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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
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FORM 10-K
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
OR
[ _ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF
THE SECURITIES ACT OF 1934
For the fiscal year ended September 27, 1998 Commission File No. 0-24492
CITATION CORPORATION
(exact name of registrant as specified in its charter)
DELAWARE 63-0828225
(State of Incorporation) (IRS Employer I.D. No.)
2 OFFICE PARK CIRCLE, SUITE 204
BIRMINGHAM, ALABAMA 35223
(Address of principal executive offices)
(205) 871-5731
(Registrant's Telephone Number)
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
Name of each exchange
Title of each class on which registered
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None None
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT
Common Stock, $.01 par value
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(Title of Class)
Preferred Stock Purchase Rights
-------------------------------
(Title of Class)
Indicate whether the registrant has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months, and has been subject to such filing requirements for the past 90
days. Yes X No _______
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ]
The aggregate market value of the registrant's voting Common Stock held by non-
affiliates of the registrant was approximately $81,747,226 as of December 15,
1998 based on the NASDAQ National Market System closing price on that date.
As of December 15, 1998 there were 17,889,113 shares of the registrant's Common
Stock, $.01 par value, outstanding.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the Proxy Statement for the Registrant's Annual Meeting of
Shareholders to be held on February 16, 1999 are incorporated by reference into
Part III of this Form 10-K.
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TABLE OF CONTENTS
<TABLE>
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Item No. Page No.
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<S> <C> <C>
PART I
1. Business ................................................................................ 3
2. Properties................................................................................ 19
3. Legal Proceedings......................................................................... 20
4. Submission of Matters to a Vote of Security Holders....................................... 20
Executive Officers ....................................................................... 20
PART II
5. Market for Registrant's Common Equity and Related
Stockholder Matters....................................................................... 22
6. Selected Financial Data................................................................... 23
7. Management's Discussion and Analysis of Financial
Condition and Results of Operations....................................................... 25
8. Financial Statements...................................................................... 34
9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure....................................................... 71
PART III
10. Directors and Executive Officers of the Registrant........................................ 71*
11. Executive Compensation ................................................................... 71*
12. Security Ownership of Certain Beneficial Owners and Management ........................... 71*
13. Certain Relationships and Related Transactions............................................ 71*
PART IV
14. Exhibits, Financial Statement Schedule, and Reports on Form 8-K .......................... 72
SIGNATURES.............................................................................................. 75
</TABLE>
* Portions of the Proxy Statement for the Registrant's Annual Meeting of
Shareholders to be held on February 16, 1999 are incorporated by reference
in Part III of this Form 10-K.
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CITATION CORPORATION
PART I
ITEM 1: BUSINESS
Citation Corporation, established in 1974, is a leading manufacturer of
cast, forged and machined components made primarily from iron, steel and
aluminum materials. The Company believes that it is the second largest castings
supplier and the third largest forgings supplier in the markets in which it
competes, with an overall 3% market share of the estimated $23 billion castings
and forgings market in North America. The Company's products are used primarily
in the automotive, construction equipment, aerospace, agriculture and capital
and durable goods industries. The Company's cast and forged products are used
in a wide range of applications, including braking, steering, engine and drive
train parts for passenger cars and light trucks; suspension and transmission
parts for heavy trucks; ground engaging tools for construction equipment; parts
for aircraft engines, landing gear and structural airframes; and thousands of
other critical parts for capital and durable goods. Citation markets its
products to many of the major original equipment manufacturers ("OEMs") and Tier
1 suppliers including, among others, Ford Motor Company, Caterpillar Inc., Dana
Corporation, LucasVarity PLC and DaimlerChrysler Corp. Through innovative design
and manufacturing expertise developed by the Company, and through selective
acquisitions, the Company has established a leading market share in many of its
product lines. In order to increase its product breadth and technological
capabilities, the Company has grown significantly over the past several years
through strategic acquisitions, resulting in an increase in the number of
divisions operated to 20 at the end of fiscal 1998 (including the November 1998
Acquisition of Custom Products Corporation) from seven at the end of fiscal
1994.
1998 OVERVIEW
In fiscal 1998, Citation reorganized its operating groups around common
markets. The groups are now Automotive, Industrial, Forging, Aerospace and
Technology, and Special Foundries. The purpose of this approach is to help
further develop common marketing among the divisions as well as strengthen
cooperative efforts and synergy.
The Company added three acquisitions in fiscal 1998, which are described
later in this report. As a result of the 1998 acquisitions, Citation now offers
die-casting and investment casting among its processes. The Company's approach
is to provide the optimum solution to its customers' needs rather than selling a
single process or metal.
In addition to the three acquisitions completed during the fiscal year,
Citation acquired Custom Products Corporation, a machiner of castings and
forgings primarily for diesel engine, construction equipment, farm implement and
automotive markets in November, 1998, shortly after the close of fiscal 1998.
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Custom Products has two locations around the Milwaukee, Wisconsin area and
approximately 650 employees. Sales for its most recent fiscal year were
approximately $75 million.
Since almost all of the castings and forgings produced and sold by Citation
are machined prior to use, the acquisition of Custom Products allows Citation to
add value to its cast and forged products. Further, with many of Citation's
large customers consolidating their supply base, the Company's ability to
provide design and engineering services as well as machining capabilities, makes
Citation a more desirable source. Custom Products is part of the Industrial
Group.
Citation's human resources continue to grow. Including Custom Products,
the Company now has approximately 7,000 employees. Recruiting and maintaining
talented people is always a priority, thus there is continuing focus on
strengthening training, development, and other programs which help make Citation
a desirable employer. As a partial means of accomplishing this, nearly 70
percent of Citation's operating divisions have better safety performance than
the national safety statistics for their specific industry.
Toward the end of the fiscal year the Board of Directors, at the request of
Chairman T. Morris Hackney, named F.F. "Rick" Sommer as Chief Executive Officer.
Mr. Sommer joined Citation in 1996 as President and Chief Operating Officer from
Lear Seating. Citation also added two new Group Vice Presidents this year, John
W. Lawson, Group Vice President - Automotive, and Edwin L. Yoder, Group Vice
President - Industrial. They join Virgil C. Reid, Jr., Group Vice President -
Special Foundries, and Timothy L. Roberts, Group Vice President - AeroSpace and
Technology.
Citation continues to strengthen its divisions through substantial capital
spending. In fiscal 1998, the Company spent approximately $48 million on capital
projects. Of that amount, about 57 percent was spent on internal expansion, new
product requirements, or productivity improvement. The remainder was spent to
modernize facilities and to protect the environment or maintain safe working
conditions. Depreciation/amortization in fiscal 1998 totaled approximately $36
million.
PRODUCTS, MARKETS AND CUSTOMER BASE
The Company manufactures ductile, gray and high-alloy iron, steel and
aluminum castings and steel forgings. Gray iron, the oldest and most widely
used iron, is readily cast into intricate shapes that are easily machinable and
wear resistant. Ductile iron, which is produced by removing sulphur from the
molten iron and adding magnesium and other alloys, has greater strength than
gray iron and is used as a higher strength alternative to gray iron and a lower
cost alternative to steel castings and forgings. High-alloy iron castings are
used in specialized applications where resistance to wear, heat and corrosion or
other desirable properties are important. Steel castings are an alternative for
products that require greater strength or more corrosion resistance than gray or
ductile iron or larger or more complex shapes than can be produced by forging.
Aluminum
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is typically used in lighter-weight or thin section applications. Steel forgings
are typically utilized where strength and consistent metallurgy are crucial.
Descriptions of the major manufacturing processes are included later in
this report.
The Company manufactures over 19,500 products, which it sells to more than
2,000 customers in North America. Citation has pursued a strategy to maintain
the diversity of its product offerings, markets and customers through internal
growth initiatives and through selective strategic acquisitions. In fiscal
1995, the Company's product mix was approximately 90% gray and ductile iron
castings, and the automotive industry and the Company's largest customer
accounted for 30% and 8% of sales, respectively. By fiscal 1998, the Company's
product mix was approximately 54% iron castings, 18% aluminum castings, 15%
steel forgings, 6% steel castings, and 7% machined components; the automotive
industry accounted for approximately 40% of sales and the Company's largest
customer represented approximately 9.5% of sales. The Company believes this
diversification mitigates cyclical or market fluctuations in sales to any
particular market or customer.
Overall, Citation's customers and markets continue to evolve with internal
growth and acquisitions. Citation's top 10 customers, as a percentage of sales,
for each of the last three fiscal years were as follows:
CITATION TOP 10 CUSTOMERS
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1998 1997 1996
CUSTOMER PERCENT PERCENT PERCENT
OF SALES OF SALES OF SALES
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Ford Motor Co. 9.5% 10.5% 5.8%
LucasVarity 6.9 2.1 1.8
Caterpillar, Inc. 6.3 8.7 4.3
Dana Corporation 6.3 5.6 5.2
Simpson Industries 2.6 2.4 2.0
DaimlerChrysler Corporation 2.2 2.0 2.1
Uni Boring Co., Inc. 2.1 2.3 1.6
John Deere 1.6 1.6 1.1
Hydro Aluminum Adrian, Inc. 1.6 1.7 1.2
Bosch Braking 1.6 1.4 1.7
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TOTAL 40.7% 38.3% 26.8%
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Not all of Citation's customers are original equipment manufacturers
(OEM's) such as Ford, Caterpillar, and DaimlerChrysler. Many, Simpson
Industries and Uni Boring, for example, machine castings and forgings for OEM's.
Others, including Dana, LucasVarity and Bosch, produce component assemblies such
as drive trains or brake systems to supply automotive companies. By including
the impact of this indirect business, as well as the direct, Ford would
represent approximately 18 percent of Citation's total business, General Motors
12 percent, and DaimlerChrysler approximately 10 percent.
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The following table sets forth information regarding the end user markets
served by the Company and the shipments to each market, as a percentage of total
sales, for each of the last three fiscal years:
<TABLE>
<CAPTION>
CITATION SHIPMENTS BY MARKET 1998 1997 1996
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<S> <C> <C> <C>
Automotive/Light Trucks 39.9% 34.7% 30.2%
Medium and Heavy Trucks 12.4 15.1 18.5
Construction Equipment 11.9 11.3 6.5
Pumps, Valves and Compressors 5.5 6.9 10.8
Oil Field Equipment 5.3 6.1 1.6
Internal Combustion Engines 3.2 4.7 5.8
Agriculture 5.0 4.2 3.5
Aircraft and Aerospace 4.7 2.7 2.4
Railroad Equipment 3.5 2.0 3.0
Electrical Equipment 2.1 1.9 2.2
Mining Equipment 2.0 1.5 --
Waterworks 1.0 1.4 1.9
Machine Tools 0.9 0.9 2.5
Other Uses 2.6 6.6 11.1
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TOTAL 100.0% 100.0% 100.0%
</TABLE>
BUSINESS TRENDS
The Company believes that the demand for its products has increased in
recent years and will continue to increase in the future as a result of several
favorable trends affecting the industries that Citation serves. These trends
include:
OUTSOURCING OF NON-CORE MANUFACTURING FUNCTIONS BY OEMS. Historically, many
of the large OEMs were vertically integrated with large in-house component
manufacturing capabilities. During the past several years, however, OEMs have
been outsourcing non-core component manufacturing functions to a much greater
extent in an effort to reduce cost, increase efficiency, improve quality and
shorten product development cycles. For example, since 1980 General Motors,
Ford, Caterpillar, John Deere, Navistar International and other large OEMs have
closed or sold many of their captive foundry operations and outsourced the
castings these operations formerly provided. Citation was recently awarded a
contract, which commenced in June 1998, to supply ductile iron steering knuckles
to General Motors and its Saturn division that were previously manufactured in-
house by General Motors.
CONSOLIDATION OF SUPPLIER BASE. Many large manufacturers, including those
served by the Company, are consolidating their supplier base in an effort to
further improve efficiency by working with fewer, better equipped, and better
capitalized suppliers. According to industry statistics, the number of
automotive suppliers is estimated to be reduced to approximately 8,000
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by the end of 1998 from approximately 30,000 in 1988. Such consolidation also
allows manufacturers to work more closely with a smaller number of suppliers at
the product development stage, resulting in additional cost reduction and
improved manufacturing efficiency. In December 1997, LucasVarity, the world's
largest producer of anti-lock braking systems ("ABS"), sold its captive ductile
iron foundry to the Company, then entered into a supply agreement with Citation
not only for ductile iron but also for certain cast gray iron, aluminum and
machined brake components. Citation has since replaced both captive and
independent sources of supply to LucasVarity in North America and, as a result,
sales to LucasVarity increased from approximately $13 million in fiscal 1997 to
approximately $50 million in fiscal 1998. To assist LucasVarity in the design of
castings and forgings for future systems, the Company has also placed one of its
applications engineers at LucasVarity on a full-time basis. Management believes
the range of its engineering and manufacturing capabilities positions the
Company to benefit from further consolidation of suppliers.
CONSOLIDATION OF CASTINGS AND FORGINGS INDUSTRIES. The castings and
forgings industries historically have been highly fragmented, comprised of many
local and regional competitors who typically concentrate on single markets and
products. For several years, however, these industries have experienced a
period of consolidation, as the smaller competitors have been increasingly
unable to satisfy customers' higher quality and service standards and the
greater capital requirements to upgrade technology. In addition, many large OEM
captive operations have been sold or closed due to the outsourcing initiatives
previously discussed. Accordingly, based on Commerce Department surveys, there
were approximately 5,100 foundries in 1987 and by the end of 1997 the number had
declined by 18% to approximately 4,200. These trends have created an attractive
environment for the Company both to expand its own operations and to capitalize
on acquisition opportunities.
DEVELOPMENT AND USE OF DIVERSE MATERIALS AND TECHNOLOGIES. Within the
castings and forgings market, there is a trend toward both improved performance
with lower costs and the use of more complex materials. This has led to the
development and use of diverse materials and technologies. Buyers of castings
and forgings continuously evaluate the tradeoffs between cost and specific
technical requirements for metallurgical characteristics. The Company believes
that its ability to provide the most cost effective solution for each specific
application and the availability within the Company's operating divisions of a
broad range of materials and technologies provide Citation a significant
competitive advantage in the markets which it serves.
INCREASING CUSTOMER REQUIREMENTS. In addition to improvements in product
capability and process technology, OEMs frequently require their suppliers to
provide design, engineering, prototyping, component sourcing, quality assurance,
testing and delivery capabilities. The Company possesses both design
engineering and prototyping capabilities that it believes can meet such
requirements. Citation's acquisition of Citation Precision, Inc. ("Citation
Precision") in March 1998 provided the Company with the additional capability
for stereo lithography production of solid models from which prototype patterns
can be produced. Many of the Company's competitors do not have this capability.
The Company also believes that the increased customer
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requirements described above have contributed to the accelerating pace of
consolidation in the manufacturer supplier base as those competitors which lack
the full-service capabilities to meet manufacturers' needs either cease
operating or are acquired.
THE AUTOMOTIVE GROUP
To better focus on automotive customer needs, the High Volume Iron and the
Aluminum Groups were combined into the Automotive Group in the latter part of
fiscal 1998. The Automotive Group's mission is to provide metal products for
passenger cars and light trucks (which includes sport utility vehicles).
THE AUTOMOTIVE GROUP
Iron Divisions:
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Alabama Ductile Castings Co.
Texas Foundries
Camden Castings Center
Aluminum Divisions:
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Bohn Aluminum
Dycast, Inc.
Southern Aluminum Castings Co.
Medium Volume Machining:
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Hi-Tech, Inc.
Camden Castings Center and Dycast, Inc. were acquired during fiscal 1998.
Customers. The primary customers of the Automotive Group are Ford, General
Motors and DaimlerChrysler, as well as first and second tier suppliers to the
OEM's. This includes companies such as LucasVarity and Bosch Braking, which
produce braking systems, and machiners such as Simpson and Linamar that machine
castings and forgings.
The Automotive Group provides a wide range of component parts either
directly or indirectly to the automotive industry. These include engine parts
such as intake and exhaust manifolds, oil filter adapters, and various brackets.
Braking and steering parts include brake master cylinders, calipers, brake
adapters, steering knuckles and steering linkage.
Chassis and suspension parts include lower control arms, yokes,
differential cases and carriers, and transmission parts. Various components
utilized in air conditioning, air bags and other electronics are also produced
by Citation.
Dycast Acquisition. Dycast is an aluminum die casting and machining
company located in Lake Zurich, Illinois. This is Citation's first aluminum die
casting company, a process different from conventional casting.
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Normally, in casting, molten metal is poured into a sand, metal or ceramic
mold. In die casting, molten aluminum is injected under pressure into a die.
Dycast has 22 conventional die casting machines and a new squeeze casting
machine. Its customer base is primarily automotive.
Capital Projects. In addition to capital projects to improve employee
safety and the environment, the Automotive Group's capital spending was focused
on improving productivity through a variety of projects.
Camden Castings Center, acquired in December 1997, previously utilized
three molding lines for ductile iron casting production at its facility in
Camden, Tennessee. The molding lines had not been significantly updated for a
number of years. By rebuilding two of the lines to modernize them and by
increasing casting cooling lines, it was possible to maintain the same level of
output as had been available with three lines previously. Further, quality was
improved. Capital cost was approximately $1.6 million.
Bohn Aluminum, acquired in 1996, is primarily a high volume producer of
automotive parts. However, Bohn also produced low to medium volume parts in a
separate area of the plant. To better focus the facility on automotive markets,
some of the low to medium volume cells were shut down and replaced with a
permanent mold line, thus increasing capacity where needed.
Dycast added a fully automated die casting work cell, including a die
casting machine, ladle, automatic casting extractor and other parts. The
project, which cost approximately $0.6 million, was completed in the fourth
fiscal quarter.
Southern Aluminum added equipment to cast, machine, and assemble a new
product family which transfers water between the two cylinder heads of a Ford
5.4 Liter engine. The project will be completed in the second half of fiscal
1999 at an estimated cost of $1.7 million.
Quality Programs. As in all industrial manufacturing facilities, quality
assurance is a significant issue for Citation's Automotive Group. In
particular, establishment of the automotive standards quality system QS 9000 is
a requirement for all automotive suppliers.
As of the end of Citation's fiscal year 1998, Alabama Ductile, Camden
Castings, Dycast, and Texas Foundries are certified to both QS 9000 and ISO
9002, which is an international standard. Bohn Aluminum is ISO 9002 compliant
and will be audited for QS 9000 in January 1999. Southern Aluminum and Hi-Tech
are to be audited for both QS 9000 and ISO 9002; Southern Aluminum in January,
and Hi-Tech later in fiscal 1999.
Casting capacity for the Automotive Group is approximately $180 million in
iron and $130 million in aluminum castings.
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THE INDUSTRIAL GROUP
The Industrial Group was organized to give better focus to the customers
and markets whose end use is principally capital goods products.
In total, approximately two-thirds of Citation's shipments are non-
automotive in nature, although the Industrial Group, by itself, only represents
about 25 percent of Citation's total shipments.
The Industrial Group also serves automotive customers, primarily with short
run and specialty parts. The Industrial Group consists of medium volume iron
foundries.
THE INDUSTRIAL GROUP
Southern Ductile Castings Co.
Foundry Service Co.
Mabry Foundry
Mansfield Foundry
Iroquois Foundry
Berlin Foundry
Customers. Unlike the Automotive Group, the Industrial Group has a much
wider base of customers and markets served. A number of these customers are
designated as "key accounts," based upon size and multi-division impact, and are
served by a central sales office.
Key markets for the Industrial Group include automotive, heavy trucks,
construction equipment, diesel engines, agricultural equipment, rail equipment,
machine tools, material handling, and pumps, valves and compressors. Major
customers are Caterpillar, Dana Corporation, John Deere, General Motors,
Freightliner, New Holland, Buffalo Brake, and Detroit Diesel.
Capital Projects. In fiscal 1998, Foundry Service initiated a $2.4 million
capital project to add an additional electric melting furnace that will provide
molten iron. The project is expected to be completed early in fiscal 1999. The
new furnace increases melt capacity approximately 25 percent.
Foundry Service had reached capacity in castings production and the new
furnace will help the Company meet demand for capital goods production. In
particular, demand for castings utilized in heavy trucks is good.
Berlin Foundry is also adding a new melt furnace to its operations. The
project, which increases melt capacity, began in fiscal 1998 but will not be
completed until the second quarter of fiscal 1999. Cost is estimated at $2.3
million.
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Another unit of the Industrial Group, Southern Ductile, added a new high-
speed core machine to improve productivity. Cores are utilized to produce the
voids in complex castings. Cost of the new core machine was approximately $0.4
million.
In addition to these projects, other capital projects for productivity
enhancement, product development, modernization, maintenance and repair, and
regulatory compliance were completed in the Industrial Group during fiscal 1998.
Quality. Like all component suppliers, Citation's Industrial Group directs
much of its management attention to its quality process. Southern Ductile,
Foundry Service, and Mansfield Foundry are certified to ISO 9002 standards.
Iroquois Foundry, Berlin Foundry and Mabry Foundry all expect to be certified
during fiscal 1999.
Casting capacity of the Industrial Group is approximately $190 million.
THE FORGING GROUP
The Forging Group consists solely of Interstate Forging Industries, which
has two divisions; Interstate Midwest in Milwaukee, Wisconsin and Interstate
Southwest in Navasota, Texas. The Texas plant produces larger forgings than the
Milwaukee plant.
In the forging process utilized by Interstate, billets of carbon, alloy or
stainless steel are heated to the point where they become malleable, but not
molten. Pressure is then applied to force the billet into a final shape in a
metal die or series of dies. In a forged part, the grain structure follows the
contour of the part, a characteristic that imparts strength.
THE FORGING GROUP
Interstate Forging Industries - Midwest
Interstate Forging Industries - Southwest
Customers. The Forging Group primarily produces forgings used in capital
goods, although it does have a some of automotive and aerospace business.
Caterpillar is its largest customer and Interstate is Caterpillar's largest
supplier of forgings.
Interstate's largest markets are construction equipment, oil field
equipment, and heavy trucks. In addition to Caterpillar, key customers include
Dana Corporation, Hughes Christensen, Dresser Industries, John Deere, Case, and
Hendrickson Suspension.
Capital Projects. Interstate rebuilds and reconditions all its forging
presses. Currently, it is in the second year of rebuilding and installing a
7,000-ton press at its Navasota facility. The 7,000-ton press is planned to
augment a 6,000-ton press at the same facility that is currently operating at
full capacity. This would be the second largest press within Interstate. When
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completed by January 1999, final capital cost is expected to be approximately
$7.0 million and the new press will add about $15 million of sales capacity.
During 1998, Interstate also completed the rebuild of a 1,000-ton press at
the Milwaukee plant. That press added about $3.5 million in sales capacity.
Quality. Interstate has a strong and continuing quality system with the
best record for rejects in Citation, except for Hi-Tech Corporation.
The Milwaukee division of Interstate is certified to ISO 9002 and the
Navasota division expects to complete certification to ISO standards in fiscal
1999. Both are also certified to a number of customer quality standards.
Total capacity of Interstate Forging Industries is approximately $155
million in sales, which includes the increase in capacity from adding the new
7,000-ton press in Navasota.
THE AEROSPACE GROUP
The Aerospace Group consists of Citation Precision and Oberdorfer
Industries. As previously announced, Citation is currently marketing Oberdorfer
for sale. Citation Precision, which was acquired in March 1998, is Citation's
only investment casting facility. The Aerospace Group and the Technology Group
are combined administratively, although both are strategic growth areas.
Investment casting, also called "lost wax" casting, is a process by which
wax is molded and assembled into a replica of the casting to be produced.
Several coats of ceramic slurry are applied to the wax replica, then it is baked
in an oven that solidifies the ceramic shell and melts off the wax. The wax is
collected for reuse. Molten stainless steel or aluminum, depending upon the
application, is poured into the ceramic mold, then the ceramic is broken off,
leaving a casting. Investment casting is used to produce castings of high
tolerances and nearer net shape for demanding applications.
Customers. All of Citation Precision's customers are aircraft and
aerospace manufacturers. Citation Precision also represents any other Citation
company that has aircraft part sales, which currently is primarily Interstate
Forging Industries. All of Citation Precision's customers are OEM aircraft,
aircraft engine, or subassembly manufacturers.
Citation Precision primarily produces two categories of components:
Airframe parts are produced for Boeing, Bombardier, Global Express, Cessna and
others, and engine parts are produced for manufacturers including Allied Signal,
Rolls-Royce, and Pratt & Whitney.
Capital Projects. Citation Precision was acquired at the end of the second
quarter, so capital spending was limited in fiscal 1998. However, the addition
of a wax press to increase
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production capability, at a cost of approximately $0.4 million, was completed in
fiscal 1998.
Quality. Obviously, total quality is a crucial part of any manufacturer
involved in the aircraft and aerospace markets. Citation Precision is certified
to ISO 9002 and Boeing D1 9000, and has Aerospace certification AS 9000.
Citation Precision is also one of very few manufacturers that offer
stereolithographic (SLA) capability for rapid prototyping. With two SLA
machines, it is possible for Citation Precision to go from blueprint to
prototype part in only 15 days.
Current capacity of Citation Precision is approximately $33 million in
annual sales.
THE TECHNOLOGY GROUP
The Technology Group was organized in fiscal 1998 for the purpose of
reviewing, exploring, and developing new technology in both the process and
product areas. The Group also has significant capabilities in design
engineering, quality assurance and troubleshooting, to design new products,
strengthen division operations, and to assist in meeting the more demanding
quality certifications required for the future. The Group currently consists of
an Engineering Division, Citation Foam Castings, and technology, engineering,
and quality professionals.
Engineering Division. The Engineering Division of the Technology Group is
located in Southfield, Michigan because most of the design requirements are
presently automotive in nature. Design capabilities, however, are available as
required by Citation customers, regardless of the end use application.
The Engineering Division has both applications and design engineers.
Applications engineers normally participate in product engineering as part of a
customer team working on specific assemblies.
Citation's engineers process data from a customer design group to prepare
specific casting and forging design. Citation's capabilities for producing
aluminum, iron and steel castings with various molding technologies and for
producing stainless, alloy and carbon steel forgings give the Company the
ability to provide solutions to broad-based customer issues rather than to
merely sell a specific material or process.
Lost Foam Division. The Technology Group's only manufacturing division at
this time is Citation Foam Castings, the largest independent iron lost foam
producer in the world. Lost foam is a unique process by which a replica of the
part to be produced is made in a polystyrene-like material. This "foam" replica
is assembled into a group of parts with a downsprue to duct molten metal to the
foam parts, and the assembly is called a "tree." The patterns are then coated
in ceramic slurry and dried.
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The tree is submerged in a metal flask and dry sand is compacted around it.
Molten metal is poured into the tree, which evaporates as the molten iron
contacts the polystyrene. What remains after the molten iron cools is a precise
replica.
The advantage of the process is that it forms a near net shape casting that
requires little or no machining, a major cost savings to the customer. Further,
there are design capabilities in lost foam that are not practical in
conventional molding methods.
Customers. Iron lost foam is still a developing process. Thus, its
potential is not yet fully recognized, but proceeds on an application-by-
application basis as the capabilities are better understood.
Current key customers include Dana Corporation, Volvo, Baldor Electric, and
Mercury Marine. Largest markets are automotive/light truck, electrical
equipment, and heavy trucks.
Capital Projects. During fiscal 1998, Citation Foam Castings completed the
final phase of its extensive expansion. Previously, the finishing and painting
operations had been reorganized and housed in a new facility and the melt
operation expanded. In fiscal 1998, in addition to completing those areas, a
new foam line at a cost of approximately $3.0 million was installed and started
production.
The new line doubles molding capacity for the facility, which is now
capable of producing nearly $40 million a year of lost foam castings. In
addition, the new line allows the production of larger castings than Citation
Foam was previously capable of producing. The plant now has two production
molding lines and a prototype molding line.
THE SPECIAL FOUNDRY GROUP
The Special Foundry Group consists of Castwell Products, which produces
high alloy iron products in shell and sand molding, and Texas Steel, which
produces large stainless and carbon steel castings. The Group will also include
Aceros Fundidos Internacionales, which is to be a joint venture steel foundry
between Citation and Caterpillar, Inc., located in Mexico.
THE SPECIAL FOUNDRY GROUP
Castwell Products
Texas Steel Co.
Aceros Fundidos Internacionales (AFI)
Customers. Caterpillar, Inc. is the largest customer of the Special Foundry
Group and Texas Steel is one of Caterpillar's largest suppliers of steel
castings. Texas Steel supplies turbine housings to Caterpillar's solar turbine
division, wheel and steering parts to Caterpillar's huge trucks used in mining,
and ground engaging tools (GET) to its construction equipment GET division.
14
<PAGE>
Texas Steel also supplies castings to Komatsu America, a manufacturer of
construction equipment, and Nordberg, a manufacturer of crushers.
Castwell Products supplies a number of specialized automotive engine parts
such as lifters to GM's Delphi Corporation, Hy-Lift, Inc., and Morestana, which
is a Mexican manufacturer of lifters. Castwell also supplies oil tool
manufacturers including Centrilift and Oil Dynamics with impeller castings. The
Company also supplies gears to fifth wheel manufacturer Binkley.
The joint venture with Caterpillar is a steel foundry to be located near
Saltillo, Mexico, that will manufacture ground engaging tools for Caterpillar.
Capital Projects. The largest capital project for Citation currently is
the construction of AFI, the joint Caterpillar-Citation steel foundry to be
located in Mexico. Each partner is to furnish half the capital outlay, expected
to cost approximately $25 to $30 million. The foundry will be operated by
Citation and Caterpillar will be the sole customer.
Currently, land in Mexico is being purchased and the engineering design
completed. It is expected that land preparation will begin in late calendar 1998
and the plant should be completed approximately one year later.
Quality. As with Citation's other groups, quality is central to the Special
Foundry Group. Because Castwell Products has both industrial and automotive
customers, it is certified to both ISO 9002 and QS 9000. Texas Steel does not
have automotive customers and thus is only certified to ISO 9002. Both
facilities are also Caterpillar certified suppliers.
Current capacity of this Group is approximately $113 million. AFI will have
capacity of approximately $25 million when completed.
RAW MATERIALS
The primary raw material used by the Company to manufacture iron and steel
castings is steel scrap and the principal raw material used by the Company in
the manufacture of steel forgings is steel bar. To produce aluminum castings the
Company purchases aluminum ingot to specified alloy grades. The ingot is
purchased from primary aluminum producers and in some cases from secondary
smelters. Bohn Aluminum and Southern Aluminum produce part of their requirements
by operating smelters that melt scrap aluminum.
The Company purchases steel from numerous sources, generally regional scrap
brokers, using a combination of spot market purchases and contract commitments.
The Company has no long-term contractual commitments with any scrap supplier and
does not anticipate, nor has it experienced, any difficulty in obtaining scrap.
This is due to the relatively large number of suppliers and the Company's
position as a major scrap purchaser. The Company is not dependent upon any one
supplier for any of its raw material needs.
15
<PAGE>
The cost of steel is subject to fluctuations, but the Company has
contractual arrangements with most of its customers allowing it to pass through
raw material price increases. In periods of rapidly rising steel prices, these
adjustments will lag the current market price for steel because they are
generally based on average market prices for prior periods. These periods vary
by customer but are generally no longer than one quarter. This adjustment lag
may have an adverse effect on the Company's results of operations during such
periods.
The price of aluminum ingot is also subject to fluctuations and in some
cases the Company has contractual arrangements to adjust its prices to reflect
fluctuations. In other cases, changes in aluminum ingot prices must be recovered
through casting price negotiations with the customer. Recovery of cost increases
in both cases may lag the aluminum ingot price increases by a quarter or more.
BACKLOG
The Company's backlog of orders at September 27, 1998 was approximately
$196.7 million compared to approximately $157.0 million at September 28, 1997.
The Company's operating divisions normally receive purchase orders from
customers either annually or for the life of the part specified. Purchase orders
specify product requirement, price and terms, but do not specify quantity, which
is usually ordered by the customer on a monthly basis. The Company's backlogs
are calculated from these monthly orders and, accordingly, are considered by the
Company to be a good indication of product demand.
COMPETITION
The market for the Company's casting products is highly competitive. There
are an estimated 3,000 foundries and forge shops currently producing ductile
iron, gray iron, steel and aluminum castings and steel forgings in the United
States. The companies within the industry compete on the basis of price,
quality, service and engineering. The industry consolidation that has occurred
over the past two decades has resulted in a significant reduction in the number
of smaller foundry companies and a rise in the share of production held by the
larger foundry companies. Major users of castings and forgings own some of the
foundries and forge shops in this industry. For example, the three largest
automobile manufacturers operate foundries. Some of the Company's competitors
have greater financial resources than the Company, may have lower production
costs than the Company, or both.
EMPLOYEES
As of September 27, 1998, the Company had 6,336 full time employees, of
whom 5,243 were hourly employees and 1,093 were salaried employees. Unions
represent approximately 2,414 of the Company's hourly manufacturing employees at
12 of its 19 operating divisions under collective bargaining agreements expiring
at various times through October 2002.
16
<PAGE>
The management of each division and corporate staff participate in a
management bonus pool equal to 15% of income before taxes, bonus and corporate
administrative charges. Divisional management's bonus compensation is based on
the financial performance of their respective divisions and specific objectives,
while corporate management's bonus compensation is based on overall Company
profitability plus also meeting specified objectives. Hourly incentive plan
programs and participants vary by division.
ENVIRONMENTAL MATTERS
Companies in the foundry and forging industries must comply with numerous
federal, state and local environmental laws and regulations which address the
generation, storage, treatment, transportation and disposal of solid and
hazardous waste, and the release of hazardous substances into the environment.
The Company's operations require compliance with these regulations, as well as
regulations concerning workplace safety and health standards. The Company
believes it is in substantial compliance with these laws and regulations.
The Company has implemented substantial record keeping, management
procedures and practices for the purposes of complying with environmental laws
and regulations. In seeking to comply with these laws and regulations, each
foundry has personnel responsible for environmental issues who work closely with
the Company's corporate director of environmental management. The corporate
director assists in supplying technical advice and guidance in interpreting
regulations, transferring technology, procedures and obtaining permits.
The chief environmental issues for the Company's foundries are air
emissions and solid waste disposal. For foundries, air emissions, primarily dust
particles, are handled by dust collection systems. The solid waste generated by
these foundries is generally sand, which is recycled and reused in the foundry
or disposed of as non-hazardous waste in landfills on Company property or in
permitted off-site landfills. The Company has closed certain of the landfills on
its properties without incurring material expenditures and expects to close
other such landfills in the future without incurring material expenditures. The
Company has also begun beneficially reusing the excess sand as fill material and
as a raw material in other products such as cement and asphalt. However, there
can be no assurance that future regulations will not require the Company to
incur additional and potentially material costs related to its past or present
environmental practices. Because the Company's forge and machine shops do not
melt metal nor utilize sand in their operations, environmental issues are much
more limited than foundry operations.
Certain of the Company's foundries do use solvents or oils. The Company has
in place programs and procedures regarding the proper use, storage and disposal
of such materials.
Although the Company's practices have, in certain instances, resulted in
noncompliance with environmental laws and regulations and in non-material fines
related thereto, the Company currently does not anticipate any environmental
related costs that would have a material adverse effect on its operations.
However, it cannot be assured that the Company's activities will not give
17
<PAGE>
rise to actions by governmental agencies or private parties, which could cause
the Company to incur fines, penalties, operational shutdowns, damages, clean-up
costs or other similar expenses. Also, the Company's foundries, capacity levels,
or increases thereof, are dependent upon the Company's ability to maintain, or
obtain increases in such levels in its permits for air emissions. However, it
cannot be assured that the Company will be able to maintain its current permits,
or obtain appropriate increases in capacity levels under such permits, so as to
maintain its current level of operations or increase capacity as it may desire
in the future.
The Company is implementing a source removal and shallow groundwater
remediation project at Castwell Products for purposes of removing excessive
levels of trichloroethylene ("TCE") which were detected at this facility. These
excessive levels of TCE resulted from previous leakage into the groundwater from
a part washing area located on the premises. The need for the remediation was
identified in connection with the Company's acquisition of Castwell Products,
and the Company assumed an accrued liability in the amount of $1.2 million
related to the estimated cost of the remediation. Of this amount, approximately
$600,000 is expected to be paid through fiscal 1999 in connection with soil
removal, groundwater remediation measures and testing expenses. Of that amount,
approximately $450,000 was spent through fiscal 1998. Thereafter, the Company
estimates that it will incur approximately $40,000 annually for an estimated 20
to 30 years for ongoing monitoring and periodic sampling tests. There can be no
assurance, however, that the costs and expenses related to this remediation
project will not be materially greater than currently estimated.
Iroquois Foundry is expected to pay over $57,000 in penalties to the USEPA
due to violations detected during an August 1997 inspection. The violations have
since been corrected.
The 1990 amendments to the Clean Air Act may have a major impact on the
compliance costs of many U.S. companies, including foundries. Many of the
regulations that will implement the Clean Air Act amendments have not yet been
promulgated. The MACT Standard affecting iron and steel foundries will not be
issued in draft form until November 1999 and in final form until November 2000.
Until such regulations are issued, it is not possible to estimate the costs the
Company may need to incur to comply with them, but the foundry industry
continues to work with the USEPA in developing these standards.
18
<PAGE>
ITEM 2: PROPERTIES
The Company maintains its corporate headquarters in leased office space in
Birmingham, Alabama and conducts its principal manufacturing operations at the
following facilities, each of which is owned by the Company.
<TABLE>
<CAPTION>
CAPACITY /(1)/ FLOOR SPACE
FACILITY LOCATION (TONS PER YEAR) (SQ. FT.)
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Alabama Ductile.............. Brewton, Alabama 45,000 135,000
Bohn Aluminum................ Butler, Indiana 15,000 135,000
Berlin Foundry............... Berlin, Wisconsin 30,000 335,000
Castwell Products............ Skokie, Illinois 32,000 286,000
Camden Casting............... Camden, Tennessee 25,300 117,000
Citation Foam................ Columbiana, Alabama 13,000 130,000
Citation Precision........... Rancho Cucamonga, California /(4)/ 68,000
Custom Products.............. Menomonee Falls, Wisconsin /(3)/ 250,000
Dycast....................... Lake Zurich, Illinois /(2)/ 96,000
Foundry Service.............. Biscoe, North Carolina 20,000 160,000
Hi-Tech Inc.................. Albion, Indiana /(3)/ 67,000
Interstate Forging........... Milwaukee, Wisconsin 16,000 200,000
Navasota, Texas 42,000 500,000
Iroquois Foundry............. Browntown, Wisconsin 25,000 131,600
Mabry Foundry................ Beaumont, Texas 12,250 118,000
Mansfield Foundry............ Mansfield Ohio 30,000 242,000
Oberdorfer Industries........ Syracuse, New York 3,500 250,000
Southern Aluminum............ Bay Minette, Alabama 22,000 255,000
Southern Ductile............. Bessemer, Alabama 15,000 108,000
Centreville, Alabama 2,400 32,000
Selma, Alabama 5,000 30,000
Texas Foundries.............. Lufkin, Texas 90,000 595,000
Texas Steel Corporation...... Fort Worth, Texas 23,500 454,000
------------------------------
TOTAL 466,950 4,694,600
</TABLE>
______________
(1) Maximum capacity of each foundry is based on six days of operations per
week with two ten-hour-shifts per day, except for Iroquois Foundry, which
is based on one ten-hour-shift per day and Bohn Aluminum, which is based on
five days of operations per week with three eight-hour-shifts per day.
(2) Dycast is a die casting producer. Capacity is measured as revenue per die
cast machine. Estimated Dycast capacity is $1.5 million per machine,
aggregating $36.0 million annually.
(3) Hi-Tech and Custom Products perform machining. Capacity is measured in
sales revenue, rather than tons. Estimated capacity of Hi-Tech and Custom
Products is approximately $15.0 and $95.0 million in sales revenue,
respectively. Custom Products was acquired November 1998.
(4) Citation Precision sells aluminum and steel products. The value of these
products are the dimensions and metallurgical properties. Capacity is
measured in sales revenue, rather than tons. Estimated capacity of Citation
Precision is approximately $33.0 million in annual sales revenue.
19
<PAGE>
The Company believes that its properties have been adequately maintained,
are in generally good condition and are suitable for the Company's business as
presently conducted. The Company believes its existing facilities, together with
the current and proposed internal expansion described elsewhere herein, provide
sufficient production capacity for its present needs and for its anticipated
needs in the foreseeable future.
ITEM 3: LEGAL PROCEEDINGS
From time to time, the Company is named as a defendant in legal actions
arising out of the normal course of business. The Company is not a party to any
pending legal proceedings the resolution of which, either individually or in the
aggregate, is expected by management of the Company to have a material adverse
effect on the Company's cash flow, results of operations or financial condition
or to any other pending legal proceedings other than ordinary, routine
litigation incidental to its business. The Company maintains liability insurance
against risks arising out of the normal course of business
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of the Company's fiscal year covered by this
report, no matter has been submitted to a vote of security holders, through the
solicitation of proxies or otherwise.
EXECUTIVE OFFICERS
The executive officers of the Company as of the end of fiscal 1998 were as
follows:
Name Position
- ---- --------
T. Morris Hackney Chairman of the Board
Frederick F. Sommer President and Chief Executive Officer
R. Conner Warren Executive Vice President and Chief Administrative
Officer
Virgil C. Reid Vice President, Special Foundry Group
Timothy L. Roberts Vice President, Aerospace and Technology Group
John W. Lawson Vice President, Automotive Group
Edwin L. Yoder Vice President, Industrial Group
Thomas W. Burleson Vice President-Finance, Chief Financial Officer and
Assistant Secretary
Karl E. Sekerka Vice President, Business Development
Stanley B. Atkins Vice President and Secretary
T. MORRIS HACKNEY founded the Company in 1974 and has served as its
Chairman of the Board since that time. Until August 1998 he was also the
Company's Chief Executive Officer. Prior to establishing the Company, Mr.
Hackney served as President of Hackney Corporation, a
20
<PAGE>
chain-link fence manufacturer, for nine years. He is also a director of Alabama
National BanCorporation and Meadowcraft, Inc.
FREDERICK F. SOMMER became President and Chief Executive Officer in August
1998. He joined the Company as its President and Chief Operating Officer in July
1996. Prior to that time, Mr. Sommer served as President and Chief Operating
Officer of Automotive Industries, Inc. from 1991 until his appointment as its
President and Chief Executive Officer in 1994. He remained in that position
after Automotive Industries, Inc. was acquired by Lear Corporation in 1995, and
also served as a Senior Vice President of Lear Corporation. He has been a
director of the Company since 1996.
R. CONNER WARREN joined the Company in 1975, shortly after its founding.
Since that time, Mr. Warren has served the Company in various capacities and is
currently its Executive Vice President and Chief Administrative Officer. He has
served on the Board of Directors since 1975. Prior to joining the Company, Mr.
Warren was an employee of Hackney Corporation. He is a past president of the
American Foundryman's Society and of the American Cast Metals Association and is
currently the U.S. representative to the International Association of Foundry
Technical Associations and a member of its executive board.
VIRGIL C. REID, JR. joined the Company in 1981 and served as Group Vice
President, Medium Volume Foundries from 1992 to 1998 before becoming Vice
President, Special Foundry Group. Prior to attaining his current position, Mr.
Reid served as General Manager of Alabama Ductile, and General Manager, Sales
Administrator and Controller of Foundry Service. From 1974 to 1981, Mr. Reid
served in various capacities for GTE, including Divisional Cost Accounting
Manager of its Metal Laminates Division.
TIMOTHY L. ROBERTS joined the Company in May 1995 as Group Vice President,
Special Foundry Group, and is currently Vice President, Aerospace and Technology
Group. He served as Director of Manufacturing Operations at Intermet
Corporation, an iron castings company, from 1994 to 1995, and previously served
ten years at Wheland Foundry where he advanced to the position of Director of
Operations and General Manager.
JOHN W. LAWSON joined the Company in February 1998 as Vice President, High
Volume Foundry Group and was named Vice President, Automotive Group in August
1998. Mr. Lawson has more than 20 years of operations experience, most recently
with Lear Corporation as its Vice President of European operations from 1996 to
February 1998, and Vice President of North American operations from 1992 to
1996.
EDWIN L. YODER was named Vice President, Medium Volume Foundry Group, when
he joined the Company in June 1998 and Vice President, Industrial Group in
August 1998. Mr. Yoder was formerly with Allied Signal Corporation as Vice
President and General Manager of its Environmental Catalysts Division from 1994
through June 1998, and he was with Garrett Automotive from 1992 to 1994.
21
<PAGE>
THOMAS W. BURLESON joined the Company in 1992 as its Corporate Controller
and became Vice President-Controller in August 1994. He became Vice President-
Finance and Chief Financial Officer in March 1998. Prior to joining the Company,
Mr. Burleson was Corporate Controller of Marvin's, a regional building products
chain, from 1990 to 1992, and was an accountant with Coopers & Lybrand from 1980
to 1990. Mr. Burleson is a certified public accountant.
KARL E. SEKERKA joined Citation in August 1994 as Vice President of
Automotive Sales in Detroit, Michigan. He was named Vice President, Business
Development in October 1996. He also serves as Vice President of Automotive
Sales. Prior to joining the Company, he was Vice President and General Sales
Manager for CMI International, a major producer of machined aluminum and iron
castings for the automotive industry.
STANLEY B. ATKINS is the Company's Vice President and Corporate Secretary
and is responsible for investor relations. He joined the Company in 1991 as Vice
President-Marketing. He was named Vice President-Sales Administration in 1992
and to his present position in June 1994. Prior to joining Citation, he was with
Intermet Corporation and its predecessor organizations for 19 years as Vice
President of Marketing.
PART II
ITEM 5: MARKET FOR THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
The Company's common stock first began trading on the NASDAQ National
Market System on August 2, 1994. The stock is quoted in the NASDAQ National
Market System under the symbol CAST. The following table sets forth, for the
fiscal periods indicated, the high and low bid prices reported on the NASDAQ
National Market System.
<TABLE>
<CAPTION>
FISCAL 1996 HIGH LOW
---- ---
<S> <C> <C>
First Quarter $19 $9 1/4
Second Quarter $13 $9 3/4
Third Quarter $15 7/8 $11 1/2
Fourth Quarter $14 3/4 $10 3/8
FISCAL 1997
First Quarter $13 1/8 $ 9 1/2
Second Quarter $15 3/8 $ 9 7/8
Third Quarter $18 1/4 $13 1/4
Fourth Quarter $20 $16 1/4
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
FISCAL 1998
<S> <C> <C>
First Quarter $20 1/2 $15 1/2
Second Quarter $23 $15 7/8
Third Quarter $23 3/4 $18
Fourth Quarter $20 5/8 $ 8 1/2
</TABLE>
As of December 15, 1998, there were approximately 3,200 holders of the
Company's Common Stock, including shares held in "street" names by nominees who
are record holders.
The Company has never declared or paid a cash dividend, except for
dividends paid to the Company's former S corporation shareholders. It is the
present policy of the Board of Directors to retain all earnings for the
development of the Company's business. Any payment of dividends in the future
will depend upon the Company's earnings, capital requirements, financial
condition and such other factors as the Board of Directors may deem relevant.
ITEM 6: SELECTED FINANCIAL DATA
The following table sets forth selected financial data for the Company and
should be read in conjunction with the consolidated financial statements and
notes related thereto included elsewhere in this report. The selected financial
data as of and for the five years ended September 27, 1998 have been derived
from the Company's consolidated financial statements, which were audited by
PricewaterhouseCoopers LLP, the Company's independent accountants.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED /(1)/
--------------------------------------------------------------------
(Dollars in thousands, except per share amounts)
October 2 October 1 September 29 September 28 September 27
1994 1995 1996 1997 1998
---------- ---------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Sales $191,566 $307,681 $487,753 $648,961 $724,017
Cost of sales 151,921 243,493 404,961 538,502 612,035
-------- -------- -------- -------- --------
Gross profits 39,645 64,188 82,792 110,459 111,982
Selling, general and administrative
expenses 19,650 32,697 45,844 58,066 63,603
FAS 121 impairment charge -- - -- -- 10,000
-------- -------- -------- -------- --------
Operating income 19,995 31,491 36,948 52,393 38,379
Interest expense, net 2,813 3,974 7,866 14,433 15,254
Other expense (income) (24) (581) 1,178 (14) 2,155
-------- -------- -------- -------- --------
Income before provision for
income taxes 17,206 28,098 27,904 37,974 20,970
Provision for income taxes/(2)/ 6,538 11,019 11,162 14,810 8,178
-------- -------- -------- -------- --------
Net income (pro forma
through October 2, 1994)/(2)/ $ 10,668 $ 17,079 $ 16,742 $ 23,164 $ 12,792
======== ======== ======== ======== ========
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
FISCAL YEAR ENDED /(1)/
-------------------------------------------------------------------
(Dollars in thousands, except per share amounts)
October 2, October 1, September 29, September 28, September 27,
1994 1995 1996 1997 1998
---------- ---------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Pro forma net income per share -
basic/(3)/ $1.02 $1.27 $0.95 $1.31 $0.72
======== ======== ======== ======== ========
Weighted average number of shares
outstanding - basic (in thousands)/(3)/ 10,486 13,438 17,694 17,733 17,838
======== ======== ======== ======== ========
Pro forma net income per share -
diluted/(3)/ $1.02 $1.25 $0.94 $1.29 $0.71
======== ======== ======== ======== ========
Weighted average number of shares
outstanding - diluted (in thousands)/(3)/ 10,499 13,652 17,866 17,918 18,042
======== ======== ======== ======== ========
OTHER DATA (UNAUDITED):
Backlog (in dollars) $ 48,051 $ 78,262 $ 84,596 $156,880 $196,677
Capital expenditures $ 17,228 $ 29,844 $ 31,166 $ 40,531 $ 47,679
Depreciation and amortization $ 7,089 $ 10,638 $ 20,151 $ 30,489 $ 36,275
EBITDA/(4)/ $ 27,084 $ 42,129 $ 57,099 $ 82,882 $ 84,654
Gross margin 20.7% 20.9% 17.0% 17.0% 15.5%
BALANCE SHEET DATA (AT END OF PERIOD):
Current assets $ 46,713 $ 94,591 $135,359 $160,503 $183,678
Current liabilities 31,213 56,015 72,855 93,957 99,056
Working capital 15,500 38,576 62,504 66,546 84,622
Net property, plant and equipment 63,203 143,425 199,367 282,991 307,008
Total assets 113,449 271,871 383,557 493,296 569,265
Short-term debt, including current
portion of long-term debt 579 6,553 2,654 2,994 6,316
Long-term debt, excluding current
portion of long-term debt 29,703 71,254 140,946 181,239 237,525
Stockholders' equity 43,631 132,476 149,319 172,639 186,034
</TABLE>
(1) The Company operates on a 52- or 53-week fiscal year ending on the Sunday
closest to September 30. Fiscal years 1994, 1995, 1996, 1997, and 1998 were
all 52-week fiscal years.
(2) The Company terminated its status as an S Corporation on the completion of
its initial public offering in August 1994 and became subject to corporate
income taxation. Accordingly, pro forma net income for October 2, 1994
reflects federal and state income taxes as if the Company had been a C
Corporation based on the statutory tax rates that were in effect during the
periods reported.
(3) The weighted average number of shares outstanding for the year ended
October 2, 1994 gives effect to the number of shares (1,002,500) of Common
Stock that would have been required to be sold (at the initial public
offering price of $8.00 per share) to fund an $8.0 million S Corporation
distribution to the former S Corporation stockholders effected at the
closing of the Company's initial public offering in August 1994.
(4) Earnings before interest, taxes, depreciation and amortization ("EBITDA")
represent operating income plus depreciation and amortization. For fiscal
1998, the SFAS 121 impairment charge of $10.0 million is
24
<PAGE>
also added to operating income. EBITDA should not be considered as an
alternative measure of net income or cash provided by operating activities
(both as determined in accordance with generally accepted accounting
principles), but it is presented to provide additional information related
to the Company's debt service capability. EBITDA should not be considered
in isolation or as a substitute for other measures of financial performance
or liquidity.
ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
The following discussion and analysis should be read in conjunction with
the Company's consolidated financial statements and notes thereto, included
elsewhere in this annual report.
The Company operates on a 52- or 53- week year, ending on the Sunday
closest to September 30. Fiscal years 1994, 1995, 1996, 1997 and 1998 consisted
of 52 weeks. The next 53 week year will be the fiscal year ending October 3,
1999.
Forward Looking Statements. The statements in this Form 10-K that are not
historical fact are "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. Those statements appear in a
number of places in this report and include statements regarding the intent,
belief or expectations of the Company and its management with respect to, among
other things: (i) the Company's operating performance; (ii) the Company's
expectations concerning sales growth and earnings per share growth; (iii) the
intent, belief or expectations of the Company and its directors and officers
with respect to anticipated acquisitions and acquisition strategies; (iv) trends
in the industries served by the Company; and (v) trends which may affect the
Company's financial condition or results of operations. Such statements are
subject to numerous risks and uncertainties which could cause actual results to
differ materially from anticipated results. The following are some of such
factors, risks and uncertainties: (i) competitive product and pricing pressures;
(ii) fluctuations in the cost and availability of raw materials; (iii) general
economic and business conditions, as well as conditions affecting the industries
served by the Company; (iv) the ability to generate sufficient cash flows to
support acquisition strategies, capital expansion plans and general operating
activities; (v) recent management changes; and (vi) the Company's ability to
penetrate new markets. Readers are cautioned not to place undue reliance on
these forward looking statements which speak only as of the date hereof.
Readers are also urged to carefully review and consider the various disclosures
made by the Company which attempt to advise interested parties of the factors
which affect the Company's business, including the disclosures made in other
periodic reports on Forms 10-K, 10-Q and 8-K filed with the Securities and
Exchange Commission.
25
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth operating results expressed as a percentage
of sales for the periods indicated and the percentage change in such operating
results between periods.
<TABLE>
<CAPTION>
Period-to-Period
Percentage of Sales Percentage
Fiscal Year Ended Increase (Decrease)
------------------------------- -------------------------
1997 1998
Sept. 29, Sept. 28, Sept. 27, compared to compared to
1996 1997 1998 1996 1997
--------- --------- --------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Sales.......................... 100.0 100.0 100.0 33.0 11.6
Cost of sales.................. 83.0 83.0 84.5 33.0 13.7
----- ----- -----
Gross profit................... 17.0 17.0 15.5 33.4 1.4
Selling, general and
administrative expenses..... 9.4 9.0 8.8 26.7 9.5
Impairment charge.............. 0 0 1.4 -- *
----- ----- -----
Operating income............... 7.6 8.0 5.3 41.8 (26.7)
Interest expense, net.......... 1.6 2.2 2.1 83.5 5.7
Other expense (income)......... 0.3 0.0 0.2 * *
----- ----- -----
Income before
income taxes.............. 5.7 5.8 3.0 36.1 (44.8)
===== ===== =====
</TABLE>
___________
* Percentage changes not meaningful due to large non-recurring charges in 1996
and 1998
FISCAL YEAR ENDED SEPTEMBER 27, 1998 COMPARED TO FISCAL YEAR ENDED SEPTEMBER 28,
1997
Sales. Sales increased 11.6%, or $75.1 million, to $724.0 million in 1998
from $649.0 million in 1997. Of this increase, $62.5 million was related to
sales from the Company's 1998 acquisitions and a full year of operations at the
Company's Interstate Forging division as compared to eleven months in 1997.
During fiscal year 1998, the Company acquired Camden Casting, Dycast and
Citation Precision. If the Company's operations were compared on a "same store"
basis, i.e., excluding the sales increase resulting from the acquisitions, sales
revenue increased approximately $12.6 million or 1.9%. Management believes this
increase was primarily attributable to the strength of the underlying economy
and its positive impact on the Company's customers, as well as capacity
expansions at selected Company facilities. The sales increase was partially
offset by the General Motors strike in the fiscal 1998 fourth quarter.
Additionally, the Company experienced reduced orders for oil tool, construction
equipment, mining equipment, and farm implement parts during the 1998 fourth
quarter.
Gross Profit. Gross profit increased 1.4% or $1.5 million, to $112.0
million in 1998 from $110.5 million in 1997. Gross margin decreased to 15.5% in
1998 from 17.0% in 1997. Excluding the 1998 acquisitions and the one month
effect of the 1997 Interstate Forging
26
<PAGE>
acquisition, gross profit on a same store basis decreased $8.0 million to $102.5
million. Gross margin on a same store basis decreased to 15.5% in 1998 from
17.0% in 1997. The decreases in gross profit on a same store basis and the
decreases in gross margin are primarily attributable to operating losses at the
Company's Oberdorfer division, the impact of the General Motors strike in the
fiscal fourth quarter, costs associated with new product launches, and the slow
down in several capital goods sectors discussed in the preceding paragraph.
Selling, General and Administrative Expenses. Selling, general and
administrative (SG&A) expenses increased 9.5%, or $5.5 million, to $63.6 million
in 1998 from $58.1 million in 1997. Approximately $6.2 million of this increase
is related to the 1998 acquisitions. On a same store basis, SG&A costs
decreased by $658 thousand. The decrease is primarily attributable to cost
cutting programs implemented by the Company in fiscal 1998.
Operating Income. Operating income decreased 26.7%, or $14.0 million, to
$38.4 million in 1998 from $52.4 million in 1997. Operating margin decreased to
5.3% in 1998 from 8.0% in 1997. The decrease in operating income and operating
margins was related to several factors. The most significant contributor to the
decreases was the $10 million asset impairment charge at the Company's
Oberdorfer division. Additionally, the Company was negatively affected by the
General Motors strike, a slow down in several capital goods sectors, start-up
costs of a number of product and process launches, and an additional $5.6
million in operating losses at the Oberdorfer division as compared to the prior
year. Net operating income attributable to the 1998 acquisitions was $3.3
million while same store operating income decreased by $17.3 million in 1998.
Interest Expense. Interest expense, net of interest income, increased 5.7%,
or $0.8 million, to $15.2 million in 1998 from $14.4 million in 1997. This
increase is primarily attributable to significantly higher average debt balances
related to an "earn out" contingent payment during the second quarter of 1998
related to the acquisition of Interstate, and the acquisitions of Camden
Casting, Dycast, and Citation Precision during the first nine months of fiscal
1998. The purchase price plus assumed debt from the above acquisitions was
approximately $58.6 million. However, increased interest expense in fiscal 1998
from the Company's overall higher debt balances was offset by an interest rate
reduction of approximately 0.5% when its credit facility was amended during July
1997. The Company capitalized $1.1 million of interest costs in 1998 as compared
to $0.4 million in 1997 due to increased capital expansion activity.
Net Income. Net income decreased 44.8%, or $10.4 million, to $12.8 million
in 1998 from net income of $23.2 million in 1997. Net income for 1998 was 1.8%
of sales as compared to 3.6% of sales in 1997. The 1998 acquisitions (including
the one additional month of Interstate in 1998) generated positive net income of
$323 thousand in fiscal 1998.
27
<PAGE>
FISCAL YEAR ENDED SEPTEMBER 28, 1997 COMPARED TO FISCAL YEAR ENDED SEPTEMBER 29,
1996
Sales. Sales increased 33.0%, or $161.2 million, to $649.0 million in 1997
from $487.8 million in 1996. Of this increase, $169.2 million resulted from
sales by the Company's 1996 and 1997 acquisitions. These include the Company's
Interstate Forging Industries operations, acquired during fiscal year 1997 and
the increase resulting from a full year of sales of the Company's Texas Steel,
Hi-Tech, Southern Aluminum, and Bohn Aluminum operations which were acquired
during fiscal year 1996. A decrease of $33.1 million in sales revenue resulted
from the sale of Pennsylvania Steel and the idling of the Texas Foundries Steel
Division, both of which were effective as of September 29, 1996. If the
continuing operations were compared on a "same store" basis, i.e., excluding
both the sales increases resulting from the acquisitions and the decreases
attributable to the sold and idled operations, sales revenue would have
increased approximately $25.1 million or 5.2%. Management believes this
increase was primarily attributable to the general strength of the underlying
economy and its positive impact on the Company's customers, as well as capacity
expansions at selected Company facilities. Tons shipped increased 15.7% for the
year ended September 28, 1997.
Gross Profit. Gross profit increased 33.4% or $27.7 million, to $110.5
million in 1997 from $82.8 million in 1996. Gross margin of 17.0% was
essentially the same in both 1997 and 1996 due to lower average gross margins on
the acquisitions. Excluding the non-continuing operations, $25.6 million of the
increase in gross profit was attributable to the acquisitions, and $4.3 million
of the increase was attributable to the same store operations.
Selling, General and Administrative Expenses. Selling, general and
administrative (SG&A) expenses increased 26.7%, or $12.2 million, to $58.1
million in 1997 from $45.8 million in 1996. Approximately $13.0 million of this
increase resulted from the impact of the 1996 and 1997 acquisitions. The SG&A
expenses increase in 1997 was offset by a decrease of $3.1 million due to the
sale of Pennsylvania Steel and the idling of the Texas Foundries Steel Division
at the end of 1996. The remaining increase of $2.3 million in 1997 compared to
1996 related primarily to higher sales commissions and administrative costs and
related staffing resulting from the Company's growth at its continuing
operations. As a percentage of sales, SG&A expenses decreased to 9.0% in 1997
from 9.4% in 1996.
Operating Income. Operating income increased 41.8%, or $15.4 million, to
$52.4 million in 1997 from $36.9 million in 1996. Operating margin increased to
8.0% in 1997 from 7.6% in 1996. The increase in the operating margins and
operating income resulted from operating efficiencies and lower SG&A expenses as
a percentage of sales at the acquisitions. In addition, spreading the SG&A
expenses over a significantly increased sales base without proportional
increases in the SG&A expenses also contributed to improved operating margins.
Operating income attributable to the acquisitions increased by $12.6 million in
1997. Same store operating income increased by $2.0 million in 1997 and the
operations of Pennsylvania Steel and Texas Foundries Steel Division, which were
sold and idled respectively, had a negative impact on 1996 operating income of
$0.9 million.
28
<PAGE>
Interest Expense. Interest expense, net of interest income, increased
83.5%, or $6.6 million, to $14.4 million in 1997 from $7.9 million in 1996.
This increase is primarily attributable to significantly higher average debt
balances related to acquisition activity during fiscal 1996 and 1997. The
Company capitalized $388 thousand of interest costs in 1997 as compared to $453
thousand in 1996.
Bank debt increased from $143.6 million as of September 29, 1996, to $184.2
million as of September 28, 1997. This increase is primarily attributable to
the Interstate acquisition on October 29, 1996. The acquisition of Interstate,
including the assumption of its debt, increased bank borrowings approximately
$73.8 million. On July 24, 1997, the Company closed a new secured revolving
credit facility with a maximum loan commitment of $300 million with a consortium
of banks, led by The First National Bank of Chicago. See further discussion of
the Company's current credit facility under "Liquidity and Capital Resources."
Net Income. Net income increased 38.4%, or $6.4 million, to $23.2 million
in 1997 from net income of $16.7 million in 1996. Net income for 1997 was 3.6%
of sales, as compared to 3.4% of sales in 1996. Net income increased by $3.4
million as a result of the acquisitions. In 1996, Pennsylvania Steel and the
Steel Division of Texas Foundries, prior to their sale and idling, respectively,
combined to lose approximately $1.2 million after tax.
SUPPLEMENTAL QUARTERLY INFORMATION
The following table presents selected unaudited quarterly results for
fiscal years 1997 and 1998. The Company's sales are generally lower in its
first fiscal quarter due to plant closings by major customers for vacations,
holidays, and model changeovers. In addition, the Company's operations usually
take normal one-week shut-downs during July. The units lose production for the
week (or weeks) they are down and also incur heavier than normal maintenance
expenses during this period. These events negatively affect gross margins at
operating units in both the first and fourth fiscal quarters.
<TABLE>
<CAPTION>
Fiscal Quarters Ended
-----------------------------------------------------------------------------------------
Dec. 29, Mar. 30, June 29, Sept. 28, Dec. 28, Mar. 29, June 28, Sept. 27,
1996 1997 1997 1997 1997 1998 1998 1998
----------- --------- --------- ---------- --------- --------- --------- ----------
(Dollars in thousands, except per share amounts)
(Unaudited)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sales.......................... $140,486 $170,435 $177,858 $160,182 $170,223 $193,091 $196,446 $164,257
Gross profit................... 22,126 29,582 32,221 26,530 26,998 34,090 35,965 14,929
SG&A expenses.................. 12,805 15,290 15,648 14,323 15,538 16,687 15,943 15,435
Impairment charge.............. -- -- -- -- -- -- -- 10,000
Operating income (loss)........ 9,321 14,292 16,573 12,207 11,460 17,403 20,022 (10,506)
Income (loss) before taxes..... 5,695 10,474 12,795 9,010 8,392 13,777 15,906 (17,105)
Net income (loss).............. 3,474 6,389 7,805 5,496 5,119 8,404 9,703 (10,434)
Net income (loss) per
share-basic............... $ 0.20 $ 0.36 $ 0.44 $ 0.31 $ 0.29 $ 0.47 $ 0.54 ($0.58)
Net income (loss) per
share-diluted............. $ 0.19 $ 0.36 $ 0.44 $ 0.30 $ 0.28 $ 0.47 $ 0.54 ($0.58)
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
Fiscal Quarters Ended
-----------------------------------------------------------------------------------------
Dec. 29, Mar. 30, June 29, Sept. 28, Dec. 28, Mar. 29, June 28, Sept. 27,
1996 1997 1997 1997 1997 1998 1998 1998
----------- --------- --------- ---------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AS A PERCENTAGE OF SALES % % % % % % % %
Gross profit................... 15.8 17.4 18.1 16.6 15.9 17.7 18.3 9.1
SG&A expenses.................. 9.1 9.0 8.8 8.9 9.1 8.6 8.1 9.4
Operating income (loss)........ 6.6 8.4 9.3 7.6 6.7 9.0 10.2 (6.4)
Income (loss) before taxes..... 4.0 6.2 7.2 5.6 4.9 7.1 8.1 (10.4)
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal capital requirements are to fund capital
expenditures for existing facilities and to fund new business acquisitions.
Historically, the Company has used cash generated by operations, bank financing
and proceeds from public equity offerings to fund its capital requirements.
Additionally, the Company requires capital to finance accounts receivable and
inventory.
Net cash provided by operating activities primarily represents net income
plus non-cash charges for depreciation, amortization and deferred income taxes
and changes in working capital positions. Because of the capital intensive
nature of the business, non-cash charges for depreciation and amortization are
substantial. Net cash provided by operating activities was $21.8 million, $68.4
million, and $45.9 million in 1996, 1997 and 1998, respectively.
Net cash used in investing activities in 1996, 1997 and 1998 was $67.6
million, $82.0 million and $104.6 million, respectively. Substantially all of
the above investment activities were for capital expenditures and acquisitions.
In addition to keeping current facilities properly equipped and maintained,
the Company is committed to replacing, enhancing and upgrading its facilities in
order to meet or exceed customer expectations, reduce production costs, increase
flexibility for quick response to market fluctuations, meet environmental
requirements and enhance safety. The Company spent approximately $31.2 million,
$40.5 million, and $47.7 million during the 1996, 1997, and 1998 fiscal years,
respectively, for the purpose of improving production efficiency, expanding
capacity and technological capability, reducing costs and complying with
regulatory requirements. The Company believes that generally expenditures of
amounts at least equal to its annual depreciation charge are necessary in order
to maintain its facilities in competitive working order and, in years when
substantial new capacity is added, capital expenditures may significantly exceed
the Company's depreciation charge. The most significant capital project was the
expansion of the Company's Citation Foam operations in Columbiana, Alabama. The
expansion included the addition of a new foam casting production line,
additional melt capacity and a new casting painting, finishing, and shipping
facility at an estimated cost of $12.5 million. Production on this new line
began during the fourth quarter of fiscal 1998. As a result of the expansion
project, Citation Foam's capacity has been more than doubled.
30
<PAGE>
As an additional capacity project, Interstate is in its second year of
rebuilding and installing a 7,000-ton press at Interstate's Navasota plant.
This 7,000-ton press will be the second largest at Interstate and will provide
approximately $15.0 million in additional capacity when completed by January
1999. Capital costs for the project are approximately $7.0 million, of which
approximately $2.5 and $3.5 million was spent during fiscal 1997 and 1998,
respectively, with an estimated $1.0 million to be spent in fiscal year 1999.
Total Interstate capacity when the project is complete is anticipated to be
approximately $155.0 million annually.
The Company had net cash provided by financing activities of $38.3 million,
$13.9 million and $58.4 million for 1996, 1997, and 1998, respectively. For
1996, 1997, and 1998, net cash of $30.1 million, $18.0 million, and $57.0
million, respectively, was provided from the Company's credit facility, capital
lease obligations, and other financing arrangements. The Company has no current
plans to pay dividends, as future earnings of the Company are expected to be
retained for use in the business.
Also, during 1998 the Company incurred costs that were expensed of
approximately $1.6 million related to a rule 144A offering of $150.0 million of
Senior Subordinated Notes including hedge costs on the base interest rate. The
Company withdrew the offering because of market conditions. The cash impact of
these expenses is included in cash flows from operating activities.
Subsequent to year end, on November 3, 1998, the Company's credit facility
was increased from $300 million to $400 million to be used for working capital
purposes and to fund future acquisitions. At September 27, 1998, the total
outstanding balance under the credit facility was $233.0 million. This
transaction and the outstanding debt balances at September 28, 1997 and
September 27, 1998 are described more fully in Note 6 of the consolidated
financial statements included elsewhere in this annual report. The credit
facility has a covenant prohibiting a change in control in excess of 30% of the
Company's outstanding stock other than by the Company's current majority
shareholder. As discussed in Note 21 to the consolidated financial statements,
subsequent to fiscal year 1998, the Drummond Corporation entered into an
agreement to acquire stock from a director of the Company and a 120-day option
to purchase stock from the majority shareholder of the Company which, if both
the stock purchase is consummated and the option is exercised, Drummond would
subsequently hold a 29.8% ownership interest in the outstanding stock of the
Company (before considering the effect of the Company's Shareholder Rights Plan
discussed in Note 21 as well).
The Company anticipates that its cash flow from operations and amounts
expected to be available for borrowing under the Credit Agreement will be
adequate to fund its capital expenditure and working capital requirements for
the next two years.
CYCLICALITY, SEASONALITY AND INDUSTRY CONCENTRATION
The Company has had and expects to have a significant concentration of its
sales in the automotive/light truck and heavy truck industries. The Company's
sales are generally lower in its first and fourth fiscal quarters due to plant
closings by major customers for vacations, holidays
31
<PAGE>
and model changeovers. As a result, the inherent cyclicality and seasonality of
these industries may affect the Company's future sales and earnings,
particularly during periods of slow economic growth or recession. In addition to
the above industries, the Company also has significant sales to substantially
all major industrial sectors of the economy. Management believes the differing
cycles of these sectors will provide protection against periodic down cycles in
any particular industrial sector.
INFLATION
Management believes that the Company's operations have not been materially
adversely affected by inflation because the Company is generally able to pass
through to its customers inflationary cost increases. However, in periods of
rapidly rising steel scrap prices, the Company will lag behind the market on the
amount it can pass through to customers, and its results of operations may be
adversely affected during these periods.
RECENTLY ISSUED ACCOUNTING STANDARDS
Note 2 of the Notes to Consolidated Financial Statements included elsewhere
in this Report describes certain recently issued accounting standards.
YEAR 2000 (Y2K) READINESS DISCLOSURE
General. As many computer systems and other equipment with embedded chips
or processors use only two digits to represent the year, they may be unable to
process accurately certain data before, during or after the year 2000. The
Company continues to address the "Year 2000" issue through a company-wide Y2K
Project (the Project).
The Project involves reviewing current software as well as embedded systems
in certain manufacturing equipment and surveying each of the Company's
divisional operations to assess the impact of the Y2K issue. The Project is
being coordinated by a twenty-five member team. This team includes five
personnel from corporate headquarters, including the overall coordinator, and a
coordinator at each division. The Project, which is approximately 80% complete
to date, is expected to be completed by mid-year 1999. The Company has
developed a contingency plan that involves manual processing, system backups,
increased inventory from critical suppliers and the selection of alternative
suppliers of critical materials.
Project. The Company's Project is divided into five major sections:
infrastructure, applications software, manufacturing software, process control
and instrumentation (PC&I) and third party suppliers/customers. The Company has
designated a Y2K team leader at each of its locations to help direct the phases
of the project. These phases, which are common to the five major sections, are
as follows: (1) inventorying Y2K items; (2) assessing compliance to Y2K for the
items identified; (3) developing a strategy for remediation of non-compliant
items; (4) implementation of the remediation strategy; and (5) independent
validation from external resources as to the Company's compliance.
32
<PAGE>
The infrastructure and applications software sections consist of an
analysis of hardware and systems software. The applications software includes
both the conversion of applications that are not Y2K compliant and, where
available from the supplier, the replacement of such software. At calendar year
end 1998, the inventory, assessment, implementation and validation for the
infrastructure, applications software and manufacturing software will be
approximately 95% complete. With respect to the manufacturing software,
approximately 80% of the Company's divisions are compliant. Approximately 60%
use BLIS (B&L Information Systems), which is Y2K compliant and another 20% use
other manufacturing software that is also Y2K compliant. The remaining 20% non-
compliant manufacturing software has been inventoried and identified. The
Company expects these three sections of the Project to be complete by mid-year
1999.
The PC&I section includes the hardware, software and associated embedded
computer chips that are used in the operation of all facilities operated by the
Company. Approximately 95% of the PC&I Y2K items have been inventoried and
identified. Furthermore, approximately 65% of those systems are deemed to be
Y2K compliant. The Company expects substantially all of its PC&I equipment to
be compliant by mid-year 1999.
The third party suppliers/customers section of the Project involves sending
a Y2K compliance questionnaire to all key suppliers as well as dealing with any
independent review of the Company's compliance by certain of its customers. The
Company obtains evidence from its key suppliers documenting their compliance
with the Y2K issue and will continue to monitor vendors that are non-compliant
for contingency planning purposes. The Company's contingency plan addresses non-
compliance of key suppliers by having alternative suppliers as well as
increasing critical inventory prior to the year 2000. At calendar year end 1998,
this section of the project is expected to be approximately 90% complete and
full implementation is expected by mid-year 1999.
Once the strategy of all sections has been implemented, the Company will
have independent validation of its Y2K compliance. Major customers will continue
to review various divisions' systems along with external resources hired by the
Company. The Company anticipates this external review to be completed by mid-
year 1999. The costs associated with the Project have been and will continue to
be expensed as incurred. The Company does not separately track these internal
costs incurred for the Y2K Project; these costs however, to-date consist
principally of the related payroll costs for its information systems group.
Risks. The failure to correct a material Y2K problem could result in an
interruption in, or a failure of, certain normal business activities or
operations. Such failures could materially and adversely affect the Company's
results of operations, liquidity and financial condition. Due to the general
uncertainty inherent in the Y2K issue, resulting in part from the uncertainty
of the Y2K readiness of third-party suppliers and customers, the Company is
unable to determine at this time whether the consequences of Y2K failures will
have a material impact on the Company's results of operations, liquidity or
financial condition. The Y2K Project is expected to significantly reduce the
Company's level of uncertainty about the Y2K problem and, in particular, about
the Y2K compliance and readiness of external parties. The Company believes that,
with the implementation and completion of the Project as scheduled, the
possibility of significant
33
<PAGE>
interruptions of normal operations should be reduced. The Company does not
believe it has any material exposure to contingencies related to the Y2K issue
for products it has sold.
RECENT ACQUISITIONS
The Company completed three acquisitions during fiscal year 1998, as
described in Note 17 of the Notes to Consolidated Financial Statements included
elsewhere in this Report. Note 20 of the Notes to Consolidated Financial
Statements describes two additional acquisitions completed or expected to be
completed in the first quarter of fiscal year 1999.
OTHER SUBSEQUENT EVENTS
See Note 21 of the Notes to Consolidated Financial Statements included
elsewhere in this Report for other significant subsequent events regarding the
potential change in ownership interest of the Company as well as the adoption of
a Shareholder Rights Plan.
ITEM 8: FINANCIAL STATEMENTS
The following financial statements are contained in this report.
<TABLE>
<CAPTION>
<S> <C>
Page
----
Report of Independent Certified Public Accountants....................... 35
Consolidated Financial Statements for Years Ended September 27, 1998,
September 28, 1997 and September 29, 1996
Consolidated Balance Sheets.......................................... 36
Consolidated Statements of Income.................................... 37
Consolidated Statements of Stockholders' Equity...................... 38
Consolidated Statements of Cash Flows................................ 39
Notes to Consolidated Financial Statements........................... 40
Report of Independent Certified Public Accountants on Supplementary
Information............................................................. 69
Schedule II - Valuation and Qualifying Accounts.......................... 70
</TABLE>
34
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Stockholders
Citation Corporation and Subsidiaries
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income, stockholders' equity, and cash flows present
fairly, in all material respects, the consolidated financial position of
Citation Corporation and subsidiaries (the Company) as of September 27, 1998 and
September 28, 1997, and the consolidated results of their operations and their
cash flows for each of the three years in the period ended September 27, 1998,
in conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
/s/ PricewaterhouseCoopers LLP
November 16, 1998, except for Notes 20 and 21
as to which the date is December 14, 1998
35
<PAGE>
CITATION CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 28, 1997 and September 27, 1998
(In Thousands, Except Share and Per Share Data)
<TABLE>
<CAPTION>
September 28, September 27,
ASSETS 1997 1998
------------- -------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 2,645 $ 2,322
Accounts receivable - trade, less allowance for doubtful accounts
of $1,367 and $2,860 in 1997 and 1998, respectively 93,542 103,152
Inventories 48,953 56,353
Income tax receivable -- 3,882
Deferred income taxes 8,429 9,751
Prepaid expenses and other assets 6,934 8,218
-------- --------
Total current assets 160,503 183,678
Property, plant, and equipment, net of accumulated depreciation 282,991 307,008
Intangible assets, net of accumulated amortization 47,373 74,595
Other assets 2,429 3,984
-------- --------
Total assets $493,296 $569,265
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Cash overdraft $ 4,211 $ 5,304
Current portion of long-term debt 2,994 6,316
Accounts payable 43,256 46,802
Income tax payable 2,745 --
Accrued wages and benefits 9,131 8,942
Accrued benefit plan contributions 4,324 3,664
Accrued vacation 4,716 5,542
Accrued insurance reserves 6,592 6,997
Accrued interest 2,430 1,556
Other accrued expenses 13,558 13,933
-------- --------
Total current liabilities 93,957 99,056
Credit facility 170,393 232,993
Other long-term debt, less current portion above 10,846 4,532
Deferred income taxes 38,921 39,382
Other liabilities 6,540 7,268
-------- --------
Total liabilities 320,657 383,231
Commitments and contingencies (Notes 14, 17, 20, and 21)
Stockholders' equity:
Preferred stock, $0.01 par value; 5,000,000 shares authorized,
none issued and outstanding (Notes 8 and 21)
Common stock, par value $0.01 per share; 30,000,000 shares
authorized, 17,759,600 and 17,889,113 shares issued and
outstanding in 1997 and 1998, respectively 178 179
Additional paid-in capital 107,242 107,844
Retained earnings 65,219 78,011
-------- --------
Total stockholders' equity 172,639 186,034
-------- --------
Total liabilities and stockholders' equity $493,296 $569,265
======== ========
</TABLE>
See notes to consolidated financial statements.
36
<PAGE>
CITATION CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
for the years ended September 29, 1996, September 28, 1997 and September 27,
1998
(In Thousands, Except Share and Per Share Data)
<TABLE>
<CAPTION>
Year Ended
--------------------------------------------
September 29, September 28, September 27,
1996 1997 1998
------------- -------------- -------------
<S> <C> <C> <C>
Sales $ 487,753 $ 648,961 $ 724,017
Cost of sales 404,961 538,502 612,035
------------------------------------------
Gross profit 82,792 110,459 111,982
Selling, general, and administrative expenses 45,844 58,066 63,603
Impairment charge (see Note 19) -- -- 10,000
------------------------------------------
Operating income 36,948 52,393 38,379
------------------------------------------
Other expenses (income):
Interest expense, net of amounts capitalized of $453,
$388, and $1,148 in 1996, 1997, and 1998, respectively 7,866 14,433 15,254
Other, net 1,178 (14) 2,155
------------------------------------------
9,044 14,419 17,409
------------------------------------------
Income before provision for income taxes 27,904 37,974 20,970
Provision for income taxes 11,162 14,810 8,178
------------------------------------------
Net income $ 16,742 $ 23,164 $ 12,792
==========================================
Earnings per average common share - basic $ .95 $ 1.31 $ .72
==========================================
Weighted average common shares outstanding - basic 17,693,974 17,733,157 17,838,354
==========================================
Earnings per average common share - diluted $ .94 $ 1.29 $ .71
==========================================
Weighted average common shares outstanding - diluted 17,865,828 17,917,609 18,042,346
==========================================
</TABLE>
See notes to consolidated financial statements.
37
<PAGE>
CITATION CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
for the years ended September 29, 1996, September 28, 1997 and September 27,
1998
(In Thousands, Except Share Data)
<TABLE>
<CAPTION>
Number Additional
of Par Paid-In Retained
Shares Value Capital Earnings Total
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, October 1, 1995 17,675,540 $177 $106,986 $25,313 $132,476
Issuance of common stock under
Incentive Award Plan 40,000 320 320
Subscriptions under employee stock
purchase plan (219) (219)
Net income 16,742 16,742
----------------------------------------------------------------
Balance, September 29, 1996 17,715,540 177 107,087 42,055 149,319
Issuance of common stock under
Incentive Award Plan 59,310 1 498 499
Purchase of common stock for
constructive retirement (15,250) (255) (255)
Subscriptions under employee stock
purchase plan (88) (88)
Net income 23,164 23,164
----------------------------------------------------------------
Balance, September 28, 1997 17,759,600 178 107,242 65,219 172,639
Issuance of common stock under
Incentive Award Plan 157,552 1 1,418 1,419
Purchase of common stock for
constructive retirement (28,039) (568) (568)
Subscriptions under employee stock
purchase plan (248) (248)
Net income 12,792 12,792
----------------------------------------------------------------
Balance, September 27, 1998 17,889,113 $179 $107,844 $78,011 $186,034
================================================================
</TABLE>
See notes to consolidated financial statements.
38
<PAGE>
CITATION CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the years ended September 29, 1996, September 28, 1997 and September 27,
1998
(In Thousands)
<TABLE>
<CAPTION>
September 29, September 28, September 27,
1996 1997 1998
-------------- -------------- --------------
Cash flows from operating activities:
<S> <C> <C> <C>
Net income $ 16,742 $ 23,164 $ 12,792
Adjustments to reconcile net income to net cash provided
by operating activities:
Provision for losses on receivables 584 64 1,249
Provision for loss on sale of Penn Steel 1,807 -- --
Impairment charge -- -- 10,000
Depreciation expense 17,080 26,539 31,649
Amortization expense 3,071 3,950 4,626
Deferred income taxes, net 3,444 3,045 1,422
Loss (gain) on sale of property, plant, and equipment (38) (116) 114
Changes in operating assets and liabilities, net:
Accounts receivable - trade (7,294) (3,729) (1,605)
Inventories (3,138) (1,175) (1,377)
Prepaid expenses and other assets (2,135) 1,519 (842)
Income tax receivable (3,166) 3,655 (3,836)
Income tax payable 3,520 (2,745)
Accounts payable 198 3,828 (1,126)
Accrued expenses and other liabilities (5,374) 4,159 (4,424)
----------------------------------------------
Net cash provided by operating activities 21,781 68,423 45,897
----------------------------------------------
Cash flows from investing activities:
Property, plant, and equipment expenditures (31,166) (40,531) (47,679)
Proceeds from sale of property, plant, and equipment 258 371 463
Cash paid for acquisitions (36,130) (51,089) (55,943)
Investment in joint venture (1,441)
Proceeds from sale of Penn Steel 9,006
Other nonoperating assets, net (593) 250 (12)
----------------------------------------------
Net cash used in investing activities (67,631) (81,993) (104,612)
----------------------------------------------
Cash flows from financing activities:
Cash overdraft 8,328 (3,890) 1,093
Issuance of capital stock 101 411 1,171
Purchase of common stock for constructive retirement (255) (568)
Other long-term debt, net (6,652) (3,029) (2,992)
Debt financing costs (227) (287) (291)
Repayment of acquired debt (33,662) (16,340) (2,621)
Credit facility, net change 70,417 37,338 62,600
----------------------------------------------
Net cash provided by financing activities 38,305 13,948 58,392
----------------------------------------------
Net increase (decrease) in cash and cash equivalents (7,545) 378 (323)
Cash and cash equivalents, beginning of year 9,812 2,267 2,645
----------------------------------------------
Cash and cash equivalents, end of year $ 2,267 $ 2,645 $ 2,322
==============================================
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 8,434 $ 13,932 $ 16,672
==============================================
Income taxes, net of refunds received $ 10,797 $ 3,431 $ 13,233
==============================================
</TABLE>
See Notes 17, 18, and 19 for additional supplemental disclosures of cash flow
information.
See notes to consolidated financial statements.
39
<PAGE>
CITATION CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands, Except Share and Per Share Data)
1. ORGANIZATION AND OPERATIONS
Citation Corporation and subsidiaries (the Company) is a manufacturer of
cast, forged, and machined components for the capital goods and durable
goods industries. At its 19 operating divisions, the Company produces
aluminum, iron and steel castings, steel forgings, and machined and
assembled components for automobiles, light, medium and heavy trucks, off-
highway construction equipment, agricultural equipment, pumps, compressors
and industrial valves, and other durable goods. The Company owns and
operates businesses in Alabama, California, Illinois, Indiana, New York,
North Carolina, Ohio, Tennessee, Texas, and Wisconsin which function as
separate divisions or subsidiaries. References herein to Alabama Ductile
Casting Company (ADCC), Berlin Foundry Corporation (Berlin), Bohn Aluminum
Corporation (Bohn), Camden Casting Center (Camden), Castwell Products
(Castwell), Citation Foam Casting Company (CFCC), Citation Precision, Inc.
(Citation Precision), Dycast, Inc. (Dycast), Foundry Service Company (FSC),
Hi-Tech, Inc. (Hi-Tech), Interstate Forging Industries, Inc (Interstate),
Iroquois Foundry Corporation (Iroquois), Mabry Foundry (Mabry), Mansfield
Foundry Corporation (Mansfield), Oberdorfer Industries (Oberdorfer),
Pennsylvania Steel Foundry and Machine Company, Inc. (Penn Steel), Southern
Ductile Casting Company (SDCC), Southern Aluminum Castings Company (SACC),
Texas Foundries, and Texas Steel Company (Texas Steel) refer to operations
of these divisions or subsidiaries. The Company also has a wholly owned
subsidiary, Citation Automotive Sales Corp. (CAS), which operates a sales
and engineering office in Detroit, Michigan. As discussed in Note 18, Penn
Steel was sold by the Company on October 31, 1996.
The consolidated financial statements and notes to consolidated financial
statements include the accounts of Citation Corporation and its divisions
and wholly-owned subsidiaries, as well as its 50% interest in a Mexican
joint venture discussed in Note 14. All significant intercompany balances
and transactions have been eliminated.
The Company sells castings and forgings to customers in various industries
and geographic regions of the U.S. To reduce credit risk, the Company
performs ongoing credit evaluations of its customers' financial condition
and does not generally require collateral. Significant volumes of sales to
customers in specific industries during fiscal years 1996, 1997, and 1998
were as follows:
40
<PAGE>
<TABLE>
<CAPTION>
1996 1997 1998
<S> <C> <C> <C>
Automotive/light truck 30% 35% 40%
Medium/heavy truck 19% 15% 10%
Construction equipment 7% 11% 9%
---- ---- ----
56% 61% 59%
==== ==== ====
</TABLE>
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Fiscal Year - The Company operates on a fifty two/fifty-three week fiscal
year which ends on the Sunday nearest to September 30. Fiscal years 1996,
1997, and 1998 each consisted of fifty-two weeks.
Revenue Recognition - The Company records sales upon shipment of the
related products, net of any discounts.
Cash Equivalents - The Company considers all highly liquid debt instruments
purchased with an original maturity of three months or less at the date of
purchase to be cash equivalents.
Cash Overdraft - In conjunction with the credit facility discussed in Note
6, the Company entered into a consolidated cash management system with the
administrative agent and lead bank of the credit facility. As a result of
maintaining this consolidated cash management system, the Company maintains
a zero balance at the lead bank, resulting in book cash overdrafts. Such
overdrafts are included in current liabilities.
Inventories - Raw materials inventories are stated at the lower of cost
(principally first-in, first-out basis) or market. Supplies and containers
inventories are stated primarily at the lower of cost (principally average
cost) or market. Castings and forgings inventories are stated primarily at
the lower of cost (determined principally at standard cost or under the
retail method) or market.
Property, Plant, and Equipment - Property, plant and equipment are carried
at cost, less accumulated depreciation, and include expenditures that
substantially increase the useful lives of existing assets. Maintenance,
repairs, and minor renovations are charged to expense as incurred. Upon
sale, retirement, or other disposition of these assets, the cost and
related accumulated depreciation are removed from the respective accounts,
and any gain or loss on the disposition is included in income.
41
<PAGE>
The Company provides for depreciation of property, plant, and equipment
using primarily the straight-line method designed to depreciate costs over
estimated useful lives as shown below:
<TABLE>
<CAPTION>
Estimated Useful Life
---------------------
<S> <C>
Buildings 10 - 50 years
Plant equipment 3 - 20 years
Office equipment 2 - 12 years
Transportation equipment 3 - 7 years
</TABLE>
Property, plant, and equipment acquired under capital lease agreements are
carried at cost less accumulated depreciation. These assets are
depreciated in a manner consistent with the Company's depreciation policy
for purchased assets.
