<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 28, 1998
REGISTRATION NO. 333- .
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
SIMCALA, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 33398 34-1780941
State or other jurisdiction of (Primary Standard Industrial (I.R.S. employer
incorporation or organization) Classification Code Number) identification number)
</TABLE>
OHIO FERRO ALLOYS ROAD
MT. MEIGS, ALABAMA 36057
(334) 215-7560
(Address, including zip code, and telephone number, including area code,
of the Company's principal executive offices)
---------------------
C. EDWARD BOARDWINE
PRESIDENT AND CHIEF EXECUTIVE OFFICER
SIMCALA, INC.
OHIO FERRO ALLOYS ROAD
MT. MEIGS, ALABAMA 36057
(334) 215-7560
(Name, address, including zip code and telephone number,
including area code, of agent for service)
COPY TO:
MICHAEL R. MCALEVEY, ESQ.
ALSTON & BIRD LLP
ONE ATLANTIC CENTER
1201 WEST PEACHTREE STREET
ATLANTA, GEORGIA 30309-3424
(404) 881-7000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: Upon
consummation of the Exchange Offer referred to herein.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [X]
---------------------
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1993, please check the
following box. [ ]
---------------------
If this form is a post-effective amendment filed pursuant to Rule 462(a)
under the Securities Act, please check the following box and list the Securities
Act registration number of the earlier effective registration statement for the
same offering. [ ]
---------------------
If deliver of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=====================================================================================================================
PROPOSED OFFERING PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER NOTE(1) OFFERING PRICE REGISTRATION FEE
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
9 5/8% Senior Notes due 2006,
Series B......................... $75,000,000 100% $75,000,000 $22,125
=====================================================================================================================
</TABLE>
(1) Estimated solely for purposes of calculating registration fee pursuant to
Rule 457(f), based upon the book value (aggregate outstanding principal
amount) of such securities.
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION (THE "COMMISSION" OR THE "SEC"). THESE
SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME
THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL
THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER,
SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION
UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED MAY 28, 1998
PROSPECTUS
$75,000,000
SIMCALA, INC.
[LOGO]
OFFER TO EXCHANGE ITS
9 5/8% SENIOR NOTES DUE 2006, SERIES B
WHICH HAVE BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933
FOR ANY AND ALL OUTSTANDING
9 5/8% SENIOR NOTES DUE 2006, SERIES A
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., EASTERN TIME, ON ,
, 1998, UNLESS EXTENDED BY THE COMPANY IN ITS SOLE DISCRETION (THE
"EXPIRATION DATE").
SIMCALA, Inc., a Delaware corporation ("SIMCALA" or the "Company") and a
wholly owned subsidiary of SIMCALA Holdings, Inc., a Georgia corporation
("Holdings"), hereby offers (the "Exchange Offer"), upon the terms and subject
to the conditions set forth in this Prospectus (the "Prospectus") and the
accompanying Letter of Transmittal (the "Letter of Transmittal"), to exchange up
to $75,000,000 aggregate principal amount of its 9 5/8% Senior Notes due 2006,
Series B (the "Exchange Notes" or the "Series B Notes") for an equal principal
amount of its outstanding 9 5/8% Senior Notes due 2006, Series A (the "Series A
Notes", and collectively with the Exchange Notes, the "Notes"). The Exchange
Notes are substantially identical (including principal amount, interest rate,
maturity and redemption rights) to the Series A Notes for which they may be
exchanged pursuant to this Exchange Offer, except that (i) the Exchange Notes
have been registered under the Securities Act of 1933, as amended (the
"Securities Act"), and (ii) holders of Exchange Notes will no longer be entitled
to certain rights of registration provided to eligible holders of the Series A
Notes under a Registration Rights Agreement by and between SAC Acquisition Corp.
("SAC") and NationsBanc Montgomery Securities LLC (the "Initial Purchaser") and
a Registration Rights Agreement Supplement by and between the Company (as
successor to SAC) and the Initial Purchaser, each dated as of March 31, 1998
(collectively, the "Registration Rights Agreement"). The Series A Notes have
been, and the Exchange Notes will be, issued under an Indenture by and between
SAC and IBJ Schroder Bank & Trust Company, as trustee (the "Trustee") and an
Indenture Supplement by and between the Company (as successor to SAC) and the
Trustee, each dated as of March 31, 1998 (collectively, the "Indenture"). The
Company will not receive any proceeds from this Exchange Offer, however,
pursuant to the Registration Rights Agreement, the Company will bear certain
offering expenses. See "Description of the Notes."
The Exchange Notes will bear interest at the same rate and on the same terms
as the Series A Notes. Consequently, interest on the Exchange Notes will be
payable semiannually on April 15 and October 15, commencing October 15, 1998,
including interest accrued but unpaid since the Series A Notes were originally
issued. The Exchange Notes will mature on April 15, 2006, unless previously
redeemed. The Exchange Notes will be redeemable at the option of the Company, in
whole or in part, on or after April 15, 2002, at the redemption prices set forth
herein, plus accrued and unpaid interest thereon and Liquidated Damages (as
defined herein), if any, to the redemption date. Notwithstanding the foregoing,
at any time on or before April 15, 2001, the Company may redeem up to 30% of the
original aggregate principal amount of the Notes with the net proceeds of a
public offering of common stock of the Company or Holdings (to the extent the
net proceeds are contributed to the Company as common equity) at the redemption
prices set forth herein, plus accrued and unpaid interest thereon, if any, to
the redemption date; provided, that at least 70% of the original aggregate
principal amount of Notes remains outstanding immediately after the occurrence
of such redemption. See "Description of the Notes."
The Notes are general unsecured obligations of the Company and rank senior
to all existing and future subordinated indebtedness of the Company and pari
passu in right of payment with all existing and future senior indebtedness of
the Company, including indebtedness under the New Credit Facility (as defined
herein). The obligations of the Company under the New Credit Facility, however,
are secured by substantially all of the Company's assets. Such indebtedness
effectively ranks senior in right of payment to the Notes to the extent of such
assets. As of March 31, 1998, on a pro forma basis after giving effect to the
Transactions (as defined herein), including the offering of the Series A Notes
(the "Offering"), the Equity Contribution (as defined herein) and the
application of the net proceeds therefrom, the Company would have had
approximately $81.1 million of indebtedness outstanding (none of which would
have been secured). The terms of the Indenture permit the Company and its
subsidiaries to incur additional indebtedness (including secured indebtedness),
subject to certain limitations. See "Use of Proceeds," "Description of the
Notes" and "Description of Other Indebtedness."
The Series A Notes have not been listed on any securities exchange or
automated quotation system. The Series A Notes have been designated eligible for
trading in the Private Offerings, Resales and Trading through Automated Linkages
("PORTAL") market. The Company does not intend to apply for listing of the
Exchange Notes on any securities exchange or for quotation through Nasdaq.
Although the Initial Purchaser has informed the Company that it currently
intends to make a market in the Notes, it is not obligated to do so, and any
such market making may be discontinued at any time without notice. Accordingly,
there can be no assurance as to the development or liquidity of any market for
the Notes.
SEE "RISK FACTORS" BEGINNING ON PAGE 17 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY HOLDERS WHO TENDER SERIES A NOTES IN THE EXCHANGE
OFFER.
The Company will accept for exchange any and all Series A Notes validly
tendered by eligible holders and not withdrawn prior to 5:00 p.m. Eastern Time
on , 1998, unless extended by the Company in its sole discretion (the
"Expiration Date"). Tenders of Series A Notes may be withdrawn at any time prior
to the Expiration Date. The Exchange Offer is subject to certain customary
conditions. The Series A Notes may be tendered only in integral multiples of
$1,000. See "The Exchange Offer."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS , 1998.
<PAGE> 3
EXPLANATORY NOTE
This Registration Statement covers $75,000,000 aggregate principal amount
of the Exchange Notes to be offered in exchange for equal principal amounts of
the Series A Notes in the Exchange Offer. This Registration Statement is being
filed to satisfy certain requirements of the Registration Rights Agreement.
Based on interpretations by the staff of the Securities and Exchange
Commission (the "SEC" or the "Commission") set forth in no-action letters issued
to unrelated third parties, the Company believes that Exchange Notes issued
pursuant to the Exchange Offer in exchange for Series A Notes may be offered for
resale, resold and otherwise transferred by any holder thereof (other than any
such holder which is a broker-dealer that holds Notes acquired for its own
account as a result of market-making or other trading activities or any holder
which is an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act) without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that such Exchange Notes are acquired
in the ordinary course of such holder's business and such holder is not engaged
in, and does not intend to participate, and has no arrangement or understanding
with any person to participate in, a distribution of such Exchange Notes. The
Company hereby notifies each holder of Series A Notes that any broker-dealer
that holds Series A Notes acquired for its own account as a result of market-
making activities or other trading activities and who receives Exchange Notes
pursuant to the Exchange Offer may be a statutory underwriter, and must deliver
a prospectus meeting the requirements of the Securities Act in connection with
any resale of the Exchange Notes. Any broker-dealer that holds Series A Notes
acquired for its own account as a result of market-making or other trading
activities, acknowledges and agrees as a term of the Exchange Offer, that it
will deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of Exchange Notes received pursuant to the Exchange
Offer. However, by so doing, the broker-dealer will not be deemed to admit that
it is an "underwriter" within the meaning of the Securities Act. Such
broker-dealer will also be deemed to represent and warrant to the Company that
it is not participating in, and has no intent to participate in, any
distribution of Exchange Notes, and has not entered into any arrangement or
understanding with any person to distribute the Exchange Notes.
In the event that any holder of Series A Notes is prohibited by law or any
policy of the Commission from participating in the Exchange Offer, or any holder
of Exchange Notes may not resell such Exchange Notes without delivering a
prospectus and this Prospectus is inappropriate or unavailable for such resales,
or if a holder is a broker-dealer and holds Notes acquired directly from the
Company or one of its affiliates, and in each case such holder satisfies certain
other requirements, including timely notice to the Company, the Company has
agreed, pursuant to the Registration Rights Agreement, to file a shelf
registration statement (the "Shelf Registration Statement") in respect of any
such Notes pursuant to Rule 415 under the Securities Act. See "Prospectus
Summary -- The Exchange Offer," "The Exchange Offer" and "Plan of Distribution."
Any Series A Notes not tendered and accepted in the Exchange Offer will
remain outstanding. To the extent Series A Notes are tendered and accepted in
the Exchange Offer, a holder's ability to sell untendered and unregistered
Series A Notes could be adversely affected. Following consummation of the
Exchange Offer, the holders of Series A Notes will continue to be subject to the
existing restrictions upon transfer thereof and the Company will have fulfilled
one of its obligations under the Registration Rights Agreement. Holders of Notes
who do not tender their Notes generally will not have any further registration
rights under the Registration Rights Agreement or otherwise. See "The Exchange
Offer -- Termination of Certain Rights" and "-- Consequences of Failure To
Exchange."
The Company expects that the Exchange Notes will be issued only in the form
of a Global Note (as defined herein), which will be deposited with, or on behalf
of, The Depository Trust Company ("DTC") and registered in its name or in the
name of DTC's nominee, Cede & Co. ("Cede"). Beneficial interests in the Global
Note representing the Exchange Notes will be shown on, and transfers thereof
will be effected through, records maintained by DTC and its participants. After
the initial issuance of the Global Note, Exchange Notes in certificated form may
be issued in exchange for the Global Note on the terms and conditions set forth
in the Indenture. See "Description of the Notes -- Book-Entry; Delivery and
Form."
The Company is not currently subject to the informational requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"). As a
result of the offering of the Exchange Notes, the Company
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<PAGE> 4
will become subject to the informational requirements of the Exchange Act. So
long as any Notes are outstanding, or the Company is subject to the periodic
reporting requirements of the Exchange Act, it is required to furnish the
information required to be filed with the Commission to the Trustee and the
holders of the Notes. The Company has agreed that, even if it is not required
under the Exchange Act to furnish such information to the Commission, it will
nonetheless continue to furnish information that would be required to be
furnished by the Company pursuant to Sections 13 and 15(d) of the Exchange Act,
to the Trustee and the holders of the Notes as if it were subject to such
periodic reporting requirements. See "Available Information."
In addition, the Company has agreed that in the event the Company is no
longer subject to Sections 13 or 15(d) under the Exchange Act, and for so long
as any of the Notes remain outstanding, it will make available to any
prospective purchaser of the Notes or beneficial owner of the Notes in
connection with any sale thereof the information required by Rule 144A(d)(4)
under the Securities Act, until such time as either (i) the Company has
exchanged the Series A Notes for the Exchange Notes or (ii) the holders thereof
have disposed of such Notes pursuant to an effective registration statement
filed by the Company.
AVAILABLE INFORMATION
The Company has filed with the Commission a registration statement on Form
S-1 (together with all amendments and exhibits thereto, the "Registration
Statement") under the Securities Act with respect to the securities offered
hereby. This Prospectus does not contain all of the information set forth in the
Registration Statement and the exhibits and schedules thereto, as permitted by
the rules and regulations of the Commission. For further information with
respect to the Company and the Exchange Notes, reference is hereby made to the
Registration Statement, including the exhibits and schedules filed or
incorporated as a part thereof. Statements contained herein concerning the
provisions of any document are not necessarily complete and in each instance
reference is made to the copy of the document filed as an exhibit or schedule to
the Registration Statement. Each such statement is qualified in its entirety by
reference to the copy of the applicable document filed with the Commission. In
addition, after effectiveness of the Registration Statement, the Company will
file periodic reports and other information with the Commission under the
Exchange Act, relating to the Company's business, financial statements and other
matters. The Registration Statement, including the exhibits and schedules
thereto, and the periodic reports and other information filed in connection
therewith, may be inspected at the public reference facilities maintained by the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the following Regional Offices of the Commission: 7 World
Trade Center, Suite 1300, New York, New York 10048 and Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies may be obtained
at the prescribed rates from the Public Reference Section of the Commission at
Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549 or on
the Internet at http://www.sec.gov.
CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS
CERTAIN OF THE MATTERS DISCUSSED IN THIS PROSPECTUS MAY CONSTITUTE
FORWARD-LOOKING STATEMENTS FOR PURPOSES OF THE SECURITIES ACT AND THE EXCHANGE
ACT. ALL STATEMENTS, OTHER THAN STATEMENTS OF HISTORICAL FACTS, INCLUDED IN THIS
PROSPECTUS THAT ADDRESS ACTIVITIES, EVENTS OR DEVELOPMENTS THAT THE COMPANY
EXPECTS OR ANTICIPATES WILL OR MAY OCCUR IN THE FUTURE, INCLUDING SUCH THINGS AS
FUTURE CAPITAL EXPENDITURES (INCLUDING THE AMOUNT AND NATURE THEREOF), BUSINESS
STRATEGY AND MEASURES TO IMPLEMENT STRATEGY, COMPETITIVE STRENGTHS, GOALS,
EXPANSION AND GROWTH OF THE COMPANY'S BUSINESS AND OPERATIONS, REFERENCES TO
FUTURE SUCCESS, FUTURE SUPPLY OF AND DEMAND FOR SILICON METAL, THE EFFECTS OF
FOREIGN COMPETITION AND OTHER SUCH MATTERS ARE FORWARD-LOOKING STATEMENTS. SUCH
FORWARD-LOOKING STATEMENTS MAY INVOLVE UNCERTAINTIES AND OTHER FACTORS THAT MAY
CAUSE THE ACTUAL RESULTS AND PERFORMANCE OF THE COMPANY TO BE MATERIALLY
DIFFERENT FROM FUTURE RESULTS OR PERFORMANCE EXPRESSED OR IMPLIED BY SUCH
STATEMENTS. CAUTIONARY STATEMENTS REGARDING THE RISKS ASSOCIATED WITH SUCH
FORWARD-LOOKING STATEMENTS INCLUDE, WITHOUT LIMITATION, THOSE STATEMENTS
INCLUDED UNDER "RISK FACTORS" AND ELSEWHERE HEREIN. AMONG OTHERS, FACTORS THAT
COULD ADVERSELY AFFECT ACTUAL RESULTS AND PERFORMANCE INCLUDE THE LOSS OF A
SIGNIFICANT CUSTOMER, A CHANGE IN CONTROL REQUIRING
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A REDEMPTION OF THE NOTES, AN INTERRUPTION IN ELECTRICAL POWER TO THE FACILITY
(AS DEFINED HEREIN), AN INABILITY TO OBTAIN KEY RAW MATERIALS AT FAVORABLE
PRICES, THE NEED FOR SIGNIFICANT CAPITAL EXPENDITURES TO COMPLY WITH
ENVIRONMENTAL REGULATIONS, THE LOSS OF KEY EMPLOYEES, A DECLINE IN THE DEMAND
FOR SILICON METAL, A FAILURE OF THE DEMAND FOR SILICON METAL TO INCREASE AS
CURRENTLY PROJECTED, THE REVOCATION OR INEFFECTIVENESS OF ANTI-DUMPING DUTIES ON
FOREIGN COMPETITORS AND THE FAILURE OF THE COMPANY TO SUCCESSFULLY COMMISSION A
FOURTH SMELTING FURNACE.
ALL WRITTEN OR ORAL FORWARD-LOOKING STATEMENTS ATTRIBUTABLE TO THE COMPANY
ARE EXPRESSLY QUALIFIED IN THEIR ENTIRETY BY THE FOREGOING CAUTIONARY STATEMENT.
CERTAIN MARKET AND INDUSTRY DATA
UNLESS OTHERWISE INDICATED HEREIN, INFORMATION REGARDING THE SILICON METAL
INDUSTRY IS BASED ON REPORTS PREPARED IN SEPTEMBER AND NOVEMBER 1997 BY CRU
INTERNATIONAL INC. ("CRU"), AN INTERNATIONALLY RECOGNIZED RESEARCH FIRM
SPECIALIZING IN COLLECTING DATA ABOUT THE SILICON METAL INDUSTRY. THE
INFORMATION INCLUDED IN CRU'S STUDIES REFLECTS A NUMBER OF FACTORS AND
ASSUMPTIONS, SUCH AS THE EFFECTS OF GOVERNMENTAL REGULATION ON THE SILICON METAL
INDUSTRY, THE GROWTH IN THE SUPPLY OF AND DEMAND FOR SILICON METAL, HISTORICAL
AND FUTURE SILICON METAL PRICES AND OPERATING AND DEVELOPMENT COSTS OF COMPANIES
IN THE SILICON METAL INDUSTRY.
4
<PAGE> 6
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and financial information,
including the financial statements and the notes thereto, included elsewhere in
this Prospectus. Unless the context otherwise requires, the terms "SIMCALA" and
the "Company" refer to SIMCALA, Inc., the term "the Predecessor" refers to the
Company prior to the Acquisition on March 31, 1998 and the term "SiMETCO" refers
to a predecessor of the Company prior to the period beginning on February 10,
1995. The Company's fiscal year ends on December 31 of each calendar year.
Unless otherwise specified, the pro forma financial information included herein
gives effect to the Transactions, including the Offering, the Equity
Contribution and the application of the net proceeds therefrom, as if the
Transactions had occurred on January 1, 1997 with respect to the income
statement information for the fiscal year ended December 31, 1997 and the three
months ended March 31, 1998.
THE EXCHANGE OFFER
The Exchange Offer......... The Exchange Offer consists of this Prospectus and
the related Letter of Transmittal, and is being
made solely to eligible holders of Series A
Notes. Upon the terms and subject to the
conditions of the Exchange Offer, the Company is
offering eligible holders of Series A Notes the
opportunity to exchange its Series A Notes that
have not been registered under the Securities Act
for the Exchange Notes that have been registered
under the Securities Act.
Exchange Offer Expiration
Date..................... The Exchange Offer expires at 5:00 p.m., Eastern
Time on , , 1998 (the
"Expiration Date") unless extended by the Company
in its sole discretion.
Exchange Notes Offered..... The Exchange Notes consist of $75,000,000 aggregate
principal amount of 9 5/8% Senior Notes due 2006,
Series B.
Procedures for Tendering
Series A Notes........... Brokers, dealers, commercial banks, trust companies
and other nominees who hold Series A Notes
through DTC (as defined herein) may effect
tenders by book-entry transfer in accordance with
DTC's Automated Tender Offer Program ("ATOP"). In
order for Series A Notes to be tendered by a
means other than by book-entry transfer, a Letter
of Transmittal must be completed and signed in
accordance with the instructions contained
herein. The Letter of Transmittal and any other
documents required by the Letter of Transmittal
must be delivered to the Exchange Agent by mail,
facsimile, hand delivery or overnight carrier,
and either such Series A Notes must be delivered
to the Exchange Agent or specified procedures for
guaranteed delivery must be complied with. See
"The Exchange Offer -- Procedures for Tendering."
Letters of Transmittal and certificates
representing Series A Notes should not be sent to
the Company. Such documents should only be sent
to the Exchange Agent. See "The Exchange
Offer -- Exchange Agent."
Conditions to the Exchange
Offer.................... The Exchange Offer is subject to certain customary
conditions, which may be waived, to the extent
permitted by law, by the Company. See "The
Exchange Offer-Conditions" and "-- Procedures for
Tendering."
5
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Special Procedures for
Beneficial Owners........ Any beneficial owner whose Series A Notes are held
in book-entry form or are registered in the name
of a broker, dealer, commercial bank, trust
company or other nominee and who wishes to
exchange such Series A Notes for the Exchange
Notes should contact such registered holder
promptly and instruct such registered holder to
tender the Series A Notes for exchange on such
beneficial owner's behalf. See "The Exchange
Offer -- Procedures for Tendering."
Guaranteed Delivery
Procedures............... Holders of Series A Notes who wish to tender their
Series A Notes and whose Series A Notes are not
immediately available or who cannot deliver their
Series A Notes, the Letter of Transmittal or any
other documents required by the Letter of
Transmittal to the Exchange Agent (or comply with
the procedures for book-entry transfer) prior to
the Expiration Date must tender their Series A
Notes according to the guaranteed delivery
procedures set forth in "The Exchange Offer --
Guaranteed Delivery Procedures."
Withdrawal Rights.......... Tenders may be withdrawn at any time prior to 5:00
P.M., Eastern Time, on the Expiration Date
pursuant to the procedures described under "The
Exchange Offer -- Withdrawals of Tenders."
Acceptance of Notes and
Delivery of Exchange
Notes.................... The Company will accept for exchange any and all
Series A Notes that are properly tendered in the
Exchange Offer, and not withdrawn, prior to 5:00
P.M., Eastern Time, on the Expiration Date. The
Exchange Notes issued pursuant to the Exchange
Offer will be delivered on the earliest
practicable date following the Expiration Date.
See "The Exchange Offer -- Terms of the Exchange
Offer."
Federal Income Tax
Consequences............. The issuance of the Exchange Notes to holders of
the Series A Notes pursuant to the terms set
forth in this Prospectus will not constitute an
exchange for federal income tax purposes.
Consequently, no gain or loss would be recognized
by holders of the Series A Notes upon receipt of
the Exchange Notes. See "The Exchange
Offer -- Certain Federal Income Tax Consequences
of the Exchange Offer."
Effect on Holders of the
Notes.................... As a result of the making of this Exchange Offer,
the Company will have fulfilled certain of its
obligations under the Registration Rights
Agreement, and holders of Series A Notes who do
not tender their Series A Notes will generally
not have any further registration rights under
the Registration Rights Agreement or otherwise.
Such holders will continue to hold the untendered
Series A Notes and will be entitled to all the
rights and subject to all the limitations,
including, without limitation, transfer
restrictions, applicable thereto under the
Indenture, except to the extent such rights or
limitations, by their terms, terminate or cease
to have further effectiveness as a result of the
Exchange Offer. Accordingly, if any Series A
Notes are tendered and accepted in the Exchange
Offer, the trading market, if any, for the
untendered Series A Notes could be adversely
affected.
Exchange Agent............. IBJ Schroder Bank & Trust Company is serving as
exchange agent (the "Exchange Agent") with
respect to the Series A Notes.
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<PAGE> 8
THE NOTES
Maturity Date.............. April 15, 2006.
Interest Payment Dates..... April 15 and October 15, commencing October 15,
1998.
Optional Redemption........ On or after April 15, 2002, the Company may redeem
the Notes, in whole or in part, at the redemption
prices set forth herein, plus accrued and unpaid
interest thereon and Liquidated Damages, if any,
to the date of redemption. Notwithstanding the
foregoing, at any time on or before April 15,
2001, the Company may redeem up to 30% of the
original aggregate principal amount of the Notes
with the net proceeds of a public offering of
common stock of the Company or Holdings (to the
extent the net proceeds therefrom are contributed
to the Company as common equity) at the
redemption prices set forth herein, plus accrued
and unpaid interest thereon, if any, to the
redemption date; provided, that at least 70% of
the original aggregate principal amount of Notes
remains outstanding immediately after the
occurrence of such redemption (excluding Notes
held by the Company or its subsidiaries); and,
provided, further, that such redemption shall
occur within 60 days of the date of the closing
of such public offering. See "Description of the
Notes -- Optional Redemption."
Mandatory Redemption....... None.
Ranking.................... The Notes are general unsecured obligations of the
Company and rank senior to all existing and
future subordinated indebtedness of the Company
and pari passu in right of payment with all
existing and future senior indebtedness of the
Company, including indebtedness under the New
Credit Facility. The obligations of the Company
under the New Credit Facility, however, are
secured by substantially all of the Company's
assets and the real and personal property used in
the Company's operations which is, as a result of
the IRB Financing, owned by the Industrial
Development Board of the City of Montgomery (the
"Montgomery IDB") and leased to the Company. Such
indebtedness effectively ranks senior in right of
payment to the Notes to the extent of such
assets. As of March 31, 1998, the Company had
approximately $81.1 million of indebtedness
outstanding (none of which was secured) and
approximately $15.0 million of secured
indebtedness available to be incurred under the
New Credit Facility (as such availability is
reduced by an approximately $6.1 million letter
of credit issued thereunder). The terms of the
Indenture permit the Company and its subsidiaries
to incur additional indebtedness (including
secured indebtedness), subject to certain
limitations. See "Use of Proceeds," "Description
of the Notes" and "Description of Other
Indebtedness."
Change of Control.......... Upon a Change of Control (as defined herein), the
Company will be required to make an offer to
repurchase all outstanding Notes at 101% of the
principal amount thereof plus accrued and unpaid
interest thereon and Liquidated Damages, if any,
to the date of repurchase. See "Description of
the Notes -- Repurchase at the Option of
Holders -- Change of Control."
Covenants.................. The Indenture restricts, among other things, the
ability of the Company and its subsidiaries to
incur additional indebtedness and issue pre-
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<PAGE> 9
ferred stock, incur liens, pay dividends or make
certain other restricted payments, apply net
proceeds from certain asset sales, enter into
certain transactions with affiliates, merge or
consolidate with any other person, and assign,
transfer, lease, convey or otherwise dispose of
substantially all of the assets of the Company.
See "Description of the Notes -- Certain
Covenants."
Use of Proceeds............ The Company will not receive any proceeds from the
issuance of the Exchange Notes pursuant to the
Exchange Offer. The net proceeds to the Company
from the sale of the Series A Notes, together
with the Equity Contribution, have been used to
fund the Acquisition (as defined herein), to
repay certain indebtedness of the Company and to
pay transaction fees and expenses and are being
used for the Company's general corporate
purposes. See "Use of Proceeds."
Shelf Registration
Statement................ If (i) the Exchange Offer is not permitted by
applicable law or (ii) any holder of Transfer
Restricted Notes (as defined herein) notifies the
Company within 20 business days of the
commencement of the Exchange Offer that (A) it is
prohibited by law or Commission policy from
participating in the Exchange Offer, (B) that it
may not resell the Exchange Notes acquired by it
in the Exchange Offer to the public without
delivering a prospectus and this Prospectus is
not appropriate or available for such resales or
(C) that it is a broker-dealer and holds Series A
Notes acquired directly from the Company or an
affiliate of the Company, the Company will be
required to provide the Shelf Registration
Statement to cover resales of the Notes by such
holders thereof. If the Company fails to satisfy
these registration obligations, it will be
required to pay Liquidated Damages to the holders
of the Notes under certain circumstances. See
"The Exchange Offer."
Absence of an Established
Trading Market for the
Notes.................... The Series A Notes are new securities that were
issued on March 31, 1998 (the "Issue Date" or
"Closing Date"). There is currently no
established trading market for the Series A Notes
or the Exchange Notes. Although the Initial
Purchaser has informed the Company that it
currently intends to make a market in the Series
A Notes and, upon issuance, the Exchange Notes,
it is not obligated to do so and any such market
making may be discontinued at any time without
notice. Accordingly, there can be no assurance as
to the development or liquidity of any market for
the Notes. To the extent Series A Notes are
exchanged in this Exchange Offer, the liquidity
of the market for the remaining Series A Notes
may be reduced. The Series A Notes have been
designated eligible for trading in the PORTAL
market. The Company does not intend to apply for
listing of the Exchange Notes on any securities
exchange or for quotation through Nasdaq. See
"Risk Factors -- Absence of an Established
Trading Market for the Notes."
8
<PAGE> 10
THE COMPANY
The Company is a leading domestic manufacturer of silicon metal which is
used in the chemical and aluminum industries. Silicon metal is an essential raw
material used by the chemical industry to produce silicones and polysilicon and
by the aluminum industry primarily as an alloying agent. The Company produces
and sells higher margin chemical grade and specialty aluminum grade silicon
metal, both of which contain the highest concentrations of silicon and the
lowest levels of impurities when compared to lower grades of silicon metal. In
1997, approximately 55% and 45% of the silicon metal consumed in the United
States was consumed by the chemical industry and the aluminum industry,
respectively. Silicones are the basic ingredient used in numerous consumer
products, including lubricants, cosmetics, shampoos, gaskets, building sealants,
automotive hoses, water repellent fluids and high temperature paints and
varnishes. Polysilicon is an essential raw material used in the manufacture of
silicon wafers for semi-conductor chips and solar cells. Aluminum containing
silicon metal as an alloy can be found in a variety of automobile components,
including engine pistons, housing and cast aluminum wheels. Management believes
that there are no commercially feasible substitutes for silicon metal in either
the chemical or aluminum industries. In addition to silicon metal, the Company
produces microsilica, a co-product of the silicon metal smelting process.
Microsilica is a strengthening and filler agent which has applications in the
refractory, concrete, fibercement, oil exploration and minerals industries.
The Company is one of the three largest manufacturers, in terms of volume,
of silicon metal in the United States, and its production facility, located in
Mt. Meigs, Alabama (the "Facility") is the nation's second largest in terms of
capacity. The Facility is the newest greenfield silicon metal manufacturing
facility in the United States and is strategically located near abundant
supplies of high quality raw materials necessary for the production of high
grade silicon metal. SIMCALA intends to use a portion of the net proceeds of the
Offering to expand the Facility by constructing a fourth smelting furnace and
the Company believes that after this expansion, the Facility will be the second
largest silicon metal production facility in the world. The Company believes
that the increased capacity resulting from the construction of a fourth furnace
will enable it to benefit from levels of demand for silicon metal in the Western
Industrialized Nations (as defined herein) which CRU estimates will exceed
currently known sources of supply through 2005. Upon completion of the fourth
furnace, the Company's production capacity will increase by approximately 12,000
metric tons to approximately 48,000 metric tons per year.
The Company is one of the most cost efficient silicon metal manufacturers
in the world, as measured by operating cost per metric ton of silicon metal
sold. The Company estimates that it held a market share of approximately 13% of
the total United States chemical market and approximately 13% of the total
United States aluminum market in 1997, based on metric tons of silicon metal
sold. In 1997, the Company had net sales and EBITDA of $62.2 million and $13.8
million, respectively. For the three months ended March 31, 1998, the Company
had net sales and EBITDA of $14.8 million and $0.1 million, respectively.
RECENT HISTORY AND TURNAROUND
SIMCALA was incorporated in 1994 and acquired the Facility from SiMETCO,
Inc. ("SiMETCO") on February 10, 1995. Under SiMETCO's management, the Facility
was underutilized and inefficient and consistently incurred operating losses as
a result of poor management and a focus on the lower margin, less stable
secondary aluminum business. Immediately after the acquisition of the Facility,
the Company hired C. Edward Boardwine, its current Chief Executive Officer. Mr.
Boardwine installed a new senior management team which implemented a major
turnaround program aimed at increasing the operating efficiency of the Facility
and focusing on the production and effective marketing of higher margin chemical
grade and specialty aluminum grade silicon metal. The Company's turnaround
program included the following:
- Increased Production. The Company increased production by improving the
efficiency and yield of two furnaces that were operating when the
acquisition of the Facility occurred and by recommissioning a third
furnace that was not operational at the time of the Facility's
acquisition. From 1994 to 1997, the Facility's annual production volume
increased approximately 55%, from approximately 24,000 metric tons to
approximately 37,100 metric tons.
9
<PAGE> 11
- Customer Relationships. The Company established relationships with the
major consumers of higher margin chemical grade and specialty aluminum
grade silicon metal. As part of this effort, the Company sought and
obtained key customer certifications, requiring it to demonstrate the
ability to consistently meet customers' proprietary quality and sizing
requirements. The Company is currently a certified supplier of chemical
grade silicon metal to G.E. Silicones ("G.E. Silicones"), a division of
General Electric Company, and Dow Corning Corporation ("Dow Corning"),
the two largest consumers of chemical grade silicon metal in the United
States, and a certified supplier of specialty aluminum grade silicon
metal to Alcan Ingot & Recycling ("Alcan") and Alumax Mill Products Inc.
("Alumax"). Production of chemical grade, primary aluminum grade and
secondary aluminum grade silicon metal at the Facility changed from
29.6%, 15.1% and 55.3%, respectively, of total net sales in 1994 to 55%,
28.2% and 16.8%, respectively, of total net sales in 1997. This change in
product mix has significantly increased the Company's profitability.
- Facility Modernization. In 1996, the Company completed a $12.0 million
facility modernization program pursuant to which all the Company's
production and air abatement equipment was rebuilt. This program
modernized the Facility and resulted in improved operating efficiency and
greater consistency in the production of chemical and specialty aluminum
grade silicon metal. To further enhance operating reliability, the
Company is in the process of upgrading its raw material handling
equipment.
- Supplier Relationships. The Company discontinued relationships with
suppliers of lower grade raw materials and established relationships with
suppliers of higher quality raw materials in order to secure a reliable,
long-term source of the ingredients necessary to produce high quality
silicon metal. By using high quality raw materials, the Company has been
able to decrease the levels of impurities in the silicon metal it
produces, resulting in more efficient production of a consistently high
quality product.
- Workforce Efficiency. The Company improved the efficiency of its
workforce by creating performance based incentives and establishing
technical training programs. In addition, despite recommissioning a third
furnace in the third quarter of 1995, the number of employees at the
Facility from 1994 to 1997 remained constant at approximately 170
(consisting of approximately 124 hourly employees and 46 salaried
employees). Consequently, the amount of silicon metal produced per hourly
employee at the Facility improved from approximately 210 metric tons in
1994 to approximately 299 metric tons in 1997.
