Inc.) with respect to premises
known as 2811 Day Street, Montgomery, Alabama and the sublease thereof to Sabel
Industries, Inc., then known as Ren Alabama Inc., dated July 30, 1987. Note: Sabel
Industries, Inc. subsequently purchased the undivided 50% interest of Mr. Cohen(1)
10.18 -- Master Lease Indenture dated July 30, 1987 between Sabel Land Company, a tenancy in
common, comprised of Mark Sabel, Janis Sabel, Marcel Moers and Dorothy Altheimer
and Sabel Industries, Inc. then known as Ten Alabama Inc. covering premises known
as Railroad Street, West Lafayette Street, East Lafayette Street, 749 North Court
Street and 589 North Court Street, all in Montgomery, Alabama (other premises
covered by this original lease are no longer used by Sabel Industries, Inc.)(1)
10.19 -- Brine Supply Agreement dated August 3, 1993 between AZKO Salt Inc. and Magnesium
Corporation of America(1)
10.20 -- Net Worth Appreciation Agreements between Sabel Industries, Inc. and:
a) Keith Sabel, dated January 24, 1994(2)
b) Phillip Brown, dated January 24, 1994(2)
10.21 -- Waiver of "Additional Fees" through October 31, 1995 dated January 11, 1996 between
The Renco Group, Inc. and Renco Metals, Inc.(3)
</TABLE>
II-3
<PAGE> 79
<TABLE>
<CAPTION>
EXHIBIT
NUMBER IDENTIFICATION OF EXHIBITS
<S> <C> <C>
12.1 -- Computation of Ratios of Earnings to Fixed Charges(4)
21.1 -- Subsidiaries of Renco Metals, Inc.(1)
23.1 -- Consent of Cadwalader, Wickersham & Taft (included in Exhibit 5.1)
23.2 -- Consent of Independent Auditors(4)
25.1 -- Statement of Eligibility of Trustee on Form T-1
</TABLE>
- ---------------
(1) Previously filed and incorporated herein by reference from the Registrants'
Registration Statement on Form S-4 (file no. 33-68230) as declared effective
by the Securities and Exchange Commission on December 3, 1993.
(2) Previously filed and incorporated herein by reference from Renco Metals,
Inc.'s Form 10-K for the fiscal year ended October 31, 1994 (File No.
33-68230).
(3) Previously filed and incorporated herein by reference from Renco Metals,
Inc.'s Form 10-K for the fiscal year ended October 31, 1995 (File No.
33-68230).
(4) Previously filed.
(5) Previously filed and incorporated herein by reference from Renco Metals,
Inc.'s Form 10-Q for the quarterly period ended January 31, 1996 (File No.
33-68230).
(b) Financial Statement Schedules.
Schedule II -- Valuation of Qualifying Accounts(*)
* Previously filed.
ITEM 17. UNDERTAKINGS
A. Undertaking in Respect of Indemnification.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
B. Undertaking with Respect to Rule 430A.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-4
<PAGE> 80
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, each of the
undersigned Registrants has duly caused this Pre-Effective Amendment No. 2 to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of New York, State of New York on the
25th day of June 1996.
RENCO METALS, INC.
By: /s/ IRA LEON RENNERT
------------------------------------
IRA LEON RENNERT
Chairman of the Board
MAGNESIUM CORPORATION OF AMERICA
By: /s/ IRA LEON RENNERT
------------------------------------
IRA LEON RENNERT
Chairman of the Board
SABEL INDUSTRIES, INC.
By: /s/ IRA LEON RENNERT
------------------------------------
IRA LEON RENNERT
Chairman of the Board
Pursuant to the requirements of the Securities Act of 1933, this
Pre-Effective Amendment No. 2 to the Registration Statement has been signed by
the following persons in the capacities indicated on the 25th day of June 1996.
<TABLE>
<CAPTION>
SIGNATURE TITLE
<C> <S>
RENCO METALS, INC.
/s/ IRA LEON RENNERT Chairman, Director and Chief Executive
- ----------------------------------------------- Officer (Principal Executive Officer)
IRA LEON RENNERT
/s/ ROGER L. FAY Vice President (Principal Financial and
- ----------------------------------------------- Accounting Officer)
ROGER L. FAY
MAGNESIUM CORPORATION OF AMERICA
/s/ MICHAEL H. LEGGE President and Chief Executive Officer
- ----------------------------------------------- (Principal Executive Officer)
MICHAEL H. LEGGE
/s/ TODD R. OGAARD Chief Financial Officer (Principal Financial
- ----------------------------------------------- and Accounting Officer)
TODD R. OGAARD
/s/ IRA LEON RENNERT Chairman of the Board of Directors
- -----------------------------------------------
IRA LEON RENNERT
</TABLE>
II-5
<PAGE> 81
<TABLE>
<CAPTION>
SIGNATURE TITLE
<C> <S>
SABEL INDUSTRIES, INC.
/s/ KEITH SABEL Director, President and Chief Executive
- ----------------------------------------------- Officer (Principal Executive Officer)
KEITH SABEL
/s/ PHILLIP BROWN Vice President--Finance (Principal Financial
- ----------------------------------------------- and Accounting Officer)
PHILLIP BROWN
/s/ IRA LEON RENNERT Director
- -----------------------------------------------
IRA LEON RENNERT
/s/ JUSTIN W. D'ATRI Director
- -----------------------------------------------
JUSTIN W. D'ATRI
</TABLE>
II-6
<PAGE> 82
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER IDENTIFICATION OF EXHIBITS
- ------ -------------------------------------------------------------------------------------
<C> <S>
1.1 -- Form of Underwriting Agreement
4.1 -- Form of Indenture
4.2 -- Specimen Note (included in Exhibit 4.1)
4.3 -- Form of Guarantee (included in Exhibit 4.1)
5.1 -- Opinion of Cadwalader, Wickersham & Taft
10.3 -- Form of Amendments to Net Worth Appreciation Agreements between Magnesium
Corporation of America and:
a) Michael H. Legge
b) Ron L. Thayer
c) Lee R. Brown
d) Todd R. Ogaard
e) Howard I. Kaplan
10.8 -- Form of Amendment No. 2 to Amended and Restated Loan and Security Agreement dated
as of August 4, 1993 between Congress Financial Corporation and Magnesium Corporation
of America
10.11 -- Form of Amendment No. 2 to Amended and Restated Loan and Security Agreement dated
as of August 4, 1993 between Congress Financial Corporation and Sabel Industries,
Inc.
23.1 -- Consent of Cadwalader, Wickersham & Taft (included in Exhibit 5.1)
25.1 -- Statement of Eligibility of Trustee on Form T-1
</TABLE>
<PAGE> 1
$150,000,000
RENCO METALS, INC.
____% Senior Notes due 2003
UNDERWRITING AGREEMENT
__________, 1996
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
277 Park Avenue
New York, New York 10172
Ladies and Gentlemen:
Renco Metals, Inc., a Delaware corporation (the "Company"),
proposes to issue and sell $150,000,000 aggregate principal amount of its ____%
Senior Notes due 2003 (the "Notes") to Donaldson, Lufkin & Jenrette Securities
Corporation (the "Underwriter"). The obligations of the Company under the
Indenture (as defined below) and the Notes will be unconditionally guaranteed
(the "Guarantees"), jointly and severally, on a senior unsecured basis, by the
Company's subsidiaries, Magnesium Corporation of America, a Delaware corporation
("MagCorp"), and Sabel Industries, Inc., an Alabama corporation ("Sabel"). The
Notes and the Guarantees are to be issued pursuant to the provisions of an
Indenture to be dated as of __________ __, 1996 (the "Indenture") by and among
the Company, MagCorp, Sabel and Fleet National Bank, as trustee (the "Trustee").
MagCorp and Sabel are hereinafter referred to individually as a "Subsidiary
Guarantor" and collectively as the "Subsidiary Guarantors." The Company and the
Subsidiary Guarantors are hereinafter referred to collectively as the "Issuers."
The Notes and the Guarantees are hereinafter referred to collectively as the
"Securities."
On May 24, 1996, an offer (the "Offer") was commenced by the
Company to purchase for cash up to all (but not less than a majority in
principal amount outstanding) of the Company's outstanding 12% Senior Notes due
2000 (the "Existing Notes") and a related solicitation (the "Consent
Solicitation") of consents to modify certain terms of the indenture governing
the Existing Notes (the "Existing Notes Indenture"). Upon receipt of the
Requisite
<PAGE> 2
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Consents (as such term is defined in the Offer to Purchase and Consent
Solicitation Statement, dated May 24, 1996 (the "Statement")), the Company, the
Subsidiary Guarantors and Fleet National Bank, as trustee, will execute a
supplemental indenture (the "Supplemental Indenture"), giving effect to the
proposed amendments to the Existing Notes Indenture. Fleet National Bank acted
as depositary (the "Depositary") in connection with the Offer and the Consent
Solicitation.
1. Registration Statement and Prospectus. The Issuers have
prepared and filed with the Securities and Exchange Commission (the
"Commission") in accordance with the provisions of the Securities Act of 1933,
as amended, and the rules and regulations of the Commission thereunder
(collectively called the "Act"), a registration statement on Form S-1 including
a prospectus relating to the Securities, which may be amended. The registration
statement as amended at the time when it becomes effective, including a
registration statement (if any) filed pursuant to Rule 462(b) under the Act
increasing the size of the offering registered under the Act and information (if
any) deemed to be part of the registration statement at the time of
effectiveness pursuant to Rule 430A under the Act, is hereinafter referred to as
the "Registration Statement"; and the prospectus in the form first used to
confirm sales of Securities is hereinafter referred as the "Prospectus."
2. Agreements to Sell and Purchase. On the basis of the
representations and warranties contained in this Agreement, and subject to its
terms and conditions, the Company agrees to issue and sell, and the Underwriter
agrees to purchase from the Company, $150,000,000 aggregate principal amount of
the Notes, at 97% of the principal amount thereof (the "Purchase Price") plus
accrued interest thereon, if any, from __________ __, 1996 to the date of
payment and delivery.
3. Terms of Public Offering. The Issuers are advised by you
that you propose (i) to make a public offering of the Securities as soon after
the effective date of the Registration Statement as in your judgment is
advisable and (ii) initially to offer the Securities upon the terms set forth in
the Prospectus.
4. Delivery and Payment. Delivery to the Underwriter of and
payment for the Securities shall be made at 10:00 A.M., New York City time, on
the third or fourth business day unless otherwise permitted by the Commission
pursuant to Rule 15c6-1 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") (the "Closing Date"), following the date of the initial public
offering, at such place as you shall designate. The
<PAGE> 3
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Closing Date and the location of delivery of and the form of payment for the
Securities may be varied by agreement between you and the Company.
Certificates for the Securities shall be registered in such
names and issued in such denominations as you shall request in writing not later
than two full business days prior to the Closing Date. Such certificates shall
be made available to you for inspection not later than 9:30 A.M., New York City
time, on the business day next preceding the Closing Date. Certificates in
definitive form evidencing the Securities shall be delivered to you on the
Closing Date with any transfer taxes thereon duly paid by the Company, for the
account of the Underwriter, against payment of the Purchase Price therefor by
wire transfer in Federal funds to the Company.
5. Agreements of the Issuers. The Issuers, jointly and
severally, covenant and agree with you:
(a) To use their best efforts to cause the Registration
Statement to become effective at the earliest possible time.
(b) To advise you promptly and, if requested by you, to
confirm such advice in writing, (i) when the Registration Statement has
become effective and when any post-effective amendment to it becomes
effective, (ii) of any request by the Commission for amendments to the
Registration Statement or amendments or supplements to the Prospectus
or for additional information, (iii) of the issuance by the Commission
of any stop order suspending the effectiveness of the Registration
Statement or of the suspension of qualification of the Securities for
offering or sale in any jurisdiction, or the initiation of any
proceeding for such purposes, and (iv) of the happening of any event
during the period referred to in paragraph (e) below which makes any
statement of a material fact made in the Registration Statement or the
Prospectus untrue or which requires the making of any additions to or
changes in the Registration Statement or the Prospectus in order to
make the statements therein not misleading. If at any time the
Commission shall issue any stop order suspending the effectiveness of
the Registration Statement, the Issuers will make every reasonable
effort to obtain the withdrawal or lifting of such order at the
earliest possible time.
(c) To furnish to you, without charge, two signed copies of
the Registration Statement as first filed with the Commission and of
each amendment to it, including all exhibits, and to furnish to you
such number of conformed
<PAGE> 4
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copies of the Registration Statement as so filed and of each amendment
to it, without exhibits, as you may reasonably request.
(d) Not to file any amendment or supplement to the
Registration Statement, whether before or after the time when it
becomes effective, or to make any amendment or supplement to the
Prospectus of which you shall not previously have been advised or to
which you shall reasonably object; and to prepare and file with the
Commission, promptly upon your reasonable request, any amendment to the
Registration Statement or supplement to the Prospectus which may be
necessary or advisable in connection with the distribution of the
Securities by you, and to use its best efforts to cause the same to
become promptly effective.
(e) Promptly after the Registration Statement becomes
effective, and from time to time thereafter for such period as in the
opinion of counsel for the Underwriter a prospectus is required by law
to be delivered in connection with sales by the Underwriter or any
dealer, to furnish to the Underwriter and any dealer as many copies of
the Prospectus (and of any amendment or supplement to the Prospectus)
as the Underwriter or any dealer may reasonably request.
(f) If during the period specified in paragraph (e) any event
shall occur as a result of which, in the opinion of counsel for the
Underwriter it becomes necessary to amend or supplement the Prospectus
in order to make the statements therein, in the light of the
circumstances when the Prospectus is delivered to a purchaser, not
misleading, or if it is necessary to amend or supplement the Prospectus
to comply with any law, forthwith to prepare and file with the
Commission an appropriate amendment or supplement to the Prospectus so
that the statements in the Prospectus, as so amended or supplemented,
will not in the light of the circumstances when it is so delivered, be
misleading, or so that the Prospectus will comply with law, and to
furnish to the Underwriter and to such dealers as you shall specify,
such number of copies thereof as the Underwriter or any dealers may
reasonably request.
(g) Prior to any public offering of the Securities, to
cooperate with you and counsel for the Underwriter in connection with
the registration or qualification of the Securities for offer and sale
by the Underwriter and by dealers under the state securities or Blue
Sky laws of such jurisdictions as you may request, to continue such
<PAGE> 5
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qualification in effect so long as required for distribution of the
Securities and to file such consents to service of process or other
documents as may be necessary in order to effect such registration or
qualification.
(h) To mail and make generally available to its security
holders as soon as reasonably practicable an earnings statement
covering a period of at least twelve months after the effective date of
the Registration Statement (but in no event commencing later than 90
days after such date) which shall satisfy the provisions of Section
11(a) of the Act, and to advise you in writing when such statement has
been so made available.
(i) During the period of five years after the date of this
Agreement, (i) to mail as soon as reasonably practicable after the end
of each fiscal year to the record holders of its Securities a financial
report of the Company and its subsidiaries on a consolidated basis (and
a similar financial report of all unconsolidated subsidiaries, if any),
all such financial reports to include a consolidated balance sheet, a
consolidated statement of operations, a consolidated statement of cash
flows and a consolidated statement of shareholders' equity as of the
end of and for such fiscal year, together with comparable information
as of the end of and for the preceding year, certified by independent
certified public accountants, and (ii) to mail and make generally
available as soon as practicable after the end of each quarterly period
(except for the last quarterly period of each fiscal year) to such
holders, a consolidated balance sheet, a consolidated statement of
operations and a consolidated statement of cash flows (and similar
financial reports of all unconsolidated subsidiaries, if any) as of the
end of and for such period, and for the period from the beginning of
such year to the close of such quarterly period, together with
comparable information for the corresponding periods of the preceding
year.
(j) During the period referred to in paragraph (i), to furnish
to you as soon as available a copy of each report or other publicly
available information of the Company mailed to the security holders of
the Company or filed with the Commission and such other publicly
available information concerning the Company and its subsidiaries as
you may reasonably request.
(k) Notwithstanding the termination of this Agreement
(pursuant to Section 9 hereof, or otherwise), to pay all
<PAGE> 6
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costs, expenses, fees and taxes incident to the performance by the
Issuers of their respective obligations hereunder, and shall promptly
pay upon demand all fees and disbursements of counsel for the
Underwriter, whether or not the transactions contemplated herein are
consummated, including, but not limited to, all costs, expenses, fees
and taxes incident to: (i) the preparation, printing, filing and
distribution under the Act of the Registration Statement (including
financial statements and exhibits), each preliminary prospectus and all
amendments and supplements to any of them prior to or during the period
specified in paragraph (e), (ii) the printing and delivery of the
Prospectus and all amendments or supplements to it during the period
specified in paragraph (e), (iii) the printing and delivery of this
Agreement, the Preliminary and Supplemental Blue Sky Memoranda and all
other agreements, memoranda, correspondence and other documents printed
and delivered in connection with the offering of the Securities
(including in each case any disbursements of counsel for the
Underwriter relating to such printing and delivery), (iv) the
registration or qualification of the Securities for offer and sale
under the securities or Blue Sky laws of the several states (including
in each case the fees and disbursements of counsel for the Underwriter
relating to such registration or qualification and memoranda relating
thereto), (v) filings and clearance with the National Association of
Securities Dealers, Inc. in connection with the offering, (vi)
furnishing such copies of the Registration Statement, the Prospectus
and all amendments and supplements thereto as may be requested for use
in connection with the offering or sale of the Securities by the
Underwriter or by dealers to whom Securities may be sold, (vii) the
transportation and other expenses incurred by or on behalf of Company,
MagCorp or Sabel representatives in connection with presentations to
prospective purchasers of the Securities, (viii) fees and expenses of
the Company's accountants and the fees and expenses of counsel
(including local and special counsel) for the Issuers, (ix) fees and
expenses of the Trustee including fees and expenses of its counsel and
(x) any fees charged by investment rating agencies for the rating of
the Securities.
(l) To apply the net proceeds from the sale of the Securities
as set forth in the Prospectus under the caption "Use of Proceeds."
(m) During the period beginning on the date hereof and
continuing to and including the Closing Date, not to offer, sell,
contract to sell or otherwise dispose of any debt securities of the
Company or warrants to purchase debt
<PAGE> 7
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securities of the Company substantially similar to the Securities
(other than (i) the Securities and (ii) commercial paper issued in the
ordinary course of business), without your prior written consent.
(n) To use their best efforts to do and perform all things
required or necessary to be done and performed under this Agreement by
the Issuers prior to the Closing Date and to satisfy all conditions
precedent to the delivery of the Securities.
6. Representations and Warranties of the Issuers. The Issuers,
jointly and severally, represent and warrant to and agree with the Underwriter
that:
(a) The Registration Statement has become effective; no stop
order suspending the effectiveness of the Registration Statement is in
effect, and no proceedings for such purpose are pending before or
threatened by the Commission.
(b) (i) Each part of the Registration Statement, when such
part became effective, did not contain and each such part, as amended
or supplemented, if applicable, will not contain any 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, (ii) the Registration Statement and the Prospectus comply
and, as amended or supplemented, if applicable, will comply in all
material respects with the Act and (iii) the Prospectus does not
contain and, as amended or supplemented, if applicable, will not
contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading, except
that the representations and warranties set forth in this paragraph (b)
do not apply to statements or omissions in the Registration Statement
or the Prospectus based upon information relating to the Underwriter
furnished to the Company in writing by the Underwriter expressly for
use therein.
(c) Each preliminary prospectus filed as part of the
registration statement as originally filed or as part of any amendment
thereto, or filed pursuant to Rule 424 under the Act, and each
Registration Statement filed pursuant to Rule 462(b) under the Act, if
any, complied when so filed in all material respects with the Act; and
did not 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
<PAGE> 8
-8-
statements therein, in the light of the circumstances under which they
were made, not misleading.
(d) Each Issuer has been duly incorporated, is validly
existing as a corporation in good standing under the laws of its
jurisdiction of incorporation and has the corporate power and authority
to carry on its business as it is currently being conducted and to own,
lease and operate its properties, and each is duly qualified and is in
good standing as a foreign corporation authorized to do business in
each jurisdiction in which the nature of its business or its ownership
or leasing of property requires such qualification, except where the
failure to be so qualified would not have a material adverse effect on
the Company and its subsidiaries, taken as a whole.
(e) As of the date hereof, the Company has no subsidiaries
other than the Subsidiary Guarantors. All of the outstanding shares of
capital stock of, or other ownership interests in, each of the
Company's subsidiaries have been duly authorized and validly issued and
are fully paid and non-assessable, and are owned by the Company, free
and clear of any security interest, claim, lien, encumbrance or adverse
interest of any nature.
(f) The Company has taken all necessary corporate action to
authorize the issuance of the Notes and each Subsidiary Guarantor has
taken all necessary corporate action to authorize the issuance of its
respective Guarantee. The Notes have been duly authorized by the
Company, and each Subsidiary Guarantor has duly authorized its
respective Guarantee, and, when executed and authenticated in
accordance with the provisions of the Indenture and delivered to the
Underwriter against payment therefor as provided by this Agreement,
will be entitled to the benefits of the Indenture, and will be valid
and binding obligations of the Company in the case of the Notes and
each Subsidiary Guarantor in the case of its respective Guarantee,
enforceable in accordance with their terms except as (i) the
enforceability thereof may be limited by bankruptcy, insolvency or
similar laws affecting creditors' rights generally and (ii) rights of
acceleration and the availability of equitable remedies may be limited
by equitable principles of general applicability.
(g) Each Issuer has all the necessary corporate power and
authority to execute and deliver this Agreement, to perform its
respective obligations hereunder and to consummate the transactions
contemplated hereby and by the Prospectus.
<PAGE> 9
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This Agreement has been duly authorized, executed and delivered by each
Issuer and is a valid and binding agreement of each Issuer enforceable
in accordance with its terms (except as rights to indemnity and
contribution hereunder may be limited by applicable law).
(h) Each Issuer has all requisite corporate power and
authority to execute, deliver and perform its obligations under the
Indenture. The Indenture has been duly qualified under, and complies
with, the Trust Indenture Act of 1939, as amended (the "TIA"), and has
been duly authorized by each Issuer and, when executed and delivered by
the Issuers (assuming the due authorization, execution and delivery by
the Trustee), will constitute a valid and binding agreement of each
Issuer, enforceable in accordance with its terms except as (i) the
enforceability thereof may be limited by bankruptcy, insolvency or
similar laws affecting creditors' rights generally and (ii) rights of
acceleration and the availability of equitable remedies may be limited
by equitable principles of general applicability. The Depositary has
received validly tendered and not withdrawn consents from holders of at
least a majority of the aggregate principal amount of Existing Notes
outstanding pursuant to the Consent Solicitation. Each of the Issuers
has all requisite corporate power and authority to execute, deliver and
perform its obligations under the Supplemental Indenture. The
Supplemental Indenture has been duly authorized by each of the Issuers
and, when executed and delivered by the Issuers (assuming the due
authorization, execution and delivery by the Trustee), will constitute
a valid and binding agreement of each Issuer, enforceable in accordance
with its terms except as (i) the enforceability thereof may be limited
by bankruptcy, insolvency or similar laws affecting creditors' rights
generally and (ii) rights of acceleration and the availability of
equitable remedies may be limited by equitable principles of general
applicability. Upon the effectiveness of the Supplemental Indenture,
the Existing Notes Indenture, as supplemented by the Supplemental
Indenture, will comply with the TIA.
(i) The Securities conform as to legal matters to the
descriptions thereof contained in the Prospectus.
(j) None of the Issuers is in violation of its respective
charter or by-laws or in default in the performance of any obligation,
agreement or condition contained in any bond, debenture, note or any
other evidence of indebtedness or in any other agreement, indenture or
instrument material to
<PAGE> 10
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the conduct of the business of the Company and its subsidiaries, taken
as a whole, to which such Issuer is a party or by which such Issuer or
its respective property is bound.
(k) The execution, delivery and performance of this Agreement,
the Indenture, the Supplemental Indenture and the Securities and
compliance by the Issuers with all the provisions hereof and thereof
and the consummation of the transactions contemplated hereby, thereby
and by the Prospectus will not require any consent, approval,
authorization or other order of any court, regulatory body,
administrative agency or other governmental body (except as such may be
required under the securities or Blue Sky laws of the various states)
and will not conflict with or constitute a breach of any of the terms
or provisions of, or a default under, the charter or by-laws of any of
the Issuers or any agreement, indenture or other instrument to which
any of the Issuers is a party or by which any of the Issuers or their
respective property is bound, or violate or conflict with any laws,
administrative regulations or rulings or court decrees applicable to
any of the Issuers or their respective property.
(l) Except as otherwise set forth in the Prospectus, there are
no material legal or governmental proceedings pending to which any of
the Issuers is a party or of which any of their respective property is
the subject, and, to the best of the Issuers' knowledge, no such
proceedings are threatened or contemplated. No contract or document of
a character required to be described in the Registration Statement or
the Prospectus or to be filed as an exhibit to the Registration
Statement is not so described or filed as required.
(m) Except as described in the Prospectus, none of the Issuers
has violated any foreign, federal, state or local law or regulation
relating to the protection of human health and safety, the environment
or hazardous or toxic substances or wastes, pollutants or contaminants
("Environmental Laws"), nor any federal or state law relating to
discrimination in the hiring, promotion or pay of employees nor any
applicable federal or state wages and hours laws, nor any provisions of
the Employee Retirement Income Security Act or the rules and
regulations promulgated thereunder, which in each case might result in
any material adverse change in the business, prospects, financial
condition or results of operation of the Company and its subsidiaries,
taken as a whole.
<PAGE> 11
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(n) The Issuers have such permits, licenses, franchises and
authorizations of governmental or regulatory authorities ("permits"),
including, without limitation, under any applicable Environmental Laws,
as are necessary to own, lease and operate its respective properties
and to conduct its business; the Issuers have fulfilled and performed
all of their material obligations with respect to such permits and no
event has occurred which allows, or after notice or lapse of time would
allow, revocation or termination thereof or results in any other
material impairment of the rights of the holder of any such permit;
and, except as described in the Prospectus, such permits contain no
restrictions that are materially burdensome to the Issuers.
(o) In the ordinary course of its business, each of the
Company and the Subsidiary Guarantors conducts a periodic review of the
effect of Environmental Laws on its respective business, operations and
properties, in the course of which it identifies and evaluates
associated costs and liabilities (including, without limitation, any
capital or operating expenditures required for clean-up, closure of
properties or compliance with Environmental Laws or any permit, license
or approval, any related constraints on operating activities and any
potential liabilities to third parties). On the basis of such review,
the Issuers have reasonably concluded that such associated costs and
liabilities would not, singly or in the aggregate, have a material
adverse effect on the Company and its subsidiaries, taken as a whole.
(p) Except as otherwise set forth in the Prospectus or such as
are not material to the business, prospects, financial condition or
results of operation of the Company and its subsidiaries, taken as a
whole, the Issuers have good and marketable title, free and clear of
all liens, claims, encumbrances and restrictions except liens for taxes
not yet due and payable, to all property and assets described in the
Registration Statement as being owned by them. All leases to which any
Issuer is a party are valid and binding and no default has occurred or
is continuing thereunder, which might result in any material adverse
change in the business, prospects, financial condition or results of
operation of the Company and its subsidiaries taken as a whole, and the
Issuers enjoy peaceful and undisturbed possession under all such leases
to which any of them is a party as lessee with such exceptions as do
not materially interfere with the use made by such Issuer.
(q) The Issuers maintain reasonably adequate insurance.
<PAGE> 12
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(r) KPMG Peat Marwick LLP are independent public accountants
with respect to the Issuers as required by the Act.
(s) The financial statements, together with related schedules
and notes forming part of the Registration Statement and the Prospectus
(and any amendment or supplement thereto), present fairly the
consolidated financial position, results of operations and changes in
financial position of the Company and its subsidiaries on the basis
stated in the Registration Statement at the respective dates or for the
respective periods to which they apply; such statements and related
schedules and notes have been prepared in accordance with generally
accepted accounting principles consistently applied throughout the
periods involved, except as disclosed therein; and the other financial
information set forth in the Registration Statement and the Prospectus
(and any amendment or supplement thereto) is, in all material respects,
accurately presented and prepared on a basis consistent with such
financial statements and the books and records of the Company. The
statistical and market-related data included in the Registration
Statement and the Prospectus (and any amendment or supplement thereto)
are based on or derived from sources which the Issuers believe to be
reliable and accurate.
(t) None of the Issuers is an "investment company" or a
company "controlled" by an "investment company" within the meaning of
the Investment Company Act of 1940, as amended.
(u) No holder of any security of the Company or either
Subsidiary Guarantor has any right to require registration of any
security of the Company or either Subsidiary Guarantor. There are no
outstanding subscriptions, rights, warrants, options, calls,
convertible securities, commitments of sale or liens related to or
entitling any person to purchase or otherwise to acquire any shares of
the capital stock of, or other ownership interest in, the Company or
either Subsidiary Guarantor, except as otherwise disclosed in the
Registration Statement and Prospectus.
(v) The Company has complied with all provisions of Section
517.075, Florida Statutes (Chapter 92-198, Laws of Florida).
(w) The Company and each Subsidiary Guarantor maintains a
system of internal accounting controls sufficient to provide reasonable
assurance that (i) transactions are executed in accordance with
management's general or specific
<PAGE> 13
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authorizations; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability;
(iii) access to assets is permitted only in accordance with
management's general or specific authorization; and (iv) the recorded
accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to
any differences.
(x) All material tax returns required to be filed by the
Company and each Subsidiary Guarantor in any jurisdiction have been
filed, other than those filings being contested in good faith, and all
material taxes, including withholding taxes, penalties and interest,
assessments, fees and other charges due pursuant to such returns or
pursuant to any assessment received by the Company or any Subsidiary
Guarantor have been paid, other than those being contested in good
faith and for which adequate reserves have been provided.
(y) There is (i) no significant unfair labor practice
complaint pending against any of the Issuers or, to the best knowledge
of the Issuers, threatened against any of them, before the National
Labor Relations Board or any state or local labor relations board, and
no significant grievance or more significant arbitration proceeding
arising out of or under any collective bargaining agreement is so
pending against any of the Issuers or, to the best knowledge of the
Issuers, threatened against any of them, and (ii) no significant
strike, labor dispute, slowdown or stoppage pending against any of the
Issuers or, to the best knowledge of the Issuers, threatened against
any of them except for such actions specified in clause (i) or (ii)
above, which, singly or in the aggregate could not reasonably be
expected to have a material adverse effect on the Company and its
subsidiaries, taken as a whole.
7. Indemnification. (a) Each Issuer, jointly and severally,
agrees to indemnify and hold harmless the Underwriter and each person, if any,
who controls the Underwriter within the meaning of Section 15 of the Act or
Section 20 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), from and against any and all losses, claims, damages, liabilities and
judgments caused by any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement or the Prospectus (as
amended or supplemented if the Issuers shall have furnished any amendments or
supplements thereto) or any preliminary prospectus, or caused by any omission or
alleged
<PAGE> 14
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omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, except insofar as such
losses, claims, damages, liabilities or judgments are caused by any such untrue
statement or omission or alleged untrue statement or omission based upon
information relating to the Underwriter furnished in writing to the Issuers by
or on behalf of the Underwriter expressly for use therein; provided, however,
that the foregoing indemnity agreement with respect to any preliminary
prospectus shall not inure to the benefit of the Underwriter from whom the
person asserting any such losses, claims, damages and liabilities and judgments
purchased Securities, or any person controlling such Underwriter, if a copy of
the Prospectus (as then amended or supplemented if the Issuers shall have
furnished any amendments or supplements thereto) was not sent or given by or on
behalf of such Underwriter to such person, if required by law so to have been
delivered, at or prior to the written confirmation of the sale of the Securities
to such person, and if the Prospectus (as so amended and supplemented) would
have cured the defect giving rise to such loss, claim, damage, liability or
judgment.
(b) In case any action shall be brought against the
Underwriter or any person controlling the Underwriter, based upon any
preliminary prospectus, the Registration Statement or the Prospectus or any
amendment or supplement thereto and with respect to which indemnity may be
sought against the Issuers, the Underwriter shall promptly notify the Issuers in
writing and the Issuers shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to such indemnified party and
payment of all fees and expenses. The Underwriter or any such controlling person
shall have the right to employ separate counsel in any such action and
participate in the defense thereof, but the fees and expenses of such counsel
shall be at the expense of the Underwriter or such controlling person unless (i)
the employment of such counsel shall have been specifically authorized in
writing by the Issuers, (ii) the Issuers shall have failed to assume the defense
and employ counsel or (iii) the named parties to any such action (including any
impleaded parties) include both the Underwriter or such controlling person and
the Issuers and the Underwriter or such controlling person shall have been
advised by such counsel that there may be one or more legal defenses available
to it which are different from or additional to those available to the Issuers
(in which case the Issuers shall not have the right to assume the defense of
such action on behalf of the Underwriter or such controlling person, it being
understood, however, that the Issuers shall not, in connection with any one such
action or separate but substantially similar or related actions in the same
jurisdiction arising out of the same general allegations or
<PAGE> 15
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circumstances, be liable for the fees and expenses of more than one separate
firm of attorneys (in addition to any local counsel) for the Underwriter and all
such controlling persons, which firm shall be designated in writing by the
Underwriter and that all such fees and expenses shall be reimbursed as they are
incurred). No Issuer shall be liable for any settlement of any such action
effected without its written consent but if settled with the written consent of
such Issuer, such Issuer agrees to indemnify and hold harmless the Underwriter
and any such controlling person from and against any loss or liability by reason
of such settlement. Notwithstanding the immediately preceding sentence, if in
any case where the fees and expenses of counsel are at the expense of the
indemnifying party and an indemnified party shall have requested the
indemnifying party to reimburse the indemnified party for such fees and expenses
of counsel as incurred, such indemnifying party agrees that it shall be liable
for any settlement of any action effected without its written consent if (i)
such settlement is entered into more than ten business days after the receipt by
such indemnifying party of the aforesaid request and (ii) such indemnifying
party shall have failed to reimburse the indemnified party in accordance with
such request for reimbursement prior to the date of such settlement. No
indemnifying party shall, without the prior written consent of the indemnified
party, effect any settlement of any pending or threatened proceeding in respect
of which any indemnified party is or could have been a party and indemnity could
have been sought hereunder by such indemnified party, unless such settlement
includes an unconditional release of such indemnified party from all liability
on claims that are the subject matter of such proceeding.
(c) The Underwriter agrees to indemnify and hold harmless the
Issuers, their respective directors, their respective officers who sign the
Registration Statement and any person controlling any Issuer within the meaning
of Section 15 of the Act or Section 20 of the Exchange Act, to the same extent
as the foregoing indemnity from the Issuers to the Underwriter but only with
reference to information relating to the Underwriter furnished in writing by or
on behalf of the Underwriter expressly for use in the Registration Statement,
the Prospectus or any preliminary prospectus. In case any action shall be
brought against any Issuer, any of its directors, any of its officers or any
person controlling such Issuer based on the Registration Statement, the
Prospectus or any preliminary prospectus and in respect of which indemnity may
be sought against the Underwriter, the Underwriter shall have the rights and
duties given to such Issuer (except that if such Issuer shall have assumed the
defense thereof, the Underwriter shall not be required to do so, but may employ
separate counsel therein and participate in the defense thereof but the fees
<PAGE> 16
-16-
and expenses of such counsel shall be at the expense of the Underwriter), and
such Issuer, its directors, any of its officers and any person controlling such
Issuer shall have the rights and duties given to the Underwriter, by Section
7(b) hereof.
(d) If the indemnification provided for in this Section 7 is
unavailable to an indemnified party in respect of any losses, claims, damages,
liabilities or judgments referred to therein, then each indemnifying party, in
lieu of indemnifying such indemnified party, shall contribute to the amount paid
or payable by such indemnified party as a result of such losses, claims,
damages, liabilities and judgments (i) in such proportion as is appropriate to
reflect the relative benefits received by the Issuers on the one hand and the
Underwriter on the other hand 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 Issuers and
the Underwriter in connection with the statements or omissions which resulted in
such losses, claims, damages, liabilities or judgments, as well as any other
relevant equitable considerations. The relative benefits received by the Issuers
and the Underwriter shall be deemed to be in the same proportion as the total
net proceeds from the offering (before deducting expenses) received by the
Issuers, and the total underwriting discounts and commissions received by the
Underwriter, bear to the total price to the public of the Securities, in each
case as set forth in the table on the cover page of the Prospectus. The relative
fault of the Issuers and the Underwriter shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission to state a material fact relates to information supplied by
any Issuer or the Underwriter and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission.
The Issuers and the Underwriter agree that it would not be
just and equitable if contribution pursuant to this Section 7(d) were determined
by pro rata allocation or by any other method of allocation which does not take
account of the equitable considerations referred to in the immediately preceding
paragraph. The amount paid or payable by an indemnified party as a result of the
losses, claims, damages, liabilities or judgments referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 7, the
<PAGE> 17
-17-
Underwriter shall not 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 the Underwriter has otherwise been required to pay by reason of
such 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 Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
8. Conditions of Underwriter's Obligations. The obligations of
the Underwriter to purchase the Securities under this Agreement are subject to
the satisfaction of each of the following conditions:
(a) All the representations and warranties of the Issuers
contained in this Agreement shall be true and correct on the Closing
Date with the same force and effect as if made on and as of the Closing
Date.
(b) The Registration Statement shall have become effective not
later than 5:00 P.M. (and in the case of a Registration Statement filed
under Rule 462(b) of the Act, not later than 10:00 p.m.), New York City
time, on the date of this Agreement or at such later date and time as
you may approve in writing, and at the Closing Date no stop order
suspending the effectiveness of the Registration Statement shall have
been issued and no proceedings for that purpose shall have been
commenced or shall be pending before or contemplated by the Commission.
(c) Subsequent to the execution and delivery of this Agreement
and prior to the Closing Date, there shall not have been any
downgrading, nor shall any notice have been given of any intended or
potential downgrading or of any review for a possible change that does
not indicate the direction of the possible change, in the rating
accorded any of the Issuers' securities by any "nationally recognized
statistical rating organization", as such term is defined for purposes
of Rule 436(g)(2) under the Act.
(d)(i) Since the date of the latest balance sheet included in
the Registration Statement and the Prospectus, there shall not have
been any material adverse change, or any development involving a
prospective material adverse change, in the condition, financial or
otherwise, or in the earnings, affairs or business prospects, whether
or not arising in the
<PAGE> 18
-18-
ordinary course of business, of the Company or either Subsidiary
Guarantor, (ii) since the date of the latest balance sheet included in
the Registration Statement and the Prospectus there shall not have been
any change, or any development involving a prospective material adverse
change, in the capital stock or in the long-term debt of the Company or
either Subsidiary Guarantor from that set forth in the Registration
Statement and Prospectus, (iii) the Company and the Subsidiary
Guarantors shall have no liability or obligation, direct or contingent,
which is material to the Company and its subsidiaries, taken as a
whole, other than those reflected in the Registration Statement and the
Prospectus and (iv) on the Closing Date you shall have received a
certificate dated the Closing Date, signed by _______________ and
_______________, in their capacities as the _______________ and
_______________ of the Company and each Subsidiary Guarantor,
confirming the matters set forth in paragraphs (a), (b), (c) and (d) of
this Section 8.
(e) You shall have received on the Closing Date an opinion
(satisfactory to you and counsel for the Underwriter), dated the
Closing Date, of Cadwalader, Wickersham & Taft, counsel for the Company
and the Subsidiary Guarantors, to the effect that:
(i) each Issuer has been duly incorporated, is
validly existing as a corporation in good standing under the
laws of its jurisdiction of incorporation and has the
corporate power and authority required to carry on its
business as it is currently being conducted and to own, lease
and operate its properties;
(ii) each Issuer is duly qualified and is in good
standing as a foreign corporation authorized to do business in
each jurisdiction in which the nature of its business or its
ownership or leasing of property requires such qualification,
except where the failure to be so qualified would not have a
material adverse effect on the Company and its subsidiaries,
taken as a whole;
(iii) as of the date hereof, the Company has no
subsidiaries other than the Subsidiary Guarantors; all of the
outstanding shares of capital stock of, or other ownership
interests in, each of the Company's subsidiaries have been
duly and validly authorized and issued and are fully paid and
non-assessable, and are owned by the Company, free and clear
of any security
<PAGE> 19
-19-
interest, claim, lien, encumbrance or adverse interest of
any nature;
(iv) the Company has taken all necessary corporate
action to authorize the issuance of the Notes and each
Subsidiary Guarantor has taken all necessary corporate action
to authorize the issuance of its respective Guarantee; the
Notes have been duly authorized by the Company, and each
Subsidiary Guarantor has duly authorized its respective
Guarantee, and, when executed and authenticated in accordance
with the provisions of the Indenture and delivered to and paid
for by the Underwriter in accordance with the terms of this
Agreement, will be entitled to the benefits of the Indenture
and will be valid and binding obligations of the Company in
the case of the Notes and each Subsidiary Guarantor in the
case of its respective Guarantee, enforceable in accordance
with their terms except as (a) the enforceability thereof may
be limited by bankruptcy, insolvency or similar laws affecting
creditors' rights generally and (b) rights of acceleration and
the availability of equitable remedies may be limited by
equitable principles of general applicability;
(v) each Issuer has all the necessary corporate
power and authority to execute and deliver this Agreement, to
perform its respective obligations hereunder and to consummate
the transactions contemplated hereby and by the Prospectus;
this Agreement has been duly authorized, executed and
delivered by each Issuer and is a valid and binding agreement
of each Issuer enforceable in accordance with its terms
(except as rights to indemnity and contribution hereunder may
be limited by applicable law);
(vi) each Issuer has all requisite corporate power
and authority to execute, deliver and perform its obligations
under the Indenture; the Indenture has been duly qualified
under the TIA and has been duly authorized by each Issuer and
when executed and delivered by the Issuers (assuming the due
authorization, execution and delivery by the Trustee), will
constitute a valid and binding agreement of each Issuer,
enforceable in accordance with its terms except as (a) the
enforceability thereof may be limited by bankruptcy,
insolvency or similar laws affecting creditors' rights
generally and (b) rights of acceleration and the availability
of equitable remedies may be limited by
<PAGE> 20
-20-
equitable principles of general applicability; each of the
Issuers has all requisite corporate power and authority to
execute, deliver and perform its obligations under the
Supplemental Indenture; the Supplemental Indenture has been
duly authorized by each of the Issuers and when executed and
delivered by the Issuers (assuming the due authorization,
execution and delivery by the Trustee), will constitute a
valid and binding agreement of each Issuer, enforceable in
accordance with its terms except as (i) the enforceability
thereof may be limited by bankruptcy, insolvency or similar
laws affecting creditors' rights generally and (ii) rights of
acceleration and the availability of equitable remedies may be
limited by equitable principles of general applicability;
(vii) the Registration Statement has become effective
under the Act, no stop order suspending its effectiveness has
been issued and no proceedings for that purpose are, to the
knowledge of such counsel, pending before or contemplated by
the Commission;
(viii) the statements under the captions "Stock
Ownership and Certain Relationships and Transactions",
"Description of Revolving Credit Facilities", "Business --
Magcorp Environmental Matters", "Business -- Magcorp -- Legal
Proceedings; Pending Trade Issues", "Description of Senior
Notes" and "Underwriting" in the Prospectus, as amended or
supplemented, and Items 14 and 15 of Part II of the
Registration Statement insofar as such statements constitute a
summary of legal matters, documents or proceedings referred to
therein, fairly present the information called for with
respect to such legal matters, documents and proceedings;
(ix) none of the Issuers is in violation of its
respective charter or by-laws and, to the best of such
counsel's knowledge after due inquiry, none of the Issuers is
in default in the performance of any obligation, agreement or
condition contained in any bond, debenture, note or any other
evidence of indebtedness or in any other agreement, indenture
or instrument material to the conduct of the business of the
Company and its subsidiaries, taken as a whole, to which such
Issuer is a party or by which such Issuer or its respective
property is bound;
<PAGE> 21
-21-
(x) the execution, delivery and performance of this
Agreement, the Indenture, the Supplemental Indenture and the
Securities and compliance by the Issuers with all the
provisions hereof and thereof and the consummation of the
transactions contemplated hereby, thereby and by the
Prospectus will not require any consent, approval,
authorization or other order of any court, regulatory body,
administrative agency or other governmental body (except as
such may be required under the securities or Blue Sky laws of
the various states) and will not conflict with or constitute a
breach of any of the terms or provisions of, or a default
under, the charter or by-laws of any of the Issuers or any
agreement, indenture or other instrument to which any of the
Issuers is a party or by which any of the Issuers or their
respective properties is bound, or violate or conflict with
any laws, administrative regulations or rulings or court
decrees applicable to any of the Issuers or their respective
properties;
(xi) after due inquiry, such counsel does not know
of any legal or governmental proceeding pending or threatened
to which any of the Issuers is a party or to which any of
their respective property is subject which is required to be
described in the Registration Statement or the Prospectus and
is not so described, or of any contract or other document
which is required to be described in the Registration
Statement or the Prospectus or is required to be filed as an
exhibit to the Registration Statement which is not described
or filed as required;
(xii) to the best of such counsel's knowledge, after
due inquiry, none of the Issuers has violated any
Environmental Laws, nor any federal or state law relating to
discrimination in the hiring, promotion or pay of employees
nor any applicable federal or state wages and hours laws, nor
any provisions of the Employee Retirement Income Security Act
or the rules and regulations promulgated thereunder, which in
each case might result in any material adverse change in the
business, prospects, financial condition or results of
operation of the Company and its subsidiaries, taken as a
whole;
(xiii) to the best of such counsel's knowledge, after
due inquiry, each Issuer has such permits, licenses,
franchises and authorizations of governmental or regulatory
authorities ("permits"), including, without
<PAGE> 22
-22-
limitation, under any applicable Environmental Laws, as are
necessary to own, lease and operate its respective properties
and to conduct its business in the manner described in the
Prospectus; to the best of such counsel's knowledge, after due
inquiry, each Issuer has fulfilled and performed all of its
material obligations with respect to such permits and no event
has occurred which allows, or after notice or lapse of time
would allow, revocation or termination thereof or results in
any other material impairment of the rights of the holder of
any such permit, subject in each case to such qualification as
may be set forth in the Prospectus; and, except as described
in the Prospectus, such permits contain no restrictions that
are materially burdensome to any Issuer;
(xiv) none of the Issuers is an "investment company"
or a company "controlled" by an "investment company" within
the meaning of the Investment Company Act of 1940, as amended;
(xv) to the best of such counsel's knowledge, after
due inquiry, no holder of any security of any of the Issuers
has any right to require registration of such security; and
(xvi) (1) the Registration Statement (including any
Registration Statement filed under 462(b) of the Act, if any)
and the Prospectus and any supplement or amendment thereto
(except for financial statements as to which no opinion need
be expressed) comply as to form in all material respects with
the Act, and (2) such counsel believes that (except for
financial statements, as aforesaid and except for that part of
the Registration Statement that constitutes the Form T-1) the
Registration Statement and the prospectus included therein at
the time the Registration Statement became effective did not
contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or
necessary to make the statements therein not misleading, and
that the Prospectus, as amended or supplemented, if applicable
(except for financial statements, as aforesaid) does not
contain any untrue statement of a material fact or omit to
state a material fact necessary in order to make the
statements therein, in the light of the circumstances under
which they were made, not misleading.
<PAGE> 23
-23-
In giving such opinion with respect to the matters covered by
clause (xvi), such counsel may state that their opinion and belief are based
upon their participation in the preparation of the Registration Statement and
Prospectus and any amendments or supplements thereto and review and discussion
of the contents thereof, but are without independent check or verification
except as specified.
The opinion of Cadwalader, Wickersham & Taft described in
paragraph (e) above shall be rendered to you at the request of the Issuers and
shall so state therein.
(f) You shall have received on the Closing Date an opinion,
dated the Closing Date, of Cahill Gordon & Reindel, counsel for the
Underwriter, as to the matters referred to in clauses (iv) (but only
the second clause thereof), (v) (but only the second clause thereof),
(vi) (but only the first clause thereof), (viii) (but only with respect
to the statements under the caption "Description of Senior Notes" and
"Underwriting") and (xvi) of the foregoing paragraph (e). In giving
such opinion with respect to the matters covered by clause (xvi) such
counsel may state that their opinion and belief are based upon their
participation in the preparation of the Registration Statement and
Prospectus and any amendments or supplements thereto and review and
discussion of the contents thereof, but are without independent check
or verification except as specified.
(g) You shall have received letters at the time this Agreement
is executed and delivered and on and as of the Closing Date, in form
and substance satisfactory to you, from KPMG Peat Marwick LLP,
independent public accountants, with respect to the financial
statements and certain financial information contained in the
Registration Statement and the Prospectus.
(h) On or before the Closing Date, the Underwriter and counsel
for the Underwriter shall have received an opinion from Houlihan,
Lokey, Howard & Zukin, in form and substance satisfactory to the
Underwriter and counsel for the Underwriter, with respect to the
solvency of the Company and MagCorp upon issuance of the Securities and
the consummation of the other transactions contemplated in this
Agreement, the Registration Statement and the Prospectus.
(i) The Offer shall have been consummated in accordance with
the terms of the Statement, [as amended by the First Supplement thereto
dated June , 1996] and the Depositary shall have received the Requisite
Consents.
<PAGE> 24
-24-
(j) The Credit Facilities (as such term is defined in the
Registration Statement)shall have been duly authorized, executed and
delivered by each of the Subsidiary Guarantors.
(k) The Underwriter shall have received true and correct
copies of the Credit Facilities and there exists as of the date hereof
and on and as of the Closing Date (after giving effect to the
transactions contemplated by this Agreement and the application of the
proceeds received by the Company from the sale of the Notes) no
condition that would constitute a Default or an Event of Default (each
as defined in the Credit Facilities) under the Credit Facilities.
(l) No Issuer shall have failed at or prior to the Closing
Date to perform or comply with any of the agreements herein contained
and required to be performed or complied with by any Issuer at or prior
to the Closing Date.
9. Effective Date of Agreement and Termination. This Agreement
shall become effective upon the later of (i) execution of this Agreement and
(ii) when notification of the effectiveness of the Registration Statement has
been released by the Commission.
This Agreement may be terminated at any time prior to the
Closing Date by you by written notice to the Company if any of the following has
occurred: (i) since the respective dates as of which information is given in the
Registration Statement and the Prospectus, any material adverse change or
development involving a prospective material adverse change in the condition,
financial or otherwise, of the Company and its subsidiaries or the earnings,
affairs, or business prospects of the Company or any of its subsidiaries taken
as a whole, whether or not arising in the ordinary course of business, which
would, in your judgment, make it impracticable to market the Securities on the
terms and in the manner contemplated in the Prospectus, (ii) any outbreak or
escalation of hostilities or other national or international calamity or crisis
or change in economic conditions or in the financial markets of the United
States or elsewhere that, in your judgment, is material and adverse and would,
in your judgment, make it impracticable to market the Securities on the terms
and in the manner contemplated in the Prospectus, (iii) the suspension or
material limitation of trading in securities on the New York Stock Exchange, the
American Stock Exchange or the NASDAQ National Market System or limitation on
prices for securities on any such exchange or National Market System, (iv) the
enactment, publication, decree or other promulgation of any federal or state
statute, regulation, rule or order of any court or other governmental authority
which in your opinion materially and adversely affects, or will materially
<PAGE> 25
-25-
and adversely affect, the business or operations of the Company or any of its
subsidiaries, (v) the declaration of a banking moratorium by either federal or
New York State authorities or (vi) the taking of any action by any federal,
state or local government or agency in respect of its monetary or fiscal affairs
which in your opinion has a material adverse effect on the financial markets in
the United States.
10. Miscellaneous. Notices given pursuant to any provision of
this Agreement shall be addressed as follows: (a) if to any Issuer, to Renco
Metals, Inc., c/o Magnesium Corporation of America, 238 North 2200 West, Salt
Lake City, Utah 84116, with a copy to Cadwalader, Wickersham & Taft, 100 Maiden
Lane, New York, New York 10038, Attention: Michael C. Ryan, Esq., and (b) if to
you, to you c/o Donaldson, Lufkin & Jenrette Securities Corporation, 277 Park
Avenue, New York, New York 10172, Attention: Syndicate Department, with a copy
to Cahill Gordon & Reindel, 80 Pine Street, New York, New York 10005, Attention:
William M. Hartnett, Esq., or in any case to such other address as the person to
be notified may have requested in writing.
The respective indemnities, contribution agreements,
representations, warranties and other statements of the Issuers, their
respective officers and directors and of the Underwriter set forth in or made
pursuant to this Agreement shall remain operative and in full force and effect,
and will survive delivery of and payment for the Securities, regardless of (i)
any investigation, or statement as to the results thereof, made by or on behalf
of the Underwriter or by or on behalf of the Issuers, their respective officers
or directors or any controlling person of any of the Issuers, (ii) acceptance of
the Securities and payment for them hereunder and (iii) termination of this
Agreement.
If this Agreement shall be terminated by the Underwriter
because of any failure or refusal on the part of any Issuer to comply with the
terms or to fulfill any of the conditions of this Agreement, the Issuers jointly
and severally agree to reimburse the Underwriter for all out-of-pocket expenses
(including the fees and disbursements of counsel) reasonably incurred by it.
Except as otherwise provided, this Agreement has been and is
made solely for the benefit of and shall be binding upon the Issuers, the
Underwriter, any controlling persons referred to herein and their respective
successors and assigns, all as and to the extent provided in this Agreement, and
no other person shall acquire or have any right under or by virtue of this
Agreement. The term "successors and assigns" shall not include a purchaser of
<PAGE> 26
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any of the Securities from the Underwriter merely because of such purchase.
This Agreement shall be governed and construed in accordance
with the laws of the State of New York without regard to principles of conflicts
of law.
This Agreement may be signed in various counterparts which
together shall constitute one and the same instrument.
<PAGE> 27
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Please confirm that the foregoing correctly sets forth the
agreement between the Company, the Subsidiary Guarantors and the Underwriter.
Very truly yours,
RENCO METALS, INC.