Intangible Assets - Goodwill, the excess of purchase price over the fair
value of net assets acquired in purchase transactions, is being amortized
on a straight-line basis primarily over 20 years but with various
amortization periods ranging from 18 to 36 years. The Company assesses the
recoverability and the amortization period of the goodwill by determining
whether the amount can be recovered through undiscounted net cash flows of
the businesses acquired over the remaining amortization period. Amounts
paid or accrued for noncompetition and consulting agreements are amortized
using the straight-line method over the term of the agreements. Bond and
other financing expenses are amortized to interest expense using the
straight-line method, which approximates the effective interest method,
over the term of the related debt issues.
Long-Lived Assets - In accordance with Statement of Financial Accounting
Standards (SFAS) No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of," the Company recognizes
impairment losses on long-lived assets used in operations when indicators
of impairment are present and the undiscounted cash flows estimated to be
generated by those assets are less than the assets' carrying amounts.
During fiscal year 1998, the Company recognized such a loss related to the
write down of certain assets of its Oberdorfer division in Syracuse, New
York (see Note 19). There were no such losses recognized during fiscal
years 1996 or 1997.
Derivative Financial Instruments - The Company enters into interest rate
swap agreements to limit the effect of changes in the interest rates on
floating debt. The differential is accrued as interest rates change and is
recognized over the life of the swap agreements as adjustments to interest
expense.
Investment in Joint Venture - The Company's investment in joint venture
discussed in Note 14 is accounted for under the equity method and is
included in other assets in the consolidated balance sheet.
42
<PAGE>
Accounting for Income Taxes - The Company accounts for income taxes in
accordance with SFAS No. 109, "Accounting for Income Taxes." Under SFAS
No. 109, deferred income taxes are recognized for the tax consequences in
future years of differences between the tax bases of assets and liabilities
and their financial reporting amounts at each year end. The amounts
recognized are based on enacted tax laws and statutory tax rates applicable
to the period in which the differences are expected to affect taxable
income. Valuation allowances are established when necessary to reduce
deferred tax assets to the amounts expected to be realized. Income tax
expense is the tax payable for the period and the change during the period
in deferred tax assets and liabilities.
Earnings Per Share - Earnings per common share and earnings per common
share assuming dilution are computed in compliance with SFAS No. 128,
"Earnings Per Share," which the Company adopted during fiscal year 1998.
This statement simplified the standards for computing earnings per share
previously found in APB Opinion No. 15, "Earnings per Share," making them
comparable to international earnings per share standards. Generally, SFAS
No. 128 requires a calculation of basic and diluted earnings per share.
The calculation of basic earnings per share only takes into consideration
income (loss) available to common shareholders and the weighted average of
shares outstanding during the period while diluted earnings per share takes
into effect the impact of all additional common shares that would have been
outstanding if all potential common shares related to options, warrants,
and convertible securities had been issued, as long as their effect is
dilutive. The earnings per share information for fiscal years 1996 and
1997 has been restated to comply with the requirement of SFAS No. 128.
SFAS No. 128 requires dual presentation of basic and diluted earnings per
share on the face of the statement of income as well as a reconciliation of
the numerator and denominator of the basic calculation to the diluted
calculation (see Note 10).
Use of Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenue and
expenses during the reporting period. Actual results could differ from
those estimates.
Recently Issued Accounting Standards - In June 1997, the Financial
Accounting Standards Board (FASB) issued SFAS No. 130, "Reporting
Comprehensive Income." SFAS No. 130 establishes reporting and display
requirements with respect to comprehensive income and its components. This
statement requires that all items that are required to be recognized under
accounting standards as components of comprehensive income be reported in a
financial statement that is displayed with the same prominence as other
financial statements. This statement requires that an enterprise (a)
classify items of other comprehensive income by their nature in a financial
statement and (b) display the accumulated balance of other comprehensive
income separately from retained earnings and additional paid-in capital in
the equity section of the balance sheet. This statement is
43
<PAGE>
effective for fiscal years beginning after December 15, 1997 and will
require reclassification of financial statements for prior periods for
comparative purposes. The Company does not expect the adoption of SFAS No.
130 to have a material effect, if any, on its consolidated financial
position, results of operations, or cash flows.
In June 1997, FASB issued SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information." SFAS No. 131 establishes standards
for the way that public business enterprises report information about
operating segments in annual financial statements and requires that those
enterprises report selected information about operating segments in interim
financial reports issued to shareholders. It also establishes standards
for related disclosures about products and services, geographic areas and
major customers. SFAS No. 131 is effective for financial statements for
fiscal years beginning after December 15, 1997. The adoption of SFAS No.
131 will have no impact on the Company's consolidated results of
operations, financial position, or cash flows.
In February 1998, FASB issued SFAS No. 132, "Employers' Disclosures about
Pensions and Other Postretirement Benefits." SFAS No. 132 revises
employers' disclosures about pension and other postretirement benefit
plans. It also standardizes the disclosure requirements for pensions and
other postretirement benefits, requires additional information on changes
in the benefit obligations and fair values of plan assets that will
facilitate financial analysis, and eliminates certain disclosures that no
longer are useful. SFAS No. 132 is effective for financial statements for
fiscal years beginning after December 15, 1997. The adoption of SFAS No.
132 will have no impact on the Company's consolidated results of
operations, financial position, or cash flows.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS 133 requires all derivatives to
be measured at fair value and recognized as either assets or liabilities on
the balance sheet. Changes in such fair value are required to be
recognized immediately in net income (loss) to the extent the derivatives
are not effective as hedges. SFAS No. 133 is effective for fiscal years
beginning after June 15, 1999 and is effective for interim periods in the
initial year of adoption. At the present time, the Company has not yet
determined the financial statement impact of the adoption of SFAS No. 133.
44
<PAGE>
3. INVENTORIES
A summary of inventories is as follows:
<TABLE>
<CAPTION>
September 28, September 27,
1997 1998
------------- -------------
<S> <C> <C>
Raw materials $10,981 $10,210
Supplies and containers 12,478 14,052
Castings and forgings 25,494 32,091
------- -------
$48,953 $56,353
======= =======
</TABLE>
4. PROPERTY, PLANT, AND EQUIPMENT
Balances of major classes of assets and accumulated depreciation are as
follows:
<TABLE>
<CAPTION>
September 28, September 27,
1997 1998
-------------- --------------
<S> <C> <C>
Land and improvements $ 11,096 $ 12,454
Buildings 50,217 59,509
Plant equipment 267,607 319,092
Office equipment 11,797 14,258
Transportation equipment 10,527 12,753
Construction in progress 23,149 9,923
-------- ---------
374,393 427,989
Less accumulated depreciation (91,402) (120,981)
-------- ---------
$282,991 $ 307,008
======== =========
</TABLE>
5. INTANGIBLE ASSETS
The Company's intangible assets, net of accumulated amortization, consist
of the following:
<TABLE>
<CAPTION>
September 28, September 27,
1997 1998
------------- -------------
<S> <C> <C>
Goodwill $46,161 $73,973
Consulting and non-competition agreements 1,178 579
Other 34 43
------- -------
$47,373 $74,595
======= =======
</TABLE>
45
<PAGE>
The future annual amount of amortization expense related to the Company's
intangible assets as of September 27, 1998 is as follows for fiscal years:
<TABLE>
<S> <C>
1999 $ 4,514
2000 4,390
2001 4,222
2002 4,164
2003 4,161
Thereafter 53,144
-------
$74,595
=======
</TABLE>
6. LONG-TERM DEBT
Long-term debt consists of the
following:
<TABLE>
<CAPTION>
September 28, September 27,
1997 1998
------------- -------------
<S> <C> <C>
Credit facility $170,393 $232,993
Other long-term debt 13,840 10,848
-------- --------
184,233 243,841
Less current portion of long-term debt 2,994 6,316
-------- --------
$181,239 $237,525
======== ========
</TABLE>
The Company has a $300,000 revolving credit facility with a consortium of
banks, led by the First National Bank of Chicago-NBD (First Chicago-NBD) to
be used for working capital purposes and to fund future acquisitions. The
facility consists of a swing line of credit of up to $15,000 bearing
interest at prime and revolving credit borrowings which bear interest at
LIBOR plus .625% to LIBOR plus 1.50% based upon the Company's ratio of debt
to its cash flow, measured by earnings before interest and taxes plus
depreciation and amortization (EBITDA). At September 28, 1997 and
September 27, 1998, the Company was able to borrow at LIBOR plus 1%. The
facility calls for an unused commitment fee payable quarterly, in arrears,
at a rate of .20% to .375% based upon the Company's ratio of debt to
EBITDA. At September 28, 1997 and September 27, 1998, the Company's unused
commitment fee rate was .25%. The facility is collateralized by the stock
of the Company's subsidiaries and expires on October 15, 2001. At
September 28, 1997 and September 27, 1998, the total outstanding balance
under this credit facility was $170,393 and $232,993, respectively, and
$129,607 and $67,007, respectively, was available for borrowing.
As of September 28, 1997, the Company had $5,393 outstanding under the
swing line of credit at the prime rate of 8.5%. The remaining $165,000
outstanding under this facility at September 28, 1997 related to five
revolving loans. The Company had $8,000 and
46
<PAGE>
$77,000 outstanding under these loans at interest rates of 6.66% and 6.85%,
respectively, which repriced on October 27, 1997 and January 27, 1998,
respectively. The remaining $80,000 outstanding under this facility
consists of one $40,000 and two $20,000 five-year interest rate swap
agreements that were entered into during fiscal year 1996. These agreements
are repriced every 90 days and expire between August 2001 and February
2002. The Company's fixed interest rates were 7.91% and 8.09% on the two
$20,000 swap agreements and 7.85% on the $40,000 swap agreement at
September 28, 1997.
As of September 27, 1998, the Company had $2,993 outstanding under the
swing line of credit at the prime rate of 8.5%. The remaining $230,000
outstanding under this facility related to four revolving loans. At
September 27, 1998, the Company had one loan at $150,000 at an interest
rate of 6.60%, which repriced on October 14, 1998, November 12, 1998, and
December 10, 1998 at interest rates of 6.42%, 6.30% and 6.13%,
respectively. This loan will reprice again on June 10, 1999. The
remaining $80,000 outstanding under this facility at September 27, 1998
consists of one $40,000 and two $20,000 five-year interest rate swap
agreements that were entered into during fiscal year 1996. These
agreements have fixed interest rates plus a margin of .625% to 1.50%, based
on the Company's leverage ratio on the date the agreements are repriced.
The Company's fixed interest rates, including margins, were 7.91% and 8.09%
on the two $20,000 swap agreements and 7.85% on the $40,000 swap agreement
at September 27, 1998. The Company is exposed to credit risk in the event
of nonperformance by the counterparty to the interest rate swap agreements.
The Company mitigates credit risk by dealing with only financially sound
banks. Accordingly, the Company does not anticipate loss for nonperformance
by these counterparties.
On November 3, 1998, the Company's credit facility was increased from
$300,000 to $400,000, which is to be used for working capital purposes and
to fund future acquisitions.
The Company's credit facility contains certain restrictive covenants that
require the maintenance of a funded debt to EBITDA ratio; a specified fixed
charge coverage ratio; place a minimum level of stockholders' equity;
place limitations on capital expenditures, and place limitations on
dividends and other borrowings. The credit facility also has a covenant
prohibiting a change in control in excess of 30% of the Company's
outstanding stock other than by the Company's current majority shareholder.
As discussed in Note 21, subsequent to fiscal year 1998, Drummond
Corporation (Drummond) entered into an agreement to acquire stock from a
director of the Company and also acquired a 120-day option to purchase
stock from the majority shareholder of the Company which, if both the stock
purchase is consummated and the option is exercised, Drummond would
subsequently hold a 29.8% ownership interest in the outstanding stock of
the Company (before considering the effect of the Shareholder Rights Plan
discussed in Note 21).
47
<PAGE>
Other long-term debt is as follows:
<TABLE>
<CAPTION>
September 28, September 27,
1997 1998
------------- -------------
<S> <C> <C>
Notes payable for the purchase of Mabry, guaranteed by the Company's
majority stockholder, requiring quarterly payments of $18 each, including
principal and interest at 8% through April 1998, at which time the rate
will be determined annually based on rates charged by banks to large
corporations until final payment in May 2003 $ 669 $ 573
Notes payable for the purchase of Berlin requiring quarterly payments of
$167 through August 1, 1998, including interest at 8% 500
Note payable for the purchase of Castwell requiring quarterly payments
of approximately $273 through October 1, 2001 4,364 3,271
Bank note bearing interest at 7.63%, payable in quarterly installments of
$200, plus interest, with a final installment due March 31, 1999 5,400 4,743
Note payable to Small Business Administration, bearing interest at 9.23%,
payable in monthly payments of interest and principal through July 2011 630 610
Note payable to Small Business Administration, bearing interest at
6.625%, payable in monthly payments of interest and principal through
September 2006, and collateralized by equipment with no remaining net
book value 226 213
Miscellaneous capital lease obligations for equipment, requiring monthly
payments ranging from $1 to $7, including principal and interest at rates
ranging from 8.25% to 12.1% and maturing at dates ranging from 1998
through 2002 664 389
Various industrial development bonds, bearing interest at fixed rates of
5.75% and 8.25% and a variable rate of 80% of prime (6.76% at
September 28, 1997 and September 27, 1998), requiring monthly
payments of principal and interest ranging from $5 to $12 through 2003,
and collateralized by property, plant, and equipment having a net book
value of $7,400 and $4,888 at September 28, 1997 and September 27,
1998, respectively 900 724
Various other notes, requiring monthly payments ranging from $1 to $50
including principal and interest at rates ranging from 9.25% to 14.5% and
maturing at dates ranging from 1998 through 2001 487 325
------- -------
$13,840 $10,848
======= =======
</TABLE>
Aggregate maturities on long-term debt at September 27, 1998 are as follows
for fiscal years:
<TABLE>
<S> <C>
1999 $ 6,316
2000 1,801
2001 234,503
2002 362
2003 196
Thereafter 663
--------
$243,841
========
</TABLE>
48
<PAGE>
During the fiscal year 1998, the Company incurred $1,610 in costs
associated with a terminated subordinated debt offering (which included a
loss of approximately $1,030 on a treasury lock transaction which was
intended to hedge against interest rate exposure on the offering). Such
costs have been included in other expenses in the consolidated statement of
income. The Company withdrew the offering because of market conditions.
7. COMMON STOCK PLANS
The Company's Incentive Award Plan (the Award Plan) provides for the grant
of incentive stock options, non-qualified stock options, stock appreciation
rights, and restricted stock or a combination thereof, as determined by the
Compensation Committee of the Board of Directors at the time of grant, to
officers and certain employees. Under the Award Plan, 1,750,000 shares of
the Company's common stock have been reserved for issuance. Options granted
under the Award Plan provide for the purchase of the Company's common stock
at not less than the fair market value on the date the option is granted.
In conjunction with the Company's initial public offering, options for
538,000 shares of common stock were granted at prices ranging from $8.00 to
$8.80 per share. The options expire on August 2, 1999, and portions of the
options granted became exercisable at varying times from December 1, 1994
through fiscal year 1998. Options subsequently granted generally become
exercisable over periods ranging from six months to four years and have
terms of five to ten years. The Company also issued 43,500 restricted
shares under the Award Plan during fiscal year 1997 in connection with the
acquisition of Interstate.
On February 23, 1995, the shareholders approved the Non-Qualified Stock
Option Plan for Non-Employee Directors (Non-Employee Directors Stock Option
Plan) which provides for the grant of stock options to the non-employee
directors of the Company. Under this plan, 100,000 shares of the Company's
common stock have been reserved for issuance. Options granted under this
plan provide for the purchase of the Company's common stock at not less
than the fair market value on the date the option is granted. The options
issued under this plan are exercisable six months after the date of grant
and expire five years after the date of grant. As of September 28, 1997 and
September 27, 1998, options for 50,000 shares of the Company's stock have
been issued under this plan and 50,000 shares are available for grant. All
of the 50,000 options issued to date were granted at $15.25 per share,
became exercisable in January 1996, and expire in June 2000. None of these
options have been exercised as of September 27, 1998. Transactions under
both plans are summarized as follows:
49
<PAGE>
<TABLE>
<CAPTION>
Weighted
Number Range of Average
of Options Exercise Prices Exercise Price
------------------------------------------------
<S> <C> <C> <C>
Options outstanding, October 1, 1995 605,500 $ 8.00 - $16.06 $10.07
Granted 100,000 $ 12.06 $12.06
Exercised (40,000) $ 8.00 $ 8.00
------------------------------------------------
Options outstanding, September 29, 1996 665,500 $ 8.00 - $16.06 $10.49
Granted 34,000 $14.44 - $14.88 $14.57
Exercised (59,310) $ 8.00 - $16.06 $ 8.41
Canceled (20,000) $ 16.06 $16.06
------------------------------------------------
Options outstanding, September 28, 1997 620,190 $ 8.00 - $16.06 $11.00
Granted 252,000 $16.13 - $19.44 $17.66
Exercised (157,552) $ 8.00 - $16.06 $ 9.01
------------------------------------------------
Options outstanding, September 27, 1998 714,638 $ 8.00 - $19.44 $13.56
================================================
</TABLE>
The following table summarizes information about options exercisable as of
the end of the following years:
<TABLE>
<CAPTION>
September 29, September 28, September 27,
1996 1997 1998
---------------------------------------------------
<S> <C> <C> <C>
Option exercisable 495,500 610,190 462,638
Weighted-average exercise
price of options exercisable $ 10.19 $ 10.67 $ 11.33
</TABLE>
The following table summarizes information about options outstanding at
September 27, 1998:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
- -------------------------------------------------------- ------------------------------
Weighted
Number Average Number
Outstanding Remaining Exercisable
Exercise September 27, Contractual September 27, Exercise
Price 1998 Life 1998 Price
- -------------------------------------------------------- ------------------------------
<S> <C> <C> <C> <C>
$8.00 162,638 .86 162,638 $ 8.00
$8.80 50,000 .86 50,000 $ 8.80
$13.38 10,000 .95 10,000 $13.38
$15.25 50,000 1.77 50,000 $15.25
$16.06 57,000 1.82 57,000 $16.06
$12.06 100,000 2.93 100,000 $12.06
</TABLE>
50
<PAGE>
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
- -------------------------------------------------------- ------------------------------
Weighted
Number Average Number
Outstanding Remaining Exercisable
Exercise September 27, Contractual September 27, Exercise
Price 1998 Life 1998 Price
- -------------------------------------------------------- ------------------------------
<S> <C> <C> <C> <C>
$14.44 23,000 3.54 23,000 $14.44
$14.88 10,000 3.70 10,000 $14.88
$17.33 200,000 9.34
$16.13 2,000 9.37
$19.44 25,000 9.53
$18.66 25,000 9.82
-------- -------
714,638 462,638
======== =======
</TABLE>
The Company applies Accounting Principles Board Opinion No. 25 and related
Interpretations in accounting for its stock option plans. Accordingly, no
compensation expense has been recognized for its stock option plans. Had
compensation expense for the Company's stock option plans been determined
based on the fair value at the grant dates for awards under those plans
consistent with the method of SFAS No. 123, the Company's net income and
earnings per share would have been reduced to the pro forma amounts
indicated below:
<TABLE>
<CAPTION>
September 29, September 28, September 27,
1996 1997 1998
-----------------------------------------------
<S> <C> <C> <C>
Net income:
As reported $16,742 $23,164 $12,792
Pro forma $16,301 $22,989 $11,634
Net income per share - basic:
As reported $ .95 $ 1.31 $ .72
Pro forma $ .92 $ 1.30 $ .65
Net income per share - diluted
As reported $ .94 $ 1.29 $ .71
Pro forma $ .91 $ 1.28 $ .65
</TABLE>
The pro forma amounts reflected above are not representative of the effects
on reported net income in future years because, in general, the options
granted have different vesting periods and additional awards are made each
year.
51
<PAGE>
The Company elected to use the Black-Scholes pricing model to calculate the
fair values of the options awarded, which are included in the pro forma
results above. The following weighted average assumptions were used to
derive the fair values:
<TABLE>
<CAPTION>
September 29, September 28, September 27,
1996 1997 1998
------------------------------------------------------
<S> <C> <C> <C>
Dividend yield 0% 0% 0%
Expected life (years) 3 3 5
Expected volatility 44.2% 41.9% 39.40%
Risk-free interest rate (range) 6.32% 6.27% - 6.56% 5.67% - 6.56%
</TABLE>
The Company also has an Employee Stock Purchase Plan (Stock Purchase Plan)
that allows eligible employees to purchase, through payroll deductions,
shares of the Company's common stock at specified dates at not less than
85% of the fair market value of the stock as of the offering date. All
active employees are eligible to participate. Shares of common stock under
the Stock Purchase Plan are to be purchased in the open market or issued
from treasury stock. The maximum number of shares currently available under
the Stock Purchase Plan is 250,000 shares. Subscriptions were outstanding
for approximately 75,000 shares of common stock at $13.50 per share at
September 28, 1997 and subscriptions for approximately 160,000 shares of
common stock at $9.97 per share were outstanding at September 27, 1998.
On December 15, 1994, the Board of Directors approved the Stock Plan for
Non-Employee Directors (Directors Stock Plan) to enable its non-employee
directors to have all or part of their directors' fees used to purchase
shares of the Company's common stock. As of September 28, 1997 and
September 27, 1998, approximately 9,700 and 13,500 shares, respectively,
have been purchased under this plan.
8. PREFERRED STOCK
The Company has 5,000,000 shares of preferred stock authorized for
issuance. The preferences, powers, and rights of the preferred stock are to
be determined by the Company's Board of Directors. None of these shares had
been issued or were outstanding as of September 27, 1998 (see Note 21).
52
<PAGE>
9. INCOME TAXES
The components of the provision (benefit) for income taxes consist of the
following:
<TABLE>
<CAPTION>
September 29, September 28, September 27,
1996 1997 1998
----------------------------------------------
<S> <C> <C> <C>
Current income tax expense:
Federal $ 6,192 $10,355 $ 6,424
State 1,526 1,410 1,180
----------------------------------------------
7,718 11,765 7,604
----------------------------------------------
Deferred income tax expense (benefit):
Federal 3,054 2,511 1,155
State 390 (384) (2,718)
----------------------------------------------
3,444 2,127 (1,563)
----------------------------------------------
Valuation allowance 918 2,137
----------------------------------------------
Total provision for income taxes $11,162 $14,810 $ 8,178
==============================================
</TABLE>
Deferred tax assets and liabilities are comprised of the following:
<TABLE>
<CAPTION>
September 28, September 27,
1997 1998
------------------------------
<S> <C> <C>
Current:
Allowance for doubtful accounts and returns $ 861 $ 1,487
Accrued insurance liabilities 2,417 4,450
Other accrued liabilities 5,151 3,814
------------------------------
Net current deferred tax asset $ 8,429 $ 9,751
==============================
Long-term:
Basis differences of property, plant, and equipment $36,807 $39,492
Other, net 1,196 (3,165)
Valuation allowance 918 3,055
------------------------------
Net long-term deferred tax liability $38,921 $39,382
==============================
</TABLE>
Realization of deferred tax assets associated with certain state net
operating loss (NOL) carryforwards is dependent upon the related subsidiary
generating sufficient income prior to their expiration. Management believes
that there is a risk that certain of the NOL carryforwards may expire
unused and, accordingly, has established a valuation allowance against them
of $918 and $3,055 as of September 28, 1997 and September 27, 1998,
respectively.
The Company has NOLs for state income tax reporting purposes of $36,600
available for years beginning after September 27, 1998. These NOLs have
expiration dates through fiscal year 2013.
53
<PAGE>
Total provision for income taxes differs from the amount which would be
provided by applying the statutory federal income tax rate to pretax
earnings as indicated below:
<TABLE>
<CAPTION>
September 29, September 28, September 27,
1996 1997 1998
-----------------------------------------------
<S> <C> <C> <C>
Provision for income taxes at statutory
federal income tax rate $ 9,766 $13,291 $ 7,340
Increase (decrease) resulting from:
Nondeductible amortization 91 157 612
Nondeductible meals and entertainment
expenses 133 190 213
State income taxes 1,245 677 (1,796)
Valuation allowance 918 2,137
Other, net (73) (423) (328)
-----------------------------------------------
Total provision for income taxes $11,162 $14,810 $ 8,178
===============================================
</TABLE>
10. EARNINGS PER SHARE
A summary of the calculation of basic and diluted earnings per share (EPS)
for fiscal years 1996, 1997, and 1998 is as follows:
<TABLE>
<CAPTION>
Income Shares Per Share
(Numerator) (Denominator) Amount
-------------------------------------
<S> <C> <C> <C>
For fiscal year 1996:
EPS - basic:
Income available to common stockholders $16,742 17,693,974 $0.95
=========
Effect of dilutive common shares:
Weighted average stock options outstanding 599,538
Less:
Weighted average stock options - assumed buyback (278,684)
Weighted average stock options - antidilutive (149,000)
--------------------------
EPS - dilutive $16,742 17,865,828 $0.94
=====================================
For fiscal year 1997:
EPS - basic:
Income available to common stockholders $23,164 17,733,157 $1.31
=========
Effect of dilutive common shares:
Weighted average stock options outstanding 650,549
Less:
Weighted average stock options - assumed buyback (310,600)
Weighted average stock options - antidilutive (155,497)
--------------------------
EPS - dilutive $23,164 17,917,609 $1.29
=====================================
</TABLE>
54
<PAGE>
<TABLE>
<CAPTION>
Income Shares Per Share
(Numerator) (Denominator) Amount
-------------------------------------
<S> <C> <C> <C>
For fiscal year 1998:
EPS - basic:
Income available to common stockholders $12,792 17,838,354 $0.72
=========
Effect of dilutive common shares:
Weighted average stock options outstanding 710,187
Less:
Weighted average stock options - assumed buyback (482,912)
Weighted average stock options - antidilutive (23,283)
--------------------------
EPS - dilutive $12,792 18,042,346 $0.71
=====================================
</TABLE>
The number of stock options assumed to have been bought back by the Company
for computational purposes has been calculated by dividing gross proceeds
from all weighted average stock options outstanding during the period, as
if exercised, by the average common share market price during the period.
The average common share market prices used in the above calculations were
$13.45, $14.36, and $17.85 for the fiscal years ended 1996, 1997, and
1998,respectively.
Stock options to purchase shares of common stock at prices greater than the
average market price of the common shares during that period are considered
antidilutive. The following options were outstanding during the respective
fiscal year, but were not included in the computation of that year's
diluted EPS because the options' exercise price was greater than the
average market price of the common shares in the respective fiscal year.
<TABLE>
<CAPTION>
1996 1997 1998
- ---------------------------------------------------------------------------------------------
Exercise Exercise Exercise
Options Price Expiration Options Price Expiration Options Price Expiration
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
50,000 $15.25 6/25/00 24,000 $14.44 3/23/02 25,000 $18.66 6/1/08
99,000 $16.06 7/11/00 10,000 $14.88 5/21/02 25,000 $19.44 2/16/08
50,000 $15.25 6/25/00
76,000 $16.06 7/11/00
</TABLE>
11. DEFINED BENEFIT PLANS
Berlin's employees are covered by a defined benefit pension plan sponsored
by the union which represents the employees. Minimum contributions are
determined in accordance with provisions of the negotiated labor contract,
but the Company's funding policy is to contribute amounts which are
actuarially determined to provide the plan with sufficient assets to meet
future benefit payment requirements consistent with the funding
requirements of federal laws and regulations.
55
<PAGE>
Bohn maintains a defined benefit pension plan covering employees subject to
a collective bargaining agreement. Benefits under the plan accrued at a
rate of $14.50 per month per year of credited service during 1996, 1997,
and 1998.
Camden maintains a defined benefit pension plan covering employees subject
to a collective bargaining agreement. Benefits under the plan accrued at a
rate of $15.00 per month per year of credited service during 1998.
Interstate sponsors two defined benefit pension plans covering Milwaukee
union employees. Pursuant to its collective bargaining agreements,
Interstate amended these defined benefit plans in 1990 and 1991 to cease
future benefit accruals and to freeze the current benefit rates.
Oberdorfer maintains a defined benefit pension plan covering employees
subject to a collective bargaining agreement. Benefits under the plan
accrued at a rate of $16 per month per year of service during 1996 and 1997
and $19 per month per year of service during 1998.
SDCC has two defined benefit pension plans for employees covered by
collective bargaining agreements. The plans provide pension benefits equal
to a multiple of years of continuous service before age 65. The Company's
policy is to make annual contributions to the plans based on the maximum
amount allowed as deductible by the Internal Revenue Service.
The components of net pension costs of the plans are as follows:
<TABLE>
<CAPTION>
Assets Exceed Accumulated Benefits Accumulated Benefits Exceed Assets
----------------------------------------------------- ------------------------------------------------
Year Ended Year Ended
----------------------------------------------------- ------------------------------------------------
September 29, September 28, September 27, September 29, September 28, September 27,
1996 1997 1998 1996 1997 1998
----------------------------------------------------- ------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Service cost $ 217 $ 168 $ 202 $ 306 $ 167 $ 411
Interest cost 442 457 854 514 434 526
Return on plan
assets (443) (757) (1,086) (674) (470) (643)
Net amortization
and deferral (27) 256 78 290 73 157
----------------------------------------------------- ------------------------------------------------
Net pension
expense $ 189 $ 124 $ 48 $ 436 $ 204 $ 451
===================================================== ================================================
</TABLE>
56
<PAGE>
The measurement dates for the plans' assets and obligations for fiscal
years 1997 and 1998 are September 30, 1997 and 1998, respectively. The
reconciliation of the funded status of the plans combined is as follows:
<TABLE>
<CAPTION>
Assets Exceed Accumulated Benefits
Accumulated Benefits Exceed Assets
--------------------------------- -----------------------------------
September 28, September 27, September 28, September 27,
1997 1998 1997 1998
--------------------------------- -----------------------------------
<S> <C> <C> <C> <C>
Present value of accumulated plan
benefits:
Vested $6,023 $10,784 $ 6,512 $ 3,861
Nonvested 323 335 399 846
--------------------------------- -----------------------------------
$6,346 $11,119 $ 6,911 $ 4,707
================================= ===================================
Projected benefit obligation $6,346 $11,119 $ 6,911 $ 4,707
Fair value of plan assets 6,788 12,729 5,700 3,399
--------------------------------- -----------------------------------
Fair value of plan assets in excess of
(less than) projected benefit
obligation 442 1,610 (1,211) (1,308)
Unrecognized net loss 242 193 1,071 634
Prior service cost not yet recognized
in net periodic pension cost 286 258 578 799
Unrecognized net assets at date of
initial application (88) (53) (38) (30)
Additional minimum liability (811) (1,403)
--------------------------------- -----------------------------------
Prepaid (accrued) pension cost $ 882 $ 2,008 $ (411) $(1,308)
================================= ===================================
</TABLE>
The settlement (discount) rates used to measure the projected benefit
obligations for all plans ranged primarily from 6.5% to 8.0% for 1997 and
from 5.75% to 8.0% for 1998. The expected long-term rates of return on all
plans' assets ranged from 7.5% to 9.0% for 1997 and from 7.0% to 9.0% for
1998.
ADCC's union employees are covered by a multi-employer defined benefit
pension plan sponsored by the union which represents the employees. The
Company makes contributions to the plan in accordance with the collective
bargaining agreement between the Company and the union. The Company
contributed $63, $59, and $69 to this plan in fiscal years 1996, 1997, and
1998, respectively. The actuarial present value of accumulated plan
benefits at January 1, 1998 (the most recent valuation date) for the multi-
employer union plan as a whole determined through an actuarial valuation
performed as of that date was $112,214. The market value of the union
plan's net assets available for benefits on that date was $171,201.
57
<PAGE>
In addition to those benefits provided by the frozen defined benefit plans
described above, Interstate's union employees are covered by two multi-
employer defined benefit pension plans sponsored by two labor unions which
represent the employees. The Company makes contributions to the plans in
accordance with the collective bargaining agreements between Interstate and
the unions. The Company contributed $133 and $155 to these plans in fiscal
years 1997 and 1998, respectively. The actuarial present values of
accumulated plan benefits at January 1, 1997 (the most recent valuation
date) for the multi-employer union plans in the aggregate determined
through actuarial valuations performed as of that date were $2,646,626 and
$3,794,847. The market values of the union plans' net assets available for
benefits on that date were $4,164,239 and $4,947,984.
12. DEFINED CONTRIBUTION PLANS
The Company maintains separate divisional or subsidiary defined
contribution 401(k) plans covering substantially all employees (other than
those covered by collective bargaining agreements). Company contributions
are based upon a multiple of operating income as a percentage of sales on a
divisional or subsidiary basis. However, the Company will match a minimum
of 20% of the employees' contributions.
In addition, Berlin maintains two 401(k) plans which cover substantially
all salaried employees and all hourly employees subject to a collective
bargaining agreement. The Company matches up to 50% of employee
contributions to the salaried plan, up to 5% of the employees'
compensation. Company matching contributions to the hourly plan are equal
to the amount required by the collective bargaining agreement. Unless
otherwise specified, the Company matching contributions shall equal 10% of
each employee's contribution or, if less, five cents for each hour of
service worked by the employee.
Bohn maintains a 401(k) plan covering substantially all salaried employees.
The Company will match 35% of the first 6% of the employees' contributions.
Additionally, the Company contributes 3% of all salaried employees' annual
compensation to the plan without regard for employee contributions.
Interstate and Dycast maintain 401(k) plans covering all salaried and
hourly employees. Company matching contributions are discretionary.
Mansfield maintains two 401(k) plans which cover its salaried and hourly
employees. Company contributions to the salaried plan are 50% of the first
6% of the employee contribution. Company contributions to the hourly plan
are equal to five cents per regular hour worked by the employee.
SACC maintains a 401(k) plan covering substantially all employees. The
Company match is based on the employees' contributions to the plan during
the year and is limited to 6%
58
<PAGE>
of the total compensation of all participants. The Company may also make a
non-elective contribution which is made at the discretion of the Board of
Directors.
Texas Steel maintains three 401(k) plans which cover its salaried and
hourly employees. Company contributions to the salaried plan are based upon
a multiple of operating income as a percentage of sales. Company
contributions to the two hourly plans are 25% of the first 10% of eligible
wages contributed for one plan and 27% of the first 7% of the eligible
wages contributed for the second plan.
Contribution expense recognized by the Company under the 401(k) plans
totaled $2,068, $3,237 and $3,383 in fiscal years 1996, 1997, and 1998,
respectively.
Subsequent to fiscal year 1998, the Company merged its seventeen non-union
401k plans into one plan.
On August 17, 1995, the Company's Board of Directors approved the
nonqualified deferred compensation plan which allows certain members of
management and highly compensated employees to defer a portion of their
compensation. The deferred compensation, which together with Company
matching amounts and accumulated interest, is distributable in cash after
retirement or termination of employment. The Company recognized expense
related to this plan of $98, $110 and $133 in fiscal years 1996, 1997, and
1998, respectively.
13. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
Interstate provides postretirement benefits other than pensions, including
health care and life insurance, to certain employee groups. Interstate
currently funds the cost of providing these benefits as they are incurred.
Employees governed by collective bargaining agreements receive health
insurance coverage to age 65 if they retire after age 62 and life insurance
coverage, in varying amounts, for the remainder of their lives.
Certain salaried employees receive health care and life insurance benefits
for the remainder of their lives if they retire after age 60.
The net periodic postretirement benefit cost is as follows:
<TABLE>
<CAPTION>
September 28, September 27,
1997 1998
------------------------------
<S> <C> <C>
Service cost $ 90 $ 82
Interest cost 158 169
Amortization of unrecognized gain (8) (18)
Amortization of prior service cost (7)
------------------------------
$ 240 $ 226
==============================
</TABLE>
59
<PAGE>
The measurement dates for the plan's assets and obligations for fiscal
years 1997 and 1998 were July 1, 1997 and 1998, respectively. A
reconciliation of the funded status of the plan is as follows:
<TABLE>
<CAPTION>
September 28, September 27,
1997 1998
-------------------------------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees $ 958 $1,057
Fully eligible active plan participants 288 264
Other active plan participants 936 867
-------------------------------
2,182 2,188
Plan assets at fair value 0 0
-------------------------------
Accumulated postretirement benefit obligation
in excess of plan assets 2,182 2,188
Unrecognized net gain 523 553
Unrecognized prior service cost 124
-------------------------------
Accrued postretirement benefit liability 2,705 2,865
Less current portion (150) (175)
-------------------------------
$2,555 $2,690
===============================
</TABLE>
Health care cost trend rate assumptions have a significant effect on the
amounts reported. For example, increasing the health care cost trend rate
by one percentage point in each year would increase the accumulated
postretirement benefit obligation as of September 28, 1997 and September
27, 1998 by $289 and $282, respectively, and the aggregate of the service
and interest cost components of net periodic postretirement benefit cost by
$66 and $51 during fiscal years 1997 and 1998, respectively.
Assumptions affecting the calculation of the accumulated postretirement
benefit obligation are as follows:
<TABLE>
<CAPTION>
Year Ended
-------------------------------
September 28, September 27,
1997 1998
-------------------------------
<S> <C> <C>
Discount rate 8.0% 8.0%
Health care cost trend rate 7.6% 7.2%
Ultimate trend rate 6.0% 6.0%
Ultimate trend rate to be reached in year 2001 2001
</TABLE>
60
<PAGE>
14. COMMITMENTS AND CONTINGENT LIABILITIES
The Company leases offices and equipment under operating lease agreements
expiring in various years through 2002. Rent expense under operating leases
was $1,277, $1,954, and $2,459 in fiscal years 1996, 1997, and 1998,
respectively. Minimum future rental payments under operating leases having
remaining terms in excess of one year are as follows for fiscal years:
<TABLE>
<S> <C>
1999 $1,646
2000 1,193
2001 889
2002 490
2003 210
Thereafter 174
------
$4,602
======
</TABLE>
In December 1997, the Company and Caterpillar, Inc. (Caterpillar) entered
into a joint venture agreement to build a steel casting foundry for the
manufacture of ground engaging tools near Saltillo, Mexico. Both companies
are investing capital to build a foundry, which Citation will operate and
from which Caterpillar will purchase the entire production. The Company
owns a 50% interest in the joint venture and, as of September 27, 1998, has
invested $1,441 in the joint venture which is included in other assets in
the consolidated balance sheet. The facility is expected upon completion to
have annual capacity of approximately $20,000. A contract to purchase land
in Mexico for the facility has been executed and engineering is currently
underway. The Company anticipates the project being complete in November
1999 at which time the Company's total investment in the joint venture is
anticipated to be approximately $14,000.
The Company is subject to legal proceedings and claims which arise in the
ordinary course of its business. In the opinion of management, the amount
of ultimate liability with respect to these actions will not materially
affect the consolidated financial position, results of operations, or cash
flows of the Company.
The Company is subject to numerous federal, state, and local environmental
laws and regulations. Management believes that the Company is in material
compliance with such laws and regulations and that potential environmental
liabilities, if any, are not material to the consolidated financial
position, results of operations, or cash flows of the Company.
The divisions and subsidiaries are primarily self insured for workman's
compensation claims and health plans. Stop loss insurance agreements are
utilized to limit the Company's liability on both a specific and aggregate
basis for the period of coverage. The liability for unpaid claims included
in accrued insurance reserves in the consolidated balance sheets includes
an accrual for an estimate of claims incurred but not reported.
61
<PAGE>
15. RELATED PARTY TRANSACTIONS
The Company made payments totaling $542, $254, and $378 in fiscal years
1996, 1997, and 1998, respectively, to a law firm in which one of the
Company's stockholders is a partner.
16. FINANCIAL INSTRUMENTS
Financial instruments consist of the following:
<TABLE>
<CAPTION>
September 28, 1997 September 27, 1998
-------------------- ---------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
-------------------- ---------------------
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 2,645 $ 2,645 $ 2,322 $ 2,322
Accounts receivable - trade, net $ 93,542 $ 93,542 $103,152 $103,152
Accounts payable $ 43,256 $ 43,256 $ 46,802 $ 46,802
Credit facility $170,393 $174,371 $232,993 $236,038
Interest rate swaps $ (2,496) $ (4,789)
Other long-term debt, including
current portion $ 13,840 $ 12,768 $ 10,848 $ 10,370
</TABLE>
The carrying amounts reported in the consolidated balance sheets for cash
and cash equivalents, accounts receivable, and accounts payable approximate
fair value because of the immediate or short-term maturity of these
financial instruments. The carrying amounts reported for a portion of the
credit facility and certain of the other long-term debt approximate fair
value because the underlying instruments are at variable interest rates
which reprice frequently. Fair value for fixed rate long-term debt was
estimated using either quoted market prices for the same or similar issues
or the current rates offered to the Company for debt with similar
maturities.
As discussed in Note 6, the Company is party to three interest rate swap
agreements with durations of five years to hedge against interest rate
exposures on $80,000 of long-term debt. The fair value of the interest rate
swaps is estimated based on valuations from the Company's lead bank.
17. ACQUISITIONS
Effective January 5, 1996, the Company completed the purchase of the net
assets of Texas Steel for $13,000 in cash. The acquisition has been
accounted for under the purchase method of accounting and, accordingly, the
purchase price has been allocated to the assets and liabilities of Texas
Steel based on their estimated fair values at the date of acquisition.
Operating results of Texas Steel since January 5, 1996 are included in the
Company's consolidated financial statements.
62
<PAGE>
Effective February 4, 1996, the Company completed the purchase of the net
assets of Hi-Tech for $2,880 in cash and a $320 note payable that was paid
in December 1996. The acquisition has been accounted for under the purchase
method of accounting and, accordingly, the purchase price has been
allocated to the assets and liabilities of Hi-Tech based on their estimated
fair values at the date of acquisition. Operating results of Hi-Tech since
February 4, 1996 are included in the Company's consolidated financial
statements.
Effective March 1, 1996, the Company completed the purchase of the
outstanding stock of SACC for $12,000 in cash. The acquisition has been
accounted for under the purchase method of accounting and, accordingly, the
purchase price has been allocated to the assets and liabilities of SACC
based on their estimated fair values at the date of acquisition. Operating
results of SACC since March 1, 1996 are included in the Company's
consolidated financial statements.
Effective April 1, 1996, the Company completed the purchase of the net
assets of Bohn for $8,250 in cash. The acquisition has been accounted for
under the purchase method of accounting and, accordingly, the purchase
price has been allocated to the assets and liabilities of Bohn based on
their estimated fair values at the date of acquisition. Operating results
of Bohn since April 1, 1996 are included in the Company's consolidated
financial statements.
Effective October 29, 1996, the Company completed the purchase of the
outstanding stock of Interstate for $58,432 in cash. The purchase agreement
requires the Company to pay contingent payments equal to five times the
amount by which the average annual net earnings of Interstate before all
interest, income taxes, and franchise taxes during the three-year period
from January 1, 1996 through December 31, 1998 exceeds $10,000, computed in
accordance with generally accepted accounting principles on a pre-
acquisition basis. Any additional payments made, as the contingencies are
resolved, will be accounted for as additional costs of acquired assets and
amortized over the remaining life of the assets. During fiscal years 1997
and 1998, the Company distributed $2,542 and $7,227, respectively, to the
previous stockholders of Interstate representing the Company's contingent
payments for calendar years 1996 and 1997 as required by the purchase
agreement. These payments have been included in the calculation of the cash
paid for the Interstate acquisition of $58,432. The acquisition has been
accounted for under the purchase method of accounting and, accordingly, the
purchase price has been allocated to the assets and liabilities of
Interstate based on their estimated fair values at the date of acquisition.
Operating results of Interstate since October 29, 1996 are included in the
Company's consolidated financial statements.
63
<PAGE>
The estimated fair values of assets acquired and liabilities assumed in
each of the fiscal year 1996 and 1997 acquisitions are summarized as
follows:
<TABLE>
<CAPTION>
Texas
Steel Hi-Tech SACC Bohn Interstate
----------------------------------------------------
<S> <C> <C> <C> <C> <C>
Accounts receivable, net $ 3,833 $ 801 $ 9,911 $ 4,139 $ 15,161
Inventories 4,795 367 5,975 1,300 12,946
Other current assets 211 8 19 112 3,014
Property, plant and equipment 9,938 4,622 26,980 5,948 78,353
Intangible assets and other 521 437 5,046 2,777 7,343
Accounts payable and accrued expenses (4,103) (410) (7,393) (4,014) (18,675)
Deferred income taxes (17,046)
Long-term debt (2,195) (2,625) (28,538) (2,012) (22,664)
----------------------------------------------------
Purchase price $13,000 $ 3,200 $ 12,000 $ 8,250 $ 58,432
====================================================
</TABLE>
Effective December 1, 1997 the Company completed the purchase of the
outstanding stock of Camden for $2,100 in cash. The acquisition has been
accounted for under the purchase method of accounting and, accordingly, the
purchase price has been allocated to the assets and liabilities of Camden
based on their estimated fair values at the date of acquisition. Operating
results of Camden since December 1, 1997 are included in the Company's
consolidated financial statements.
Effective January 8, 1998, the Company completed the purchase of the
outstanding stock of Dycast for $21,069 in cash. The acquisition has been
accounted for using the purchase method of accounting and, accordingly, the
purchase price has been allocated to the assets and liabilities of Dycast
based on their estimated fair values at the date of acquisition. Operating
results of Dycast since January 8, 1998 are included in the Company's
consolidated financial statements.
Effective March 30, 1998, Citation Precision, a newly formed subsidiary of
the Company, acquired the net assets of Amcast Precision Products, Inc. for
$25,431 in cash. The acquisition has been accounted for under the purchase
method of accounting and, accordingly, the purchase price has been
allocated to the assets and liabilities of Citation Precision based on the
estimated fair values at the date of acquisition. Operating results of
Citation Precision since March 30, 1998 are included in the Company's
consolidated financial statements.
64
<PAGE>
The estimated fair values of assets acquired and liabilities assumed in
each of the fiscal year 1998 acquisitions are summarized as follows:
<TABLE>
<CAPTION>
Citation
Camden Dycast Precision
------------------------------
<S> <C> <C> <C>
Accounts receivable, net $ 2,367 $ 3,276 3,611
Inventories 735 992 4,296
Other current assets 537 408
Property, plant and equipment 399 12,302 7,051
Deferred income tax asset (liability) 2,572 (1,076)
Intangible assets and other 11,774 11,684
Accounts payable and accrued expenses (3,973) (4,115) (1,619)
Long-term debt (2,621)
------------------------------
Purchase price $ 2,100 $21,069 $25,431
==============================
</TABLE>
The following unaudited pro forma summary for the year ended September 28,
1997 combines the results of operations of the Company as if the
acquisitions of Interstate, Camden, Dycast and Citation Precision had
occurred at the beginning of the 1997 fiscal year. For the year ended
September 27, 1998, the pro forma summary presents the results of
operations of the Company as if the acquisitions of Camden, Dycast, and
Citation Precision had occurred at the beginning of the 1998 fiscal year.
Certain adjustments, including additional depreciation expense, interest
expense on the acquisition debt, amortization of intangible assets and
income tax effects, have been made to reflect the impact of the purchase
transactions. These pro forma results have been prepared for comparative
purposes only and do not purport to be indicative of what would have
occurred had the acquisitions and the sale been made at the beginning of
the respective fiscal years, or of results which may occur in the future.
<TABLE>
<CAPTION>
September 28, September 27,
1997 1998
-------------------------------
<S> <C> <C>
Sales $722,895 $746,821
Operating income $ 56,674 $ 39,632
Income before provision for income taxes $ 34,253 $ 20,779
Net income $ 20,894 $ 12,675
Net income per common share - basic $ 1.18 $ .71
Net income per common share - diluted $ 1.17 $ .70
</TABLE>
Pro forma earnings per share - basic for the years ended September 28, 1997
and September 27, 1998 is calculated by dividing pro forma net income by
the basic weighted average shares outstanding of 17,733,157 and 17,838,354,
respectively. Pro forma
65
<PAGE>
earnings per share - diluted for the years ended September 28, 1997 and
September 27, 1998 is calculated by dividing pro forma net income by the
diluted weighted average shares outstanding of 17,917,609 and 18,042,346,
respectively.
18. SALE OF PENN STEEL
On October 31, 1996, the Company completed the sale of Penn Steel and
recorded a pre-tax loss of $1,807 in the consolidated statement of income
for the year ended September 29, 1996.
19. IMPAIRMENT CHARGE
During fiscal year 1998, the Company recognized an impairment loss, in
accordance with SFAS No. 121, on the long-lived assets of Oberdorfer, a
division located in Syracuse, New York. The Company is currently marketing
Oberdorfer for sale and intends to dispose of it during fiscal year 1999.
The trends at Oberdorfer indicated that the undiscounted future cash flows
from this division would be substantially less than the carrying value of
the long-lived assets related to that division. Accordingly, the Company
recognized a non-cash pre-tax charge of $10,000 in fiscal year 1998 to
write the assets down to their estimated fair value based on management's
estimate of the expected net proceeds to be received upon the sale of
Oberdorfer. The fiscal year 1998 charge consisted of $9,116 related to
property, plant and equipment, $780 related to goodwill, and $104 related
to other long-lived assets.
20. SUBSEQUENT ACQUISITIONS
Subsequent to year end, the Company acquired all of the stock of Custom
Products Corporation (Custom) of Milwaukee, Wisconsin, for $35,570 in cash.
In addition, the agreement provides for contingent payments equal to five
times the amount by which the average annual net earnings of Custom before
all interest, income taxes, and franchise taxes during the three year
period from October 1, 1998 through September 29, 2001 exceeds $9,500.
Earnings shall be computed in accordance with generally accepted accounting
principles on a pre-acquisition basis, and the aggregate amount of
contingent payments shall not exceed $16,500. The acquisition will be
accounted for under the purchase method of accounting. Custom is a machiner
of cast and forged metal products, primarily for the diesel engine,
construction equipment, farm implement and automotive markets. Custom's
revenues for its 1998 fiscal year were approximately $75,000.
On December 14, 1998, the Company also reached an agreement in principle
for the purchase of CT-South of Marion, Alabama, for a purchase price of
approximately $15,000. The acquisition, which is expected to close on
December 28, 1998, will be accounted for under the purchase method of
accounting. CT-South is a producer of ductile
66
<PAGE>
iron thin-walled castings primarily for the passenger car and light truck
markets. CT-South's revenues for its most recent fiscal year were
approximately $30,000.
21. OTHER SUBSEQUENT EVENTS - SHAREHOLDER RIGHTS PLAN
Subsequent to fiscal year 1998, Drummond Company of Birmingham, Alabama
(Drummond) acquired a 120-day option to purchase 4 million of the Company's
common shares from the Company's Chairman of the Board (and majority
shareholder) at a price of $20 per share. Drummond has also acquired
approximately 1.3 million of the Company's shares from a Director of the
Company subsequent to fiscal year 1998, subject to clearance under the
Hart-Scott-Rodino Act, for $15 per share. If Drummond were to exercise the
option and consummate the purchase of the 5.3 million shares from the two
directors, Drummond would own approximately 29.8% of the Company's
outstanding shares as of September 27, 1998 (before considering the effect
of the Shareholder Rights Plan discussed below). Drummond has also acquired
the right of first-refusal on additional shares (which amount to
approximately 1 million shares) held by the Company's Chairman of the
Board.
The Company's Board of Directors appointed an independent committee to
review the Company's response to the above events. On November 25, 1998,
upon recommendation of this Board committee, the Company adopted a
shareholder rights plan (the Shareholder Rights Plan) and designated
300,000 shares of its 5,000,000 authorized shares of preferred stock as
Series A Junior Participating Preferred Stock (the Preferred Stock). In
connection with the adoption of the Shareholder Rights Plan, the Company
declared a dividend of one preferred share purchase right (a Right) for
each outstanding share of the Company's common stock to all stockholders of
record as of December 7, 1998. The Rights will not become exercisable, and
will continue to trade with the underlying common stock, unless a person or
group acquires 15% or more of the Company's common stock or announces a
tender offer, the consummation of which would result in ownership by a
person or group of 15% or more of the Company's common stock. Each Right
entitles the holder to purchase one one-hundredth of a share of the
Company's newly created Preferred Stock at an exercise price of $45 per one
one-hundredth of a share. The Rights will expire on November 25, 2008.
In the event that any person or group acquires 15% or more of the Company's
outstanding common stock, each holder of a Right (other than the acquiring
person or group) will be entitled to receive, upon payment of the exercise
price, that number of shares of common stock (or other equivalent security
such as the Preferred Stock) having a market value equal to twice the
exercise price. Pursuant to the Shareholder Rights Plan, the shares held by
the Company's Chairman of the Board and the related option granted to
Drummond are grandfathered. However, any exercise by Drummond of such
option which results in Drummond's direct ownership of more than 15% of
the Company's outstanding common stock, without the prior approval of the
Company's Board of Directors, would trigger the Rights issued under the
Shareholder Rights Plan. The Company adopted the Shareholder Rights Plan
because it wants any third party investor wishing to purchase more than 15%
of the Company's stock
67
<PAGE>
to fully discuss its intentions with the Company's Board of Directors so
that the Board will be in a position to act in the best interest of the
Company's employees and stockholders.
The Company also amended its two stock option plans so that participants
will be immediately fully vested in the event of a change in control and
entered into change of control severance agreements with certain of its key
executives. Further, the Company amended its bylaws to provide for an
orderly administration of a consent solicitation and to require a
two-thirds majority vote of shareholders to effect amendment of the bylaws.
68
<PAGE>
EXHIBIT 99.1
------------
REPORT OF INDEPENDENT ACCOUNTANTS ON SUPPLEMENTARY INFORMATION
To the Stockholders
Citation Corporation and Subsidiaries
Our report on the consolidated financial statements of Citation Corporation and
subsidiaries is included on page 35 of this Form 10-K. In connection with our
audits of such financial statements, we have also audited the related financial
statement schedule listed in the index in Item 14 of this Form 10-K.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Birmingham, Alabama
November 16, 1998
69
<PAGE>
SCHEDULE II
-----------
VALUATION AND QUALIFYING ACCOUNTS
for the years ending September 29, 1996, September 28, 1997 and September 27,
1998
1998
<TABLE>
<CAPTION>
Balance at the Opening Charged Charged Balance at
Beginning of Balances of to to the End of
Description Period Acquisitions Expense Assets Deductions Period
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Allowance for doubtful accounts 1,366,692 647,477 1,248,596 73,601 (476,152) 2,860,214
Reserve for obsolete inventory 971,543 7,040 -- -- (216,739) 761,844
Reserve on sales and returns 1,066,517 -- 4,008,502 -- (3,993,083) 1,081,936
Deferred tax valuation allowance 918,000 -- 2,137,000 -- -- 3,055,000
</TABLE>
1997
<TABLE>
<CAPTION>
Balance at the Opening Charged Charged Balance at
Beginning of Balances of to to the End of
Description Period Acquisitions Expense Assets Deductions Period
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Allowance for doubtful accounts 1,421,027 -- 63,766 319,216 (437,317) 1,366,692
Reserve for obsolete inventory 490,988 -- 397,543 300,000 (216,988) 971,543
Reserve on sales and returns 1,075,236 -- 3,009,944 439,846 (3,458,509) 1,066,517
Deferred tax valuation allowance 370,000 -- 918,000 -- (370,000) 918,000
</TABLE>
1996
<TABLE>
<CAPTION>
Balance at the Opening Charged Charged Balance at
Beginning of Balances of to to the End of
Description Period Acquisitions Expense Assets Deductions Period
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Allowance for doubtful accounts 770,672 -- 583,539 208,519 (141,703) 1,421,027
Reserve for obsolete inventory 267,890 -- 259,922 217,455 (254,279) 490,988
Reserve on sales and returns 1,020,939 -- 643,731 281,060 (870,494) 1,075,236
Deferred tax valuation allowance -- -- 370,000 -- -- 370,000
</TABLE>
70
<PAGE>
ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
During the fiscal years 1997 and 1998 and through the date of this report,
there has been no change in the Company's independent accountants, nor have any
disagreements with such accountants or reportable events occurred.
PART III
ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS
Information required by this item is incorporated by reference from the
sections entitled "Election of Directors" and "Compliance with Section 16(a) of
the Securities Exchange Act of 1934" in the Proxy Statement for the Annual
Meeting of Shareholders to be held February 16, 1999, as filed with the
Securities and Exchange Commission.
ITEM 11: EXECUTIVE COMPENSATION
Information required by this item is incorporated by reference from the
section entitled "Executive Compensation" in the Proxy Statement for the Annual
Meeting of Shareholders to be held February 16, 1999, as filed with the
Securities and Exchange Commission.
ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information required by this item is incorporated by reference from the
section entitled "Security Ownership of Management and Certain Beneficial
Owners" and "Election of Directors" in the Proxy Statement for the Annual
Meeting of Shareholders to be held February 16, 1999, as filed with the
Securities and Exchange Commission.
ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information required by this item is incorporated by reference from the
section entitled "Executive Compensation" in the Proxy Statement for the Annual
Meeting of Shareholders to be held February 16, 1999, as filed with the
Securities and Exchange Commission.
71
<PAGE>
PART IV
ITEM 14: EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
EXHIBITS
The exhibits set forth in the following index of exhibits are filed as a
part of this report:
<TABLE>
<CAPTION>
Exhibit
- -------
Number Page
- ------ ----
<S> <C> <C>
3.1 Certificate of Incorporation of the Company, as amended/(1)/
3.1(a) Certificate of Designations of Series A Junior Participating Preferred
Stock of Citation Corporation dated November 30, 1998. 77
3.2(a) Bylaws of the Company as amended November 25, 1998 83
4.1 Rights Agreement dated as of November 25, 1998 between Citation
Corporation and the Bank of New York as Rights Agent /(2)/ 92
10.2(w) Agreement and Plan of Merger dated May 16, 1996 among Interstate
Forging Industries, Inc., Citation Forging Corporation, and Citation
Corporation, as amended/(3)/
10.2(x) Second Amended and Restated Credit Agreement, dated as of August 3,
1998, among the Company and certain of its subsidiaries, certain banks
and other lenders party thereto from time to time, The First National Bank
of Chicago, and SouthTrust Bank, National Association 133
10.2(y) First Amendment to Second Amended and Restated Credit Agreement,
dated as of November 3, 1998 207
10.2(z) Second Amendment to Second Amended and Restated Credit Agreement,
dated as of November 25, 1998 216
10.3(b) Employment Agreement commencing on August 9, 1994 between Citation
Corporation and R. Conner Warren/(1)/
10.3(c) Change in Control Retention and Severance Agreement dated December 1,
1998 between the Company and Frederick F. Sommer 224
10.3(d) Change in Control Retention and Severance Agreement dated December 1,
1998 between the Company and John W. Lawson 230
10.3(e) Change in Control Retention and Severance Agreement dated December 1,
1998 between the Company and Edwin L. Yoder 236
10.3(f) Change in Control Retention and Severance Agreement dated December 1,
1998 between the Company and Stanley B. Atkins 242
</TABLE>
72
<PAGE>
<TABLE>
<S> <C>
10.3(g) Change in Control Retention and Severance Agreement dated December 1,
1998 between the Company and Thomas W. Burleson 248
10.3(h) Change in Control Retention and Severance Agreement dated December 1,
1998 between the Company and G. Thomas Surtees 254
10.3(i) Change in Control Retention and Severance Agreement dated December 1,
1998 between the Company and Virgil C. Reid 260
10.3(j) Change in Control Retention and Severance Agreement dated December 1,
1998 between the Company and Timothy L. Roberts 266
10.4 Citation Corporation Incentive Award Plan/(1)/
10.4(a) Citation Corporation Stock Plan for Non Employee Directors/(4)/
10.4(b) Citation Non-Qualified Stock Option Plan for Non-Employee Directors/(5)/
10.6 Tax Indemnification Agreement between Shareholders existing prior to
August 9, 1994 and Citation Corporation/(1)/
21 Subsidiaries of the Registrant 272
23 Consent of PricewaterhouseCoopers LLP 273
27 Financial Data Schedules, submitted to the Securities and Exchange
Commission in electronic format
99.1 Report of Independent Certified Public Accountants on Supplementary
Information 69
99.2 Schedule II - Valuation and Qualifying Accounts 70
</TABLE>
(1) Incorporated by reference to the Company's Registration Statement on Form
S-1 under the Securities Act of 1933 (Registration No. 33-79804, as filed
August 2, 1994). The exhibit numbers listed correspond to the exhibit
numbers in the Form S-1.
(2) Incorporated by reference to the Company's Registration Statement on Form
8-A under the Securities Act of 1934 (Registration No.000-24492, as filed
December 1, 1998).
(3) Incorporated by reference to Exhibit 2.2 of the Company's Form 8-K dated
March 1, 1996.
(4) Incorporated by reference to Exhibit 10.4(a) of the Company's Annual Report
on Form 10-K for the year ended October 1, 1995.
(5) Incorporated by reference to Exhibit 10.4(b) of the Company's Annual Report
on Form 10-K for the year ended September 29, 1996.
73
<PAGE>
FINANCIAL STATEMENT SCHEDULES
The Index to financial statements filed as a part of this Report is
contained at page 34.
The following schedule is filed as an exhibit to this report:
Report of Independent Certified Public Accountants on Supplementary
Information, page 69
Schedule II - Valuation and Qualifying Accounts, page 70
REPORTS ON FORM 8-K
No reports on Form 8-K were filed for the quarter ended September 27, 1998.
74
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 of 15(d) of the Securities and
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
CITATION CORPORATION
/s/ Frederick F. Sommer
-------------------------------------------
By: FREDERICK F. SOMMER
President and Chief Executive Officer
December 21, 1998
Pursuant to the requirements of the Securities and Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
<S> <C> <C>
/s/ Frederick F. Sommer President and Chief Executive Officer December 21, 1998
- -----------------------------
FREDERICK F. SOMMER (Principal Executive Officer)
/s/ T. Morris Hackney Chairman of the Board December 21, 1998
- -----------------------------
T. MORRIS HACKNEY
/s/ R. Conner Warren Executive Vice President, December 21, 1998
- -----------------------------
R. CONNER WARREN Chief Administrative Officer
and Director
/s/ Thomas W. Burleson Vice President-Finance, Chief December 21, 1998
- -----------------------------
THOMAS W. BURLESON Financial Officer and Assistant
Secretary
(Principal Financial Officer)
/s/ Hugh G. Weeks Director December 21, 1998
- -----------------------------
HUGH G. WEEKS
/s/ A. Derrill Crowe Director December 21, 1998
- -----------------------------
A. DERRILL CROWE
/s/ Franklyn Esenberg Director December 21, 1998
- -----------------------------
FRANKLYN ESENBERG
/s/ William W. Featheringill Director December 21, 1998
- -----------------------------
WILLIAM W. FEATHERINGILL
Director December 21, 1998
- -----------------------------
FRANK B. KELSO, II
/s/ Van L. Richey Director December 21, 1998
- -----------------------------
VAN L. RICHEY
</TABLE>
75
<PAGE>
EXHIBIT 3.1(A)
--------------
CERTIFICATE OF DESIGNATIONS
of
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
of
Citation Corporation
Pursuant to Section 151 of the General Corporation law
of the State of Delaware
Citation Corporation, a corporation organized and existing under the
General Corporation law of the State of Delaware, in accordance with the
provisions of Section 103 thereof, DOES HEREBY CERTIFY:
That pursuant to the authority vested in the Board of Directors in
accordance with the provisions of the Certificate of Incorporation of the said
Corporation, the said Board of Directors on November 25, 1998 adopted the
following resolution creating a series of 300,000 shares of Preferred Stock
designated as "Series A Junior Participating Preferred Stock":
RESOLVED, that pursuant to the authority vested in the Board of
Directors of this Corporation in accordance with the provisions of the
Certificate of Incorporation, a series of Preferred Stock, par value
$0.01 per share, of the Corporation be and hereby is created, and that
the designation and number of shares thereof and the voting and other
powers, preferences and relative, participating, optional or other
rights of the shares of such series and the qualifications,
limitations and restrictions thereof are as follows:
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
1. Designation and Amount. There shall be a series of Preferred Stock
that shall be designated as "Series A Junior Participating Preferred Stock," and
the number of shares constituting such series shall be 300,000. Such number of
shares may be increased or decreased by resolution of the Board of Directors;
provided, however, that no decrease shall reduce the number of shares of Series
A Junior Participating Preferred Stock to less than the number of shares then
issued and outstanding plus the number of shares issuable upon exercise of
outstanding rights, options or warrants or upon conversion of outstanding
securities issued by the Corporation.
<PAGE>
2. Dividends and Distribution.
(A) Subject to the prior and superior rights of the holders of any
shares of any series of Preferred Stock ranking prior and superior to the shares
of Series A Junior Participating Preferred Stock with respect to dividends, the
holders of shares of Series A Junior Participating Preferred Stock, in
preference to the holders of shares of any class or series of stock of the
Corporation ranking junior to the Series A Junior Participating Preferred Stock,
shall be entitled to receive, when, as and if declared by the Board of Directors
out of funds legally available for the purpose, quarterly dividends payable in
cash on such quarterly dates as shall be determined by the Corporation's Board
of Directors in each year (each such date being referred to herein as a
"Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend
Payment Date after the first issuance of a share or fraction of a share of
Series A Junior Participating Preferred Stock, in an amount per share (rounded
to the nearest cent) equal to the greater of (a) $1.00 or (b) the Adjustment
Number (as defined below) times the aggregate per share amount of all cash
dividends, and the Adjustment Number times the aggregate per share amount
(payable in kind) of all non-cash dividends or other distributions other than a
dividend payable in shares of Common Stock or a subdivision of the outstanding
shares of Common Stock (by reclassification or otherwise), declared on the
Common Stock, par value $0.01 per share, of the Corporation (the "Common Stock")
since the immediately preceding Quarterly Dividend Payment Date, or, with
respect to the first Quarterly Dividend Payment Date, since the first issuance
of any share or fraction of a share of Series A Junior Participating Preferred
Stock. The "Adjustment Number" shall initially be 100. In the event the
Corporation shall at any time after November 25, 1998 (i) declare any dividend
on Common Stock payable in shares of Common Stock, (ii) subdivide the
outstanding Common Stock or (iii) combine the outstanding Common Stock into a
smaller number of shares, then in each such case the Adjustment Number in effect
immediately prior to such event shall be adjusted by multiplying such Adjustment
Number by a fraction the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding immediately prior to
such event.
(B) The Corporation shall declare a dividend or distribution on the
Series A Junior Participating Preferred Stock as provided in paragraph (A) above
immediately after it declares a dividend or distribution on the Common Stock
(other than a dividend payable in shares of Common Stock).
(C) Dividends shall begin to accrue and be cumulative on outstanding
shares of Series A Junior Participating Preferred Stock from the Quarterly
Dividend Payment Date next preceding the date of issue of such shares of Series
A Junior Participating Preferred Stock, unless the date of issue of such shares
is prior to the record date for the first Quarterly Dividend Payment Date, in
which case dividends on such shares shall begin to accrue from the date of issue
of such shares, or unless the date of issue is a Quarterly Dividend Payment Date
or is a date after the record date for the determination of holders of shares of
Series A Junior Participating Preferred Stock entitled to receive a quarterly
dividend and before such Quarterly Dividend Payment Date, in either of which
2
<PAGE>
events such dividends shall begin to accrue and be cumulative from such
Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear
interest. Dividends paid on the shares of Series A Junior Participating
Preferred Stock in an amount less than the total amount of such dividends at the
time accrued and payable on such shares shall be allocated pro rata on a share-
by-share basis among all such shares at the time outstanding. The Board of
Directors may fix a record date for the determination of holders of shares of
Series A Junior Participating Preferred Stock entitled to receive payment of a
dividend or distribution declared thereon, which record date shall be no more
than 30 days prior to the date fixed for the payment thereof.
3. Voting Rights. The holders of shares of Series A Junior Participating
Preferred Stock shall have the following voting rights:
(A) Each share of Series A Junior Participating Preferred Stock shall
entitle the holder thereof to a number of votes equal to the Adjustment Number
on all matters submitted to a vote of the stockholders of the Corporation.
(B) Except as required by law, holders of Series A Junior
Participating Preferred Stock shall have no special voting rights and their
consent shall not be required (except to the extent they are entitled to vote
with holders of Common Stock as set forth herein) for taking any corporate
action.
4. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or distributions
payable on the Series A Junior Participating Preferred Stock as provided in
Section 2 are in arrears, thereafter and until all accrued and unpaid dividends
and distributions, whether or not declared, on shares of Series A Junior
Participating Preferred Stock outstanding shall have been paid in full, the
Corporation shall not:
(i) declare or pay dividends on, make any other distributions
on, or redeem or purchase or otherwise acquire for consideration any shares of
stock ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Series A Junior Participating Preferred Stock;
(ii) declare or pay dividends on or make any other
distributions on any shares of stock ranking on a parity (either as to dividends
or upon liquidation, dissolution or winding up) with the Series A Junior
Participating Preferred Stock, except dividends paid ratably on the Series A
Junior Participating Preferred Stock and all such parity stock on which
dividends are payable or in arrears in proportion to the total amounts to which
the holders of all such shares are then entitled; or
(iii) purchase or otherwise acquire for consideration any
shares of Series A Junior Participating Preferred Stock, or any shares of stock
ranking on a parity with the Series A
3
<PAGE>
Junior Participating Preferred Stock, except in accordance with a purchase offer
made in writing or by publication (as determined by the Board of Directors) to
all holders of Series A Junior Participating Preferred Stock, or to such holders
and holders of any such shares ranking on a parity therewith, upon such terms as
the Board of Directors, after consideration of the respective annual dividend
rates and other relative rights and preferences of the respective series and
classes, shall determine in good faith will result in fair and equitable
treatment among the respective series or classes.
(B) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any shares of
stock of the Corporation unless the Corporation could, under paragraph (A) of
this Section 4, purchase or otherwise acquire such shares at such time and in
such manner.
5. Reacquired Shares. Any shares of Series A Junior Participating
Preferred Stock purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired promptly after the acquisition thereof. All such
shares shall upon their retirement become authorized but unissued shares of
Preferred Stock and may be reissued as part of a new series of Preferred Stock
to be created by resolution or resolutions of the Board of Directors, subject to
any conditions and restrictions on issuance set forth herein.
6. Liquidation, Dissolution or Winding Up. (A) Upon any liquidation
(voluntary or otherwise), dissolution or winding up of the Corporation, no
distribution shall be made to the holders of shares of stock ranking junior
(either as to dividends or upon liquidation, dissolution or winding up) to the
Series A Junior Participating Preferred Stock unless, prior thereto, the holders
of shares of Series A Junior Participating Preferred Stock shall have received
$100.00 per share, plus an amount equal to accrued and unpaid dividends and
distributions thereon, whether or not declared, to the date of such payment (the
"Series A Liquidation Preference"). Following the payment of the full amount of
the Series A Liquidation Preference, no additional distributions shall be made
to the holders of shares of Series A Junior Participating Preferred Stock
unless, prior thereto, the holders of shares of Common Stock shall have received
an amount per share (the "Common Adjustment") equal to the quotient obtained by
dividing (i) the Series A Liquidation Preference by (ii) the Adjustment Number.
Following the payment of the full amount of the Series A Liquidation Preference
and the Common Adjustment in respect of all outstanding shares of (1) Series A
Junior Participating Preferred Stock and (2) Common Stock, respectively, (a)
holders of Series A Junior Participating Preferred Stock and (b) holders of
shares of Common Stock shall, subject to the prior rights of all other series of
Preferred Stock, if any, ranking prior thereto, receive their ratable and
proportionate share of the remaining assets to be distributed in the ratio of
the Adjustment Number to 1 with respect to (x) the Series A Junior Participating
Preferred Stock and (y) the Common Stock, on a per share basis, respectively.
(B) In the event, however, that there are not sufficient assets
available to permit payment in full of the Series A Liquidation Preference and
the liquidation preferences of all other series of Preferred Stock, if any, that
rank on a parity with the Series A Junior Participating Preferred
4
<PAGE>
Stock, then such remaining assets shall be distributed ratably to the holders of
such parity shares in proportion to their respective liquidation preferences. In
the event, however, that there are not sufficient assets available to permit
payment in full of the Common Adjustment, then such remaining assets shall be
distributed ratably to the holders of Common Stock.
(C) Neither the merger or consolidation of the Corporation into or
with another corporation nor the merger or consolidation of any other
corporation into or with the Corporation shall be deemed to be a liquidation,
dissolution or winding up of the Corporation within the meaning of this Section
6.
7. Consolidation, Merger, Etc. In case the Corporation shall enter into
any consolidation, merger, combination or other transaction in which the shares
of Common Stock are exchanged for or changed into other stock or securities,
cash and/or any other property, then in any such case each share of Series A
Junior Participating Preferred Stock shall at the same time be similarly
exchanged or changed in an amount per share equal to the Adjustment Number times
the aggregate amount of stock, securities, cash and/or any other property
(payable in kind), as the case may be, into which or for which each share of
Common Stock is changed or exchanged.
8. No Redemption. Shares of Series A Junior Participating Preferred
Stock shall not be subject to redemption by the Company.
9. Ranking. The Series A Junior Participating Preferred Stock shall rank
junior to all other series of the Corporation's Preferred Stock as to the
payment of dividends and the distribution of assets, unless the terms of any
such series shall provide otherwise, and shall rank senior to the Common Stock
as to such matters.
10. Amendment. At any time that any shares of Series A Junior
Participating Preferred Stock are outstanding, the Certificate of Incorporation
of the Corporation shall not be amended in any manner which would materially
alter or change the powers, preferences or special rights of the Series A Junior
Participating Preferred Stock so as to affect them adversely without the
affirmative vote of the holders of two-thirds of the outstanding shares of
Series A Junior Participating Preferred Stock, voting separately as a class.
11. Fractional Shares. Series A Junior Participating Preferred Stock may
be issued in fractions of a share that shall entitle the holder, in proportion
to such holder's fractional shares, to exercise voting rights, receive
dividends, participate in distributions and to have the benefit of all other
rights of holders of Series A Junior Participating Preferred Stock.
IN WITNESS WHEREOF, the undersigned has executed this Certificate this
30/th/ day of November, 1998.
5
<PAGE>
ATTEST: CITATION CORPORATION
/s/ Stanley B. Atkins By: /s/ Federick F. Sommer
- ------------------------------ ------------------------------------------
Name: Stanley B. Atkins Name: Frederick F. Sommer
Title: Vice President and Title: President and Chief Executive Officer
Corporate Secretary
6
<PAGE>
EXHIBIT 3.2(A)
--------------
B Y L A W S
OF
CITATION CORPORATION
AS AMENDED NOVEMBER 25, 1998
ARTICLE I
STOCKHOLDERS
------------
Section 1. Annual Meeting. The annual meeting of the stockholders for
--------------
the election of directors and for the transaction of such other business as may
properly come before the meeting shall be held at such place, either within or
without the State of Delaware, on such date and at such time as the Board of
Directors may by resolution provide. The Board of Directors may specify by
resolution prior to any special meeting of stockholders held within the year
that such meeting shall be in lieu of the annual meeting.
Section 2. Special Meetings. Special meetings of the stockholders may
----------------
be called at any time for any purpose or purposes by a majority of the Board of
Directors, the Chairman of the Board, or the President, but no such special
meetings may be called by any other person or persons. Special meetings shall
be held at such place, either within or without the State of Delaware, as is
stated in the call and notice thereof.
Section 3. Notice of Meetings. Unless otherwise provided by law, whenever
------------------
stockholders are required or permitted to take any action at a meeting, a
written notice of the meeting stating the place, date and hour of the meeting,
and, in the case of a special meeting, the purpose or purposes for which the
meeting is called, shall be given not less than ten (10) nor more than sixty
(60) days prior to such meeting to each stockholder entitled to vote at the
meeting. If mailed, such notice shall be deemed to be given when deposited in
the mail, postage prepaid, directed to the stockholder at such stockholder's
address as it appears on the records of the Corporation. Whenever notice is
required to be given to any stockholder, a written waiver thereof, signed by the
stockholder entitled to notice, whether before or after the time stated therein,
shall be deemed equivalent to notice. Attendance at a meeting shall constitute
a waiver of notice of such meeting, except when the stockholder attends a
meeting for the express purpose of objecting, at the beginning of the meeting,
to the transaction of any business because the meeting is not lawfully called or
convened. Neither the business transacted at, nor the purpose of, any regular
or special meeting need be stated in the written waiver of notice of such
meeting.
Notice of any meeting may be given by the President, the Secretary or the
person or persons calling such meeting. No notice need be given of the time and
place of reconvening of any adjourned meeting if the time and place to which the
meeting is adjourned are announced at the adjourned meeting. If the adjournment
is for more than thirty (30) days, or if after the adjournment a new record date
is fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote at the meeting.
Section 4. List of Stockholders. The officer who has charge of the stock
--------------------
ledger of the Corporation shall prepare and make, at least ten (10) days before
every meeting of stockholders, a complete list of the stockholders entitled to
vote at the meeting, arranged in alphabetical order, showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten (10) days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present. The stock ledger shall be the only evidence as to who are the
stockholders entitled to examine the stock ledger, the list of stockholders or
the books of the Corporation, or to vote in person or by proxy at any meeting of
the stockholders.
<PAGE>
Section 5. Quorum; Required Stockholder Vote. Except as otherwise
---------------------------------
provided by the Certificate of Incorporation, each stockholder entitled to vote
at any meeting of stockholders shall be entitled to one vote for each share of
stock held by such stockholder that has voting power upon the matter in
question. A quorum for the transaction of business at any annual or special
meeting of stockholders shall exist when the holders of a majority of the
outstanding shares entitled to vote are represented either in person or by proxy
at such meeting. If a quorum is present, in all matters other than the election
of directors, the affirmative vote of a majority of the shares present in person
or represented by proxy at the meeting and entitled to vote on the subject
matter shall be the act of the stockholders, unless a greater vote is required
by law, by the Certificate of Incorporation or by these Bylaws. If a quorum is
present, directors shall be elected by the affirmative vote of a plurality of
the shares present in person or represented by proxy at the meeting and entitled
to vote on the election of directors. When a quorum is once present to organize
a meeting, the stockholders present may continue to do business at the meeting
or at any adjournment thereof notwithstanding the withdrawal of enough
stockholders to leave less than a quorum. Shares of its own stock belonging to
the Corporation or to another corporation, if a majority of the shares entitled
to vote in the election of directors of such other corporation is held, directly
or indirectly, by the Corporation, shall neither be entitled to vote nor be
counted for quorum purposes; provided, however, that the foregoing shall not
limit the right of the Corporation to vote stock, including but not limited to
its own stock, held by it in a fiduciary capacity.
Section 6. Proxies. A stockholder may vote either in person or by a
-------
proxy which such stockholder has duly executed in writing. No proxy shall be
valid after three years from the date of its execution unless a longer period is
expressly provided in the proxy. A duly executed proxy shall be irrevocable if
it states that it is irrevocable and if, and only as long as, it is coupled with
an interest sufficient in law to support an irrevocable power. A stockholder
may revoke any proxy which is not irrevocable by attending the meeting and
voting in person or by filing an instrument in writing revoking the proxy or
another duly executed proxy bearing a later date with the Secretary of the
Corporation.
Section 7. Organization. Meetings of stockholders shall be presided over
------------
by the Chairman of the Board, if any, or in his absence by the President, or in
his absence by a Vice President, or in the absence of the foregoing persons by a
chairman designated by the Board of Directors, or in the absence of such
designation by a chairman chosen at the meeting. The Secretary shall act as
secretary of the meeting, but in his absence the chairman of the meeting may
appoint any person to act as secretary of the meeting.
Section 8. Action of Stockholders Without Meeting. Unless otherwise
--------------------------------------
provided in the Certificate of Incorporation, any action required to be, or
which may be, taken at any annual or special meeting of stockholders, may be
taken without a meeting, without prior notice and without a vote, if written
consent, setting forth the action so taken, shall be signed and dated by the
holders of outstanding stock having not less than the minimum number of votes
that would be necessary to authorize or take such action at a meeting at which
all shares entitled to vote thereon were present and voted. Prompt notice of
the taking of corporate action without a meeting by less than unanimous written
consent shall be given to those stockholders who have not consented in writing.
Such consent shall have the same force and effect as an affirmative vote of the
stockholders and shall be filed with the minutes of the proceedings of the
stockholders.
Section 9. Record Date. In order that the Corporation may determine
-----------
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for any other lawful
purpose, the Board of Directors of the Corporation may fix a record date, which
record date shall not precede the date upon which the resolution fixing the
record date is adopted by the Board of Directors, and which record date: (a) in
the case of the determination of stockholders entitled to vote at any meeting of
stockholders or adjournment thereof, shall not be more than sixty (60) nor less
than ten (10) days before the date of such meeting; (b) in the case of the
determination of stockholders entitled to express consent to corporate action in
writing without a meeting, shall not be more than ten (10) days after the date
upon which the resolution fixing the record date is adopted by the Board of
Directors; and (c) in the case of any other action, shall not be more than sixty
(60) days
2
<PAGE>
prior to such other action. Any stockholder of record seeking to have the
stockholders authorize or take corporate action by written consent shall, by
written notice to the Secretary, request the board of directors to fix a record
date. The Board of Directors shall promptly, but in all events within ten (10)
days after the date on which such request is received, adopt a resolution fixing
the record date. If no record date is fixed: (x) the record date for
determining stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the day next preceding the day
on which notice is given, or, if notice is waived, at the close of business on
the day next preceding the day on which the meeting is held; (y) the record date
for determining stockholders entitled to express consent to corporate action in
writing without a meeting when no prior action of the Board of Directors is
required by law, shall be the first date on which a signed written consent
setting forth the action taken or proposed to be taken is delivered to the
Corporation in accordance with applicable law, or, if prior action by the Board
of Directors is required by law, shall be at the close of business on the day on
which the Board of Directors adopts the resolution taking such prior action; and
(z) the record date for determining stockholders for any other purpose shall be
at the close of business on the day on which the Board of Directors adopts the
resolution relating thereto. A determination of stockholders of record entitled
to notice of or to vote at a meeting of stockholders shall apply to any
adjournment of the meeting; provided, however, that the Board of Directors may
fix a new record date for the adjourned meeting.
Section 10. Notice of Stockholder Business. At any meeting of the
------------------------------
stockholders, only such business shall be conducted as shall have been properly
brought before the meeting. To be properly brought before a meeting, business
must be (a) specified in the notice of meeting (or any supplement thereto) given
by or at the direction of the Board of Directors, (b) otherwise properly brought
before the meeting by or at the direction of the Board of Directors, or (c)
otherwise properly brought before the meeting by a stockholder. For business to
be properly brought before a meeting by a stockholder, the stockholder must have
given timely notice thereof in writing to the Secretary of the Corporation. To
be timely, a stockholder's notice must be delivered to or mailed and received at
the principal executive offices of the Corporation, not less than 60 days nor
more than 90 days prior to the meeting; provided, however, that in the event
that less than 60 days' notice or prior public disclosure of the date of the
meeting is given or made to stockholders, notice by the stockholder to be timely
must be so received not later than the close of business on the 10th day
following the day on which such notice of the date of the meeting was mailed or
such public disclosure was made. A stockholder's notice to the Secretary shall
set forth as to each matter the stockholder proposes to bring before the meeting
(a) a brief description of the business desired to be brought before the meeting
and the reasons for conducting such business at the meeting, (b) the name and
address, as they appear on the Corporation's books, of the stockholder proposing
such business, (c) the class and number of shares of the Corporation which are
beneficially owned by the stockholder, and (d) any material interest of the
stockholder in such business. Nothing in this Section 10 shall be construed to
limit the applicability and requirements of Regulation 14A under the Securities
Exchange Act of 1934 or any other applicable laws or regulations, the
requirements of which, if any, would have to be met for a matter to be properly
brought before the meeting. Notwithstanding anything in these Bylaws to the
contrary, no business shall be conducted at any meeting except in accordance
with the procedures set forth in this Section 10. The Chairman of the meeting
shall, if the facts warrant, determine that business was not properly brought
before the meeting in accordance with the provisions of this Section 10, and if
he should so determine, he shall so declare to the meeting and any such business
not properly brought before the meeting shall not be transacted.
Section 11. Notice of Stockholder Nominees. Only persons who are
------------------------------
nominated in accordance with the procedures set forth in this Section 11 shall
be eligible for election as Directors. Nominations of persons for election to
the Board of Directors of the Corporation may be made at a meeting of
stockholders by or at the direction of the Board of Directors or by any
stockholder of the Corporation entitled to vote for the election of Directors at
the meeting who complies with the notice procedures set forth in this Section
11. Such nominations, other than those made by or at the direction of the Board
of Directors, shall be made pursuant to timely notice in writing to the
Secretary of the Corporation. To be timely, a stockholder's notice shall be
delivered to or mailed and received at the principal executive offices of the
Corporation not less than 60 days nor more than 90 days prior to the meeting;
provided, however, that in the event that less than 60 days' notice or prior
public disclosure of the date of the meeting is given or made to stockholders,
notice by the stockholder must be so received no later than the close of
business on the 10th day following the day on which such notice of the date of
the meeting was mailed or such public
3
<PAGE>
disclosure was made. Such stockholder notice shall set forth (a) as to each
person whom the stockholder proposes to nominate for election or re-election as
a Director, (i) the name, age, business address and residence address of such
person, (ii) the principal occupation or employment of such person, (iii) the
class and number of shares of the Corporation which are beneficially owned by
such person, and (iv) any other information relating to such person that is
required to be disclosed in solicitations of proxies for election of Directors,
or is otherwise required, in each case pursuant to Regulation 14A under the
Securities Exchange Act of 1934, as amended (including, without limitation, a
copy of such person's written consent to being named in any applicable proxy
statement as a nominee and to serving as a Director if elected); and (b) as to
the stockholder giving the notice, (i) the name and address, as they appear on
the Corporation's books, of such stockholder and (ii) the class and number of
shares of the Corporation which are beneficially owned by such stockholder. At
the request of the Board of Directors, any person nominated by the Board of
Directors for election as a Director shall furnish to the Secretary of the
Corporation that information required to be set forth in a stockholder's notice
of nomination which pertains to the nominee. No person shall be eligible for
election as a Director of the Corporation unless nominated in accordance with
the procedures set forth in this Section 11. The Chairman of the meeting shall,
if the facts warrant, determine that a nomination was not made in accordance
with the procedure prescribed by this Section 11, and if he should so determine,
he shall so declare to the meeting and the defective nomination shall be
disregarded. Nothing in this Section 11 shall be construed to affect the
requirements for proxy statements of the Corporation under Regulation 14A of the
Securities Exchange Act of 1934.
ARTICLE II
DIRECTORS
---------
Section 1. Power of Directors. The business and affairs of the
------------------
Corporation shall be managed by or under the direction of its Board of
Directors, which may exercise all of the powers of the Corporation, subject to
any restrictions imposed by law, by the Certificate of Incorporation or by these
Bylaws.
Section 2. Composition of the Board. The number of directors
------------------------
constituting the entire Board of Directors shall be not less than one (1) nor
more than fifteen (15), and the exact number shall be fixed from time to time by
the Board of Directors; provided, however, that the number of directors
constituting the entire Board shall be three (3) until otherwise changed by the
Board of Directors. No decrease in the number of directors shall shorten the
term of any director at the time in office. Directors need not be residents of
the State of Delaware or stockholders of the Corporation.
Section 3. Meetings of the Board; Notice of Meetings; Waiver of Notice.
-----------------------------------------------------------
Regular meetings of the Board of Directors may be held at such places within or
without the State of Delaware and at such times as the Board of Directors may
from time to time determine, and if so determined, notices thereof need not be
given. Special meetings of the Board of Directors may be held at such places
within or without the State of Delaware and may be called by the President or
two or more directors. Written notice of the time and place of such special
meetings shall be given to each director by the persons calling such meeting by
first class or registered mail at least four (4) days before the meeting or by
telephone, telecopy or in person at least two (2) days before the meeting.
Whenever notice is required to be given to any director, a written waiver
thereof, signed by such director, whether before or after the time stated
therein, shall be deemed equivalent to notice. Attendance at a meeting shall
constitute a waiver of any required notice of such meeting, except when the
director attends such meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened. Neither the business to be transacted at,
nor the purpose of, any meeting of the Board of Directors need be stated in the
notice or waiver of notice of such meeting.
Section 4. Quorum; Vote Requirement. A majority of the total number of
------------------------
directors shall constitute a quorum for the transaction of business at any
meeting. When a quorum is present, the vote of a majority of the
4
<PAGE>
directors present shall be the act of the Board of Directors, unless a greater
vote is required by law, by the Certificate of Incorporation or by these Bylaws.
Section 5. Organization. Meetings of the Board of Directors shall be
------------
presided over by the Chairman of the Board, if any, or in his absence by the
President, or in their absence by a chairman chosen at the meeting. The
Secretary shall act as secretary of the meeting, but in his absence the chairman
of the meeting may appoint any person to act as secretary of the meeting.
Section 6. Action of Board without Meeting. Any action required or
-------------------------------
permitted to be taken at a meeting of the Board of Directors or any committee
thereof may be taken without a meeting if written consent, setting forth the
action so taken, is signed by all the directors or committee members and filed
with the minutes of the proceedings of the Board of Directors or committee.
Such consent shall have the same force and effect as a unanimous affirmative
vote of the Board of Directors or committee, as the case may be.
Section 7. Resignations; Removal; Vacancies. Any director may resign at
--------------------------------
any time upon written notice to the Corporation. The entire Board of Directors
or any individual director may be removed only for cause and only at a
stockholders meeting called for that purpose by the affirmative vote of the
holders of at least two-thirds of the shares entitled to vote at an election of
directors. Any newly created directorship or any vacancy occurring in the Board
of Directors may be filled by the affirmative vote of a majority of the
remaining directors, although such a majority is less than a quorum of the Board
of Directors, or by a plurality of the votes cast at a meeting of the
stockholders. A director elected to fill a vacancy shall serve for the
unexpired term of his predecessor in office or until the next election of
directors by the stockholders and the election and qualification of his
successor.
Section 8. Conference Telephone Meeting. Unless the Certificate of
----------------------------
Incorporation otherwise provides, members of the Board of Directors, or any
committee designated by the Board of Directors, may participate in a meeting of
the Board or any such committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation in a meeting pursuant to this
Section 8 shall constitute presence in person at such meeting.