As a result of the foregoing measures, net sales doubled to $62.2 million
in 1997 from $31.1 million in 1994. During that period, EBITDA increased to
$13.8 million from a loss of $3.0 thousand. In addition, operating cost per
metric ton of silicon metal produced at the Facility decreased 9.6%, to $1,279.0
in 1997 from $1,415.0 in 1994.
THE SILICON METAL INDUSTRY
The silicon metal industry consists of two general markets: the chemical
industry market and the aluminum industry market. The chemical industry market
is subdivided into the silicones market and the polysilicon market, both of
which require the highest grade of silicon metal. The aluminum industry market
is subdivided into the primary aluminum market (producing aluminum from ore) and
the secondary aluminum market (producing aluminum from scrap). The Company
defines the primary aluminum market and the higher-end of the secondary aluminum
market as the "specialty aluminum" market because the aluminum produced for
those markets requires higher quality silicon metal.
From 1987 to 1997, demand for silicon metal in the United States increased
at an average annual rate of approximately 7.7% (on a non-compounded basis).
This increase was driven by an average annual rate of growth of approximately
10.1% (on a non-compounded basis) in the United States chemical market. While
the aluminum market has also grown during this period, demand for chemical grade
silicon metal has increased 73.8% and, in 1997, chemical grade silicon metal
represented approximately 55% of the silicon metal consumed in the United
States. The major factors contributing to the growth of the chemical market are
10
<PAGE> 12
(i) the introduction of new silicon based product applications (such as
emulsions, release agents and sealants) and (ii) the displacement of
petrochemical based products (such as lubrication and hydraulic fluids). The
growth in the aluminum market is primarily attributable to the increased use of
aluminum in the transportation industry.
According to CRU, demand for silicon metal in the United States is
projected to increase over the next eight years at an average annual rate of
approximately 5.3% (on a non-compounded basis). During that period, CRU projects
that demand for chemical grade silicon metal in the United States will increase
at an average annual rate of approximately 7.6% (on a non-compounded basis).
COMPETITIVE STRENGTHS
The Company believes that it has a strong competitive position attributable
to a number of factors, including the following:
- Preferred Supplier Status with Key Customers. SIMCALA has satisfied
rigorous qualification requirements with its primary customers who
purchase chemical grade and specialty aluminum grade silicon metal.
Satisfying these requirements may take up to two years. As a result, the
Company believes that these rigorous qualification requirements
constitute a significant barrier to entry into the high grade silicon
metal market.
- Low Cost Producer. As a result of the major turnaround program executed
by the current management team, the Company has been recognized by CRU as
among the five most cost efficient silicon metal manufacturers in the
world, as measured by cost per metric ton of silicon metal produced.
- Production Facilities. The Facility has recently undergone an extensive
facility modernization program which has resulted in improved operational
efficiency and greater consistency in the production of chemical and
specialty aluminum grade silicon metal. In addition, the Facility was
originally designed to support the addition of a fourth smelting furnace,
allowing the Company to increase capacity at a relatively low cost and in
a relatively short time, without significantly disrupting operations.
- Experienced, Highly Qualified Management Team. SIMCALA has assembled a
highly qualified management team with over 75 years of combined
experience in the silicon metal business. In particular, since 1969, C.
Edward Boardwine, the Company's Chief Executive Officer, has worked in
various capacities in the ferroalloy and silicon metal industries, most
recently serving as Vice President--Silicon Metal Division of Elkem ASA,
a position he held from 1990 until joining the Company in 1995. The
Company believes that its management team has the operational and
technical skill to continue to operate the Facility at world class levels
of efficiency and to consistently produce high grade silicon metal.
BUSINESS STRATEGY
SIMCALA intends to capitalize on the aforementioned competitive strengths
and has developed and is implementing the following business strategy aimed at
increasing revenues and EBITDA:
- Focus on Chemical and Specialty Aluminum Markets. The Company will
remain focused on manufacturing high grade silicon metal for use by the
chemical and specialty aluminum markets. Management has focused on the
chemical market for four principal reasons: (i) as a result of diverse
end-use applications of chemical grade silicon metal, demand has
historically grown despite economic downturns, and demand and prices have
historically been less volatile than the demand for, and the prices of,
lower grade silicon metal; (ii) the United States market for chemical
grade silicon metal is expected to grow at an average annual rate of
approximately 7.6% (on a non-compounded basis) through the year 2005,
according to CRU; (iii) sales of chemical grade silicon metal have
historically provided higher profit margins than sales of lower grades of
silicon metal because chemical grade silicon metal customers have paid
higher prices for the required high quality silicon metal, resulting in
11
<PAGE> 13
part from the limited number of manufacturers able to supply silicon
metal of such quality; and (iv) the Company's management has the
operational and technical expertise necessary to consistently and
efficiently produce high quality silicon metal. Similarly, management has
focused on the specialty aluminum market because it is less susceptible
to competition from low priced secondary grade silicon metal imports, and
sales of specialty aluminum grade silicon metal have historically
provided higher profit margins and been subject to less price volatility
than sales of secondary grade silicon metal. In addition, because the
United States International Trade Commission has concluded that there are
no commercially feasible substitutes for silicon metal in either the
chemical or aluminum industries, management believes that higher silicon
metal prices will not result in customers purchasing silicon metal
substitutes.
- Maintain Low Cost Operations. Management intends to maintain the
Company's position as one of the five most cost-efficient manufacturers
of silicon metal in the world. The Company intends to achieve this
objective by continuing to increase the yield from its three existing
smelting furnaces and increasing capacity by commissioning a fourth
furnace. The Company believes it will effectively be able to spread fixed
costs over the resulting increased production volume to further reduce
costs per metric ton of silicon metal sold.
- Expand Capacity to Meet Increasing Demand. CRU projects that demand for
silicon metal in the Western Industrialized Nations will exceed currently
known sources of supply through 2005. The Company believes that it can
take advantage of this increased demand by constructing a fourth smelting
furnace. The Facility's infrastructure was originally designed and built
to accommodate a fourth furnace. Within approximately two years, the
Company believes a fourth furnace will enable it to increase its capacity
by 12,000 metric tons of silicon metal and 5,000 metric tons of
microsilica per year, making the Facility the second largest silicon
metal production facility in the world. The Company intends to use a
portion of the net proceeds from the Offering to fund in part the
construction of a fourth furnace. Management believes that completion of
a fourth furnace and the sale of the resulting silicon metal produced
will increase profitability.
CGW AND SUMMARY OF THE TRANSACTIONS
CGW. CGW Southeast Partners III, L.P. ("CGW") is the most recently formed
investment fund sponsored by Cravey, Green & Wahlen, Incorporated, the
principals of which are Richard L. Cravey and Edwin A. Wahlen, Jr. The general
partner of CGW is CGW Southeast III, L.L.C. (the "General Partner") and Messrs.
Cravey and Wahlen are the only shareholders and directors of its manager. CGW
and other investment funds sponsored by Cravey, Green & Wahlen, Incorporated
seek to acquire, usually with participation by operating management, middle
market businesses whose profitability can be significantly enhanced through the
implementation of operating efficiencies, improved financial management or new
growth strategies, including follow-on acquisitions. Investment funds sponsored
by Cravey, Green & Wahlen, Incorporated have historically taken an active,
hands-on role in the implementation of such efficiencies, management
improvements and strategies with respect to their portfolio companies.
The Transactions. On March 31, 1998, SAC Acquisition Corp., a Georgia
corporation ("SAC") and then wholly owned subsidiary of Holdings, acquired all
of the outstanding capital stock of the Company (the "Acquisition") from its
stockholders (the "Selling Stockholders") for a cash payment of approximately
$66.7 million (the "Cash Consideration"). See "The Transactions -- The
Acquisition."
The aggregate purchase price paid by SAC for the Acquisition was financed
with the net proceeds of the Offering and the initial capital contribution by
CGW and C. Edward Boardwine, Dwight L. Goff and R. Myles Cowan, II (each, a
"Senior Manager" and collectively, the "Senior Management") of $22.0 million to
Holdings (the "Equity Contribution"), which was then contributed by Holdings to
SAC. Immediately following the Acquisition, SAC merged with and into the
Company, with the Company being the surviving corporation (the "Merger"). As a
result of the Merger, the Company became the obligor of the Notes and a wholly
owned direct subsidiary of Holdings. See "The Transactions -- Financing of the
Acquisition" and "Use of Proceeds."
12
<PAGE> 14
In connection with the Acquisition, the Company (i) repaid approximately
$9.2 million of term loan indebtedness (including accrued interest thereon and
fees) outstanding under its prior bank credit facility (the "Terminated Credit
Facility") with a portion of the net proceeds of the Offering and (ii) replaced
the Terminated Credit Facility and a related letter of credit reimbursement
agreement (the "Terminated Reimbursement Agreement") with a new credit facility
(the "New Credit Facility"). The New Credit Facility consists of a $15.0 million
revolving credit facility which provides availability for borrowings and letters
of credit. As part of the Company's industrial revenue bond financing (the "IRB
Financing"), an approximately $6.1 million letter of credit was issued under the
New Credit Facility to replace the letter of credit issued under the Terminated
Reimbursement Agreement. The Acquisition, the Merger, the replacement of the
Terminated Credit Facility and the Terminated Reimbursement Agreement with the
New Credit Facility and the Equity Contribution, the Offering and the
application of the net proceeds therefrom are referred to in this Prospectus as
the "Transactions." See "The Transactions" and "Description of Other
Indebtedness."
The following table sets forth the approximate amounts of the sources and
uses of funds in connection with the Transactions:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
SOURCES OF FUNDS:
Notes sold in the Offering.................................. $75,000
Equity Contribution(1)...................................... 22,000
-------
Total Sources..................................... $97,000
=======
USES OF FUNDS:
The Acquisition............................................. $66,703
Repayment of indebtedness(2)................................ 9,159
Transaction fees and expenses(3)............................ 6,000
General corporate purposes(4)............................... 15,138
-------
Total Uses........................................ $97,000
=======
</TABLE>
- ---------------
(1) Of the total Equity Contribution, CGW contributed $20.0 million and Senior
Management collectively contributed $2.0 million.
(2) Consists of (i) term loan indebtedness outstanding under the Terminated
Credit Facility the principal amount of which was payable in quarterly
installments with the last of such installments payable on March 31, 2002
and which, as of March 31, 1998, accrued interest at a rate of approximately
8% per annum, and (ii) accrued interest thereon and fees.
(3) Includes transaction fees and expenses of SAC and Holdings incurred in
connection with the Transactions.
(4) The Company expects that a portion of the net proceeds of the Offering will
be used to construct a fourth smelting furnace at the Facility and estimates
that construction of the furnace will cost approximately $25.0 million. The
Company anticipates that the balance of the construction costs will be
funded by cash flow from the Company's operations during the construction
period.
RISK FACTORS
See "Risk Factors" for a discussion of certain factors that should be
considered by holders of both Series A Notes and Exchange Notes.
13
<PAGE> 15
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL INFORMATION
The following table presents (i) summary selected historical financial
information of the Predecessor as of the dates and for the periods indicated and
(ii) summary pro forma financial information of the Company for the year ended
December 31, 1997 and for the three months ended March 31, 1998, adjusted to
reflect the effects of the Transactions. The term "the Predecessor" refers to
the Company for periods prior to the Acquisition on March 31, 1998. The summary
pro forma financial information and the financial position of the Company
subsequent to the Acquisition on March 31, 1998 are referred to as the
"Company." The historical financial information for the three months ended March
31, 1998 has been derived from the unaudited financial statements of the
Predecessor and the historical financial information as of March 31, 1998 has
been derived from the unaudited financial statements of the Company, each of
which are included elsewhere in this Prospectus. The historical financial
information for the year ended December 31, 1997 and as of such date has been
derived from the financial statements of the Predecessor which have been audited
by Deloitte & Touche LLP, independent auditors, and are included elsewhere in
this Prospectus. The historical financial information for the year ended
December 31, 1996 and as of such date has been derived from the financial
statements of the Predecessor which have been audited by Crowe, Chizek and
Company LLP, independent auditors, and are included elsewhere in this
Prospectus. The historical financial information for the period from February
10, 1995 (date of inception) to December 31, 1995 and as of December 31, 1995
has been derived from the financial statements of the Company which have been
audited by Ernst & Young LLP, independent auditors, and are included elsewhere
in this Prospectus. The summary pro forma financial information is not
necessarily indicative of the Company's future results of operations or
financial position and does not purport to indicate the Company's results of
operations for the year ended December 31, 1997 or for the three months ended
March 31, 1998 had the Transactions been completed on January 1, 1997. The
summary financial information is qualified in its entirety by, and should be
read in conjunction with, "Unaudited Condensed Pro Forma Financial Information,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Predecessor's Financial Statements and the notes thereto
appearing elsewhere herein.
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
------------------------------------------------------ ---------------------------
PERIOD FROM
FEBRUARY 10, PRO FORMA
1995 PRO FORMA AS ADJUSTED
(DATE OF INCEPTION) YEAR ENDED THREE MONTHS AS ADJUSTED THREE MONTHS
TO DECEMBER 31, ENDED YEAR ENDED ENDED
DECEMBER 31, ----------------- MARCH 31, DECEMBER 31, MARCH 31,
1995(1) 1996 1997 1998 1997 1998
------------------- ------- ------- ------------ ------------ ------------
(UNAUDITED)
(DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales................ $31,523 $52,407 $62,184 $14,854 $62,184 $14,854
Cost of goods sold....... 32,391 42,798 47,972 11,679 50,189 12,233
------- ------- ------- ------- ------- -------
Gross profit (loss)...... (868) 9,609 14,212 3,175 11,995 2,621
Selling and
administrative
expenses............... 1,599 1,923 2,846 3,824 4,452 4,225
------- ------- ------- ------- ------- -------
Operating income
(loss)................. (2,467) 7,686 11,366 (649) 7,543 (1,604)
Interest expense......... 1,111 1,511 1,710 314 8,293 2,073
Other income,
net.......... 359 444 228 282 228 282
------- ------- ------- ------- ------- -------
Earnings (loss) before
provision for income
taxes.................. (3,219) 6,619 9,884 (681) (522) (3,395)
Provision for income
taxes.................. -- 1,169 3,513 (100) 369 (1,018)
------- ------- ------- ------- ------- -------
Net income (loss)........ $(3,219) $ 5,450 $ 6,371 $ (581) $ (891) $(2,377)
======= ======= ======= ======= ======= =======
OTHER DATA (UNAUDITED):
EBITDA(2)................ $(1,038) $ 9,723 $13,762 $ 104 $13,762 $ 105
EBITDA margin(3)......... (3.3)% 18.6% 22.1% 0.7% 22.1% 0.7%
</TABLE>
14
<PAGE> 16
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
------------------------------------------------------ ---------------------------
PERIOD FROM
FEBRUARY 10, PRO FORMA
1995 PRO FORMA AS ADJUSTED
(DATE OF INCEPTION) YEAR ENDED THREE MONTHS AS ADJUSTED THREE MONTHS
TO DECEMBER 31, ENDED YEAR ENDED ENDED
DECEMBER 31, ----------------- MARCH 31, DECEMBER 31, MARCH 31,
1995(1) 1996 1997 1998 1997 1998
------------------- ------- ------- ------------ ------------ ------------
(UNAUDITED)
(DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Depreciation and
amortization........... $ 1,070 $ 1,593 $ 2,167 $ 471 $ 5,991 $ 1,427
Capital expenditures..... 4,154 6,913 2,075 1,184 2,075 1,184
Cash interest expense.... 929 1,238 1,560 161 8,143 1,920
Ratio of EBITDA to cash
interest expense(4).... -- 7.9x 8.8x -- 1.7x --
Ratio of earnings to
fixed charges(5)....... -- 4.8x 5.9x -- -- --
Ratio of net debt to pro
forma EBITDA(6)........ -- -- -- -- 4.75x 622.6x
Cash flows from operating
activities............. $(1,408) $ 9,235 $ 9,995 $ 1,168 $ 6,556 $ 327
Cash flows from investing
activities............. (4,154) (6,913) (2,075) (1,184) (2,075) (1,184)
Cash flows from financing
activities............. 2,785 (2,144) (7,472) 39 -- --
OPERATING DATA
(UNAUDITED):
Silicon metal production
(in metric tons)....... 25,669 33,373 37,094 9,110 37,094 9,110
Average sales price per
metric ton............. $ 1,436 $ 1,641 $ 1,723 $ 1,661 $ 1,723 $ 1,661
Average cost per metric
ton.................... $ 1,529 $ 1,358 $ 1,279 $ 1,279 $ 1,279 $ 1,279
</TABLE>
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
--------------------------- ---------
AS OF
AS OF DECEMBER 31, MARCH 31,
1995 1996 1997 1998
------- ------- ------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................ $ 8 $ 186 $ 635 $ 15,796
Working capital (deficit)................................ (2,926) (3,347) 885 20,446
Total assets............................................. 24,217 30,581 33,663 122,667
Long-term debt, less current portion..................... 12,014 13,207 12,763 81,083
Mandatorily redeemable preferred stock................... 3,000 -- -- --
Stockholders' equity..................................... (718) 5,635 8,275 18,807
</TABLE>
- ---------------
(1) On February 10, 1995, the Company acquired the Facility from SiMETCO. At
such time, SiMETCO was operating the Facility as a debtor-in-possession
under Chapter 11 of the U.S. Bankruptcy Code of 1978, as amended (the
"Bankruptcy Code"). In connection with the acquisition of the Facility, the
Company (i) paid a purchase price of approximately $2.8 million to the
estate of SiMETCO, (ii) assumed approximately $7.9 million of vendor
indebtedness, accrued expenses and other indebtedness, (iii) incurred $6.0
million of additional indebtedness and (iv) issued $3.0 million of its
mandatorily redeemable Series A Preferred Stock, par value $1.00 per share
(the "Series A Preferred Stock") to the estate of SiMETCO. In June 1996, the
Series A Preferred Stock was converted into a non-interest bearing note,
which the Company has repaid in full. See "Certain
Transactions -- Transactions with
15
<PAGE> 17
CGW, its Affiliates and Certain Stockholders" and Notes 6 and 12 to the
Predecessor's Financial Statements.
(2) "EBITDA" is defined as earnings (loss) from continuing operations before
interest expense, income taxes, depreciation and amortization. While EBITDA
should not be construed as a substitute for operating income or as a better
measure of liquidity than cash flow from operations, both of which are
determined in accordance with generally accepted accounting principles, it
is included herein to provide additional information relating to the
Company's ability to service indebtedness. EBITDA as presented herein is not
necessarily comparable to EBITDA presented by other companies because not
all companies define EBITDA similarly.
(3) EBITDA margin is EBITDA as a percentage of net sales.
(4) There was a deficiency of EBITDA to cover cash interest expense for the
period from February 10, 1995 to December 31, 1995 of $2.0 million, for the
three months ended March 31, 1998 of $.06 million and for the pro forma as
adjusted three months ended March 31, 1998 of $1.8 million.
(5) For purposes of computing this ratio, earnings consist of earnings (loss)
from continuing operations before provision for income taxes and fixed
charges adjusted to exclude capitalized interest. Fixed charges consist of
interest expense, whether expensed or capitalized, plus amortization of debt
issuance costs and debt discount plus such portion of rental expense which
is representative of the interest factor. There was a deficiency of earnings
to cover fixed charges for the period from February 10, 1995 to December 31,
1995 of $3.3 million and for the three months ended March 31, 1998 of $0.7
million. On a pro forma as adjusted basis, there was a deficiency of
earnings to cover fixed charges of $522,000 and $3.4 million for the year
ended December 31, 1997 and for the three months ended March 31, 1998,
respectively.
(6) In calculating the ratio of net debt to pro forma EBITDA, net debt equals
long-term debt as of March 31, 1998, including the current portion, less
cash and cash equivalents as of such date.
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RISK FACTORS
Before tendering Series A Notes in the Exchange Offer, eligible holders of
Series A Notes should consider the specific factors set forth below, as well as
the other information set forth elsewhere in this Prospectus.
SIGNIFICANT LEVERAGE AND DEBT SERVICE
The Company has significant outstanding indebtedness and will be
significantly leveraged. As of March 31, 1998, the Company had approximately
$81.1 million of indebtedness outstanding (none of which is secured) and
approximately $15.0 million of secured indebtedness available to be incurred
under the New Credit Facility (as such availability is reduced by an
approximately $6.1 million letter of credit issued thereunder). In addition, on
a pro forma basis assuming the Transactions had occurred on January 1, 1997, the
Company would have had a deficiency of earnings to cover fixed charges of
$522,000 and $3.4 million, for the year ended December 31, 1997 and the three
months ended March 31, 1998, respectively. The Company and its subsidiaries may
incur additional indebtedness, including up to $15.0 million under the New
Credit Facility. See "Capitalization," "Description of the Notes" and
"Description of Other Indebtedness."
The Company's ability to make scheduled payments of principal of, or to pay
the interest or Liquidated Damages, if any, on, or to refinance, its
indebtedness (including the Notes), or to fund planned capital expenditures will
depend on its future performance, which, to a certain extent, is subject to
general economic, financial, competitive, legislative, regulatory and other
factors that are beyond its control. There can be no assurance that the
Company's business will generate sufficient cash flow from operations or that
future borrowings will be available under the New Credit Facility in an amount
sufficient to enable the Company to service its indebtedness, including the
Notes, or to fund its other liquidity needs, including the construction of a
fourth smelting furnace. In addition, the Company may need to refinance all or a
portion of the principal of the Notes on or prior to maturity. There can be no
assurance that the Company will be able to effect any such refinancing on
commercially reasonable terms or at all. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources."
The degree to which the Company will be leveraged following the
consummation of the Transactions could have important consequences to the
holders of the Notes, including, but not limited to, (i) making it more
difficult for the Company to satisfy its obligations to the holders of the
Notes, (ii) increasing the Company's vulnerability to adverse general economic
and industry conditions, (iii) limiting the Company's ability to obtain
additional financing for future capital expenditures, general corporate or other
purposes, (iv) requiring the dedication of a substantial portion of the
Company's cash flow from operations to the payment of principal of, and interest
on, indebtedness, thereby reducing the funds available for operations and future
business opportunities, (v) limiting the Company's flexibility in reacting to
changes in its business and the industry and (vi) placing the Company at a
competitive disadvantage vis-a-vis less leveraged competitors. In addition, the
Indenture and the New Credit Facility contain financial and other restrictive
covenants that limit the ability of the Company to, among other things, borrow
additional funds. Failure by the Company to comply with such covenants could
result in an event of default which, if not cured or waived, could have a
material adverse effect on the Company. In addition, the degree to which the
Company is leveraged could prevent it from repurchasing all of the Notes
tendered to it upon the occurrence of a Change of Control. See "Description of
the Notes -- Repurchase at Option of Holders -- Change of Control" and
"Description of Other Indebtedness -- Credit Facilities."
RANKING OF SENIOR NOTES; ASSET ENCUMBRANCE
The Notes are general unsecured obligations of the Company and rank senior
to all existing and future subordinated indebtedness of the Company and pari
passu in right of payment with all existing and future senior indebtedness of
the Company, including indebtedness under the New Credit Facility. However, the
Notes are effectively subordinated to all secured indebtedness of the Company to
the extent of the value of the assets securing such indebtedness. The
obligations of the Company under the New Credit Facility are secured by
substantially all of the Company's assets and the real and personal property
used in the Company's operations which is, as a result of the IRB Financing,
owned by the Montgomery IDB and leased to the
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Company. Accordingly, the Notes are effectively subordinated to the Company's
obligations under the New Credit Facility to the extent of the assets securing
the New Credit Facility. Upon an event of default under any such secured
indebtedness, the lenders could elect to declare all amounts outstanding,
together with accrued and unpaid interest thereon, to be immediately due and
payable. If the Company were unable to repay such amounts, the lenders could
proceed against the collateral granted to them. After any realization upon the
collateral or a dissolution, reorganization or similar proceeding involving the
Company, there can be no assurance that there will be sufficient available
proceeds or other assets for the holders of the Notes to recover all or any
portion of their claims under the Notes and the Indenture. See "Description of
the Notes" and "Description of Other Indebtedness."
RESTRICTIVE COVENANTS
The New Credit Facility and the Indenture contain numerous restrictive
covenants which limit, among other things, the ability of the Company to incur
additional indebtedness, to create liens or other encumbrances, to pay dividends
or make other restricted payments, to make investments, loans and guarantees and
to sell or otherwise dispose of a substantial portion of its assets to, or merge
or consolidate with, another entity. The New Credit Facility also contains a
number of financial covenants that require the Company to meet certain financial
ratios and tests and provides that a "change of control" constitutes an event of
default thereunder. A failure to comply with the obligations contained in the
New Credit Facility or the Indenture, if not cured or waived, could permit
acceleration of the related indebtedness and the acceleration of indebtedness
under other instruments of the Company that contain cross-acceleration or
cross-default provisions. Upon the occurrence of an event of default under the
New Credit Facility, the lenders thereunder would be entitled to exercise the
remedies available to a secured creditor under applicable law. If the Company
were obligated to repay all or a significant portion of its indebtedness, there
can be no assurance that it would have sufficient cash to do so or that it could
successfully refinance such indebtedness. In addition, other indebtedness that
the Company may incur in the future may contain financial or other covenants
more restrictive than those contained in the New Credit Facility or the
Indenture. See "Description of the Notes -- Certain Covenants" and "Description
of Other Indebtedness."
IMPORTANCE OF KEY CUSTOMERS
Certain of the Company's customers are material to its business and
operations. In 1997 and the three months ended March 31, 1998, G.E. Silicones
accounted for approximately $18.0 million and $2.1 million, or approximately 29%
and 13.9%, of net sales, respectively; Dow Corning accounted for approximately
$15.0 million and $6.1 million, or approximately 24.2% and 40.3%, of net sales,
respectively; Wabash Alloys, L.L.C. ("Wabash Alloys") accounted for
approximately $9.9 million and $2.3 million, or approximately 16.0% and 14.8%,
of net sales, respectively; and Alcan accounted for approximately $4.9 million
and $1.2 million, or approximately 7.9% and 8.2%, of net sales, respectively. In
1997 and the three months ended March 31, 1998, the Company's five largest
customers accounted for approximately $49.3 million and $12.1 million, or
approximately 79.3% and 79.8%, of net sales, respectively. Dow Corning is
currently operating as a debtor-in-possession under Chapter 11 of the Bankruptcy
Code.
The Company's prospects depend on the success of its customers, as well as
its customers' retention of the Company as a significant supplier of silicon
metal. A significant part of the Company's business strategy is directed toward
strengthening its relationships with its major customers that purchase chemical
grade silicon metal, such as G.E. Silicones and Dow Corning. The Company does
not generally have long-term contracts with its major customers and the loss of
any major customer, or a significant reduction of the Company's business with
any of them, would have a material adverse effect on the Company. See
"-- Competition."
DEPENDENCE ON SUPPLY OF ELECTRICAL POWER
The production of silicon metal is heavily dependent upon a reliable supply
of electrical power. The Company's electrical power is supplied by Alabama Power
Company ("APCo") through a dedicated 110,000 volt line. The Facility operates
twenty four hours a day, seven days per week. Any interruption in the supply of
electrical power to the Facility would adversely effect production levels and a
sustained interruption in the power supply would have a material adverse effect
on the Company.
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COMPETITION
The silicon metal manufacturing industry is highly competitive. A number of
the Company's competitors are significantly larger and have greater financial
resources than the Company. In addition, certain of the Company's major
customers have in the past manufactured silicon metal for their own use, thereby
reducing their need to purchase silicon metal from suppliers such as the
Company. The resumption of silicon metal manufacturing by one or more of these
major customers would thus reduce the quantity of silicon metal purchased from
the Company and could have a material adverse effect on the Company. There can
be no assurance that the Company will be able to continue to compete
successfully in silicon metal manufacturing or that the Company will maintain or
increase its sales of chemical grade and specialty aluminum grade silicon metal.
See "Business -- Competition."
ANTI-DUMPING DUTIES ON FOREIGN COMPETITORS' PRODUCTS
In 1990 and 1991, domestic producers of silicon metal successfully
prosecuted anti-dumping actions against unfairly traded imports of silicon metal
from the People's Republic of China (the "PRC"), Brazil and Argentina. These
actions were brought under the anti-dumping provisions of the Tariff Act of
1930, as amended. Under that statute, an anti-dumping duty order may be issued
if a domestic industry establishes in proceedings before the United States
Department of Commerce and the United States International Trade Commission that
imports from the country (or countries) covered by the action(s) are being sold
at less than normal value and are causing material injury or threat of such
injury to the domestic industry. An anti-dumping order requires special duties
to be imposed in the amount of the margin of dumping (i.e., the percentage
difference between the United States price for the goods received by the foreign
producer or exporter and the normal value of the merchandise).
Once an order is in place, each year foreign producers, importers, domestic
producers and other interested parties may request a new investigation (or
"administrative review") to determine the margin of dumping during the
immediately preceding year. The rates calculated in these administrative reviews
(or the existing rates if no review is requested) are used to assess
anti-dumping duties on imports during the review period and to collect cash
deposits on future imports. An administrative review covering five Brazilian
producers and a review covering two PRC exporters are now in progress. The rates
established in these reviews and in future reviews will depend upon the prices
and costs during the periods covered by the reviews, the methodologies applied
and other factors. Anti-dumping orders remain in effect until they are revoked.
In order for an individual foreign producer or exporter to qualify for
revocation of an anti-dumping order, the United States Department of Commerce
must conclude that the producer or exporter has sold the merchandise at not less
than normal value for a period of at least three consecutive years and is not
likely to sell the merchandise at less than normal value in the future.
Anti-dumping orders may also be revoked as a result of periodic "sunset
reviews."
No assurance can be given that one or more of such anti-dumping orders will
not be revoked or that effective duty rates will continue to be imposed. Any
such revocation or the imposition of ineffective duty rates could have a
material adverse effect on the Company. See "Business -- Environmental and
Regulatory Matters -- Anti-Dumping Duties on Foreign Competitors' Products."
ENVIRONMENTAL LAWS AND REGULATIONS
The Company is subject to extensive federal, state and local environmental
laws and regulations governing the discharge, emission, storage, handling and
disposal of a variety of substances and wastes used in or resulting from the
Company's operations. There can be no assurance that environmental laws or
regulations (or the interpretation of existing laws or regulations) will not
become more stringent in the future, that the Company will not incur substantial
costs in the future to comply with such requirements or that the Company will
not discover currently unknown environmental problems or conditions. Any such
event could have a material adverse effect on the Company. See
"Business -- Environmental and Regulatory Matters -- Environmental."
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DEPENDENCE ON KEY PERSONNEL
The Company's operations are dependent, to a significant extent, on the
continued employment of each Senior Manager, with whom it has entered into
employment agreements containing non-compete provisions. If these employees of
the Company become unable to continue in their respective roles, or if the
Company is unable to attract and retain other skilled employees, the Company's
results of operations and financial condition could be adversely effected. See
"Management."
CONTROL BY INVESTORS
As a result of the Acquisition and the Merger, 100% of the outstanding
shares of the Company's common stock is directly owned by Holdings. Holdings has
no business other than holding the capital stock of the Company, which is the
sole source of Holdings' financial resources. Holdings is controlled by CGW,
which beneficially owns shares representing 79.8% of the voting power of
Holdings (on a fully diluted basis) and has the power to elect all of the
directors of Holdings. Accordingly, CGW, through its control of Holdings,
controls the Company and has the power to elect all of its directors, appoint
new management and approve any action requiring the approval of the holders of
the Company's common stock, including adopting amendments to the Company's
Certificate of Incorporation and approving mergers or sales of substantially all
of the Company's assets. The directors elected by Holdings have the authority to
make decisions affecting the capital structure of the Company, including the
issuance of additional capital stock, the implementation of stock repurchase
programs and the declaration of dividends. See "Management," "Certain
Transactions" and "Principal Stockholder."
POTENTIAL INABILITY TO FUND CHANGE OF CONTROL OFFER
Upon a Change of Control (as defined in the Indenture), each holder of
Notes will have the right to require the Company to repurchase all or any part
of such holder's Notes at 101% of the principal amount thereof, plus accrued and
unpaid interest thereon and Liquidated Damages, if any, to the date of
repurchase. The source of funds for any such repurchase will be the Company's
available cash or cash generated from operations or other sources, including
borrowings, sales of equity or funds provided by a new controlling person.
However, there can be no assurance that sufficient funds will be available at
the time of any Change of Control to make any required repurchases of Notes
tendered. Moreover, a Change of Control would constitute an event of default
under the New Credit Facility. Notwithstanding these provisions, the Company
could enter into certain transactions, including certain recapitalizations, that
would not constitute a Change of Control but would increase the amount of debt
outstanding at such time. See "Description of the Notes" and "Description of
Other Indebtedness -- Credit Facilities."
FRAUDULENT CONVEYANCE CONSIDERATIONS
Under applicable provisions of federal bankruptcy law or comparable
provisions of state fraudulent conveyance law, if, among other things, the
Company, at the time it incurred the indebtedness evidenced by the Notes, (i)(a)
was or is insolvent or rendered insolvent by reason of such occurrence or (b)
was or is engaged in a business or transaction for which the assets remaining
with the Company were unreasonably small or constituted unreasonably small
capital or (c) intended or intends to incur, or believed, believes or should
have believed that it would incur, debts beyond its ability to repay such debts
as they mature and (ii) the Company received or receives less than the
reasonably equivalent value or fair consideration for the incurrence of such
indebtedness, the Notes could be invalidated or subordinated to all other debts
of the Company. The Notes could also be invalidated or subordinated if it were
found that the Company incurred indebtedness in connection with the Notes with
the intent of hindering, delaying or defrauding current or future creditors of
the Company. In addition, the payment of Liquidated Damages, if any, interest
and principal by the Company pursuant to the Notes could be voided and required
to be returned to the person making such payment, or to a fund for the benefit
of the creditors of the Company.
The measures of insolvency for purposes of the foregoing considerations
will vary depending upon the law applied in any proceeding with respect to the
foregoing. Generally, however, the Company would be
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considered insolvent if (i) the sum of its debts, including contingent
liabilities, were greater than the sum of all of its assets at a fair valuation
or if the present fair salable value of its assets were less than the amount
that would be required to pay its probable liability on its existing debts,
including contingent liabilities, as they become absolute and mature or (ii) it
could not pay its debts as they become due.
On the basis of its historical financial information and recent operating
history, as discussed in "Prospectus Summary," "Selected Historical Financial
Information," "Unaudited Condensed Pro Forma Financial Information," and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," the Company believes that, after giving effect to the indebtedness
incurred in connection with the Transactions, it will not be insolvent, will not
have unreasonably small assets or capital for the businesses in which it is
engaged and will not incur debts beyond its ability to pay such debts as they
mature. In addition, the Company believes that it is receiving fair
consideration in return for its issuance and sale of the Notes. There can be no
assurance, however, as to what standard a court would apply in making such
determinations.