By:________________________________
Name:
Title:
MAGNESIUM CORPORATION OF AMERICA
By:________________________________
Name:
Title:
SABEL INDUSTRIES, INC.
By:________________________________
Name:
Title:
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By:__________________________
Name:
Title:
<PAGE> 1
- --------------------------------------------------------------------------------
RENCO METALS, INC.,
as Issuer,
MAGNESIUM CORPORATION OF AMERICA
and
SABEL INDUSTRIES, INC.,
as Guarantors,
and
FLEET NATIONAL BANK
as Trustee
-----------------------------
INDENTURE
Dated as of , 1996
-----------------------------
% Senior Notes due 2003
- --------------------------------------------------------------------------------
<PAGE> 2
CROSS-REFERENCE TABLE
---------------------
<TABLE>
<CAPTION>
TIA Section Indenture Section
- ----------- -----------------
<S> <C>
Section 310(a)(1) ................................ 7.10
(a)(2) ...................................... 7.10
(a)(3) ...................................... N.A.
(a)(4) ...................................... N.A.
(b) ......................................... 7.8; 7.10; 11.2
(c) ......................................... N.A.
Section 311(a) ................................... 7.11
(b) ......................................... 7.11
(c) ......................................... N.A.
Section 312(a) ................................... 2.5
(b) ......................................... 11.3
(c) ......................................... 11.3
Section 313(a) ................................... 7.6
(b)(1) ...................................... 7.6
(b)(2) ...................................... 7.6
(c) ......................................... 7.6; 11.2
(d) ......................................... 7.6
Section 314(a) ................................... 4.7; 4.8; 11.2
(b) ......................................... N.A.
(c)(1) ...................................... 11.4
(c)(2) ...................................... 11.4
(c)(3) ...................................... N.A.
(d) ......................................... N.A.
(e) ......................................... 11.5
(f) ......................................... N.A.
Section 315(a) ................................... 7.1(b)
(b) ......................................... 7.5; 11.2
(c) ......................................... 7.1(a)
(d) ......................................... 7.1(c)
(e) ......................................... 6.11
Section 316(a) (last sentence) ................... 2.9
(a)(1)(A) ................................... 6.5
(a)(1)(B) ................................... 6.4
(a)(2) ...................................... N.A.
(b) ......................................... 6.7
Section 317(a)(1) ................................ 6.8
(a)(2) ...................................... 6.9
(b) ......................................... 2.4
Section 318(a) ................................... 11.1
</TABLE>
- --------------------
N.A. means Not Applicable.
NOTE: This Cross-Reference Table shall not, for any purpose, be deemed to be
a part of this Indenture.
-i-
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C>
ARTICLE I
DEFINITIONS AND
INCORPORATION BY REFERENCE
1.1 Definitions ..................................................... 1
1.2 Incorporation by Reference of Trust
Indenture Act ................................................ 15
1.3 Rules of Construction ........................................... 15
ARTICLE II
THE SECURITIES
2.1 Form and Dating ................................................. 16
2.2 Execution and Authentication .................................... 16
2.3 Registrar and Paying Agent ...................................... 17
2.4 Paying Agent To Hold Money in Trust ............................. 18
2.5 Securityholder Lists ............................................ 18
2.6 Transfer and Exchange ........................................... 18
2.7 Replacement Securities .......................................... 20
2.8 Outstanding Securities .......................................... 20
2.9 Treasury Securities ............................................. 21
2.10 Temporary Securities ............................................ 21
2.11 Cancellation .................................................... 22
2.12 Defaulted Interest .............................................. 22
2.13 CUSIP Number .................................................... 22
2.14 Deposit of Moneys ............................................... 22
ARTICLE III
REDEMPTION
3.1 Optional Redemption ............................................. 23
3.2 Notices to Trustee .............................................. 24
3.3 Selection of Securities To Be Redeemed .......................... 24
3.4 Notice of Redemption ............................................ 24
3.5 Effect of Notice of Redemption .................................. 25
3.6 Deposit of Redemption Price ..................................... 26
3.7 Securities Redeemed in Part ..................................... 26
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C>
ARTICLE IV
COVENANTS
4.1 Payment of Securities ........................................... 26
4.2 Maintenance of Office or Agency ................................. 27
4.3 Corporate Existence ............................................. 27
4.4 Payment of Taxes and Other Claims ............................... 28
4.5 Maintenance of Properties; Insurance; Books
and Records; Compliance with Law ............................. 28
4.6 Guarantees ...................................................... 29
4.7 Compliance Certificates ......................................... 29
4.8 Reports ......................................................... 30
4.9 Further Assurance to the Trustee ................................ 30
4.10 Limitation on Additional Indebtedness ........................... 30
4.11 Limitation on Liens ............................................. 32
4.12 Limitation on Restricted Payments ............................... 33
4.13 Limitation on Certain Sales of Assets and
Subsidiary Stock ............................................. 35
4.14 Limitation on Transactions with
Affiliates ................................................... 38
4.15 Change of Control ............................................... 38
4.16 Limitation on Dividends and Other Payment
Restrictions Affecting Subsidiaries .......................... 40
4.17 Limitation on Issuance of Preferred Stock
by Subsidiaries .............................................. 41
4.18 Special Covenants of Each Guarantor ............................. 41
4.19 Additional Guarantors ........................................... 42
4.20 Limitation on Investments, Loans and
Advances ..................................................... 42
4.21 Limitation on Sale-Leaseback Transactions ....................... 42
4.22 Waiver of Stay, Extension or Usury Laws ......................... 43
ARTICLE V
SUCCESSOR CORPORATION
5.1 When Company May Merge, Etc ..................................... 43
5.2 Successor Entity Substituted .................................... 45
ARTICLE VI
DEFAULT AND REMEDIES
6.1 Events of Default ............................................... 45
6.2 Acceleration .................................................... 47
6.3 Other Remedies .................................................. 47
6.4 Waiver of Past Default .......................................... 48
6.5 Control by Majority ............................................. 48
</TABLE>
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6.6 Limitation on Suits ............................................. 48
6.7 Rights of Holders To Receive Payment ............................ 49
6.8 Collection Suit by Trustee ...................................... 49
6.9 Trustee May File Proofs of Claim ................................ 49
6.10 Priorities ...................................................... 50
6.11 Undertaking for Costs ........................................... 51
ARTICLE VII
TRUSTEE
7.1 Duties of Trustee ............................................... 51
7.2 Rights of Trustee ............................................... 52
7.3 Individual Rights of Trustee .................................... 53
7.4 Trustee's Disclaimer ............................................ 54
7.5 Notice of Defaults .............................................. 54
7.6 Reports by Trustee to Holders ................................... 54
7.7 Compensation and Indemnity ...................................... 54
7.8 Replacement of Trustee .......................................... 55
7.9 Successor Trustee by Merger, Etc ................................ 57
7.10 Eligibility; Disqualification ................................... 57
7.11 Preferential Collection of Claims Against
Company ...................................................... 57
ARTICLE VIII
DISCHARGE OF INDENTURE; DEFEASANCE
8.1 Termination of Company's Obligations ............................ 57
8.2 Legal Defeasance and Covenant Defeasance ........................ 59
8.3 Application of Trust Money ...................................... 63
8.4 Repayment to Company or Guarantors .............................. 63
8.5 Reinstatement ................................................... 64
ARTICLE IX
AMENDMENTS, SUPPLEMENTS AND WAIVERS
9.1 Without Consent of Holders ...................................... 64
9.2 With Consent of Holders ......................................... 65
9.3 Compliance with Trust Indenture Act ............................. 66
9.4 Revocation and Effect of Consents ............................... 66
9.5 Notation on or Exchange of Securities ........................... 67
9.6 Trustee To Sign Amendments, Etc ................................. 67
ARTICLE X
GUARANTEE ARRANGEMENTS
10.1 Guarantee ....................................................... 68
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10.2 Execution and Delivery of Guarantee ............................ 69
10.3 Release of a Guarantor ......................................... 70
10.4 Limitation of Guarantee ........................................ 70
ARTICLE XI
MISCELLANEOUS
11.1 Trust Indenture Act Controls ................................... 71
11.2 Notices ........................................................ 71
11.3 Communications by Holders with Other
Holders ..................................................... 72
11.4 Certificate and Opinion of Counsel as to
Conditions Precedent ........................................ 72
11.5 Statements Required in Certificate and
Opinion of Counsel .......................................... 72
11.6 Rules by Trustee, Paying Agent,
Registrar ................................................... 73
11.7 Legal Holidays ................................................. 73
11.8 Governing Law .................................................. 73
11.9 No Recourse Against Others ..................................... 73
11.10 Successors ..................................................... 73
11.11 Duplicate Originals ............................................ 74
11.12 Separability ................................................... 74
11.13 Table of Contents, Headings, Etc ............................... 74
SIGNATURES .............................................................. 75
EXHIBIT A - Form of Security ............................................ A-1
EXHIBIT B - Form of Legend for Book - Entry
Securities ............................................................ B-1
</TABLE>
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<PAGE> 7
INDENTURE dated as of , 1996, among RENCO METALS, INC., a
Delaware corporation, as issuer (the "Company"), MAGNESIUM CORPORATION OF
AMERICA, a Delaware corporation, as Guarantor ("MagCorp" or a "Guarantor"),
SABEL INDUSTRIES, INC., an Alabama corporation, as Guarantor ("Sabel" or a
"Guarantor"), and FLEET NATIONAL BANK, [a national banking association], as
Trustee (the "Trustee").
The Company and the Guarantors have duly authorized the
execution and delivery of this Indenture to provide for the issuance of the
Securities (as hereinafter defined) to be issued as provided for in this
Indenture and the related Guarantees (as hereinafter defined) of MagCorp and
Sabel.
The parties hereto agree as follows for the benefit of each
other and for the equal and ratable benefit of the Holders (as hereinafter
defined) of the Securities:
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.1 Definitions.
"Acquired Indebtedness" means Indebtedness of a Person
existing at the time such Person becomes a Subsidiary of the Company or assumed
in connection with an Asset Acquisition of such Person, including, without
limitation, Indebtedness incurred in connection with, or in anticipation of,
such Person's becoming a Subsidiary of the Company or such acquisition.
"Affiliate" of any specified Person means any other Person
which, directly or indirectly, controls, is controlled by or is under direct or
indirect common control with such specified Person. 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.
"Affiliate Transaction" has the meaning provided in
Section 4.14.
"Agent" means any Registrar or Paying Agent.
"Asset Acquisition" means (i) any capital contribution (by
means of transfers of cash or other property to others or payments for property
or services for the account or use of
<PAGE> 8
-2-
others, or otherwise) or purchase or acquisition of Capital Stock by the Company
or any of its Subsidiaries to or in any other Person, in either case as a result
of which such Person shall become a Subsidiary of the Company or any of its
Subsidiaries or shall be merged with or into the Company or any of its
Subsidiaries or (ii) any acquisition by the Company or any of its Subsidiaries
of the assets of any Person which constitute substantially all of an operating
unit or business of such Person.
"Asset Sale" means any direct or indirect sale, conveyance,
transfer, lease (including by means of sale-leaseback) or other disposition to
any Person other than the Company or a Subsidiary of the Company, in one
transaction or a series of related transactions, of (i) any Capital Stock of any
Subsidiary of the Company or (ii) any other property or asset of the Company or
any Subsidiary of the Company, in each case other than in the ordinary course of
business and other than isolated transactions which do not exceed $250,000
individually. For the purposes of this definition, the term "Asset Sale" shall
not include sales of receivables not a part of a sale of the business from which
they arose or any disposition of all or substantially all of the properties and
assets of the Company that is governed under and complies with the requirements
set forth in Section 5.1.
"Asset Sale Offer" has the meaning provided in Section
4.13(a).
"Asset Sale Purchase Date" has the meaning provided in
Section 4.13(a).
"Available Amount" has the meaning provided in Section
4.13(a).
"Bankruptcy Law" means Title 11 of the U.S. Code or any
similar federal or state law for the relief of debtors.
"Base Period" has the meaning provided in Section
4.12(a)(ii).
"Board of Directors" means the Board of Directors of the
Company or a Guarantor, as appropriate, or any committee of such Board of
Directors authorized to act for it hereunder.
"Board Resolution" means a copy of a resolution certified by
the Secretary or an Assistant Secretary of the Company or a Guarantor, as
appropriate, to have been duly adopted by the Board of Directors of the Company
or a Guarantor, as
<PAGE> 9
-3-
appropriate, and to be in full force and effect on the date of such
certification and delivered to the Trustee.
"Book-Entry Security" means a Security represented by a Global
Security and registered in the name of the nominee of the Depository.
"Business Day" means any day except a Saturday, a Sunday or
any day on which banking institutions in New York, New York or the city in which
the principal corporate trust office of the Trustee are required or authorized
by law or other governmental action to be closed.
"Capital Stock" means, with respect to any Person, any and all
shares, interests, participations, rights in, or other equivalents (however
designated and whether voting or non-voting) of such Person's capital stock,
whether outstanding on the Issue Date or issued after the Issue Date, and any
and all rights, warrants or options exchangeable for or convertible into such
capital stock.
"Capitalized Lease Obligation" means any obligation to pay
rent or other amounts under a lease of (or other agreement conveying the right
to use) any property (whether real, personal or mixed) that is required to be
classified and accounted for as a capital lease obligation under GAAP, and, for
the purposes of this Indenture, the amount of such obligation at any date shall
be the capitalized amount thereof at such date, determined in accordance with
GAAP.
"Cash Equivalents" means, at any time, (i) any evidence of
Indebtedness with a maturity of 180 days or less issued or directly and fully
guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States of America is pledged in support thereof); (ii) certificates of deposit
or acceptances with a maturity of 180 days or less of any financial institution
that is a member of the Federal Reserve System having combined capital and
surplus and undivided profits of not less than $250,000,000; (iii) commercial
paper with a maturity of 180 days or less issued by a corporation (except an
Affiliate of the Company) organized under the laws of any state of the United
States or the District of Columbia and rated at least A-1 by Standard & Poor's
Ratings Group or at least P-1 by Moody's Investors Service, Inc.; and (iv)
repurchase agreements and reverse repurchase agreements relating to marketable
direct obligations issued or unconditionally guaranteed by the United States of
America or issued by any agency thereof and backed by the full faith and credit
of the United States, in each case
<PAGE> 10
-4-
maturing within one year from the date of acquisition; provided, however, that
the terms of such agreements comply with the guidelines set forth in the Federal
Financial Agreements of Depository Institutions with Securities Dealers and
Others, as adopted by the Comptroller of the Currency.
"Change of Control" means (i) the direct or indirect sale,
lease, exchange or other transfer of all or substantially all of the assets of
the Company or Renco to any Person or entity or group of Persons or entities
acting in concert as a partnership or other group (a "Group of Persons") other
than an Affiliate of the Company, (ii) the merger or consolidation of the
Company or Renco with or into another corporation with the effect that the then
existing shareholders of the Company or Renco, as the case may be, hold less
than 50% of the combined voting power of the then outstanding securities of the
surviving corporation of such merger or the corporation resulting from such
consolidation ordinarily (and apart from rights arising under special
circumstances) having the right to vote in the election of directors, (iii) the
replacement of a majority of the Board of Directors of Renco, over a two-year
period, from the directors who constituted the Board of Directors at the
beginning of such period, and such replacement shall not have been approved by a
vote of at least a majority of the Board of Directors then still in office who
either were members of the Board of Directors at the beginning of such period or
whose election as a member of the Board of Directors was previously so approved,
or (iv) a Person or Group of Persons (other than Renco and its Affiliates)
shall, as a result of a tender or exchange offer, open market purchases,
privately negotiated purchases or otherwise, have become the direct or indirect
beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act) of
securities of the Company or Renco representing 50% or more of the combined
voting power of the then outstanding securities of the Company or Renco
ordinarily (and apart from rights accruing under special circumstances) having
the right to vote in the election of directors.
"Change of Control Date" has the meaning provided in Section
4.15.
"Change of Control Offer" has the meaning provided in Section
4.15.
"Change of Control Payment Date" has the meaning provided in
Section 4.15.
"Common Stock" means, with respect to any Person, any and all
shares, interests or other participations in, and other
<PAGE> 11
-5-
equivalents (however designated and whether voting or nonvoting) 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.
"Company" 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 the successor.
"Consolidated Cash Flow" means, with respect to any Person for
any period, the Consolidated Net Income of such Person for such period increased
(to the extent deducted in determining Consolidated Net Income) by the sum of:
(i) all United States Federal, state and foreign income taxes of such Person
paid or accrued according to GAAP for such period (other than income taxes
attributable to extraordinary, unusual or non-recurring gains or losses); (ii)
all interest expense of such Person paid or accrued in accordance with GAAP (net
of any interest income) for such period (including amortization of original
issue discount and the interest portion of deferred payment obligations); (iii)
depreciation and depletion; (iv) amortization including, without limitation,
amortization of capitalized debt issuance costs; and (v) any other non-cash
charges to the extent deducted from Consolidated Net Income (including non-cash
expenses recognized in accordance with Financial Accounting Standards Bulletin
Number 106).
"Consolidated Net Income" means, with respect to any Person
for any period, the aggregate of the Net Income of such Person and its
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP; provided, however, that (a) the Net Income of any Person (the "Other
Person") in which the Person in question or one of its Subsidiaries has a joint
interest with a third party (which interest does not allow the net income of
such Other Person to be consolidated into the net income of the Person in
question in accordance with GAAP) shall be included only to the extent of the
amount of dividends or distributions paid to the Person in question or the
Subsidiary, (b) the Net Income of any Subsidiary of the Person in question that
is subject to any contractual restriction or limitation on the payment of
dividends or the making of other distributions shall be excluded to the extent
of such restriction or limitation, (c)(i) the Net Income (or loss) of any Person
acquired in a pooling of interests transaction for any period prior to the date
of such acquisition and (ii) any net gain (but not loss) resulting from an Asset
Sale by the Person in question or any of its Subsidiaries other than in the
ordinary course of
<PAGE> 12
-6-
business shall be excluded and (d) extraordinary gains and losses shall be
excluded.
"Consolidated Net Worth" means, with respect to any Person at
any date of determination, the consolidated stockholders' equity represented by
the shares of such Person's Capital Stock (other than Disqualified Stock)
outstanding at such date, as determined on a consolidated basis in accordance
with GAAP.
"Credit Facilities" means (i) the revolving credit facility as
in effect as of the Issue Date between MagCorp and Congress Financial
Corporation and (ii) the revolving credit facility as in effect as of the Issue
Date between Sabel and Congress Financial Corporation, in each case as the same
may at any time be amended, amended and restated, supplemented or otherwise
modified, including any refinancing, refunding, replacement or extension thereof
and whether by the same or any other lender or group of lenders.
"Custodian" has the meaning provided in Section 6.1(b).
"Default" means any event that is, or after notice or passage
of time or both would be, an Event of Default.
"Depository" means, with respect to the Securities issued in
the form of one or more Book-Entry Securities, The Depository Trust Company or
another person designated as Depository by the Company, which must be a clearing
agency registered under the Exchange Act.
"Disqualified Stock" means, with respect to any Person, any
Capital Stock of such Person which, by its terms (or by the terms of any
security into which it is convertible or for which it is exchangeable), or upon
the happening of any event, matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or is exchangeable for Indebtedness, or is
redeemable at the option of the holder thereof, in whole or in part, in each
case on or prior to the final Maturity Date of the Securities.
"Event of Default" has the meaning provided in Section 6.1.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended and the rules and regulations promulgated thereunder.
<PAGE> 13
-7-
"Existing Notes" means the 12% Senior Notes due 2000 issued,
authenticated and delivered under the indenture, dated as of August 1, 1993,
among the Company, the Guarantors and the Trustee, as amended or supplemented
from time to time pursuant to the terms of such indenture.
"Fair Market Value" or "fair value" means, with respect to any
asset or property, the price which could be negotiated in an arm's length free
market transaction, for cash, between a willing seller and a willing buyer,
neither of whom is under undue pressure or compulsion to complete the
transaction. Fair Market Value shall be determined by the Board of Directors of
the Company acting in good faith and shall be evidenced by a Board Resolution
delivered to the Trustee.
"Fixed Charge Coverage Ratio" means, with respect to any
Person, the ratio of (i) Consolidated Cash Flow of such Person for the four full
fiscal quarters for which financial statements are available that immediately
precede the date of the transaction or other circumstances giving rise to the
need to calculate the Fixed Charge Coverage Ratio (the "Transaction Date") to
(ii) all cash and non-cash interest expense (including capitalized interest) of
such Person and its Subsidiaries determined in accordance with GAAP (net of any
interest income of such Person and its Subsidiaries and exclusive of deferred
financing fees of such Person and its Subsidiaries) and the aggregate amount of
cash dividends or other distributions declared or paid on Capital Stock (other
than Common Stock) of such Person and its Subsidiaries, in each case for such
four full fiscal quarter period. For purposes of this definition, if the
Transaction Date occurs prior to the date on which the Company's consolidated
financial statements for the four full fiscal quarters subsequent to the Issue
Date are first available, then "Consolidated Cash Flow" and the items referred
to in the preceding clause (ii) shall be calculated, in the case of the Company,
after giving effect on a pro forma basis as if the Securities outstanding on the
Transaction Date were issued on the first day of such four full fiscal quarter
period. In addition to and without limitation of the foregoing two sentences,
for purposes of this definition, "Consolidated Cash Flow" and the items referred
to in the preceding clause (ii) shall be calculated after giving effect on a pro
forma basis for the period of such calculation to (i) the Incurrence or
repayment of any Indebtedness of such Person or any of its Subsidiaries (other
than Indebtedness for working capital) at any time during the period (the
"Reference Period") (A) commencing on the first day of the four full fiscal
quarter period for which financial statements are available that precedes the
Transaction Date and (B) ending on and including the Transaction Date,
including,
<PAGE> 14
-8-
without limitation, the Incurrence or repayment of the Indebtedness giving rise
to the need to make such calculation, as if such Incurrence or repayment
occurred on the first day of the Reference Period; provided that if such Person
or any of its Subsidiaries directly or indirectly guarantees Indebtedness of a
third Person, the above clause shall give effect to the Incurrence of such
guaranteed Indebtedness as if such Person or Subsidiary had directly Incurred
such guaranteed Indebtedness and (ii) any Asset Sales or Asset Acquisitions
(including, without limitation, any Asset Acquisition giving rise to the need to
make such calculation as a result of the Company or any of its Subsidiaries
(including any Person who becomes a Subsidiary as a result of the Asset
Acquisition) incurring Acquired Indebtedness) occurring during the Reference
Period and any retirement of Indebtedness in connection with such Asset Sales,
as if such Asset Sale or Asset Acquisition and/or retirement occurred on the
first day of the Reference Period. Furthermore, in calculating the denominator
(but not the numerator) of this "Fixed Charge Coverage Ratio," (1) subject to
clause (3) below, interest on Indebtedness determined on a fluctuating basis as
of the Transaction Date and which will continue to be so determined thereafter
shall be deemed to accrue at a fixed rate per annum equal to the rate of
interest on such Indebtedness in effect on the Transaction Date; (2) if interest
on any Indebtedness actually incurred on the Transaction Date may optionally be
determined at an interest rate based upon a factor of a prime or similar rate, a
eurocurrency interbank offered rate, or other rates, then the interest rate
based upon a factor of a prime or similar rate shall be deemed to have been in
effect; and (3) notwithstanding clause (1) above, interest on Indebtedness
determined on a fluctuating basis, to the extent such interest is covered by
agreements relating to Interest Rate Protection Obligations, shall be deemed to
accrue at the rate per annum resulting after giving effect to the operation of
such agreements.
"GAAP" means generally accepted accounting principles in
effect on the Issue Date 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.
"Global Security" means a Security evidencing all or a part of
the Securities to be issued as Book-Entry Securities, issued to the Depository
in accordance with Section 2.2 and bearing the legend prescribed in Exhibit B.
<PAGE> 15
-9-
"Guarantee" means the guarantee of each Guarantor set
forth in Article X.
"Guarantor" means (i) each of the Company's Subsidiaries
executing this Indenture and (ii) each of the Company's Subsidiaries which
becomes a guarantor of the Securities pursuant to Section 4.19.
"Holder" or "Securityholder" means the Person in whose name a
Security is registered on the Registrar's books.
"Incur" means, with respect to any Indebtedness, to incur,
create, issue, assume, guarantee or otherwise become liable for or with respect
to the payment of, contingently or otherwise, such Indebtedness; provided that
neither the accrual of interest nor the accretion of original issue discount
shall be considered an Incurrence of Indebtedness.
"Indebtedness" means, with respect to any Person, without
duplication, (i) any liability, contingent or otherwise, of such Person (A) for
borrowed money (whether or not the recourse of the lender is to the whole of the
assets of such Person or only to a portion thereof), (B) evidenced by a note,
debenture or similar instrument, letter of credit or draft accepted (including a
purchase money obligation) representing extensions of credit whether or not
representing obligations for borrowed money or (C) for the payment of money
relating to a Capitalized Lease Obligation or other obligation relating to the
deferred purchase price of any property or services (other than property or
services purchased on ordinary trade terms therefor) which purchase price is
payable over a period in excess of six months or is evidenced by a note, invoice
or similar written instrument with a maturity in excess of six months; (ii) any
liability of others of the kind described in the preceding clause (i) which the
Person has guaranteed or which is otherwise its legal liability; (iii) any
obligation secured by a lien to which the property or assets of such Person are
subject, whether or not the obligations secured thereby shall have been assumed
by or shall otherwise be such Person's legal liability; and (iv) any and all
deferrals, renewals, extensions, replacements, refinancings, and refundings of,
or amendments, modifications or supplements to, any liability of the kind
described in any of the preceding clauses (i), (ii) or (iii).
"Indenture" means this Indenture as amended or supplemented
from time to time pursuant to the terms hereof.
"interest," when used with respect to any Security, means the
amount of all interest accruing on such Security,
<PAGE> 16
-10-
including all interest accruing subsequent to the occurrence of any events
specified in Sections 6.1(a)(vii) and (viii) or which would have accrued but for
any such event.
"Interest Payment Date," when used with respect to any
Security, means the stated maturity of an installment of interest specified in
such Security.
"Interest Rate," when used with respect to any Security, means
the rate per annum specified in such Security as the rate of interest accruing
on the principal amount of such Security.
"Interest Rate Protection Obligations" means the obligations
of any Person pursuant to any arrangement with any other Person whereby,
directly or indirectly, such Person is entitled to receive from time to time
periodic payments calculated by applying either a floating or a fixed rate of
interest on a stated notional amount in exchange for periodic payments made by
such Person calculated by applying a fixed or a floating rate of interest on the
same notional amount and shall include, without limitation, interest rate swaps,
caps, floors, collars and similar agreements.
"Investment" has the meaning provided in Section 4.20.
"Issue Date" means the date on which the Securities were
originally issued in accordance with the terms of this Indenture.
"Legal Holiday" means any day other than a Business Day.
"Lien" means any mortgage, lien (statutory or other), pledge,
security interest, encumbrance, hypothecation, assignment for security or other
security agreement of any kind or nature whatsoever. For purposes of this
Indenture, a Person 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 Indebtedness of such Person.
"Maturity Date," when used with respect to any Security, means
the date specified in such Security as the fixed date on which the principal of
such Security is due and payable.
"Net Cash Proceeds" means, with respect to any Asset Sale, the
proceeds thereof in the form of cash or Cash
<PAGE> 17
-11-
Equivalents, including payments in respect of deferred payment obligations when
received in the form of cash or Cash Equivalents (except to the extent that such
obligations with respect to Indebtedness are financed or sold with recourse to
the Company or any of its Subsidiaries), net of (i) brokerage commissions and
other reasonable fees and expenses (including fees and expenses of counsel and
investment bankers) related to such Asset Sale; (ii) provisions for all taxes
payable as a result of such Asset Sale; (iii) payments made to retire
Indebtedness secured by the assets subject to such Asset Sale (including
retirements of Indebtedness under the Credit Facilities) to the extent required
pursuant to the terms of such Indebtedness; and (iv) appropriate amounts to be
provided by the Company or any of its Subsidiaries, as the case may be, as a
reserve, in accordance with GAAP, against any liabilities associated with such
Asset Sale and retained by the Company or any of its Subsidiaries, 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 Income" means, with respect to any Person for any period,
the net income (loss) of such Person determined in accordance with GAAP.
"Net Proceeds" means (a) in the case of any sale of Capital
Stock (other than Disqualified Stock) by the Company, the aggregate net proceeds
received by the Company, after payment of expenses, commissions and the like
incurred in connection therewith, whether such proceeds are in cash or in
property (valued at the Fair Market Value thereof, as determined in good faith
by the Board of Directors of the Company, at the time of receipt), (b) in the
case of any exchange, exercise, conversion or surrender of outstanding
securities of any kind of the Company for or into shares of Capital Stock of the
Company which is not Disqualified Stock, the net book value of such outstanding
securities on the date of such exchange, exercise, conversion or surrender (plus
any additional amount required to be paid by the holder to the Company upon such
exchange, exercise, conversion or surrender, less any and all payments made to
the holders, e.g., on account of fractional shares, and less all expenses
incurred by the Company in connection therewith) and (c) in the case of the
issuance of any Indebtedness by the Company, the aggregate net cash proceeds
received by the Company, after payment of expenses, commissions and the like
incurred therewith.
"Officer" means the Chairman, the President, the Chief
Executive Officer, any Vice President, the Chief Financial
<PAGE> 18
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Officer, the Treasurer, the Secretary or the Controller of the Company or a
Guarantor, as the case may be.
"Officers' Certificate" means a certificate signed by two
Officers or by an Officer and an Assistant Treasurer or Assistant Secretary of
the Company or a Guarantor, as the case may be.
"Opinion of Counsel" means a written opinion from legal
counsel both of which are acceptable to the Trustee, which may include counsel
to the Company or a Guarantor, as the case may be.
"Paying Agent" has the meaning provided in Section 2.3.
"Permitted Liens" means, with respect to any Person, any lien
arising by reason of (a) any attachment, judgment, decree or order of any court,
so long as such lien is being contested in good faith and is either adequately
bonded or execution thereon has been stayed pending appeal or review, and any
appropriate legal proceedings which may have been duly initiated for the review
of such attachment, judgment, decree or order shall not have been finally
terminated or the period within which such proceedings may be initiated shall
not have expired; (b) taxes, assessments or governmental charges not yet
delinquent or which are being contested in good faith; (c) security for payment
of workers' compensation or other insurance; (d) security for the performance of
tenders, bids, leases and contracts (other than contracts for the payment of
money); (e) deposits to secure public or statutory obligations or in lieu of
surety or appeal bonds or to secure permitted contracts for the purchase or sale
of any currency entered into in the ordinary course of business; (f) operation
of law in favor of carriers, warehousemen, landlords, mechanics, materialmen,
laborers, employees or suppliers, incurred in the ordinary course of business
for sums which are not yet delinquent or are being contested in good faith by
negotiations or by appropriate proceedings which suspend the collection thereof;
(g) any interest or title of a lessor under any lease; (h) security for surety
or appeal bonds; and (i) easements, rights-of-way, zoning and similar covenants
and restrictions and other similar encumbrances or title defects which, in the
aggregate, are not substantial in amount and which do not in any case materially
interfere with the ordinary conduct of the business of the Company or any of its
Subsidiaries.
"Person" means any individual, corporation, partnership, joint
venture, trust, unincorporated organization or government or any agency or
political subdivision thereof.
<PAGE> 19
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"principal" of a debt security means the principal amount of
the security plus, when appropriate, the premium, if any, on the security.
"Public Equity Offerings" has the meaning provided in Section
3.1.
"Redemption Date" means, with respect to any Security, the
Maturity Date of such Security or the date on which such Security is to be
redeemed by the Company pursuant to Section 3.1.
"Registrar" has the meaning provided in Section 2.3.
"Renco" means The Renco Group, Inc., a New York corporation
and the parent of the Company.
"Required Filing Date" has the meaning provided in Section
4.8.
"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 (x) dividends or
distributions payable solely in Capital Stock (other than Disqualified Stock) or
in options, warrants or other rights to purchase Capital Stock (other than
Disqualified Stock), and (y) 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 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 which is subordinated in right of payment to the Securities (other
than Indebtedness acquired in anticipation of satisfying a sinking fund
obligation, principal installment or final maturity, in each case due within one
year of the date of acquisition) and (iv) the making of any Investment in any
Person other than pursuant to clauses (i) through (vii) of Section 4.20.
"Sale-Leaseback Transaction" means any arrangement with any
Person providing for the leasing by the Company or any Subsidiary of the Company
of any real or tangible personal property, which property has been or is to be
sold or transferred by the
<PAGE> 20
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Company or such Subsidiary to such Person in contemplation of such leasing.
"SEC" means the Securities and Exchange Commission.
"Securities" means the __% Senior Notes due 2003, issued,
authenticated and delivered under this Indenture, as amended or supplemented
from time to time pursuant to the terms of this Indenture.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
"Subsidiary" means, with respect to any Person, (i) any
corporation of which the outstanding Capital Stock having at least a majority of
the votes entitled to be cast in the election of directors shall at the time be
owned, directly or indirectly, by such Person, by a Subsidiary of such Person or
by such Person and a Subsidiary of such Person, or (ii) any other Person (other
than a corporation) of which at least a majority of voting interest is at the
time, directly or indirectly, owned by such Person, by a Subsidiary of such
Person or by such Person and a Subsidiary of such Person.
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code
Sections 77aaa-77bbbb), as amended by the Trust Indenture Reform Act of 1990, as
in effect on the date of this Indenture.
"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 an officer or assistant officer of the
Trustee assigned to the Corporate Trustee Administration Department or similar
department performing corporate trust work, or any successor to such department
or, in the case of a successor trustee, an officer assigned to the department,
division or group performing the corporate trust work of such successor and also
means with respect to any particular corporate trust matter any other officer of
the Trustee to whom such matter is referred because of his knowledge of and
familiarity with the particular subject.
"U.S. Government Obligations" has the meaning provided in
Section 8.1(b).
"Wholly-Owned Subsidiary" means any Subsidiary all of the
outstanding Capital Stock of which (other than directors'
<PAGE> 21
-15-
qualifying shares) is owned, directly or indirectly, by the Company.
SECTION 1.2 Incorporation by Reference
of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the
provision shall be deemed incorporated by reference in and made a part of this
Indenture. The following TIA terms used in this Indenture have the following
meanings:
(a) "Commission" means the SEC;
(b) "indenture securities" means the Securities;
(c) "indenture security holder" means a Holder or
Securityholder;
(d) "indenture to be qualified" means this Indenture;
(e) "indenture trustee" or "institutional trustee"
means the Trustee; and
(f) "obligor" on the indenture securities means the
Company and the Guarantors 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 SEC rule and
not otherwise defined herein have the meanings so assigned to them therein.
SECTION 1.3 Rules of Construction.
Unless the context otherwise requires:
(a) a term has the meaning assigned to it;
(b) "or" is exclusive;
(c) words in the singular include the plural, and
words in the plural include the singular;
(d) "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; and
(e) unless otherwise specified herein, all accounting
terms used herein shall be interpreted, all accounting
<PAGE> 22
-16-
determinations hereunder shall be made, and all financial statements
required to be delivered hereunder shall be prepared in accordance with
GAAP as in effect from time to time, applied on a basis consistent with
the most recent audited consolidated financial statements of the
Company.
ARTICLE II
THE SECURITIES
SECTION 2.1 Form and Dating.
The Securities and the Trustee's certificates of
authentication with respect thereto shall be substantially in the form set forth
in Exhibit A annexed hereto, which is hereby incorporated in and expressly made
a part of this Indenture. The Securities may have notations, legends or
endorsements required by law, rule, usage or agreement to which the Company or
any Guarantor is subject. Each Security shall be dated the date of its
authentication. The terms and provisions contained in the Securities shall
constitute, and are expressly made, a part of this Indenture.
SECTION 2.2 Execution and Authentication.
Two Officers shall execute the Securities on behalf of the
Company by either manual or facsimile signature. The Company's seal shall be
impressed, affixed, imprinted or reproduced on the Securities.
If an Officer whose signature is on a Security no longer holds
that office at the time the Trustee authenticates the Security or at any time
thereafter, the Security shall be valid nevertheless.
A Security shall not be valid until an authorized signatory of
the Trustee manually signs the certificate of authentication on the Security.
Such signature shall be conclusive evidence that the Security has been
authenticated under this Indenture.
The Trustee shall authenticate Securities for original issue
in an aggregate principal amount not to exceed $150,000,000, upon receipt of an
Officers' Certificate signed by two Officers directing the Trustee to
authenticate the Securities and certifying that all conditions precedent to the
issuance of the Securities contained herein have been complied with. The
aggregate principal amount of Securities outstanding at any time may not exceed
$150,000,000 except as provided in Section 2.7.
<PAGE> 23
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The Trustee may appoint an authenticating agent acceptable to
the Company to authenticate Securities. Unless limited by the terms of such
appointment, an 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. Such authenticating agent shall
have the same rights as the Trustee in any dealings hereunder with the Company
or with any Affiliate of the Company.
If the Securities are to be issued in the form of one or more
Global Securities, then the Company shall execute and the Trustee shall
authenticate and deliver one or more Global Securities that (i) shall represent
and shall be in minimum denominations of $1,000, (ii) shall be registered in the
name of the Depository for such Global Security or Securities or the nominee of
such Depository, (iii) shall be delivered by the Trustee to such Depository or
pursuant to such Depository's instructions and (iv) shall bear the legend set
forth in Exhibit B.
SECTION 2.3 Registrar and Paying Agent.
The Company shall maintain an office or agency (which shall be
located in the Borough of Manhattan in the City of New York, State of New York)
where Securities may be presented for registration of transfer or for exchange
(the "Registrar"), an office or agency (which shall be located in the Borough of
Manhattan, City of New York, State of New York) where Securities may be
presented for payment (the "Paying Agent") and an office or agency where notices
and demands to or upon the Company in respect of the Securities and this
Indenture may be served. The Registrar shall keep a register of the Securities
and of their transfer and exchange. The Company may have one or more additional
paying agents. The term "Paying Agent" includes any additional paying agent.
None of the Company, any Guarantor or any Affiliate of the Company or any
Guarantor may act as Paying Agent.
The Company shall enter into an appropriate agency agreement
with any Agent not a party to this Indenture, which shall incorporate the
provisions of the TIA. The agreement shall implement the provisions of this
Indenture that relate to such Agent. The Company shall notify the Trustee in
writing of the name and address of any such Agent. If the Company fails to
maintain a Registrar or Paying Agent, or fails to give the foregoing notice, the
Trustee shall act as such and shall be entitled to appropriate compensation in
accordance with Section 7.7.
<PAGE> 24
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The Company initially appoints the Trustee as Registrar,
Paying Agent and agent for service of notices and demands in connection with the
Securities.
SECTION 2.4 Paying Agent To Hold Money in Trust.
Each Paying Agent shall hold in trust for the benefit of the
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 notify the Trustee of any default by the
Company (or any other obligor on the Securities) in making any such payment.
Money held in trust by the Paying Agent need not be segregated except as
required by law and in no event shall the Paying Agent be liable for any
interest on any money received by it hereunder. The Company at any time may
require the 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 Event of Default specified in Section 6.1(a)(i) or (ii), upon written
request to the Paying Agent, require such Paying Agent to pay forthwith all
money so 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 2.5 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 the 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 the Securityholders.
SECTION 2.6 Transfer and Exchange.
When Securities in certificated form are presented to the
Registrar with a request from the Holder of such Securities 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; provided that every Security presented or
surrendered for registration of transfer or exchange shall be duly endorsed 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 his attorneys
duly authorized in writing.
<PAGE> 25
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To permit registrations of transfers and exchanges, the Company shall issue and
execute, and the Trustee shall authenticate new Securities evidencing such
transfer or exchange at the Registrar's request. No service charge shall be made
to the Securityholder for any registration of transfer or exchange. The Company
may require from the Securityholder payment of a sum sufficient to cover any
transfer taxes or other governmental charge that may be imposed in relation to a
transfer or exchange, but this provision shall not apply to any exchange
pursuant to Sections 2.10, 3.7, 4.13, 4.15 or 9.5 (in which events the Company
will be responsible for the payment of such taxes). The Trustee shall not be
required to exchange or register a transfer of any Security for a period of 15
days immediately preceding the first mailing of notice of redemption of
Securities to be redeemed or of any Security selected, called or being called
for redemption except, in the case of any Security where public notice has been
given that such Security is to be redeemed in part, the portion thereof not to
be redeemed.
In accordance with the provisions of the Indenture and subject
to certain limitations herein set forth, an owner of a beneficial interest in a
Global Security may request a Security in certificated form, in exchange in
whole or in part, as the case may be, for such beneficial owner's interest in
the Global Security.
Upon any exchange provided for in the preceding paragraph, the
Company shall execute and the Trustee shall authenticate and deliver to the
person specified by the Depository a new Security or Securities registered in
such names and in such authorized denominations as the Depository, pursuant to
the instructions of the beneficial owner of the Securities requesting the
exchange, shall instruct the Trustee. Thereupon, the beneficial ownership of
such Global Security shown on the records maintained by the Depository or its
nominee shall be reduced by the amounts so exchanged and an appropriate
endorsement shall be made by or on behalf of the Trustee on the Global Security.
Any such exchange shall be effected through the Depository in
accordance with the procedures of the Depository therefor.
Notwithstanding the foregoing, no Global Security shall be
registered for transfer or exchange, or authenticated and delivered, whether
pursuant to this Section, Section 2.7, 2.10 or 3.7 or otherwise, in the name of
a person other than the Depository for such Global Security or its nominee until
(i) the Depository notifies the Company that it is unwilling or unable to
continue as Depository for such Global Security or if at any time
<PAGE> 26
-20-
the Depository ceases to be a clearing agency registered under the Exchange Act,
and a successor depository is not appointed by the Company within 30 days, (ii)
the Company executes and delivers to the Trustee a Company order that all such
Global Securities shall be exchangeable or (iii) there shall have occurred and
be continuing an Event of Default. Upon the occurrence in respect of any Global
Security representing the Securities of any one or more of the conditions
specified in clause (i), (ii) or (iii) of the preceding sentence, such Global
Security may be registered for transfer or exchange for Securities registered in
the names of, authenticated and delivered to, such persons as the Trustee or the
Depository, as the case may be, shall direct.
Except as provided above, any Security authenticated and
delivered upon registration of transfer of, or in exchange for, or in lieu of,
any Global Security, whether pursuant to this Section, Section 2.7, 2.10 or 3.7
or otherwise, shall also be a Global Security and bear the legend specified in
Exhibit B.
SECTION 2.7 Replacement Securities.
If a mutilated Security is surrendered to the Registrar or the
Trustee or if the Holder of a Security claims that the Security has been lost,
destroyed or wrongfully taken, the Company shall issue and the Trustee shall
authenticate a replacement Security if the Holder of such Security furnishes to
the Company and to the Trustee evidence reasonably acceptable to them of the
ownership and the destruction, loss or theft of such Security. If required by
the Trustee or the Company, an indemnity bond shall be posted, sufficient in the
judgment of both to protect the Company, the Trustee or any Paying Agent from
any loss that any of them may suffer if such Security is replaced. The Company
may charge such Holder for the Company's expenses in replacing such Security and
the Trustee may charge the Company for the Trustee's expenses in replacing such
Security. Every replacement Security shall constitute an additional obligation
of the Company.
SECTION 2.8 Outstanding Securities.
The Securities outstanding at any time are all Securities that
have been authenticated by the Trustee except for (a) those cancelled by it, (b)
those delivered to it for cancellation, (c) to the extent set forth in Sections
8.1 and 8.2, on or after the date on which the conditions set forth in Section
8.1 or 8.2 have been satisfied, those Securities theretofore authenticated and
delivered by the Trustee hereunder and (d) those described in this Section 2.8
as not outstanding.
<PAGE> 27
-21-
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 2.7, it ceases
to be outstanding unless the Trustee receives proof satisfactory to it that the
replaced Security is held by a bona fide purchaser in whose hands such Security
is a legal, valid and binding obligation of the Company.
If the Paying Agent holds, in its capacity as such, on any
Maturity Date or on any optional redemption date, money sufficient to pay all
accrued interest and principal with respect to such Securities payable on that
date and is not prohibited from paying such money to the Holders thereof
pursuant to the terms of this Indenture, then on and after that date such
Securities cease to be outstanding and interest on them ceases to accrue.
SECTION 2.9 Treasury Securities.
In determining whether the Holders of the required principal
amount of Securities have concurred in any declaration of acceleration or notice
of default or direction, waiver or consent or any amendment, modification or
other change to this Indenture, Securities owned by the Company, any Guarantor
or an Affiliate of the Company or any Guarantor shall be disregarded as though
they were not outstanding, except that for the purposes of determining whether
the Trustee shall be protected in relying on any such direction, waiver or
consent or any amendment, modification or other change to this Indenture, only
Securities as to which a Trust Officer of the Trustee receives an Officers'
Certificate stating that such Securities are so owned shall be so disregarded.
SECTION 2.10 Temporary Securities.
Until definitive Securities are prepared and 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. Until such exchange, temporary Securities
shall be entitled to the same rights, benefits and privileges as definitive
Securities.
<PAGE> 28
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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 any Securities surrendered to them for registration of transfer,
exchange or payment. The Trustee shall cancel all Securities surrendered for
registration of transfer, exchange, payment, replacement or cancellation and
shall (subject to the record-retention requirements of the Exchange Act) dispose
of cancelled Securities unless the Company in writing directs the Trustee to
return such Securities to the Company, and, if so disposed, shall deliver a
certificate of disposition thereof to the Company. The Company may not reissue
or resell, or issue new Securities to replace, Securities that the Company has
redeemed or paid, or that have been delivered to the Trustee for cancellation.
SECTION 2.12 Defaulted Interest.
If the Company defaults on a payment of interest on the
Securities, it shall pay the defaulted interest, plus (to the extent permitted
by law) any interest payable on the defaulted interest, in accordance with the
terms hereof, to the Persons who are Securityholders on a subsequent special
record date, which date shall be at least five Business Days prior to the
payment date. The Company shall fix such special record date and payment date in
a manner satisfactory to the Trustee. At least 15 days before such special
record date, the Company shall mail to each Securityholder of such series a
notice that states the special record date, the payment date and the amount of
defaulted interest, and interest payable on such defaulted interest, if any, to
be paid.
SECTION 2.13 CUSIP Number.
The Company in issuing the Securities may use a "CUSIP"
number, and if so, such CUSIP number shall be included in notices of redemption
or exchange as a convenience to Holders; provided, however, that any such notice
may state that no representation is made as to the correctness or accuracy of
the CUSIP number printed in the notice or on the Securities, and that reliance
may be placed only on the other identification numbers printed on the
Securities. The Company will promptly notify the Trustee of any change in the
CUSIP number.
SECTION 2.14 Deposit of Moneys.
Prior to 10:00 a.m., New York City time, on each Interest
Payment Date and Maturity Date, the Company shall have
<PAGE> 29
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deposited with the Paying Agent in immediately available funds money sufficient
to make cash payments, if any, due on such Interest Payment Date or Maturity
Date, as the case may be, in a timely manner which permits the Trustee to remit
payment to the Holders on such Interest Payment Date or Maturity Date, as the
case may be. The principal and interest on Book-Entry Securities shall be
payable to the Depository or its nominee, as the case may be, as the sole
registered owner and the sole holder of the Book-Entry Securities represented
thereby. The principal and interest on Securities in certificated form shall be
payable at the office of the Paying Agent.
ARTICLE III
REDEMPTION
SECTION 3.1 Optional Redemption. The Securities will be
subject to redemption, in whole or in part, at the option of the Company, at any
time on or after , 2000, at the redemption prices (expressed as percentages of
principal amount) set forth below plus accrued interest to the redemption date,
if redeemed during the 12-month period beginning on of the years indicated
below:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2000 ........................
2001 ........................
2002 ........................ 100.00%
</TABLE>
In addition, at any time prior to , 1999, the Company may
redeem up to 33% of the aggregate principal amount of the Securities originally
issued with the proceeds of one or more Public Equity Offerings (as defined
below) at a redemption price (expressed as a percentage of principal amount) of
% plus accrued interest to the redemption date; provided that at least $100.0
million aggregate principal amount of Securities remains outstanding immediately
after any such redemption. In order to effect the foregoing redemption with the
proceeds of any Public Equity Offering, the Company shall make such redemption
not more than 120 days after the consummation of any such Public Equity
Offering. "Public Equity Offering" means an underwritten public offering of
Capital Stock (other than Disqualified Stock) pursuant to a registration
statement filed with the SEC in accordance with the Securities Act.
<PAGE> 30
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SECTION 3.2 Notices to Trustee.
If the Company elects to redeem Securities pursuant to Section
3.1 of this Indenture and Paragraph 5 of the Securities, it shall notify the
Trustee and the Paying Agent in writing of the Redemption Date and the principal
amount of Securities to be redeemed.
The Company shall give each notice provided for in this
Section 3.2 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 and in the Securities.
SECTION 3.3 Selection of Securities
To Be Redeemed.
If less than all of the Securities are to be redeemed at any
time, the Trustee shall select the Securities to be redeemed in compliance with
the requirements of the principal national securities exchange, if any, on which
the Securities being redeemed are listed or, if the Securities are not listed on
a national securities exchange, on a pro rata basis, by lot or by such method as
the Trustee shall deem fair and appropriate. The Trustee shall make the
selection from the Securities outstanding and not previously called for
redemption. The Trustee shall promptly notify the Company in writing of such
Securities selected for redemption and, in the case of Securities selected for
partial redemption, the principal amount to be redeemed. The Trustee may select
for redemption portions of the principal amount of Securities that have
denominations larger than $1,000. Securities and portions of them the Trustee
selects shall be in amounts of $1,000 or integral multiples of $1,000. If a
redemption is to be made with the proceeds of a Public Equity Offering pursuant
to Section 3.1, selection of the Securities for redemption shall be made by the
Trustee only on a pro rata basis unless such method is otherwise prohibited.
Provisions of this Indenture that apply to Securities called for redemption also
apply to portions of Securities called for redemption.
SECTION 3.4 Notice of Redemption.
At least 30 days but not more than 60 days before a Redemption
Date, the Company shall mail or cause the mailing of, in the name of, at the
request of, and at the expense of the Company, a notice of redemption by
first-class mail to each Holder of Securities to be redeemed at its registered
address and the Trustee and any Paying Agent.
<PAGE> 31
-25-
The notice shall identify the Securities to be redeemed and
shall state:
(a) the Redemption Date;
(b) the redemption price and the amount of accrued
interest, if any, to be paid;
(c) the name and address of the Paying Agent;
(d) that Securities called for redemption must be
surrendered to the Paying Agent to collect the redemption
price and accrued interest, if any;
(e) 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 of such Securities of such series is to receive payment of the
redemption price upon surrender to the Paying Agent of the Securities
redeemed;
(f) if any Security is to be redeemed in part, the portion of
the principal amount (equal to $1,000 or any integral multiple thereof)
of such Security to be redeemed and that, on or after the Redemption
Date, upon surrender of such Security, a new Security or Securities in
aggregate principal amount equal to the unredeemed portion thereof will
be issued without charge to the Securityholder;
(g) if less than all of the Securities are to be redeemed, the
identification of the particular Securities (or portion thereof) to be
redeemed, as well as the aggregate principal amount of Securities to be
redeemed and the aggregate principal amount of Securities estimated to
be outstanding after such partial redemption; and
(h) the CUSIP number, if any, pursuant to Section
2.13.
At the Company's written request, the Trustee shall give the
notice of redemption in the Company's name and at the Company's expense.
SECTION 3.5 Effect of Notice of Redemption.
Once notice of redemption is mailed, Securities called for
redemption become due and payable on the Redemption Date and at the redemption
price. Upon surrender to the Paying Agent,
<PAGE> 32
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such Securities shall be paid at the redemption price plus accrued interest to
the Redemption Date, but interest installments whose maturity is on or prior to
such Redemption Date will be payable on the relevant Interest Payment Dates to
the Holders of record at the close of business on the relevant record dates
referred to in the Securities.
SECTION 3.6 Deposit of Redemption Price.
At least one Business Day prior to the Redemption Date, the
Company shall deposit with the Paying Agent in immediately available funds money
sufficient to pay the redemption price of and accrued interest on all Securities
or portions thereof to be redeemed on the Redemption Date.
If any Security surrendered for redemption in the manner
provided in the Securities shall not be so paid on the Redemption Date due to
the failure of the Company or any Guarantor to deposit sufficient funds with the
Paying Agent, interest will continue to accrue from the Redemption Date until
such payment is made on the unpaid principal and, to the extent lawful, on any
interest not paid on such unpaid principal, in each case at the date and in the
manner provided in the Securities.
SECTION 3.7 Securities Redeemed in Part.
Upon surrender to the Paying Agent of a Security that is
redeemed in part, the Company shall execute and the Trustee shall authenticate
for the Holder a new Security (accompanied by a notation of Guarantee duly
endorsed by the Guarantors) equal in principal amount to the unredeemed portion
of the Security surrendered.
ARTICLE IV
COVENANTS
SECTION 4.1 Payment of Securities.
The Company shall pay the principal of and interest on the
Securities on the dates and in the manner provided in the Securities and this
Indenture.
An installment of principal or interest shall be considered
paid on the date due if the Trustee or the Paying Agent holds on such date
immediately available funds designated for and sufficient to pay such
installment.
<PAGE> 33
-27-
The Company shall pay interest on overdue principal and (to
the extent permitted by law) on overdue installments of interest at a rate equal
to 14% per annum.
SECTION 4.2 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 will 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 11.2.
The Company may also from time to time designate one or more
other offices or agencies where the Securities may be presented or surrendered
for any or all such purposes and may from time to time rescind such
designations; provided, however, that no such designation or rescission shall in
any manner relieve the Company of its obligation to maintain an office or agency
in the Borough of Manhattan, the City of New York, for such purposes. The
Company will 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.
The Company hereby initially designates Fleet National Bank,
c/o First Chicago Trust Company, 14 Wall Street, 8th Floor, Window No. 2, New
York, New York 10005, as an agency of the Company in accordance with Section
2.3.