Section 9. Committees. The Board of Directors, by resolution passed by a
----------
majority of all of the directors, may designate one or more committees, each
committee to consist of one or more of the directors. The Board may designate
one or more directors as alternate members of any committee, who may replace any
absent or disqualified member at any meeting of the committee. In the absence
or disqualification of a member of the committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another member of the Board of
Directors to act at the meeting in place of any such absent or disqualified
member. Any such committee, to the extent provided in the resolution of the
Board of Directors, shall have and may exercise all the power and authority of
the Board of Directors in the management of the business and affairs of the
Corporation, and may authorize the seal of the Corporation to be affixed to all
papers which may require it; provided that no committee shall have the power or
authority of the Board of Directors in reference to (a) amending the Certificate
of Incorporation (except that a committee may, to the extent authorized in the
resolution or resolutions providing for the issuance of shares of stock adopted
by the Board of Directors as provided in Section 151(a) of the Delaware General
Corporation Law fix the designations and any of the preferences or rights of
such shares relating to dividends, redemption, dissolution, any distribution of
assets of the Corporation or the conversion into, or the exchange of such shares
for, shares of any other class or classes or any other series of the same or any
other class or classes of stock of the Corporation), (b) adopting an agreement
of merger or consolidation under Sections 251 or 252 of the Delaware General
Corporation Law, (c) recommending to the stockholders the sale, lease or
exchange of all or substantially all of the property and assets of the
Corporation, (d) recommending to the stockholders a dissolution of the
Corporation or a revocation thereof, or (e) amending the Bylaws of the
Corporation. In addition, unless the resolution of the Board of Directors or
the Certificate of Incorporation expressly so provides, no such committee shall
have the power or authority to declare a dividend, to authorize the issuance of
stock, or to adopt a certificate of ownership and merger pursuant to Section 253
of the Delaware General Corporation Law. Unless the Board of Directors
otherwise provides, each committee designated
5
<PAGE>
by the Board may make, alter and repeal rules for the conduct of its business.
In the absence of such rules each committee shall conduct its business in the
same manner as the Board of Directors conducts its business pursuant to this
Article II.
ARTICLE III
OFFICERS
--------
Section 1. Executive Structure of the Corporation. The officers of the
--------------------------------------
Corporation shall be elected by the Board of Directors and shall consist of a
Chairman of the Board of Directors, a Chief Executive Officer, a President and a
Secretary and such other officers or assistant officers, including one or more
Executive Vice Presidents, Senior Vice Presidents, Vice Presidents, Secretaries,
Treasurers, Assistant Secretaries or Assistant Treasurers, or any other officers
that the Board of Directors may establish, as may be elected by the Board of
Directors. Each officer shall hold office for the term for which such officer
has been elected or until such officer's successor is elected and qualified, or
until such officer's earlier resignation, removal from office, or death. Any
two or more offices may be held by the same person.
Section 2. Duties and Responsibilities. Each officer, employee and agent
---------------------------
of the Corporation shall have such duties and authority as may be conferred upon
such officer, employee or agent by the Board of Directors or delegated to such
officer, employee or agent by the President.
Section 3. Resignations; Removal; Vacancies. Any officer may resign at
--------------------------------
any time upon written notice to the Corporation. The Board of Directors may
remove any officer with or without cause at any time, but such removal shall be
without prejudice to the contractual rights of such officer, if any, with the
Corporation. Any vacancy occurring in any office of the Corporation by reason
of death, resignation, removal or otherwise may be filled for the unexpired
portion of the term by the Board of Directors at any regular or special meeting.
Section 4. Compensation. The salaries of the officers shall be fixed from
------------
time to time by the Board of Directors or by any officer designated by the
Board. No officer shall be prevented from receiving such salary by reason of
the fact that such officer is also a director of the Corporation.
ARTICLE IV
STOCK
-----
Section 1. Stock Certificates. The shares of stock of the Corporation
------------------
shall be represented by certificates, provided that the Board of Directors may
by resolution provide that some or all of any or all classes or series of stock
shall be uncertificated shares. Certificates shall be in such form as may be
approved by the Board of Directors, which certificates shall be issued to
stockholders of the Corporation in numerical order from the stock book of the
Corporation, and each of which shall bear the name of the stockholder, the
number of shares represented, and the date of issue; and which shall be signed
by the President or a Vice President and the Secretary or an Assistant Secretary
of the Corporation or any other officer authorized to sign by the Board of
Directors; and which shall be sealed with the seal of the Corporation. Any or
all of the signatures on the certificate may be a facsimile. In case any
officer, transfer agent, or registrar who has signed or whose facsimile
signature has been placed upon a certificate shall have ceased to be such
officer, transfer agent or registrar before such certificate is issued, it may
be issued by the Corporation with the same effect as if he were such officer,
transfer agent or registrar at the date of issue.
Within a reasonable time after the issuance or transfer of uncertificated
stock, the Corporation shall send to the registered owner thereof a written
notice containing the information required to be set forth or stated on
certificates pursuant to Section 151, 156, 202(a) or 218(a) of the Delaware
General Corporation Law or a statement that the Corporation will furnish without
charge to each stockholder who so requests the powers, designations,
6
<PAGE>
preferences and relative participating, optional or other special rights of each
class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights.
Section 2. Transfer of Stock. Shares of stock of the Corporation shall
-----------------
be transferred only on the books of the Corporation upon surrender to the
Corporation of the certificate or certificates representing the shares to be
transferred accompanied by an assignment in writing of such shares properly
executed by the stockholder of record or such stockholder's duly authorized
attorney-in-fact and with all taxes on the transfer having been paid. The
Corporation may refuse any requested transfer until furnished evidence
satisfactory to it that such transfer is proper. Upon the surrender of a
certificate for transfer of stock, such certificate shall at once be
conspicuously marked on its face "Cancelled" and filed with the permanent stock
records of the Corporation. Upon receipt of proper transfer instructions from
the registered owner of uncertificated shares such uncertificated shares shall
be cancelled and issuance of new equivalent uncertificated shares or
certificated shares shall be made to the person entitled thereto and the
transaction shall be recorded upon the books of the Corporation. The Board of
Directors may make such additional rules concerning the issuance, transfer and
registration of stock.
Section 3. Lost, Stolen or Destroyed Stock Certificates; Issuance of New
-------------------------------------------------------------
Certificates. The Corporation may issue a new certificate of stock or
- ------------
uncertificated shares in the place of any certificate theretofore issued by it,
alleged to have been lost, stolen or destroyed, and the Corporation may require
the owner of the lost, stolen or destroyed certificate, or his legal
representative, to give the Corporation a bond sufficient to indemnify it
against any claim that may be made against it on account of the alleged loss,
theft or destruction of any such certificate or the issuance of such new
certificate or uncertificated shares.
Section 4. Registered Stockholders. The Corporation may deem and treat
-----------------------
the holder of record of any stock as the absolute owner for all purposes and
shall not be required to take any notice of any right or claim of right of any
other person.
ARTICLE V
DEPOSITORIES, SIGNATURES AND SEAL
---------------------------------
Section 1. Depositories. All funds of the Corporation shall be deposited
------------
in the name of the Corporation in such bank, banks, or other financial
institutions as the Board of Directors may from time to time designate and shall
be drawn out on checks, drafts or other orders signed on behalf of the
Corporation by such person or persons as the Board of Directors may from time to
time designate.
Section 2. Contracts and Deeds. All contracts, deeds and other
-------------------
instruments shall be signed on behalf of the Corporation by the President or by
such other officer, officers, agent or agents as the Board of Directors may
provide from time to time by resolution.
Section 3. Seal. The Board of Directors shall provide for a suitable
----
seal, which seal shall be in the charge of the Secretary.
7
<PAGE>
ARTICLE VI
INDEMNIFICATION
---------------
Section 1. Right to Indemnification. The Corporation shall indemnify and
------------------------
hold harmless, to the fullest extent permitted by applicable law as it presently
exists or may hereafter be amended (but, in the case of any such amendment, only
to the extent that such amendment permits the Corporation to provide broader
indemnification rights than said law permitted the Corporation to provide prior
to such amendment), any person who was or is made a party or is threatened to be
made a party to or is otherwise involved in any action, suit or proceeding,
whether civil, criminal, administrative or investigative (hereinafter a
"Proceeding"), by reason of the fact that he, or a person for whom he is the
legal representative, is or was a director of the Corporation or is or was
serving at the request of the Corporation as a director of another corporation
or of a partnership, joint venture, trust, enterprise or non-profit entity,
including service with respect to employee benefit plans, against all expense,
liability and loss (including attorneys' fees, judgments, fines, ERISA excise
taxes or penalties and amounts to be paid in settlement) reasonably incurred by
such person in connection therewith and such indemnification shall continue as
to a person who has ceased to be a director of the Corporation (or other entity)
and shall inure to the benefit of his heirs, executors and administrators. The
Corporation shall be required to indemnify a person in connection with a
proceeding (or part thereof) initiated by such person only if such proceeding
(or part thereof) was authorized by the Board of Directors of the Corporation.
Section 2. Power of Indemnification. The Corporation shall have the
------------------------
power to indemnify and hold harmless, to the fullest extent permitted by
applicable law as it presently exists or may hereafter be amended (but, in the
case of any such amendment, only to the extent that such amendment permits the
Corporation to provide broader indemnification rights than said law permitted
the Corporation to provide prior to such amendment), any person who was or is
made a party or is threatened to be made a party to or is otherwise involved in
any action, suit or proceeding, whether civil, criminal, administrative or
investigative (hereinafter a "Proceeding"), by reason of the fact that he, or a
person for whom he is the legal representative, is or was an officer, employee
or agent of the Corporation or is or was serving at the request of the
Corporation as an officer, employee or agent of another corporation or of a
partnership, joint venture, trust, enterprise or non-profit entity, including
service with respect to employee benefit plans, against all expense, liability
and loss (including attorneys' fees, judgments, fines, ERISA excise taxes or
penalties and amounts to be paid in settlement) reasonably incurred by such
person in connection therewith and such indemnification may be continued as to a
person who has ceased to be an officer, employee or agent of the Corporation (or
other entity) and shall inure to the benefit of his heirs, executors and
administrators.
Section 3. Prepayment of Expenses. The Corporation shall pay the
-----------------------
expenses as they are incurred in defending any proceeding in advance of its
final disposition; provided, however, that, if the Delaware General Corporation
Law requires, the payment of such expenses incurred by a director or officer in
his or her capacity as a director or officer (and not in any other capacity in
which service was or is rendered by such person while a director or officer,
including, without limitation, service to an employee benefit plan) in advance
of the final disposition of the proceeding shall be made only upon delivery to
the Corporation of (a) an undertaking, by or on behalf of such director or
officer, to repay all amounts so advanced if it shall ultimately be determined
that such director or officer is not entitled to be indemnified under this
Article VI or otherwise and (b) such individual furnishes to the Corporation a
written affirmation of such individual's good faith belief that such
individual's conduct does not constitute behavior of the kind that may not be
indemnified under Section 1 or 2.
Section 4. Payment of Indemnification. If a claim for indemnification or
--------------------------
payment of expenses under this Article VI is not paid in full by the Corporation
within 90 days after a written claim therefor has been received by the
Corporation, the claimant may at any time thereafter file suit against the
Corporation to recover the unpaid amount of the claim and, if successful in
whole or in part, shall be entitled to be paid also the expense of prosecuting
such claim. In any such action the Corporation shall have the burden of proving
that the claimant was not entitled to the requested indemnification or payment
of expenses under applicable law.
8
<PAGE>
Section 5. Indemnification Not Exclusive. The right to indemnification
-----------------------------
and the payment of expenses incurred in defending a proceeding in advance of its
final disposition conferred in this Article VI shall not be exclusive of any
other right which any person may have or hereafter acquire under any statute,
provision of the Certificate of Incorporation, these Bylaws, agreement, vote of
stockholders or disinterested directors or otherwise.
Section 6. Insurance. The Corporation may maintain insurance, at its
---------
expense, to protect itself and any director or officer of the Corporation or
another corporation, partnership, joint venture, trust or other enterprise
against any expense, liability or loss, whether or not the Corporation would
have the power to indemnify such person against such expense, liability or loss
under the Delaware General Corporation Law.
Section 7. Other Indemnification. The Corporation's obligation, if any,
---------------------
to indemnify any person who was or is serving at its request as a director of
another corporation, partnership, joint venture, trust, enterprise or non-profit
entity shall be reduced by any amount such person may collect as indemnification
from such other corporation, partnership, joint venture, trust, enterprise or
non-profit enterprise.
Section 8. Amendment or Repeal. Any repeal or modification of the
-------------------
foregoing provisions of this Article VI shall not adversely affect any right or
protection hereunder of any person in respect of any act or omission occurring
prior to the time of such repeal or modification.
ARTICLE VII
AMENDMENT OF BYLAWS
-------------------
Section 1. Directors. In furtherance and not in limitation of the powers
---------
conferred by stature, the Board of Directors is expressly authorized to make,
adopt, alter, amend, change or repeal the Bylaws of the Corporation.
Section 2. Stockholders. The stockholders of the Corproation may not
------------
make, adopt, alter, amend, change or repeal the Bylaws of the Corporation except
upon the affirmation vote of not less than two/thirds (66 2/3%) of the
outstanding stock of the Corproation entitled to vote thereon; provided,
however, that the power of the stockholders to make, adopt, alter, amend, change
or repeal the Bylaws of the Corporation is further subject to the provisions of
the Certificate of Incorporation.
9
<PAGE>
EXHIBIT 4.1
-----------
RIGHTS AGREEMENT
DATED AS OF
NOVEMBER 25, 1998
BETWEEN
CITATION CORPORATION
AND
THE BANK OF NEW YORK,
AS RIGHTS AGENT
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
<S> <C>
1. Certain Definitions........................................................................................ 1
2. Appointment of Rights Agent................................................................................ 4
3. Issue of Right Certificates................................................................................ 4
4. Form of Right Certificates................................................................................. 5
5. Countersignature and Registration.......................................................................... 6
6. Transfer, Split Up, Combination and Exchange of Right Certificates; Mutilated, Destroyed, Lost or Stolen
Right Certificates.................................................................................... 6
7. Exercise of Rights, Purchase Price; Expiration Date of Rights.............................................. 7
8. Cancellation and Destruction of Right Certificates......................................................... 8
9. Availability of Shares of Preferred Stock.................................................................. 8
10. Preferred Stock Record Date................................................................................ 9
11. Adjustment of Purchase Price, Number and Kind of Shares and Number of Rights............................... 9
12. Certificate of Adjusted Purchase Price or Number of Shares................................................. 14
13. Consolidation, Merger or Sale or Transfer of Assets or Earnings Power...................................... 15
14. Fractional Rights and Fractional Shares.................................................................... 17
15. Rights of Action........................................................................................... 18
16. Agreement of Right Holders................................................................................. 18
17. Right Certificate Holder Not Deemed a Stockholder.......................................................... 18
18. Concerning the Rights Agent................................................................................ 19
19. Merger or Consolidation or Change of Name of Rights Agent.................................................. 19
20. Duties of Rights Agent..................................................................................... 20
21. Change of Rights Agent..................................................................................... 21
22. Issuance of New Right Certificates......................................................................... 22
23. Redemption................................................................................................. 22
</TABLE>
<PAGE>
<TABLE>
<S> <C>
24. Exchange................................................................................................. 22
25. Notice of Certain Events................................................................................. 23
26. Notices.................................................................................................. 24
27. Supplements and Amendments............................................................................... 24
28. Successors............................................................................................... 25
29. Benefits of this Agreement............................................................................... 25
30. Determinations and Actions by the Board of Directors..................................................... 25
31. Severability............................................................................................. 25
32. Governing law............................................................................................ 25
33. Counterparts............................................................................................. 25
34. Descriptive Headings..................................................................................... 25
</TABLE>
<PAGE>
RIGHTS AGREEMENT
----------------
This Rights Agreement is dated as of November 25, 1998 ("Agreement"),
between Citation Corporation, a Delaware corporation (the "Company"), and The
Bank of New York, a New York banking corporation, as Rights Agent (the "Rights
Agent").
The Board of Directors of the Company has authorized and declared a
dividend of one preferred share purchase right (a "Right") for each share of
Common Stock (as hereinafter defined) of the Company outstanding as of the Close
of Business (as defined below) on December 7, 1998 (the "Record Date"), each
Right representing the right to purchase one one-hundredth (subject to
adjustment) of a share of Preferred Stock (as hereinafter defined), upon the
terms and subject to the conditions herein set forth, and has further authorized
and directed the issuance of one Right (subject to adjustment as provided
herein) with respect to each share of Common Stock that shall become outstanding
between the Record Date and the earlier of the Distribution Date and the
Expiration Date (as such terms are hereinafter defined); provided, however, that
Rights may be issued with respect to shares of Common Stock that shall become
outstanding after the Distribution Date and prior to the Expiration Date in
accordance with Section 22.
Accordingly, in consideration of the premises and the mutual
agreements herein set forth, the parties hereby agree as follows:
Section 1. Certain Definitions. For purposes of this Agreement, the
-------------------
following terms have the meaning indicated:
(a) "Acquiring Person" shall mean any Person (as such term is
hereinafter defined) who or which shall be the Beneficial Owner (as such term is
hereinafter defined) of 15% or more of the shares of Common Stock then
outstanding, but shall not include an Exempt Person (as such term is hereinafter
defined); provided, however, that if the Board of Directors of the Company
determines in good faith that a Person who would otherwise be an "Acquiring
Person" became such inadvertently, and if such Person as promptly as practicable
divests itself of Beneficial Ownership of a sufficient number of shares of
Common Stock so that such Person would no longer be an "Acquiring Person," then
such Person shall not be deemed to be or to have become an "Acquiring Person"
for any purposes of this Agreement. Notwithstanding the foregoing, no Person
shall become an "Acquiring Person" as the result of an acquisition of shares of
Common Stock by the Company which, by reducing the number of shares outstanding,
increases the proportionate number of shares of Common Stock beneficially owned
by such Person to 15% or more of the shares of Common Stock then outstanding,
provided, however, that if a Person shall become the Beneficial Owner of 15% or
more of the shares of Common Stock then outstanding by reason of such share
acquisitions by the Company and shall thereafter become the Beneficial Owner of
any additional shares of Common Stock, then such Person shall be deemed to be an
"Acquiring Person" unless upon the consummation of the acquisition of such
additional shares of Common Stock such Person does not own 15% or more of the
shares of Common Stock then outstanding. In addition, notwithstanding the
foregoing, no Person who or which on November 25, 1998 was the Direct Beneficial
Owner of 15% or more of the shares of Common Stock then outstanding or the
Indirect Beneficial Owner of 15% or more of the shares of Common Stock then
outstanding shall be an "Acquiring Person" as the result of such Direct or
Indirect Beneficial Ownership as of such date; provided however, if such Person
who is a Direct or Indirect Beneficial Owner of more than 15% of such shares
shall thereafter become the Beneficial Owner of any additional shares of Common
Stock, or if such Person who is an Indirect Beneficial Owner of more than 15% of
such shares shall thereafter convert such Person's ownership of any shares held
as an Indirect Beneficial Owner into shares held as a Direct Beneficial Owner,
then such Person shall be deemed to be an "Acquiring Person" unless upon the
consummation of the acquisition of such additional shares of Common Stock or
such conversion from Indirect Beneficial Ownership to Direct Beneficial
Ownership such Person does not own 15% or more of the shares of Common Stock
then outstanding. For all purposes of this Agreement, any calculation of the
number of shares of Common Stock outstanding at any particular time, including
for purposes of determining
1
<PAGE>
the particular percentage of such outstanding shares of Common Stock of which
any Person is the Beneficial Owner, shall be made in accordance with the last
sentence of Rule 13d-3(d)(1)(i) of the General Rules and Regulations under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), as in effect
on the date hereof.
(b) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Exchange Act, as in effect on the date of this Rights Agreement.
(c) A Person shall be deemed the "Beneficial Owner" of, shall be
deemed to have "Beneficial Ownership" of and shall be deemed to "beneficially
own" any securities:
(i) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has or shares the right to vote (or to
direct the voting) or to dispose (or to direct the disposition) of, including
pursuant to any agreement, arrangement or understanding (whether or not in
writing); or
(ii) which such Person or any of such Person's Affiliates or
Associates has (A) the right to acquire (whether such right is exercisable
immediately or only after the passage of time) pursuant to any agreement,
arrangement or understanding (other than customary agreements with and between
underwriters and selling group members with respect to a bona fide public
offering of securities), or upon the exercise of conversion rights, exchange
rights, rights, warrants or options, or otherwise; provided, however, that a
Person shall not be deemed the Beneficial Owner of, or to beneficially own,
securities tendered pursuant to a tender or exchange offer made by or on behalf
of such Person or any of such Person's Affiliates or Associates until such
tendered securities are accepted for purchase or exchange; or (B) the right to
vote pursuant to any agreement, arrangement or understanding; provided, however,
that (notwithstanding Section 1(c)(i) above) a Person shall not be deemed the
Beneficial Owner of, or to beneficially own, any security by reason of any
agreement, arrangement or understanding if the agreement, arrangement or
understanding to vote such security (1) arises solely from a revocable proxy or
consent given to such Person in response to a public proxy or consent
solicitation made pursuant to, and in accordance with, the applicable rules and
regulations promulgated under the Exchange Act and (2) is not also then
reportable on Schedule 13D under the Exchange Act (or any comparable or
successor report); or
(iii) which are beneficially owned, directly or indirectly, by any
other Person with which such Person or any of such Person's Affiliates or
Associates has any agreement, arrangement or understanding (other than customary
agreements with and between underwriters and selling group members with respect
to a bona fide public offering of securities) for the purpose of acquiring,
holding, voting (except to the extent contemplated by the proviso to Section
1(c)(ii)(B)) or disposing of any securities of the Company; provided, however,
that no Person who is an officer, director or employee of an Exempt Person shall
be deemed, solely by reason of such Person's status or authority as such, to be
the "Beneficial Owner" of, to have "Beneficial Ownership" of or to "beneficially
own" any securities that are "beneficially owned" (as defined in this Section
1(c)), including, without limitation, in a fiduciary capacity, by an Exempt
Person or by any other such officer, director or employee of an Exempt Person.
(d) "Business Day" shall mean any day other than a Saturday, a Sunday
or a day on which banking institutions in the State of New York are authorized
or obligated by law or executive order to close.
(e) "Close of Business" on any given date shall mean 5:00 P.M., New
York time, on such date; provided, however, that if such date is not a Business
Day it shall mean 5:00 P.M., New York time, on the next succeeding Business Day.
(f) "Common Stock" when used with reference to the Company shall mean
the Common Stock, presently par value $0.01 per share, of the Company. "Common
Stock" when used with reference to any Person other than the Company shall mean
the common stock (or, in the case of an unincorporated entity, the equivalent
equity interest) with the greatest voting power of such other Person or, if such
other Person is a subsidiary of another Person, the Person or Persons which
ultimately control such first-mentioned Person.
2
<PAGE>
(g) "Common Stock equivalents" shall have the meaning set forth in
Section 11(a)(iii) hereof.
(h) "Current Value" shall have the meaning set forth in Section
11(a)(iii) hereof.
(i) "Direct Beneficial Owner" shall mean a Person who beneficially
owns any securities within the meaning of Section 1(c)(i) hereof. As to such
securities, such Person is a Direct Beneficial Owner.
(j) "Distribution Date" shall have the meaning set forth in Section 3
hereof.
(k) "Equivalent preferred shares" shall have the meaning set forth in
Section 11(b) hereof.
(l) "Exempt Person" shall mean the Company or any Subsidiary (as such
term is hereinafter defined) of the Company, in each case including, without
limitation, in its fiduciary capacity, or any employee benefit plan of the
Company or of any Subsidiary of the Company, or any entity or trustee holding
Common Stock for or pursuant to the terms of any such plan or for the purpose of
funding any such plan or funding other employee benefits for employees of the
Company or of any Subsidiary of the Company.
(m) "Exchange Consideration" shall have the meaning set forth in
Section 24 hereof.
(n) "Expiration Date" shall have the meaning set forth in Section 7
hereof.
(o) "Flip-In Event" shall have the meaning set forth in Section
11(a)(ii) hereof.
(p) "Final Expiration Date" shall have the meaning set forth in
Section 7 hereof.
(q) "Indirect Beneficial Owner" shall mean a Person who beneficially
owns any securities within the meaning of Sections 1(c)(ii) or 1(c)(iii). As to
such securities, such Person is an Indirect Beneficial Owner.
(r) "NASDAQ" shall mean the National Association of Securities
Dealers, Inc. Automated Quotation System.
(s) "New York Stock Exchange" shall mean the New York Stock Exchange,
Inc.
(t) "Person" shall mean any individual, firm, corporation,
partnership, association, trust, group (as such term is used in Rule 13d-5 under
the Exchange Act as in effect on the date of this Agreement or any successor
rule or provision) or other entity, and shall include any successor (by merger
or otherwise) to such entity.
(u) "Preferred Stock" shall mean the Series A Junior Participating
Preferred Stock, par value $0.01 per share, of the Company having the rights and
preferences set forth in the Form of Certificate of Designations attached to
this Rights Agreement as Exhibit A.
(v) "Principal Party" shall have the meaning set forth in Section 13
hereof.
(w) "Purchase Price" shall have the meaning set forth in Section 4
hereof.
(x) "Record Date" shall have the meaning set forth in the second
introductory paragraph of this Agreement.
(y) "Redemption Date" shall have the meaning set forth in Section 7
hereof.
(z) "Redemption Price" shall have the meaning set forth in Section 23
hereof.
3
<PAGE>
(aa) "Right Certificate" shall have the meaning set forth in Section 3
hereof.
(bb) "Rights" shall mean the rights to purchase Preferred Stock (or
other securities) as provided in this Agreement.
(cc) "Securities Act" shall mean the Securities Act of 1933, as
amended.
(dd) "Section 11(a)(ii) Trigger Date" shall have the meaning set forth
in Section 11(a)(iii) hereof.
(ee) "Spread" shall have the meaning set forth in Section 11(a)(iii)
hereof.
(ff) "Stock Acquisition Date" shall mean the first date of public
announcement (which, for purposes of this definition, shall include, without
limitation, a report filed pursuant to Section 13(d) of the Exchange Act) by the
Company or an Acquiring Person that an Acquiring Person has become such, or such
earlier date as a majority of the Board of Directors shall become aware of the
existence of an Acquiring Person.
(gg) "Subsidiary" of any Person shall mean any corporation or other
entity of which securities or other ownership interests having ordinary voting
power sufficient to elect a majority of the board of directors or other persons
performing similar functions are beneficially owned, directly or indirectly, by
such Person, and any corporation or other entity that is otherwise controlled by
such Person.
(hh) "Substitution Period" shall have the meaning set forth in Section
11(a)(iii) hereof.
(ii) "Summary of Rights" shall have the meaning set forth in Section 3
hereof.
(jj) "Trading Day" shall have the meaning set forth in Section 11(d)
hereof.
Section 2. Appointment of Rights Agent. The Company hereby appoints
---------------------------
the Rights Agent to act as agent for the Company and the holders of the Rights
(who, in accordance with Section 3 hereof, shall prior to the Distribution Date
be the holders of Common Stock) in accordance with the terms and conditions
hereof, and the Rights Agent hereby accepts such appointment. The Company may
from time to time appoint such co-Rights Agents as it may deem necessary or
desirable. The Rights Agent shall have no duty to supervise, and shall in no
event be liable for, the acts or omissions of any such co-Rights Agent.
Section 3. Issue of Right Certificates.
---------------------------
(a) Until the Close of Business on the earlier of (i) the tenth day
after the Stock Acquisition Date or (ii) the tenth Business Day (or such later
date as may be determined by action of the Board of Directors prior to such time
as any Person becomes an Acquiring Person) after the date of the commencement by
any Person (other than an Exempt Person) of, or of the first public announcement
of the intention of such Person (other than an Exempt Person) to commence, a
tender or exchange offer the consummation of which would result in any Person
(other than an Exempt Person) becoming the Beneficial Owner of shares of Common
Stock aggregating 15% or more of the Common Stock then outstanding (including
any such date which is after the date of this Agreement and prior to the
issuance of the Rights; the earlier of such dates being herein referred to as
the "Distribution Date"), (x) the Rights will be evidenced (subject to the
provisions of Section 3(b) hereof) by the certificates for Common Stock
registered in the names of the holders thereof and not by separate Right
Certificates, and (y) the Rights will be transferable only in connection with
the transfer of Common Stock. As soon as practicable after the Distribution
Date, the Company will notify the Rights Agent in writing that the Distribution
Date has occurred and the Company will prepare and execute, the Rights Agent
will countersign and the Company will send or cause to be sent (and the Rights
Agent will, if requested, send) by first-class, insured, postage-prepaid mail,
to each record holder of Common Stock as of the close of business on the
Distribution Date (other than any Acquiring Person or any Associate or Affiliate
of an Acquiring Person), at the address of such holder shown on the records of
the Company, a Right Certificate, in
4
<PAGE>
substantially the form of Exhibit B hereto (a "Right Certificate"), evidencing
one Right (subject to adjustment as provided herein) for each share of Common
Stock so held. As of the Distribution Date, the Rights will be evidenced solely
by such Right Certificates.
(b) On the Record Date, or as soon as practicable thereafter, the
Company will send a copy of a Summary of Rights to Purchase Shares of Preferred
Stock, in substantially the form of Exhibit C hereto (the "Summary of Rights"),
by first-class, postage-prepaid mail, to each record holder of Common Stock as
of the Close of Business on the Record Date (other than any Acquiring Person or
any Associate or Affiliate of any Acquiring Person), at the address of such
holder shown on the records of the Company. With respect to certificates for
Common Stock outstanding as of the Record Date, until the Distribution Date, the
Rights will be evidenced by such certificates registered in the names of the
holders thereof together with the Summary of Rights. Until the Distribution
Date (or, if earlier, the Expiration Date), the surrender for transfer of any
certificate for Common Stock outstanding on the Record Date, with or without a
copy of the Summary of Rights, shall also constitute the transfer of the Rights
associated with the Common Stock represented thereby.
(c) Certificates issued for Common Stock (including, without
limitation, upon transfer of outstanding Common Stock, disposition of Common
Stock out of treasury stock or issuance or reissuance of Common Stock out of
authorized but unissued shares) after the Record Date but prior to the earlier
of the Distribution Date and the Expiration Date shall have impressed on,
printed on, written on or otherwise affixed to them the following legend:
This certificate also evidences and entitles the holder
hereof to certain rights as set forth in a Rights Agreement
between Citation Corporation and The Bank of New York, as
Rights Agent, dated as of November 25, 1998 as the same may
be amended from time to time (the "Rights Agreement"), the
terms of which are hereby incorporated herein by reference
and a copy of which is on file at the principal executive
offices of Citation Corporation. Under certain
circumstances, as set forth in the Rights Agreement, such
Rights will be evidenced by separate certificates and will
no longer be evidenced by this certificate. Citation
Corporation will mail to the holder of this certificate a
copy of the Rights Agreement without charge after receipt of
a written request therefor. Under certain circumstances, as
-------------------------------
set forth in the Rights Agreement, Rights owned by or
-----------------------------------------------------
transferred to any Person who is or becomes an Acquiring
--------------------------------------------------------
Person (as defined in the Rights Agreement) and certain
-------------------------------------------------------
transferees thereof will become null and void and will no
---------------------------------------------------------
longer be transferable.
----------------------
With respect to such certificates containing the foregoing legend, until the
Distribution Date the Rights associated with the Common Stock represented by
such certificates shall be evidenced by such certificates alone, and the
surrender for transfer of any such certificate, except as otherwise provided
herein, shall also constitute the transfer of the Rights associated with the
Common Stock represented thereby. In the event that the Company purchases or
otherwise acquires any Common Stock after the Record Date but prior to the
Distribution Date, any Rights associated with such Common Stock shall be deemed
canceled and retired so that the Company shall not be entitled to exercise any
Rights associated with the Common Stock which are no longer outstanding.
Notwithstanding this paragraph (c), the omission of a legend shall not
affect the enforceability of any part of this Agreement or the rights of any
holder of the Rights.
Section 4. Form of Right Certificates. The Right Certificates (and the
--------------------------
forms of election to purchase shares and of assignment to be printed on the
reverse thereof) shall be substantially in the form set forth in Exhibit B
hereto and may have such marks of identification or designation and such
legends, summaries or endorsements printed thereon as the Company may deem
appropriate and as are not inconsistent with the provisions of this Agreement,
or as may be required to comply with any applicable law or with any rule or
regulation made pursuant thereto or
5
<PAGE>
with any rule or regulation of any stock exchange or inter-dealer quotation
system on which the Rights may from time to time be listed or quoted, or to
conform to usage. Subject to the provisions of Sections 11, 13 and 22 hereof,
the Right Certificates shall entitle the holders thereof to purchase such number
of one one-hundredths of a share of Preferred Stock as shall be set forth
therein at the price per one one-hundredth of a share of Preferred Stock set
forth therein (the "Purchase Price"), but the number of such one one-hundredths
of a share of Preferred Stock and the Purchase Price shall be subject to
adjustment as provided herein. All references herein to the Purchase Price
shall mean the Purchase Price as in effect at the time in question.
Section 5. Countersignature and Registration.
---------------------------------
(a) The Right Certificates shall be executed on behalf of the Company by
its Chairman, Chief Executive Officer, President, any of its Vice Presidents, or
Treasurer, either manually or by facsimile signature, shall have affixed thereto
the Company's seal or a facsimile thereof and shall be attested by the Secretary
of the Company, either manually or by facsimile signature. The Right
Certificates shall be manually countersigned by the Rights Agent and shall not
be valid for any purpose unless countersigned. In case any officer of the
Company who shall have signed any of the Right Certificates shall cease to be
such officer of the Company before countersignature by the Rights Agent and
issuance and delivery by the Company, such Right Certificates, nevertheless, may
be countersigned by the Rights Agent and issued and delivered by the Company
with the same force and effect as though the person who signed such Right
Certificates had not ceased to be such officer of the Company; and any Right
Certificate may be signed on behalf of the Company by any person who, at the
actual date of the execution of such Right Certificate, shall be a proper
officer of the Company to sign such Right Certificate, although at the date of
the execution of this Agreement any such person was not such an officer.
(b) Following the Distribution Date, the Rights Agent will keep or cause to
be kept, at an office or agency designated for such purpose, books for
registration and transfer of the Right Certificates issued hereunder. Such
books shall show the names and addresses of the respective holders of the Right
Certificates, the number of Rights evidenced on its face by each of the Right
Certificates and the date of each of the Right Certificates.
Section 6. Transfer, Split Up, Combination and Exchange of Right
-----------------------------------------------------
Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificates.
- ---------------------------------------------------------------------
(a) Subject to the provisions of Sections 7(e), 11(a)(ii) and 14 hereof,
at any time after the Distribution Date and prior to the Expiration Date, any
Right Certificate or Right Certificates (other than Right Certificates that have
become void pursuant to Section 11(a)(ii) hereof or that have been exchanged
pursuant to Section 24 hereof) may be transferred, split up, combined or
exchanged for another Right Certificate or Right Certificates, entitling the
registered holder to purchase a like number of one one-hundredths of a share of
Preferred Stock as the Right Certificate or Right Certificates surrendered then
entitled such holder to purchase. Any registered holder desiring to transfer,
split up, combine or exchange any Right Certificate or Right Certificates shall
make such request in writing delivered to the Rights Agent, and shall surrender
the Right Certificate or Right Certificates to be transferred, split up,
combined or exchanged at the office or agency of the Rights Agent designated for
such purpose. Thereupon the Rights Agent shall countersign and deliver to the
Person entitled thereto a Right Certificate or Right Certificates, as the case
may be, as so requested. The Company may require payment of a sum sufficient to
cover any tax or governmental charge that may be imposed in connection with any
transfer, split up, combination or exchange of Right Certificates.
(b) Subject to the provisions of Section 11(a)(ii) hereof, at any time
after the Distribution Date and prior to the Expiration Date, upon receipt by
the Company and the Rights Agent of evidence reasonably satisfactory to them of
the loss, theft, destruction or mutilation of a Right Certificate, and, in case
of loss, theft or destruction, of indemnity or security reasonably satisfactory
to them, and, at the Company's request, reimbursement to the Company and the
Rights Agent of all reasonable expenses incidental thereto, and upon surrender
to the Rights Agent and cancellation of the Right Certificate if mutilated, the
Company will make and deliver a new Right Certificate
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of like tenor to the Rights Agent for delivery to the registered holder in lieu
of the Right Certificate so lost, stolen, destroyed or mutilated.
Section 7. Exercise of Rights, Purchase Price; Expiration Date of Rights.
-------------------------------------------------------------
(a) Except as otherwise provided herein, the Rights shall become
exercisable on the Distribution Date, and thereafter the registered holder of
any Right Certificate may, subject to Section 11(a)(ii) hereof and except as
otherwise provided herein, exercise the Rights evidenced thereby in whole or in
part upon surrender of the Right Certificate, with the form of election to
purchase on the reverse side thereof duly executed, to the Rights Agent at the
office or agency of the Rights Agent designated for such purpose, together with
payment of the aggregate Purchase Price with respect to the total number of one
one-hundredths of a share of Preferred Stock (or other securities, cash or other
assets, as the case may be) as to which the Rights are exercised, at any time
which is both after the Distribution Date and prior to the time (the "Expiration
Date") that is the earliest of (i) the Close of Business on November 25, 2008
(the "Final Expiration Date"), (ii) the time at which the Rights are redeemed as
provided in Section 23 hereof (the "Redemption Date") or (iii) the time at which
such Rights are exchanged as provided in Section 24 hereof.
(b) The Purchase Price shall be initially $45.00 for each one one-hundredth
of a share of Preferred Stock purchasable upon the exercise of a Right. The
Purchase Price and the number of one one-hundredths of a share of Preferred
Stock or other securities or property to be acquired upon exercise of a Right
shall be subject to adjustment from time to time as provided in Sections 11 and
13 hereof and shall be payable in lawful money of the United States of America
in accordance with paragraph (c) of this Section 7.
(c) Upon receipt of a Right Certificate representing exercisable Rights,
with the form of election to purchase duly executed, accompanied by payment of
the aggregate Purchase Price for the shares of Preferred Stock to be purchased
and an amount equal to any applicable transfer tax required to be paid by the
holder of such Right Certificate in accordance with Section 9 hereof, in cash or
by certified check, cashier's check or money order payable to the order of the
Company, the Rights Agent shall thereupon promptly (i) (A) requisition from any
transfer agent of the Preferred Stock certificates for the number of shares of
Preferred Stock to be purchased and the Company hereby irrevocably authorizes
its transfer agent to comply with all such requests, or (B) requisition from the
depositary agent depositary receipts representing interests in such number of
one one-hundredths of a share of Preferred Stock as are to be purchased (in
which case certificates for the Preferred Stock represented by such receipts
shall be deposited by the transfer agent with the depositary agent) and the
Company hereby directs the depositary agent to comply with such request, (ii)
when appropriate, requisition from the Company the amount of cash to be paid in
lieu of issuance of fractional shares in accordance with Section 14 hereof,
(iii) after receipt of such certificates or depositary receipts, cause the same
to be delivered to or upon the order of the registered holder of such Right
Certificate, registered in such name or names as may be designated by such
holder and (iv) after receipt, deliver such cash, if any, to or upon the order
of the registered holder of such Right Certificate. The payment of the Purchase
Price (as such amount may be reduced pursuant to Section 11(a) hereof) may be
made in cash or by certified bank check or money order payable to the Company.
In the event that the Company is obligated to issue other securities of the
Company, pay cash and/or distribute other property pursuant to Section 11(a)
hereof, the Company will make all arrangements necessary so that such other
securities, cash and/or other property are available for distribution by the
Rights Agent, if and when appropriate.
(d) In case the registered holder of any Right Certificate shall exercise
less than all of the Rights evidenced thereby, a new Right Certificate
evidencing Rights equivalent to the exercisable Rights remaining unexercised
shall be issued by the Rights Agent to the registered holder of such Right
Certificate or to his duly authorized assigns, subject to the provisions of
Section 14 hereof.
(e) Notwithstanding anything in this Agreement to the contrary, neither
the Rights Agent nor the Company shall be obligated to undertake any action with
respect to a registered holder of Rights upon the occurrence of any purported
transfer or exercise of Rights pursuant to Section 6 hereof or this Section 7
unless such registered holder
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shall have (i) completed and signed the certificate contained in the form of
assignment or form of election to purchase set forth on the reverse side of the
Rights Certificate surrendered for such transfer or exercise and (ii) provided
such additional evidence of the identity of the Beneficial Owner (or former
Beneficial Owner) thereof as the Company shall reasonably request.
Section 8. Cancellation and Destruction of Right Certificates. All Right
--------------------------------------------------
Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Company or to any of its
agents, be delivered to the Rights Agent for cancellation or in cancelled form,
or, if surrendered to the Rights Agent, shall be cancelled by it, and no Right
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Agreement. The Company shall deliver to the
Rights Agent for cancellation and retirement, and the Rights Agent shall so
cancel and retire, any other Right Certificate purchased or acquired by the
Company otherwise than upon the exercise thereof. The Rights Agent shall
deliver all cancelled Right Certificates to the Company, or shall, at the
written request of the Company, destroy such cancelled Right Certificates, and
in such case shall deliver a certificate of destruction thereof to the Company.
Section 9. Availability of Shares of Preferred Stock.
-----------------------------------------
(a) The Company covenants and agrees that it will cause to be reserved and
kept available out of its authorized and unissued shares of Preferred Stock or
any shares of Preferred Stock held in its treasury, the number of shares of
Preferred Stock that will be sufficient to permit the exercise in full of all
outstanding Rights.
(b) So long as the shares of Preferred Stock (and, following the time
that any Person becomes an Acquiring Person, shares of Common Stock and other
securities) issuable upon the exercise of Rights may be listed or admitted to
trading on any national securities exchange, or quoted on NASDAQ, the Company
shall use its best efforts to cause, from and after such time as the Rights
become exercisable, all shares reserved for such issuance to be listed or
admitted to trading on such exchange, or quoted on NASDAQ, upon official notice
of issuance upon such exercise.
(c) From and after such time as the Rights become exercisable, the
Company shall use its best efforts, if then necessary to permit the issuance of
shares of Preferred Stock (and, following the time that any Person becomes an
Acquiring Person, shares of Common Stock and other securities) upon the exercise
of Rights, to register and qualify such shares of Preferred Stock (and,
following the time that any Person becomes an Acquiring Person, shares of Common
Stock and other securities) under the Securities Act and any applicable state
securities or "Blue Sky" laws (to the extent exemptions therefrom are not
available), cause such registration statement and qualifications to become
effective as soon as possible after such filing and keep such registration and
qualifications effective until the earlier of the date as of which the Rights
are no longer exercisable for such securities and the Expiration Date. The
Company may temporarily suspend, for a period of time not to exceed 90 days, the
exercisability of the Rights in order to prepare and file a registration
statement under the Securities Act and permit it to become effective. Upon any
such suspension, the Company shall notify the Rights Agent and shall issue a
public announcement stating that the exercisability of the Rights has been
temporarily suspended, as well as a public announcement at such time as the
suspension is no longer in effect. Notwithstanding any provision of this
Agreement to the contrary, the Rights shall not be exercisable in any
jurisdiction unless the requisite qualification in such jurisdiction shall have
been obtained and until a registration statement under the Securities Act (if
required) shall have been declared effective.
(d) The Company covenants and agrees that it will take all such action as
may be necessary to ensure that all shares of Preferred Stock (and, following
the time that any Person becomes an Acquiring Person, shares of Common Stock and
other securities) delivered upon exercise of Rights shall, at the time of
delivery of the certificates therefor (subject to payment of the Purchase
Price), be duly and validly authorized and issued and fully paid and
nonassessable shares.
(e) The Company further covenants and agrees that it will pay when due and
payable any and all federal and state transfer taxes and charges which may be
payable in respect of the issuance or delivery of the Right
8
<PAGE>
Certificates or of any shares of Preferred Stock (or shares of Common Stock or
other securities) upon the exercise of Rights. The Company shall not, however,
be required to pay any transfer tax which may be payable in respect of any
transfer or delivery of Right Certificates to a Person other than, or the
issuance or delivery of certificates or depositary receipts for the Preferred
Stock (or shares of Common Stock or other securities) in a name other than that
of, the registered holder of the Right Certificate evidencing Rights surrendered
for exercise or to issue or deliver any certificates or depositary receipts for
Preferred Stock (or shares of Common Stock or other securities) upon the
exercise of any Rights until any such tax shall have been paid (any such tax
being payable by that holder of such Right Certificate at the time of surrender)
or until it has been established to the Company's reasonable satisfaction that
no such tax is due.
Section 10. Preferred Stock Record Date. Each Person in whose name any
---------------------------
certificate for Preferred Stock is issued upon the exercise of Rights shall for
all purposes be deemed to have become the holder of record of the shares of
Preferred Stock represented thereby on, and such certificate shall be dated, the
date upon which the Right Certificate evidencing such Rights was duly
surrendered and payment of the Purchase Price (and any applicable transfer
taxes) was made; provided, however, that if the date of such surrender and
payment is a date upon which the Preferred Stock transfer books of the Company
are closed, such Person shall be deemed to have become the record holder of such
shares on, and such certificate shall be dated, the next succeeding Business Day
on which the Preferred Stock transfer books of the Company are open. Prior to
the exercise of the Rights evidenced thereby, the holder of a Right Certificate
shall not be entitled to any rights of a holder of Preferred Stock for which the
Rights shall be exercisable, including, without limitation, the right to vote or
to receive dividends or other distributions, and shall not be entitled to
receive any notice of any proceedings of the Company, except as provided herein.
Section 11. Adjustment of Purchase Price, Number and Kind of Shares and
-----------------------------------------------------------
Number of Rights. The Purchase Price, the number of shares of Preferred Stock
- ----------------
or other securities or property purchasable upon exercise of each Right and the
number of Rights outstanding are subject to adjustment from time to time as
provided in this Section 11.
(a)(i) In the event the Company shall at any time after the date of
this Agreement (A) declare a dividend on the Preferred Stock payable in shares
of Preferred Stock, (B) subdivide the outstanding Preferred Stock, (C) combine
the outstanding Preferred Stock into a smaller number of shares of Preferred
Stock or (D) issue any shares of its capital stock in a reclassification of the
Preferred Stock (including any such reclassification in connection with a
consolidation or merger in which the Company is the continuing or surviving
corporation), except as otherwise provided in this Section 11(a), the Purchase
Price in effect at the time of the record date for such dividend or of the
effective date of such subdivision, combination or reclassification, and the
number and kind of shares of capital stock issuable on such date, shall be
proportionately adjusted so that the holder of any Right exercised after such
time shall be entitled to receive the aggregate number and kind of shares of
capital stock which, if such Right had been exercised immediately prior to such
date and at a time when the Preferred Stock transfer books of the Company were
open, the holder would have owned upon such exercise and been entitled to
receive by virtue of such dividend, subdivision, combination or
reclassification; provided, however, that in no event shall the consideration to
be paid upon the exercise of one Right be less than the aggregate par value of
the shares of capital stock of the Company issuable upon exercise of one Right.
(ii) Subject to Section 24 of this Agreement, in the event any
Person becomes an Acquiring Person (the first occurrence of such event being
referred to hereinafter as the "Flip-In Event"), then (A) the Purchase Price
shall be adjusted to be the Purchase Price in effect immediately prior to the
Flip-In Event multiplied by the number of one one-hundredths of a share of
Preferred Stock for which a Right was exercisable immediately prior to such
Flip-In Event, whether or not such Right was then exercisable, and (B) each
holder of a Right, except as otherwise provided in this Section 11(a)(ii) and
Section 11(a)(iii) hereof, shall thereafter have the right to receive, upon
exercise thereof at a price equal to the Purchase Price (as so adjusted), in
accordance with the terms of this Agreement and in lieu of shares of Preferred
Stock, such number of shares of Common Stock as shall equal the result obtained
by dividing the Purchase Price (as so adjusted) by 50% of the current per share
market price of the Common Stock (determined pursuant to Section 11(d) hereof)
on the date of such Flip-In Event; provided, however,
9
<PAGE>
that the Purchase Price (as so adjusted) and the number of shares of Common
Stock so receivable upon exercise of a Right shall, following the Flip-In Event,
be subject to further adjustment as appropriate in accordance with Section 11(f)
hereof.
Notwithstanding anything in this Agreement to the contrary, however, from
and after the Flip-In Event, any Rights that are beneficially owned by (x) any
Acquiring Person (or any Affiliate or Associate of any Acquiring Person), (y) a
transferee of any Acquiring Person (or any such Affiliate or Associate) who
becomes a transferee after the Flip-In Event or (z) a transferee of any
Acquiring Person (or any such Affiliate or Associate) who became a transferee
prior to or concurrently with the Flip-In Event pursuant to either (I) a
transfer from the Acquiring Person to holders of its equity securities or to any
Person with whom it has any continuing agreement, arrangement or understanding
regarding the transferred Rights or (II) a transfer which the Board of Directors
has determined is part of a plan, arrangement or understanding which has the
purpose or effect of avoiding the provisions of this paragraph, and subsequent
transferees of such Persons, shall be void without any further action and any
holder of such Rights shall thereafter have no rights whatsoever with respect to
such Rights under any provision of this Agreement. The Company shall use all
reasonable efforts to ensure that the provisions of this Section 11(a)(ii) are
complied with, but neither the Company nor the Rights Agent shall have any
liability to any holder of Right Certificates or other Person as a result of the
Company's failure to make any determinations with respect to an Acquiring Person
or its Affiliates, Associates or transferees hereunder. From and after the
Flip-In Event, no Right Certificate shall be issued pursuant to Section 3 or
Section 6 hereof that represents Rights that are or have become void pursuant to
the provisions of this paragraph, and any Right Certificate delivered to the
Rights Agent that represents Rights that are or have become void pursuant to the
provisions of this paragraph shall be cancelled. From and after the occurrence
of an event specified in Section 13(a) hereof, any Rights that theretofore have
not been exercised pursuant to this Section 11(a)(ii) shall thereafter be
exercisable only in accordance with Section 13 and not pursuant to this Section
11(a)(ii).
(iii) The Company may at its option substitute for a share of Common
Stock issuable upon the exercise of Rights in accordance with the foregoing
subparagraph (ii) such number or fractions of shares of Preferred Stock having
an aggregate current market value equal to the current per share market price of
a share of Common Stock. In the event that there shall not be sufficient shares
of Common Stock issued but not outstanding or authorized but unissued to permit
the exercise in full of the Rights in accordance with the foregoing subparagraph
(ii), the Board of Directors shall, to the extent permitted by applicable law
and any material agreements then in effect to which the Company is a party (A)
determine the excess (such excess, the "Spread") of (1) the value of the shares
of Common Stock issuable upon the exercise of a Right in accordance with the
foregoing subparagraph (ii) (the "Current Value") over (2) the Purchase Price
(as adjusted in accordance with the foregoing subparagraph (ii)), and (B) with
respect to each Right (other than Rights which have become void pursuant to the
foregoing subparagraph (ii)), make adequate provision to substitute for the
shares of Common Stock issuable in accordance with the foregoing subparagraph
(ii) upon exercise of the Right and payment of the Purchase Price (as adjusted
in accordance therewith), (1) cash, (2) a reduction in such Purchase Price, (3)
shares of Preferred Stock or other equity securities of the Company (including,
without limitation, shares or fractions of shares of preferred stock which, by
virtue of having dividend, voting and liquidation rights substantially
comparable to those of the shares of Common Stock, are deemed in good faith by
the Board of Directors to have substantially the same value as the shares of
Common Stock (such shares of Preferred Stock and shares or fractions of shares
of preferred stock are hereinafter referred to as "Common Stock equivalents")),
(4) debt securities of the Company, (5) other assets, or (6) any combination of
the foregoing, having a value which, when added to the value of the shares of
Common Stock actually issued upon exercise of such Right, shall have an
aggregate value equal to the Current Value (less the amount of any reduction in
such Purchase Price), where such aggregate value has been determined by the
Board of Directors upon the advice of a nationally recognized investment banking
firm selected in good faith by the Board of Directors; provided, however, that
if the Company shall not make adequate provision to deliver value pursuant to
clause (B) above within thirty (30) days following the Flip-In Event (the
"Section 11(a)(ii) Trigger Date"), then the Company shall be obligated to
deliver, to the extent permitted by applicable law and any material agreements
then in effect to which the Company is a party, upon the surrender for exercise
of a Right and without requiring payment of such Purchase Price, shares of
Common Stock (to the extent available), and then, if necessary, such
10
<PAGE>
number or fractions of shares of Preferred Stock (to the extent available) and
then, if necessary, cash, which shares and/or cash have an aggregate value equal
to the Spread. If, upon the occurrence of the Flip-In Event, the Board of
Directors shall determine in good faith that it is likely that sufficient
additional shares of Common Stock could be authorized for issuance upon exercise
in full of the Rights, then, if the Board of Directors so elects, the thirty
(30) day period set forth above may be extended to the extent necessary, but not
more than ninety (90) days after the Section 11(a)(ii) Trigger Date, in order
that the Company may seek stockholder approval for the authorization of such
additional shares (such thirty (30) day period, as it may be extended, is herein
called the "Substitution Period"). To the extent that the Company determines
that some action need be taken pursuant to the second and/or third sentence of
this Section 11(a)(iii), the Company (x) shall provide, subject to Section
11(a)(ii) hereof and the last sentence of this Section 11(a)(iii) hereof, that
such action shall apply uniformly to all outstanding Rights and (y) may suspend
the exercisability of the Rights until the expiration of the Substitution Period
in order to seek any authorization of additional shares and/or to decide the
appropriate form of distribution to be made pursuant to such second sentence and
to determine the value thereof. In the event of any such suspension, the
Company shall notify the Rights Agent and shall issue a public announcement
stating that the exercisability of the Rights has been temporarily suspended, as
well as a public announcement at such time as the suspension is no longer in
effect. For purposes of this Section 11(a)(iii), the value of the shares of
Common Stock shall be the current per share market price (as determined pursuant
to Section 11(d)(i)) on the Section 11(a)(ii) Trigger Date and the per share or
fractional value of any "Common Stock equivalent" shall be deemed to equal the
current per share market price of the Common Stock. The Board of Directors of
the Company may, but shall not be required to, establish procedures to allocate
the right to receive shares of Common Stock upon the exercise of the Rights
among holders of Rights pursuant to this Section 11(a)(iii).
(b) In case the Company shall fix a record date for the issuance of
rights, options or warrants to all holders of Preferred Stock entitling them
(for a period expiring within 45 calendar days after such record date) to
subscribe for or purchase Preferred Stock (or shares having the same rights,
privileges and preferences as the Preferred Stock ("equivalent preferred
shares")) or securities convertible into Preferred Stock or equivalent preferred
shares at a price per share of Preferred Stock or equivalent preferred shares
(or having a conversion price per share, if a security convertible into shares
of Preferred Stock or equivalent preferred shares) less than the then current
per share market price of the Preferred Stock (determined pursuant to Section
11(d) hereof), on such record date, the Purchase Price to be in effect after
such record date shall be determined by multiplying the Purchase Price in effect
immediately prior to such record date by a fraction, the numerator of which
shall be the number of shares of Preferred Stock and equivalent preferred shares
outstanding on such record date plus the number of shares of Preferred Stock and
equivalent preferred shares which the aggregate offering price of the total
number of shares of Preferred Stock and/or equivalent preferred shares so to be
offered (and/or the aggregate initial conversion price of the convertible
securities so to be offered) would purchase at such current market price, and
the denominator of which shall be the number of shares of Preferred Stock and
equivalent preferred shares outstanding on such record date plus the number of
additional shares of Preferred Stock and/or equivalent preferred shares to be
offered for subscription or purchase (or into which the convertible securities
so to be offered are initially convertible); provided, however, that in no event
shall the consideration to be paid upon the exercise of one Right be less than
the aggregate par value of the shares of capital stock of the Company issuable
upon exercise of one Right. In case such subscription price may be paid in a
consideration part or all of which shall be in a form other than cash, the value
of such consideration shall be as determined in good faith by the Board of
Directors of the Company, whose determination shall be described in a statement
filed with the Rights Agent and shall be conclusive for all purposes. Shares of
Preferred Stock and equivalent preferred shares owned by or held for the account
of the Company shall not be deemed outstanding for the purpose of any such
computation. Such adjustment shall be made successively whenever such a record
date is fixed; and in the event that such rights, options or warrants are not so
issued, the Purchase Price shall be adjusted to be the Purchase Price which
would then be in effect if such record date had not been fixed.
(c) In case the Company shall fix a record date for the making of a
distribution to all holders of the Preferred Stock (including any such
distribution made in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation) of evidences of indebtedness
or assets (other than a regular quarterly cash dividend or a dividend payable in
Preferred Stock) or subscription rights or warrants (excluding those
11
<PAGE>
referred to in Section (b) hereof, the Purchase Price to be in effect after such
record date shall be determined by multiplying the Purchase Price in effect
immediately prior to such record date by a fraction, the numerator of which
shall be the then current per share market price of the Preferred Stock
(determined pursuant to Section (d) hereof, on such record date, less the fair
market value (as determined in good faith by the Board of Directors of the
Company whose determination shall be described in a statement filed with the
Rights Agent) of the portion of the assets or evidences of indebtedness so to be
distributed or of such subscription rights or warrants applicable to one share
of Preferred Stock, and the denominator of which shall be such current per share
market price (determined pursuant to Section 11(d) hereof) of the Preferred
Stock; provided, however, that in no event shall the consideration to be paid
upon the exercise of one Right be less than the aggregate par value of the
shares of capital stock of the Company to be issued upon exercise of one Right.
Such adjustments shall be made successively whenever such a record date is
fixed; and in the event that such distribution is not so made, the Purchase
Price shall again be adjusted to be the Purchase Price which would then be in
effect if such record date had not been fixed.
(d) (i) Except as otherwise provided in this Section 11(d)(i), for
the purpose of any computation hereunder, the "current per share market price"
of any security (a "Security" for the purpose of this Section 11(d)(i)) on any
date shall be deemed to be the average of the daily closing prices per share of
such Security for the 30 consecutive Trading Days (as such term is hereinafter
defined) immediately prior to such date; provided, however, that in the event
that the current per share market price of the Security is determined during a
period following the announcement by the issuer of such Security of (A) a
dividend or distribution on such Security payable in shares of such Security or
securities convertible into such shares, or (B) any subdivision, combination or
reclassification of such Security, and prior to the expiration of 30 Trading
Days after the ex-dividend date for such dividend or distribution, or the record
date for such subdivision, combination or reclassification, then, and in each
such case, the current per share market price shall be appropriately adjusted to
reflect the current market price per share equivalent of such Security. The
closing price for each day shall be the last sale price, regular way, or, in
case no such sale takes place on such day, the average of the closing bid and
asked prices, regular way, in either case as reported by the principal
consolidated transaction reporting system with respect to securities listed or
admitted to trading on the New York Stock Exchange or, if the Security is not
listed or admitted to trading on the New York Stock Exchange, as reported in the
principal consolidated transaction reporting system with respect to securities
listed on the principal national securities exchange on which the Security is
listed or admitted to trading or, if the Security is not listed or admitted to
trading on any national securities exchange, the last quoted price or, if not so
quoted, the average of the high bid and low asked prices in the over-the-counter
market, as reported by NASDAQ or such other system then in use, or, if on any
such date the Security is not quoted by any such organization, the average of
the closing bid and asked prices as furnished by a professional market maker
making a market in the Security selected by the Board of Directors of the
Company. The term "Trading Day" shall mean a day on which the principal national
securities exchange on which the Security is listed or admitted to trading is
open for the transaction of business or, if the Security is not listed or
admitted to trading on any national securities exchange, a Business Day.
(ii) For the purpose of any computation hereunder, if the Preferred
Stock is publicly traded, the "current per share market price" of the Preferred
Stock shall be determined in accordance with the method set forth in Section
11(d)(i). If the Preferred Stock is not publicly traded but the Common Stock is
publicly traded, the "current per share market price" of the Preferred Stock
shall be conclusively deemed to be the current per share market price of the
Common Stock as determined pursuant to Section 11(d)(i) multiplied by one-one
hundredth (appropriately adjusted to reflect any stock split, stock dividend or
similar transaction occurring after the date hereof). If neither the Common
Stock nor the Preferred Stock is publicly traded, "current per share market
price" shall mean the fair value per share as determined in good faith by the
Board of Directors of the Company, whose determination shall be described in a
statement filed with the Rights Agent.
(e) No adjustment in the Purchase Price shall be required unless such
adjustment would require an increase or decrease of at least 1% in the Purchase
Price; provided, however, that any adjustments which by reason of this Section
11(e) are not required to be made shall be carried forward and taken into
account in any subsequent adjustment. All calculations under this Section 11
shall be made to the nearest cent or to the nearest one
12
<PAGE>
ten-thousandth of a share of Preferred Stock or share of Common Stock or other
share or security, as the case may be. Notwithstanding the first sentence of
this Section (e), any adjustment required by this Section 11 shall be made no
later than the earlier of (i) three years from the date of the transaction which
requires such adjustment or (ii) the Expiration Date.
(f) If as a result of an adjustment made pursuant to Section 11(a)
hereof, the holder of any Right thereafter exercised shall become entitled to
receive any shares of capital stock of the Company other than the Preferred
Stock, thereafter the Purchase Price and the number of such other shares so
receivable upon exercise of a Right shall be subject to adjustment from time to
time in a manner and on terms as nearly equivalent as practicable to the
provisions with respect to the Preferred Stock contained in Sections 11(a),
11(b), 11(c), 11(e), 11(h), 11(i) and 11(m) hereof, as applicable, and the
provisions of Sections 7, 9, 10, 13 and 14 hereof with respect to the Preferred
Stock shall apply on like terms to any such other shares.
(g) All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of one one-hundredths of a
share of Preferred Stock purchasable from time to time hereunder upon exercise
of the Rights, all subject to further adjustment as provided herein.
(h) Unless the Company shall have exercised its election as provided in
Section 11(i), upon each adjustment of the Purchase Price as a result of the
calculations made in Sections 11(b) and (c), each Right outstanding immediately
prior to the making of such adjustment shall thereafter evidence the right to
purchase, at the adjusted Purchase Price, that number of one one-hundredths of a
share of Preferred Stock (calculated to the nearest one ten-thousandth of a
share of Preferred Stock) obtained by (i) multiplying (x) the number of one one-
hundredths of a share covered by a Right immediately prior to such adjustment by
(y) the Purchase Price in effect immediately prior to such adjustment of the
Purchase Price and (ii) dividing the product so obtained by the Purchase Price
in effect immediately after such adjustment of the Purchase Price.
(i) The Company may elect on or after the date of any adjustment of the
Purchase Price pursuant to Sections 11(a)(i), 11(b) or 11(c) hereof to adjust
the number of Rights, in substitution for any adjustment in the number of one
one-hundredths of a share of Preferred Stock purchasable upon the exercise of a
Right. Each of the Rights outstanding after such adjustment of the number of
Rights shall be exercisable for the number of one one-hundredths of a share of
Preferred Stock for which a Right was exercisable immediately prior to such
adjustment. Each Right held of record prior to such adjustment of the number of
Rights shall become that number of Rights (calculated to the nearest one-
hundredth) obtained by dividing the Purchase Price in effect immediately prior
to adjustment of the Purchase Price by the Purchase Price in effect immediately
after adjustment of the Purchase Price. The Company shall make a public
announcement of its election to adjust the number of Rights, indicating the
record date for the adjustment, and, if known at the time, the amount of the
adjustment to be made. This record date may be the date on which the Purchase
Price is adjusted or any day thereafter, but, if the Right Certificates have
been issued, shall be at least 10 days later than the date of the public
announcement. If Right Certificates have been issued, upon each adjustment of
the number of Rights pursuant to this Section 11(i), the Company may, as
promptly as practicable, cause to be distributed to holders of record of Right
Certificates on such record date Right Certificates evidencing, subject to
Section 14 hereof, the additional Rights to which such holders shall be entitled
as a result of such adjustment, or, at the option of the Company, shall cause to
be distributed to such holders of record in substitution and replacement for the
Right Certificates held by such holders prior to the date of adjustment, and
upon surrender thereof, if required by the Company, new Right Certificates
evidencing all the Rights to which such holders shall be entitled after such
adjustment. Right Certificates so to be distributed shall be issued, executed
and countersigned in the manner provided for herein and shall be registered in
the names of the holders of record of Right Certificates on the record date
specified in the public announcement.
(j) Irrespective of any adjustment or change in the Purchase Price or the
number of one one-hundredths of a share of Preferred Stock issuable upon the
exercise of the Rights, the Right Certificates theretofore and
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<PAGE>
thereafter issued may continue to express the Purchase Price and the number of
one one-hundredths of a share of Preferred Stock which were expressed in the
initial Right Certificates issued hereunder.
(k) Before taking any action that would cause an adjustment reducing the
Purchase Price below the then par value, if any, of the Preferred Stock or other
shares of capital stock issuable upon exercise of the Rights, the Company shall
take any corporate action which may, in the opinion of its counsel, be necessary
in order that the Company may validly and legally issue fully paid and
nonassessable shares of Preferred Stock or other such shares at such adjusted
Purchase Price.
(l) In any case in which this Section 11 shall require that an adjustment
in the Purchase Price be made effective as of a record date for a specified
event, the Company may elect to defer until the occurrence of such event the
issuing to the holder of any Right exercised after such record date of the
Preferred Stock and other capital stock or securities of the Company, if any,
issuable upon such exercise over and above the Preferred Stock and other capital
stock or securities of the Company, if any, issuable upon such exercise on the
basis of the Purchase Price in effect prior to such adjustment; provided,
however, that the Company shall deliver to such holder a due bill or other
appropriate instrument evidencing such holder's right to receive such additional
shares upon the occurrence of the event requiring such adjustment.
(m) Anything in this Section 11 to the contrary notwithstanding, the
Company shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and to
the extent that it in its sole discretion shall determine to be advisable in
order that any consolidation or subdivision of the Preferred Stock, issuance
wholly for cash of any shares of Preferred Stock at less than the current market
price, issuance wholly for cash of Preferred Stock or securities which by their
terms are convertible into or exchangeable for Preferred Stock, dividends on
Preferred Stock payable in shares of Preferred Stock or issuance of rights,
options or warrants referred to hereinabove in Section 11(b), hereafter made by
the Company to holders of its Preferred Stock shall not be taxable to such
stockholders.
(n) Anything in this Agreement to the contrary notwithstanding, in the
event that at any time after the date of this Rights Agreement and prior to the
Distribution Date, the Company shall (i) declare or pay any dividend on the
Common Stock payable in Common Stock or (ii) effect a subdivision, combination
or consolidation of the Common Stock (by reclassification or otherwise than by
payment of a dividend payable in Common Stock) into a greater or lesser number
of shares of Common Stock, then in such case, the number of Rights associated
with each share of Common Stock then outstanding, or issued or delivered
thereafter, shall be proportionately adjusted so that the number of Rights
thereafter associated with each share of Common Stock following any such event
shall equal the result obtained by multiplying the number of Rights associated
with each share of Common Stock immediately prior to such event by a fraction
the numerator of which shall be the total number of shares of Common Stock
outstanding immediately prior to the occurrence of the event and the denominator
of which shall be the total number of shares of Common Stock outstanding
immediately following the occurrence of such event.
(o) The Company agrees that, after the earlier of the Distribution Date
or the Stock Acquisition Date, it will not, except as permitted by Sections 23,
24 or 27 hereof, take (or permit any Subsidiary to take) any action if at the
time such action is taken it is reasonably foreseeable that such action will
diminish substantially or eliminate the benefits intended to be afforded by the
Rights.
Section 12. Certificate of Adjusted Purchase Price or Number of Shares.
----------------------------------------------------------
Whenever an adjustment is made as provided in Section 11 or 13 hereof, the
Company shall promptly (a) prepare a certificate setting forth such adjustment,
and a brief statement of the facts accounting for such adjustment, (b) file with
the Rights Agent and with each transfer agent for the Common Stock and the
Preferred Stock a copy of such certificate and (c) mail a brief summary thereof
to each holder of a Right Certificate in accordance with Section 25 hereof (if
so required under Section 25 hereof). The Rights Agent shall be fully
protected in relying on any such certificate and on any adjustment therein
contained, shall not be deemed to have knowledge of any such
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<PAGE>
adjustment unless and until it shall have received such certificate, and shall
not be required or permitted to question the requirement for or the calculation
of any such adjustment.
Secton 13. Consolidation, Merger or Sale or Transfer of Assets or
------------------------------------------------------
Earnings Power.
- --------------
(a) In the event, directly or indirectly, at any time after the Flip-In
Event (i) the Company shall merge with and into any other Person, (ii) any
Person shall consolidate with the Company, or any Person shall merge with and
into the Company and the Company shall be the continuing or surviving
corporation of such merger and, in connection with such merger, all or part of
the Common Stock shall be changed into or exchanged for stock or other
securities of any other Person (or of the Company) or cash or any other
property, or (iii) the Company shall sell or otherwise transfer (or one or more
of its Subsidiaries shall sell or otherwise transfer), in one or more
transactions, assets or earning power aggregating 50% or more of the assets or
earning power of the Company and its Subsidiaries (taken as a whole) to any
other Person (other than the Company or one or more wholly owned Subsidiaries of
the Company), then upon the first occurrence of such event, proper provision
shall be made so that: (A) each holder of a Right (other than Rights which have
become void pursuant to Section 11(a)(ii) hereof) shall thereafter have the
right to receive, upon the exercise thereof at the Purchase Price (as
theretofore adjusted in accordance with Section 11(a)(ii) hereof), in accordance
with the terms of this Agreement and in lieu of shares of Preferred Stock or
Common Stock of the Company, such number of validly authorized and issued, fully
paid, non-assessable and freely tradeable shares of Common Stock of the
Principal Party (as such term is hereinafter defined), not subject to any liens,
encumbrances, rights of first refusal or other adverse claims, as shall equal
the result obtained by dividing the Purchase Price (as theretofore adjusted in
accordance with Section (a)(ii) hereof) by 50% of the current per share market
price of the Common Stock of such Principal Party (determined pursuant to
Section 11(d) hereof) on the date of consummation of such consolidation, merger,
sale or transfer; provided, however, that the Purchase Price (as theretofore
adjusted in accordance with Section 11(a)(ii) hereof) and the number of shares
of Common Stock of such Principal Party so receivable upon exercise of a Right
shall be subject to further adjustment as appropriate in accordance with Section
11(f) hereof to reflect any events occurring in respect of the Common Stock of
such Principal Party after the occurrence of such consolidation, merger, sale or
transfer; (B) such Principal Party shall thereafter be liable for, and shall
assume, by virtue of such consolidation, merger, sale or transfer, all the
obligations and duties of the Company pursuant to this Rights Agreement; (C) the
term "Company" shall thereafter be deemed to refer to such Principal Party; and
(D) such Principal Party shall take such steps (including, but not limited to,
the reservation of a sufficient number of its shares of Common Stock in
accordance with Section 9 hereof) in connection with such consummation of any
such transaction as may be necessary to assure that the provisions hereof shall
thereafter be applicable, as nearly as reasonably may be, in relation to the
shares of its Common Stock thereafter deliverable upon the exercise of the
Rights; provided that, upon the subsequent occurrence of any consolidation,
merger, sale or transfer of assets or other extraordinary transaction in respect
of such Principal Party, each holder of a Right shall thereupon be entitled to
receive, upon exercise of a Right and payment of the Purchase Price as provided
in this Section 13(a), such cash shares, rights, warrants and other property
which such holder would have been entitled to receive had such holder, at the
time of such transaction, owned the Common Stock of the Principal Party
receivable upon the exercise of a Right pursuant to this Section 13(a), and such
Principal Party shall take such steps (including, but not limited to,
reservation of shares of stock) as may be necessary to permit the subsequent
exercise of the Rights in accordance with the terms hereof for such cash,
shares, rights, warrants and other property.
(b) "Principal Party" shall mean
(i) in the case of any transaction described in (i) or (ii) of the
first sentence of Section 13(a) hereof: (A) the Person that is the issuer of
the securities into which the shares of Common Stock are converted in such
merger or consolidation, or, if there is more than one such issuer, the issuer
the shares of Common Stock of which have the greatest aggregate market value of
shares outstanding, or (B) if no securities are so issued, (x) the Person that
is the other party to the merger, if such Person survives said merger, or, if
there is more than one such Person, the Person the shares of Common Stock of
which have the greatest aggregate market value of shares outstanding or (y) if
the Person that is the other party to the merger does not survive the merger,
the Person that does survive the merger (including the Company if it survives)
or (z) the Person resulting from the consolidation; and
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<PAGE>
(ii) in the case of any transaction described in (iii) of the
first sentence in Section 13(a) hereof, the Person that is the party receiving
the greatest portion of the assets or earning power transferred pursuant to such
transaction or transactions, or, if each Person that is a party to such
transaction or transactions receives the same portion of the assets or earning
power so transferred or if the Person receiving the greatest portion of the
assets or earning power cannot be determined, whichever of such Persons as is
the issuer of Common Stock having the greatest aggregate market value of shares
outstanding; provided, however, that in any such case described in the foregoing
clause (b)(i) or (b)(ii), if the Common Stock of such Person is not at such time
or has not been continuously over the preceding 12-month period registered under
Section 12 of the Exchange Act, then (1) if such Person is a direct or indirect
Subsidiary of another Person the Common Stock of which is and has been so
registered, the term "Principal Party" shall refer to such other Person, or (2)
if such Person is a Subsidiary, directly or indirectly, of more than one Person,
the Common Stock of all of which is and has been so registered, the term
"Principal Party" shall refer to whichever of such Persons is the issuer of
Common Stock having the greatest aggregate market value of shares outstanding,
or (3) if such Person is owned, directly or indirectly, by a joint venture
formed by two or more Persons that are not owned, directly or indirectly, by the
same Person, the rules set forth in clauses (1) and (2) above shall apply to
each of the owners having an interest in the venture as if the Person owned by
the joint venture was a Subsidiary of both or all of such joint venturers, and
the Principal Party in each such case shall bear the obligations set forth in
this Section 13 in the same ratio as its interest in such Person bears to the
total of such interests.
(c) The Company shall not consummate any consolidation, merger, sale or
transfer referred to in Section 13(a) hereof unless prior thereto the Company
and the Principal Party involved therein shall have executed and delivered to
the Rights Agent an agreement confirming that the requirements of Sections 13(a)
and (b) hereof shall promptly be performed in accordance with their terms and
that such consolidation, merger, sale or transfer of assets shall not result in
a default by the Principal Party under this Agreement as the same shall have
been assumed by the Principal Party pursuant to Sections 13(a) and (b) hereof
and providing that, as soon as practicable after executing such agreement
pursuant to this Section 13, the Principal Party will:
(i) prepare and file a registration statement under the Securities
Act, if necessary, with respect to the Rights and the securities purchasable
upon exercise of the Rights on an appropriate form, use its best efforts to
cause such registration statement to become effective as soon as practicable
after such filing and use its best efforts to cause such registration statement
to remain effective (with a prospectus at all times meeting the requirements of
the Securities Act) until the Expiration Date and similarly comply with
applicable state securities laws;
(ii) use its best efforts, if the Common Stock of the Principal
Party shall be listed or admitted to trading on the New York Stock Exchange or
on another national securities exchange, to list or admit to trading (or
continue the listing of) the Rights and the securities purchasable upon exercise
of the Rights on the New York Stock Exchange or such securities exchange, or, if
the Common Stock of the Principal Party shall not be listed or admitted to
trading on the New York Stock Exchange or a national securities exchange, to
cause the Rights and the securities receivable upon exercise of the Rights to be
authorized for quotation on NASDAQ or on such other system then in use;
(iii) deliver to holders of the Rights historical financial
statements for the Principal Party which comply in all respects with the
requirements for registration on Form 10 (or any successor form) under the
Exchange Act; and
(iv) obtain waivers of any rights of first refusal or preemptive
rights in respect of the Common Stock of the Principal Party subject to purchase
upon exercise of outstanding Rights.
(d) In case the Principal Party has provision in any of its authorized
securities or in its certificate of incorporation or by-laws or other instrument
governing its corporate affairs, which provision would have the effect of (i)
causing such Principal Party to issue (other than to holders of Rights pursuant
to this Section 13), in connection with, or as a consequence of, the
consummation of a transaction referred to in this Section 13, shares of Common
16
<PAGE>
Stock of such Principal Party at less than the then current market price per
share thereof (determined pursuant to Section 11(d) hereof) or securities
exercisable for, or convertible into, Common Stock of such Principal Party at
less than such then current market price, or (ii) providing for any special
payment, tax or similar provision in connection with the issuance of the Common
Stock of such Principal Party pursuant to the provisions of Section 13, then, in
such event, the Company hereby agrees with each holder of Rights that it shall
not consummate any such transaction unless prior thereto the Company and such
Principal Party shall have executed and delivered to the Rights Agent a
supplemental agreement providing that the provision in question of such
Principal Party shall have been canceled, waived or amended, or that the
authorized securities shall be redeemed, so that the applicable provision will
have no effect in connection with, or as a consequence of, the consummation of
the proposed transaction.
(e) The Company covenants and agrees that it shall not, at any time after
the Flip-In Event, enter into any transaction of the type described in clauses
(i) through (iii) of Section 13(a) hereof if (i) at the time of or immediately
after such consolidation, merger, sale, transfer or other transaction there are
any rights, warrants or other instruments or securities outstanding or
agreements in effect which would substantially diminish or otherwise eliminate
the benefits intended to be afforded by the Rights, (ii) prior to,
simultaneously with or immediately after such consolidation, merger, sale,
transfer or other transaction, the stockholders of the Person who constitutes,
or would constitute, the Principal Party for purposes of Section 13(a) hereof
shall have received a distribution of Rights previously owned by such Person or
any of its Affiliates or Associates or (iii) the form or nature of organization
of the Principal Party would preclude or limit the exercisability of the Rights.
Section 14. Fractional Rights and Fractional Shares.
---------------------------------------
(a) The Company shall not be required to issue fractions of Rights or to
distribute Right Certificates which evidence fractional Rights (except prior to
the Distribution Date in accordance with Section 11(n) hereof). In lieu of such
fractional Rights, the Company shall pay to the registered holders of the Right
Certificates with regard to which such fractional Rights would otherwise be
issuable, an amount in cash equal to the same fraction of the current market
value of a whole Right. For the purposes of this Section 14(a), the current
market value of a whole Right shall be the closing price of the Rights for the
Trading Day immediately prior to the date on which such fractional Rights would
have been otherwise issuable. The closing price for any day shall be the last
sale price, regular way, or, in case no such sale takes place on such day, the
average of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with respect
to securities listed or admitted to trading on the New York Stock Exchange or,
if the Rights are not listed or admitted to trading on the New York Stock
Exchange, as reported in the principal consolidated transaction reporting system
with respect to securities listed on the principal national securities exchange
on which the Rights are listed or admitted to trading or, if the Rights are not
listed or admitted to trading on any national securities exchange, the last
quoted price or, if not so quoted, the average of the high bid and low asked
prices in the over-the-counter market, as reported by NASDAQ or such other
system then in use or, if on any such date the Rights are not quoted by any such
organization, the average of the closing bid and asked prices as furnished by a
professional market maker making a market in the Rights selected by the Board of
Directors of the Company. If on any such date no such market maker is making a
market in the Rights, the fair value of the Rights on such date as determined in
good faith by the Board of Directors of the Company shall be used.
(b) The Company shall not be required to issue fractions of Preferred
Stock (other than fractions which are integral multiples of one one-hundredth of
a share of Preferred Stock) upon exercise of the Rights or to distribute
certificates which evidence fractional shares of Preferred Stock (other than
fractions which are integral multiples of one one-hundredth of a share of
Preferred Stock). Interests in fractions of Preferred Stock in integral
multiples of one one-hundredth of a share of Preferred Stock may, at the
election of the Company, be evidenced by depositary receipts, pursuant to an
appropriate agreement between the Company and a depositary selected by it;
provided, that such agreement shall provide that the holders of such depositary
receipts shall have all the rights, privileges and preferences to which they are
entitled as beneficial owners of the Preferred Stock represented by such
depositary receipts. In lieu of fractional shares of Preferred Stock that are
not integral multiples of one one-hundredth of a share of Preferred Stock, the
Company shall pay to the registered holders of Right Certificates at the time
such
17
<PAGE>
Rights are exercised as herein provided an amount in cash equal to the same
fraction of the current market value of one share of Preferred Stock. For the
purposes of this Section 14(b), the current market value of a share of Preferred
Stock shall be the closing price of a share of Preferred Stock (as determined
pursuant to Section 11(d) hereof) for the Trading Day immediately prior to the
date of such exercise.
(c) The holder of a Right by the acceptance of the Right expressly waives
his right to receive any fractional Rights or any fractional shares upon
exercise of a Right (except as provided by this Section 14).
Section 15. Rights of Action. All rights of action in respect of this
----------------
Agreement, excepting the rights of action given to the Rights Agent under
Section 18 hereof, are vested in the respective registered holders of the Right
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Stock); and any registered holder of any Right Certificate (or, prior to
the Distribution Date, of the Common Stock), without the consent of the Rights
Agent or of the holder of any other Right Certificate (or, prior to the
Distribution Date, of the Common Stock), on his own behalf and for his own
benefit, may enforce, and may institute and maintain any suit, action or
proceeding against the Company to enforce, or otherwise act in respect of, his
right to exercise the Rights evidenced by such Right Certificate (or, prior to
the Distribution Date, such Common Stock) in the manner provided therein and in
this Agreement. Without limiting the foregoing or any remedies available to the
holders of Rights, it is specifically acknowledged that the holders of Rights
would not have an adequate remedy at law for any breach of this Agreement and
will be entitled to specific performance of the obligations under, and
injunctive relief against actual or threatened violations of, the obligations of
any Person subject to this Agreement.
Section 16. Agreement of Right Holders. Every holder of a Right, by
--------------------------
accepting the same, consents and agrees with the Company and the Rights Agent
and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be transferable only
in connection with the transfer of the Common Stock;
(b) after the Distribution Date, the Right Certificates are transferable
only on the registry books of the Rights Agent if surrendered at the office or
agency of the Rights Agent designated for such purpose, duly endorsed or
accompanied by a proper instrument of transfer;
(c) the Company and the Rights Agent may deem and treat the Person in
whose name the Right Certificate (or, prior to the Distribution Date, the Common
Stock certificate) is registered as the absolute owner thereof and of the Rights
evidenced thereby (notwithstanding any notations of ownership or writing on the
Right Certificates or the Common Stock certificate made by anyone other than the
Company or the Rights Agent) for all purposes whatsoever, and neither the
Company nor the Rights Agent shall be affected by any notice to the contrary;
(d) notwithstanding anything in this Agreement to the contrary, neither
the Company nor the Rights Agent shall have any liability to any holder of a
Right or other Person as a result of its inability to perform any of its
obligations under this Agreement by reason of any preliminary or permanent
injunction or other order, decree or ruling issued by a court of competent
jurisdiction or by a governmental, regulatory or administrative agency or
commission, or any statute, rule, regulation or executive order promulgated or
enacted by any governmental authority, prohibiting or otherwise restraining
performance of such obligation; and
(e) such holder shall be entitled to the benefits of this Agreement but
shall not be entitled to any right not specifically set forth herein, nor shall
any provision of this Agreement be deemed to impose any fiduciary duty on the
officers or directors of the Company or the Rights Agent with respect to any
holder of the Rights.
Section 17. Right Certificate Holder Not Deemed a Stockholder. No holder,
--------------------------------------------------
as such, of any Right Certificate shall be entitled to vote, receive dividends
or be deemed for any purpose the holder of the Preferred Stock or any other
securities of the Company which may at any time be issuable on the exercise of
the Rights represented thereby, nor shall anything contained herein or in any
Right Certificate be construed to confer upon the holder of
18
<PAGE>
any Right Certificate, as such, any of the rights of a stockholder of the
Company or any right to vote for the election of directors or upon any matter
submitted to stockholders at any meeting thereof, or to give or withhold consent
to any corporate action, or to receive notice of meetings or other actions
affecting stockholders (except as provided in this Agreement), or to receive
dividends or subscription rights, or otherwise, until the Rights evidenced by
such Right Certificate shall have been exercised in accordance with the
provisions hereof.
Section 18. Concerning the Rights Agent.
---------------------------
(a) The Company agrees to pay to the Rights Agent reasonable compensation
for all services rendered by it hereunder and, from time to time, on demand of
the Rights Agent, its reasonable expenses and counsel fees and other
disbursements incurred in the administration and execution of this Agreement and
the exercise and performance of its duties hereunder. The Company also agrees
to indemnify the Rights Agent, its officers, employees, agents and directors,
for, and to hold all of them harmless against, any loss, liability or expense,
incurred without gross negligence, bad faith or willful misconduct on the part
of the Rights Agent or such other indemnified party, for anything done or
omitted by the Rights Agent in connection with the acceptance or administration
of this Agreement or performance hereunder, including the costs and expenses of
defending against any claim of liability arising therefrom, directly or
indirectly, and will promptly reimburse the Rights Agent therefor.
(b) The Rights Agent, its officers, employees, agents and directors shall
be protected and shall incur no liability for, or in respect of any action
taken, suffered or omitted by it in connection with, its administration of this
Agreement or the exercise or performance of its duties hereunder in reliance
upon any Right Certificate or certificate for the Preferred Stock or Common
Stock or for other securities of the Company, instrument of assignment or
transfer, power of attorney, endorsement, affidavit, letter, notice, direction,
consent, certificate, statement or other paper or document believed by it to be
genuine and to be signed, executed and, where necessary, verified or
acknowledged, by the proper Person or Persons, or otherwise upon the advice of
counsel as set forth in Section 20 hereof.
Anything in this Agreement to the contrary notwithstanding, in no event
shall the Rights Agent be liable for special, indirect or consequential loss or
damage or any kind whatsoever (including but not limited to lost profits), even
if the Rights Agent has been advised of the likelihood of such loss or damage
and regardless of the form of action.
Section 19. Merger or Consolidation or Change of Name of Rights Agent.
---------------------------------------------------------
(a) Any corporation into which the Rights Agent or any successor Rights
Agent may be merged or with which it may be consolidated, or any corporation
resulting from any merger or consolidation to which the Rights Agent or any
successor Rights Agent shall be a party, or any corporation succeeding to the
stock transfer or corporate trust powers of the Rights Agent or any successor
Rights Agent, shall be the successor to the Rights Agent under this Agreement
without the execution or filing of any paper or any further act on the part of
any of the parties hereto; provided, however, that such corporation would be
eligible for appointment as a successor Rights Agent under the provisions of
Section 21 hereof. In case at the time such successor Rights Agent shall succeed
to the agency created by this Agreement, any of the Right Certificates shall
have been countersigned but not delivered, any such successor Rights Agent may
adopt the countersignature of the predecessor Rights Agent and deliver such
Right Certificates so countersigned; and in case at that time any of the Right
Certificates shall not have been countersigned, any successor Rights Agent may
countersign such Right Certificates either in the name of the predecessor Rights
Agent or in the name of the successor Rights Agent; and in all such cases such
Right Certificates shall have the full force provided in the Right Certificates
and in this Agreement.
(b) In case at any time the name of the Rights Agent shall be changed and
at such time any of the Right Certificates shall have been countersigned but not
delivered, the Rights Agent may adopt the countersignature under its prior name
and deliver Right Certificates so countersigned; and in case at that time any of
the Right Certificates shall not have been countersigned, the Rights Agent may
countersign such Right Certificates either in its prior name
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<PAGE>
or in its changed name and in all such cases such Right Certificates shall have
the full force provided in the Right Certificates and in this Agreement.
Section 20. Duties of Rights Agent. The Rights Agent undertakes the duties
----------------------
and obligations expressly imposed by this Agreement (and no implied duties or
obligations shall be imposed on the Rights Agent) upon the following terms and
conditions, by all of which the Company and the holders of Right Certificates,
by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may be legal
counsel for the Company), and the opinion of such counsel shall be full and
complete authorization and protection to the Rights Agent as to any action taken
or omitted by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this Agreement the
Rights Agent shall deem it necessary or desirable that any fact or matter be
proved or established by the Company prior to taking or suffering any action
hereunder, such fact or matter (unless other evidence in respect thereof be
herein specifically prescribed) may be deemed to be conclusively proved and
established by a certificate signed by any person believed in good faith by the
Rights Agent to be the Chairman of the Board, the Chief Executive Officer, the
President, any Vice President, the Treasurer and the Secretary or any Assistant
Secretary of the Company and delivered to the Rights Agent; and such certificate
shall be full authorization to the Rights Agent for any action taken or suffered
in good faith by it under the provisions of this Agreement in reliance upon such
certificate.
(c) The Rights Agent shall be liable hereunder to the Company and any
other Person only for its own gross negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of any of the
statements of fact or recitals contained in this Agreement or in the Right
Certificates (except its countersignature thereof) or be required to verify the
same, but all such statements and recitals are and shall be deemed to have been
made by the Company only.