RESTRICTIONS ON RESALE
The Series A Notes have not been registered under the Securities Act or any
state securities laws and, unless so registered or qualified, may not be offered
or sold except pursuant to an exemption from, or in transactions not subject to,
the registration requirements of the Securities Act or any applicable state
securities laws. The Exchange Notes have been registered under the Securities
Act and, generally, will be freely tradable. See "The Exchange Offer" and "Plan
of Distribution."
ABSENCE OF AN ESTABLISHED TRADING MARKET FOR THE NOTES
The Series A Notes are new securities that were first issued on March 31,
1998. There is currently no established trading market for the Notes. Although
the Initial Purchaser has informed the Company that it currently intends to make
a market in the Series A Notes and, upon issuance, the Exchange Notes, it is not
obligated to do so and any such market making may be discontinued at any time
without notice. Accordingly, there can be no assurance as to the development or
liquidity of any market for the Notes. To the extent Series A Notes are
exchanged in this Exchange Offer, the liquidity of the market for the remaining
Series A Notes may be reduced. The Series A Notes have been designated eligible
for trading in the PORTAL market. The Company does not intend to apply for
listing of the Exchange Notes on any securities exchange or for quotation
through Nasdaq. There is no assurance that an active public or other market will
develop for the Exchange Notes, and it is expected that the market, if any, that
develops for the Exchange Notes will be similar to the limited market that
currently exists for the Series A Notes.
LIMITED REGISTRATION RIGHTS
EXCEPT AS OTHERWISE PROVIDED HEREIN, FOLLOWING THE CONSUMMATION OF THE
EXCHANGE OFFER, ANY HOLDERS OF SERIES A NOTES NOT TENDERED THEREIN WHO ARE NOT
ENTITLED TO RESELL THE SAME PURSUANT TO A RESALE PROSPECTUS, IF ANY, REQUIRED TO
BE FILED AS A POST-EFFECTIVE AMENDMENT TO THIS REGISTRATION STATEMENT OR
PURSUANT TO A SHELF REGISTRATION STATEMENT, WILL HAVE NO FURTHER EXCHANGE OR
REGISTRATION RIGHTS, AND SUCH NOTES WILL CONTINUE TO BE SUBJECT TO CERTAIN
RESTRICTIONS ON TRANSFER.
THE EXCHANGE OFFER
PERSONS NOT ELIGIBLE TO PARTICIPATE IN THE EXCHANGE OFFER
ANY HOLDER OF SERIES A NOTES WHO IS PROHIBITED BY APPLICABLE LAW OR SEC
POLICY FROM PARTICIPATING IN THE EXCHANGE OFFER, INCLUDING ANY HOLDER WHO IS AN
AFFILIATE OF THE COMPANY OR A BROKER-DEALER WHO HOLDS SERIES A NOTES ACQUIRED
DIRECTLY FROM THE COMPANY OR ONE OF ITS AFFILIATES, AND ANY PERSON WHO INTENDS
TO, OR HAS ANY ARRANGEMENT OR UNDERSTANDING TO
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PARTICIPATE IN, A DISTRIBUTION OF THE EXCHANGE NOTES, SHOULD CONTACT THE COMPANY
WITHIN 20 BUSINESS DAYS OF THE CONSUMMATION OF THE EXCHANGE OFFER IN ORDER TO
PRESERVE ITS REGISTRATION RIGHTS THAT ARE DISCUSSED HEREIN.
REGISTRATION RIGHTS AND EFFECT OF EXCHANGE OFFER
The Series A Notes were sold by the Company on the Closing Date to the
Initial Purchaser pursuant to a Purchase Agreement dated March 24, 1997, by and
between SAC and the Initial Purchaser and a Purchase Agreement Supplement dated
as of March 31, 1998 by and between the Company (as successor to SAC) and the
Initial Purchaser (collectively, the "Purchase Agreement"). Subsequently, the
Initial Purchaser sold the Series A Notes to "qualified institutional buyers"
("QIBs") and to a limited number of institutional "accredited investors" (as
defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act ("Accredited
Investors")) in reliance upon Rule 144A and other available exemptions under the
Securities Act. As a condition to the Initial Purchaser's obligations under the
Purchase Agreement, the Company entered into the Registration Rights Agreement
with the Initial Purchaser, pursuant to which the Company agreed to file with
the Commission a registration statement (the "Exchange Offer Registration
Statement") on an appropriate form under the Securities Act with respect to an
offer to the holders of Series A Notes who are able to make certain
representations ("Eligible Holders"), the opportunity to exchange their Series A
Notes for a like principal amount of Exchange Notes.
The Exchange Offer Registration Statement covers the offer of the Exchange
Notes pursuant to the Exchange Offer made hereby and resales by broker-dealers
that acquired Series A Notes for their own accounts as a result of market-making
and other trading activities. Such resales of Transfer Restricted Securities (as
defined herein) made in reliance upon the registration thereof under the
Securities Act may be made only pursuant to the "Plan of Distribution" set forth
in this Prospectus or the other prospectus, if any, filed as an amendment to the
Exchange Offer Registration Statement. To be eligible to effect resales of
Transfer Restricted Securities pursuant to a registration of the Notes for
resale by holders ineligible to participate in the Exchange Offer, holders of
Transfer Restricted Securities must (i) notify the Company within 20 business
days after the consummation of the Exchange Offer that it has determined that it
is not permitted by law or any policy of the Commission to participate in the
Exchange Offer made hereby or that such holder may not resell the Exchange Notes
acquired by it in the Exchange Offer to the public without delivering a
prospectus and that this Prospectus is inappropriate or unavailable for such
resales by such holder or that such holder is a broker-dealer and holds Series A
Notes acquired directly from the Company or one of its affiliates and (ii)
provide to the Company, within 15 business days following the Company's request
therefor, such information as the Company may reasonably request for use in
connection with the registration statement. In the event that any holders of
Transfer Restricted Securities comply with the foregoing requirements, and
supply any additional information reasonably requested by the Company within 20
business days following such request, the Company will use commercially
reasonable efforts to file a shelf registration statement with the Commission on
the appropriate Commission form available to the Company pursuant to Rule 415
under the Securities Act, which may be an amendment to the Exchange Offer
Registration Statement (in either event, the "Shelf Registration Statement")
containing an appropriate resale prospectus and will use its commercially
reasonable efforts to cause such Shelf Registration Statement to become
effective under the Securities Act and to remain continuously effective
thereunder for a period of two years following the Closing Date.
Each holder of Series A Notes that wishes to exchange Series A Notes for
Exchange Notes in the Exchange Offer is required to establish that it is an
Eligible Holder that may participate in the Exchange Offer by making certain
representations, including representations that (i) any Exchange Notes to be
received by it will be acquired in the ordinary course of its business and that
it did not acquire such Series A Notes directly from the Company, (ii) it has no
arrangement or understanding with any person to participate in and has no
intention of participating in, a distribution (within the meaning of the
Securities Act) of the Exchange Notes and (iii) it is not an "affiliate," as
defined in Rule 405 under the Securities Act, of the Company.
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If the holder is a broker-dealer that will receive Exchange Notes for its
own account in exchange for Series A Notes that were acquired as a result of
market-making activities or other trading activities, it also will be required
to acknowledge that it will deliver a prospectus in connection with any resale
of such Exchange Notes, but that by delivering such a prospectus it is not
thereby deemed to admit that it is an "underwriter" within the meaning of the
Securities Act.
Holders of Series A Notes acquired directly from the Company, affiliates of
the Company and persons participating in, or having any arrangement or
understanding with any person or participate in, a distribution of the Exchange
Notes will be ineligible, under the Commission policy, to participate in the
Exchange Offer, and must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any secondary resale
transaction of the Notes.
If (i) the Company is not required to file an Exchange Offer Registration
Statement or to consummate the Exchange Offer because the Exchange Offer is not
permitted by applicable law or Commission policy or (ii) any holder of Series A
Notes notifies the Company within 20 business days after consummation of the
Exchange Offer that (a) it is prohibited by applicable law or Commission policy
from participating in the Exchange Offer, (b) it may not resell the Exchange
Notes acquired by it in the Exchange Offer to the public without delivering a
prospectus and this Prospectus is not appropriate or available for such resales
by such holder or (c) it is a broker-dealer and holds Series A Notes acquired
directly from the Company or an affiliate of the Company, the Company will use
commercially reasonable efforts to file with the Commission a Shelf Registration
Statement to cover resales of the Transfer Restricted Securities by the holders
thereof. The Company has agreed to use its commercially reasonable efforts to
cause such Shelf Registration Statement to be declared effective as promptly as
possible by the Commission on or before the 105th day after the Shelf Filing
Deadline (as defined below).
For purposes of the foregoing and as used elsewhere herein, "Transfer
Restricted Securities" means each Series A Note until the earliest to occur of:
(i) the date on which such Series A Note is exchanged in the Exchange Offer and
entitled to be resold to the public by the holder thereof without complying with
the prospectus delivery requirements of the Securities Act, (ii) the date on
which such Note has been effectively registered under the Securities Act and
disposed of in accordance with the Shelf Registration Statement or (iii) the
date on which such Note is distributed to the public pursuant to Rule 144 under
the Securities Act or by a broker-dealer pursuant to the "Plan of Distribution"
contemplated by the Exchange Offer Registration Statement (including delivery of
this Prospectus).
Under existing Commission interpretations, the Exchange Notes will, in
general, be freely transferable by holders after the Exchange Offer without
further registration under the Securities Act; provided that in the case of
eligible broker-dealers participating in the Exchange Offer, a prospectus
meeting the requirements of the Securities Act must be delivered upon resale by
such broker-dealers in connection with resales of the Exchange Notes. The
Company has agreed, for a period of 180 days after the consummation of the
Exchange Offer, to make available a prospectus meeting the requirements of the
Securities Act to any such broker-dealer for use in connection with any resale
of any Exchange Notes acquired in the Exchange Offer. A broker-dealer which
delivers such a prospectus to purchasers in connection with such resales may be
deemed a statutory underwriter that may, as such, be subject to certain of the
civil liability provisions under the Securities Act and will be bound by the
provisions of the Registration Rights Agreement (including certain
indemnification rights and obligations).
The Company has agreed to pay all expenses incident to the Exchange Offer
and to indemnify the Initial Purchaser against certain liabilities, including
liabilities under the Securities Act.
The Registration Rights Agreement provides that unless the Exchange Offer
is not permitted by applicable law or Commission policy, the Company will: (i)
use all commercially reasonable efforts to file the Exchange Offer Registration
Statement with the Commission on or prior to 60 days after the Closing Date,
(ii) use all commercially reasonable efforts to have the Registration Statement
declared effective by the Commission on or prior to 120 days after the Closing
Date and (iii) commence the Exchange Offer following the effectiveness of the
Exchange Offer Registration Statement and use all commercially reasonable
efforts to issue, on or prior to 30 business days after the date on which the
Exchange Offer Registration Statement was
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declared effective by the Commission, Exchange Notes in exchange for all Series
A Notes tendered prior thereto in the Exchange Offer.
In addition, the Registration Rights Agreement provides that, if obligated
to file the Shelf Registration Statement, the Company will use its commercially
reasonable efforts to file on or prior to the earliest to occur of (i) the 60th
day after the date on which the Company determines that it is not required to
file the Exchange Offer Registration Statement or (ii) the 60th day after the
date on which the Company receives notice from a holder of Transfer Restricted
Securities (such earliest date being the "Shelf Filing Deadline"). The Company
shall use its commercially reasonable efforts to (i) cause such Shelf
Registration Statement to be declared effective by the Commission on or before
the 105th day after the Shelf Filing Deadline and (ii) keep such Shelf
Registration Statement, if required, continuously effective, supplemented and
amended for a period of two years from the Closing Date or such shorter period
ending when all Transfer Restricted Securities covered by the Shelf Registration
Statement have been sold in the manner set forth and as contemplated in the
Shelf Registration Statement, such Notes are no longer outstanding or when the
Notes become eligible for resale pursuant to Rule 144 under the Securities Act
without volume restrictions.
A holder of Notes that sells its Notes pursuant to the Shelf Registration
Statement generally will be required to be named as a selling securityholder in
the related prospectus and to deliver a prospectus to purchasers, will be
subject to certain of the civil liability provisions under the Securities Act in
connection with such sales and will be bound by the provisions of the
Registration Rights Agreement that are applicable to such a holder (including
certain indemnification and contribution obligations). In addition, each holder
of the Notes will be required to timely deliver information to be used in
connection with the Shelf Registration Statement within the time periods set
forth in the Registration Rights Agreement in order to have their Notes included
in the Shelf Registration Statement and to benefit from the provisions regarding
Liquidated Damages set forth in the following paragraph.
If (a) the Company fails to file any of the registration statements
required by the Registration Rights Agreement on or before the date specified
for such filing, (b) any of such registration statements is not declared
effective by the Commission on or prior to the date specified for such
effectiveness (the "Effectiveness Target Date"), or (c) the Company fails to
consummate the Exchange Offer within 30 business days of the Effectiveness
Target Date with respect to the Exchange Offer Registration Statement, or (d)
the Shelf Registration Statement or the Exchange Offer Registration Statement is
declared effective but thereafter ceases to be effective or usable in connection
with resales of Transfer Restricted Securities during the periods specified in
the Registration Rights Agreement (each such event referred to in clauses (a)
through (d) above a "Registration Default"), then the Company will pay
Liquidated Damages to each holder of Transfer Restricted Securities, with
respect to the first 90-day period immediately following the occurrence of the
first Registration Default in an amount equal to $.05 per week per $1,000
principal amount of Transfer Restricted Securities held by such holder. The
amount of the Liquidated Damages will increase by an additional $.05 per week
per $1,000 principal amount of Transfer Restricted Securities with respect to
each subsequent 90-day period until all Registration Defaults have been cured,
up to a maximum amount of Liquidated Damages for all Registration Defaults of
$.30 per week per $1,000 principal amount of Transfer Restricted Securities. All
accrued Liquidated Damages will be paid by the Company on each Damages Payment
Date to the Global Note holder by wire transfer of immediately available funds
or by federal funds check and to holders of Certificated Securities by wire
transfer to the accounts specified by them or by mailing checks to their
registered addresses if no such accounts have been specified. Following the cure
of all Registration Defaults relating to any particular Transfer Restricted
Securities, the accrual of Liquidated Damages with respect to such Transfer
Restricted Securities will cease. However, the Registration Rights Agreement
provides that pending the announcement of a material corporate event, the
Company may issue a notice that the Shelf Registration Statement is unusable, so
long as the number of days in any consecutive twelve-month period for which all
such notices are issued does not exceed 30 days in the aggregate. In such event,
the Company will not be required to pay Liquidated Damages during such 30 days.
EXCEPT AS OTHERWISE PROVIDED HEREIN WITH RESPECT TO THE SHELF REGISTRATION
STATEMENT, FOLLOWING THE CONSUMMATION OF THE EXCHANGE OFFER, ANY HOLDER OF
SERIES A NOTES THAT HAS NOT TENDERED AND EFFECTIVELY
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DELIVERED TO THE EXCHANGE AGENT IN ACCORDANCE WITH THE EXCHANGE OFFER, AND ANY
HOLDER OF EXCHANGE NOTES WHO IS NOT ENTITLED TO RESELL SUCH EXCHANGE NOTES
PURSUANT TO A RESALE PROSPECTUS, IF ANY, REQUIRED TO BE FILED AS AN AMENDMENT TO
THE EXCHANGE OFFER REGISTRATION STATEMENT, WILL HAVE NO FURTHER EXCHANGE OR
REGISTRATION RIGHTS AND SUCH SERIES A NOTES WILL CONTINUE TO BE SUBJECT TO
CERTAIN RESTRICTIONS ON TRANSFER. See "-- Termination of Certain Rights,"
"-- Consequences of Failure to Exchange," and "-- Resale of Exchange Notes."
Accordingly, the ability of any such holder of Notes to resell its Notes could
be adversely affected.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Company will accept any and all Series A
Notes validly tendered and not withdrawn prior to 5:00 P.M. Eastern Time, on the
Expiration Date. The Company will issue $1,000 principal amount of Exchange
Notes in exchange for each $1,000 principal amount of outstanding Series A Notes
accepted in the Exchange Offer. Holders may tender some or all of their Series A
Notes pursuant to the Exchange Offer. However, Series A Notes may be tendered
only in integral multiples of $1,000.
The form and terms of the Exchange Notes are substantially identical to the
form and terms of the Series A Notes except that (i) the Exchange Notes have
been registered under the Securities Act and hence will not bear the transfer
restrictions set forth on the Series A Notes and (ii) the holders of the
Exchange Notes generally will not be entitled to certain rights under the
Registration Rights Agreement, which rights generally will terminate upon
consummation of the Exchange Offer. The Exchange Notes will evidence the same
indebtedness as the Series A Notes and will be entitled to the benefits of the
Indenture.
Holders of the Notes do not have any appraisal or dissenters' rights under
the Indenture or otherwise in connection with the Exchange Offer. The Company
intends to conduct the Exchange Offer in accordance with the Indenture, the
Registration Rights Agreement, and the applicable requirements of the Exchange
Act and the rules and regulations of the SEC thereunder, including Rule 14e-1
thereunder.
The Company shall be deemed to have accepted validly tendered Series A
Notes when, as and if the Company has given telephonic, facsimile or written
notice thereof to the Exchange Agent. The Exchange Agent will act as agent for
the tendering holders for the purpose of receiving the Exchange Notes from the
Company.
If any tendered Series A Notes are not accepted for exchange because of an
invalid tender, the occurrence of certain other events set forth herein or
otherwise, the certificates for any such unaccepted Series A Notes will be
returned, without expense, to the tendering holder thereof as promptly as
practicable after the Expiration Date.
Holders who tender Series A Notes in the Exchange Offer will not be
required to pay brokerage commissions or fees or, subject to the instructions in
the Letter of Transmittal, transfer taxes with respect to the exchange of Series
A Notes pursuant to the Exchange Offer. The Company will pay all charges and
expenses, other than transfer taxes in certain circumstances, in connection with
the Exchange Offer. See "-- Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 P.M., Eastern Time, on
, 1998, unless the Company, in its sole discretion, extends the
Exchange Offer, in which case the term "Expiration Date" shall mean the latest
date and time to which the Exchange Offer is extended.
To extend the Exchange Offer, the Company will notify the Exchange Agent of
any extension by oral or written notice, followed by a public announcement
thereof no later than 9:00 A.M., Eastern Time, on the next business day after
the previously scheduled Expiration Date.
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The Company reserves the right, in its reasonable judgment, (i) to delay
accepting any Series A Notes, to extend the Exchange Offer or to terminate the
Exchange Offer if any of the conditions set forth below under "-- Conditions"
shall not have been satisfied, by giving telephonic, facsimile or written notice
of such delay, extension or termination to the Exchange Agent or (ii) to amend
the terms of the Exchange Offer in any manner. Any such delay in acceptance,
extension or termination, and any amendment will be followed as promptly as
practicable by a public announcement thereof. If the Exchange Offer is amended
in a manner determined by the Company to constitute a material change, the
Company will promptly disclose such amendment by means of a prospectus
supplement that will be distributed to the registered holders.
If the Company does not consummate the Exchange Offer, or, in lieu thereof,
the Company does not file and cause to become effective a Shelf Registration
Statement for the Series A Notes within the time periods set forth herein,
Liquidated Damages will accrue and be payable on the Transfer Restricted
Securities. See "-- Registration Rights and Effect of Exchange Offer."
Without limiting the manner in which the Company may choose to make public
announcement of any delay, extension, termination or amendment of the Exchange
Offer, the Company shall have no obligation to publish, advertise or otherwise
communicate any such public announcement, other than by making a timely release
to the Dow Jones News Service.
INTEREST ON THE EXCHANGE NOTES
The Exchange Notes will bear interest from March 31, 1998, the date of
issuance of the Series A Notes that are exchanged for the Exchange Notes (or, if
later, the most recent Interest Payment Date to which interest on such Series A
Notes has been paid or duly provided for). Accordingly, holders of Series A
Notes that are accepted for exchange will not receive interest that is accrued
but unpaid on those Notes at the time of tender, but such interest will be
payable on the first Interest Payment Date following the Expiration Date.
Interest on the Exchange Notes will be payable semiannually on each April 15 and
October 15, commencing on October 15, 1998.
PROCEDURES FOR TENDERING
Only an eligible holder of Series A Notes may tender such Notes in the
Exchange Offer. To tender in the Exchange Offer, a holder of Series A Notes must
complete, sign and date the Letter of Transmittal, or a facsimile thereof, have
the signatures thereon guaranteed if required by the Letter of Transmittal and
mail or otherwise deliver the Letter of Transmittal or such facsimile, together
with the Series A Notes and any other required documents, to the Exchange Agent
so as to be received by the Exchange Agent at the address set forth below prior
to 5:00 P.M., Eastern Time, on the Expiration Date. Delivery of the Series A
Notes may be made by book-entry transfer in accordance with the procedures
described below. Confirmation of such book-entry transfer must be received by
the Exchange Agent prior to the Expiration Date. In addition, either (i)
certificates for such Series A Notes must be received by the Exchange Agent
along with the Letter of Transmittal, or (ii) a timely confirmation of a
book-entry transfer (a "Book-Entry Confirmation") of such Series A Notes, if
such procedure is available, into the Exchange Agent's account at DTC (the
"Book-Entry Transfer Facility") pursuant to the procedure for book-entry
transfer described below, must be received by the Exchange Agent prior to the
Expiration Date, or (iii) the holder must comply with the guaranteed delivery
procedures described below. To be tendered effectively, the Letter of
Transmittal or, in the case of a book-entry transfer, an Agent's Message in lieu
of a Letter of Transmittal, and all other required documents must be received by
the Exchange Agent at the address set forth below under "-- Exchange Agent"
prior to the Expiration Date. The term "Agent's Message" means a message
transmitted by DTC to, and received by, the Exchange Agent and forming a part of
a Book-Entry Confirmation, which states that DTC has received express
acknowledgment from the tendering DTC participant indicating that such
participant has received, and agrees to be bound by, the Letter of Transmittal
and that the Company may enforce such Letter of Transmittal against such
participant.
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The tender by a holder and the acceptance thereof by the Company will
constitute an agreement between such holder of Series A Notes and the Company
upon the terms and subject to the conditions set forth herein and in the Letter
of Transmittal.
THE METHOD OF DELIVERY OF THE SERIES A NOTES AND THE LETTER OF TRANSMITTAL
AND ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE SOLE ELECTION
AND RISK OF THE HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT
HOLDERS USE AN OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME
SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION
DATE. NO LETTER OF TRANSMITTAL OR SERIES A NOTES SHOULD BE SENT TO THE COMPANY.
HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST
COMPANIES OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR SUCH HOLDERS.
Any beneficial owner whose Series A Notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee, including
Series A Notes held in book-entry form and who wishes to tender should contact
the registered holder of Series A Notes promptly, or in the case of book-entry
Series A Notes, the DTC participant who holds such Series A Notes at DTC on
behalf of the beneficial owner, and instruct such registered holder to tender on
such beneficial owner's behalf. See "The Exchange Offer."
Signatures on the Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by an Eligible Institution (as defined below)
unless the Series A Notes tendered pursuant thereto are tendered (i) by a
registered holder who has not completed the box entitled "Special Registration
Instructions" or "Special Delivery Instructions" on the Letter of Transmittal or
(ii) for the account of an Eligible Institution. In the event that signatures on
the Letter of Transmittal or a notice of withdrawal, as the case may be, are
required to be guaranteed, such guarantee must be by a member firm of a
registered national securities exchange or of the National Association of
Securities Dealers, Inc., a commercial bank or trust company having an office or
correspondent in the United States or an "eligible guarantor institution" within
the meaning of Rule 17Ad-15 under the Exchange Act (an "Eligible Institution").
If the Letter of Transmittal is signed by a person other than the
registered holder of any Series A Notes listed therein, such Series A Notes must
be endorsed or accompanied by a properly completed bond power, signed by such
registered holder as such registered holder's name appears on such Series A
Notes with the signature thereon guaranteed by an Eligible Institution.
If the Letter of Transmittal or any Series A Notes or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and unless waived by the
Company, evidence satisfactory to the Company of their authority to so act must
be submitted with the Letter of Transmittal.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Series A Notes and withdrawal of tendered
Series A Notes will be determined by the Company in its sole discretion, which
determination will be final and binding. The Company reserves the absolute right
to reject any and all Series A Notes not properly tendered or any Series A Notes
the Company's acceptance of which would, in the opinion of counsel for the
Company, be unlawful. The Company also reserves the right to waive, to the
extent permitted by applicable law, any defects, irregularities or conditions of
tender as to particular Series A Notes. The Company's interpretation of the
terms and conditions of the Exchange Offer (including the instructions in the
Letter of Transmittal) will be final and binding on all parties. Unless waived,
any defects or irregularities in connection with tenders of Series A Notes must
be cured within such time as the Company shall determine. Although the Company
intends to notify holders of Series A Notes of defects or irregularities with
respect to tenders of Series A Notes, none of the Company, the Exchange Agent
nor any other person shall incur any liability for failure to give such
notification. Tenders of Series A Notes will not be deemed to have been made
until such defects or irregularities have been cured or waived. Any Series A
Notes received by the Exchange Agent that are not properly tendered and as to
which the defects or irregularities
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have not been cured or waived will be returned by the Exchange Agent to the
tendering holders as soon as practicable following the Expiration Date.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request promptly after the date of this
Prospectus to establish accounts with respect to the Series A Notes at DTC for
the purpose of facilitating the Exchange Offer, and subject to the establishment
thereof, any financial institution that is a DTC Participant may make book-entry
delivery of the Series A Notes by causing DTC to transfer such Series A Notes
into the relevant Exchange Agent's account with respect to the Series A Notes in
accordance with DTC's ATOP procedures for such transfer. Although delivery of
the Series A Notes may be effected through book-entry transfer into the Exchange
Agent's account at DTC, an Agent's Message or an appropriate Letter of
Transmittal properly completed and duly executed with any required signature
guarantee and all other required documents must in each case be transmitted to
and received or confirmed by the Exchange Agent at its address set forth below
on or prior to the Expiration Date, or, if the guaranteed delivery procedures
described below are complied with, within the time period provided under such
procedures. Delivery of documents to DTC does not constitute delivery to the
Exchange Agent.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Series A Notes and (i) whose Series A
Notes are not immediately available, (ii) who cannot deliver their Series A
Notes, the Letter of Transmittal or any other required documents to the Exchange
Agent or (iii) who cannot complete the procedures for book-entry transfer, in
each case prior to the Expiration Date, may effect a tender if:
(a) the tender is made through an Eligible Institution;
(b) prior to the Expiration Date, the Exchange Agent receives from
such Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the holder of Series A Notes, the
certificate number(s) of such holder's Series A Notes and the principal
amount of Series A Notes tendered, stating that the tender is being made
thereby and guaranteeing that, within three New York Stock Exchange trading
days after the Expiration Date, the Letter of Transmittal (or facsimile
thereof), together with the certificates(s) representing the tendered
Series A Notes (or a confirmation of book-entry transfer of such Series A
Notes into the Exchange Agent's account at DTC) and any other documents
required by the Letter of Transmittal, will be deposited by the Eligible
Institution with the Exchange Agent; and
(c) such properly completed and executed Letter of Transmittal (or
facsimile thereof), as well as the certificate(s) representing all tendered
Series A Notes in proper form for transfer (or a confirmation of book-entry
transfer of such Series A Notes into the Exchange Agent's account at DTC)
and all other documents required by the Letter of Transmittal, are received
by the relevant Exchange Agent within three New York Stock Exchange trading
days after the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to holders who wish to tender their Series A Notes according to the
guaranteed delivery procedures set forth above.
WITHDRAWALS OF TENDERS
Except as otherwise provided herein, tenders of Series A Notes may be
withdrawn at any time prior to 5:00 P.M., Eastern Time, on the Expiration Date.
To withdraw a tender of Series A Notes in the Exchange Offer, a written or
facsimile transmission notice of withdrawal must be received by the relevant
Exchange Agent at its address set forth herein prior to 5:00 P.M., Eastern Time,
on the Expiration Date. Any such notice of withdrawal must (i) specify the name
of the person having deposited the Series A Notes to be withdrawn (the
"Depositor"), (ii) identify the Series A Notes to be withdrawn (including the
certificate number(s) and principal amount of such Series A Notes, or, in the
case of Series A Notes transferred by book-entry transfer, the name and number
of the account at DTC
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to be credited and the DTC participant through which such Series A Notes are
held), (iii) be signed by the holder of such Series A Notes in the same manner
as the original signature on the Letter of Transmittal by which such Series A
Notes were tendered (including any required signature guarantees) or be
accompanied by documents of transfer sufficient to have the transfer agent and
registrar with respect to the Series A Notes register the transfer of such
Series A Notes into the name of the person withdrawing the tender, and (iv)
specify the name in which any such Series A Notes are to be registered, if
different from that of the Depositor. All questions as to the validity, form and
eligibility (including time of receipt) of such notices will be determined by
the Company, whose determination shall be final and binding on all parties. Any
Series A Notes so withdrawn will be deemed not to have been validly tendered for
purposes of the Exchange Offer and no Exchange Notes will be issued with respect
thereto unless the Series A Notes so withdrawn are validly and timely
re-tendered. Any Series A Notes which have been tendered but which are not
accepted for exchange will be returned to the holder thereof without cost to
such holder, as soon as practicable after withdrawal, rejection of tender or
termination of the Exchange Offer. Properly withdrawn Series A Notes may be
retendered by following one of the procedures described above under
"-- Procedures for Tendering" at any time prior to the Expiration Date.
CONDITIONS
Notwithstanding any other term of the Exchange Offer including, without
limitation, the terms and conditions contained herein and in the Letter of
Transmittal, the Company shall not be required to accept for exchange, or to
exchange Exchange Notes for, any Series A Notes, and may terminate or amend the
Exchange Offer as provided herein before the acceptance of such Series A Notes,
if:
(a) any law, statute, rule, regulation or interpretation by the
Commission is proposed, adopted or enacted, which, in the reasonable
judgment of the Company, might materially impair the ability of the Company
to proceed with the Exchange Offer or materially impair the contemplated
benefits of the Exchange Offer to the Company; or
(b) any governmental approval has not been obtained, which approval
the Company shall, in its reasonable judgment, deem necessary for the
consummation of the Exchange Offer as contemplated hereby.
If the Company determines in its reasonable judgment that any of the
conditions are not satisfied, the Company may, in its sole discretion (i) refuse
to accept any Series A Notes and return all tendered Notes to the tendering
holders, (ii) extend the Exchange Offer and retain all Series A Notes tendered
prior to the expiration of the Exchange Offer, subject, however, to the rights
of holders to withdraw such Series A Notes (see "-- Withdrawals of Tenders") or
(iii) waive such unsatisfied conditions with respect to the Exchange Offer and
accept all properly tendered Series A Notes which have not been withdrawn. If
such waiver constitutes a material change to the Exchange Offer, the Company
will promptly disclose such waiver by means of a prospectus supplement that will
be distributed to the registered holders of Series A Notes.
TERMINATION OF CERTAIN RIGHTS
Holders of the Series A Notes to whom this Exchange Offer is made have
special rights under the Registration Rights Agreement, certain of which will
terminate upon the consummation of the Exchange Offer. Such special rights which
will terminate include (a) the right to require the Company to comply with the
following: (x) to use all commercially reasonable efforts to cause to be filed
with the Commission an Exchange Offer Registration Statement no later than 60
days following the Closing Date, (y) to use all commercially reasonable efforts
to cause such Exchange Offer Registration Statement to be declared effective by
the Commission no later than 120 days after the Closing Date, and (z) unless the
Exchange Offer would not be permitted by applicable law or Commission policy, to
commence the Exchange Offer and use all commercially reasonable efforts to
issue, on or prior to 30 business days after the date on which the Exchange
Offer Registration Statement was declared effective by the Commission, Exchange
Notes in exchange for all Series A Notes tendered prior thereto in the Exchange
Offer, and (b) the right to receive Liquidated Damages in the event of a breach
by the Company of any of its obligations set forth in the foregoing clauses
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<PAGE> 31
(x), (y) or (z), in an amount, during the first 90-day period immediately
following the occurrence of the first Registration Default, equal to $.05 per
week per $1,000 principal amount of Series A Notes held by such holder, such
amount to increase by an additional $.05 per week per $1,000 principal amount of
Series A Notes with respect to each subsequent 90-day period until all
Registration Defaults have been cured, up to a maximum amount of $.30 per week
per $1,000 principal amount of Series A Notes. See "-- Registration Rights and
Effect of Exchange Offer."
The Registration Rights Agreement also requires the registering for resale,
pursuant to Rule 415 under the Securities Act, the Transfer Restricted
Securities under certain circumstances. Such resale of Transfer Restricted
Securities made in reliance upon the registration thereof under the Securities
Act may be made only pursuant to the "Plan of Distribution" set forth in this
Prospectus or a separate resale prospectus, if any, filed as an amendment to the
Exchange Offer Registration Statement. To be eligible to effect resales of
Transfer Restricted Securities pursuant to the Shelf Registration Statement, a
holder of Transfer Restricted Securities must (i) notify the Company within 20
business days after the consummation of the Exchange Offer that (a) it is not
permitted by law or any policy of the Commission to participate in the Exchange
Offer, (b) it may not resell the Exchange Notes acquired by it in the Exchange
Offer to the public without delivering a prospectus and this Prospectus is not
appropriate or available for such resales by such holder or (c) it is a
broker-dealer and holds Series A Notes acquired directly from the Company or an
affiliate of the Company and (ii) furnish to the Company in writing, within 15
business days after receipt of a request therefor, such information as the
Company may reasonably request for use in connection with the Shelf Registration
Statement. In the event that any holders of Transfer Restricted Securities
comply with the foregoing requirements, and supply any additional information
reasonably requested by the Company within 15 business days following such
request, the Company will file a Shelf Registration Statement containing an
appropriate resale prospectus and will use commercially reasonable efforts to
cause such Shelf Registration Statement to become effective under the Securities
Act and to remain continuously effective thereunder for a period of at least two
years following the Closing Date. In the event that the Company fails to comply
with its obligations in connection with resales of Transfer Restricted
Securities under the Shelf Registration Statement it may be required to pay
Liquidated Damages. See "-- Registration Rights and Effect of Exchange Offer."
EXCHANGE AGENT
The Trustee will act as Exchange Agent for the Exchange Offer with respect
to the Notes (the "Exchange Agent").
Questions and requests for assistance, requests for additional copies of
this Prospectus or of the Letter of Transmittal for the Series A Notes and
requests for copies of Notice of Guaranteed Delivery should be directed to the
Exchange Agent, addressed as follows:
By Registered or Certified Mail:
IBJ Schroder Bank & Trust Company
P.O. Box 84
Bowling Green Station
New York, New York 10274-0084
Attn: Reorganization Operations Department
By Overnight Mail or Courier Service or in Person by Hand:
IBJ Schroder Bank & Trust Company
One State Street
New York, New York 10004
Attn: Securities Processing Window, Subcellar One (SC-1)
By Facsimile: (212) 858-2611
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FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Company. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, telephone, facsimile or in person by officers and
regular employees of the Company and its affiliates, who may be reimbursed their
reasonable expenses incurred in connection with such solicitation, but who will
not otherwise receive special compensation for such efforts.