SECTION 4.3 Corporate Existence.
Subject to Article V, the Company shall do or cause to be
done, at its own cost and expense, all things necessary to and will cause each
of its Subsidiaries to, preserve and keep in full force and effect the corporate
or partnership existence and rights (charter and statutory), licenses and/or
franchises of the Company and each of its Subsidiaries; provided, however, that
the Company or any of its Subsidiaries shall not be required to preserve any
such rights, licenses or franchises if the Board of Directors of the Company
shall reasonably determine that the preservation thereof is no longer desirable
in the conduct of the business of the Company or such Subsidiary and the loss
thereof is not adverse in any material respect to the Holders.
<PAGE> 34
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SECTION 4.4 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, (a) all taxes, assessments
and governmental charges levied or imposed upon its or its Subsidiaries' income,
profits or property and (b) all lawful claims for labor, materials and supplies
which, if unpaid, might by law become a Lien upon its property; provided,
however, that 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
negotiations or proceedings and for which disputed amounts adequate reserves (in
the good faith judgment of the Board of Directors of the Company) have been
made.
SECTION 4.5 Maintenance of Properties; Insurance;
Books and Records; Compliance with Law.
(a) The Company shall, and shall cause each of its
Subsidiaries to, at all times cause all properties used or useful in the conduct
of its business to be maintained and kept in good condition, repair and working
order (reasonable wear and tear excepted) and supplied with all necessary
equipment, and shall cause to be made all necessary repairs, renewals,
replacements, betterments and improvements thereto.
(b) The Company and each of its Subsidiaries shall maintain
insurance in such amounts and covering such risks as are usually and customarily
carried with respect to similar facilities according to their respective
locations.
(c) The Company shall and shall cause each of its Subsidiaries
to keep proper books of record and account, in which full and correct entries
shall be made of all financial transactions and the assets and business of the
Company and each Subsidiary of the Company, in accordance with GAAP consistently
applied to the Company and each of its Subsidiaries taken as a whole.
(d) The Company shall and shall cause each of its Subsidiaries
to comply with all statutes, laws, ordinances, or government rules and
regulations to which it is subject, non-compliance with which would materially
adversely affect the business, prospects, earnings, properties, assets or
condition (financial or otherwise) of the Company and its Subsidiaries taken as
a whole.
<PAGE> 35
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SECTION 4.6 Guarantees.
The Company shall at all times ensure that the Guarantees
shall remain in full force and effect and shall not be subordinated in right of
payment to any Indebtedness of the Guarantors.
SECTION 4.7 Compliance Certificates.
(a) The Company and each Guarantor shall deliver to the
Trustee, within 45 days after the end of each of the first three quarters of the
Company's fiscal year, and within 90 days after the end of such fiscal year,
Officers' Certificates of the Company and each Guarantor stating (i) that a
review of the activities of the Company or such Guarantor, as the case may be,
during the preceding fiscal quarter or year, as the case may be, has been made
under the supervision of the signing Officers with a view to determining whether
the Company or such Guarantor, as the case may be, has kept, observed, performed
and fulfilled its obligations under this Indenture, and (ii) that, to the best
knowledge of each Officer signing such certificate, the Company or such
Guarantor, as the case may be, has kept, observed, performed and fulfilled each
and every covenant contained in this Indenture and is not in default in the
performance or observance of any of the terms, provisions and conditions hereof
(or, if a Default or Event of Default shall have occurred, describing all such
Defaults or Events of Default of which such Officers may have knowledge, their
status and what action the Company or such Guarantor, as the case may be, is
taking or proposes to take with respect thereto).
(b) So long as (and to the extent) not contrary to the then
current recommendations of the American Institute of Certified Public
Accountants, the annual financial statements delivered pursuant to Section 4.8
shall be accompanied by a written statement of the Company's independent public
accountants that in making the examination necessary for certification of such
annual financial statements nothing has come to their attention that would lead
them to believe that the Company or any Guarantor has violated any provisions of
Section 4.10, 4.11, 4.12, 4.13, 4.14, 4.15, 4.16 or 4.17 of this Indenture or,
if any such violation has occurred, specifying the nature and period of
existence thereof, it being understood that such accountants shall not be liable
directly or indirectly to any Person for any failure to obtain knowledge of any
such violation.
(c) The Company and each Guarantor shall, so long as any of
the Securities are outstanding, deliver to the Trustee, forthwith upon any
Officer becoming aware of any Default or Event
<PAGE> 36
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of Default, an Officers' Certificate specifying such Default or Event of Default
and what action the Company is taking or proposes to take with respect thereto.
SECTION 4.8 Reports.
So long as any 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 (i) transmit by
mail to all Holders, as their names and addresses appear in the register of
Securities maintained by the Registrar, without cost to such Holders and (ii)
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 and the
Guarantors shall also comply with the other provisions of TIA Section 314(a).
SECTION 4.9 Further Assurance to the Trustee.
The Company and the Guarantors shall, upon request of the
Trustee, execute and deliver such further instruments and do such further acts
as may reasonably be necessary or proper to carry out more effectively the
provisions of this Indenture.
SECTION 4.10 Limitation on Additional Indebtedness.
The Company shall not, and shall not permit any of its
Subsidiaries to, Incur any Indebtedness (including Acquired
Indebtedness), except for the following:
(a) Indebtedness of the Company and the Guarantors
under the Securities, the Guarantees and the Indenture;
(b) Indebtedness of the Company and the Guarantors
outstanding (plus interest, premium, fees and other obligations
associated therewith) pursuant to the Credit Facilities (or pursuant to
letters of credit) not to exceed
<PAGE> 37
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$40 million at any one time outstanding, less any Indebtedness
thereunder repaid with the proceeds of an Asset Sale in accordance with
Section 4.13;
(c) Indebtedness of the Company and Guarantors not
otherwise referred to in this Section 4.10 outstanding on
the Issue Date, including but not limited to, the Existing
Notes;
(d) Indebtedness of the Company and the Guarantors if,
immediately after giving pro forma effect to the incurrence thereof,
the Fixed Charge Coverage Ratio of the Company would be greater than or
equal to 3.0:1;
(e) Indebtedness of the Company and the Guarantors in
respect of Interest Rate Protection Obligations incurred in
the ordinary course of business;
(f) Indebtedness of a Subsidiary issued to and held by
the Company or a Wholly-Owned Subsidiary or Indebtedness of
the Company to a Wholly-Owned Subsidiary in respect of
intercompany advances or transactions;
(g) Indebtedness of the Company and the Guarantors
Incurred after the Issue Date in connection with or arising out of
Capitalized Lease Obligations and purchase money Indebtedness not to
exceed $5 million at any one time outstanding;
(h) Indebtedness of the Company and the Guarantors
Incurred after the Issue Date in connection with the acquisition or
licensing of technology and other assets relating to the implementation
of new cell technology not to exceed $6 million at any one time
outstanding; and
(i) any deferrals, renewals, extensions, replacements,
refinancings, or refundings of, or amendments, modifications or
supplements to, Indebtedness incurred under clauses (b) and (c) above,
whether involving the same or any other lender or creditor or group of
lenders or creditors, provided that any such deferrals, renewals,
extensions, replacements, refinancings, refundings, amendments,
modifications or supplements (i) shall not provide for any mandatory
redemption, amortization or sinking fund requirement in an amount
greater than or at a time prior to the amounts and times specified in
the Indebtedness being deferred, renewed, extended, replaced,
refinanced, refunded, amended, modified or supplemented, (ii) shall not
exceed the principal amount (plus accrued interest and prepayment
<PAGE> 38
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premium, if any) of the Indebtedness being replaced, renewed, refunded,
refinanced or extended and (iii) shall be subordinated to the
Securities at least to the extent and in the manner, if at all, that
the Indebtedness being replaced, renewed, refunded, refinanced or
extended is subordinate to the Securities.
The Company shall not, directly or indirectly, Incur any
Indebtedness which by its terms (or by the terms of any agreement governing such
Indebtedness) is subordinated to any other Indebtedness of the Company unless
such Indebtedness is also by its terms (or by the terms of any agreement
governing such Indebtedness) made expressly subordinated to the Securities to
the same extent and in the same manner as such Indebtedness is subordinated to
such other Indebtedness of the Company. The Guarantors shall not, directly or
indirectly, in any event Incur any Indebtedness which by its terms (or by the
terms of any agreement governing such Indebtedness) is subordinated to any other
Indebtedness of such Guarantor unless such Indebtedness is also by its terms (or
by the terms of any agreement governing such Indebtedness) made expressly
subordinated to the Guarantee of the Securities by such Guarantor to the same
extent and in the same manner as such Indebtedness is subordinated to such other
Indebtedness of such Guarantor.
SECTION 4.11 Limitation on Liens.
The Company shall not, and shall not permit, cause or suffer
any of its Subsidiaries to, create, incur, assume or suffer to exist any Lien of
any kind upon any of its property or assets owned or acquired by the Company on
or after the Issue Date, except for the following:
(a) Liens existing as of the Issue Date;
(b) Permitted Liens;
(c) Liens on the assets or property of a Subsidiary of
the Company existing at the time such Subsidiary became a Subsidiary of
the Company and not incurred as a result of (or in connection with or
in anticipation of) such Subsidiary's becoming a Subsidiary of the
Company; provided that such Liens do not extend to or cover any
property or assets of the Company or any of its Subsidiaries (other
than the property or assets of the Subsidiary so acquired);
(d) Liens on inventory, accounts, contract rights,
documents, instruments and general intangibles in respect of
the Credit Facilities (or letters of credit);
<PAGE> 39
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(e) any Lien securing Capitalized Lease Obligations and
purchase money obligations; provided that such Capitalized Lease
Obligations and purchase money obligations are incurred in compliance
with Section 4.10; and provided, further that such Liens do not extend
to or cover any property or assets owned by the Company or any of its
Subsidiaries as of the Issue Date or extend to any property or assets
other than the property or assets subject to such Capitalized Lease
Obligations and purchase money obligations;
(f) Liens pursuant to leases and subleases of real
property which do not interfere with the ordinary conduct of the
business of the Company or any of its Subsidiaries and which are made
on customary and usual terms applicable to similar properties;
(g) Liens securing Indebtedness which is incurred to
refinance or replace Indebtedness which has been secured by a Lien
permitted under this Indenture and is permitted to be refinanced or
replaced under this Indenture; provided that such Liens do not extend
to or cover any property or assets of the Company or any of its
Subsidiaries not securing the Indebtedness so refinanced or replaced;
and
(h) Liens securing reimbursement obligations under
letters of credit but only in or upon the goods the purchase of which
was financed by such letters of credit.
SECTION 4.12 Limitation on Restricted Payments.
(a) The Company shall not, and shall 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 under this Indenture at the time of or after giving
effect to such Restricted Payment; and
(ii) immediately after giving effect to such Restricted
Payment, the aggregate of all Restricted Payments declared or made
after the Issue Date through and including the date of such Restricted
Payment (the "Base Period") does not exceed the sum of (1) 50% of the
Company's Consolidated Net Income (or in the event such Consolidated
Net Income shall be a deficit, minus 100% of such deficit) during the
Base Period, and (2) 100% of the aggregate Net Proceeds and the Fair
Market Value of marketable securities and property received by the
Company from the issue or sale, during the
<PAGE> 40
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Base Period of Capital Stock (other than Disqualified Stock) of the
Company or any Indebtedness or other securities of the Company
convertible into or exercisable or exchangeable for Capital Stock
(other than Disqualified Stock) of the Company which has been so
converted, exercised or exchanged, as the case may be. For purposes of
determining under this clause (ii) the amount expended for Restricted
Payments, cash distributed shall be valued at the face amount thereof
and property other than cash shall be valued at its Fair Market Value.
(b) The provisions of clause (a) of this Section 4.12 shall
not prohibit (i) the payment of any dividend within 60 days after the date of
declaration thereof, if at such date of declaration such payment would comply
with the provisions of this Indenture; (ii) the retirement of any shares of
Capital Stock or subordinated Indebtedness of the Company in exchange for, by
conversion into, 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 of
the Company (other than Disqualified Stock); (iii) the redemption or retirement
of subordinated Indebtedness of the Company in exchange for, by conversion into,
or out of the Net Proceeds of the substantially concurrent incurrence of
subordinated Indebtedness of the Company (other than any such subordinated
Indebtedness owing to a Subsidiary of the Company) that is contractually
subordinated in right of payment to the Securities and that is permitted to be
incurred in accordance with Section 4.10; (iv) a management fee payable to Renco
not to exceed $1.2 million in any one year; and (v) the making of payments by
the Company to Renco (A) pursuant to a tax sharing arrangement between the
Company and Renco (provided that the payments thereunder shall not exceed the
amount the Company would have been required to pay for taxes on a stand-alone
basis except that the Company will not have the benefit of any of its tax loss
carry forwards) and (B) to reimburse Renco for out of pocket insurance payments
made by Renco on behalf of the Company and its Subsidiaries.
In determining the amount of Restricted Payments permissible
under clause (b) of this Section 4.12, amounts expended pursuant to clauses
(b)(i) and (b)(ii) of this Section 4.12 shall be included as Restricted Payments
and amounts expended pursuant to clauses (b)(iii), (iv) and (v) of this Section
4.12 shall not be so included. For purposes of determining the amount expended
for Restricted Payments, cash distributed or invested shall be valued at the
face amount thereof and property other than cash shall be valued at its Fair
Market Value.
<PAGE> 41
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SECTION 4.13 Limitation on Certain Sales
of Assets and Subsidiary Stock.
(a) The Company shall not, and shall not permit any of its
Subsidiaries to, make any Asset Sale unless (i) such Asset Sale is for Fair
Market Value, (ii) the net proceeds therefrom consist of at least 85% cash or
Cash Equivalents and (iii) the Company shall commit to apply or to cause its
Subsidiaries to apply the Net Cash Proceeds of such Asset Sale within 180 days
of receipt thereof, and shall apply such Net Cash Proceeds within 270 days of
receipt thereof, as follows:
(A) first, to satisfy all mandatory repayment obligations
under the Credit Facilities arising by reason of such Asset Sale to the
extent that such repayment permanently reduces the amount that may be
borrowed under the Credit Facilities;
(B) second, to repurchase Existing Notes required to
be repurchased pursuant to the indenture governing the
Existing Notes; and
(C) third, out of any Net Cash Proceeds remaining after
application of Net Cash Proceeds pursuant to the preceding paragraphs
(A) and (B) (the "Available Amount"), the Company shall make an offer
to purchase (the "Asset Sale Offer") from all Holders of Securities, up
to a maximum principal amount (expressed as a multiple of $1,000) of
Securities equal to the Available Amount at a purchase price of 100% of
the principal amount thereof plus accrued and unpaid interest thereon,
if any, to the date of purchase (the "Asset Sale Purchase Date");
provided that the Company will not be required to apply pursuant to
this paragraph (C) Net Cash Proceeds received from any Asset Sale if,
and only to the extent that, such Net Cash Proceeds are committed in
writing to be applied to acquire or construct property or assets in
lines of business related to the Company's and its Subsidiaries'
businesses within 180 days after the consummation of such Asset Sale
and are so applied within 270 days after the consummation of such Asset
Sale; and provided, further, that the Company may defer the Asset Sale
Offer until there is an aggregate unutilized Available Amount equal to
or in excess of $2.5 million (at which time the entire unutilized
Available Amount and not just the amount in excess of $2.5 million
shall be applied as required pursuant to this Section 4.13).
(b) The Company shall provide the Trustee with written
notice of the Asset Sale Offer at least 40 days before any notice
<PAGE> 42
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of any Asset Sale Offer is mailed to Holders of the Securities (unless shorter
notice is acceptable to the Trustee). Notice of an Asset Sale Offer shall be
mailed by the Company to all Holders of Securities not less than 25 days nor
more than 45 days before the Asset Sale Purchase Date at their last registered
address with a copy to the Trustee and the Paying Agent. The Asset Sale 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 Asset Sale Purchase Date. The notice, which shall govern the terms of the
Asset Sale Offer, shall include such disclosures as are required by law and
shall state:
(i) that the Asset Sale Offer is being made pursuant
to this Section 4.13;
(ii) the purchase price (including the amount of accrued
interest, if any) for each Security and the Asset Sale Purchase 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 on making the
payment, any Security accepted for payment pursuant to the Asset Sale
Offer shall cease to accrue interest after the Asset Sale Purchase
Date;
(v) that Holders electing to have Securities purchased
pursuant to an Asset Sale 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 Asset Sale Purchase 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 Asset Sale
Purchase 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 election to have
such Securities purchased;
<PAGE> 43
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(vii) that if Securities in a principal amount in excess of
the Available Amount are tendered pursuant to the Asset Sale 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.
On or before the Asset Sale Purchase Date, the Company shall
(i) accept for payment, on a pro rata basis among the Securities (subject to
adjustment as contemplated by clause (vii) above), Securities or portions
thereof tendered pursuant to the Asset Sale Offer, (ii) deposit with the Paying
Agent on the Asset Sale Purchase Date money, in immediately available funds, in
an amount sufficient to pay the purchase price of all Securities or portions
thereof so tendered and accepted and (iii) deliver to the Trustee the Securities
so accepted together with an Officers' Certificate setting forth the Securities
or portions thereof tendered to and accepted for payment by the Company. The
Paying Agent shall promptly mail or deliver 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 Holder thereof. To the extent an Asset Sale Offer is not fully subscribed
to by the Holders, the Company may retain (free and clear of the Lien of this
Indenture) any unutilized portion of the Available Amount. The Paying Agent
shall promptly deliver to the Company the balance of any such moneys held by the
Paying Agent after payment to the holders of Securities as aforesaid.
The Company shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Securities pursuant to the
Asset Sale Offer. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this Section 4.13, the Company shall
comply with the applicable securities laws and
<PAGE> 44
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regulations and shall not be deemed to have breached its obligations under this
Section 4.13 by virtue thereof.
(c) No transaction or action otherwise permitted under this
Section 4.13 shall occur until the Trustee shall have received an Officers'
Certificate and an Opinion of Counsel as to (i) the Company's compliance with
this Section 4.13 and (ii) the fulfillment of all conditions precedent to such
transaction or action.
SECTION 4.14 Limitation on Transactions with
Affiliates.
The Company shall not, and the Company shall not permit,
cause, or suffer any Subsidiary of the Company to, conduct any business or enter
into any transaction or series of transactions with or for the benefit of any
Affiliate of the Company or any of its Subsidiaries or any holder of 10% or more
of any class of Capital Stock of the Company (each an "Affiliate Transaction"),
except in good faith and on terms that are, in the aggregate, no less favorable
to the Company or such Subsidiary, as the case may be, than those that could
have been obtained in a comparable transaction on an arm's-length basis from a
Person not an Affiliate of the Company or such Subsidiary. All Affiliate
Transactions (and each series of related Affiliate Transactions which are
similar or part of a common plan) involving aggregate payments or other market
value in excess of $500,000 shall be approved by the Board of Directors of the
Company, such approval to be evidenced by a Board Resolution stating that such
Board of Directors has, in good faith, determined that such transaction complies
with the foregoing provisions of this Section 4.14. Notwithstanding the
foregoing, the restrictions set forth in this Section 4.14 shall not apply to
(i) customary directors' fees, consulting fees, indemnification and similar
arrangements, and employee salaries and bonuses, (ii) transactions between the
Company and any of its Subsidiaries or among Subsidiaries of the Company, (iii)
the payment of a management fee to Renco and (iv) the making of payments by the
Company to Renco pursuant to Section 4.12(b)(v).
SECTION 4.15 Change of Control.
In the event of a Change of Control (the date of such
occurrence being the "Change of Control Date"), the Company shall notify the
Trustee and the Holders of Securities in writing of such occurrence and shall
make an offer to purchase (the "Change of Control Offer"), on a Business Day
(the "Change of Control Payment Date") not later than 60 days following the
Change of Control Date, all Securities then outstanding at a purchase price
<PAGE> 45
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equal to 101% of the principal amount thereof plus accrued and unpaid interest,
if any, to the Change of Control Payment Date.
Notice of a Change of Control Offer shall be mailed by the
Company not less than 30 days nor more than 45 days before the Change of Control
Payment Date to the holders of Securities at their last registered addresses
with a copy to the Trustee and the Paying Agent. The Change of Control Offer
shall remain open from the time of mailing for at least 20 Business Days and
until 5:00 p.m., New York City time, on the Business Day next preceding the
Change of Control Payment Date. The notice, which shall govern the terms of the
Change of Control Offer, shall include such disclosures as are required by law
and shall state:
(a) that a Change of Control Offer is being made
pursuant to this Section 4.15 and that all Securities will
be accepted for payment;
(b) the purchase price (including the amount of
accrued interest, if any) for each Security and the Change
of Control Payment Date;
(c) that any Security not tendered for payment will
continue to accrue interest in accordance with the terms
thereof;
(d) that, unless the Company defaults on making the
payment, any Security accepted for payment pursuant to the Change of
Control Offer shall cease to accrue interest after the Change of
Control Payment Date;
(e) that Holders electing to have Securities purchased
pursuant to a Change of Control Offer will be required to surrender
their Securities to the Paying Agent at the address specified in the
notice prior to 5:00 p.m., New York City time, on the business day next
preceding the Change of Control Payment Date and must complete any form
letter of transmittal proposed by the Company and acceptable to the
Trustee and the Paying Agent;
(f) that Holders of Securities 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
Change of Control 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
election to have such Securities purchased;
<PAGE> 46
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(g) that Holders whose Securities are purchased only in
part will be issued Securities equal in principal amount to the
unpurchased portion of the Securities surrendered;
(h) the instructions that Holders must follow in order to
tender their Securities; and
(i) the circumstances and relevant facts regarding such
Change of Control (including, but not limited to, information with
respect to pro forma historical financial information after giving
effect to such Change of Control, information regarding the Persons
acquiring control and such Persons' business plans going forward).
On the Change of Control Payment Date, the Company shall (i)
accept for payment Securities or portions thereof tendered pursuant to the
Change of Control Offer, (ii) deposit with the Paying Agent money sufficient to
pay the purchase price of all Securities or portions thereof so tendered and
accepted and (iii) deliver to the Trustee the Securities so accepted together
with an Officers' Certificate setting forth the Securities or portions thereof
tendered to and accepted for payment by the Company. The Paying Agent shall
promptly mail or deliver to the Holders of Securities so accepted payment in an
amount equal to the purchase price, and the Trustee shall promptly authenticate
and mail or deliver to such Holders a new Security equal in principal amount to
any unpurchased portion of the Security surrendered. Any Securities not so
accepted shall be promptly mailed or delivered by the Company to the Holder
thereof.
The Company shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act, and any other securities laws
or regulations in connection with the repurchase of Securities pursuant to a
Change of Control Offer. To the extent that the provisions of any securities
laws or regulations conflict with provisions of this Section 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.
SECTION 4.16 Limitation on Dividends and Other
Payment Restrictions Affecting
Subsidiaries.
The Company shall not, and shall not permit any Subsidiary of
the Company to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective or enter into any agreement with any Person that would
cause or create any
<PAGE> 47
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consensual encumbrance or restriction of any kind on the ability of any
Subsidiary of the Company to (a) pay dividends, in cash or otherwise, 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 a
Subsidiary of the Company, (b) make any loans or advances to, or pay any
Indebtedness owed to, the Company or any Subsidiary of the Company or (c)
transfer any of its properties or assets to the Company or to any Subsidiary of
the Company, except, in each case, for such encumbrances or restrictions
existing under or contemplated by or by reason of (i) the Securities or this
Indenture, (ii) any restrictions existing under or contemplated by agreements in
effect on the Issue Date, including, without limitation, restrictions under the
Credit Facilities as in effect on the Issue Date, (iii) any restrictions, with
respect to a Subsidiary of the Company that is not a Subsidiary of the Company
on the Issue Date, in existence at the time such Person becomes a Subsidiary of
the Company (but not created in contemplation of such Person becoming a
Subsidiary) or created after the Issue Date, so long as such restrictions are
not materially less favorable to the holders of the Securities than those under
the Credit Facilities as in effect on the Issue Date, and (iv) any restrictions
existing under any agreement that refinances or replaces an agreement containing
a restriction permitted by clause (i), (ii) or (iii) above; provided that the
terms and conditions of any such restrictions are not materially less favorable
in the aggregate to the holders of the Securities than those under or pursuant
to the agreement being replaced or the agreement evidencing the Indebtedness
refinanced or replaced.
SECTION 4.17 Limitation on Issuance of Preferred
Stock by Subsidiaries.
The Company shall not cause or permit any Subsidiary of the
Company to issue any Capital Stock other than Common Stock or to have
outstanding at any time any shares of Capital Stock other than Common Stock,
except issuances of Capital Stock to the Company or a Wholly-Owned Subsidiary of
the Company that is a Guarantor; provided, however, that the Company or such
Wholly-Owned Subsidiary of the Company, as the case may be, is at all times the
sole beneficial and record owner of such Capital Stock.
SECTION 4.18 Special Covenants of Each Guarantor.
Each Guarantor shall comply with each of the covenants
contained in this Indenture that impose restrictions or obligations on such
Guarantor (by virtue of being a Guarantor or otherwise) notwithstanding that the
text of such covenant is
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worded as a restriction on or obligation of the Company with respect to such
Guarantor.
SECTION 4.19 Additional Guarantors.
If the Company or any of its Subsidiaries shall transfer or
cause to be transferred, in one or a series of related transactions, any assets,
businesses, divisions, real property or equipment having a book value in excess
of $100,000 to any Subsidiary that is not a Guarantor the Company shall, prior
to such transfer, (1) cause such transferee Subsidiary to become a Guarantor,
execute a Guarantee and agree to be bound by the terms of this Indenture, and
(2) deliver an Opinion of Counsel to the effect that such Guarantee has been
duly authorized and executed by such transferee Subsidiary and constitutes the
legal, valid, binding and enforceable obligation of such transferee Subsidiary
(subject to such customary exceptions concerning creditors' rights and equitable
principles as may be acceptable to the Trustee in its discretion).
SECTION 4.20 Limitation on Investments, Loans
and Advances.
The Company shall not make and shall not permit any of its
Subsidiaries to make any capital contributions, advances or loans to (including
any guarantees of loans to), or investments or purchases of Capital Stock in,
any Person (collectively, "Investments"), except: (i) Investments by the Company
in any Wholly-Owned Subsidiary and Investments in or to the Company or a
Subsidiary by any Subsidiary; (ii) Investments represented by accounts
receivable created or acquired in the ordinary course of business; (iii)
advances to employees in the ordinary course of business not to exceed an
aggregate of $250,000 outstanding at any one time; (iv) Investments under or
pursuant to Interest Rate Protection Obligations; (v) Cash Equivalents; (vi)
Investments in joint ventures not to exceed $10 million in the aggregate; and
(vii) Investments permitted to be made pursuant to Section 4.12.
SECTION 4.21 Limitation on Sale-Leaseback
Transactions.
The Company shall not, and shall not permit any of its
Subsidiaries to, enter into any Sale-Leaseback Transaction. Notwithstanding the
foregoing, the Company and its Subsidiaries may enter into Sale-Leaseback
Transactions if (i) after giving pro forma effect to any such Sale-Leaseback
Transaction, the Company shall be in compliance with Section 4.10, (ii) the sale
price in such Sale-Leaseback Transaction is at least equal to the Fair Market
Value of such property, and (iii) the Company or such
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Subsidiary shall apply the Net Cash Proceeds of the sale as provided pursuant to
Section 4.13, to the extent required.
SECTION 4.22 Waiver of Stay, Extension
or Usury Laws.
Each of the Company and each Guarantor covenants (to the
extent permitted by law) that it will not at any time insist upon, plead, or in
any manner whatsoever claim or take the benefit or advantage of, any stay or
extension law or any usury law or other law that would prohibit or forgive the
Company or any Guarantor from paying all or any portion of the principal of or
interest on the Securities as contemplated herein, wherever enacted, now or at
any time hereafter in force, or that may affect the covenants or the performance
of this Indenture; and (to the extent permitted by law) each of the Company and
each Guarantor hereby expressly waives all benefit or advantage of any such law,
and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.
ARTICLE V
SUCCESSOR CORPORATION
SECTION 5.1 When Company May Merge, Etc.
Neither the Company nor any Guarantor shall consolidate with
or merge with or into or sell, assign, convey, lease or transfer all or
substantially all of its properties and assets as an entirety to any Person or
group of affiliated Persons in a single transaction or through a series of
transactions, unless, after giving effect thereto:
(a) the Company or such Guarantor, as the case may be,
shall be the continuing Person or the resulting, surviving or
transferee Person (the "surviving entity") shall be a corporation
organized and existing under the laws of the United States or any State
thereof or the District of Columbia;
(b) the surviving entity shall expressly assume, by a
supplemental indenture executed and delivered to the Trustee, in form
and substance reasonably satisfactory to the Trustee, all of the
obligations of the Company or such Guarantor, as the case may be, under
the Securities, the Guarantees and this Indenture;
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(c) immediately before and immediately after giving
effect to such transaction or series of transactions (including,
without limitation, any Indebtedness incurred or anticipated to be
incurred in connection with or in respect of such transaction or series
of transactions), no Default or Event of Default shall have occurred
and be continuing;
(d) the Company, such Guarantor or the surviving entity,
as the case may be, shall immediately before and immediately after
giving effect to such transaction or series of transactions (including,
without limitation, any Indebtedness incurred or anticipated to be
incurred in connection with or in respect of the transaction or series
of transactions) have a Consolidated Net Worth equal to or greater than
the Consolidated Net Worth of the Company or such Guarantor immediately
prior to such transaction or series of transactions;
(e) immediately after giving effect to such transaction
or series of transactions, the Company, such Guarantor or the surviving
entity, as the case may be, could incur $1.00 of Indebtedness pursuant
to clause (d) of Section 4.10;
(f) the Company, such Guarantor or the surviving entity
shall have delivered to the Trustee an Officer's Certificate stating
that such consolidation, merger, conveyance, transfer or lease and, if
a supplemental indenture is required in connection with such
transaction or series of transactions, such supplemental indenture
complies with this Section 5.1 and that all conditions precedent in the
Indenture relating to the transaction or series of transactions have
been satisfied; and
(g) neither the Company nor any Subsidiary would
thereupon become obligated with respect to any Indebtedness, nor any of
its property become subject to any Lien, unless the Company or such
Subsidiary could incur such Indebtedness or create such Lien under the
Indenture.
The foregoing provisions shall not be applicable with respect
to a transaction involving the consolidation or merger of a Guarantor with or
into any Person (other than the Company or an Affiliate of the Company) that
results in such Guarantor being released from its Guarantee as provided pursuant
to Section 10.3.
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SECTION 5.2 Successor Entity Substituted.
Upon any consolidation, merger or any transfer of all or
substantially all of the assets of the Company in accordance with Section 5.1,
the surviving entity formed by such consolidation or into which the Company is
merged or to which such transfer is made shall succeed to, and be substituted
for, and may exercise every right and power of, the Company under this Indenture
with the same effect as if such surviving entity had been named as the Company
herein.
ARTICLE VI
DEFAULT AND REMEDIES
SECTION 6.1 Events of Default.
(a) An "Event of Default" occurs if:
(i) the Company defaults in the payment of interest on the
Securities when the same becomes due and payable and any such default
continues for a period of 30 days; or
(ii) the Company defaults in the payment of the principal of,
or premium, if any, on, the Securities when due (including by reason of
a default in payment upon an offer to purchase); or
(iii) the Company or any Guarantor defaults in the performance
of, or breaches, any covenant contained in this Indenture (other than
defaults specified in clause (i) or (ii) above), and such default or
breach continues for a period of 30 days after written notice thereof
has been given to the Company by the Trustee or to the Company and the
Trustee by the Holders of at least 25% in aggregate principal amount of
the outstanding Securities; or
(iv) the Company or any of its Subsidiaries fails to perform
any term, covenant, condition or provision of one or more classes or
issues of other Indebtedness in an aggregate principal amount of
$2,000,000 or more, which failure results in an acceleration of the
maturity thereof; or
(v) one or more judgments, orders or decrees for the payment
of money in excess of $2,000,000, either individually or in an
aggregate amount, shall be entered against the Company, any of its
Subsidiaries or any of their respective properties and shall not be
discharged, and there shall have been a period of 60 days during which
a stay of
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enforcement of such judgment or order, by reason of a pending appeal or
otherwise, shall not be in effect; or
(vi) any Guarantee shall be found to be unenforceable or
invalid by any final judgment, order or decree of any court; or
(vii) 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,
(D) makes a general assignment for the benefit of its
creditors or
(E) shall generally not pay its debts when such debts
become due or shall admit in writing its inability to pay its
debts generally; or
(viii) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that:
(A) is for relief against the Company or any
Guarantor in an involuntary case or proceeding,
(B) appoints a Custodian of the Company or any
Guarantor for all or substantially all of its properties, 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
60 days; provided, however, 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.
(b) For purposes of this Section 6.1, the term "Custodian"
means any receiver, trustee, assignee, liquidator, sequestrator or similar
official charged with maintaining possession or control over property for one or
more creditors.
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(c) Subject to the provisions of Sections 7.1 and 7.2, the
Trustee shall not be charged with knowledge of any Event of Default unless
written notice thereof shall have been given to a Trust Officer at the corporate
trust office of the Trustee by the Company or any other Person.
SECTION 6.2 Acceleration.
If an Event of Default (other than an Event of Default
specified in Section 6.1(a)(vii) or (viii) with respect to the Company or any
Guarantor) occurs and is continuing, the Holders of at least 25% in aggregate
principal amount of the outstanding Securities may, by written notice to the
Company and the Trustee, and the Trustee upon the written request of the Holders
of not less than 25% in aggregate principal amount of the outstanding
Securities, shall declare the principal of, premium, if any, and accrued
interest on all the Securities to be due and payable immediately. Upon any such
declaration such amounts shall become due and payable immediately. If an Event
of Default specified in Section 6.1(a)(vii) or (viii) with respect to the
Company or any Guarantor occurs and is continuing, then the principal of,
premium, if any, and accrued interest on all the Securities shall ipso facto
become and be immediately due and payable without any declaration or other act
on the part of the Trustee or any Holder. The Holders of a majority in aggregate
principal amount of outstanding Securities may, by written notice to the
Trustee, rescind such declaration of acceleration if all existing Events of
Default have been cured or waived, other than the non-payment of principal of,
premium, if any, and accrued interest on the Securities that have become due
solely as a result of such acceleration and if the rescission of acceleration
would not conflict with any judgment or decree. No such rescission shall affect
any subsequent default or impair any right consequent thereto.
SECTION 6.3 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, premium, if any, or interest on the Securities or to
enforce the performance of any provision of the Securities or this Indenture.
All rights of action and claims under this Indenture or the
Securities may be enforced by the Trustee even if the Trustee 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 accruing upon an Event of Default shall not impair the right or remedy or
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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.
SECTION 6.4 Waiver of Past Default.
Subject to Sections 6.7 and 9.2, the Holders of, in the
aggregate, at least a majority in aggregate principal amount of the outstanding
Securities by notice to the Trustee may waive an existing Default or Event of
Default and its consequences, except a Default specified in Section 6.1(a)(i) or
(ii) or in respect of any provision hereof which cannot be modified or amended
without the consent of the Holder so affected pursuant to Section 9.2. When a
Default or Event of Default is so waived, it shall be deemed cured and ceases.
SECTION 6.5 Control by Majority.
The Holders of at least a majority in aggregate 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; provided, however, that the Trustee may
refuse to follow any direction that (i) conflicts with law or this Indenture,
(ii) the Trustee determines may be unduly prejudicial to the rights of another
Securityholder, or (iii) may involve the Trustee in personal liability unless
the Trustee has asked for and received indemnification reasonably satisfactory
to it in its sole discretion against any loss or expense caused by its following
such direction; and provided, further, that the Trustee may take any other
action deemed proper by the Trustee that is not inconsistent with such
direction.
SECTION 6.6 Limitation on Suits.
A Securityholder may not pursue any remedy with respect to
this Indenture or the Securities unless:
(a) the Holder or Holders give to the Trustee written notice
of a continuing Event of Default;
(b) the Holders of at least 25% in aggregate principal amount
of the outstanding Securities make a written request to the Trustee to
pursue a remedy;
(c) such Holder or Holders offer and, if requested, provide to
the Trustee indemnity reasonably satisfactory to the Trustee against
any loss, liability or expense;
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(d) the Trustee does not comply with the request within 15
days after receipt of the request and the offer and, if requested,
provision of indemnity by the Holders; and
(e) during such 15-day period the Holders of a majority in
aggregate principal amount of the outstanding Securities do not give
the Trustee a written direction inconsistent with the request.
The foregoing limitations shall not apply to a suit instituted
by a Holder for the enforcement of the payment of principal of, premium, if any,
or accrued interest on such Security on or after the respective due dates set
forth in such Security.
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 6.7 Rights of Holders To Receive Payment.
Notwithstanding any other provision of this Indenture, the
right of any Holder to receive payment of principal of, premium, if any, and
interest on a 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, is absolute and unconditional and shall not be impaired
or affected without the consent of such Holder.
SECTION 6.8 Collection Suit by Trustee.
If an Event of Default specified in Section 6.1(a)(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, the Guarantors 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 Interest Rate and such further amount as shall be
sufficient to cover the costs and expenses of collection, including all sums due
and owing to the Trustee pursuant to Section 7.7 hereof.
SECTION 6.9 Trustee May File Proofs of Claim.
The Trustee shall be entitled and empowered to 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
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(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, the Subsidiaries of
the Company or any Guarantor (or any other obligor upon the Securities), their
respective creditors or 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 amounts
due the Trustee under Section 7.7. 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 pursuant to this Article VI,
it shall pay out such money in the following order:
First: to the Trustee for amounts due under Section 7.7;
Second: to Holders for interest accrued on the Securities,
ratably, without preference or priority of any kind, according to the
amounts due and payable on the Securities for interest;
Third: to Holders for principal amounts owing under the
Securities, ratably, without preference or priority of any kind,
according to the amounts due and payable on the Securities for
principal; and
Fourth: to the Company or, to the extent the Trustee collects
any amount pursuant to Article X from any Guarantor, to such Guarantor.
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.
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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 does not apply to a suit by the Trustee, a suit by a
Holder pursuant to Section 6.7, or a suit by Holders of more than 10% in
aggregate principal amount of the outstanding Securities.
ARTICLE VII
TRUSTEE
SECTION 7.1 Duties of Trustee.
(a) If a Trust Officer of the Trustee has received written
notice that an Event of Default has occurred and is continuing, the Trustee
shall exercise such of the rights and powers vested in it by this Indenture and
use the same degree of care and skill in their exercise as a prudent person
would exercise or use under the circumstances in the conduct of his own affairs.
(b) Except during the continuance of an Event of Default
actually known to the Trustee:
(i) The Trustee need perform only those duties as are
specifically set forth in this Indenture and no others and no implied
covenants or obligations shall be read into this Indenture against the
Trustee.
(ii) 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 furnished to the Trustee and conforming to the requirements of
this Indenture. However, in the case of any such certificates or
opinions which by any provision hereof are specifically required to be
furnished to the Trustee, the Trustee shall examine such certificates
and opinions to determine whether or not they conform to the
requirements of this Indenture but need not verify the contents
thereof.
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(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:
(i) This paragraph does not limit the effect of paragraph (b)
of this Section 7.1.
(ii) 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.
(iii) 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 6.5.
(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 in the exercise of any of its
rights or powers if it shall have reasonable grounds for believing that
repayment of such funds or reasonable indemnity against such risk or liability
is not reasonably assured to it.
(e) Every provision of this Indenture that in any way relates
to the Trustee is subject to paragraphs (a), (b), (c), (d), (f) and (g) of this
Section 7.1.
(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 or
any Guarantor. Money held in trust by the Trustee need not be segregated from
other funds except to the extent required by law.
(g) The Trustee may refuse to perform any duty or exercise any
right or power unless it is provided adequate funds to enable it to do so and it
receives indemnity reasonably satisfactory to it against any loss, liability,
fee or expense.
SECTION 7.2 Rights of Trustee.
Subject to Section 7.1:
(a) The Trustee may rely and shall be protected in acting or
refraining from acting upon any document believed by it to be genuine
and to have been signed or presented by the proper Person. The Trustee
shall not be bound to make any investigation into the facts or matters
stated in any
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resolution, certificate, statement, instrument, opinion, report,
notice, request, direction, consent, order, bond, debenture, note,
other evidence of indebtedness or other paper or document, but the
Trustee, in its discretion, may make such further inquiry or
investigation into such facts or matters as it may see fit, and, if the
Trustee shall determine to make such further inquiry or investigation,
it shall be entitled to examine the books, records and premises of the
Company or any Guarantor, personally or by agent or attorney.
(b) Before the Trustee acts or refrains from acting with
respect to any matter contemplated by this Indenture, it may require an
Officers' Certificate or an Opinion of Counsel, which shall conform to
the provisions of Section 11.5. 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 the negligence or willful misconduct of 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, provided that the Trustee's
conduct does not constitute negligence or bad faith.
(e) Before taking or refraining from taking any action, 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.
SECTION 7.3 Individual Rights of Trustee.
The Trustee in its individual capacity or any other capacity
may become the owner or pledgee of Securities and may otherwise deal with the
Company, any Guarantor or their respective Subsidiaries and 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.
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SECTION 7.4 Trustee's Disclaimer.
The Trustee shall not be responsible for and makes no
representation as to the validity or adequacy of this Indenture, the Securities
or the Guarantees and it shall not be accountable for the Company's or any
Guarantor's use of the proceeds from the issuance of the Securities, and it
shall not be responsible for any statement of the Company or any Guarantor in
this Indenture, the Guarantee 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.
SECTION 7.5 Notice of Defaults.
If a Default or an Event of Default with respect to the
Securities occurs and is continuing and is known to the Trustee, the Trustee
shall mail to each Securityholder notice of the Default or Event of Default
within 90 days after the occurrence thereof. 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 to the Securityholders if a committee of its
Trust Officers in good faith determines that withholding the notice is in the
interest of Securityholders.
SECTION 7.6 Reports by Trustee to Holders.
To the extent required by TIA Section 313(a), within 60 days
after each May 15 commencing with May 15, 1997 and for as long as there are
Securities outstanding hereunder, the Trustee shall mail to each Securityholder
the Company's brief report dated as of such date that complies with TIA Section
313(a). The Trustee also shall comply with TIA Section 313(b) and TIA Section
313(c) and (d). A copy of such report at the time of its mailing to
Securityholders shall be filed with the SEC, if required, and each stock
exchange, if any, on which the Securities are listed.
The Company shall promptly notify the Trustee if the
Securities become listed on any stock exchange, and the Trustee shall comply
with TIA Section 313(d).
SECTION 7.7 Compensation and Indemnity.
The Company and the Guarantors shall pay to the Trustee, the
Paying Agent and the Registrar from time to time reasonable compensation for
their respective services rendered hereunder. The Trustee's, the Paying Agent's
and the Registrar's compensation shall not be limited by any law on compensation
of a trustee of an express trust. The Company and the Guarantors shall reimburse
the Trustee, the Paying Agent and the Registrar
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upon request for all reasonable out-of-pocket disbursements, expenses and
advances (including fees and expenses of counsel) incurred or made by each of
them in addition to the compensation for their respective services. Such
expenses shall include the reasonable compensation, out-of-pocket disbursements
and expenses of the Trustee's, the Paying Agent's and the Registrar's agents and
counsel.
The Company and the Guarantors shall indemnify the Trustee,
the Paying Agent and the Registrar for, and hold each of them harmless against,
any claim, demand, expense (including but not limited to attorneys' fees and
expenses), loss or liability incurred by each of them arising out of or in
connection with the administration of this Indenture and their respective duties
hereunder. Each of the Trustee, the Paying Agent and the Registrar shall notify
the Company and the Guarantors promptly of any claim asserted against it for
which it may seek indemnity. However, failure by the Trustee, the Paying Agent
or the Registrar to so notify the Company and the Guarantors shall not relieve
the Company or any Guarantor of its obligations hereunder. The Company and the
Guarantors need not reimburse any expense or indemnify against any loss or
liability incurred by the Trustee, the Paying Agent or the Registrar through the
Trustee's, the Paying Agent's or the Registrar's, as the case may be, own
willful misconduct, negligence or bad faith.
To secure the Company's and the Guarantors' payment
obligations in this Section 7.7, each of the Trustee, the Paying Agent and the
Registrar shall have a lien prior to the Securities on all money or property
held or collected by it, in its capacity as Trustee, Paying Agent or Registrar,
as the case may be, except money or property held in trust to pay principal of
or interest on particular Securities. Such lien and indemnity shall survive the
satisfaction, discharge and termination of this Indenture, including the
termination or rejection hereof in any bankruptcy proceeding.
When any of the Trustee, the Paying Agent and the Registrar
incurs expenses or renders services after an Event of Default specified in
Section 6.1(a)(vii) or (viii) occurs, the expenses and the compensation for the
services are intended to constitute expenses of administration under any
Bankruptcy Law.
SECTION 7.8 Replacement of Trustee.
The Trustee may resign at any time by so notifying the Company
and the Guarantors in writing, such resignation to be effective upon the
appointment of a successor Trustee. The Holders of a majority in principal
amount of the outstanding
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Securities may remove the Trustee by so notifying the Trustee in writing and may
appoint a successor Trustee with the Company's consent, which consent shall not
be unreasonably withheld. The Company may remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10;
(b) the Trustee is adjudged a bankrupt or an insolvent;
(c) a receiver or other public officer takes charge of the
Trustee or its property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in
the office of the Trustee for any reason (the Trustee in such event being
referred to herein as the retiring Trustee), the Company and the Guarantors
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 all property held by it as Trustee to the
successor Trustee (subject to the lien provided in Section 7.7), the resignation
or removal of the retiring Trustee shall become effective, and the successor
Trustee shall have all 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 25% 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.
Notwithstanding replacement of the Trustee pursuant to this
Section 7.8, the Company's and the Guarantors' obligations
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under Section 7.7 shall continue for the benefit of the retiring Trustee.
SECTION 7.9 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 national banking association, the resulting, surviving or
transferee corporation or national banking association without any further act
shall be the successor Trustee, provided such corporation shall be otherwise
qualified and eligible under this Article VII.
SECTION 7.10 Eligibility; Disqualification.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA Section 310(a)(1), (2) and (5). 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. The Trustee shall comply with TIA
Section 310(b); provided, however, that there shall be excluded from the
operation of TIA Section 310(b)(1) any indenture or indentures under which other
securities, or certificates of interest or participation in other securities, of
the Company are outstanding if the requirements for such exclusion set forth in
TIA Section 310(b)(1) are met. The provisions of TIA Section 310 shall apply to
the Company, as obligor of the Securities.
SECTION 7.11 Preferential Collection of Claims Against
Company.
The Trustee shall comply with TIA Section 311(a), excluding
any creditor relationship listed in TIA Section 311(b). A Trustee who has
resigned or been removed shall be subject to TIA Section 311(a) to the extent
indicated therein. The provisions of TIA Section 311 shall apply to the Company
and each Guarantor, as obligors on the Securities.
ARTICLE VIII
DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 8.1 Termination of Company's Obligations.
The Company may terminate its obligations under the Securities
and this Indenture, and the obligations of the Guarantors shall terminate,
except those obligations referred to in the penultimate paragraph of this
Section 8.1, if all Securities previously authenticated and delivered (other
than
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destroyed, lost or stolen Securities which have been replaced or paid and
Securities for whose payment money has heretofore been deposited in trust or
segregated and held in trust by the Company and thereafter repaid to the Company
or discharged from such trust) have been delivered to the Trustee for
cancellation and the Company has paid all sums payable by it hereunder, or if:
(a) pursuant to Article III, the Company shall have given
notice to the Trustee and mailed a notice of redemption to each Holder
of the redemption of all of the Securities under arrangements
satisfactory to the Trustee for the giving of such notice;
(b) the Company shall have irrevocably deposited or caused to
be deposited with the Trustee or a trustee satisfactory to the Trustee,
under the terms of an irrevocable trust agreement in form and substance
satisfactory to the Trustee, as trust funds in trust solely for the
benefit of the Holders for that purpose, money or direct non-callable
obligations of, or non-callable obligations guaranteed by, the United
States of America for the payment of which guarantee or obligation the
full faith and credit of the United States is pledged ("U.S. Government
Obligations") maturing as to principal and interest in such amounts and
at such times as are sufficient without consideration of any
reinvestment of such interest, to pay principal of and interest on the
outstanding Securities to redemption as certified to the Trustee by a
nationally recognized firm of independent public accountants designated
by the Company, provided that the Trustee shall have been irrevocably
instructed to apply such money or the proceeds of such U.S. Government
Obligations to the payment of said principal and interest with respect
to the Securities; and
(c) the Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that all
conditions precedent providing for the termination of the Company's and
the Guarantors' obligation under the Securities and this Indenture have
been complied with.
Notwithstanding the foregoing paragraph, the Company's
obligations and to the extent applicable, the Guarantor's obligations in
Sections 2.5, 2.6, 2.7, 2.8, 4.1, 4.2, 7.7, 7.8, 8.4, 8.5 and 10.1 shall survive
until the Securities are no longer outstanding. After the Securities are no
longer outstanding, the Company's obligations and to the extent applicable, the
Guarantor's obligations in Sections 7.7, 8.4 and 8.5 shall survive.
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After such delivery or irrevocable deposit the Trustee upon
request shall acknowledge in writing the discharge of the Company's and the
Guarantors' obligations under the Securities and this Indenture except for those
surviving obligations specified above.
SECTION 8.2 Legal Defeasance and Covenant Defeasance.
(a) The Company may, at its option by Board Resolution, at any
time, with respect to the Securities, elect to have either paragraph (b) or
paragraph (c) below be applied to the outstanding Securities upon compliance
with the conditions set forth in paragraph (d).
(b) Upon the Company's exercise under paragraph (a) of the
option applicable to this paragraph (b), the Company shall be deemed to have
been released and discharged from its obligations with respect to the
outstanding Securities on the date the conditions set forth below are satisfied
(hereinafter, "legal defeasance"). For this purpose, such legal defeasance means
that the Company shall be deemed to have paid and discharged the entire
indebtedness represented by the outstanding Securities, which shall thereafter
be deemed to be "outstanding" only for the purposes of paragraph (e) below and
the other Sections of and matters under this Indenture referred to in (i) and
(ii) below, and to have satisfied all its other obligations under such
Securities and this Indenture insofar as such Securities are concerned (and the
Trustee, at the expense of the Company, shall execute proper instruments
acknowledging the same), except for the following which shall survive until
otherwise terminated or discharged hereunder: (i) the rights of Holders of
outstanding Securities to receive solely from the trust fund described in
paragraph (d) below and as more fully set forth in such paragraph, payments in
respect of the principal of and interest on such Securities when such payments
are due, (ii) the Company's obligations and to the extent applicable, the
Guarantor's obligations with respect to such Securities under Sections 2.5, 2.6,
2.7, 2.8, 4.2, 7.7, 7.8, 8.4 and 8.5, (iii) the rights, powers, trusts, duties
and immunities of the Trustee hereunder and (iv) this Section 8.2. Subject to
compliance with this Section 8.2, the Company may exercise its option under this
paragraph (b) notwithstanding the prior exercise of its option under paragraph
(c) below with respect to the Securities.
(c) Upon the Company's exercise under paragraph (a) of the
option applicable to this paragraph (c), the Company and to the extent
applicable the Guarantors shall be released and discharged from their
obligations under any covenant contained in
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Article V and in Sections 4.6 through 4.21 with respect to the outstanding
Securities on and after the date the conditions set forth below are satisfied
(hereinafter, "covenant defeasance"), and the Securities shall thereafter be
deemed to be not "outstanding" for the purpose of any direction, waiver, consent
or declaration or act of Holders (and the consequences of any thereof) in
connection with such covenants, but shall continue to be deemed "outstanding"
for all other purposes hereunder. For this purpose, such covenant defeasance
means that, with respect to the outstanding Securities, the Company and any
Guarantor may omit to comply with and shall have no liability in respect of any
term, condition or limitation set forth in any such covenant, whether directly
or indirectly, by reason of any reference elsewhere herein to any such covenant
or by reason of any reference in any such covenant to any other provision herein
or in any other document and such omission to comply shall not constitute a
Default or an Event of Default under Section 6.1, but, except as specified
above, the remainder of this Indenture and such Securities shall be unaffected
thereby.
(d) The following shall be the conditions to application of
either paragraph (b) or paragraph (c) above to the outstanding Securities:
(i) the Company shall irrevocably have deposited or caused to
be deposited with the Trustee as trust funds in trust for the purpose
of making the following payments, specifically pledged as security for,
and dedicated solely to, the benefit of the Holders of such Securities,
(A) money in an amount, or (B) U.S. Government Obligations which
through the scheduled payment of principal of and interest in respect
thereof in accordance with their terms will provide, not later than one
day before the due date of any payment, money in an amount, or (C) a
combination thereof, 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 and
discharge and which shall be applied by the Trustee (or other
qualifying trustee) to pay and discharge principal of, premium, if any,
and interest on the outstanding Securities on the Maturity Date of such
principal or installment of principal or interest in accordance with
the terms of this Indenture and of such Securities; provided, however,
that the Trustee (or other qualifying trustee) shall have received an
irrevocable written order from the Company instructing the Trustee (or
other qualifying trustee) to apply such money or the proceeds of such
U.S. Government Obligations to said payments with respect to the
Securities;
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(ii) no Default or Event of Default or event which with notice
or lapse of time or both would become a Default or an Event of Default
with respect to the Securities shall have occurred and be continuing on
the date of such deposit or, insofar as Sections 6.1(a)(vii) and (viii)
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);
(iii) such legal defeasance or covenant defeasance shall not
result in a breach or violation of, or constitute a Default or Event of
Default under, this Indenture or any other agreement or instrument to
which the Company is a party or by which it is bound;
(iv) in the case of an election under paragraph (b) above, the
Company shall have delivered to the Trustee an Opinion of Counsel
stating that (x) the Company has received from, or there has been
published by, the Internal Revenue Service a ruling or (y) 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 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 legal defeasance and will be subject
to Federal income tax on the same amounts, in the same manner and at
the same times as would have been the case if such legal defeasance had
not occurred;
(v) in the case of an election under paragraph (c) above, the
Company shall have delivered to the Trustee an Opinion of Counsel 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;
(vi) in the case of an election under either paragraph (b) or
(c) above, an Opinion of Counsel to the effect that, (x) the trust
funds will not be subject to any rights of any other holders of
Indebtedness of the Company, and (y) after the 91st day following the
deposit, the trust funds will not be subject to the effect of any
applicable Bankruptcy Law; provided, however, that if a court were to
rule under any such law in any case or proceeding that the
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trust funds remained property of the Company, no opinion needs to be
given as to the effect of such laws on the trust funds except the
following: (A) assuming such trust funds remained in the Trustee's
possession prior to such court ruling to the extent not paid to Holders
of Securities, the Trustee will hold, for the benefit of the Holders of
Securities, a valid and enforceable security interest in such trust
funds that is not avoidable in bankruptcy or otherwise, subject only to
principles of equitable subordination, (B) the Holders of Securities
will be entitled to receive adequate protection of their interests in
such trust funds if such trust funds are used, and (C) no property,
rights in property or other interests granted to the Trustee or the
Holders of Securities in exchange for or with respect to any of such
funds will be subject to any prior rights of any other Person, subject
only to prior Liens granted under Section 364 of Title 11 of the U.S.