(e) The Rights Agent is serving as an administrative agent only, and
accordingly shall not be under any responsibility in respect of the validity of
any provision of this Agreement or the execution and delivery hereof (except the
due execution hereof by the Rights Agent) or in respect of the validity or
execution of any Right Certificate (except its countersignature thereof); nor
shall it be responsible for any breach by the Company of any covenant or
condition contained in this Agreement or in any Right Certificate; nor shall it
be responsible for any change in the exercisability of the Rights (including the
Rights becoming void pursuant to Section 11(a) (ii) hereof) or any adjustment in
the terms of the Rights provided for herein, or the ascertaining of the
existence of facts that would require any such change or adjustment (except with
respect to the exercise of Rights evidenced by Right Certificates after receipt
of a certificate furnished pursuant to Section 11, describing such change or
adjustment); nor shall it by any act hereunder be deemed to make any
representation or warranty as to the authorization or reservation of any shares
of Preferred Stock or other securities to be issued pursuant to this Agreement
or any Right Certificate or as to whether any shares of Preferred Stock or other
securities will, when issued, be validly authorized and issued fully paid and
nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered all such
further and other acts, instruments and assurances as may reasonably be required
by the Rights Agent for the carrying out or performing by the Rights Agent of
the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from any
person reasonably believed by the Rights Agent to be one of the Chairman of the
Board, the Chief Executive Officer, the President, any Vice President, the
Secretary or the Treasurer or any Assistant Secretary of the Company, and to
apply to such officers for advice or instructions in connection with its duties,
and it shall not be liable for any action taken or suffered by it in good faith
in accordance
20
<PAGE>
with instructions of any such officer or for any delay in acting while waiting
for those instructions. Any application by the Rights Agent for written
instructions from the Company may, at the option of the Rights Agent, set forth
in writing any action proposed to be taken or omitted by the Rights Agent under
this Agreement and the date on and/or after which such action shall be taken or
such omission shall be effective. The Rights Agent shall not be liable for any
action taken by, or omission of, the Rights Agent in accordance with a proposal
included in any such application on or after the date specified in such
application (which date shall not be less than five Business Days after the date
any officer of the Company actually receives such application unless any such
officer shall have consented in writing to an earlier date) unless, prior to
taking any such action (or the effective date in the case of an omission), the
Rights Agent shall have received written instructions in response to such
application specifying the action to be taken or omitted.
(h) The Rights Agent and any stockholder, director, officer or employee of
the Rights Agent may buy, sell or deal in any of the Rights or other securities
of the Company or become pecuniarily interested in any transaction in which the
Company may be interested, or contract with or lend money to the Company or
otherwise act as fully and freely as though it were not Rights Agent under this
Agreement. Nothing herein shall preclude the Rights Agent from acting in any
other capacity for the Company or for any other legal entity.
(i) The Rights Agent may execute and exercise any of the rights or powers
hereby vested in it or perform any duty hereunder either itself or by or through
its attorneys or agents, and the Rights Agent shall not be answerable or
accountable for any act, default, neglect or misconduct of any such attorneys or
agents or for any loss to the Company resulting from any such act, default,
neglect or misconduct, provided reasonable care was exercised in the selection
and continued employment thereof.
(j) If, with respect to any Right Certificate surrendered to the Rights
Agent for exercise or transfer, the certificate contained in the form of
assignment or the form of election to purchase set forth on the reverse thereof,
as the case may be, has not been completed to certify the holder is not an
Acquiring Person (or an Affiliate or Associate thereof), a Rights Agent shall
not take any further action with respect to such requested exercise of transfer
without first consulting with the Company.
Section 21. Change of Rights Agent. The Rights Agent or any successor
----------------------
Rights Agent may resign and be discharged from its duties under this Agreement
upon 30 days' notice in writing mailed to the Company and to each transfer agent
of the Common Stock or Preferred Stock by registered or certified mail, and,
following the Distribution Date, to the holders of the Right Certificates by
first-class mail. The Company may remove the Rights Agent or any successor
Rights Agent upon 30 days' notice in writing, mailed to the Rights Agent or
successor Rights Agent, as the case may be, and to each transfer agent of the
Common Stock or Preferred Stock by registered or certified mail, and, following
the Distribution Date, to the holders of the Right Certificates by first-class
mail. If the Rights Agent shall resign or be removed or shall otherwise become
incapable of acting, the Company shall appoint a successor to the Rights Agent.
If the Company shall fail to make such appointment within a period of 30 days
after giving notice of such removal or after it has been notified in writing of
such resignation or incapacity by the resigning or incapacitated Rights Agent or
by the holder of a Right Certificate (who shall, with such notice, submit his
Right Certificate for inspection by the Company), then the registered holder of
any Right Certificate may apply to any court of competent jurisdiction for the
appointment of a new Rights Agent. Any successor Rights Agent, whether
appointed by the Company or by such a court, shall be a corporation organized
and doing business under the laws of the United States or the State of Alabama
or the State of New York (or of any other state of the United States so long as
such corporation is authorized to do business as a banking institution in the
State of Alabama or the State of New York), in good standing, having an office
in the State of Alabama or the State of New York, which is authorized under such
laws to exercise corporate trust or stock transfer powers and is subject to
supervision or examination by federal or state authority and which has at the
time of its appointment as Rights Agent a combined capital and surplus of at
least $50 million. After appointment, the successor Rights Agent shall be
vested with the same powers, rights, duties and responsibilities as if it had
been originally named as Rights Agent without further act or deed; but the
predecessor Rights Agent shall deliver and transfer to the successor Rights
Agent any property
21
<PAGE>
at the time held by it hereunder, and execute and deliver any further assurance,
conveyance, act or deed necessary for the purpose. Not later than the effective
date of any such appointment the Company shall file notice thereof in writing
with the predecessor Rights Agent and each transfer agent of the Common Stock or
Preferred Stock, and, following the Distribution Date, mail a notice thereof in
writing to the registered holders of the Right Certificates. Failure to give any
notice provided for in this Section 21, however, or any defect therein, shall
not affect the legality or validity of the resignation or removal of the Rights
Agent or the appointment of the successor Rights Agent, as the case may be.
Section 22. Issuance of New Right Certificates. Notwithstanding any of
----------------------------------
the provisions of this Agreement or of the Rights to the contrary, the Company
may, at its option, issue new Right Certificates evidencing Rights in such forms
as may be approved by its Board of Directors to reflect any adjustment or change
in the Purchase Price and the number or kind or class of shares or other
securities or property purchasable under the Right Certificates made in
accordance with the provisions of this Agreement. In addition, in connection
with the issuance or sale of Common Stock following the Distribution Date and
prior to the Expiration Date, the Company may with respect to shares of Common
Stock so issued or sold pursuant to (i) the exercise of stock options, (ii)
under any employee plan or arrangement, (iii) upon the exercise, conversion or
exchange of securities notes or debentures issued by the Company or (iv) a
contractual obligation of the Company, in each case existing prior to the
Distribution Date, issue Right Certificates representing the appropriate number
of Rights in connection with such issuance or sale.
Section 23. Redemption.
----------
(a) The Board of Directors of the Company may, at any time prior to a
Flip-In Event, redeem all but not less than all the then outstanding Rights at a
redemption price of $.01 per Right, appropriately adjusted to reflect any stock
split, stock dividend or similar transaction occurring after the date hereof
(the redemption price being hereinafter referred to as the "Redemption Price").
The redemption of the Rights may be made effective at such time, on such basis
and with such conditions as the Board of Directors in its sole discretion may
establish.
(b) Immediately upon the action of the Board of Directors ordering the
redemption of the Rights pursuant to paragraph (a) of this Section 23 (or at
such later time as the Board of Directors may establish for the effectiveness of
such redemption), and without any further action and without any notice, the
right to exercise the Rights will terminate and the only right thereafter of the
holders of Rights shall be to receive the Redemption Price. The Company shall
promptly give public notice of any such redemption; provided, however, that the
failure to give, or any defect in, any such notice shall not affect the validity
of such redemption. Within 10 days after such action of the Board of Directors
ordering the redemption of the Rights (or such later time as the Board of
Directors may establish for the effectiveness of such redemption), the Company
shall mail a notice of redemption to all the holders of the then outstanding
Rights at their last addresses as they appear upon the registry books of the
Rights Agent or, prior to the Distribution Date, on the registry books of the
transfer agent for the Common Stock. Any notice which is mailed in the manner
herein provided shall be deemed given, whether or not the holder receives the
notice. Each such notice of redemption shall state the method by which the
payment of the Redemption Price will be made. Neither the Company nor any of its
Affiliates or Associates may redeem, acquire or purchase for value any Rights at
any time in any manner other than that specifically set forth in this Section 23
or in Section 24 hereof, and other than in connection with the purchase of
Common Shares prior to the Distribution Date.
Section 24. Exchange.
--------
(a) The Board of Directors of the Company may, at its option, at any time
after a Flip-In Event, exchange all or part of the then outstanding and
exercisable Rights (which shall not include Rights that have become void
pursuant to the provisions of Section 11(a) (ii) hereof) by exchanging for each
such Right one share of Common Stock, appropriately adjusted to reflect an
stock split, stock dividend or similar transaction occurring after he date of
such Flip-In Event (such amount per Right being hereinafter referred to as the
"Exchange Consideration"). Notwithstanding the foregoing, the Board of Directors
shall not be empowered to effect such exchange at any time after any Person
(other than an Exempt Person), together with all Affiliates and Associates of
such Person, becomes
22
<PAGE>
the Beneficial Owner of shares of Common Stock aggregating 50% or more of the
shares of Common Stock then outstanding. From and after the occurrence of an
event specified in Section 13(a) hereof, any Rights that theretofore have not
been exchanged pursuant to this Section 24 all thereafter be exercisable only
in accordance with Section 13 and may not be exchanged pursuant to this Section
24(a).
(b) Immediately upon the action of the Board of Directors of the Company
ordering the exchange of any Rights pursuant to paragraph (a) of this Section 24
and without any further action and without any notice, the right to exercise
such Rights shall terminate and the only right thereafter of a holder of such
Rights shall be to receive the Exchange Consideration. The Company shall
promptly give public notice of any such exchange; provided, however, that the
failure to give, or any defect in, such notice shall not affect the validity of
such exchange. The Company shall promptly mail a notice of any such exchange to
all of the holders of the Rights so exchanged at their last addresses as they
appear upon the registry books of the Rights Agent. Any notice which is mailed
in the manner herein provided shall be deemed given, whether or not the holder
receives the notice. Each such notice of exchange will state the method by which
the exchange of the shares of Common Stock for Rights will be effected and, in
the event of any partial exchange, the number of Rights which will be exchanged.
Any partial exchange shall be effected pro rata based on the number of Rights
(other than Rights which have become void pursuant to the provisions of Section
11(a)(ii) hereof) held by each holder of Rights.
(c) The Company may at its option substitute, and, in the event that
there shall not be sufficient shares of Common Stock issued but not outstanding
or authorized but unissued to permit any exchange of Rights as contemplated in
accordance with this Section 24, the Company shall substitute to the extent of
such insufficiency, for each share of Common Stock be issuable upon exchange of
a Right, a number of shares of Preferred Stock or fractions thereof (or
equivalent preferred shares, as such term is defined in Section 11(b)) having
an aggregate current per share market price (determined pursuant to Section
11(d) hereof) equal to the current per share market price of one share of Common
Stock (determined pursuant to Section 11(d) hereof) as of the date of the Flip-
In Event.
(d) The Company shall not, in connection with any exchange pursuant to
this Section 24, be required to issue fractions of shares of Common Stock or to
distribute certificates which evidence fractional shares of Common Stock. In
lieu of such fractional shares of Common Stock, the Company shall pay to the
registered holders of the Right Certificates with regard to which such
fractional shares of Common Stock would otherwise be issuable an amount in cash
equal to the same fraction of the current market value of a whole share of
Common Stock. For the purposes of this paragraph (d), the current market value
of a whole share of Common Stock shall be the closing price of a share of Common
Stock (as determined pursuant to Section 11(d) hereof) for the Trading Day
immediately prior to the date of exchange pursuant to this Section 24.
Section 25. Notice of Certain Events.
------------------------
(a) In case the Company shall at any time after the earlier of the
Distribution Date or the Stock Acquisition Date propose (i) to pay any dividend
payable in stock of any class to the holders of its Preferred Stock or to make
any other distribution to the holders of its Preferred Stock (other than a
regular quarterly cash dividend), (ii) to offer to the holders of its Preferred
Stocks or warrants to subscribe for or to purchase any additional shares of
Preferred Stock or shares of stock of any class or any other securities, rights
or options, (iii) to effect any reclassification of its Preferred Stock (other
than a reclassification involving only the subdivision of outstanding Preferred
Stock), (iv) to effect the liquidation, dissolution or winding up of the
Company, or (v) to declare or pay any dividend on the Common Stock payable in
Common Stock or to effect a subdivision, combination or consolidation of the
Common Stock (by reclassification or otherwise than by payment of dividends in
Common Stock), then, in each such case, the Company shall give to each holder of
a Right Certificate, in accordance with Section 26 hereof, a notice of such
proposed action, which shall specify the record date for the purposes of such
stock dividend, or distribution of rights or warrants, or the date on which such
liquidation, dissolution or winding up is to take place and the date of
participation therein by the holders of the Common Stock and/or Preferred Stock,
if any such date is to be fixed, and such notice shall be so given in the case
of any action covered by clause (i) or (ii) above at least 10 days prior
23
<PAGE>
to the record date for determining holders of the Preferred Stock for purposes
of such action, and in the case of any such other action, at least 10 days prior
to the date of the taking of such proposed action or the date of participation
therein by the holders of the Common Stock and/or Preferred Stock, whichever
shall be the earlier.
(b) In case any event described in Section 11(a)(ii) or Section 13 shall
occur then the Company shall as soon as practicable thereafter give to each
holder of a Right Certificate (or if occurring prior to the Distribution Date,
the holders of the Common Stock) in accordance with Section 26 hereof, a notice
of the occurrence of such event, which notice shall describe such event and or
sequences of such event to holders of Rights under Section 11(a)(ii) and Section
13 hereof.
Section 26. Notices. Notices or demands authorized by this Agreement to
-------
be given or made by the Rights Agent or by the holder of any Right Certificate
to or on the Company shall be sufficiently given or made if delivered by hand,
sent by overnight courier or sent by first-class mail, postage prepaid,
addressed (until another address is filed in writing with the Rights Agent) as
follows:
Citation Corporation
2 Office Park Circle
Suite 204
Birmingham, Alabama 35223
Attention: Secretary
Subject to the provisions of Section 21 hereof, any notice or demand authorized
by this Agreement to be given or made by the Company or by the holder of any
Right Certificate to or on the Rights Agent shall be sufficiently given or made
if delivered by hand, sent by overnight courier or sent by first-class mail,
postage prepaid, addressed (until another address is filed in writing with the
Company) as follows:
Stock Transfer Administration
The Bank of New York
101 Barclay Street - 12 West
New York, New York 10286
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Right Certificate shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed to such holder at the address of such holder as shown on the registry
books of the Company.
Section 27. Supplements and Amendments. Except as provided in the
--------------------------
penultimate sentence of this Section 27, for so long as the Rights are then
redeemable, the Company may in its sole and absolute discretion, and the Rights
Agent shall if the Company so directs, supplement or amend any provision of this
Agreement in any respect without the approval of any holders of the Rights. At
any time when the Rights are no longer redeemable, except as provided in the
penultimate sentence of this Section 27, the Company may, and the Rights Agent
shall, if the Company so directs, supplement or amend this Agreement without the
approval of any holders of Rights Certificates in order to (i) cure any
ambiguity, (ii) correct or supplement any provision contained herein which may
be defective or inconsistent with any other provisions herein, (iii) shorten or
lengthen any time period hereunder, or (iv) change or supplement the provisions
hereunder in any manner which the Company may deem necessary or desirable;
provided that no such supplement or amendment shall adversely affect the
interests of the holders of Rights as such (other than an Acquiring Person or an
Affiliate or Associate of an Acquiring Person), and no such amendment may cause
the rights again to become redeemable or cause the Agreement again to become
amendable other than in accordance with this sentence. Notwithstanding any
thing to the contrary contained herein, no supplement or amendment which changes
the rights and duties of the Rights Agent hereunder shall be effective without
the written consent of the Rights Agent, which consent shall be given in the
sole discretion of the Rights Agent. Notwithstanding anything contained in this
Agreement to the contrary, no supplement or amendment shall be made which
changes the Redemption Price. Upon the delivery of a certificate from an
appropriate officer of the Company
24
<PAGE>
which states that the proposed supplement or amendment is in compliance with the
terms of this Section 27, the Rights Agent shall execute such supplement or
amendment; provided, however, that the Rights Agent shall have no duty to
execute such supplement or amendment in the absence of its consent where such
consent is required by this Section 27.
Section 28. Successors. All the covenants and provisions of this
----------
Agreement by or for the benefit of the Company or the Rights Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.
Section 29. Benefits of this Agreement. Nothing in this Agreement shall
--------------------------
be construed to give to any Person other than the Company, the Rights Agent and
the registered holders of the Right Certificates (and, prior to the Distribution
Date, the Common Stock) any legal or equitable right, remedy or claim under this
Agreement; but this Agreement shall be for the sole and exclusive benefit of the
Company, the Rights Agent and the registered holders of the Right Certificates
(and, prior to the Distribution Date, the Common Stock).
Section 30. Determinations and Actions by the Board of Directors. The
----------------------------------------------------
Board of Directors of the Company shall have the exclusive power and authority
to exercise the rights and powers specifically granted to the Board of Directors
of the Company or to the Company, including, without limitation, the right and
power to (i) interpret the provisions of this Agreement and (ii) make all
determinations deemed necessary or advisable for the administration of this
Agreement (including.)imitation, a determination to redeem or not redeem the
Rights or to amend this Agreement). All such actions, calculations,
interpretations and determinations (including, for purposes of clause (y) below,
all omissions with respect to the foregoing) that are done or made by the Board
of Directors of the Company in good faith, shall (x) be final, conclusive and
binding on the Company and the holders of the Rights, as such, and (y) not
subject the Board of Directors to any liability to the holders of the Rights.
Section 31. Severability. If any term, provision, covenant or
------------
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated.
Section 32. Governing law. This Agreement and each Right Certificate
-------------
issued hereunder shall be deemed to be a contract made under the laws of the
State of Delaware and for all purposes shall be governed by and construed in
accordance with the laws of such State applicable to contracts to be made and
performed entirely within such State, except that the rights and duties of the
Rights Agent shall be governed by the laws of the State of New York applicable
to contracts made and to be performed entirely within such state.
Section 33. Counterparts. This Agreement may be executed in any number of
------------
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
Section 34. Descriptive Headings. Descriptive headings of the several
--------------------
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
25
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and attested, all as of the day and year first above written.
Attest: CITATION CORPORATION
By /s/ Stanley B. Atkins By /s/ Frederick F. Sommer
Name: Stanley B. Atkins Name: Frederick F. Sommer
Title: Vice President and Title: President and CEO
Corporate Secretary
WITNESS: THE BANK OF NEW YORK
/s/ John Sivertsen By /s/ Ralph Chianese
Vice President Name: Ralph Chianese
Title: Vice President
26
<PAGE>
Exhibit A
---------
FORM OF
CERTIFICATE OF DESIGNATIONS
of
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
of
Citation Corporation
Pursuant to Section 151 of the General Corporation law
of the State of Delaware
Citation Corporation, a corporation organized and existing under the
General Corporation law of the State of Delaware, in accordance with the
provisions of Section 103 thereof, DOES HEREBY CERTIFY:
That pursuant to the authority vested in the Board of Directors in
accordance with the provisions of the Certificate of Incorporation of the said
Corporation, the said Board of Directors on November 25, 1998 adopted the
following resolution creating a series of 300,000 shares of Preferred Stock
designated as "Series A Junior Participating Preferred Stock":
RESOLVED, that pursuant to the authority vested in the Board of
Directors of this Corporation in accordance with the provisions of the
Certificate of Incorporation, a series of Preferred Stock, par value
$0.01 per share, of the Corporation be and hereby is created, and that
designation and number of shares thereof and the voting and other
powers, preferences and relative, participle optional or other rights
of the shares of such series and the qualifications, limitations and
restrictions thereof are as follows:
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
1. Designation and Amount. There shall be a series of Preferred Stock
that shall be designated as "Series A Junior Participating Preferred Stock," and
the number of shares constituting such series shall be 300,000. Such number of
shares may be increased or decreased by resolution of the Board of Directors;
provided, however, that no decrease shall reduce the number of shares of Series
A Junior Participating Preferred Stock to less than the number of shares then
issued and outstanding plus the number of shares issuable upon exercise of
outstanding rights, options or warrants or upon conversion of outstanding
securities issued by the Corporation.
2. Dividends and Distribution.
(A) Subject to the prior and superior rights of the holders of any
shares of any series of Preferred Stock ranking prior and superior to the shares
of Series A Junior Participating Preferred Stock with respect to dividends, the
holders of shares of Series A Junior Participating Preferred Stock, in
preference to the holders of shares of any class or series of stock of the
Corporation ranking junior to the Series A Junior Participating Preferred Stock,
shall be entitled to receive, when, as and if declared by the Board of Directors
out of funds legally available for the purpose, quarterly dividends payable in
cash on such quarterly dates as shall be determined by the Corporation's Board
of Directors in each year (each such date being referred to herein as a
"Quarterly Dividend
A-1
<PAGE>
Payment Date"), commencing on the first Quarterly Dividend Payment Date after
the first issuance of a share or fraction of a share of Series A Junior
Participating Preferred Stock, in an amount per share (rounded to the nearest
cent) equal to the greater of (a) $1.00 or (b) the Adjustment Number (as defined
below) times the aggregate per share amount of all cash dividends, and the
Adjustment Number times the aggregate per share amount (payable in kind) of all
non-cash dividends or other distributions other than a dividend payable in
shares of Common Stock or a subdivision of the outstanding shares of Common
Stock (by reclassification or otherwise), declared on the Common Stock, par
value $0.01 per share, of the Corporation (the "Common Stock") since the
immediately preceding Quarterly Dividend Payment Date, or, with respect to the
first Quarterly Dividend Payment Date, since the first issuance of any share or
fraction of a share of Series A Junior Participating Preferred Stock. The
"Adjustment Number" shall initially be 100. In the event the Corporation shall
at any time after November 25, 1998 (i) declare any dividend on Common Stock
payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock
or (iii) combine the outstanding Common Stock into a smaller number of shares,
then in each such case the Adjustment Number in effect immediately prior to such
event shall be adjusted by multiplying such Adjustment Number by a fraction the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
(B) The Corporation shall declare a dividend or distribution on the Series A
Junior Participating Preferred Stock as provided in paragraph (A) above
immediately after it declares a dividend or distribution on the Common Stock
(other than a dividend payable in shares of Common Stock). (C) Dividends shall
begin to accrue and be cumulative on outstanding shares of Series A Junior
Participating Preferred Stock from the Quarterly Dividend Payment Date next
preceding the date of issue of such shares of Series A Junior Participating
Preferred Stock, unless the date of issue of such shares is prior to the record
date for the first Quarterly Dividend Payment Date, in which case dividends on
such shares shall begin to accrue from the date of issue of such shares, or
unless the date of issue is a Quarterly Dividend Payment Date or is a date after
the record date for the determination of holders of shares of Series A Junior
Participating Preferred Stock entitled to receive a quarterly dividend and
before such Quarterly Dividend Payment Date, in either of which events such
dividends shall begin to accrue and be cumulative from such Quarterly Dividend
Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends
paid on the shares of Series A Junior Participating Preferred Stock in an amount
less than the total amount of such dividends at the time accrued and payable on
such shares shall be allocated pro rata on a share-by-share basis among all such
shares at the time outstanding. The Board of Directors may fix a record date for
the determination of holders of shares of Series A Junior Participating
Preferred Stock entitled to receive payment of a dividend or distribution
declared thereon, which record date shall be no more than 30 days prior to the
date fixed for the payment thereof.
3. Voting Rights. The holders of shares of Series A Junior Participating
Preferred Stock shall have the following voting rights:
(A) Each share of Series A Junior Participating Preferred Stock shall
entitle the holder thereof to a number of votes equal to the Adjustment Number
on all matters submitted to a vote of the stockholders of the Corporation.
(B) Except as required by law, holders of Series A Junior
Participating Preferred Stock shall have no special voting rights and their
consent shall not be required (except to the extent they are entitled to vote
with holders of Common Stock as set forth herein) for taking any corporate
action.
4. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or distributions
payable on the Series A Junior Participating Preferred Stock as provided in
Section 2 are in arrears, thereafter and until all accrued and unpaid dividends
and distributions, whether or not declared, on shares of Series A Junior
Participating Preferred Stock outstanding shall have been paid in full, the
Corporation shall not:
A-2
<PAGE>
(i) declare or pay dividends on, make any other distributions on,
or redeem or purchase or otherwise acquire for consideration any shares of stock
ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Series A Junior Participating Preferred Stock;
(ii) declare or pay dividends on or make any other distributions on
any shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Junior Participating
Preferred Stock, except dividends paid ratably on the Series A Junior
Participating Preferred Stock and all such parity stock on which dividends are
payable or in arrears in proportion to the total amounts to which the holders of
all such shares are then entitled; or
(iii) purchase or otherwise acquire for consideration any shares of
Series A Junior Participating Preferred Stock, or any shares of stock ranking on
a parity with the Series A Junior Participating Preferred Stock, except in
accordance with a purchase offer made in writing or by publication (as
determined by the Board of Directors) to all holders of Series A Junior
Participating Preferred Stock, or to such holders and holders of any such shares
ranking on a parity therewith, upon such terms as the Board of Directors, after
consideration of the respective annual dividend rates and other relative
rights and preferences of the respective series and classes, shall determine in
good faith will result in fair and equitable treatment among the respective
series or classes.
(B) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any shares of
stock of the Corporation unless the Corporation could, under paragraph (A) of
this Section 4, purchase or otherwise acquire such shares at such time and in
such manner.
5. Reacquired Shares. Any shares of Series A Junior Participating
Preferred Stock purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired promptly after the acquisition thereof. All such
shares shall upon their retirement become authorized but unissued shares of
Preferred Stock and may be reissued as part of a new series of Preferred Stock
to be created by resolution or resolutions of the Board of Directors, subject to
any conditions and restrictions on issuance set forth herein.
6. Liquidation, Dissolution or Winding Up. (A) Upon any liquidation
(voluntary or otherwise), dissolution or winding up of the Corporation, no
distribution shall be made to the holders of shares of stock ranking junior
(either as to dividends or upon liquidation, dissolution or winding up) to the
Series A Junior Participating Preferred Stock unless, prior thereto, the holders
of shares of Series A Junior Participating Preferred Stock shall have received
$100.00 per share, plus an amount equal to accrued and unpaid dividends and
distributions thereon, whether or not declared, to the date of such payment (the
"Series A Liquidation Preference"). Following the payment of the full amount of
the Series A Liquidation Preference, no additional distributions shall be made
to the holders of shares of Series A Junior Participating Preferred Stock
unless, prior thereto, the holders of shares of Common Stock shall have received
an amount per share (the "Common Adjustment") equal to the quotient obtained by
dividing (i) the Series A Liquidation Preference by (ii) the Adjustment Number.
Following the payment of the full amount of the Series A Liquidation Preference
and the Common Adjustment in respect of all outstanding shares of (1) Series A
Junior Participating Preferred Stock and (2) Common Stock, respectively, (a)
holders of Series A Junior Participating Preferred Stock and (b) holders of
shares of Common Stock shall, subject to the prior rights of all other series of
Preferred Stock, if any, ranking prior thereto, receive their ratable and
proportionate share of the remaining assets to be distributed in the ratio of
the Adjustment Number to 1 with respect to (x) the Series A Junior Participating
Preferred Stock and (y) the Common Stock, on a per share basis, respectively.
(B) In the event, however, that there are not sufficient assets available
to permit payment in full of the Series A Liquidation Preference and the
liquidation preferences of all other series of Preferred Stock, if any, that
rank on a parity with the Series A Junior Participating Preferred Stock, then
such remaining assets shall be distributed ratably to the holders of such parity
shares in proportion to their respective liquidation preferences. In the event,
however, that there are not sufficient assets available to permit payment in
full of the Common Adjustment, then such remaining assets shall be distributed
ratably to the holders of Common Stock.
A-3
<PAGE>
(C) Neither the merger or consolidation of the Corporation into or with
another corporation nor the merger or consolidation of any other corporation
into or with the Corporation shall be deemed to be a liquidation, dissolution or
winding up of the Corporation within the meaning of this Section 6.
7. Consolidation, Merger, Etc. In case the Corporation shall enter into
any consolidation, merger, combination or other transaction in which the shares
of Common Stock are exchanged for or changed into other stock or securities,
cash and/or any other property, then in any such case each share of Series A
Junior Participating Preferred Stock shall at the same time be similarly
exchanged or changed in an amount per share equal to the Adjustment Number times
the aggregate amount of stock, securities, cash and/or any other property
(payable in kind), as the case may be, into which or for which each share of
Common Stock is changed or exchanged.
8. No Redemption. Shares of Series A Junior Participating Preferred
Stock shall not be subject to redemption by the Company.
9. Ranking. The Series A Junior Participating Preferred Stock shall rank
junior to all other series of the Corporation's Preferred Stock as to the
payment of dividends and the distribution of assets, unless the terms of any
such series shall provide otherwise, and shall rank senior to the Common Stock
as to such matters.
10. Amendment. At any time that any shares of Series A Junior
Participating Preferred Stock are outstanding, the Certificate of Incorporation
of the Corporation shall not be amended in any manner which would materially
alter or change the powers, preferences or special rights of the Series A Junior
Participating Preferred Stock so as to affect them adversely without the
affirmative vote of the holders of two-thirds of the outstanding shares of
Series A Junior Participating Preferred Stock, voting separately as a class.
11. Fractional Shares. Series A Junior Participating Preferred Stock may
be issued in fractions of a share that shall entitle the holder, in proportion
to such holder's fractional shares, to exercise voting rights, receive
dividends, participate in distributions and to have the benefit of all other
rights of holders of Series A Junior Participating Preferred Stock.
IN WITNESS WHEREOF, the undersigned has executed this Certificate this 30th
day of November, 1998.
ATTEST: CITATION CORPORATION
_______________________________ By: ________________________________
Name: Name:
Title: Title:
A-4
<PAGE>
Exhibit B
---------
Form of Right Certificate
Certificate No. R-_____ _______Rights
NOT EXERCISABLE AFTER DECEMBER 7, 2008 OR EARLIER IF
REDEMPTION OR EXCHANGE OCCURS. THE RIGHTS ARE SUBJECT
REDEMPTION AT $.01 PER RIGHT AND TO EXCHANGE ON THE TERMS
SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN
CIRCUMSTANCES, AS SET FORTH IN THE RIGHTS AGREEMENT,
RIGHTS OWNED BY OR TRANSFERRED TO ANY PERSON WHO IS OR
BECOMES AN ACQUIRING PERSON (AS DEFINED IN THE RIGHTS
AGREEMENT) AND CERTAIN TRANSFEREES THEREOF WILL BECOME
NULL AND VOID AND WILL NO LONGER BE TRANSFERABLE.
Right Certificate
Citation Corporation
This certifies that _______________ or registered assigns, is the
registered owner of the number of Rights set forth above, each of which entitles
the owner thereof, subject to the terms, provisions and conditions of the Rights
Agreement, dated as of November 25, 1998 as the same may be amended from time to
time (the "Rights Agreement"), between Citation Corporation, a Delaware
corporation (the "Company"), and The Bank of New York (the "Rights Agent"), to
purchase from the Company at any time after the Distribution Date (as such term
is defined in the Rights Agreement) and prior to 5:00 P.M., New York time, on
December 7, 2008 at the office or agency of the Rights Agent designated for such
purpose, or of its successor as Rights Agent, one one-hundredth of a fully paid
non-assessable share of Series A Junior Participating Preferred Stock, par value
$0.01 per share (the "Preferred Stock"), of the Company, at a purchase price of
$45.00 per one one-hundredth of a share of Preferred Stock (the "Purchase
Price"), upon presentation and surrender of this Right Certificate with the Form
of Election to Purchase duly executed. The number of Rights evidenced by this
Rights Certificate (and the number of one one-hundredths of a share of Preferred
Stock which may be purchased upon exercise hereof) set forth above, and the
Purchase Price set forth above, are the number and Purchase Price as of December
7, 1998, based on the Preferred Stock as constituted at such date. As provided
in the Rights Agreement, the Purchase Price, the number of one one-hundredths of
a share of Preferred Stock (or other securities or property) which may be
purchased upon the exercise of the Rights and the number of Rights evidenced by
this Right Certificate are subject to modification and adjustment upon the
happening of certain events.
This Right Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Right Certificates. Copies of
the Rights Agreement are on file at the principal executive offices of the
Company and the above-mentioned office or agency of the Rights Agent. The
Company will mail to the holder of this Right Certificate a copy of the Rights
Agreement without charge after receipt of a written request therefor.
This Right Certificate, with or without other Right Certificates, upon
surrender at the office or agency of the Rights Agent designated for such
purpose, may be exchanged for another Right Certificate or Right Certificates of
like tenor and date evidencing Rights entitling the holder to purchase a like
aggregate number of shares of Preferred Stock as the Rights evidenced by the
Right Certificate or Right Certificates surrendered shall have entitled
B-1
<PAGE>
such holder to purchase. If this Right Certificate shall be exercised in part,
the holder shall be entitled to receive upon surrender hereof another Right
Certificate or Right Certificates for the number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights
evidenced by this Certificate (i) may be redeemed by the Company at a redemption
price of $.01 per Right or (ii) may be exchanged in whole or in part for shares
of the Company's Common Stock, par value $0.01 per share, or shares of Preferred
Stock.
No fractional shares of Preferred Stock will be issued upon the
exercise of any Right or Rights evidenced hereby (other than fractions which are
integral multiples of one one-hundredth of a share of Preferred Stock, which
may, at the election of the Company, be evidenced by depositary receipts), but
in lieu thereof, the Company will make cash payments, as provided in the Rights
Agreement.
No holder of this Right Certificate, as such, shall be entitled to
vote or receive dividends or be deemed for any purpose the holder of the
Preferred Stock or of any other securities of the Company which may at any time
be issuable on the exercise hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a stockholder of the Company or any right to vote for the
election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting stockholders (except as
provided in the Rights Agreement) or to receive dividends or subscription
rights, or otherwise, until the Right or Rights evidenced by this Right
Certificate shall have been exercised as provided in the Rights Agreement.
This Right Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the Company
and its corporate seal. Dated as of ________________ ___, 199__.
ATTEST: CITATION CORPORATION
_____________________________ By: __________________________________
Name: Name:
Title: Title:
Countersigned:
_____________________________
as Rights Agent
By _________________________
Authorized Signature
B-2
<PAGE>
Form of Reverse Side of Right Certificate
FORM OF ASSIGNMENT
------------------
(To be executed by the registered holder if such
holder desires to transfer the Right Certificate)
FOR VALUE RECEIVED _________________________________ hereby sells, assigns
and transfers unto
________________________________________________________________________________
________________________________________________________________________________
(Please print name and address of transferee)
________________________________________________________________________________
this Right Certificate, together with all right, title and interest therein, and
does hereby irrevocably constitute and appoint ______________________________
Attorney, to transfer said Rights Certificate on the books of the within-named
Company, with full power of substitution.
Dated:_______________________
______________________________________
Signature
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a registered national
securities exchange, a member of the National Association of Securities Dealers,
Inc., or a commercial bank or trust company having an office or correspondent in
the United States.
................................................................................
(To be completed)
The undersigned hereby certifies that the Rights evidenced by this Right
Certificate are not beneficially owned by, were not acquired by the undersigned
from, and are not being assigned to an Acquiring Person or an Affiliate or
Associate thereof (as defined in the Rights Agreement).
______________________________________
Signature
B-3
<PAGE>
Form of Reverse Side of Right Certificate - continued
FORM OF ELECTION TO PURCHASE
----------------------------
(To be executed if holder desires to exercise
Rights represented by the Rights Certificate)
To: Citation Corporation
The undersigned hereby irrevocably elects to exercise ___________ Rights
represented by this Right Certificate to purchase the shares of Preferred Stock
(or other securities or property) issuable upon the exercise of such Rights and
requests that certificates for such shares of Preferred Stock (or such other
securities) be issued in the name of:
________________________________________________________________________________
(Please print name and address)
________________________________________________________________________________
If such number of Rights shall not be all the Rights evidenced by this
Right Certificate, a new Right Certificate for the balance remaining of such
Rights shall be registered in the name of and delivered to:
Please insert social security
or other identifying number
________________________________________________________________________________
(Please print name and address)
________________________________________________________________________________
Dated: __________ ___________________________________
Signature
(Signature must conform to holder specified on Right Certificate)
Signature Guaranteed: Signature must be guaranteed by a member firm of a
registered national securities exchange, a member of the National Association of
Securities Dealers, Inc., or a commercial bank or trust company having an office
or correspondent in the United States.
________________________________________________________________________________
(To be completed)
B-4
<PAGE>
Form of Reverse Side of Right Certificate - continued
The undersigned certifies that the Rights evidenced by this Right
Certificate are not beneficially owned by, and were not acquired by the
undersigned from, an Acquiring Person or an Affiliate or Associate thereof (as
defined in the Rights Agreement).
_________________________________________
Signature
________________________________________________________________________________
NOTICE
------
The signature in the Form of Assignment or Form of Election to Purchase, as
the case may be, must conform to the name as written upon the face of this Right
Certificate in every particular, without alteration or enlargement or any change
whatsoever.
In the event the certification set forth above in the Form of Assignment or
the Form of Election to Purchase, as the case may be, is not completed, such
Assignment or Election to Purchase will not be honored.
B-5
<PAGE>
Exhibit C
---------
UNDER CERTAIN CIRCUMSTANCES, AS SET FORTH IN THE RIGHTS AGREEMENT,
RIGHTS OWNED BY OR TRANSFERRED TO ANY PERSON WHO IS OR BECOMES AN
ACQUIRING PERSON (AS DEFINED IN THE RIGHTS AGREEMENT) AND CERTAIN
TRANSFEREES THEREOF WILL BECOME NULL AND VOID AND WILL NO LONGER BE
TRANSFERABLE.
SUMMARY OF RIGHTS TO PURCHASE
SHARES OF PREFERRED STOCK
On November 25, 1998, the Board of Directors of Citation Corporation (the
"Company") declared a dividend of one preferred share purchase right (a "Right")
for each outstanding share of common stock, par value $0.1 per share, of the
Company (the "Common Stock"). The dividend is payable on December 7, 1998 (the
"Record Date") to the stockholders of record on that date. Each Right entitles
the registered holder to purchase from the Company one one-hundredth of a share
of Series A Junior Participating Preferred Stock, par value $0.01 per share (the
"Preferred Stock") of the Company at a price of $45.00 per one one-hundredth of
a share of Preferred Stock (the "Purchase Price"), subject to adjustment. The
description and terms of the Rights are set forth in a Rights Agreement dated as
of November 25, 1998, as the same may be amended from time to time (the "Rights
Agreement"), between the Company and The Bank of New York as Rights Agent (the
"Rights Agent").
Until the earlier to occur of (i) 10 days following a public announcement
that a person or group of affiliated or associated persons (an "Acquiring
Person") has acquired beneficial ownership of 15% or more of the outstanding
shares of Common Stock or (ii) 10 business days (or such later date as may be
determined by action of the Board of Directors prior to such time as any person
or group of affiliated persons becomes an Acquiring Person) following the
commencement of, or announcement of an intention to make, a tender offer or
exchange offer the consummation of which would result in the beneficial
ownership by a person or group of 15% or more of the outstanding shares of
Common Stock (the earlier of such dates being called the "Distribution Date"),
the Rights will be evidenced, with respect to any of the Common Stock
certificates outstanding as of the Record Date, by such Common Stock certificate
together with a copy of this Summary of Rights.
Existing holdings of 15% or more of the Company's Common Stock by persons
who are deemed to own directly such shares will not cause the Rights to be
exercisable, or entitle the holders of Rights to purchase additional shares of
the Company or any other entity, unless such holder acquires additional shares.
Also, existing holdings of 15% or more of the Company's Common Stock by persons
who are deemed to own indirectly such shares will not cause the Rights to be
exercisable, or entitle the holders of Rights to purchase additional shares of
the Company or any other entity, unless such holder acquires additional shares
or converts any of such holder's holdings from indirect to direct beneficial
ownership.
The Rights Agreement provides that, until the Distribution Date (or earlier
redemption or expiration of the Rights), the Rights will be transferred with and
only with the Common Stock. Until the Distribution Date (or earlier redemption
or expiration of the Rights), new Common Stock certificates issued after the
Record Date upon transfer or new issuances of Common Stock will contain a
notation incorporating the Rights Agreement by reference. Until the Distribution
Date (or earlier redemption or expiration of the Rights), the surrender for
transfer of any certificates for shares of Common Stock outstanding as of the
Record Date, even without such notation or a copy of this Summary of Rights,
will also constitute the transfer of the Rights associated with the shares of
Common Stock represented by such certificate. As soon as practicable following
the Distribution Date, separate certificates
C-1
<PAGE>
evidencing the Rights ("Right Certificates") will be mailed to holders of record
of the Common Stock as of the close of business on the Distribution Date and
such separate Right Certificates alone will evidence the Rights.
The Rights are not exercisable until the Distribution Date. The
Rights will expire, if not previously exercised, on December 7, 2008 (the "Final
Expiration Date"), unless the Final Expiration Date is extended or unless the
Rights are earlier redeemed or exchanged by the Company, in each case as
described below.
The Purchase Price payable, and the number of shares of Preferred
Stock or other securities or property issuable, upon exercise of the Rights is
subject to adjustment from time to time to prevent dilution (i) in the event of
a stock dividend on, or a subdivision, combination or reclassification of, the
Preferred Stock, (ii) upon the grant to holders of the Preferred Stock of
certain rights or warrants to subscribe for or purchase Preferred Stock at a
price, or securities convertible into Preferred Stock with a conversion price,
less than the then-current market price of the Preferred Stock or (iii) upon the
distribution to holders of the Preferred Stock of evidences of indebtedness or
assets (excluding regular periodic cash dividends or dividends payable in
Preferred Stock) or of subscription rights or warrants (other than those
referred to above).
The number of outstanding Rights is also subject to adjustment in the
event of a stock split of the Common Stock or a stock dividend on the Common
Stock payable in shares of Common Stock or subdivisions, consolidations or
combinations of the Common Stock occurring, in any such case, prior to the
Distribution Date.
Shares of Preferred Stock purchasable upon exercise of the Rights will
not be redeemable. Each share of Preferred Stock will be entitled, when, as and
if declared, to a minimum preferential quarterly dividend payment of $1.00 per
share but will be entitled to an aggregate dividend of 100 times the dividend
declared per share of Common Stock. In the event of liquidation, the holders of
the Preferred Stock will be entitled to a minimum preferential liquidation
payment of $100.00 per share (plus any accrued but unpaid dividends) but will be
entitled to an aggregate payment of 100 times the payment made per share of
Common Stock. Each share of Preferred Stock will have 100 votes, voting together
with the Common Stock. Finally, in the event of any merger, consolidation or
other transaction in which shares of Common Stock are converted or exchanged,
each share of Preferred Stock will be entitled to receive 100 times the amount
received per share of Common Stock. These rights are protected by customary
antidilution provisions.
Because of the nature of the Preferred Stock's dividend, liquidation
and voting rights, the value of the one one-hundredth interest in a share of
Preferred Stock purchasable upon exercise of each Right should approximate the
value of one share of Common Stock.
In the event that any person or group of affiliated or associated
persons becomes an Acquiring Person, each holder of a Right, other than Rights
beneficially owned by the Acquiring Person (which will thereupon become void),
will thereafter have the right to receive upon exercise of a Right at the then-
current exercise price of the Right, that number of shares of Common Stock (or,
under certain circumstances, on economically equivalent such as the Preferred
Stock) having a market value of two times the exercise price of the Right.
In the event that, after a person or group has become an Acquiring
Person, the Company is acquired in a merger or other business combination
transaction or 50% or more of its consolidated assets or earning power are sold,
proper provisions will be made so that each holder of a Right (other than Rights
beneficially owned by an Acquiring Person which will have become void) will
thereafter have the right to receive, upon the exercise thereof at the then-
current exercise price of the Right, that number of shares of common stock of
the person with whom the Company has engaged in the foregoing transaction (or
its parent), which number of shares at the time of such transaction will have a
market value of two times the exercise price of the Right.
At any time after any person or group becomes an Acquiring Person and
prior to the earlier of one of the events described in the previous paragraph or
the acquisition by such person or group of 50% or more of the outstanding shares
of Common Stock, the Board of Directors of the Company may exchange the Rights
(other than
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<PAGE>
Rights owned by such person or group which will have become void), in whole or
in part, at an exchange ratio of one share of Common Stock, or one one-
hundredths of a share of Preferred Stock (or shares of a class or series of the
Company's preferred stock having equivalent rights, preferences and privileges).
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least 1% in
such Purchase Price. No fractional shares of Preferred Stock will be issued
(other than fractions which are integral multiples of one one-hundredth of a
share of Preferred Stock, which may, at the election of the Company, be
evidenced by depositary receipts), and in lieu thereof an adjustment in cash
will be made based on the market price of the Preferred Stock on the last
trading day prior to the date of exercise.
At any time prior to the time an Acquiring Person becomes such, the
Board of Directors of the Company may redeem the Rights in whole, but not in
part, at a price of $.01 per Right (the "Redemption Price"). The redemption of
the Rights may be made effective at such time, on such basis and with such
conditions as the Board of Directors in its sole discretion may establish.
Immediately upon any redemption of the Rights, the right to exercise the Rights
will terminate and the only right of the holders of Rights will be to receive
the Redemption Price.
For so long as the Rights are then redeemable, the Company may, except
with respect to the redemption price, amend the Rights in any manner. After the
Rights are no longer redeemable, the Company may, except with respect to the
redemption price, amend the Rights in any manner that does not adversely affect
the interests of holders of the Rights.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company, including, without limitation, the right
to vote or to receive dividends.
A copy of the Rights Agreement has been filed with the Securities and
Exchange Commission as an Exhibit to a Registration Statement on Form 8-A dated
December 1, 1998. A copy of the Rights Agreement is available free of charge
from the Company. This summary description of the Rights does not purport to be
complete and is qualified in its entirety by reference to the Rights Agreement,
as the same may be amended from time to time, which is hereby incorporated
herein by reference.
C-3
<PAGE>
EXHIBIT 10.2(X)
---------------
Execution Copy
CITATION CORPORATION
CITATION AUTOMOTIVE SALES CORP.
MANSFIELD FOUNDRY CORPORATION
IROQUOIS FOUNDRY CORPORATION
OBERDORFER INDUSTRIES CORP.
BERLIN FOUNDRY CORPORATION
CASTWELL PRODUCTS, INC.
TEXAS STEEL CORPORATION
HI-TECH, INC.
SOUTHERN ALUMINUM CASTINGS COMPANY
BOHN ALUMINUM, INC.
TSC TEXAS CORPORATION
TEXAS FOUNDRIES, LTD.
MABRY FOUNDRY COMPANY, LTD.
CITATION CASTINGS, INC.
INTERSTATE FORGING INDUSTRIES, INC.
INTERSTATE SOUTHWEST, LTD.
ISW TEXAS CORPORATION
CAMDEN CASTING CENTER, INC.
DYCAST, INC.
and
CITATION PRECISION, INC.
_______________________________________________________
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
dated as of August 3, 1998
________________________________________________________
The Banks Party Hereto,
THE FIRST NATIONAL BANK OF CHICAGO,
as Administrative and Syndication Agent
and
SOUTHTRUST BANK, NATIONAL ASSOCIATION
as Collateral Agent
Arranged
by
FIRST CHICAGO CAPITAL MARKETS, INC.
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Article Page
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<S> <C>
INTRODUCTION..................................................................... 1
ARTICLE I. DEFINITIONS.......................................................... 1
1.1 Certain Definitions........................................................ 1
1.2 Other Definitions; Rules of Construction................................... 16
ARTICLE II. THE COMMITMENTS, THE SWING LINE FACILITY AND THE ADVANCES........... 16
2.1 Commitment of the Banks and Swing Line Facility............................ 16
(a) Revolving Credit Advances.............................................. 16
(b) Limitation on Amount of Revolving Credit Advances...................... 17
(c) Swing Line Loans....................................................... 17
2.2 Termination and Reduction of Commitments................................... 18
2.3 Fees....................................................................... 18
2.4 Disbursement of Advances................................................... 19
2.5 Conditions for First Disbursement.......................................... 21
(a) Charter and Partnership Documents...................................... 21
(b) By-Laws, Partnership Agreements and Corporate Authorizations........... 21
(c) Incumbency Certificates................................................ 21
(d) Notes.................................................................. 21
(e) Security Documents..................................................... 21
(i) Recording, Filing, Etc............................................. 22
(iii) Environmental Certificate........................................ 22
(f) Legal Opinions......................................................... 22
(g) Consents, Approvals, Etc............................................... 22
(h) Fees................................................................... 22
(i) Subordinated Notes Offering Memorandum................................. 22
(j) Year 2000 Assessment................................................... 22
(k) Payment of Amounts Owing Under Existing Credit Agreement............... 22
(l) Other.................................................................. 22
2.6 Further Conditions for Disbursement........................................ 22
2.7 Subsequent Elections as to Loans........................................... 23
2.8 Limitation of Requests and Elections....................................... 23
2.9 Minimum Amounts; Etc....................................................... 24
2.10 Additional Required Documents for New Participating Subsidiaries.......... 24
ARTICLE III. PAYMENTS AND PREPAYMENTS OF ADVANCES............................... 25
3.1 Principal Payments and Prepayments......................................... 25
3.2 Interest Payments.......................................................... 25
3.3 Letter of Credit Reimbursement Payments.................................... 25
3.4 Payment Method............................................................. 27
3.5 No Setoff or Deduction..................................................... 27
3.6 Payment on Non-Business Day; Payment Computations.......................... 27
3.7 Additional Costs........................................................... 28
3.8 Illegality and Impossibility............................................... 28
3.9 Indemnification............................................................ 29
ARTICLE IV. REPRESENTATIONS AND WARRANTIES...................................... 29
</TABLE>
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4.1 Original............................................................................. 29
4.2 Survival............................................................................. 32
ARTICLE V. BORROWERS' COVENANTS........................................................... 32
5.1 Affirmative Covenants................................................................ 33
5.2 Negative Covenants................................................................... 38
5.3 Financial Covenants.................................................................. 43
5.4 Interpretation and Consolidation..................................................... 43
ARTICLE VI. DEFAULT....................................................................... 43
6.1 Events of Default.................................................................... 43
6.2 Remedies............................................................................. 45
6.3 Distribution of Proceeds of Collateral............................................... 46
6.4 Letter of Credit Liabilities......................................................... 47
ARTICLE VII. THE AGENTS AND THE BANKS..................................................... 47
7.1 Appointment and Authorization........................................................ 47
7.2 Agents and Affiliates................................................................ 47
7.3 Scope of Agents' Duties.............................................................. 47
7.4 Reliance by Agents................................................................... 48
7.5 Default.............................................................................. 48
7.6 Liability of Agents.................................................................. 48
7.7 Nonreliance on Agents and Other Banks................................................ 48
7.8 Indemnification...................................................................... 48
7.9 Successor Agents..................................................................... 49
7.10 Sharing of Payments................................................................. 49
7.11 Withholding Tax Exemption........................................................... 50
7.12 Collateral Agent Matters............................................................ 50
ARTICLE VIII. COLLATERAL SECURITY......................................................... 51
8.1 Composition of the Collateral........................................................ 51
8.2 Rights in Property Held by the Banks................................................. 51
8.3 Rights in Property Held Either by Borrowers or by the Banks.......................... 51
8.4 Priority of Liens.................................................................... 52
8.5 Perfection........................................................................... 52
8.6 Collateral Release................................................................... 52
8.7 [intentionally omitted].............................................................. 52
ARTICLE IX. MISCELLANEOUS................................................................. 53
9.1 Amendments, Etc...................................................................... 53
9.2 Notices.............................................................................. 53
9.3 No Waiver By Conduct; Remedies Cumulative............................................ 54
9.4 Reliance on and Survival of Various Provisions....................................... 54
9.5 Expenses; Indemnification............................................................ 54
9.6 Successors and Assigns............................................................... 56
9.7 Counterparts......................................................................... 58
9.8 Governing Law........................................................................ 58
9.9 Table of Contents and Headings....................................................... 59
9.10 Construction of Certain Provisions.................................................. 59
9.11 Integration and Severability........................................................ 59
9.12 Independence of Covenants........................................................... 59
9.13 Interest Rate Limitation............................................................ 59
9.14 Joint and Several Obligations; Subrogation and Contribution Rights; Savings Clause.. 59
9.15 Waivers, Etc........................................................................ 61
ii
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<S> <C>
9.16 Citation To Act For All Borrowers................................................... 61
9.17 Further Assurances.................................................................. 61
9.18 Waiver and Release by Borrowers..................................................... 61
9.19 No Partnership or Joint Venture..................................................... 62
9.20 Termination......................................................................... 62
9.21 Existing Letters of Credit.......................................................... 63
9.22 WAIVER OF JURY TRIAL................................................................ 63
</TABLE>
EXHIBITS
- --------
Exhibit A Environmental Certificate
Exhibit B-1 Revolving Credit Note
Exhibit B-2 Swing Line Note
Exhibit C-1 Request for Borrowing
Exhibit C-2 Request for Swing Line Loan
Exhibit D Request for Continuation or Conversion
Exhibit E Legal Opinion
Exhibit F Compliance Certificate
Exhibit G Participating Subsidiary Assumption Agreement
Exhibit H Assignment and Acceptance
SCHEDULES
- ---------
Schedule 1.1(a) Security Documents
Schedule 1.1(b) Existing Liens
Schedule 4.1(a) Qualification to do Business, Places of
Business and Locations of Collateral
Schedule 4.1(b) Tradenames
Schedule 4.1(d) Mergers, Acquisitions and Certain Changes
Schedule 4.1(i) Claims, Litigation
Schedule 4.1(n) Compliance with Laws Disclosures
Schedule 4.1(u) ERISA Disclosures
Schedule 4.1(v) Citation and Consolidated Entities
Organization
Schedule 5.2(h) Certain Existing Indebtedness
iii
<PAGE>
THIS SECOND AMENDED AND RESTATED CREDIT AGREEMENT, dated as of August
3, 1998 (this "Agreement"), is by and among CITATION CORPORATION, a Delaware
corporation ("Citation" or the "Company"), CITATION AUTOMOTIVE SALES CORP., a
Michigan corporation, MANSFIELD FOUNDRY CORPORATION, an Ohio corporation
formerly known as MFC Acquisition Corporation, IROQUOIS FOUNDRY CORPORATION, a
Wisconsin corporation formerly known as Iroquois Acquisition Corporation,
OBERDORFER INDUSTRIES CORP., a New York corporation formerly known as OBI
Acquisition Corp., BERLIN FOUNDRY CORPORATION, a Wisconsin corporation, CASTWELL
PRODUCTS, INC., an Illinois corporation, TEXAS STEEL CORPORATION, a Texas
corporation formerly known as TSC Acquisition Corporation, HI-TECH, INC., an
Indiana corporation formerly known as HTC Acquisition Corporation, SOUTHERN
ALUMINUM CASTINGS COMPANY, an Alabama corporation, BOHN ALUMINUM, INC., an
Indiana corporation formerly known as BAC Acquisition Corporation, TSC TEXAS
CORPORATION, a Delaware corporation, TEXAS FOUNDRIES, LTD., a Texas limited
partnership, MABRY FOUNDRY COMPANY, LTD., a Texas limited partnership, CITATION
CASTINGS, INC., an Alabama corporation, INTERSTATE FORGING INDUSTRIES, INC., a
Wisconsin corporation, INTERSTATE SOUTHWEST, LTD., a Texas limited partnership,
ISW TEXAS CORPORATION, a Delaware corporation, CAMDEN CASTING CENTER, INC., a
Tennessee corporation, DYCAST, INC., a Delaware corporation, and CITATION
PRECISION, INC., a California corporation (collectively the "Initial
Participating Subsidiaries" and individually an "Initial Participating
Subsidiary"; and, together with Citation and all other Subsidiaries (as
hereinafter defined) of Citation that hereafter become Participating
Subsidiaries, collectively the "Borrowers" and individually a "Borrower"), the
banks and other lenders party hereto from time to time (collectively the "Banks"
and individually a "Bank"), THE FIRST NATIONAL BANK OF CHICAGO, a national
banking association, successor to NBD Bank, a Michigan banking corporation, as
administrative and syndication agent (in such capacity, the "Administrative
Agent") for the Banks, and SOUTHTRUST BANK, NATIONAL ASSOCIATION, a national
banking association formerly known as SouthTrust Bank of Alabama, National
Association, as collateral agent (in such capacity, the "Collateral Agent", and
together with the Administrative Agent, collectively the "Agents" and
individually an "Agent") for the Banks.
INTRODUCTION
------------
A. Citation, the Initial Participating Subsidiaries, certain Banks
(collectively the "Existing Banks" and individually an "Existing Bank") and the
Agents are parties to the Amended and Restated Credit Agreement, dated as of
July 24, 1997, as amended by the First Amendment to Amended and Restated Credit
Agreement, dated as of December 19, 1997(the "Existing Credit Agreement"),
pursuant to which the Existing Banks provide to the Borrowers a revolving credit
facility in the aggregate principal amount of $300,000,000, including letters of
credit, for working capital and general corporate purposes, including
acquisitions.
B. Citation, the Initial Participating Subsidiaries, the Banks and
the Agents now desire to amend and restate the Existing Credit Agreement in
order to, among other things, revise the pricing for borrowings from the Banks,
modify certain covenants applicable to the Borrowers and reflect the release of
certain collateral.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements herein contained, the parties hereto hereby amend and restate the
Existing Credit Agreement, and further agree, as follows:
ARTICLE I.
DEFINITIONS
-----------
1.1 Certain Definitions. As used herein the following terms shall
-------------------
have the following respective meanings:
"Accounts", "Chattel Paper", "Inventory" and other terms not
-------- ------------- ---------
specifically defined in this Agreement shall have the same respective meanings
as are given to those terms in the Uniform Commercial Code as currently adopted
and in effect in the State of Illinois.
1
<PAGE>
"Adjusted EBITDA" for any period means EBITDA for such period
---------------
calculated on a pro forma basis assuming that each Consolidated Entity that was
acquired by Citation after the first day of such period (and that exists as a
Consolidated Entity at the end of such period) was acquired on and as of the
first day of such period.
"Advance" means any Loan and any Letter of Credit Advance.
-------
"Affiliate" means, with respect to any person, any other person (A)
---------
which directly or indirectly, through one or more intermediaries, controls, or
is controlled by, or is under common control with, such person, or (B) five
percent (5%) or more of the equity interest of which is held beneficially or of
record by such person. The term "control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of a person, whether through the ownership of voting securities, by
contract or otherwise.
"Arranger" means First Chicago Capital Markets, Inc.
--------
"Bank Obligations" means the obligations of the Borrowers to the Banks
----------------
described in paragraph (A) of the definition of Obligations.
"Base Rate" means the per annum rate equal to the greater of (a) the
---------
Corporate Base Rate in effect from time to time, and (b) the sum of one percent
(1%) per annum plus the Federal Funds Effective Rate in effect from time to
time; which Base Rate shall change simultaneously with any change in such
Corporate Base Rate or Federal Funds Rate, as the case may be.
"Benefit Plan" means any employee welfare benefit plan as defined in
------------
Section 3(1) of ERISA or any employee pension benefit plan as defined in Section
3(2) of ERISA.
"Borrowing" means the aggregation of Advances, including each Letter
---------
of Credit issuance, of the Banks to be made to the Borrowers, or continuations
and conversions of any Loans, made pursuant to Article II on a single date and,
in the case of any Loans, for a single Interest Period, which Borrowings may be
classified for purposes of this Agreement by reference to the type of Loans or
the type of Advance comprising the related Borrowing, e.g., a "Eurodollar Rate
Borrowing" is a Borrowing comprised of Eurodollar Rate Loans and a "Letter of
Credit Borrowing" is an Advance comprised of the issuance of a single Letter of
Credit.
"Business Day" means a day other than a Saturday, Sunday or other day
------------
on which the Administrative Agent is not open to the public for carrying on
substantially all of its banking functions in Chicago, Illinois.
"Capital Expenditure" means any payment by any of the Borrowers or any
-------------------
of the other Consolidated Entities for the purpose of acquiring or constructing
any real property, plant and equipment or other Fixed Assets, or acquiring any
existing business or part thereof, including any such payment made under a title
retention agreement or capital lease obligation and any such payment made for
goodwill of a business or for any noncompetition covenant in connection with the
acquisition of a business, and any other expenditure or liability that is
properly charged to a capital account or otherwise capitalized on Citation's
Consolidated balance sheet in accordance with Generally Accepted Accounting
Principles.
"Capital Lease" of any person means any lease which, in accordance
-------------
with generally accepted accounting principles, is or should be capitalized on
the books of such person.
"Change in Control" means the acquisition by any Person, or two or
-----------------
more Persons acting in concert, other than T. Morris Hackney, members of T.
Morris Hackney's immediate family and any trust or trusts controlled by T.
Morris Hackney or members of his immediate family for their benefit, of
beneficial ownership (within the meaning of Rule 13d-3 of the Securities and
Exchange Commission under the Securities Exchange Act of 1934) of 30% or more of
the outstanding shares of voting stock of Citation.
2
<PAGE>
"Code" means the Internal Revenue Code of 1986, as amended from time
----
to time, and the regulations thereunder.
"Collateral" means the property and rights, and any proceeds, in
----------
whatever form, thereof, described in Article VIII of this Agreement and in the
Security Documents.
"Commitment" means, with respect to each Bank, the commitment of each
----------
such Bank to make Loans and to participate in Letter of Credit Advances made
through the Administrative Agent pursuant to Section 2.1, in amounts not
exceeding in aggregate principal amount outstanding at any time the respective
commitment amounts for each such Bank set forth next to the name of each such
Bank on the signature pages hereof or otherwise pursuant to Section 9.6, as such
amounts may be reduced from time to time pursuant to Section 2.2.
"Commitment Fee Rate" means the per annum rate (expressed as a
-------------------
percentage) in accordance with the following:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------
Ratio of Total Debt as of preceding fiscal
quarter end to Adjusted EBITDA Commitment
for period of four consecutive fiscal quarters Rate (%)
ending with such quarter end
- ---------------------------------------------------------------
<S> <C>
Greater than 3.50 to 1.00 .375
- ---------------------------------------------------------------
Greater than 3.00 to 1.00
but not greater than 3.50 to 1.00 .25
- ---------------------------------------------------------------
Greater than 2.50 to 1.00
but not greater than 3.00 to 1.00 .25
- ---------------------------------------------------------------
Greater than 2.25 to 1.00
but not greater than 2.50 to 1.00 .25
- ---------------------------------------------------------------
Greater than 1.75 to 1.00
but not greater than 2.25 to 1.00 .225
- ---------------------------------------------------------------
Equal to or less than 1.75 to 1.00 .20
- ---------------------------------------------------------------
</TABLE>
Such ratio shall be determined from the then most recent Margin Certificate
delivered by Citation from time to time pursuant to Section 5.1(c)(6); provided
--------
that the Commitment Fee Rate in effect under this Agreement for the period from
and including the Effective Date to and including the last day prior to the
first change in accordance with the next sentence shall be .25%. Each change,
if any, in the Commitment Fee Rate shall be effective on the fifth Business Day
after delivery of any such Margin Certificate, commencing with the Margin
Certificate delivered with the financial statements furnished under Section
5.1(c)(3) for Citation's 1998 fiscal year. In the event that Citation shall at
any time fail to furnish to the Administrative Agent any Margin Certificate
required to be delivered pursuant to Section 5.1(c)(6), the maximum Commitment
Fee Rate shall apply until such time as such Margin Certificate is so delivered.
"Compliance Certificate" means a certificate in the form annexed
----------------------
hereto as Exhibit F which is delivered by Citation, on behalf of itself and the
---------
other Borrowers, and accepted by the Administrative Agent pursuant to Section
5.l(c)(4) of this Agreement.
3
<PAGE>
"Consolidated" refers to the consolidation of the accounts of a Person
------------
and its Consolidated Entities on a balance sheet and statement of income and
retained earnings in accordance with Generally Accepted Accounting Principles.
"Consolidated Entity" means each Participating Subsidiary and any
-------------------
other Person the financial statements of which are appropriately consolidated
with the financial statements of Citation under Generally Accepted Accounting
Principles; and "Consolidated Entities" means all of them, collectively.
---------------------
"Consolidated Net Income" means, for any period, the net income of
-----------------------
Citation and the Consolidated Entities (on a Consolidated basis and excluding
intercompany items) for such period, determined in accordance with Generally
Accepted Accounting Principles.
"Contingent Liabilities" of any person means, as of any date, all
----------------------
obligations of such person or of others for which such person is contingently
liable, as obligor, guarantor, surety, accommodation party, partner or in any
other capacity, or in respect of which obligations such person assures a
creditor against loss or agrees to take any action to prevent any such loss
(other than endorsements of negotiable instruments for collection in the
ordinary course of business), including, without limitation, all reimbursement
obligations of such person in respect of any letters of credit, surety bonds or
similar obligations (including, without limitation, bankers acceptances) and all
obligations of such person to advance funds to, or to purchase assets, property
or services from, any other person in order to maintain the financial condition
of such other person.
"Corporate Base Rate" means a rate per annum equal to the corporate
-------------------
base rate of interest announced by First Chicago from time to time, changing
when and as said corporate base rate changes.
"Default" means any event or condition which might become an Event
-------
of Default with notice or lapse of time or both.
"Dollars" and "$" each mean the lawful money of the United States
------- -
of America.
"Domestic Subsidiary" means each present and future Subsidiary of
-------------------
Citation or any of the Consolidated Entities which is not a Foreign Subsidiary.
"EBIT" for any period means Consolidated Net Income after taxes
----
(or the net deficit, if expenses and charges exceed revenues and proper income
items) for such period, plus amounts that have been deducted for (i) Interest
Expense, (ii) income taxes, (iii) extraordinary items, (iv) the cumulative
effects of changes in accounting principles and (v) minority interest expense,
in determining Consolidated Net Income for such period, and minus amounts that
have been added for (vi) extraordinary items and (vii) the cumulative effects of
changes in accounting principles, in determining Consolidated Net Income for
such period.
"EBITDA" for any period means Consolidated Net Income after taxes
------
(or the net deficit, if expenses and charges exceed revenues and proper income
items) for such period, plus amounts that have been deducted for (i)
depreciation, (ii) amortization, (iii) Interest Expense, (iv) income taxes, (v)
extraordinary items, (vi) the cumulative effects of changes in accounting
principles, (vii) non-cash losses on the disposition or abandonment of assets
and (viii) minority interest expense, in determining Consolidated Net Income for
such period, and minus amounts that have been added for (ix) extraordinary
items, (x) the cumulative effects of changes in accounting principles and (xi)
gains on the disposition or abandonment of assets, in determining Consolidated
Net Income for such period.
"Effective Date" means the effective date specified in the final
--------------
paragraph of this Agreement.
"Eligible Transferee" means (i) a Bank or any Affiliate thereof;
-------------------
(ii) a bank; (iii) a "qualified institutional buyer" as defined under Rule 144A
of the Securities Act of 1933, as in effect from time to time; and (iv) any
other Person approved by the Administrative Agent and, unless a Default or Event
of Default has occurred and is continuing, Citation, such approval by the
Administrative Agent and Citation not to be unreasonably withheld
4
<PAGE>
or delayed; provided, however, that neither any Borrower nor any Affiliate of
-------- -------
any Borrower shall qualify as an Eligible Transferee.
"Environmental Certificate" means an appropriately completed environmental
-------------------------
certificate in the form annexed hereto as Exhibit A, executed and delivered by
---------
the Borrowers to the Administrative Agent.
"Environmental Laws" shall have the meaning ascribed thereto in the
------------------
Environmental Certificate.
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended
-----
and in effect from time to time, and the regulations promulgated by the
Department of Labor or the Pension Benefit Guaranty Corporation thereunder.
"ERISA Affiliate" means any trade or business, whether or not incorporated,
---------------
that with any Borrower is a member of a group that would be treated as a single
employer for purposes of Section 414(b), (c), (m) or (o) of the Internal Revenue
Code of 1986, as amended.
"Eurodollar Business Day" means, with respect to any Eurodollar Rate Loan, a
-----------------------
day which is both a Business Day and a day on which dealings in Dollar deposits
are carried out in the London interbank market.
"Eurodollar Interest Period" means, with respect to any Eurodollar Rate Loan,
--------------------------
the period commencing on the day such Eurodollar Rate Loan is made or converted
to a Eurodollar Rate Loan and ending on the day which is one, two, three or six
months thereafter, as the Borrowers may elect under Section 2.4 or 2.7, and each
subsequent period commencing on the last day of the immediately preceding
Eurodollar Interest Period and ending on the day which is one, two, three or six
months thereafter, as the Borrowers may elect under Section 2.4 or 2.7,
provided, however, that (a) any Eurodollar Interest Period which commences on
- -------- -------
the last Eurodollar Business Day of a calendar month (or on any day for which
there is no numerically corresponding day in the appropriate subsequent calendar
month) shall end on the last Eurodollar Business Day of the appropriate
subsequent calendar month, (b) each Eurodollar Interest Period which would
otherwise end on a day which is not a Eurodollar Business Day shall end on the
next succeeding Eurodollar Business Day or, if such next succeeding Eurodollar
Business Day falls in the next succeeding calendar month, on the next preceding
Eurodollar Business Day, and (c) no Eurodollar Interest Period which would end
after the Termination Date shall be permitted.
"Eurodollar Rate" means, with respect to any Eurodollar Rate Borrowing and the
---------------
related Eurodollar Interest Period, the per annum rate that is equal to the sum
of:
(a) the Margin, plus
(b) the rate per annum obtained by dividing (i) the per annum rate
determined by the Administrative Agent to be the rate at which First Chicago
offers to place deposits in Dollars with first-class banks in the London
interbank market at approximately 11:00 a.m. London time on the second
Eurodollar Business Day prior to the first day of such Eurodollar Interest
Period, in the approximate amount of First Chicago's relevant Eurodollar Rate
Loan and having a maturity approximately equal to such Eurodollar Interest
Period, by (ii) an amount equal to one minus the stated maximum rate (expressed
as a decimal) of all reserve requirements (including, without limitation, any
marginal, emergency, supplemental, special or other reserves) that are specified
on the first day of such Eurodollar Interest Period by the Board of Governors of
the Federal Reserve System (or any successor agency thereto) for determining the
maximum reserve requirement with respect to eurocurrency funding (currently
referred to as "Eurocurrency liabilities" in Regulation D of such Board)
maintained by a member bank of such System;
all as conclusively determined by the Administrative Agent, such sum to be
rounded up, if necessary, to the nearest whole multiple of one one-hundredth of
one percent (1/100 of 1%).
"Eurodollar Rate Loan" means any Loan which bears interest at the Eurodollar
--------------------
Rate.
5
<PAGE>
"Event of Default" means any of the events or conditions described in Section
----------------
6.1.
"Federal Funds Effective Rate" means, for any day, an interest rate per annum
----------------------------
equal to the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers on such day, as published for such day (or, if such day is not a
Business Day, for the immediately preceding Business Day) by the Federal Reserve
Bank of New York, or, if such rate is not so published for any day which is a
Business Day, the average of the quotations at approximately 10:00 a.m. (Chicago
time) on such day on such transactions received by the Administrative Agent from
three Federal funds brokers of recognized standing selected by the
Administrative Agent in its sole discretion.
"Financial Statements" means the Consolidated balance sheet of Citation and
--------------------
the Consolidated Entities as of September 28, 1997, and the Consolidated
statements of income and retained earnings and cash flows of Citation and the
Consolidated Entities for the years or months ended on such dates, all as
furnished to the Administrative Agent, and shall also mean any such balance
sheets and statements as may hereafter be furnished by any Borrower to the
Administrative Agent.
"First Chicago" means The First National Bank of Chicago in its individual
-------------
capacity, and its successors.
"Fixed Assets" means long-term assets used in the operation of the business of
------------
Citation or any Consolidated Entity, as determined in accordance with Generally
Accepted Accounting Principles.
"Fixed Charge Coverage" means the quotient which is obtained by dividing (a)
---------------------
the sum of (i) EBIT for the four (4) calendar quarters preceding the applicable
date plus (ii) to the extent deducted in determining such EBIT, Rent Expense, by
(b) Interest Expense for the four (4) calendar quarters preceding the applicable
date plus (ii) such Rent Expense.
"Floating Rate" means the per annum rate equal to the sum of (a) the Margin
-------------
plus (b) the Base Rate.
"Floating Rate Loan" means any Loan which bears interest at the Floating Rate.
------------------
"Foreign Subsidiary" means any Subsidiary incorporated or formed in any
------------------
jurisdiction other than any State of the United States of America or any
political subdivision of any such State.
"Generally Accepted Accounting Principles" and "GAAP" each mean generally
---------------------------------------- ----
accepted principles of accounting in effect from time to time in the United
States applied in a manner consistent with those used in preparing such
financial statements as have theretofore been furnished to the Administrative
Agent by or on behalf of the Borrowers or any one or more of them.
"Governmental Authority" means any nation or government, any state and any
----------------------
political subdivision thereof, and any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government,
which has or asserts jurisdiction over any Bank, either Agent, any Borrower, or
over the property of any of them.
"Hazardous Materials" shall have the meaning ascribed thereto in the
-------------------
Environmental Certificate.
"Hedging Contract" means, with respect to any Borrower, all liabilities of
----------------
such Borrower under interest rate swap, cap or collar agreements, currency
exchange agreements and all similar agreements designed to protect such person
against fluctuations in interest rates or currency exchange rates entered into
with any Bank or any Affiliate of any Bank.
"Indebtedness" of any person means, as of any date, (a) all obligations of
------------
such person for borrowed money and all obligations of such person evidenced by
any promissory note, debenture or other similar instrument,
6
<PAGE>
(b) all obligations of such person as lessee under any Capital Lease, (c) all
obligations which are secured by any Lien existing on any asset or property of
such person whether or not the obligation secured thereby shall have been
assumed by such person (to the extent of such Lien if such obligation is not
assumed), (d) all obligations of such person for the unpaid purchase price for
goods, property or services acquired by such person, (e) all obligations of such
person to purchase goods, property or services where payment therefor is
required regardless of whether delivery of such goods or property or the
performance of such services is ever made or tendered (generally referred to as
"take or pay contracts"), (f) all liabilities of such person in respect of
Unfunded Benefit Liabilities under any Plan of such person or of any ERISA
Affiliate, (g) all obligations of such person in respect of any Hedging Contract
(valued in an amount equal to the highest termination payment, if any, that
would be payable by such person upon termination for any reason on the date of
determination), (h) all principal amounts outstanding and owing to parties other
than Citation or any Consolidated Entity under the items described in clause (a)
of the definition of Receivables Program Obligations, and (i) all obligations of
others similar in character to those described in clauses (a) through (h) of
this definition for which such person is contingently liable, as guarantor,
surety, accommodation party, partner or in any other capacity, or in respect of
which obligations such person assures a creditor against loss or agrees to take
any action to prevent any such loss (other than endorsements of negotiable
instruments for collection in the ordinary course of business), including
without limitation all reimbursement obligations of such person in respect of
letters of credit, surety bonds or similar obligations and all obligations of
such person to advance funds to, or to purchase assets, property or services
from, any other person in order to maintain the financial condition of such
other person.
"Interest Expense" means interest payable by Citation and the Consolidated
----------------
Entities on Indebtedness (including, without limitation, (a) the component of
amounts payable under capitalized leases attributable to interest and (b)
interest, yield, discount or similar amounts paid under any Qualified
Receivables Transactions) during the period in question.
"Interest Payment Date" means (a) with respect to any Eurodollar Rate Loan,
---------------------
the last day of each Interest Period with respect to such Eurodollar Rate Loan
and, in the case of any Interest Period exceeding three months, those days that
occur during such Interest Period at intervals of three months after the first
day of such Interest Period, and (b) in all other cases, the last Business Day
of each March, June, September and December occurring after the date hereof,
commencing with the first such Business Day occurring after the date of this
Agreement.
"Interest Period" means any Eurodollar Interest Period or Swing Line Interest
---------------
Period.
"Law" and "Laws" each means all ordinances, statutes, rules, regulations,
--- ----
orders, injunctions, judgments, writs or decrees of any government or political
subdivision or agency thereof, or any court or similar entity established by any
thereof.
"Letter of Credit" means a standby letter of credit, having a stated expiry
----------------
date or a date upon which the draft must be reimbursed not later than twelve
months after the date of issuance and not later than the fifth Business Day
before the Termination Date, issued by the Administrative Agent on behalf of
the Banks for the account of the Borrowers under an application and related
documentation acceptable to the Administrative Agent requiring, among other
things, immediate reimbursement by the Borrowers jointly and severally to the
Administrative Agent in respect of all drafts or other demand for payment
honored thereunder and all expenses paid or incurred by the Administrative Agent
relative thereto.
"Letter of Credit Advance" means any issuance of a Letter of Credit under
------------------------
Section 2.4 made pursuant to Section 2.1 in which each Bank acquires a pro rata
risk participation pursuant to Section 2.4(d).
"Letter of Credit Borrowings" means, as of any date, the maximum aggregate
---------------------------
amount that the Administrative Agent could be required to pay under any drafts
that conceivably could be drawn under all Letters of Credit outstanding on such
date, but does not include drafts that have been drawn and paid.
"Letter of Credit Documents" shall have the meaning ascribed thereto in
--------------------------
Section 3.3(b).
7
<PAGE>
"Letter of Credit Fee Rate" means the rate (expressed as a percentage) in
-------------------------
accordance with the following:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
Ratio of Total Debt as of preceding
fiscal quarter end to Adjusted EBITDA
for period of four consecutive fiscal quarters Letter of Credit
ending with such quarter end Fee
Rate (%)
- ------------------------------------------------------------------------
<S> <C>
Greater than 3.50 to 1.00 1.50
- ------------------------------------------------------------------------
Greater than 3.00 to 1.00
but not greater than 3.50 to 1.00 1.25
- ------------------------------------------------------------------------
Greater than 2.50 to 1.00
but not greater than 3.00 to 1.00 1.0
- ------------------------------------------------------------------------
Greater than 2.25 to 1.00
but not greater than 2.50 to 1.00 .875
- ------------------------------------------------------------------------
Greater than 1.75 to 1.00
but not greater than 2.25 to 1.00 .75
- ------------------------------------------------------------------------
Equal to or less than 1.75 to 1.00 .625
- ------------------------------------------------------------------------
</TABLE>
Such ratio shall be determined from the then most recent Margin Certificate
delivered by Citation from time to time pursuant to Section 5.1(c)(6); provided
--------
that the Letter of Credit Fee Rate in effect under this Agreement for the period
from and including the Effective Date to and including the last day prior to the
first change in accordance with the next sentence shall be 1.0%. Each change in
the Letter of Credit Fee Rate shall be effective on the fifth Business Day after
delivery of any such Margin Certificate, commencing with the Margin Certificate
delivered with the financial statements furnished under Section 5.1(c)(3) for
Citation's 1998 fiscal year. In the event that Citation shall at any time fail
to furnish to the Administrative Agent any Margin Certificate required to be
delivered pursuant to Section 5.1(c)(6), the maximum Letter of Credit Fee Rate
shall apply until such time as such Margin Certificate is so delivered.
"Letter of Credit Obligations" means (a) the Letter of Credit Borrowings and
----------------------------
(b) the reimbursement obligations and other obligations of Borrowers under this
Agreement with respect to drawings made on Letters of Credit (including any
obligations owing under the application or agreement relating to any such Letter
of Credit), including all principal, interest, fees and other charges relating
thereto.
"Lien" means any pledge, assignment, hypothecation, mortgage, security
----
interest, deposit arrangement, option, conditional sale or title retaining
contract, sale and leaseback transaction, financing statement filing, lessor's
or lessee's interest under any lease, subordination of any claim or right, or
any other type of lien, charge, encumbrance, preferential arrangement or other
claim or right.
"Loan" means any Revolving Credit Loan or any Swing Line Loan, as the context
----
may require.
"Loan Documents" means, collectively, this Agreement, the Notes, the Security
--------------
Documents, the Hedging Contracts and all other agreements, instruments and other
documents now or hereafter executed pursuant, or otherwise relating, thereto.
8
<PAGE>
"Margin" means the margin (expressed as a percentage) to be used to determine
------
the Floating Rate or the Eurodollar Rate, as the case may be, in accordance with
the following:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
Ratio of Total Debt as of preceding
fiscal quarter end to Adjusted EBITDA
for period of four consecutive fiscal quarters Floating Rate Eurodollar
ending with such quarter end Margin Rate
(%) Margin (%)
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Greater than 3.50 to 1.00 .50 1.50
- -----------------------------------------------------------------------------------------------
Greater than 3.00 to 1.00
but not greater than 3.50 to 1.00 .25 1.25
- -----------------------------------------------------------------------------------------------
Greater than 2.50 to 1.00
but not greater than 3.00 to 1.00 .0 1.0
- -----------------------------------------------------------------------------------------------
Greater than 2.25 to 1.00
but not greater than 2.50 to 1.00 0 .875
- -----------------------------------------------------------------------------------------------
Greater than 1.75 to 1.00
but not greater than 2.25 to 1.00 0 .75
- -----------------------------------------------------------------------------------------------
Equal to or less than 1.75 to 1.00 0 .625
- -----------------------------------------------------------------------------------------------
</TABLE>
Such ratio shall be determined from the then most recent Margin Certificate
delivered by Citation from time to time pursuant to Section 5.1(c)(6); provided
--------
that the Margin in effect under this Agreement for the period from and including
the Effective Date to and including the last day prior to the first change in
accordance with the next sentence shall be 0% for Floating Rate Loans and 1.0%
for Eurodollar Rate Loans. Each change in the Margin shall be effective on the
fifth Business Day after delivery of any such Margin Certificate, commencing
with the Margin Certificate delivered with the financial statements furnished
under Section 5.1(c)(3) for Citation's 1998 fiscal year. For purposes of
clarification, the Margin initially applicable to any Loan shall be the Margin
in effect at the time such Loan is funded, without regard to the Margin in
effect at the time such Loan was requested and, in the case of Eurodollar Rate
Loans, without regard to the Margin in effect at the time the components of the
applicable Eurodollar Rate (other than the Margin) were set. In the event that
Citation shall at any time fail to furnish to the Administrative Agent any
Margin Certificate required to be delivered pursuant to Section 5.1(c)(6), the
maximum Margin shall apply until such time as such Margin Certificate is so
delivered.
"Margin Certificate" means the certificate with respect to the ratio used to
------------------
calculate the Margin, provided to the Administrative Agent by Citation on behalf
of itself and the other Borrowers on a quarterly basis pursuant to Section
5.1(c)(6).
"Maximum Funding Amount" means the sum of (a) with respect to outstanding
----------------------
Receivables Investor Instruments that have fixed principal amounts, such
principal amounts, and (b) with respect to Receivables Investor Instruments that
have variable principal amounts, the Receivable Stated Amount thereof.
"Net Cash Proceeds" means, in each case as set forth in a statement in
-----------------
reasonable detail delivered to the Administrative Agent, with respect to the
disposition of assets pursuant to Qualified Receivables Transactions by Citation
or any other Sellers, the excess, if any, of (a) the cash received in connection
with such disposition over (b) the sum of (i) the principal amount of any
Indebtedness (other than the Obligations) which is secured by such asset and
which is required to be repaid in connection with the disposition thereof, plus
(ii) the reasonable out-of-
9
<PAGE>
pocket expenses incurred by Citation or such other Sellers, as the case may be,
in connection with such disposition, plus (iii) provision for taxes, including
income taxes, attributable to the disposition of such assets.
"Notes" means the Revolving Credit Notes and the Swing Line Note; and "Note"
-----
means any Revolving Credit Note or the Swing Line Note, as the context may
require.
"Obligations" means the obligations, whether joint or several, of Borrowers:
-----------
(A) To pay the principal of and interest on the Notes in accordance with the
terms thereof and to satisfy, pay and perform the Letter of Credit Obligations
and all other liabilities to the Agents and the Banks under this Agreement and
the other Loan Documents, including, without limitation, the Hedging Contracts,
whether now existing or hereafter incurred, matured or unmatured, direct or
contingent, joint or several, including any extensions, modifications, and
renewals thereof and substitutions therefor;
(B) To repay to the Agents and the Banks all amounts advanced by any Agent or
any Bank under this Agreement, under any of the Security Documents or under any
of the other Loan Documents on behalf of the Borrowers, or any one or more of
them, including, but without limitation, advances for principal or interest
payments to prior secured parties, mortgagees, or lienors, or for taxes, levies,
insurance rent, repairs to or maintenance or storage of any of the Collateral;
(C) To reimburse the Agents, on demand, for all of each Agent's expenses and
costs, including the reasonable fees and expenses of its counsel, in connection
with the preparation, administration, amendment, modification, or enforcement of
this Agreement and the documents required or contemplated hereunder, including,
without limitation, any proceeding brought or threatened to enforce payment of
any of the obligations referred to in the foregoing paragraphs (A) and (B), and
all other costs and expenses reimbursable under Section 9.5(a)(iii); and
(D) To reimburse the Banks, on demand, for all costs and expenses reimbursable
under Section 9.5(a)(iii).
"Overdue Rate" means (a) in respect of principal of Floating Rate Loans, a
------------
rate per annum that is equal to the sum of three percent (3%) per annum plus the
Floating Rate, (b) in respect of principal of Eurodollar Rate Loans and Swing
Line Loans, a rate per annum that is equal to the sum of three percent (3%) per
annum plus the per annum rate in effect thereon until the end of the then
current Interest Period for such Loan and, thereafter, a rate per annum that is
equal to the sum of three percent (3%) per annum plus the Floating Rate, and (c)
in respect of other amounts payable by the Borrowers hereunder (other than
interest), a per annum rate that is equal to the sum of three percent (3%) per
annum plus the Floating Rate.
"Participating Subsidiary" means (a) each of the Initial Participating
------------------------
Subsidiaries and (b) any other Subsidiary that hereafter executes and delivers
to the Administrative Agent a Participating Subsidiary Assumption Agreement, the
appropriate Security Documents and all other documents necessary to assume joint
and several liability as to the Obligations arising with respect to the Advances
or any agreement or instrument executed by such Subsidiary in connection
therewith (in the maximum amount provided for in such Assumption Agreement).
"Participating Subsidiary Assumption Agreement" means each Assumption
---------------------------------------------
Agreement duly authorized and executed by each Subsidiary that is to become a
Participating Subsidiary after the Effective Date and substantially in the form
annexed hereto as Exhibit G, as each such Assumption Agreement may be thereafter
----------
supplemented or amended, and "Participating Subsidiary Assumption Agreements"
----------------------------------------------
means all of them, collectively.
"Pension Plan" means any employee pension benefit plan, as defined in Section
------------
3(2) of ERISA that is subject to Section 302 of ERISA.
"Permitted Liens" means:
---------------
10
<PAGE>
(A) Liens for taxes, assessments, or similar charges, incurred in the
ordinary course of business that are not yet due and payable;
(B) Pledges or deposits made in the ordinary course of business to
secure payment of workmen's compensation, or to participate in any fund in
connection with workmen's compensation, unemployment insurance, old-age pensions
or other social security programs;
(C) Liens of mechanics, materialmen, warehousemen, carriers, or other
like liens, securing obligations incurred in the ordinary course of business
that are not yet due and payable;
(D) Good faith pledges or deposits made in the ordinary course of
business to secure performance of bids, tenders, contracts (other than for the
repayment of borrowed money) or leases, not in excess of ten percent (10%) of
the aggregate amount due thereunder, or to secure statutory obligations, or
surety, appeal, indemnity, performance or other similar bonds required in the
ordinary course of business;
(E) Encumbrances consisting of zoning restrictions, easement or other
restrictions on the use of real property, none of which materially impairs the
use of such property by a Borrower or any Consolidated Entity in the operation
of its business, and none of which is violated in any material respect by
existing or proposed structures or land use;
(F) Liens in favor of the Collateral Agent for the benefit of the
Banks;
(G) Existing liens set forth or described on Schedule 1.1(b), attached
---------------
hereto and incorporated herein;
(H) Purchase money security interests granted to secure not more than
the purchase price of assets, the purchase of which does not violate any Loan
Document, and provided that any such security interest does not encumber any
asset other than the related asset purchased;
(I) The following, if the validity or amount thereof is being
contested in good faith by appropriate and lawful proceedings, so long as levy
and execution thereon have been stayed and continue to be stayed and they do
not, in the aggregate, materially detract from the value of the property of a
Borrower or any Consolidated Entity or materially impair the use thereof in the
operation of its business:
(1) Claims or liens for taxes, assessments or charges due and
payable and subject to interest or penalty;
(2) Claims, liens and encumbrances upon, and defects of title
to, real or personal property, including any attachment of
personal or real property or other legal process prior to
adjudication of a dispute on the merits;
(3) Claims or liens of mechanics, materialmen, warehousemen,
carriers, or other like liens; and
(4) Subject to Section 6.1(h), adverse judgments on appeal;
(J) The Lien in favor of M&I Marshall & Ilsley Bank ("M&I Bank")
covering Interstate Forging Industries, Inc.'s ("Interstate") 14,000 ton press
line and related equipment located in the building commonly referred to by
Interstate as its 14,000 ton press building in Navasota, Texas, and only such
assets, to secure the Indebtedness of Interstate permitted under Part (10) of
Section 5.2(h), and only such Indebtedness; and
11
<PAGE>
(K) The customary interests of any Receivables Subsidiaries, Special
Purpose Vehicles and related collateral agents and trustees in Receivables
Program Assets under Qualified Receivables Transactions permitted under clause
(ii) of Section 5.2(b).
"Person" or "person" shall include an individual, a corporation, an
------ ------
association, a partnership, a trust or estate, a joint stock company, a limited
liability company, an unincorporated organization, a joint venture, a trade or
business (whether or not incorporated), a government (foreign or domestic) and
any agency or political subdivision thereof, or any other entity.
"Pledge Agreements" means each stock pledge agreement identified on
-----------------
Schedule 1.1(a) annexed hereto, and each other pledge agreement now or
- --------------
hereafter entered into by any Borrower for the benefit of the Agents and the
Banks pursuant to this Agreement, as any of the foregoing may be amended or
modified from time to time.
"Pledged Stock" means one hundred percent (100%) of all capital stock
-------------
and other ownership interests of all Domestic Subsidiaries and sixty-five
percent (65%) of all capital stock and other ownership interests of all Foreign
Subsidiaries, in both cases now or hereafter owned, directly or indirectly, by
Citation.