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers or other
persons soliciting acceptance of the Exchange Offer. The Company, however, will
pay the Exchange Agent reasonable and customary fees for its services and will
reimburse it for its reasonable out-of-pocket expenses in connection therewith
and pay other registration expenses, including reasonable fees and expenses of
the Trustee, filing fees, blue sky fees and printing and distribution expenses.
The Company will pay all transfer taxes, if any, applicable to the exchange
of the Notes pursuant to the Exchange Offer. If, however, certificates
representing the Exchange Notes or the Series A Notes for principal amounts not
tendered or accepted for exchange are to be delivered to, or are to be issued in
the name of, any person other than the registered holder of the Series A Notes
tendered, or if tendered Series A Notes are registered in the name of any person
other than the person signing the Letter of Transmittal, or if a transfer tax is
imposed for any reason other than the exchange of the Notes pursuant to the
Exchange Offer, then the amount of any such transfer taxes (whether imposed on
the registered holder or any other person) will be payable by the tendering
holder of Series A Notes.
ACCOUNTING TREATMENT
The Exchange Notes will be recorded by the Company at the same carrying
value as the Series A Notes, which is the aggregate principal amount in the case
of the Series A Notes. Accordingly, no gain or loss for accounting purposes will
be recognized in connection with the Exchange Offer. The expenses of the
Exchange Offer will be amortized over the term of the Exchange Notes.
RESALE OF EXCHANGE NOTES
Based on an interpretation by the staff of the SEC set forth in no-action
letters issued to unrelated third parties, the Company believes that Exchange
Notes issued pursuant to the Exchange Offer in exchange for Series A Notes may
be offered for resale, resold and otherwise transferred by any holder thereof
(other than any such holder which is a broker-dealer that holds Series A Notes
acquired for its own account as a result of market-making or other trading
activities or any such holder which is an "affiliate" of the Company within the
meaning of Rule 405 under the Securities Act) without compliance with the
registration and prospectus delivery provisions of the Securities Act, provided
that such Exchange Notes are acquired in the ordinary course of such holder's
business and such holder does not intend to participate, and has no arrangement
or understanding with any person to participate, in the distribution of such
Exchange Notes. Any holder who tenders in the Exchange Offer with the intention
to participate, or for the purpose of participating, in a distribution of the
Exchange Notes may not rely on the position of the staff of the SEC enunciated
in Exxon Capital Holdings Corporation (available May 13, 1988) and Morgan
Stanley & Co., Incorporated (available June 5, 1991), or similar no-action
letters, but rather must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with a secondary resale
transaction. In addition, any such resale transaction should be covered by an
effective registration statement containing the selling security holder
information required by Item 507 or 508, as applicable, of Regulation S-K of the
Securities Act. Each broker-dealer that receives Exchange Notes for its own
account in exchange for Series A Notes, where such Series A Notes were acquired
by such broker-dealer as a result of market-making activities or other trading
activities, may be a statutory underwriter and must acknowledge that it will
deliver a prospectus in connection with any resale of such Exchange Notes.
By tendering Series A Notes in the Exchange Offer, each holder tendering
such Series A Notes will represent to the Company that, among other things, (i)
the holder is not an affiliate of the Company, (ii) the
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holder is not engaged in, and does not intend to engage in, and has no
arrangement or understanding with any person to participate in, a distribution
of the Exchange Notes to be issued in the Exchange Offer and (iii) the holder is
acquiring the Exchange Notes in its ordinary course of business, and (iv) the
holder acknowledges that if it or any broker-dealer uses the Exchange offer to
participate in a distribution of the Exchange Notes they must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with a secondary resale of the Exchange Notes and cannot rely on the
no-action letters referenced above.
Affiliates of the Company are not entitled to rely on the foregoing
interpretations of the staff of the SEC with respect to resales of the Exchange
Notes without compliance with the registration and prospectus delivery
requirements of the Securities Act. The Company has agreed to bear all
registration expenses incurred under the Registration Rights Agreement,
including printing and distribution expenses, reasonable fees of counsel, blue
sky fees and expenses, reasonable fees of independent accountants in connection
with the preparation of comfort letters (to the extent required), and SEC and
the NASD filing fees and expenses.
CONSEQUENCES OF FAILURE TO EXCHANGE
As a result of the making of this Exchange Offer, the Company will have
fulfilled one of its obligations under the Registration Rights Agreement, and
holders of Series A Notes who do not tender their Series A Notes generally will
not have any further registration rights under the Registration Rights Agreement
or otherwise. Accordingly, any holder of Series A Notes that does not exchange
that holder's Series A Notes for Exchange Notes will continue to hold
unregistered Series A Notes and will be entitled to all the rights and
limitations applicable thereto under the Indenture, except to the extent that
such rights or limitations, by their terms, terminate or cease to have further
effectiveness as a result of the Exchange Offer.
The Series A Notes that are not exchanged for Exchange Notes pursuant to
the Exchange Offer will remain restricted securities. Accordingly, such Series A
Notes may be resold only (i) to the Company (upon redemption thereof or
otherwise), (ii) pursuant to an effective registration statement under the
Securities Act, (iii) so long as the Series A Notes are eligible for resale
pursuant to Rule 144A, to a qualified institutional buyer within the meaning of
Rule 144A under the Securities Act in a transaction meeting the requirements of
Rule 144A, (iv) outside the United States to a foreign person pursuant to the
exemption from the registration requirements of the Securities Act provided by
Regulation S thereunder, (v) pursuant to an exemption from registration under
the Securities Act provided by Rule 144 thereunder (if available) or (vi) to an
institutional accredited investor in a transaction exempt from the registration
requirements of the Securities Act, in each case in accordance with any
applicable securities laws of any state of the United States. See "Risk
Factors -- Restrictions on Resale."
NO RECOMMENDATION
Participation in the Exchange Offer is voluntary and holders of Series A
Notes should carefully consider whether to accept. Holders of Series A Notes are
urged to consult their own financial and tax advisors in making their own
decision on what action to take. The Board of Directors of the Company makes no
recommendation as to whether or not holders should tender Series A Notes
pursuant to the Exchange Offer.
OTHER
The Company may in the future seek to acquire unregistered Series A Notes
that are not tendered in the Exchange Offer in open market, privately negotiated
or other transactions, through subsequent exchange offers or otherwise. The
Company has no present plans to acquire any Series A Notes that are not tendered
in the Exchange Offer or, except as required by the Registration Rights
Agreement, to file a registration statement to permit resales of any untendered
Series A Notes.
32
<PAGE> 34
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer must acknowledge (i) that by receiving Exchange
Notes for its own account in exchange for Series A Notes, where such Series A
Notes were acquired as a result of market-making activities or other trading
activities (other than Transfer Restricted Securities acquired directly from the
Company), such broker-dealer may be a statutory underwriter, and (ii) that it
will deliver a prospectus in connection with any resale of such Exchange Notes.
This Prospectus, as it may be amended or supplemented from time to time, may be
used by a broker-dealer in connection with the resales of Exchange Notes
received in exchange for the Series A Notes where such Series A Notes were
acquired as a result of market-making activities or other trading activities.
The Company has agreed that for a period of 180 days after the date on which the
Exchange Offer Registration Statement is declared effective, it will make this
Prospectus, as amended or supplemented, available to any broker-dealer upon
reasonable request for use in connection with any such resale.
The Company will not receive any proceeds from any sale of Exchange Notes
by broker-dealers or any other persons. Exchange Notes received by
broker-dealers for their own account pursuant to the Exchange Offer may be sold
from time to time in one or more transactions in the over-the-counter market, in
negotiated transactions, through the writing of options on the Exchange Notes or
a combination of such methods of resale, at market prices prevailing at the time
of resale, at prices related to such prevailing market prices or negotiated
prices. Any such resale may be made directly to purchasers or to or through
brokers or dealers who may receive compensation in the form of commissions or
concessions from any such broker-dealer and/or the purchasers of any such
Exchange Notes. Any broker-dealer that resells Exchange Notes that were received
by it for its own account pursuant to the Exchange Offer and any broker or
dealer that participates in a distribution of such Exchange Notes may be deemed
to be an "underwriter" within the meaning of the Securities Act and any profit
on any such resale of Exchange Notes and any commissions or concessions received
by any such persons may be deemed to be underwriting compensation under the
Securities Act. The Letter of Transmittal states that by acknowledging that it
will deliver and by delivering a prospectus, a broker-dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
The Company has agreed to pay all expenses incident to the Company's
performance of, or compliance with, the Registration Rights Agreement and will
indemnify the holders (including any broker-dealers) and certain parties related
to the holders against certain liabilities, including liabilities under the
Securities Act.
THE TRANSACTIONS
THE ACQUISITION
General. Pursuant to the Stock Purchase Agreement, SAC purchased all of
the outstanding capital stock of the Company in the Acquisition. The aggregate
purchase price paid by SAC for the Acquisition was equal to the approximately
$66.7 million Cash Consideration. The Cash Consideration is subject to
adjustment (the "Post-closing Adjustment") if the value of the net assets of the
Company as of the date of the closing of the Acquisition (the "Acquisition
Closing") differs from the value of the net assets of the Company as of December
31, 1997.
Indemnification. The Selling Stockholders are required to indemnify,
defend and hold harmless SAC, the Company and certain affiliated persons,
against and for all Losses (as defined in the Stock Purchase Agreement)
resulting from, based upon or arising out of, among other things, breaches of
representations, warranties or covenants of the Company or the Selling
Stockholders contained in or made pursuant to the Stock Purchase Agreement. The
Selling Stockholders are obligated to provide such indemnity generally for a
period of 18 months following the Acquisition Closing, although indemnification
for tax related matters continues until September 15, 2002, and indemnification
for Losses related to title to the shares of the Company's capital stock
acquired (or the options exercised) is not limited by any time period. The
Selling Stockholders are not obligated to provide such indemnity until the total
of all Losses with respect thereto exceeds $500,000, and the Selling
Stockholders will only be liable for the amount by which such Losses exceed
$250,000. The maximum aggregate liability of the Selling Stockholders may not
exceed $8.2 million,
33
<PAGE> 35
except with respect to Losses related to title to the Company's assets and title
to the shares of the Company's capital stock sold to SAC. Pursuant to the Stock
Purchase Agreement, $4.0 million of the Cash Consideration is being held in
escrow for a limited period of time to secure a portion of the indemnification
obligations of the Selling Stockholders under the Stock Purchase Agreement.
FINANCING OF THE ACQUISITION
The aggregate purchase price paid by SAC for the Acquisition, which was
comprised of the Cash Consideration (subject to the Post-closing Adjustment),
together with $6.0 million of related fees and expenses, was financed with the
net proceeds of the Offering and the $22.0 million Equity Contribution by CGW
and the Senior Management to Holdings, which was then contributed by Holdings to
SAC. Immediately following the Acquisition, the Merger occurred in which SAC
merged with and into the Company, with the Company being the surviving
corporation. As a result of the Merger, the Company became the obligor of the
Notes and a wholly owned subsidiary of Holdings. In return for funding the
Equity Contribution, CGW received 20,000 shares of Holdings' no par value common
stock (the "Holdings Stock"), or 79.8% of the economic and voting power of
Holdings (on a fully diluted basis), and the Senior Management collectively
received 2,000 shares of Holdings Stock, or 8.0% of the economic and voting
power of Holdings (on a fully diluted basis). After taking into consideration
shares of Holdings Stock for which options held by Senior Management will be
exercisable, 20.2% of the economic and voting power of Holdings (on a fully
diluted basis) is held by Senior Management. See "Use of Proceeds," "Principal
Stockholder" and "Certain Transactions."
CREDIT FACILITIES AND IRB FINANCING
In connection with the Acquisition, the Company (i) repaid approximately
$9.2 million of term loan indebtedness (including accrued interest thereon and
fees) outstanding under the Terminated Credit Facility with a portion of the net
proceeds of the Offering and (ii) replaced the Terminated Credit Facility and
the Terminated Reimbursement Agreement with the New Credit Facility. The New
Credit Facility consists of a $15.0 million revolving credit facility which
provides availability for borrowings and letters of credit. As part of the IRB
Financing, the letter of credit issuing bank under the Terminated Reimbursement
Agreement issued an approximately $6.1 million letter of credit (the "Terminated
Bond Letter of Credit") for the account of the Company to Regions Bank, as
trustee (the "Bond Trustee") for the holders of the industrial revenue bonds
(the "IRBs") issued under the Trust Indenture dated as of January 1, 1995 (the
"Bond Indenture") between the Bond Trustee and the State Industrial Development
Authority, a public corporation organized under the laws of the State of Alabama
(the "SIDA"). As a result of the termination of the Terminated Reimbursement
Agreement, the Terminated Bond Letter of Credit was replaced by a new
approximately $6.1 million letter of credit (the "New Bond Letter of Credit")
issued under the New Credit Facility. In addition, as a consequence of the IRB
Financing, substantially all of the real and personal property used in SIMCALA's
operations (including the Facility) is owned by the Montgomery IDB and leased to
SIMCALA. See "Description of Other Indebtedness."
34
<PAGE> 36
USE OF PROCEEDS
The Company will not receive any proceeds from the issuance of the Exchange
Notes pursuant to the Exchange Offer. The net proceeds to SAC from the sale of
the Series A Notes were approximately $70.3 million after deducting underwriting
discounts and offering expenses. The net proceeds from the sale of the Series A
Notes, together with the Equity Contribution, have been used to fund the
purchase price for the Acquisition, to repay certain indebtedness of the Company
and to pay transaction fees and expenses and are being used for the Company's
general corporate purposes.
The following table sets forth the approximate amounts of the sources and
uses of funds in connection with the Transactions, including the Offering:
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
<S> <C>
SOURCES OF FUNDS:
Notes sold in the Offering.................................. $75,000
Equity Contribution(1)...................................... 22,000
-------
Total Sources..................................... $97,000
=======
USES OF FUNDS:
The Acquisition............................................. $66,703
Repayment of indebtedness(2)................................ 9,159
Transaction fees and expenses(3)............................ 6,000
General corporate purposes(4)............................... 15,138
-------
Total Uses........................................ $97,000
=======
</TABLE>
- ---------------
(1) Of the total Equity Contribution, CGW contributed $20.0 million and Senior
Management collectively contributed $2.0 million.
(2) Consists of (i) term loan indebtedness outstanding under the Terminated
Credit Facility the principal amount of which was payable in quarterly
installments with the last of such installments payable on March 31, 2002
and which, as of March 31, 1998, accrued interest at the rate of
approximately 8% per annum, and (ii) accrued interest thereon and fees. This
term loan indebtedness was used to refinance certain indebtedness of the
Company.
(3) Includes transaction fees and expenses of SAC and Holdings incurred in
connection with the Transactions.
(4) The Company expects that a portion of the net proceeds of the Offering will
be used to construct a fourth smelting furnace at the Facility and estimates
that construction of the furnace will cost approximately $25.0 million. The
Company anticipates that the balance of the construction costs will be
funded by cash flow from the Company's operations during the construction
period.
35
<PAGE> 37
CAPITALIZATION
The following table sets forth, as of March 31, 1998, the capitalization of
the Company after giving effect to the Transactions. This table should be read
in conjunction with "The Transactions," "Description of the Notes," "Description
of Other Indebtedness," "Unaudited Condensed Pro Forma Financial Information"
and the Company's Financial Statements and the notes thereto appearing elsewhere
herein.
<TABLE>
<CAPTION>
AS OF MARCH 31, 1998
---------------------
(DOLLARS IN
THOUSANDS)
<S> <C>
Cash and cash equivalents................................... $15,796
=======
Current maturities of long-term obligations................. $ 90
=======
Long-term obligations (net of current maturities):
Industrial revenue bonds.................................. $ 6,000
New Credit Facility....................................... --
Capital lease obligations................................. 83
Notes 9 5/8% due 2006..................................... 75,000
-------
Total long-term obligations....................... 81,083
Stockholders' equity:
Common stock, par value $.01 per share; 20,000 shares
authorized; 10,889 shares issued and outstanding....... --
Additional paid-in capital................................ 18,807
Retained earnings......................................... --
-------
Total stockholders' equity........................ 18,807
Total capitalization.............................. $99,890
=======
</TABLE>
36
<PAGE> 38
UNAUDITED CONDENSED PRO FORMA FINANCIAL INFORMATION
The following Unaudited Condensed Pro Forma Financial Information of the
Company is based on the historical financial statements of the Predecessor
appearing elsewhere in this Prospectus, as adjusted to reflect the effects of
the Transactions. The Unaudited Condensed Pro Forma Financial Information has
been prepared to give effect to the Transactions, including the Acquisition, the
Offering and the application of the net proceeds therefrom. The unaudited
condensed pro forma statements of income for the year ended December 31, 1997
and the three months ended March 31, 1998 assume the Transactions occurred on
January 1, 1997.
The Unaudited Condensed Pro Forma Financial Information is not necessarily
indicative of the Company's future results of operations or financial position
and does not purport to indicate the Company's results of operations for the
year ended December 31, 1997 and the three months ended March 31, 1998 had the
Transactions been completed on January 1, 1997. In connection with the
Acquisition, the purchase method of accounting was used to establish and record
a new cost basis for the assets acquired and liabilities assumed. The allocation
of the purchase price and acquisition costs to the assets acquired and
liabilities assumed is preliminary at March 31, 1998 and is subject to change
pending the finalization of appraisals and other studies of fair value and
finalization of management's plans which may result in the recording of
additional liabilities. The excess of the purchase price over preliminary fair
market value of assets acquired and liabilities assumed was recorded as
goodwill.
The Unaudited Condensed Pro Forma Financial Information and the
accompanying notes should be read in conjunction with the historical financial
information pertaining to the Predecessor included in this Prospectus, including
the Financial Statements of the Predecessor and the notes thereto. See "The
Transactions," "Capitalization" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
UNAUDITED CONDENSED PRO FORMA INCOME STATEMENTS
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 1998
----------------------------------------
PRO FORMA
HISTORICAL ADJUSTMENTS AS ADJUSTED
---------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales................................................. $14,854 $ -- $14,854
Cost of goods sold........................................ 11,679 554(1) 12,233
------- -------- -------
Gross profit (loss)....................................... 3,175 (554)(1) 2,621
Selling and administrative expenses....................... 3,824 401(2) 4,225
------- -------- -------
Operating loss............................................ (649) (955) (1,604)
Interest expense.......................................... 314 1,759(3) 2,073
Other income, net......................................... 282 -- 282
------- -------- -------
Loss before provision for income taxes.................... (681) (2,714) (3,395)
Provision for income taxes................................ (100) (918)(4) (1,018)
------- -------- -------
Net loss.................................................. $ (581) $ (1,796) $(2,377)
======= ======== =======
OTHER DATA:
EBITDA(5)............................................................................... $ 105
EBITDA margin(6)........................................................................ 0.7%
Depreciation and amortization........................................................... $ 1,427
Capital expenditures.................................................................... $ 1,184
Cash interest expense................................................................... $ 1,920
Ratio of EBITDA to cash interest expense(7)............................................. --
Ratio of earnings to fixed charges(8)................................................... --
Ratio of net debt to pro forma EBITDA(9)................................................ 622.6x
</TABLE>
37
<PAGE> 39
<TABLE>
<S> <C>
Cash flows from operating activities........................ $ 327
Cash flows from investing activities........................ $(1,184)
Cash flows from financing activities........................ --
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
----------------------------------------
PRO FORMA
HISTORICAL ADJUSTMENTS AS ADJUSTED
---------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales................................................. $62,184 $ -- $62,184
Cost of goods sold........................................ 47,972 2,217(1) 50,189
------- -------- -------
Gross profit (loss)....................................... 14,212 (2,217)(1) 11,995
Selling and administrative expenses....................... 2,846 1,606(2) 4,452
------- -------- -------
Operating income (loss)................................... 11,366 (3,823) 7,543
Interest expense.......................................... 1,710 6,583(3) 8,293
Other income, net......................................... 228 -- 228
------- -------- -------
Earnings (loss) before provision for income taxes......... 9,884 (10,406) (522)
------- -------- -------
Provision for income taxes................................ 3,513 (3,144)(4) 369
------- -------- -------
Net income (loss)......................................... $ 6,371 $ (7,262) $ (891)
======= ======== =======
OTHER DATA:
EBITDA(5)............................................................................ $13,762
EBITDA margin(6)..................................................................... 22.1%
Depreciation and amortization........................................................ $ 5,991
Capital expenditures................................................................. $ 2,075
Cash interest expense................................................................ $ 8,143
Ratio of EBITDA to cash interest expense(7).......................................... 1.7x
Ratio of earnings to fixed charges(8)................................................ --
Ratio of net debt to pro forma EBITDA(9)............................................. 4.75x
Cash flows from operating activities................................................. $ 6,556
Cash flows from investing activities................................................. $(2,075)
Cash flows from financing activities................................................. --
</TABLE>
- ---------------
(1) Reflects the increase in annual depreciation expense resulting from purchase
accounting adjustments which increase the depreciable basis of the property,
plant and equipment acquired in the Acquisition.
(2) Reflects the increase in amortization expense resulting from the excess of
the Cash Consideration over the estimated fair market value of the net
assets acquired in the Acquisition as follows:
<TABLE>
<S> <C>
Total estimated Cash Consideration.......................... $ 66,703,000
Less:
Carryover basis allocated to goodwill..................... (1,373,410)
Property, plant and equipment............................. (55,000,000)
Other assets acquired..................................... (7,702,000)
Plus:
Liabilities assumed....................................... 25,962,000
Estimated fees and expenses related to the Acquisition.... 1,250,000
Net deferred tax liability associated with the change in
basis of assets........................................ 10,302,711
------------
Excess of Cash Consideration over estimated fair market
value of the net assets acquired....................... $ 40,142,301
============
</TABLE>
Pro forma amortization expense has been calculated based on the excess of
the Cash Consideration over estimated fair market value of the net assets
acquired amortized over a 25 year period using the straight-line method.
38
<PAGE> 40
(3) Reflects interest expense on a going forward basis for (i) interest costs
associated with the Notes; (ii) amortization of debt issuance costs related
to the Offering; and (iii) interest costs associated with the existing
indebtedness of the Company that will not be paid off in conjunction with
the Transactions.
<TABLE>
<S> <C>
Interest expense on the Notes............................... $7,218,750
Amortization of debt issuance costs......................... 593,750
----------
Total interest expense related to new
indebtedness..................................... 7,812,500
Interest expense associated with existing indebtedness...... $ 480,000
==========
Pro forma interest expense.................................. $8,292,500
==========
</TABLE>
Interest on Notes is based on the rate of 9.625% per annum. The debt
issuance costs are amortized over the eight year term of the Notes.
Interest on the existing $6,000,000 indebtedness is based on the rate of 8%
per annum.
(4) Reflects the tax effect of pro forma adjustments to earnings before
provision for income taxes adjusted for non-deductible amortization of
goodwill multiplied by the statutory income tax rate of 34%.
(5) "EBITDA" is defined as earnings (loss) from continuing operations before
interest expense, income taxes, depreciation and amortization. While EBITDA
should not be construed as a substitute for operating income or as a better
measure of liquidity than cash flow from operations, both of which are
determined in accordance with generally accepted accounting principles, it
is included herein to provide additional information relating to the
Company's ability to service indebtedness. EBITDA as presented herein is not
necessarily comparable to EBITDA presented by other companies because not
all companies define EBITDA similarly.
(6) EBITDA margin is EBITDA as a percentage of net sales.
(7) There was a deficiency of EBITDA to cover cash interest expense for the pro
forma as adjusted three months ending March 31, 1998 of $1.8 million.
(8) For purposes of computing this ratio, earnings consist of earnings (loss)
from continuing operations before provision for income taxes and fixed
charges adjusted to exclude capitalized interest. Fixed charges consist of
interest expense, whether expensed or capitalized, plus amortization of debt
issuance costs and debt discount plus such portion of rental expense which
is representative of the interest factor. The pro forma ratio of earnings to
fixed charges was a deficiency of earnings to cover fixed charges of
$522,000 and $3.4 million, for the year ended December 31, 1997 and the
three months ended March 31, 1998, respectively.
(9) In calculating the ratio of net debt to pro forma EBITDA, net debt equals
long-term debt as of March 31, 1998, including the current portion, less
cash and cash equivalents as of such date.
39
<PAGE> 41
SELECTED HISTORICAL FINANCIAL INFORMATION
The selected financial information for the three months ended March 31,
1997 and March 31, 1998 has been derived from the unaudited financial statements
of the Predecessor and are included elsewhere in this Prospectus. The selected
financial information as of March 31, 1998 has been derived from the unaudited
financial statements of the Company which are included elsewhere in this
Prospectus. The selected financial information for the year ended December 31,
1997 and as of such date has been derived from the financial statements of the
Predecessor which have been audited by Deloitte & Touche LLP, independent
auditors, and are included elsewhere in this Prospectus. The selected financial
information for the year ended December 31, 1996 and as of such date has been
derived from the financial statements of the Predecessor which have been audited
by Crowe, Chizek and Company LLP, independent auditors, and are included
elsewhere in this Prospectus. The selected financial information for the period
from February 10, 1995 (date of inception) to December 31, 1995 and as of
December 31, 1995 has been derived from the financial statements of the
Predecessor which have been audited by Ernst & Young LLP, independent auditors,
and are included elsewhere in this Prospectus. The selected financial
information for the period from January 1, 1995 to February 10, 1995 and the
year ending December 31, 1994 has been derived from the unaudited financial
statements of SiMETCO, a predecessor. The selected financial information for the
year ended December 31, 1993 and as of such date has been derived from the
audited financial statements of SiMETCO, a predecessor. In the opinion of
management, the unaudited condensed statements of operations and cash flows
included herein reflect all normal recurring accruals necessary for a fair
statement of the results of the interim periods reflected. The selected
financial information below is qualified in its entirety by, and should be read
in conjunction with, "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the Predecessor's Financial Statements
and the notes thereto appearing elsewhere herein.
<TABLE>
<CAPTION>
SIMETCO, INC.(1) PREDECESSOR
------------------------------------ ---------------------------------------------------
PERIOD FROM
FEB. 10,
PERIOD FROM 1995 (DATE THREE MONTHS
YEAR ENDED JAN. 1, OF YEAR ENDED ENDED
DECEMBER 31, 1995 TO INCEPTION) DECEMBER 31, MARCH 31,
---------------------- FEB. 10, TO DEC. 31, ----------------- -----------------
1993 1994 1995 1995(1) 1996 1997 1997 1998
-------- ----------- ----------- ----------- ------- ------- ------- -------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT OPERATING DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT
DATA:
Net sales............ $ 31,014 $31,127 $3,742 $31,523 $52,407 $62,184 $15,655 $14,854
Cost of goods sold... 29,864 30,310 3,314 32,391 42,798 47,972 12,225 11,679
-------- ------- ------ ------- ------- ------- ------- -------
Gross profit (loss).. 1,150 817 428 (868) 9,609 14,212 3,430 3,175
Selling and
administrative
expenses........... 2,241 1,749 66 1,599 1,923 2,846 682 3,824
-------- ------- ------ ------- ------- ------- ------- -------
Operating income
(loss)............. (1,091) (932) 362 (2,467) 7,686 11,366 2,748 (649)
Interest expense..... 776 800 72 1,111 1,511 1,710 415 314
Other (expense)
income, net........ (861) (211) -- 359 444 228 30 282
-------- ------- ------ ------- ------- ------- ------- -------
Earnings (loss)
before provision
for income taxes... (2,728) (1,943) 290 (3,219) 6,619 9,884 2,363 (681)
Provision for income
taxes.............. -- -- -- -- 1,169 3,513 793 (100)
-------- ------- ------ ------- ------- ------- ------- -------
Earnings (loss) from
continuing
operations before
cumulative effect
of a change in
accounting
principle.......... (2,728) (1,943) 290 (3,219) 5,450 6,371 1,570 (581)
</TABLE>
40
<PAGE> 42
<TABLE>
<CAPTION>
SIMETCO, INC.(1) PREDECESSOR
------------------------------------ ---------------------------------------------------
PERIOD FROM
FEB. 10,
PERIOD FROM 1995 (DATE THREE MONTHS
YEAR ENDED JAN. 1, OF YEAR ENDED ENDED
DECEMBER 31, 1995 TO INCEPTION) DECEMBER 31, MARCH 31,
---------------------- FEB. 10, TO DEC. 31, ----------------- -----------------
1993 1994 1995 1995(1) 1996 1997 1997 1998
-------- ----------- ----------- ----------- ------- ------- ------- -------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT OPERATING DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Loss on disposal of
discontinued
operations......... (182) -- -- -- -- -- -- --
-------- ------- ------ ------- ------- ------- ------- -------
Earnings (loss)
before cumulative
effect of change in
accounting
principle.......... (2,910) (1,943) 290 (3,219) 5,450 6,371 1,570 (581)
-------- ------- ------ ------- ------- ------- ------- -------
Cumulative effect on
prior years of a
change in
accounting for
post-retirement
benefits other than
pensions........... (9,292) -- -- -- -- -- -- --
-------- ------- ------ ------- ------- ------- ------- -------
Net income (loss).... $(12,202) $(1,943) $ 290 $(3,219) $ 5,450 $ 6,371 $ 1,570 $ (581)
======== ======= ====== ======= ======= ======= ======= =======
OTHER DATA:
(UNAUDITED)
EBITDA(2)............ $(1,038) $ 9,723 $13,762 $ 3,202 $ 104
EBITDA margin(3)..... (3.3)% 18.6% 22.1% 20.5% 0.7%
Depreciation and
amortization....... $ 1,070 $ 1,593 $ 2,167 $ 424 $ 471
Capital
expenditures....... $ 4,154 $ 6,913 $ 2,075 $ 438 $ 1,184
Cash interest
expense............ $ 929 $ 1,238 $ 1,560 $ 421 $ 1,920
Ratio of EBITDA to
cash interest
expense(4)......... -- 7.9x 8.8x 7.6x --
Ratio of earnings to
fixed charges(5)... -- 4.8x 5.9x 6.5x --
Cash flows from
operating
activities......... $(1,408) $ 9,235 $ 9,995 $ 992 $ 1,168
Cash flows from
investing
activities......... $(4,154) $(6,913) $(2,075) $ (438) $(1,184)
Cash flows from
financing
activities......... $ 2,785 $(2,144) $(7,472) $ (119) $ 39
OPERATING DATA:
(UNAUDITED)
Silicon metal
production (in
metric tons)....... 23,435 23,987 2,395 25,669 33,373 37,094 9,076 9,110
Average sales price
per metric ton..... $ 1,388 $ 1,366 $1,410 $ 1,436 $ 1,641 $ 1,723 $ 1,743 $ 1,661
Average cost per
metric ton......... $ 1,419 $ 1,415 $1,481 $ 1,529 $ 1,358 $ 1,279 $ 1,320 $ 1,279
</TABLE>
41
<PAGE> 43
<TABLE>
<CAPTION>
SIMETCO,
INC.(1) PREDECESSOR COMPANY
----------------- --------------------------- ---------------
AS OF
DECEMBER 31, AS OF DECEMBER 31,
----------------- --------------------------- AS OF MARCH 31,
1993 1994 1995 1996 1997 1998
------- ------- ------- ------- ------- ---------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital (deficit).................... $ 483 $(4,069) $(2,926) $(3,347) $ 885 $ 20,446
Total assets................................. 13,356 12,342 24,217 30,581 33,663 122,667
Long-term debt, less current portion......... -- 2,219 12,014 13,207 12,763 81,083
Mandatorily redeemable preferred stock....... -- -- 3,000 -- -- --
</TABLE>
- ---------------
(1) On February 10, 1995, the Company acquired the Facility from SiMETCO. At
such time, SiMETCO was operating the Facility as a debtor-in-possession
under Chapter 11 of the Bankruptcy Code. In connection with the acquisition
of the Facility, the Company (i) paid a purchase price of approximately $2.8
million to the estate of SiMETCO, (ii) assumed approximately $7.9 million of
vendor indebtedness, accrued expenses and other indebtedness, (iii) incurred
$6.0 million of additional indebtedness and (iv) issued $3.0 million of its
Series A Preferred Stock to the estate of SiMETCO. In June 1996, the Series
A Preferred Stock was converted into a non-interest bearing note, which the
Company has repaid in full. See "Certain Transactions -- Transactions with
CGW, its Affiliates and Certain Stockholders" and Notes 6 and 12 to the
Predecessor's Financial Statements.
(2) "EBITDA" is defined as earnings (loss) from continuing operations before
interest expense, income taxes, depreciation and amortization. While EBITDA
should not be construed as a substitute for operating income or as a better
measure of liquidity than cash flow from operations, both of which are
determined in accordance with generally accepted accounting principles, it
is included herein to provide additional information relating to the
Company's ability to service indebtedness. EBITDA as presented herein is not
necessarily comparable to EBITDA presented by other companies because not
all companies define EBITDA similarly.
(3) EBITDA margin is EBITDA as a percentage of net sales.
(4) There was a deficiency of EBITDA to cover cash interest expense for the
three months ended March 31, 1998 of $0.06 million.
(5) For purposes of computing this ratio, earnings consist of earnings (loss)
from continuing operations before provision for income taxes and fixed
charges adjusted to exclude capitalized interest. Fixed charges consist of
interest expense, whether expensed or capitalized, plus amortization of debt
issuance costs and debt discount plus such portion of rental expense which
is representative of the interest factor. There was a deficiency of earnings
to cover fixed charges of $2.7 million, $1.9 million, $3.3 million and $0.7
million in the year ended December 31, 1993, the year ended December 31,
1994, the period from February 10, 1995 to December 31, 1995 and the three
months ended March 31, 1998, respectively.
42
<PAGE> 44
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The following discussion and analysis of the results of operations and
financial condition of the Company covers periods prior to consummation of the
Acquisition on March 31, 1998. Accordingly, the discussion and analysis of such
periods does not reflect the significant impact that the Transactions has had
and will have on the Company. See the discussion below under "Liquidity and
Capital Resources" for further discussion of certain effects that the
Transactions may have on the Company.
SIMCALA was incorporated in 1994 and acquired the Facility from SiMETCO on
February 10, 1995. At the time of the acquisition, SiMETCO was operating the
Facility as a debtor-in-possession under Chapter 11 of the Bankruptcy Code.
Under SiMETCO's ownership, the Facility's operating potential was limited due to
high operating costs, low capacity utilization and an ineffective marketing
strategy. Through SIMCALA's management, operating costs have declined, capacity
utilization has increased and a more focused marketing strategy has been
implemented.
Under SiMETCO's ownership, the Facility produced primarily low grade
silicon metal for the secondary aluminum market. The new management team has
successfully repositioned the Company as a manufacturer of high grade silicon
metal for the chemical and specialty aluminum markets. Historically, higher
grade silicon metal has yielded higher profit margins and been subject to less
demand and price volatility than lower grade silicon metal.