Bankruptcy Code (or any section of any other Bankruptcy Law having the
same effect), but still subject to the foregoing clause (B); and
(vii) the Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that (A)
all conditions precedent provided for relating to either the legal
defeasance under paragraph (b) above or the covenant defeasance under
paragraph (c) above, as the case may be, have been complied with and
(B) if any other Indebtedness of the Company shall then be outstanding,
such legal defeasance or covenant defeasance will not violate the
provisions of the agreements or instruments evidencing such
Indebtedness.
(e) All money and U.S. Government Obligations (including the
proceeds thereof) deposited with the Trustee (or other qualifying trustee,
collectively for purposes of this paragraph (e), the "Trustee") pursuant to
paragraph (d) above in respect of the outstanding Securities shall be held in
trust and applied by the Trustee, in accordance with the provisions of such
Securities and this Indenture, to the payment, either directly or through any
Paying Agent (other than the Company, any Guarantor or any of their respective
Affiliates) as the Trustee may determine, to the Holders of such Securities of
all sums due and to become due thereon in respect of principal and interest, but
such money need not be segregated from other funds except to the extent required
by law.
The Company shall pay and indemnify the Trustee against any
tax, fee or other charge imposed on or assessed against the U.S. Government
Obligations deposited pursuant to paragraph (d)
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above or the principal and interest received in respect thereof other than any
such tax, fee or other charge which by law is for the account of the Holders of
the outstanding Securities.
Anything in this Section 8.2 to the contrary notwithstanding,
the Trustee shall deliver or pay to the Company from time to time upon the
request, in writing, by the Company any money or U.S. Government Obligations
held by it as provided in paragraph (d) above which, in the opinion of a
nationally recognized firm of independent public accountants expressed in a
written certification thereof delivered to the Trustee, are in excess of the
amount thereof which would then be required to be deposited to effect an
equivalent legal defeasance or covenant defeasance.
SECTION 8.3 Application of Trust Money.
The Trustee shall hold in trust money or U.S. Government
Obligations deposited with it pursuant to Sections 8.1 and 8.2, and shall apply
the deposited money and the money from U.S. Government Obligations in accordance
with this Indenture to the payment of principal of, premium, if any, and
interest on the Securities.
SECTION 8.4 Repayment to Company or Guarantors.
Subject to Sections 7.7, 8.1 and 8.2, the Trustee shall
promptly pay to the Company, or if deposited with the Trustee by the Guarantors,
to the Guarantors, upon receipt by the Trustee of an Officers' Certificate, any
excess money, determined in accordance with Sections 8.2(d)(i) and (e), held by
it at any time. The Trustee and the Paying Agent shall pay to the Company or the
Guarantors, as the case may be, upon receipt by the Trustee or the Paying Agent,
as the case may be, of an Officers' Certificate, any money held by it for the
payment of principal or interest that remains unclaimed for two years; provided,
however, that the Trustee and the Paying Agent before being required to make any
payment may, but need not, 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 will be repaid to the Company. After payment to the Company or the
Guarantors, as the case may be, Securityholders entitled to money must look
solely to the Company or the Guarantors for payment as general creditors unless
an applicable abandoned property law designates another Person, and
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all liability of the Trustee or Paying Agent with respect to such money shall
thereupon cease.
SECTION 8.5 Reinstatement.
If the Trustee or Paying Agent is unable to apply any money or
U.S. Government Obligations in accordance with this Indenture 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, then and only then the Company's and each Guarantor's obligations
under this Indenture and the Securities shall be revived and reinstated as
though no deposit had been made pursuant to this Indenture until such time as
the Trustee is permitted to apply all such money or U.S. Government Obligations
in accordance with this Indenture; provided, however, that if the Company or the
Guarantors have made any payment of interest on or principal of any Securities
because of the reinstatement of their obligations, the Company or the
Guarantors, as the case may be, shall be subrogated to the rights of the holders
of such Securities to receive such payment from the money or U.S. Government
Obligations held by the Trustee or Paying Agent.
ARTICLE IX
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.1 Without Consent of Holders.
The Company and the Guarantors, when authorized by a Board
Resolution of each of them, and the Trustee may amend, waive or supplement this
Indenture or the Securities without notice to or consent of any Securityholder:
(a) to cure any ambiguity, defect or inconsistency;
(b) to provide for uncertificated Securities in addition to or
in place of certificated Securities;
(c) to comply with any requirements of the SEC under the TIA;
(d) to evidence the succession in accordance with Article V
hereof of another Person to the Company or a Guarantor and the
assumption by any such successor of the covenants of the Company herein
and in the Securities;
(e) to provide for an additional Guarantor as required by
Section 4.19;
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(f) to evidence and provide for the acceptance of appointment
hereunder by a separate or successor Trustee with respect to the
Securities; or
(g) to make any change that does not adversely affect the
rights of any Holder.
SECTION 9.2 With Consent of Holders.
Subject to Section 6.7 and the provisions of this Section 9.2,
the Company, the Guarantors and the Trustee may amend or supplement this
Indenture or the Securities with the written consent of the Holders of not less
than a majority in aggregate principal amount of the Securities then
outstanding. Subject to Section 6.7 and the provisions of this Section 9.2, the
Holders of, in the aggregate, not less than a majority in aggregate principal
amount of the outstanding Securities affected may waive compliance by the
Company or any Guarantor with any provision of this Indenture or the Securities
without notice to any other Securityholder. However, without the consent of each
Securityholder affected, an amendment, supplement or waiver, including a waiver
pursuant to Section 6.4, may not:
(a) reduce the percentage in principal amount outstanding of
Securities necessary for consent to an amendment, supplement or waiver
of any provision of this Indenture or the Securities or who must
consent to take any action under the Securities, the Guarantee or the
Indenture;
(b) reduce the rate of, or extend the time for, payment of
interest on any Security;
(c) reduce the principal amount outstanding of or extend the
fixed maturity of any Security or alter the redemption provisions with
respect thereto;
(d) waive a default in the payment of the principal of,
interest on, or redemption payment or an offer to purchase required
hereunder with respect to, any Security;
(e) make any Security payable in currency other than that
stated in the Security;
(f) change the Company's obligation to purchase Securities
upon the occurrence of a Change of Control (or change the definition
thereof) or an Asset Sale in accordance with this Indenture or waive
any default in the performance thereof;
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(g) affect the ranking of the Securities or the Guarantees;
(h) release any Guarantor from any of its obligations under
its Guarantee except pursuant to Section 10.3;
(i) impair the right to institute suit for the enforcement of
any payment on or with respect to the Securities or the Guarantee; or
(j) modify this Section 9.2 or Section 6.4.
It shall not be necessary for the consent of the Holders under
this Section 9.2 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
9.2 becomes effective, the Company shall mail to the Holders affected thereby a
notice briefly describing the amendment, supplement or waiver. Any failure of
the Company to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such amendment, supplement or
waiver.
SECTION 9.3 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 9.4 Revocation and Effect of Consents.
Until an amendment or waiver becomes effective, a written
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, 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 the notice of
revocation before the date the amendment, supplement or waiver becomes
effective. Notwithstanding the above, nothing in this paragraph shall impair the
right of any Securityholder under Section 316(b) of the TIA.
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 second and third
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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 any consent previously given, whether or not such Persons continue to be
Holders after such record date. Such consent shall be effective only for actions
taken within 90 days after such record date.
After an amendment, supplement or waiver becomes effective, it
shall bind every Securityholder, unless it makes a change described in any of
clauses (a) through (j) of Section 9.2; if it makes such a change, the
amendment, supplement or waiver shall bind every subsequent Holder of a Security
or portion of a Security that evidences the same debt as the consenting Holder's
Security.
SECTION 9.5 Notation on or Exchange of Securities.
If an amendment, supplement or waiver changes the terms of a
Security, the Trustee shall (in accordance with the specific written direction
of the Company) request the Holder of the Security to deliver it to the Trustee.
The Trustee shall (in accordance with the specific written direction of the
Company) 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 9.6 Trustee To Sign Amendments, Etc.
The Trustee shall sign any amendment, supplement or waiver
authorized pursuant to this Article IX if the amendment, supplement or waiver
does not adversely affect the rights, duties or immunities of the Trustee. If it
does, the Trustee may, but need not, sign it. In signing any amendment,
supplement or waiver, the Trustee shall be entitled to receive, if it so
requests, an indemnity reasonably satisfactory to it, 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 IX is
authorized or permitted by this Indenture and that any supplemental indenture
constitutes the legal, valid and binding obligation of the Company and each of
the Guarantors, enforceable against each of them in accordance with its terms
(subject to customary exceptions). The Company may not sign an amendment until
its Board of Directors approves it.
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ARTICLE X
GUARANTEE ARRANGEMENTS
SECTION 10.1 Guarantee.
Each Guarantor hereby jointly and severally unconditionally
guarantees (such guarantees collectively referred to as the "Guarantee") to each
Holder of a Security authenticated and delivered by the Trustee and to the
Trustee and its successors and assigns, irrespective of the validity and
enforceability of this Indenture, the Securities or the obligations of the
Company or any other Guarantors to the Holders or the Trustee hereunder or
thereunder, that: (a) the principal of, premium, if any, and any interest on the
Securities will be duly and punctually paid in full when due, whether at stated
maturity, by acceleration or otherwise, and interest on the overdue principal
and (to the extent permitted by law) interest, if any, on the Securities and all
other obligations of the Company or the Guarantors to the Holders or the Trustee
hereunder or thereunder (including fees, expenses or other) will be promptly
paid in full or performed, all in accordance with the terms hereof and thereof;
and (b) in case of any extension of time of payment or renewal of any Securities
or any of 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,
whether at stated maturity, by acceleration or otherwise. Failing payment when
due of any amount so guaranteed, or failing performance of any other obligation
of the Company to the Holders, for whatever reason, each Guarantor will be
obligated to pay, or to perform or cause the performance of, without the
necessity of action by the Trustee or any Holder, the same immediately. An Event
of Default under this Indenture or the Securities shall constitute an event of
default under this Guarantee, and shall entitle the Holders of Securities to
accelerate the obligations of the Guarantors hereunder in the same manner and to
the same extent as the obligations of the Company. Each of the Guarantors 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, any
release of any other Guarantor, 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 of the Guarantors hereby agrees that its obligations hereunder constitute a
guarantee of payment and not of collection and waives diligence, presentment,
demand of
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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 its 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 or to any
Guarantor, or any custodian, trustee, liquidator or other similar official
acting in relation to the Company or such Guarantor, any amount paid by the
Company or such Guarantor to the Trustee or such Securityholder, this Guarantee,
to the extent theretofore discharged, shall be reinstated in full force and
effect. All of the Guarantors agree that they shall not be entitled to, and
hereby irrevocably waive, any right of subrogation in relation to the
Securityholders or the Trustee, as the case may be, in respect of any
obligations guaranteed hereby. Each Guarantor further agrees that, as between
it, on the one hand, and the Holders of Securities and the Trustee, on the other
hand, (x) subject to this Article X, the maturity of the obligations guaranteed
hereby may be accelerated as provided in Article VI hereof for the purposes 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 VI hereof, such obligations (whether or not due and payable) shall
forthwith become due and payable by the Guarantors for the purpose of this
Guarantee. If acceleration of the time for payment of any amount payable by the
Company under this Indenture or the Securities is stayed upon the insolvency,
bankruptcy or reorganization of the Company, all such amounts subject to
acceleration under the terms of this Indenture shall nonetheless be payable by
the Guarantors hereunder pursuant to the terms of this Article X.
SECTION 10.2 Execution and Delivery of Guarantee.
To further evidence the Guarantee set forth in Section 10.1,
each Guarantor hereby agrees that a notation of such Guarantee shall be endorsed
on each Security authenticated and delivered by the Trustee and executed by
either manual or facsimile signature of two Officers of each Guarantor.
Each of the Guarantors hereby agrees that its Guarantee set
forth in Section 10.1 shall remain in full force and effect notwithstanding any
failure to endorse on each Security a notation of such Guarantee.
<PAGE> 76
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If an Officer of a Guarantor whose signature is on this
Indenture or a Security no longer holds that office at the time the Trustee
authenticates such Security or at any time thereafter, such Guarantor's
Guarantee of such Security shall be valid nevertheless.
The delivery of any Security by the Trustee, after the
authentication thereof hereunder, shall constitute due delivery of any Guarantee
set forth in this Indenture on behalf of the Guarantor.
SECTION 10.3 Release of a Guarantor.
Upon the sale or disposition of all of the Capital Stock of a
Guarantor by the Company or a Subsidiary of the Company, or upon the
consolidation or merger of a Guarantor with or into any Person, (in each case,
other than to the Company or an Affiliate of the Company) such Guarantor will be
automatically and unconditionally released from all obligations under this
Article 10, provided that (a) immediately before and after giving effect to such
transactions, no Default or Event of Default shall have occurred and be
continuing and (b) the proceeds received by the Company or any Subsidiary of the
Company from such transaction shall be applied as provided pursuant to Section
4.13.
SECTION 10.4 Limitation of Guarantee.
Each Guarantor, and by its acceptance hereof each Holder,
hereby confirms that it is the intention of all such parties that in no event
shall any Guarantor's obligations under its Guarantee constitute or result in a
violation of any applicable fraudulent conveyance or similar law of any relevant
jurisdiction. Therefore, in the event that the Guarantee would, but for this
sentence, constitute or result in such a violation, then the liability of the
Guarantors under the Guarantee shall be reduced to the extent necessary to
eliminate such violation under the applicable fraudulent conveyance or similar
law. Subject to the preceding limitation on liability, the Guarantee of each
Guarantor constitutes a guarantee of payment in full when due and not merely a
guarantee of collectibility as further set forth in Section 10.1.
<PAGE> 77
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ARTICLE XI
MISCELLANEOUS
SECTION 11.1 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 11.2 Notices.
Any notice or communication shall be sufficiently given only
if in writing and delivered in Person or mailed by first-class mail addressed as
follows:
(a) if to the Company or the Guarantors:
Renco Metals, Inc.
c/o Magnesium Corporation of America
238 North 2200 West
Salt Lake City, Utah 84116
Attention: Ira Leon Rennert, Chairman
(b) if to the Trustee:
Fleet National Bank
777 Main Street
Hartford, Connecticut 06115
Attention: Corporate Trust Administration
The Company, the Guarantors or the Trustee by written notice
to the other may designate additional or different addresses for subsequent
notices or communications.
Any notice or communication mailed to a Securityholder,
including any notice delivered in connection with TIA Section 310(b), TIA
Section 313(c), TIA Section 314(a) and TIA Section 315(b), shall be mailed to
him, first-class postage prepaid, at his address as it appears on the
registration books of the Registrar and shall be sufficiently given to him if so
mailed within the time prescribed.
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. Except for a notice to the Trustee, which is deemed given only
when received, if a notice or communication is mailed in the manner provided
<PAGE> 78
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above, it is duly given, whether or not the addressee receives it.
SECTION 11.3 Communications by Holders with Other Holders.
Securityholders may communicate pursuant to TIA Section 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 Section 312(c).
SECTION 11.4 Certificate and Opinion of Counsel as to
Conditions Precedent.
Upon any request or application by the Company or any
Guarantor to the Trustee to take any action under this Indenture, the Company or
such Guarantor, as the case may be, shall furnish to the Trustee at the request
of the Trustee (a) 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 have been complied with, (b) an Opinion of Counsel in form and substance
satisfactory to the Trustee stating that, in the opinion of counsel, all such
conditions have been complied with and (c) where applicable, a certificate or
opinion by an independent certified public accountant satisfactory to the
Trustee that complies with TIA Section 314(c).
SECTION 11.5 Statements Required in Certificate and Opinion of
Counsel.
Each certificate and Opinion of Counsel with respect to
compliance with a condition or covenant provided for in this Indenture shall
include:
(a) a statement that the Person making such certificate or
Opinion of Counsel has read such covenant or condition;
(b) a brief statement as to the nature and scope of the
examination or investigation upon which the statements contained in
such certificate or Opinion of Counsel are based;
(c) a statement that, in the opinion of such Person, he has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to
<PAGE> 79
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whether or not such covenant or condition has been complied with; and
(d) a statement as to whether or not, in the opinion of such
Person, such condition or covenant has been complied with.
SECTION 11.6 Rules by Trustee, Paying Agent, Registrar.
The Trustee may make reasonable rules in accordance with the
Trustee's customary practices for action by or at a meeting of Securityholders.
The Paying Agent or Registrar may make reasonable rules for its functions.
SECTION 11.7 Legal Holidays.
If a payment date is a Legal Holiday at a place of payment,
payment may be made at that place on the next succeeding day that is not a Legal
Holiday, and no interest shall accrue for the intervening period.
SECTION 11.8 Governing Law.
The internal laws of the State of New York shall govern this
Indenture and the Securities without regard to principles of conflict of laws.
SECTION 11.9 No Recourse Against Others.
A trustee, director, officer, employee, stockholder or
beneficiary, as such, of the Company or the Guarantors shall not have any
liability for any obligations of the Company or the Guarantors under the
Securities, the Guarantees or the Indenture or for any claim based on, in
respect of or by reason of such obligations or their creation. Each
Securityholder by accepting a Security waives and releases all such liability.
SECTION 11.10 Successors.
All agreements of the Company and each Guarantor in this
Indenture and the Securities shall bind their respective successors. All
agreements of the Trustee in this Indenture shall bind its successor.
<PAGE> 80
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SECTION 11.11 Duplicate 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 11.12 Separability.
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 11.13 Table of Contents, Headings, Etc.
The table of contents, cross-reference sheet and headings of
the Articles and Sections of this Indenture have been inserted for convenience
of reference only, and are not to be considered a part hereof, and shall in no
way modify or restrict any of the terms or provisions hereof.
<PAGE> 81
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IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed as of the date first written above.
RENCO METALS, INC.
By:________________________________
Name:
Title:
FLEET NATIONAL BANK, as Trustee
By:________________________________
Name:
Title:
GUARANTORS:
MAGNESIUM CORPORATION OF AMERICA
By:________________________________
Name:
Title:
SABEL INDUSTRIES, INC.
By:________________________________
Name:
Title:
<PAGE> 82
Exhibit A
(Form of Face of Security)
RENCO METALS, INC.
No. $
__% SENIOR NOTE DUE 2003
RENCO METALS, INC. promises to pay to or
registered assigns the principal sum of Dollars on________, 2003.
Interest Payment Dates: ___________ and __________
Record Dates: ____________ and ____________
RENCO METALS, INC.
By: _______________________________
By: _______________________________
Dated: ______________
Certificate of Authentication
This is one of the __% Senior Notes due 2003 referred to in
the within-mentioned Indenture.
FLEET NATIONAL BANK, as Trustee
By:________________________________
Authorized Officer
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<PAGE> 83
(REVERSE OF SECURITY)
RENCO METALS, INC.
__% SENIOR NOTE DUE 2003
1. Interest. RENCO METALS, INC., a Delaware corporation (the
"Company"), promises to pay, until the principal hereof is paid or made
available for payment, interest on the principal amount set forth on the reverse
side hereof at a rate of __% per annum. Interest on this __% Senior Note due
2003 (the "Security") 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 ______, 1996 through but excluding the date on which interest is paid.
Interest shall be payable in arrears on ________, ________ and at the stated
maturity commencing ________, 1997. Interest will be computed on the basis of a
360- day year of twelve 30-day months. The Company shall pay interest on overdue
principal and on overdue interest (to the full extent permitted by law) at a
rate of % per annum.
2. Method of Payment. The Company will pay interest on the
Securities (except defaulted interest) to the Persons who are registered Holders
of Securities at the close of business on ________ and ________ next preceding
the interest payment date. Holders must surrender Securities to a Paying Agent
to collect principal payments. The Company will pay principal and interest in
money of the United States that at the time of payment is legal tender for
payment of public and private debts. If the Security is a Global Security, all
payments in respect of this Security will be made to the Depository or its
nominee in immediately available funds in accordance with customary procedures
established from time to time by the Depository.
3. Paying Agent and Registrar. Initially, Fleet National Bank
(the "Trustee"), will act as Paying Agent and Registrar. The Company may change
any Paying Agent or Registrar without notice. None of the Company, any Guarantor
or any of their Affiliates may act as Paying Agent, Registrar or co- Registrar.
4. Indenture. The Company issued the Securities under an
Indenture dated as of _________, 1996 (the "Indenture"), among the Company,
Magnesium Corporation of America and Sabel Industries, Inc. (the "Guarantors"),
and the Trustee. This Security is one of an issue of Securities of the Company
issued, or to be issued, under the Indenture. The terms of the Securities
include those stated in the Indenture and those made part of the Indenture by
reference to the Trust Indenture Act of 1939 (15 U.S. Code SectionSection
77aaa-77bbbb), as amended from time to time. The Securities are subject to all
such terms, and Holders
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<PAGE> 84
are referred to the Indenture and such Act for a statement of them. Capitalized
and certain other terms used herein and not otherwise defined have the meanings
set forth in the Indenture. The Securities are general unsecured obligations of
the Company limited in aggregate principal amount to $150,000,000. The Indenture
limits, among other things, the incurrence of Indebtedness by the Company and
its Subsidiaries; the creation of Liens by the Company and its Subsidiaries; the
declaration or payment of any dividend or any other distribution on Capital
Stock of the Company or any Subsidiary; purchases, redemptions, and other
acquisitions or retirements of Capital Stock of the Company and its
Subsidiaries; transactions by the Company and its Subsidiaries with their
respective Affiliates; the issuance of preferred stock by the Company's
Subsidiaries; and the ability of the Company or any of its Subsidiaries to merge
with or into another entity. The Indenture also requires each Guarantor to
comply with each of the covenants that impose restrictions on such Guarantor.
The limitations are subject to a number of important qualifications and
exceptions. The Company must report to the Trustee quarterly on compliance with
the limitations contained in the Indenture.
5. Optional Redemption. The Securities will be subject to
redemption, in whole or in part, at the option of the Company, at any time on or
after , 2000, at the redemption prices (expressed as percentages of principal
amount) set forth below plus accrued interest to the redemption date, if
redeemed during the 12-month period beginning on of the years indicated below:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2000 .............................................
2001 .............................................
2002 ............................................. 100.00%
</TABLE>
In addition, at any time prior to , 1999, the Company may
redeem up to 33% of the aggregate principal amount of the Securities originally
issued with the proceeds of one or more Public Equity Offerings (as defined
below) at a redemption price (expressed as a percentage of principal amount) of
% plus accrued interest to the redemption date; provided that at least $100.0
million aggregate principal amount of Securities remains outstanding immediately
after any such redemption. In order to effect the foregoing redemption with the
proceeds of any Public Equity Offering, the Company shall make such redemption
not more than 120 days after the consummation of any such Public Equity
Offering. "Public Equity Offering" means an underwritten public offering of
Capital Stock (other than Disqualified Stock) pursuant to a registration
statement filed with the SEC in accordance with the Securities Act.
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<PAGE> 85
6. Notice of Redemption. Notice of redemption will be mailed
at least 30 days but not more than 60 days before the redemption date to each
Holder of Securities to be redeemed at his registered address. On and after the
Redemption Date, unless the Company defaults in making the redemption payment,
interest ceases to accrue on Securities or portions thereof called for
redemption.
7. Offers To Purchase. Sections 4.13 and 4.15 of the Indenture
provide that after an Asset Sale or upon the occurrence of a Change of Control,
and subject to further limitations contained therein, the Company shall make an
offer to purchase certain amounts of Securities in accordance with the
procedures set forth in the Indenture.
8. 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 to it any
taxes and fees required by law or permitted by the Indenture. The Registrar need
not transfer or exchange any Securities or portion of a Security selected for
redemption, or transfer or exchange any Securities for a period of 15 days
before a selection of Securities to be redeemed.
9. Persons Deemed Owners. The registered Holder of a Security
may be treated as the owner of it for all purposes.
With respect to Global Securities, the Depository may grant
proxies and otherwise authorize Holders of Book-Entry Securities to give or take
any request, demand, authorization, direction, notice, consent, waiver or other
action which a Holder of a Security is entitled to give or take under this
Indenture.
10. Unclaimed Money. If money for the payment of principal or
interest remains unclaimed for two years, the Trustee or Paying Agent will pay
the money back to the Company at its written request. After that, Holders
entitled to the money must look to the Company for payment as general creditors
unless an "abandoned property" law designates another Person.
11. Amendment, Supplement, Waiver. The Company and the
Guarantors and the Trustee may, without the consent of the Holders of any
outstanding Securities, amend, waive or supplement the Indenture or the
Securities for certain specified purposes, including, among other things, curing
ambiguities, defects or inconsistencies, maintaining the qualification of the
Indenture under the Trust Indenture Act of 1939, as amended, making any change
that does not adversely affect the rights of any Holder. Other amendments and
modifications of the Indenture or the
A-4
<PAGE> 86
Securities may be made by the Company, the Guarantors and the Trustee with the
consent of the Holders of not less than a majority of the aggregate principal
amount of the outstanding Securities, subject to certain exceptions requiring
the consent of the Holders of the particular Securities to be affected.
12. Successor Corporation. When a successor corporation
assumes all the obligations of its predecessor under the Securities and the
Indenture and the transaction complies with the terms of Article V of the
Indenture, the predecessor corporation will be released from those obligations.
13. Defaults and Remedies. Events of Default are set forth in
the Indenture. Subject to certain limitations in the Indenture, if an Event of
Default (other than an Event of Default specified in Section 6.1(a)(vii) or
(viii) of the Indenture) occurs and is continuing, then the Holders of not less
than 25% in aggregate principal amount of the outstanding Securities may, and
the Trustee upon the request of the Holders of not less than 25% in aggregate
principal amount of the outstanding Securities shall, declare the principal of
and interest on all of the Securities to be due and payable immediately. If an
Event of Default specified in Section 6.1(a)(vii) or (viii) of the Indenture
occurs and is continuing, the principal of, and premium, if any, and interest on
all of the Securities shall ipso facto become and be immediately due and payable
without any declaration or other act on the part of the Trustee or any Holder.
Holders may not enforce the Indenture or the Securities except as provided in
the Indenture. The Trustee may require indemnity reasonably satisfactory to it
before it enforces the Indenture or the Securities. Subject to certain
limitations, Holders of a majority in aggregate principal amount of the then
outstanding Securities may direct the Trustee in its exercise of any trust or
power. The Trustee may withhold from Holders notice of any continuing default
(except a default in payment of principal or interest) if it determines that
withholding notice is in their interests. The Company must furnish an annual
compliance certificate to the Trustee.
14. 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.
15. No Recourse Against Others. A director, officer, employee
or stockholder, as such, of the Company or the Guarantors shall not have any
liability for any obligations of the Company or the Guarantors under the
Securities, the Guarantee or the Indenture or for any claim based on, in respect
of, or by reason of, such obligations or their creation. Each Holder by
accepting a Security waives and releases all such liability. The
A-5
<PAGE> 87
waiver and release are part of the consideration for the issue of the
Securities.
16. Discharge. The Company's obligations pursuant to the
Indenture will be discharged, except for obligations pursuant to 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 money or U.S.
Government Obligations sufficient to pay when due principal of, and premium, if
any, and interest on the Securities to maturity or redemption, as the case may
be.
17. Authentication. This Security shall not be valid until the
Trustee manually signs the certificate of authentication on the other side of
this Security.
18. Abbreviations. Customary abbreviations may be used in the
name of a Holder or an assignee, such as: TEN COM (= tenants in common), TENANT
(= 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).
19. Certain Information Obligations. Pursuant to the
Indenture, whether or not required by the rules and regulations of the SEC, so
long as any Securities are outstanding, the Company will file with the SEC and
distribute or cause to be distributed to holders of the Securities copies of the
financial information that would have been contained in such annual reports and
quarterly reports that the Company would have been required to file with the SEC
pursuant to Section 13 or 15(d) of the Exchange Act. Such financial information
shall include annual reports containing consolidated financial statements and
notes thereto, together with an opinion thereon expressed by an independent
public accounting firm, management's discussion and analysis of financial
condition and results of operations as well as quarterly reports containing
unaudited condensed consolidated financial statements for the first three
quarters of each fiscal year.
The Company will furnish to any Holder upon written request
and without charge a copy of the Indenture. Requests may be made to:
Renco Metals, Inc.
c/o Magnesium Corporation of America
238 North 2200 West
Salt Lake City, Utah 84116
Attention: Ira Leon Rennert, Chairman
A-6
<PAGE> 88
GUARANTEE
Each Guarantor (which term includes any successor Person under
the Indenture) has unconditionally guaranteed, to the extent set forth in the
Indenture and subject to the provisions in the Indenture, (a) 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 overdue principal, and, to the extent permitted by law, interest, and the due
and punctual performance of all other obligations of the Company or the other
Guarantors to the Holders or the Trustee all in accordance with the terms set
forth in Article X of the Indenture and (b) in 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 obligations of the Guarantors to the Holders of Securities
and to the Trustee pursuant to the Guarantee and the Indenture are expressly set
forth in Article X of the Indenture and reference is hereby made to the
Indenture for the precise terms of the Guarantee.
Guarantors:
MAGNESIUM CORPORATION OF AMERICA
By:________________________________
Chief Executive Officer
By:________________________________
Secretary
SABEL INDUSTRIES, INC.
By:________________________________
Chief Executive Officer
By:________________________________
Secretary
A-7
<PAGE> 89
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
_______________________________________________________________________________
(Insert assignee's social security or tax ID number) __________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
(Print or type assignee's name, address and zip code) and irrevocably appoint
_______________________________________________________________________________
agent to transfer this Security on the books of the Company. The agent may
substitute another to act for him.
_______________________________________________________________________________
Date:______________ Your signature:____________________________________________
(Sign exactly as your name
appears on the other side of
this Security)
Signature Guarantee:___________________________________________________________
A-8
<PAGE> 90
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Security purchased by the Company
pursuant to Section 4.13 or 4.15 of the Indenture, check the Box:
4.13 [ ] 4.15 [ ]
If you wish to have a portion of this Security purchased by
the Company pursuant to Section 4.13 or 4.15 of the Indenture, state the amount:
$____________
Date:______________ Your signature:____________________________________________
(Sign exactly as your name
appears on the other side of
this Security)
Signature Guarantee: ______________________________________________
A-9
<PAGE> 91
EXHIBIT B
FORM OF LEGEND FOR BOOK-ENTRY SECURITIES
Any Global Security authenticated and delivered hereunder
shall bear a legend in substantially the following form:
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE
INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A
DEPOSITORY OR A NOMINEE OF A DEPOSITORY OR A SUCCESSOR DEPOSITORY. THIS
SECURITY IS NOT EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A
PERSON OTHER THAN THE DEPOSITORY OR ITS NOMINEE EXCEPT IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER OF THIS
SECURITY (OTHER THAN A TRANSFER OF THIS SECURITY AS A WHOLE BY THE
DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE
DEPOSITORY TO THE DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY) MAY
BE REGISTERED EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE
INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION
("DTC"), TO ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE,
OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF
CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH
OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC),
ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR
TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE
& CO., HAS AN INTEREST HEREIN.
B-1
<PAGE> 92
AMENDMENT NO. 2 TO
LOAN AND SECURITY AGREEMENT
SABEL INDUSTRIES, INC.
749 North Court Street
Montgomery, Alabama 36102
June __, 1996
Congress Financial Corporation
1133 Avenue of the Americas
New York, New York 10036
Gentlemen:
Congress Financial Corporation ("Lender") and Magnesium Corporation of
America ("Borrower") have entered into certain financing arrangements pursuant
to the Loan and Security Agreement, dated as of August 4, 1993, between Lender
and Borrower, as previously amended pursuant to Amendment No. 1 to Loan and
Security Agreement, dated January 31, 1996 (the "Amendment No. 1"), between
Lender and Borrower (as amended hereby and as the same may be further amended,
modified, supplemented, extended, renewed, restated or replaced, the "Loan
Agreement", and together with all agreements, documents and instruments at any
time executed and/or delivered in connection therewith or related thereto,
collectively, the "Financing Agreements"). All capitalized terms used herein
shall have the meaning assigned thereto in the other Financing Agreements,
unless otherwise defined herein.
Renco Metals, Inc., owner of all of the issued and outstanding shares
of common stock of Borrower ("Renco Metals"), is purchasing up to all of the
Existing Senior Notes (as defined below) pursuant to the Tender Offer (as
defined below) as described in the Tender Offer Agreements (as defined below);
Renco Metals is also issuing $150,000,000 of the New RMI Notes (as
defined below), which will be guaranteed by Borrower and another wholly owned
subsidiary of Renco Metals, and some of the proceeds of such notes are to be
used by Renco Metals to repurchase up to all of the Existing Senior Notes
pursuant to the Tender Offer;
Borrower has requested that Lender, among other things, (a) consent to
the purchase by Renco Metals of the Existing Senior Notes tendered for such
purchase pursuant to the Tender Offer, (b) permit Borrower to execute and
deliver the unsecured guarantee by Borrower of the indebtedness of Renco Metals
evidenced by the New RMI Notes, (c) agree to amend certain provisions of the
Loan Agreement to permit the foregoing transactions and (d) agree to extend the
term of the Financing Agreements and further amend the Loan Agreement, and
Lender is willing to consent to such purchase of the Existing Senior Notes,
permit such unsecured guarantee, and agree to such an extension to the Financing
Agreements and to such amendments to the Loan Agreement, subject to the terms
and conditions contained herein. By this Amendment, Lender and Borrower desire
and intend to evidence such amendments.
<PAGE> 93
In consideration of the foregoing, and other good and valuable
consideration, and the respective agreements and covenants contained herein, the
parties hereto agree as follows:
1. Definitions.
(a) Additional Definitions. As used herein, the following terms
shall have the respective meanings given to them below and the Loan Agreement
shall be deemed and is hereby amended to include, in addition and not in
limitation, each of the following definitions:
(i) "New RMI Indenture" shall mean the Indenture, dated as of
__________, 1996, by and among Renco Metals, as obligor Borrower and Magnesium
Corporation of America, as guarantors, and Fleet National Bank, as Indenture
Trustee with respect to the New RMI Notes, as the same now exists or may
hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced.
(ii) "New RMI Notes" shall mean the _____% Senior Notes due
2003, issued by Renco Metals dated as of June __, 1996, pursuant to the New RMI
Indenture in the aggregate principal amount of $150,000,000, as the same now
exists or may hereafter be amended, modified, supplemented, extended, renewed,
restated or replaced.
(iii) "Tender Offer" shall mean the offer by Renco Metals to
purchase for cash up to all of the Existing Senior Notes at a price of 111% of
the aggregate principal amount outstanding under the Existing Senior Notes, plus
accrued and unpaid interest, pursuant to the Tender Offer Agreements.
(iv) "Tender Offer Agreements" shall mean, individually and
collectively, the Offer to Purchase and Consent Solicitation Statement, dated
May 24, 1996, with respect to the repurchase by Renco Metals of the Existing
Senior Notes, and all other agreements, documents and instruments related
thereto, as the same now exists or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced.
(v) "Existing Senior Notes" shall mean the 12% Senior Notes due
2000, issued by Renco Metals, dated as of August 4, 1993, pursuant to the
Existing Indenture payable to the order of the holders thereof in the original
principal amount of $75,000,000, on the terms and conditions set forth in
Exhibit A to the Loan Agreement, as the same now exists or may hereafter be
amended, modified, supplemented, extended, renewed, restated or replaced.
(vi) "Existing Indenture" shall mean the Indenture, dated as of
August 1, 1993, by and among Renco Metals, as obligor, Borrower and Magnesium
Corporation of America, as guarantors, and Shawmut Bank Connecticut National
Association, as indenture trustee with respect to the Existing Senior Notes, and
the [Amendment to Indenture], dated June __, 1996, as the same now exist or may
hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced.
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(b) Amendments to Definitions.
(i) All references to the term "Senior Notes" in the Loan
Agreement and in any of the other Financing Agreements shall be deemed and each
such reference is hereby amended to mean in the "Existing Senior Notes" as such
term is defined herein.
(ii) All references to the term "Indenture" in the Loan
Agreement and in any of the other Financing Agreements shall be deemed and each
such reference is hereby amended to mean the "Existing Indenture" as such term
is defined herein.
(iii) Sections 1.22 and 1.43 of the Loan Agreement, are hereby
deleted in their entirety and the following substituted therefor:
"[Intentionally omitted]".
(c) Interpretation. For purposes of this Amendment, unless otherwise
defined herein, all terms used herein, including, but not limited to, those
terms used and/or defined in the recitals hereto, shall have the respective
meanings assigned thereto in the Loan Agreement.
2. Consents. Subject to the terms and conditions contained herein,
Lender hereby consents to: (a) the purchase by Renco Metals of up to all of the
Existing Senior Notes pursuant to the Tender Offer and (b) the amendment to the
Existing Indenture as set forth in the [Amendment to Indenture].
3. Interest Rate. All references in Section 1.23 of the Loan Agreement
to "one and three-quarter percent (1 3/4%) per annum" and "three and
three-quarter (3-3/4%) percent per annum" are each hereby deleted and the
following substituted therefor: "one (1%) percent per annum" and "three (3%)
percent per annum", respectively.
4. Maximum Credit. Section 1.32 of the Loan Agreement is hereby deleted
in its entirety and the following substituted therefor:
"1.32 "Maximum Credit" shall mean $7,000,000."
5. Inventory Advance Rate. Section 2.1(a)(ii) of the Loan Agreement is
hereby deleted in its entirety and the following substituted therefor:
"(ii) fifty (50%) percent of the Value of Eligible Inventory (or
such greater or lesser percentage thereof as Lender may determine
from time to time).
6. Inventory Sublimit. Section 2.1(b) of the Loan Agreement is hereby
deleted in its entirety and the following substituted therefor:
"(b) Notwithstanding anything to the contrary contained herein or in
any of the other Financing Agreements, except in Lender's
discretion, the aggregate unpaid principal amount of the Loans
outstanding at any time based on Eligible Inventory, regardless of
the amounts of such Eligible Inventory, shall not exceed
$3,500,000."
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<PAGE> 95
7. Letter of Credit Accommodations.
(a) Section 2.2(b)(i) of the Loan Agreement is hereby deleted in its
entirety and the following substituted therefor:
"(i) additional Loans pursuant to the Lending Formulas, lending
sublimits set forth in Sections 2.1(b) and 2.1(f) and the Maximum
Credit, shall be available to Borrower on the date of, and after
giving effect to, the proposed issuance of the Letter of Credit
Accommodation as follows: (A) if the proposed Letter of Credit
Accommodation is for the purpose of purchasing Eligible Inventory,
then in an amount equal to (1) fifty (50%) percent multiplied by the
Value of such Eligible Inventory, plus (2) the freight, duty and
other amounts which Lender estimates, in its discretion, must be
paid for or in connection with such Inventory upon arrival or for
delivery to Borrower and (B) if the proposed Letter of Credit
Accommodation is for any other purpose, then one hundred (100%)
percent of the amount thereof;"
(b) Section 2.2(d) of the Loan Agreement is hereby deleted in its
entirety and the following substituted therefor:
"(d) Except in Lender's discretion, the aggregate maximum amount of
Loans which might otherwise be made available to Borrower by Lender
pursuant to the Lending Formulas, the lending sublimits set forth in
Sections 2.1(b) and 2.1(f) and the Maximum Credit, shall be reduced
from time to time as follows: (i) as to Letter of Credit
Accommodations for the purpose of purchasing Eligible Inventory, by
an amount equal to: (A) fifth (50%) percent multiplied by the Value
of Eligible Inventory to be purchased with such Letter of Credit
Accommodation, plus (B) the freight, duty and other amounts which
Lender estimates, in its discretion, must be paid for or in
connection with such Inventory upon arrival or for delivery to
Borrower and (ii) as to Letter of Credit Accommodations for any
other purpose, one hundred (100%) percent of the then outstanding
aggregate amount thereof and all other commitments and obligations
made or incurred by Lender with respect thereto."
(c) The reference in Section 2.2(e) of the Loan Agreement to "three
(3%) percent per annum" is hereby deleted and the following substituted
therefor: "one and one-half (1 1/2%) percent per annum".
8. Unused Line Fee. The reference in Section 2.5(a) of the Loan
Agreement to the "Maximum Credit" is hereby deleted and the following
substituted therefor: "$5,000,000".
9. Section 6.3(f) of the Loan Agreement is hereby deleted in its
entirety and the following substituted therefor:
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<PAGE> 96
"(f) Indebtedness of Borrower in respect of Capitalized Lease
Obligations incurred in the ordinary course of business;"
10. Guarantees.
(a) Section 6.5(c) of the Loan Agreement is hereby deleted in its
entirety and the following substituted therefore:
"(c) the unsecured guarantee by Borrower of the Indebtedness of
Renco Metals evidenced by the Existing Senior Notes (as in effect
on the date hereof) in an aggregate principal amount equal to the
sum of $75,000,000 minus the aggregate principal amount of Existing
Senior Notes purchased by Renco Metals in the Tender Offer pursuant
to the terms of the Tender Offer Agreements; provided, that: (i)
Borrower shall not, directly or indirectly, (a) amend, modify,
alter or change the terms of such guarantee or consent to any of
the same as to the Existing Senior Notes or any agreements,
documents or instruments executed and/or delivered in connection
therewith, including, but not limited to, the Existing Indenture,
or (b) redeem, retire, defease, purchase or otherwise acquire such
indebtedness, or set aside or otherwise deposit or invest any sums
for such purpose, and (ii) Borrower shall furnish to Lender all
notices, demands or other material either received from any of the
holders of the Existing Senior Notes or any representative of the
holders (including, but not limited to, the trustee), promptly
after receipt thereof, or sent by Borrower, or on its behalf, to
any of the holders or the Existing Senior Notes, or any
representative of the holders (including, but not limited to, the
trustee) concurrently with the sending thereof, as the case may
be;"
(b) Section 6.5 of the Loan Agreement is hereby amended by adding
the following new Section (h) immediately after Section 6.5(g) thereof:
"(h) the unsecured guarantee by Borrower of the Indebtedness of
Renco Metals evidenced by the New RMI Notes (as in effect on the
date hereof); provided, that: (i) Borrower shall not, directly or
indirectly, (a) amend, modify, alter or change the terms of such
guarantee or consent to any of the same as to the New RMI Notes or
any agreements, documents or instruments executed and/or delivered
in connection therewith, including, but not limited to, the New RMI
Indenture, or (b) redeem, retire, defease, purchase or otherwise
acquire such indebtedness, or set aside or otherwise deposit or
invest any sums for such purpose, and (ii) Borrower shall furnish
to Lender all notices, demands or other material either received
from any of the holders of the New RMI Notes or any representative
of such holders, including, but not limited to, the trustee),
promptly after receipt thereof, or sent by Borrower, or on its
behalf, to any of the holders of the New RMI Notes, or any
representative of such holders (including, but not limited to, the
trustee) concurrently with the sending thereof, as the case may
be;"
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<PAGE> 97
11. Transactions with Affiliates.
(a) Section 6.6(f) of the Loan Agreement is hereby deleted in its
entirety and the following substituted therefor:
"(f) Borrower may make payments to or on behalf of Renco Metals, on
or about __________ and __________ of each year; provided, that,
(i) all proceeds of each such payment by Borrower to or on behalf
of Renco Metals shall be used to pay the regularly scheduled
interest due and payable on or about the date of such payment under
the terms of the New RMI Notes (as in effect on the date hereof),
(ii) the amount of each such payment by Borrower to or on behalf of
Renco Metals shall not exceed an amount equal to: (A) the amount of
the regularly scheduled payments of interest under the New RMI
Notes (as in effect on the date hereof) due and payable on the date
of such payment by Borrower to or on behalf of Renco Metals minus
(B) any amounts paid by Magcorp to or on behalf of Renco Metals in
respect of such interest then due, and (iii) no Event of Default,
or act, condition or event which with notice or passage of time or
both would constitute an Event of Default shall have occurred and
be continuing at the time of or after giving effect to the payment
of any such amounts".
(b) Section 6.6 of the Loan Agreement is hereby amended by adding
the following new Section (g) immediately after Section 6.6(f) thereof:
"(g) Borrower may make certain payments to or on behalf of Renco
Metals; provided, that, (I) all proceeds of each such payment by
Borrower to or on behalf of Renco Metals shall be used to pay any
mandatory redemptions of the New RMI Notes (as in effect on the
date hereof) required by the New RMI Indenture (as in effect on the
date hereof) in the event of (A) certain Asset Sales (as defined in
the New RMI Indenture as in effect on the date hereof) of Borrower
other than the Collateral, and (B) a Change of Control (ad defined
in the New RMI Indenture as in effect on the date hereof), (ii) the
amount of each such payment by Borrower to or on behalf of Renco
Metals shall not exceed an amount equal to: (A) the amount of such
payment by Borrower to or on behalf of Renco Metals minus (B) any
amounts paid by Magcorp to or on behalf of Renco Metals in respect
of such payments, and (iii) no Event of Default, or act, condition
or event which with notice or passage of time or both would
constitute an Event of Default shall have occurred and be
continuing at the time of or after giving effect to the payment of
any such amounts".
(c) Notwithstanding anything to the contrary contained in Section
7.7 of the Loan Agreement, but subject to the terms and conditions contained
herein, Borrower may declare and pay, out of legally available funds therefor, a
one (1) time dividend as of the date hereof to Renco Metals or to Renco Group on
behalf of Renco Metals in an amount not to exceed an amount equal to: (A)
$__________ minus (B) any amounts paid by Magcorp to
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<PAGE> 98
Renco Metals or to Renco Group on behalf of Renco Metals in respect of such a
dividend payment as of the date hereof.
12. Renewal Date. The reference in Section 9.1(a) of the Loan Agreement
(as previously amended) to "five (5) years from the date hereof" shall be
deleted in its entirety and the following substituted therefor: "six (6) years
from the date hereof".
13. Early Termination Fee. Notwithstanding anything to the contrary
contained in Section 9.1(e) of the Loan Agreement or any of the other Financing
Agreements (including Amendment No. 1), if Lender terminates the Loan Agreement
or the other Financing Agreements upon the occurrence of any Event of Default or
at the request or Borrower prior to the Renewal Date (as amended herein),
Borrower hereby agrees to pay to Lender for the account of Lender, upon the
effective date of such termination, an early termination fee in an amount equal
to:
(i) $140,000, if such termination is effective prior to the fourth
anniversary of the Loan Agreement; or
(ii) $70,000, if such termination is effective after the fourth
anniversary of the Loan Agreement but prior to the Renewal Date or
the anniversary of the Renewal Date in any subsequent year
thereafter.
14. Notice. Notwithstanding anything to the contrary contained in
Section 9.5 of the Loan Agreement, copies of all notices, requests and demands
to or upon Borrower are to be given to the following address:
The Renco Group, Inc.
30 Rockefeller Plaza
New York, New York 10111
Attention: Mr. Ira Leon Rennert
15. Facility Increase Fee. Borrower hereby agrees to pay Lender a
Facility Increase Fee in the amount of $20,000, simultaneously with the
execution of this Amendment, which fee is fully earned as of the date hereof.
Such fee may, at Congress' option, be charged directly to any account of
Borrower maintained by Lender.
16. Representations, Warranties and Covenants. In addition to the
continuing representations, warranties and covenants heretofore or hereafter
made by Borrower to Lender pursuant to the other Financing Agreements, Borrower
hereby represents, warrants and covenants with and to Lenders as follows (which
representations, warranties and covenants are continuing and shall survive the
execution and delivery hereof and shall be incorporated into and made a part of
the Financing Agreements):
(a) Tender Offer and Cancellation of New RMI Notes.
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<PAGE> 99
(i) The Tender Offer Agreements and the transactions contemplated
thereunder have been duly executed, delivered and performed in accordance with
their terms by the respective parties thereto in all respects, including the
fulfillment (not merely the waiver, except as may be disclosed to Agent and
consented to in writing by Agent) of all conditions precedent set forth therein
and giving effect to the terms of the Tender Offer Agreements, all of the New
RMI Notes have been purchased by Borrower and all obligations, liabilities and
indebtedness of Borrower evidenced by or arising under the New RMI Notes have
been satisfied.
(ii) All actions and proceedings required by the Tender Offer
Agreements, applicable law and regulation have been taken and the transactions
required thereunder had been duly and validly taken and consummated.
(iii) No court of competent jurisdiction has issued any injunction,
restraining order or other order which prohibits consummation of the
transactions described in the Tender Offer Agreements and no governmental action
or proceeding has been threatened or commenced seeking any injunction,
restraining order or other order which seeks to void or otherwise modify the
transactions described in the Tender Offer Agreements.
(iv) Borrower has delivered, or caused to be delivered, to Lender,
true, correct and complete copies of the Tender Offer Agreements.
(b) New RMI Notes.
(i) The New RMI Notes have been duly authorized, issued and
delivered by Renco Metals and all agreements, documents and instruments related
thereto, including, but not limited to, the indenture, have been duly
authorized, executed and delivered and the transactions contemplated thereunder
performed in accordance with their terms by the respective parties thereto in
all respects, including the fulfillment (not merely the waiver) of all
conditions precedent set forth herein. All actions and proceedings required by
the New RMI Notes and the agreements, documents and instruments related thereto,
applicable law or regulation have been taken and the transactions required
thereunder have been duly and validly taken and consummated. Neither the
execution and deliver of New RMI Notes or any of the instruments and documents
to be delivered pursuant thereto, nor the consummation of the transactions
therein contemplated, nor compliance with the provisions therein contemplated,
has violated or will violate any law or regulation or any order or decree of any
court or governmental instrumentality in any respect or does or will conflict
with or result in the breach of, or constitute a default in any respect under,
any indenture, mortgage, deed of trust, agreement or instrument to which either
Borrower or Renco Metals is or was a party or may be bound, or result in the
creation or imposition of any lien, charge, or encumbrance upon any of the
property of Borrower or Renco Metals or violate any provision of the Certificate
of Incorporation or By-Laws of Borrower or Renco Metals.
(ii) No court of competent jurisdiction has issued any injunction,
restraining order or other order which prohibits consummation of the issuance of
the New RMI Notes and the transactions described therein and no governmental or
other action or
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<PAGE> 100
proceeding has been threatened or commenced, seeking any injunction, restraining
order or other order which seeks to void or otherwise modify the issuance of the
New RMI Notes.
(iii) Borrower has delivered, or caused to be delivered, to
Lender, true, correct and complete copies of the New RMI Notes and all other
agreements, documents and instruments existing as of the date relating thereto.
(c) No Default. No Event of Default exists on the date of this
Amendment (after giving effect to the amendments to the Loan Agreement made by
this Amendment).
(d) Corporate Power and Authority. This Amendment has been duly
executed and delivered by Borrower and is in full force and effect as of the
date hereof, and the agreements and obligations of Borrower contained herein
constitute legal, valid and binding obligations of Borrower enforceable against
Borrower in accordance with their respective terms.
17. Conditions Precedent. The effectiveness of the consents and other
terms and conditions contained herein shall be subject to the receipt by Lender
of each of the following, in form and substance satisfactory to Lender:
(a) evidence that: (I) the New RMI Notes and all agreements,
documents and instruments relating thereto have been duly authorized, executed
and delivered by the parties thereto in accordance with their terms and (ii)
Renco Metals has received from or on behalf of the holders of the New RMI Notes
cash or other immediately available funds in the aggregate amount of
$150,000,000 constituting the proceeds from the issuance of the New RMI Notes;
(b) evidence that the proceeds received by Renco Metals from or on
behalf of the holders of the New RMI Notes have been applied as set forth in the
Form S-1 Registration Statement filed by Renco Metals with the Securities and
Exchange Commission on May 24, 1996, including that some of the proceeds have
been applied to repurchase all of the Existing Senior Notes tendered by such
holders pursuant to the Tender Offer;
(c) an original of this Amendment, duly authorized, executed and
delivered by Borrower.
18. Additional Evens of Default. The parties hereto acknowledge,
confirm and agree that the failure of Borrower to comply with the covenants,
conditions and agreements contained herein or in the New RMI Indenture shall
constitute an Event of Default under the Financing Agreements (subject to the
applicable cure period, if any, with respect thereto provided for in the Loan
Agreement as in effect on the date hereof).
19. Effect of this Agreement. Except as modified pursuant hereto, no
other changes or modifications in the Loan Agreement or the other Financing
Agreements are intended or implied and the Financing Agreements are hereby
specifically ratified, restated and confirmed by all parties hereto as of the
affective date hereof. To the extent of conflict between the terms
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<PAGE> 101
of this Amendment and the other Financing Agreements, the terms of this
Amendment shall control.
20. Governing Law. The rights and obligations hereunder of each of the
parties hereto shall be governed by and interpreted and determined in accordance
with the laws of the State of New York.
21. Binding Effect. This Amendment shall be binding upon and inure to
the benefit of each of the parties hereto and their respective successors and
assigns.