"Purchase Money Note" means a promissory note evidencing the
-------------------
obligation of a Receivables Subsidiary to pay the purchase price for Receivables
to Citation or any other Seller in connection with a Qualified Receivables
Transaction, which note shall be repaid from cash available to the maker of such
note, other than cash required to be held as reserves pursuant to Receivables
Documents, amounts paid in respect of interest, principal and other amounts
owing under Receivables Documents and amounts paid in connection with the
purchase of newly generated Receivables.
"Qualified Receivables Transaction" means any transaction or series of
---------------------------------
transactions that may be entered into by Citation or any other Seller pursuant
to which Citation or such other Seller may sell, convey or otherwise transfer to
a Receivables Subsidiary (in the case of a transfer by Citation or any other
Seller) and any other Person (in the case of a transfer by a Receivables
Subsidiary), or may grant a security interest in, any Receivables Program Assets
(whether now existing or arising in the future); provided that:
--------
(a) no portion of the indebtedness or any other obligations
(contingent or otherwise) of a Receivables Subsidiary or Special Purpose
Vehicle (i) is guaranteed by Citation or any other Seller (excluding
guarantees of obligations pursuant to Standard Securitization
Undertakings), (ii) is recourse to or obligates Citation or any other
Seller in any way other than pursuant to Standard Securitization
Undertakings or (iii) subjects any property or asset of Citation or any
other Seller, directly or indirectly, contingently or otherwise, to the
satisfaction of obligations incurred in such transactions, other than
pursuant to Standard Securitization Undertakings,
(b) neither Citation nor any other Seller has any material contract,
agreement, arrangement or understanding with a Receivables Subsidiary or a
Special Purpose Vehicle other than on terms no less favorable to Citation
or such Seller than those that might be obtained at the time from Persons
that are not Affiliates of Citation, other than fees payable in the
ordinary course of business in connection with servicing accounts
receivable, and
(c) Citation and the other Sellers do not have any obligation to
maintain or preserve the financial condition of a Receivables Subsidiary or
a Special Purpose Vehicle or cause such entity to achieve certain levels of
operating results.
"Receivable Stated Amount" means, with respect to a Receivables
------------------------
Investor Instrument, the maximum amount of the funding commitment with respect
thereto.
"Receivables" means all rights of Citation or any other Seller to
-----------
payments (whether constituting accounts, chattel paper, instruments, general
intangibles or otherwise, and including the right to payment of any
12
<PAGE>
interest or finance charges), which rights are identified in the accounting
records of Citation or such Seller as accounts receivable.
"Receivables Documents" means (a) a receivables purchase agreement,
---------------------
pooling and servicing agreement, credit agreement, agreements to acquire
undivided interests or other agreement to transfer, or create a security
interest in, Receivables Program Assets, in each case as amended, modified,
supplemented or restated and in effect from time to time entered into by
Citation, another Seller and/or a Receivables Subsidiary, and (b) each other
instrument, agreement and other document entered into by Citation, any other
Seller or a Receivables Subsidiary relating to the transactions contemplated by
the items referred to in clause (a) above, in each case as amended, modified,
supplemented or restated and in effect from time to time.
"Receivables Investor Instruments" means trust certificates, purchased
--------------------------------
interests or any other securities, instruments or agreements evidencing an
interest in the Receivables Program Assets held by a person other than Citation
and the other Consolidated Entities.
"Receivables Program Assets" means (a) all Receivables which are
--------------------------
described as being transferred by Citation, another Seller or a Receivables
Subsidiary pursuant to the Receivables Documents, (b) all Receivables Related
Assets, and (c) all collections (including recoveries) and other proceeds of the
assets described in the foregoing clauses.
"Receivables Program Obligations" means (a) notes, trust certificates,
-------------------------------
undivided interests, partnership interests or other interests representing the
right to be paid a specified principal amount from the Receivables Program
Assets, and (b) related obligations of Citation, another Seller or a Special
Purpose Vehicle (including, without limitation, rights in respect of interest or
yield, breach of warranty claims and expense reimbursement and indemnity
provisions) and other Standard Securitization Undertakings.
"Receivables Related Assets" means (a) any rights arising under the
--------------------------
documentation governing or relating to Receivables (including rights in respect
of liens securing such Receivables and other credit support in respect of such
Receivables), (b) any proceeds of such Receivables and any lockboxes or accounts
in which such proceeds are deposited, (c) spread amounts and other similar
accounts (and any amounts on deposit therein) established in connection with a
Qualified Receivables Transaction, (d) any warranty, indemnity, dilution and
other intercompany claim arising out of Receivables Documents and (e) other
assets which are customarily transferred or in respect of which security
interests are customarily granted in connection with asset securitization
transactions involving accounts receivable.
"Receivables Subsidiary" means a special purpose wholly-owned
----------------------
Subsidiary of Citation or any Consolidated Entity created in connection with the
transactions contemplated by a Qualified Receivables Transaction, which
Subsidiary engages in no activities other than those incidental to such
Qualified Receivables Transaction and which is designated as a Receivables
Subsidiary by Citation's or such Consolidated Entity's, as the case may be,
Board of Directors. Any such designation by such Board of Directors shall be
evidenced by providing to the Administrative Agent a certified copy of the
resolutions of such Board of Directors giving effect to such designation and an
officer's certificate certifying, to the best of such officer's knowledge and
belief after consulting with counsel, that such designation, and the
transactions in which the Receivables Subsidiary will engage, comply with the
requirements of the definition of Qualified Receivables Transaction.
"Records" means correspondence, memoranda, tapes, discs, microfilm,
-------
microfiche, papers, books and other documents, or transcribed information of any
type, whether expressed in ordinary or machine language, and all filing
cabinets, computer hardware, and other containers in which any of the foregoing
is stored, maintained or updated.
"Regulation D" means Regulation D of the Board of Governors of the
------------
Federal Reserve System as now or from time to time hereafter in effect, and
shall include any successor or other regulation or official interpretation of
said Board of Governors relating to reserve requirements applicable to member
banks of the Federal Reserve System.
13
<PAGE>
"Regulation U" means Regulation U of the Board of Governors of the
------------
Federal Reserve System as now or from time to time hereafter in effect and shall
include any successor or other regulation or official interpretation of said
Board of Governors relating to the extension of credit by banks for the purpose
of purchasing or carrying margin stocks applicable to member banks of the
Federal Reserve System.
"Rent Expense" means, for any period, the maximum aggregate amount of
------------
all rents and other payments (exclusive of property taxes, property and
liability insurance premiums and maintenance costs) paid or required to be paid
by Citation and the Consolidated Entities under any Capital Leases and other
leases of real or personal property in respect of which Citation or any
Consolidated Entity is obligated as a lessee or user.
"Required Banks" means Banks holding not less than (i) fifty-one
--------------
percent (51%) of the aggregate principal amount of the Advances then outstanding
or (ii) fifty-one percent (51%) of the Commitments if no Advances are then
outstanding.
"Revolving Credit Advance" means any Revolving Credit Loan and any
------------------------
Letter of Credit Advance.
"Revolving Credit Loan" means any borrowing under Section 2.4
---------------------
evidenced by the Notes and made by a Bank pursuant to Section 2.1. Any such Loan
or portion thereof may also be denominated as a Floating Rate Loan or a
Eurodollar Rate Loan and such Loans are referred to herein as "types" of Loans.
"Revolving Credit Note" means any promissory note of the Borrowers
---------------------
evidencing the Revolving Credit Loans, in substantially the form annexed hereto
as Exhibit B-1, as amended or modified from time to time and together with any
-----------
promissory note or notes issued in exchange or replacement therefor.
"Security Documents" means, collectively, the Pledge Agreements, the
------------------
Environmental Certificate, and all other and related agreements and documents,
including financing statements and similar documents, delivered pursuant to this
Agreement, the Existing Credit Agreement or any predecessor credit agreement or
otherwise entered into by any person to secure the Advances.
"Seller" means Citation and any Consolidated Entity (other than a
------
Receivables Subsidiary) which is a party to a Receivables Document.
"SouthTrust" means SouthTrust Bank, National Association in its
----------
individual capacity, and its successors.
"Special Purpose Vehicle" means a trust, partnership or other special
-----------------------
purpose Person established by Citation and/or the Consolidated Entities to
implement a Qualified Receivables Transaction.
"Standard Securitization Undertakings" means representations,
------------------------------------
warranties, covenants and indemnities entered into by Citation or any other
Seller which are reasonably customary in accounts receivable securitization
transactions, as determined in good faith by the Administrative Agent.
"Stockholders' Equity" means, at any time, the sum of the following
--------------------
accounts (less treasury stock carried at cost) set forth in a balance sheet of a
Borrower (or, if the Borrower in question is Citation, a Consolidated balance
sheet of Citation and the Consolidated Entities), prepared in accordance with
Generally Accepted Accounting Principles consistently applied:
(A) The par or stated value of all outstanding capital stock;
(B) Capital surplus; and
(C) Retained earnings.
14
<PAGE>
"Subordinated Indebtedness" of any person means, as of any date, that
-------------------------
Indebtedness of such person for borrowed money which is expressly subordinate
and junior in right and priority of payment to the Advances and other
Indebtedness of such person to the Banks in manner and by agreement satisfactory
in form and substance to the Required Banks.
"Subordinated Notes" means the subordinated notes that may be issued
------------------
from time to time by Citation substantially as described in the preliminary
Subordinated Notes Offering Memorandum furnished to the Administrative Agent
pursuant to Section 2.5(i).
"Subordinated Notes Documents" means the Subordinated Notes Indenture,
----------------------------
the Subordinated Notes and all other agreements, instruments and documents
executed or delivered in connection therewith, including, without limitation,
the Subsidiary Guarantees (as defined in the Subordinated Notes Indenture).
"Subordinated Notes Indenture" means the Indenture to be entered into
----------------------------
among Citation, the Subsidiaries of Citation that are Guarantors (as defined in
the final Subordinated Notes Offering Memorandum) and the trustee identified in
the final Subordinated Notes Offering Memorandum, as amended or modified from
time to time.
"Subordinated Notes Offering Memorandum" means the Offering Memorandum
--------------------------------------
with respect to the $150,000,000 Citation Corporation Senior Subordinated Notes
Due 2008. Any reference to the Subordinated Notes Offering Memorandum shall
mean the Subordinated Notes Offering Memorandum in preliminary or final form, as
indicated with such reference.
"Subsidiary" of any person means any other person (whether now
----------
existing or hereafter organized or acquired) in which (other than directors
qualifying shares required by law) more than 50% of the securities or other
ownership interests of each class having ordinary voting power or analogous
right (other than securities or other ownership interests which have such power
or right only by reason of the happening of a contingency), at the time as of
which any determination is being made, are owned, beneficially and of record, by
such person or by one or more of the other Subsidiaries of such person or by any
combination thereof.
"Swing Line Bank" means the Administrative Agent.
"Swing Line Facility" shall have the meaning specified in Section
-------------------
2.1(c).
"Swing Line Interest Period" means, with respect to any Swing Line
--------------------------
Loan, the period commencing on the day such Swing Line Loan is made and ending
on the date agreed upon between Citation and the Swing Line Bank at the time
such Swing Line Loan is made, provided no Swing Line Interest Period which would
end after the Termination Date shall be permitted.
"Swing Line Loan" means any borrowing under Section 2.4 evidenced by
---------------
the Swing Line Note and made by the Swing Line Bank pursuant to Section 2.1(c).
"Swing Line Note" means any promissory note of the Borrowers
---------------
evidencing the Swing Line Loans, in substantially the form annexed hereto as
Exhibit B-2, as amended or modified from time to time and together with any
- -----------
promissory note or notes issued in exchange or replacement therefor.
"Swing Line Rate" means the Base Rate.
---------------
"Termination Date" means the earlier to occur of (a) October 15, 2001
----------------
and (b) the date on which the Commitments shall be terminated pursuant to
Section 2.2 or 6.2.
"Total Assets" of any person means the net book value of all assets of
------------
such person, less all goodwill included in such assets.
15
<PAGE>
"Total Consideration" means, with respect to any acquisition by any
-------------------
person, the sum of the maximum purchase price paid or to be paid and any other
consideration given or to be given for such acquisition, including, without
limitation, cash payments, Indebtedness issued, deferred obligations incurred,
including, without limitation pursuant to earn-out provisions, equity and other
securities issued or exchanged, and Indebtedness and other obligations forgiven,
plus the aggregate principal amount of all Indebtedness and other obligations
assumed by such person in connection with such acquisition.
"Total Debt" means the Bank Obligations and all other Indebtedness of
----------
Citation and the Consolidated Entities, whether now existing or hereafter
incurred, but excluding (a) Contingent Liabilities pursuant to earn-out
provisions incurred as part of acquisitions permitted under Section 5.2(r), (b)
trade accounts or accruals payable arising in the ordinary course of business,
and (c) Indebtedness of the types described in clauses (e), (f) and (g) of the
definition of the term "Indebtedness".
"UCC-1" means each financing statement to be filed pursuant to the
-----
Uniform Commercial Code, as enacted in any state in which any of the Collateral
is located, in order to perfect the Collateral Agent's lien on the Collateral.
"Year 2000 Issues" means anticipated costs, problems and uncertainties
-----------------
associated with the inability of certain computer applications to effectively
handle data including dates on and after January 1, 2000, as such inability
affects the business, operations, and financial condition of Citation and the
Consolidated Entities and of Citation's and the Consolidated Entities' material
customers, suppliers and vendors.
"Year 2000 Program" has the meaning ascribed thereto in Section
-----------------
4.1(y).
1.2 Other Definitions; Rules of Construction. As used herein, the terms
----------------------------------------
"Administrative Agent", "Agents", "Bank", "Banks", "Borrower", "Borrowers",
-------------------- ------ ---- ----- -------- ---------
"Citation", "Collateral Agent", "Company", "Existing Bank", "Existing Banks",
-------- ---------------- ------- ------------- --------------
"Existing Credit Agreement", "Initial Participating Subsidiaries", "Initial
------------------------- ---------------------------------- -------
Participating Subsidiary" and "this Agreement" shall have the respective
------------------------ --------------
meanings ascribed thereto in the introductory paragraphs of this Agreement.
Such terms, together with the other terms defined in Section 1.1 shall include
both the singular and the plural forms thereof and shall be construed
accordingly. All computations required hereunder and all financial terms used
herein shall be made or construed in accordance with Generally Accepted
Accounting Principles unless such principles are inconsistent with the express
requirements of this Agreement; provided that, if the Company notifies the
--------
Administrative Agent that the Borrowers wish to amend any covenant in Article V
to eliminate the effect of any change in Generally Accepted Accounting
Principles in the operation of such covenant (or if the Administrative Agent
notifies the Company that the Required Banks wish to amend Article V for such
purpose), then the Borrowers' compliance with such covenant shall be determined
on the basis of Generally Accepted Accounting Principles in effect immediately
before the relevant change in Generally Accepted Accounting Principles became
effective, until either such notice is withdrawn or such covenant is amended in
a manner satisfactory to the Borrowers and the Required Banks. Use of the terms
"herein", "hereof" and "hereunder" shall be deemed references to this Agreement
------ ------ ---------
in its entirety and not to the Section or clause in which such term appears.
References to "Sections" and "subsections" shall be to Sections and
subsections, respectively, of this Agreement unless otherwise specifically
provided.
ARTICLE II.
THE COMMITMENTS, THE SWING LINE FACILITY AND THE ADVANCES
---------------------------------------------------------
2.1 Commitment of the Banks and Swing Line Facility
-----------------------------------------------
(a) Revolving Credit Advances Each Bank agrees, for itself only,
-------------------------
subject to the terms and conditions of this Agreement, to make Revolving Credit
Loans to the Borrowers pursuant to Section 2.4 and Section 3.3 and to
participate in Letter of Credit Advances to the Borrowers pursuant to Section
2.4, from time to time from and including the Effective Date to but excluding
the Termination Date, not to exceed in aggregate principal amount at any time
outstanding the amount determined pursuant to Section 2.1(b).
16
<PAGE>
(b) Limitation on Amount of Revolving Credit Advances. Notwithstanding
-------------------------------------------------
anything in this Agreement to the contrary, the aggregate principal amount of
the Revolving Credit Advances made by any Bank at any time outstanding shall not
exceed the amount of its respective Commitment as of the date any such Advance
is made and the aggregate principal amount of the Revolving Credit Advances made
by all the Banks at any time outstanding shall not exceed $300,000,000,
provided, however, that the aggregate principal amount of Letter of Credit
- -------- -------
Advances outstanding at any time shall not exceed $20,000,000.
(c) Swing Line Loans. (i) The Borrowers may request the Swing Line
----------------
Bank to make, and the Swing Line Bank may, in its sole discretion provided that
the requirements of Section 2.6 are complied with by the Borrowers at the time
of such request, make, Swing Line Loans to the Borrowers from time to time on
any Business Day during the period from the Effective Date until the Termination
Date in an aggregate principal amount not to exceed at any date the lesser of
(A) $15,000,000 (the "Swing Line Facility") and (B) the aggregate unused
portions of the Commitments of the Banks as of such date. Each Bank's Commitment
shall be deemed utilized by an amount equal to such Bank's pro rata share (based
on such Bank's Commitment) of each Swing Line Loan for purposes of determining
the amount of Revolving Credit Advances required to be made by such Bank, but no
Bank's Commitment, other than the Swing Line Bank, shall be deemed utilized for
purposes of determining commitment fees under Section 2.3(a). Swing Line Loans
shall bear interest at the Swing Line Rate. Within the limits of the Swing Line
Facility, so long as the Swing Line Bank, in its sole discretion, elects to make
Swing Line Loans, the Borrowers may borrow and reborrow under this Section
2.1(c)(i).
(ii) The Swing Line Bank may at any time in its sole and absolute
discretion require that any Swing Line Loan be refunded by a Floating Rate
Borrowing from the Banks, and upon written notice thereof by the Swing Line Bank
to the Administrative Agent, the Banks and Citation, the Borrowers shall be
deemed to have requested a Floating Rate Borrowing in an amount equal to the
amount of such Swing Line Loan, and such Floating Rate Borrowing shall be made
to refund such Swing Line Loan. Each Bank shall be absolutely and
unconditionally obligated (except as set forth in Section 2.1(c)(i)) to fund its
pro rata share (based on such Bank's Commitment) of such Floating Rate Borrowing
or, if applicable, purchase a participating interest in the Swing Line Loans
pursuant to Section 2.1(c)(iii) and such obligation shall not be affected by any
circumstance, including, without limitation, (A) any set-off, counterclaim,
recoupment, defense or other right which such Bank or any Borrower or any of
their respective Subsidiaries may have against the Swing Line Bank, any Borrower
or any of their respective Subsidiaries or anyone else for any reason
whatsoever; (B) the occurrence or continuance of a Default or an Event of
Default, subject to Section 2.1(c)(iii); (C) any adverse change in the condition
(financial or otherwise) of any Borrower or any of its Subsidiaries; (D) any
breach of this Agreement by any Borrower or any of its Subsidiaries or any other
Bank; or (E) any other circumstance, happening or event whatsoever, whether or
not similar to any of the foregoing (including without limitation any Borrower's
failure to satisfy any conditions contained in Article II or any other provision
of this Agreement).
(iii) If, for any reason (including without limitation as a
result of the occurrence of an Event of Default with respect to any Borrower
pursuant to Section 6.1(e), (f) or (g)), Floating Rate Loans may not be made by
the Banks as described in Section 2.1(c)(ii), then (A) each Borrower agrees that
each Swing Line Loan not paid pursuant to Section 2.1(c)(ii) shall bear
interest, payable on demand by the Swing Line Bank, at the Overdue Rate, and (B)
effective on the date each such Floating Rate Loan would otherwise have been
made, each Bank severally agrees that it shall unconditionally and irrevocably,
without regard to the occurrence of any Default or Event of Default, in lieu of
deemed disbursement of loans, to the extent of such Bank's Commitment, purchase
a participating interest in the Swing Line Loans by paying its participation
percentage thereof. Each Bank will immediately transfer to the Swing Line Bank,
in same day funds, the amount of its participation. Each Bank shall share on a
pro rata basis (calculated by reference to its Commitment) in any interest which
accrues thereon and in all repayments thereof. If and to the extent that any
Bank shall not have so made the amount of such participating interest available
to the Swing Line Bank, such Bank and the Borrowers severally agree to pay to
the Swing Line Bank forthwith on demand such amount together with interest
thereon, for each day from the date of demand by the Swing Line Bank until the
date such amount is paid to the Swing Line Bank, at (x) in the case of the
Borrowers, the interest rate specified above and (y) in the case of such Bank,
the Federal Funds Rate.
17
<PAGE>
2.2 Termination and Reduction of Commitments. (a) The Borrowers
----------------------------------------
shall have the right to terminate or reduce the Commitments at any time and from
time to time at their option, provided that (i) the Borrowers shall give notice
--------
of such termination or reduction to the Administrative Agent (with sufficient
executed copies for each Bank) specifying the amount and effective date thereof,
(ii) each partial reduction of the Commitments shall be in a minimum amount of
$5,000,000 and in an integral multiple of $500,000, (iii) no such termination or
reduction shall be permitted with respect to any portion of the Commitments as
to which a request for an Advance pursuant to Section 2.4 is then pending and
(iv) the Commitments may not be terminated if any Advances are then outstanding
and may not be reduced below the principal amount of Advances then outstanding.
(b) Each reduction of the Commitments pursuant to this Section
2.2 shall reduce the Commitments of all the Banks proportionately in accordance
with the respective Commitment amounts for each such Bank prior to such
reduction. The Commitments or any portion thereof terminated or reduced pursuant
to this Section 2.2 may not be reinstated.
(c) For purposes of this Agreement, a Letter of Credit Advance
(i) shall be deemed outstanding in an amount equal to the sum of the maximum
amount available to be drawn under the related Letter of Credit on or after the
date of determination and on or before the stated expiry date thereof plus the
amount of any draws under such Letter of Credit that have not been reimbursed as
provided in Section 3.3 and (ii) shall be deemed outstanding at all times on and
before such stated expiry date or such earlier date on which all amounts
available to be drawn under such Letter of Credit have been fully drawn, and
thereafter until all related reimbursement obligations have been paid pursuant
to Section 3.3. As provided in Section 3.3, upon each payment made by the
Administrative Agent in respect of any draft or other demand for payment under
any Letter of Credit, the amount of any Letter of Credit Advance outstanding
immediately prior to such payment shall be automatically reduced by the amount
of each Loan deemed advanced in respect of the related reimbursement obligation
of the Borrowers.
2.3 Fees. (a) The Borrowers agree to pay to the Administrative
----
Agent for the pro rata account of the Banks (based upon their respective
Commitments) a commitment fee on the daily average unused amount of the
aggregate Commitments, during each calendar quarter or portion thereof for the
period from the Effective Date to but excluding the Termination Date, at a rate
equal to the Commitment Fee Rate applicable during each such quarter. Accrued
commitment fees shall be determined quarterly in arrears on the last Business
Day of each March, June, September and December, commencing on the first such
Business Day occurring after the Effective Date, and on the Termination Date,
and shall be payable within 15 days of each such last Business Day and on the
Termination Date.
(b) The Borrowers agree to pay to the Administrative Agent for
the pro rata account of the Banks (based upon their respective Commitments) a
closing fee in the amount equal to $150,000. Such closing fee shall be payable
on or prior to the Effective Date.
(c) On or before the date of issuance, extension or renewal of
any Letter of Credit during any calendar quarter, the Borrowers agree (i) to pay
to the Administrative Agent for the pro rata account of the Banks (based upon
their respective Commitments) a fee computed at the rate equal to the Letter of
Credit Fee Rate applicable during such quarter of the maximum amount available
to be drawn from time to time under such Letter of Credit for the period from
and including the date of issuance, extension or renewal, as the case may be, of
such Letter of Credit to and including the stated expiry date of such Letter of
Credit, and (ii) to pay an additional fee to the Administrative Agent for its
own account computed at the rate of one-eighth of one percent (1/8 of 1%) per
annum of such maximum amount for such period. Such fees are nonrefundable and
the Borrowers shall not be entitled to any rebate of any portion thereof if such
Letter of Credit does not remain outstanding through its stated expiry date or
for any other reason. The Borrowers further agree to pay to the Administrative
Agent, on demand, such other customary administrative fees, charges and expenses
of the Administrative Agent in respect of the issuance, negotiation, acceptance,
amendment, transfer and payment of such Letter of Credit or otherwise payable
pursuant to the application and related documentation under which such Letter of
Credit is issued.
(d) The Borrowers agree to pay to the Administrative Agent and
the Arranger certain fees, in such amounts, and on such schedule, as provided in
that certain letter agreement dated July 1, 1998 among
18
<PAGE>
Citation, the Administrative Agent and the Arranger, and as the Borrowers and
the Administrative Agent and the Arranger otherwise may from time to time agree.
2.4 Disbursement of Advances. (a) Except with respect to Swing Line
------------------------
Loans, the Borrowers shall give the Administrative Agent notice of their request
for each Borrowing in substantially the form annexed hereto as Exhibit C-1 not
-----------
later than 11:00 a.m. Chicago time (i) three Eurodollar Business Days prior to
the date such Borrowing is requested to be made if such Borrowing is to be made
as a Eurodollar Rate Borrowing, (ii) five Business Days prior to the date any
Letter of Credit Borrowing is requested to be made, and (iii) one Business Day
prior to the date such Borrowing is requested to be made in all other cases,
which notice shall specify whether a Eurodollar Rate Borrowing, Floating Rate
Borrowing or Letter of Credit Borrowing is requested and, in the case of each
requested Eurodollar Rate Borrowing, the Interest Period to be initially
applicable thereto and, in the case of each Letter of Credit Borrowing, such
information as may be necessary for the issuance thereof by the Administrative
Agent. With respect to Swing Line Loans, the Borrowers shall give the Swing Line
Bank notice of their request for each Swing Line Loan in substantially the form
of Exhibit C-2 not later than 1:00 p.m. Chicago time on the same Business Day
-----------
such Swing Line Loan is requested to be made. The Administrative Agent, not
later than 11:00 a.m. Chicago time on the Business Day next succeeding the day
such notice is given, shall provide notice of each such requested Borrowing (not
including Swing Line Loans) to each Bank. Subject to the terms and conditions of
this Agreement, the proceeds of each such requested Swing Line Loan or Borrowing
comprised of Revolving Credit Loans shall be made available to the Borrowers by
depositing the proceeds thereof, in immediately available funds, in an account
maintained and designated by the Borrowers at the principal office of the
Administrative Agent. Subject to the terms and conditions of this Agreement, the
Administrative Agent shall, on the date any Letter of Credit Advance is
requested to be made, issue the related Letter of Credit on behalf of the Banks
for the account of the Borrowers. Notwithstanding anything herein to the
contrary, the Administrative Agent may decline to issue any requested Letter of
Credit on the basis that the beneficiary, the purpose of issuance or the terms
or the conditions of drawing are unacceptable to it in its discretion.
(b) Each Bank, on the date any Borrowing comprised of Loans is
requested to be made, shall make its pro rata share of such Borrowing available
in immediately available funds for disbursement to the Borrowers pursuant to the
terms and conditions of this Agreement at the principal office of the
Administrative Agent. Unless the Administrative Agent shall have received
notice from any Bank prior to the date such Borrowing is requested to be made
under this Section 2.4 that such Bank will not make available to the
Administrative Agent such Bank's pro rata portion of such Borrowing, the
Administrative Agent may assume that such Bank has made such portion available
to the Administrative Agent on the date such Borrowing is requested to be made
in accordance with this Section 2.4. If and to the extent such Bank shall not
have so made such pro rata portion available to the Administrative Agent, the
Administrative Agent may (but shall not be obligated to) make such amount
available to the Borrowers, and such Bank and the Borrowers severally agree to
pay to the Administrative Agent forthwith on demand such amount together with
interest thereon, for each day from the date such amount is made available to
the Borrowers by the Administrative Agent until the date such amount is repaid
to the Administrative Agent, at the Federal Funds Rate. If such Bank shall pay
such amount to the Administrative Agent together with interest, such amount so
paid shall constitute a Loan by such Bank as a part of such Borrowing for
purposes of this Agreement. The failure of any Bank to make its pro rata portion
of any such Borrowing available to the Administrative Agent shall not relieve
any other Bank of its obligation to make available its pro rata portion of such
Borrowing on the date such Borrowing is requested to be made, but no Bank shall
be responsible for failure of any other Bank to make such pro rata portion
available to the Administrative Agent on the date of any such Borrowing.
(c) All Revolving Credit Loans made under this Section 2.4 shall
be evidenced by the Revolving Credit Notes, all Swing Line Loans under this
Section 2.4 shall be evidenced by the Swing Line Note, and all such Loans shall
be due and payable and bear interest as provided in Article III. Each Bank is
hereby authorized by the Borrowers to record on the schedule attached to its
Note(s), or in its books and records, the date, amount and type of each Loan and
the duration of the related Interest Period (if applicable), the amount of each
payment or prepayment of principal thereon, and the other information provided
for on such schedule, which schedule or books and records, as the case may be,
shall constitute prima facie evidence of the information so recorded, provided,
--------
however, that failure of any Bank to record, or any error in recording, any such
- -------
information shall not relieve the Borrowers of their obligation to repay the
outstanding principal amount of the Loans, all accrued
19
<PAGE>
interest thereon and other amounts payable with respect thereto in accordance
with the terms of the Notes and this Agreement. Subject to the terms and
conditions of this Agreement, the Borrowers may borrow Revolving Credit Loans
under this Section 2.4 and under Section 3.3, prepay Revolving Credit Loans
pursuant to Section 3.1 and reborrow Revolving Credit Loans under this Section
2.4 and under Section 3.3.
(d) Nothing in this Agreement shall be construed to require or
authorize any Bank to issue any Letter of Credit, it being recognized that the
Administrative Agent has the sole obligation under this Agreement to issue
Letters of Credit on behalf of the Banks, and the Commitment of each Bank with
respect to Letter of Credit Advances is expressly conditioned upon the
Administrative Agent's performance of such obligations. Upon such issuance by
the Administrative Agent, each Bank shall automatically acquire a pro rata risk
participation interest in such Letter of Credit Advance based on the amount of
its respective Commitment. If the Administrative Agent shall honor a draft or
other demand for payment presented or made under any Letter of Credit, the
Administrative Agent shall provide notice thereof to each Bank by 11:00 a.m.
Chicago time on the date such draft or demand is honored unless the Company
shall have satisfied its reimbursement obligation under Section 3.3 by payment
to the Administrative Agent on such date. Each Bank, by 4:00 p.m. Chicago time
on such date, shall make its pro rata share of the amount paid by the
Administrative Agent available in immediately available funds at the principal
office of the Administrative Agent for the account of the Administrative Agent.
If and to the extent such Bank shall not have made such pro rata portion
available to the Administrative Agent, such Bank and the Borrowers severally
agree to pay to the Administrative Agent forthwith on demand such amount
together with interest thereon, for each day from the date such amount was paid
by the Administrative Agent until such amount is so made available to the
Administrative Agent at a per annum rate equal to the Federal Funds Rate. If
such Bank shall pay such amount to the Administrative Agent together with such
interest, such amount so paid shall constitute a Loan by such Bank as part of
the Borrowing disbursed in respect of the reimbursement obligation of the
Borrowers under Section 3.3 for purposes of this Agreement. The failure of any
Bank to make its pro rata portion of any such amount paid by the Administrative
Agent available to the Administrative Agent shall not relieve any other Bank of
its obligation to make available its pro rata portion of such amount, but no
Bank shall be responsible for failure of any other Bank to make such pro rata
portion available to the Administrative Agent.
(e) The initial Borrowing under this Agreement shall, subject to
the terms and conditions of this Agreement, be a Borrowing of Revolving Credit
Loans in an aggregate principal amount not less than the aggregate outstanding
principal amount of the Loans (as defined in the Existing Credit Agreement) made
by the Existing Banks under the Existing Credit Agreement (the "Restated Debt")
and shall be made immediately upon the satisfaction of all conditions set forth
in Sections 2.5 and 2.6. Notwithstanding anything in this Agreement or any of
the other Loan Documents to the contrary, the Borrowers, the Banks and the
Agents hereby agree that such initial Borrowing shall be funded as follows:
(i) each Existing Bank, in its capacity as a Bank under this
Agreement, shall automatically be deemed to have already funded to the
Administrative Agent (and the Administrative Agent likewise shall
automatically be deemed to have already disbursed to the Borrowers) an
amount of such initial Borrowing equal to the portion of the Restated
Debt held by such Bank;
(ii) each Bank that is not an Existing Bank shall fund to the
Administrative Agent an amount of such initial Borrowing equal to such
Bank's pro rata share thereof based on such Bank's respective
Commitment amount under this Agreement;
(iii) if the amount deemed funded by any Bank under clause (i) above
is less than such Bank's pro rata share of such initial Borrowing
(based on such Bank's respective Commitment amount under this
Agreement), then such Bank shall fund, by the actual transfer to the
Administrative Agent of immediately available funds, the amount equal
to such shortfall;
20
<PAGE>
(iv) if the amount deemed funded by any Bank under clause (i) above
exceeds such Bank's pro rata share of such initial Borrowing (based on
such Bank's respective Commitment amount under this Agreement), then
the Administrative Agent shall remit to such Bank a portion of the
amounts funded under clauses (ii) and (iii) above equal to such
excess; and
(v) any portion of the amounts funded by the Banks under clauses
(ii) and (iii) above remaining after the Administrative Agent has
remitted all amounts required to be remitted to the Banks under clause
(iv) above shall be made available to the Borrowers in accordance with
Section 2.4(a);
such that thereupon (A) each Bank shall have funded a portion of such initial
Borrowing in a net amount equal to its pro rata share thereof (based on such
Bank's respective Commitment amount), and (B) all Loans (as defined in the
Existing Credit Agreement) shall be deemed restated and replaced by such initial
Borrowing.
2.5 Conditions for First Disbursement. The obligation of the Banks to make
---------------------------------
the first Advances hereunder is subject to receipt by the Administrative Agent
of the following documents (with sufficient copies for the Banks) and completion
of the following matters, in form and substance satisfactory to each Bank and
the Administrative Agent:
(a) Charter and Partnership Documents. Certificates of recent date of
---------------------------------
the appropriate authority or official of Citation's and each Initial
Participating Subsidiary's respective state of incorporation or organization
(listing all charter documents or the certificate of limited partnership, as
applicable, of Citation and each Initial Participating Subsidiary, respectively,
on file in that office if such listing is available) and certifying as to the
good standing and corporate or partnership existence of Citation and each
Initial Participating Subsidiary, respectively, together with copies of such
charter documents or certificate of limited partnership, as the case may be, of
Citation and each Initial Participating Subsidiary, certified as of a recent
date by such authority or official and certified as true and correct as of the
Effective Date by a duly authorized officer of Citation, such Initial
Participating Subsidiary or the general partner of such Initial Participating
Subsidiary, as applicable;
(b) By-Laws, Partnership Agreements and Corporate Authorizations.
------------------------------------------------------------
Copies of the by-laws or partnership agreement, as applicable, of Citation and
each Initial Participating Subsidiary, together with all authorizing resolutions
and evidence of other corporate action taken by Citation, such Initial
Participating Subsidiary or the general partner of such Initial Participating
Subsidiary, as the case may be, to authorize the execution, delivery and
performance by Citation and each Initial Participating Subsidiary of the Loan
Documents to which it is a party and the consummation by Citation and each such
Initial Participating Subsidiary, respectively, of the transactions contemplated
hereby, certified as true and correct as of the Effective Date by a duly
authorized officer of Citation, such Initial Participating Subsidiary or the
general partner of such Initial Participating Subsidiary, as applicable;
(c) Incumbency Certificates. Certificates of incumbency of Citation,
-----------------------
of each corporate Initial Participating Subsidiary and of the general partner of
each partnership Initial Participating Subsidiary containing, and attesting to
the genuineness of, the signatures of those officers authorized to act on behalf
of Citation, each such Initial Participating Subsidiary and each such general
partner in connection with the Loan Documents to which Citation or such Initial
Participating Subsidiary, as the case may be, is a party and the consummation by
Citation and such Initial Participating Subsidiary of the transactions
contemplated hereby, certified as true and correct as of the Effective Date by a
duly authorized officer of Citation, such Initial Participating Subsidiary or
the general partner of such Initial Participating Subsidiary, as applicable;
(d) Notes. The Revolving Credit Notes duly executed on behalf of
-----
Citation and each Initial Participating Subsidiary for each Bank, and the Swing
Line Note so executed for the Swing Line Bank;
(e) Security Documents. The Security Documents and such confirmations
------------------
and amendments of the Security Documents required or reasonably desired by the
Administrative Agent in order to
21
<PAGE>
satisfy the requirements of Article VIII of this Agreement and otherwise to
provide to the Collateral Agent for the benefit of the Banks and the Agents all
of the security intended to be provided thereby, duly executed on behalf of
Citation and each Initial Participating Subsidiary, as applicable, together
with:
(i) Recording, Filing, Etc. Evidence of the recordation, filing
----------------------
and other action (including payment of any applicable taxes or fees) in such
jurisdictions as the Administrative Agent may deem necessary or appropriate with
respect to the Security Documents, including the filing of financing statements,
financing statement assignments, financing statement amendments and similar
documents which the Administrative Agent may deem necessary or appropriate to
create, preserve or perfect the liens, security interests and other rights
intended to be granted to the Banks and the Agents thereunder, together with
Uniform Commercial Code record searches in such offices as the Administrative
Agent may request; and
(ii) Environmental Certificate. An Environmental Certificate dated
-------------------------
as of the Effective Date;
(f) Legal Opinions. The favorable written opinion of Ritchie &
--------------
Rediker, L.L.C., counsel for Citation the and Initial Participating Subsidiaries
in substantially the form annexed hereto as Exhibit E;
---------
(g) Consents, Approvals, Etc. Copies of all governmental and
------------------------
nongovernmental consents, approvals, authorizations, declarations, registrations
or filings, if any, required on the part Citation or any Initial Participating
Subsidiary in connection with the execution, delivery and performance of the
Loan Documents or the transactions contemplated hereby or as a condition to the
legality, validity or enforceability of any of the Loan Documents, certified as
true and correct and in full force and effect as of the Effective Date by a duly
authorized officer of Citation, or, if none is required, a certificate of such
officer to that effect;
(h) Fees. Payment of the closing fees described in Section 2.3(b) and
----
all fees due to the Administrative Agent and the Arranger in accordance with
Section 2.3(d);
(i) Subordinated Notes Offering Memorandum. The latest draft of the
--------------------------------------
preliminary Subordinated Notes Offering Memorandum certified as true and
complete by the chief financial officer of Citation, and the terms of the
Subordinated Notes offering shall have been found satisfactory by the
Administrative Agent;
(j) Year 2000 Assessment. Information satisfactory to the Banks
--------------------
regarding Citation's Year 2000 Program;
(k) Payment of Amounts Owing Under Existing Credit Agreement. The
--------------------------------------------------------
Borrowers shall have paid to the Existing Banks all interest, fees and other
amounts including, without limitation, all amounts provided for under Section
3.9 of the Existing Credit Agreement in connection with the prepayment of
Eurodollar Rate Loans (as defined in the Existing Credit Agreement) (but
excluding principal of outstanding Loans (as defined in the Existing Credit
Agreement), which shall be deemed part of the funding of the initial Borrowing
under this Agreement, in accordance with Section 2.4(e)), it being understood
that the restating and replacement of the Loans (as defined in the Existing
Credit Agreement) pursuant to Section 2.4(e) shall result in a breaking of such
Eurodollar Rate Loan contracts, and amounts may be due under Section 3.9 of the
Existing Credit Agreement in connection therewith; and
(l) Other. Such other documents, and completion of such other matters,
-----
as the Administrative Agent may reasonably request.
2.6 Further Conditions for Disbursement. The obligation of the Banks to
-----------------------------------
make the Advances (including the first Advances), or any continuation or
conversion under Section 2.7, is further subject to the satisfaction of the
following conditions precedent:
22
<PAGE>
(a) The representations and warranties contained in Article IV hereof
and in the Security Documents shall be true and correct on and as of the date
such Advances are made (both before and after such Advances are made) as if such
representations and warranties were made on and as of such date;
(b) No Default or Event of Default shall exist or shall have occurred
and be continuing on the date such Advances are made (whether before or after
such Advance is made);
(c) No material adverse change shall have occurred in the financial
condition of any Borrower since September 28, 1997;
(d) All of the Loan Documents shall have remained, and then be, in full
force and effect; and
(e) In the case of any Letter of Credit Advance, the Borrowers shall
have delivered to the Administrative Agent an application for the related Letter
of Credit and other related documentation requested by and acceptable to the
Administrative Agent appropriately completed and duly executed on behalf of the
Borrowers.
The Borrowers shall be deemed to have made a representation and warranty to the
Banks at the time of the making of, and the continuation or conversion of, each
Advance to the effects set forth in clauses (a), (b), (c) and (d) of this
Section 2.6.
2.7 Subsequent Elections as to Loans. The Borrowers may elect (a) to
--------------------------------
continue a Eurodollar Rate Borrowing, or a portion thereof, as a Eurodollar Rate
Borrowing or (b) to convert a Eurodollar Rate Borrowing, or a portion thereof,
to a Floating Rate Borrowing or (c) to convert a Floating Rate Borrowing, or a
portion thereof, to a Eurodollar Rate Borrowing in each case by giving notice
thereof to the Administrative Agent in substantially the form annexed hereto as
Exhibit D not later than 11:00 a.m. Chicago time three Eurodollar Business Days
- ---------
prior to the date any such continuation of or conversion to a Eurodollar Rate
Borrowing is to be effective and not later than 11:00 a.m. Chicago time one
Business Day prior to the date such continuation or conversion is to be
effective in all other cases, provided that an outstanding Eurodollar Rate
--------
Borrowing may only be converted on the last day of the then current Interest
Period with respect to such Borrowing, and provided, further, if a continuation
-------- -------
of a Borrowing as, or a conversion of a Borrowing to, a Eurodollar Rate
Borrowing is requested, such notice shall also specify the Interest Period to be
applicable thereto upon such continuation or conversion. The Administrative
Agent, not later than 11:00 a.m. Chicago time on the Business Day next
succeeding the day such notice is given, shall provide notice of such election
to the Banks. If the Borrowers shall not timely deliver such a notice with
respect to any outstanding Eurodollar Rate Borrowing, the Borrowers shall be
deemed to have elected to convert such Eurodollar Rate Borrowing to a Floating
Rate Borrowing on the last day of the then current Interest Period with respect
to such Borrowing.
2.8 Limitation of Requests and Elections. Notwithstanding any other
------------------------------------
provision of this Agreement to the contrary, if, upon receiving a request for a
Eurodollar Rate Borrowing pursuant to Section 2.4, or a request for a
continuation of a Eurodollar Rate Borrowing, or a request for a conversion of a
Floating Rate Borrowing to a Eurodollar Rate Borrowing pursuant to Section 2.7,
(a) deposits in Dollars for periods comparable to the Interest Period elected by
the Borrowers are not available to one or more of the Banks in the London
interbank market, or (b) the Eurodollar Rate will not adequately and fairly
reflect the cost to any Bank of making, funding or maintaining its related
Eurodollar Rate Loan, or (c) by reason of national or international financial,
political or economic conditions or by reason of any applicable law, treaty or
other international agreement, rule or regulation (whether domestic or foreign)
now or hereafter in effect, or the interpretation or administration thereof by
any governmental authority charged with the interpretation or administration
thereof, or compliance by any Bank with any guideline, request or directive of
such authority (whether or not having the force of law), including without
limitation exchange controls, it is impracticable, unlawful or impossible for,
or shall limit or impair the ability of, any Bank to make or fund its relevant
Loan or to continue such Loan as a Loan of the then existing type or to convert
a Loan to such a Loan, then the Borrowers shall not be entitled, so long as such
circumstances continue, to request a Eurodollar Rate Borrowing pursuant to
Section 2.4 or a continuation of or conversion to a Eurodollar Rate
23
<PAGE>
Borrowing type pursuant to Section 2.7. In the event that such circumstances no
longer exist, the Banks shall again consider requests for Eurodollar Rate
Borrowings pursuant to Section 2.4, and requests for continuations of and
conversions to Eurodollar Rate Borrowings pursuant to Section 2.7.
2.9 Minimum Amounts; Etc. Except for (a) Borrowings which exhaust the
--------------------
entire remaining amount of the Commitments, and (b) payments required pursuant
to Section 3.8, each Eurodollar Rate Borrowing and each continuation thereof or
conversion thereto pursuant to Section 2.7 shall be in a minimum amount of
$2,500,000 and in an integral multiple of $100,000, and each Floating Rate
Borrowing and each continuation thereof or conversion thereto pursuant to
Section 2.7 and each prepayment thereof shall be in a minimum amount of $500,000
and in an integral multiple of $100,000.
2.10 Additional Required Documents for New Participating Subsidiaries. On
----------------------------------------------------------------
or before the date on which a Subsidiary becomes a Participating Subsidiary, the
Administrative Agent shall have received, with copies for each of the Banks, the
following:
(a) a certificate of such Subsidiary's, or such Subsidiary's general
partner's, corporate secretary, in substantially the same form as those provided
by the Initial Participating Subsidiaries and otherwise satisfactory to the
Administrative Agent and certifying as to the incumbency and signatures of the
officers of such Subsidiary or general partner, as the case may be, together
with the following documents attached thereto:
(1) A copy of resolutions of such Subsidiary's, or such
Subsidiary's general partner's, board of directors authorizing
the execution, delivery and performance of this Agreement, the
Notes and the other Loan Documents, and each other document to
be delivered by such Subsidiary pursuant hereto;
(2) A copy, certified as of the most recent date practicable by
the appropriate authority or official of the jurisdiction in
which such Subsidiary's articles or certificate of
incorporation or certificate of limited partnership or similar
document is filed or the appropriate authority or official of
the state where such Subsidiary is incorporated or with which
such Subsidiary's certificate of limited partnership or
similar document has been filed, as appropriate, of such
Subsidiary's articles or certificate of incorporation or
certificate of limited partnership or similar document; and
(3) A copy of such Subsidiary's bylaws or partnership agreement or
similar document;
(b) certificates, as of the most recent dates practicable, of the
aforesaid authorities or officials, the appropriate authority or official of
each state in which such Subsidiary is qualified as a foreign corporation and
the department of revenue or taxation of each of the foregoing states, as to the
good standing of such Subsidiary;
(c) a written opinion of legal counsel for such Subsidiary and
addressed to the Agents and the Banks, in form substantially similar to, and
covering such matters covered by, the opinion provided by counsel for the
Initial Participating Subsidiaries in connection with the closing of this
Agreement, and otherwise satisfactory to the Administrative Agent;
(d) fully executed copies of all Loan Documents that this Agreement
requires to be executed or delivered (or both) by such Subsidiary (including a
duly executed Participating Subsidiary Assumption Agreement, in the case of any
Subsidiary that becomes a Participating Subsidiary after the Effective Date),
and fully executed Security Documents, which Security Documents shall include,
as applicable, a pledge agreement of such Subsidiary, in substantially the same
form as any Pledge Agreement provided by Citation and otherwise acceptable
24
<PAGE>
to the Administrative Agent, an amendment to the Pledge Agreement of Citation,
and an Environmental Certificate executed by such Subsidiary; and
(e) such additional supporting documents as the Administrative
Agent or its counsel may reasonably request.
ARTICLE III.
PAYMENTS AND PREPAYMENTS OF ADVANCES
------------------------------------
3.1 Principal Payments and Prepayments. (a) Unless earlier payment
----------------------------------
is required under this Agreement, the Borrowers shall pay to the Banks on the
Termination Date the entire outstanding principal amount of the Loans.
(b) The Borrowers may at any time and from time to time prepay
all or a portion of the Loans, without premium or penalty, provided that (i) the
--------
Borrowers may not prepay any portion of any Loan as to which an election for a
continuation of or a conversion to a Eurodollar Rate Loan is pending pursuant to
Section 2.4, and (ii) unless earlier payment is required under this Agreement,
any Eurodollar Rate Loan may only be prepaid on the last day of the then current
Interest Period with respect to such Loan.
(c) Notwithstanding any other provision of this Agreement or the
Notes, immediately upon any reduction of the Commitments under Section 2.2, the
Borrowers shall prepay the Loans in an amount sufficient that, after giving
effect to such prepayment, the aggregate outstanding principal amount of the
Loans shall not be greater than the aggregate amount of the Commitments as so
reduced.
3.2 Interest Payments. The Borrowers shall pay interest to the Banks
-----------------
on the unpaid principal amount of each Loan, for the period commencing on the
date such Loan is made until such Loan is paid in full, on each Interest Payment
Date and at maturity (whether at stated maturity, by acceleration or otherwise),
and thereafter on demand, at the following rates per annum:
(a) With respect to Revolving Credit Loans:
(i) During such periods that such Loan is a Floating Rate
Loan, the Floating Rate; and
(ii) During such periods that such Loan is a Eurodollar
Rate Loan, the Eurodollar Rate applicable to such Loan for each related
Eurodollar Interest Period.
(b) With respect to Swing Line Loans, the Swing Line Rate.
Notwithstanding the foregoing paragraphs (a) and (b), the Borrowers shall pay
interest on demand by the Administrative Agent at the Overdue Rate on the
outstanding principal amount of any Loan and any other amount payable by the
Borrowers hereunder (other than interest) at any time on or after an Event of
Default if required in writing by the Required Banks.
3.3 Letter of Credit Reimbursement Payments. (a)(i) The Borrowers
---------------------------------------
agree to pay to the Banks, on the day on which the Administrative Agent shall
honor a draft or other demand for payment presented or made under any Letter of
Credit, an amount equal to the amount paid by the Administrative Agent in
respect of such draft or other demand under such Letter of Credit and all
expenses paid or incurred by the Administrative Agent relative thereto. Unless
the Borrowers shall have made such payment to the Banks on such day, upon each
such payment by the Administrative Agent, the Administrative Agent shall be
deemed to have disbursed to the Borrowers, and the Borrowers shall be deemed to
have elected to satisfy their reimbursement obligation by, a Borrowing of
Revolving Credit Loans bearing interest at the Floating Rate for the account of
the Banks in an amount equal to the amount so paid by the Administrative Agent
in respect of such draft or other demand under such Letter of Credit. Such Loans
shall be disbursed notwithstanding any failure to satisfy any conditions for
disbursement of
25
<PAGE>
any Advance set forth in Article II hereof and, to the extent of the Loans so
disbursed, the reimbursement obligation of the Borrowers under this Section 3.3
shall be deemed satisfied; provided, however, that nothing in this Section 3.3
-------- -------
shall be deemed to constitute a waiver of any Default or Event of Default caused
by the failure to satisfy the conditions for disbursement or otherwise.
(ii) If, for any reason (including without limitation as a
result of the occurrence of an Event of Default with respect to any Borrower
pursuant to Section 6.1(e), (f) or (g)), Floating Rate Loans may not be made by
the Banks as described in Section 3.3(a)(i), then (A) the Borrowers agree that
each reimbursement amount not paid pursuant to the first sentence of Section
3.3(a)(i) shall bear interest, payable on demand by the Administrative Agent, at
the interest rate then applicable to Floating Rate Loans, and (B) effective on
the date each such Floating Rate Loan would otherwise have been made, each Bank
severally agrees that it shall unconditionally and irrevocably, without regard
to the occurrence of any Default or Event of Default, in lieu of deemed
disbursement of Loans, to the extent of such Bank's Commitment, purchase a
participating interest in each reimbursement amount. Each Bank will immediately
transfer to the Administrative Agent, in same day funds, the amount of its
participation. Each Bank shall share on a pro rata basis (calculated by
reference to its Commitment) in any interest which accrues thereon and in all
repayments thereof. If and to the extent that any Bank shall not have so made
the amount of such participating interest available to the Administrative Agent,
such Bank and the Borrowers severally agree to pay to the Administrative Agent
forthwith on demand such amount together with interest thereon, for each day
from the date of demand by the Administrative Agent until the date such amount
is paid to the Administrative Agent, at (x) in the case of the Borrowers, the
interest rate then applicable to Floating Rate Loans and (y) in the case of such
Bank, the Federal Funds Rate.
(b) The reimbursement obligation of the Borrowers under this
Section 3.3 shall be absolute, unconditional and irrevocable and shall remain in
full force and effect until all obligations of the Borrowers to the Banks
hereunder shall have been satisfied, and such obligations of the Borrowers shall
not be affected, modified or impaired upon the happening of any event, including
without limitation, any of the following, whether or not with notice to, or the
consent of, any Borrower:
(i) Any lack of validity or enforceability of any Letter
of Credit or any documentation relating to any Letter of Credit or to any
transaction related in any way to such Letter of Credit (the "Letter of Credit
Documents");
(ii) Any amendment, modification, waiver, consent, or any
substitution, exchange or release of or failure to perfect any interest in
collateral or security, with respect to any of the Letter of Credit Documents;
(iii) The existence of any claim, setoff, defense or other
right which the Borrowers may have at any time against any beneficiary or any
transferee of any Letter of Credit (or any persons or entities for whom any such
beneficiary or any such transferee may be acting), either Agent or any Bank or
any other person or entity, whether in connection with any of the Letter of
Credit Documents, the transactions contemplated herein or therein or any
unrelated transactions;
(iv) Any draft or other statement or document presented
under any Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or inaccurate
in any respect;
(v) Payment by the Administrative Agent to the
beneficiary under any Letter of Credit against presentation of documents which
do not comply with the terms of the Letter of Credit, including failure of any
documents to bear any reference or adequate reference to such Letter of Credit;
(vi) Any failure, omission, delay or lack on the part of
the either Agent or any Bank or any party to any of the Letter of Credit
Documents to enforce, assert or exercise any right, power or remedy conferred
upon either Agent, any Bank or any such party under this Agreement or any of the
Letter of Credit Documents, or any other acts or omissions on the part of either
Agent, any Bank or any such party;
26
<PAGE>
(vii) Any other event or circumstance that would, in the
absence of this clause, result in the release or discharge by operation of law
or otherwise of any Borrower from the performance or observance of any
obligation, covenant or agreement contained in this Section 3.3.
No setoff, counterclaim, reduction or diminution of any obligation or any
defense of any kind or nature which any of the Borrowers have or may have
against the beneficiary of any Letter of Credit shall be available hereunder to
the Borrowers against the Agent or any Bank. Nothing in this Section 3.3 shall
limit the liability, if any, of the Banks to the Borrowers pursuant to Section
9.5, or the liability, if any, of the Agents to the Banks under Article VII of
this Agreement.
3.4 Payment Method. (a) All payments to be made by the Borrowers
--------------
hereunder will be made to the Administrative Agent for the account of the Banks
in Dollars and in immediately available funds not later than 1:00 p.m. at the
principal office of the Administrative Agent specified in Section 9.2. Payments
received after 1:00 p.m. at the place for payment shall be deemed to be payments
made prior to 1:00 p.m. at the place for payment on the next succeeding Business
Day; provided that payments with respect to Swing Line Loans shall be made to
--------
the Administrative Agent for the account of the Swing Line Bank. The Borrowers
hereby authorize the Administrative Agent to charge their accounts with the
Administrative Agent in order to cause timely payment of amounts due hereunder
to be made (subject to sufficient funds being available in such account for that
purpose).
(b) At the time of making each such payment, the Borrowers
shall, subject to the other terms and conditions of this Agreement, specify to
the Administrative Agent that Borrowing or other obligation of the Borrowers
hereunder to which such payment is to be applied. In the event that the
Borrowers fail to so specify the relevant obligation or if an Event of Default
shall have occurred and be continuing, the Administrative Agent may apply such
payments as it may determine in its sole discretion.
(c) On the day such payments are deemed received, the
Administrative Agent shall remit to the Banks their pro rata shares of such
payments in immediately available funds to the Banks at their respective address
in the United States specified for notices pursuant to Section 9.2. In the case
of payments of principal and interest on any Borrowing, such pro rata shares
shall be determined with respect to each such Bank by the ratio which the
outstanding principal balance of its Loan included in such Borrowing bears to
the outstanding principal balance of the Loans of all of the Banks included in
such Borrowing, and in the case of fees paid pursuant to Section 2.3 and other
amounts payable hereunder (other than the closing fees payable pursuant to
Section 2.3(b), the Letter of Credit fees for the Administrative Agent pursuant
to Section 2.3(c), the Administrative Agent's fees payable pursuant to Section
2.3(d) and amounts payable to any Bank under Section 3.7), such pro rata shares
shall be determined with respect to each such Bank by the ratio which the
Commitment of such Bank bears to the Commitments of all the Banks.
3.5 No Setoff or Deduction. All payments of principal of and
----------------------
interest on the Loans and other amounts payable by the Borrowers hereunder shall
be made by the Borrowers without setoff or counterclaim, and, subject to the
next succeeding sentence, free and clear of, and without deduction or
withholding for, or on account of, any present or future taxes, levies, imposts,
duties, fees, assessments, or other charges of whatever nature, imposed by any
governmental authority, or by any department, agency or other political
subdivision or taxing authority. If any such taxes, levies, imposts, duties,
fees, assessments or other charges are imposed, the Borrowers will pay such
additional amounts as may be necessary so that payment of principal of and
interest on the Loans and other amounts payable hereunder, after withholding or
deduction for or on account thereof, will not be less than any amount provided
to be paid hereunder and, in any such case, the Borrowers will furnish to the
Banks certified copies of all tax receipts evidencing the payment of such
amounts within 45 days after the date any such payment is due pursuant to
applicable law.
3.6 Payment on Non-Business Day; Payment Computations. Except as
-------------------------------------------------
otherwise provided in this Agreement to the contrary, whenever any installment
of principal of, or interest on, any Loan or any other amount due hereunder
becomes due and payable on a day which is not a Business Day, the maturity
thereof shall be extended to the next succeeding Business Day and, in the case
of any installment of principal, interest shall be payable thereon at the rate
per annum determined in accordance with this Agreement during such extension.
27
<PAGE>
Computations of interest and other amounts due under this Agreement shall be
made on the basis of a year of 360 days (or 365 or 366 days, as the case may be,
when determining the Floating Rate) for the actual number of days elapsed,
including the first day but excluding the last day of the relevant period.
3.7 Additional Costs. (a) In the event that any applicable law,
----------------
treaty or other international agreement, rule or regulation (whether domestic or
foreign) now or hereafter in effect and whether or not presently applicable to
any Bank or either Agent, or any interpretation or administration thereof by any
governmental authority charged with the interpretation or administration
thereof, or compliance by any Bank or either Agent with any guideline, request
or directive of any such authority (whether or not having the force of law),
shall (i) affect the basis of taxation of payments to any Bank or either Agent
of any amounts payable by the Borrowers under this Agreement (other than taxes
imposed on the overall net income of any Bank or either Agent by the
jurisdiction, or by any political subdivision or taxing authority of any such
jurisdiction, in which any Bank or either Agent, as the case may be, has its
principal office), or (ii) shall impose, modify or deem applicable any reserve,
special deposit or similar requirement against assets of, deposits with or for
the account of, or credit extended by any Bank or either Agent, or (iii) shall
impose any other condition with respect to this Agreement, or any of the
Commitments, the Notes or the Loans or any Letter of Credit, and the result of
any of the foregoing is to increase the cost to any Bank or either Agent, as the
case may be, of making, funding or maintaining any Eurodollar Rate Loan or any
Letter of Credit or to reduce the amount of any sum receivable by any Bank or
either Agent, as the case may be, thereon, then the Borrowers shall pay to such
Bank or such Agent, as the case may be, from time to time, upon request by such
Bank (with a copy of such request to be provided to the Administrative Agent) or
such Agent, additional amounts sufficient to compensate such Bank or such Agent,
as the case may be, for such increased cost or reduced sum receivable to the
extent, in the case of any Eurodollar Rate Loan, such Bank or such Agent is not
compensated therefor in the computation of the interest rate applicable to such
Eurodollar Rate Loan. A statement as to the amount of such increased cost or
reduced sum receivable, prepared in good faith and in reasonable detail by such
Bank or such Agent, as the case may be, and submitted by such Bank or such
Agent, as the case may be, to the Borrowers, shall be conclusive and binding for
all purposes absent manifest error in computation.
(b) In the event that any applicable law, treaty or other
international agreement, rule or regulation (whether domestic or foreign) now or
hereafter in effect and whether or not presently applicable to any Bank or
either Agent, or any interpretation or administration thereof by any
governmental authority charged with the interpretation or administration
thereof, or compliance by any Bank or either Agent with any guideline, request
or directive of any such authority (whether or not having the force of law),
including any risk-based capital guidelines, affects or would affect the amount
of capital required or expected to be maintained by such Bank or such Agent (or
any corporation controlling such Bank or such Agent) and such Bank or such
Agent, as the case may be, determines that the amount of such capital is
increased by or based upon the existence of such Bank's or such Agent's
obligations hereunder and such increase has the effect of reducing the rate of
return on such Bank's or such Agent's (or such controlling corporation's)
capital as a consequence of such obligations hereunder to a level below that
which such Bank or such Agent (or such controlling corporation) could have
achieved but for such circumstances (taking into consideration its policies with
respect to capital adequacy), then the Borrowers shall pay to such Bank or such
Agent, as the case may be, from time to time, upon request by such Bank (with a
copy of such request to be provided to the Administrative Agent) or such Agent,
additional amounts sufficient to compensate such Bank or such Agent (or such
controlling corporation) for any increase in the amount of capital and reduced
rate of return which such Bank or such Agent reasonably determines to be
allocable to the existence of such Bank's or such Agent's obligations hereunder.
A statement as to the amount of such compensation, prepared in good faith and in
reasonable detail by such Bank or such Agent, as the case may be, and submitted
by such Bank or such Agent to the Company, shall be conclusive and binding for
all purposes absent manifest error in computation.
3.8 Illegality and Impossibility. In the event that any applicable
----------------------------
law, treaty or other international agreement, rule or regulation (whether
domestic or foreign) now or hereafter in effect and whether or not presently
applicable to any Bank, or any interpretation or administration thereof by any
governmental authority charged with the interpretation or administration
thereof, or compliance by any Bank with any guideline, request or directive of
such authority (whether or not having the force of law), including without
limitation exchange controls, shall make it unlawful or impossible for any Bank
to maintain any Loan under this Agreement, the Borrowers shall upon receipt of
notice thereof from such Bank repay in full the then outstanding principal
amount
28
<PAGE>
of each Loan so affected, together with all accrued interest thereon to the date
of payment and all amounts owing to such Bank under Section 3.9, (a) on the last
day of the then current Interest Period applicable to such Loan if such Bank may
lawfully continue to maintain such Loan to such day, or (b) immediately if such
Bank may not continue to maintain such Loan to such day.
3.9 Indemnification. If the Borrowers make any payment of principal
---------------
with respect to any Eurodollar Rate Loan on any other date than the last day of
an Interest Period applicable thereto (whether pursuant to Section 3.8, Section
6.2, or in connection with any transaction contemplated by Section 9.1(d), or
otherwise), or if the Borrowers fail to borrow any Eurodollar Rate Loan after
notice has been given to the Banks in accordance with Section 2.4 or fail to
convert a Floating Rate Borrowing into, or to continue, a Eurodollar Rate
Borrowing after making such election pursuant to Section 2.7, or if the
Borrowers fail to make any payment of principal or interest in respect of a
Eurodollar Rate Loan when due, the Borrowers shall reimburse each Bank on demand
for any resulting loss or expense incurred by each such Bank, including without
limitation any loss incurred in obtaining, liquidating or employing deposits
from third parties, whether or not such Bank shall have funded or committed to
fund such Loan. A statement as to the amount of such loss or expense, prepared
in good faith and in reasonable detail by such Bank and submitted by such Bank
to the Borrowers, shall be conclusive and binding for all purposes absent
manifest error in computation. Calculation of all amounts payable to such Bank
under this Section 3.9 shall be made as though such Bank shall have actually
funded or committed to fund the relevant Eurodollar Rate Loan through the
purchase of an underlying deposit in an amount equal to the amount of such Loan
in the relevant market and having a maturity comparable to the related Interest
Period and through the transfer of such deposit to a domestic office of such
Bank in the United States; provided, however, that each Bank may fund any
-------- -------
Eurodollar Rate Loan in any manner it sees fit and the foregoing assumption
shall be utilized only for the purpose of calculation of amounts payable under
this Section 3.9.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
------------------------------
4.1 Original. To induce the Agents and the Banks to enter into this
--------
Agreement, each Borrower, jointly and severally, represents and warrants to the
Agents and the Banks, as of the date hereof and, except as otherwise expressly
provided, as of all times (including, without limitation, as of the date each
Advance is requested and made) until the Termination Date and thereafter until
all Obligations under the Loan Documents are satisfied, as follows:
(a) Citation is a corporation duly organized, validly existing
and in good standing under the Laws of the State of Delaware; each Consolidated
Entity is a corporation or limited partnership, as the case may be, duly
organized, validly existing and in good standing under the Laws of its state of
organization, each of Citation and the Consolidated Entities has the lawful
power to own its properties and to engage in the business it conducts, and is
duly qualified and in good standing as a foreign corporation in the
jurisdictions wherein the nature of the business transacted by it or property
owned by it makes such qualification necessary; the states in which Citation and
each Consolidated Entity are qualified to do business are set forth in Schedule
--------
4.1(a) annexed hereto, the addresses of all places of business and headquarters
- ------
of Citation and each Consolidated Entity are as set forth in Schedule 4.1(a)
---------------
annexed hereto and the addresses of all places where any property or assets of
Citation and each Consolidated Entity are located and a brief description of the
nature of such property and assets at each such location are set forth in
Schedule 4.1(a) annexed hereto;
- ---------------
(b) Except as set forth in Schedule 4.1(b) annexed hereto,
---------------
neither Citation nor any Consolidated Entity has used any corporate or
fictitious name other than the name for Citation or such Consolidated Entity, as
the case may be, as is used in this Agreement, which is the same as the name
shown, respectively, on Citation's and such Consolidated Entity's certificate or
articles of incorporation or certificate of limited partnership, as applicable,
through the date of filing of the last amendment thereto;
(c) None of the Borrowers is directly or indirectly controlled
by, or acting on behalf of, any Person which is an "Investment Company," within
the meaning of the Investment Company Act of 1940, as amended;
29
<PAGE>
(d) Neither Citation nor any Consolidated Entity has been the
surviving corporation in a merger, acquired any business, or changed its
principal executive office within five (5) years and one (1) month prior to the
date hereof, except as set forth in Schedule 4.1(d) annexed hereto;
---------------
(e) Neither Citation nor any Consolidated Entity is in default
with respect to any of its existing Indebtedness, and the making and performance
of this Agreement, the Notes, and the other Loan Documents will not
(immediately, or with the passage of time, the giving of notice, or both):
(1) Violate the charter or by-law provisions or the
certificate of limited partnership or partnership
agreement or any similar document of any Borrower, or
violate any Law or result in a default under any
contract, agreement or instrument to which any Borrower
or any Consolidated Entity is a party or by which any
Borrower or any Consolidated Entity or its property is
bound; or
(2) Result in the creation or imposition of any security
interest in, or lien or encumbrance upon, any of the
assets of any Borrower or any Consolidated Entity
except in favor of the Collateral Agent for the benefit
of the Banks and the Agents;
(f) Each Borrower has the power and authority to enter into and
perform this Agreement, the Notes, and the other Loan Documents, and to incur
the obligations herein and therein provided for, and has taken all corporate or
partnership, as the case may be, action necessary to authorize the execution,
delivery, and performance of this Agreement, the Notes, and the other Loan
Documents;
(g) This Agreement, the Notes and the other Loan Documents are,
or when delivered will be, valid, binding, and enforceable in accordance with
their respective terms;
(h) The Security Documents, together with any UCC-1's and all
other documents filed in connection therewith, create as security for the
Obligations a valid and enforceable perfected first-priority security interest
in and lien on all of each Borrower's rights, title and interest in the
Collateral, in favor of the Collateral Agent for the benefit of the Banks and
the Agents, superior and prior to the rights of all third Persons and subject to
no other Liens;
(i) Except as disclosed in Schedule 4.1(i) annexed hereto, there
---------------
is no pending order, notice, claim, litigation, proceeding or investigation
against or affecting Citation or any Consolidated Entity whether or not covered
by insurance, that would involve the payment of $500,000 or more if adversely
determined;
(j) Each of Citation and the Consolidated Entities has good and
marketable title to all of its assets, including the Collateral, free of any
security interest, encumbrance or lien, or claim of any third person except for
Permitted Liens;
(k) The Financial Statements, including any schedules and notes
pertaining thereto, have been prepared in accordance with Generally Accepted
Accounting Principles consistently applied, and fully and fairly present the
financial condition of Citation and the Consolidated Entities at the dates
thereof and the results of operations for the periods covered thereby, except
that the interim Financial Statements may not include all footnotes required for
conformity with Generally Accepted Accounting Principles, and there have been no
material adverse changes in the Consolidated financial condition or business of
Citation and the Consolidated Entities from the dates of the Financial
Statements to the date hereof;
(l) As of the date of the Financial Statements, Citation and the
Consolidated Entities had no material Indebtedness of any nature, including, but
without limitation, liabilities for taxes and any interest or penalties relating
thereto, except to the extent reflected (in a footnote or otherwise) and
reserved against in the Financial Statements or as disclosed in or permitted by
this Agreement; none of the Borrowers knows or has any
30
<PAGE>
reasonable ground to know of any basis for the assertion against it or any
Consolidated Entity of any material Indebtedness of any nature not fully
reflected and reserved against in the Financial Statements;
(m) Except as otherwise permitted herein, each of Citation and
the Consolidated Entities has filed all federal, state and local tax returns and
other reports that it is required by Law to file prior to the date hereof and
which are material to the conduct of its businesses, has paid or caused to be
paid all taxes, assessments and other governmental charges that are due and
payable prior to the date hereof, and has made adequate provision for the
payment of such taxes, assessments or other charges accruing but not yet
payable; none of the Borrowers has any knowledge of any deficiency or additional
assessment in a materially important amount in connection with any taxes,
assessments or charges not provided for on its books;
(n) Except as otherwise disclosed in Schedule 4.1(n) annexed
---------------
hereto, or except to the extent that the failure to comply would not materially
interfere with the conduct of the business of Citation or any Consolidated
Entity, Citation and each Consolidated Entity has complied with all applicable
Laws with respect to:
(1) Any restrictions, specifications, or other requirements
pertaining to products that Citation or any
Consolidated Entity manufactures or sells or to the
services that Citation or any Consolidated Entity
performs;
(2) The conduct of its businesses; and
(3) The use, maintenance and operation of the real and
personal properties owned or leased by it in the
conduct of its businesses;
(o) No representation or warranty by any Borrower contained
herein or in any other Loan Document or in any certificate or other document
furnished by any Borrower pursuant hereto contains any untrue statement of
material fact or omits to state a material fact necessary to make such
representation or warranty not misleading in light of the circumstances under
which it was made;
(p) Each consent, approval or authorization of, or filing,
registration or qualification with, any Person that is required to be obtained
or effected by Citation or any Consolidated Entity in connection with the
execution and delivery of this Agreement, the Notes, and the other Loan
Documents or the undertaking or performance of any obligation hereunder or
thereunder has been duly obtained or effected;
(q) All existing Indebtedness of each Borrower which, with
respect to any particular item, is in excess of $150,000:
(1) For money borrowed; or
(2) Under any security agreement, mortgage, or agreement
covering the lease by any Borrower as lessee of real or
personal property,
is described in the most recent Financial Statements furnished by the Borrowers
to the Administrative Agent;
(r) To the best of each Borrower's knowledge, all parties
(including each Borrower and each Consolidated Entity) to any material lease,
contract or commitment of any kind to which any Borrower or any other
Consolidated Entity is a party have complied with the provisions of such lease,
contract or commitment; no party is in default under any material lease,
contract, or other commitment thereof and no event has occurred which, but for
the giving of notice or the passage of time, or both, would constitute a default
thereunder;
(s) Neither Citation nor any Consolidated Entity has made any
agreement or taken any action which may cause any Person to become entitled to a
commission or finder's fee as a result of the making of the Advances hereunder;
31
<PAGE>
(t) Citation's Consolidated federal tax returns for all years of
operation prior to its fiscal year ended September 28, 1997 have been filed with
the Internal Revenue Service and have not been challenged; provided, however,
that said tax returns for the fiscal years ended October 3, 1993 and October 2,
1994 have been audited and the Internal Revenue Service has proposed adjustments
to taxable income for such years of $295,543 and $835,737, respectively, but
there has not to date been any final determination made with respect thereto;
(u) Except as set forth on Schedule 4.1(u) annexed hereto, with
---------------
regard to each Benefit Plan that any Borrower or any ERISA Affiliate maintains
or contributes to, or has maintained or contributed to: (1) Any such Benefit
Plan that is a Pension Plan satisfies the minimum funding standards of Section
302 of ERISA; (2) there have been no Reportable Events (as defined in Section
4043 of ERISA) or Prohibited Transactions (as defined in Section 408 of ERISA)
with respect to any such Benefit Plan; (3) the Internal Revenue Service has not
issued a minimum funding waiver with respect to any such Benefit Plan that is a
Pension Plan; (4) none of such Benefit Plans is a multiemployer plan as defined
in Section 3(37) of ERISA; (5) each such Benefit Plan to which 4980B of the
Internal Revenue Code of 1986, as amended, applies has been operated in
compliance therewith; (6) no such Benefit Plan provides benefits to employees
beyond retirement or other termination of employment other than benefits
required by Section 4980B of the Internal Revenue Code of 1986, as amended; and
(7) each such Benefit Plan is in compliance in all material respects with the
Code and ERISA;
(v) Schedule 4.1(v) annexed hereto correctly sets forth the
---------------
corporate or partnership, as the case may be, name, the jurisdiction of
incorporation or partnership formation, as the case may be, and the ownership
(corporate stock or partnership interest, as the case may be) of Citation and
each Consolidated Entity. All outstanding shares of capital stock or partnership
interests of each class or type of each of Citation and the Consolidated
Entities have been validly issued and are fully paid and nonassessable and, in
the case of each such Consolidated Entity, are owned, beneficially and of
record, by Citation or another Consolidated Entity free and clear of any Liens.
Each Participating Subsidiary is a Consolidated Entity;
(w) Each Borrower owns or has the rights to use, pursuant to
written licenses, all patents, trademarks and copyrights used or employed in its
business and products; and
(x) No Borrower's Inventory is subject to any license agreement
relating to patents, trademarks or copyrights which could, directly or
indirectly, preclude or render impracticable the realization by Agent for the
benefit of the Banks of the value of such Inventory.
(y) Citation and the Consolidated Entities are in the process of
making a full and complete assessment of the Year 2000 Issues, which process
they reasonably expect to complete by December 31, 1998, and they have a
realistic and achievable program for remediating the Year 2000 Issues on a
timely basis (the "Year 2000 Program"). Based on such assessment and on the
Year 2000 Program the Borrowers do not reasonably anticipate that Year 2000
Issues will have a material adverse effect on (i) the business, assets,
operations or condition (financial or otherwise) of Citation and the
Consolidated Entities on a consolidated basis, (ii) the ability of any Borrower
to perform its obligations under the Loan Documents, or (iii) the validity or
enforceability of any Loan Document or the rights or remedies of any Bank or
either Agent under any Loan Document.
4.2 Survival. All of the representations and warranties set forth in
--------
Section 4.1 shall survive until all Obligations are satisfied in full and there
remain no outstanding Commitments.
ARTICLE V.
BORROWERS' COVENANTS
--------------------
Each Borrower does hereby, jointly and severally, covenant and agree
with the Agents and the Banks that, so long as any of the Obligations remains
unsatisfied or any Commitments remain outstanding, and thereafter until this
Agreement is terminated in writing, it will comply and it will cause the other
Borrowers and the Consolidated Entities to comply, at all times with the
following covenants:
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5.1 Affirmative Covenants.
---------------------
(a) Each Borrower will take and will cause each other
Consolidated Entity to take all necessary steps to preserve their respective
corporate or limited partnership, as the case may be, existence and franchises
and comply with all present and future Laws, applicable to it in the operation
of its businesses, and all material agreements to which it is subject.
(b) Each Borrower will use the proceeds of the Advances only for
the purposes set forth below in this Section 5.1(b), and will furnish to each
Bank such evidence as it may reasonably require with respect to such use. The
proceeds of the Advances shall be used by the Borrowers for general working
capital and, to the extent permitted by this Agreement, to fund acquisitions.
(c) Citation will furnish to the Administrative Agent (and the
Administrative Agent will furnish copies thereof to the Banks):
(1) Within three (3) Business Days after the initial
issuance of Subordinated Notes under the Subordinated
Notes Indenture, copies of all Subordinated Notes
Documents, certified as true and complete and in full
force and effect by the chief financial officer of
Citation.
(2) Within sixty (60) days after the close of each
quarterly accounting period in each fiscal year:
(i) A Consolidated statement of Stockholders' Equity
and a Consolidated statement of Cash Flows of
Citation and the Consolidated Entities for such
quarterly period;
(ii) Consolidated and consolidating income statements
of Citation and the Consolidated Entities for
such quarterly period;
(iii) Consolidated and consolidating balance sheets of
Citation and the Consolidated Entities as of the
end of such quarterly period all in reasonable
detail, subject to year-end audit adjustments
and certified by Citation's president or
principal financial officer as having been
prepared in accordance with Generally Accepted
Accounting Principles, consistently applied, by
Citation and the Consolidated Entities, except
for any inconsistencies explained in such
certificate to the satisfaction of the Required
Banks; and
(iv) A Consolidated income statement for the period
of four consecutive fiscal quarters of Citation
ending with the end of such quarter, in each
case prepared for Citation and the Consolidated
Entities on a pro forma basis assuming that each
Consolidated Entity that was acquired by
Citation after the first day of such period (and
that exists as a Consolidated Entity at the end
of such period) was acquired on and as of the
first day of such period;
(3) Within ninety (90) days after the close of each fiscal
year:
(i) A Consolidated statement of Stockholders' Equity
and a Consolidated statement of Cash Flows of
Citation and the Consolidated Entities for such
fiscal year;
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<PAGE>
(ii) Consolidated and consolidating income statements
of Citation and the Consolidated Entities for
such fiscal year; and
(iii) Consolidated and consolidating balance sheets of
Citation and the Consolidated Entities as of the
end of such fiscal year;
all in reasonable detail, including all supporting
schedules and comments; the Consolidated statements and
balance sheets to be audited by an independent
certified public accountant selected by Citation and
acceptable to the Required Banks, and certified by such
accountants to have been prepared in accordance with
Generally Accepted Accounting Principles, consistently
applied, by Citation and the Consolidated Entities
except for any inconsistencies explained in such
certificate to the satisfaction of the Required Banks;
in addition, Citation will obtain from such independent
certified public accountants and deliver to the
Administrative Agent (and the Administrative Agent will
furnish copies thereof to the Banks), within ninety
(90) days after the close of each fiscal year, their
written statement that in making the examination
necessary to their certification they have obtained no
knowledge of any Event of Default by Citation or any
other Borrower, or disclosing all Events of Default of
which they have obtained knowledge; provided, however,
-------- -------
that in making their examination such accountants shall
not be required to go beyond the bounds of generally
accepted auditing procedures for the purpose of
certifying financial statements; Lender shall have the
right from time to time to discuss Citation's and each
Consolidated Entity's affairs directly with Citation's
independent certified public accountant after notice to
Citation and opportunity of Citation to be present at
any such discussions.
(4) Contemporaneously with each quarterly and year-end
financial report required by the foregoing paragraphs,
a Compliance Certificate, wherein in addition to the
financial information reported in such Compliance
Certificate, the president or principal financial
officer of Citation shall certify that he has
individually reviewed the provisions of this Agreement
and that a review of the activities of Citation and the
Consolidated Entities during such year or quarterly
period, as the case may be, has been made by or under
the supervision of the signer of such certificate with
a view to determine whether each Borrower has kept,
observed, performed and fulfilled all its obligations
under this Agreement, and that, to the best of his
knowledge, each Borrower has observed and performed
each and every undertaking contained in this Agreement
and is not at the time in default in the observance or
performance of any of the terms and conditions hereof,
or specifying all such Defaults and Events of Default
of which he may have knowledge;
(5) Promptly after sending or making available or filing of
the same, copies of all reports, proxy statements and
financial statements that any Borrower sends or makes
available to its stockholders or other holders of
equity interests and all registration statements and
reports that any Borrower files with the Securities and
Exchange Commission or any successor Person;
(6) Together with the financial statements required under
Section 5.1(c)(2) and 5.1(c)(3), a certificate (the
"Margin Certificate") executed by the
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chief financial officer, treasurer or chief executive
officer of Citation setting forth (a) the ratio of
Total Debt as of such fiscal quarter-end or year-end,
as the case may be, to Adjusted EBITDA for the period
of four consecutive fiscal quarters ending on such date
and (b) the computations used in calculating said
ratio;
(7) Within thirty (30) days after the close of each fiscal
year, the budget of Citation and the Consolidated
Entities for the next following fiscal year; and
(8) Upon any Bank's request from time to time, copies of
any or all leases, contracts, or commitments of the
type referred to in Section 4.1(r) hereof.
(d) Citation and each Consolidated Entity will maintain its
Inventory, Equipment, real estate and other properties in good condition and
repair (normal wear and tear excepted), and will pay and discharge, or cause to
be paid and discharged when due, the cost of repairs to or maintenance of the
same, and will pay or cause to be paid all rental or mortgage payments due on
such real estate. Borrowers hereby agree that, in the event they or any
Consolidated Entity fail to pay or cause to be paid any such payments, the
Administrative Agent may do so and on demand be reimbursed therefor by
Borrowers. In addition, Borrowers jointly and severally agree to reimburse the
Agents for any reasonable expenses incurred by either of them to protect and
preserve the Collateral pursuant to Section 8.5(c).
(e) Citation and each Consolidated Entity will maintain, or
cause to be maintained, public liability insurance, and fire and extended
coverage insurance on all tangible assets owned by it, all in such form and
amounts as are consistent with industry practices and with such insurers as may
be satisfactory to the Administrative Agent. Each Borrower will furnish to the
Administrative Agent such evidence of insurance as the Administrative Agent may
require.
(f) Citation and each Consolidated Entity will pay or cause to
be paid when due all taxes, assessments and charges or levies imposed upon it or
on any of its property or which it is required to withhold and pay over, except
where contested in good faith by appropriate proceedings with adequate reserves
therefor having been set aside on their books; provided, however, that Citation
-------- -------
and each Consolidated Entity shall pay or cause to be paid all such taxes,
assessments, charges or levies forthwith whenever foreclosure on any lien that
attached (or security therefor) appears imminent.
(g) Citation and each Consolidated Entity will, when requested
to do so, make available for inspection by the Administrative Agent's and each
Bank's duly authorized representatives any of its books and Records, and will
furnish to the Administrative Agent and each Bank any information regarding its
business affairs and financial condition within a reasonable time after written
request therefor. Each Borrower will, and will cause each Consolidated Entity
to, keep proper books of record and account in which full, true and correct
entries in all material respects shall be substantially in conformity with GAAP
and all requirements of Law shall be satisfied in all dealings and transactions
in relation to its business and activities. Each Borrower will, and will cause
each Consolidated Entity to, permit the Administrative Agent's and each Bank's
officers and designated representatives to visit and inspect, during normal
business hours, any of the properties of such Borrower or such Consolidated
Entity and to examine the books of account of such Borrower or such Consolidated
Entity and discuss the affairs, finances, accounts of such Borrower or such
Consolidated Entity with, and be advised as to the same by, its and their
officers, all at such reasonable times and intervals and to such reasonable
extent as the Administrative Agent or any Bank may from time to time request. In
connection with the foregoing, each of the Administrative Agent and the Banks
agrees to utilize such documents, materials and information solely and
exclusively in connection with this Agreement and the other Loan Documents and
the transactions contemplated therein and to exercise its best efforts to keep
all such documents, materials and information delivered or made available by
Borrowers confidential from anyone other than the Collateral Agent and Persons
employed or retained by the Administrative Agent, any such Bank or the
Collateral Agent, as the case may be, who are expected to be engaged
35
<PAGE>
in evaluating, approving, structuring, and enforcing or administering this
Agreement; provided, however, that nothing herein shall prevent the
-------- -------
Administrative Agent, any such Bank, the Collateral Agent or any such Persons
from disclosing such information;
(1) to any actual or potential assignee or participant of
any Advance or Note; provided that such assignee or
participant shall be subject to this Section;
(2) upon order of any court or administrative agency after
it, to the extent practical, gives notice to Citation
pursuant to which Citation may seek a protective order
against such disclosure;
(3) upon request or demand of any regulatory agency or
authority having jurisdiction over the Administrative
Agent, such Bank or the Collateral Agent, as the case
may be;
(4) which has been publicly disclosed;
(5) in connection with any litigation;
(6) to the extent reasonably required in connection with
the exercise of any remedy hereunder; or
(7) to the Administrative Agent's, such Bank's or the
Collateral Agent's legal counsel and independent
auditors in connection with the Administrative Agent's,
such Bank's or the Collateral Agent's business.
(h) Citation and each Consolidated Entity will collect their
respective Accounts and sell their respective Inventory only in the ordinary
course of business.
(i) Citation and each Consolidated Entity will keep accurate and
complete Records of their respective Accounts, Inventory and Equipment,
consistent with sound business practices.
(j) Citation and each Consolidated Entity will give immediate
notice to the Banks of:
(1) Any litigation or proceeding in which it is a party if
an adverse decision therein would require it to pay
over more than $500,000 or deliver assets the value of
which exceeds such sum (whether or not the claim is
considered to be covered by insurance); and
(2) The institution of any other suit or proceeding
involving it that might materially and adversely affect
its operations, financial condition, property or
business prospects.
(k) Within ten (10) days of the Administrative Agent's or any
Bank's request therefor, each Borrower will furnish to the Administrative Agent
or such Bank, as the case may be, copies of federal income tax returns filed by
such Borrower.
(l) Citation and each Consolidated Entity will pay when due (or
within applicable grace periods) all Indebtedness due third Persons, except when
the amount thereof is being contested in good faith by appropriate proceedings
and with adequate reserves therefor being set aside on the books of Citation and
each Consolidated Entity. If default is made by Citation or any Consolidated
Entity in the payment of any principal (or installment thereof) of, or interest
on, any such Indebtedness, the Administrative Agent shall have the right, in its
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<PAGE>
discretion, to pay such interest or principal for the account of Citation or
such Consolidated Entity and be reimbursed by Borrowers therefor.
(m) Citation and each Consolidated Entity will notify the Banks
immediately if any of them becomes aware of the occurrence of any Event of
Default or of any fact, condition or event that only with the giving of notice
or passage of time or both, could become an Event of Default, including, without
limitation any default under the Subordinated Notes Documents, or if they become
aware of any material adverse change in the business prospects, financial
condition (including, without limitation, proceedings in bankruptcy, insolvency,
reorganization, or the appointment of a receiver or trustee), or results of
operations of Citation or any Consolidated Entity, or of the failure of Citation
or any Consolidated Entity to observe any of its undertakings hereunder or under
any of the Loan Documents.
(n) Citation and each Consolidated Entity will notify the
Administrative Agent thirty (30) days in advance of any change in the location
of any of its places of business or of the establishment of any new place of
business, or the discontinuance of any existing place of business.
(o) [intentionally omitted]
(p) Each Borrower and each ERISA Affiliate will:
(1) Fund each of its Pension Plans, if any, in accordance
with no less than the minimum funding standards set
forth in Section 302 of ERISA;
(2) Furnish to the Banks, promptly after filing the same,
copies of all reports or statements filed with the
United States Department of Labor, the Pension Benefit
Guaranty Corporation, or the Internal Revenue Service
with respect to any Benefit Plans;
(3) Promptly advise the Banks of the occurrence of any
Reportable Event or Prohibited Transaction; each as
defined in ERISA, with respect to any Benefit Plan; and
(4) Promptly advise the Banks of the issuance of a funding
waiver by the Internal Revenue Service with respect to
any Pension Plan.
(q) If at any time Citation or any Consolidated Entity shall
enter into or be a party to any instrument or agreement, including all such
instruments or agreements in existence as of the date hereof and all such
instruments or agreements entered into after the date hereof, relating to or
amending any terms or conditions applicable to any of its Indebtedness or any
issuance or placement of its equity which includes covenants, terms, conditions
or defaults not substantially provided for in this Agreement or more favorable
to the holder or holders thereof than those provided for in this Agreement, then
Citation shall promptly so advise the Administrative Agent and the Banks.
Thereupon, if the Administrative Agent shall request, upon notice to Citation,
the Agents and the Banks shall enter into an amendment to this Agreement or an
additional agreement (as the Administrative Agent may request), providing for
substantially the same covenants, terms, conditions and defaults as those
provided for in such instrument or agreement to the extent required and as may
be selected by the Administrative Agent. In addition to the foregoing, upon the
initial issuance of Subordinated Notes, any covenants, terms, conditions or
defaults in the Subordinated Notes Documents not substantially provided for in
this Agreement or more favorable to the holders of the Subordinated Notes than
those provided for in this Agreement are hereby incorporated by reference into
this Agreement to the same extent as if set forth fully herein, and no
subsequent amendment, waiver or modification thereof shall effect any such
covenants, terms, conditions or defaults as incorporated herein.
(r) Citation and each Borrower shall take all such actions as
are reasonably necessary to successfully implement the Year 2000 Program and to
assure that Year 2000 Issues will not have a material adverse effect on (i) the
business, assets, operations or condition (financial or otherwise) of Citation
and the
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<PAGE>
Consolidated Entities on a consolidated basis, (ii) the ability of any Borrower
to perform its obligations under the Loan Documents, or (iii) the validity or
enforceability of any Loan Document or the rights or remedies of any Bank or
either Agent under any Loan Document. At the request of the Administrative
Agent or any Bank, Citation will provide a description of the Year 2000 Program,
together with any updates or progress reports with respect thereto.