At the time that SIMCALA acquired the Facility, only two of the three
silicon metal smelting furnaces were operating. Management immediately began to
rebuild the non-operating furnace and, in the third quarter of 1995, this
furnace was successfully recommissioned and began operating. In addition, a
refurbishment of the other two furnaces was completed by the fourth quarter of
1996. The recommissioning of the third furnace and the refurbishment of the
remaining two, resulted in a 55% increase in production from 1994 to 1997.
Despite the addition of a third operating furnace, employee headcount remained
constant at approximately 170.
The principal cost components in the production of silicon metal are
electricity, carbon electrodes, quartz, coal, charcoal and woodchips.
Electricity is the largest cost component, comprising 25.5% and 24.4% of cost of
goods sold in 1997 and the three months ended March 31, 1998, respectively. The
balance of raw materials, consisting of electrodes, quartz, coal/charcoal and
woodchips, represented 14.4% and 14.3%, 3.6% and 3.7%, 12.6% and 12.2%, and 8.1%
and 8.2% of cost of goods sold, respectively, in 1997 and the three months ended
March 31, 1998, respectively. In addition, labor comprised 13.3% and 13.7% of
cost of goods sold in 1997 and the three months ended March 31, 1998,
respectively. The Company has a five-year contract with APCo through the year
2000 for the provision of electrical power. Power rates have remained steady for
the last three years and are not expected to increase for the remaining life of
the contract.
When the Facility was constructed in 1976, it was designed to support a
fourth smelting furnace. For example, the main electrical power supply, as well
as the non-contact cooling water system, can accommodate a fourth furnace. This
potential expansion is believed by the Company to be the most cost competitive
"brownfield" expansion opportunity in the United States. Because the Facility is
designed to accommodate a fourth smelting furnace, construction of the furnace
can be accomplished for $7.0 million to $10.0 million less than, and
approximately one year of construction time less than the construction cost and
time that would have been required if the Facility were not designed to support
a fourth furnace. The expansion will increase the Company's production capacity
from 36,000 metric tons to 48,000 metric tons per year. After the expansion,
management believes that the Facility will be the second largest silicon metal
production facility in the world.
From 1987 to 1997, demand for silicon metal in the United States increased
at an average annual rate of approximately 7.7% (on a non-compounded basis).
This increase was driven by an average annual rate of growth of approximately
10.1% (on a non-compounded basis) in the United States chemical market. While
43
<PAGE> 45
the aluminum market has also grown during this period, demand for chemical grade
silicon metal has increased 73.8% and, in 1997, chemical grade silicon metal
represented approximately 55.0% of the silicon metal consumed in the United
States. The major factors contributing to the growth of the chemical market are
(i) the introduction of new silicones based product applications (such as
emulsions, release agents and sealants) and (ii) the displacement of
petrochemical based products (such as lubrication and hydraulic fluids). The
growth in the aluminum market is primarily attributable to the increased use of
aluminum in the transportation industry.
CRU projects that the historical growth trends in both the chemical and
aluminum markets will continue. CRU expects that the most rapid growth in demand
will occur in the consumption of electronic grade silicon metal, with this
growth in demand primarily driven by the semi-conductor industry.
The following table sets forth certain information regarding the Company's
production levels and product mix for the period from February 10, 1995 to
December 31, 1995, the years ended December 31, 1996 and 1997 and the three
months ended March 31, 1998:
<TABLE>
<CAPTION>
PERIOD
FROM
FEBRUARY 10,
1995
(DATE OF THREE
INCEPTION) YEAR ENDED MONTHS
TO DECEMBER 31, ENDED
DECEMBER 31, --------------- MARCH 31,
1995 1996 1997 1998
----------------- ------ ------ ----------------
(IN METRIC TONS)
<S> <C> <C> <C> <C>
Silicon metal production................ 25,669 33,373 37,094 9,110
Chemical grade silicon metal
production............................ 11,603 14,275 20,257 6,728
Specialty aluminum grade silicon
metal production...................... 6,350 9,979 10,304 1,397
</TABLE>
RESULTS OF OPERATIONS
The following table sets forth certain of the Company's statement of
operations information as a percentage of net sales during the period from
February 10, 1995 to December 31, 1995, the years ended December 31, 1996 and
1997 and the three months ended March 31, 1997 and 1998:
<TABLE>
<CAPTION>
PERIOD
FROM
FEBRUARY 10,
1995
(DATE OF INCEPTION) YEAR ENDED THREE MONTHS
TO DECEMBER 31, ENDED MARCH 31,
DECEMBER 31, -------------- ----------------
1995 1996 1997 1997 1998
------------------- ----- ----- ------ ------
<S> <C> <C> <C> <C> <C>
Net sales.......................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of goods sold................. 102.8 81.7 77.1 78.1 78.6
----- ----- ----- ----- -----
Gross profit (loss)................ (2.8) 18.3 22.9 21.9 21.4
Selling and administrative
expenses......................... 5.1 3.7 4.6 4.4 25.7
----- ----- ----- ----- -----
Operating income (loss)............ (7.9) 14.6 18.3 17.5 (4.3)
Interest expense................... 3.5 2.9 2.7 2.7 2.1
Other income, net.................. 1.1 0.9 0.4 0.2 1.9
----- ----- ----- ----- -----
Earnings (loss) before provision
for income taxes................. (10.3) 12.6 16.0 15.0 (4.5)
Provision for income taxes......... -- 2.2 5.7 5.1 (0.7)
----- ----- ----- ----- -----
Net income (loss).................. (10.3)% 10.4% 10.3% 9.9% (3.8)%
===== ===== ===== ===== =====
</TABLE>
44
<PAGE> 46
Three Months Ended March 31, 1998 Compared to Three Months Ended March 31,
1997
Net Sales. Net sales decreased 5.1%, to $14.9 million in the first quarter
of 1998 from $15.7 million in the first quarter of 1997 due principally to
decreased selling prices in domestic silicon metal markets. Production increased
0.4% to 9,110 metric tons in the first quarter of 1998 from 9,076 metric tons in
the first quarter of 1997 due to improved efficiency and scrap recovery in the
silicon smelting process.
Gross Profit. Gross profit decreased 7.4%, to $3.2 million in the first
quarter of 1998 from $3.4 million in the first quarter of 1997. Gross profit
margin decreased to 21.4% in the first quarter of 1998 from 21.9% in the first
quarter of 1997. These decreases were principally due to decreased selling
prices in domestic silicon metal markets offset slightly by decreased production
costs and improved operating efficiencies realized in the silicon metal
production process.
Selling and Administrative Expenses. Selling and administrative expenses
increased 460.7% to $3.8 million in the first quarter of 1998 from $0.7 million
in the first quarter of 1997, primarily due to a bonus paid to management
related to the exercise of options of $1.5 million and the recognition of
compensation expenses of $0.9 million related to certain stock options. In
addition, the Company incurred increases in health insurance costs and franchise
taxes.
Operating Income. Operating income decreased 123.6% to a $0.7 million loss
in the first quarter of 1998 from $2.7 million in the first quarter of 1997,
while the operating margin decreased to a loss of 4.4% from 17.6% for the same
periods. Excluding the bonus costs discussed above recorded in the first quarter
of 1998, operating income decreased 62.6% to $0.8 million in the first quarter
of 1998 from $2.7 million in the first quarter of 1997, while the operating
margin decreased to 5.4% from 17.6% for the same periods.
Interest Expense. Interest expense decreased 24.3% to $0.3 million in the
first quarter of 1998 from $0.4 million in the first quarter of 1997 principally
due to lower average outstanding borrowing under the Company's credit
facilities. As a result of the substantial indebtedness incurred in connection
with the Acquisition, in the future the Company's interest expense will have a
greater proportionate impact on net income in comparison to pre-acquisition
periods.
Other Income, Net. Other income, net increased 840.0% to $0.3 million in
the first quarter of 1998 from $0.03 million in the first quarter of 1997
primarily due to increased benefits associated with the State of Alabama's
Mercedes Act which allows the Company to retain and recognize the state taxes
withheld from employees as income.
Provision for Income Taxes. Provision for income taxes decreased to a
benefit of $0.1 million in the first quarter of 1998 from a provision of $0.8
million in the first quarter of 1997. This decrease was primarily due to the
decrease in taxable income from $2.4 million in 1997 to a loss of $.7 million in
1998.
Net Income. As a result of the above factors, net income decreased to a
loss of $0.6 million in the first quarter of 1998 from $1.6 million in the first
quarter of 1997.
Year Ended December 31, 1997 Compared to Year Ended December 31, 1996
Net Sales. Net sales increased 18.7%, to $62.2 million in 1997 from $52.4
million in 1996. The increase was principally due to increased production from
furnaces #1 and #3 which were refurbished in the third and fourth quarters of
1996 and, as a result, operated at or near full capacity during 1997. Production
increased 11.1%, to 37,094 metric tons in 1997 from 33,373 metric tons in 1996.
Increased sales of higher priced chemical grade silicon metal, as well as
increased sales of microsilica, also contributed to this increase.
Gross Profit. Gross profit increased 47.9%, to $14.2 million in 1997 from
$9.6 million in 1996. Gross margin increased to 22.9% in 1997 from 18.3% in 1996
primarily as a result of increased sales of higher margin chemical grade silicon
metal and the continuation of improved operating efficiencies. In this regard,
the fixed components of cost of goods sold remained relatively unchanged from
1996 to 1997. However, variable components did increase as a result of higher
production volumes.
45
<PAGE> 47
Selling and Administrative Expenses. Selling and administrative expenses
increased 47.4%, to $2.8 million in 1997 from $1.9 million in 1996. This
increase was principally due to professional fees incurred in 1997 in connection
with the Company's consideration of various strategic business alternatives,
offset in part by a decrease in bad debt expense. The Company maintains credit
insurance which reduces the risk of loss related to bad debts. In addition,
selling and administrative expenses increased in 1997 primarily due to
compensation expense recorded in connection with the Company's variable stock
option plan.
Operating Income. As a result of the above factors, operating income
increased $3.7 million, to $11.4 million in 1997 from $7.7 million in 1996. As a
percentage of net sales, operating income increased to 18.3% in 1997 from 14.6%
in 1996.
Interest Expense. Interest expense increased 13.3%, to $1.7 million in
1997 from $1.5 in 1996. This increase was primarily the result of interest costs
associated with the repayment of certain non-interest bearing indebtedness of
the Company in 1997, offset by decreased average levels of indebtedness used to
fund the Company's operations. See Notes 5 and 6 to the Company's Financial
Statements.
Other Income, Net. Other income, net decreased 48.6%, to $228,000 in 1997
from $444,000 in 1996 primarily as a result of the Company's receipt of
approximately $200,000 of insurance proceeds for losses resulting from hurricane
damage in 1996.
Provision for Income Taxes. Provision for income taxes increased to $3.5
million in 1997 from $1.2 million in 1996. The Company's effective tax rate was
35.5% in 1997 compared to 17.7% in 1996. This increase in the effective tax rate
resulted primarily from the Company's reduction of its deferred tax valuation
allowance by approximately $1.1 million in 1996.
Net Income. As a result of the above factors, net income increased $1.0
million, to $6.4 million in 1997 from $5.4 million in 1996. As a percentage of
net sales, net income remained unchanged.
Year Ended December 31, 1996 Compared to the Period from February 10, 1995 to
December 31, 1995
Net Sales. Net sales increased 66.3%, to $52.4 million in 1996 from $31.5
million in 1995. The increase was due primarily to the effects of the
recommissioning of furnace #2 in the third quarter of 1995, which operated
during all of 1996, the completion of the refurbishment of furnaces #1 and #3 in
the third and fourth quarters of 1996, and the resulting increase in production.
Sales at newly established price levels to major customers and a shift to higher
priced grades of silicon metal also contributed to the increase.
Gross Profit. Gross profit increased to $9.6 million in 1996 from a loss
of $868,000 in 1995. Gross margin increased to 18.3% in 1996 from a loss of 2.8%
in 1995. The increase was attributable to increased net sales, particularly with
respect to higher margin products, and significantly improved operating
efficiencies. The greater operating efficiencies were achieved primarily as a
result of the refurbishment of two furnaces and the solution of production
problems resulting from the inaccuracy of the Company's raw material mix system
and higher than normal electrode consumption.
Selling and Administrative Expenses. Total selling and administrative
expenses increased 18.8%, to $1.9 million in 1996 from $1.6 million in 1995. The
increase was principally attributable to increased selling expenses resulting
from the hiring of a salesperson. As a percentage of net sales, selling and
administrative expenses decreased to 3.7% in 1996 from 5.1% in 1995.
Operating Income. As a result of the above factors, operating income
increased $10.2 million, to $7.7 million in 1996 from a loss of $2.5 million in
1995.
Interest Expense. Interest expense increased 36.4%, to $1.5 million in
1996 from $1.1 million in 1995. This increase was primarily the result of
increased levels of indebtedness used to fund the Company's operations.
Other Income, Net. Other income, net increased 23.7%, to $444,000 in 1996
from $359,000 in 1995. The principal reason for this increase was the Company's
receipt of approximately $200,000 of insurance proceeds for losses resulting
from hurricane damage in 1996.
46
<PAGE> 48
Provision for Income Taxes. Provision for income taxes increased to $1.2
million in 1996 from no provision in 1995, as a result of the Company's
profitability in 1996 as compared with a loss in 1995 and recording a valuation
allowance in 1995. This valuation allowance was reversed in 1996. The Company's
effective tax rate was 17.7% in 1996.
Net Income. As a result of the above factors, net income increased $8.6
million, to $5.4 million in 1996 from a net loss of $3.2 million in 1995.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of liquidity are cash flow from operations,
borrowings under the New Credit Facility and a portion of the net proceeds from
the Offering. The Company's principal uses of liquidity are to fund operations,
meet debt service requirements and finance the Company's planned capital
expenditures, including the construction of a fourth smelting furnace.
The Company's cash flows from its operations are influenced by selling
prices of its products and raw materials costs, and are subject to moderate
fluctuation due to market supply factors driven by imports. The Company's
silicon metal business experiences price fluctuations principally due to the
competitive nature of one of its market, the secondary aluminum market.
Historically, the Company's microsilica business has been affected by the
developing nature of the markets for this product. Average transaction selling
prices for the Company's microsilica in the first quarter of 1998 were very near
the average transaction selling prices at the end of the first quarter of 1997.
Depreciation and amortization is expected to increase significantly in the
future as a result of the Acquisition, which was accounted for under the
purchase method of accounting.
For the three months ended March 31, 1997 and March 31, 1998, net cash
provided by operating activities was $992,000 and $1.2 million, respectively.
Net cash used in investing activities increased to $1.2 million for the three
months ended March 31, 1998 from $438,000 for the three months ended March 31,
1997. This increase was primarily a result of the Company purchasing additional
production equipment. For the three months ended March 31, 1998, financing
activities provided net cash of $39,000 compared to $119,000 of net cash used in
financing activities for the three months ended March 31, 1997. This decrease in
net cash used in financing activities was principally the result of larger debt
payments made during 1997.
In 1996 and 1997, net cash provided by operating activities was $9.2
million and $10.0 million, respectively. Net cash used in investing activities
decreased to $2.1 million in 1997 from $6.9 million in 1996. This decrease was
primarily a result of a decrease in the level of investment by the Company in
property, plant and equipment. Net cash used in financing activities increased
to $7.5 million in 1997 from $2.1 million in 1996. This increase was principally
a result of (i) the net repayment of $3.2 million of indebtedness outstanding
under the Company's revolving line of credit, (ii) the repayment of $12.8
million of other indebtedness, (iii) the redemption of the Company's Series B
Preferred Stock, par value $1.00 per share, for $1.5 million, (iv) a payment to
stockholders of $2.3 million and (v) the payment of a $270,000 preferred stock
dividend, all of which was offset by the Company's borrowing of $13.0 million of
term loan indebtedness under the Existing Credit Facility.
In April 1997, the Company entered into the Existing Credit Facility, which
provided for (i) a $5.0 million revolving line of credit, including a $1.5
million letter of credit subfacility, which terminates on June 30, 1998, and
(ii) a $13.0 million term loan which requires repayment of principal in
quarterly installments with the last of such installments payable on March 31,
2002. As of December 31, 1997, $9.0 million principal amount of such term loan
indebtedness was outstanding, and it accrued interest at a LIBOR-based, variable
interest rate equal to approximately 8.4% per annum. Borrowings under the
revolving line of credit are limited to 85% of eligible accounts receivable and
60% of eligible inventory, each as defined in the Existing Credit Agreement. As
of December 31, 1997, no amounts were outstanding under the revolving line of
credit and the Company had availability thereunder equal to approximately $5.0
million.
Pursuant to the Bond Loan Agreement (as defined herein) the Company has
agreed to pay the principal of, premium, if any, and interest on, the IRBs,
which mature on December 1, 2019. Interest on the IRBs,
47
<PAGE> 49
which is payable monthly, currently accrues at a rate which is reset every seven
days as determined by Merchant Capital, L.L.C., the remarketing agent for the
IRB Financing (the "Remarketing Agent"), based on its evaluation of certain
factors including, among others, market interest rates for comparable
securities, other financial market rates and indices, general financial market
conditions, the credit standing of SIMCALA and the bank issuing the letter of
credit which provides credit support for the IRBs, and other relevant facts
regarding the Facility ("Rate Determination Factors"). However, interest borne
by the IRBs cannot exceed the lower of 15% per annum and the maximum rate per
annum specified in any letter of credit which provides credit support for the
IRBs. As of March 31, 1998, interest on the IRBs accrued at a rate equal to
approximately 5.8% per annum. As part of the IRB Financing, the Company is
required to provide the $6.1 million Existing Bond Letter of Credit to the Bond
Trustee as credit support for the IRBs. As of March 31, 1998, no drawings were
outstanding under the Existing Bond Letter of Credit.
In the ordinary course of its business, the Company expects to make annual
capital expenditures aggregating approximately $3.0 million to $4.0 million. The
Company anticipates that these capital expenditures will be made for routine
maintenance of the smelting furnaces, air abatement equipment and other
equipment used in its operations. In addition, the Company expects that
approximately $16.3 million of the net proceeds of the Offering will be used to
construct a fourth smelting furnace at the Facility and estimates that
construction of the furnace will cost a total of approximately $25.0 million.
The Company anticipates that the balance of the construction costs will be
funded by cash flow from the Company's operations during the construction
period.
As of March 31, 1998, the Company had entered into contracts totaling
approximately $1.0 million for the construction of certain production equipment
and had a commitment to purchase lumber totaling approximately $145,000. The
Company is involved in litigation arising in the normal course of business.
Management believes that the ultimate resolution of such litigation will not
have a material adverse effect on the financial statements.
In connection with the Acquisition, the Company replaced the Existing
Credit Facility and the Reimbursement Agreement with the New Credit Facility.
The New Credit Facility consists of a $15.0 million revolving credit facility
which provides availability for borrowings and letters of credit. Revolving
loans will bear interest at a variable rate equal, at the option of the Company,
to (i) a LIBOR-based rate plus a margin of up to 2.25% per annum or (ii) the
base rate (defined to mean the higher of (a) the publicly announced "prime rate"
of the agent thereunder and (b) a rate tied to the rates on overnight Federal
funds transactions with members of the Federal Reserve System) plus a margin of
up to 1.25% per annum. In addition, the Existing Bond Letter of Credit, which
was issued for the account of the Company to the Bond Trustee as credit support
for the IRBs, was replaced by the $6.1 million New Bond Letter of Credit issued
under the New Credit Facility. Drawings under letters of credit (including the
New Bond Letter of Credit) which are not promptly reimbursed by the Company will
accrue interest at a variable rate equal to the base rate plus a margin of up to
3.25% per annum.
As of March 31, 1998, the Company had $81.1 million of long term
indebtedness, $15.0 million of availability under the New Credit Facility (as
such availability is reduced by the issuance of the $6.1 million New Bond Letter
of Credit thereunder) and $15.8 million in cash.
The Company's ability to make scheduled payments of principal of, or to pay
the interest or Liquidated Damages, if any, on, or to refinance, its
indebtedness (including the Notes), or to fund planned capital expenditures will
depend on its future performance, which, to a certain extent, is subject to
general economic, financial, competitive, legislative, regulatory and other
factors that are beyond its control. Based upon the current level of operations,
management believes that cash flow from operations and available cash, together
with availability under the New Credit Facility, will be adequate to meet the
Company's future liquidity needs for at least the next two years. There can be
no assurance that the Company's business will generate sufficient cash flow from
operations or that future borrowings will be available under the New Credit
Facility in an amount sufficient to enable the Company to service its
indebtedness, including the Notes, or to fund its other liquidity needs,
including the construction of a fourth smelting furnace. In addition, the
Company may need to refinance all or a portion of the principal of the Notes on
or prior to maturity. There can be no assurance that
48
<PAGE> 50
the Company will be able to effect any such refinancing on commercially
reasonable terms or at all. See "Risk Factors -- Significant Leverage and Debt
Service."
Moreover the New Credit Agreement imposes restrictions on the Company's
ability to make capital expenditures and both the Credit Agreement and the
Indenture limit the Company's ability to incur additional indebtedness. Such
restrictions, together with the highly leveraged nature of the Company, could
limit the Company's ability to respond to market conditions, to make capital
expenditures, to provide for unanticipated capital investments or to take
advantage of business opportunities. The covenants contained in the New Credit
Agreement also, among other things, restrict the ability of the Company and its
subsidiaries to dispose of assets, incur guarantee obligations, repay the Notes,
pay dividends, create liens on assets, enter into sale and leaseback
transactions, make investments, loans or advances, make acquisitions, engage in
acquisitions or consolidations, make capital expenditures or engage in certain
transactions with affiliates, and otherwise restrict corporate activities. The
covenants contained in the indenture also impose restrictions on the operation
of the Company's business.
NEW ACCOUNTING STANDARDS
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income" (SFAS
130) and Statement of Financial Accounting Standards No. 131, "Disclosures about
Segments of an Enterprise and Related Information" (SFAS 131). SFAS 130
establishes standards for the reporting and displaying of comprehensive income
and its components (revenues, expenses, gains and losses) in a full set of
general-purpose financial statements. SFAS 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 financial reports issued to
stockholders. The Company adopted SFAS 130 effective January 1, 1998. The
adoption of this standard did not have an effect on its financial statements.
Comprehensive income equaled net income for the three months ending March 31,
1998. SFAS 131 will be adopted by the Company in its annual financial statements
for 1998. The adoption of this standard is not expected to significantly impact
the Company's financial statements.
YEAR 2000
The Company uses several application programs written over many years using
two-digit year fields to define the applicable year, rather than four-digit year
fields. Programs that are time-sensitive may recognize a date using "00" as the
year 1900 rather than the year 2000. This misinterpretation of the year could
result in an incorrect computation or a computer shutdown.
The Company has identified the systems that could be affected by the year
2000 issue and is developing a plan to resolve the issue. The plan contemplates,
among other things, the replacement or modification of existing data processing
systems as necessary. Management has estimated the costs associated with the
implementation of the plan to be approximately $50,000.
49
<PAGE> 51
BUSINESS
THE COMPANY
The Company is a leading domestic manufacturer of silicon metal which is
used in the chemical and aluminum industries. Silicon metal is an essential raw
material used by the chemical industry to produce silicones and polysilicon and
by the aluminum industry primarily as an alloying agent. The Company produces
and sells higher margin chemical grade and specialty aluminum grade silicon
metal, both of which contain the highest concentrations of silicon and the
lowest levels of impurities when compared to lower grades of silicon metal. In
1997, approximately 55% and 45% of the silicon metal consumed in the United
States was consumed by the chemical industry and the aluminum industry,
respectively. Silicones are the basic ingredient used in numerous consumer
products, including lubricants, cosmetics, shampoos, gaskets, building sealants,
automotive hoses, water repellent fluids and high temperature paints and
varnishes. Polysilicon is an essential raw material used in the manufacture of
silicon wafers for semi-conductor chips and solar cells. Aluminum containing
silicon metal as an alloy can be found in a variety of automobile components,
including engine pistons, housing and cast aluminum wheels. Management believes
that there are no commercially feasible substitutes for silicon metal in either
the chemical or aluminum industries. In addition to silicon metal, the Company
produces microsilica, a co-product of the silicon metal smelting process.
Microsilica is a strengthening and filler agent which has applications in the
refractory, concrete, fibercement, oil exploration and minerals industries.
The Company is one of the three largest manufacturers, in terms of volume,
of silicon metal in the United States, and its Facility, located in Mt. Meigs,
Alabama is the nation's second largest in terms of capacity. The Facility is the
newest greenfield silicon metal manufacturing facility in the United States and
is strategically located near abundant supplies of high quality raw materials
necessary for the production of high grade silicon metal. SIMCALA intends to use
a portion of the net proceeds of the Offering to expand the Facility by
constructing a fourth smelting furnace and the Company believes that after this
expansion, the Facility will be the second largest silicon metal production
facility in the world. The Company believes that the increased capacity
resulting from the construction of a fourth furnace will enable it to benefit
from levels of demand for silicon metal in the Western Industrialized Nations
which CRU estimates will exceed currently known sources of supply through 2005.
Upon completion of the fourth furnace, the Company's production capacity will
increase by approximately 12,000 metric tons to approximately 48,000 metric tons
per year.
The Company is one of the most cost efficient silicon metal manufacturers
in the world, as measured by operating cost per metric ton of silicon metal
sold. The Company estimates that it held a market share of approximately 13% of
the total United States chemical market and approximately 13% of the total
United States aluminum market in 1997, based on metric tons of silicon metal
sold. In 1997, the Company had net sales and EBITDA of $62.2 million and $13.8
million, respectively. For the three months ended March 31, 1998, the Company
had net sales and EBITDA of $14.8 million and $0.1 million, respectively.
RECENT HISTORY AND TURNAROUND
SIMCALA was incorporated in 1994 and acquired the Facility from SiMETCO on
February 10, 1995. At the time of the acquisition, SiMETCO was operating the
Facility as a debtor-in-possession under Chapter 11 of the Bankruptcy Code.
Under SiMETCO's management, the Facility was underutilized and inefficient and
consistently incurred operating losses as a result of poor management and a
focus on the lower margin, less stable secondary aluminum business. Immediately
after the acquisition of the Facility, the Company hired C. Edward Boardwine,
its current Chief Executive Officer. Mr. Boardwine installed a new senior
management team which implemented a major turnaround program aimed at increasing
the operating efficiency of the Facility and focusing on the production and
effective marketing of higher margin chemical grade and specialty aluminum grade
silicon metal. The Company's turnaround program included the following:
- Increased Production. The Company increased production by improving the
efficiency and yield of two furnaces that were operating when the
acquisition of the Facility occurred and by recommissioning
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a third furnace that was not operational at the time of the Facility's
acquisition. From 1994 to 1997, the Facility's annual production volume
increased approximately 55%, from approximately 24,000 metric tons to
approximately 37,100 metric tons.
- Customer Relationships. The Company established relationships with the
major consumers of higher margin chemical grade and specialty aluminum
grade silicon metal. As part of this effort, the Company sought and
obtained key customer certifications, requiring it to demonstrate the
ability to consistently meet customers' proprietary quality and sizing
requirements. The Company is currently a certified supplier of chemical
grade silicon metal to G.E. Silicones and Dow Corning, the two largest
consumers of chemical grade silicon metal in the United States, and a
certified supplier of specialty aluminum grade silicon metal to Alcan and
Alumax. Production of chemical grade, primary aluminum grade and
secondary aluminum grade silicon metal at the Facility changed from
29.6%, 15.1% and 55.3%, respectively, of total net sales in 1994 to 55%,
28.2% and 16.8%, respectively, of total net sales in 1997. This change in
product mix has significantly increased the Company's profitability.
- Facility Modernization. In 1996, the Company completed a $12.0 million
facility modernization program pursuant to which all the Company's
production and air abatement equipment was rebuilt. This program
modernized the Facility and resulted in improved operating efficiency and
greater consistency in the production of chemical and specialty aluminum
grade silicon metal. To further enhance operating reliability, the
Company is in the process of upgrading its raw material handling
equipment.
- Supplier Relationships. The Company discontinued relationships with
suppliers of lower grade raw materials and established relationships with
suppliers of higher quality raw materials in order to secure a reliable,
long-term source of the ingredients necessary to produce high quality
silicon metal. By using high quality raw materials, the Company has been
able to decrease the levels of impurities in the silicon metal it
produces, resulting in more efficient production of a consistently high
quality product.
- Workforce Efficiency. The Company improved the efficiency of its
workforce by creating performance based incentives and establishing
technical training programs. In addition, despite recommissioning a third
furnace in the third quarter of 1995, the number of employees at the
Facility from 1994 to 1997 remained constant at approximately 170
(consisting of approximately 124 hourly employees and 46 salaried
employees). Consequently, the amount of silicon metal produced per hourly
employee at the Facility improved from approximately 210 metric tons in
1994 to approximately 299 metric tons in 1997.
As a result of the foregoing measures, net sales doubled to $62.2 million
in 1997 from $31.1 million in 1994. During that period, EBITDA increased to
$13.8 million from a loss of $3.0 thousand. In addition, operating cost per
metric ton of silicon metal produced at the Facility decreased 9.6%, to $1,279.0
in 1997 from $1,415.0 in 1994.
COMPETITIVE STRENGTHS
The Company believes that it has a strong competitive position attributable
to a number of factors, including the following:
- Preferred Supplier Status with Key Customers. SIMCALA has satisfied
rigorous qualification requirements with its primary customers who
purchase chemical grade and specialty aluminum grade silicon metal.
Satisfying these requirements may take up to two years. As a result, the
Company believes that these rigorous qualification requirements
constitute a significant barrier to entry into the high grade silicon
metal market.
- Low Cost Producer. As a result of the major turnaround program executed
by the current management team, the Company has been recognized by CRU as
among the five most cost efficient silicon metal manufacturers in the
world, as measured by cost per metric ton of silicon metal produced.
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- Production Facilities. The Facility has recently undergone an extensive
facility modernization program which has resulted in improved operational
efficiency and greater consistency in the production of chemical and
specialty aluminum grade silicon metal. In addition, the Facility was
originally designed to support the addition of a fourth smelting furnace,
allowing the Company to increase capacity at a relatively low cost and in
a relatively short time, without significantly disrupting operations.
- Experienced, Highly Qualified Management Team. SIMCALA has assembled a
highly qualified management team with over 75 years of combined
experience in the silicon metal business. In particular, since 1969, C.
Edward Boardwine, the Company's Chief Executive Officer, has worked in
various capacities in the ferroalloy and silicon metal industries, most
recently serving as Vice President--Silicon Metal Division of Elkem ASA,
a position he held from 1990 until joining the Company in 1995. The
Company believes that its management team has the operational and
technical skill to continue to operate the Facility at world class levels
of efficiency and to consistently produce high grade silicon metal.
BUSINESS STRATEGY
SIMCALA intends to capitalize on the aforementioned competitive strengths
and has developed and is implementing the following business strategy aimed at
increasing revenues and EBITDA:
- Focus on Chemical and Specialty Aluminum Markets. The Company will
remain focused on manufacturing high grade silicon metal for use by the
chemical and specialty aluminum markets. Management has focused on the
chemical market for four principal reasons: (i) as a result of diverse
end-use applications of chemical grade silicon metal, demand has
historically grown despite economic downturns, and demand and prices have
historically been less volatile than the demand for, and the prices of,
lower grade silicon metal; (ii) the United States market for chemical
grade silicon metal is expected to grow at an average annual rate of
approximately 7.6% (on a non-compounded basis) through the year 2005,
according to CRU; (iii) sales of chemical grade silicon metal have
historically provided higher profit margins than sales of lower grades of
silicon metal because chemical grade silicon metal customers have paid
higher prices for the required high quality silicon metal, resulting in
part from the limited number of manufacturers able to supply silicon
metal of such quality; and (iv) the Company's management has the
operational and technical expertise necessary to consistently and
efficiently produce high quality silicon metal. Similarly, management has
focused on the specialty aluminum market because it is less susceptible
to competition from low priced secondary grade silicon metal imports, and
sales of specialty aluminum grade silicon metal have historically
provided higher profit margins and been subject to less price volatility
than sales of secondary grade silicon metal. In addition, because the
United States International Trade Commission has concluded that there are
no commercially feasible substitutes for silicon metal in either the
chemical or aluminum industries, management believes that higher silicon
metal prices will not result in customers purchasing silicon metal
substitutes.
- Maintain Low Cost Operations. Management intends to maintain the
Company's position as one of the five most cost-efficient manufacturers
of silicon metal in the world. The Company intends to achieve this
objective by continuing to increase the yield from its three existing
smelting furnaces and increasing capacity by commissioning a fourth
furnace. The Company believes it will effectively be able to spread fixed
costs over the resulting increased production volume to further reduce
costs per metric ton of silicon metal sold.
- Expand Capacity to Meet Increasing Demand. CRU projects that demand for
silicon metal in the Western Industrialized Nations will exceed currently
known sources of supply through 2005. The Company believes that it can
take advantage of this increased demand by constructing a fourth smelting
furnace. The Facility's infrastructure was originally designed and built
to accommodate a fourth furnace. Within approximately two years, the
Company believes a fourth furnace will enable it to increase its capacity
by 12,000 metric tons of silicon metal and 5,000 metric tons of
microsilica per year, making the Facility the second largest silicon
metal production facility in the world. The Company intends to use a
portion of the net proceeds from the Offering to fund in part the
construction
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of a fourth furnace. Management believes that completion of a fourth
furnace and the sale of the resulting silicon metal produced will
increase profitability.
INDUSTRY
Industry Markets
The silicon metal industry consists of two general markets: the chemical
industry market and the aluminum industry market. The chemical industry market
is subdivided into the silicones market and the polysilicon market, both of
which require the highest grade of silicon metal. The aluminum industry market
is subdivided into the primary aluminum market (producing aluminum from ore) and
the secondary aluminum market (producing aluminum from scrap). The Company
defines the primary aluminum market and the higher-end of the secondary aluminum
market as the "specialty aluminum" market because the aluminum produced for
those markets requires higher quality silicon metal.
In 1997, approximately 55% and 45% of the silicon metal consumed in the
United States was consumed by the chemical industry and the aluminum industry,
respectively. Of the 45% of silicon metal produced in the United States that was
consumed by the aluminum industry, management believes that approximately 12%
was used in primary aluminum production and approximately 33% was used in
secondary aluminum production. The production of silicones and polysilicon
requires the highest quality silicon metal or "chemical grade" silicon metal.
Specialty aluminum production requires higher grade silicon metal or "specialty
aluminum grade."
Supply
From 1993 to 1997, the production capacity of silicon metal in major
industrialized nations other than the PRC, the Confederation of Independent
States and certain other Eastern European nations (collectively, the "Western
Industrialized Nations") increased approximately 14.9%, from 716,000 metric tons
in 1993 to an estimated 823,000 metric tons in 1997. Production capacity in the
United States increased approximately 10.5% from 190,000 metric tons in 1993 to
an estimated 210,000 metric tons in 1997.