22. Counterparts. This Amendment may be executed in any number of
counterparts, but all of such counterparts shall together constitute but one and
the same agreement. In making proof of this Amendment, it shall not be necessary
to produce or account for more than one counterpart thereof signed by each of
the parties hereto.
23. Further Assurances. The parties hereto shall execute and deliver
such additional documents and take such additional action as may be necessary or
desirable to effectuate the provisions and purposes of this Agreement.
Please sign the enclosed counterpart of this Amendment in the space
provided below, whereupon this Amendment, as so accepted by Lender, shall become
a binding agreement between Borrower and Lender.
Very truly yours,
SABEL INDUSTRIES, INC.
By:
--------------------------------------
Title:
-----------------------------------
AGREED:
CONGRESS FINANCIAL CORPORATION
By:
-----------------------------------
Title:
--------------------------------
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AMENDMENT NO. 2 TO AMENDED AND
RESTATED LOAN AND SECURITY AGREEMENT
MAGNESIUM CORPORATION OF AMERICA
238 North 2200 West
Salt Lake City, Utah 84116
June _, 1996
Congress Financial Corporation
1133 Avenue of the Americas
New York, New York 10036
Gentlemen:
Congress Financial Corporation ("Lender") and Magnesium Corporation of
America ("Borrower") have entered into certain financing arrangements pursuant
to the Amended and Restated Loan and Security Agreement, dated as of August 4,
1993, between Lender and Borrower, as previously amended pursuant to the
Amendment No. 1 to Amended and Restated Loan and Security Agreement, dated
January 31, 1996 (the "Amendment No. 1"), between Lender and Borrower (as
amended hereby and as the same may be further amended, modified, supplemented,
extended, renewed, restated or replaced, the "Loan Agreement", and together with
all agreements, documents and instruments at any time executed and/or delivered
in connection therewith or related thereto, collectively, the "Financing
Agreements"). All capitalized terms used herein shall have the meaning assigned
thereto in the other Financing Agreements, unless otherwise defined herein.
Renco Metals, Inc., owner of all of the issued and outstanding shares
of common stock of Borrower ("Renco Metals"), is purchasing up to all of the
Existing Senior Notes (as defined below) pursuant to the Tender Offer (as
defined below) as described in the Tender Offer Agreements (as defined below);
Renco Metals is also issuing $150,000,000 of the New RMI Notes (as
defined below), which will be guaranteed by Borrower and another wholly owned
subsidiary of Renco Metals, and some of the proceeds of such notes are to be
used by Renco Metals to repurchase up to all of the Existing Senior Notes
pursuant to the Tender Offer;
Borrower has requested that Lender, among other things, (a) consent to
the purchase by Renco Metals of the Existing Senior Notes tendered for such
purchase pursuant to the Tender Offer, (b) permit Borrower to execute and
deliver the unsecured guarantee by Borrower of the indebtedness of Renco Metals
evidenced by the New RMI Notes, (c) agree to amend certain provisions of the
Loan Agreement to permit the foregoing transactions and (d) agree to extend the
term of the Financing Agreements and further amend the Loan Agreement,
<PAGE> 103
and Lender is willing to consent to such purchase of the Existing Senior Notes,
permit such unsecured guarantee, and agree to such an extension to the Financing
Agreements and to such amendments to the Loan Agreement, subject to the terms
and conditions contained herein. By this Amendment, Lender and Borrower desire
and intend to evidence such amendments.
In consideration of the foregoing, and other good and valuable
consideration, and the respective agreements and covenants contained herein, the
parties hereto agree as follows:
1. Definitions.
(a) Additional Definitions. As used herein, the following terms shall
have the respective meanings given to them below and the Loan Agreement shall be
deemed and is hereby amended to include, in addition and not in limitation, each
of the following definitions:
(i) "Excess Availability" shall mean the amount, as determined by
Lender, calculated at any time, equal to: (a) the lesser of (i) the amount of
Loans available to Borrower as of such time based on the applicable Lending
Formulas multiplied by the Net Amount of Eligible Accounts and the Value of
Eligible Inventory, as determined by Lender, and subject to the sublimits and
reserves from time to time established by Lender hereunder and (ii) the Maximum
Credit, minus (b) the sum of: (i) the amount of all then outstanding and unpaid
Obligations, plus (ii) the aggregate amount of all trade payables of Borrower
which are more than thirty (30) days past due as of such time.
(ii) "New RMI Indenture" shall mean the Indenture, dated as of
_________, 1996, by and among Renco Metals, as obligor, Borrower and Sabel
Industries, Inc. as guarantors, and Fleet National Bank, as Indenture Trustee
with respect to the New RMI Notes, as the same now exists or may hereafter be
amended, modified, supplemented, extended, renewed, restated or replaced.
(iii) "New RMI Notes" shall mean the ____% Senior Notes due 2003,
issued by Renco Metals dated as of June 1996, pursuant to the New RMI Indenture
in the aggregate principal amount of $150,000,000, as the same now exists or may
hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced.
(iv) "Tender Offer" shall mean the offer by Renco Metals to
purchase for cash up to all of the Existing Senior Notes at a price of 111% of
the aggregate principal amount outstanding under the Existing Senior Notes, plus
accrued and unpaid interest, pursuant to the Tender Offer Agreements.
(v) "Tender Offer Agreements" shall mean, individually and
collectively, the Offer to Purchase and Consent Solicitation Statement, dated
May 24, 1996, with respect to the repurchase by Renco Metals of the Existing
Senior Notes, and all other agreements, documents and instruments related
thereto, as the same now exists or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced.
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<PAGE> 104
(vi) "Existing Senior Notes" shall mean the 12% Senior Notes due
2000, issued by Renco Metals, dated as of August 4, 1993, pursuant to the
Existing Indenture payable to the order of the holders thereof in the original
principal amount of $75,000,000, on the terms and conditions set forth in
Exhibit A to the Loan Agreement, as the same now exists or may hereafter be
amended, modified, supplemented, extended, renewed, restated or replaced.
(vii) "Existing Indenture" shall mean the Indenture, dated as of
August 1, 1993, by and among Renco Metals, as obligor, Borrower and Sabel
Industries, Inc., as guarantors, and Shawmut Bank Connecticut National
Association, as indenture trustee with respect to the Existing Senior Notes, and
the [Amendment to Indenture], dated June ___, 1996, as the same now exist or may
hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced.
(b) Amendments to Definitions.
(i) All references to the term "Senior Notes" in the Loan Agreement
and in any of the other Financing Agreements shall be deemed and each such
reference is hereby amended to mean in the "Existing Senior Notes" as such term
is defined herein.
(ii) All references to the term "Indenture" in the Loan Agreement
and in any of the other Financing Agreements shall be deemed and each such
reference is hereby amended to mean the "Existing Indenture" as such term is
defined herein.
(iii) Sections 1.32 and 1.57 of the Loan Agreement, are hereby
deleted in their entirety and the following substituted therefor:
"[Intentionally omitted]".
(c) Interpretation. For purposes of this Amendment, unless otherwise
defined herein, all terms used herein, including, but not limited to, those
terms used and/or defined in the recitals hereto, shall have the respective
meanings assigned thereto in the Loan Agreement.
2. Consents. Subject to the terms and conditions contained herein,
Lender hereby consents to: (a) the purchase by Renco Metals of up to all of the
Existing Senior Notes pursuant to the Tender Offer and (b) the amendment to the
Existing Indenture as set forth in the [Amendment to Indenture].
3. Interest Rate. All references in Section 1.33 of the Loan Agreement
to "one and three-quarter percent (1 3/4%) per annum" and "three and
three-quarter (3-3/4%) percent per annum" are each hereby deleted and the
following substituted therefor: "one (1%) percent per annum" and "three (3%)
percent per annum", respectively.
4. Maximum Credit. Section 1.41 of the Loan Agreement is hereby deleted
in its entirety and the following substituted therefor:
"1.41 "Maximum Credit" shall mean $33,000,000."
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<PAGE> 105
5. Inventory Advance Rate. Section 3.1(a)(iii) of the Loan Agreement is
hereby deleted in its entirety and the following substituted therefor:
"(iii) thirty (30%) percent of the Value of Eligible Inventory
consisting of Supplies (or such greater or lesser percentage thereof as
Lender may determine from time to time)."
6. Inventory Sublimit. Section 3.1(b) of the Loan Agreement is hereby
deleted in its entirety and the following substituted therefor:
"(b) Notwithstanding anything to the contrary contained herein or in
any of the other Financing Agreements, except in Lender's discretion,
the aggregate unpaid principal amount of the Loans outstanding at any
time based on Eligible Inventory, regardless of the amounts of such
Eligible Inventory, shall not exceed $12,000,000 and the aggregate
unpaid principal amount of the Loans outstanding at any time based on
Eligible Inventory consisting of Supplies, regardless of the amounts of
such Eligible Inventory, shall not exceed $3,000,000."
7. Letter of Credit Accommodations.
(a) The reference in Section 3.2(e) of the Loan Agreement to "three
(3%) percent per annum" is hereby deleted and the following substituted
therefor: "one and one-half (1 1/2%) percent per annum".
(b) The reference in Section 3.2(f) of the Loan Agreement to
"$3,000,000" is hereby deleted and the following substituted therefor:
"S5,000,000"
8. Unused Line Fee. The reference in Section 3.5(c) of the Loan
Agreement to "$15,000,000" is hereby deleted and the following substituted
therefor: "$25,000,000".
9. Net Worth Covenants. Section 7.19 of the Loan Agreement is hereby
deleted in its entirety and the following substituted therefor:
"7.19 Consolidated Net Worth. Borrower and its subsidiaries shall, at
all times, maintain a Consolidated Net Worth of not less than negative
$112,000,000."
10. Guarantees.
(a) Section 7.5(c) of the Loan Agreement is hereby deleted in its
entirety and the following substituted therefore:
"(c) the unsecured guarantee by Borrower of the Indebtedness of Renco
Metals evidenced by the Existing Senior Notes (as in effect on the date
hereof) in an aggregate principal amount equal to the sum of
$75,000,000 minus the
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<PAGE> 106
aggregate principal amount of Existing Senior Notes purchased by Renco
Metals in the Tender Offer pursuant to the terms of the Tender Offer
Agreements; provided, that: (i) Borrower shall not, directly or
indirectly, (a) amend, modify, alter or change the terms of such
guarantee or consent to any of the same as to the Existing Senior Notes
or any agreements, documents or instruments executed and/or delivered
in connection therewith, including, but not limited to, the Existing
Indenture, or (b) redeem, retire, defease, purchase or otherwise
acquire such indebtedness, or set aside or otherwise deposit or invest
any sums for such purpose, and (ii) Borrower shall furnish to Lender
all notices, demands or other material either received from any of the
holders of the Existing Senior Notes or any representative of the
holders (including, but not limited to, the trustee), promptly after
receipt thereof, or sent by Borrower, or on its behalf, to any of the
holders or the Existing Senior Notes, or any representative of the
holders (including, but not limited to, the trustee) concurrently with
the sending thereof, as the case may be;"
(b) Section 7.5 of the Loan Agreement is hereby amended by adding the
following new Section (h) immediately after Section 7.5(g) thereof:
"(h) the unsecured guarantee by Borrower of the Indebtedness of Renco
Metals evidenced by the New RMI Notes (as in effect on the date
hereof); provided, that: (i) Borrower shall not, directly or
indirectly, (a) amend, modify, alter or change the terms of such
guarantee or consent to any of the same as to the New RMI Notes or any
agreements, documents or instruments executed and/or delivered in
connection therewith, including, but not limited to, the New RMI
Indenture, or (b) redeem, retire, defease, purchase or otherwise
acquire such indebtedness, or set aside or otherwise deposit or invest
any sums for such purpose, and (ii) Borrower shall furnish to Lender
all notices, demands or other material either received from any of the
holders of the New RMI Notes or any representative of such holders,
including, but not limited to, the trustee), promptly after receipt
thereof, or sent by Borrower, or on its behalf, to any of the holders
of the New RMI Notes, or any representative of such holders (including,
but not limited to, the trustee) concurrently with the sending thereof,
as the case may be;"
11. Transactions with Affiliates.
(a) Section 7.6(g) of the Loan Agreement is hereby deleted in its
entirety and the following substituted therefor:
"(g) Borrower may make payments to or on behalf of Renco Metals, on or
about ______________ and of each year; provided, that, (i) all proceeds
of each such payment by Borrower to or on behalf of Renco Metals shall
be used to pay the regularly scheduled interest due and payable on or
about the date of such payment under the terms of the New RMI Notes (as
in effect on the date
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<PAGE> 107
hereof), (ii) the amount of each such payment by Borrower to or on
behalf of Renco Metals shall not exceed an amount equal to: (A) the
amount of the regularly scheduled payments of interest under the New
RMI Notes (as in effect on the date hereof) due and payable on the date
of such payment by Borrower to or on behalf of Renco Metals minus (B)
any amounts paid by Sabel to or on behalf of Renco Metals in respect of
such interest then due, and (iii) no Event of Default, or act,
condition or event which with notice or passage of time or both would
constitute an Event of Default shall have occurred and be continuing at
the time of or after giving effect to the payment of any such amounts".
(b) Section 7.6 of the Loan Agreement is hereby amended by adding the
following new Section (h) immediately after Section 7.6(g) thereof:
"(h) Borrower may make certain payments to or on behalf of Renco
Metals; provided, that, (i) all proceeds of each such payment by
Borrower to or on behalf of Renco Metals shall be used to pay any
mandatory redemptions of the New RMI Notes (as in effect on the date
hereof) required by the New RMI Indenture (as in effect on the date
hereof) in the event of (A) certain Asset Sales (as defined in the New
RMI Indenture as in effect on the date hereof) of Borrower other than
the Collateral, and (B) a Change of Control (as defined in the New RMI
Indenture as in effect on the date hereof), (ii) the amount of each
such payment by Borrower to or on behalf of Renco Metals shall not
exceed an amount equal to: (A) the amount of such payment by Borrower
to or on behalf of Renco Metals minus (B) any amounts paid by Sabel to
or on behalf of Renco Metals in respect of such payments, and (iii) no
Event of Default, or act, condition or event which with notice or
passage of time or both would constitute an Event of Default shall have
occurred and be continuing at the time of or after giving effect to the
payment of any such amounts".
(c) Notwithstanding anything to the contrary contained in Section 7.7
of the Loan Agreement, but subject to the terms and conditions contained herein,
Borrower may (i) declare and pay, out of legally available funds therefor, a one
(1) time dividend as of the date hereof to Renco Metals or to Renco Group on
behalf of Renco Metals in an amount not to exceed an amount equal to: (A) $
____________ minus (B) any amounts paid by Sabel to Renco Metals or to Renco
Group on behalf of Renco Metals in respect of such a dividend payment as of the
date hereof and (ii) pay to certain officers of Borrower an amount up to S
pursuant to existing net worth appreciation agreements between such officers and
Borrower.
12. Renewal Date. The reference in Section 10.1(a) of the Loan
Agreement (as previously amended) to "five (5) years from the date hereof" shall
be deleted in its entirety and the following substituted therefor: "six (6)
years from the date hereof".
13. Early Termination Fee. Notwithstanding anything to the contrary
contained in Section 10.1(e) of the Loan Agreement or any of the other Financing
Agreements (including Amendment No. 1), if Lender terminates the Loan Agreement
or the other
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<PAGE> 108
Financing Agreements upon the occurrence of an Event of Default or at the
request of Borrower prior to the Renewal Date (as amended herein), Borrower
hereby agrees to pay to Lender for the account of Lender, upon the effective
date of such termination, an early termination fee in an amount equal to:
(i) $660,000, if such termination is effective prior to the fourth
anniversary of the Loan Agreement; or
(ii) $330,000, if such termination is effective after the fourth
anniversary of the Loan Agreement but prior to the Renewal Date or the
anniversary of the Renewal Date in any subsequent year thereafter.
14. Audit Fee Limit Notwithstanding anything to the contrary contained
in Section 10.2(a)(vi) of the Loan Agreement, so long as no Event of Default, or
act, condition or event which with notice or passage of time or both would
constitute an Event of Default shall exist or have occurred, Borrower shall not
be required to reimburse Lender with respect to costs (exclusive of
out-of-pocket expenses) incurred by Lender for field examinations of the
Collateral and Borrower's operations in excess of $10,000 per calendar year. The
foregoing shall not be construed to limit any other provisions of the Financing
Agreements regarding costs and expenses to be paid by Borrower to Lender.
15. Notice. Notwithstanding anything to the contrary contained in
Section 10.5 of the Loan Agreement, all notices, requests and demands to or upon
Borrower are to be given to the following address:
Magnesium Corporation of America
238 North 2200 West
Salt Lake City, Utah 84116
Attention: Michael H. Legge
with copies to:
The Renco Group, Inc.
30 Rockefeller Plaza
New York, New York 10111
Attention: Mr. Ira Leon Rennert
16. Reporting Requirements. In addition to, and not in limitation of,
all such financial and other information as Lender shall reasonably request
relating to the Collateral and the assets, businesses and operations of
Borrower, Borrower shall provide Lender a borrowing base certificate, in form
and substance satisfactory to Lender, setting forth Borrower's calculation of
the Loans and Letter of Credit Accommodations available to Borrower pursuant to
the terms and conditions contained in the Loan Agreement as of the previous day
each such certificate is due, based on the following schedule:
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<PAGE> 109
(a) on a semi-monthly basis, if the Obligations are at all times during
such period less than $10,000,000 and/or Borrower has Excess Availability, as
determined by Lender, at any time during such period, in an amount equal to or
greater than $15,000,000;
(b) on a weekly basis, if the Obligations are at all times during such
period equal to or greater than $10,000,000 but less than $20,000,000 and/or
Borrower shall have Excess Availability, as determined by Lender, at any time
during such period, in an amount greater than $7,500,000 but less than
$15,000,000; and
(c) on a daily basis, if the Obligations at any time exceed $20,000,000
and/or Borrower shall have Excess Availability, as determined by Lender, at any
time in an amount less than $7,500,000.
17. Facility Increase Fee. Borrower hereby agrees to pay Lender a
Facility Increase Fee in the amount of $130,000, simultaneously with the
execution of this Amendment, which fee is fully earned as of the date hereof.
Such fee may, at Congress' option, be charged directly to any account of
Borrower maintained by Lender.
18. Representations, Warranties and Covenants. In addition to the
continuing representations, warranties and covenants heretofore or hereafter
made by Borrower to Lender pursuant to the other Financing Agreements, Borrower
hereby represents, warrants and covenants with and to Lenders as follows (which
representations, warranties and covenantor are continuing and shall survive the
execution and delivery hereof and shall be incorporated into and made a part of
the Financing Agreements):
(a) Tender Offer and Cancellation of New RMI Notes.
(i) The Tender Offer Agreements and the transactions contemplated
thereunder have been duly executed, delivered and performed in accordance with
their terms by the respective parties thereto in all respects, including the
fulfillment (not merely the waiver, except as may be disclosed to Agent and
consented to in writing by Agent) of all conditions precedent set forth therein
and giving effect to the terms of the Tender Offer Agreements, all of the New
RMI Notes have been purchased by Borrower and all obligations, liabilities and
indebtedness of Borrower evidenced by or arising under the New RMI Notes have
been satisfied.
(ii) All actions and proceedings required by the Tender Offer
Agreements, applicable law and regulation have been taken and the transactions
required thereunder had been duly and validly taken and consummated.
(iii) No court of competent jurisdiction has issued any injunction,
restraining order or other order which prohibits consummation of the
transactions described in the Tender Offer Agreements and no governmental action
or proceeding has been threatened or commenced seeking any injunction,
restraining order or other order which seeks to void or otherwise modify the
transactions described in the Tender Offer Agreements.
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<PAGE> 110
(iv) Borrower has delivered, or caused to be delivered, to Lender,
true, correct and complete copies of the Tender Offer Agreements.
(b) New RMI Notes.
(i) The New RMI Notes have been duly authorized, issued and
delivered by Renco Metals and all agreements, documents and instruments related
thereto, including, but not limited to, the indenture, have been duly
authorized, executed and delivered and the transactions contemplated thereunder
performed in accordance with their terms by the respective parties thereto in
all respects, including the fulfillment (not merely the waiver) of all
conditions precedent set forth herein. All actions and proceedings required by
the New RMI Notes and the agreements, documents and instruments related thereto,
applicable law or regulation have been taken and the transactions required
thereunder have been duly and validly taken and consummated.
Neither the execution and delivery of New RMI Notes or any of the instruments
and documents to be delivered pursuant thereto, nor the consummation of the
transactions therein contemplated, nor compliance with the provisions therein
contemplated, nor compliance with the provisions therein contemplated, has
violated or will violate any law or regulation or any order or decree of any
court or governmental instrumentality in any respect or does or will conflict
with or result in the breach of, or constitute a default in any respect under,
any indenture, mortgage, deed of trust, agreement or instrument to which either
Borrower or Renco Metals is or was a party or may be bound, or result in the
creation or imposition of any lien, charge or encumbrance upon any of the
property or Borrower or Renco Metals or violate any provision of the Certificate
of Incorporation or By-Laws of Borrower or Renco Metals.
(ii) No court of competent jurisdiction has issued any injunction,
restraining order or other order which prohibits consummation of the issuance of
the New RMI notes and the transactions described therein and no governmental or
other action or proceeding has been threatened or commenced, seeking any
injunction, restraining order or other order which seeks to void or otherwise
modify the issuance of the New RMI Notes.
(iii) Borrower has delivered, or caused to be delivered, to Lender,
true, correct and complete copies of the New RMI Notes and all other agreements,
documents and instruments existing as of the date relating thereto.
(c) No Default. No Event of Default exists on the date of the Amendment
(after giving effect to the amendments to the Loan Agreement made by this
Amendment).
(d) Corporate Power and Authority. This Amendment has been duly
executed and delivered by Borrower and is in full force and effect as of the
date hereof, and the agreements and obligations of Borrower contained herein
constitute legal, valid and binding obligations of Borrower enforceable against
Borrower in accordance with their respective terms.
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<PAGE> 111
19. Conditions Precedent. The effectiveness of the consents and other
terms and conditions contained herein shall be subject to the receipt by Lender
of each of the following, in form and substance satisfactory to Lender:
(a) evidence that: (i) the New RMI Notes and all agreements, documents
and instruments relating thereto have been duly authorized, executed and
delivered by the parties thereto in accordance with their terms and (ii) Renco
Metals has received from or on behalf of the holders of the New RMI Notes cash
or other immediately available funds in the aggregate amount of $150,000,000
constituting the proceeds from the issuance of the New RMI Notes;
(b) evidence that the proceeds received by Renco Metals from or on
behalf of the holders of the New RMI Notes have been applied as set forth in the
Form S-l Registration Statement filed by Renco Metals with the Securities and
Exchange Commission on May 24, 1996, including that some of the proceeds have
been applied to repurchase all of the Existing Senior Notes tendered by such
holders pursuant to the Tender Offer;
(c) an original of this Amendment, duly authorized, executed and
delivered by Borrower.
20. Additional Events of Default. The parties hereto acknowledge,
confirm and agree that the failure of Borrower to comply with the covenants,
conditions and agreements contained herein or in the New RMI Indenture shall
constitute an Event of Default under the Financing Agreements (subject to the
applicable cure period, if any, with respect thereto provided for in the Loan
Agreement as in effect on the date hereof).
21. Effect of this Agreement. Except as modified pursuant hereto, no
other changes or modifications in the Loan Agreement or the other Financing
Agreements are intended or implied and the Financing Agreements are hereby
specifically ratified, restated and confirmed by all parties hereto as of the
affective date hereof. To the extent of conflict between the terms of this
Amendment and the other Financing Agreements, the terms of this Amendment shall
control.
22. Governing Law. The rights and obligations hereunder of each of the
parties hereto shall be governed by and interpreted and determined in accordance
with the laws of the State of New York.
23. Binding Effect. This Amendment shall be binding upon and inure to
the benefit of each of the parties hereto and their respective successors and
assigns.
24. Counterparts. This Amendment may be executed in any number of
counterparts, but all of such counterparts shall together constitute but one and
the same agreement. In making proof of this Amendment, it shall not be necessary
to produce or account for more than one counterpart thereof signed by each of
the parties hereto.
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<PAGE> 112
25. Further Assurances. The parties hereto shall execute and deliver
such additional documents and take such additional action as may be necessary or
desirable to effectuate the provisions and purposes of this Agreement.
Please sign the enclosed counterpart of this Amendment in the space
provided below, whereupon this Amendment, as 80 accepted by Lender, shall become
a binding agreement between Borrower and Lender.
Very truly yours,
MAGNESIUM CORPORATION OF AMERICA
By:
---------------------------------------
Title:
------------------------------------
AGREED:
CONGRESS FINANCIAL CORPORATION
By:
-----------------------------------
Title:
--------------------------------
-11-
<PAGE> 1
June 25, 1996
Renco Metals, Inc.
238 North 2200 West
Salt Lake City, Utah 84116
Magnesium Corporation of America
238 North 2200 West
Salt Lake City, Utah 84116
Sabel Industries, Inc.
749 North Court Street
Montgomery, Alabama 36104
Re: $150,000,000 Aggregate Principal Amount of %
Senior Notes due 2003
Ladies and Gentlemen:
We have acted as special counsel to Renco Metals, Inc.
("Renco"), Magnesium Corporation of America ("Magcorp") and Sabel Industries,
Inc. ("Sabel" and together with Renco and Magcorp, the "Issuers") in connection
with the preparation of the Issuers' Registration Statement on Form S-1 (No.
333-4513) (the "Registration Statement"), which was filed with the Securities
and Exchange Commission (the "Commission") on May 24, 1996, as amended by
Pre-Effective Amendment No. 1, which was filed with the Commission on June 13,
1996, and Pre-Effective Amendment No. 2 being filed with the Commission on even
date herewith and to which this opinion is an exhibit, pursuant to the
Securities Act of 1933, as amended (the "Act"). The Registration Statement
relates to the issuance and sale of $150,000,000 aggregate principal amount of
Renco's Senior Notes due 2003 (the "Notes"). The Notes are to be issued under an
Indenture (the "Indenture"), to be dated __________________, 1996, by and among
Renco, Magcorp
<PAGE> 2
Renco Metals, Inc. -2- June 25, 1996
Magnesium Corporation of America
Sabel Industries, Inc.
and Sabel, as guarantors (in such capacities, together, the "Guarantors"), and
Fleet National Bank, as trustee (the "Trustee"). The Issuers intend to enter
into an underwriting agreement (the "Underwriting Agreement") with Donaldson,
Lufkin & Jenrette Securities Corporation, as underwriter (the "Underwriter").
We have examined and relied upon the following: (i) the
Registration Statement, including the preliminary Prospectus constituting a part
thereof; (ii) the form of Indenture filed as an exhibit on even date herewith;
and (iii) the originals or copies, certified or otherwise identified to our
satisfaction, of such corporate records of the Issuers and such other
instruments and other certificates of public officials, officers, and
representatives of the Issuers, and such other persons, as we have deemed
appropriate as a basis for the opinions expressed below. We have also made such
investigations of law as we have deemed appropriate. In arriving at the opinions
expressed below, we have assumed and have not verified that the signatures on
all documents that we have examined are genuine. In addition, we have assumed
that the Notes and the guarantees of the Guarantors (the "Guarantees") will be
executed and delivered in substantially the form in which they are filed as an
exhibit to the Registration Statement.
We are members of the Bar of the State of New York and do not
purport to be an expert in, or express any opinion concerning, the laws of any
jurisdiction other than the laws of the State New York, the federal laws of the
United States and the General Corporation Law of the State of Delaware.
Based on the foregoing, we are of the opinion that the Notes
and the Guarantees will be legally and validly issued and binding obligations of
Renco and the Guarantors, as the case may be (except to the extent
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer or other similar laws affecting
the enforcement of creditor's rights generally and by the effect of general
principles of equity, regardless of whether enforceability is considered in a
proceeding in equity or at law), when (i) the Registration Statement, as finally
amended, shall have become effective under the Act and the Indenture shall have
been qualified under the Trust Indenture Act of 1939, as amended, and duly
executed and delivered by the Issuers and the Trustee; (ii) the Issuers'
respective Board of Directors shall have duly adopted final resolutions
authorizing the issuance and/or sale of the Notes and the Guarantees, as the
case may be, as contemplated by the Registration Statement and the Indenture;
and (iii) the Notes shall have been duly executed, authenticated, delivered and
sold as contemplated in the Registration Statement.
We hereby consent to the filing of this letter as an exhibit
to the Registration Statement and to the reference to this firm under the
heading "Legal Matters" in the form of Prospectus forming a part of the
Registration Statement, without admitting that we are "experts" within the
meaning of the Act or the rules and regulations of the Commission issued
thereunder, with respect to any part of the Registration Statement, including
this exhibit.
Very truly yours,
/s/CADWALADER, WICKERSHAM & TAFT
2
<PAGE> 1
[Cadwalader, Wickersham & Taft]
Telephone: (212) 504-6000
Facsimile: (212) 504-6666
June 25, 1996
Securities and Exchange Commission
450 Fifth Street
Washington, D.C. 20549
Re: Renco Metals, Inc. - File No. 333-4513
Ladies and Gentlemen:
On behalf of and as counsel to Renco Metals, Inc. (the
"Registrant") in connection with the above-referenced proposed public offering,
we hereby transmit Pre-effective Amendment No. 2 to the above-captioned
registration statement. The registration statement is being filed to include all
exhibits and respond to certain staff comments as set for in a comment letter
(the "Comment Letter") dated June 17, 1996. The numbered paragraphs below
correspond to the numbered comments of the Comment Letter.
1. The section "Description of Senior-Notes--Guarantees" on
page 34 of the prospectus has been revised to state that separate financial
statements of the Subsidiary Guarantors are not presented because, in
management's opinion, such financial statements would not be material to
investors because the Registrant has no independent operations and its only
assets are cash and its investments in the Subsidiary Guarantors.
2. Revisions were made in response to comment 2 of the Comment
Letter on pages 1, 5, 33 and 46 of the prospectus.
<PAGE> 2
-2-
Securities and Exchange Commission June 25, 1996
Please telephone me at (212) 504-6027 with any questions you
may have.
Sincerely,
Richard Knaub, Jr.
cc: Robert Mandell, Esq.
Robert Burnett
Roger Fay
Todd R. Ogaard
Michael C. Ryan, Esq.
<PAGE> 1
MAGNESIUM CORPORATION OF AMERICA
238 NORTH 2200 WEST
SALT LAKE CITY, UTAH 84116
June 11, 1996
Mr. Michael H. Legge
c/o Magnesium Corporation of America
238 North 2200 West
Salt Lake City, Utah 84116
Dear Sir:
Reference is made to your net worth appreciation participation
agreement with this Corporation (the "Agreement").
This will confirm our agreement with you as follows:
1. As you know, our parent company, Renco Metals, Inc. ("Renco
Metals") is contemplating a refinancing under which it will issue
$150,000,000 of Senior Notes due 2003 ("New Notes") and retire its
presently outstanding $75,000,000 of Senior Notes due 2000 (the
"Existing Notes"). On the issuance of the New Notes this company will
pay a dividend to Renco Metals. Concurrently with the payment of such
dividend this company will make a payment to you on account of the
dividend and the Agreement and you will accept same in full settlement
of all of your rights arising from the payment of the dividend. In
consideration of such payment and your agreement to the amendments to
the Agreement as outlined in paragraph 2 below, the Company agrees that
although after paying the above mentioned payment "Cumulative Net
Income" under the Agreement would be approximately negative
$50,000,000, nevertheless, your Cumulative Net Income will be deemed to
be zero as of July 31, 1996. Your Cumulative Net Income participation
shall be calculated on the company's Cumulative Net Income accruing
after that date.
2. Notwithstanding anything in the Agreement in the contrary,
you agree, effective upon your receipt of the payment referred to in
paragraph 1 of this letter, as follows:
(a) Should you voluntarily leave the employ of this
company before the earlier of the 15th anniversary of this
agreement or your attainment of age 62, then the payment of
the Payment (as defined in the "Agreement") to you shall not
commence until such anniversary or your attaining age 62.
Notwithstanding the foregoing, payments shall
commence immediately upon your death or upon your continuing
disability making it impossible for you to continue to
perform your normal business duties.
<PAGE> 2
(b) You agree that, so long as you are entitled to
any part of the Payment, you will not, directly or indirectly,
whether as employee, consultant, proprietor, partner,
stockholder or other capacity, engage in any aspect of the
magnesium business (production, marketing, sales, use) in any
part of the world. In this respect, you and we acknowledge
that the primary magnesium industry is a worldwide industry,
that the participants therein compete against each other in
all parts of the world, and that therefore this restriction is
reasonable.
Should you engage in any activity proscribed by
the preceding paragraph then the company's obligation to you
to make the Payment (or any unpaid part thereof) shall
automatically and permanently cease, and you shall be deemed
to have irrevocably released you right to same.
(c) Should you voluntarily leave the company, you
shall give 30 days advance written notice, and the amount of
your Payment will be calculated as to the close of the fiscal
quarter in which such 30 day notice period ends.
3. The parties hereby reaffirm the Agreement as amended
hereby.
Please confirm your agreement to the foregoing by signing and
returning the enclosed copy.
Very truly yours,
MAGNESIUM CORPORATION
OF AMERICA
By_________________________________
CONFIRMED AND AGREED TO:
________________________
Michael H. Legge
-2-
<PAGE> 1
MAGNESIUM CORPORATION OF AMERICA
238 NORTH 2200 WEST
SALT LAKE CITY, UTAH 84116
June 11, 1996
Mr. Ron L. Thayer
c/o Magnesium Corporation of America
238 North 2200 West
Salt Lake City, Utah 84116
Dear Sir:
Reference is made to your net worth appreciation participation
agreement with this Corporation (the "Agreement").
This will confirm our agreement with you as follows:
1. As you know, our parent company, Renco Metals, Inc. ("Renco
Metals") is contemplating a refinancing under which it will issue
$150,000,000 of Senior Notes due 2003 ("New Notes") and retire its
presently outstanding $75,000,000 of Senior Notes due 2000 (the
"Existing Notes"). On the issuance of the New Notes this company will
pay a dividend to Renco Metals. Concurrently with the payment of such
dividend this company will make a payment to you on account of the
dividend and the Agreement and you will accept same in full settlement
of all of your rights arising from the payment of the dividend. In
consideration of such payment and your agreement to the amendments to
the Agreement as outlined in paragraph 2 below, the Company agrees that
although after paying the above mentioned payment "Cumulative Net
Income" under the Agreement would be approximately negative
$50,000,000, nevertheless, your Cumulative Net Income will be deemed to
be zero as of July 31, 1996. Your Cumulative Net Income participation
shall be calculated on the company's Cumulative Net Income accruing
after that date.
2. Notwithstanding anything in the Agreement in the contrary,
you agree, effective upon your receipt of the payment referred to in
paragraph 1 of this letter, as follows:
(a) Should you voluntarily leave the employ of this
company before the earlier of the 15th anniversary of this
agreement or your attainment of age 62, then the payment of
the Payment (as defined in the "Agreement") to you shall not
commence until such anniversary or your attaining age 62.
Notwithstanding the foregoing, payments shall
commence immediately upon your death or upon your continuing
disability making it impossible for you to continue to perform
your normal business duties.
<PAGE> 2
(b) You agree that, so long as you are entitled to
any part of the Payment, you will not, directly or indirectly,
whether as employee, consultant, proprietor, partner,
stockholder or other capacity, engage in any aspect of the
magnesium business (production, marketing, sales, use) in any
part of the world. In this respect, you and we acknowledge
that the primary magnesium industry is a worldwide industry,
that the participants therein compete against each other in
all parts of the world, and that therefore this restriction is
reasonable.
Should you engage in any activity proscribed by
the preceding paragraph then the company's obligation to you
to make the Payment (or any unpaid part thereof) shall
automatically and permanently cease, and you shall be deemed
to have irrevocably released you right to same.
(c) Should you voluntarily leave the company, you
shall give 30 days advance written notice, and the amount of
your Payment will be calculated as to the close of the fiscal
quarter in which such 30 day notice period ends.
3. The parties hereby reaffirm the Agreement as amended
hereby.
Please confirm your agreement to the foregoing by signing and
returning the enclosed copy.
Very truly yours,
MAGNESIUM CORPORATION
OF AMERICA
By_________________________________
CONFIRMED AND AGREED TO:
________________________
Ron L. Thayer
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<PAGE> 1
MAGNESIUM CORPORATION OF AMERICA
238 NORTH 2200 WEST
SALT LAKE CITY, UTAH 84116
June 11, 1996
Mr. Lee R. Brown
c/o Magnesium Corporation of America
238 North 2200 West
Salt Lake City, Utah 84116
Dear Sir:
Reference is made to your net worth appreciation participation
agreement with this Corporation (the "Agreement").
This will confirm our agreement with you as follows:
1. As you know, our parent company, Renco Metals, Inc. ("Renco
Metals") is contemplating a refinancing under which it will issue
$150,000,000 of Senior Notes due 2003 ("New Notes") and retire its
presently outstanding $75,000,000 of Senior Notes due 2000 (the
"Existing Notes"). On the issuance of the New Notes this company will
pay a dividend to Renco Metals. Concurrently with the payment of such
dividend this company will make a payment to you on account of the
dividend and the Agreement and you will accept same in full settlement
of all of your rights arising from the payment of the dividend. In
consideration of such payment and your agreement to the amendments to
the Agreement as outlined in paragraph 2 below, the Company agrees that
although after paying the above mentioned payment "Cumulative Net
Income" under the Agreement would be approximately negative
$50,000,000, nevertheless, your Cumulative Net Income will be deemed to
be zero as of July 31, 1996. Your Cumulative Net Income participation
shall be calculated on the company's Cumulative Net Income accruing
after that date.
2. Notwithstanding anything in the Agreement in the contrary,
you agree, effective upon your receipt of the payment referred to in
paragraph 1 of this letter, as follows:
(a) Should you voluntarily leave the employ of this
company before the earlier of the 15th anniversary of this
agreement or your attainment of age 62, then the payment of
the Payment (as defined in the "Agreement") to you shall not
commence until such anniversary or your attaining age 62.
Notwithstanding the foregoing, payments shall
commence immediately upon your death or upon your continuing
disability making it impossible for you to continue to
perform your normal business duties.
<PAGE> 2
(b) You agree that, so long as you are entitled to
any part of the Payment, you will not, directly or indirectly,
whether as employee, consultant, proprietor, partner,
stockholder or other capacity, engage in any aspect of the
magnesium business (production, marketing, sales, use) in any
part of the world. In this respect, you and we acknowledge
that the primary magnesium industry is a worldwide industry,
that the participants therein compete against each other in
all parts of the world, and that therefore this restriction is
reasonable.
Should you engage in any activity proscribed by
the preceding paragraph then the company's obligation to you
to make the Payment (or any unpaid part thereof) shall
automatically and permanently cease, and you shall be deemed
to have irrevocably released you right to same.
(c) Should you voluntarily leave the company, you
shall give 30 days advance written notice, and the amount of
your Payment will be calculated as to the close of the fiscal
quarter in which such 30 day notice period ends.
3. The parties hereby reaffirm the Agreement as amended
hereby.
Please confirm your agreement to the foregoing by signing and
returning the enclosed copy.
Very truly yours,
MAGNESIUM CORPORATION
OF AMERICA
By_________________________________
CONFIRMED AND AGREED TO:
________________________
Lee R. Brown
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<PAGE> 1
MAGNESIUM CORPORATION OF AMERICA
238 NORTH 2200 WEST
SALT LAKE CITY, UTAH 84116
June 11, 1996
Mr. Todd R. Ogaard
c/o Magnesium Corporation of America
238 North 2200 West
Salt Lake City, Utah 84116
Dear Sir:
Reference is made to your net worth appreciation participation
agreement with this Corporation (the "Agreement").
This will confirm our agreement with you as follows:
1. As you know, our parent company, Renco Metals, Inc. ("Renco
Metals") is contemplating a refinancing under which it will issue
$150,000,000 of Senior Notes due 2003 ("New Notes") and retire its
presently outstanding $75,000,000 of Senior Notes due 2000 (the
"Existing Notes"). On the issuance of the New Notes this company will
pay a dividend to Renco Metals. Concurrently with the payment of such
dividend this company will make a payment to you on account of the
dividend and the Agreement and you will accept same in full settlement
of all of your rights arising from the payment of the dividend. In
consideration of such payment and your agreement to the amendments to
the Agreement as outlined in paragraph 2 below, the Company agrees that
although after paying the above mentioned payment "Cumulative Net
Income" under the Agreement would be approximately negative
$50,000,000, nevertheless, your Cumulative Net Income will be deemed to
be zero as of July 31, 1996. Your Cumulative Net Income participation
shall be calculated on the company's Cumulative Net Income accruing
after that date.
2. Notwithstanding anything in the Agreement in the contrary,
you agree, effective upon your receipt of the payment referred to in
paragraph 1 of this letter, as follows:
(a) Should you voluntarily leave the employ of this
company before the earlier of the 15th anniversary of this
agreement or your attainment of age 62, then the payment of
the Payment (as defined in the "Agreement") to you shall not
commence until such anniversary or your attaining age 62.
Notwithstanding the foregoing, payments shall
commence immediately upon your death or upon your continuing
disability making it impossible for you to continue to
perform your normal business duties.
<PAGE> 2
(b) You agree that, so long as you are entitled to
any part of the Payment, you will not, directly or indirectly,
whether as employee, consultant, proprietor, partner,
stockholder or other capacity, engage in any aspect of the
magnesium business (production, marketing, sales, use) in any
part of the world. In this respect, you and we acknowledge
that the primary magnesium industry is a worldwide industry,
that the participants therein compete against each other in
all parts of the world, and that therefore this restriction is
reasonable.
Should you engage in any activity proscribed by
the preceding paragraph then the company's obligation to you
to make the Payment (or any unpaid part thereof) shall
automatically and permanently cease, and you shall be deemed
to have irrevocably released you right to same.
(c) Should you voluntarily leave the company, you
shall give 30 days advance written notice, and the amount of
your Payment will be calculated as to the close of the fiscal
quarter in which such 30 day notice period ends.
3. The parties hereby reaffirm the Agreement as amended
hereby.
Please confirm your agreement to the foregoing by signing and
returning the enclosed copy.
Very truly yours,
MAGNESIUM CORPORATION
OF AMERICA
By_________________________________
CONFIRMED AND AGREED TO:
________________________
Todd R. Ogaard
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<PAGE> 1
MAGNESIUM CORPORATION OF AMERICA
238 NORTH 2200 WEST
SALT LAKE CITY, UTAH 84116
June 17, 1996
Dr. Howard I. Kaplan
c/o Magnesium Corporation of America
238 North 2200 West
Salt Lake City, Utah 84116
Dear Sir:
Reference is made to your net worth appreciation participation
agreement with this Corporation (the "Agreement").
This will confirm our agreement with you as follows:
1. As you know, our parent company, Renco Metals, Inc. ("Renco
Metals") is contemplating a refinancing under which it will issue
$150,000,000 of Senior Notes due 2003 ("New Notes") and retire its
presently outstanding $75,000,000 of Senior Notes due 2000 (the
"Existing Notes"). On the issuance of the New Notes this company will
pay a dividend to Renco Metals. Concurrently with the payment of such
dividend this company will make a payment to you on account of the
dividend and the Agreement and you will accept same in full settlement
of all of your rights arising from the payment of the dividend. In
consideration of such payment and your agreement to the amendments to
the Agreement as outlined in paragraph 2 below, the Company agrees that
although after paying the above mentioned payment "Cumulative Net
Income" under the Agreement would be approximately negative
$50,000,000, nevertheless, your Cumulative Net Income will be deemed to
be zero as of July 31, 1996. Your Cumulative Net Income participation
shall be calculated on the company's Cumulative Net Income accruing
after that date.
2. Notwithstanding anything in the Agreement in the contrary,
you agree, effective upon your receipt of the payment referred to in
paragraph 1 of this letter, as follows:
(a) Should you voluntarily leave the employ of this
company before the earlier of the 15th anniversary of this
agreement or your attainment of age 62, then the payment of
the Payment (as defined in the "Agreement") to you shall not
commence until such anniversary or your attaining age 62.
- -1-
<PAGE> 2
Notwithstanding the foregoing, payments
shall commence immediately upon your death or upon your
continuing disability making it impossible for you to continue
to perform your normal business duties.
(b) You agree that, so long as you are entitled to
any part of the Payment, you will not, directly or indirectly,
whether as employee, consultant, proprietor, partner,
stockholder or other capacity, engage in any aspect of the
magnesium business (production, marketing, sales, use) in any
part of the world. In this respect, you and we acknowledge
that the primary magnesium industry is a worldwide industry,
that the participants therein compete against each other in
all parts of the world, and that therefore this restriction is
reasonable.
Should you engage in any activity proscribed
by the preceding paragraph then the company's obligation to
you to make the Payment (or any unpaid part thereof) shall
automatically and permanently cease, and you shall be deemed
to have irrevocably released you right to same.
(c) Should you voluntarily leave the company, you
shall give 30 days advance written notice, and the amount of
your Payment will be calculated as to the close of the fiscal
quarter in which such 30 day notice period ends.
3. The parties hereby reaffirm the Agreement as amended
hereby.
Please confirm your agreement to the foregoing by signing and
returning the enclosed copy.
Very truly yours,
MAGNESIUM CORPORATION
OF AMERICA
By
CONFIRMED AND AGREED TO:
Howard I. Kaplan
2
<PAGE> 1
AMENDMENT NO. 2 TO AMENDED AND
RESTATED LOAN AND SECURITY AGREEMENT
MAGNESIUM CORPORATION OF AMERICA
238 North 2200 West
Salt Lake City, Utah 84116
July _, 1996
Congress Financial Corporation
1133 Avenue of the Americas
New York, New York 10036
Gentlemen:
Congress Financial Corporation ("Lender") and Magnesium Corporation
of America ("Borrower") have entered into certain financing arrangements
pursuant to the Amended and Restated Loan and Security Agreement, dated as of
August 4, 1993, between Lender and Borrower, as previously amended pursuant to
the Amendment No. 1 to Amended and Restated Loan and Security Agreement, dated
January 31, 1996 (the "Amendment No. 1"), between Lender and Borrower (as
amended hereby and as the same may be further amended, modified, supplemented,
extended, renewed, restated or replaced, the "Loan Agreement", and together with
all agreements, documents and instruments at any time executed and/or delivered
in connection therewith or related thereto, collectively, the "Financing
Agreements"). All capitalized terms used herein shall have the meaning assigned
thereto in the other Financing Agreements, unless otherwise defined herein.
Renco Metals, Inc., owner of all of the issued and outstanding shares
of common stock of Borrower ("Renco Metals"), is purchasing up to all of the
Existing Senior Notes (as defined below) pursuant to the Tender Offer (as
defined below) as described in the Tender Offer Agreements (as defined below);
Renco Metals is also issuing $150,000,000 of the New RMI Notes (as
defined below), which will be guaranteed by Borrower and Sabel Industries, Inc.,
a wholly owned subsidiary of Renco Metals ("Sabel"), and some of the proceeds of
such notes are to be used by Renco Metals to repurchase up to all of the
Existing Senior Notes pursuant to the Tender Offer;
Borrower has requested that Lender, among other things, (a) consent
to the purchase by Renco Metals of the Existing Senior Notes tendered for such
purchase pursuant to the Tender Offer, (b) permit Borrower to execute and
deliver the unsecured guarantee by Borrower of the indebtedness of Renco Metals
evidenced by the New RMI Notes, (c) agree to amend certain provisions of the
Loan Agreement to permit the foregoing transactions and
<PAGE> 2
(d) agree to extend the term of the Financing Agreements and further amend the
Loan Agreement, and Lender is willing to consent to such purchase of the
Existing Senior Notes, permit such unsecured guarantee, and agree to such an
extension to the Financing Agreements and to such amendments to the Loan
Agreement, subject to the terms and conditions contained herein. By this
Amendment, Lender and Borrower desire and intend to evidence such amendments.
In consideration of the foregoing, and other good and valuable
consideration, and the respective agreements and covenants contained herein, the
parties hereto agree as follows:
1. Definitions.
(a) Additional Definitions. As used herein, the following terms shall
have the respective meanings given to them below and the Loan Agreement shall be
deemed and is hereby amended to include, in addition and not in limitation, each
of the following definitions:
(i) "Excess Availability" shall mean the amount, as determined by
Lender, calculated at any time, equal to: (a) the lesser of (i) the amount of
Loans available to Borrower as of such time based on the applicable Lending
Formulas multiplied by the Net Amount of Eligible Accounts and the Value of
Eligible Inventory, as determined by Lender, and subject to the sublimits and
reserves from time to time established by Lender hereunder and (ii) the Maximum
Credit, minus (b) the sum of: (i) the amount of all then outstanding and unpaid
Obligations, plus (ii) the aggregate amount of all trade payables of Borrower
which are more than thirty (30) days past due as of such time.
(ii) "New RMI Indenture" shall mean the Indenture, dated as of July
__, 1996, by and among Renco Metals, as obligor, Borrower and Sabel Industries,
Inc. as guarantors, and Fleet National Bank, as Indenture Trustee with respect
to the New RMI Notes, as the same now exists or may hereafter be amended,
modified, supplemented, extended, renewed, restated or replaced.
(iii) "New RMI Notes" shall mean the ____% Senior Notes due 2003,
issued by Renco Metals dated as of July __, 1996, pursuant to the New RMI
Indenture in the aggregate principal amount of $150,000,000, as the same now
exists or may hereafter be amended, modified, supplemented, extended, renewed,
restated or replaced.
(iv) "Tender Offer" shall mean the offer by Renco Metals to
purchase for cash up to all of the Existing Senior Notes at a price of ___% of
the aggregate principal amount outstanding under the Existing Senior Notes, plus
accrued and unpaid interest, pursuant to the Tender Offer Agreements.
(v) "Tender Offer Agreements" shall mean, individually and
collectively, the Offer to Purchase and Consent Solicitation Statement, dated
May 24, 1996, as amended on June __, 1996, with respect to the repurchase by
Renco Metals of the Existing Senior Notes, and all other agreements, documents
and instruments related thereto, as the
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<PAGE> 3
same now exists or may hereafter be amended, modified, supplemented, extended,
renewed, restated or replaced.
(vi) "Existing Senior Notes" shall mean the 12% Senior Notes due
2000, issued by Renco Metals, dated as of August 4, 1993, pursuant to the
Existing Indenture payable to the order of the holders thereof in the original
principal amount of $75,000,000, on the terms and conditions set forth in
Exhibit A to the Loan Agreement, as the same now exists or may hereafter be
amended, modified, supplemented, extended, renewed, restated or replaced.
(vii) "Existing Indenture" shall mean the Indenture, dated as of
August 1, 1993, by and among Renco Metals, as obligor, Borrower and Sabel
Industries, Inc., as guarantors, and Fleet National Bank, as indenture trustee
with respect to the Existing Senior Notes, and the Supplemental Indenture, dated
July ___, 1996 (the "Supplemental Indenture"), as the same now exist or may
hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced.
(b) Amendments to Definitions.
(i) All references to the term "Senior Notes" in the Loan
Agreement and in any of the other Financing Agreements shall be deemed and each
such reference is hereby amended to mean in the "Existing Senior Notes" as such
term is defined herein.
(ii) All references to the term "Indenture" in the Loan
Agreement and in any of the other Financing Agreements shall be deemed and each
such reference is hereby amended to mean the "Existing Indenture" as such term
is defined herein.
(iii) Sections 1.32 and 1.57 of the Loan Agreement, are hereby
deleted in their entirety and the following substituted therefor:
"[Intentionally omitted]".
(c) Interpretation. For purposes of this Amendment, unless otherwise
defined herein, all terms used herein, including, but not limited to, those
terms used and/or defined in the recitals hereto, shall have the respective
meanings assigned thereto in the Loan Agreement.
2. Consents. Subject to the terms and conditions contained herein,
Lender hereby consents to: (a) the purchase by Renco Metals of up to all of the
Existing Senior Notes pursuant to the Tender Offer and (b) the amendment to the
Existing Indenture as set forth in the Supplemental Indenture.
3. Interest Rate. All references in Section 1.33 of the Loan
Agreement to "one and three-quarter percent (1 3/4%) per annum" and "three and
three-quarter (3-3/4%) percent per annum" are each hereby deleted and the
following substituted therefor: "one (1%) percent per annum" and "three (3%)
percent per annum", respectively.
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<PAGE> 4
4. Maximum Credit. Section 1.41 of the Loan Agreement is hereby
deleted in its entirety and the following substituted therefor:
"1.41 "Maximum Credit" shall mean $33,000,000."
5. Inventory Advance Rate. Section 3.1(a)(iii) of the Loan Agreement
is hereby deleted in its entirety and the following substituted therefor:
"(iii) thirty (30%) percent of the Value of Eligible Inventory
consisting of Supplies (or such greater or lesser percentage thereof as Lender
may determine from time to time)."
6. Inventory Sublimit. Section 3.1(b) of the Loan Agreement is hereby
deleted in its entirety and the following substituted therefor:
"(b) Notwithstanding anything to the contrary contained herein or in
any of the other Financing Agreements, except in Lender's discretion,
the aggregate unpaid principal amount of the Loans outstanding at any
time based on Eligible Inventory, regardless of the amounts of such
Eligible Inventory, shall not exceed $12,000,000 and the aggregate
unpaid principal amount of the Loans outstanding at any time based on
Eligible Inventory consisting of Supplies, regardless of the amounts
of such Eligible Inventory, shall not exceed $3,000,000."
7. Letter of Credit Accommodations.
(a) The reference in Section 3.2(e) of the Loan Agreement to "three
(3%) percent per annum" is hereby deleted and the following substituted
therefor: "one and one-half (1 1/2%) percent per annum".
(b) The reference in Section 3.2(f) of the Loan Agreement to
"$3,000,000" is hereby deleted and the following substituted therefor:
"S5,000,000"
8. Unused Line Fee. The reference in Section 3.5(c) of the Loan
Agreement to "$15,000,000" is hereby deleted and the following substituted
therefor: "$25,000,000".