(s) All representations and warranties of the Borrowers
contained in the Subordinated Notes Documents shall be true and correct in all
material respects when made or deemed made. All Obligations (as defined in this
Agreement) shall be "Senior Debt" and "Designated Senior Debt" as such terms are
defined, respectively in the final Subordinated Notes Offering Memorandum and
the Subordinated Notes Indenture. This Agreement and the other Loan Documents
shall be the "Credit Agreement" as such term is defined in the final
Subordinated Notes Offering Memorandum and the Subordinated Notes Indenture.
Other than the Obligations (as defined in this Agreement) and other Indebtedness
permitted under Section 5.2(h), there shall be no "Senior Debt" as such term is
defined in the final Subordinated Notes Offering Memorandum and the Subordinated
Notes Indenture. Other than the Obligations (as defined in this Agreement),
there shall be no "Designated Senior Debt" as such term is defined in the final
Subordinated Notes Offering Memorandum and the Subordinated Notes Indenture.
5.2 Negative Covenants.
------------------
(a) Neither Citation nor any Consolidated Entity will enter into
any merger, consolidation, reorganization or recapitalization, enter into any
joint venture or similar arrangement, reclassify its capital stock, liquidate or
dissolve or, unless Citation shall have given not less than thirty (30) days
prior written notice to the Administrative Agent and furnished to the
Administrative Agent all further instruments and documents, including, without
limitation, UCC financing statement amendments, and taken all further action
that may be necessary or desirable, or that the Administrative Agent may
request, in order to preserve the effectiveness and perfected status of the
liens and security interests of the Agents and the Banks with respect to the
Collateral, change its name; provided that this Section 5.2(a) shall not
--------
prohibit any merger of a Consolidated Entity completed as part of a transaction
permitted under Section 5.2(r).
(b) Neither Citation nor any Consolidated Entity will sell,
transfer, lease, assign or otherwise dispose of all or (except inventory in the
ordinary course of business) any material part of its assets, provided, however,
-------- -------
that this Section 5.2(b) shall not prohibit (i) any such sale, transfer, lease
or other disposition if the aggregate book value (disregarding any write-downs
of such book value other than ordinary depreciation and amortization) of all of
the business, assets, rights, revenues and property disposed of by Citation and
the Consolidated Entities during any period of twelve (12) consecutive months
ending after the date of this Agreement shall be less than the amount equal to
5% of the Total Assets of Citation and the Consolidated Entities determined on a
consolidated basis as of the end of such twelve-month period or (ii) any
Qualified Receivables Transaction so long as the aggregate Maximum Funding
Amount with respect to all such Qualified Receivables Transactions does not
exceed $100,000,000 at any time, provided, further, that immediately before and
-------- -------
after any such transaction described in clauses (i) and (ii) above, no Default
or Event of Default shall exist or shall have occurred and be continuing.
(c) Except as permitted under Section 5.2(b), neither Citation
nor any Consolidated Entity will sell, or enter into any agreement to sell, any
of its Accounts.
(d) Neither Citation nor any Consolidated Entity will sell,
lease, transfer, assign, or otherwise dispose of any of the Collateral.
(e) Neither Citation nor any Consolidated Entity will sell, or
otherwise dispose of, or for any reason cease operating, any of its divisions,
franchises, or lines of business.
(f) Neither Citation nor any Consolidated Entity will mortgage,
pledge, or grant or permit to exist a security interest in or lien upon any of
its assets of any kind, now owned or hereafter acquired, except for Permitted
Liens.
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<PAGE>
(g) Neither Citation nor any Consolidated Entity will incur any
Contingent Liabilities, except for (i) the endorsement of commercial paper for
deposit or collection in the ordinary course of business, (ii) deferred purchase
price obligations, including without limitation pursuant to earn-out provisions,
incurred as part of acquisitions permitted under Section 5.2(r), (iii) the
guarantee by Citation of obligations of Participating Subsidiaries permitted
under this Agreement, (iv) Standard Securitization Undertakings in connection
with Qualified Receivables Transactions permitted under clause (ii) of Section
5.2(b), and (v) guarantees of Subordinated Indebtedness pursuant to and in
accordance with the terms of the Subordinated Notes Documents.
(h) Neither Citation nor any Consolidated Entity will incur,
create, assume, or permit to exist any Indebtedness except:
(1) The Advances;
(2) Subordinated Indebtedness under the Subordinated Notes
in an aggregate principal amount not exceeding
$200,000,000;
(3) Indebtedness to Persons other than the Banks which is
existing on the date of this Agreement and, in the case
of any such Indebtedness in excess of $500,000, is
listed on Schedule 5.2(h) annexed hereto;
(4) Trade indebtedness incurred in the ordinary course of
business;
(5) Contingent Liabilities permitted by Section 5.2(g);
(6) Indebtedness not to exceed $25,000,000 in the aggregate
which is unsecured or secured by Permitted Liens;
(7) Lease obligations permitted by Section 5.2(m);
(8) Hedging Contracts;
(9) Purchase money Indebtedness of any person acquired by
Citation, provided that such purchase money
Indebtedness was existing at the time of such
acquisition and not created in contemplation thereof
and such purchase money Indebtedness was incurred to
acquire fixed assets;
(10) Indebtedness of any Participating Subsidiary owing to
Citation or to any other Participating Subsidiary;
(11) The following Indebtedness of Interstate Forging
Industries, Inc. ("Interstate") to M&I Bank, provided
that no extension or renewal thereof shall be
permitted: term loan in the principal amount of
$5,600,000, reducing by $200,000 each quarter, maturing
March 31, 1999;
(12) Indebtedness of any Receivables Subsidiary to Citation
or any other Seller under any Purchase Money Notes in
connection with Qualified Receivables Transactions
permitted under clause (ii) of Section 5.2(b); and
(13) Receivables Program Obligations described under clause
(a) of the definition of such term of Special Purpose
Vehicles, and Receivables Program Obligations described
under clause (b) of the definition of such term of
Citation and the Consolidated Entities, provided in
--------
each case
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<PAGE>
such Receivables Program Obligations relate solely to
Qualified Receivables Transactions permitted under
clause (ii) of Section 5.2(b).
(i) Except as permitted under Section 5.2(b), neither Citation
nor any Consolidated Entity will make any assignment or transfer of Accounts,
Chattel Paper or Equipment, or, other than in the ordinary course of business,
of Inventory.
(j) Neither Citation nor any Consolidated Entity will (i) form
or acquire any Subsidiary that would be used to acquire the assets of or to
substantially succeed to the operations of any of their respective divisions or
(ii) except as permitted under Section 5.2(r), 5.2(n) or 5.2(k), without the
prior written consent of the Required Banks in their sole discretion, make any
investment in or loan to any Person, including, without limitation, any
Subsidiary; provided, however, that (A) no such action described in clause (i)
-------- -------
of this Section 5.2(j) taken in connection with any restructuring of any
Subsidiaries or divisions of Citation or any Consolidated Entity for tax or
other legal reasons shall be prohibited by this Section 5.2(j) provided that
such formed or acquired Subsidiary is a Domestic Subsidiary and satisfies the
requirements for, and becomes, a Participating Subsidiary in accordance with the
terms of this Agreement and (B) this Section 5.2(j) shall not prohibit the
formation of Receivables Subsidiaries and Special Purpose Vehicles for Qualified
Receivables Transactions permitted under clause (ii) of Section 5.2(b).
(k) Neither Citation nor any Consolidated Entity will make any
loan or advance to any officer, shareholder, director or employee of Citation or
any Consolidated Entity except for business travel and similar temporary
advances in the ordinary course of business.
(l) Citation will not declare or pay any dividends, or make any
other payments or distributions on account of its capital stock, which exceed in
the aggregate for all such dividends, payments and distributions in any fiscal
year an amount equal to 10% of Citation's net income, determined in accordance
with Generally Accepted Accounting Principles, for the immediately preceding
fiscal year; provided, however, that no dividends or other such payments shall
-------- -------
be made by Citation at any time that the ratio of Total Debt, as determined as
of the end of the latest fiscal quarter of Citation for which a Compliance
Certificate has been delivered pursuant to Section 5.1(c)(4), to Adjusted EBITDA
for the period of four consecutive fiscal quarters ending with such quarter end
is greater than 2.5 to 1.0. Notwithstanding anything herein to the contrary,
this Section 5.2(l) shall not prohibit a distribution to Citation's former S
Corporation stockholders relating to a determination, due to an Internal Revenue
Service audit, that Citation's taxable income for any period prior to the
termination of its former S Corporation status should be increased.
(m) Neither Citation nor any Consolidated Entity will pay, in an
aggregate amount in any fiscal year (commencing with the current fiscal year),
lease obligations in excess of $5,000,000. As used in this paragraph, the term
"lease" means a lease that is not reflected on a Consolidated balance sheet of
Citation and the Consolidated Entities and should not be so reflected under
Generally Accepted Accounting Principles.
(n) Neither Citation nor any Consolidated Entity will purchase
or otherwise invest in or hold securities, non-operating real estate or other
non-operating assets, or otherwise make any investment in, or loan or advance
to, any Person, or enter into any joint venture or similar arrangement with any
other Person, except:
(1) Direct obligations of the United States of America;
(2) Operating assets that hereafter become nonoperating
assets; and
(3) Other investments and loans, including, without
limitation, investments in joint ventures, in an
aggregate amount not exceeding at any time 7.5% of the
Total Assets of Citation and the Consolidated Entities
determined on a consolidated basis as of such time;
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provided that investments in Subsidiaries that satisfy the requirements for, and
- --------
become, Participating Subsidiaries in accordance with the terms of this
Agreement, and with respect to which the capital stock and other ownership
interests in which that are owned, directly or indirectly, by Citation are
pledged to the Collateral Agent for the benefit of the Agent and the Banks,
shall not be counted for purposes of the limit under the foregoing clause (3),
and this Section 5.2(n) shall not prohibit (i) the creation by Citation and the
Consolidated Entities of Receivables Subsidiaries, the creation by Receivables
Subsidiaries of Special Purpose Vehicles or the incurrence by Citation and the
Consolidated Entities of Standard Securitization Undertakings, in each case
solely in connection with Qualified Receivables Transactions permitted under
clause (ii) of Section 5.2(b), (ii) loans and advances between Citation and any
Participating Subsidiary or between any Participating Subsidiary and any other
Participating Subsidiary or (iii) loans or advances by Citation and the
Consolidated Entities to Receivables Subsidiaries evidenced by Purchase Money
Notes in connection with Qualified Receivables Transactions permitted under
clause (ii) of Section 5.2(b).
(o) Neither Citation nor any Consolidated Entity will redeem, purchase or
retire any of its capital stock or partnership or other ownership interests or
grant or issue any warrant, right or option pertaining thereto or other security
convertible into any of the foregoing, or permit any redemption or retirement of
the outstanding capital stock or partnership or other ownership interests of
Citation or of any Consolidated Entity. No Consolidated Entity will issue any
capital stock or partnership or other ownership interests or grant or issue any
warrant, right or option pertaining thereto or other security convertible into
any of the foregoing. Notwithstanding anything in this Agreement to the
contrary, this Section 5.2(o) shall not prohibit the transactions of Citation
and the Consolidated Entities in the ordinary course of business under, and in
accordance with the terms of, the following: (i) Citation Corporation 1994
Incentive Award Plan; (ii) Citation Corporation Employee Stock Purchase Plan;
(iii) Citation Corporation Non-Qualified Stock Option Plan For Non-Employee
Directors; (iv) Citation Corporation Stock Plan for Non-Employee Directors; (v)
401(k) plans for Citation and numerous of the Consolidated Entities (in all of
which participants may invest elective deferral accounts and employer matching
contribution accounts in Citation stock); and (vi) other plans established from
time to time by Citation and the Consolidated Entities that are reasonably
determined by the Administrative Agent to be of a similar nature to those
described in the foregoing clauses (i)-(v), provided that, prior to the
establishment of any such plan, Citation furnishes to the Administrative Agent
such information about such plan and copies of such documents relating thereto
as the Administrative Agent may reasonably request for the purpose of making the
determination required under this clause (vi).
(p) Neither Citation nor any Consolidated Entity will (i) directly or
indirectly, make, or permit to be made any optional payment, or any optional or
mandatory prepayment, redemption or repurchase of any of its Indebtedness,
excluding the Obligations, but including, without limitation, all Subordinated
Indebtedness, and including, without limitation, the Subordinated Notes and any
repurchase thereof upon the occurrence of any "Change of Control" or "Change of
Control Triggering Event" (as such terms are defined in the final Subordinated
Notes Offering Memorandum and the Subordinated Notes Indenture), or (ii) amend
or modify, or consent or agree to any amendment or modification of, any
instrument or agreement under which any of its Subordinated Indebtedness is
issued or created or otherwise related thereto, including, without limitation,
the Subordinated Notes Documents, or (iii) enter into any agreement or
arrangement providing for the defeasance of any of its Subordinated
Indebtedness, or (iv) designate any Indebtedness (other than the Obligations) as
"Designated Senior Debt" under the Subordinated Notes Documents; provided,
however, that amendments, modifications, refinancings and other alterations
thereof shall be permitted if no more restrictive covenants or terms are imposed
thereby, including without limitation any shorter maturities, increased rates or
fees or more restrictive covenants or defaults, and the subordination provisions
of such Indebtedness are not rendered less favorable to the Banks and Agents
thereby, as determined by the Required Banks in their sole discretion.
(q) Neither Citation nor any Consolidated Entity will enter into any sale-
leaseback transaction.
(r) Neither Citation nor any Consolidated Entity will acquire any stock in,
or acquire all or substantially all of the assets of, any Person, whether by
purchase, merger, consolidation or other means, (1) if any Default or Event of
Default has occurred and is continuing or would exist after giving effect to
such transaction or be caused thereby, (2) in the case of any such stock
acquisition, if such Consolidated Entity is a Foreign Subsidiary and the
acquired person would be a Foreign Subsidiary or (3) in the case of any
transaction or
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series of related transactions for which the aggregate Total Consideration would
exceed $25,000,000, without furnishing to the Administrative Agent (and the
Administrative Agent will furnish copies thereof to the Banks), at least 10 days
prior thereto, the following, in form and substance satisfactory to the
Administrative Agent: (i) historical financial information on the entity or
assets to be acquired and (ii) pro forma financial statements after giving
effect to the acquisition, and showing that no Event of Default or Default would
exist after giving effect to such acquisition or be caused thereby; provided
--------
that this Section 5.2(r) shall not prohibit the creation by Citation and the
Consolidated Entities of Receivables Subsidiaries or the creation by Receivables
Subsidiaries of Special Purpose Vehicles, in each case solely in connection with
Qualified Receivables Transactions permitted under clause (ii) of Section
5.2(b). Notwithstanding anything in this Section 5.2(r) to the contrary,
without the prior written consent of the Required Banks, neither Citation nor
any Consolidated Entity will acquire any stock in, or acquire all or
substantially all of the assets of, any Person, whether by purchase, merger,
consolidation or other means, in any transaction or series of related
transactions for which the aggregate Total Consideration would exceed
$100,000,000.
(s) Neither Citation nor any Consolidated Entity will furnish to either
Agent or any Bank any certificate or other document that will contain any untrue
statement of material fact or that will omit to state a material fact necessary
to make it not misleading in light of the circumstances under which it was
furnished.
(t) Neither Citation nor any Consolidated Entity will directly or
indirectly apply any part of the proceeds of the Advances to the purchasing or
carrying of any "margin stock" within the meaning of Regulation U or any
regulations, interpretations or rulings thereunder.
(u) Neither Citation nor any Consolidated Entity will enter into any
transaction or series of transactions where any Affiliate, officer, director or
shareholder of Citation or a Consolidated Entity, or any family member or
Affiliate of the foregoing, is a counter-party to such transaction except for
such transactions as are entered into on terms that would otherwise be available
with unaffiliated Persons on an "arms-length" basis.
(v) Neither Citation nor any Consolidated Entity will enter into any
agreement whereby title to any of Citation's or any Consolidated Entity's
inventory passes to any transferee prior to delivery by Citation or such
Consolidated Entity
(w) Citation and the Consolidated Entities will not incur during any Fiscal
Year on an aggregate basis Capital Expenditures (exclusive of acquisitions
permitted under Section 5.2(r)) exceeding 200% of the annual depreciation and
amortization expense of Citation and the Consolidated Entities for such fiscal
year; provided that for any Consolidated Entity that was acquired by Citation or
--------
another Consolidated Entity during such fiscal year, for purposes of this
covenant the acquired Consolidated Entity's depreciation expense for such fiscal
year shall be deemed to have been equal to its depreciation expense for its last
complete fiscal year prior to such acquisition.
(x) Neither Citation nor any Consolidated Entity will enter into any
private placement of any of its debt or equity with any Persons other than all
the Banks unless the covenants contained in the agreements for any such private
placement are less restrictive on Citation and the Consolidated Entities than
those contained in this Agreement.
(y) Neither Citation nor any Consolidated Entity will enter into any
agreement with any Person other than the Banks pursuant hereto which prohibits
or limits the ability of Citation or any Consolidated Entity to create, incur,
assume or suffer to exist any Lien upon any of its assets, rights, revenues or
property, real, personal or mixed, tangible or intangible, whether now owned or
hereafter acquired, in favor of the Collateral Agent for the benefit of the
Banks.
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5.3 Financial Covenants. Citation will maintain at all times:
-------------------
(a) A ratio of Total Debt as of the end of any fiscal
quarter to Adjusted EBITDA for the period of four consecutive fiscal quarters
ending with such quarter end of not more than 3.5 to 1.00; provided that as of
any fiscal quarter end as of which Citation shall have Indebtedness of at least
$100,000,000 in aggregate outstanding principal amount under the Subordinated
Notes, such ratio may be maintained at not more than 4.00 to 1.00.
(b) Fixed Charge Coverage of not less than 2.0 to 1.0.
(c) Stockholders' Equity of not less than the sum of (i)
$157,000,000, plus (ii) 50% of Consolidated Net Income after taxes for the
period commencing July 1, 1998 through the end of the then most recently
completed fiscal quarter of Citation (but without reduction for any net loss
incurred for any fiscal quarter during such period), plus (iii) 100% of the net
proceeds received after June 30, 1998 by Citation and the Consolidated Entities
from the sale of any capital stock or other equity securities of or other equity
interests in Citation or any of the Consolidated Entities, including, without
limitation, securities exchangeable or convertible into such capital stock or
other equity securities or equity interests, and including, without limitation,
warrants, rights and other options to purchase or otherwise acquire such capital
stock or other equity securities or equity interests.
5.4 Interpretation and Consolidation. Except as otherwise expressly
--------------------------------
provided in this Article V, each Borrower shall also cause and require each of
the Consolidated Entities to observe and perform the covenants and agreements of
this Article V that are to be observed and performed by such Borrower,
regardless of whether any such covenant expressly refers to the Consolidated
Entities. All financial covenants set forth in Section 5.3 shall be computed
only on a Consolidated basis for Citation and the Consolidated Entities. In
addition, all calculations required to be made in connection with any numerical
or dollar limitations set forth in this Article V shall be made only on a
combined or Consolidated basis for Citation and the Consolidated Entities, in
accordance with Generally Accepted Accounting Principles, but after elimination
of intercompany items.
ARTICLE VI.
DEFAULT
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6.1 Events of Default. The occurrence of any one or more of the following
-----------------
events shall constitute an Event of Default hereunder:
(a) Any Borrower shall fail to pay when due any installment of
principal under the Loans, any reimbursement obligation in respect of drawings
on the Letters of Credit, or any interest or fee payable under this Agreement,
any Security Document or any other Loan Document.
(b) (1) Any Borrower shall fail to observe or perform any of its
covenants contained in Sections 5.1(a), 5.2(a) or 5.3; or
(2) Any Borrower or any Consolidated Entity shall fail to observe
or perform any other obligation to be observed or performed
by it hereunder, or under the Notes or under any of the other
Loan Documents, and such failure shall continue for five (5)
days after the earlier of: (i) notice (either written or
verbal) of such failure from the Administrative Agent to
Citation; or (ii) the Banks are notified or should have been
notified of such failure pursuant to the provisions of
Section 5.1(m).
(c) Any Borrower or any Consolidated Entity shall (1) fail to pay when
due any Indebtedness (other than Indebtedness under this Agreement) to either
Agent or any Bank; (2) fail to pay any Indebtedness due any third Persons and
such failure shall continue beyond any applicable grace period; or (3) default
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under any agreement binding such Borrower or such Consolidated Entity with
respect to any Indebtedness owing to either Agent or any Bank (other than
Indebtedness hereunder) or any third Persons if the effect of such default is to
permit the holder of such Indebtedness to accelerate the maturity date thereof
(or take any other action which would have the practical effect of the foregoing
action, including, without limitation, any "put" of such Indebtedness).
(d) Any financial statement, representation, warranty or certificate
made or furnished by any Borrower or any Consolidated Entity to either Agent or
any Bank in connection with this Agreement, or as inducement to either Agent or
any Bank to enter into this Agreement, or in any separate statement or document
to be delivered hereunder to either Agent or the Banks: (1) shall be materially
false, incorrect, or incomplete when made; or (2) shall become materially false
or incorrect and remain so for ten (10) days after the earlier of: (1) notice
(either written or verbal) from the Administrative Agent to Citation; or (2) the
Banks are notified or should have been notified pursuant to the provisions of
Section 5.1(m).
(e) Any Borrower or any Consolidated Entity shall admit its inability
to pay its debts as they mature, or shall make an assignment for the benefit of
itself or any of its creditors.
(f) Any proceeding in bankruptcy, or for reorganization, of any
Borrower or any Consolidated Entity or for the readjustment of any of their
respective debts, under the Bankruptcy Code, or any part thereof, or under any
other Law, whether state or federal, for the relief of debtors, now or hereafter
existing, shall be commenced by any Borrower or any Consolidated Entity or shall
be commenced against any Borrower or any Consolidated Entity and shall not be
discharged within thirty (30) days of its commencement.
(g) A receiver, trustee or conservator shall be appointed for any
Borrower or any Consolidated Entity or for any substantial part of their
respective assets, or any proceeding shall be instituted for the dissolution or
the full or partial liquidation of any Borrower or any Consolidated Entity and
such receiver, trustee or conservator shall not be discharged within thirty (30)
days of his appointment, or such proceeding shall not be discharged within
thirty (30) days of its commencement, or any Borrower or any Consolidated Entity
shall discontinue business or materially change the nature of its business.
(h) Any Borrower or any Consolidated Entity shall suffer final
judgments for payment of money aggregating in excess of $500,000 and shall not
discharge the same within a period of thirty (30) days unless, pending further
proceedings, execution has been effectively stayed.
(i) A creditor of any Borrower or any Consolidated Entity shall obtain
possession of any of the Collateral by any means, including, without limitation,
levy, distraint, replevin or self-help.
(j) The validity or enforceability of this Agreement, any Note, or any
of the other Loan Documents shall be contested by any Borrower or any
Consolidated Entity or any of them shall deny that it has any or further
liability or obligation hereunder or thereunder.
(k) Any Pension Plan shall fail to meet the minimum funding standards
of Section 302 of ERISA as now in effect or hereafter amended; any Pension Plan
shall be involuntarily terminated or shall be terminated in a "distress
termination," as described in ERISA Section 4041(c); or any Borrower or any
ERISA Affiliate shall become a participating employer with respect to any
"multiemployer plan" (as defined in ERISA Section 3(37)) without the prior
written consent of the Required Banks.
(l) A criminal investigation is commenced with respect to any
Borrower or any Consolidated Entity.
(m) Any property of any Borrower or any Consolidated Entity is seized
by a governmental authority, or a forfeiture proceeding is commenced against any
Borrower or any Consolidated Entity or any property of any Borrower, or any
Consolidated Entity.
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(n) Any default or event of default shall occur under any of the
Security Documents or other Loan Documents.
(o) Any Change in Control shall occur.
(p) Any "Event of Default" (as defined in the Subordinated Notes
Documents) shall have occurred and be continuing, or any provision of the
subordination terms under the Subordinated Notes Documents shall at any time for
any reason cease to be valid and binding and enforceable against Citation, any
other Borrower, any holder of the Subordinated Notes or the Trust under the
Indenture, as applicable, or the validity, binding effect or enforceability
thereof shall be contested by any such Person or any such Person shall deny that
it has any or further liability or obligation thereunder, or any provision of
the subordination terms under any Subordinated Notes Document shall be
terminated, invalidated or set aside, or be declared ineffective or inoperative
or in any way cease to give or provide to the Banks and the Agents the benefits
purported to be created thereby.
6.2 Remedies.
--------
(a) Upon the occurrence and during the continuance of any Event of
Default, the Administrative Agent may and, upon being directed to do so by the
Required Banks, shall by notice to Citation (i) terminate the Commitments or
(ii) declare the outstanding principal of, and accrued interest on, the Notes,
all unpaid reimbursement obligations in respect of drawings under Letters of
Credit and all other amounts owing under this Agreement to be immediately due
and payable, or (iii) demand immediate delivery of cash collateral, and the
Borrowers agree to deliver such cash collateral upon demand, in an amount equal
to the maximum amount that may be available to be drawn at any time prior to the
stated expiry of all outstanding Letters of Credit, or any one or more of the
foregoing, whereupon the Commitments shall terminate forthwith and all such
amounts, including such cash collateral, shall become immediately due and
payable, provided that in the case of any event or condition described in
--------
Section 6.1(e), (f) or (g) with respect to any Borrower, the Commitments shall
automatically terminate forthwith and all such amounts, including such cash
collateral, shall automatically become immediately due and payable without
notice; in all cases without demand, presentment, protest, diligence, notice of
dishonor or other formality, all of which are hereby expressly waived. Such
cash collateral delivered in respect of outstanding Letters of Credit shall be
deposited in a special cash collateral account to be held by the Administrative
Agent as collateral security for the payment and performance of the Borrowers'
obligations under this Agreement and the other Loan Documents to the Banks and
the Agents.
(b) Subject to the terms and conditions of this Agreement and the
other Loan Documents, the Administrative Agent may and, upon being directed to
do so by the Required Banks, shall, and the Collateral Agent, upon being
directed to do so by the Administrative Agent, shall, in addition to the
remedies provided in Section 6.2(a), exercise and enforce any and all other
rights and remedies available to them, whether arising under this Agreement, the
Notes or any Security Document or under applicable law, in any manner deemed
appropriate by such Agent, including suit in equity, action at law, or other
appropriate proceedings, whether for the specific performance (to the extent
permitted by law) of any covenant or agreement contained in this Agreement or in
the Notes or any Security Document or in aid of the exercise of any power
granted in this Agreement, the Notes or any Security Document. Without limiting
the generality of the foregoing, subject to the terms and conditions of this
Agreement and the other Loan Documents, the Agents may immediately, without
demand of performance and without other notice (except as specifically required
by this Agreement or the other Loan Documents, or as required by Law and which
cannot be waived) or demand whatsoever to Borrowers, all of which are hereby
expressly waived, and without advertisement, sell at public or private sale or
otherwise realize upon, the whole or, from time to time, any part of the
Collateral, or any interest which any Borrower may have therein. The Agents
shall apply the proceeds of sale or other disposition of the Collateral toward
the satisfaction of the Obligations in accordance with Section 6.3. Notice of
any sale or other disposition shall be given to Citation on behalf of the
Borrowers at least five (5) days before the time of any intended public sale or
of the time after which any intended private sale or other disposition of the
Collateral is to be made, which each Borrower hereby agrees shall be reasonable
notice of such sale or other disposition. Borrowers shall be jointly and
severally liable for any deficiency. At any such sale or other disposition,
either Agent or any Bank may, to the extent permissible under applicable Law,
purchase the whole or any part of the Collateral, free from any right of
redemption on the part of any Borrower, which right is hereby waived and
45
<PAGE>
released. Without limiting the generality of any of the rights and remedies
conferred upon the Agents and the Banks under this paragraph, to the extent
applicable to the Collateral, the Agents may, to the full extent permitted by
applicable Law:
(1) Enter upon any Borrower's premises, exclude therefrom
any Borrower or any Affiliate thereof, and take
immediate possession of the Collateral, either
personally or by means of a receiver appointed by a
court of competent jurisdiction, using all necessary
force to do so;
(2) At the Administrative Agent's option, use, operate,
manage and control the Collateral in any lawful manner;
(3) Collect and receive all rents, income, revenue,
earnings, issues and profits therefrom; and
(4) Maintain, repair, renovate, alter or remove the
Collateral as the Administrative Agent may determine in
its discretion.
(c) Upon the occurrence and during the continuance of any Event of
Default, each Bank may at any time and from time to time, without notice to any
Borrower (any requirement for such notice being expressly waived by each
Borrower) set off and apply against any and all of the obligations of the
Borrowers now or hereafter existing under this Agreement, whether owing to such
Bank or any other Bank or either Agent, any and all deposits (general or
special, time or demand, provisional or final) at any time held and other
indebtedness at any time owing by such Bank to or for the credit or the account
of any Borrower and any property of any Borrower from time to time in possession
of such Bank, irrespective of whether or not such Bank shall have made any
demand hereunder and although such obligations may be contingent and unmatured.
The rights of such Bank under this Section 6.2(c) are in addition to other
rights and remedies (including, without limitation, other rights of setoff)
which such Bank may have.
6.3 Distribution of Proceeds of Collateral. All proceeds received by
--------------------------------------
either Agent pursuant to the Security Documents for application to the
Obligations or any payments on any of the liabilities secured by the Security
Documents received by either Agent or any Bank upon and during the continuance
of any Event of Default, including, without limitation, pursuant to the exercise
of rights of setoff, shall be allocated and distributed as follows:
(a) First, to the payment of all costs, expenses and fees, including
without limitation all attorneys' fees, of each Agent in connection with the
enforcement of the Security Documents and otherwise administering this
Agreement;
(b) Second, to the payment of all costs, expenses and fees, including
without limitation, commitment fees and attorneys' fees, owing to the Banks
pursuant to the Obligations on a pro rata basis in accordance with the
Obligations consisting of fees, costs and expenses owing to the Banks under the
Obligations, for application to payment of such liabilities;
(c) Third, to the Banks on a pro rata basis in accordance with the
Obligations consisting of interest under the Loan Documents and termination
payments under Hedging Contracts owing to the Banks under the Obligations, for
application to payment of such liabilities;
(d) Fourth, to the Banks and the Administrative Agent on a pro rata
basis in accordance with the Obligations consisting of principal and
reimbursement obligations pursuant to Letters of Credit (including without
limitation any cash collateral for any outstanding Letters of Credit) owing to
the Banks and the Administrative Agent under the Obligations, for application to
payment of such liabilities;
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(e) Fifth, to the payment of any and all other amounts owing to the
Banks and the Agents on a pro rata basis in accordance with the total amount of
such Indebtedness owing to each of the Banks and the Agents, for application to
payment of such liabilities; and
(f) Sixth, to the Borrowers or such other person as may be legally
entitled thereto.
6.4 Letter of Credit Liabilities. For the purposes of payments and
----------------------------
distributions under Section 6.3, the full amount of Bank Obligations on account
of any Letter of Credit then outstanding but not drawn upon shall be deemed to
be then due and owing. Amounts distributable to the Banks on account of such
Bank Obligations under such Letter of Credit shall be deposited in a separate
interest bearing collateral account in the name of and under the control of the
Administrative Agent and held by the Administrative Agent first as security for
such Letter of Credit Obligations and then as security for all other Bank
Obligations and the amount so deposited shall be applied to the Letter of Credit
Obligations at such times and to the extent that such Letter of Credit
Obligations become absolute liabilities and if and to the extent that the Letter
of Credit Obligations fail to become absolute Bank Obligations because of the
expiration or termination of the underlying letters of credit without being
drawn upon then such amounts shall be applied to the remaining Bank Obligations
in the order provided in Section 6.3. Each Borrower hereby grants to the
Administrative Agent, for the benefit of the Banks, a lien and security interest
in all such funds deposited in such separate interest bearing collateral
account, as security for all the Bank Obligations as set forth above.
ARTICLE VII.
THE AGENTS AND THE BANKS
------------------------
7.1 Appointment and Authorization. Each Bank hereby irrevocably
-----------------------------
appoints and authorizes each Agent to take such action as agent on its behalf
and to exercise such powers under this Agreement, the Notes and the other Loan
Documents as are delegated to such Agent by the terms hereof or thereof,
together with all such powers as are reasonably incidental thereto, subject to
the further terms and conditions of this Agreement. The provisions of this
Article VII are solely for the benefit of the Agents and the Banks, and no
Borrower shall have any rights as a third party beneficiary of any of the
provisions hereof. In performing its functions and duties under this Agreement,
each Agent shall act solely as agent of the Banks and does not assume and shall
not be deemed to have assumed any obligation towards or relationship of agency
or trust with or for any Borrower.
7.2 Agents and Affiliates. Each of First Chicago and SouthTrust in
---------------------
their respective capacity as a Bank hereunder shall have the same rights and
powers hereunder as any other Bank and may exercise or refrain from exercising
the same as though it were not an Agent. First Chicago and SouthTrust and their
respective affiliates may (without having to account therefor to any Bank)
accept deposits from, lend money to, and generally engage in any kind of
banking, trust, financial advisory or other business with any Borrower or any of
their respective Subsidiaries as if it were not acting as an Agent hereunder,
and may accept fees and other consideration therefor without having to account
for the same to the Banks.
7.3 Scope of Agents' Duties. Neither Agent shall have any duties or
-----------------------
responsibilities except those expressly set forth herein and in the other Loan
Documents, and neither Agent shall, by reason of this Agreement, have a
fiduciary relationship with any Bank, and no implied functions, covenants,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or shall otherwise be imposed upon or exist against either Agent. As
to any matters not expressly provided for by this Agreement (including, without
limitation, collection and enforcement action under the Notes and the Security
Documents), neither Agent shall be required to exercise any discretion or take
any action, but (a) the Administrative Agent shall either take such action or
omit to take any action pursuant to the reasonable written instructions of the
Required Banks and may request instructions from the Required Banks and (b) the
Collateral Agent shall either take such action or omit to take any action
pursuant to the reasonable instructions of the Administrative Agent and may
request instructions from the Administrative Agent. Each Agent shall in all
cases be fully protected in acting, or in refraining from acting, pursuant to
the written instructions of the Required Banks (or all of the Banks, as the case
may be, in accordance with the requirements of this Agreement), which
instructions and any action or omission pursuant thereto shall be binding upon
all of the Banks; provided, however, that neither Agent shall be required to act
--------
or omit to act if, in
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the sole judgment of such Agent, such action or omission may expose such Agent
to personal liability or is contrary to this Agreement, the Notes or the
Security Documents or applicable law.
7.4 Reliance by Agents. Each Agent shall be entitled to rely upon
------------------
any certificate, notice, document or other communication (including any cable,
telegram, telex, facsimile transmission or oral communication) believed by it to
be genuine and correct and to have been sent or given by or on behalf of a
proper person. The Administrative Agent may treat the payee of any Note as the
holder thereof unless and until the Administrative Agent receives written notice
of the assignment thereof pursuant to the terms of this Agreement signed by such
payee and the Administrative Agent receives the written agreement of the
assignee that such assignee is bound hereby to the same extent as if it had been
an original party hereto. Each Agent may employ agents (including without
limitation collateral agents) and may consult with legal counsel (who may be
counsel for the Borrowers), independent public accountants and other experts
selected by it and shall not be liable to the Banks, except as to money or
property received by it or its authorized agents, for the negligence or
misconduct of any such agent selected by it with reasonable care or for any
action taken or omitted to be taken by it in good faith in accordance with the
advice of such counsel, accountants or experts.
7.5 Default. Neither Agent shall be deemed to have knowledge of the
-------
occurrence of any Default or Event of Default, unless such Agent has received
written notice from a Bank or Citation specifying such Default or Event of
Default and stating that such notice is a "Notice of Default". In the event that
either Agent receives such a notice, such Agent shall give written notice
thereto to the other Agent and the Banks.
7.6 Liability of Agents. Neither the Administrative Agent nor any of
-------------------
its directors, officers, agents or employees shall be liable to the Banks for
any action taken or not taken by it or them or the Collateral Agent in
connection herewith with the consent or at the request of the Required Banks or
in the absence of its or their own gross negligence or willful misconduct.
Neither the Collateral Agent nor any of its directors, officers, agents or
employees shall be liable to the Banks for any action taken or not taken by it
or them in connection herewith with the consent or at the request of the
Administrative Agent or in the absence of its or their own gross negligence or
willful misconduct. Neither of the Agents nor any of their respective directors,
officers, agents or employees shall be responsible for or have any duty to
ascertain, inquire into or verify (a) any recital, statement, warranty or
representation contained in this Agreement, any Note or any other Loan Document,
or in any certificate, report, financial statement or other document furnished
in connection with this Agreement, (b) the performance or observance of any of
the covenants or agreements of any Borrower, (c) the satisfaction of any
condition specified in Article II hereof, or (d) the validity, effectiveness,
legal enforceability, value or genuineness of this Agreement, the Notes or any
other Loan Documents or any collateral subject thereto or any other instrument
or document furnished in connection herewith.
7.7 Nonreliance on Agents and Other Banks. Each Bank acknowledges and
-------------------------------------
agrees that it has, independently and without reliance on either Agent or any
other Bank, and based on such documents and information as it has deemed
appropriate, made its own credit analysis of the Borrowers and decision to enter
into this Agreement and that it will, independently and without reliance upon
either Agent or any other Bank, and based on such documents and information as
it shall deem appropriate at the time, continue to make its own analysis and
decision in taking or not taking action under this Agreement. Neither Agent
shall be required to keep itself informed as to the performance or observance by
the Borrowers of this Agreement, the Notes or the other Loan Documents or any
other documents referred to or provided for herein or to inspect the properties
or books of any Borrower and, except for notices, reports and other documents
and information expressly required to be furnished to the Banks by such Agent
hereunder, neither Agent shall have any duty or responsibility to provide any
Bank with any information concerning the affairs, financial condition or
business of any Borrower or any of their respective Subsidiaries which may come
into the possession of such Agent or any of its affiliates.
7.8 Indemnification. The Banks agree to indemnify each Agent (to the
---------------
extent not reimbursed by the Borrowers, but without limiting any obligation of
the Borrowers to make such reimbursement), ratably according to the respective
principal amounts of the Advances then outstanding made by each of them (or if
no Advances are at the time outstanding, ratably according to the respective
amounts of their Commitments), from and against any and all claims, damages,
losses, liabilities, costs or expenses of any kind or nature whatsoever
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(including, without limitation, fees and disbursements of counsel) which may be
imposed on, incurred by, or asserted against such Agent in any way relating to
or arising out of this Agreement or the transactions contemplated hereby or any
action taken or omitted by such Agent under this Agreement or any of the other
Loan Documents, provided, however, that no Bank shall be liable for any portion
-------- -------
of such claims, damages, losses, liabilities, costs or expenses resulting from
such Agent's gross negligence or willful misconduct. Without limitation of the
foregoing, each Bank agrees to reimburse each Agent promptly upon demand for its
ratable share of any out-of-pocket expenses (including without limitation fees
and expenses of counsel) incurred by such Agent in connection with the
preparation, execution, delivery, administration, modification, amendment or
enforcement (whether through negotiations, legal proceedings or otherwise) of,
or legal advice in respect of rights or responsibilities under, this Agreement
and the other Loan Documents, to the extent that such Agent is not reimbursed
for such expenses by the Borrowers, but without limiting the obligation of any
Borrower to make such reimbursement. Each Bank agrees to reimburse each Agent
promptly upon demand for its ratable share of any amounts owing to such Agent by
the Banks pursuant to this Section. If the indemnity furnished to any Agent
under this Section shall, in the judgment of such Agent, be insufficient or
become impaired, such Agent may call for additional indemnity from the Banks and
cease, or not commence, to take any action until such additional indemnity is
furnished.
7.9 Successor Agents. Either Agent may resign as such at any time
----------------
upon 30 days' prior written notice to Citation and the Banks. In the event of
any such resignation, the Required Banks shall, by an instrument in writing
delivered to Citation and the Administrative Agent, appoint a successor, which
shall be a commercial bank organized under the laws of the United States or any
State thereof and having a combined capital and surplus of at least
$500,000,000. If a successor is not so appointed or does not accept such
appointment before an Agent's resignation becomes effective, the retiring Agent
may appoint a temporary successor to act until such appointment by the Required
Banks is made and accepted or if no such temporary successor is appointed as
provided above by the retiring Agent, the Required Banks shall thereafter
perform all the duties of such Agent hereunder until such appointment by the
Required Banks is made and accepted. Any successor to either Agent shall execute
and deliver to Citation and the Banks an instrument accepting such appointment
and thereupon such successor Agent, without further act, deed, conveyance or
transfer shall become vested with all of the properties, rights, interests,
powers, authorities and obligations of its predecessor hereunder with like
effect as if originally named as an Agent hereunder. Upon request of such
successor Agent, the Borrowers and the retiring Agent shall execute and deliver
such instruments of conveyance, assignment and further assurance and do such
other things as may reasonably be required for more fully and certainly vesting
and confirming in such successor Agent all such properties, rights, interests,
powers, authorities and obligations. The provisions of this Article VII shall
thereafter remain effective for such retiring Agent with respect to any actions
taken or omitted to be taken by such Agent while acting as an Agent hereunder.
7.10 Sharing of Payments. The Banks agree among themselves that, in
-------------------
the event that any Bank shall obtain payment in respect of any Advance or any
other Obligation through the exercise of a right of set-off, banker's lien,
counterclaim or otherwise in excess of its ratable share of payments received by
all of the Banks on account of the Advances and other Obligations (or if no
Advances are outstanding, ratably according to the respective amounts of the
Commitments), such Bank shall promptly purchase from the other Banks
participation in such Advances and other Obligations in such amounts, and make
such other adjustments from time to time, as shall be equitable to the end that
all of the Banks share such payment in accordance with such ratable shares. The
Banks further agree among themselves that if payment to a Bank obtained by such
Bank through the exercise of a right of set-off, banker's lien, counterclaim or
otherwise as aforesaid shall be rescinded or must otherwise be restored, each
Bank which shall have shared the benefit of such payment shall, by repurchase of
participation theretofore sold, return its share of that benefit to each Bank
whose payment shall have been rescinded or otherwise restored. Each of the
Borrowers agrees that any Bank so purchasing such a participation may, to the
fullest extent permitted by law, exercise all rights of payment, including set-
off, banker's lien or counterclaim, with respect to such participation as fully
as if such Bank were a holder of such Advance or other obligation in the amount
of such participation. The Banks further agree among themselves that, in the
event that amounts received by the Banks and the Agents hereunder are
insufficient to pay all such obligations or insufficient to pay all such
obligations when due, the fees and other amounts owing to the Agents in such
capacity shall be paid therefrom before payment of obligations owing to the
Banks under this Agreement. Except as otherwise expressly provided in this
Agreement, if any Bank or either Agent (the "Payer") shall fail to remit to any
Bank or either Agent (the "Payee") an amount payable by the Payer
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to the Payee pursuant to this Agreement on the date when such amount is due,
such payments shall be made together with interest thereon for each date from
the date such amount is due until the date such amount is paid to the Payee at a
rate per annum equal to the rate at which borrowings are available to the Payee
in its overnight federal funds market. It is further understood and agreed
among the Banks and the Agents that if First Chicago or SouthTrust shall engage
in any other transactions permitted under this Agreement with any of the
Borrowers and shall have the benefit of any collateral or security therefor
which does not expressly secure the obligations arising under this Agreement
except by virtue of a so-called dragnet clause or comparable provision, First
Chicago or SouthTrust, as the case may be, shall be entitled to apply any
proceeds of such collateral or security first in respect of the obligations
arising in connection with such other transaction before application to the
obligations arising under this Agreement.
7.11 Withholding Tax Exemption. At least five Business Days prior to
-------------------------
the first date on which interest or fees are payable hereunder for the account
of any Bank, each Bank that is not incorporated under the laws of the United
States of America, or a state thereof, agrees that it will deliver to each of
Citation and the Administrative Agent two duly completed copies of United States
Internal Revenue Service Form 1001 or 4224, certifying in either case that such
Bank is entitled to receive payments under this Agreement and the Notes without
deduction or withholding of any United States federal income taxes. Each Bank
which so delivers a Form 1001 or 4224 further undertakes to deliver to each of
Citation and the Administrative Agent two additional copies of such form (or a
successor form) on or before the date that such form expires (currently, three
successive calendar years for Form 1001 and one calendar year for Form 4224) or
becomes obsolete or after the occurrence of any event requiring a change in the
most recent forms so delivered by it, and such amendments thereto or extensions
or renewals thereof as may be reasonably requested by Citation or the
Administrative Agent, in each case certifying that such Bank is entitled to
receive payments under this Agreement and the Notes without deduction or
withholding of any United States federal income taxes, unless an event
(including without limitation any change in treaty, law or regulation) has
occurred prior to the date on which any such delivery would otherwise be
required which renders all such forms inapplicable or which would prevent such
Bank from duly completing and delivering any such form with respect to it and
such Bank advises Citation and the Administrative Agent that it is not capable
of receiving payments without any deduction or withholding of United States
federal income tax.
7.12 Collateral Agent Matters. (a) Subject to the other terms and
------------------------
conditions of this Agreement and the other Loan Documents, the Collateral Agent
shall be the secured party under the Security Documents, shall receive, hold,
administer and enforce the Collateral and the Security Documents, and shall
foreclose upon, collect and dispose of the Collateral, all for the benefit of
the Banks and the Agents, and otherwise perform its duties and obligations as
Collateral Agent hereunder and under the Security Documents in accordance with
the respective terms hereof and thereof.
(b) Notwithstanding anything to the contrary in this Agreement or
any of the other Loan Documents, the Collateral Agent shall act or refrain from
acting as directed by the Administrative Agent (acting at the direction of the
Required Banks or all the Banks, as the case may be, if required under this
Agreement or the other Loan Documents); and the Collateral Agent shall take no
enforcement or foreclosure action under any Loan Document except at the written
direction of the Administrative Agent (acting at the direction of the Required
Banks or all the Banks, as required).
(c) If the Collateral Agent enters into possession of part or all
of the Collateral, the Collateral Agent shall use reasonable care to preserve
the part of the Collateral in its possession.
(d) If at any time the Collateral Agent receives from any
Borrower any request for any notice, consent, waiver, approval, decision,
direction or other action under, or in respect of any right granted to the
Collateral Agent in, any Loan Document, the Collateral Agent shall promptly
notify the Administrative Agent of such request. The Collateral Agent shall
thereafter promptly give such notice, consent, waiver, approval or direction,
make such decision or take such action, in each case, as the Administrative
Agent (acting at the direction of the Required Banks or all the Banks, as the
case may be, if required under this Agreement or the other Loan Documents) shall
instruct. Without limiting the generality of the foregoing, upon receipt by the
Collateral Agent of instructions from the Administrative Agent (acting at the
direction of the Required Banks or all the Banks, as required), the Collateral
Agent shall (i) take such action with respect to the Collateral as shall be
specified in such
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instruction; (ii) approve as satisfactory to it all matters as are required by
the terms of this Agreement or any other Loan Document to be satisfactory to, or
approved by, it; (iii) execute and file any financing statements and any
amendment or continuation statement with respect to any such financing
statements and any recording instrument or other similar instrument or document
relating to any Liens created by any Loan Document as may be specified in such
instruction; and (iv) make such requests, accept such instruments, agreements,
documents, certificates, and writings and give and demand such notices under
this Agreement and the other Loan Documents as may be specified in such
instructions.
(e) The Collateral Agent shall make available for inspection and
copying by the Administrative Agent each certificate or other paper furnished to
the Collateral Agent by any Borrower under or in respect of this Agreement, any
other Loan Document or any of the Collateral.
(f) Notwithstanding anything in this Agreement to the contrary, the
Collateral Agent shall not be obligated to take any action if the Collateral
Agent believes that such action is or may be contrary to any applicable law or
might cause the Collateral Agent to incur any loss or liability for which it has
not been indemnified to its satisfaction.
(g) Notwithstanding anything in this Agreement to the contrary, (i)
the Collateral Agent is authorized on behalf of the Administrative Agent and the
Banks, without the necessity of any notice to or for the consent of the
Administrative Agent or the Banks, from time to time to take any action with
respect to any Collateral or the Loan Documents which may be necessary to
monitor, perfect and maintain perfected the security interest in and Liens upon
the Collateral, provided that the Collateral Agent shall notify the
Administrative Agent promptly after taking any such action, and (ii) the
Collateral Agent shall prepare and file on a timely basis all continuation
statements necessary from time to time in order to properly continue the
effectiveness of all financing statements relating to the Collateral.
(h) [intentionally omitted]
(i) [intentionally omitted]
(j) The Administrative Agent shall endeavor to notify the Banks
reasonably promptly after giving any direction or instruction to the Collateral
Agent with respect to any material matter as contemplated under Sections 7.12(b)
and (d) (other than any such direction or instruction given by the
Administrative Agent at the direction of all the Banks); provided that the
Administrative Agent shall have no liability for any failure to provide such
notice.
ARTICLE VIII.
COLLATERAL SECURITY
-------------------
8.1 Composition of the Collateral. The property in which a security
-----------------------------
interest is granted pursuant to the provisions of Sections 8.2 and 8.3 hereof or
pursuant to the provisions of any Security Document is herein collectively
called the "Collateral." The Collateral, together with all of each Borrower's
other property of any kind held by either Agent or any Bank, shall stand as one
general, continuing collateral security for all Obligations and may be retained
by such Agent and such Bank until all Obligations have been satisfied in full
and the Commitments have been terminated.
8.2 Rights in Property Held by the Banks. As security for the prompt
------------------------------------
satisfaction of all Obligations, each Borrower hereby assigns, transfers and
conveys to each Bank for the benefit of the Agents and the Banks all of such
Borrower's right, title and interest in and to, and grants such Bank a lien on
and a security interest in, all amounts that may be owing from time to time by
such Bank to such Borrower in any capacity, including, without limitation, any
balance or share belonging to such Borrower, of any deposit or other account
with such Bank, which lien and security interest shall be independent of any
right of setoff which such Bank may have.
8.3 Rights in Property Held Either by Borrowers or by the Banks. As
-----------------------------------------------------------
further security for the prompt satisfaction of all Obligations, in addition to
any other or further security provided under any of the Security
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Documents, each Borrower hereby pledges to the Collateral Agent for the benefit
of the Agents and the Banks all of such Borrower's right, title and interest in
and to, and grants the Collateral Agent for the benefit of the Agents and the
Banks a lien upon and security interest in the Pledged Stock.
8.4 Priority of Liens. The foregoing liens shall be first and prior
-----------------
liens.
8.5 Perfection.
----------
(a) Each Borrower will:
(1) Execute and deliver such Pledge Agreements and such
stock powers relating to the Pledged Stock, in form
satisfactory to the Administrative Agent as the
Administrative Agent may from time to time specify;
(2) Pay, or reimburse either Agent for paying, all costs
for the transfer of the Pledged Stock;
(3) Deliver the Pledged Stock to the Administrative Agent
or the Collateral Agent or either Agents' designated
agent or bailee, as directed by the Administrative
Agent; and
(4) Take such other steps as the Administrative Agent may
from time to time direct, all to perfect the Collateral
Agent's security interest in such Collateral.
(b) In addition to the foregoing, and not in limitation thereof:
(1) A carbon, photographic, or other reproduction of this
Agreement shall be sufficient as a financing statement
and may be filed in any appropriate office in lieu
thereof; and,
(2) To the extent lawful, each Borrower hereby appoints
each Agent as its attorney-in-fact (without requiring
either Agent to act as such) to execute any financing
statement or financing statement assignment or
amendment in the name of such Borrower, and to perform
all other acts that the Administrative Agent deems
appropriate to perfect and continue the security
interest in, and to protect and preserve, the
Collateral. Such appointment is coupled with an
interest and is irrevocable until this Agreement is
terminated in accordance with the provisions of Section
9.20 hereof.
8.6 Collateral Release. Each of the Existing Banks that is a Bank
------------------
hereby acknowledges and consents to the release of all Collateral (as defined in
the Existing Credit Agreement) other than the Collateral (as defined in this
Agreement), and to the execution and delivery by the Agents or either of them of
all terminations and discharges and similar instruments and documents reasonably
requested by the Borrowers to give effect to such release.
8.7 [intentionally omitted]
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ARTICLE IX.
MISCELLANEOUS
-------------
9.1 Amendments, Etc. (a) No amendment, modification, termination or
waiver of any provision of this Agreement nor any consent to any departure
therefrom shall be effective unless the same shall be in writing and signed by
Citation and the Required Banks and, to the extent any rights or duties of
either Agent may be affected thereby, such Agent, provided, however, that no
-------- -------
such amendment, modification, termination, waiver or consent shall, without the
consent of the Administrative Agent and all of the Banks, (i) authorize or
permit the extension of time for, or any reduction of the amount of, any payment
of the principal of, or interest on, the Notes or any Letter of Credit
reimbursement obligation, or any fees or other amount payable hereunder, (ii)
authorize or permit any reduction of the rate of interest on the Notes or the
rate of any fee hereunder, (iii) subject to Section 9.1(d), amend, extend or
terminate the respective Commitment of any Bank set forth on the signature pages
hereof or modify the provisions of this Section regarding the taking of any
action under this Section or the provisions of Section 7.10 or the definition of
Required Banks or any provision of this Agreement requiring the consent of all
of the Banks, (iv) provide for the discharge of any Borrower or the release of
any Collateral, or (v) modify any other provision of this Agreement which by its
terms requires the consent of all of the Banks.
(b) Any such amendment, waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given.
(c) Notwithstanding anything herein to the contrary, no Bank that is
in default of any of its obligations, covenants or agreements under this
Agreement shall be entitled to vote (whether to consent or to withhold its
consent) with respect to any amendment, modification, termination or waiver of
any provision of this Agreement or any departure therefrom or any direction from
the Banks to either Agent, and, for purposes of determining the Required Banks
at any time when any Bank is in default under this Agreement, the Commitment and
Advances of such defaulting Bank shall be disregarded.
(d) Notwithstanding anything in this Agreement to the contrary, the
total amount of the Commitments may be increased from time to time to an amount
not to exceed $400,000,000 with the consent of Citation and the Required Banks,
through one or more Additional Banks (as hereinafter defined) or increases in
the Commitments of one or more existing Banks, or any combination thereof,
provided that no Bank's commitment shall be increased without its consent. In
connection with any such increase in the Commitments, Citation and the
Administrative Agent may from time to time designate additional financial
institutions (the "Additional Banks") to be parties to this Agreement and to
become Banks hereunder upon the execution and delivery to the Administrative
Agent by each such Additional Bank and Citation of an assumption agreement in
form and substance satisfactory to such Additional Bank, Citation and the
Administrative Agent (an "Assumption Agreement"). Any Additional Bank shall
become a party to this Agreement and be considered a Bank hereunder for all
purposes if (a) it shall execute and deliver to the Administrative Agent an
Assumption Agreement, (b) it shall make Revolving Credit Loans to the Borrowers
in the principal amount which bears the same ratio to the amounts of the
Revolving Credit Loans of the other Banks then outstanding as the Commitment of
such Additional Bank bears to the then Commitments of such other Banks, and (c)
a copy of such Assumption Agreement and evidence satisfactory to the
Administrative Agent of the making of such Revolving Credit Loans shall be
furnished to the Banks, together with a schedule showing the Commitment amount
of each Bank and the new percentage of the total Commitments of each Bank. In
connection with any such increase in the total Commitments, whether through
Additional Banks and/or increases in the Commitments of existing Banks, the
Borrowers, the Banks and the Agents shall execute and deliver such other
agreements, instruments and documents, including, without limitation, new
Revolving Credit Notes reflecting the Commitment amount of each Bank going
forward, and amendments to this Agreement, as may reasonably be requested to
give effect to and evidence such increase.
9.2 Notices. (a) Except as otherwise provided in Section 9.2(c)
hereof, all notices and other communications hereunder shall be in writing and
shall be delivered or sent to Citation and the other Borrowers c/o Citation at 2
Office Park Circle, Suite 204, Birmingham, Alabama 35223, Attention: T. Morris
Hackney, Chairman, Facsimile No. (205) 870-8211, Facsimile Confirmation No.
(205) 871-5731, with a copy to Ritchie & Rediker, 312 North 23rd Street,
Birmingham, Alabama 35203, Attention: Thomas A. Ritchie, Esq., Facsimile No.
(205) 324-
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7832, Facsimile Confirmation No. (205) 251-1288, and to the Agents and the Banks
at the respective addresses for notices set forth on the signatures pages
hereof, or to such other address as may be designated by Citation, either Agent
or any Bank by notice to the other parties hereto. All notices and other
communications shall be deemed to have been given at the time of actual delivery
thereof to such address, or, unless sooner delivered, (i) if sent by certified
or registered mail, postage prepaid, to such address, on the third day after the
date of mailing, (ii) if sent by telex, upon receipt of the appropriate answer
back, or (iii) if sent by facsimile transmission, upon confirmation of receipt
by telephone at the number specified for confirmation, provided, however, that
-------- -------
notices to the Administrative Agent or the Collateral Agent, as the case may be,
shall not be effective until received.
(b) Notices by the Borrowers to the Administrative Agent with respect
to terminations or reductions of the Commitments pursuant to Section 2.2,
requests for Borrowings pursuant to Section 2.4, requests for continuations or
conversions of Borrowings pursuant to Section 2.7 and notices of prepayment
pursuant to Section 3.1 shall be irrevocable and binding on the Borrowers.
(c) Any notice to be given by the Borrowers to the Administrative
Agent pursuant to Sections 2.4, 2.7 or 3.1 and any notice to be given by the
Administrative Agent or any Bank hereunder, may be given by telephone, and all
such notices given by the Borrowers must be immediately confirmed in writing in
the manner provided in Section 9.2(a). Any such notice given by telephone shall
be deemed effective upon receipt thereof by the party to whom such notice is to
be given. The Borrowers shall indemnify and hold harmless the Banks and the
Agents from any and all losses, damages, liabilities and claims arising from
their good faith reliance on any such telephone notice.
9.3 No Waiver By Conduct; Remedies Cumulative. No course of dealing
-----------------------------------------
on the part of either Agent or any Bank, nor any delay or failure on the part of
either Agent or any Bank in exercising any right, power or privilege hereunder
shall operate as a waiver of such right, power or privilege or otherwise
prejudice such Agent's or such Bank's rights and remedies hereunder; nor shall
any single or partial exercise thereof preclude any further exercise thereof or
the exercise of any other right, power or privilege. No right or remedy
conferred upon or reserved to either Agent or any Bank under this Agreement, the
Notes or any other Loan Document is intended to be exclusive of any other right
or remedy, and every right and remedy shall be cumulative and in addition to
every other right or remedy granted thereunder or now or hereafter existing
under any applicable law. Every right and remedy granted by this Agreement, the
Notes or any other Loan Document or by applicable law to either Agent or any
Bank may, subject to the other terms and conditions of this Agreement, be
exercised from time to time and as often as may be deemed expedient by such
Agent or such Bank, as the case may be, and, unless contrary to the express
provisions of this Agreement, the Notes or any other Loan Document, irrespective
of the occurrence or continuance of any Default or Event of Default.
9.4 Reliance on and Survival of Various Provisions. All terms,
----------------------------------------------
covenants, agreements, representations and warranties of the Borrowers made
herein or in any other Loan Document or in any certificate, report, financial
statement or other document furnished by or on behalf of any Borrower in
connection with this Agreement shall be deemed to be material and to have been
relied upon by the Banks, notwithstanding any investigation heretofore or
hereafter made by any Bank or on such Bank's behalf, and those covenants and
agreements of the Borrowers set forth in Section 3.7, 3.9 and 9.5 hereof shall
survive the repayment in full of the Advances and the termination of the
Commitments.
9.5 Expenses; Indemnification. (a) The Borrowers agree to pay, or
-------------------------
reimburse each Agent for the payment of, on demand, (i) the reasonable fees and
expenses of counsel to each Agent, including without limitation the fees and
expenses of Dickinson Wright PLLC and Gordon, Silberman, Wiggins, and Childs,
PC, in connection with the preparation, execution, delivery and administration
of this Agreement, the Notes and the other Loan Documents and in connection with
advising each Agent as to its rights and responsibilities with respect thereto,
and in connection with any amendments, waivers or consents in connection
therewith, and (ii) all stamp and other taxes and fees payable or determined to
be payable in connection with the execution, delivery, filing or recording of
this Agreement, Notes, the other Loan Documents (or the verification of filing,
recording, perfection or priority thereof) or the consummation of the
transactions contemplated hereby, and any and all liabilities with respect to or
resulting from any delay in paying or omitting to pay such taxes or fees, and
(iii) all reasonable costs and expenses
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of the Agents and the Banks (including reasonable fees and expenses of counsel
and whether incurred through negotiations, legal proceedings or otherwise) in
connection with any Default or Event of Default or the enforcement of, or the
exercise or preservation of any rights under, this Agreement or the Notes or any
other Loan Document or in connection with any refinancing or restructuring of
the credit arrangements provided under this Agreement and (iv) all reasonable
costs and expenses of the Agents and the Banks (including reasonable fees and
expenses of counsel) in connection with any action or proceeding relating to a
court order, injunction or other process or decree restraining or seeking to
restrain the Administrative Agent from paying any amount under, or otherwise
relating in any way to, any Letter of Credit and any and all costs and expenses
which any of them may incur relative to any payment under any Letter of Credit.
(b) The Borrowers hereby indemnify and agree to hold harmless the
Banks and the Agents, and their respective officers, directors, employees and
agents, from and against any and all claims, damages, losses, liabilities, costs
or expenses of any kind or nature whatsoever which the Banks or the Agents or
any such person may incur or which may be claimed against any of them by reason
of or in connection with any Letter of Credit, and neither any Bank nor either
Agent or any of their respective officers, directors, employees or agents shall
be liable or responsible for: (i) the use which may be made of any Letter of
Credit or for any acts or omissions of any beneficiary in connection therewith;
(ii) the validity, sufficiency or genuineness of documents or of any endorsement
thereon, even if such documents should in fact prove to be in any or all
respects invalid, insufficient, fraudulent or forged; (iii) payment by the
Administrative Agent to the beneficiary under any Letter of Credit against
presentation of documents which do not comply with the terms of any Letter of
Credit, including failure of any documents to bear any reference or adequate
reference to such Letter of Credit; (iv) any error, omission, interruption or
delay in transmission, dispatch or delivery of any message or advice, however
transmitted, in connection with any Letter of Credit; or (v) any other event or
circumstance whatsoever arising in connection with any Letter of Credit;
provided, however, that the Borrowers shall not be required to indemnify the
- -------- -------
Banks and the Agents and such other persons, and the Administrative Agent shall
be liable to the Borrowers to the extent, but only to the extent, of any direct,
as opposed to consequential or incidental, damages suffered by the Borrowers
which were caused by (A) the Administrative Agent's wrongful dishonor of any
Letter of Credit after the presentation to it by the beneficiary thereunder of a
draft or other demand for payment and other documentation strictly complying
with the terms and conditions of such Letter of Credit, or (B) the payment by
the Administrative Agent to the beneficiary under any Letter of Credit against
presentation of documents which do not comply with the terms of the Letter of
Credit to the extent, but only to the extent that (i) such payment results from
the Administrative Agent's failure to act in good faith or to observe general
banking usage in connection with the Letter of Credit or failure to examine
documents presented under the Letter of Credit with care to determine whether
they comply with the terms of the Letter of Credit (it being understood that the
Administrative Agent assumes no responsibility for the genuineness,
falsification or effect of any document which appears on such examination to be
regular on its face) or (ii) such payment constitutes gross negligence or
willful misconduct of the Administrative Agent. It is understood that in making
any payment under a Letter of Credit the Administrative Agent will rely on
documents presented to it under such Letter of Credit as to any and all matters
set forth therein without further investigation and regardless of any notice or
information to the contrary, and such reliance and payment against documents
presented under a Letter of Credit substantially complying with the terms
thereof shall not be deemed gross negligence or willful misconduct of the
Administrative Agent in connection with such payment. It is further
acknowledged and agreed that the Borrowers may have rights against the
beneficiary or others in connection with any Letter of Credit with respect to
which the Administrative Agent is alleged to be liable and it shall be a
precondition of the assertion of any liability of the Administrative Agent under
this Section that the Borrowers shall first have exhausted all remedies in
respect of the alleged loss against such beneficiary and any other parties
obligated or liable in connection with such Letter of Credit and any related
transactions.
(c) In consideration of the execution and delivery of this Agreement
by each Bank and each Agent and the extension of the Commitments, the Borrowers
hereby indemnify, exonerate and hold each Agent, each Bank and each of their
respective officers, directors, employees and agents (collectively, the
"Indemnified Parties") free and harmless from and against any and all actions,
-------------------
causes of action, suits, losses, costs, liabilities and damages, and expenses
incurred in connection therewith (irrespective of whether any such Indemnified
Party is a party to the action for which indemnification hereunder is sought),
including reasonable attorneys' fees
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and disbursements (collectively, the "Indemnified Liabilities"), incurred by the
-----------------------
Indemnified Parties or any of them as a result of, or arising out of, or
relating to:
(i) any transaction financed or to be financed in whole
or in part, directly or indirectly, with the proceeds of any Advance or any
transaction contemplated hereby or any acquisition by any Borrower;
(ii) the entering into and performance of this Agreement
and any other agreement or instrument executed in connection herewith by any of
the Indemnified Parties (including any action brought by or on behalf of the
Borrowers or any of them as the result of any determination by the Required
Banks not to fund any Advance);
(iii) any investigation, litigation or proceeding related
to any acquisition or proposed acquisition by the Borrowers or any of their
respective Subsidiaries of any portion of the stock or assets of any person,
whether or not the Agent or such Bank is party thereto;
(iv) any investigation, litigation or proceeding related
to any environmental cleanup, audit, compliance or other matter relating to the
protection of the environment or the release by the Borrowers or any of their
respective Subsidiaries of any Hazardous Material; or
(v) the presence on or under, or the escape, seepage,
leakage, spillage, discharge, emission, discharging or releasing from, any real
property owned or operated by the Borrowers or any of their respective
Subsidiaries of any Hazardous Material (including any losses, liabilities,
damages, injuries, costs, expenses or claims asserted or arising under any
Environmental Law), regardless of whether caused by, or within the control of,
any Borrower or any such Subsidiary, except for any such Indemnified Liabilities
arising for the account of a particular Indemnified Party by reason of the
activities of the Indemnified Party on the property of the Borrowers conducted
subsequent to a foreclosure on such property by the Banks or by reason of the
relevant Indemnified Party's gross negligence or willful misconduct or breach of
this Agreement, and if and to the extent that the foregoing undertaking may be
unenforceable for any reason, the Borrowers hereby agree to make the maximum
contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable law. The Borrowers shall be
obligated to indemnify the Indemnified Parties for all Indemnified Liabilities
subject to and pursuant to the foregoing provisions, regardless of whether the
Borrowers or any of their respective Subsidiaries had knowledge of the facts and
circumstances giving rise to such Indemnified Liability.
9.6 Successors and Assigns. (a) This Agreement shall be binding
----------------------
upon and inure to the benefit of the parties hereto and their respective
successors and assigns, provided that the Borrowers may not, without the prior
--------
consent of the Banks, assign their rights or obligations hereunder or under the
Notes or any other Loan Document and the Banks shall not be obligated to make
any Advance hereunder to any entity other than the Borrowers.
(b) Any Bank may sell to any Eligible Transferee or Eligible
Transferees, and such Eligible Transferee or Eligible Transferees may further
sell to any Eligible Transferee or Eligible Transferees (subject to any
limitations set forth in the relevant participation agreements), a participation
interest (undivided or divided) in the Advances and such Bank's rights and
benefits under this Agreement, the Notes and the other Loan Documents, and to
the extent of that participation interest such participant or participants shall
have the same rights and benefits against the Borrowers under Section 3.7, 3.9
and 6.2(c) as it or they would have had if such participant or participants were
the Bank making the Advances to the Borrowers hereunder, provided, however, that
-------- -------
(i) such Bank's obligations under this Agreement shall remain unmodified and
fully effective and enforceable against such Bank, (ii) such Bank shall remain
solely responsible to the other parties hereto for the performance of such
obligations, (iii) such Bank shall remain the holder of its Note(s) for all
purposes of this Agreement, (iv) the Borrowers, the Agents and the other Banks
shall continue to deal solely and directly with such Bank in connection with
such Bank's rights and obligations under this Agreement, and (v) no participant
shall be granted any rights to consent or withhold consent to any action taken
by such Bank or either Agent under this Agreement other than action requiring
the consent of all of the Banks hereunder.
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(c) Each Agent from time to time in its sole discretion may appoint
agents for the purpose of servicing and administering this Agreement and the
transactions contemplated hereby and enforcing or exercising any rights or
remedies of such Agent provided under this Agreement, the Notes, any other Loan
Documents or otherwise. In furtherance of such agency, each Agent may from time
to time direct that the Borrowers provide notices, reports and other documents
contemplated by this Agreement (or duplicates thereof) to such agent. The
Borrowers hereby consent to the appointment of such agent and agree to provide
all such notices, reports and other documents and to otherwise deal with such
agent acting on behalf of either Agent in the same manner as would be required
if dealing with such Agent itself.
(d) Each Bank may, with the prior consent (which shall not be
unreasonably withheld or delayed) of Citation and the Administrative Agent,
assign to one or more Eligible Transferees all or a portion of its rights and
obligations under this Agreement (including, without limitation, all or a
portion of its Commitment, the Advances owing to it and the Note or Notes held
by it); provided, however, that (i) each such assignment shall be of a uniform,
-------- -------
and not a varying, percentage of all rights and obligations, (ii) except in the
case of an assignment of all of a Bank's rights and obligations under this
Agreement, the amount of the Commitment of the assigning Bank being assigned
pursuant to each such assignment (determined as of the date of the Assignment
and Acceptance with respect to such assignment) shall in no event be less than
$5,000,000, and in integral multiples of $1,000,000 thereafter, or such lesser
amount to which Citation and the Administrative Agent may consent, (iii) the
parties to each such assignment shall execute and deliver to the Administrative
Agent, for its acceptance and recording in the Register, an Assignment and
Acceptance in the form annexed hereto as Exhibit H (an "Assignment and
--------- --------------
Acceptance"), together with any Note or Notes subject to such assignment and a
- ----------
processing and recordation fee of $3,500, and (iv) any Bank may without paying
any fee, assign to any Affiliate of such Bank all of its rights and obligations
under this Agreement. Upon such execution, delivery, acceptance and recording,
from and after the effective date specified in such Assignment and Acceptance,
(x) the assignee thereunder shall be a party hereto and, to the extent that
rights and obligations hereunder have been assigned to it pursuant to such
Assignment and Acceptance, have the rights and obligations of a Bank hereunder
and (y) the Bank assignor thereunder shall, to the extent that rights and
obligations hereunder have been assigned by it pursuant to such Assignment and
Acceptance, relinquish its rights and be released from its obligations under
this Agreement (and, in the case of an Assignment and Acceptance covering all of
the remaining portion of an assigning Bank's rights and obligations under this
Agreement, such Bank shall cease to be a party hereto). Notwithstanding
anything in this Agreement to the contrary, (1) the consent of Citation and the
Administrative Agent shall not be required for any assignment to a Bank or an
Affiliate of a Bank which is an entity described in clause (ii) or (iii) of the
definition of the term "Eligible Transferee", (2) no minimum requirement shall
apply to any assignment to a Bank or an Affiliate of a Bank, and (3) under no
circumstances shall the consent of Citation be required for any assignment if a
Default or Event of Default has occurred and is continuing.
(e) By executing and delivering an Assignment and Acceptance, the Bank
assignor thereunder and the assignee thereunder confirm to and agree with each
other and the other parties hereto as follows: (i) other than as provided in
such Assignment and Acceptance, such assigning Bank makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with this Agreement or
the execution, legality, validity, enforceability, genuineness, sufficiency or
value of this Agreement or any other instrument or document furnished pursuant
hereto; (ii) such assigning Bank makes no representation or warranty and assumes
no responsibility with respect to the financial condition of the Borrowers or
the performance or observance by the Borrowers of any of their obligations under
this Agreement or any other instrument or document furnished pursuant hereto;
(iii) such assignee confirms that it has received a copy of this Agreement,
together with copies of the financial statements referred to in Section 4.1(k)
and such other documents and information as it has deemed appropriate to make
its own credit analysis and decision to enter into such Assignment and
Acceptance; (iv) such assignee will, independently and without reliance upon
either Agent, such assigning Bank or any other Bank and based on such documents
and information as it shall deem appropriate at the time, continue to make its
own credit decisions in taking or not taking action under this Agreement; (v)
such assignee appoints and authorizes each Agent to take such action as agent on
its behalf and to exercise such powers and discretion under this Agreement and
the other Loan Documents as are delegated to such Agent by the terms hereof,
together with such powers and discretion as are reasonably incidental thereto;
and (vi) such assignee agrees that it
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will perform in accordance with their terms all of the obligations that by the
terms of this Agreement are required to be performed by it as a Bank.
(f) The Administrative Agent shall maintain at its address
designated on the signature pages hereof a copy of each Assignment and
Acceptance delivered to and accepted by it and a register for the recordation of
the names and addresses of the Banks and the Commitment of, and principal amount
of the Advances owing to, each Bank from time to time (the "Register"). The
--------
entries in the Register shall be conclusive and binding for all purposes, absent
manifest error, and the Borrowers, the Agents and the Banks may treat each
person whose name is recorded in the Register as a Bank hereunder for all
purposes of this Agreement. The Register shall be available for inspection by
Citation or any Bank at any reasonable time and from time to time upon
reasonable prior notice.
(g) Upon its receipt of an Assignment and Acceptance executed by
an assigning Bank and an assignee, together with any Note or Notes subject to
such assignment, the Administrative Agent shall, if such Assignment and
Acceptance has been completed, (i) accept such Assignment and Acceptance, (ii)
record the information contained therein in the Register and (iii) give prompt
notice thereof to Citation. Within five Business Days after its receipt of such
notice, the Borrowers, at their own expense, shall execute and deliver to the
Administrative Agent in exchange for the surrendered Note or Notes a new Note to
the order of such assignee in an amount equal to the Commitment assumed by it
pursuant to such Assignment and Acceptance and, if the assigning Bank has
retained a Commitment hereunder, a new Note to the order of the assigning Bank
in an amount equal to the Commitment retained by it hereunder. Such new Note or
Notes shall be in an aggregate principal amount equal to the aggregate principal
amount of such surrendered Note or Notes, shall be dated the effective date of
such Assignment and Acceptance and shall otherwise be in substantially the form
of Exhibit I hereto.
---------
(h) The Borrowers shall not be liable for any costs or expenses of
any Bank in effectuating any participation or assignment under this Section 9.6
or any fee payable in connection therewith.
(i) The Banks may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this Section
9.6, disclose to the assignee or participant or proposed assignee or participant
any information relating to the Borrowers.
(j) Notwithstanding any other provision set forth in this
Agreement, any Bank may at any time create a security interest in, or assign,
all or any portion of its rights under this Agreement (including, without
limitation, the Loans owing to it and the Note or Notes held by it) in favor of
any Federal Reserve Bank in accordance with Regulation A of the Board of
Governors of the Federal Reserve System; provided that such creation of a
--------
security interest or assignment shall not release such Bank from its obligations
under this Agreement.
9.7 Counterpart . This Agreement may be executed in any number
------------
of counterparts, all of which taken together shall constitute one and the same
instrument, and any of the parties hereto may execute this Agreement by signing
any such counterpart.
9.8 Governing Law. This Agreement is a contract made under, and shall
-------------
be governed by and construed in accordance with, the law of the State of
Illinois applicable to contracts made and to be performed entirely within such
State and without giving effect to choice of law principles of such State. Each
of the Borrowers, the Agents and the Banks further agrees that any legal or
equitable action or proceeding with respect to this Agreement, the Notes or any
other Loan Document or the transactions contemplated hereby shall be brought in
any court of the State of Illinois, or in any court of the United States of
America sitting in Illinois, and each of the Borrowers, the Agents and the Banks
hereby submits to and accepts generally and unconditionally the jurisdiction of
those courts with respect to its person and property, and, in the case of each
Borrower, irrevocably appoints Castwell Products, Inc., whose address in
Illinois is 7800 North Austin Avenue, Skokie, Illinois 60077, as its agent for
service of process and irrevocably consents to the service of process in
connection with any such action or proceeding by personal delivery to such agent
or to Citation, or by the mailing thereof by registered or certified mail,
postage prepaid to Citation at its address for notices pursuant to Section 9.2.
The Borrowers shall at all times maintain such an agent in Illinois for such
purpose and shall notify the Banks and the Administrative Agent of such
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agent's address in Illinois within ten days of any change of address. Nothing
in this paragraph shall affect the right of the Banks and the Agents to serve
process in any other manner permitted by law or limit the right of the Banks or
the Agents to bring any such action or proceeding against any Borrower or
property in the courts of any other jurisdiction. Each of the Borrowers and the
Banks hereby irrevocably waives any objection to the laying of venue of any such
action or proceeding in the above described courts.
9.9 Table of Contents and Headings. The table of contents and the
------------------------------
headings of the various subdivisions hereof are for the convenience of reference
only and shall in no way modify any of the terms or provisions hereof.
9.10 Construction of Certain Provisions. If any provision of this
----------------------------------
Agreement refers to any action to be taken by any person, or which such person
is prohibited from taking, such provision shall be applicable whether such
action is taken directly or indirectly by such person, whether or not expressly
specified in such provision.
9.11 Integration and Severability. This Agreement, the Notes and the
----------------------------
other Loan Documents embody the entire agreement and understanding between the
Borrowers and the Agents and the Banks, and supersede all prior agreements and
understandings, relating to the subject matter hereof. In case any one or more
of the obligations of the Borrowers under this Agreement, the Notes or any other
Loan Document shall be invalid, illegal or unenforceable in any jurisdiction,
the validity, legality and enforceability of the remaining obligations of the
Borrowers shall not in any way be affected or impaired thereby, and such
invalidity, illegality or unenforceability in one jurisdiction shall not affect
the validity, legality or enforceability of the obligations of any Borrower
under this Agreement, the Notes or any other Loan Document in any other
jurisdiction.
9.12 Independence of Covenants. All covenants hereunder shall be
-------------------------
given independent effect so that if a particular action or condition is not
permitted by any such covenant, the fact that it would be permitted by an
exception to, or would be otherwise within the limitations of, another covenant
shall not avoid the occurrence of a Default or an Event of Default if such
action is taken or such condition exists.
9.13 Interest Rate Limitation. Notwithstanding any provisions of this
------------------------
Agreement, the Notes or any other Loan Document, in no event shall the amount of
interest paid or agreed to be paid by the Borrowers exceed an amount computed at
the highest rate of interest permissible under applicable law. If, from any
circumstances whatsoever, fulfillment of any provision of this Agreement, the
Notes or any other Loan Document at the time performance of such provision shall
be due, shall involve exceeding the interest rate limitation validly prescribed
by law which a court of competent jurisdiction may deem applicable hereto, then,
ipso facto, the obligations to be fulfilled shall be reduced to an amount
computed at the highest rate of interest permissible under applicable law, and
if for any reason whatsoever any Bank shall ever receive as interest an amount
which would be deemed unlawful under such applicable law such interest shall be
automatically applied to the payment of principal of the Advances outstanding
hereunder (whether or not then due and payable) and not to the payment of
interest, or shall be refunded to the Borrowers if such principal and all other
obligations of the Borrowers to the Banks have been paid in full.
9.14 Joint and Several Obligations; Subrogation and Contribution
-----------------------------------------------------------
Rights; Savings Clause. (a) Notwithstanding anything to the contrary set forth
- ----------------------
herein or in any Note or in any other Loan Document, all the obligations of the
Borrowers hereunder and under the Notes and the other Loan Documents are joint
and several.
(b) If any Borrower makes a payment in respect of the
Obligations the proceeds of which were received by another Borrower (a
"Nonpaying Borrower"), such paying Borrower shall be subrogated to the rights of
the payee against the Nonpaying Borrower and shall have the rights of
contribution with respect to such payment set forth below against the other
Borrowers (other than the Nonpaying Borrower); provided that no Borrower shall
--------
enforce its rights to any payment by way of subrogation or exercise its rights
of contribution until the Obligations have been paid in full. If any Borrower
makes a payment in respect of the Obligations the proceeds of which were
received by a Nonpaying Borrower (herein, such Nonpaying Borrower's "Guaranteed
Obligations") that is smaller in proportion to such Borrower's Payment Share (as
hereinafter defined) than the payments made by
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the other Borrowers in repayment of such Guaranteed Obligations are in
proportion to the amounts of their respective Payment Shares, the Borrower
making such proportionately smaller payment shall, when permitted by the
preceding sentence, pay to the other Borrowers (other than the Nonpaying
Borrower) an amount such that the net payments made by the Borrowers (other than
the Nonpaying Borrower) in respect of such Guaranteed Obligations shall be
shared among such Borrowers (other than the Nonpaying Borrower) pro rata in
proportion to their respective Payment Shares. If any Borrower receives with
respect to the Guaranteed Obligations of any Nonpaying Borrower any payment by
way of subrogation that is greater in proportion to the amount of its Payment
Share than the payments with respect to such Guaranteed Obligations received by
way of subrogation by the other Borrowers (other than the Nonpaying Borrower)
are in proportion to the amounts of their respective Payment Shares, the
Borrower receiving such proportionately greater payment shall, when permitted by
the second preceding sentence, pay to such other Borrowers an amount such that
the subrogation payments received by all Borrowers (other than the Nonpaying
Borrower) shall be shared among such Borrowers pro rata in proportion to their
respective Payment Shares. Notwithstanding anything to the contrary contained in
this paragraph or in this Agreement, no liability or obligation of any Borrower
that shall accrue pursuant to this paragraph shall be paid nor shall it be
deemed owed pursuant to this paragraph until all of the Obligations shall be
paid in full.
For purposes hereof, the "Payment Share" of any Borrower with respect
to the Guaranteed Obligations of any Nonpaying Borrower shall be the product of
(a) the aggregate amount of such Guaranteed Obligations remaining unpaid on the
date such Guaranteed Obligations become due and payable in full, whether by
stated maturity, acceleration, or otherwise (the "Determination Date"), times
(b) a fraction, the numerator of which is such paying Borrower's net worth on
the Effective Date, and the denominator of which is the aggregate net worth of
all Borrowers (other than the Nonpaying Borrower) on such date.
(c) It is the intent of each Borrower and the Agents and the
Banks that each Borrower's maximum Bank Obligations shall be, but not in excess
of:
(i) in a case or proceeding commenced by or against such
Borrower under the Bankruptcy Code on or within one year from the date on which
any of the Bank Obligations are incurred, the maximum amount that would not
otherwise cause the Bank Obligations (or any other obligations of such Borrower
to the Agents and the Banks) to be avoidable or unenforceable against such
Borrower under (A) Section 548 of the Bankruptcy Code or (B) any state
fraudulent transfer or fraudulent conveyance act or statute applied in such case
or proceeding by virtue of Section 544 of the Bankruptcy Code; or
(ii) in a case or proceeding commenced by or against such
Borrower under the Bankruptcy Code subsequent to one year from the date on which
any of the Bank Obligations are incurred, the maximum amount that would not
otherwise cause the Bank Obligations (or any other obligations of such Borrower
to the Agents and the Banks) to be avoidable or unenforceable against such
Borrower under any state fraudulent transfer or fraudulent conveyance act or
statute applied in any such case or proceeding by virtue of Section 544 of the
Bankruptcy Code;
(iii) in a case or proceeding commenced by or against such
Borrower under any law, statute or regulation other than the Bankruptcy Code
(including, without limitation, any other bankruptcy, reorganization,
arrangement, moratorium, readjustment of debt, dissolution, liquidation or
similar debtor relief laws), the maximum amount that would not otherwise cause
the Bank Obligations (or any other obligations of such Borrower to the Agents
and the Banks) to be avoidable or unenforceable against such Borrower under such
law, statute or regulation including, without limitation, any state fraudulent
transfer or fraudulent conveyance act or statute applied in any such case or
proceeding.
(d) The Borrowers acknowledge and agree that they have requested
that the Banks make credit available to the Borrowers with each Borrower
expecting to derive benefit, directly and indirectly, from the loans and other
credit extended by the Banks to the Borrowers.
(e) The joint and several obligations of the Borrowers described
in this Section 9.14 shall remain in full force and effect without regard to and
shall not be released, affected or impaired by: (i) any
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amendment, assignment, transfer, modification of or addition or supplement to
the Obligations, this Agreement, any Note or any other Loan Document, except to
the extent any such amendment, assignment, transfer or modification specifically
relates to the matters set forth in Section 9.14; (ii) any extension,
indulgence, increase in the Obligations or other action or inaction in respect
of any of the Loan Documents or otherwise with respect to the Obligations, or
any acceptance of security for, or guaranties of, any of the Obligations or Loan
Documents, or any surrender, release, exchange, impairment or alteration of any
such security or guaranties including without limitation the failing to perfect
a security interest in any such security or abstaining from taking advantage or
of realizing upon any guaranties or upon any security interest in any such
security; (iii) any default by any Borrower under, or any lack of due execution,
invalidity or unenforceability of, or any irregularity or other defect in, any
of the Loan Documents; (iv) any waiver by the Banks or any other person of any
required performance or otherwise of any condition precedent or waiver of any
requirement imposed by any of the Loan Documents, any guaranties or otherwise
with respect to the Obligations; (v) any exercise or non-exercise of any right,
remedy, power or privilege in respect of this Agreement or any of the other Loan
Documents; (vi) any sale, lease, transfer or other disposition of the assets of
any Borrower or any consolidation or merger of any Borrower with or into any
other person, corporation, or entity, or any transfer or other disposition by
any Borrower or any other holder of any shares of capital stock of any Borrower;
(vii) any bankruptcy, insolvency, reorganization or similar proceedings
involving or affecting any Borrower; (viii) the release or discharge of any
Borrower from the performance or observance of any agreement, covenant, term or
condition under any of the Obligations or contained in any of the Loan Documents
by operation of law; or (ix) any other cause whether similar or dissimilar to
the foregoing which, in the absence of this provision, would release, affect or
impair the obligations, covenants, agreements and duties of any Borrower
hereunder, including without limitation any act or omission by either Agent, any
Bank or any other any person which increases the scope of such Borrower's risk;
and in each case described in this paragraph whether or not any Borrower shall
have notice or knowledge of any of the foregoing, each of which is specifically
waived by each Borrower. Each Borrower warrants to the Banks that it has
adequate means to obtain from each other Borrower on a continuing basis
information concerning the financial condition and other matters with respect to
the Borrowers and that it is not relying on the Agents or the Banks to provide
such information either now or in the future.
9.15 Waivers, Etc. Each Borrower unconditionally waives: (a) notice
------------
of any of the matters referred to in Section 9.14(e) above; (b) all notices
which may be required by statute, rule or law or otherwise to preserve any
rights of either Agent or the Banks, including, without limitation, presentment
to and demand of payment or performance from the other Borrowers and protect for
non-payment or dishonor; (c) any right to the exercise by either Agent or the
Banks of any right, remedy, power or privilege in connection with any of the
Loan Documents; (d) any requirement that either Agent or the Banks, in the event
of any default by any Borrower, first make demand upon or seek to enforce
remedies against, such Borrower or any other Borrower before demanding payment
under or seeking to enforce this Agreement or any other Loan Document against
any other Borrower; (f) any right to notice of the disposition of any security
which either Agent or any Bank may hold from any Borrower or otherwise and any
right to object to the commercial reasonableness of the disposition of any such
security; and (g) all errors and omissions in connection with either Agent's or
any Bank's administration of any of the Obligations, any of the Loan Documents,
or any other act or omission of either Agent or any Bank which changes the scope
of the Borrowers' risk, except as a result of the gross negligence or willful
misconduct of an Agent or a Bank. The obligations of each Borrower hereunder
shall be complete and binding forthwith upon the execution of this Agreement and
subject to no condition whatsoever, precedent or otherwise, and notice of
acceptance hereof or action in reliance hereon shall not be required.
9.16 Citation To Act For All Borrowers. Each Participating
---------------------------------
Subsidiary, separately and severally, hereby appoints and designates Citation as
such party's agent and attorney-in-fact to act on behalf of such party for all
purposes of the Loan Documents. Citation shall have authority to exercise on
behalf of each Participating Subsidiary all rights and powers that Citation
deems, in its sole discretion, necessary, incidental or convenient in connection
with the Loan Documents, including the authority to execute and deliver
certificates, documents, agreements and other instruments referred to in or
contemplated by the Loan Documents, request Advances hereunder, request the
issuance of Letters of Credit, receive all proceeds of Advances, give all
notices, approvals and consents required or requested from time to time by
either Agent or any Bank and take any other actions and steps that a
Participating Subsidiary could take for its own account in connection with the
Loan Documents from time to time, it being the intent of the Participating
Subsidiaries to grant to Citation plenary power
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to act on behalf of the Participating Subsidiaries in connection with and
pursuant to the Loan Documents. The appointment of Citation as agent and
attorney-in-fact for the Participating Subsidiaries hereunder shall be coupled
with an interest and be irrevocable so long as any Loan Document shall remain in
effect. The Agents and the Banks need not obtain any Participating Subsidiary's
consent or approval for any act taken by Citation pursuant to any Loan Document,
and all such acts shall bind and obligate Citation and the Participating
Subsidiaries, jointly and severally. The Agents and the Banks may rely on any
representation or request made or action taken by Citation in connection with
the Loan Documents as authorized by the Participating Subsidiaries. Each
Participating Subsidiary forever waives and releases any claim (whether now or
hereafter arising) against either Agent or any Bank based on Citation's lack of
authority to act on behalf of any Participating Subsidiary in connection with
the Loan Documents.
9.17 Further Assurances. From time to time, each Borrower will
------------------
execute and deliver to the Agents and the Banks such additional documents and
will provide such additional information as the Administrative Agent or the
Required Banks may reasonably require to carry out the terms of this Agreement
and be informed of the status and affairs of each of the Borrowers and the
Consolidated Entities. Each Borrower will take any and all actions as reasonably
requested by the Administrative Agent or the Required Banks to ensure that the
Agents and the Banks enjoy the full benefits of the security intended to be
granted hereunder and under the Security Documents and under the other Loan
Documents.