During this period, production of silicon metal in the Western
Industrialized Nations increased approximately 26.8% from 542,000 metric tons in
1993 to an estimated 687,000 metric tons in 1997, while United States production
increased approximately 14.5% from 159,000 metric tons in 1993 to an estimated
182,000 metric tons in 1997. As a result of the greater increase in the rate of
production as compared to capacity, capacity utilization in the Western
Industrialized Nations increased from 85.7% in 1993 to an estimated 89.7% in
1997, and capacity utilization in the United States increased from 89.8% to an
estimated 90.1% over the same period. In the United States, most of the demand
for chemical grade and specialty aluminum grade silicon metal is satisfied by
domestic production. However, the demand for lower quality secondary aluminum
grade silicon metal is satisfied by both domestic and foreign suppliers.
Demand
From 1993 to 1997, demand for silicon metal in the Western Industrialized
Nations increased approximately 26.5% from 706,000 metric tons in 1993 to an
estimated 893,000 metric tons in 1997, representing an average annual rate of
increase of approximately 6.6% (on a non-compounded basis). Demand in the United
States increased approximately 23.8% from 227,000 metric tons in 1993 to an
estimated 281,000 metric tons in 1997, representing an average annual rate of
increase of approximately 6% (on a non-compounded basis).
Demand in the United States for chemical grade silicon metal increased
approximately 36% from 114,000 metric tons in 1993 to an estimated 155,000
metric tons in 1997, representing an average annual rate of increase of
approximately 9% (on a non-compounded basis). The United States constitutes the
largest individual market for chemical grade silicon metal in the world,
followed by Germany, Japan, the United Kingdom and France. The customer base for
chemical grade silicon metal is highly concentrated. In 1997,
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G.E. Silicones and Dow Corning collectively consumed almost all of the chemical
grade silicon metal that was consumed in the United States.
Demand in the United States for aluminum grade silicon metal increased
approximately 11.5% from 113,000 metric tons in 1993 to an estimated 126,000
metric tons in 1997, representing an average annual rate of increase of
approximately 2.9% (on a non-compounded basis). In the United States the primary
aluminum market, which is dominated by Alcan, Alumax, Aluminum Company of
America ("Alcoa") and Reynolds Metals Company, is characterized by fairly
concentrated demand and less volatile prices. In contrast, the market for
secondary aluminum is characterized by widely diffused demand, more volatile
prices and by many small plants supplying specific customers in the
transportation industry.
Trends
According to CRU, demand for silicon metal in the Western Industrialized
Nations and in the United States will increase over the next eight years at an
average annual rate of approximately 5.1% and 5.3% (on a non-compounded basis),
respectively. During the same period, CRU projects that demand for chemical
grade silicon metal in the United States will increase at an average annual rate
of approximately 7.6% (on a non-compounded basis). Demand in the United States
for aluminum grade silicon metal is also projected by CRU to increase over the
next eight years at an average annual rate of approximately 2.4% (on a
non-compounded basis).
Against this backdrop of steadily increasing demand, capacity utilization
in the Western Industrialized Nations and the United States is at or near
maximum historic levels. Management believes this supply/ demand imbalance will
cause silicon metal prices to continue to rise until new or "greenfield"
capacity becomes available. The following graph demonstrates that within three
to four years, demand in the Western Industrialized Nations will need to be
satisfied by greenfield facilities because demand is expected to exceed the
amount of supply that reasonably can be generated by production facilities
already operating and by confirmed and probable additions to existing facilities
(primarily through the conversion of existing facilities to silicon metal
manufacturing and the rehabilitation of older facilities).
(Supply and Demand Comparison Chart)
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Management does not believe that foreign imports will substantially affect
domestic demand, especially for chemical grade and specialty aluminum grade
silicon metal, because management believes that foreign manufacturers are not
reliable alternative sources of high-grade silicon metal, primarily due to
quality issues and high freight costs. In addition, because the United States
International Trade Commission has concluded that there are no commercially
feasible substitutes for silicon metal in either the chemical or aluminum
industries, management believes that higher silicon metal prices will not result
in customers purchasing silicon metal substitutes. Management believes its
fourth smelting furnace will become operational at or about the time prices rise
to a level sufficient to warrant construction of greenfield facilities.
PRODUCTS AND MARKETS
Silicon Metal
The chemical industry uses silicon metal as a raw material in the
manufacture of silicones and polysilicon. Silicones are the basic ingredient
used in numerous consumer products, including lubricants, cosmetics, shampoos,
gaskets, building sealants, automotive hoses, water repellent fluids and high
temperature paints and varnishes. Silicones are readily adaptable to a variety
of uses because they possess several desirable qualities, including electrical
resistance, resistance to extreme temperatures, resistance to deterioration from
aging, water repellency, lubricating characteristics, relative chemical and
physiological inertness and resistance to ultraviolet radiation. Polysilicon is
the essential raw material used by the chemical industry in the manufacture of
silicon wafers for semi-conductor chips and solar cells.
The aluminum industry uses silicon metal in the production of aluminum
alloys, both in primary and secondary aluminum production. Aluminum containing
silicon metal as an alloy can be found in a variety of automobile components
including engine pistons, housing and cast aluminum wheels. The addition of
silicon metal to aluminum in the casting process improves castability and
minimizes shrinkage and cracking. In the finished aluminum product, silicon
metal increases corrosion resistance, hardness, tensile strength and wear
resistance.
In 1997 the Company produced approximately 20,257 metric tons of chemical
grade silicon metal and approximately 10,304 metric tons of specialty aluminum
grade silicon metal, representing approximately 55% and approximately 28% of its
total silicon metal output, respectively.
Microsilica (Silica Fume)
During the silicon metal production process the offtake gases are drawn
from the smelting furnaces by large fans and are collected in baghouses. As the
material cools it oxidizes to amorphous silicon dioxide (SiO(2)) and condenses
in the form of spheres consisting of non-crystalline silicon dioxide. These
extremely fine particles (less than one micron in size) are referred to as
microsilica (silica fume). Microsilica is widely used in the refractory,
concrete, fibercement, oil exploration and minerals industry. Because there are
more than 50,000 particles of microsilica for each grain of cement, microsilica
is used in cement-based products to fill the microscopic voids between cement
particles. In concrete applications microsilica increases the strength,
durability and reduces permeability in applications such as parking garages,
bridge decks and marine structures. SIMCALA collects approximately 16,000 metric
tons of microsilica annually. In 1997, the Company sold approximately 11,700
metric tons of microsilica.
MANUFACTURING OPERATIONS
Overview
Silicon metal is produced by smelting quartz (SiO(2)) with carbon
substances (typically low ash coal and/or charcoal) and wood chips. Wood chips
provide porosity to the raw material mix. At the Facility, an automated weighing
system accurately measures the mixture of quartz, coal, charcoal and wood chips.
The mixture is fed into the top of a submerged-arc electric furnace by automatic
conveyors. SIMCALA's furnaces measure 28 feet in diameter and nine feet in
depth. Electric power is delivered to the furnaces by pre-baked amorphous carbon
electrodes. The electrodes act as conductors of electricity in each furnace,
generating heat
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in excess of 3,000(degree) C. At this temperature, the mix of raw materials
reaches a molten state. The carbon, acting as a reducing agent, combines with
the oxygen in the silicate to form the silicon metal.
The molten silicon metal is intermittently tapped out of the furnaces into
ladles, where it is refined by injecting oxygen to meet specific customer
requirements. After the refining process, the silicon metal is cast into iron
chills (molds) for cooling. When the casts have cooled, they are weighed and
crushed to the desired size. The finished silicon metal is then shipped to the
customer in bulk, pallet boxes or bags by railcars or trucks.
The emissions from the electric arc furnaces are collected by dust
collecting hoods and passed through a dust collection and bagging system. The
resulting co-product is microsilica.
Technology
The carbothermic smelting process used in the production of silicon metal
is well established. Since acquiring the Facility, the Company has made
significant technological advances in key areas. The batch weighing system for
raw materials is computer controlled to adjust weights for incoming batches
based on feedback from prior batches. Computers monitor key operational
variables in the smelting process for increased production controls. The Company
employs the most advanced furnace electrodes produced by UCAR International
Inc., the world leader in electrode technology. The Company has also installed
an advanced oxygen-air system that enables refining of the molten silicon metal
in order to consistently meet the quality requirements for chemical grade and
specialty aluminum grade silicon metal.
Product Quality
SIMCALA is committed to being a leading manufacturer of high grade silicon
metal. To achieve this goal, SIMCALA is dedicated to a total quality assurance
program which is tied to complying with ISO 9000 standards, including the use of
statistical techniques to improve process capability, audits by trained and
qualified personnel and a documented system for disposing of nonconforming
materials. The Company warrants to its customers that its products will meet
their specifications and provides a Certificate of Analysis with each shipment.
Customers are permitted to return products that do not meet their
specifications. The certified analysis is based on samples taken during the
process at key control points with real time analysis provided by the Company's
in-house X-ray fluorescent analytical instruments.
Employee Training
The Company believes that it has one of the most experienced and efficient
management teams in the silicon metal business. This management team is
supported by a productive and experienced workforce equipped with skills in
metallurgical operations, maintenance, quality control and marketing. Employees
participate in SIMCALA's training program which has been jointly developed by
the Alabama State Department of Education and the John M. Patterson State
Technical College. The program is designed to provide each employee with the
skills required to evaluate, control and continuously improve production and
support service processes. Since the Facility was acquired from SiMETCO,
employee productivity has improved from approximately 210 metric tons of silicon
metal per hourly employee in 1994 to approximately 299 metric tons per hourly
employee in 1997.
RAW MATERIALS
The Facility is located in close proximity to abundant sources of
high-quality and competitively priced raw materials and electricity. Where
strategically important, the Company may enter into long-term contracts to
secure a stable supply of raw materials at favorable prices, although it
currently has only a long-term contract for the supply of electricity. The
Company believes that the quality of its raw materials is among the highest
available and that supplies are adequate to satisfy its long-term requirements.
Because the Company believes there are sufficient alternative sources of quality
raw materials available to it, it is not expected that the loss of any one of
its suppliers would have a material adverse effect on the Company.
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The principal cost components in the production of silicon metal are
electricity, carbon electrodes, quartz, coal, charcoal and wood chips.
Electricity is the largest cost component, comprising 25.5% and 24.4% of cost of
goods sold in 1997 and the three months ended March 31, 1998, respectively. The
balance of raw materials, consisting of electrodes, quartz, coal/charcoal and
wood chips, represented 14.4% and 14.3%, 3.6% and 3.7%, 12.6% and 12.2%, and
8.1% and 8.2% of cost of goods sold, respectively, in 1997 and the three months
ended March 31, 1998, respectively. In addition, labor comprised 13.3% and 13.7%
of cost of goods sold in 1997 and the three months ended March 31, 1998,
respectively.
Electrical power used in the smelting process is supplied by APCo through a
dedicated 110,000 volt line into SIMCALA's high voltage main substation. The
Company has a five-year contract with APCo through February 2000. The Company
does not expect any rate increases through the contract period. If, however,
electric rates did increase significantly, such increases would have an adverse
effect on the Company's operating performance and the Company may not be able to
pass the additional cost on to its customers. See "Risk Factors -- Dependence on
Supply of Electrical Power."
The Company purchases two sizes of quartz from a local supplier. The low
level of iron and titanium impurities found in local Alabama quartz is ideally
suited to produce chemical grade silicon metal. High grade metallurgical coal is
supplied by one supplier located in Alabama and two in Kentucky. Metallurgical
grade charcoal is purchased from one supplier in Kentucky and one in Missouri.
Hardwood logs are purchased and processed into metallurgical wood chips on-site
by an independent contractor. The logs are harvested in close proximity to the
Facility.
CUSTOMERS
The Company is a supplier to two of the largest producers of silicones in
the United States, G.E. Silicones and Dow Corning. G.E. Silicones' production
facility, which is located in Waterford, New York, consumes over 50,000 metric
tons of silicon metal per year. The facility produces feedstock for silicones,
electronic and fumed silica applications. In 1996 and 1997, G.E. Silicones
accounted for approximately 27.2% and 29%, respectively, of the Company's net
sales. In the three months ended March 31, 1998, G.E. Silicones accounted for
approximately 13.9% of the Company's net sales.
Dow Corning's production facilities are located in Carrollton, Kentucky and
Midland, Michigan. Dow Corning consumes over 100,000 metric tons of silicon
metal per year with the Carrollton facility being the dominant consumer. The
Midland facility primarily produces feedstock for polysilicon applications in
electronics while Carrollton produces siloxane for silicones applications. In
1996 and 1997, Dow Corning accounted for approximately 12.4% and 24.2%,
respectively, of the Company's net sales. In the three months ended March 31,
1998, Dow Corning accounted for approximately 40.3% of the Company's net sales.
SIMCALA also supplies many of the leading companies in the specialty
aluminum industry. The Company's three largest customers in the specialty
aluminum industry are Wabash Alloys, Alcan and Alumax, which in 1996 and 1997
collectively accounted for approximately 32.9% and 26.1%, respectively, of the
Company's net sales. In the three months ended March 31, 1998, Wabash Alloys,
Alcan and Alumax collectively accounted for approximately 24.1% of the Company's
net sales.
In 1997 and the three months ended March 31, 1998, the Company's five
largest customers accounted for approximately 79.3% and 79.8% of net sales,
respectively. The Company does not generally have long-term contracts with its
major customers and the loss of any major customer, or a significant reduction
of the Company's business with any of them, would have a material adverse effect
on the Company. See "Risk Factors -- Importance of Key Customers."
Most of the Company's customers require their suppliers to pass a rigorous
qualification process. Although each customer has established its own testing
requirements, qualification processes are generally designed to test for (i) low
variability of critical chemical elements and (ii) reliable and predictable
chemical reactivity. The process can take anywhere from two to three years
depending upon the customer's testing requirements and the manufacturer's
ability to comply with such requirements. The Company views the qualification
process as a competitive barrier to entry in its business.
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COMPETITION
The Company competes in the silicon metal market primarily on the basis of
product quality (particularly in the production of chemical grade silicon
metal), service and price. In the chemical and specialty aluminum markets, the
Company considers itself in competition only with other domestic producers.
Management believes that foreign manufacturers are not reliable alternative
sources of high-grade silicon metal, primarily due to quality issues and high
freight costs. The Company, however, does compete with a number of domestic
companies, including Globe Metallurgical Inc. ("Globe Metallurgical") and Elkem
Metals Company ("Elkem Metals"). According to CRU, in 1997, Globe Metallurgical
and Elkem Metals had estimated production capacity in the United States of
92,000 metric tons and 57,000 metric tons, respectively.
SIMCALA is strongly positioned in the chemical and specialty aluminum
markets. In 1997, the Company estimates that it held a market share of
approximately 13% of the total United States chemical market and approximately
13% of the United States aluminum market, based on metric tons of silicon metal
sold. With respect to microsilica sales, the Company estimates that in 1997 it
held a 19% share of the domestic market.
EMPLOYEES
As of March 31, 1998, the Company employed 169 people, of which 126 people
were paid on an hourly basis. Approximately 76% of the employees paid on an
hourly basis are represented by the United Steelworkers of America, Local 8538
(the "Union"). On August 8, 1995, the Company and the Union entered into a
five-year collective bargaining contract. Although wages remain fixed over the
life of the Union contract, the Company has agreed in the contract to discuss
wages with the Union beginning in February 1998. In mid-February 1998,
management held meetings with Union and non-Union employees to discuss various
matters, including wage levels. There has been no increase in wages as a result
of such meetings. The Company does not believe that this provision in the Union
contract requires the renegotiation of wage levels. The Company believes that
its relations with all its employees are good.
THE FACILITY
The Facility consists of a silicon metal production plant and
administrative offices, which are located on 129 acres in Mt. Meigs, Alabama,
approximately 15 miles from Montgomery. The Facility contains three identical 20
megawatt submerged-arc electric furnaces with an annual capacity of 36,000
metric tons of silicon metal and 16,000 metric tons of microsilica. As a
consequence of the IRB Financing, substantially all of the real and personal
property used in SIMCALA's operations (including the Facility) is owned by the
Montgomery IDB and leased to SIMCALA. The lease expires on June 1, 2010. See
"Description of Other Indebtedness--Industrial Revenue Bond Financing."
ENVIRONMENTAL AND REGULATORY MATTERS
Environmental
The Company is subject to extensive federal, state and local environmental
laws and regulations governing the discharge, emission, storage, handling and
disposal of a variety of substances and wastes used in or resulting from the
Company's operations. Although the Company believes that it is currently in
material compliance with those laws and regulations, it has historically, and
expects to continue to, incur costs related to environmental remediation.
However, the Company is not aware of any material remediation contingencies
associated with any of its real estate or facilities. The Company estimates that
approximately $1.0 million of budgeted capital expenditures in each of 1998 and
1999 will relate to air abatement equipment.
Taxes
As an economic incentive to facilitate the rehabilitation of the Facility,
the SIDA granted SIMCALA significant tax credits against corporate income tax
and the collection of state income tax withholding from employees under Alabama
Act No. 93-851, also known as the "Mercedes Act." Subject to certain
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requirements, these benefits allow the Company to (i) apply state employee
withholding tax, otherwise payable to the Alabama Department of Revenue, toward
the payment of the Company's debt obligation under the Bond Loan Agreement and
(ii) take a corporate income tax credit equal to the amount paid pursuant to the
Bond Loan Agreement. The Mercedes Act has been repealed in favor of a new
incentives package for projects subsequent to January 1995. In addition, because
legal title to substantially all of the real and personal property used in the
Company's operations is held by the Montgomery IDB, the Company receives, and
expects to continue to receive, an exemption from property tax through May 30,
2010. However, it is not expected that the property tax exemptions will apply to
the fourth smelting furnace the Company intends to construct. See "Description
of Other Indebtedness -- Industrial Revenue Bond Financing."
Anti-Dumping Duties on Foreign Competitors' Products
In 1990 and 1991, domestic producers of silicon metal successfully
prosecuted anti-dumping actions against unfairly traded imports of silicon metal
from the PRC, Brazil and Argentina. These actions were brought under the
antidumping provisions of the Tariff Act of 1930, as amended. Under that
statute, an anti-dumping duty order may be issued if a domestic industry
establishes in proceedings before the United States Department of Commerce and
the United States International Trade Commission that imports from the country
(or countries) covered by the action(s) are being sold at less than normal value
and are causing material injury or threat of such injury to the domestic
industry. An anti-dumping order requires special duties to be imposed in the
amount of the margin of dumping (i.e., the percentage difference between the
United States price for the goods received by the foreign producer or exporter
and the normal value of the merchandise).
Once an order is in place, each year foreign producers, importers, domestic
producers and other interested parties may request a new investigation (or
"administrative review") to determine the margin of dumping during the
immediately preceding year. The rates calculated in these administrative reviews
(or the existing rates if no review is requested) are used to assess
anti-dumping duties on imports during the review period and to collect cash
deposits on future imports. An administrative review covering five Brazilian
producers and a review covering two PRC exporters are now in progress. The rates
established in these reviews and in future reviews will depend upon the prices
and costs during the periods covered by the reviews, the methodologies applied
and other factors. Anti-dumping orders remain in effect until they are revoked.
In order for an individual producer or exporter to qualify for revocation of an
anti-dumping order, the United States Department of Commerce must conclude that
the producer or exporter has sold the merchandise at not less than normal value
for a period of at least three consecutive years and is not likely to sell the
merchandise at less than normal value in the future. Anti-dumping orders may
also be revoked as a result of periodic "sunset reviews."
The domestic silicon metal industry has aggressively sought to maintain
effective relief under the antidumping orders by actively participating in
administrative reviews, appeals and circumvention proceedings. Although these
efforts have been successful in protecting the industry from dumped imports from
the countries covered by the orders, no assurance can be given that one or more
of such anti-dumping orders will not be revoked or that effective duty rates
will continue to be imposed.
LEGAL PROCEEDINGS
The Company is involved in routine litigation from time to time in the
regular course of its business. There are no material legal proceedings pending
or known to be contemplated to which the Company is a party or to which any of
its property is subject.
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MANAGEMENT
DIRECTORS AND OFFICERS OF THE COMPANY
Set forth below are the names and positions of the directors, officers and
significant employees of the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
C. Edward Boardwine......................... 51 President, Chief Executive Officer and
Director
Dwight L. Goff.............................. 43 Vice President
R. Myles Cowan, II.......................... 46 Vice President of Finance
Donald J. Williams.......................... 47 Director of Human Resources
Howard L. McHenry........................... 54 Senior Metallurgist
Roger Hall.................................. 57 Superintendent of Engineering and Maintenance
Edwin A. Wahlen, Jr......................... 50 Director
William A. Davies........................... 52 Director
James A. O'Donnell.......................... 45 Director
</TABLE>
C. EDWARD BOARDWINE has been the President and Chief Executive Officer of
the Company since February 1995. Prior to joining the Company, he was Vice
President -- Silicon Metal Division of Elkem ASA ("Elkem ASA"), a ferroalloy and
silicon metal manufacturer based in Oslo, Norway, since July 1990. Mr. Boardwine
became a director of the Company on the date of the Acquisition Closing.
DWIGHT L. GOFF has been the Vice President of the Company since February
1995. Prior to joining the Company, he was President of Elkem Materials, Inc., a
microsilica marketing company, since November 1989. In addition, from June 1989
until February 1995, Mr. Goff was the Division Controller for the Silicon Metal
Division of Elkem Metals, a ferroalloy manufacturer.
R. MYLES COWAN, II has been the Vice President -- Finance of the Company
since October 1995. Prior to joining the Company, he was employed by the Thermal
Components Group, a division of Insilco Corporation, a diversified manufacturing
company, since October 1990, where he had most recently been Director of
Business Planning. Mr. Cowan filed a voluntary petition under Chapter 7 of the
Bankruptcy Code in December 1995, and the case resulting therefrom was
discharged in April 1996.
DONALD J. WILLIAMS has been the Director of Human Resources of the Company
since February 1995. Prior thereto, he was employed in a similar capacity by
SiMETCO at the Facility since October 1988.
HOWARD L. MCHENRY has been the Senior Metallurgist of the Company since
July 1995. Prior thereto, he was employed by Elkem Metals since July 1981, where
he had most recently been the Senior Metallurgist.
ROGER HALL has been the Superintendent of Engineering and Maintenance of
the Company since February 1995. Prior thereto, he was employed in a similar
capacity by SiMETCO at the Facility since May 1988.
EDWIN A. WAHLEN, JR. is a member of the General Partner and is jointly
responsible for all major decisions of the General Partner. Mr. Wahlen is also a
member of CGW Southeast Management III, L.L.C. (the "Management Company"), an
affiliate of CGW. Mr. Wahlen has been a member of the General Partner, the
Management Company or affiliated entities for more than five years. He is a
director of AMRESCO, Inc., Cameron Ashley Building Products, Inc. and several
private companies. Mr. Wahlen became a director of the Company on the date of
the Acquisition Closing.
WILLIAM A. DAVIES is a member of the General Partner, and is responsible
for sourcing, structuring and negotiating transactions, participating in
strategic planning with members of management of various CGW portfolio companies
to increase value and manage exit strategies. Mr. Davies has been a member of
the General Partner or an employee of affiliates of the General Partner for more
than five years. He is a director of
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<PAGE> 62
Gorges/Quik-to-Fix Foods, Inc. and several private companies. Mr. Davies became
a director of the Company on the date of the Acquisition Closing.
JAMES A. O'DONNELL has been a member of the General Partner since 1995, and
is responsible for sourcing, structuring and negotiating transactions,
participating in strategic planning with members of management of various CGW
portfolio companies to increase value and manage exit strategies. Mr. O'Donnell
has been a general partner of Sherry Lane Partners, a private equity investment
firm based in Dallas, Texas since 1992. Also, Mr. O'Donnell has been a general
partner of O'Donnell & Masur, a private equity investment firm based in Dallas,
Texas, since 1989. He is a director of Bestway Rental, Inc., Gorges/Quik-to-Fix
Foods, Inc. and several private companies. Mr. O'Donnell became a director of
the Company on the date of the Acquisition Closing.
MANAGEMENT COMPENSATION
Summary Compensation Table
The following table sets forth the compensation earned during the year
ended December 31, 1997 by the Chief Executive Officer of the Company and each
other executive officer of the Company who served as such at December 31, 1997
and whose total salary and bonus exceeded $100,000 (collectively, the "Named
Executive Officers"). The Company did not grant any options or stock
appreciation rights or make any long-term incentive plan payouts during the year
ended December 31, 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-------------------- ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION($)
- --------------------------- ---- --------- -------- ---------------
<S> <C> <C> <C> <C>
C. Edward Boardwine,................................. 1997 $189,545 $99,000 $11,185(1)
President and Chief Executive Officer
Dwight L. Goff,...................................... 1997 95,206 54,000 --
Vice President
R. Myles Cowan, II,.................................. 1997 83,000 49,800 --
Vice President -- Finance
</TABLE>
- ---------------
(1) Includes $8,567 for premiums paid by the Company with respect to a split
dollar life insurance policy for Mr. Boardwine and $2,618 for payments made
by the Company to Mr. Boardwine with respect to a mortgage interest
differential.
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<PAGE> 63
OPTION EXERCISES AND YEAR-END VALUES
The following table sets forth information regarding the number of
unexercised options held by the Named Executive Officers at December 31, 1997
and the aggregate dollar value of unexercised options held at December 31, 1997.
No options were exercised during the year ended December 31, 1997.
AGGREGATED FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS
DECEMBER 31, 1997(#) AT DECEMBER 31, 1997($)(2)
------------------------------ ------------------------------
NAME EXERCISABLE UNEXERCISABLE(1) EXERCISABLE UNEXERCISABLE(1)
- ---- ----------- ---------------- ----------- ----------------
<S> <C> <C> <C> <C>
C. Edward Boardwine........................ 346 216 $2,084,903 $1,301,558
Dwight L. Goff............................. 42 67 253,081 403,724
Myles Cowan, II............................ 27 82 162,695 494,110
</TABLE>
- ---------------
(1) All options became immediately exercisable at the Acquisition Closing.
(2) Value is based on the difference between the option exercise price of
$100.00 and the fair market value of $6,125.73 per share at December 31,
1997 multiplied by the number of shares underlying the option. The fair
market value per share is based on the price per share paid by SAC in
connection with the Acquisition, based on a total purchase price of $66.7
million.
EMPLOYMENT AGREEMENTS
SIMCALA has an employment agreement with each Senior Manager (collectively,
the "Employment Agreements") for a term expiring on the fifth anniversary of the
Acquisition Closing. The Company will have the right to terminate the Employment
Agreements at any time prior to their scheduled expiration upon thirty (30) days
written notice. However, if a Senior Manager is terminated other than for cause,
whether pursuant to such Senior Manager's Employment Agreement or following the
termination or expiration of the term of such Employment Agreement, such Senior
Manager will receive, in addition to earned salary and bonus, a severance
payment equal to 12 months' base salary. If a Senior Manager is terminated for
cause, death or disability, or upon the voluntary termination by such Senior
Manager of his employment under such Senior Manager's Employment Agreement, such
Senior Manager will receive only earned salary and, in the case of termination
due to death or disability, bonus due as of the date of termination. The
Employment Agreements also contain non-competition, non-solicitation and
confidentiality provisions.
Mr. Boardwine's Employment Agreement provides for a base salary of
$205,000, Mr. Goff's Employment Agreement provides for a base salary of
$100,000, and Mr. Cowan's Employment Agreement provides for a base salary of
$90,000. Mr. Boardwine will be eligible to receive a bonus of up to 75% of his
base salary, while Messrs. Goff and Cowan will be eligible to receive a bonus of
up to 65% of their respective base salaries. Half of the bonus available to the
Senior Managers will be awarded based upon earnings of the Company (subject to
certain adjustments) if certain performance targets of the Company are reached.
The other half of the bonus will be awarded to each Senior Manager and paid at
the discretion of the Company's Board of Directors.
STOCK INCENTIVE PLAN
Holdings has adopted a Stock Incentive Plan (the "Plan") pursuant to which
options to purchase up to 8,000 shares of Holdings Stock (the "Options") may be
granted to the Senior Management or other employees (each an "Optionee")
selected for participation in the Plan by the Compensation Committee of the
Company's Board of Directors. At the time of the Acquisition Closing, Senior
Management collectively was issued Options to acquire 3,070 shares of Holdings
Stock. The Options are subject to a five-year vesting period and the Options
issued on the date of the Acquisition Closing are exercisable at an initial
price per share of $1,000. The Options will immediately and fully vest in the
event of a merger or consolidation of Holdings with, or the sale of
substantially all of the assets or stock of Holdings to, any person other than
CGW
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<PAGE> 64
or a CGW affiliate. The Plan also provides for other equity-based forms of
incentive compensation in addition to the Options. See "Certain Transactions."
CERTAIN TRANSACTIONS
SHAREHOLDERS AGREEMENT
At the Acquisition Closing, CGW and the Senior Management, as the
shareholders of Holdings, entered into a Shareholders Agreement (the
"Shareholders Agreement"). All future purchasers of Holdings capital stock will
be required to enter into the Shareholders Agreement. The Shareholders Agreement
contains restrictions on the transferability of the capital stock of Holdings
and other rights and obligations of Holdings, CGW and the Senior Management with
respect to the capital stock of Holdings.
In addition, the Shareholders Agreement grants to the Senior Managers
pre-emptive rights, exercisable pro rata in accordance with their respective
ownership of capital stock of Holdings, to purchase shares or equity securities
of Holdings (other than shares of capital stock issued upon exercise of options,
rights, awards or grants pursuant to the Plan). The Shareholders Agreement also
provides for certain co-sale rights of the Senior Managers in the event CGW
elects to sell all or a portion of its shares of Holdings' capital stock and
co-sale obligations of the Senior Managers in the event of a sale of Holdings or
its subsidiaries (including SIMCALA). Holdings has a right of first refusal in
connection with any proposed sale by any Senior Manager of his investment in
Holdings.
The Shareholders Agreement further provides that if a Senior Manager's
employment is terminated for any reason other than for cause, such Senior
Manager will have the right to sell to Holdings any shares of Holdings' capital
stock owned by such Senior Manager at the greater of cost or fair value. Such
right is exercisable within one month (six months in the event of the death or
disability of the Senior Manager) following such termination of employment of
the Senior Manager. If a Senior Manager's employment is terminated for cause,
Holdings will have the right, exercisable within 120 days following such
termination, to repurchase any shares of Holdings' capital stock owned by such
Senior Manager at the lesser of cost or fair value. Fair value of the
repurchased shares will be determined by agreement between Holdings and the
Senior Manager whose shares are being repurchased or, failing such agreement, by
an independent appraiser.
If Holdings is unable to, or elects not to, exercise any right to purchase
such shares of capital stock from a Senior Manager or his transferee, Holdings
may assign such right to CGW, which may then exercise such right with respect to
the purchase of such shares of capital stock as to which such right is assigned.
TRANSACTIONS WITH CGW, ITS AFFILIATES AND CERTAIN STOCKHOLDERS
At the Acquisition Closing, the General Partner entered into a consulting
agreement (the "Consulting Agreement") with the Company whereby the Company will
pay the General Partner a monthly retainer fee of $15,000 for financial and
management consulting services. The General Partner may also receive additional
compensation if approved by the Board of Directors of the Company at the end of
each fiscal year of the Company, based upon the overall performance of the
Company. The Consulting Agreement expires five years from the Acquisition
Closing. At the Acquisition Closing, the General Partner delegated its rights
and obligations under the Consulting Agreement to the Management Company, an
affiliate of CGW. At the Acquisition Closing, the Company also paid to the
Management Company an investment banking fee of $1.35 million for its services
in assisting the Company in structuring and negotiating the Transactions.
In June 1997, Mr. Cowan received a loan of $75,000 from a third-party
lender, which was guaranteed by the Company. This guarantee was terminated on
the date of the Acquisition Closing.
In connection with the exercise of certain stock options by members of
Senior Management immediately prior to the Acquisition Closing, the Company is
responsible to certain tax authorities for payment of $1,799,863 of withholding
taxes (the "Tax Obligation") by June 15, 1998. Upon the payment by the Company
of the Tax Obligation, each of the members of Senior Management has agreed to
reimburse the
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<PAGE> 65
Company for his pro rata portion of the Tax Obligation. C. Edward Boardwine,
Dwight L. Goff and R. Myles Cowan, II have agreed to reimburse the Company
$1,358,501, $220,681 and $220,681, respectively.
During October 1996, a limited partnership formed by the former
stockholders of the Company, including the members of Senior Management,
purchased from the estate of SiMETCO $7.7 million aggregate principal amount of
the Company's non-interest bearing notes payable for an aggregate purchase price
of $3.1 million (the "SiMETCO Notes"). On the date of the purchase, the Company
was in default under the SiMETCO Notes. During April 1997, the Company paid $7.7
million to the limited partnership, prepayment in full of the SiMETCO Notes,
together with $464,000 of prepayment penalties and fees. See Note 7 to the
Company's Financial Statements.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
The Certificate of Incorporation of the Company contains a provision
eliminating, to the full extent permitted by Delaware law or any other
applicable law, the personal liability of directors to the Company or its
stockholders with respect to any acts or omissions in the performance of a
director's duties as a director of the Company. The Certificate of Incorporation
of the Company also provides that directors and officers of the Company will be
indemnified by the Company to the full extent permitted by Delaware law or any
other applicable law, but the Company may enter into agreements providing for
greater or different indemnification.
The Articles of Incorporation of SAC contains a provision eliminating the
personal liability of directors to SAC or its shareholders for monetary damages
for breaches of their duty of care or other duty as a director, except in
certain prescribed circumstances. The Bylaws of SAC provide that directors and
officers of SAC will be indemnified by SAC to the extent allowed by Georgia law,
against all expenses, judgments, fines and amounts paid in settlement that are
actually and reasonably incurred in connection with service for or on behalf of
SAC. The Bylaws of SAC further provide that SAC may purchase and maintain
insurance on behalf of its directors and officers whether or not SAC would have
the power to indemnify such directors and officers against any liability under
Georgia law.
The Articles of Incorporation of Holdings contains a provision eliminating
the personal liability of directors to Holdings or its shareholders for monetary
damages for breaches of their duty of care or other duty as a director, except
in certain prescribed circumstances. The Bylaws of Holdings provide that
directors and officers of Holdings will be indemnified by Holdings to the extent
allowed by Georgia law, against all expenses, judgments, fines and amounts paid
in settlement that are actually and reasonably incurred in connection with
service for or on behalf of Holdings. The Bylaws of Holdings further provide
that Holdings may purchase and maintain insurance on behalf of its directors and
officers whether or not Holdings would have the power to indemnify such
directors and officers against any liability under Georgia law.
PRINCIPAL STOCKHOLDER
Holdings owns 100% of the issued and outstanding capital stock of the
Company. On the date of the Acquisition Closing, the Senior Managers purchased
an aggregate of 8% of the Holdings Stock (the "Management Stock"), on a fully
diluted basis. After taking into consideration shares of Holdings Stock which
may be acquired upon the exercise of Options granted to Senior Management on
such date, Holdings is owned 79.8% by CGW and 20.2% by the Senior Management.