9. Net Worth Covenants. Section 7.19 of the Loan Agreement is hereby
deleted in its entirety and the following substituted therefor:
"7.19 Consolidated Net Worth. Borrower and its subsidiaries shall, at
all times, maintain a Consolidated Net Worth of not less than
negative $112,000,000."
10. Indebtedness. Section 7.6 of the Loan Agreement is hereby amended
by adding the following new Section (1) immediately after Section 7.6(k)
thereof:
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<PAGE> 5
"(1) Indebtedness of Borrower to Renco Metals, outstanding as of the
date hereof in the amount of $__________, which Indebtedness is, in
all respects, subject and subordinate in right of payment to the
right of Lender to receive the prior indefeasible payment in full of
all of the Obligations; provided, that, Borrower shall not make any
payments in respect of such Indebtedness except to the extent
permitted under Section 7.6."
11. Guarantees.
(a) Section 7.5(c) of the Loan Agreement is hereby deleted in its
entirety and the following substituted therefore:
"(c) the unsecured guarantee by Borrower of the Indebtedness of Renco
Metals evidenced by the Existing Senior Notes (as in effect on the
date hereof) in an aggregate principal amount equal to the sum of
$75,000,000 minus the aggregate principal amount of Existing Senior
Notes purchased by Renco Metals in the Tender Offer pursuant to the
terms of the Tender Offer Agreements; provided, that: (i) Borrower
shall not, directly or indirectly, (a) amend, modify, alter or change
the terms of such guarantee or consent to any of the same as to the
Existing Senior Notes or any agreements, documents or instruments
executed and/or delivered in connection therewith, including, but not
limited to, the Existing Indenture, or (b) redeem, retire, defease,
purchase or otherwise acquire such indebtedness, or set aside or
otherwise deposit or invest any sums for such purpose, and (ii)
Borrower shall furnish to Lender all notices, demands or other
material either received from any of the holders of the Existing
Senior Notes or any representative of the holders (including, but not
limited to, the trustee), promptly after receipt thereof, or sent by
Borrower, or on its behalf, to any of the holders or the Existing
Senior Notes, or any representative of the holders (including, but
not limited to, the trustee) concurrently with the sending thereof,
as the case may be;"
(b) Section 7.5 of the Loan Agreement is hereby amended by adding the
following new Section (h) immediately after Section 7.5(g) thereof:
"(h) the unsecured guarantee by Borrower of the Indebtedness of Renco
Metals evidenced by the New RMI Notes (as in effect on the date
hereof); provided, that: (i) Borrower shall not, directly or
indirectly, (a) amend, modify, alter or change the terms of such
guarantee or consent to any of the same as to the New RMI Notes or
any agreements, documents or instruments executed and/or delivered in
connection therewith, including, but not limited to, the New RMI
Indenture, or (b) redeem, retire, defease, purchase or otherwise
acquire such indebtedness, or set aside or otherwise deposit or
invest any sums for such purpose, and (ii) Borrower shall furnish to
Lender all notices, demands or other material either received from
any of the holders of the New RMI Notes or any representative of such
holders, including, but not limited to, the trustee),
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<PAGE> 6
promptly after receipt thereof, or sent by Borrower, or on its
behalf, to any of the holders of the New RMI Notes, or any
representative of such holders (including, but not limited to, the
trustee) concurrently with the sending thereof, as the case may be;"
12. Transactions with Affiliates.
(a) Section 7.6(g) of the Loan Agreement is hereby deleted in its
entirety and the following substituted therefor:
"(g) Borrower may make payments to or on behalf of Renco Metals, on
or about January 15 and July 15 and of each year; provided, that, (i)
all proceeds of each such payment by Borrower to or on behalf of
Renco Metals shall be used to pay the regularly scheduled interest
due and payable on or about the date of such payment under the terms
of the Existing Senior Notes (as in effect on the date hereof), (ii)
the amount of each such payment by Borrower to or on behalf of Renco
Metals shall not exceed an amount equal to: (A) the amount of the
regularly scheduled payments of interest under the Existing Senior
Notes (as in effect on the date hereof) due and payable on or about
the date of such payment by Borrower to or on behalf of Renco Metals
minus (B) any amounts paid by Sabel to or on behalf of Renco Metals
in respect of such interest then due, and (iii) no Event of Default,
or act, condition or event which with notice or passage of time or
both would constitute an Event of Default shall have occurred and be
continuing at the time of or after giving effect to the payment of
any such amounts;".
(b) Section 7.6 of the Loan Agreement is hereby amended by adding the
following new Sections (h) and (i) immediately after Section 7.6(g) thereof:
"(h) Borrower may make payments to or on behalf of Renco Metals, on
or about _______________ and _______________ of each year; provided,
that, (i) all proceeds of each such payment by Borrower to or on
behalf of Renco Metals shall be used to pay the regularly scheduled
interest due and payable on or about the date of such payment under
the terms of the New RMI Notes (as in effect on the date hereof),
(ii) the amount of each such payment by Borrower to or on behalf of
Renco Metals shall not exceed an amount equal to: (A) the amount of
the regularly scheduled payments of interest under the New RMI Notes
(as in effect on the date hereof) due and payable on the date of such
payment by Borrower to or on behalf of Renco Metals minus (B) any
amounts paid by Sabel to or on behalf of Renco Metals in respect of
such interest then due, and (iii) no Event of Default, or act,
condition or event which with notice or passage of time or both would
constitute an Event of Default shall have occurred and be continuing
at the time of or after giving effect to the payment of any such
amounts; and
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<PAGE> 7
"(i) Borrower may make certain payments to or on behalf of Renco
Metals; provided, that, (i) all proceeds of each such payment by
Borrower to or on behalf of Renco Metals shall be used to pay any
mandatory redemptions of the New RMI Notes (as in effect on the date
hereof) required by the New RMI Indenture (as in effect on the date
hereof) in the event of (A) certain Asset Sales (as defined in the
New RMI Indenture as in effect on the date hereof) of Borrower other
than the Collateral, and (B) a Change of Control (as defined in the
New RMI Indenture as in effect on the date hereof), (ii) the amount
of each such payment by Borrower to or on behalf of Renco Metals
shall not exceed an amount equal to: (A) the amount of the mandatory
redemptions of the New RMI Notes required to be paid by Renco Metals
minus (B) any amounts paid by Sabel to or on behalf of Renco Metals
in respect of such payments, and (iii) no Event of Default, or act,
condition or event which with notice or passage of time or both would
constitute an Event of Default shall have occurred and be continuing
at the time of or after giving effect to the payment of any such
amounts".
(c) Notwithstanding anything to the contrary contained in Section 7.6
or 7.7 of the Loan Agreement, but subject to the terms and conditions contained
herein, Borrower may (i) declare and pay, out of legally available funds
therefor, a one (1) time dividend as of the date hereof to Renco Metals or to
Renco Group on behalf of Renco Metals in an amount not to exceed an amount equal
to: (A) $ ____________ minus (B) any amounts paid by Sabel to Renco Metals or to
Renco Group on behalf of Renco Metals in respect of such a dividend payment as
of the date hereof and (ii) pay to certain officers of Borrower an amount up to
S pursuant to existing net worth appreciation agreements between such officers
and Borrower.
13. Renewal Date. The reference in Section 10.1(a) of the Loan
Agreement (as previously amended) to "five (5) years from the date hereof" shall
be deleted in its entirety and the following substituted therefor: "six (6)
years from the date hereof".
14. Early Termination Fee. Notwithstanding anything to the contrary
contained in Section 10.1(e) of the Loan Agreement or any of the other Financing
Agreements (including Amendment No. 1), if Lender terminates the Loan Agreement
or the other Financing Agreements upon the occurrence of an Event of Default or
at the request of Borrower prior to the Renewal Date (as amended herein),
Borrower hereby agrees to pay to Lender for the account of Lender, upon the
effective date of such termination, an early termination fee in an amount equal
to:
(i) $660,000, if such termination is effective prior to the fourth
anniversary of the Loan Agreement; or
(ii) $330,000, if such termination is effective after the fourth
anniversary of the Loan Agreement but prior to the Renewal Date or
the anniversary of the Renewal Date in any subsequent year
thereafter.
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<PAGE> 8
15. Audit Fee Limit. Notwithstanding anything to the contrary
contained in Section 10.2(a)(vi) of the Loan Agreement, so long as no Event of
Default, or act, condition or event which with notice or passage of time or both
would constitute an Event of Default shall exist or have occurred, Borrower
shall not be required to reimburse Lender with respect to costs (exclusive of
out-of-pocket expenses) incurred by Lender for field examinations of the
Collateral and Borrower's operations in excess of $10,000 per calendar year. The
foregoing shall not be construed to limit any other provisions of the Financing
Agreements regarding costs and expenses to be paid by Borrower to Lender.
16. Notice. Notwithstanding anything to the contrary contained in
Section 10.5 of the Loan Agreement, all notices, requests and demands to or upon
Borrower are to be given to the following address:
Magnesium Corporation of America
238 North 2200 West
Salt Lake City, Utah 84116
Attention: Michael H. Legge
with copies to:
The Renco Group, Inc.
30 Rockefeller Plaza
New York, New York 10112
Attention: Mr. Ira Leon Rennert
17. Reporting Requirements. In addition to, and not in limitation of,
all such financial and other information as Lender shall reasonably request
relating to the Collateral and the assets, businesses and operations of
Borrower, Borrower shall provide Lender a borrowing base certificate, in form
and substance satisfactory to Lender, setting forth Borrower's calculation of
the Loans and Letter of Credit Accommodations available to Borrower pursuant to
the terms and conditions contained in the Loan Agreement as of the previous day
each such certificate is due, based on the following schedule:
(a) on a semi-monthly basis, if (i) the Obligations are at all times
during such period less than $10,000,000, (ii) Borrower has Excess Availability,
as determined by Lender, at any time during such period, in an amount equal to
or greater than $15,000,000 and (iii) no Event of Default, or act, condition or
event which with notice or passage of time or both would constitute an Event of
Default, shall have occurred and be continuing during such period;
(b) on a weekly basis, if (i) the Obligations are at all times during
such period equal to or greater than $10,000,000 but less than $20,000,000, (ii)
Borrower shall have Excess Availability, as determined by Lender, at any time
during such period, in an amount greater than $7,500,000 but less than
$15,000,000; (iii) no Event of Default, or act, condition or event which with
notice or passage of time or both would constitute an Event of Default, shall
have occurred and be continuing during such period; and
-8-
<PAGE> 9
(c) on a daily basis, at all other times.
18. Facility Increase Fee. Borrower hereby agrees to pay Lender a
Facility Increase Fee in the amount of $130,000, simultaneously with the
execution of this Amendment, which fee is fully earned as of the date hereof.
Such fee may, at Congress' option, be charged directly to any account of
Borrower maintained by Lender.
19. Representations, Warranties and Covenants. In addition to the
continuing representations, warranties and covenants heretofore or hereafter
made by Borrower to Lender pursuant to the other Financing Agreements, Borrower
hereby represents, warrants and covenants with and to Lenders as follows (which
representations, warranties and covenantor are continuing and shall survive the
execution and delivery hereof and shall be incorporated into and made a part of
the Financing Agreements):
(a) Tender Offer and Cancellation of Existing Senior Notes.
(i) The Tender Offer Agreements and the transactions contemplated
thereunder have been duly executed, delivered and performed in accordance with
their terms by the respective parties thereto in all respects, including the
fulfillment (not merely the waiver, except as may be disclosed to Agent and
consented to in writing by Agent) of all conditions precedent set forth therein
and giving effect to the terms of the Tender Offer Agreements, the portion of
the Existing Senior Notes tendered by the holders of the Existing Senior Notes
and accepted by Renco Metals have been purchased by Borrower and all
obligations, liabilities and indebtedness of Borrower evidenced by or arising
under such tendered Existing Senior Notes have been satisfied.
(ii) All actions and proceedings required by the Tender Offer
Agreements, applicable law and regulation have been taken and the transactions
required thereunder had been duly and validly taken and consummated.
(iii) No court of competent jurisdiction has issued any injunction,
restraining order or other order which prohibits consummation of the
transactions described in the Tender Offer Agreements and no governmental action
or proceeding has been threatened or commenced seeking any injunction,
restraining order or other order which seeks to void or otherwise modify the
transactions described in the Tender Offer Agreements.
(iv) Borrower has delivered, or caused to be delivered, to Lender,
true, correct and complete copies of the Tender Offer Agreements.
(b) New RMI Notes.
(i) The New RMI Notes have been duly authorized, issued and delivered by Renco
Metals and all agreements, documents and instruments related thereto, including,
but not limited to, the New RMI Indenture, have been duly authorized, executed
and delivered and the transactions contemplated thereunder performed in
accordance with their terms by the respective parties thereto in all respects,
including the fulfillment (not merely the waiver) of all
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<PAGE> 10
conditions precedent set forth herein. All actions and proceedings required by
the New RMI Notes and the agreements, documents and instruments related thereto,
applicable law or regulation have been taken and the transactions required
thereunder have been duly and validly taken and consummated. Neither the
execution and delivery of New RMI Notes or any of the instruments and documents
to be delivered pursuant thereto, nor the consummation of the transactions
therein contemplated, nor compliance with the provisions thereof, has violated
or will violate any law or regulation or any order or decree of any court or
governmental instrumentality in any respect or does or will conflict with or
result in the breach of, or constitute a default in any respect under, any
indenture, mortgage, deed of trust, agreement or instrument to which either
Borrower or Renco Metals is or was a party or may be bound, or result in the
creation or imposition of any lien, charge or encumbrance upon any of the
property or Borrower or Renco Metals or violate any provision of the Certificate
of Incorporation or By-Laws of Borrower or Renco Metals.
(ii) No court of competent jurisdiction has issued any injunction,
restraining order or other order which prohibits consummation of the issuance of
the New RMI notes and the transactions described therein and no governmental or
other action or proceeding has been threatened or commenced, seeking any
injunction, restraining order or other order which seeks to void or otherwise
modify the issuance of the New RMI Notes.
(iii) Borrower has delivered, or caused to be delivered, to Lender,
a true, correct and complete specimen of the New RMI Notes and copies of all
other agreements, documents and instruments existing as of the date relating
thereto.
(c) No Default. No Event of Default exists on the date of the
Amendment (after giving effect to the amendments to the Loan Agreement made by
this Amendment).
(d) Corporate Power and Authority. This Amendment has been duly
executed and delivered by Borrower and is in full force and effect as of the
date hereof, and the agreements and obligations of Borrower contained herein
constitute legal, valid and binding obligations of Borrower enforceable against
Borrower in accordance with their respective terms.
20. Conditions Precedent. The effectiveness of the consents and other
terms and conditions contained herein shall be subject to the receipt by Lender
of each of the following, in form and substance satisfactory to Lender:
(a) evidence that: (i) the New RMI Notes and all agreements,
documents and instruments relating thereto have been duly authorized, executed
and delivered by the parties thereto in accordance with their terms and (ii)
Renco Metals has received from or on behalf of the initial holder of the New RMI
Notes cash or other immediately available funds in the aggregate amount of
$150,000,000, minus any underwriting discount with respect thereto, constituting
the net proceeds from the issuance of the New RMI Notes;
(b) evidence that the proceeds received by Renco Metals from or on
behalf of the holders of the New RMI Notes have been applied as set forth in the
Form S-1
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<PAGE> 11
Registration Statement filed by Renco Metals with the Securities and Exchange
Commission on May 24, 1996, as amended, including that some of the proceeds have
been applied to repurchase all of the Existing Senior Notes tendered by such
holders pursuant to the Tender Offer; and
(c) an original of this Amendment, duly authorized, executed and
delivered by Borrower.
21. Additional Events of Default. The parties hereto acknowledge,
confirm and agree that the failure of Borrower to comply with the covenants,
conditions and agreements contained herein or in the New RMI Indenture shall
constitute an Event of Default under the Financing Agreements (subject to the
applicable cure period, if any, with respect thereto provided for in the Loan
Agreement as in effect on the date hereof).
22. Effect of this Agreement. Except as modified pursuant hereto, no
other changes or modifications in the Loan Agreement or the other Financing
Agreements are intended or implied and the Financing Agreements are hereby
specifically ratified, restated and confirmed by all parties hereto as of the
affective date hereof. To the extent of conflict between the terms of this
Amendment and the other Financing Agreements, the terms of this Amendment shall
control.
23. Governing Law. The rights and obligations hereunder of each of
the parties hereto shall be governed by and interpreted and determined in
accordance with the laws of the State of New York.
24. Binding Effect. This Amendment shall be binding upon and inure to
the benefit of each of the parties hereto and their respective successors and
assigns.
25. Counterparts. This Amendment may be executed in any number of
counterparts, but all of such counterparts shall together constitute but one and
the same agreement. In making proof of this Amendment, it shall not be necessary
to produce or account for more than one counterpart thereof signed by each of
the parties hereto.
26. Further Assurances. The parties hereto shall execute and deliver
such additional documents and take such additional action as may be necessary or
desirable to effectuate the provisions and purposes of this Agreement.
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<PAGE> 12
Please sign the enclosed counterpart of this Amendment in the space
provided below, whereupon this Amendment, as accepted by Lender, shall become
a binding agreement between Borrower and Lender.
Very truly yours,
MAGNESIUM CORPORATION OF AMERICA
By:_____________________________________
Title:__________________________________
AGREED:
CONGRESS FINANCIAL CORPORATION
By:___________________________
Title:________________________
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<PAGE> 1
AMENDMENT NO. 2 TO
LOAN AND SECURITY AGREEMENT
SABEL INDUSTRIES, INC.
749 North Court Street
Montgomery, Alabama 36102
July __, 1996
Congress Financial Corporation
1133 Avenue of the Americas
New York, New York 10036
Gentlemen:
Congress Financial Corporation ("Lender") and Magnesium Corporation of
America ("Borrower") have entered into certain financing arrangements pursuant
to the Loan and Security Agreement, dated as of August 4, 1993, between Lender
and Borrower, as previously amended pursuant to Amendment No. 1 to Loan and
Security Agreement, dated January 31, 1996 (the "Amendment No. 1"), between
Lender and Borrower (as amended hereby and as the same may be further amended,
modified, supplemented, extended, renewed, restated or replaced, the "Loan
Agreement", and together with all agreements, documents and instruments at any
time executed and/or delivered in connection therewith or related thereto,
collectively, the "Financing Agreements"). All capitalized terms used herein
shall have the meaning assigned thereto in the other Financing Agreements,
unless otherwise defined herein.
Renco Metals, Inc., owner of all of the issued and outstanding shares
of common stock of Borrower ("Renco Metals"), is purchasing up to all of the
Existing Senior Notes (as defined below) pursuant to the Tender Offer (as
defined below) as described in the Tender Offer Agreements (as defined below);
Renco Metals is also issuing $150,000,000 of the New RMI Notes (as
defined below), which will be guaranteed by Borrower and Magnesium Corporation
of America, a wholly owned subsidiary of Renco Metals ("Magcorp"), and some of
the proceeds of such notes are to be used by Renco Metals to repurchase up to
all of the Existing Senior Notes pursuant to the Tender Offer;
Borrower has requested that Lender, among other things, (a) consent to
the purchase by Renco Metals of the Existing Senior Notes tendered for such
purchase pursuant to the Tender Offer, (b) permit Borrower to execute and
deliver the unsecured guarantee by Borrower of the indebtedness of Renco Metals
evidenced by the New RMI Notes, (c) agree to amend certain provisions of the
Loan Agreement to permit the foregoing transactions and (d) agree to extend the
term of the Financing Agreements and further amend the Loan Agreement, and
Lender is willing to consent to such purchase of the Existing Senior Notes,
permit such unsecured guarantee, and agree to such an extension to the Financing
Agreements and to such
<PAGE> 2
amendments to the Loan Agreement, subject to the terms and conditions contained
herein. By this Amendment, Lender and Borrower desire and intend to evidence
such amendments.
In consideration of the foregoing, and other good and valuable
consideration, and the respective agreements and covenants contained herein, the
parties hereto agree as follows:
1. Definitions.
(a) Additional Definitions. As used herein, the following
terms shall have the respective meanings given to them below and the Loan
Agreement shall be deemed and is hereby amended to include, in addition and not
in limitation, each of the following definitions:
(i) "New RMI Indenture" shall mean the Indenture,
dated as of July __, 1996, by and among Renco Metals, as obligor Borrower and
Magcorp, as guarantors, and Fleet National Bank, as Indenture Trustee with
respect to the New RMI Notes, as the same now exists or may hereafter be
amended, modified, supplemented, extended, renewed, restated or replaced.
(ii) "New RMI Notes" shall mean the _____% Senior
Notes due 2003, issued by Renco Metals dated as of July __, 1996, pursuant to
the New RMI Indenture in the aggregate principal amount of $150,000,000, as the
same now exists or may hereafter be amended, modified, supplemented, extended,
renewed, restated or replaced.
(iii) "Tender Offer" shall mean the offer by Renco
Metals to purchase for cash up to all of the Existing Senior Notes at a price of
___% of the aggregate principal amount outstanding under the Existing Senior
Notes, plus accrued and unpaid interest, pursuant to the Tender Offer
Agreements.
(iv) "Tender Offer Agreements" shall mean,
individually and collectively, the Offer to Purchase and Consent Solicitation
Statement, dated May 24, 1996, as amended on June __, 1996, with respect to the
repurchase by Renco Metals of the Existing Senior Notes, and all other
agreements, documents and instruments related thereto, as the same now exists or
may hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced.
(v) "Existing Senior Notes" shall mean the 12% Senior
Notes due 2000, issued by Renco Metals, dated as of August 4, 1993, pursuant to
the Existing Indenture payable to the order of the holders thereof in the
original principal amount of $75,000,000, on the terms and conditions set forth
in Exhibit A to the Loan Agreement, as the same now exists or may hereafter be
amended, modified, supplemented, extended, renewed, restated or replaced.
(vi) "Existing Indenture" shall mean the Indenture,
dated as of August 1, 1993, by and among Renco Metals, as obligor, Borrower and
Magnesium Corporation of America, as guarantors, and Shawmut Bank Connecticut
National Association, as indenture trustee with respect to the Existing Senior
Notes, and the Supplemental Indenture,
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<PAGE> 3
dated July __, 1996 (the "Supplemental Indenture"), as the same now exist or may
hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced.
(b) Amendments to Definitions.
(i) All references to the term "Senior Notes" in the
Loan Agreement and in any of the other Financing Agreements shall be deemed and
each such reference is hereby amended to mean in the "Existing Senior Notes" as
such term is defined herein.
(ii) All references to the term "Indenture" in the
Loan Agreement and in any of the other Financing Agreements shall be deemed and
each such reference is hereby amended to mean the "Existing Indenture" as such
term is defined herein.
(iii) Sections 1.22 and 1.43 of the Loan Agreement,
are hereby deleted in their entirety and the following substituted therefor:
"[Intentionally omitted]".
(c) Interpretation. For purposes of this Amendment, unless
otherwise defined herein, all terms used herein, including, but not limited to,
those terms used and/or defined in the recitals hereto, shall have the
respective meanings assigned thereto in the Loan Agreement.
2. Consents. Subject to the terms and conditions contained
herein, Lender hereby consents to: (a) the purchase by Renco Metals of up to all
of the Existing Senior Notes pursuant to the Tender Offer and (b) the amendment
to the Existing Indenture as set forth in the Supplemental Indenture.
3. Interest Rate. All references in Section 1.23 of the Loan
Agreement to "one and three-quarter percent (1 3/4%) per annum" and "three and
three-quarter (3-3/4%) percent per annum" are each hereby deleted and the
following substituted therefor: "one (1%) percent per annum" and "three (3%)
percent per annum", respectively.
4. Maximum Credit. Section 1.32 of the Loan Agreement is hereby
deleted in its entirety and the following substituted therefor:
"1.32 "Maximum Credit" shall mean $7,000,000."
5. Inventory Advance Rate. Section 2.1(a)(ii) of the Loan
Agreement is hereby deleted in its entirety and the following substituted
therefor:
"(ii) fifty (50%) percent of the Value of Eligible Inventory
(or such greater or lesser percentage thereof as Lender may
determine from time to time).
6. Inventory Sublimit. Section 2.1(b) of the Loan Agreement is
hereby deleted in its entirety and the following substituted therefor:
"(b) Notwithstanding anything to the contrary contained herein
or in any of the other Financing Agreements, except in
Lender's discretion, the aggregate
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<PAGE> 4
unpaid principal amount of the Loans outstanding at any time
based on Eligible Inventory, regardless of the amounts of such
Eligible Inventory, shall not exceed $3,500,000."
7. Letter of Credit Accommodations.
(a) Section 2.2(b)(i) of the Loan Agreement is hereby deleted
in its entirety and the following substituted therefor:
"(i) additional Loans pursuant to the Lending Formulas,
lending sublimits set forth in Sections 2.1(b) and 2.1(f) and
the Maximum Credit, shall be available to Borrower on the date
of, and after giving effect to, the proposed issuance of the
Letter of Credit Accommodation as follows: (A) if the proposed
Letter of Credit Accommodation is for the purpose of
purchasing Eligible Inventory, then in an amount equal to (1)
fifty (50%) percent multiplied by the Value of such Eligible
Inventory, plus (2) the freight, duty and other amounts which
Lender estimates, in its discretion, must be paid for or in
connection with such Inventory upon arrival or for delivery to
Borrower and (B) if the proposed Letter of Credit
Accommodation is for any other purpose, then one hundred
(100%) percent of the amount thereof;"
(b) Section 2.2(d) of the Loan Agreement is hereby deleted in
its entirety and the following substituted therefor:
"(d) Except in Lender's discretion, the aggregate maximum
amount of Loans which might otherwise be made available to
Borrower by Lender pursuant to the Lending Formulas, the
lending sublimits set forth in Sections 2.1(b) and 2.1(f) and
the Maximum Credit, shall be reduced from time to time as
follows: (i) as to Letter of Credit Accommodations for the
purpose of purchasing Eligible Inventory, by an amount equal
to: (A) fifth (50%) percent multiplied by the Value of
Eligible Inventory to be purchased with such Letter of Credit
Accommodation, plus (B) the freight, duty and other amounts
which Lender estimates, in its discretion, must be paid for or
in connection with such Inventory upon arrival or for delivery
to Borrower and (ii) as to Letter of Credit Accommodations for
any other purpose, one hundred (100%) percent of the then
outstanding aggregate amount thereof and all other commitments
and obligations made or incurred by Lender with respect
thereto."
(c) The reference in Section 2.2(e) of the Loan Agreement to
"three (3%) percent per annum" is hereby deleted and the following substituted
therefor: "one and one-half (1 1/2%) percent per annum".
8. Unused Line Fee. The reference in Section 2.5(a) of the Loan
Agreement to the "Maximum Credit" is hereby deleted and the following
substituted therefor: "$5,000,000".
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<PAGE> 5
9. Section 6.3(f) of the Loan Agreement is hereby deleted in its
entirety and the following substituted therefor:
"(f) Indebtedness of Borrower in respect of Capitalized Lease
Obligations incurred in the ordinary course of business;"
10. Guarantees.
(a) Section 6.5(c) of the Loan Agreement is hereby deleted in
its entirety and the following substituted therefore:
"(c) the unsecured guarantee by Borrower of the Indebtedness
of Renco Metals evidenced by the Existing Senior Notes (as in
effect on the date hereof) in an aggregate principal amount
equal to the sum of $75,000,000 minus the aggregate principal
amount of Existing Senior Notes purchased by Renco Metals in
the Tender Offer pursuant to the terms of the Tender Offer
Agreements; provided, that: (i) Borrower shall not, directly
or indirectly, (a) amend, modify, alter or change the terms of
such guarantee or consent to any of the same as to the
Existing Senior Notes or any agreements, documents or
instruments executed and/or delivered in connection therewith,
including, but not limited to, the Existing Indenture, or (b)
redeem, retire, defease, purchase or otherwise acquire such
indebtedness, or set aside or otherwise deposit or invest any
sums for such purpose, and (ii) Borrower shall furnish to
Lender all notices, demands or other material either received
from any of the holders of the Existing Senior Notes or any
representative of the holders (including, but not limited to,
the trustee), promptly after receipt thereof, or sent by
Borrower, or on its behalf, to any of the holders or the
Existing Senior Notes, or any representative of the holders
(including, but not limited to, the trustee) concurrently with
the sending thereof, as the case may be;"
(b) Section 6.5 of the Loan Agreement is hereby amended by
adding the following new Section (h) immediately after Section 6.5(g) thereof:
"(h) the unsecured guarantee by Borrower of the Indebtedness
of Renco Metals evidenced by the New RMI Notes (as in effect
on the date hereof); provided, that: (i) Borrower shall not,
directly or indirectly, (a) amend, modify, alter or change the
terms of such guarantee or consent to any of the same as to
the New RMI Notes or any agreements, documents or instruments
executed and/or delivered in connection therewith, including,
but not limited to, the New RMI Indenture, or (b) redeem,
retire, defease, purchase or otherwise acquire such
indebtedness, or set aside or otherwise deposit or invest any
sums for such purpose, and (ii) Borrower shall furnish to
Lender all notices, demands or other material either received
from any of the holders of the New RMI Notes or any
representative of such holders, including, but not limited to,
the trustee), promptly after receipt thereof, or sent by
Borrower, or on its behalf, to any of the holders of the New
RMI Notes, or any representative of such holders
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<PAGE> 6
(including, but not limited to, the trustee) concurrently with
the sending thereof, as the case may be;"
11. Transactions with Affiliates.
(a) Section 6.6(f) of the Loan Agreement is hereby deleted in
its entirety and the following substituted therefor:
"(f) Borrower may make payments to or on behalf of Renco
Metals, on or about January 15 and July 15 of each year;
provided, that, (i) all proceeds of each such payment by
Borrower to or on behalf of Renco Metals shall be used to pay
the regularly scheduled interest due and payable on or about
the date of such payment under the terms of the Existing
Senior Notes (as in effect on the date hereof), (ii) the
amount of each such payment by Borrower to or on behalf of
Renco Metals shall not exceed an amount equal to: (A) the
amount of the regularly scheduled payments of interest under
the Existing Senior Notes (as in effect on the date hereof)
due and payable on or about the date of such payment by
Borrower to or on behalf of Renco Metals minus (B) any amounts
paid by Magcorp to or on behalf of Renco Metals in respect of
such interest then due, and (iii) no Event of Default, or act,
condition or event which with notice or passage of time or
both would constitute an Event of Default shall have occurred
and be continuing at the time of or after giving effect to the
payment of any such amounts".
(b) Section 6.6 of the Loan Agreement is hereby amended by
adding the following new Sections (g) and (h) immediately after Section 6.6(f)
thereof:
"(g) Borrower may make payments to or on behalf of Renco
Metals, on or about ___________ and __________ of each year;
provided, that, (i) all proceeds of each such payment by
Borrower to or on behalf of Renco Metals shall be used to pay
the regularly scheduled interest due and payable on or about
the date of such payment under the terms of the New RMI Notes
(as in effect on the date hereof), (ii) the amount of each
such payment by Borrower to or on behalf of Renco Metals shall
not exceed an amount equal to: (A) the amount of the regularly
scheduled payments of interest under the New RMI Notes (as in
effect on the date hereof) due and payable on or about the
date of such payment by Borrower to or on behalf of Renco
Metals minus (B) any amounts paid by Magcorp to or on behalf
of Renco Metals in respect of such interest then due, and
(iii) no Event of Default, or act, condition or event which
with notice or passage of time or both would constitute an
Event of Default shall have occurred and be continuing at the
time of or after giving effect to the payment of any such
amounts; and
"(h) Borrower may make certain payments to or on behalf of
Renco Metals; provided, that, (I) all proceeds of each such
payment by Borrower to or on behalf of Renco Metals shall be
used to pay any mandatory redemptions of the
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<PAGE> 7
New RMI Notes (as in effect on the date hereof) required by
the New RMI Indenture (as in effect on the date hereof) in the
event of (A) certain Asset Sales (as defined in the New RMI
Indenture as in effect on the date hereof) of Borrower other
than the Collateral, and (B) a Change of Control (ad defined
in the New RMI Indenture as in effect on the date hereof),
(ii) the amount of each such payment by Borrower to or on
behalf of Renco Metals shall not exceed an amount equal to:
(A) the amount of such payment by Borrower to or on behalf of
Renco Metals minus (B) any amounts paid by Magcorp to or on
behalf of Renco Metals in respect of such payments, and (iii)
no Event of Default, or act, condition or event which with
notice or passage of time or both would constitute an Event of
Default shall have occurred and be continuing at the time of
or after giving effect to the payment of any such amounts".
(c) Notwithstanding anything to the contrary contained in
Sections 6.6 or 6.7 of the Loan Agreement, but subject to the terms and
conditions contained herein, Borrower may declare and pay, out of legally
available funds therefor, a one (1) time dividend as of the date hereof to Renco
Metals or to Renco Group on behalf of Renco Metals in an amount not to exceed an
amount equal to: (A) $__________ minus (B) any amounts paid by Magcorp to Renco
Metals or to Renco Group on behalf of Renco Metals in respect of such a dividend
payment as of the date hereof.
12. Renewal Date. The reference in Section 9.1(a) of the Loan Agreement
(as previously amended) to "five (5) years from the date hereof" shall be
deleted in its entirety and the following substituted therefor: "six (6) years
from the date hereof".
13. Early Termination Fee. Notwithstanding anything to the contrary
contained in Section 9.1(e) of the Loan Agreement or any of the other Financing
Agreements (including Amendment No. 1), if Lender terminates the Loan Agreement
or the other Financing Agreements upon the occurrence of any Event of Default or
at the request or Borrower prior to the Renewal Date (as amended herein),
Borrower hereby agrees to pay to Lender for the account of Lender, upon the
effective date of such termination, an early termination fee in an amount equal
to:
(i) $140,000, if such termination is effective prior to the
fourth anniversary of the Loan Agreement; or
(ii) $70,000, if such termination is effective after the
fourth anniversary of the Loan Agreement but prior to the
Renewal Date or the anniversary of the Renewal Date in any
subsequent year thereafter.
14. Notice. Notwithstanding anything to the contrary contained in
Section 9.5 of the Loan Agreement, copies of all notices, requests and demands
to or upon Borrower are to be given to the following address:
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<PAGE> 8
The Renco Group, Inc.
30 Rockefeller Plaza
New York, New York 10112
Attention: Mr. Ira Leon Rennert
15. Facility Increase Fee. Borrower hereby agrees to pay Lender a
Facility Increase Fee in the amount of $20,000, simultaneously with the
execution of this Amendment, which fee is fully earned as of the date hereof.
Such fee may, at Congress' option, be charged directly to any account of
Borrower maintained by Lender.
16. Representations, Warranties and Covenants. In addition to the
continuing representations, warranties and covenants heretofore or hereafter
made by Borrower to Lender pursuant to the other Financing Agreements, Borrower
hereby represents, warrants and covenants with and to Lenders as follows (which
representations, warranties and covenants are continuing and shall survive the
execution and delivery hereof and shall be incorporated into and made a part of
the Financing Agreements):
(a) Tender Offer and Cancellation of Existing Senior Notes.
(i) The Tender Offer Agreements and the transactions
contemplated thereunder have been duly executed, delivered and performed in
accordance with their terms by the respective parties thereto in all respects,
including the fulfillment (not merely the waiver, except as may be disclosed to
Agent and consented to in writing by Agent) of all conditions precedent set
forth therein and giving effect to the terms of the Tender Offer Agreements, the
portion of all of the Existing Senior Notes tendered by the holders of Existing
Senior Notes and accepted by Renco Metals have been purchased by Borrower and
obligations, liabilities and indebtedness of Borrower evidenced by or arising
under such tendered Existing Senior Notes have been satisfied.
(ii) All actions and proceedings required by the
Tender Offer Agreements, applicable law and regulation have been taken and the
transactions required thereunder had been duly and validly taken and
consummated.
(iii) No court of competent jurisdiction has issued
any injunction, restraining order or other order which prohibits consummation of
the transactions described in the Tender Offer Agreements and no governmental
action or proceeding has been threatened or commenced seeking any injunction,
restraining order or other order which seeks to void or otherwise modify the
transactions described in the Tender Offer Agreements.
(iv) Borrower has delivered, or caused to be
delivered, to Lender, true, correct and complete copies of the Tender Offer
Agreements.
(b) New RMI Notes.
(i) The New RMI Notes have been duly authorized,
issued and delivered by Renco Metals and all agreements, documents and
instruments related thereto,
-8-
<PAGE> 9
including, but not limited to, the New RMI Indenture, have been duly authorized,
executed and delivered and the transactions contemplated thereunder performed in
accordance with their terms by the respective parties thereto in all respects,
including the fulfillment (not merely the waiver) of all conditions precedent
set forth herein. All actions and proceedings required by the New RMI Notes and
the agreements, documents and instruments related thereto, applicable law or
regulation have been taken and the transactions required thereunder have been
duly and validly taken and consummated. Neither the execution and deliver of New
RMI Notes or any of the instruments and documents to be delivered pursuant
thereto, nor the consummation of the transactions therein contemplated, nor
compliance with the provisions thereof, has violated or will violate any law or
regulation or any order or decree of any court or governmental instrumentality
in any respect or does or will conflict with or result in the breach of, or
constitute a default in any respect under, any indenture, mortgage, deed of
trust, agreement or instrument to which either Borrower or Renco Metals is or
was a party or may be bound, or result in the creation or imposition of any
lien, charge, or encumbrance upon any of the property of Borrower or Renco
Metals or violate any provision of the Certificate of Incorporation or By-Laws
of Borrower or Renco Metals.
(ii) No court of competent jurisdiction has issued
any injunction, restraining order or other order which prohibits consummation of
the issuance of the New RMI Notes and the transactions described therein and no
governmental or other action or proceeding has been threatened or commenced,
seeking any injunction, restraining order or other order which seeks to void or
otherwise modify the issuance of the New RMI Notes.
(iii) Borrower has delivered, or caused to be
delivered, to Lender, a true, correct and complete specimen of the New RMI Notes
and copies of all other agreements, documents and instruments existing as of the
date relating thereto.
(c) No Default. No Event of Default exists on the date of
this Amendment (after giving effect to the amendments to the Loan Agreement made
by this Amendment).
(d) Corporate Power and Authority. This Amendment has
been duly executed and delivered by Borrower and is in full force and effect as
of the date hereof, and the agreements and obligations of Borrower contained
herein constitute legal, valid and binding obligations of Borrower enforceable
against Borrower in accordance with their respective terms.
17. Conditions Precedent. The effectiveness of the consents and
other terms and conditions contained herein shall be subject to the receipt by
Lender of each of the following, in form and substance satisfactory to Lender:
(a) evidence that: (I) the New RMI Notes and all agreements,
documents and instruments relating thereto have been duly authorized, executed
and delivered by the parties thereto in accordance with their terms and (ii)
Renco Metals has received from or on behalf of the initial holder of the New RMI
Notes cash or other immediately available funds in the aggregate amount of
$150,000,000 minus any underwriting discount with respect thereto, constituting
the net proceeds from the issuance of the New RMI Notes;
-9-
<PAGE> 10
(b) evidence that the proceeds received by Renco Metals from
or on behalf of the holders of the New RMI Notes have been applied as set forth
in the Form S-1 Registration Statement filed by Renco Metals with the Securities
and Exchange Commission on May 24, 1996, as amended, including that some of the
proceeds have been applied to repurchase all of the Existing Senior Notes
tendered by such holders pursuant to the Tender Offer; and
(c) an original of this Amendment, duly authorized, executed
and delivered by Borrower.
18. Additional Evens of Default. The parties hereto acknowledge,
confirm and agree that the failure of Borrower to comply with the covenants,
conditions and agreements contained herein or in the New RMI Indenture shall
constitute an Event of Default under the Financing Agreements (subject to the
applicable cure period, if any, with respect thereto provided for in the Loan
Agreement as in effect on the date hereof).
19. Effect of this Agreement. Except as modified pursuant hereto,
no other changes or modifications in the Loan Agreement or the other Financing
Agreements are intended or implied and the Financing Agreements are hereby
specifically ratified, restated and confirmed by all parties hereto as of the
affective date hereof. To the extent of conflict between the terms of this
Amendment and the other Financing Agreements, the terms of this Amendment shall
control.
20. Governing Law. The rights and obligations hereunder of each of
the parties hereto shall be governed by and interpreted and determined in
accordance with the laws of the State of New York.
21. Binding Effect. This Amendment shall be binding upon and inure
to the benefit of each of the parties hereto and their respective successors and
assigns.
22. Counterparts. This Amendment may be executed in any number of
counterparts, but all of such counterparts shall together constitute but one and
the same agreement. In making proof of this Amendment, it shall not be necessary
to produce or account for more than one counterpart thereof signed by each of
the parties hereto.
23. Further Assurances. The parties hereto shall execute and
deliver such additional documents and take such additional action as may be
necessary or desirable to effectuate the provisions and purposes of this
Agreement.
-10-
<PAGE> 11
Please sign the enclosed counterpart of this Amendment in the space
provided below, whereupon this Amendment, as so accepted by Lender, shall become
a binding agreement between Borrower and Lender.
Very truly yours,
SABEL INDUSTRIES, INC.
By:____________________________________
Title:_________________________________
AGREED:
CONGRESS FINANCIAL CORPORATION
By:____________________________
Title:_________________________
-11-
<PAGE> 12
MAGNESIUM CORPORATION OF AMERICA
238 NORTH 2200 WEST
SALT LAKE CITY, UTAH 84116
June 11, 1996
Dr. Howard I. Kaplan
c/o Magnesium Corporation of America
238 North 2200 West
Salt Lake City, Utah 84116
Dear Sir:
Reference is made to your net worth appreciation participation
agreement with this Corporation (the "Agreement").
This will confirm our agreement with you as follows:
1. As you know, our parent company, Renco Metals, Inc. ("Renco
Metals") is contemplating a refinancing under which it will issue
$150,000,000 of Senior Notes due 2003 ("New Notes") and retire its
presently outstanding $75,000,000 of Senior Notes due 2000 (the
"Existing Notes"). On the issuance of the New Notes this company will
pay a dividend to Renco Metals. Concurrently with the payment of such
dividend this company will make a payment to you on account of the
dividend and the Agreement and you will accept same in full settlement
of all of your rights arising from the payment of the dividend. In
consideration of such payment and your agreement to the amendments to
the Agreement as outlined in paragraph 2 below, the Company agrees that
although after paying the above mentioned payment "Cumulative Net
Income" under the Agreement would be approximately negative
$50,000,000, nevertheless, your Cumulative Net Income will be deemed to
be zero as of July 31, 1996. Your Cumulative Net Income participation
shall be calculated on the company's Cumulative Net Income accruing
after that date.
2. Notwithstanding anything in the Agreement in the contrary,
you agree, effective upon your receipt of the payment referred to in
paragraph 1 of this letter, as follows:
(a) Should you voluntarily leave the employ of this
company before the earlier of the 15th anniversary of this
agreement or your attainment of age 62, then the payment of
the Payment (as defined in the "Agreement") to you shall not
commence until such anniversary or your attaining age 62.
- -1-
<PAGE> 13
Notwithstanding the foregoing, payments
shall commence immediately upon your death or upon your
continuing disability making it impossible for you to continue
to perform your normal business duties.
(b) You agree that, so long as you are entitled to
any part of the Payment, you will not, directly or indirectly,
whether as employee, consultant, proprietor, partner,
stockholder or other capacity, engage in any aspect of the
magnesium business (production, marketing, sales, use) in any
part of the world. In this respect, you and we acknowledge
that the primary magnesium industry is a worldwide industry,
that the participants therein compete against each other in
all parts of the world, and that therefore this restriction is
reasonable.
Should you engage in any activity proscribed
by the preceding paragraph then the company's obligation to
you to make the Payment (or any unpaid part thereof) shall
automatically and permanently cease, and you shall be deemed
to have irrevocably released you right to same.
(c) Should you voluntarily leave the company, you
shall give 30 days advance written notice, and the amount of
your Payment will be calculated as to the close of the fiscal
quarter in which such 30 day notice period ends.
3. The parties hereby reaffirm the Agreement as amended
hereby.
Please confirm your agreement to the foregoing by signing and
returning the enclosed copy.
Very truly yours,
MAGNESIUM CORPORATION
OF AMERICA
By
CONFIRMED AND AGREED TO:
Howard I. Kaplan
2
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Renco Metals, Inc.
We consent to the use of our report dated December 1, 1995 on the
financial statements of Renco Metals, Inc. included in the Registration
Statement on Form S-1 and to the reference to our firm under the heading
"Experts" in the Prospectus.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Salt Lake City, Utah
June 12, 1996
<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------
FORM T-1
----------
STATEMENT OF ELIGIBILITY AND QUALIFICATION UNDER THE
TRUST INDENTURE ACT OF 1939 OF A CORPORATION
DESIGNATED TO ACT AS TRUSTEE
----------
/ / CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(B)(2)
FLEET NATIONAL BANK
---------------------------------------------------------
(Exact name of trustee as specified in its charter)
<TABLE>
<S> <C>
Not applicable 04-317415
- ------------------------------- -----------------------------
(State of incorporation (I.R.S. Employer
if not a national bank) Identification No.)
One Monarch Place, Springfield, MA 01102
- ---------------------------------------- -----------------------------
(Address of principal executive offices) (Zip Code)
</TABLE>
Pat Beaudry, 777 Main Street, Hartford, CT 06115 (203) 728-2065
--------------------------------------------------------------
(Name, address and telephone number of agent for service)
RENCO METALS, INC.
---------------------------------------------------
(Exact name of obligor as specified in its charter)
<TABLE>
<S> <C>
Delaware 13-3724916
- ------------------------------- -----------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
c/o Magnesium Corporation of America
238 North 2200 West, Salt Lake City, Utah 84116
- ---------------------------------------- -----------------------------
(Address of principal executive offices) (Zip Code)
</TABLE>
Senior Notes Due 2003
------------------------------------------------------------------
(Title of the indenture securities)
<PAGE> 2
Item 1. General Information.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to
which it is subject,
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 and underwriter. If the obligor or
any underwriter for the obligor is an affiliate of the trustee,
describe each such affiliation.
None with respect to the trustee.
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 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 as now in effect.
(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.
NOTES
In as much as this Form T-1 is filed prior to the ascertainment by the trustee
of all facts on which to base answers to Item 2, the answers to said Items are
based upon imcomplete information. Said Items may, however, be considered
correct unless amended by an amendment to this Form T-1.
<PAGE> 3
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939,
the trustee, Fleet National Bank, a national banking association organized and
existing under the laws of the United States, has duly caused this statement of
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 6th day of June, 1996.
FLEET NATIONAL BANK,
AS TRUSTEE
By: /s/
-------------------------
Frank Kimball
Its Vice President
<PAGE> 4
EXHIBIT 1
ARTICLES OF ASSOCIATION
OF
FLEET NATIONAL BANK
FIRST. The title of this Association, which shall carry on the business of
banking under the laws of the United States, shall be "Fleet National Bank."
SECOND. The main office of the Association shall be in Springfield, Hampden
County Commonwealth of Massachusetts. 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 therefore 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
eight million five hundred thousand (8,500,000) shares of which three million
five hundred thousand (3,500,000) shares shall be common stock with a
par value of six and 25/100 dollars ($6.25) each, and of which five million
(5,000,000) shares without par value shall be preferred stock. The 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 class of the Association shall
have any pre-emptive or preferential right of subscription to any shares of any
class of stock of the Association, whether now or hereafter authorized, or to
any obligations convertible into stock of the Association, 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.
<PAGE> 5
The board of directors of the Association is authorized, subject to limitations
prescribed by law and the provisions of this Article, to provide for the
issuance from time to time in one or more series of any number of the preferred
shares, and to establish the number of shares be included in each series, and
to fix the designation, relative rights, preferences, qualifications and
limitations of the shares of each such series. The authority of the board of
directors with respect to each series shall include, but not be limited to,
determination of the following:
a. The number of shares constituting that series and the distinctive
designation of that series;
b. The dividend rate on the shares of that series, whether dividends shall be
cumulative, and, if so, from which date or dates, and whether they shall be
payable in preference to, or in another relation to, the dividends payable
to any other class or classes or series of stock;
c. Whether that series shall have voting rights, in addition to the voting
rights provided by law, and, if so, the terms of such voting rights;
d. Whether that series shall have conversion or exchange privileges, and,
if so, the terms and conditions of such conversion or exchange, including
provision for the adjustment of the conversion or exchange rate in such
events as the board of directors shall determine;
e. Whether or not the shares of that series shall be redeemable, and, if so,
the terms and conditions of such redemption, including the manner of
selecting shares for redemption if less than all shares are to be redeemed,
the date or dates upon or after which they shall be redeemable, and the
amount per share payable in case of redemption, which amount may vary under
different conditions and at different redemption dates;
f. Whether that series shall be entitled to the benefit of a sinking fund to
be applied to the purchase or redemption of shares of that series, and, if
so, the terms and amounts of such sinking fund;
g. The right of the shares of that series to the benefit of conditions and
restrictions upon the creation of indebtedness of the Association or any
subsidiary, upon the issue of any additional stock (including additional
shares of such series or of any other series) and upon the payment of
dividends or the making of other distributions on, and the purchase,
redemption or other acquisition by the Association or any subsidiary of
any outstanding stock of the Association;
h. The right of the shares of that series in the event of voluntary or
involuntary liquidation, dissolution or winding up of the Association and
whether such rights shall be in preference to, or in another relation to,
the comparable rights of any other class or classes or series of stock; and
i. Any other relative, participating, optional or other special rights,
qualifications, limitations or restrictions of that series.
Shares of any series of preferred stock which have been redeemed (whether
through the operation of a sinking fund or otherwise) or which, if convertible
or exchangeable, have been converted into or exchanged for shares of stock of
any other class or classes shall have the status of authorized and unissued
shares of preferred stock of the same series and may be reissued as a part of
the series of which they were originally a part or may be reclassified and
reissued as part of a new series of preferred stock to be created by resolution
or resolutions of the board of directors or as part of any other series or
preferred stock, all subject to the conditions and the restrictions adopted by
the board of directors providing for the issue of any series of preferred
stock and by the provisions of any applicable law.
Subject to the provisions of any applicable law, or except as otherwise
provided by the resolution or resolutions providing for the issue of any series
of preferred stock, the holders of outstanding shares of common stock shall
exclusively possess voting power for the election of directors and for all
purposes, each holder of record of shares of common stock being entitled to one
vote for each share of common stock standing in his name on the books of the
Association.
Except as otherwise provided by the resolution or resolutions providing for the
issue of any series of preferred stock, after payment shall have been made to
the holders of preferred stock of the full amount of dividends to which they
shall be entitled pursuant to the resolution or resolutions providing for the
issue of any other series of preferred stock, the holders of common stock shall
be entitled, to the exclusion of the holders of preferred stock of any and all
series, to receive such dividends as from time to time may be declared by the
board of directors.
Except as otherwise provided by the resolution or resolutions for the issue
of any series of preferred stock, in the event of any liquidation, dissolution
or winding up of the Association, whether voluntary or involuntary, after
payment shall have been made to the holders of preferred stock of the full
amount to which they shall be entitled pursuant to the resolution or
resolutions providing for the issue of any series of preferred stock the
holders of common stock shall be entitled, to the exclusion of the holders of
preferred stock of any and all series, to share, ratable according to the
number of shares of common stock held by them, in all remaining assets of the
Association available for distribution to its shareholders.
The number of authorized shares of any class may be increased or decreased by
the affirmative vote of the holders of a majority of the stock of the
Association entitled to vote.
<PAGE> 6
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. (a) Right to Indemnification. Each person who was or is made a party
or is threatened to be made a party to any threatened, pending or completed
action, suit, or proceeding, whether civil, criminal, administrative, or
investigative (hereinafter a "proceeding"), by reason of the fact that he or
she is or was a director, officer or employee of the Association or is or was
serving at the request of the Association as a director, officer, employee or
agent of another corporation or of a partnership, joint venture, limited
liability company, trust, or other enterprise, including service with respect
to an employee benefit plan, shall be indemnified and held harmless by the
Association to the fullest extent authorized by the law of the state in which
the Association's ultimate parent company is incorporated, except as provided
in subsection (b). The aforesaid indemnity shall protect the indemnified
person against all expense, liability and loss (including attorney's fees,
judgements, fines ERISA excise taxes or penalties, and amounts paid in
settlement) reasonably incurred by such person in connection with such a
proceeding. Such indemnification shall continue as to a person who has ceased
to be a director, officer or employee and shall inure to the benefit of his or
her heirs, executors, and administrators, but shall only cover such person's
period of service with the Association. The Association may, by action of its
Board of Directors, grant rights to indemnification to agents of the
Association and to any director, officer, employee or agent of any of its
subsidiaries with the same scope and effect as the foregoing indemnification
of directors and officers.
(b) Restrictions on Indemnification. Notwithstanding the foregoing, (i) no
person shall be indemnified hereunder by the Association against expenses,
penalties, or other payments incurred in an administrative proceeding or action
instituted by a federal bank regulatory agency which proceeding or action
results in a final order assessing civil money penalties against that person,
requiring affirmative action by that person in the form of payments to the
Association, or removing or prohibiting that person from service with the
Association, and any advancement of expenses to that person in that proceeding
must be repaid; and (ii) no person shall be indemnified hereunder by the
Association and no advancement of expenses shall be made to any person
hereunder to the extent such indemnification or advancement of expenses would
violate or conflict with any applicable federal statute now or hereafter in
force or any applicable final regulation or interpretation now or hereafter
adopted by the Office of the Comptroller of the Currency ("OCC") or the Federal
Deposit Insurance Corporation ("FDIC"). The Association shall comply with any
requirements imposed on it by any such statue or regulation in connection with
any indemnification or advancement of expenses hereunder by the Association.
With respect to proceedings to enforce a claimant's rights to indemnification,
the Association shall indemnify any such claimant in connection with such a
proceeding only as provided in subsection (d) hereof.