9.18 Waiver and Release by Borrowers. To the maximum extent permitted
-------------------------------
by applicable Law, each Borrower and each Consolidated Entity:
(a) Waives protest of all commercial paper at any time held by
any Bank on which any Borrower or any Consolidated Entity is any way liable;
(b) Except as the same may herein be specifically granted,
waives notice of acceleration and of intention to accelerate; and
(c) Waives notice and opportunity to be heard, after
acceleration in the manner provided in Section 6.2, before exercise by either
Agent or any Bank of the remedies of self-help, set-off, or of other summary
procedures permitted by any applicable Law or by any agreement with any Borrower
or any Consolidated Entity and except where required hereby or by any applicable
Law which requirement cannot be waived, notice of any other action taken by
either Agent or any Bank; and
(d) Releases each Agent and each Bank and their respective
officers, attorneys, agents and employees from all claims for loss or damage
caused by any act or omission on the part of any of them except willful
misconduct.
9.19 No Partnership or Joint Venture. Notwithstanding anything to the
-------------------------------
contrary herein contained or implied, none of the Agents and the Banks, by this
Agreement or by any action pursuant hereto or thereto, shall be deemed a
partner, joint venturer or participant in the venture of any Borrower, and each
Borrower hereby jointly and severally indemnifies and agrees to defend each
Agent and each Bank harmless (including the payment of attorneys' fees) from any
and all damages resulting from such allegation or construction of the parties'
relationship. The requirements herein, and the restrictions imposed in this
Agreement, are solely for the protection and benefit of the Agents and the Banks
and shall not be construed to create any obligation on behalf of either Agent or
any Bank to supervise, warn or disclose matters to any Borrower.
9.20 Termination. The terms and provisions of this Agreement shall
-----------
continue in effect until the Obligations shall have been fully paid and
performed, and the Banks shall have no further obligation whatsoever to make any
Advances or extend any other credit or accommodation. Following any termination
(if applicable), the terms and provisions of this Agreement (excluding any
obligation to lend or other commitment hereunder made by any Bank), and all of
the covenants and promises of Borrowers hereunder, shall be automatically
reinstated if at any time all or any part of any payment made upon the
Obligations is rescinded or must for any reason be returned to the Person making
such payment, whether due to insolvency, bankruptcy, dissolution, appointment of
a custodian or receiver, or any other reason whatsoever, all as though such
payment had not been made.
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9.21 Existing Letters of Credit. Notwithstanding anything in this
--------------------------
Agreement to the contrary, the letters of credit issued by First Chicago, or by
its Affiliate and predecessor Administrative Agent, NBD Bank, under the Existing
Credit Agreement that are outstanding as of the Effective Date (collectively the
"Existing Letters of Credit" and individually an "Existing Letter of Credit"),
shall for all purposes on and after the Effective Date be deemed Letters of
Credit under this Agreement in which each Bank shall have acquired a pro rata
risk participation pursuant to Section 2.4(d), and constitute usage of the
Commitments of the Banks, all as if such Existing Letters of Credit originally
were issued under this Agreement, provided that: (a) in each instance in this
Agreement and the other Loan Documents where there is a reference to the
Administrative Agent as issuer of the Letters of Credit, such reference shall,
with respect to the Existing Letters of Credit, be deemed a reference to First
Chicago or NBD Bank, as the case may be, in its capacity as issuer of the
Existing Letters of Credit issued by it, each of which shall have all the
benefits of this Agreement with respect to the Existing Letters of Credit issued
by it as if it issued such Letters of Credit as the Administrative Agent
hereunder, and (b) no Existing Letter of Credit shall be extended or renewed
except pursuant to a Letter of Credit issued by First Chicago in its capacity as
the Administrative Agent under this Agreement.
9.22 WAIVER OF JURY TRIAL. THE BANKS AND THE AGENTS AND THE
--------------------
BORROWERS, AFTER CONSULTING OR HAVING HAD THE OPPORTUNITY TO CONSULT WITH
COUNSEL, KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT ANY OF THEM
MAY HAVE TO A TRIAL BY JURY IN ANY LITIGATION BASED UPON OR ARISING OUT OF THIS
AGREEMENT OR ANY RELATED INSTRUMENT OR AGREEMENT OR ANY OF THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT OR ANY COURSE OF CONDUCT, DEALING, STATEMENTS
(WHETHER ORAL OR WRITTEN) OR ACTIONS OF ANY OF THEM. NEITHER ANY BANK, EITHER
AGENT, NOR ANY BORROWER SHALL SEEK TO CONSOLIDATE, BY COUNTERCLAIM OR OTHERWISE,
ANY SUCH ACTION IN WHICH A JURY TRIAL HAS BEEN WAIVED WITH ANY OTHER ACTION IN
WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED. THESE PROVISIONS SHALL NOT
BE DEEMED TO HAVE BEEN MODIFIED IN ANY RESPECT OR RELINQUISHED BY ANY PARTY
HERETO EXCEPT BY A WRITTEN INSTRUMENT EXECUTED BY SUCH PARTY.
[The rest of this page intentionally left blank.]
63
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered on the day and year first above written, which
shall be the Effective Date of this Agreement.
CITATION CORPORATION
By: /s/ T. Morris Hackney
---------------------
T. Morris Hackney
Its Chairman
---------------------
CITATION AUTOMOTIVE SALES CORP.
By: /s/ R. Conner Warren
---------------------
R. Conner Warren
Its Vice President
---------------------
MANSFIELD FOUNDRY CORPORATION
By: /s/ R. Conner Warren
---------------------
R. Conner Warren
Its Vice President
---------------------
IROQUOIS FOUNDRY CORPORATION
By: /s/ R. Conner Warren
---------------------
R. Conner Warren
Its Vice President
---------------------
OBERDORFER INDUSTRIES CORP.
By: /s/ R. Conner Warren
---------------------
R. Conner Warren
Its Vice President
---------------------
BERLIN FOUNDRY CORPORATION
By: /s/ R. Conner Warren
---------------------
R. Conner Warren
Its Vice President
---------------------
CASTWELL PRODUCTS, INC.
By: /s/ R. Conner Warren
---------------------
R. Conner Warren
Its Vice President
---------------------
TEXAS STEEL CORPORATION
By: /s/ R. Conner Warren
---------------------
R. Conner Warren
Its Vice President
---------------------
64
<PAGE>
HI-TECH, INC.
By: /s/ R. Conner Warren
------------------------
R. Conner Warren
Its Vice President
------------------------
SOUTHERN ALUMINUM CASTINGS
COMPANY
By: /s/ R. Conner Warren
------------------------
R. Conner Warren
Its Vice President
------------------------
BOHN ALUMINUM, INC.
By: /s/ R. Conner Warren
------------------------
R. Conner Warren
Its Vice President
------------------------
TSC TEXAS CORPORATION
By: /s/ Thomas W. Burleson
------------------------
Thomas W. Burleson
Its Vice President
------------------------
TEXAS FOUNDRIES, LTD.
By Texas Steel Corporation
Its General Partner
By: /s/ R. Conner Warren
------------------------
R. Conner Warren
Its Vice President
------------------------
MABRY FOUNDRY COMPANY, LTD.
By Texas Steel Corporation
Its General Partner
By: /s/ R. Conner Warren
------------------------
R. Conner Warren
Its Vice President
------------------------
CITATION CASTINGS, INC.
By: /s/ R. Conner Warren
------------------------
R. Conner Warren
Its Executive Vice President
------------------------
INTERSTATE FORGING INDUSTRIES,
INC.
By: /s/ R. Conner Warren
------------------------
R. Conner Warren
Its Vice President
------------------------
65
<PAGE>
INTERSTATE SOUTHWEST, LTD.
By Texas Steel Corporation
Its General Partner
By: /s/ R. Conner Warren
------------------------
R. Conner Warren
Its Vice President
------------------------
ISW TEXAS CORPORATION
By: /s/ Thomas W. Burleson
------------------------
Thomas W. Burleson
Its Vice President
------------------------
CAMDEN CASTING CENTER, INC.
By: /s/ R. Conner Warren
------------------------
R. Conner Warren
Its Vice President
------------------------
DYCAST, INC.
By: /s/ R. Conner Warren
------------------------
R. Conner Warren
Its Vice President
------------------------
CITATION PRECISION, INC.
By: /s/ R. Conner Warren
------------------------
R. Conner Warren
Its Vice President
------------------------
Address for Notices: THE FIRST NATIONAL BANK OF
CHICAGO, as a Bank and as the
Administrative Agent
First Chicago Capital Markets, Inc. By /s/ David T. McNeela
----------------------------
One First National Plaza
Mail Suite 0324 Its Vice President
Chicago, Illinois 60670-0324
Attention: David T. McNeela
Facsimile No.: (312) 732-2991
Facsimile
Confirmation No.: (312) 732-5730
Commitment Amount: $36,000,000
Percentage of
Total Commitments: 12%
66
<PAGE>
Address for Notices: SOUTHTRUST BANK, NATIONAL
ASSOCIATION, as a Bank and as the
Collateral Agent
420 North 20th Street, 6th Floor By /s/ Alan T. Drennen III
-----------------------
Birmingham, Alabama 35202 Its Group Vice President
Attention: Alan T. Drennen III
Facsimile No.: (205) 254-5911
Facsimile
Confirmation No.: (205) 254-4639
Commitment Amount: $36,000,000
Percentage of
Total Commitments: 12%
Address for Notices: AMSOUTH BANK
Metro Commercial Banking, Upper Level By /s/ Harry M. Waugh III
-----------------------
1900 Fifth Avenue North Its Vice President
Birmingham, Alabama 35203
Attention: Harry M. Waugh III
Facsimile No.: (205) 326-4793
Facsimile
Confirmation No.: (205) 320-7112
Commitment Amount: $35,000,000
Percentage of
Total Commitments: 11.6666667%
Address for Notices: CIBC INC.
Two Paces West By /s/ Cyd Petre
-----------------------
2727 Paces Ferry Road, Suite 1200 Its Executive Director
-----------------------
Atlanta, Georgia 30339
Attention: Charlene Harris
Facsimile No.: (770) 319-4954
Facsimile
Confirmation No.: (770) 319-4847
with a copy to:
CIBC Oppenheimer
425 Lexington Avenue
New York, New York 10017
Attention: Cyd Petre
Facsimile No.: (212) 856-3991
Facsimile Confirmation No.: (212) 856-4165
Commitment Amount: $20,000,000
Percentage of
Total Commitments: 6.6666667%
67
<PAGE>
Address for Notices: FIRST UNION NATIONAL BANK
One First Union Plaza By /s/ Mark B. Felker
------------------------
301 South College Its Senior Vice President
------------------------
Charlotte, North Carolina 28288
Attention: Jorge Gonzalez
Facsimile No.: (704) 374-3300
Facsimile
Confirmation No.: (704) 383-8461
Commitment Amount: $20,000,000
Percentage of
Total Commitments: 6.6666667%
Address for Notices: SCOTIABANC INC.
600 Peachtree Street, N.E. By /s/ P.M Brown
-------------------------
Suite 2700
Atlanta, Georgia 30308 Its Relationship Manager
------------------------
Attention: Pat Brown
Facsimile No.: (404) 888-8998
Facsimile
Confirmation No.: (404) 877-1506
Commitment Amount: $20,000,000
Percentage of
Total Commitments: 6.6666667%
Address for Notices: BRANCH BANKING AND TRUST
COMPANY
110 South Stratford Road By /s/ Thatcher L. Townsend III
-----------------------------
Winston-Salem, North Carolina 27104 Its Vice President
Attention: Thatcher L. Townsend III
Facsimile No.: (336) 733-3254
Facsimile
Confirmation No.: (336) 733-3245
Commitment Amount: $18,000,000
Percentage of
Total Commitments: 6%
Address for Notices: NATIONAL CITY BANK OF
KENTUCKY
National City Bank By /s/ Kevin C. Anderson
-----------------------------
Southern Banking Division
101 South Fifth Street Its Vice President
Louisville, Kentucky 40202
Attention: Kevin L. Anderson
Facsimile No.: (502) 581-5122
Facsimile
Confirmation No.: (502) 581-7894
Commitment Amount: $18,000,000
Percentage of
Total Commitments: 6%
68
<PAGE>
Address for Notices: SUNTRUST BANK, ATLANTA
25 Park Place, 24th Floor By /s/ David J. Edge
-----------------------------
Mail Code 120
Atlanta, Georgia 30303 Its Vice President
----------------------------
Attention: David Edge and By John R. Frazer
------------------------
Facsimile No.: (404) 827-6270 Its: Vice President
---------------------------
Facsimile
Confirmation No.: (404) 827-6735
Commitment Amount: $18,000,000
Percentage of
Total Commitments: 6%
Address for Notices: MELLON BANK, N.A.
Corporate Banking Department By /s/ Stephen L. Prather
-----------------------------
Metals Section
One Mellon Bank Center, Room 4401 Its Vice President
----------------------------
Pittsburgh, Pennsylvania 15258-0001
Attention: Stephen L. Prather
Facsimile No.: (412) 234-8888
Facsimile
Confirmation No.: (412) 234-8665
Commitment Amount: $17,000,000
Percentage of
Total Commitments: 5.6666667%
Address for Notices: CREDIT LYONNAIS ATLANTA
AGENCY
303 Peachtree Street, N.E. By /s/ David M. Cawrse
-----------------------------
Suite 4400
Atlanta, Georgia 30308 Its First Vice President & Manager
--------------------------------
Attention: Christina I. Earnshaw
Facsimile No.: (404) 584-5249
Facsimile
Confirmation No.: (404) 524-3700
Commitment Amount: $11,000,000
Percentage of
Total Commitments: 3.6666667%
Address for Notices: MICHIGAN NATIONAL BANK
27777 Inkster Road By /s/ Eric Haege
------------------------------
Mail Code 10-36
Farmington Hills, Michigan 48333 Its Commercial Relationship Manager
--------------------------------
Attention: Eric Haege
Facsimile No.: (248) 473-4345
Facsimile
Confirmation No.: (248) 473-4374
Commitment Amount: $11,000,000
Percentage of
Total Commitments: 3.6666667%
69
<PAGE>
Address for Notices: BANK OF TOKYO-MITSUBISHI,
LTD.
Atlanta Agency By /s/ William Otott, Jr.
-------------------------------
133 Peachtree Street, N.E.
Suite 4970 Its Vice President
-------------------------------
Atlanta, Georgia 30303-1808
Attention: Bill Otott
Facsimile No.: (404) 577-1155
Facsimile
Confirmation No.: (404) 577-2960
Commitment Amount: $10,000,000
Percentage of
Total Commitments: 3.3333333%
Address for Notices: DEPOSIT GUARANTY NATIONAL
BANK
Regional Department, Room 1180 By /s/ Steven C . Krohn
--------------------------------
210 East Capital Street
Jackson, Mississippi 39201 Its Senior Vice
President
Attention: Steven C. Krohn
Facsimile No.: (601) 354-8412
Facsimile
Confirmation No.: (601) 354-8264
Commitment Amount: $10,000,000
Percentage of
Total Commitments: 3.3333333%
Address for Notices: THE SUMITOMO BANK, LIMITED
133 Peachtree Street By /s/ Peter Leahy
-------------------------------
Suite 3210
Atlanta, Georgia 30303 Its Vice President
------------------------------
Attention: Peter Leahy
Facsimile No.: (404) 521-1187
Facsimile
Confirmation No.: (404) 526-8516
Commitment Amount: $10,000,000
Percentage of
Total Commitment: 3.3333333%
Address for Notices: COMPASS BANK
15 South 20/th/ Street By /s/ Eric Cates
-------------------------------
Birmingham, Alabama 35233 Its Sr. Vice President
------------------------------
Attention: Eric Cates
Facsimile No.: (205) 933-3926
Facsimile
Confirmation No.: (205) 933-3294
Commitment Amount: $10,000,000
Percentage of
Total Commitment: 3.3333333%
Total Commitment Amount of
all Banks: $300,000,000
70
<PAGE>
EXHIBIT 10.2(Y)
---------------
FIRST AMENDMENT
---------------
TO
--
SECOND AMENDED AND RESTATED
---------------------------
CREDIT AGREEMENT
----------------
THIS FIRST AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT,
dated as of November 3, 1998 (this "Amendment"), is by and among CITATION
CORPORATION, a Delaware corporation ("Citation" or the "Company"), CITATION
AUTOMOTIVE SALES CORP., a Michigan corporation, MANSFIELD FOUNDRY CORPORATION,
an Ohio corporation formerly known as MFC Acquisition Corporation, IROQUOIS
FOUNDRY CORPORATION, a Wisconsin corporation formerly known as Iroquois
Acquisition Corporation, OBERDORFER INDUSTRIES CORP., a New York corporation
formerly known as OBI Acquisition Corp., BERLIN FOUNDRY CORPORATION, a Wisconsin
corporation, CASTWELL PRODUCTS, INC., an Illinois corporation, TEXAS STEEL
CORPORATION, a Texas corporation formerly known as TSC Acquisition Corporation,
HI-TECH, INC., an Indiana corporation formerly known as HTC Acquisition
Corporation, SOUTHERN ALUMINUM CASTINGS COMPANY, an Alabama corporation, BOHN
ALUMINUM, INC., an Indiana corporation formerly known as BAC Acquisition
Corporation, TSC TEXAS CORPORATION, a Delaware corporation, TEXAS FOUNDRIES,
LTD., a Texas limited partnership, MABRY FOUNDRY COMPANY, LTD., a Texas limited
partnership, CITATION CASTINGS, INC., an Alabama corporation, INTERSTATE FORGING
INDUSTRIES, INC., a Wisconsin corporation, INTERSTATE SOUTHWEST, LTD., a Texas
limited partnership, ISW TEXAS CORPORATION, a Delaware corporation, CAMDEN
CASTING CENTER, INC., a Tennessee corporation, DYCAST, INC., a Delaware
corporation, and CITATION PRECISION, INC., a California corporation (together
with Citation, collectively, the "Borrowers" and, individually, a "Borrower"),
the banks and other lenders identified on the signature pages hereof
(collectively, the "Banks" and, individually, a "Bank"), THE FIRST NATIONAL BANK
OF CHICAGO, a national banking association, successor to NBD Bank, a Michigan
banking corporation, as administrative and syndication agent (in such capacity,
the "Administrative Agent") for the Banks, and SOUTHTRUST BANK, NATIONAL
ASSOCIATION, a national banking association formerly known as SouthTrust Bank of
Alabama, National Association, as collateral agent (in such capacity, the
"Collateral Agent", and together with the Administrative Agent, collectively,
the "Agents" and, individually, an "Agent") for the Banks.
INTRODUCTION
------------
The Borrowers, certain Banks (collectively, the "Existing Banks" and,
individually, an "Existing Bank") and the Agents have entered into the Second
Amended and Restated Credit Agreement, dated as of August 3, 1998 (as amended or
modified from time to time, the "Credit Agreement"), pursuant to which the
Existing Banks provide to the Borrowers a revolving credit facility in the
aggregate principal amount of $300,000,000. The Borrowers now desire to increase
the aggregate principal amount of such revolving credit facility to $400,000,000
and otherwise to amend the Credit Agreement in certain respects, and the Banks
and the Agents are willing to provide for such increase and other amendments,
all on the terms and conditions herein set forth.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements herein and in the Credit Agreement contained, the Borrowers, the
Banks and the Agents hereby agree as follows:
ARTICLE 1. AMENDMENTS TO CREDIT AGREEMENT
------------------------------------------
On the date (the "Amendment Date") all conditions precedent set forth in
Article 2 are satisfied, the Credit Agreement hereby is amended, and the parties
hereby otherwise agree, as follows.
1.1 Each Bank party hereto (including each such Bank that is an Existing
Bank) shall be deemed a Bank party to the Credit Agreement with a Commitment in
the amount of the respective "Commitment Amount" for each such Bank set forth
next to the name of each such Bank on the signature pages of this Amendment
(which Commitment, in the case of each Existing Bank, shall replace its existing
Commitment under the Credit Agreement), and, to the extent of such
<PAGE>
Commitment pursuant to this Amendment, each such Bank party hereto shall have
the rights and obligations of a Bank under the Credit Agreement.
1.2 By executing and delivering this Amendment, the Banks and the Agents
confirm to and agree with each other and the other parties hereto as follows:
(i) none of the Banks and the Agents makes any representation or warranty or
assumes any responsibility with respect to any statements, warranties or
representations made in or in connection with the Credit Agreement or the
execution, legality, validity, enforceability, genuineness, sufficiency or value
of the Credit Agreement or any other instrument or document furnished pursuant
thereto; (ii) none of the Banks and the Agents makes any representation or
warranty or assumes any responsibility with respect to the financial condition
of the Borrowers or the performance or observance by the Borrowers of any of
their obligations under the Credit Agreement or any other instrument or document
furnished pursuant thereto; (iii) each Bank confirms that it has received a copy
of the Credit Agreement, together with copies of the financial statements
referred to in Section 4.1(k) of the Credit Agreement and such other documents
and information as it has deemed appropriate to make its own credit analysis and
decision to enter into this Amendment and the Credit Agreement; (iv) each Bank
will, independently and without reliance upon either Agent or any other Bank and
based on such documents and information as it shall deem appropriate at the
time, make and continue to make its own credit decisions in taking or not taking
action under the Credit Agreement; (v) each Bank appoints and authorizes each
Agent to take such action as agent on its behalf and to exercise such powers and
discretion under the Credit Agreement and the other Loan Documents as are
delegated to such Agent by the terms thereof, together with such powers and
discretion as are reasonably incidental thereto; and (vi) each Bank agrees that
it will perform in accordance with their terms all of the obligations that by
the terms of the Credit Agreement are required to be performed by it as a Bank.
1.3 The initial Borrowing under the Credit Agreement after giving
effect to this Amendment shall, subject to the terms and conditions of the
Credit Agreement and this Amendment, be made on the Amendment Date and shall be
a Borrowing of Revolving Credit Loans in an aggregate principal amount not less
than the aggregate outstanding principal amount of the existing Loans made by
the Existing Banks under the Credit Agreement (the "Restated Debt").
Notwithstanding anything in this Amendment, the Credit Agreement or any of the
other Loan Documents to the contrary, the Borrowers, the Banks and the Agents
hereby agree that such initial Borrowing shall be funded as follows:
(i) each Existing Bank, in its capacity as a Bank under
the Credit Agreement as amended by this Amendment (the
"Amended Credit Agreement"), shall automatically be deemed
to have already funded to the Administrative Agent (and the
Administrative Agent likewise shall automatically be deemed
to have already disbursed to the Borrowers) an amount of
such initial Borrowing equal to the portion of the Restated
Debt held by such Bank;
(ii) each Bank that is not an Existing Bank shall fund to
the Administrative Agent an amount of such initial Borrowing
equal to such Bank's pro rata share thereof based on such
Bank's respective Commitment amount under the Amended Credit
Agreement;
(iii) if the amount deemed funded by any Bank under clause
(i) above is less than such Bank's pro rata share of such
initial Borrowing (based on such Bank's respective
Commitment amount under the Amended Credit Agreement), then
such Bank shall fund, by the actual transfer to the
Administrative Agent of immediately available funds, the
amount equal to such shortage;
(iv) if the amount deemed funded by any Bank under clause
(i) above exceeds such Bank's pro rata share of such initial
Borrowing (based on such Bank's respective Commitment amount
under the Amended Credit Agreement), then the Administrative
Agent shall remit to such Bank a portion of the amounts
funded under clauses (ii) and (iii) above equal to such
excess; and
-2-
<PAGE>
(v) any portion of the amounts funded by the Banks under
clauses (ii) and (iii) above remaining after the
Administrative Agent has remitted all amounts required to be
remitted to the Banks under clause (iv) above shall be made
available to the Borrowers in accordance with Section 2.4(a)
of the Credit Agreement;
such that thereupon (A) each Bank shall have funded a portion of such initial
Borrowing in a net amount equal to its pro rata share thereof (based on such
Bank's respective Commitment amount under the Amended Credit Agreement), and (B)
all existing Loans shall be deemed restated and replaced by such initial
Borrowing.
1.4 Section 5.2(o) of the Credit Agreement is amended and restated in full
as follows:
(o) Neither Citation nor any Consolidated Entity will redeem,
purchase or retire any of its capital stock or partnership or other
ownership interests or grant or issue any warrant, right or option
pertaining thereto or other security convertible into any of the
foregoing, or permit any redemption or retirement of the outstanding
capital stock or partnership or other ownership interests of Citation
or of any Consolidated Entity; provided, however, that this Section
-------- -------
5.2(o) shall not prohibit the redemption, repurchase, retirement or
other acquisition by Citation of its common stock to the extent the
aggregate consideration paid by Citation and the Consolidated Entities
in connection with all such redemptions, repurchases, retirements and
other acquisitions after the Effective Date does not exceed
$10,000,000. No Consolidated Entity will issue any capital stock or
partnership or other ownership interests or grant or issue any
warrant, right or option pertaining thereto or other security
convertible into any of the foregoing. Notwithstanding anything in
this Agreement to the contrary, this Section 5.2(o) shall not prohibit
the transactions of Citation and the Consolidated Entities in the
ordinary course of business under, and in accordance with the terms
of, the following: (i) Citation Corporation 1994 Incentive Award Plan;
(ii) Citation Corporation Employee Stock Purchase Plan; (iii) Citation
Corporation Non-Qualified Stock Option Plan For Non-Employee
Directors; (iv) Citation Corporation Stock Plan for Non-Employee
Directors; (v) 401(k) plans for Citation and numerous of the
Consolidated Entities (in all of which participants may invest
elective deferral accounts and employer matching contribution accounts
in Citation stock); and (vi) other plans established from time to time
by Citation and the Consolidated Entities that are reasonably
determined by the Administrative Agent to be of a similar nature to
those described in the foregoing clauses (i)-(v), provided that, prior
to the establishment of any such plan, Citation furnishes to the
Administrative Agent such information about such plan and copies of
such documents relating thereto as the Administrative Agent may
reasonably request for the purpose of making the determination
required under this clause (vi).
ARTICLE 2. CONDITIONS PRECEDENT
--------------------------------
As conditions precedent to the effectiveness of the amendments set forth in
Article 1 of this Amendment, the Administrative Agent and the Banks shall
receive the following documents, and the following matters shall be completed,
all in form and substance satisfactory to the Administrative Agent:
2.1 This Amendment duly executed on behalf of the Borrowers, the Banks and
the Agents.
2.2 The Borrowers shall execute and deliver to each Bank a Revolving
Credit Note, in substantially the form annexed to the Credit Agreement as
Exhibit B-1 (collectively, the "New Revolving Credit Notes" and, individually, a
- -----------
"New Revolving Credit Note"), to replace the Revolving Credit Notes issued by
the Borrowers to each of the Existing Banks under the Credit Agreement
(collectively, the "Existing Revolving Credit Notes" and, individually, an
"Existing Revolving Credit Note"). On the Amendment Date, in accordance with
Section 1.3 of this Amendment, the principal balance of the Existing Revolving
Credit Notes shall be endorsed on the New Revolving Credit Notes. The execution
and delivery of the New Revolving Credit Notes shall not in any circumstances be
deemed a novation or to have terminated, extinguished or discharged the
Borrowers' indebtedness evidenced by the Existing Revolving Credit Notes, all of
which indebtedness shall continue under and be evidenced and governed by the New
Revolving Credit Notes and the Credit Agreement, and the Banks shall be entitled
to all of the benefits of the Security Documents with respect to the
indebtedness evidenced by the
-3-
<PAGE>
New Revolving Credit Notes. Upon receipt of its New Revolving Credit Note, each
Existing Bank shall return to the Administrative Agent, and the Administrative
Agent shall forward to the Company for cancellation, the Existing Revolving
Credit Note held by such Existing Bank.
2.3 The Borrowers shall have given to the Administrative Agent a Request
for Borrowing in accordance with Section 2.4 of the Credit Agreement, subject to
Section 1.3 of this Amendment.
2.4 The Borrowers shall have replaced all Loans outstanding on the
Amendment Date with the Borrowing in accordance with Section 1.3, and shall have
paid to the Administrative Agent for the account of the Existing Banks all
accrued and unpaid interest through the Amendment Date on all Loans and all
amounts owing under Section 3.9 of the Credit Agreement in connection with such
replacement of the Loans, it being understood that the replacement of such Loans
pursuant to Section 1.3 may result in a breaking of Eurodollar Rate Loan
contracts, and amounts may be due under Section 3.9 of the Credit Agreement in
connection therewith.
2.5 The Borrowers shall have paid to the Administrative Agent and First
Chicago Capital Markets, Inc. ("FCCM") all fees in accordance with that certain
fee letter dated September 16, 1998 among Citation, the Administrative Agent and
FCCM, and the Borrowers shall have paid to the Administrative Agent for the
account of the Banks closing fees as follows: (a) for each of the Existing
Banks, 0.025% of the amount of the Commitment of each such Existing Bank under
the Credit Agreement before giving effect to this Amendment, and (b) for all
Banks (including the Existing Banks, as applicable), 0.075% of the positive
remainder, if any, determined by subtracting from the amount of the Commitment
of each such Bank under the Credit Agreement after giving effect to this
Amendment for the amount of the Commitment of such Bank under the Credit
Agreement before giving effect to this Amendment. (For purposes of
clarification, the amount of the Commitment under the Credit Agreement before
giving effect to this Amendment, of each Bank that is not an Existing Bank, is
$0.)
2.6 An incumbency certificate of each Borrower, and certified copies of
such documents evidencing necessary corporate action of the Borrowers with
respect to this Amendment, the New Revolving Credit Notes and the transactions
contemplated hereby as the Banks and the Administrative Agent may reasonably
request.
2.7 The favorable written opinion of counsel for the Borrowers with
respect to such matters as the Banks and the Administrative Agent may reasonably
request, dated as of the Amendment Date. The Borrowers hereby direct and
authorize their counsel to deliver such opinion.
ARTICLE 3. REPRESENTATIONS AND WARRANTIES
------------------------------------------
In order to induce the Banks and the Agents to enter into this Amendment,
as of the Amendment Date each of the Borrowers hereby, jointly and severally,
represents and warrants to the Banks and the Agents that:
3.1 The execution, delivery and performance by such Borrower of this
Amendment and the New Revolving Credit Notes are within its corporate powers,
have been duly authorized by all necessary corporate action and are not in
contravention of any law, rule or regulation, or any judgment, decree, writ,
injunction, order or award of any arbitrator, court or governmental authority,
or of the terms of such Borrower's charter or by-laws or partnership agreement,
or of any contract or undertaking to which such Borrower is a party or by which
such Borrower or its property is or may be bound or affected.
3.2 This Amendment is, and each New Revolving Credit Note when delivered
hereunder will be, a legal, valid and binding obligation of such Borrower,
enforceable against such Borrower in accordance with its terms.
3.3 No consent, approval or authorization of or declaration, registration
or filing with any governmental authority or any nongovernmental person or
entity, including without limitation any creditor, stockholder or member of such
Borrower, is required on the part of such Borrower in connection with the
execution, delivery and performance of this Amendment, the New Revolving Credit
Notes or the transactions contemplated hereby or as a condition to the legality,
validity or enforceability of this Amendment and the New Revolving Credit Notes.
-4-
<PAGE>
3.4 After giving effect to the amendments set forth in Article 1 of this
Amendment, all representations and warranties contained in Article IV of the
Credit Agreement and in the Security Documents are true and correct on and as of
the Amendment Date as if such representations and warranties were made on and as
of such date. No Default or Event of Default exists or has occurred and is
continuing on the Amendment Date (whether before or after the effectiveness of
this Amendment).
ARTICLE 4. MISCELLANEOUS
-------------------------
4.1 All references to the Credit Agreement in any of the other Loan
Documents or any other document, instrument or certificate referred to in the
Credit Agreement or delivered in connection therewith or pursuant thereto,
hereafter shall be deemed references to the Credit Agreement, as amended hereby.
4.2 The other Loan Documents, any and all certificates or financing
statements executed pursuant to the Credit Agreement or in connection therewith
and, subject to the amendments herein provided, the Credit Agreement shall in
all respects continue in full force and effect.
4.3 Capitalized terms used but not defined herein shall have the
respective meanings ascribed thereto in the Credit Agreement. The headings of
the various subdivisions hereof are for the convenience of reference only and
shall in no way modify any of the terms or provisions hereof.
4.4 This Amendment shall be governed by and construed in accordance with
the laws of the State of Illinois.
4.5 The Borrowers, jointly and severally, agree to pay the reasonable fees
and expenses of Dickinson Wright, counsel for the Administrative Agent, in
connection with the negotiation and preparation of this Amendment and in
connection with advising the Administrative Agent as to its rights and
responsibilities with respect thereto.
4.6 This Amendment may be executed upon any number of counterparts with
the same effect as if the signatures thereto were upon the same instrument.
[The rest of this page intentionally left blank.]
-5-
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Amendment to be duly
executed and delivered as of the day and year first above written.
CITATION CORPORATION,
CITATION AUTOMOTIVE SALES CORP.,
MANSFIELD FOUNDRY CORPORATION,
IROQUOIS FOUNDRY CORPORATION,
OBERDORFER INDUSTRIES CORP.,
BERLIN FOUNDRY CORPORATION,
CASTWELL PRODUCTS, INC.,
TEXAS STEEL CORPORATION,
HI-TECH, INC., SOUTHERN ALUMINUM
CASTINGS COMPANY, BOHN ALUMINUM,
INC., TEXAS FOUNDRIES, LTD, by Texas Steel
Corporation, its General Partner,
MABRY FOUNDRY COMPANY, LTD.,
by Texas Steel Corporation, its General
Partner,
CITATION CASTINGS, INC.,
INTERSTATE FORGING INDUSTRIES,
INC., INTERSTATE SOUTHWEST, LTD.,
by Texas Steel Corporation, its General
Partner,
CAMDEN CASTING CENTER, INC.,
DYCAST, INC. and CITATION PRECISION,
INC.
By /s/ R. Conner Warren
--------------------------------------------
R. Conner Warren, signing on behalf of each
of them as Vice President of each of them
TSC TEXAS CORPORATION
By /s/ Thomas W. Burleson
--------------------------------------------
Thomas W. Burleson
Its Vice President
ISW TEXAS CORPORATION
By /s/ Thomas W. Burleson
--------------------------------------------
Thomas W. Burleson
Its Vice President
-6-
<PAGE>
THE FIRST NATIONAL BANK OF
CHICAGO, as a Bank and as the
Administrative Agent
Commitment Amount: $40,000,000 By /s/ George C. Plunkett
--------------------------------
Percentage of
Total Commitment: 10% Its Vice President
----------------------------
SOUTHTRUST BANK, NATIONAL
ASSOCIATION, as a Bank and as the
Collateral Agent
Commitment Amount: $40,000,000 By /s/ Alan T. Drennen III
--------------------------------
Percentage of
Total Commitment: 10% Its Group Vice President
----------------------------
AMSOUTH BANK
Commitment Amount: $36,000,000 By /s/ Harry M. Waugh III
--------------------------------
Percentage of
Total Commitment: 9% Its Vice President
----------------------------
FIRST UNION NATIONAL BANK
Commitment Amount: $30,000,000 By /s/ Mark B. Felker
--------------------------------
Percentage of
Total Commitment: 7.5% Its Senior Vice President
----------------------------
CREDIT LYONNAIS ATLANTA AGENCY
Commitment Amount: $30,000,000 By /s/ David M. Cawrse
--------------------------------
Percentage of
Total Commitment: 7.5% Its First VP & Manager
----------------------------
BRANCH BANKING & TRUST COMPANY
Commitment Amount: $25,000,000 By Thatcher L. Townsend III
--------------------------------
Percentage of
Total Commitment: 6.25% Its Vice President
----------------------------
SUNTRUST BANK, ATLANTA
Commitment Amount: $25,000,000 By /s/ David J. Edge
--------------------------------
Percentage of
Total Commitment: 6.25% Its Vice President
----------------------------
and By /s/ Carolyn S. McMullen
----------------------------
Its Bank Officer
----------------------------
CIBC INC.
Commitment Amount: $20,000,000 By /s/ Cyd Petre
--------------------------------
Percentage of
Total Commitment: 5% Its Executive Director
----------------------------
-7-
<PAGE>
SCOTIABANC INC.
Commitment Amount: $20,000,000 By /s/ Frank F. Sandler
--------------------------------
Percentage of
Total Commitment: 5% Its Relationship Manager
----------------------------
NATIONAL CITY BANK OF KENTUCKY
Commitment Amount: $18,000,000 By /s/ Kevin C. Anderson
--------------------------------
Percentage of
Total Commitment: 4.5% Its Vice President
----------------------------
MELLON BANK, N.A.
Commitment Amount: $17,000,000 By /s/ Roger N. Stanier
--------------------------------
Percentage of
Total Commitment: 4.25% Its Vice President
----------------------------
MICHIGAN NATIONAL BANK
Commitment Amount: $15,000,000 By Eric Haeger
--------------------------------
Percentage of
Total Commitment: 3.75% Its Commercial Relationship
-----------------------
Manager
-------
COMERICA BANK
Commitment Amount: $15,000,000 By /s/ David W. Shirey
--------------------------------
Percentage of
Total Commitment: 3.75% Its Asst. Vice President
----------------------------
NATIONSBANK, N.A.
Commitment Amount: $15,000,000 By /s/ Nan C. Hillis
--------------------------------
Percentage of
Total Commitment: 3.75% Its Senior Vice President
----------------------------
PNC BANK, NATIONAL ASSOCIATION
Commitment Amount: $14,000,000 By /s/ David W. Mengel
--------------------------------
Percentage of
Total Commitment: 3.5% Its Senior Vice President
----------------------------
BANK OF TOKYO-MITSUBISHI, LTD.
Commitment Amount: $10,000,000 By /s/ G. Englund
--------------------------------
Percentage of
Total Commitment: 2.5% Its V.P. & Manager
----------------------------
DEPOSIT GUARANTY NATIONAL BANK
Commitment Amount: $10,000,000 By /s/ Steven C. Krohn
--------------------------------
Percentage of
Total Commitment: 2.5% Its Senior Vice President
----------------------------
-8-
<PAGE>
THE SUMITOMO BANK, LIMITED
Commitment Amount: $10,000,000 By /s/ Gary Franke
--------------------------------
Percentage of
Total Commitment: 2.5% Its Vice President & Manager
----------------------------
COMPASS BANK
Commitment Amount: $10,000,000 By /s/ Eric Cates
--------------------------------
Percentage o
Total Commitment: 2.5% Its Sr. Vice President
----------------------------
Total Commitment Amount
of all Banks: $400,000,000
-9-
<PAGE>
EXHIBIT 10.2(Z)
---------------
SECOND AMENDMENT
----------------
TO
--
SECOND AMENDED AND RESTATED
---------------------------
CREDIT AGREEMENT
----------------
THIS SECOND AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT,
dated as of November 25, 1998 (this "Amendment"), is by and among CITATION
CORPORATION, a Delaware corporation ("Citation" or the "Company"), CITATION
AUTOMOTIVE SALES CORP., a Michigan corporation, MANSFIELD FOUNDRY CORPORATION,
an Ohio corporation formerly known as MFC Acquisition Corporation, IROQUOIS
FOUNDRY CORPORATION, a Wisconsin corporation formerly known as Iroquois
Acquisition Corporation, OBERDORFER INDUSTRIES CORP., a New York corporation
formerly known as OBI Acquisition Corp., BERLIN FOUNDRY CORPORATION, a Wisconsin
corporation, CASTWELL PRODUCTS, INC., an Illinois corporation, TEXAS STEEL
CORPORATION, a Texas corporation formerly known as TSC Acquisition Corporation,
HI-TECH, INC., an Indiana corporation formerly known as HTC Acquisition
Corporation, SOUTHERN ALUMINUM CASTINGS COMPANY, an Alabama corporation, BOHN
ALUMINUM, INC., an Indiana corporation formerly known as BAC Acquisition
Corporation, TSC TEXAS CORPORATION, a Delaware corporation, TEXAS FOUNDRIES,
LTD., a Texas limited partnership, MABRY FOUNDRY COMPANY, LTD., a Texas limited
partnership, CITATION CASTINGS, INC., an Alabama corporation, INTERSTATE FORGING
INDUSTRIES, INC., a Wisconsin corporation, INTERSTATE SOUTHWEST, LTD., a Texas
limited partnership, ISW TEXAS CORPORATION, a Delaware corporation, CAMDEN
CASTING CENTER, INC., a Tennessee corporation, DYCAST, INC., a Delaware
corporation, and CITATION PRECISION, INC., a California corporation (together
with Citation, collectively, the "Borrowers" and, individually, a "Borrower"),
the banks and other lenders identified on the signature pages hereof
(collectively, the "Banks" and, individually, a "Bank"), THE FIRST NATIONAL BANK
OF CHICAGO, a national banking association, successor to NBD Bank, a Michigan
banking corporation, as administrative and syndication agent (in such capacity,
the "Administrative Agent") for the Banks, and SOUTHTRUST BANK, NATIONAL
ASSOCIATION, a national banking association formerly known as SouthTrust Bank of
Alabama, National Association, as collateral agent (in such capacity, the
"Collateral Agent", and together with the Administrative Agent, collectively,
the "Agents" and, individually, an "Agent") for the Banks.
INTRODUCTION
------------
The Borrowers, certain Banks (collectively, the "Existing Banks" and,
individually, an "Existing Bank") and the Agents have entered into the Second
Amended and Restated Credit Agreement, dated as of August 3, 1998, as amended by
the First Amendment to Second Amended and Restated Credit Agreement, dated as of
November 3, 1998 (as further amended or modified from time to time, the "Credit
Agreement"), pursuant to which the Existing Banks provide to the Borrowers a
revolving credit facility in the aggregate principal amount of $400,000,000.
The Borrowers now desire to amend the Credit Agreement in certain respects, and
the Banks and the Agents are willing to provide for such amendments on the terms
and conditions herein set forth.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements herein and in the Credit Agreement contained, the Borrowers, the
Banks and the Agents hereby agree as follows:
ARTICLE 1. AMENDMENTS TO CREDIT AGREEMENT
Effective as of the date hereof, the Credit Agreement hereby is amended as
follows:
1
<PAGE>
1.1 The following definition of the term "Shareholder Rights Plan" is
added to Section 1.1 in alphabetical order:
"Shareholder Rights Plan" shall mean the Shareholder Rights Plan
adopted by Citation, effective November 25, 1998, as announced by Citation
November 30, 1998.
1.2 Paragraphs (b) and (c) of Section 2.2 are relabeled as paragraphs
(c) and (d), respectively, and the following new paragraph (b) is added to
Section 2.2:
(b) Immediately upon the receipt by Citation of such proceeds,
the Commitments automatically shall be reduced by an amount equal to 100%
of the proceeds (net of expenses reasonably incurred in connection
therewith; and such net proceeds to be rounded to the nearest $500,000)
received by Citation from the issuance, sale or other disposition of any of
its capital stock, including, without limitation, pursuant to the exercise
of shareholder rights under the Shareholder Rights Plan, but excluding any
such issuance, sale or other disposition pursuant to the Citation
Compensation and Benefit Plans (as such term is defined in Section 5.2(o)).
For purposes of this Section 2.2(b), "capital stock" shall include capital
stock and any securities exchangeable for or convertible into capital stock
and any warrants, rights or other options to purchase or otherwise acquire
capital stock or such securities.
1.3 Paragraph (l) of Section 5.2 is amended and restated in full as
follows:
(l) Citation will not declare or pay any dividends, or make any
other payments or distributions on account of its capital stock, which
exceed in the aggregate for all such dividends, payments and distributions
in any fiscal year an amount equal to 10% of Citation's net income,
determined in accordance with Generally Accepted Accounting Principles, for
the immediately preceding fiscal year; provided, however, that no dividends
or other such payments shall be made by Citation at any time that the ratio
of Total Debt, as determined as of the end of the latest fiscal quarter of
Citation for which a Compliance Certificate has been delivered pursuant to
Section 5.1(c)(4), to Adjusted EBITDA for the period of four consecutive
fiscal quarters ending with such quarter end is greater than 2.5 to 1.0.
Notwithstanding anything herein to the contrary, this Section 5.2(l) shall
not prohibit (i) a distribution to Citation's former S Corporation
stockholders relating to a determination, due to an Internal Revenue
Service audit, that Citation's taxable income for any period prior to the
termination of its former S Corporation status should be increased, or (ii)
the dividends of share purchase rights in accordance with the Shareholder
Rights Plan.
1.4 Paragraph (o) of Section 5.2 is amended and restated in full as
follows:
(o) Neither Citation nor any Consolidated Entity will redeem,
purchase or retire any of its capital stock or partnership or other
ownership interests or grant or issue any warrant, right or option
pertaining thereto or other security convertible into any of the foregoing,
or permit any redemption or retirement of the outstanding capital stock or
partnership or other ownership interests of Citation or of any Consolidated
Entity; provided, however, that this Section 5.2(o) shall not prohibit (i)
the issuance of share purchase rights in accordance with the Shareholder
Rights Plan, or (ii) the redemption, repurchase, retirement or other
acquisition by Citation of its common stock to the extent the aggregate
consideration paid by Citation and the Consolidated Entities in connection
with all such redemptions, repurchases, retirements and other acquisitions
after the Effective Date does not exceed $10,000,000. No Consolidated
Entity will issue any capital stock or partnership or other ownership
interests or grant or issue any warrant, right or option pertaining thereto
or other security convertible into any of the foregoing. Notwithstanding
anything in this Agreement to the contrary, this Section 5.2(o) shall not
prohibit the transactions of Citation and the Consolidated Entities in the
ordinary course of business under, and in accordance with the terms of, the
following (collectively, the "Citation Compensation and
2
<PAGE>
Benefit Plans"): (i) Citation Corporation 1994 Incentive Award Plan; (ii)
Citation Corporation Employee Stock Purchase Plan; (iii) Citation
Corporation Non-Qualified Stock Option Plan For Non-Employee Directors;
(iv) Citation Corporation Stock Plan for Non-Employee Directors; (v) 401(k)
plans for Citation and numerous of the Consolidated Entities (in all of
which participants may invest elective deferral accounts and employer
matching contribution accounts in Citation stock); and (vi) other plans
established from time to time by Citation and the Consolidated Entities
that are reasonably determined by the Administrative Agent to be of a
similar nature to those described in the foregoing clauses (i)-(v),
provided that, prior to the establishment of any such plan, Citation
furnishes to the Administrative Agent such information about such plan and
copies of such documents relating thereto as the Administrative Agent may
reasonably request for the purpose of making the determination required
under this clause (vi).
ARTICLE 2. REPRESENTATIONS AND WARRANTIES
In order to induce the Banks and the Agents to enter into this Amendment,
each of the Borrowers hereby, jointly and severally, represents and warrants to
the Banks and the Agents that:
2.1 The execution, delivery and performance by such Borrower of this
Amendment are within its corporate powers, have been duly authorized by all
necessary corporate action and are not in contravention of any law, rule or
regulation, or any judgment, decree, writ, injunction, order or award of any
arbitrator, court or governmental authority, or of the terms of such Borrower's
charter or by-laws or partnership agreement, or of any contract or undertaking
to which such Borrower is a party or by which such Borrower or its property is
or may be bound or affected.
2.2 This Amendment is a legal, valid and binding obligation of such
Borrower, enforceable against such Borrower in accordance with its terms.
2.3 No consent, approval or authorization of or declaration, registration
or filing with any governmental authority or any nongovernmental person or
entity, including without limitation any creditor, stockholder or member of such
Borrower, is required on the part of such Borrower in connection with the
execution, delivery and performance of this Amendment or the transactions
contemplated hereby or as a condition to the legality, validity or
enforceability of this Amendment.
2.4 After giving effect to the amendments set forth in Article 1 of this
Amendment, all representations and warranties contained in Article IV of the
Credit Agreement and in the Security Documents are true and correct on and as of
the date of execution hereof as if such representations and warranties were made
on and as of such date. No Default or Event of Default exists or has occurred
and is continuing on the date of execution hereof (whether before or after the
effectiveness of this Amendment).
ARTICLE 3. MISCELLANEOUS
3.1 All references to the Credit Agreement in any of the other Loan
Documents or any other document, instrument or certificate referred to in the
Credit Agreement or delivered in connection therewith or pursuant thereto,
hereafter shall be deemed references to the Credit Agreement, as amended hereby.
3.2 The other Loan Documents, any and all certificates or financing
statements executed pursuant to the Credit Agreement or in connection therewith
and, subject to the amendments herein provided, the Credit Agreement shall in
all respects continue in full force and effect.
3
<PAGE>
3.3 Capitalized terms used but not defined herein shall have the
respective meanings ascribed thereto in the Credit Agreement. The headings of
the various subdivisions hereof are for the convenience of reference only and
shall in no way modify any of the terms or provisions hereof.
3.4 This Amendment shall be governed by and construed in accordance with
the laws of the State of Illinois.
3.5 The Borrowers, jointly and severally, agree to pay the reasonable fees
and expenses of Dickinson Wright PLLC, counsel for the Administrative Agent, in
connection with the negotiation and preparation of this Amendment and in
connection with advising the Administrative Agent as to its rights and
responsibilities with respect thereto.
3.6 This Amendment may be executed upon any number of counterparts with
the same effect as if the signatures thereto were upon the same instrument.
[The rest of this page intentionally left blank.]
4
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Amendment to be duly
executed and delivered as of the day and year first above written.
CITATION CORPORATION,
CITATION AUTOMOTIVE SALES CORP.,
MANSFIELD FOUNDRY CORPORATION,
IROQUOIS FOUNDRY CORPORATION,
OBERDORFER INDUSTRIES CORP.,
BERLIN FOUNDRY CORPORATION,
CASTWELL PRODUCTS, INC.,
TEXAS STEEL CORPORATION,
HI-TECH, INC., SOUTHERN ALUMINUM
CASTINGS COMPANY, BOHN ALUMINUM,
INC., TSC TEXAS CORPORATION, TEXAS
FOUNDRIES, LTD., by Texas Steel
Corporation, its General Partner,
MABRY FOUNDRY COMPANY, LTD.,
by Texas Steel Corporation, its General Partner,
CITATION CASTINGS, INC.,
INTERSTATE FORGING INDUSTRIES,
INC., INTERSTATE SOUTHWEST, LTD.,
by Texas Steel Corporation, its General Partner,
ISW TEXAS CORPORATION, CAMDEN
CASTING CENTER, INC., DYCAST, INC.
and CITATION PRECISION,
INC.
By /s/ Thomas W. Burleson
------------------------------------------
Thomas W. Burleson, signing on behalf of each
of them as Vice President of each of them
THE FIRST NATIONAL BANK OF
CHICAGO, as a Bank and as the
Administrative Agent
By /s/ David T. McNeela
---------------------------------------------
Its Vice President
5
<PAGE>
SOUTHTRUST BANK, NATIONAL
ASSOCIATION, as a Bank and as the
Collateral Agent
By__________________________________
Its_______________________________
AMSOUTH BANK
By /s/ J.M. Noel
---------------------------------
Its S.V.P.
FIRST UNION NATIONAL BANK
By /s/ Mark F. Felker
---------------------------------
Its Senior Vice President
CREDIT LYONNAIS ATLANTA AGENCY
By /s/ David M. Cawrse
---------------------------------
Its First Vice President & Manager
BRANCH BANKING & TRUST COMPANY
By /s/ Thatcher L. Townsend III
---------------------------------
Its Senior Vice President
SUNTRUST BANK, ATLANTA
By__________________________________
Its_______________________________
and By _____________________________
Its_______________________________
CIBC INC.
By /s/ Cyd Petre
---------------------------------
Its Executive Director
6
<PAGE>
SCOTIABANC INC.
By /s/ W. Brown
----------------------------------
Its Managing Director
NATIONAL CITY BANK OF KENTUCKY
By /s/ Kevin L. Anderson
---------------------------------
Its Vice President
MELLON BANK, N.A.
By__________________________________
Its_______________________________
MICHIGAN NATIONAL BANK
By /s/ Eric Haege
---------------------------------
Its Commercial Relationship Manager
COMERICA BANK
By /s/ David W. Shirey
---------------------------------
Its Assistant Vice President
NATIONSBANK, N.A.
By /s/ Nan C. Hillis
---------------------------------
Its Sr. Vice President
PNC BANK, NATIONAL ASSOCIATION
By__________________________________
Its_______________________________
7
<PAGE>
BANK OF TOKYO-MITSUBISHI, LTD.
By /s/ William Otott
---------------------------------
Its VP
DEPOSIT GUARANTY NATIONAL BANK
By /s/ Steven C. Krohn
---------------------------------
Its Senior Vice President
THE SUMITOMO BANK, LIMITED
By__________________________________
Its_______________________________
COMPASS BANK
By /s/ Eric Cates
---------------------------------
Its Sr. Vice President
8
<PAGE>
EXHIBIT 10.3(C)
---------------
Citation Corporation
2 Office Park Circle
Suite 204
Birmingham, Alabama 35223
(205) 871-5731
FAX (205) 870-8211
December 1, 1998
Mr. Frederick F. Sommer
c/o Citation Corporation
2 Office Park Circle
Suite 204
Birmingham, Alabama 35223
Re: Change in Control Retention and Severance Agreement
Dear Mr. Sommer:
Citation Corporation (the "Company"), considers the establishment and
maintenance of a sound and vital senior management team to be essential to
protecting and enhancing the best interests of the Company and its stockholders.
In this connection, the Company recognizes that the possibility of a change in
control may exist in the future, and that such possibility, and the uncertainty
and questions which it may raise among management, may result in the departure
or distraction of management personnel to the detriment of the Company and its
stockholders. Accordingly, the Board of Directors of the Company (the "Board")
has determined that appropriate steps should be taken to reinforce and encourage
the continued attention and dedication of members of the Company's senior
management, including yourself, to their assigned duties without distraction
arising from the possibility of a change in control of the Company. The Board
has also determined that appropriate steps should be taken to encourage senior
management's participation, in the event of a proposed change in control, in the
successful completion of the change in control transaction while maintaining
their focus on business performance and strategy execution.
In order to induce you to remain in the employ of the Company and in
consideration of your agreeing to remain in the employ of the Company subject to
the terms and conditions set forth below, this letter agreement sets forth the
benefits which the Company agrees will be provided to you in the event your
employment with the Company is terminated subsequent to a change in control of
the Company (as defined in Section 1 of this letter agreement) under the
circumstances described below.
1. CHANGE IN CONTROL. No benefits shall be payable hereunder unless
there shall have been a change in control of the Company, as set forth below and
such change in control occurs prior to the termination of your employment. For
purposes of this Agreement, a "change in control" shall mean the occurrence of
any of the following events, if subsequent to the date of this Agreement:
(a) Any person, entity or "group" (within the meaning of Rules 13d
through 13d-6 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act")) (other than any subsidiary or affiliate as of the date hereof of the
Company or any employee benefit plan of the Company) has acquired or agreed to
acquire beneficial ownership of 50% or more of the voting and/or economic
interest in the capital stock of the Company; or
1
<PAGE>
(b) A majority of the board of directors of the Company shall consist
at such time of individuals other than (i) members of the board of directors on
the date hereof and (ii) other members of the Board approved to become a
director by a majority of such members referred to in clause (i) or by members
so approved ("Continuing Directors"); or
(c) The approval by the stockholders of the Company and completion of
(i) a merger or consolidation of the Company, statutory share exchange, or other
similar transaction with another corporation, partnership, or other entity or
enterprise in which either the Company is not the surviving or continuing
corporation, (ii) a sale or disposition of all or substantially all of the
assets of the Company, or (iii) the dissolution of the Company.
2. INCENTIVE AWARDS. If any of the events described in Section 1 hereof
constituting a change in control shall have occurred, then any award you have
received under the 1994 Incentive Award Plan or a successor plan will be vested
and any restrictions placed on such awards will lapse as of the date the change
in control is completed ("Change in Control Date").
3. NONQUALIFIED DEFERRED COMPENSATION. If any of the events described in
Section 1 hereof constituting a change in control shall have occurred, then you
shall receive payment of the entire balance in your Compensation Deferral
Account and Matching Contribution Account, as defined in the Citation
Corporation Nonqualified Deferred Compensation Plan, in cash and in one lump sum
as of the Change in Control Date.
4. TERMINATION FOLLOWING CHANGE IN CONTROL. If any of the events
described in Section 1 hereof constituting a change in control of the Company
shall have occurred, you shall be entitled to the benefits provided in Section 5
hereof upon the subsequent involuntary termination of your employment by the
Company, if such termination occurs within the period beginning on the Change in
Control Date and ending on the second anniversary of the Change in Control Date
(the "Trigger Period") unless such termination is (i) because of your death or
Retirement, (ii) by the Company for Cause (iii) by the Company or you for
Disability (such termination within such period, as limited by clauses (i)
through (iii), being sometimes referred to hereinafter as a "Payment Trigger").
In the event your employment is terminated within the Trigger Period, following
the occurrence of any of the events set forth at paragraph (c) below, such
termination of your employment shall be deemed to be an involuntary termination
of your employment by the Company and shall entitle you to the benefits provided
in Section 5 hereof.
(a). Disability; Retirement.
(i) "Disability" shall mean a disability which entitles
you to a disability benefit under a disability program sponsored or
maintained by the Company; provided, that if no such program is applicable
to you, then "Disability" shall mean that, based on medical evidence
reasonably satisfactory to the Compensation Committee of the Board, you are
totally and permanently unable to engage in any occupation or gainful
employment for which you are reasonably suited by background, training,
education or experience.
(ii) Termination by the Company or you of your employment
based on "Retirement" shall mean termination in accordance with the
Company's retirement policy, including early retirement, generally
applicable to its salaried employees.
(b) Cause. Termination by the Company of your employment for
"Cause" shall mean termination based upon any of the following:
(i) dishonesty or fraud by you in connection with your
employment;
2
<PAGE>
(ii) appropriation (or attempted appropriation) by you of a
material business opportunity of the Company, including attempting to
secure or securing any personal profit in connection with any transaction
entered into on behalf of the Company;
(iii) misappropriation by you (or attempted
misappropriation) of any of the Company's funds or property;
(iv) your conviction of, or indictment for (or its
procedural equivalent) or entering of a guilty plea or plea of no contest
with respect to, a felony or any other criminal offense involving moral
turpitude; or
(v) deliberate, willful or gross misconduct by you in the
performance of your duties with the Company, as determined by the good
faith judgment of the Compensation Committee of the Board.
For purposes of this paragraph, no act, or failure to act, on your part shall be
considered "willful" unless done, or omitted to be done, by you not in good
faith and without any reasonable belief that your action or omission was in the
best interest of the Company.
(c) Constructive Termination. Your employment will be deemed to
have been involuntarily terminated by the Company upon the termination of your
employment, whether by you or by the Company, following the occurrence of any of
the following without your prior written consent (any such event being sometimes
referred to hereinafter as your "Constructive Termination"):
(i) subsequent to a change in control of the Company, any
reduction in your title, duties, responsibilities or authority with the
Company as such existed immediately prior to a change in control, except in
connection with the termination of your employment for Cause, Disability,
Retirement or as a result of your death or voluntarily by you; or
(ii) subsequent to a change in control of the Company, a
reduction by the Company in your base salary as in effect on the date
hereof or as the same may be increased from time to time; or
(iii) subsequent to a change in control of the Company, a
failure by the Company to continue any bonus plans in which you are
presently entitled to participate as the same may be modified from time to
time prior to (but not in anticipation of) such change in control, or as
the same may be modified following such change in control as may be
required by or desirable for the Company due to changes to (x) the Internal
Revenue Code of 1986, as amended (the "Code"), (y) applicable accounting
rules or principles or (z) applicable laws or regulations, including,
without limitation, the Employee Retirement Income and Security Act of
1974, as amended, (the "Bonus Plans") or a failure by the Company to
continue you as a participant in the Bonus Plans on at least the same basis
as you presently participate in accordance with the Bonus Plans; or
(iv) subsequent to a change in control of the Company, the
failure by the Company to continue in effect any benefit or compensation
plan, life insurance plan, health-and-accident plan or disability plan in
which you are participating at the time of a change in control of the
Company (or plans providing you with substantially similar benefits), the
taking of any action by the Company which would materially adversely affect
your participation in or materially reduce your benefits under any such
plans or deprive you of any material fringe benefit enjoyed by you at the
time of the change in control, or the failure by the Company to provide you
with the number of paid vacation days to which you are then entitled in
accordance with the Company's normal vacation policy in effect on the date
hereof; or
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(v) subsequent to a change in control of the Company, a
change in the location of your employment greater than twenty-five (25)
miles from your office location on the date hereof.
(d) Notice of Termination. Any purported termination by the
Company pursuant to your Disability or Retirement, as defined in paragraph (a)
above, or for Cause, as defined in paragraph (b) above, or by you pursuant to
your Disability or Retirement, as defined in paragraph (a) above or by you or
the Company based on an event of Constructive Termination, as defined in
paragraph (c) above, shall be communicated by written Notice of Termination to
the other party hereto. For purposes of this Agreement, a "Notice of
Termination" shall indicate the specific termination provision in this Agreement
relied upon and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of your employment under the
provision so indicated.
(e) Date of Termination. "Date of Termination" shall mean (i)
if your employment is terminated for Disability, thirty (30) days after Notice
of Termination is given (provided that you shall not have returned to the
performance of your duties on a full-time basis during such thirty (30) day
period), (ii) if your employment is terminated due to your death, the date of
your death, (iii) if your employment is terminated pursuant to paragraph (b)
above, the date specified in the Notice of Termination, (iv) if your employment
is terminated for Retirement, the date specified in the Notice of Termination,
and (v) if your employment is terminated for any other reason, the date on which
a Notice of Termination is given; provided that if within thirty (30) days after
any Notice of Termination is given the party receiving such Notice of
Termination notifies the other party that a dispute exists concerning the
termination, the Date of Termination shall be the date on which the dispute is
finally determined, either by mutual written agreement of the parties, or by a
final judgment, order or decree of a court of competent jurisdiction (the time
for appeal therefrom having expired and no appeal having been perfected);
provided further, however, that if such disputed termination constitutes a
Payment Trigger, the Trigger Period shall not run pending resolution of the
dispute but shall recommence upon the date that the dispute is finally
determined (as set forth in the preceding proviso).
5. CERTAIN BENEFITS UPON TERMINATION. If, after a change in control of
the Company shall have occurred, as defined in Section 1 above, your employment
with the Company shall be terminated (including a Constructive Termination)
within the Trigger Period by the Company or you other than for Cause,
Disability, Retirement or death, and other than by your voluntarily terminating
your employment with the Company, then you shall be entitled to the benefits
outlined below:
(a) the Company shall pay to you within thirty (30) days following the
Date of Termination in a lump sum cash payment your full base salary through the
Date of Termination at the rate in effect at the time Notice of Termination is
given plus (i) credit for any vacation earned but not taken, (ii) the amount, if
any, of any bonus for a past fiscal year which has been earned but not yet been
paid to you, and (iii) a pro-rated payment, based on the Company's results as of
the Date of Termination, of any bonus due under any Bonus Plan in which you
participate;
(b) in lieu of any further salary payments to you for periods
subsequent to the Date of Termination, the Company shall pay as severance pay to
you within thirty (30) days following the Date of Termination a lump sum amount
equal to two and ninety-nine/hundredths (2.99) times the sum of (i) the amount
of your annual base salary at the highest rate in effect during the twelve (12)
months immediately preceding the Date of Termination, and (ii) the average
annual bonus received by you during the three (3) years immediately preceding
the Date of Termination or, if the term of your employment with the Company has
been less than the amount of time necessary for full (not partial or pro-rated)
participation in the bonus plan for three years, then the average annual bonus
received by you in the number of years immediately preceding the Date of
Termination (but no more than three) for which you have been a full participant
in the bonus plan; or, if the term of your employment has been less than one
year, then your average annual bonus will be equal to the total of your bonus
for the first four full quarters guaranteed at the time of your employment;
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(c) the Company shall maintain in full force and effect, for your
continued benefit until the earlier of (i) three (3) years after the Date of
Termination or (ii) you obtain substantially the same coverage from a new
employer, all life insurance, medical, health and accident, and disability
plans, programs or arrangements in which you were entitled to participate
immediately prior to the Date of Termination, provided that your continued
participation is possible under the general terms and provisions of such plans
and programs. In the event that your participation in any such plan or program
is barred, the Company shall use reasonable efforts to arrange to provide you
with benefits substantially similar to those which you are entitled to receive
under such plans and programs.
6. SECTION 280G CAP. It is the intent of the parties hereto that no
amount payable pursuant to the terms of this Agreement shall cause any payment
or transfer by the Company to or for your benefit, whether paid or payable (or
transferred or transferable) pursuant to the terms of this Agreement or
otherwise (a "Payment"), to be subject to taxation under section 4999 of the
Code and as an "excess parachute payment" as defined in section 280g of the
Code. In the event that the last independent auditors selected by the Board
prior to your termination under this Agreement (the "Auditors") determine that
any such item constitutes an "excess parachute payment", then you are required
to irrevocably elect to relinquish or not exercise any payments of benefits
available to you under any plan, contract or program before the payment or
enjoyment thereof in order to limit such payments or benefits for the purpose of
eliminating any "excess parachute payment."
7. TERM OF AGREEMENT. This Agreement shall become effective on the date
hereof and shall continue in effect until the earliest of the following:
(i) a Date of Termination in accordance with Section 4(e) or other
termination of your employment with the Company shall have occurred prior to a
change in control of the Company; or
(ii) if a Payment Trigger shall have occurred during the term of this
Agreement, the performance by the Company of all its obligations, and the
satisfaction by the Company of all its obligations and liabilities, under this
Agreement; or
(iii) the date that is the third (3rd) anniversary of the date of this
agreement, or, if the agreement has been renewed, the date that is the first
(1st) anniversary of date of the renewal of the agreement; provided, however,
that if a change in control of the Company occurs prior to the third (3rd)
anniversary of the date of this agreement or the first (1st) anniversary of the
Renewal Date (whichever is later), the Company's obligation to you under this
Agreement due to such change in control shall continue through the final day of
the Trigger Period that begins with such change in control.
Beginning on the third (3rd) anniversary of the date of this agreement and
continuing each anniversary thereafter ("Renewal Date"), the agreement will be
automatically renewed for a one-year period, unless either party gives written
notice to the other party at least thirty (30) days prior to the Renewal Date.
Any change in control of the Company during the term of this Agreement
that for any reason ceases to constitute a change in control under this
agreement or is not followed by a Payment Trigger shall not effect a termination
or lapse of this Agreement.
8. COMPANY'S RIGHT TO TERMINATE. You acknowledge that this Agreement
does not operate as an employment contract nor establish any right of continued
employment with the Company and that the Company may terminate your employment
at any time, subject to providing the benefits specified in this Agreement, if
applicable.
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9. SUCCESSORS; BINDING AGREEMENT.
(a) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. Failure of the Company to obtain such agreement prior to the
effectiveness of any such succession shall be a breach of this Agreement and
shall constitute an event of Constructive Termination.
(b) This Agreement shall inure to the benefit of and be enforceable
by your personal or legal representatives, executors, administrators,
successors, heirs, and legatees.
10. NOTICE. For the purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered personally or mailed by certified
or registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth on the last page of this Agreement (provided that
all notices to the Company shall be directed to the Chief Executive Officer of
the Company with a copy to the Secretary of the Company), or to such other
address as either party may have furnished to the other in writing.
11. MISCELLANEOUS. No provisions of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing signed by you and such officer as may be authorized by the Board of
Directors of the Company. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
Alabama. This Agreement shall not supersede or in any way limit the rights,
duties or obligations you may have under any other written agreement with the
Company.
12. ENFORCEMENT; EXPENSES. The provisions of this Agreement shall be
regarded as divisible, and if any provision is declared invalid or unenforceable
by a court of competent jurisdiction, the validity and enforceability of the
remainder of such provisions hereof shall not be affected. The Company shall
pay all fees, costs and expenses (including, without limitation, reasonable
attorneys' fees and the costs of investigating any potential claim) incurred by
you in connection with any dispute arising under or relating to this Agreement
or any action(s) or proceeding(s) to enforce your rights under this Agreement,
should you prevail in such action or proceeding.
Kindly sign and return to the Company the enclosed copy of this letter,
which will then constitute our agreement on the subject.
CITATION CORPORATION
/s/ T. Morris Hackney
- -----------------------------------
T. Morris Hackney, Chairman of the Board
2 Office Park Circle, Suite 204
Birmingham, Alabama 35223
AGREED TO THIS 7th DAY OF DECEMBER, 1998.
/s/ Frederick F. Sommer
- -------------------------------
Frederick F. Sommer, Executive
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EXHIBIT 10.3(D)
---------------
Citation Corporation
2 Office Park Circle
Suite 204
Birmingham, Alabama 35223
(205) 871-5731
FAX (205) 870-8211
December 1, 1998
Mr. John W. Lawson
c/o Citation Corporation
2 Office Park Circle
Suite 204
Birmingham, Alabama 35223
Re: Change in Control Retention and Severance Agreement
Dear Mr. Lawson:
Citation Corporation (the "Company"), considers the establishment and
maintenance of a sound and vital senior management team to be essential to
protecting and enhancing the best interests of the Company and its stockholders.
In this connection, the Company recognizes that the possibility of a change in
control may exist in the future, and that such possibility, and the uncertainty
and questions which it may raise among management, may result in the departure
or distraction of management personnel to the detriment of the Company and its
stockholders. Accordingly, the Board of Directors of the Company (the "Board")
has determined that appropriate steps should be taken to reinforce and encourage
the continued attention and dedication of members of the Company's senior
management, including yourself, to their assigned duties without distraction
arising from the possibility of a change in control of the Company. The Board
has also determined that appropriate steps should be taken to encourage senior
management's participation, in the event of a proposed change in control, in the
successful completion of the change in control transaction while maintaining
their focus on business performance and strategy execution.
In order to induce you to remain in the employ of the Company and in
consideration of your agreeing to remain in the employ of the Company subject to
the terms and conditions set forth below, this letter agreement sets forth the
benefits which the Company agrees will be provided to you in the event your
employment with the Company is terminated subsequent to a change in control of
the Company (as defined in Section 1 of this letter agreement) under the
circumstances described below.
1. CHANGE IN CONTROL. No benefits shall be payable hereunder unless
there shall have been a change in control of the Company, as set forth below and
such change in control occurs prior to the termination of your employment. For
purposes of this Agreement, a "change in control" shall mean the occurrence of
any of the following events, if subsequent to the date of this Agreement:
(a) Any person, entity or "group" (within the meaning of Rules 13d
through 13d-6 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act")) (other than any subsidiary or affiliate as of the date hereof of the
Company or any employee benefit plan of the Company) has acquired or agreed to
acquire beneficial ownership of 50% or more of the voting and/or economic
interest in the capital stock of the Company; or
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(b) A majority of the board of directors of the Company shall consist
at such time of individuals other than (i) members of the board of directors on
the date hereof and (ii) other members of the Board approved to become a
director by a majority of such members referred to in clause (i) or by members
so approved ("Continuing Directors"); or
(c) The approval by the stockholders of the Company and completion of
(i) a merger or consolidation of the Company, statutory share exchange, or other
similar transaction with another corporation, partnership, or other entity or
enterprise in which either the Company is not the surviving or continuing
corporation, (ii) a sale or disposition of all or substantially all of the
assets of the Company, or (iii) the dissolution of the Company.
2. INCENTIVE AWARDS. If any of the events described in Section 1 hereof
constituting a change in control shall have occurred, then any award you have
received under the 1994 Incentive Award Plan or a successor plan will be vested
and any restrictions placed on such awards will lapse as of the date the change
in control is completed ("Change in Control Date").
3. NONQUALIFIED DEFERRED COMPENSATION. If any of the events described in
Section 1 hereof constituting a change in control shall have occurred, then you
shall receive payment of the entire balance in your Compensation Deferral
Account and Matching Contribution Account, as defined in the Citation
Corporation Nonqualified Deferred Compensation Plan, in cash and in one lump sum
as of the Change in Control Date.
4. TERMINATION FOLLOWING CHANGE IN CONTROL. If any of the events
described in Section 1 hereof constituting a change in control of the Company
shall have occurred, you shall be entitled to the benefits provided in Section 5
hereof upon the subsequent involuntary termination of your employment by the
Company, if such termination occurs within the period beginning on the Change in
Control Date and ending on the second anniversary of the Change in Control Date
(the "Trigger Period") unless such termination is (i) because of your death or
Retirement, (ii) by the Company for Cause (iii) by the Company or you for
Disability (such termination within such period, as limited by clauses (i)
through (iii), being sometimes referred to hereinafter as a "Payment Trigger").
In the event your employment is terminated within the Trigger Period, following
the occurrence of any of the events set forth at paragraph (c) below, such
termination of your employment shall be deemed to be an involuntary termination
of your employment by the Company and shall entitle you to the benefits provided
in Section 5 hereof.
(a). Disability; Retirement.
(i) "Disability" shall mean a disability which entitles
you to a disability benefit under a disability program sponsored or
maintained by the Company; provided, that if no such program is applicable
to you, then "Disability" shall mean that, based on medical evidence
reasonably satisfactory to the Compensation Committee of the Board, you are
totally and permanently unable to engage in any occupation or gainful
employment for which you are reasonably suited by background, training,
education or experience.
(ii) Termination by the Company or you of your employment
based on "Retirement" shall mean termination in accordance with the
Company's retirement policy, including early retirement, generally
applicable to its salaried employees.
(b) Cause. Termination by the Company of your employment for "Cause"
shall mean termination based upon any of the following:
(i) dishonesty or fraud by you in connection with your
employment;
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(ii) appropriation (or attempted appropriation) by you of a
material business opportunity of the Company, including attempting to
secure or securing any personal profit in connection with any transaction
entered into on behalf of the Company;
(iii) misappropriation by you (or attempted misappropriation) of
any of the Company's funds or property;
(iv) your conviction of, or indictment for (or its procedural
equivalent) or entering of a guilty plea or plea of no contest with respect
to, a felony or any other criminal offense involving moral turpitude; or
(v) deliberate, willful or gross misconduct by you in the
performance of your duties with the Company, as determined by the good
faith judgment of the Compensation Committee of the Board.
For purposes of this paragraph, no act, or failure to act, on your part shall be
considered "willful" unless done, or omitted to be done, by you not in good
faith and without any reasonable belief that your action or omission was in the
best interest of the Company.
(c) Constructive Termination. Your employment will be deemed to have
been involuntarily terminated by the Company upon the termination of your
employment, whether by you or by the Company, following the occurrence of any of
the following without your prior written consent (any such event being sometimes
referred to hereinafter as your "Constructive Termination"):
(i) subsequent to a change in control of the Company, any
reduction in your title, duties, responsibilities or authority with the
Company as such existed immediately prior to a change in control, except in
connection with the termination of your employment for Cause, Disability,
Retirement or as a result of your death or voluntarily by you; or
(ii) subsequent to a change in control of the Company, a
reduction by the Company in your base salary as in effect on the date
hereof or as the same may be increased from time to time; or
(iii) subsequent to a change in control of the Company, a
failure by the Company to continue any bonus plans in which you are
presently entitled to participate as the same may be modified from time to
time prior to (but not in anticipation of) such change in control, or as
the same may be modified following such change in control as may be
required by or desirable for the Company due to changes to (x) the Internal
Revenue Code of 1986, as amended (the "Code"), (y) applicable accounting
rules or principles or (z) applicable laws or regulations, including,
without limitation, the Employee Retirement Income and Security Act of
1974, as amended, (the "Bonus Plans") or a failure by the Company to
continue you as a participant in the Bonus Plans on at least the same basis
as you presently participate in accordance with the Bonus Plans; or
(iv) subsequent to a change in control of the Company, the
failure by the Company to continue in effect any benefit or compensation
plan, life insurance plan, health-and-accident plan or disability plan in
which you are participating at the time of a change in control of the
Company (or plans providing you with substantially similar benefits), the
taking of any action by the Company which would materially adversely affect
your participation in or materially reduce your benefits under any such
plans or deprive you of any material fringe benefit enjoyed by you at the
time of the change in control, or the failure by the Company to provide you
with the number of paid vacation days to which you are then entitled in
accordance with the Company's normal vacation policy in effect on the date
hereof; or
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(v) subsequent to a change in control of the Company, a change
in the location of your employment greater than twenty-five (25) miles from
your office location on the date hereof.
(d) Notice of Termination. Any purported termination by the Company
pursuant to your Disability or Retirement, as defined in paragraph (a) above, or
for Cause, as defined in paragraph (b) above, or by you pursuant to your
Disability or Retirement, as defined in paragraph (a) above or by you or the
Company based on an event of Constructive Termination, as defined in paragraph
(c) above, shall be communicated by written Notice of Termination to the other
party hereto. For purposes of this Agreement, a "Notice of Termination" shall
indicate the specific termination provision in this Agreement relied upon and
shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of your employment under the provision so
indicated.
(e) Date of Termination. "Date of Termination" shall mean (i) if your
employment is terminated for Disability, thirty (30) days after Notice of
Termination is given (provided that you shall not have returned to the
performance of your duties on a full-time basis during such thirty (30) day
period), (ii) if your employment is terminated due to your death, the date of
your death, (iii) if your employment is terminated pursuant to paragraph (b)
above, the date specified in the Notice of Termination, (iv) if your employment
is terminated for Retirement, the date specified in the Notice of Termination,
and (v) if your employment is terminated for any other reason, the date on which
a Notice of Termination is given; provided that if within thirty (30) days after
any Notice of Termination is given the party receiving such Notice of
Termination notifies the other party that a dispute exists concerning the
termination, the Date of Termination shall be the date on which the dispute is
finally determined, either by mutual written agreement of the parties, or by a
final judgment, order or decree of a court of competent jurisdiction (the time
for appeal therefrom having expired and no appeal having been perfected);
provided further, however, that if such disputed termination constitutes a
Payment Trigger, the Trigger Period shall not run pending resolution of the
dispute but shall recommence upon the date that the dispute is finally
determined (as set forth in the preceding proviso).
5. CERTAIN BENEFITS UPON TERMINATION. If, after a change in control of
the Company shall have occurred, as defined in Section 1 above, your employment
with the Company shall be terminated (including a Constructive Termination)
within the Trigger Period by the Company or you other than for Cause,
Disability, Retirement or death, and other than by your voluntarily terminating
your employment with the Company, then you shall be entitled to the benefits
outlined below:
(a) the Company shall pay to you within thirty (30) days following
the Date of Termination in a lump sum cash payment your full base salary through
the Date of Termination at the rate in effect at the time Notice of Termination
is given plus (i) credit for any vacation earned but not taken, (ii) the amount,
if any, of any bonus for a past fiscal year which has been earned but not yet
been paid to you, and (iii) a pro-rated payment, based on the Company's results
as of the Date of Termination, of any bonus due under any Bonus Plan in which
you participate;
(b) in lieu of any further salary payments to you for periods
subsequent to the Date of Termination, the Company shall pay as severance pay to
you within thirty (30) days following the Date of Termination a lump sum amount
equal to two (2) times the sum of (i) the amount of your annual base salary at
the highest rate in effect during the twelve (12) months immediately preceding
the Date of Termination, and (ii) the average annual bonus received by you
during the three (3) years immediately preceding the Date of Termination or, if
the term of your employment with the Company has been less than the amount of
time necessary for full (not partial or pro-rated) participation in the bonus
plan for three years, then the average annual bonus received by you in the
number of years immediately preceding the Date of Termination (but no more than
three) for which you have been a full participant in the bonus plan; or, if the
term of your employment has been less than one year, then your average annual
bonus will be equal to the total of your bonus for the first four full quarters
guaranteed at the time of your employment;
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(c) the Company shall maintain in full force and effect, for your
continued benefit until the earlier of (i) two (2) years after the Date of
Termination or (ii) you obtain substantially the same coverage from a new
employer, all life insurance, medical, health and accident, and disability
plans, programs or arrangements in which you were entitled to participate
immediately prior to the Date of Termination, provided that your continued
participation is possible under the general terms and provisions of such plans
and programs. In the event that your participation in any such plan or program
is barred, the Company shall use reasonable efforts to arrange to provide you
with benefits substantially similar to those which you are entitled to receive
under such plans and programs.
6. SECTION 280G CAP. It is the intent of the parties hereto that no
amount payable pursuant to the terms of this Agreement shall cause any payment
or transfer by the Company to or for your benefit, whether paid or payable (or
transferred or transferable) pursuant to the terms of this Agreement or
otherwise (a "Payment"), to be subject to taxation under section 4999 of the
Code and as an "excess parachute payment" as defined in section 280g of the
Code. In the event that the last independent auditors selected by the Board
prior to your termination under this Agreement (the "Auditors") determine that
any such item constitutes an "excess parachute payment", then you are required
to irrevocably elect to relinquish or not exercise any payments of benefits
available to you under any plan, contract or program before the payment or
enjoyment thereof in order to limit such payments or benefits for the purpose of
eliminating any "excess parachute payment."
7. TERM OF AGREEMENT. This Agreement shall become effective on the date
hereof and shall continue in effect until the earliest of the following:
(i) a Date of Termination in accordance with Section 4(e) or other
termination of your employment with the Company shall have occurred prior to a
change in control of the Company; or
(ii) if a Payment Trigger shall have occurred during the term of
this Agreement, the performance by the Company of all its obligations, and the
satisfaction by the Company of all its obligations and liabilities, under this
Agreement; or
(iii) the date that is the third (3rd) anniversary of the date of
this agreement, or, if the agreement has been renewed, the date that is the
first (1st) anniversary of date of the renewal of the agreement; provided,
however, that if a change in control of the Company occurs prior to the third
(3rd) anniversary of the date of this agreement or the first (1st) anniversary
of the Renewal Date (whichever is later), the Company's obligation to you under
this Agreement due to such change in control shall continue through the final
day of the Trigger Period that begins with such change in control.
Beginning on the third (3rd) anniversary of the date of this agreement and
continuing each anniversary thereafter ("Renewal Date"), the agreement will be
automatically renewed for a one-year period, unless either party gives written
notice to the other party at least thirty (30) days prior to the Renewal Date.
Any change in control of the Company during the term of this Agreement
that for any reason ceases to constitute a change in control under this
agreement or is not followed by a Payment Trigger shall not effect a termination
or lapse of this Agreement.
8. COMPANY'S RIGHT TO TERMINATE. You acknowledge that this Agreement
does not operate as an employment contract nor establish any right of continued
employment with the Company and that the Company may terminate your employment
at any time, subject to providing the benefits specified in this Agreement, if
applicable.
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9. SUCCESSORS; BINDING AGREEMENT.
(a) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. Failure of the Company to obtain such agreement prior to the
effectiveness of any such succession shall be a breach of this Agreement and
shall constitute an event of Constructive Termination.
(b) This Agreement shall inure to the benefit of and be enforceable
by your personal or legal representatives, executors, administrators,
successors, heirs, and legatees.
10. NOTICE. For the purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered personally or mailed by certified
or registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth on the last page of this Agreement (provided that
all notices to the Company shall be directed to the Chief Executive Officer of
the Company with a copy to the Secretary of the Company), or to such other
address as either party may have furnished to the other in writing.
11. MISCELLANEOUS. No provisions of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing signed by you and such officer as may be authorized by the Board of
Directors of the Company. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
Alabama. This Agreement shall not supersede or in any way limit the rights,
duties or obligations you may have under any other written agreement with the
Company.
12. ENFORCEMENT; EXPENSES. The provisions of this Agreement shall be
regarded as divisible, and if any provision is declared invalid or unenforceable
by a court of competent jurisdiction, the validity and enforceability of the
remainder of such provisions hereof shall not be affected. The Company shall
pay all fees, costs and expenses (including, without limitation, reasonable
attorneys' fees and the costs of investigating any potential claim) incurred by
you in connection with any dispute arising under or relating to this Agreement
or any action(s) or proceeding(s) to enforce your rights under this Agreement,
should you prevail in such action or proceeding.
Kindly sign and return to the Company the enclosed copy of this letter,
which will then constitute our agreement on the subject.
CITATION CORPORATION
/s/ Frederick F. Sommer
- ----------------------------------------------
Frederick F. Sommer, Chief Executive Officer
2 Office Park Circle, Suite 204
Birmingham, Alabama 35223
AGREED TO THIS 7th DAY OF DECEMBER, 1998.
/s/ John W. Lawson
- ----------------------------------------------
John W. Lawson, Executive
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EXHIBIT 10.3(E)
---------------
Citation Corporation
2 Office Park Circle
Suite 204
Birmingham, Alabama 35223
(205) 871-5731
FAX (205) 870-8211
December 1, 1998
Mr. Edwin L. Yoder
c/o Citation Corporation
2 Office Park Circle
Suite 204
Birmingham, Alabama 35223
Re: Change in Control Retention and Severance Agreement
Dear Mr. Yoder:
Citation Corporation (the "Company"), considers the establishment and
maintenance of a sound and vital senior management team to be essential to
protecting and enhancing the best interests of the Company and its stockholders.
In this connection, the Company recognizes that the possibility of a change in
control may exist in the future, and that such possibility, and the uncertainty
and questions which it may raise among management, may result in the departure
or distraction of management personnel to the detriment of the Company and its
stockholders. Accordingly, the Board of Directors of the Company (the "Board")
has determined that appropriate steps should be taken to reinforce and encourage
the continued attention and dedication of members of the Company's senior
management, including yourself, to their assigned duties without distraction
arising from the possibility of a change in control of the Company. The Board
has also determined that appropriate steps should be taken to encourage senior
management's participation, in the event of a proposed change in control, in the
successful completion of the change in control transaction while maintaining
their focus on business performance and strategy execution.
In order to induce you to remain in the employ of the Company and in
consideration of your agreeing to remain in the employ of the Company subject to
the terms and conditions set forth below, this letter agreement sets forth the
benefits which the Company agrees will be provided to you in the event your
employment with the Company is terminated subsequent to a change in control of
the Company (as defined in Section 1 of this letter agreement) under the
circumstances described below.
1. CHANGE IN CONTROL. No benefits shall be payable hereunder unless there
shall have been a change in control of the Company, as set forth below and such
change in control occurs prior to the termination of your employment. For
purposes of this Agreement, a "change in control" shall mean the occurrence of
any of the following events, if subsequent to the date of this Agreement:
(a) Any person, entity or "group" (within the meaning of Rules 13d
through 13d-6 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act")) (other than any subsidiary or affiliate as of the date hereof of the
Company or any employee benefit plan of the Company) has acquired or agreed to
acquire beneficial ownership of 50% or more of the voting and/or economic
interest in the capital stock of the Company; or
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(b) A majority of the board of directors of the Company shall consist
at such time of individuals other than (i) members of the board of directors on
the date hereof and (ii) other members of the Board approved to become a
director by a majority of such members referred to in clause (i) or by members
so approved ("Continuing Directors"); or
(c) The approval by the stockholders of the Company and completion of
(i) a merger or consolidation of the Company, statutory share exchange, or other
similar transaction with another corporation, partnership, or other entity or
enterprise in which either the Company is not the surviving or continuing
corporation, (ii) a sale or disposition of all or substantially all of the
assets of the Company, or (iii) the dissolution of the Company.
2. INCENTIVE AWARDS. If any of the events described in Section 1 hereof
constituting a change in control shall have occurred, then any award you have
received under the 1994 Incentive Award Plan or a successor plan will be vested
and any restrictions placed on such awards will lapse as of the date the change
in control is completed ("Change in Control Date").
3. NONQUALIFIED DEFERRED COMPENSATION. If any of the events described in
Section 1 hereof constituting a change in control shall have occurred, then you
shall receive payment of the entire balance in your Compensation Deferral
Account and Matching Contribution Account, as defined in the Citation
Corporation Nonqualified Deferred Compensation Plan, in cash and in one lump sum
as of the Change in Control Date.
4. TERMINATION FOLLOWING CHANGE IN CONTROL. If any of the events
described in Section 1 hereof constituting a change in control of the Company
shall have occurred, you shall be entitled to the benefits provided in Section 5
hereof upon the subsequent involuntary termination of your employment by the
Company, if such termination occurs within the period beginning on the Change in
Control Date and ending on the second anniversary of the Change in Control Date
(the "Trigger Period") unless such termination is (i) because of your death or
Retirement, (ii) by the Company for Cause (iii) by the Company or you for
Disability (such termination within such period, as limited by clauses (i)
through (iii), being sometimes referred to hereinafter as a "Payment Trigger").
In the event your employment is terminated within the Trigger Period, following
the occurrence of any of the events set forth at paragraph (c) below, such
termination of your employment shall be deemed to be an involuntary termination
of your employment by the Company and shall entitle you to the benefits provided
in Section 5 hereof.
(a). Disability; Retirement.
(i) "Disability" shall mean a disability which entitles you to a
disability benefit under a disability program sponsored or maintained by
the Company; provided, that if no such program is applicable to you, then
"Disability" shall mean that, based on medical evidence reasonably
satisfactory to the Compensation Committee of the Board, you are totally
and permanently unable to engage in any occupation or gainful employment
for which you are reasonably suited by background, training, education or
experience.
(ii) Termination by the Company or you of your employment based
on "Retirement" shall mean termination in accordance with the Company's
retirement policy, including early retirement, generally applicable to its
salaried employees.
(b) Cause. Termination by the Company of your employment for "Cause"
shall mean termination based upon any of the following:
(i) dishonesty or fraud by you in connection with your
employment;
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(ii) appropriation (or attempted appropriation) by you of a
material business opportunity of the Company, including attempting to
secure or securing any personal profit in connection with any transaction
entered into on behalf of the Company;
(iii) misappropriation by you (or attempted misappropriation) of
any of the Company's funds or property;
(iv) your conviction of, or indictment for (or its procedural
equivalent) or entering of a guilty plea or plea of no contest with respect
to, a felony or any other criminal offense involving moral turpitude; or
(v) deliberate, willful or gross misconduct by you in the
performance of your duties with the Company, as determined by the good
faith judgment of the Compensation Committee of the Board.
For purposes of this paragraph, no act, or failure to act, on your part shall be
considered "willful" unless done, or omitted to be done, by you not in good
faith and without any reasonable belief that your action or omission was in the
best interest of the Company.