Affiliated entities of each of Edwin A. Wahlen, Jr., William A. Davies and James
A. O'Donnell are limited partners of CGW. See "The Transactions," "Management"
and "Certain Transactions."
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<PAGE> 66
DESCRIPTION OF THE NOTES
GENERAL
The Exchange Notes are substantially identical (including principal amount,
interest rate, maturity and redemption rights) to the Series A Notes for which
they may be exchanged pursuant to this offer, except that (i) the offering and
sale of the Exchange Notes will have been registered under the Securities Act,
and (ii) holders of Exchange Notes will not be entitled to certain rights of
holders of the Series A Notes under the Registration Rights Agreement. The
Exchange Notes will be issued, and the Series A Notes were issued, pursuant to
the Indenture between the Company and the Trustee. The terms of the Exchange
Notes and the Series A Notes include those stated in the Indenture and those
made part of the Indenture by reference to the Trust Indenture Act of 1939 (the
"Trust Indenture Act"). The Exchange Notes will be, and the Series A Notes are,
subject to all such terms, and holders of Notes are referred to the Indenture
and the Trust Indenture Act for a statement thereof. The following summary of
the material provisions of the Indenture and the Registration Rights Agreement
does not purport to be complete and is qualified in its entirety by reference to
the Indenture and the Registration Rights Agreement, including the definitions
therein of certain terms used below. The definitions of certain terms used in
the following summary are set forth below under "-- Certain Definitions."
The Exchange Notes will be, and the Series A Notes are, general unsecured
obligations of the Company ranking senior in right of payment to all existing
and future subordinated Indebtedness of the Company and pari passu in right of
payment with all existing and future senior Indebtedness of the Company,
including Indebtedness under the New Credit Facility. The obligations of the
Company under the New Credit Facility, however, are secured by substantially all
of the Company's assets and the real and personal property used in the Company's
operations which are, as a result of the IRB Financing, owned by the Montgomery
IRB and leased to the Company. Accordingly, the New Credit Facility effectively
ranks senior in right of payment to the Notes to the extent of the assets
subject to such security interest. As of March 31, 1998, the Company had
approximately $81.1 million of indebtedness outstanding (none of which was
secured) and approximately $15.0 million of secured Indebtedness available to be
incurred under the New Credit Facility (as such availability is reduced by a
$6.1 million letter of credit issued thereunder). The terms of the Indenture
permit the Company and its subsidiaries to incur additional Indebtedness
(including secured Indebtedness), subject to certain limitations. See "Use of
Proceeds" and "Description of Other Indebtedness."
PRINCIPAL, MATURITY AND INTEREST
The Notes are limited in aggregate principal amount to $75.0 million and
will mature on April 15, 2006. Interest on the Notes will accrue at the rate of
9 5/8% per annum and will be payable semi-annually in arrears on April 15 and
October 15, commencing on October 15, 1998, to holders of record on the
immediately preceding April 1 and October 1. Interest on the Notes will accrue
from the most recent date to which interest has been paid or, if no interest has
been paid, from the date of original issuance. Interest will be computed on the
basis of a 360-day year comprised of twelve 30-day months. Principal, premium,
if any, and interest and Liquidated Damages on the Notes will be payable at the
office or agency of the Company maintained for such purpose within the City and
State of New York or, at the option of the Company, payment of interest and
Liquidated Damages may be made by check mailed to the holders of the Notes at
their respective addresses set forth in the register of holders of Notes;
provided that all payments of principal, premium, interest and Liquidated
Damages with respect to Notes the holders of which have given wire transfer
instructions to the Company will be required to be made by wire transfer of
immediately available funds to the accounts specified by the holders thereof.
Until otherwise designated by the Company, the Company's office or agency in New
York will be the office of the Trustee maintained for such purpose. The Exchange
Notes will be, and the Series A Notes have been, issued in denominations of
$1,000 and integral multiples thereof.
SUBSIDIARY GUARANTEES
The Company does not currently have any Subsidiaries. The Indenture
provides that the Company's payment obligations under the Notes will be jointly
and severally guaranteed (the "Subsidiary Guarantees")
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<PAGE> 67
by each of the future Domestic Subsidiaries of the Company that, directly or
indirectly, guarantee or pledge any assets to secure the payment of any other
Indebtedness of the Company (the "Guarantors"). The obligations of each
Guarantor under its Subsidiary Guarantee will be limited so as not to constitute
a fraudulent conveyance under applicable law. See "Risk Factors -- Fraudulent
Conveyance Considerations."
The Indenture provides that no Guarantor may consolidate with or merge with
or into (whether or not such Guarantor is the surviving Person), another
corporation, Person or entity whether or not affiliated with such Guarantor
unless (i) subject to the provisions of the following paragraph, the Person
formed by or surviving any such consolidation or merger (if other than such
Guarantor) assumes all the obligations of such Guarantor pursuant to a
supplemental indenture in form and substance reasonably satisfactory to the
Trustee, under the Notes, the Indenture and the Registration Rights Agreement;
(ii) immediately after giving effect to such transaction, no Default or Event of
Default exists; (iii) such Guarantor, or any Person formed by or surviving any
such consolidation or merger, would have Consolidated Net Worth (immediately
after giving effect to such transaction), equal to or greater than the
Consolidated Net Worth of such Guarantor immediately preceding the transaction;
and (iv) the Company would be permitted by virtue of the Company's pro forma
Fixed Charge Coverage Ratio, immediately after giving effect to such
transaction, to incur at least $1.00 of additional Indebtedness pursuant to the
Fixed Charge Coverage Ratio test set forth in the covenant described below under
"-- Certain Covenants -- Incurrence of Indebtedness and Issuance of Preferred
Stock." Notwithstanding the foregoing, a Guarantor may consolidate with or merge
with or into the Company or another Guarantor.
The Indenture provides that in the event of a sale or other disposition of
all of the assets of any Guarantor by way of merger, consolidation or otherwise,
or a sale or other disposition of all of the capital stock of any Guarantor,
then such Guarantor (in the event of a sale or other disposition, by way of such
a merger, consolidation or otherwise, of all of the capital stock of such
Guarantor) or the corporation acquiring the property (in the event of a sale or
other disposition of all of the assets of such Guarantor) will be released and
relieved of any obligations under its Subsidiary Guarantee; provided that the
Net Proceeds of such sale or other disposition are applied in accordance with
the applicable provisions of the Indenture (other than in the case of a sale
from a Guarantor to the Company or a Subsidiary of the Company). See
"-- Repurchase at the Option of Holders -- Asset Sales."
OPTIONAL REDEMPTION
The Notes will not be redeemable at the Company's option prior to April 15,
2002. Thereafter, the Notes will be subject to redemption at any time at the
option of the Company, in whole or in part, upon not less than 30 nor more than
60 days' notice, at the redemption prices (expressed as percentages of principal
amount) set forth below plus accrued and unpaid interest and Liquidated Damages
thereon to the applicable redemption date, if redeemed during the twelve-month
period beginning on April 15 of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ---- ----------
<S> <C>
2002........................................................ 104.8125%
2003........................................................ 103.2083
2004........................................................ 101.6042
2005 and thereafter......................................... 100.0000%
</TABLE>
Notwithstanding the foregoing, at any time on or before, April 15, 2001,
the Company may redeem up to 30% of the aggregate principal amount of Notes
originally issued under the Indenture at a redemption price of 109.625% of the
principal amount thereof, plus accrued and unpaid interest and Liquidated
Damages thereon, if any, to the redemption date, with the net cash proceeds of a
public offering of common stock of the Company; provided that at least 70% of
the original aggregate principal amount of Notes remain outstanding immediately
after the occurrence of such redemption (excluding Notes held by the Company and
its Subsidiaries); and provided, further, that such redemption shall occur
within 60 days of the date of the closing of such public offering.
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<PAGE> 68
SELECTION AND NOTICE
If less than all of the Notes are to be redeemed at any time, selection of
Notes for redemption will be made by the Trustee in compliance with the
requirements of the principal national securities exchange, if any, on which the
Notes are listed, or, if the Notes are not so listed, on a pro rata basis, by
lot or by such method as the Trustee shall deem fair and appropriate; provided
that no Notes of $1,000 or less shall be redeemed in part. Notices of redemption
shall be mailed by first class mail at least 30 but not more than 60 days before
the redemption date to each holder of Notes to be redeemed at its registered
address. Notices of redemption may not be conditional. If any Note is to be
redeemed in part only, the notice of redemption that relates to such Note shall
state the portion of the principal amount thereof to be redeemed. A new Note in
principal amount equal to the unredeemed portion thereof will be issued in the
name of the holder thereof upon cancellation of the original Note. Notes called
for redemption become due on the date fixed for redemption. On and after the
redemption date, interest ceases to accrue on Notes or portions of them called
for redemption.
MANDATORY REDEMPTION
The Company is not required to make mandatory redemption or sinking fund
payments with respect to the Notes.
REPURCHASE AT THE OPTION OF HOLDERS
Change of Control
Upon the occurrence of a Change of Control, each holder of Notes will have
the right to require the Company to repurchase all or any part (equal to $1,000
or an integral multiple thereof) of such holder's Notes pursuant to the offer
described below (the "Change of Control Offer") at an offer price in cash equal
to 101% of the aggregate principal amount thereof plus accrued and unpaid
interest and Liquidated Damages thereon, if any, to the date of purchase (the
"Change of Control Payment"). Within ten days following any Change of Control,
the Company will mail a notice to each holder describing the transaction or
transactions that constitute the Change of Control and offering to repurchase
Notes on the date specified in such notice, which date shall be no earlier than
30 days and no later than 60 days from the date such notice is mailed (the
"Change of Control Payment Date"), pursuant to the procedures required by the
Indenture and described in such notice. The Company will comply with the
requirements of Rule 14e-1 under the Exchange Act and any other securities laws
and regulations thereunder to the extent such laws and regulations are
applicable in connection with the repurchase of the Notes as a result of a
Change of Control.
On the Change of Control Payment Date, the Company will, to the extent
lawful, (i) accept for payment all Notes or portions thereof properly tendered
pursuant to the Change of Control Offer, (ii) deposit with the Paying Agent an
amount equal to the Change of Control Payment in respect of all Notes or
portions thereof so tendered and (iii) deliver or cause to be delivered to the
Trustee the Notes so accepted together with an Officers' Certificate stating the
aggregate principal amount of Notes or portions thereof being purchased by the
Company. The Paying Agent will promptly mail to each holder of Notes so tendered
the Change of Control Payment for such Notes, and the Trustee will promptly
authenticate and mail (or cause to be transferred by book entry) to each holder
a new Note equal in principal amount to any unpurchased portion of the Notes
surrendered, if any; provided that each such Note will be in a principal amount
of $1,000 or an integral multiple thereof. The Company will publicly announce
the results of the Change of Control Offer on or as soon as practicable after
the Change of Control Payment Date.
The Change of Control provisions described above will be applicable whether
or not any other provisions of the Indenture are applicable. Except as described
above with respect to a Change of Control, the Indenture does not contain
provisions that permit the holders of the Notes to require that the Company
repurchase or redeem the Notes in the event of a takeover, recapitalization or
similar transaction.
The Company's other senior indebtedness contains prohibitions of certain
events that would constitute a Change of Control. In addition, the exercise by
the holders of Notes of their right to require the Company to repurchase the
Notes could cause a default under such other senior indebtedness, even if the
Change of
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Control itself does not, due to the financial effect of such repurchases on the
Company. Finally, the Company's ability to pay cash to the holders of Notes upon
a repurchase may be limited by the Company's then existing financial resources.
See "Risk Factors -- Potential Inability to Fund Change of Control Offer."
The New Credit Facility also provides that certain change of control events
with respect to the Company would constitute a default thereunder. Any future
credit agreements or other agreements relating to Senior Debt to which the
Company becomes a party may contain similar restrictions and provisions. In the
event a Change of Control occurs at a time when the Company is prohibited from
purchasing Notes, the Company could seek the consent of its lenders to the
purchase of Notes or could attempt to refinance the borrowings that contain such
prohibition. If the Company does not obtain such a consent or repay such
borrowings, the Company will remain prohibited from purchasing Notes. In such
case, the Company's failure to purchase tendered Notes would constitute an Event
of Default under the Indenture which would, in turn, constitute a default under
the New Credit Facility.
The Company will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set forth
in the Indenture applicable to a Change of Control Offer made by the Company and
purchases all Notes validly tendered and not withdrawn under such Change of
Control Offer.
The definition of Change of Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of "all or substantially all"
of the assets of the Company and its Subsidiaries taken as a whole. Although
there is a developing body of case law interpreting the phrase "substantially
all," there is no precise established definition of the phrase under applicable
law. Accordingly, the ability of a holder of Notes to require the Company to
repurchase such Notes as a result of a sale, lease, transfer, conveyance or
other disposition of less than all of the assets of the Company taken as a whole
to another Person or group may be uncertain.
Asset Sales
The Indenture provides that the Company will not, and will not permit any
of its Subsidiaries to, consummate an Asset Sale unless (i) the Company (or the
Subsidiary, as the case may be) receives consideration at the time of such Asset
Sale at least equal to the fair market value (evidenced by a resolution of the
Board of Directors (whose determination, if made in good faith, shall be
conclusive) set forth in an Officers' Certificate delivered to the Trustee) of
the assets or Equity Interests issued or sold or otherwise disposed of and (ii)
at least 75% of the consideration therefor received by the Company or such
Subsidiary is in the form of cash; provided that the amount of (x) any
liabilities (as shown on the Company's or such Subsidiary's most recent balance
sheet) of the Company or any Subsidiary (other than contingent liabilities and
liabilities that are by their terms subordinated to the Notes) that are assumed
by the transferee of any such assets pursuant to a customary novation agreement
that releases the Company or such Subsidiary from further liability and (y) any
securities, notes or other obligations received by the Company or any such
Subsidiary from such transferee that are contemporaneously (subject to ordinary
settlement periods) converted by the Company or such Subsidiary into cash (to
the extent of the cash received), shall be deemed to be cash for purposes of
this provision.
Within 270 days after the receipt of any Net Proceeds from an Asset Sale,
the Company may apply such Net Proceeds at its option, (a) to permanently
reduce, repurchase, repay or redeem any Indebtedness (and other amounts) under
the New Credit Facility or any one or more successor or additional Credit
Facilities, or (b) to the acquisition of a majority of the assets of, or a
majority of the Voting Stock of, another Permitted Business, the making of a
capital expenditure or the acquisition of other long-term assets that are used
or useful in a Permitted Business. Pending the final application of any such Net
Proceeds, the Company may temporarily reduce revolving credit borrowings or
otherwise invest such Net Proceeds in any manner that is not prohibited by the
Indenture. Any Net Proceeds from Asset Sales that are not applied or invested as
provided in the first sentence of this paragraph will be deemed to constitute
"Excess Proceeds." When the aggregate amount of Excess Proceeds exceeds $5.0
million, the Company will be required to make an offer to all holders of Notes
and all holders of other Indebtedness containing provisions similar to those set
forth in the
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Indenture with respect to offers to purchase or redeem with the proceeds of
sales of assets (an "Asset Sale Offer") to purchase the maximum principal amount
of Notes and such other Indebtedness that may be purchased out of the Excess
Proceeds, at an offer price in cash in an amount equal to 100% of the principal
amount thereof plus accrued and unpaid interest and Liquidated Damages thereon,
if any, to the date of purchase, in accordance with the procedures set forth in
the Indenture and such other Indebtedness. To the extent that any Excess
Proceeds remain after consummation of an Asset Sale Offer, the Company may use
such Excess Proceeds for any purpose not otherwise prohibited by the Indenture.
If the aggregate principal amount of Notes and such other Indebtedness tendered
into such Asset Sale Offer surrendered by holders thereof exceeds the amount of
Excess Proceeds, the Trustee shall select the Notes and such other Indebtedness
to be purchased on a pro rata basis. Upon completion of such offer to purchase,
the amount of Excess Proceeds shall be reset at zero.
CERTAIN COVENANTS
Restricted Payments
The Indenture provides that the Company will not, and will not permit any
of its Subsidiaries to, directly or indirectly: (i) declare or pay any dividend
or make any other payment or distribution on account of the Company's or any of
its Subsidiaries' Equity Interests (including, without limitation, any payment
in connection with any merger or consolidation involving the Company or any of
its Subsidiaries) or to the direct or indirect holders of the Company's or any
of its Subsidiaries' Equity Interests in their capacity as such (other than
dividends or distributions payable in Equity Interests (other than Disqualified
Stock) of the Company or to the Company or a Subsidiary of the Company); (ii)
purchase, redeem or otherwise acquire or retire for value (including, without
limitation, in connection with any merger or consolidation involving the
Company) any Equity Interests of the Company or any direct or indirect parent of
the Company or other Affiliate of the Company (other than any such Equity
Interests owned by the Company or any Wholly Owned Subsidiary of the Company);
(iii) make any payment on or with respect to, or purchase, redeem, defease or
otherwise acquire or retire for value any Indebtedness that is pari passu with
or subordinated to the Notes (other than Notes), except a payment of interest or
principal at Stated Maturity; or (iv) make any Restricted Investment (all such
payments and other actions set forth in clauses (i) through (iv) above being
collectively referred to as "Restricted Payments," unless, at the time of and
after giving effect to such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof; and
(b) the Company would, at the time of such Restricted Payment and
after giving pro forma effect thereto as if such Restricted Payment had
been made at the beginning of the applicable four-quarter period, have been
permitted to incur at least $1.00 of additional Indebtedness pursuant to
the Fixed Charge Coverage Ratio test set forth in the first paragraph of
the covenant described below under caption "-- Incurrence of Indebtedness
and Issuance of Preferred Stock"; and
(c) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by the Company and its Subsidiaries after
the date of the Indenture (excluding Restricted Payments permitted by
clauses (ii), (iii) and (iv) of the next succeeding paragraph), is less
than the sum, without duplication, of (i) 50% of the Consolidated Net
Income of the Company for the period (taken as one accounting period) from
the beginning of the first fiscal quarter commencing after the date of the
Indenture to the end of the Company's most recently ended fiscal quarter
for which internal financial statements are available at the time of such
Restricted Payment (or, if such Consolidated Net Income for such period is
a deficit, less 100% of such deficit), plus (ii) 100% of the aggregate net
cash proceeds received by the Company since the date of the Indenture as a
contribution to its common equity capital or from the issue or sale of
Equity Interests of the Company (other than Disqualified Stock) or from the
issue or sale of Disqualified Stock or debt securities of the Company that
have been converted into such Equity Interests (other than Equity Interests
(or Disqualified Stock or convertible debt securities) sold to a Subsidiary
of the Company), plus (iii) to the extent that any Restricted Investment
that was made after the date of the Indenture is sold for cash or otherwise
liquidated or repaid for cash,
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the lesser of (A) the cash return of capital with respect to such
Restricted Investment (less the cost of disposition, if any) and (B) the
initial amount of such Restricted Investment, plus (iv) $5.0 million.
The foregoing provisions will not prohibit (i) the payment of any dividend
within 60 days after the date of declaration thereof, if at said date of
declaration such payment would have complied with the provisions of the
Indenture; (ii) the redemption, repurchase, retirement, defeasance or other
acquisition of any pari passu or subordinated Indebtedness or Equity Interests
of the Company in exchange for, or out of the net cash proceeds of the
substantially concurrent sale (other than to a Subsidiary of the Company) of,
other Equity Interests of the Company (other than any Disqualified Stock);
provided that the amount of any such net cash proceeds that are utilized for any
such redemption, repurchase, retirement, defeasance or other acquisition shall
be excluded from clause (c) (ii) of the immediately preceding paragraph; (iii)
the defeasance, redemption, repurchase or other acquisition of pari passu or
subordinated Indebtedness with the net cash proceeds from an incurrence of
Permitted Refinancing Indebtedness; (iv) the payment of any dividend by a
Subsidiary of the Company to the holders of its common Equity Interests on a pro
rata basis; and (v) the repurchase, redemption or other acquisition or
retirement for value of any Equity Interests of the Company or any Subsidiary of
the Company held by any member of the Company's (or any of its Subsidiaries')
management pursuant to any management equity subscription agreement or stock
option agreement in effect as of the date of the Indenture or entered into after
the Closing Date with members of the management of any Person acquired after the
Closing Date in connection with the acquisition of such Person or the repurchase
of Equity Interests of the Company or any Subsidiary of the Company held by
employees, former employees, directors or former directors pursuant to the terms
of agreements (including employment agreements) approved by the Board of
Directors; provided that the aggregate price paid for all such repurchased,
redeemed, acquired or retired Equity Interests shall not exceed $500,000 in any
twelve-month period and no Default or Event of Default shall have occurred and
be continuing immediately after any such transaction; (vi) payments to Holdings
in an amount not to exceed the amount of the Company's federal and state income
tax liability that the Company would owe if it were filing a separate income tax
return as a stand alone company (or, if there are any subsidiaries of the
Company, the amount of the federal and state income tax liability for which the
Company and such subsidiaries would be liable if the Company and such
subsidiaries were filing a separate consolidated (or combined) income tax
return) plus $100,000; provided, that any such payment shall not exceed the tax
liability of Holdings that is actually then due and payable; (vii) loans,
advances, dividends or distributions by the Company or any of its Subsidiaries
to Holdings to pay for corporate, administrative and operating expenses in the
ordinary course of business, including payment of directors' and officers
liability insurance premiums, directors' fees, and fees, expenses and
indemnities in connection with the Transactions, in an aggregate amount not to
exceed $250,000 in any fiscal year; and (viii) (A) loans, advances, dividends or
distributions by the Company or any of its Subsidiaries to Holdings not to
exceed an amount necessary to permit Holdings to pay (1) its costs (including
all professional fees and expenses) incurred to comply with its reporting
obligations under federal or state laws or in connection with reporting or other
obligations under the New Credit Facility or any related collateral documents or
guarantees, (2) its expenses incurred in connection with any public offering of
equity securities which has been terminated by the board of directors of
Holdings, the net proceeds of which were specifically intended to be received by
or contributed or loaned to the Company as evidenced by a resolution of the
Board of Directors of Holdings and (B) loans or advances by the Company or any
of its Subsidiaries to Holdings not to exceed an amount necessary to permit
Holdings to pay its interim expenses incurred in connection with any public
offering of equity securities the net proceeds of which are specifically
intended to be received by or contributed or loaned to the Company, which,
unless such offering shall have been terminated by the board of directors of
Holdings shall be repaid to the Company promptly out of the proceeds of such
offering; provided, that no Default or Event of Default shall have occurred and
be continuing immediately after any of the foregoing payments.
The amount of all Restricted Payments (other than cash) shall be the fair
market value on the date of the Restricted Payment of the asset(s) or securities
proposed to be transferred or issued by the Company or such Subsidiary, as the
case may be, pursuant to the Restricted Payment. The fair market value of any
non-cash Restricted Payment shall be determined by the Board of Directors whose
resolution with respect thereto shall be delivered to the Trustee, such
determination to be based upon an opinion or appraisal issued by an accounting,
appraisal or investment banking firm of national standing if such fair market
value exceeds $1.0
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million. Not later than the date of making any Restricted Payment, the Company
shall deliver to the Trustee an Officers' Certificate stating that such
Restricted Payment is permitted and setting forth the basis upon which the
calculations required by the covenant "Restricted Payments" were computed,
together with a copy of any fairness opinion or appraisal required by the
Indenture.
Incurrence of Indebtedness and Issuance of Preferred Stock
The Indenture provides that the Company will not, and will not permit any
of its Subsidiaries to, directly or indirectly, create, incur, issue, assume,
guarantee or otherwise become directly or indirectly liable, contingently or
otherwise, with respect to (collectively, "incur") any Indebtedness (including
Acquired Debt) and that the Company will not issue any Disqualified Stock and
will not permit any of its Subsidiaries to issue any shares of preferred stock;
provided that the Company may incur Indebtedness (including Acquired Debt) or
issue shares of Disqualified Stock if the Fixed Charge Coverage Ratio for the
Company's most recently ended four full fiscal quarters for which internal
financial statements are available immediately preceding the date on which such
additional Indebtedness is incurred or such Disqualified Stock is issued would
have been (A) on or prior to April 15, 2000, at least 2.0 to 1 and (B) after
April 15, 2000, 2.25 to 1; determined on a pro forma basis (including a pro
forma application of the net proceeds therefrom), as if the additional
Indebtedness had been incurred, or the Disqualified Stock had been issued, as
the case may be, at the beginning of such four-quarter period;
The Indenture also provides that the Company will not incur any
Indebtedness that is contractually subordinated in right of payment to any other
Indebtedness of the Company unless such Indebtedness is also contractually
subordinated in right of payment to the Notes on substantially identical terms;
provided that no Indebtedness of the Company shall be deemed to be contractually
subordinated in right of payment to any other Indebtedness of the Company solely
by virtue of being unsecured.
The provisions of the first paragraph of this covenant will not apply to
the incurrence of any of the following items of Indebtedness (collectively,
"Permitted Debt"):
(i) the incurrence by the Company of Indebtedness and letters of
credit pursuant to Credit Facilities; provided that the aggregate principal
amount of all Indebtedness and letters of credit (with letters of credit
being deemed to have a principal amount equal to the maximum potential
liability of the Company and its Subsidiaries thereunder) outstanding under
all Credit Facilities after giving effect to such incurrence does not
exceed an amount equal to $20.0 million less the aggregate amount of all
Net Proceeds of Asset Sales applied to repay Indebtedness under a Credit
Facility or a credit agreement pursuant to the covenant described above
under "-- Repurchase at the Option of Holders -- Asset Sales";
(ii) the incurrence by the Company of the Existing Indebtedness;
(iii) the incurrence by the Company of Indebtedness represented by the
Notes;
(iv) the incurrence by the Company or any of its Subsidiaries of
Indebtedness represented by Capital Lease Obligations, mortgage financings
or purchase money obligations, in each case incurred for the purpose of
financing all or any part of the purchase price or cost of construction or
improvement of property, plant or equipment used in the business of the
Company or such Subsidiary, in an aggregate principal amount not to exceed
5% of total assets;
(v) the incurrence by the Company or any of its Subsidiaries of
Permitted Refinancing Indebtedness in exchange for, or the net proceeds of
which are used to refund, refinance or replace Indebtedness (other than
intercompany Indebtedness) that was permitted by the Indenture to be
incurred under the first paragraph hereof or clauses (ii), (iii), (iv) or
(x) of this paragraph;
(vi) the incurrence by the Company or any of its Subsidiaries of
intercompany Indebtedness between or among the Company and any of its
Wholly Owned Subsidiaries; provided that (i) if the Company is the obligor
on such Indebtedness, such Indebtedness is expressly subordinated to the
prior payment in full in cash of all Obligations with respect to the Notes
and (ii)(A) any subsequent issuance
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or transfer of Equity Interests that results in any such Indebtedness being
held by a Person other than the Company or a Subsidiary thereof and (B) any
sale or other transfer of any such Indebtedness to a Person that is not
either the Company or a Wholly Owned Subsidiary thereof shall be deemed, in
each case, to constitute an incurrence of such Indebtedness by the Company
or such Subsidiary, as the case may be, that was not permitted by this
clause (vi);
(vii) the incurrence by the Company or any of its Subsidiaries of
Hedging Obligations that are incurred for the purpose of fixing or hedging
interest rate risk with respect to any floating rate Indebtedness that is
permitted by the terms of the Indenture to be outstanding;
(viii) the guarantee by the Company of Indebtedness of the Company or
a Subsidiary of the Company that was permitted to be incurred by another
provision of this covenant;
(ix) Indebtedness of the Company or any of its Subsidiaries
represented by letters of credit or guarantees by or for the account of the
Company or such Subsidiary as the case may be, in each case, in order to
provide security for workers' compensation claims, payment obligations in
connection with self-insurance or similar requirements in the ordinary
course of business;
(x) Acquired Debt of a Subsidiary, which Subsidiary was acquired after
the Closing Date and which Acquired Debt was in existence at the time of
acquisition of such Subsidiary, and not incurred in contemplation of such
acquisition, if such Acquired Indebtedness is Non-Recourse Debt (except
with respect to such Subsidiary and its Subsidiaries) and such Acquired
Debt does not exceed $5.0 million in the aggregate outstanding at any time;
(xi) Indebtedness in the form of holdback notes or deferred purchase
price in connection with an acquisition in an amount not to exceed the
lesser of $5.0 million or 20% of the purchase price at any time
outstanding;
(xii) Indebtedness arising from agreements of the Company or a
Subsidiary of the Company providing for indemnification, adjustment of
purchase price or similar obligations, in each case, incurred in connection
with the disposition of any business, assets or subsidiary, other than
guarantees of Indebtedness incurred by any Person acquiring all or any
portion of such business, assets or subsidiary for the purpose of financing
such acquisition; provided that the maximum aggregate liability in respect
of all such Indebtedness shall at no time exceed the gross proceeds
actually received by the Company in connection with such disposition;
(xiii) Obligations in respect of performance bonds and completion
guarantees provided by the Company or any Subsidiary of the Company in the
ordinary course of business;
(xiv) the guarantee by the Company or any of the Guarantors of
Indebtedness of the Company or a Subsidiary of the Company that was
permitted to be incurred by another provision of this covenant; and
(xv) the incurrence by the Company or any of its Subsidiaries of
additional Indebtedness in an aggregate principal amount (or accreted
value, as applicable) at any time outstanding, including all Permitted
Refinancing Indebtedness incurred to refund, refinance or replace any
Indebtedness incurred pursuant to this clause (xv), not to exceed $5.0
million.
For purposes of determining compliance with this covenant, in the event
that an item of Indebtedness meets the criteria of more than one of the
categories of Permitted Debt described in clauses (i) through (xv) above or is
entitled to be incurred pursuant to the first paragraph of this covenant, the
Company shall, in its sole discretion, classify such item of Indebtedness in any
manner that complies with this covenant. Accrual of interest, accretion or
amortization of original issue discount, the payment of interest on any
Indebtedness in the form of additional Indebtedness with the same terms, and the
payment of dividends on Disqualified Stock in the form of additional shares of
the same class of Disqualified Stock will not be deemed to be an incurrence of
Indebtedness or an issuance of Disqualified Stock for purposes of this covenant;
provided, in each such case, that the amount thereof is included in Fixed
Charges of the Company as accrued.
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Liens
The Indenture provides that the Company will not, and will not permit any
of its Subsidiaries to, directly or indirectly, create, incur, assume or suffer
to exist any Lien securing Indebtedness and trade payables on any asset now
owned or hereafter acquired, or any income or profits therefrom or assign or
convey any right to receive income therefrom, except Permitted Liens.
Dividend and Other Payment Restrictions Affecting Subsidiaries
The Indenture provides that the Company will not, and will not permit any
of its Subsidiaries to, directly or indirectly, create or otherwise cause or
suffer to exist or become effective any encumbrance or restriction on the
ability of any Subsidiary to (i)(a) pay dividends or make any other
distributions to the Company or any of its Subsidiaries (1) on its Capital Stock
or (2) with respect to any other interest or participation in, or measured by,
its profits, or (b) pay any indebtedness owed to the Company or any of its
Subsidiaries, (ii) make loans or advances to the Company or any of its
Subsidiaries or (iii) transfer any of its properties or assets to the Company or
any of its Subsidiaries. However, the foregoing restrictions will not apply to
encumbrances or restrictions existing under or by reason of (a) Existing
Indebtedness as in effect on the date of the Indenture, (b) the New Credit
Facility as in effect as of the date of the Indenture, and any amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacements or refinancings thereof, provided that such amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacement or refinancings are no more restrictive, taken as a whole, with
respect to such dividend and other payment restrictions than those contained in
the New Credit Facility as in effect on the date of the Indenture, (c) the
Indenture and the Notes, (d) applicable law, (e) any instrument governing
Indebtedness or Capital Stock of a Person acquired by the Company or any of its
Subsidiaries as in effect at the time of such acquisition (except to the extent
such Indebtedness was incurred in connection with or in contemplation of such
acquisition), which encumbrance or restriction is not applicable to any Person,
or the properties or assets of any Person, other than the Person, or the
property or assets of the Person, so acquired, provided that, in the case of
Indebtedness, such Indebtedness was permitted by the terms of the Indenture to
be incurred, (f) customary non-assignment provisions in leases entered into in
the ordinary course of business and consistent with past practices, (g) purchase
money obligations for property acquired in the ordinary course of business that
impose restrictions of the nature described in clause (iii) above on the
property so acquired, (h) any agreement for the sale of a Subsidiary that
restricts distributions by that Subsidiary pending its sale, (i) Permitted
Refinancing Indebtedness, provided that the restrictions contained in the
agreements governing such Permitted Refinancing Indebtedness are no more
restrictive, taken as a whole, than those contained in the agreements governing
the Indebtedness being refinanced, (j) Liens securing Indebtedness otherwise
permitted to be incurred pursuant to the provisions of the covenant described
above under the caption "-- Liens" that limits the right of the debtor to
dispose of the assets securing such Indebtedness, (k) provisions with respect to
the disposition or distribution of assets or property in joint venture
agreements and other similar agreements entered into in the ordinary course of
business and (l) restrictions on cash or other deposits or net worth imposed by
customers under contracts entered into in the ordinary course of business.
Merger, Consolidation, or Sale of Assets
The Indenture provides that the Company may not consolidate or merge with
or into (whether or not the Company is the surviving corporation), or sell,
assign, transfer, lease, convey or otherwise dispose of all or substantially all
of its properties or assets in one or more related transactions, to another
corporation, Person or entity unless (i) the Company is the surviving
corporation or the entity or the Person formed by or surviving any such
consolidation or merger (if other than the Company) or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made is a corporation organized or existing under the laws of the United States,
any state thereof or the District of Columbia; (ii) the entity or Person formed
by or surviving any such consolidation or merger (if other than the Company) or
the entity or Person to which such sale, assignment, transfer, lease, conveyance
or other disposition shall have been made assumes all the obligations of the
Company under the Registration Rights Agreement, the Notes and the Indenture
pursuant to a supplemental indenture in a form reasonably satisfactory to the
Trustee; (iii) immediately after such
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transaction no Default or Event of Default exists; and (iv) except in the case
of a merger of the Company with or into a Wholly Owned Subsidiary of the
Company, the Company or the entity or Person formed by or surviving any such
consolidation or merger (if other than the Company), or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made (A) will have Consolidated Net Worth immediately after the transaction
equal to or greater than the Consolidated Net Worth of the Company immediately
preceding the transaction and (B) will, at the time of such transaction and
after giving pro forma effect thereto as if such transaction had occurred at the
beginning of the applicable four-quarter period, be permitted to incur at least
$1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio
test set forth in the first paragraph of the covenant described above under
"-- Incurrence of Indebtedness and Issuance of Preferred Stock." The Indenture
will provide that the foregoing covenant shall not apply to the Merger.