(c) Advancement of Expenses. The conditional right to indemnification
conferred in this section shall be a contract right and shall include the
right to be paid by the Association the reasonable expenses (including
attorney's fees) incurred in defending a proceeding in advance of its final
disposition (an "advancement of expenses"); provided, however, that an
advancement of expenses shall be made only upon (i) delivery to the Association
of a binding written undertaking by or on behalf of the person receiving the
advancement to repay all amounts so advanced if it is ultimately determined
that such person is not entitled to be indemnified in such proceeding,
including if such proceeding results in a final order assessing civil money
penalties against that person, requiring affirmative action by that person
in the form of payments to the Association, or removing or prohibiting that
person from service with the Association, and (ii) compliance with any other
actions or determinations required by applicable law, regulation or OCC or FDIC
interpretation to be taken or made by the Board of Directors of the Association
or other persons prior to an advancement of expenses. The Association shall
cease advancing expenses at any time its Board of Directors believes that any
of the prerequisites for advancement of expenses are no longer being met.
(d) Right of Claimant to Bring Suit. If a claim under subsection (a) of the
section is not paid in full by the Association within thirty (30) days after
written claim has been received by the Association, the claimant may at any time
thereafter bring suit against the Association to recover the unpaid amount
of the claim. If successful in whole or in part in any such suit, or in a
suit brought by the Association to recover an advancement of expenses pursuant
to the terms of an undertaking, the claimant shall be entitled to be paid also
the expense of prosecuting or defending such claim. It shall be a defense to
any such action brought by the claimant to enforce a right to indemnification
hereunder (other than an action brought to enforce a claim for an advancement
of expenses where the required undertaking, if any, has been tendered to the
Association) that the claimant has not met any applicable standard for
indemnification under the law of the state in which the Association's ultimate
parent company is incorporated. In any suit brought by the Association to
recover an advancement of expenses pursuant to the terms of an undertaking, the
Association shall be entitled to recover such expenses upon a final
adjudication that the claimant has not met any applicable standard for
indemnification standard for indemnification under the law of the state in
which the Association's ultimate parent company is incorporated.
(e) Non-Exclusivity of Rights. The rights to indemnification and the
advancement of expenses conferred in this section shall not be exclusive of any
other right which any person may have or hereafter acquired under any statute,
agreement, vote of stockholders or disinterested directors or otherwise.
(f) Insurance. The Association may purchase, maintain, and make payment or
reimbursement for reasonable premiums on, insurance to protect itself and any
director, officer, employee or agent of the Association or another corporation,
partnership, joint venture, trust or other enterprise against any expense,
liability or loss, whether or not the Association would have the power to
indemnify such person against such expense, liability or loss under the law of
the state in which the Association's ultimate parent company is incorporated;
provided however, that such insurance shall explicitly exclude insurance
coverage for a final order of a federal bank regulatory agency assessing civil
money penalties against an Association director, officer, employee or agent.
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 February 15, 1996
<PAGE> 7
EXHIBIT 2
[LOGO]
- --------------------------------------------------------------------------------
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) "Fleet National Bank of Connecticut", 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
4th day of April, 1996.
/s/ EUGENE A. LUDWIG
----------------------------------
Comptroller of the Currency
<PAGE> 8
EXHIBIT 2
[LOGO]
- --------------------------------------------------------------------------------
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 "Fleet National Bank of Connecticut",
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
4th day of April, 1996.
/s/ EUGENE A. LUDWIG
----------------------------------
Comptroller of the Currency
<PAGE> 9
EXHIBIT 4
AMENDED AND RESTATED BY-LAWS OF
FLEET NATIONAL BANK
ARTICLE I
MEETINGS OF SHAREHOLDERS
Section 1. Annual Meeting. The regular annual meeting of the shareholders for
the election of Directors and the transaction of any other business that may
properly come before the meeting shall be held at the Main Office of the
Association, or such other place as the Board of Directors may designate, on
the fourth Thursday of April in each year at 1:15 o'clock in the afternoon
unless some other hour of such day is fixed by the Board of Directors.
If, from any cause, an election of Directors is not made on such day, the Board
of Directors shall order the election to be held on some subsequent day, of
which special notice shall be given in accordance with the provisions of law,
and of these bylaws.
Section 2. Special Meetings. Special meetings of the shareholders may be called
at any time by the Board of Directors, the President, or any shareholders
owning not less than twenty-five percent (25%) of the stock of the Association.
Section 3. Notice of Meetings of Shareholders. Except as otherwise provided
by law, notice of the time and place of annual or special meetings of the
shareholders shall be mailed, postage prepaid, at least ten (10) days before
the date of the meeting to each shareholder of record entitled to vote thereat
at his address as shown upon the books of the Association; but any failure to
mail such notice to any shareholder or any irregularity therein, shall not
affect the validity of such meeting or of any of the proceedings thereat.
Notice of a special meeting shall also state the purpose of the meeting.
Section 4. Quorum; Adjourned Meetings. Unless otherwise provided by law, a
quorum for the transaction of business at every meeting of the shareholders
shall consist of not less than two-fifths (2/5) of the outstanding capital
stock represented in person or by proxy; less than such quorum may adjourn the
meeting to a future time. No notice need be given of an adjourned annual or
special meeting of the shareholders if the adjournment be to a definite place
and time.
Section 5. Votes and Proxies. At every meeting of the shareholders, each
share of the capital stock shall be entitled to one vote except as otherwise
provided by law. A majority of the votes cast shall decide every question
or matter submitted to the shareholder at any meeting, unless otherwise
provided by law or by the Articles of Association or these By-laws. Share-
holders may vote by proxies duly authorized in writing and filed with the
Cashier, but no officer, clerk, teller or bookeeper of the Association may act
as a proxy.
<PAGE> 10
Section 6. Nominations to Board of Directors. At any meeting of shareholders
held for the election of Directors, nominations for election to the Board of
Directors may be made, subject to the provisions of this section, by any share-
holder of record of any outstanding class of stock of the Association entitled
to vote for the election of Directors. No person other than those whose names
are stated as proposed nominees in the proxy statement accompanying the notice
of the meeting may be nominated as such meeting unless a shareholder shall have
given to the President of the Association and to the Comptroller of the
Currency, Washington, DC written notice of intention to nominate such other
person mailed by certified mail or delivered not less than fourteen (14) days
nor more than fifty (50) days prior to the meeting of shareholders at which
such nomination is to be made; provided, however, that if less than twenty-one
(21) days' notice of such meeting is given to shareholders, such notice of
intention to nominate shall be mailed by certified mail or delivered to said
President and said Comptroller on or before the seventh day following the day
on which the notice of such meeting was mailed. Such notice of intention to
nominate shall contain the following information to the extent known to the
notifying shareholder: (a) the name and address of each proposed nominee; (b)
the principal occupation of each proposed nominee; (c) the total number of
shares of capital stock of the Association that will be voted for each proposed
nominee; (d) the name and residence address of the notifying shareholder; and
(e) the number of shares of capital stock of the Association owned by the
notifying shareholder. In the event such notice is given, the proposed nominee
may be nominated either by the shareholder giving such notice or by any other
shareholder present at the meeting at which such nomination is to be made.
Such notice may contain the names of more than one proposed nominee, and if
more than one is named, any one or more of those named may be nominated.
Section 7. Action Taken Without a Shareholder Meeting. Any action requiring
shareholder approval or consent may be taken without a meeting and without
notice of such meeting by written consent of the shareholders.
ARTICLE II
DIRECTORS
Section 1. Number. The Board of Directors shall consist of such number of
shareholders, not less than five (5) nor more than twenty-five (25), as from
time to time shall be determined by a majority of the votes to which all of its
shareholders are at the time entitled, or by the Board of Directors as
hereinafter provided.
Section 2. Mandatory Retirement for Directors. No person shall be elected a
director who has attained the age of 68 and no person shall continue to serve
as a director after the date of the first meeting of the stockholders of the
Association held on or after the date on which such person attains the age of
68; provided, however, that any director serving on the Board as of December
15, 1995 who has attanined the age of 65 on or prior to such date shall be
permitted to continue to serve as a director until the date of the first
meeting of the stockholders of the Association held on or after the date on
which such person attains the age of 70.
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<PAGE> 11
Section 3. General Powers. The Board of Directors shall exercise all the
coporate powers of the Association, except as expressly limited by law, and
shall have the control, management, direction and dispositon of all its
property and affairs.
Section 4. Annual Meeting. Immediately following a meeting of shareholders
held for the election of Directors, the Cashier shall notify the directors-
elect who may be present of their election and they shall then hold a meeting
at the Main Office of the Association, or such other place as the Board of
Directors may designate, for the purpose of taking their oaths, organizing the
new Board, electing officers and transacting any other business that may come
before such meeting.
Section 5. Regular Meeting. Regular meetings of the Board of Directors shall
be held without notice at the Main Office of the Association, or such other
place as the Board of Directors may designate, at such dates and times as the
Board shall determine. If the day designated for a regular meeting falls on a
legal holiday, the meeting shall be held on the next business day.
Section 6. Special Meetings. A special meeting of the Board of Directors may
be called at anytime upon the written request of the Chairman of the Board, the
President, or of two Directors, stating the purpose of the meeting. Notice of
the time and place shall be given not later than the day before the date of the
meeting, by mailing a notice to each Director at his last known address, by
delivering such notice to him personally, or by telephoning.
Section 7. Quorum; Votes. A majority of the Board of Directors at the time
holding office shall constitute a quorum for the transaction of all business,
except when otherwise provided by law, but less than a quorum may adjourn
a meeting from time to time, and the meeting may be held, as adjourned, without
further notice. If a quorum is present when a vote is taken, the affirmative
vote of a majority of Directors present is the act of the Board of Directors.
Section 8. Action by Directors Without a Meeting. Any action requiring
Director approval or consent may be taken without a meeting and without notice
of such meeting by written consent of all the Directors.
Section 9. Telephonic Participation in Directors' Meetings. A Director or
member of a Committee of the Board of Directors may participate in a meeting of
the Board or of such Committee may participate in a meeting of the Board or of
such Committee by means of a conference telephone or similar communications
equipment enabling all Directors participating in the meeting to hear one
another, and participation in such a meeting shall constitute presence in person
at such a meeting.
Section 10. Vacancies. Vacancies in the Board of Directors may be filled by
the remaining members of the Board at any regular or special meeting of the
Board.
Section 11. Interim Appointments. The Board of Directors shall, if the share-
holders at any meeting for the election of Directors have determined a number
of Directors less than twenty-five (25), have the power, by affirmative vote of
the majority of all the Directors, to increase such number of Directors to not
more than twenty-five (25) and to elect Directors to fill the resulting
vacancies and to serve until the next annual meeting of shareholders or the
next election of Directors; provided, however, that the number of Directors
shall not be so increased by more than two (2) if the number last determined
by shareholders was fifteen (15) or less, or increased by more than four (4) if
the number last determined by shareholders was sixteen (16) or more.
Section 12. Fees. The Board of Directors shall fix the amount and direct the
payment of fees which shall be paid to each Director for attendance at any
meeting of the Board of Directors or of any Committees of the Board.
ARTICLE III
COMMITTEES OF THE BOARD
Section 1. Executive Committee. The Board of Directors shall appoint from its
members an Executive Committee which shall consist of such number of persons as
the Board of Directors shall determine; the Chairman of the Board and the
President shall be members ex-officio of the Executive Committee with full
voting power. The Chairman of the Board or the President may from time to time
appoint from the Board of Directors as temporary additional members of the
Executive Committee, with full voting powers, not more than two members to serve
for such periods as the Chairman of the Board or the President may determine.
The Board of Directors shall designate a member of the Executive Committee to
serve as Chairman thereof. A meeting of the Executive Committee may be called
at any time upon the written request of the Chairman of the Board, the President
or the Chairman of the Executive Committee, stating the purpose of the meeting.
Not less than twenty four hours' notice of said meeting shall be given to each
member of the Committee personally, by telephoning, or by mail. The Chairman of
the Executive Committee or, in his absence, a member of the Committee chosen by
a majority of the members present shall preside at meetings of the Executive
Committee.
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<PAGE> 12
The Executive Committee shall possess and may exercise all the powers of the
Board when the Board is not in session except such as the Board, only, by law,
is authorized to exercise; it shall keep minutes of its acts and proceedings
and cause same to be presented and reported at every regular meeting and at any
special meeting of the Board including specifically, all its actions relating
to loans and discounts.
All acts done and powers and authority conferred by the Executive Committee,
from time to time, within the scope of its authority, shall be deemed to be,
and may be certified as being, the acts of and under the authority of the
Board.
Section 2. Risk Management Committee. The Board shall appoint from its
members a Risk Management Committee which shall consist of such number as the
Board shall determine. The Board shall designate a member of the Risk
Management Committee to serve as Chairman thereof. It shall be the duty of the
Risk Management Committee to (a) serve as the channel of communication with
management and the Board of Directors of Fleet Financial Group, Inc. to assure
that formal processes supported by management information systems are in place
for the identification, evaluation and management of significant risks inherent
in or associated with lending activities, the loan portfolio, asset-liablity
management, the investment portfolio, trust and investment advisory activities,
the sale of nondeposit investment products and new products and services and
such additional activities or functions as the Board may determine from time
to time; (b) assure the formulation and adoption of policies approved by the
Risk Management Committee or Board governing lending activities, management of
the loan portfolio, the maintenance of an adequate allowance for loan and lease
losses, asset-liability management, the investment portfolio, the retail
sale of non-deposit investment products, new products and services and such
additional activities or functions as the Board may determine from time to time
(c) assure that a comprehensive independent loan review program is in place for
the early detection of problem loans and review significant reports of the loan
review department, management's responses to those reports and the risk
attributed to unresolved issues; (d) subject to control of the Board, exercise
general supervision over trust activities, the investment of trust funds, the
disposition of trust investments and the acceptance of new trusts and the terms
of such acceptance, and (e) perform such additional duties and exercise such
additional powers of the Board as the Board may determine from time to time.
Section 3. Audit Committee. The Board shall appoint from its memebers and
Audit Committee which shall consist of such number as the Board shall determine
no one of whom shall be an active officer or employee of the Association or
Fleet Financial Group, Inc. or any of its affiliates. In addition, members of
the Audit Committee must not (i) have served as an officer or employee of the
Association or any of its affiliates at any time during the year prior to their
appointment; or (ii) own, control, or have owned or controlled at any time
during the year prior to appointment, ten percent (10%) or more of any
outstanding class of voting securities of the Association. At least two (2)
members of the Audit Committee must have significant executive, professional,
educational or regulatory experience in financial, auditing, accounting,
or banking matters. No member of the Audit Commitee may have significant
direct or indirect credit or other relationships with the Association, the
termination of which would materially adversely affect the Association's
financial condition or results of operations.
The Board shall designate a member of the Audit Committee to serve as Chairman
thereof. It shall be the duty of the Audit Committee to (a) cause a continuous
audit and examination to be made on its behalf into the affairs of the
Association and to review the results of such examination; (b) review
significant reports of the internal auditing department, management's responses
to those reports and the risk attributed to unresolved issues; (c) review the
basis for the reports issued under Section 112 of The Federal Deposit Insurance
Corporation Improvement Act of 1991; (d) consider, in consultation with the
independent auditor and an internal auditing executive, the adequacy of the
Association's internal controls, including the resolution of identified material
weakness and reportable conditions; (e) review regulatory communications
received from any federal or state agency with supervisory jurisdiction or
other examining authority and monitor any needed corrective action by
management; (f) ensure that a formal system of internal controls is in place
for maintaining compliance with laws and regulations; (g) cause an audit of the
Trust Department at least once during each calendar year and within 15 months
of the last such audit or, in liew thereof, adopt a continuous audit system and
report to the Board each calendar year and within 15 months of the previous
report on the performance of such audit function; and (h) perform such
additional duties and exercise such additional powers of the Board as the Board
may determine from time to time.
The Audit Committee may consult with internal counsel and retain its own
outside counsel without approval (prior or otherwise) from the Board or
management and obligate the Association to pay the fees of such counsel.
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<PAGE> 13
Section 4. Community Affairs Committee. The Board shall appoint from its
members a Community Affairs Committee which shall consist of such number as the
Board shall determine. The Board shall designate a member of the Community
Affairs Committee to serve as Chairman thereof. It shall be the duty of the
Commmunity Affairs Committee to (a) oversee compliance by the Association with
the Community Reinvestment Act of 1977, as amended, and the regulations
promulgated thereunder; and (b) perform such additional duties and exercise such
additional powers of the Board as the Board may determine from time to time.
Section 5. Regular Meetings. Except for the Executive Committee which shall
meet on an ad hoc basis as set forth in Section 1 of this Article, regular
meetings of the Committees of the Board of Directors shall be held, without
notice, at such time and place as the Committee or the Board of Directors may
appoint and as often as the business of the Association may require.
Section 6. Special Meetings. A Special Meeting of any of the Committees of
the Board of Directors may be called upon the written request of the Chairman
of the Board or the President, or of any two members of the respective
Committee, stating the purpose of the meeting. Not less than twenty-four
hours' notice of such special meeting shall be given to each member of the
Committee personally, by telephoning, or by mail.
Section 7. Emergency Meetings. An Emergency Meeting of any of the Committees
of the Board of Directors may be called at the request of the Chairman of the
Board or the President, who shall state that an emergency exists, upon not
less than one hour's notice to each member of the Committee personally or by
telephoning.
Section 8. Action Taken Without a Committee Meeting. Any Committee of the
Board of Directors may take action without a meeting and without notice of such
meeting by resolution assented to in writing by all members of such Committee.
Section 9. Quorum. A majority of a Committee of the Board of Directors shall
constitute a quorum for the transaction of any business at any meeting of such
Committee. If a quorum is not available, the Chairman of the Board or the
President shall have power to make temporary appointments to a Committee of-
members of the Board of Directors, to act in the place and stead of members who
temporarily cannot attend any such meeting; provided, however, that any
temporary appointment to the Audit Committee must meet the requirements for
members of that Committee set forth in Section 3 of this Article.
Section 10. Record. The committes of the Board of Directors shall keep a
record of their respective meetings and proceedings which shall be presented
at the regular meeting of the Board of Directors held in the calendar month
next following the meetings of the Committees. If there is no regular Board
of Directors meeting held in the calendar month next following the meeting of
a Committee, then such Committee's records shall be presented at the next
regular Board of Directors meeting held in a month subsequent to such Committee
meeting.
Section 11. Changes and Vacancies. The Board of Directors shall have power
to change the members of any Committee at any time and to fill vacancies on any
Committee; provided, however, that any newly appointed member of the Audit
Committee must meet the requirements for members of that Committee set forth in
Section 3 of this Article.
Section 12. Other Committees. The Board of Directors may appoint, from time
to time, other committees of one or more persons, for such purposes and with
such powers as the Board may determine.
ARTICLE IV
WAIVER OF NOTICE OF MEETINGS
Section 1. Waiver. Whenever notice is required to be given to any shareholder,
Director, or member of a Committee of the Board of Directors, such notice may
be waived in writing either before or after such meeting by any shareholder,
Director or Committee member respectively, as the case may be, who may be
entitled to such notice; and such notice will be deemed to be waived by
attendance at any such meeting.
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<PAGE> 14
ARTICLE V
OFFICERS AND AGENTS
Section 1. Officers. The Board shall appoint a Chairman of the Board and a
President, and shall have the power to appoint one or more Executive Vice
Presidents, one or more Senior Vice Presidents, one or more Vice Presidents, a
Cashier, a Secretary, an Auditor, a Controller, one or more Trust Officers and-
such other officers as are deemed necessary or desirable for the proper
transaction of business of the Association. The Chairman of the Board and the
President shall be appointed from members of the Board of Directors. Any two
or more offices, except those of President and Cashier, or Secretary, may be
held by the same person. The Board may, from time to time, by resolution
passed by a majority of the entire Board, designate one or more officers of the
Association or of an affiliate or of Fleet Financial Group, Inc. with power to
appoint one or more Vice Presidents and such other officers of the Association
below the level of Vice President as the officer or officers designated in such
resolution deem necessary or desirable for the proper transaction of the
business of the Association.
Section 2. Chairman of the Board. The chairman of the Board shall preside at
all meetings of the Board of Directors. Subject to definition by the Board of
Directors, he shall have general executive powers and such specific powers and
duties as from time to time may be conferred upon or assigned to him by the
Board of Directors.
Section 3. President. The President shall preside at all meetings of the
Board of Directors if there be no Chairman or if the Chairman be absent.
Subject to definition by the Board of Directors, he shall have general
executive powers and such specific powers and duties as from time to time may
be conferred upon or assigned to him by the Board of Directors.
-6-
<PAGE> 15
Section 4. Cashier and Secretary. The Cashier shall be the Secretary of the
Board and of the Executive Committee, and shall keep accurate minutes of their
meetings and of all meetings of the shareholders. He shall attend to the
giving of all notices required by these By-laws. He shall be custodian of the
corporate seal, records, documents and papers of the Association. He shall
have such powers and perform such duties as pertain by law or regulation to the
office of Cashier, or as are imposed by these By-laws, or as may be delegated
to him from time to time by the Board of Directors, the Chairman of the Board
or the President.
Section 5. Auditor. The Auditor shall be the chief auditing officer of the
Association. He shall continuously examine the affairs of the Association and
from time to time shall report to the Board of Directors. He shall have such
powers and perform such duties as are conferred upon, or assigned to him by
these By-laws, or as may be delegated to him from time to time by the Board
of Directors.
Section 6. Officers Seriatim. The Board of Directors shall designate from
time to time not less than two officers who shall in the absence or disability
of the Chairman or President or both, succeed seriatim to the duties and
responsibilities of the Chairman and President respectively.
Section 7. Clerks and Agents. The Board of Directors may appoint, from time
to time, such clerks, agents and employees as it may deem advisable for the
prompt and orderly transaction of the business of the Association, define
their duties, fix the salaries to be paid them and dismiss them. Subject to
the authority of the Board of Directors, the Chairman of the Board or the
President, or any other officer of the Association authorized by either of them
may appoint and dismiss all or any clerks, agents and employees and prescribe
their duties and the conditions of their employment, and from time to time
fix their compensation.
Section 8. Tenure. The Chairman of the Board of Directors and the President
shall, except in the case of death, resignation, retirement or disqualification
under these By-laws, or unless removed by the affirmative vote of at least two-
thirds of all of the members of the Board of Directors, hold office for the
term of one year or until their respective successors are appointed. Either
of such officers appointed to fill a vacancy occurring in an unexpired term
shall serve for such unexpired term of such vacancy. All other officers,
clerks, agents, attorneys-in-fact and employees of the Association shall hold
office during the pleasure of the Board of Directors or of the officer or
committee appointing them respectively.
ARTICLE VI
TRUST DEPARTMENT
Section 1. General Powers and Duties. All fiduciary powers of the Association
shall be exercised through the Trust Department, subject to such regulations as
the Comptroller of the Currency shall from time to time establish. The Trust
Department shall be to placed under the management and immediate supervision
of an officer or officers appointed by the Board of Directors. The duties of
all officers of the Trust Department shall be to cause the policies and
instructions of the Board and the Risk Management Committee with respect to the
trusts under their supervision to be carried out, and to supervise the due
performance of the trusts and agencies entrusted to the Association and under
their supervision, in accordance with law and in accordance with the terms of
such trusts and agencies.
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<PAGE> 16
ARTICLE VII
BRANCH OFFICES
Section 1. Establishment. The Board of Directors shall have full power to
establish, to discontinue, or, from time to time, to change the location of any
branch office, subject to such limitations as may be provided by law.
Section 2. Supervision and Control. Subject to the general supervision and
control of the Board of Directors, the affairs of branch offices shall be
under the immediate supervision and control of the President or of such other
officer or officers, employee or employees, or other individuals as the Board
of Directors may from time to time determine, with such powers and duties as
the Board of Directors may confer upon or assign to him or them.
ARTICLE VIII
SIGNATURE POWERS
Section 1. Authorization. The power of officers, employees, agents and
attorneys to sign on behalf of and to affix the seal of the Association shall
be prescribed by the Board of Directors or by the Executive Committee or by
both; provided that the President is authorized to restrict such power of any
officer, employee, agent or attorney to the business of a specific department
or departments, or to a specific branch office or branch offices. Facsimile
signatures may be authorized.
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<PAGE> 17
ARTICLE IX
STOCK CERTIFICATES AND TRANSFERS
Section 1. Stock Records. The Trust Department shall have custody of the
stock certificate books and stock ledgers of the Association, and shall make
all transfers of stock, issue certificates thereof and disburse dividends
declared thereon.
Section 2. Form of Certificate. Every shareholder shall be entitled to a
certificate conforming to the requirements of law and otherwise in such form
as the Board of Directors may approve. The certificates shall state on the
face thereof that the stock is transferable only on the books of the
Association and shall be signed by such officers as may be prescribed from time
to time by the Board of Directors or Executive Committee. Facsimile signatures
may be authorized.
Section 3. Transfers of Stock. Transfers of stock shall be made only on the
books of the Association by the holder in person, or by attorney duly
authorized in writing, upon surrender of the certificate therefor properly
endorsed, or upon the surrender of such certificate accompanied by a properly
executed written assignment of the same, or a written power of attorney to
sell, assign or transfer the same or the shares represented thereby.
Section 4. Lost Certificate. The Board of Directors or Executive Committee
may order a new certificate to be issued in place of a certificate lost or
destroyed, upon proof of such loss or destruction and upon tender to the
Association by the shareholder, of a bond in such amount and with or without
surety, as may be ordered, indemnifying the Association against all liability,
loss, cost and damage by reason of such loss or destruction and the issuance
of a new certificate.
Section 5. Closing Transfer Books. The Board of Directors may close the
transfer books for a period not exceeding thirty days preceding any regular
or special meeting of the shareholders, or the day designated for the payment
of a dividend or the allotment of rights. In lieu of closing the transfer
books the Board of Directors may fix a day and hour not more than thirty days
prior to the day of holding any meeting of the shareholders, or the day
designated for the payment of a dividend, or the day designated for the
allotment of rights, or the day when any change of conversion or exchange of
capital stock is to go into effect, as the day as of which shareholders
entitled to notice of and to vote at such meetings or entitled to such dividend
or to such allotment of rights or to exercise the rights in respect of any
such change, conversion or exchange of capital stock, shall be determined, and
only such shareholders as shall be shareholders of record on the day and hour
so fixed shall be entitled to notice of and to vote at such meeting or to
receive payment of such dividend or to receive such allotment of rights or to
exercise such rights, as the case may be.
ARTICLE X
THE CORPORATE SEAL
Section 1. Seal. The following is an impression of the seal of the
Association adopted by the Board of Directors.
ARTICLE XI
BUSINESS HOURS
Section 1. Business Hours. The main office of this Association and each
branch office thereof shall be open for business on such days, and for such
hours as the Chairman, or the President, or any Executive Vice President, or
such other officer as the Board of Directors shall from time to time
designate, may determine as to each office to conform to local custom and
convenience, provided that any one or more of the main and branch offices or
certain departments thereof may be open for such hours as the President, or
such other officer as the Board of Directors shall from time to time designate,
may determine as to each office or department on any legal holiday on which
work is not prohibited by law, and provided further that any one or more of
the main and branch offices or certain departments thereof may be ordered
closed or open on any day for such hours as to each office or department as
the President, or such other officer as the Board of Directors shall from time
to time designate, subject to applicable laws regulations, may determine when
such action may be required by reason of disaster or other emergency condition.
ARTICLE IX
CHANGES IN BY-LAWS
Section 1. Amendments. These By-laws may be amended upon vote of a majority
of the entire Board of Directors at any meeting of the Board, provided ten (10)
day's notice of the proposed amendment has been given to each member of the
Board of Directors. No amendment may be made unless the By-law, as amended, is
consistent with the requirements of law and of the Articles of Association.
These By-laws may also be amended by the Association's shareholders.
A true copy
Attest:
Secretary/Assistant Secretary
- ---------------------------------------
Dated at , as of .
--------------------------------------- ----------------------
Revision of January 11, 1993
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<PAGE> 18
EXHIBIT 1
CONSENT OF THE TRUSTEE
REQUIRED BY SECTION 321(b)
OF THE TRUST INDENTURE ACT OF 1939
The undersigned, as Trustee under the Indenture to be entered into between
Hills Stores Company and Fleet National Bank, as 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.
FLEET NATIONAL BANK,
AS TRUSTEE
By /s/
-------------------------------
Stephen M. Maceroni
Its: Vice President
Dated:
<PAGE> 19
EXHIBIT 6
<TABLE>
<S> <C>
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
FEDERAL FINANCIAL INSTITUTIONS EXAMINATION COUNCIL Expires March 31, 1999
- -----------------------------------------------------------------------------------------------------------------------------
Please refer to page i, / 1 /
[LOGO] Table of Contents, for
the required disclosure
of estimated burden.
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 20
CONSOLIDATED REPORTS OF CONDITION AND INCOME FOR
A BANK WITH DOMESTIC AND FOREIGN OFFICES--FFIEC 031
(960331)
REPORT AT THE CLOSE OF BUSINESS March 31, 1996 -----------
(RCRI 9999)
This report is required by law: 12 U.S.C. Section 324 (State member banks);
12 U.S.C. Section 1817 (State nonmember banks); and 12 U.S.C. Section 161
(National banks).
This report form is to be filed by banks with branches and consolidation
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, Giro S. DeRosa, Vice President 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/ GIRO DEROSA
- --------------------------------------------------------------------------------
Signature of Officer Authorized to Sign Report
April 25, 1996
- --------------------------------------------------------------------------------
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)
- --------------------------------------------------------------------------------
<PAGE> 21
FOR BANKS SUBMITTING HARD COPY REPORT FORMS:
STATE MEMBER BANKS: Return the original and one copy to the appropriate Federal
Feserve 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, 2127
Espey Court, Suite 204, 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, 2127
Espey Court, Suite 204, Crofton, MD 21114.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C>
___
FDIC Certificate Number | 1 | 0 | 5 | 8 | 2 | |
______________________ CALL NO. 190 31 03-31-96
(RCRI 9050)
CERT: 02499 10582 STBK 09-0590
FLEET NATIONAL BANK OF CONNECTICUT
777 MAIN STREET
HARTFORD, CT 06115
| |
___ ___
<FN>
Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, Office of the Comptroller of the Currency
</TABLE>
<PAGE> 22
FFIEC 031
Page i
/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
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-3,4,5
Schedule RC-C--Loans and Lease Fianancing
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--Trading Assets and Liabilities
(to be completed only by selected banks)..................................RC-8
Schedule RC-E--Deposit Liabilities....................................RC-9,10,11
Schedule RC-F--Only 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 IBF's.................................................................RC-13
Schedule RC-K--Quarterly Averages..........................................RC-13
Schedule RC-L--Off-Balance Sheet Items...............................RC-14,15,16
Schedule RC-M--Memoranda................................................RC-17,18
Schedule RC-N--Past Due and Nonaccrual Loans,
Leases, and Other Assets..............................................RC-19,20
Schedule RC-O--Other Data for Deposit
Insurance Assessments.................................................RC-21,22
Schedule RC-R--Risk-Based Captial.......................................RC-23,24
Optional Narrative Statement Concerning the
Amounts Reported in the Reports of
Conditions and Income....................................................RC-25
Special Report (TO BE COMPLETED BY ALL BANKS)
Schedule RC-J--Repricing Opportunities (sent only to
and to be completed only by savings banks)
<PAGE> 23
DISCLOSURE OF ESTIMATED BURDEN
The estimated average burden associated with this information collection is
32.2 hours per respondent and is estimated to vary from 15 to 230 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
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.
<TABLE>
<S> <C>
___________
</TABLE>
<PAGE> 24
<TABLE>
<CAPTION>
Legal Title of Bank: FLEET NATIONAL BANK OF CONNECTICUT Call Date: 03/31/96 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RI-1
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
Consolidated Report of Income
for the period January 1, 1996 - March 31, 1996
All Report of Income schedules are to be reported on a calendar year-to-date basis in thousands of dollars.
file
Schedule RI--Income Statement ________
| I480 |
Dollar Amounts in Thousands RIAD Bil Mil Thou__|
_______________________________________________________________________________________________ ___________|________|
<S> <C> <C>
1. Interest income: | ////////////////// |
a. Interest and fee income on loans: | ////////////////// |
(1) In domestic offices: | ////////////////// |
(a) Loans secured by real estate ................................................... | 4011 68,007 | 1.a.(1)(a)
(b) Loans to depository institutions ............................................... | 4019 0 | 1.a.(1)(b)
(c) Loans to finance agricultural production and other loans to farmers ............ | 4024 42 | 1.a.(1)(c)
(d) Commercial and industrial loans ................................................ | 4012 119,467 | 1.a.(1)(d)
(e) Acceptances of other banks ..................................................... | 4026 22 | 1.a.(1)(e)
(f) Loans to individuals for household, family, and other personal expenditures: | ////////////////// |
(1) Credit cards and related plans ............................................. | 4054 1,870 | 1.a.(1)(f)(1)
(2) Other ...................................................................... | 4055 11,553 | 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 0 | 1.a.(1)(h)(1)
(2) Tax-exempt obligations ..................................................... | 4504 469 | 1.a.(1)(h)(2)
(i) All other loans in domestic offices ............................................ | 4058 14,004 | 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 192 | 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 26 | 1.c.(2)
d. Interest and dividend income on securities: | ////////////////// |
(1) U.S. Treasury securities and U.S. Government agency and corporation obligations .... | 4027 33,725 | 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 1 | 1.d.(2)(b)
(3) Other domestic debt securities ..................................................... | 3657 7,306 | 1.d.(3)
(4) Foreign debt securities ............................................................ | 3658 49 | 1.d.(4)
(5) Equity securities (including investments in mutual funds) .......................... | 3659 1,888 | 1.d.(5)
e. Interest income from trading assets..................................................... | 4069 0 | 1.e.
______________________
<FN>
____________
(1) Includes interest income on time certificates of deposit not held for trading.
</TABLE>
3
<PAGE> 25
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK OF CONNECTICUT Call Date: 03/31/96 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RI-2
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RI--Continued
________________
Dollar Amounts in Thousands | Year-to-date |
___________________________________________________________________________________ ______________
<S> <C> <C>
1. Interest income (continued) | RIAD Bil Mil Thou |
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 292 | 1.f.
g. Total interest income (sum of items 1.a through 1.f) ................ | 4107 258,913 | 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 519 | 2.a.(1)(a)
(b) Nontransaction accounts: | ////////////////// |
(1) Money market deposit accounts (MMDAs) ................... | 4509 6,345 | 2.a.(1)(b)(1)
(2) Other savings deposits .................................. | 4511 11,368 | 2.a.(1)(b)(2)
(3) Time certificates of deposit of $100,000 or more ........ | 4174 21,500 | 2.a.(1)(b)(3)
(4) All other time deposits ................................. | 4512 31,522 | 2.a.(1)(b)(4)
(2) Interest on deposits in foreign offices, Edge and Agreement | ////////////////// |
subsidiaries, and IBFs .......................................... | 4172 4,742 | 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 35,405 | 2.b.
c. Interest on demand notes issued to the U.S. Treasury, trading | ////////////////// |
liabilities, and other money borrowed ............................... | 4185 29,123 | 2.c.
d. Interest on mortgage indebtedness and obligations under | ////////////////// |
capitalized leases .................................................. | 4072 106 | 2.d.
e. Interest on subordinated notes and debentures ....................... | 4200 2,993 | 2.e.
f. Total interest expense (sum of items 2.a through 2.e) ............... | 4073 143,623 | 2.f.
___________________________
3. Net interest income (item 1.g minus 2.f) ............................... | ////////////////// | RIAD 4074 | 115,290 | 3.
___________________________
4. Provisions: | ////////////////// |
___________________________
a. Provision for loan and lease losses ................................. | ////////////////// | RIAD 4230 | 1,911 | 4.a.
b. Provision for allocated transfer risk ............................... | ////////////////// | RIAD 4243 | 0 | 4.b.
___________________________
5. Noninterest income: | ////////////////// |
a. Income from fiduciary activities .................................... | 4070 21,652 | 5.a.
b. Service charges on deposit accounts in domestic offices ............. | 4080 15,687 | 5.b.
c. Trading revenue (must equal Schedule RI, sum of Memorandum | ////////////////// |
items 8.a through 8.d)............................................... A220 78 5.c.
d. Other foreign transaction gains (losses) ............................ | 4076 6 | 5.d.
e. Not applicable....................................................... | ////////////////// |
f. Other noninterest income: | ////////////////// |
(1) Other fee income ................................................ | 5407 13,425 | 5.f.(1)
(2) All other noninterest income* ................................... | 5408 43,419 | 5.f.(2)
___________________________
g. Total noninterest income (sum of items 5.a through 5.f) ............. | ////////////////// | RIAD 4079 | 94,267 | 5.g.
6. a. Realized gains (losses) on held-to-maturity securities .............. | ////////////////// | RIAD 3521 | 1 | 6.a.
b. Realized gains (losses) on available-for-sale securities ............ | ////////////////// | RIAD 3196 | 11,352 | 6.b.
| ////////////////// |___________________________
7. Noninterest expense: | ////////////////// |
a. Salaries and employee benefits ...................................... | 4135 36,676 | 7.a.
b. Expenses of premises and fixed assets (net of rental income) | ////////////////// |
(excluding salaries and employee benefits and mortgage interest) .... | 4217 14,846 | 7.b.
c. Other noninterest expense* .......................................... | 4092 57,219 | 7.c.
___________________________
d. Total noninterest expense (sum of items 7.a through 7.c) ............ | ////////////////// | RIAD 4093 | 108,741 | 7.d.
___________________________
8. Income (loss) before income taxes and extraordinary items and other | ////////////////// |
___________________________
adjustments (item 3 plus or minus items 4.a, 4.b, 5.g, 6.a, 6.b, and 7.d)| ////////////////// | RIAD 4301 | 110,258 | 8.
9. Applicable income taxes (on item 8) .................................... | ////////////////// | RIAD 4302 | 51,617 | 9.
___________________________
10. Income (loss) before extraordinary items and other adjustments | ////////////////// |
___________________________
(item 8 minus 9) ....................................................... | ////////////////// | RIAD 4300 | 58,641 | 10.
_________________________________________________
<FN>
____________
*Describe on Schedule RI-E--Explanations.
</TABLE>
4
<PAGE> 26
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK OF CONNECTICUT Call Date: 03/31/96 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RI-3
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RI--Continued
________________
| Year-to-date |
______ ______________
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
___________________________________________________________________________________ ______________
<S> <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 | 58,641 | 12.
_________________________________________________
</TABLE>
<TABLE>
<CAPTION> __________
______|__I481__|
Memoranda | Year-to-date |
______ ______________
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
______________________________________________________________________________________________________ ____________________
<S> <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 0 | M.1.
2. Income from the sale and servicing of mutual funds and annuities in domestic offices | ////////////////// |
(included in Schedule RI, item 8) ............................................................... | 8431 0 | M.2.
3.-4. Not applicable | ////////////////// |
5. Number of full-time equivalent employees on payroll at end of current period (round to | //// Number |
nearest whole number) ........................................................................... | 4150 1,831 | M.5.
6. Not applicable | ////////////////// |
7. If the reporting bank has restated its balance sheet as a result of applying push down | //// MM DD YY |
accounting this calendar year, report the date of the bank's acquisition ........................ | 9106 00/00/00 | M.7.
8. Trading revenue (from cash instruments and off-balance sheet derivative instruments) | ////////////////// |
(sum of Memorandum items 8.a through 8.d must equal Schedule RI, item 5.c): | //// Bil Mil Thou |
a. Interest rate exposures ...................................................................... | 8757 11 | M.8.a.
b. Foreign exchange exposures ................................................................... | 8758 67 | M.8.b.
c. Equity security and index exposures .......................................................... | 8759 0 | M.8.c.
d. Commodity and other exposures ................................................................ | 8760 0 | M.8.d.
9. Impact on income of off-balance sheet derivatives held for purposes other than trading: | ////////////////// |
a. Net increase (decrease) to interest income.....................................................| 8761 (2,618)| M.9.a.
b. Net (increase) decrease to interest expense ...................................................| 8762 (2,834)| M.9.b.
c. Other (noninterest) allocations ...............................................................| 8763 0 | M.9.c.
10. Credit losses on off-balance sheet derivatives (see instructions).................................| A251 0 | M.10.
</TABLE>
____________
*Describe on Schedule RI-E--Explanations.
<PAGE> 27
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK OF CONNECTICUT Call Date: 03/31/96 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RI-4
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RI-A--Changes in Equity Capital
Indicate decreases and losses in parentheses. _________
| I483 |
_____________________
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
______________________________________________________________________________________________________|____________________|
<S> <C> <C>
1. Total equity capital originally reported in the December 31, 1995, Reports of Condition | ////////////////// |
and Income ...................................................................................... | 3215 1,342,473 | 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 1,342,473 | 3.
4. Net income (loss) (must equal Schedule RI, item 12) ............................................. | 4340 58,641 | 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 10,922 | 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 (10,978)| 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 1,379,214 | 14.
______________________
<FN>
____________
*Describe on Schedule RI-E--Explanations.
</TABLE>
<TABLE>
<CAPTION>
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.
__________
| I486 | <-
_________________________________ ________
| (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>
1. Loans secured by real estate: | ////////////////// | ////////////////// |
a. To U.S. addressees (domicile) ......................................... | 4651 6,328 | 4661 3,137 | 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 2 | 4665 21 | 3.
4. Commercial and industrial loans: | ////////////////// | ////////////////// |
a. To U.S. addressees (domicile) ......................................... | 4645 5,700 | 4617 1,564 | 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 290 | 4666 10 | 5.a.
b. Other (includes single payment, installment, and all student loans) ... | 4657 2,187 | 4667 702 | 5.b.
6. Loans to foreign governments and official institutions ................... | 4643 0 | 4627 0 | 6.
7. All other loans .......................................................... | 4644 0 | 4628 298 | 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 14,507 | 4605 5,732 | 9.
___________________________________________
</TABLE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK OF CONNECTICUT Call Date: 03/31/96 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RI-5
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RI-B--Continued
Part I. Continued
Memoranda
_________________________________ ________
| (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>
1-3. Not applicable | ////////////////// | ////////////////// |
4. 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 71 | 5410 667 | M.4.
5. Loans secured by real estate in domestic offices (included in | ////////////////// | ////////////////// |
Schedule RI-B, part I, item1, above): | ////////////////// | ////////////////// |
a. Construction and land development ..................................... | 3582 102 | 3583 142 | M.5.a.
b. Secured by farmLand ................................................... | 3584 75 | 3585 4 | M.5.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 963 | 5412 0 | M.5.c.(1)
(2) All other loans secured by 1-4 family residential properties ...... | 5413 2,574 | 5414 642 | M.5.c.(2)
d. Secured by multifamily (5 or more) residential properties ............. | 3588 78 | 3589 211 | M.5.d.
e. Secured by nonfarm nonresidential properties .......................... | 3590 2,536 | 3591 2,138 | M.5.e.
|_________________________________________|
Part II. Changes in Allowance for Loan and Lease Losses
_____________________
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
___________________________________________________________________________________________________ ____________________
1. Balance originally reported in the December 31, 1995, Reports of Condition and Income.......... | 3124 266,943 | 1.
2. Recoveries (must equal part I, item 9, column B above) ........................................ | 4605 5,732 | 2.
3. LESS: Charge-offs (must equal part I, item 9, column A above) ................................. | 4635 14,507 | 3.
4. Provision for loan and lease losses (must equal Schedule RI, item 4.a)......................... | 4230 1,911 | 4.
5. Adjustments* (see instructions for this schedule) ................................ ............ | 4815 0 | 5.
6. Balance end of current period (sum of items 1 through 5) (must equal Schedule RC, | ////////////////// |
item 4.b) ..................................................................................... | 3123 260,079 | 6.
|____________________|
____________
*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.
| 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> 28
<TABLE>
<S> <C> <C>
Legal Title of Bank: FLEET NATIONAL BANK OF CONNECTICUT Call Date: 03/31/96 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RI-6
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
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. Adjustment 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.
______________________
<CAPTION>
Memoranda ______________________
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>
<TABLE>
<CAPTION>
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
________________
| 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> 29
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK OF CONNECTICUT Call Date: 03/31/96 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RI-7
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
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.)
__________
| I495 | <-
______ ________
| 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 |______________________________________________________________________________| |
___________ Gain on Sale of Branches 4461 27,961 1.d.
e. | TEXT 4462 |______________________________________________________________________________| 4462 | 1.e.
___________ 4463 1.f.
f. | TEXT 4463 |______________________________________________________________________________| |
_____________
2. Other noninterest expense (from Schedule RI, item 7.c): | ////////////////// |
a. Amortization expense of intangible assets ................................................ | 4531 5,424 | 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 |______________________________________________________________________________| |
___________ Intercompany Data Processing & Programming Charges 4464 19,616 2.e.
f. | TEXT 4467 |______________________________________________________________________________| 4467 11,457 | 2.f.
___________ Intercompany Corporate Support Function Charges 4468 2.g.
g. | TEXT 4468 |______________________________________________________________________________| |
_____________
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> 30
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK OF CONNECTICUT Call Date: 03/31/96 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RI-8
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
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.
_____________
____________________
9. Other explanations (the space below is provided for the bank to briefly describe, | I498 | I499 | <-
______________________
at its option, any other significant items affecting the Report of Income):
___
No comment |X| (RIAD 4769)
___
Other explanations (please type or print clearly):
(TEXT 4769)
</TABLE>
10
<PAGE> 31
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK OF CONNECTICUT Call Date: 03/31/96 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-1
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Consolidated Report of Condition for Insured Commercial
and State-Chartered Savings Banks for March 31, 1996
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 644,422 | 1.a.
b. Interest-bearing balances(2) ............................................................ | 0071 175 | 1.b.
2. Securities: | ////////////////// |
a. Held-to-maturity securities (from Schedule RC-B, column A) .............................. | 1754 3,192 | 2.a.
b. Available-for-sale securities (from Schedule RC-B, column D) ............................ | 1773 1,806,430 | 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 | 10,679,728 | ////////////////// | 4.a.
b. LESS: Allowance for loan and lease losses ................... | RCFD 3123 | 260,079 | ////////////////// | 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 10,419,649 | 4.d.
5. Trading assets (from schedule RC-D )........................................................ | 3545 484 | 5.
6. Premises and fixed assets (including capitalized leases) ................................... | 2145 146,450 | 6.
7. Other real estate owned (from Schedule RC-M) ............................................... | 2150 871 | 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 6,513 | 9.
10. Intangible assets (from Schedule RC-M) ..................................................... | 2143 283,894 | 10.
11. Other assets (from Schedule RC-F) .......................................................... | 2160 615,485 | 11.
12. Total assets (sum of items 1 through 11) ................................................... | 2170 13,927,565 | 12.
______________________
<FN>
____________
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held for trading.
</TABLE>
11
<PAGE> 32
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK OF CONNECTICUT Call Date: 03/31/96 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-2
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
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 8,134,739 | 13.a.
____________________________
(1) Noninterest-bearing(1) ................................ | RCON 6631 2,366,568 | /////////////////////// | 13.a.(1)
(2) Interest-bearing ...................................... | RCON 6636 5,768,171 | /////////////////////// | 13.a.(2)
____________________________
b. In foreign offices, Edge and Agreement subsidiaries, and IBFs (from Schedule RC-E, | /////////////////////// |
part II) .............................................................................. | RCFN 2200 261,352 | 13.b.
____________________________
(1) Noninterest-bearing ................................... | RCFN 6631 0 | /////////////////////// | 13.b.(1)
(2) Interest-bearing ...................................... | RCFN 6636 261,352 | /////////////////////// | 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 2,009,304 | 14.a.
b. Securities sold under agreements to repurchase ........................................ | RCFD 0279 55,853 | 14.b.
15. a. Demand notes issued to the U.S. Treasury .............................................. | RCON 2840 170,257 | 15.a.
b. Trading liabilities (from Schedule RC-D) .............................................. | RCFD 3548 460 | 15.b.
16. Other borrowed money: | /////////////////////// |
a. With a remaining maturity of one year or less.......................................... | RCFD 2332 954,145 | 16.a.
b. With a remaining maturity of more than one year........................................ | RCFD 2333 143,887 | 16.b.
17. Mortgage indebtedness and obligations under capitalized leases ........................... | RCFD 2910 8,762 | 17.
18. Bank's liability on acceptances executed and outstanding ................................. | RCFD 2920 6,513 | 18.
19. Subordinated notes and debentures ........................................................ | RCFD 3200 440,000 | 19.
20. Other liabilities (from Schedule RC-G) ................................................... | RCFD 2930 363,079 | 20.
21. Total liabilities (sum of items 13 through 20) ........................................... | RCFD 2948 12,548,351 | 21.
| /////////////////////// |
22. Limited-life preferred stock and related surplus ......................................... | RCFD 3282 0 | 22.
EQUITY CAPITAL | /////////////////////// |
23. Perpetual preferred stock and related surplus ............................................ | RCFD 3838 125,000 | 23.
24. Common stock ............................................................................. | RCFD 3230 19,487 | 24.
25. Surplus (exclude all surplus related to preferred stock).................................. | RCFD 3839 955,984 | 25.
26. a. Undivided profits and capital reserves ................................................ | RCFD 3632 286,513 | 26.a.
b. Net unrealized holding gains (losses) on available-for-sale securities ................ | RCFD 8434 (7,770)| 26.b.
27. Cumulative foreign currency translation adjustments ...................................... | RCFD 3284 0 | 27.
28. Total equity capital (sum of items 23 through 27) ........................................ | RCFD 3210 1,379,214 | 28.
29. Total liabilities, limited-life preferred stock, and equity capital (sum of items 21, 22, | /////////////////////// |
and 28) .................................................................................. | RCFD 3300 13,927,565 | 29.
___________________________
</TABLE>
<TABLE>
<CAPTION>
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 Number
most comprehensive level of auditing work performed for the bank by independent external __________________
auditors as of any date during 1995 ............................................................... | RCFD 6724 2 | M.1.
__________________
<S> <C>
1 = Independent audit of the bank conducted in accordance 4 = Directors' examination of the bank performed by other
with generally accepted auditing standards by a certified external auditors (may be required by state chartering
public accounting firm which submits a report on the bank authority)
2 = Independent audit of the bank's parent holding company 5 = Review of the bank's financial statements by external
conducted in accordance with generally accepted auditing auditors
standards by a certified public accounting firm which 6 = Compilation of the bank's financial statements by external
submits a report on the consolidated holding company auditors
(but not on the bank separately) 7 = Other audit procedures (excluding tax preparation work)
3 = Directors' examination of the bank conducted in 8 = No external audit work
accordance with generally accepted auditing standards
by a certified public accounting firm (may be required by
state chartering authority)
<FN>
____________
(1) Includes total demand deposits and noninterest-bearing time and savings deposits.
</TABLE>
12
<PAGE> 33
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK OF CONNECTICUT Call Date: 03/31/96 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-3
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-A--Cash and Balances Due From Depository Institutions
Exclude assets held for trading.
__________
| 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>
1. Cash items in process of collection, unposted debits, and currency and | ////////////////// | ////////////////// |
coin .................................................................... | 0022 553,818 | ////////////////// | 1.
a. Cash items in process of collection and unposted debits .............. | ////////////////// | 0020 418,841 | 1.a.
b. Currency and coin .................................................... | ////////////////// | 0080 134,977 | 1.b.
2. Balances due from depository institutions in the U.S. ................... | ////////////////// | 0082 89,741 | 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 89,741 | ////////////////// | 2.b.
3. Balances due from banks in foreign countries and foreign central banks .. | ////////////////// | 0070 1,038 | 3.
a. Foreign branches of other U.S. banks ................................. | 0073 0 | ////////////////// | 3.a.
b. Other banks in foreign countries and foreign central banks ........... | 0074 1,038 | ////////////////// | 3.b.
4. Balances due from Federal Reserve Banks ................................. | 0090 0 | 0090 0 | 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 644,597 | 0010 644,597 | 5.
___________________________________________
<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 89,566 | M.1.
______________________
</TABLE>
Schedule RC-B--Securities
Exclude assets held in trading accounts.
<TABLE>
_______
| 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>
1. U.S. Treasury securities ......... | 0211 250 | 0213 250 | 1286 843,487 | 1287 829,503 | 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.
_____________________________________________________________________________________
<FN>
_____________
(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 mortgage-backed securities) 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>
13
<PAGE> 34
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK OF CONNECTICUT Call Date: 03/31/96 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-4
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
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>
3. Securities issued by states | ////////////////// |/ //////////////// | ////////////////// | ///////////////// |
and political subdivisions | ////////////////// |////////////////// | ////////////////// | ///////////////// |
in the U.S.: | ////////////////// |////////////////// | ////////////////// | ////////// ////// |
a. General obligations ......... | 1676 0 |1677 0 | 1678 0 | 1679 0 | 3.a.
b. Revenue obligations ......... | 1681 42 |1686 45 | 1690 0 | 1691 0 | 3.b.
c. Industrial development ...... | ////////////////// |////////////////// | ////////////////// | ///////////////// |
and similiar 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 849 | 1702 849 | 4.a.(1)
(2) Issued by FNMA | ////////////////// |////////////////// | ////////////////// | ///////////////// |
and FHLMC ................. | 1703 0 |1705 0 | 1706 847,095 | 1707 849,756 | 4.a.(2)
(3) Other pass-through | ////////////////// |////////////////// | ///////////////////| ///////////////// |
secruities ................. | 1709 0 |1710 0 | 1711 0 | 1713 0 | 4.a.(3)
b. Other mortgage-backed | ////////////////// |////////////////// | ////////////////// | ///////////////// |
securities (include CMO's, | ////////////////// |////////////////// | ////////////////// | ///////////////// |
REMICs, and stripped | ////////////////// |////////////////// | ////////////////// | ///////////////// |
MBS): | ////////////////// |////////////////// | ////////////////// | ///////////////// |
(1) Issued or guaranteed | ////////////////// |////////////////// | ////////////////// | ///////////////// |
by FNMA, FHLMC, | ////////////////// |////////////////// | ////////////////// | ///////////////// |
or GNMA ............... | 1714 0 |1715 0 | 1716 0 | 1717 0 | 4.b.(1)
(2) 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 mortgage- | ////////////////// |////////////////// | ////////////////// | //////////////// |
backed securities ..... | 1733 0 |1734 0 | 1735 0 | 1736 0 | 4.b.(3)
5. Other debt securities: | ////////////////// |////////////////// | ////////////////// | ///////////////// |
a. Other domestic debt | ////////////////// |////////////////// | ////////////////// | ///////////////// |
securities | 1737 0 |1738 0 | 1739 478 | 1741 475 | 5.a.
b. Foreign debt | ////////////////// |////////////////// | ////////////////// | ///////////////// |
securities ................. | 1742 2,900 |1743 2,900 | 1744 0 | 1746 0 | 5.b.