(c) Constructive Termination. Your employment will be deemed to have
been involuntarily terminated by the Company upon the termination of your
employment, whether by you or by the Company, following the occurrence of any of
the following without your prior written consent (any such event being sometimes
referred to hereinafter as your "Constructive Termination"):
(i) subsequent to a change in control of the Company, any
reduction in your title, duties, responsibilities or authority with the
Company as such existed immediately prior to a change in control, except in
connection with the termination of your employment for Cause, Disability,
Retirement or as a result of your death or voluntarily by you; or
(ii) subsequent to a change in control of the Company, a
reduction by the Company in your base salary as in effect on the date
hereof or as the same may be increased from time to time; or
(iii) subsequent to a change in control of the Company, a
failure by the Company to continue any bonus plans in which you are
presently entitled to participate as the same may be modified from time to
time prior to (but not in anticipation of) such change in control, or as
the same may be modified following such change in control as may be
required by or desirable for the Company due to changes to (x) the Internal
Revenue Code of 1986, as amended (the "Code"), (y) applicable accounting
rules or principles or (z) applicable laws or regulations, including,
without limitation, the Employee Retirement Income and Security Act of
1974, as amended, (the "Bonus Plans") or a failure by the Company to
continue you as a participant in the Bonus Plans on at least the same basis
as you presently participate in accordance with the Bonus Plans; or
(iv) subsequent to a change in control of the Company, the
failure by the Company to continue in effect any benefit or compensation
plan, life insurance plan, health-and-accident plan or disability plan in
which you are participating at the time of a change in control of the
Company (or plans providing you with substantially similar benefits), the
taking of any action by the Company which would materially adversely affect
your participation in or materially reduce your benefits under any such
plans or deprive you of any material fringe benefit enjoyed by you at the
time of the change in control, or the failure by the Company to provide you
with the number of paid vacation days to which you are then entitled in
accordance with the Company's normal vacation policy in effect on the date
hereof; or
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(v) subsequent to a change in control of the Company, a change
in the location of your employment greater than twenty-five (25) miles from
your office location on the date hereof.
(d) Notice of Termination. Any purported termination by the Company
pursuant to your Disability or Retirement, as defined in paragraph (a) above, or
for Cause, as defined in paragraph (b) above, or by you pursuant to your
Disability or Retirement, as defined in paragraph (a) above or by you or the
Company based on an event of Constructive Termination, as defined in paragraph
(c) above, shall be communicated by written Notice of Termination to the other
party hereto. For purposes of this Agreement, a "Notice of Termination" shall
indicate the specific termination provision in this Agreement relied upon and
shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of your employment under the provision so
indicated.
(e) Date of Termination. "Date of Termination" shall mean (i) if your
employment is terminated for Disability, thirty (30) days after Notice of
Termination is given (provided that you shall not have returned to the
performance of your duties on a full-time basis during such thirty (30) day
period), (ii) if your employment is terminated due to your death, the date of
your death, (iii) if your employment is terminated pursuant to paragraph (b)
above, the date specified in the Notice of Termination, (iv) if your employment
is terminated for Retirement, the date specified in the Notice of Termination,
and (v) if your employment is terminated for any other reason, the date on which
a Notice of Termination is given; provided that if within thirty (30) days after
any Notice of Termination is given the party receiving such Notice of
Termination notifies the other party that a dispute exists concerning the
termination, the Date of Termination shall be the date on which the dispute is
finally determined, either by mutual written agreement of the parties, or by a
final judgment, order or decree of a court of competent jurisdiction (the time
for appeal therefrom having expired and no appeal having been perfected);
provided further, however, that if such disputed termination constitutes a
Payment Trigger, the Trigger Period shall not run pending resolution of the
dispute but shall recommence upon the date that the dispute is finally
determined (as set forth in the preceding proviso).
5. CERTAIN BENEFITS UPON TERMINATION. If, after a change in control of
the Company shall have occurred, as defined in Section 1 above, your employment
with the Company shall be terminated (including a Constructive Termination)
within the Trigger Period by the Company or you other than for Cause,
Disability, Retirement or death, and other than by your voluntarily terminating
your employment with the Company, then you shall be entitled to the benefits
outlined below:
(a) the Company shall pay to you within thirty (30) days following
the Date of Termination in a lump sum cash payment your full base salary through
the Date of Termination at the rate in effect at the time Notice of Termination
is given plus (i) credit for any vacation earned but not taken, (ii) the amount,
if any, of any bonus for a past fiscal year which has been earned but not yet
been paid to you, and (iii) a pro-rated payment, based on the Company's results
as of the Date of Termination, of any bonus due under any Bonus Plan in which
you participate;
(b) in lieu of any further salary payments to you for periods
subsequent to the Date of Termination, the Company shall pay as severance pay to
you within thirty (30) days following the Date of Termination a lump sum amount
equal to two (2) times the sum of (i) the amount of your annual base salary at
the highest rate in effect during the twelve (12) months immediately preceding
the Date of Termination, and (ii) the average annual bonus received by you
during the three (3) years immediately preceding the Date of Termination or, if
the term of your employment with the Company has been less than the amount of
time necessary for full (not partial or pro-rated) participation in the bonus
plan for three years, then the average annual bonus received by you in the
number of years immediately preceding the Date of Termination (but no more than
three) for which you have been a full participant in the bonus plan; or, if the
term of your employment has been less than one year, then your average annual
bonus will be equal to the total of your bonus for the first four full quarters
guaranteed at the time of your employment;
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(c) the Company shall maintain in full force and effect, for your
continued benefit until the earlier of (i) two (2) years after the Date of
Termination or (ii) you obtain substantially the same coverage from a new
employer, all life insurance, medical, health and accident, and disability
plans, programs or arrangements in which you were entitled to participate
immediately prior to the Date of Termination, provided that your continued
participation is possible under the general terms and provisions of such plans
and programs. In the event that your participation in any such plan or program
is barred, the Company shall use reasonable efforts to arrange to provide you
with benefits substantially similar to those which you are entitled to receive
under such plans and programs.
6. SECTION 280G CAP. It is the intent of the parties hereto that no
amount payable pursuant to the terms of this Agreement shall cause any payment
or transfer by the Company to or for your benefit, whether paid or payable (or
transferred or transferable) pursuant to the terms of this Agreement or
otherwise (a "Payment"), to be subject to taxation under section 4999 of the
Code and as an "excess parachute payment" as defined in section 280g of the
Code. In the event that the last independent auditors selected by the Board
prior to your termination under this Agreement (the "Auditors") determine that
any such item constitutes an "excess parachute payment", then you are required
to irrevocably elect to relinquish or not exercise any payments of benefits
available to you under any plan, contract or program before the payment or
enjoyment thereof in order to limit such payments or benefits for the purpose of
eliminating any "excess parachute payment."
7. TERM OF AGREEMENT. This Agreement shall become effective on the date
hereof and shall continue in effect until the earliest of the following:
(i) a Date of Termination in accordance with Section 4(e) or other
termination of your employment with the Company shall have occurred prior to a
change in control of the Company; or
(ii) if a Payment Trigger shall have occurred during the term of this
Agreement, the performance by the Company of all its obligations, and the
satisfaction by the Company of all its obligations and liabilities, under this
Agreement; or
(iii) the date that is the third (3rd) anniversary of the date of this
agreement, or, if the agreement has been renewed, the date that is the first
(1st) anniversary of date of the renewal of the agreement; provided, however,
that if a change in control of the Company occurs prior to the third (3rd)
anniversary of the date of this agreement or the first (1st) anniversary of the
Renewal Date (whichever is later), the Company's obligation to you under this
Agreement due to such change in control shall continue through the final day of
the Trigger Period that begins with such change in control.
Beginning on the third (3rd) anniversary of the date of this agreement and
continuing each anniversary thereafter ("Renewal Date"), the agreement will be
automatically renewed for a one-year period, unless either party gives written
notice to the other party at least thirty (30) days prior to the Renewal Date.
Any change in control of the Company during the term of this Agreement
that for any reason ceases to constitute a change in control under this
agreement or is not followed by a Payment Trigger shall not effect a termination
or lapse of this Agreement.
8. COMPANY'S RIGHT TO TERMINATE. You acknowledge that this Agreement
does not operate as an employment contract nor establish any right of continued
employment with the Company and that the Company may terminate your employment
at any time, subject to providing the benefits specified in this Agreement, if
applicable.
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9. SUCCESSORS; BINDING AGREEMENT.
(a) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. Failure of the Company to obtain such agreement prior to the
effectiveness of any such succession shall be a breach of this Agreement and
shall constitute an event of Constructive Termination.
(b) This Agreement shall inure to the benefit of and be enforceable
by your personal or legal representatives, executors, administrators,
successors, heirs, and legatees.
10. NOTICE. For the purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered personally or mailed by certified
or registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth on the last page of this Agreement (provided that
all notices to the Company shall be directed to the Chief Executive Officer of
the Company with a copy to the Secretary of the Company), or to such other
address as either party may have furnished to the other in writing.
11. MISCELLANEOUS. No provisions of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing signed by you and such officer as may be authorized by the Board of
Directors of the Company. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
Alabama. This Agreement shall not supersede or in any way limit the rights,
duties or obligations you may have under any other written agreement with the
Company.
12. ENFORCEMENT; EXPENSES. The provisions of this Agreement shall be
regarded as divisible, and if any provision is declared invalid or unenforceable
by a court of competent jurisdiction, the validity and enforceability of the
remainder of such provisions hereof shall not be affected. The Company shall
pay all fees, costs and expenses (including, without limitation, reasonable
attorneys' fees and the costs of investigating any potential claim) incurred by
you in connection with any dispute arising under or relating to this Agreement
or any action(s) or proceeding(s) to enforce your rights under this Agreement,
should you prevail in such action or proceeding.
Kindly sign and return to the Company the enclosed copy of this letter,
which will then constitute our agreement on the subject.
CITATION CORPORATION
/s/ Frederick F. Sommer
- -------------------------------------------
Frederick F. Sommer, Chief Executive Officer
2 Office Park Circle, Suite 204
Birmingham, Alabama 35223
AGREED TO THIS 7th DAY OF DECEMBER, 1998.
/s/ Edwin L. Yoder
- ----------------------------------------
Edwin L. Yoder, Executive
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EXHIBIT 10.3(F)
---------------
Citation Corporation
2 Office Park Circle
Suite 204
Birmingham, Alabama 35223
(205) 871-5731
FAX (205) 870-8211
December 1, 1998
Mr. Stanley B. Atkins
c/o Citation Corporation
2 Office Park Circle
Suite 204
Birmingham, Alabama 35223
Re: Change in Control Retention and Severance Agreement
Dear Mr. Atkins:
Citation Corporation (the "Company"), considers the establishment and
maintenance of a sound and vital senior management team to be essential to
protecting and enhancing the best interests of the Company and its stockholders.
In this connection, the Company recognizes that the possibility of a change in
control may exist in the future, and that such possibility, and the uncertainty
and questions which it may raise among management, may result in the departure
or distraction of management personnel to the detriment of the Company and its
stockholders. Accordingly, the Board of Directors of the Company (the "Board")
has determined that appropriate steps should be taken to reinforce and encourage
the continued attention and dedication of members of the Company's senior
management, including yourself, to their assigned duties without distraction
arising from the possibility of a change in control of the Company. The Board
has also determined that appropriate steps should be taken to encourage senior
management's participation, in the event of a proposed change in control, in the
successful completion of the change in control transaction while maintaining
their focus on business performance and strategy execution.
In order to induce you to remain in the employ of the Company and in
consideration of your agreeing to remain in the employ of the Company subject to
the terms and conditions set forth below, this letter agreement sets forth the
benefits which the Company agrees will be provided to you in the event your
employment with the Company is terminated subsequent to a change in control of
the Company (as defined in Section 1 of this letter agreement) under the
circumstances described below.
1. CHANGE IN CONTROL. No benefits shall be payable hereunder unless
there shall have been a change in control of the Company, as set forth below and
such change in control occurs prior to the termination of your employment. For
purposes of this Agreement, a "change in control" shall mean the occurrence of
any of the following events, if subsequent to the date of this Agreement:
(a) Any person, entity or "group" (within the meaning of Rules 13d
through 13d-6 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act")) (other than any subsidiary or affiliate as of the date hereof of the
Company or any employee benefit plan of the Company) has acquired or agreed to
acquire beneficial ownership of 50% or more of the voting and/or economic
interest in the capital stock of the Company; or
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(b) A majority of the board of directors of the Company shall consist
at such time of individuals other than (i) members of the board of directors on
the date hereof and (ii) other members of the Board approved to become a
director by a majority of such members referred to in clause (i) or by members
so approved ("Continuing Directors"); or
(c) The approval by the stockholders of the Company and completion of
(i) a merger or consolidation of the Company, statutory share exchange, or other
similar transaction with another corporation, partnership, or other entity or
enterprise in which either the Company is not the surviving or continuing
corporation, (ii) a sale or disposition of all or substantially all of the
assets of the Company, or (iii) the dissolution of the Company.
2. INCENTIVE AWARDS. If any of the events described in Section 1 hereof
constituting a change in control shall have occurred, then any award you have
received under the 1994 Incentive Award Plan or a successor plan will be vested
and any restrictions placed on such awards will lapse as of the date the change
in control is completed ("Change in Control Date").
3. NONQUALIFIED DEFERRED COMPENSATION. If any of the events described in
Section 1 hereof constituting a change in control shall have occurred, then you
shall receive payment of the entire balance in your Compensation Deferral
Account and Matching Contribution Account, as defined in the Citation
Corporation Nonqualified Deferred Compensation Plan, in cash and in one lump sum
as of the Change in Control Date.
4. TERMINATION FOLLOWING CHANGE IN CONTROL. If any of the events
described in Section 1 hereof constituting a change in control of the Company
shall have occurred, you shall be entitled to the benefits provided in Section 5
hereof upon the subsequent involuntary termination of your employment by the
Company, if such termination occurs within the period beginning on the Change in
Control Date and ending on the second anniversary of the Change in Control Date
(the "Trigger Period") unless such termination is (i) because of your death or
Retirement, (ii) by the Company for Cause (iii) by the Company or you for
Disability (such termination within such period, as limited by clauses (i)
through (iii), being sometimes referred to hereinafter as a "Payment Trigger").
In the event your employment is terminated within the Trigger Period, following
the occurrence of any of the events set forth at paragraph (c) below, such
termination of your employment shall be deemed to be an involuntary termination
of your employment by the Company and shall entitle you to the benefits provided
in Section 5 hereof.
(a) Disability; Retirement.
(i) "Disability" shall mean a disability which entitles
you to a disability benefit under a disability program sponsored or
maintained by the Company; provided, that if no such program is applicable
to you, then "Disability" shall mean that, based on medical evidence
reasonably satisfactory to the Compensation Committee of the Board, you are
totally and permanently unable to engage in any occupation or gainful
employment for which you are reasonably suited by background, training,
education or experience.
(ii) Termination by the Company or you of your employment
based on "Retirement" shall mean termination in accordance with the
Company's retirement policy, including early retirement, generally
applicable to its salaried employees.
(b) Cause. Termination by the Company of your employment for "Cause"
shall mean termination based upon any of the following:
(i) dishonesty or fraud by you in connection with your
employment;
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(ii) appropriation (or attempted appropriation) by you of a
material business opportunity of the Company, including attempting to
secure or securing any personal profit in connection with any transaction
entered into on behalf of the Company;
(iii) misappropriation by you (or attempted
misappropriation) of any of the Company's funds or property;
(iv) your conviction of, or indictment for (or its
procedural equivalent) or entering of a guilty plea or plea of no contest
with respect to, a felony or any other criminal offense involving moral
turpitude; or
(v) deliberate, willful or gross misconduct by you in the
performance of your duties with the Company, as determined by the good
faith judgment of the Compensation Committee of the Board.
For purposes of this paragraph, no act, or failure to act, on your part shall be
considered "willful" unless done, or omitted to be done, by you not in good
faith and without any reasonable belief that your action or omission was in the
best interest of the Company.
(c) Constructive Termination. Your employment will be deemed to
have been involuntarily terminated by the Company upon the termination of your
employment, whether by you or by the Company, following the occurrence of any of
the following without your prior written consent (any such event being sometimes
referred to hereinafter as your "Constructive Termination"):
(i) subsequent to a change in control of the Company, any
reduction in your title, duties, responsibilities or authority with the
Company as such existed immediately prior to a change in control, except in
connection with the termination of your employment for Cause, Disability,
Retirement or as a result of your death or voluntarily by you; or
(ii) subsequent to a change in control of the Company, a
reduction by the Company in your base salary as in effect on the date
hereof or as the same may be increased from time to time; or
(iii) subsequent to a change in control of the Company, a
failure by the Company to continue any bonus plans in which you are
presently entitled to participate as the same may be modified from time to
time prior to (but not in anticipation of) such change in control, or as
the same may be modified following such change in control as may be
required by or desirable for the Company due to changes to (x) the Internal
Revenue Code of 1986, as amended (the "Code"), (y) applicable accounting
rules or principles or (z) applicable laws or regulations, including,
without limitation, the Employee Retirement Income and Security Act of
1974, as amended, (the "Bonus Plans") or a failure by the Company to
continue you as a participant in the Bonus Plans on at least the same basis
as you presently participate in accordance with the Bonus Plans; or
(iv) subsequent to a change in control of the Company, the
failure by the Company to continue in effect any benefit or compensation
plan, life insurance plan, health-and-accident plan or disability plan in
which you are participating at the time of a change in control of the
Company (or plans providing you with substantially similar benefits), the
taking of any action by the Company which would materially adversely affect
your participation in or materially reduce your benefits under any such
plans or deprive you of any material fringe benefit enjoyed by you at the
time of the change in control, or the failure by the Company to provide you
with the number of paid vacation days to which you are then entitled in
accordance with the Company's normal vacation policy in effect on the date
hereof; or
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(v) subsequent to a change in control of the Company, a
change in the location of your employment greater than twenty-five (25)
miles from your office location on the date hereof.
(d) Notice of Termination. Any purported termination by the
Company pursuant to your Disability or Retirement, as defined in paragraph (a)
above, or for Cause, as defined in paragraph (b) above, or by you pursuant to
your Disability or Retirement, as defined in paragraph (a) above or by you or
the Company based on an event of Constructive Termination, as defined in
paragraph (c) above, shall be communicated by written Notice of Termination to
the other party hereto. For purposes of this Agreement, a "Notice of
Termination" shall indicate the specific termination provision in this Agreement
relied upon and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of your employment under the
provision so indicated.
(e) Date of Termination. "Date of Termination" shall mean (i)
if your employment is terminated for Disability, thirty (30) days after Notice
of Termination is given (provided that you shall not have returned to the
performance of your duties on a full-time basis during such thirty (30) day
period), (ii) if your employment is terminated due to your death, the date of
your death, (iii) if your employment is terminated pursuant to paragraph (b)
above, the date specified in the Notice of Termination, (iv) if your employment
is terminated for Retirement, the date specified in the Notice of Termination,
and (v) if your employment is terminated for any other reason, the date on which
a Notice of Termination is given; provided that if within thirty (30) days after
any Notice of Termination is given the party receiving such Notice of
Termination notifies the other party that a dispute exists concerning the
termination, the Date of Termination shall be the date on which the dispute is
finally determined, either by mutual written agreement of the parties, or by a
final judgment, order or decree of a court of competent jurisdiction (the time
for appeal therefrom having expired and no appeal having been perfected);
provided further, however, that if such disputed termination constitutes a
Payment Trigger, the Trigger Period shall not run pending resolution of the
dispute but shall recommence upon the date that the dispute is finally
determined (as set forth in the preceding proviso).
5. CERTAIN BENEFITS UPON TERMINATION. If, after a change in control
of the Company shall have occurred, as defined in Section 1 above, your
employment with the Company shall be terminated (including a Constructive
Termination) within the Trigger Period by the Company or you other than for
Cause, Disability, Retirement or death, and other than by your voluntarily
terminating your employment with the Company, then you shall be entitled to the
benefits outlined below:
(a) the Company shall pay to you within thirty (30) days
following the Date of Termination in a lump sum cash payment your full base
salary through the Date of Termination at the rate in effect at the time Notice
of Termination is given plus (i) credit for any vacation earned but not taken,
(ii) the amount, if any, of any bonus for a past fiscal year which has been
earned but not yet been paid to you, and (iii) a pro-rated payment, based on the
Company's results as of the Date of Termination, of any bonus due under any
Bonus Plan in which you participate;
(b) in lieu of any further salary payments to you for periods
subsequent to the Date of Termination, the Company shall pay as severance pay to
you within thirty (30) days following the Date of Termination a lump sum amount
equal to two (2) times the sum of (i) the amount of your annual base salary at
the highest rate in effect during the twelve (12) months immediately preceding
the Date of Termination, and (ii) the average annual bonus received by you
during the three (3) years immediately preceding the Date of Termination or, if
the term of your employment with the Company has been less than the amount of
time necessary for full (not partial or pro-rated) participation in the bonus
plan for three years, then the average annual bonus received by you in the
number of years immediately preceding the Date of Termination (but no more than
three) for which you have been a full participant in the bonus plan; or, if the
term of your employment has been less than one year, then your average annual
bonus will be equal to the total of your bonus for the first four full quarters
guaranteed at the time of your employment;
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(c) the Company shall maintain in full force and effect, for your
continued benefit until the earlier of (i) two (2) years after the Date of
Termination or (ii) you obtain substantially the same coverage from a new
employer, all life insurance, medical, health and accident, and disability
plans, programs or arrangements in which you were entitled to participate
immediately prior to the Date of Termination, provided that your continued
participation is possible under the general terms and provisions of such plans
and programs. In the event that your participation in any such plan or program
is barred, the Company shall use reasonable efforts to arrange to provide you
with benefits substantially similar to those which you are entitled to receive
under such plans and programs.
6. SECTION 280G CAP. It is the intent of the parties hereto that no
amount payable pursuant to the terms of this Agreement shall cause any payment
or transfer by the Company to or for your benefit, whether paid or payable (or
transferred or transferable) pursuant to the terms of this Agreement or
otherwise (a "Payment"), to be subject to taxation under section 4999 of the
Code and as an "excess parachute payment" as defined in section 280g of the
Code. In the event that the last independent auditors selected by the Board
prior to your termination under this Agreement (the "Auditors") determine that
any such item constitutes an "excess parachute payment", then you are required
to irrevocably elect to relinquish or not exercise any payments of benefits
available to you under any plan, contract or program before the payment or
enjoyment thereof in order to limit such payments or benefits for the purpose of
eliminating any "excess parachute payment."
7. TERM OF AGREEMENT. This Agreement shall become effective on the date
hereof and shall continue in effect until the earliest of the following:
(i) a Date of Termination in accordance with Section 4(e) or other
termination of your employment with the Company shall have occurred prior to a
change in control of the Company; or
(ii) if a Payment Trigger shall have occurred during the term of this
Agreement, the performance by the Company of all its obligations, and the
satisfaction by the Company of all its obligations and liabilities, under this
Agreement; or
(iii) the date that is the third (3rd) anniversary of the date of this
agreement, or, if the agreement has been renewed, the date that is the first
(1st) anniversary of date of the renewal of the agreement; provided, however,
that if a change in control of the Company occurs prior to the third (3rd)
anniversary of the date of this agreement or the first (1st) anniversary of the
Renewal Date (whichever is later), the Company's obligation to you under this
Agreement due to such change in control shall continue through the final day of
the Trigger Period that begins with such change in control.
Beginning on the third (3rd) anniversary of the date of this agreement and
continuing each anniversary thereafter ("Renewal Date"), the agreement will be
automatically renewed for a one-year period, unless either party gives written
notice to the other party at least thirty (30) days prior to the Renewal Date.
Any change in control of the Company during the term of this Agreement
that for any reason ceases to constitute a change in control under this
agreement or is not followed by a Payment Trigger shall not effect a termination
or lapse of this Agreement.
8. COMPANY'S RIGHT TO TERMINATE. You acknowledge that this Agreement
does not operate as an employment contract nor establish any right of continued
employment with the Company and that the Company may terminate your employment
at any time, subject to providing the benefits specified in this Agreement, if
applicable.
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9. SUCCESSORS; BINDING AGREEMENT.
(a) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. Failure of the Company to obtain such agreement prior to the
effectiveness of any such succession shall be a breach of this Agreement and
shall constitute an event of Constructive Termination.
(b) This Agreement shall inure to the benefit of and be enforceable
by your personal or legal representatives, executors, administrators,
successors, heirs, and legatees.
10. NOTICE. For the purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered personally or mailed by certified
or registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth on the last page of this Agreement (provided that
all notices to the Company shall be directed to the Chief Executive Officer of
the Company with a copy to the Secretary of the Company), or to such other
address as either party may have furnished to the other in writing.
11. MISCELLANEOUS. No provisions of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing signed by you and such officer as may be authorized by the Board of
Directors of the Company. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
Alabama. This Agreement shall not supersede or in any way limit the rights,
duties or obligations you may have under any other written agreement with the
Company.
12. ENFORCEMENT; EXPENSES. The provisions of this Agreement shall be
regarded as divisible, and if any provision is declared invalid or unenforceable
by a court of competent jurisdiction, the validity and enforceability of the
remainder of such provisions hereof shall not be affected. The Company shall
pay all fees, costs and expenses (including, without limitation, reasonable
attorneys' fees and the costs of investigating any potential claim) incurred by
you in connection with any dispute arising under or relating to this Agreement
or any action(s) or proceeding(s) to enforce your rights under this Agreement,
should you prevail in such action or proceeding.
Kindly sign and return to the Company the enclosed copy of this letter,
which will then constitute our agreement on the subject.
CITATION CORPORATION
/s/ Frederick F. Sommer
- ----------------------------------------
Frederick F. Sommer, Chief Executive Officer
2 Office Park Circle, Suite 204
Birmingham, Alabama 35223
AGREED TO THIS 1st DAY OF DECEMBER, 1998.
/s/ Stanley B. Atkins
- ----------------------------------------
Stanley B. Atkins, Executive
6
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EXHIBIT 10.3(G)
---------------
Citation Corporation
2 Office Park Circle
Suite 204
Birmingham, Alabama 35223
(205) 871-5731
FAX (205) 870-8211
December 1, 1998
Mr. Thomas W. Burleson
c/o Citation Corporation
2 Office Park Circle
Suite 204
Birmingham, Alabama 35223
Re: Change in Control Retention and Severance Agreement
Dear Mr. Burleson:
Citation Corporation (the "Company"), considers the establishment and
maintenance of a sound and vital senior management team to be essential to
protecting and enhancing the best interests of the Company and its stockholders.
In this connection, the Company recognizes that the possibility of a change in
control may exist in the future, and that such possibility, and the uncertainty
and questions which it may raise among management, may result in the departure
or distraction of management personnel to the detriment of the Company and its
stockholders. Accordingly, the Board of Directors of the Company (the "Board")
has determined that appropriate steps should be taken to reinforce and encourage
the continued attention and dedication of members of the Company's senior
management, including yourself, to their assigned duties without distraction
arising from the possibility of a change in control of the Company. The Board
has also determined that appropriate steps should be taken to encourage senior
management's participation, in the event of a proposed change in control, in the
successful completion of the change in control transaction while maintaining
their focus on business performance and strategy execution.
In order to induce you to remain in the employ of the Company and in
consideration of your agreeing to remain in the employ of the Company subject to
the terms and conditions set forth below, this letter agreement sets forth the
benefits which the Company agrees will be provided to you in the event your
employment with the Company is terminated subsequent to a change in control of
the Company (as defined in Section 1 of this letter agreement) under the
circumstances described below.
1. CHANGE IN CONTROL. No benefits shall be payable hereunder unless
there shall have been a change in control of the Company, as set forth below and
such change in control occurs prior to the termination of your employment. For
purposes of this Agreement, a "change in control" shall mean the occurrence of
any of the following events, if subsequent to the date of this Agreement:
(a) Any person, entity or "group" (within the meaning of Rules 13d
through 13d-6 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act")) (other than any subsidiary or affiliate as of the date hereof of the
Company or any employee benefit plan of the Company) has acquired or agreed to
acquire beneficial ownership of 50% or more of the voting and/or economic
interest in the capital stock of the Company; or
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(b) A majority of the board of directors of the Company shall consist
at such time of individuals other than (i) members of the board of directors on
the date hereof and (ii) other members of the Board approved to become a
director by a majority of such members referred to in clause (i) or by members
so approved ("Continuing Directors"); or
(c) The approval by the stockholders of the Company and completion of
(i) a merger or consolidation of the Company, statutory share exchange, or other
similar transaction with another corporation, partnership, or other entity or
enterprise in which either the Company is not the surviving or continuing
corporation, (ii) a sale or disposition of all or substantially all of the
assets of the Company, or (iii) the dissolution of the Company.
2. INCENTIVE AWARDS. If any of the events described in Section 1 hereof
constituting a change in control shall have occurred, then any award you have
received under the 1994 Incentive Award Plan or a successor plan will be vested
and any restrictions placed on such awards will lapse as of the date the change
in control is completed ("Change in Control Date").
3. NONQUALIFIED DEFERRED COMPENSATION. If any of the events described in
Section 1 hereof constituting a change in control shall have occurred, then you
shall receive payment of the entire balance in your Compensation Deferral
Account and Matching Contribution Account, as defined in the Citation
Corporation Nonqualified Deferred Compensation Plan, in cash and in one lump sum
as of the Change in Control Date.
4. TERMINATION FOLLOWING CHANGE IN CONTROL. If any of the events
described in Section 1 hereof constituting a change in control of the Company
shall have occurred, you shall be entitled to the benefits provided in Section 5
hereof upon the subsequent involuntary termination of your employment by the
Company, if such termination occurs within the period beginning on the Change in
Control Date and ending on the second anniversary of the Change in Control Date
(the "Trigger Period") unless such termination is (i) because of your death or
Retirement, (ii) by the Company for Cause (iii) by the Company or you for
Disability (such termination within such period, as limited by clauses (i)
through (iii), being sometimes referred to hereinafter as a "Payment Trigger").
In the event your employment is terminated within the Trigger Period, following
the occurrence of any of the events set forth at paragraph (c) below, such
termination of your employment shall be deemed to be an involuntary termination
of your employment by the Company and shall entitle you to the benefits provided
in Section 5 hereof.
(a). Disability; Retirement.
(i) "Disability" shall mean a disability which entitles
you to a disability benefit under a disability program sponsored or
maintained by the Company; provided, that if no such program is applicable
to you, then "Disability" shall mean that, based on medical evidence
reasonably satisfactory to the Compensation Committee of the Board, you are
totally and permanently unable to engage in any occupation or gainful
employment for which you are reasonably suited by background, training,
education or experience.
(ii) Termination by the Company or you of your employment
based on "Retirement" shall mean termination in accordance with the
Company's retirement policy, including early retirement, generally
applicable to its salaried employees.
(b) Cause. Termination by the Company of your employment for
"Cause" shall mean termination based upon any of the following:
(i) dishonesty or fraud by you in connection with your
employment;
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(ii) appropriation (or attempted appropriation) by you of
a material business opportunity of the Company, including attempting to
secure or securing any personal profit in connection with any transaction
entered into on behalf of the Company;
(iii) misappropriation by you (or attempted
misappropriation) of any of the Company's funds or property;
(iv) your conviction of, or indictment for (or its
procedural equivalent) or entering of a guilty plea or plea of no contest
with respect to, a felony or any other criminal offense involving moral
turpitude; or
(v) deliberate, willful or gross misconduct by you in the
performance of your duties with the Company, as determined by the good
faith judgment of the Compensation Committee of the Board.
For purposes of this paragraph, no act, or failure to act, on your part shall be
considered "willful" unless done, or omitted to be done, by you not in good
faith and without any reasonable belief that your action or omission was in the
best interest of the Company.
(c) Constructive Termination. Your employment will be deemed to
have been involuntarily terminated by the Company upon the termination of your
employment, whether by you or by the Company, following the occurrence of any of
the following without your prior written consent (any such event being sometimes
referred to hereinafter as your "Constructive Termination"):
(i) subsequent to a change in control of the Company, any
reduction in your title, duties, responsibilities or authority with the
Company as such existed immediately prior to a change in control, except in
connection with the termination of your employment for Cause, Disability,
Retirement or as a result of your death or voluntarily by you; or
(ii) subsequent to a change in control of the Company, a
reduction by the Company in your base salary as in effect on the date
hereof or as the same may be increased from time to time; or
(iii) subsequent to a change in control of the Company, a
failure by the Company to continue any bonus plans in which you are
presently entitled to participate as the same may be modified from time to
time prior to (but not in anticipation of) such change in control, or as
the same may be modified following such change in control as may be
required by or desirable for the Company due to changes to (x) the Internal
Revenue Code of 1986, as amended (the "Code"), (y) applicable accounting
rules or principles or (z) applicable laws or regulations, including,
without limitation, the Employee Retirement Income and Security Act of
1974, as amended, (the "Bonus Plans") or a failure by the Company to
continue you as a participant in the Bonus Plans on at least the same basis
as you presently participate in accordance with the Bonus Plans; or
(iv) subsequent to a change in control of the Company, the
failure by the Company to continue in effect any benefit or compensation
plan, life insurance plan, health-and-accident plan or disability plan in
which you are participating at the time of a change in control of the
Company (or plans providing you with substantially similar benefits), the
taking of any action by the Company which would materially adversely affect
your participation in or materially reduce your benefits under any such
plans or deprive you of any material fringe benefit enjoyed by you at the
time of the change in control, or the failure by the Company to provide you
with the number of paid vacation days to which you are then entitled in
accordance with the Company's normal vacation policy in effect on the date
hereof; or
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(v) subsequent to a change in control of the Company, a
change in the location of your employment greater than twenty-five (25)
miles from your office location on the date hereof.
(d) Notice of Termination. Any purported termination by the
Company pursuant to your Disability or Retirement, as defined in paragraph (a)
above, or for Cause, as defined in paragraph (b) above, or by you pursuant to
your Disability or Retirement, as defined in paragraph (a) above or by you or
the Company based on an event of Constructive Termination, as defined in
paragraph (c) above, shall be communicated by written Notice of Termination to
the other party hereto. For purposes of this Agreement, a "Notice of
Termination" shall indicate the specific termination provision in this Agreement
relied upon and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of your employment under the
provision so indicated.
(e) Date of Termination. "Date of Termination" shall mean (i)
if your employment is terminated for Disability, thirty (30) days after Notice
of Termination is given (provided that you shall not have returned to the
performance of your duties on a full-time basis during such thirty (30) day
period), (ii) if your employment is terminated due to your death, the date of
your death, (iii) if your employment is terminated pursuant to paragraph (b)
above, the date specified in the Notice of Termination, (iv) if your employment
is terminated for Retirement, the date specified in the Notice of Termination,
and (v) if your employment is terminated for any other reason, the date on which
a Notice of Termination is given; provided that if within thirty (30) days after
any Notice of Termination is given the party receiving such Notice of
Termination notifies the other party that a dispute exists concerning the
termination, the Date of Termination shall be the date on which the dispute is
finally determined, either by mutual written agreement of the parties, or by a
final judgment, order or decree of a court of competent jurisdiction (the time
for appeal therefrom having expired and no appeal having been perfected);
provided further, however, that if such disputed termination constitutes a
Payment Trigger, the Trigger Period shall not run pending resolution of the
dispute but shall recommence upon the date that the dispute is finally
determined (as set forth in the preceding proviso).
5. CERTAIN BENEFITS UPON TERMINATION. If, after a change in control
of the Company shall have occurred, as defined in Section 1 above, your
employment with the Company shall be terminated (including a Constructive
Termination) within the Trigger Period by the Company or you other than for
Cause, Disability, Retirement or death, and other than by your voluntarily
terminating your employment with the Company, then you shall be entitled to the
benefits outlined below:
(a) the Company shall pay to you within thirty (30) days
following the Date of Termination in a lump sum cash payment your full base
salary through the Date of Termination at the rate in effect at the time Notice
of Termination is given plus (i) credit for any vacation earned but not taken,
(ii) the amount, if any, of any bonus for a past fiscal year which has been
earned but not yet been paid to you, and (iii) a pro-rated payment, based on the
Company's results as of the Date of Termination, of any bonus due under any
Bonus Plan in which you participate;
(b) in lieu of any further salary payments to you for periods
subsequent to the Date of Termination, the Company shall pay as severance pay to
you within thirty (30) days following the Date of Termination a lump sum amount
equal to two (2) times the sum of (i) the amount of your annual base salary at
the highest rate in effect during the twelve (12) months immediately preceding
the Date of Termination, and (ii) the average annual bonus received by you
during the three (3) years immediately preceding the Date of Termination or, if
the term of your employment with the Company has been less than the amount of
time necessary for full (not partial or pro-rated) participation in the bonus
plan for three years, then the average annual bonus received by you in the
number of years immediately preceding the Date of Termination (but no more than
three) for which you have been a full participant in the bonus plan; or, if the
term of your employment has been less than one year, then your average annual
bonus will be equal to the total of your bonus for the first four full quarters
guaranteed at the time of your employment;
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(c) the Company shall maintain in full force and effect, for your
continued benefit until the earlier of (i) two (2) years after the Date of
Termination or (ii) you obtain substantially the same coverage from a new
employer, all life insurance, medical, health and accident, and disability
plans, programs or arrangements in which you were entitled to participate
immediately prior to the Date of Termination, provided that your continued
participation is possible under the general terms and provisions of such plans
and programs. In the event that your participation in any such plan or program
is barred, the Company shall use reasonable efforts to arrange to provide you
with benefits substantially similar to those which you are entitled to receive
under such plans and programs.
6. SECTION 280G CAP. It is the intent of the parties hereto that no
amount payable pursuant to the terms of this Agreement shall cause any payment
or transfer by the Company to or for your benefit, whether paid or payable (or
transferred or transferable) pursuant to the terms of this Agreement or
otherwise (a "Payment"), to be subject to taxation under section 4999 of the
Code and as an "excess parachute payment" as defined in section 280g of the
Code. In the event that the last independent auditors selected by the Board
prior to your termination under this Agreement (the "Auditors") determine that
any such item constitutes an "excess parachute payment", then you are required
to irrevocably elect to relinquish or not exercise any payments of benefits
available to you under any plan, contract or program before the payment or
enjoyment thereof in order to limit such payments or benefits for the purpose of
eliminating any "excess parachute payment."
7. TERM OF AGREEMENT. This Agreement shall become effective on the date
hereof and shall continue in effect until the earliest of the following:
(i) a Date of Termination in accordance with Section 4(e) or other
termination of your employment with the Company shall have occurred prior to a
change in control of the Company; or
(ii) if a Payment Trigger shall have occurred during the term of this
Agreement, the performance by the Company of all its obligations, and the
satisfaction by the Company of all its obligations and liabilities, under this
Agreement; or
(iii) the date that is the third (3rd) anniversary of the date of this
agreement, or, if the agreement has been renewed, the date that is the first
(1st) anniversary of date of the renewal of the agreement; provided, however,
that if a change in control of the Company occurs prior to the third (3rd)
anniversary of the date of this agreement or the first (1st) anniversary of the
Renewal Date (whichever is later), the Company's obligation to you under this
Agreement due to such change in control shall continue through the final day of
the Trigger Period that begins with such change in control.
Beginning on the third (3rd) anniversary of the date of this agreement and
continuing each anniversary thereafter ("Renewal Date"), the agreement will be
automatically renewed for a one-year period, unless either party gives written
notice to the other party at least thirty (30) days prior to the Renewal Date.
Any change in control of the Company during the term of this Agreement
that for any reason ceases to constitute a change in control under this
agreement or is not followed by a Payment Trigger shall not effect a termination
or lapse of this Agreement.
8. COMPANY'S RIGHT TO TERMINATE. You acknowledge that this Agreement
does not operate as an employment contract nor establish any right of continued
employment with the Company and that the Company may terminate your employment
at any time, subject to providing the benefits specified in this Agreement, if
applicable.
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<PAGE>
9. SUCCESSORS; BINDING AGREEMENT.
(a) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. Failure of the Company to obtain such agreement prior to the
effectiveness of any such succession shall be a breach of this Agreement and
shall constitute an event of Constructive Termination.
(b) This Agreement shall inure to the benefit of and be enforceable
by your personal or legal representatives, executors, administrators,
successors, heirs, and legatees.
10. NOTICE. For the purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered personally or mailed by certified
or registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth on the last page of this Agreement (provided that
all notices to the Company shall be directed to the Chief Executive Officer of
the Company with a copy to the Secretary of the Company), or to such other
address as either party may have furnished to the other in writing.
11. MISCELLANEOUS. No provisions of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing signed by you and such officer as may be authorized by the Board of
Directors of the Company. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
Alabama. This Agreement shall not supersede or in any way limit the rights,
duties or obligations you may have under any other written agreement with the
Company.
12. ENFORCEMENT; EXPENSES. The provisions of this Agreement shall be
regarded as divisible, and if any provision is declared invalid or unenforceable
by a court of competent jurisdiction, the validity and enforceability of the
remainder of such provisions hereof shall not be affected. The Company shall
pay all fees, costs and expenses (including, without limitation, reasonable
attorneys' fees and the costs of investigating any potential claim) incurred by
you in connection with any dispute arising under or relating to this Agreement
or any action(s) or proceeding(s) to enforce your rights under this Agreement,
should you prevail in such action or proceeding.
Kindly sign and return to the Company the enclosed copy of this letter,
which will then constitute our agreement on the subject.
CITATION CORPORATION
/s/ Frederick F. Sommer
- -------------------------------------
Frederick F. Sommer, Chief Executive Officer
2 Office Park Circle, Suite 204
Birmingham, Alabama 35223
AGREED TO THIS 1st DAY OF DECEMBER, 1998.
/s/ Thomas W. Burleson
- -------------------------------------
Thomas W. Burleson, Executive
6
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EXHIBIT 10.3(H)
---------------
Citation Corporation
2 Office Park Circle
Suite 204
Birmingham, Alabama 35223
(205) 871-5731
FAX (205) 870-8211
December 1, 1998
Mr. G. Thomas Surtees
c/o Citation Corporation
2 Office Park Circle
Suite 204
Birmingham, Alabama 35223
Re: Change in Control Retention and Severance Agreement
Dear Mr. Surtees:
Citation Corporation (the "Company"), considers the establishment and
maintenance of a sound and vital senior management team to be essential to
protecting and enhancing the best interests of the Company and its stockholders.
In this connection, the Company recognizes that the possibility of a change in
control may exist in the future, and that such possibility, and the uncertainty
and questions which it may raise among management, may result in the departure
or distraction of management personnel to the detriment of the Company and its
stockholders. Accordingly, the Board of Directors of the Company (the "Board")
has determined that appropriate steps should be taken to reinforce and encourage
the continued attention and dedication of members of the Company's senior
management, including yourself, to their assigned duties without distraction
arising from the possibility of a change in control of the Company. The Board
has also determined that appropriate steps should be taken to encourage senior
management's participation, in the event of a proposed change in control, in the
successful completion of the change in control transaction while maintaining
their focus on business performance and strategy execution.
In order to induce you to remain in the employ of the Company and in
consideration of your agreeing to remain in the employ of the Company subject to
the terms and conditions set forth below, this letter agreement sets forth the
benefits which the Company agrees will be provided to you in the event your
employment with the Company is terminated subsequent to a change in control of
the Company (as defined in Section 1 of this letter agreement) under the
circumstances described below.
1. CHANGE IN CONTROL. No benefits shall be payable hereunder unless
there shall have been a change in control of the Company, as set forth below and
such change in control occurs prior to the termination of your employment. For
purposes of this Agreement, a "change in control" shall mean the occurrence of
any of the following events, if subsequent to the date of this Agreement:
(a) Any person, entity or "group" (within the meaning of Rules 13d
through 13d-6 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act")) (other than any subsidiary or affiliate as of the date hereof of the
Company or any employee benefit plan of the Company) has acquired or agreed to
acquire beneficial ownership of 50% or more of the voting and/or economic
interest in the capital stock of the Company; or
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(b) A majority of the board of directors of the Company shall consist
at such time of individuals other than (i) members of the board of directors on
the date hereof and (ii) other members of the Board approved to become a
director by a majority of such members referred to in clause (i) or by members
so approved ("Continuing Directors"); or
(c) The approval by the stockholders of the Company and completion of
(i) a merger or consolidation of the Company, statutory share exchange, or other
similar transaction with another corporation, partnership, or other entity or
enterprise in which either the Company is not the surviving or continuing
corporation, (ii) a sale or disposition of all or substantially all of the
assets of the Company, or (iii) the dissolution of the Company.
2. INCENTIVE AWARDS. If any of the events described in Section 1 hereof
constituting a change in control shall have occurred, then any award you have
received under the 1994 Incentive Award Plan or a successor plan will be vested
and any restrictions placed on such awards will lapse as of the date the change
in control is completed ("Change in Control Date").
3. NONQUALIFIED DEFERRED COMPENSATION. If any of the events described in
Section 1 hereof constituting a change in control shall have occurred, then you
shall receive payment of the entire balance in your Compensation Deferral
Account and Matching Contribution Account, as defined in the Citation
Corporation Nonqualified Deferred Compensation Plan, in cash and in one lump sum
as of the Change in Control Date.
4. TERMINATION FOLLOWING CHANGE IN CONTROL. If any of the events
described in Section 1 hereof constituting a change in control of the Company
shall have occurred, you shall be entitled to the benefits provided in Section 5
hereof upon the subsequent involuntary termination of your employment by the
Company, if such termination occurs within the period beginning on the Change in
Control Date and ending on the second anniversary of the Change in Control Date
(the "Trigger Period") unless such termination is (i) because of your death or
Retirement, (ii) by the Company for Cause (iii) by the Company or you for
Disability (such termination within such period, as limited by clauses (i)
through (iii), being sometimes referred to hereinafter as a "Payment Trigger").
In the event your employment is terminated within the Trigger Period, following
the occurrence of any of the events set forth at paragraph (c) below, such
termination of your employment shall be deemed to be an involuntary termination
of your employment by the Company and shall entitle you to the benefits provided
in Section 5 hereof.
(a). Disability; Retirement.
(i) "Disability" shall mean a disability which entitles
you to a disability benefit under a disability program sponsored or
maintained by the Company; provided, that if no such program is applicable
to you, then "Disability" shall mean that, based on medical evidence
reasonably satisfactory to the Compensation Committee of the Board, you are
totally and permanently unable to engage in any occupation or gainful
employment for which you are reasonably suited by background, training,
education or experience.
(ii) Termination by the Company or you of your employment
based on "Retirement" shall mean termination in accordance with the
Company's retirement policy, including early retirement, generally
applicable to its salaried employees.
(b) Cause. Termination by the Company of your employment for
"Cause" shall mean termination based upon any of the following:
(i) dishonesty or fraud by you in connection with your
employment;
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(ii) appropriation (or attempted appropriation) by you of a
material business opportunity of the Company, including attempting to
secure or securing any personal profit in connection with any transaction
entered into on behalf of the Company;
(iii) misappropriation by you (or attempted
misappropriation) of any of the Company's funds or property;
(iv) your conviction of, or indictment for (or its
procedural equivalent) or entering of a guilty plea or plea of no contest
with respect to, a felony or any other criminal offense involving moral
turpitude; or
(v) deliberate, willful or gross misconduct by you in the
performance of your duties with the Company, as determined by the good
faith judgment of the Compensation Committee of the Board.
For purposes of this paragraph, no act, or failure to act, on your part shall be
considered "willful" unless done, or omitted to be done, by you not in good
faith and without any reasonable belief that your action or omission was in the
best interest of the Company.
(c) Constructive Termination. Your employment will be deemed to
have been involuntarily terminated by the Company upon the termination of your
employment, whether by you or by the Company, following the occurrence of any of
the following without your prior written consent (any such event being sometimes
referred to hereinafter as your "Constructive Termination"):
(i) subsequent to a change in control of the Company, any
reduction in your title, duties, responsibilities or authority with the
Company as such existed immediately prior to a change in control, except in
connection with the termination of your employment for Cause, Disability,
Retirement or as a result of your death or voluntarily by you; or
(ii) subsequent to a change in control of the Company, a
reduction by the Company in your base salary as in effect on the date
hereof or as the same may be increased from time to time; or
(iii) subsequent to a change in control of the Company, a
failure by the Company to continue any bonus plans in which you are
presently entitled to participate as the same may be modified from time to
time prior to (but not in anticipation of) such change in control, or as
the same may be modified following such change in control as may be
required by or desirable for the Company due to changes to (x) the Internal
Revenue Code of 1986, as amended (the "Code"), (y) applicable accounting
rules or principles or (z) applicable laws or regulations, including,
without limitation, the Employee Retirement Income and Security Act of
1974, as amended, (the "Bonus Plans") or a failure by the Company to
continue you as a participant in the Bonus Plans on at least the same basis
as you presently participate in accordance with the Bonus Plans; or
(iv) subsequent to a change in control of the Company, the
failure by the Company to continue in effect any benefit or compensation
plan, life insurance plan, health-and-accident plan or disability plan in
which you are participating at the time of a change in control of the
Company (or plans providing you with substantially similar benefits), the
taking of any action by the Company which would materially adversely affect
your participation in or materially reduce your benefits under any such
plans or deprive you of any material fringe benefit enjoyed by you at the
time of the change in control, or the failure by the Company to provide you
with the number of paid vacation days to which you are then entitled in
accordance with the Company's normal vacation policy in effect on the date
hereof; or
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(v) subsequent to a change in control of the Company, a
change in the location of your employment greater than twenty-five (25)
miles from your office location on the date hereof.
(d) Notice of Termination. Any purported termination by the
Company pursuant to your Disability or Retirement, as defined in paragraph (a)
above, or for Cause, as defined in paragraph (b) above, or by you pursuant to
your Disability or Retirement, as defined in paragraph (a) above or by you or
the Company based on an event of Constructive Termination, as defined in
paragraph (c) above, shall be communicated by written Notice of Termination to
the other party hereto. For purposes of this Agreement, a "Notice of
Termination" shall indicate the specific termination provision in this Agreement
relied upon and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of your employment under the
provision so indicated.
(e) Date of Termination. "Date of Termination" shall mean (i)
if your employment is terminated for Disability, thirty (30) days after Notice
of Termination is given (provided that you shall not have returned to the
performance of your duties on a full-time basis during such thirty (30) day
period), (ii) if your employment is terminated due to your death, the date of
your death, (iii) if your employment is terminated pursuant to paragraph (b)
above, the date specified in the Notice of Termination, (iv) if your employment
is terminated for Retirement, the date specified in the Notice of Termination,
and (v) if your employment is terminated for any other reason, the date on which
a Notice of Termination is given; provided that if within thirty (30) days after
any Notice of Termination is given the party receiving such Notice of
Termination notifies the other party that a dispute exists concerning the
termination, the Date of Termination shall be the date on which the dispute is
finally determined, either by mutual written agreement of the parties, or by a
final judgment, order or decree of a court of competent jurisdiction (the time
for appeal therefrom having expired and no appeal having been perfected);
provided further, however, that if such disputed termination constitutes a
Payment Trigger, the Trigger Period shall not run pending resolution of the
dispute but shall recommence upon the date that the dispute is finally
determined (as set forth in the preceding proviso).
5. CERTAIN BENEFITS UPON TERMINATION. If, after a change in control
of the Company shall have occurred, as defined in Section 1 above, your
employment with the Company shall be terminated (including a Constructive
Termination) within the Trigger Period by the Company or you other than for
Cause, Disability, Retirement or death, and other than by your voluntarily
terminating your employment with the Company, then you shall be entitled to the
benefits outlined below:
(a) the Company shall pay to you within thirty (30) days
following the Date of Termination in a lump sum cash payment your full base
salary through the Date of Termination at the rate in effect at the time Notice
of Termination is given plus (i) credit for any vacation earned but not taken,
(ii) the amount, if any, of any bonus for a past fiscal year which has been
earned but not yet been paid to you, and (iii) a pro-rated payment, based on the
Company's results as of the Date of Termination, of any bonus due under any
Bonus Plan in which you participate;
(b) in lieu of any further salary payments to you for periods
subsequent to the Date of Termination, the Company shall pay as severance pay to
you within thirty (30) days following the Date of Termination a lump sum amount
equal to two (2) times the sum of (i) the amount of your annual base salary at
the highest rate in effect during the twelve (12) months immediately preceding
the Date of Termination, and (ii) the average annual bonus received by you
during the three (3) years immediately preceding the Date of Termination or, if
the term of your employment with the Company has been less than the amount of
time necessary for full (not partial or pro-rated) participation in the bonus
plan for three years, then the average annual bonus received by you in the
number of years immediately preceding the Date of Termination (but no more than
three) for which you have been a full participant in the bonus plan; or, if the
term of your employment has been less than one year, then your average annual
bonus will be equal to the total of your bonus for the first four full quarters
guaranteed at the time of your employment;
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(c) the Company shall maintain in full force and effect, for your
continued benefit until the earlier of (i) two (2) years after the Date of
Termination or (ii) you obtain substantially the same coverage from a new
employer, all life insurance, medical, health and accident, and disability
plans, programs or arrangements in which you were entitled to participate
immediately prior to the Date of Termination, provided that your continued
participation is possible under the general terms and provisions of such plans
and programs. In the event that your participation in any such plan or program
is barred, the Company shall use reasonable efforts to arrange to provide you
with benefits substantially similar to those which you are entitled to receive
under such plans and programs.
6. SECTION 280G CAP. It is the intent of the parties hereto that no
amount payable pursuant to the terms of this Agreement shall cause any payment
or transfer by the Company to or for your benefit, whether paid or payable (or
transferred or transferable) pursuant to the terms of this Agreement or
otherwise (a "Payment"), to be subject to taxation under section 4999 of the
Code and as an "excess parachute payment" as defined in section 280g of the
Code. In the event that the last independent auditors selected by the Board
prior to your termination under this Agreement (the "Auditors") determine that
any such item constitutes an "excess parachute payment", then you are required
to irrevocably elect to relinquish or not exercise any payments of benefits
available to you under any plan, contract or program before the payment or
enjoyment thereof in order to limit such payments or benefits for the purpose of
eliminating any "excess parachute payment."
7. TERM OF AGREEMENT. This Agreement shall become effective on the date
hereof and shall continue in effect until the earliest of the following:
(i) a Date of Termination in accordance with Section 4(e) or other
termination of your employment with the Company shall have occurred prior to a
change in control of the Company; or
(ii) if a Payment Trigger shall have occurred during the term of this
Agreement, the performance by the Company of all its obligations, and the
satisfaction by the Company of all its obligations and liabilities, under this
Agreement; or
(iii) the date that is the third (3rd) anniversary of the date of this
agreement, or, if the agreement has been renewed, the date that is the first
(1st) anniversary of date of the renewal of the agreement; provided, however,
that if a change in control of the Company occurs prior to the third (3rd)
anniversary of the date of this agreement or the first (1st) anniversary of the
Renewal Date (whichever is later), the Company's obligation to you under this
Agreement due to such change in control shall continue through the final day of
the Trigger Period that begins with such change in control.
Beginning on the third (3rd) anniversary of the date of this agreement and
continuing each anniversary thereafter ("Renewal Date"), the agreement will be
automatically renewed for a one-year period, unless either party gives written
notice to the other party at least thirty (30) days prior to the Renewal Date.
Any change in control of the Company during the term of this Agreement
that for any reason ceases to constitute a change in control under this
agreement or is not followed by a Payment Trigger shall not effect a termination
or lapse of this Agreement.
8. COMPANY'S RIGHT TO TERMINATE. You acknowledge that this Agreement
does not operate as an employment contract nor establish any right of continued
employment with the Company and that the Company may terminate your employment
at any time, subject to providing the benefits specified in this Agreement, if
applicable.
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9. SUCCESSORS; BINDING AGREEMENT.
(a) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. Failure of the Company to obtain such agreement prior to the
effectiveness of any such succession shall be a breach of this Agreement and
shall constitute an event of Constructive Termination.
(b) This Agreement shall inure to the benefit of and be enforceable
by your personal or legal representatives, executors, administrators,
successors, heirs, and legatees.
10. NOTICE. For the purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered personally or mailed by certified
or registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth on the last page of this Agreement (provided that
all notices to the Company shall be directed to the Chief Executive Officer of
the Company with a copy to the Secretary of the Company), or to such other
address as either party may have furnished to the other in writing.
11. MISCELLANEOUS. No provisions of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing signed by you and such officer as may be authorized by the Board of
Directors of the Company. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
Alabama. This Agreement shall not supersede or in any way limit the rights,
duties or obligations you may have under any other written agreement with the
Company.
12. ENFORCEMENT; EXPENSES. The provisions of this Agreement shall be
regarded as divisible, and if any provision is declared invalid or unenforceable
by a court of competent jurisdiction, the validity and enforceability of the
remainder of such provisions hereof shall not be affected. The Company shall
pay all fees, costs and expenses (including, without limitation, reasonable
attorneys' fees and the costs of investigating any potential claim) incurred by
you in connection with any dispute arising under or relating to this Agreement
or any action(s) or proceeding(s) to enforce your rights under this Agreement,
should you prevail in such action or proceeding.
Kindly sign and return to the Company the enclosed copy of this letter,
which will then constitute our agreement on the subject.
CITATION CORPORATION
/s/ Frederick F. Sommer
- -----------------------------------------
Frederick F. Sommer, Chief Executive Officer
2 Office Park Circle, Suite 204
Birmingham, Alabama 35223
AGREED TO THIS 1st DAY OF DECEMBER, 1998.
/s/ G. Thomas Surtees
- -----------------------------------------
G. Thomas Surtees, Executive
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EXHIBIT 10.3(I)
---------------
Citation Corporation
2 Office Park Circle
Suite 204
Birmingham, Alabama 35223
(205) 871-5731
FAX (205) 870-8211
December 1, 1998
Mr. Virgil C. Reid
c/o Citation Corporation
2 Office Park Circle
Suite 204
Birmingham, Alabama 35223
Re: Change in Control Retention and Severance Agreement
Dear Mr. Reid:
Citation Corporation (the "Company"), considers the establishment and
maintenance of a sound and vital senior management team to be essential to
protecting and enhancing the best interests of the Company and its stockholders.
In this connection, the Company recognizes that the possibility of a change in
control may exist in the future, and that such possibility, and the uncertainty
and questions which it may raise among management, may result in the departure
or distraction of management personnel to the detriment of the Company and its
stockholders. Accordingly, the Board of Directors of the Company (the "Board")
has determined that appropriate steps should be taken to reinforce and encourage
the continued attention and dedication of members of the Company's senior
management, including yourself, to their assigned duties without distraction
arising from the possibility of a change in control of the Company. The Board
has also determined that appropriate steps should be taken to encourage senior
management's participation, in the event of a proposed change in control, in the
successful completion of the change in control transaction while maintaining
their focus on business performance and strategy execution.
In order to induce you to remain in the employ of the Company and in
consideration of your agreeing to remain in the employ of the Company subject to
the terms and conditions set forth below, this letter agreement sets forth the
benefits which the Company agrees will be provided to you in the event your
employment with the Company is terminated subsequent to a change in control of
the Company (as defined in Section 1 of this letter agreement) under the
circumstances described below.
1. CHANGE IN CONTROL. No benefits shall be payable hereunder unless
there shall have been a change in control of the Company, as set forth below and
such change in control occurs prior to the termination of your employment. For
purposes of this Agreement, a "change in control" shall mean the occurrence of
any of the following events, if subsequent to the date of this Agreement:
(a) Any person, entity or "group" (within the meaning of Rules 13d
through 13d-6 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act")) (other than any subsidiary or affiliate as of the date hereof of the
Company or any employee benefit plan of the Company) has acquired or agreed to
acquire beneficial ownership of 50% or more of the voting and/or economic
interest in the capital stock of the Company; or
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(b) A majority of the board of directors of the Company shall consist
at such time of individuals other than (i) members of the board of directors on
the date hereof and (ii) other members of the Board approved to become a
director by a majority of such members referred to in clause (i) or by members
so approved ("Continuing Directors"); or
(c) The approval by the stockholders of the Company and completion of
(i) a merger or consolidation of the Company, statutory share exchange, or other
similar transaction with another corporation, partnership, or other entity or
enterprise in which either the Company is not the surviving or continuing
corporation, (ii) a sale or disposition of all or substantially all of the
assets of the Company, or (iii) the dissolution of the Company.
2. INCENTIVE AWARDS. If any of the events described in Section 1 hereof
constituting a change in control shall have occurred, then any award you have
received under the 1994 Incentive Award Plan or a successor plan will be vested
and any restrictions placed on such awards will lapse as of the date the change
in control is completed ("Change in Control Date").
3. NONQUALIFIED DEFERRED COMPENSATION. If any of the events described in
Section 1 hereof constituting a change in control shall have occurred, then you
shall receive payment of the entire balance in your Compensation Deferral
Account and Matching Contribution Account, as defined in the Citation
Corporation Nonqualified Deferred Compensation Plan, in cash and in one lump sum
as of the Change in Control Date.
4. TERMINATION FOLLOWING CHANGE IN CONTROL. If any of the events
described in Section 1 hereof constituting a change in control of the Company
shall have occurred, you shall be entitled to the benefits provided in Section 5
hereof upon the subsequent involuntary termination of your employment by the
Company, if such termination occurs within the period beginning on the Change in
Control Date and ending on the second anniversary of the Change in Control Date
(the "Trigger Period") unless such termination is (i) because of your death or
Retirement, (ii) by the Company for Cause (iii) by the Company or you for
Disability (such termination within such period, as limited by clauses (i)
through (iii), being sometimes referred to hereinafter as a "Payment Trigger").
In the event your employment is terminated within the Trigger Period, following
the occurrence of any of the events set forth at paragraph (c) below, such
termination of your employment shall be deemed to be an involuntary termination
of your employment by the Company and shall entitle you to the benefits provided
in Section 5 hereof.
(a). Disability; Retirement.
(i) "Disability" shall mean a disability which entitles you to a
disability benefit under a disability program sponsored or maintained by
the Company; provided, that if no such program is applicable to you, then
"Disability" shall mean that, based on medical evidence reasonably
satisfactory to the Compensation Committee of the Board, you are totally
and permanently unable to engage in any occupation or gainful employment
for which you are reasonably suited by background, training, education or
experience.
(ii) Termination by the Company or you of your employment based
on "Retirement" shall mean termination in accordance with the Company's
retirement policy, including early retirement, generally applicable to its
salaried employees.
(b) Cause. Termination by the Company of your employment for "Cause"
shall mean termination based upon any of the following:
(i) dishonesty or fraud by you in connection with your
employment;
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(ii) appropriation (or attempted appropriation) by you of a
material business opportunity of the Company, including attempting to
secure or securing any personal profit in connection with any transaction
entered into on behalf of the Company;
(iii) misappropriation by you (or attempted misappropriation) of
any of the Company's funds or property;
(iv) your conviction of, or indictment for (or its procedural
equivalent) or entering of a guilty plea or plea of no contest with respect
to, a felony or any other criminal offense involving moral turpitude; or
(v) deliberate, willful or gross misconduct by you in the
performance of your duties with the Company, as determined by the good
faith judgment of the Compensation Committee of the Board.
For purposes of this paragraph, no act, or failure to act, on your part shall be
considered "willful" unless done, or omitted to be done, by you not in good
faith and without any reasonable belief that your action or omission was in the
best interest of the Company.
(c) Notice of Termination. Any purported termination by the Company
pursuant to your Disability or Retirement, as defined in paragraph (a) above, or
for Cause, as defined in paragraph (b) above, or by you pursuant to your
Disability or Retirement, as defined in paragraph (a) above or by you or the
Company based on an event of Constructive Termination, as defined in paragraph
(c) above, shall be communicated by written Notice of Termination to the other
party hereto. For purposes of this Agreement, a "Notice of Termination" shall
indicate the specific termination provision in this Agreement relied upon and
shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of your employment under the provision so
indicated.
(d) Date of Termination. "Date of Termination" shall mean (i) if your
employment is terminated for Disability, thirty (30) days after Notice of
Termination is given (provided that you shall not have returned to the
performance of your duties on a full-time basis during such thirty (30) day
period), (ii) if your employment is terminated due to your death, the date of
your death, (iii) if your employment is terminated pursuant to paragraph (b)
above, the date specified in the Notice of Termination, (iv) if your employment
is terminated for Retirement, the date specified in the Notice of Termination,
and (v) if your employment is terminated for any other reason, the date on which
a Notice of Termination is given; provided that if within thirty (30) days after
any Notice of Termination is given the party receiving such Notice of
Termination notifies the other party that a dispute exists concerning the
termination, the Date of Termination shall be the date on which the dispute is
finally determined, either by mutual written agreement of the parties, or by a
final judgment, order or decree of a court of competent jurisdiction (the time
for appeal therefrom having expired and no appeal having been perfected);
provided further, however, that if such disputed termination constitutes a
Payment Trigger, the Trigger Period shall not run pending resolution of the
dispute but shall recommence upon the date that the dispute is finally
determined (as set forth in the preceding proviso).
5. CERTAIN BENEFITS UPON TERMINATION. If, after a change in control of
the Company shall have occurred, as defined in Section 1 above, your employment
with the Company shall be terminated (including a Constructive Termination)
within the Trigger Period by the Company or you other than for Cause,
Disability, Retirement or death, and other than by your voluntarily terminating
your employment with the Company, then you shall be entitled to the benefits
outlined below:
(a) the Company shall pay to you within thirty (30) days following the
Date of Termination in a lump sum cash payment your full base salary through the
Date of Termination at the rate in effect at the time
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Notice of Termination is given plus (i) credit for any vacation earned but not
taken, (ii) the amount, if any, of any bonus for a past fiscal year which has
been earned but not yet been paid to you, and (iii) a pro-rated payment, based
on the Company's results as of the Date of Termination, of any bonus due under
any Bonus Plan in which you participate;
(b) in lieu of any further salary payments to you for periods
subsequent to the Date of Termination, the Company shall pay as severance pay to
you within thirty (30) days following the Date of Termination a lump sum amount
equal to two (2) times the sum of (i) the amount of your annual base salary at
the highest rate in effect during the twelve (12) months immediately preceding
the Date of Termination, and (ii) the average annual bonus received by you
during the three (3) years immediately preceding the Date of Termination or, if
the term of your employment with the Company has been less than the amount of
time necessary for full (not partial or pro-rated) participation in the bonus
plan for three years, then the average annual bonus received by you in the
number of years immediately preceding the Date of Termination (but no more than
three) for which you have been a full participant in the bonus plan; or, if the
term of your employment has been less than one year, then your average annual
bonus will be equal to the total of your bonus for the first four full quarters
guaranteed at the time of your employment;
(c) the Company shall maintain in full force and effect, for your
continued benefit until the earlier of (i) two (2) years after the Date of
Termination or (ii) you obtain substantially the same coverage from a new
employer, all life insurance, medical, health and accident, and disability
plans, programs or arrangements in which you were entitled to participate
immediately prior to the Date of Termination, provided that your continued
participation is possible under the general terms and provisions of such plans
and programs. In the event that your participation in any such plan or program
is barred, the Company shall use reasonable efforts to arrange to provide you
with benefits substantially similar to those which you are entitled to receive
under such plans and programs.
6. SECTION 280G CAP. It is the intent of the parties hereto that no
amount payable pursuant to the terms of this Agreement shall cause any payment
or transfer by the Company to or for your benefit, whether paid or payable (or
transferred or transferable) pursuant to the terms of this Agreement or
otherwise (a "Payment"), to be subject to taxation under section 4999 of the
Code and as an "excess parachute payment" as defined in section 280g of the
Code. In the event that the last independent auditors selected by the Board
prior to your termination under this Agreement (the "Auditors") determine that
any such item constitutes an "excess parachute payment", then you are required
to irrevocably elect to relinquish or not exercise any payments of benefits
available to you under any plan, contract or program before the payment or
enjoyment thereof in order to limit such payments or benefits for the purpose of
eliminating any "excess parachute payment."
7. TERM OF AGREEMENT. This Agreement shall become effective on the date
hereof and shall continue in effect until the earliest of the following:
(i) a Date of Termination in accordance with Section 4(e) or other
termination of your employment with the Company shall have occurred prior to a
change in control of the Company; or
(ii) if a Payment Trigger shall have occurred during the term of this
Agreement, the performance by the Company of all its obligations, and the
satisfaction by the Company of all its obligations and liabilities, under this
Agreement; or
(iii) the date that is the third (3rd) anniversary of the date of this
agreement, or, if the agreement has been renewed, the date that is the first
(1st) anniversary of date of the renewal of the agreement; provided, however,
that if a change in control of the Company occurs prior to the third (3rd)
anniversary of the date of this agreement or the first (1st) anniversary of the
Renewal Date (whichever is later), the Company's obligation to you under this
Agreement due to such change in control shall continue through the final day of
the Trigger Period that begins with such change in control.
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Beginning on the third (3rd) anniversary of the date of this agreement and
continuing each anniversary thereafter ("Renewal Date"), the agreement will be
automatically renewed for a one-year period, unless either party gives written
notice to the other party at least thirty (30) days prior to the Renewal Date.
Any change in control of the Company during the term of this Agreement
that for any reason ceases to constitute a change in control under this
agreement or is not followed by a Payment Trigger shall not effect a termination
or lapse of this Agreement.
8. COMPANY'S RIGHT TO TERMINATE. You acknowledge that this Agreement
does not operate as an employment contract nor establish any right of continued
employment with the Company and that the Company may terminate your employment
at any time, subject to providing the benefits specified in this Agreement, if
applicable.
9. SUCCESSORS; BINDING AGREEMENT.
(a) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. Failure of the Company to obtain such agreement prior to the
effectiveness of any such succession shall be a breach of this Agreement and
shall constitute an event of Constructive Termination.
(b) This Agreement shall inure to the benefit of and be enforceable
by your personal or legal representatives, executors, administrators,
successors, heirs, and legatees.
10. NOTICE. For the purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered personally or mailed by certified
or registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth on the last page of this Agreement (provided that
all notices to the Company shall be directed to the Chief Executive Officer of
the Company with a copy to the Secretary of the Company), or to such other
address as either party may have furnished to the other in writing.
11. MISCELLANEOUS. No provisions of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing signed by you and such officer as may be authorized by the Board of
Directors of the Company. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
Alabama. This Agreement shall not supersede or in any way limit the rights,
duties or obligations you may have under any other written agreement with the
Company.
12. ENFORCEMENT; EXPENSES. The provisions of this Agreement shall be
regarded as divisible, and if any provision is declared invalid or unenforceable
by a court of competent jurisdiction, the validity and enforceability of the
remainder of such provisions hereof shall not be affected. The Company shall
pay all fees, costs and expenses (including, without limitation, reasonable
attorneys' fees and the costs of investigating any potential claim) incurred by
you in connection with any dispute arising under or relating to this Agreement
or any action(s) or proceeding(s) to enforce your rights under this Agreement,
should you prevail in such action or proceeding.
5
<PAGE>
Kindly sign and return to the Company the enclosed copy of this letter,
which will then constitute our agreement on the subject.
CITATION CORPORATION
/s/ Frederick F. Sommer
- --------------------------------
Frederick F. Sommer, Chief Executive Officer
2 Office Park Circle, Suite 204
Birmingham, Alabama 35223
AGREED TO THIS 3rd DAY OF DECEMBER, 1998.
/s/ Virgil C. Reid
- --------------------------------
Virgil C. Reid, Executive
6
<PAGE>
EXHIBIT 10.3(J)
---------------
Citation Corporation
2 Office Park Circle
Suite 204
Birmingham, Alabama 35223
(205) 871-5731
FAX (205) 870-8211
December 1, 1998
Mr. Timothy L. Roberts
c/o Citation Corporation
2 Office Park Circle
Suite 204
Birmingham, Alabama 35223
Re: Change in Control Retention and Severance Agreement
Dear Mr. Roberts:
Citation Corporation (the "Company"), considers the establishment and
maintenance of a sound and vital senior management team to be essential to
protecting and enhancing the best interests of the Company and its stockholders.
In this connection, the Company recognizes that the possibility of a change in
control may exist in the future, and that such possibility, and the uncertainty
and questions which it may raise among management, may result in the departure
or distraction of management personnel to the detriment of the Company and its
stockholders. Accordingly, the Board of Directors of the Company (the "Board")
has determined that appropriate steps should be taken to reinforce and encourage
the continued attention and dedication of members of the Company's senior
management, including yourself, to their assigned duties without distraction
arising from the possibility of a change in control of the Company. The Board
has also determined that appropriate steps should be taken to encourage senior
management's participation, in the event of a proposed change in control, in the
successful completion of the change in control transaction while maintaining
their focus on business performance and strategy execution.
In order to induce you to remain in the employ of the Company and in
consideration of your agreeing to remain in the employ of the Company subject to
the terms and conditions set forth below, this letter agreement sets forth the
benefits which the Company agrees will be provided to you in the event your
employment with the Company is terminated subsequent to a change in control of
the Company (as defined in Section 1 of this letter agreement) under the
circumstances described below.
1. CHANGE IN CONTROL. No benefits shall be payable hereunder unless
there shall have been a change in control of the Company, as set forth below and
such change in control occurs prior to the termination of your employment. For
purposes of this Agreement, a "change in control" shall mean the occurrence of
any of the following events, if subsequent to the date of this Agreement:
(a) Any person, entity or "group" (within the meaning of Rules 13d
through 13d-6 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act")) (other than any subsidiary or affiliate as of the date hereof of the
Company or any employee benefit plan of the Company) has acquired or agreed to
acquire beneficial ownership of 50% or more of the voting and/or economic
interest in the capital stock of the Company; or
1
<PAGE>
(b) A majority of the board of directors of the Company shall consist
at such time of individuals other than (i) members of the board of directors on
the date hereof and (ii) other members of the Board approved to become a
director by a majority of such members referred to in clause (i) or by members
so approved ("Continuing Directors"); or
(c) The approval by the stockholders of the Company and completion of
(i) a merger or consolidation of the Company, statutory share exchange, or other
similar transaction with another corporation, partnership, or other entity or
enterprise in which either the Company is not the surviving or continuing
corporation, (ii) a sale or disposition of all or substantially all of the
assets of the Company, or (iii) the dissolution of the Company.
2. INCENTIVE AWARDS. If any of the events described in Section 1 hereof
constituting a change in control shall have occurred, then any award you have
received under the 1994 Incentive Award Plan or a successor plan will be vested
and any restrictions placed on such awards will lapse as of the date the change
in control is completed ("Change in Control Date").
3. NONQUALIFIED DEFERRED COMPENSATION. If any of the events described in
Section 1 hereof constituting a change in control shall have occurred, then you
shall receive payment of the entire balance in your Compensation Deferral
Account and Matching Contribution Account, as defined in the Citation
Corporation Nonqualified Deferred Compensation Plan, in cash and in one lump sum
as of the Change in Control Date.
4. TERMINATION FOLLOWING CHANGE IN CONTROL. If any of the events
described in Section 1 hereof constituting a change in control of the Company
shall have occurred, you shall be entitled to the benefits provided in Section 5
hereof upon the subsequent involuntary termination of your employment by the
Company, if such termination occurs within the period beginning on the Change in
Control Date and ending on the second anniversary of the Change in Control Date
(the "Trigger Period") unless such termination is (i) because of your death or
Retirement, (ii) by the Company for Cause (iii) by the Company or you for
Disability (such termination within such period, as limited by clauses (i)
through (iii), being sometimes referred to hereinafter as a "Payment Trigger").
In the event your employment is terminated within the Trigger Period, following
the occurrence of any of the events set forth at paragraph (c) below, such
termination of your employment shall be deemed to be an involuntary termination
of your employment by the Company and shall entitle you to the benefits provided
in Section 5 hereof.
(a). Disability; Retirement.
(i) "Disability" shall mean a disability which entitles you to a
disability benefit under a disability program sponsored or maintained by
the Company; provided, that if no such program is applicable to you, then
"Disability" shall mean that, based on medical evidence reasonably
satisfactory to the Compensation Committee of the Board, you are totally
and permanently unable to engage in any occupation or gainful employment
for which you are reasonably suited by background, training, education or
experience.
(ii) Termination by the Company or you of your employment based
on "Retirement" shall mean termination in accordance with the Company's
retirement policy, including early retirement, generally applicable to its
salaried employees.
(b) Cause. Termination by the Company of your employment for "Cause"
shall mean termination based upon any of the following:
(i) dishonesty or fraud by you in connection with your
employment;
2
<PAGE>
(ii) appropriation (or attempted appropriation) by you of a
material business opportunity of the Company, including attempting to
secure or securing any personal profit in connection with any transaction
entered into on behalf of the Company;
(iii) misappropriation by you (or attempted misappropriation) of
any of the Company's funds or property;
(iv) your conviction of, or indictment for (or its procedural
equivalent) or entering of a guilty plea or plea of no contest with respect
to, a felony or any other criminal offense involving moral turpitude; or
(v) deliberate, willful or gross misconduct by you in the
performance of your duties with the Company, as determined by the good
faith judgment of the Compensation Committee of the Board.
For purposes of this paragraph, no act, or failure to act, on your part shall be
considered "willful" unless done, or omitted to be done, by you not in good
faith and without any reasonable belief that your action or omission was in the
best interest of the Company.
(c) Notice of Termination. Any purported termination by the Company
pursuant to your Disability or Retirement, as defined in paragraph (a) above, or
for Cause, as defined in paragraph (b) above, or by you pursuant to your
Disability or Retirement, as defined in paragraph (a) above or by you or the
Company based on an event of Constructive Termination, as defined in paragraph
(c) above, shall be communicated by written Notice of Termination to the other
party hereto. For purposes of this Agreement, a "Notice of Termination" shall
indicate the specific termination provision in this Agreement relied upon and
shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of your employment under the provision so
indicated.
(d) Date of Termination. "Date of Termination" shall mean (i) if your
employment is terminated for Disability, thirty (30) days after Notice of
Termination is given (provided that you shall not have returned to the
performance of your duties on a full-time basis during such thirty (30) day
period), (ii) if your employment is terminated due to your death, the date of
your death, (iii) if your employment is terminated pursuant to paragraph (b)
above, the date specified in the Notice of Termination, (iv) if your employment
is terminated for Retirement, the date specified in the Notice of Termination,
and (v) if your employment is terminated for any other reason, the date on which
a Notice of Termination is given; provided that if within thirty (30) days after
any Notice of Termination is given the party receiving such Notice of
Termination notifies the other party that a dispute exists concerning the
termination, the Date of Termination shall be the date on which the dispute is
finally determined, either by mutual written agreement of the parties, or by a
final judgment, order or decree of a court of competent jurisdiction (the time
for appeal therefrom having expired and no appeal having been perfected);
provided further, however, that if such disputed termination constitutes a
Payment Trigger, the Trigger Period shall not run pending resolution of the
dispute but shall recommence upon the date that the dispute is finally
determined (as set forth in the preceding proviso).
5. CERTAIN BENEFITS UPON TERMINATION. If, after a change in control of
the Company shall have occurred, as defined in Section 1 above, your employment
with the Company shall be terminated (including a Constructive Termination)
within the Trigger Period by the Company or you other than for Cause,
Disability, Retirement or death, and other than by your voluntarily terminating
your employment with the Company, then you shall be entitled to the benefits
outlined below:
(a) the Company shall pay to you within thirty (30) days following
the Date of Termination in a lump sum cash payment your full base salary through
the Date of Termination at the rate in effect at the time
3
<PAGE>
Notice of Termination is given plus (i) credit for any vacation earned but not
taken, (ii) the amount, if any, of any bonus for a past fiscal year which has
been earned but not yet been paid to you, and (iii) a pro-rated payment, based
on the Company's results as of the Date of Termination, of any bonus due under
any Bonus Plan in which you participate;
(b) in lieu of any further salary payments to you for periods
subsequent to the Date of Termination, the Company shall pay as severance pay to
you within thirty (30) days following the Date of Termination a lump sum amount
equal to two (2) times the sum of (i) the amount of your annual base salary at
the highest rate in effect during the twelve (12) months immediately preceding
the Date of Termination, and (ii) the average annual bonus received by you
during the three (3) years immediately preceding the Date of Termination or, if
the term of your employment with the Company has been less than the amount of
time necessary for full (not partial or pro-rated) participation in the bonus
plan for three years, then the average annual bonus received by you in the
number of years immediately preceding the Date of Termination (but no more than
three) for which you have been a full participant in the bonus plan; or, if the
term of your employment has been less than one year, then your average annual
bonus will be equal to the total of your bonus for the first four full quarters
guaranteed at the time of your employment;
(c) the Company shall maintain in full force and effect, for your
continued benefit until the earlier of (i) two (2) years after the Date of
Termination or (ii) you obtain substantially the same coverage from a new
employer, all life insurance, medical, health and accident, and disability
plans, programs or arrangements in which you were entitled to participate
immediately prior to the Date of Termination, provided that your continued
participation is possible under the general terms and provisions of such plans
and programs. In the event that your participation in any such plan or program
is barred, the Company shall use reasonable efforts to arrange to provide you
with benefits substantially similar to those which you are entitled to receive
under such plans and programs.
6. SECTION 280G CAP. It is the intent of the parties hereto that no
amount payable pursuant to the terms of this Agreement shall cause any payment
or transfer by the Company to or for your benefit, whether paid or payable (or
transferred or transferable) pursuant to the terms of this Agreement or
otherwise (a "Payment"), to be subject to taxation under section 4999 of the
Code and as an "excess parachute payment" as defined in section 280g of the
Code. In the event that the last independent auditors selected by the Board
prior to your termination under this Agreement (the "Auditors") determine that
any such item constitutes an "excess parachute payment", then you are required
to irrevocably elect to relinquish or not exercise any payments of benefits
available to you under any plan, contract or program before the payment or
enjoyment thereof in order to limit such payments or benefits for the purpose of
eliminating any "excess parachute payment."
7. TERM OF AGREEMENT. This Agreement shall become effective on the date
hereof and shall continue in effect until the earliest of the following:
(i) a Date of Termination in accordance with Section 4(e) or other
termination of your employment with the Company shall have occurred prior to a
change in control of the Company; or
(ii) if a Payment Trigger shall have occurred during the term of this
Agreement, the performance by the Company of all its obligations, and the
satisfaction by the Company of all its obligations and liabilities, under this
Agreement; or
(iii) the date that is the third (3rd) anniversary of the date of this
agreement, or, if the agreement has been renewed, the date that is the first
(1st) anniversary of date of the renewal of the agreement; provided, however,
that if a change in control of the Company occurs prior to the third (3rd)
anniversary of the date of this agreement or the first (1st) anniversary of the
Renewal Date (whichever is later), the Company's obligation to you under this
Agreement due to such change in control shall continue through the final day of
the Trigger Period that begins with such change in control.
4
<PAGE>
Beginning on the third (3rd) anniversary of the date of this agreement and
continuing each anniversary thereafter ("Renewal Date"), the agreement will be
automatically renewed for a one-year period, unless either party gives written
notice to the other party at least thirty (30) days prior to the Renewal Date.
Any change in control of the Company during the term of this Agreement
that for any reason ceases to constitute a change in control under this
agreement or is not followed by a Payment Trigger shall not effect a termination
or lapse of this Agreement.
8. COMPANY'S RIGHT TO TERMINATE. You acknowledge that this Agreement
does not operate as an employment contract nor establish any right of continued
employment with the Company and that the Company may terminate your employment
at any time, subject to providing the benefits specified in this Agreement, if
applicable.
9. SUCCESSORS; BINDING AGREEMENT.
(a) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. Failure of the Company to obtain such agreement prior to the
effectiveness of any such succession shall be a breach of this Agreement and
shall constitute an event of Constructive Termination.
(b) This Agreement shall inure to the benefit of and be enforceable
by your personal or legal representatives, executors, administrators,
successors, heirs, and legatees.
10. NOTICE. For the purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered personally or mailed by certified
or registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth on the last page of this Agreement (provided that
all notices to the Company shall be directed to the Chief Executive Officer of
the Company with a copy to the Secretary of the Company), or to such other
address as either party may have furnished to the other in writing.
11. MISCELLANEOUS. No provisions of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing signed by you and such officer as may be authorized by the Board of
Directors of the Company. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
Alabama. This Agreement shall not supersede or in any way limit the rights,
duties or obligations you may have under any other written agreement with the
Company.
12. ENFORCEMENT; EXPENSES. The provisions of this Agreement shall be
regarded as divisible, and if any provision is declared invalid or unenforceable
by a court of competent jurisdiction, the validity and enforceability of the
remainder of such provisions hereof shall not be affected. The Company shall
pay all fees, costs and expenses (including, without limitation, reasonable
attorneys' fees and the costs of investigating any potential claim) incurred by
you in connection with any dispute arising under or relating to this Agreement
or any action(s) or proceeding(s) to enforce your rights under this Agreement,
should you prevail in such action or proceeding.
5
<PAGE>
Kindly sign and return to the Company the enclosed copy of this letter,
which will then constitute our agreement on the subject.
CITATION CORPORATION
/s/ Frederick F. Sommer
- ----------------------------------------
Frederick F. Sommer, Chief Executive Officer
2 Office Park Circle, Suite 204
Birmingham, Alabama 35223
AGREED TO THIS 4th DAY OF DECEMBER, 1998.
/s/ Timothy L. Roberts
- -----------------------------------------
Timothy L. Roberts, Executive
6
<PAGE>
EXHIBIT 21
----------
SUBSIDIARIES OF CITATION CORPORATION STATE OF ORGANIZATION
Berlin Foundry Corporation Wisconsin
Bohn Aluminum, Inc. Indiana
Camden Casting Center, Inc. Tennessee
Castwell Products, Inc. Illinois
Citation Automotive Sales Corp. Michigan
Citation Precision, Inc. California
Citation Castings, Inc. Alabama
Custom Products Corporation Wisconsin
Dycast, Inc. Delaware
Hi-Tech, Inc. Indiana
Interstate Southwest, Ltd. Texas
Interstate Forging Industries, Inc. Wisconsin
Iroquois Foundry Corporation Wisconsin
ISW Texas Corporation (subsidiary of Interstate
Forging Industries, Inc. Delaware
Mabry Foundry Company, Ltd. Texas
Mansfield Foundry Corporation Ohio
Oberdorfer Industries Corp. New York
Southern Aluminum Castings Company Alabama
Texas Foundries, Ltd. Texas
Texas Steel Corporation Texas
TSC Texas Corporation Delaware
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the incorporation by reference in the registration statements of
Citation Corporation and subsidiaries on Forms S-8 (File No. 33-93630, File No.
33-93652, File No. 333-4206, File No. 333-4026, File No. 333-43461, and File No.
333-65239) of our report, dated November 16, 1998 except for Notes 20 and 21 as
to which the date is December 14, 1998, on our audits of the consolidated
financial statements and the financial statement schedule of Citation
Corporation and subsidiaries as of September 27, 1998 and September 28, 1997,
and for each of the three years in the period ended September 27, 1998, which
report is included in this Annual Report on Form 10-K. We also consent to the
reference to our firm under the caption "Selected Financial Data."
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Birmingham, Alabama
December 22, 1998
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND CONSOLIDATED STATEMENT OF INCOME FOUND ON PAGES
36 AND 37 OF THE COMPANY'S FORM 10-K FOR THE FISCAL YEAR ENDED SEPTEMBER 28,
1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-28-1997
<PERIOD-START> SEP-30-1996
<PERIOD-END> SEP-28-1997
<CASH> 2,645
<SECURITIES> 0
<RECEIVABLES> 94,909
<ALLOWANCES> (1,367)
<INVENTORY> 48,953
<CURRENT-ASSETS> 160,503
<PP&E> 374,393
<DEPRECIATION> (91,402)
<TOTAL-ASSETS> 493,296
<CURRENT-LIABILITIES> 93,957
<BONDS> 0
0
0
<COMMON> 178
<OTHER-SE> 172,461
<TOTAL-LIABILITY-AND-EQUITY> 493,296
<SALES> 648,961
<TOTAL-REVENUES> 648,961
<CGS> 538,502
<TOTAL-COSTS> 596,568
<OTHER-EXPENSES> (14)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14,433
<INCOME-PRETAX> 37,974
<INCOME-TAX> 14,810
<INCOME-CONTINUING> 23,164
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 23,164
<EPS-PRIMARY> 1.31<F1>
<EPS-DILUTED> 1.29<F1>
<FN>
<F1>WE HAVE CALCULATED AND RESTATED EARNINGS PER SHARE AMOUNTS IN ACCORDANCE WITH
FAS 128, "EARNINGS PER SHARE." WE HAVE ENTERED BASIC AND DILUTED AMOUNTS IN
PLACE OF PRIMARY AND FULLY DILUTED, RESPECTIVELY. NO OTHER CHANGES HAVE BEEN
MADE TO THE PREVIOUSLY FILED AMOUNTS FOR THE YEAR ENDED SEPTEMBER 28, 1997.
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND CONSOLIDATED STATEMENT OF INCOME FOUND ON PAGES
36 AND 37 OF THE COMPANY'S FORM 10-K FOR THE FISCAL YEAR ENDED SEPTEMBER 27,
1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-27-1998
<PERIOD-START> SEP-29-1997
<PERIOD-END> SEP-27-1998
<CASH> 2,322
<SECURITIES> 0
<RECEIVABLES> 106,012
<ALLOWANCES> (2,860)
<INVENTORY> 56,353
<CURRENT-ASSETS> 183,678
<PP&E> 427,989
<DEPRECIATION> (120,981)
<TOTAL-ASSETS> 569,265
<CURRENT-LIABILITIES> 99,056
<BONDS> 0
0
0
<COMMON> 179
<OTHER-SE> 185,855
<TOTAL-LIABILITY-AND-EQUITY> 569,265
<SALES> 724,017
<TOTAL-REVENUES> 724,017
<CGS> 612,035
<TOTAL-COSTS> 685,638
<OTHER-EXPENSES> 2,155
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 15,254
<INCOME-PRETAX> 20,970
<INCOME-TAX> 8,178
<INCOME-CONTINUING> 12,792
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,792
<EPS-PRIMARY> .72
<EPS-DILUTED> .71
</TABLE>