6. Equity securities: | ////////////////// |////////////////// | ////////////////// | ///////////////// |
a. Investments in mutual | ////////////////// |////////////////// | ////////////////// | ///////////////// |
funds ...................... | ////////////////// |////////////////// | 1747 9,427 | 1748 9,427 | 6.a.
b. Other equity securities | ////////////////// |////////////////// | ////////////////// | ///////////////// |
with readily determin- | ////////////////// |////////////////// | ////////////////// | ///////////////// |
able fair values ........... | ////////////////// |////////////////// | 1749 0 | 1751 0 | 6.b.
c. All other equity | ////////////////// |////////////////// | ////////////////// | ///////////////// |
securities (1) ............. | ////////////////// |////////////////// | 1752 116,420 | 1753 116,420 | 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 3,192 | 1771 3,195 | 1772 1,817,756 | 1773 1,806,430 | 7.
____________ |__________________________________________________________________________________|
1) Includes equity securities without readily determinable fair values at historical cost in item 6.c, column D.
</TABLE>
14
<PAGE> 35
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK OF CONNECTICUT Call Date: 03/31/96 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-5
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-B--Continued
<CAPTION>
___________
Memoranda | C412 | <-
___________ _________
Dollar Amounts in Thousands | RCFD Bil Mil Thou |
__________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. Pledged securities(2) ......................................................................... | 0416 934,681 | 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 5,621 | 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 1,548,431 | M.2.a.(3)
(4) Over five years ........................................................................ | 0346 27,232 | M.2.a.(4)
(5) Total fixed rate debt securities (sum of Memorandum items 2.a.(1) through 2.a.(4)) ..... | 0347 1,581,284 | M.2.a.(5)
b. Floating rate debt securities with a repricing frequency of: | ////////////////// |
(1) Quarterly or more frequently ........................................................... | 4544 99,741 | M.2.b.(1)
(2) Annually or more frequently, but less frequently than quarterly ........................ | 4545 2,750 | 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 102,491 | 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 1,683,775 | M.2.c.
3. Not applicable | ////////////////// |
4. Held-to-maturity debt securities restructured and in compliance with modified terms (included | ////////////////// |
in Schedule RC-B, 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)(4) (included in | ////////////////// |
Memorandum items 2.b(1) through 2.b.(4) above)................................................. | 5519 1,000 | 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 (report the amortized cost at date of sale. | ////////////////// |
or transfer ................................................................................... | 1778 0 | m.7.
8. High-Risk mortgage securities (included in the held-to-maturity and available-for-sale | ////////////////// |
accounts in Schedule RC-B, item 4.b): | ////////////////// |
a. Amortized cost ............................................................................. | 8780 0 | M.8.a.
b. Fair Value ................................................................................. | 8781 0 | M.8.b.
9. Structured notes (included in the held-to-maturity and available-for-sale accounts in | ////////////////// |
Schedule RC-B, items.2, 3, and 5): | ////////////////// |
a. Amortized cost ............................................................................. | 8782 0 | M.9.a.
b. Fair Value ................................................................................. | 8783 0 | M.9.b.
----------------------
____________
(2) Includes held-to-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 items 2 and 6 are not applicable to savings banks that must complete supplemental Schedule RC-J.
15
</TABLE>
<PAGE> 36
<TABLE>
Legal Title of Bank: FLEET NATIONAL BANK OF CONNECTICUT
Address: 777 MAIN STREET Call Date: 3/31/96 ST-BK: 09-0590 FFIEC 031
City, State Zip: HARTFORD, CT 06115 Page RC-6
<CAPTION>
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 _________________________________| C415 | <-
income. Exclude assets held for trading. | (Column A) | (Column B) |
| Consolidated | Domestic |
| Bank | Offices |
____________________ ____________________
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCON Bil Mil Thou |
_____________________________________________________________________________ ____________________ ____________________
<S> <C> <C> <C>
1. Loans secured by real estate ........................................... | 1410 3,574,653 | ////////////////// | 1.
a. Construction and land development ................................... | ////////////////// | 1415 51,282 | 1.a.
b. Secured by farmland (including farm residential and other | ////////////////// | ////////////////// |
improvements) ....................................................... | ////////////////// | 1420 307 | 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 325,605 | 1.c.(1)
(2) All other loans secured by 1-4 family residential properties: | ////////////////// | ////////////////// |
(a) Secured by first liens ...................................... | ////////////////// | 5367 2,073,517 | 1.c.(2)(a)
(b) Secured by junior liens ..................................... | ////////////////// | 5368 172,054 | 1.c.(2)(b)
d. Secured by multifamily (5 or more) residential properties ........... | ////////////////// | 1460 65,430 | 1.d.
e. Secured by nonfarm nonresidential properties ........................ | ////////////////// | 1480 886,458 | 1.e.
2. Loans to depository institutions: | ////////////////// | ////////////////// |
a. To commercial banks in the U.S. ..................................... | ////////////////// | 1505 204,042 | 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 204,042 | ////////////////// | 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 1,568 | 1590 1,568 | 3.
4. Commercial and industrial loans: | ////////////////// | ////////////////// |
a. To U.S. addressees (domicile) ....................................... | 1763 5,397,715 | 1763 5,397,715 | 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 1,538 | 1756 1,538 | 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 548,048 | 6.
a. Credit cards and related plans (includes check credit and other | ////////////////// | ////////////////// |
revolving credit plans) ............................................. | 2008 25,114 | ////////////////// | 6.a.
b. Other (includes single payment, installment, and all student loans) . | 2011 522,934 | ////////////////// | 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 27,864 | 2107 27,864 | 8.
9. Other loans ............................................................ | 1563 934,616 | ////////////////// | 9.
a. Loans for purchasing or carrying securities (secured and unsecured) . | ////////////////// | 1545 155,278 | 9.a.
b. All other loans (exclude consumer loans) ............................ | ////////////////// | 1564 779,338 | 9.b.
10. Lease financing receivables (net of unearned income) ................... | ////////////////// | 2165 7,297 | 10.
a. Of U.S. addressees (domicile) ....................................... | 2182 7,297 | ////////////////// | 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 17,613 | 2123 17,613 | 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 10,679,728 | 2122 10,679,728 | 12.
___________________________________________
</TABLE>
16
<PAGE> 37
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK OF CONNECTICUT Call Date: 03/31/96 ST-BK: 09-0590 FFIEC031
Address: 777 MAIN STREET Page: RC-7
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-C--Continued
Part I. Continued
___________________________________________
| (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 and not reported as past due | ////////////////// | ////////////////// |
or nonaccrual in Schedule RC-N, Memorandum item 1): | ////////////////// | ////////////////// |
a. Loans secured by real estate: | ////////////////// | ////////////////// |
(1) To U.S. addressees (domicile) ................................... | 1687 19,431 | M.2.a.(1)
(2) To non-U.S. addressees (domicile) ............................... | 1689 0 | M.2.a.(2)
b. All other loans and all lease financing receivables (exclude loans | ////////////////// |
to individuals for household, family, and other personal expenditures)| 8691 0 | M.2.b.
c. Commercial and industrial loans to and lease financing receivables | ////////////////// |
of non-U.S. addressees (domicile) included in Memorandum item 2.b | ////////////////// |
above ............................................................... | 8692 0 | M.2.c.
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 4,174,641 | M.3.a.(1)
(2) Over three months through 12 months ............................. | 0349 85,961 | M.3.a.(2)
(3) Over one year through five years ................................ | 0356 965,740 | M.3.a.(3)
(4) Over five years ................................................. | 0357 1,877,648 | M.3.a.(4)
(5) Total fixed rate loans and leases (sum of | ////////////////// |
Memorandum items 3.a.(1) through 3.a.(4)) ....................... | 0358 7,103,990 | M.3.a.(5)
b. Floating rate loans with a repricing frequency of: | ////////////////// |
(1) Quarterly or more frequently .................................... | 4554 2,937,472 | M.3.b.(1)
(2) Annually or more frequently, but less frequently than quarterly . | 4555 547,425 | M.3.b.(2)
(3) Every five years or more frequently, but less frequently than | ////////////////// |
annually ........................................................ | 4561 20,958 | 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 3,505,855 | 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 10,609,845 | M.3.c.
d. Floating rate loans with a remaining maturity of one year or less | ////////////////// |
(included in Memorandum items 3.b.(1) through 3.b.(4) above)......... | A246 277,721 | M.3.d.
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 47,652 | M.4.
5. Loans and leases held for sale (included in Schedule RC-C, part I, | ////////////////// |
above .................................................................. | 5369 0 | 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 | ////////////////// | RCON Bil Mil Thou |
| ////////////////// |____________________
1.c.(2)(a), column B, page RC-6) ....................................... | ////////////////// | 5370 425,358 | M.6.
___________________________________________
<FN>
_____________________________
(1) Memorandum item 3 is not applicable to savings banks that must complete supplememtal Schedule RC-J.
(2) Exclude loans secured by real estate that are included in Schedule RC-C, part I, item 1, column A.
Legal Title of Bank: FLEET NATIONAL BANK OF CONNECTICUT Call Date: 03/31/96 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-8
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
___________
Schedule RC-D--Trading Assets and Liabilities _________
Schedule RC-D is to be completed only by banks with $1 billion or more intotal assets or with $2 billion or more in par/notional
amount of off-balance sheet derivative contracts (as reported in Schedule RC-L, items 14.a through 14.e, columns A through D).
| C420 |
Dollar Amounts in Thousands ////////// Bil Mil Thou
__________________________________________________________________________________________________ _______________|________|
<S> <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-backed securities (MBS) in domestic offices ........................................ | /////////////////////// |
a. Pass-through securities issued or guaranteed by FNMA, FHLMC, or GNMA ..................... | RCON 3534 0 | 4.a.
b. Other mortgage-backed securities issued or guaranteed by FNMA, FHLMC, or GNMA | /////////////////////// |
(include CMOs, REMICs, and stripped MBS) ................................................. | RCON 3535 0 | 4.b.
c. All other mortgage-backed securities ......................................................| 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 ........................................................... | RCFN 3542 0 | 10.
11. Revaluation gains on interest rate, foreign exchange rate, and other commodity and equity | /////////////////////// |
contracts: | /////////////////////// |
a. In domestic offices ...................................................................... | RCON 3543 484 | 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 484 | 12.
<CAPTION>
___________________________
___________________________
| ///////// Bil Mil Thou |
LIABILITIES _________________________
<S> <C> <C>
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 460 | 14.
15. Total trading liabilities (sum of items 13 and 14) (must equal Schedule RC, item 15.b) ...... | RCFD 3548 460 | 15.
___________________________
</TABLE>
18
<PAGE> 38
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK OF CONNECTICUT Call Date: 03/31/96 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-9
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
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>
Deposits of: | ////////////////// | ////////////////// | ////////////////// |
1. Individuals, partnerships, and corporations .......... | 2201 1,870,879 | 2240 1,790,783 | 2346 5,557,638 | 1.
2. U.S. Government ...................................... | 2202 32,574 | 2280 32,277 | 2520 0 | 2.
3. States and political subdivisions in the U.S. ........ | 2203 150,578 | 2290 127,109 | 2530 106,071 | 3.
4. Commercial banks in the U.S. ......................... | 2206 202,546 | 2310 202,546 | 2550 100 | 4.
5. Other depository institutions in the U.S. ............ | 2207 174,699 | 2312 174,699 | 2349 500 | 5.
6. Banks in foreign countries ........................... | 2213 318 | 2320 318 | 2236 0 | 6.
7. Foreign governments and official institutions | ////////////////// | ////////////////// | ////////////////// |
(including foreign central banks) .................... | 2216 0 | 2300 0 | 2377 0 | 7.
8. Certified and official checks ........................ | 2330 38,836 | 2330 38,836 | ////////////////// | 8.
9. Total (sum of items 1 through 8) (sum of | ////////////////// | ////////////////// | ////////////////// |
columns A and C must equal Schedule RC, | ////////////////// | ////////////////// | ////////////////// |
item 13.a) ........................................... | 2215 2,470,430 | 2210 2,366,568 | 2385 5,664,309 | 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 698,350 | M.1.a.
b. Total brokered deposits ..................................................................... | 2365 974,688 | 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 60 | 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 974,628 | M.1.c.(2)
d. Maturity data for brokered deposits: | ////////////////// |
(1) Brokered deposits issued in denominations of less than $100,000 with a remaining | ////////////////// |
maturity of one year or less (included in Memorandum item 1.c.(1) above)................. | A243 40 | M.1.d.(1)
(2) Brokered deposits issued in denominations of $100,000 or more with a remaining | ////////////////// |
maturity of one year or less (included in memorandum item 1.b above)..................... | A244 348,862 | M.1.d.(2)
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 250,556 | 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 2,070,204 | M.2.a.(1)
(2) Other savings deposits (excludes MMDAs) ................................................. | 0352 607,255 | M.2.a.(2)
b. Total time deposits of less than $100,000 ................................................... | 6648 1,723,479 | M.2.b.
c. Time certificates of deposit of $100,000 or more ............................................ | 6645 1,263,371 | 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 103,862 | M.3.
4. Not applicable.
______________________
</TABLE>
19
<PAGE> 39
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK OF CONNECTICUT Call Date: 03/31/96 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-10
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
___________
<CAPTION>
Schedule RC-E--Continued
Part I. Continued
Memoranda (continued)
_________________________________________________________________________________________________________________________________
</TABLE>
<TABLE>
<CAPTION>
______________________
Dollar Amounts in Thousands | RCON Bil Mil Thou |
___________________________________________________________________________________________________ ____________________
<S> <C> <C>
5. Maturity and repricing data for time deposits of less than $100,000 (sum of | ////////////////// |
Memorandum items 5.a.(1) through 5.b.(3) must equal Memorandum item 2.b above):(1) | ////////////////// |
a. Fixed rate time deposits of less than $100,000 with a remaining maturity of: | ////////////////// |
(1) Three months or less.................................................................... | A225 606,686 | M.5.a.(1)
(2) Over three months through 12 months..................................................... | A226 797,678 | M.5.a.(2)
(3) Over one year........................................................................... | A227 271,853 | M.5.a.(3)
b. Floating rate time deposits of less than $100,000 with a repricing frequency of: | ////////////////// |
(1) Quarterly or more frequently............................................................ | A228 47,262 | M.5.b.(1)
(2) Annually or more frequently, but less frequently than quarterly......................... | A229 0 | M.5.b.(2)
(3) Less frequently than annually........................................................... | A230 0 | M.5.b.(3)
c. Floating rate time deposits of less than $100,000 with a remaining maturity of | ////////////////// |
one year or less (included in Memorandum items 5.b.(1) through 5.b.(3) above)............... | A231 28,168 | M.5.c.
6. Maturity and repricing data for time deposits of $100,000 or more (i.e., time certificates | ////////////////// |
of deposits of $100,000 or more and open-account time deposits of $100,000 or more) | ////////////////// |
(sum of Memorandum items 6.a.(1) through 6.b.(4) must equal the sum of Memorandum | ////////////////// |
items 2.c and 2.d above):(1) | ////////////////// |
a. Fixed rate time deposits of $100,000 or more wiht a remaining maturity of: | ////////////////// |
(1) Three months or less ................................................................... | A232 270,543 | M.6.a.(1)
(2) Over three months through 12 months .................................................... | A233 297.457 | M.6.a.(2)
(3) Over one year through five years ....................................................... | A234 695,371 | M.6.a.(3)
(4) Over five years ........................................................................ | A235 0 | M.6.a.(4)
b. Floating rate time deposits of $100,000 or more with a repricing frequency of: | ////////////////// |
(1) Quarterly or more frequently ........................................................... | A236 0 | M.6.b.(1)
(2) Annually or more frequently, but less frequently than quarterly ........................ | A237 0 | M.6.b.(2)
(3) Every five years or more frequently, but less frequently than annually ................. | A238 0 | M.6.b.(3)
(4) Less frequently than every five years .................................................. | A239 0 | M.6.b.(4)
c. Floating rate time deposits of $100,000 or more with a remaining maturity of | ////////////////// |
one year or less (included in Memorandum items 6.b.(1) through 6.b.(4) above)............... | A240 0 | M.6.c.
______________________
<FN>
_____________
(1) Memorandum items 5 and 6 are not applicable to savings banks that must complete supplemental Schedule RC-J.
</TABLE>
20
<PAGE> 40
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK OF CONNECTICUT Call Date: 03/31/96 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-11
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
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 256,352 | 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 5,000 | 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 261,352 | 7.
Memorandum
Dollar Amounts in Thousands |RCFN Bil Mil Thou |
1. Time deposits with a remaining maturity of one year or less (included in Part II, item 7 above) |A245 261,352 | M.1.
______________________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-F--Other Assets
__________
| C430 | <-
_________________ ________
Dollar Amounts in Thousands | ////////// Bil Mil Thou |
__________________________________________________________________________________________________ _________________________
<S> <C> <C>
1. Income earned, not collected on loans ........................................................ | RCFD 2164 51,988 | 1.
2. Net deferred tax assets(1) ................................................................... | RCFD 2148 166,839 | 2.
3. Excess residential mortgage servicing fees receivable ........................................ | RCFD 5371 17,484 | 3.
4. Other (itemize and describe amounts that exceed 25% of this item)............................. | RCFD 2168 379,174 | 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 615,485 | 5.
___________________________
<CAPTION>
Memorandum ___________________________
Dollar Amounts in Thousands | ////////// Bil Mil Thou |
__________________________________________________________________________________________________ _________________________
<S> <C> <C>
1. Deferred tax assets disallowed for regulatory capital purposes ............................... | RCFD 5610 0 | M.1.
___________________________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-G--Other Liabilities
__________
| 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 24,670 | 1.a.
b. Other expenses accrued and unpaid (includes accrued income taxes payable) ................. | RCFD 3646 305,857 | 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 and describe amounts that exceed 25% of this item)............................. | RCFD 2938 32,552 | 4.
_____________ ___________________________
a. | TEXT 3552 |____________________________________________________| RCFD 3552 | | /////////////////////// | 4.a.
___________
b. | TEXT 3553 |____________________________________________________| RCFD 3553 | | /////////////////////// | 4.b.
___________
c. | TEXT 3554 |____________________________________________________| RCFD 3554 | | /////////////////////// | 4.c.
_____________
___________________________
5. Total (sum of items 1 through 4) (must equal Schedule RC, item 20) ........................... | RCFD 2930 363,079 | 5.
___________________________
<FN>
____________
(1) See discussion of deferred income taxes in Glossary entry on "income taxes."
(2) For savings banks, include "dividends" accrued and unpaid on deposits.
</TABLE>
21
<PAGE> 41
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK OF CONNECTICUT Call Date: 03/31/96 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-12
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
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 6,513 | 1.
2. Bank's liability on acceptances executed and outstanding ........................................ | 2920 6,513 | 2.
3. Federal funds sold and securities purchased under agreements to resell .......................... | 1350 0 | 3.
4. Federal funds purchased and securities sold under agreements to repurchase ...................... | 2800 2,065,157 | 4.
5. Other borrowed money ............................................................................ | 3190 1,098,032 | 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 261,771 | 7.
8. Total assets (excludes net due from foreign offices, Edge and Agreement subsidiaries, and IBFs) . | 2192 13,927,565 | 8.
9. Total liabilities (excludes net due to foreign offices, Edge and Agreement subsidiaries, and IBFs)| 3129 12,286,580 | 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 829,753 | 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 42 | 12.
13. Mortgage-backed securities (MBS): | ////////////////// |
a. Pass-through securities: | ////////////////// |
(1) Issued or guaranteed by FNMA, FHLMC, or GNMA ............................................ | 1787 850,605 | 13.a.(1)
(2) Other pass-through securities ........................................................... | 1869 0 | 13.a.(2)
b. Other mortgage-backed securities (include CMOs, REMICs, and stripped MBS): | ////////////////// |
(1) Issued or guaranteed by FNMA, FHLMC, or GNMA ............................................ | 1877 0 | 13.b.(1)
(2) All other mortgage-backed securities..................................................... | 2253 0 | 13.b.(2)
14. Other domestic debt securities ................................................................. | 3159 475 | 14.
15. Foreign debt securities ........................................................................ | 3160 2,900 | 15.
16. Equity securities: | ////////////////// |
a. Investments in mutual funds ................................................................. | 3161 9,427 | 16.a.
b. Other equity securities with readily determinable fair values ............................... | 3162 0 | 16.b.
c. All other equity securities ................................................................. | 3169 116,420 | 16.c.
17. Total held-to-maturity and available-for-sale securities (sum of items 10 through 16) .......... | 3170 1,809,622 | 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> 42
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK OF CONNECTICUT Call Date: 03/31/96 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-13
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
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.
______________________
</TABLE>
<TABLE>
<CAPTION>
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 1,841 | 1.
2. U.S. Treasury securities and U.S. Government agency and corporation obligations(2) ....... | RCFD 3382 2,327,287 | 2.
3. Securities issued by states and political subdivisions in the U.S.(2) .................... | RCFD 3383 42 | 3.
4. a. Other debt securities(2) .............................................................. | RCFD 3647 537,639 | 4.a.
b. Equity securities(3) (includes investments in mutual funds and Federal Reserve stock) . | RCFD 3648 124,253 | 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 24,049 | 5.
6. Loans: | /////////////////////// |
a. Loans in domestic offices: | /////////////////////// |
(1) Total loans ....................................................................... | RCON 3360 11,036,031 | 6.a.(1)
(2) Loans secured by real estate ...................................................... | RCON 3385 3,924,553 | 6.a.(2)
(3) Loans to finance agricultural production and other loans to farmers ............... | RCON 3386 1,787 | 6.a.(3)
(4) Commercial and industrial loans ................................................... | RCON 3387 5,456,987 | 6.a.(4)
(5) Loans to individuals for household, family, and other personal expenditures ....... | RCON 3388 620,136 | 6.a.(5)
| /////////////////////// |
b. Total loans in foreign offices, Edge and Agreement subsidiaries, and IBFs ............. | RCFN 3360 0 | 6.b.
7. Trading assets ........................................................................... | RCFD 3401 658 | 7.
8. Lease financing receivables (net of unearned income) ..................................... | RCFD 3484 9,155 | 8.
9. Total assets (4) ......................................................................... | RCFD 3368 15,745,746 | 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 145,491 | 10.
11. Nontransaction accounts in domestic offices: | /////////////////////// |
a. Money market deposit accounts (MMDAs) ................................................. | RCON 3486 1,367,351 | 11.a.
b. Other savings deposits ................................................................ | RCON 3487 1,715,719 | 11.b.
c. Time certificates of deposit of $100,000 or more ...................................... | RCON 3345 1,290,422 | 11.c.
d. All other time deposits ............................................................... | RCON 3469 2,270,162 | 11.d.
12. Interest-bearing deposits in foreign offices, Edge and Agreement subsidiaries, and IBFs .. | RCFN 3404 357,799 | 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 2,634,782 | 13.
14. Other borrowed money ..................................................................... | RCFD 3355 1,058,218 | 14.
___________________________
<FN>
_____________
(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.
(4) The quarterly average for total assets should reflect all debt securities (not held for trading) at amortized
cost, equity securities with readily determinable fair values at the lower of cost or fair value, and equity
securities without readily determinable fair values at historical cost.
</TABLE>
23
<PAGE> 43
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK OF CONNECTICUT Call Date: 03/31/96 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-14
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
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 404,731 | 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 112,242 | 1.c.(1)
(2) Commitments to fund loans not secured by real estate ................................... | 6550 4,610 | 1.c.(2)
d. Securities underwriting .................................................................... | 3817 0 | 1.d.
e. Other unused commitments ................................................................... | 3818 5,996,651 | 1.e.
2. Financial standby letters of credit and foreign office guarantees ............................. | 3819 1,038,270 | 2.
___________________________
a. Amount of financial standby letters of credit conveyed to others | RCFD 3820 | 1,075 | ////////////////// | 2.a.
___________________________
3. Performance standby letters of credit and foreign office guarantees ........................... | 3821 48,181 | 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 129,940 | 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. Loans 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 60,259 | 9.a.(1)
(2) Amount of recourse exposure on these mortgages as of the report date ................... | 3651 54,182 | 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)
d. Small business obligations transferred with recourse under Section 208 of the | ////////////////// |
Riegle Community Development and Regulatory Improvement Act of 1994: | ////////////////// |
(1) Outstanding principal balance of small business obligations transferred | ////////////////// |
as of the report date................................................................... | A249 0 | 9.d.(1)
(2) Amount of retained recourse on these obligations as of the report date.................. | A250 0 | 9.d.(2)
10. When-issued securities: | ////////////////// |
a. Gross commitments to purchase .............................................................. | 3434 0 | 10.a.
b. Gross commitments to sell .................................................................. | 3435 0 | 10.b.
11. Spot foreign exchange contracts ............................................................... | 8765 0 | 11.
12. All other off-balance sheet liabilities (exclude off-balance sheet derivatives ) (itemize and | ////////////////// |
describe each component of this item over 25% of Schedule RC, item 28, "Total equity capital") | 3430 0 | 12.
a. | TEXT 3555 |______________________________________________________| RCFD 3555 | | ////////////////// | 12.a.
b. | TEXT 3556 |______________________________________________________| RCFD 3556 | | ////////////////// | 12.b.
___________
c. | TEXT 3557 |______________________________________________________| RCFD 3557 | | ////////////////// | 12.c.
_____________
d. | TEXT 3558 |______________________________________________________| RCFD 3558 | | ////////////////// | 12.d.
_____________
Dollar Amounts in Thousands RCFD Bil Mil Thou
13. All other off-balance sheet assets (exclude off-balance sheet derivatives) (itemize and | ////////////////// |
describe each component of this item over 25% of Schedule RC,item 28,"Total equity capital") | 5591 0 | 13.
_____________ __________________________
a. | TEXT 5592 |______________________________________________________| RCFD 5592 | | ////////////////// | 13.a.
___________
b. | TEXT 5593 |______________________________________________________| RCFD 5593 | | ////////////////// | 13.b.
___________
c. | TEXT 5594 |______________________________________________________| RCFD 5594 | | ////////////////// | 13.c.
_____________
d. | TEXT 5595 |______________________________________________________| RCFD 5595 | | ////////////////// | 13.d.
_____________
________________________________________________
</TABLE>
24
<PAGE> 44
<TABLE>
<CAPTION>
Legal Title of Bank: FLEET NATIONAL BANK OF CONNECTICUT Call Date: 03/31/96 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-15
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
Schedule RC-L -- Continued
_____________
| C461 | <-
_________________________________________ ____________________________|___________|
| (Column A) | (Column B) | (Column C) | (Column D) |
| Interest Rate | Foreign Exchange | Equity Derivative | Commodity and other|
| Contracts | Contracts | Contracts | Contracts |
|___________________|____________________|____________________|____________________|
Dollar Amounts in Thousands |Tril Bil Mil Thou | Tril Bil Mil Thou | Tril Bil Mil Thou | Tril Bil Mil Thou |
______________________________________________________________________________________________________________________|
<S> <C> <C> <C> <C> <C>
| Off-balance Sheet Derivatives | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
| Position Indicators | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
___________________________________| ///////////////// | ////////////////// | ////////////////// | ////////////////// |
14. Gross amounts (e.g., notional | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
amounts) (for each column, sum of | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
items 14.a through 14.e must equal| ///////////////// | ////////////////// | ////////////////// | ////////////////// |
sum of items 15, 16.a, and 16.b): |___________________|____________________|___________________ |____________________|
a. Future contracts .............. | 0 | 0 | 0 | 0 | 14.a.
| RCFD 8693 | RCFD 8694 | RCFD 8695 | RCFD 8696 |
b. Forward contracts ............. | 0 | 0 | 0 | 0 | 14.b.
| RCFD 8697 | RCFD 8698 | RCFD 8699 | RCFD 8700 |
c. Exchange-traded option contracts| ///////////////// | ////////////////// | ////////////////// | ////////////////// |
(1) Written options .......... | 0 | 0 | 0 | 0 | 14.c.(1)
| RCFD 8701 | RCFD 8702 | RCFD 8703 | RCFD 8704 |
(2) Purchased options ........ | 0 | 0 | 0 | 0 | 14.c.(2)
| RCFD 8705 | RCFD 8706 | RCFD 8707 | RCFD 8708 |
d. Over-the-counter option contracts: | //////////////////| ///////////////// | ///////////////// | //////////////// |
(1) Written options .......... | 68,500 | 0 | 0 | 0 | 14.d.(1)
| RCFD 8709 | RCFD 8710 | RCFD 8711 | RCFD 8712 |
(2) Purchased options ........ | 368,500 | 0 | 0 | 0 | 14.d.(2)
| RCFD 8713 | RCFD 8714 | RCFD 8715 | RCFD 8716 |
e. Swaps ............................ | 4,553,328 | 0 | 0 | 0 | 14.e.
| RCFD 3450 | RCFD 3826 | RCFD 8719 | RCFD 8720 |
15. Total gross notional amount of | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
derivative contracts held for | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
trading ......................... | 160,000 | 0 | 0 | 0 | 15.
| RCFD A126 | RFD A127 | RCFD 8723 | RCFD 8724 |
16. Total gross notional amount of | ///////////////// | //////////////// | ///////////////// | ////////////////// |
derivative contracts held for | ///////////////// | ///////////////// | ///////////////// | ////////////////// |
purposes other than trading: | ///////////////// | ///////////////// | ///////////////// | ////////////////// |
a. Contracts marked to market ... | 0 | 0 | 0 | 0 | 16.a.
| RCFD 8725 | RCFD 8726 | RCF 8727 | RCFD 8728 |
b. Contracts not marked to market | 4,830,328 | 0 | 0 | 0 | 16.b.
| RCFD 8729 | RCFD 8730 | RFD 8731 | RCFD 8732 |
___________________________________________________________________________________|
</TABLE>
<PAGE> 45
25
<TABLE>
<CAPTION>
Legal Title of Bank: FLEET NATIONAL BANK OF CONNECTICUT Call Date: 03/31/96 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-15
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
Schedule RC-L -- Continued
<CAPTION>
_________________________________________ _________________________________________
| (Column A) | (Column B) | (Column C) | (Column D) |
| Interest Rate | Foreign Exchange | Equity Derivative | Commodity and other|
| Contracts | Contracts | Contracts | Contracts |
|___________________|____________________|____________________|____________________|
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>
| Off-balance Sheet Derivatives | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
| Position Indicators | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
___________________________________| ///////////////// | ////////////////// | ////////////////// | ////////////////// |
| ///////////////// | ////////////////// | ////////////////// | ////////////////// |
17. Gross fair values of | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
derivative contracts: | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
a. Contracts held for | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
trading: | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
(1) Gross positive | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
fair value ................... | 8733 484 | 8734 0 | 8735 0 | 8736 0 | 17.a.(1)
(2) Gross negative | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
fair value ................... | 8737 460 | 8738 0 | 8739 0 | 8740 0 | 17.a.(2)
b. Contracts held for | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
purposes other than | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
trading that are marked | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
to market: | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
(1) Gross positive | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
fair value ................... | 8741 0 | 8742 0 | 8743 0 | 8744 0 | 17.b.(1)
(2) Gross negative | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
fair value ................... | 8745 0 | 8746 0 | 8747 0 | 8748 0 | 17.b.(2)
c. Contracts held for | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
purposes other than | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
trading that are not | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
marked to market: | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
(1) Gross positive | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
fair value .................. | 8749 5,594 | 8750 0 | 8751 0 | 8752 0 | 17.c.(1)
(2) Gross negative | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
fair value ................... | 8753 44,514 | 8754 0 | 8755 0 | 8756 0 | 17.c.(2)
|__________________________________________________________________________________|
______________________
Memoranda Dollar Amounts in Thousands | RCFD Bil Mil Thou |
_________________________________________________________________________________________________________________________
1. -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 4,493,867 | M.3.
a. Participations in commitments with an original maturity | ////////////////// |
exceeding one year conveyed to others ................................|RCFD 3834 | 93,830 | ////////////////// | 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 317,126 | M.4.
5. 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 automobiles (to be completed for the | ////////////////// |
September report only)....................................................................... | 2741 N/A | M.5.a.
b. Credit cards and related plans (TO BE COMPLETED QUARTERLY)................................... | 2742 0 | M.5.b.
c. All other consumer installment credit (including mobile home loans)(to be completed for the | ////////////////// |
September report only........................................................................ | 2743 N/A | M.5.c
</TABLE>
<PAGE> 46
<TABLE>
<CAPTION>
Legal Title of Bank: FLEET NATIONAL BANK OF CONNECTICUT Call Date: 03/31/96 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-17
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9| _____________
| C465 |
_________|___________|
Schedule RC-M--Memoranda | |
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 159,583 | 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 20,866 | 4.a.
b. Mortgages serviced under a FHLMC contract: | ////////////////// |
(1) Serviced with recourse to servicer ........................................................ | 5501 11,305 | 4.b.(1)
(2) Serviced without recourse to servicer ..................................................... | 5502 1,163,045 | 4.b.(2)
c. Mortgages serviced under a FNMA contract: | ////////////////// |
(1) Serviced under a regular option contract .................................................. | 5503 48,954 | 4.c.(1)
(2) Serviced under a special option contract .................................................. | 5504 2,112,518 | 4.c.(2)
d. Mortgages serviced under other servicing contracts ............................................ | 5505 3,306,908 | 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 6,513 | 5.a.
b. Non-U.S. addressees (domicile) ................................................................ | 2104 0 | 5.b.
6. Intangible assets: | ////////////////// |
a. Mortgage servicing rights ..................................................................... | 3164 28,816 | 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 255,078 | 6.c.
d. Total (sum of items 6.a through 6.c) (must equal Schedule RC, item 10) ........................ | 2143 283,894 | 6.d.
e. Amount of intangible assets (included in item 6.b.(2) above) that have been grandfathered or | ////////////////// |
are otherwise qualifying for regulatory capital purposes ...................................... | 6442 0 | 6.e.
7. Mandatory convertible debt, net of common or perpetual preferred stock dedicated to | ////////////////// |
redeem the debt ...................................................................................| 3295 0 | 7.
______________________
<FN>
- ------------
(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.
</TABLE>
27
<PAGE> 47
<TABLE>
<CAPTION>
Legal Title of Bank: FLEET NATINAL BANK OF CONNECTICUT Call Date: 03/31/96 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-18
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
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 74 | 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 596 | 8.a.(2)(c)
(d) Multifamily (5 or more) residential properties in domestic offices .......... | RCON 5511 192 | 8.a.(2)(d)
(e) Nonfarm nonresidential properties in domestic offices ....................... | RCON 5512 9 | 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 871 | 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 products): | /////////////////////// |
a. Money market funds .................................................................. | RCON 6441 0 | 10.a.
b. Equity securities funds ............................................................. | RCON 8427 0 | 10.b.
c. Debt securities funds ............................................................... | RCON 8428 0 | 10.c.
d. Other mutual funds .................................................................. | RCON 8429 0 | 10.d.
e. Annuities ........................................................................... | RCON 8430 0 | 10.e.
f. Sales of proprietary mutual funds and annuities (included in itmes 10.a through | /////////////////////// |
10.e. above) ........................................................................... | RCON 8784 0 | 10.f.
_________________________
</TABLE>
<TABLE>
<CAPTION>
_________________________________________________________________________________________________________________________________
| |
______________________
|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>
28
<PAGE> 48
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK OF CONNECTICUT Call Date: 03/31/96 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-19
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
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, | C470 | <-
column A, and in Memorandum items 2 through 4, ______________________________________________________ ________
column A, as confidential. | (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 | |
____________________ ____________________ ____________________
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
______________________________________________________ ____________________ ____________________ ____________________
<S> <C> <C> <C> <C>
1. Loans secured by real estate: | ////////////////// | ////////////////// | ////////////////// |
a. To U.S. addressees (domicile) ................ | 1245 | 1246 18,232 | 1247 53,840 | 1.a.
b. To non-U.S. addressees (domicile) ............ | 1248 | 1249 0 | 1250 0 | 1.b.
2. Loans to depository institutions and | ////////////////// | ////////////////// | ////////////////// |
acceptances of other banks: | ////////////////// | ////////////////// | ////////////////// |
a. To U.S. banks and other U.S. depository | ////////////////// | ////////////////// | ////////////////// |
institutions ................................. | 5377 | 5378 0 | 5379 0 | 2.a.
b. To foreign banks ............................. | 5380 | 5381 0 | 5382 0 | 2.b.
3. Loans to finance agricultural production and | ////////////////// | ////////////////// | ////////////////// |
other loans to farmers .......................... | 1594 | 1597 0 | 1583 100 | 3.
4. Commercial and industrial loans: | ////////////////// | ////////////////// | ////////////////// |
a. To U.S. addressees (domicile) ................ | 1251 | 1252 1,756 | 1253 31,162 | 4.a.
b. To non-U.S. addressees (domicile) ............ | 1254 | 1255 0 | 1256 0 | 4.b.
5. Loans to individuals for household, family, and | ////////////////// | ////////////////// | ////////////////// |
other personal expenditures: | ////////////////// | ////////////////// | ///////////////// |
a. Credit cards and related plans ............... | 5383 | 5384 183 | 5385 184 | 5.a.
b. Other (includes single payment, installment, | ////////////////// | ////////////////// | ////////////////// |
and all student loans) ....................... | 5386 | 5387 1,542 | 5388 2,138 | 5.b.
6. Loans to foreign governments and official | ////////////////// | ////////////////// | ////////////////// |
institutions .................................... | 5389 | 5390 0 | 5391 0 | 6.
7. All other loans ................................. | 5459 | 5460 253 | 5461 72 | 7.
8. Lease financing receivables: | ////////////////// | ////////////////// | ////////////////// |
a. Of U.S. addressees (domicile) ................ | 1257 | 1258 0 | 1259 0 | 8.a.
b. Of non-U.S. addressees (domicile) ............ | 1271 | 1272 0 | 1791 0 | 8.b.
9. Debt securities and other assets (exclude other | ////////////////// | ////////////////// | ////////////////// |
real estate owned and other repossessed assets) . | 3505 | 3506 0 | 3507 0 | 9.
________________________________________________________________
</TABLE>
<TABLE>
<CAPTION>
====================================================================================================================================
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.
________________________________________________________________
| RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
____________________ ____________________ ____________________
<S> <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 ............... | 5612 | 5613 324 | 5614 317 | 10.
a. Guaranteed portion of loans and leases | ////////////////// | ////////////////// | ////////////////// |
included in item 10 above .................... | 5615 | 5616 256 | 5617 263 | 10.a.
________________________________________________________________
</TABLE>
29
<PAGE> 49
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK OF CONNECTICUT Call Date: 03/31/96 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-20
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
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 | |
Memoranda | accruing | accruing | |
____________________ ____________________ ____________________
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
______________________________________________________ ____________________ ____________________ ____________________
<S> <C> <C> <C> <C>
1. Restructured loans and leases included in | ////////////////// | /////////////////// | ///////////////// |
Schedule RC-N, items 1 through 8, above (and not | ////////////////// | /////////////////// | ///////////////// |
reported in Schedule RC-C, part I, Memorandum | ////////////////// | /////////////////// | ///////////////// |
item 2) ......................................... | 1658 | | | M.1.
2. Loans to finance commercial real estate, | ////////////////// | /////////////////// | ///////////////// |
construction, and land development activities | ////////////////// | /////////////////// | ///////////////// |
(not secured by real estate) included in | ////////////////// | /////////////////// | ///////////////// |
Schedule RC-N, items 4 and 7, above ............. | 6558 | 6559 593 | 6560 26 | M.2.
|____________________|____________________ |___________________
3. Loans secured by real estate in domestic offices | RCON Bil Mil Thou | RCON Bil Mil Thou | RCON Bil Mil Thou|
|___________________ |____________________ ____________________
(included in Schedule RC-N, item 1, above): | ////////////////// | ////////////////// | ////////////////// |
a. Construction and land development ............ | 2759 | 2769 0 | 3492 1,108 | M.3.a.
b. Secured by farmland .......................... | 3493 | 3494 0 | 3495 0 | 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 ........... | 5398 | 5399 1,772 | 5400 2,746 | M.3.c.(1)
(2) All other loans secured by 1-4 family | ////////////////// | ////////////////// | ////////////////// |
residential properties ................... | 5401 | 5402 12,822 | 5403 13,798 | M.3.c.(2)
d. Secured by multifamily (5 or more) | ////////////////// | ////////////////// | ////////////////// |
residential properties ....................... | 3499 | 3500 1,426 | 3501 1,352 | M.3.d.
e. Secured by nonfarm nonresidential properties . | 3502 | 3503 2,212 | 3504 34,836 | M.3.e.
________________________________________________________________
</TABLE>
<TABLE>
<CAPTION>
___________________________________________
| (Column A) | (Column B) |
| Past due 30 | Past due 90 |
| through 89 days | days or more |
____________________ ____________________
| RCFD Bil Mil Thou | RCFD Bil Mil Thou |
____________________ ____________________
<S> <C> <C> <C>
4. Interest rate, foreign exchange rate, and other | ////////////////// | ////////////////// |
commodity and equity contracts: | ////////////////// | ////////////////// |
a. Book value of amounts carried as assets ...... | 3522 | 3528 0 | M.4.a.
b. Replacement cost of contracts with a | ////////////////// | ////////////////// |
positive replacement cost .................... | 3529 | 3530 0 | M.4.b.
___________________________________________
</TABLE>
30
<PAGE> 50
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK OF CONNECTICUT Call Date: 03/31/96 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-21
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION> ______________________
Schedule RC-O--Other Data for Deposit Insurance Assessments | 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 0 | 1.a.
OR | ////////////////// |
b. Separate amount of unposted debits: | ////////////////// |
(1) Actual amount of unposted debits to demand deposits ................................... | 0031 N/A | 1.b.(1)
(2) Actual amount of unposted debits to time and savings deposits(1) ...................... | 0032 N/A | 1.b.(2)
2. Unposted credits (see instructions): | ////////////////// |
a. Actual amount of all unposted credits ..................................................... | 3510 0 | 2.a.
OR | ////////////////// |
b. Separate amount of unposted credits: | ////////////////// |
(1) Actual amount of unposted credits to demand deposits .................................. | 3512 N/A | 2.b.(1)
(2) Actual amount of unposted credits to time and savings deposits(1) ..................... | 3514 N/A | 2.b.(2)
3. Uninvested trust funds (cash) held in bank's own trust department (not included in total | ////////////////// |
deposits in domestic offices) ................................................................ | 3520 28,655 | 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 3,266 | 4.a.
b. Time and savings deposits(1) of consolidated subsidiaries ................................. | 2351 5,000 | 4.b.
c. Interest accrued and unpaid on deposits of consolidated subsidiaries ...................... | 5514 2 | 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 reflected in demand deposits (included in Schedule RC-E, item 4 or 5, column B)..... | 2314 0 | 6.a.
b. Amount reflected in time and savings deposits(1) (included in Schedule RC-E, | ////////////////// |
item 4 or 5, column A or C, but not column 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 864,186 | 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.
______________________
<FN>
______________
(1) For FDIC insurance assessment purposes, "time and savings deposits" consists of nontransaction
accounts and all transaction accounts other than demand deposits.
</TABLE>
31
<PAGE> 51
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK OF CONNECTICUT Call Date: 03/31/96 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-22
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-O--Continued
Dollar Amounts in Thousands | RCON Bil Mil Thou |
__________________________________________________________________________________________________ ____________________
<S> <C>
11. Adjustments to demand deposits in domestic offices reported in Schedule RC-E for | ////////////////// |
certain reciprocal demand balances: | ////////////////// |
a. Amount by which demand deposits would be reduced if reciprocal demand balances | ////////////////// |
between the reporting bank and savings associations were reported on a net basis | ////////////////// |
rather than a gross basis in Schedule RC-E .................................................. | 8785 0 | 11.a.
b. Amount by which demand deposits would be increased if reciprocal demand balances | ////////////////// |
between the reporting bank and U.S. branches and agencies of foreign banks were | ////////////////// |
reported on a gross basis rather than a net basis in Schedule RC-E .......................... | A181 0 | 11.b.
c. Amount by which demand deposits would be reduced if cash items in process of | ////////////////// |
collections were included in the calculation of net reciprocal demand balances between | ////////////////// |
the reporting bank and the domestic offices of U.S. banks and savings associations | ////////////////// |
in Schedule RC-E ............................................................................ | A182 0 | 11.c.
____________________
Memoranda (to be completed each quarter except as noted) Dollar Amounts in Thousands | RCON Bil Mil Thou |
________________________________________________________________________________________________|____________________|
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. Deposits accounts of $100,000 or less: | ////////////////// |
(1) amount of deposit accounts of $100,000 or less .................................... | 2702 4,389,311 | 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 .................................. | 2710 3,745,428 | M.1.b.(1)
Number | ////////////////// |
(2) Number of deposit accounts of more than $100,000 .............|RCON 2722______6,366 | ////////////////// | 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 mutiplying 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 determining a better estimate of uninsured deposits that the ____________YES_______NO__
estimated described above ............................................................... |RCON 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.
_____________________________________________________________________________________________________________________________
| C477 | <-
Person to whom questions about the Reports of Condition and Income should be directed: __________
PAMELA S. FLYNN, VICE PRESIDENT (401) 278-5194
___________________________________________________________________________________ ______________________________________
Name and Title (TEXT 8901) Area code and phone number (TEXT 8902)
</TABLE>
32
<PAGE> 52
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK OF CONNECTICUT Call Date: 03/31/96 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-23
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-R--Regulatory 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, 1995, must complete items 2 through 9 and Memoranda items 1 and 2. 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.
<S> <C>
____________
| C480 | <-
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 | YES NO |
box at the right whether the bank has total capital greater than or equal to eight percent___________ _______________
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 response 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.
</TABLE>
<TABLE>
<CAPTION>
___________________________________________
| (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>
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 440,000 | 3791 0 | 2.f.
3. Amounts used in calculating regulatory capital ratios (report amounts | ////////////////// | ////////////////// |
determined by the bank for its own internal regulatory capital analyses): | ////////////////// | RCFD Bil Mil Thou |
a. Tier 1 capital......................................................... | ////////////////// | 8274 1,131,906 | 3.a.
b. Tier 2 capital......................................................... | ////////////////// | 8275 614,539 | 3.b.
c. Total risk-based capital............................................... | ////////////////// | 3792 1,746,445 | 3.c.
d. Excess allowance for loan and lease losses............................. | ////////////////// | A222 85,540 | 3.d.
e. Risk-weighted assets................................................... | ////////////////// | A223 13,877,543 | 3.e.
f. "Average total assets"................................................. | ////////////////// | A224 15,490,668 | 3.f.
___________________________________________
| (Column A) | (Column B) |
Items 4-9 and Memoranda items 1 and 2 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) |
____________________ ____________________
| RCFD Bil Mil Thou | RCFD Bil Mil Thou |
____________________ ____________________
<S> <C> <C> <C>
4. Assets and credit equivalent amounts of off-balance sheet items assigned | | |
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 848,861 | ////////////////// | 4.a.(1)
(2) All other ......................................................... | 3795 168,507 | ////////////////// | 4.a.(2)
b. Credit equivalent amount of off-balance sheet items ................... | ////////////////// | 3796 0 | 4.b.
___________________________________________
<FN>
______________
(1) Exclude mandatory convertible debt reported in Schedule RC-M, item 7.
(2) Do not report in column B the risk-weighted amount of assets reported in column A.
</TABLE>
33
<PAGE> 53
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK OF CONNECTICUT Call Date: 03/31/96 ST-BK: 09-0590 FFIEC 031
Address: 777 MAIN STREET Page RC-24
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
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>
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. Government and its | ////////////////// | ////////////////// |
agencies and other OECD central governments ....................... | 3798 21,083 | ////////////////// | 5.a.(1)
(2) Claims collateralized by securities issued by the U.S. Govern- | ////////////////// | ////////////////// |
ment 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 1,567,242 | ////////////////// | 5.a.(3)
b. Credit equivalent amount of off-balance sheet items ................... | ////////////////// | 3801 67,114 | 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 2,037,765 | ////////////////// | 6.a.
b. Credit equivalent amount of off-balance sheet items ................... | ////////////////// | 3803 116,963 | 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 9,551,472 | ////////////////// | 7.a.
b. Credit equivalent amount of off-balance sheet items ................... | ////////////////// | 3805 3,288,367 | 7.b.
8. On-balance sheet asset values excluded from the calculation of the | ////////////////// | ////////////////// |
risk-based capital ratio(2) .............................................. | 3806 (7,286)| ////////////////// | 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 14,187,644 | ////////////////// | 9.
___________________________________________
Memoranda
______________________
Dollar Amounts in Thousands | RCFD Bil Mil Thou |
__________________________________________________________________________________________________ ____________________
1.Current credit exposure across all off-balance sheet derivative contracts covered by the | ///////////////// |
risked-based capital standards ...................................................................| 8764 6,077| M.1.
|___________________|
________________________________________________________________
| With a remaining maturity of |
|______________________________________________________________|
| (Column A) | (Column B) | (Column C) |
| | | |
| One year or less | Over one year | Over five years |
| | through five years | |
|______________________________________________________________|
|RCFD Tril Bil Mil Th|RCFD Tril Bil Mil Th|RCFD Tril Bil Mil Th|
|____________________|____________________|____________________|
2. Notional principal amounts of <C> <C> <C> <C>
off-balance sheet derivative contracts(3):| | | |
a. Interest rate contracts ................. | 3809 1,308,203 | 8766 3,328,625 | 8767 0 | M.2.a.
b. Foreign exchange contracts .............. | 3812 0 | 8769 0 | 8770 0 | M.2.b.
c. Gold contracts .......................... | 8771 0 | 8772 0 | 8773 0 | M.2.c.
d. Other precious metals contracts ......... | 8774 0 | 8775 0 | 8776 0 | M.2.d.
e. Other commodity contracts ............... | 8777 0 | 8778 0 | 8779 0 | M.2.e.
f. Equity derivative contracts ............. | A000 0 | A001 0 | A002 0 | M.2.f.
|______________________________________________________________|
<FN>
_________________
1) Do not report in column B the risk-weighted amount of assets reported in column A.
2) Include the difference between the fair value and the amortized cost of 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.
3) Exclude foreign exchange contracts with an original maturity of 14 days or less and all futures contracts.
</TABLE>
34
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK OF CONNECTICUT Call Date: 03/31/96 ST-BK: 09-0590
Address: 777 MAIN STREET
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
THIS PAGE IS TO BE COMPLETED BY ALL BANKS
- -------------------------------------------------------------------------------------------------------------------------------
| OMB No. For OCC: 1557-0081
Name and address of Bank | OMB No. For FDIC: 3064-0052
| OMB No. For Federal Reserve: 7100-0036
| Expiration Date: 3/31/96
|
PLACE LABEL HERE |
| SPECIAL REPORT
| (Dollar Amounts in Thousands)
|
|___________________________________________________________________
| CLOSE OF BUSINESS| FDIC Certificate Number | |
| DATE | | C-700 | <-
| 12/31/95 | |0|2|4|9|9 | |
__________________________________________________________________________________________________________________________________
LOANS TO EXECUTIVE OFFICERS (Complete as of each Call Report Date)
- ----------------------------------------------------------------------------------------------------------------------------------
The following information is required by Public Laws 90-44 and 102-242, but does not constitute a part of the Report of Condition.
With each Report of Condition, these Laws require all banks to furnish a report of all loans or other extensions of credit to
their executive officers made since the date of the previous Report of Condition. Data regarding individual loans or other
extensions of credit are not required. If no such loans or other extensions of credit were made during the period, insert "none"
against subitem (a). (Exclude the first $15,000 of indebtedness of each executive officer under bank credit card plan.) See
Sections 215.2 and 215.3 of Title 12 of the Code of Federal Regulations (Federal Reserve Board Regulation 0) for the definitions
of "executive officer" and "extension of credit," respectively. Exclude loans and other extensions of credit to directors and
principal shareholders who are not executive officers.
________________________________________________________________________________________________________________________________
a. Number of loans made to executive officers since the previous Call Report date ...................| RCFD 3561| 0 a.
b. Total dollar amount of above loans (in thousands of dollars) .....................................| RCFD 3652| 0 b.
c. Range of interest charged on above loans
(example: 9 3/4% = 9.75) ........................................|RCFD 7701| 0.00 | % to | RCFD 7702 | 0.00 | % c.
________________________________________________________________________________________________________________________________
________________________________________________________________________________________________________________________________
SIGNATURE OF TITLE OF OFFICER AUTHORIZED TO SIGN REPORT | DATE (Month, Day, Year)
|
|
________________________________________________________________________________________________________________________________
NAME AND TITLE OF PERSON TO WHOM INQUIRIES MAY BE DIRECTED (TEXT 8903) | AREA CODE/PHONE NUMBER/EXTENSION
| (TEXT 8904)
|
ROBERT P. DUFF VICE PRESIDENT | (203) 986-2474
|
________________________________________________________________________________________________________________________________
FDIC 8040/53 (6-95)
35
</TABLE>
<TABLE>
<S> <C>
Title of Bank: FLEET NATIONAL BANK OF CONNECTICUT
Address: 777 MAIN STREET Call Date: 3/31/96 ST-BK: 09-0590 FFIEC 031
City, State, Zip: HARTFORD, CT 06115 Page RC-25
FDIC Certificate No.: 02499
</TABLE>
Optional Narrative Statement Concerning the Amounts
Reported in the Reports of Condition and Income
at close of business on March 31, 1996
FLEET NATIONAL BANK OF CONNECTICUT HARTFORD , CONNECTICUT
Legal Title of Bank City State
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)
__Gero DeRosa_______________________________ ___4/25/96________
Signature of Executive Officer of Bank Date of Signature