Transactions with Affiliates
The Indenture provides that the Company will not, and will not permit any
of its Subsidiaries to, make any payment to, or sell, lease, transfer or
otherwise dispose of any of its properties or assets to, or purchase any
property or assets from, or enter into or make or amend any transaction,
contract, agreement, understanding, loan, advance or guarantee with, or for the
benefit of, any Affiliate (each of the foregoing, an "Affiliate Transaction"),
unless (i) such Affiliate Transaction is on terms that are no less favorable to
the Company or the relevant Subsidiary than those that would have been obtained
in a comparable transaction by the Company or such Subsidiary with an unrelated
Person and (ii) the Company delivers to the Trustee (a) with respect to any
Affiliate Transaction or series of related Affiliate Transactions involving
aggregate consideration in excess of $1.0 million, a resolution of the Board of
Directors set forth in an Officers' Certificate certifying that such Affiliate
Transaction complies with clause (i) above and that such Affiliate Transaction
has been approved by a majority of the disinterested members of the Board of
Directors and (b) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of $5.0
million, an opinion as to the fairness to the holders of such Affiliate
Transaction from a financial point of view issued by an accounting, appraisal or
investment banking firm of national standing. Notwithstanding the foregoing, the
following items shall not be deemed to be Affiliate Transactions: (i) any
employment agreement entered into by the Company or any of its Subsidiaries in
the ordinary course of business and consistent with the past practice of the
Company or such Subsidiary, (ii) transactions between or among the Company
and/or its Subsidiaries, (iii) payment of reasonable directors fees to Persons
who are not otherwise Affiliates of the Company, (iv) Restricted Payments that
are permitted by the provisions of the Indenture described above under the
caption "--Restricted Payments", (v) the payment to CGW Southeast Management
III, L.L.C. or its designees of the Investment Banking Fee, and (vi) the payment
to CGW Southeast III, L.L.C. or its designees of the Management Fee.
Limitation on Issuances and Sales of Equity Interests in Wholly Owned
Subsidiaries
The Indenture provides that the Company (i) will not, and will not permit
any Wholly Owned Subsidiary of the Company to, transfer, convey, sell, lease or
otherwise dispose of any Equity Interests in any Wholly Owned Subsidiary of the
Company to any Person (other than the Company or a Wholly Owned Subsidiary of
the Company), unless (a) such transfer, conveyance, sale, lease or other
disposition is of all the Equity Interests in such Wholly Owned Subsidiary and
(b) the cash Net Proceeds from such transfer, conveyance, sale, lease or other
disposition are applied in accordance with the covenant described above under
the caption "-- Asset Sales," and (ii) will not permit any Wholly Owned
Subsidiary of the Company to issue any of its Equity Interests (other than, if
necessary, shares of its Capital Stock constituting directors' qualifying
shares) to any Person other than to the Company or a Wholly Owned Subsidiary of
the Company.
Business Activities
The Company will not, and will not permit any Subsidiary to, engage in any
business other than Permitted Businesses, except to such extent as would not be
material to the Company and its Subsidiaries taken as a whole.
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Payments for Consent
The Indenture provides that neither the Company nor any of its Subsidiaries
will, directly or indirectly, pay or cause to be paid any consideration, whether
by way of interest, fee or otherwise, to any holder of any Notes for or as an
inducement to any consent, waiver or amendment of any of the terms or provisions
of the Indenture or the Notes unless such consideration is offered to be paid or
is paid to all holders of the Notes that consent, waive or agree to amend in the
time frame set forth in the solicitation documents relating to such consent,
waiver or agreement.
Reports
The Indenture provides that, whether or not required by the rules and
regulations of the Commission, so long as any Notes are outstanding, the Company
will furnish to the holders of Notes (i) all quarterly and annual financial
information that would be required to be contained in a filing with the
Commission on Forms 10-Q and 10-K if the Company were required to file such
Forms, including a "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and, with respect to the annual information only, a
report thereon by the Company's certified independent accountants and (ii) all
current reports that would be required to be filed with the Commission on Form
8-K if the Company were required to file such reports, in each case within the
time periods specified in the Commission's rules and regulations. In addition,
following the consummation of this Exchange Offer, whether or not required by
the rules and regulations of the Commission, the Company will file a copy of all
such information and reports with the Commission for public availability within
the time periods specified in the Commission's rules and regulations (unless the
Commission will not accept such a filing) and make such information available to
securities analysts and prospective investors upon request. In addition, the
Company has agreed that, for so long as any Notes remain outstanding, it will
furnish to the holders and to securities analysts and prospective investors,
upon their request, the information required to be delivered pursuant to Rule
144A(d)(4) under the Securities Act.
SUBSIDIARY GUARANTEES
The Indenture provides that the Company will not permit any Subsidiary,
directly or indirectly, to Guarantee or pledge any assets to secure the payment
of any other Indebtedness of the Company unless such Subsidiary simultaneously
executes and delivers a supplemental indenture to the Indenture providing for
the Guarantee of the payment of the Notes by such Subsidiary, which Guarantee
shall be senior to or pari passu with such Subsidiary's Guarantee of or pledge
to secure such other Indebtedness.
EVENTS OF DEFAULT AND REMEDIES
The Indenture provides that each of the following constitutes an Event of
Default: (i) default for 30 days in the payment when due of interest on, or
Liquidated Damages with respect to, the Notes; (ii) default in payment when due
of the principal of or premium, if any, on the Notes; (iii) failure by the
Company or any of its Subsidiaries to comply with the provisions described under
the captions "-- Change of Control," "-- Asset Sales," "-- Restricted Payments"
or "-- Incurrence of Indebtedness and Issuance of Preferred Stock"; (iv) failure
by the Company or any of its Subsidiaries for 60 days after notice to comply
with any of its other agreements in the Indenture or the Notes; (v) default
under any mortgage, indenture or instrument under which there may be issued or
by which there may be secured or evidenced any Indebtedness for money borrowed
by the Company or any of its Subsidiaries (or the payment of which is guaranteed
by the Company or any of its Subsidiaries) whether such Indebtedness or
guarantee now exists, or is created after the date of the Indenture, which
default (a) is caused by a failure to pay principal of or premium, if any, or
interest on such Indebtedness prior to the expiration of the grace period
provided in such Indebtedness on the date of such default (a "Payment Default")
or (b) results in the acceleration of such Indebtedness prior to its express
maturity and, in each case, the principal amount of any such Indebtedness,
together with the principal amount of any other such Indebtedness under which
there has been a Payment Default or the maturity of which has been so
accelerated, aggregates $5.0 million or more; (vi) failure by the Company or any
of its Subsidiaries to pay final judgments not covered by insurance aggregating
in excess of $5.0 million, which judgments are not paid, discharged, bonded or
stayed for a period of 60 days; (vii) except as permitted by the Indenture, any
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Subsidiary Guarantee shall be held in any judicial proceeding to be
unenforceable or invalid or shall cease for any reason to be in full force and
effect or any Guarantor, or any Person acting on behalf of any Guarantor, shall
deny or disaffirm its obligations under its Subsidiary Guarantee; and (viii)
certain events of bankruptcy or insolvency with respect to the Company or any of
its Significant Subsidiaries.
If any Event of Default occurs and is continuing, the Trustee or the
holders of at least 25% in principal amount of the then outstanding Notes may
declare all the Notes to be due and payable immediately. Notwithstanding the
foregoing, in the case of an Event of Default arising from certain events of
bankruptcy or insolvency, with respect to the Company, any Significant
Subsidiary or any group of Subsidiaries that, taken together, would constitute a
Significant Subsidiary, all outstanding Notes will become due and payable
without further action or notice. Holders of the Notes may not enforce the
Indenture or the Notes except as provided in the Indenture. Subject to certain
limitations, holders of a majority in principal amount of the then outstanding
Notes may direct the Trustee in its exercise of any trust or power. The Trustee
may withhold from holders of the Notes notice of any continuing Default or Event
of Default (except a Default or Event of Default relating to the payment of
principal or interest) if it determines that withholding notice is in their
interest.
In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Company with
the intention of avoiding payment of the premium that the Company would have had
to pay if the Company then had elected to redeem the Notes pursuant to the
optional redemption provisions of the Indenture, an equivalent premium shall
also become and be immediately due and payable to the extent permitted by law
upon the acceleration of the Notes. If an Event of Default occurs prior to April
15, 2002 by reason of any willful action (or inaction) taken (or not taken) by
or on behalf of the Company with the intention of avoiding the prohibition on
redemption of the Notes prior to April 15, 2002 then the premium specified in
the Indenture shall also become immediately due and payable to the extent
permitted by law upon the acceleration of the Notes.
The holders of a majority in aggregate principal amount of the Notes then
outstanding by notice to the Trustee may on behalf of the holders of all of the
Notes waive any existing Default or Event of Default and its consequences under
the Indenture except a continuing Default or Event of Default in the payment of
interest on, or the principal of, the Notes.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company is required upon
becoming aware of any Default or Event of Default, to deliver to the Trustee a
statement specifying such Default or Event of Default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee, incorporator or stockholder of the Company,
as such, shall have any liability for any obligations of the Company under the
Notes, the Indenture or for any claim based on, in respect of, or by reason of,
such obligations or their creation. Each holder of Notes by accepting a Note
waives and releases all such liability. The waiver and release are part of the
consideration for issuance of the Notes. Such waiver may not be effective to
waive liabilities under the federal securities laws and it is the view of the
Commission that such a waiver is against public policy.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, elect to have all of its
obligations discharged with respect to the outstanding Notes ("Legal
Defeasance") except for (i) the rights of holders of outstanding Notes to
receive payments in respect of the principal of, premium, if any, and interest
and Liquidated Damages on such Notes when such payments are due from the trust
referred to below, (ii) the Company's obligations with respect to the Notes
concerning issuing temporary Notes, registration of Notes, mutilated, destroyed,
lost or stolen Notes and the maintenance of an office or agency for payment and
money for security payments held in trust, (iii) the rights, powers, trusts,
duties and immunities of the Trustee, and the Company's obligations in
connection therewith and (iv) the Legal Defeasance provisions of the Indenture.
In addition, the Company may, at its option and at any time, elect to have the
obligations of the Company
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released with respect to certain covenants that are described in the Indenture
("Covenant Defeasance") and thereafter any omission to comply with such
obligations shall not constitute a Default or Event of Default with respect to
the Notes. In the event Covenant Defeasance occurs, certain events (not
including non-payment, bankruptcy, receivership, rehabilitation and insolvency
events) described under "Events of Default" will no longer constitute an Event
of Default with respect to the Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i)
the Company must irrevocably deposit with the Trustee, in trust, for the benefit
of the holders of the Notes, cash in U.S. dollars, non-callable Government
Securities, or a combination thereof, in such amounts as will be sufficient, in
the opinion of a nationally recognized firm of independent public accountants,
to pay the principal of, premium, if any, and interest and Liquidated Damages on
the outstanding Notes on the stated maturity or on the applicable redemption
date, as the case may be, and the Company must specify whether the Notes are
being defeased to maturity or to a particular redemption date; (ii) in the case
of Legal Defeasance, the Company shall have delivered to the Trustee an opinion
of counsel in the United States reasonably acceptable to the Trustee confirming
that (A) the Company has received from, or there has been published by, the
Internal Revenue Service a ruling or (B) since the date of the Indenture, there
has been a change in the applicable federal income tax law, in either case to
the effect that, and based thereon such opinion of counsel shall confirm that,
the holders of the outstanding Notes will not recognize income, gain or loss for
federal income tax purposes as a result of such Legal Defeasance and will be
subject to federal income tax on the same amounts, in the same manner and at the
same times as would have been the case if such Legal Defeasance had not
occurred; (iii) in the case of Covenant Defeasance, the Company shall have
delivered to the Trustee an opinion of counsel in the United States reasonably
acceptable to the Trustee confirming that the holders of the outstanding Notes
will not recognize income, gain or loss for federal income tax purposes as a
result of such Covenant Defeasance and will be subject to federal income tax on
the same amounts, in the same manner and at the same times as would have been
the case if such Covenant Defeasance had not occurred; (iv) no Default or Event
of Default shall have occurred and be continuing on the date of such deposit
(other than a Default or Event of Default resulting from the borrowing of funds
to be applied to such deposit) or insofar as Events of Default from bankruptcy
or insolvency events are concerned, at any time in the period ending on the 91st
day after the date of deposit; (v) such Legal Defeasance or Covenant Defeasance
will not result in a breach or violation of, or constitute a default under any
material agreement or instrument (other than the Indenture) to which the Company
or any of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries is bound; (vi) the Company must have delivered to the Trustee an
opinion of counsel to the effect that after the 91st day following the deposit,
the trust funds will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally; (vii) the Company must deliver to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the intent
of preferring the holders of Notes over the other creditors of the Company with
the intent of defeating, hindering, delaying or defrauding creditors of the
Company or others; and (viii) the Company must deliver to the Trustee an
Officers' Certificate and an opinion of counsel, each stating that all
conditions precedent provided for relating to the Legal Defeasance or the
Covenant Defeasance have been complied with.
TRANSFER AND EXCHANGE
A holder may transfer or exchange Notes in accordance with the Indenture.
The Registrar and the Trustee may require a holder, among other things, to
furnish appropriate endorsements and transfer documents and the Company may
require a holder to pay any taxes and fees required by law or permitted by the
Indenture. The Company is not required to transfer or exchange any Note selected
for redemption. Also, the Company is not required to transfer or exchange any
Note for a period of 15 days before a selection of Notes to be redeemed.
The registered holder of a Note will be treated as the owner of it for all
purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next two succeeding paragraphs, the Indenture or
the Notes may be amended or supplemented with the consent of the holders of at
least a majority in principal amount of the Notes then
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outstanding (including, without limitation, consents obtained in connection with
a purchase of, or tender offer or exchange offer for, Notes), and any existing
default or compliance with any provision of the Indenture or the Notes may be
waived with the consent of the holders of a majority in principal amount of the
then outstanding Notes (including, without limitation, consents obtained in
connection with a purchase of, or tender offer or exchange offer for, Notes).
Without the consent of each holder affected, an amendment or waiver may not
(with respect to any Notes held by a non-consenting holder): (i) reduce the
principal amount of Notes whose holders must consent to an amendment, supplement
or waiver, (ii) reduce the principal of or change the fixed maturity of any Note
or alter the provisions with respect to the redemption of the Notes (other than
provisions relating to the covenants described above under the caption
"-- Repurchase at the Option of Holders"), (iii) reduce the rate of or change
the time for payment of interest on any Note, (iv) waive a Default or Event of
Default in the payment of principal of or premium, if any, or interest on the
Notes (except a rescission of acceleration of the Notes by the holders of at
least a majority in aggregate principal amount of the Notes and a waiver of the
payment default that resulted from such acceleration), (v) make any Note payable
in money other than that stated in the Notes, (vi) make any change in the
provisions of the Indenture relating to waivers of past Defaults or the rights
of holders of Notes to receive payments of principal of or premium, if any, or
interest on the Notes, (vii) waive a redemption payment with respect to any Note
(other than a payment required by one of the covenants described above under the
caption "-- Repurchase at the Option of Holders") or (viii) make any change in
the foregoing amendment and waiver provisions.
Notwithstanding the foregoing, without the consent of any holder of Notes,
the Company and the Trustee may amend or supplement the Indenture or the Notes
to cure any ambiguity, defect or inconsistency, to provide for uncertificated
Notes in addition to or in place of certificated Notes, to provide for the
assumption of the Company's obligations to holders of Notes in the case of a
merger or consolidation or sale of all or substantially all of the Company's
assets, to make any change that would provide any additional rights or benefits
to the holders of Notes or that does not adversely affect the legal rights under
the Indenture of any such holder, or to comply with requirements of the
Commission in order to effect or maintain the qualification of the Indenture
under the Trust Indenture Act.
CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any such
claim as security or otherwise. The Trustee will be permitted to engage in other
transactions; however, if it acquires any conflicting interest it must eliminate
such conflict within 90 days, apply to the Commission for permission to continue
or resign.
The holders of a majority in principal amount of the then outstanding Notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that in case an Event of Default
shall occur (which shall not be cured), the Trustee will be required, in the
exercise of its power, to use the degree of care of a prudent man in the conduct
of his own affairs. Subject to such provisions, the Trustee will be under no
obligation to exercise any of its rights or powers under the Indenture at the
request of any holder of Notes, unless such holder shall have offered to the
Trustee security and indemnity satisfactory to it against any loss, liability or
expense.
ADDITIONAL INFORMATION
Anyone who receives this Prospectus may obtain a copy of the Indenture and
Registration Rights Agreement without charge by writing to SIMCALA, Inc., P.O.
Box 68, Mt. Meigs, Alabama 36057; Attention: Chief Financial Officer.
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BOOK-ENTRY, DELIVERY AND FORM
Series A Global Notes
The Series A Notes were offered and sold (i) to qualified institutional
buyers in reliance on Rule 144A under the Securities Act ("Rule 144A Notes") and
(ii) to institutional "accredited investors" as defined in Rule 501(a)(1), (2),
(3) or (7) under the Securities Act ("Accredited Investor Notes") and in each
case are represented by a separate note in registered, global form
(collectively, the "Series A Global Notes").
Series B Global Note
The Series B Notes will initially be issued in the form of one global
certificate (the "Series B Global Note" and collectively with the Series A
Global Notes, the "Global Notes"). The Series B Global Note will be deposited on
the date of the consummation of the Exchange Offer with or on behalf of DTC and
registered in the name of DTC or its nominee.
DTC has advised the Company that DTC is a limited purpose trust company
organized under the laws of the State of New York, a member of the Federal
Reserve System, a "clearing corporation" within the meaning of the Uniform
Commercial Code, and a "clearing agency" registered pursuant to the provisions
of Section 17A of the Exchange Act. DTC was created to hold securities for its
participants and facilitate the clearance and settlement of securities
transactions between participants through electronic book-entry changes in
accounts of its participants, thereby eliminating the need for physical movement
of certificates. Participants include securities brokers and dealers, banks,
trust companies, and clearing corporations and may include certain other
organizations. Indirect access to the DTC system is available to others such as
banks, brokers, dealers, and trust companies that clear through or maintain a
custodial relationship with a participant, either directly or indirectly
("indirect participants").
So long as DTC, or its nominee, is the registered owner or holder of the
Series B Global Note, DTC or such nominee, as the case may be, will be
considered the sole owner or holder of the Notes represented by such Series B
Global Note for all purposes under the Indenture. The Company understands that
pursuant to procedures established by DTC (i) upon deposit of the Series B
Global Note, DTC or its custodian will credit, on its book entry registration
and transfer system, the respective principal amount of Series B Notes of the
individual beneficial interests represented by such Series B Global Note to the
accounts of Persons who have accounts with such depositary and (ii) ownership of
the Series B Notes evidenced by the Series B Global Note will be shown on, and
the transfer of ownership thereof will be effected only through, records
maintained by DTC or its nominee (with respect to the interests of DTC's
participants), DTC's participants and DTC's indirect participants. No beneficial
owner of an interest in the Series B Global Note will be able to transfer that
interest except in accordance with DTC's applicable procedures, in addition to
those provided for under the Indenture.
Payments made with respect to the Series B Global Note will be made to DTC
or its nominee, as the case may be, as the registered owner thereof. The Company
will have no responsibility or liability for any aspect of the records relating
to or payments made on account of beneficial ownership interests in the Series B
Global Note or for maintaining, supervising, or reviewing any records relating
to such beneficial ownership interests.
The Company expects that DTC or its nominee, upon receipt of any payments
made with respect to the Series B Global Note, will credit participants'
accounts with payments in amounts proportionate to their respective beneficial
interests in the principal amount of such Series B Global Note as shown on the
records of DTC or its nominee. The Company also expects that payments by
participants to owners of beneficial interests in such Series B Global Note held
through such participants will be governed by standing instructions and
customary practices, as is now the case with securities held for the accounts of
customers registered in the names of nominees for such customers. Such payments
will be the responsibility of such participants.
Transfers between participants in DTC will be effected in accordance with
DTC rules and will be settled in same-day funds.
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Although DTC is expected to follow the foregoing procedures in order to
facilitate transfers of interests in the Series B Global Note among participants
of DTC, it is under no obligation to perform or continue to perform such
procedures, and such procedures may be discontinued at any time. Neither the
Company nor the Trustee nor any of their respective agents will have any
responsibility for the performance by DTC or its respective participants or
indirect participants of their respective obligations under the rules and
procedures governing their operations.
Certificated Notes
Subject to certain conditions contained in the Indenture, any person having
a beneficial interest in the Global Notes may, upon request to the Trustee,
exchange such beneficial interest for Notes in registered certificated form
("Certificated Notes"). Upon any such issuance, the Trustee is required to
register such Certificated Notes in the name of, and cause the same to be
delivered to, such person or persons (or the nominee of any thereof). In
addition, if (i) the Company notifies the Trustee in writing that DTC is no
longer willing or able to act as a depository and the Company is unable to
locate a qualified successor within 90 days or (ii) the Company, at its option,
notifies the Trustee in writing that it elects to cause the issuance of Notes in
the form of Certificated Notes under the Indenture, then, upon surrender by the
Global Note holder of the Global Notes, Notes in such form will be issued to
each person that the Global Note holder and the DTC identify as being the
beneficial owner of the related Notes.
Neither the Company nor the Trustee will be liable for any delay by the
Global Note holder or the DTC in identifying the beneficial owners of the Notes
and the Company and the Trustee may conclusively rely on, and will be protected
in relying on, instructions from the Global Note holder or the DTC for all
purposes.
Same Day Settlement and Payment
The Indenture requires that payments in respect of the Notes represented by
the Global Notes (including principal, premium, if any, interest and Liquidated
Damages, if any) be made by wire transfer of immediately available funds to the
accounts specified by the Global Note holder. With respect to Notes in
certificated form, the Company will make all payments of principal, premium, if
any, interest and Liquidated Damages, if any, by wire transfer of immediately
available funds to the accounts specified by the holders thereof or, if no such
account is specified, by mailing a check to each such holder's registered
address. The Notes represented by the Global Notes are expected to trade in the
DTC's Same-Day Funds Settlement System, and any permitted secondary market
trading activity in such Notes will, therefore, be required by the DTC to be
settled in immediately available funds. The Company expects that secondary
trading in any certificated Notes will also be settled in immediately available
funds.
Because of time zone differences, the securities account of a Euroclear
System ("Euroclear") or Cedel Bank societe anonyme ("Cedel") participant
purchasing an interest in a Global Note from a participant in DTC will be
credited, and any such crediting will be reported to the relevant Euroclear or
Cedel participant, during the securities settlement processing day (which must
be a business day for Euroclear and Cedel) immediately following the settlement
date of DTC. DTC has advised the Company that cash received in Euroclear or
Cedel as a result of sales of interests in a Global Note by or through a
Euroclear or Cedel participant to a participant in DTC will be received with
value on the settlement date of DTC but will be available in the relevant
Euroclear or Cedel cash account only as of the business day for Euroclear or
Cedel following DTC's settlement date.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full disclosure of all such terms, as well as any
other capitalized terms used herein for which no definition is provided.
"Acquired Debt" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, including,
without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other
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Person merging with or into or becoming a Subsidiary of such specified Person,
and (ii) Indebtedness secured by a Lien encumbering any asset acquired by such
specified Person.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided that
beneficial ownership of 10% or more of the Voting Stock of a Person shall be
deemed to be control.
"Asset Sale" means (i) the sale, lease, conveyance or other disposition of
any assets or rights (including, without limitation, by way of a sale and
leaseback) other than sales of inventory or obsolete or excess equipment or
equipment that is not longer useable, in each case, in the ordinary course of
business (provided that the sale, lease, conveyance or other disposition of all
or substantially all of the assets of the Company and its Subsidiaries taken as
a whole will be governed by the provisions of the Indenture described above
under the caption "-- Change of Control" and/or the provisions described above
under the caption "--Merger, Consolidation or Sale of Assets" and not by the
provisions of the Asset Sale covenant), and (ii) the issue or sale by the
Company or any of its Subsidiaries of Equity Interests of any of the Company's
Subsidiaries, in the case of either clause (i) or (ii), whether in a single
transaction or a series of related transactions (a) that have a fair market
value in excess of $1.0 million or (b) for net proceeds in excess of $1.0
million. Notwithstanding the foregoing, the following items shall not be deemed
to be Asset Sales: (i) a transfer of assets by the Company to a Wholly Owned
Subsidiary or by a Wholly Owned Subsidiary to the Company or to another Wholly
Owned Subsidiary, (ii) an issuance of Equity Interests by a Wholly Owned
Subsidiary to the Company or to another Wholly Owned Subsidiary, and (iii) a
Restricted Payment that is permitted by the covenant described above under
"-- Certain Covenants -- Restricted Payments."
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be required to be capitalized on a balance sheet in accordance with
GAAP.
"Capital Stock" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership or limited liability
company, partnership or membership interests (whether general or limited) and
(iv) any other interest or participation that confers on a Person the right to
receive a share of the profits and losses of, or distributions of assets of, the
issuing Person.
"Cash Equivalents" means (i) United States dollars, (ii) securities issued
or directly and fully guaranteed or insured by the United States government or
any agency or instrumentality thereof (provided that the full faith and credit
of the United States is pledged in support thereof) having maturities of not
more than six months from the date of acquisition, (iii) certificates of deposit
and eurodollar time deposits with maturities of six months or less from the date
of acquisition, bankers' acceptances with maturities not exceeding six months
and overnight bank deposits, in each case with any lender party to the New
Credit Facility or with any domestic commercial bank having capital and surplus
in excess of $500 million and a Thompson Bank Watch Rating of "B" or better,
(iv) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clauses (ii) and (iii) above
entered into with any financial institution meeting the qualifications specified
in clause (iii) above, (v) commercial paper having the highest rating obtainable
from Moody's Investors Service, Inc. or Standard & Poor's Corporation and in
each case maturing within six months after the date of acquisition and (vi)
money market funds at least 95% of the assets of which constitute Cash
Equivalents of the kinds described in clauses (i)-(v) of this definition.
"Change of Control" means the occurrence of any of the following: (i) the
sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all or
substantially all of the assets of the Company and its Subsidiaries taken as a
whole to any "person" (as such term is used in Section 13(d)(3) of the Exchange
Act); (ii) the adoption of a plan relating to the liquidation or dissolution of
the Company; (iii) the consummation of any transaction (including,
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without limitation, any merger or consolidation) the result of which is that any
"person" (as defined above) becomes the "beneficial owner" (as such term is
defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that a
person shall be deemed to have "beneficial ownership" of all securities that
such person has the right to acquire, whether such right is currently
exercisable or is exercisable only upon the occurrence of a subsequent
condition), directly or indirectly, of more than 50% of the Voting Stock of the
Company (measured by voting power rather than number of shares); (iv) the first
day on which a majority of the members of the Board of Directors of the Company
are not Continuing Directors or; (iv) the Company consolidates with, or merges
with or into, any Person, or any Person consolidates with, or merges with or
into, the Company, in any such event pursuant to a transaction in which any of
the outstanding Voting Stock of the Company is converted into or exchanged for
cash, securities or other property, other than any such transaction where the
Voting Stock of the Company outstanding immediately prior to such transaction is
converted into or exchanged for Voting Stock (other than Disqualified Stock) of
the surviving or transferee Person constituting a majority of the outstanding
shares of such Voting Stock of such surviving or transferee Person (immediately
after giving effect to such issuance).
"Consolidated Cash Flow" means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period plus (i) an amount
equal to any extraordinary loss plus any net loss realized in connection with an
Asset Sale (to the extent such losses were deducted in computing such
Consolidated Net Income), plus (ii) provision for taxes based on income or
profits of such Person and its Subsidiaries for such period, to the extent that
such provision for taxes was included in computing such Consolidated Net Income,
plus (iii) consolidated interest expense of such Person and its Subsidiaries for
such period, whether paid or accrued and whether or not capitalized (including,
without limitation, amortization of debt issuance costs and original issue
discount, non-cash interest payments, the interest component of any deferred
payment obligations, the interest component of all payments associated with
Capital Lease Obligations commissions, discounts and other fees and charges
incurred in respect of letter of credit or bankers' acceptance financings, and
net payments (if any) pursuant to Hedging Obligations), to the extent that any
such expense was deducted in computing such Consolidated Net Income, plus (iv)
depreciation, amortization (including amortization of transaction fees, goodwill
and other intangibles but excluding amortization of prepaid cash expenses that
were paid in a prior period) and other non-cash expenses (excluding any such
non-cash expense to the extent that it represents an accrual of or reserve for
cash expenses in any future period or amortization of a prepaid cash expense
that was paid in a prior period) of such Person and its Subsidiaries for such
period to the extent that such depreciation, amortization and other non-cash
expenses were deducted in computing such Consolidated Net Income, minus (v)
non-cash items increasing such Consolidated Net Income for such period, in each
case, on a consolidated basis and determined in accordance with GAAP.
Notwithstanding the foregoing, the provision for taxes on the income or profits
of, and the depreciation and amortization and other non-cash expenses of, a
Subsidiary of the referent Person shall be added to Consolidated Net Income to
compute Consolidated Cash Flow only to the extent that a corresponding amount
would be permitted at the date of determination to be dividended to the Company
by such Subsidiary without prior governmental approval (that has not been
obtained), and without direct or indirect restriction pursuant to the terms of
its charter and all agreements, instruments, judgments, decrees, orders,
statutes, rules and governmental regulations applicable to that Subsidiary or
its stockholders.
"Consolidated Net Income" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Subsidiaries for such
period, on a consolidated basis, determined in accordance with GAAP; provided
that (i) the Net Income (but not loss) of any Person that is not a Subsidiary or
that is accounted for by the equity method of accounting shall be included only
to the extent of the amount of dividends or distributions paid in cash to the
referent Person or a Wholly Owned Subsidiary thereof that is a guarantor, (ii)
the Net Income of any Subsidiary shall be excluded to the extent that the
declaration or payment of dividends or similar distributions by that Subsidiary
of that Net Income is not at the date of determination permitted without any
prior governmental approval (that has not been obtained) or, directly or
indirectly, by operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or governmental regulation
applicable to that Subsidiary or its stockholders, (iii) the Net Income of any
Person acquired in a pooling of interests transaction for any period prior to
the date of such acquisition shall be excluded and (iv) the cumulative effect of
a change in accounting principles shall be excluded.
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"Consolidated Net Worth" means, with respect to any Person as of any date,
the sum of (i) the consolidated equity of the common stockholders of such Person
and its consolidated Subsidiaries as of such date plus (ii) the respective
amounts reported on such Person's balance sheet as of such date with respect to
any series of preferred stock (other than Disqualified Stock) that by its terms
is not entitled to the payment of dividends unless such dividends may be
declared and paid only out of net earnings in respect of the year of such
declaration and payment, but only to the extent of any cash received by such
Person upon issuance of such preferred stock, less (x) all write-ups (other than
write-ups resulting from foreign currency translations and write-ups of tangible
assets of a going concern business made within 12 months after the acquisition
of such business) subsequent to the date of the Indenture in the book value of
any asset owned by such Person or a consolidated Subsidiary of such Person, (y)
all investments as of such date in unconsolidated Subsidiaries and in Persons
that are not Subsidiaries (except, in each case, Permitted Investments), and (z)
all unamortized debt discount and expense and unamortized deferred charges as of
such date, all of the foregoing determined in accordance with GAAP.
"Continuing Directors" means, as of any date of determination, any member
of the Board of Directors of the Company who (i) was a member of such Board of
Directors on the date of the Indenture or (ii) was nominated for election or
elected to such Board of Directors with the approval of a majority of the
Continuing Directors who were members of such Board at the time of such
nomination or election.
"Credit Facilities" means, with respect to the Company, one or more debt
facilities (including, without limitation, the New Credit Facility) or
commercial paper facilities with banks or other institutional lenders providing
for revolving credit loans, term loans, receivables financing (including through
the sale of receivables to such lenders or to special purpose entities formed to
borrow from such lenders against such receivables) or letters of credit, in each
case, as amended, restated, modified, renewed, refunded, replaced or refinanced
in whole or in part from time to time. Indebtedness under Credit Facilities
outstanding on the date on which Notes are first issued and authenticated under
the Indenture shall be deemed to have been incurred on such date in reliance on
the exception provided by clause (i) or (ii) of the definition of Permitted
Debt.
"Default" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible, or for which it is
exchangeable, at the option of the holder thereof), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or redeemable at the option of the holder thereof, in
whole or in part, on or prior to the date that is 91 days after the date on
which the Notes mature; provided, however, that any Capital Stock that would
constitute Disqualified Stock solely because the holders thereof have the right
to require the Company to repurchase such Capital Stock upon the occurrence of a
Change of Control or an Asset Sale shall not constitute Disqualified Stock if
the terms of such Capital Stock provide that the Company may not repurchase or
redeem any such Capital Stock pursuant to such provisions unless such repurchase
or redemption complies with the covenant described above under "-- Certain
Covenants -- Restricted Payments."
"Domestic Subsidiary" means any Subsidiary of the Company that either (a)
is organized within any state of the United States of America, or (b) has
guaranteed any Indebtedness of the Company or any other Domestic Subsidiary.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Existing Indebtedness" means up to $6.1 million in aggregate principal
amount of Indebtedness of the Company and its Subsidiaries (other than
Indebtedness under the New Credit Facility) in existence on the date of the
Indenture, until such amounts are repaid.
"Fixed Charges" means, with respect to any Person for any period, the sum,
without duplication, of (i) the consolidated interest expense of such Person and
its Subsidiaries for such period, whether paid or accrued (including, without
limitation, amortization of debt issuance costs and original issue discount,
non-cash interest payments, the interest component of any deferred payment
obligations, the interest component of
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all payments associated with Capital Lease Obligations, commissions, discounts
and other fees and charges incurred in respect of letter of credit or bankers'
acceptance financings, and net payments (if any) pursuant to Hedging
Obligations) and (ii) the consolidated interest of such Person and its
Subsidiaries that was capitalized during such period, and (iii) any interest
expense on Indebtedness of another Person that is Guaranteed by such Person or
one of its Subsidiaries or secured by a Lien on assets of such Person or one of
its Subsidiaries (whether or not such Guarantee or Lien is called upon) and (iv)
the product of (a) all dividend payments, whether or not in cash, on any series
of preferred stock of such Person or any of its Subsidiaries, other than
dividend payments on Equity Interests payable solely in Equity Interests of the
Company (other than Disqualified Stock) or to the Company or a Subsidiary of the
Company, times (b) a fraction, the numerator of which is one and the denominator
of which is one minus the then current combined federal, state and local
statutory tax rate of such Person, expressed as a decimal, in each case, on a
consolidated basis and in accordance with GAAP.
"Fixed Charge Coverage Ratio" means with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person for such period
to the Fixed Charges of such Person for such period. In the event that the
referent Person or any of its Subsidiaries incurs, assumes, Guarantees or
redeems any Indebtedness (other than revolving credit borrowings) or issues or
redeems preferred stock subsequent to the commencement of the period for which
the Fixed Charge Coverage Ratio is being calculated but prior to the date on
which the event for which the calculation of the Fixed Charge Coverage Ratio is
made (the "Calculation Date"), then the Fixed Charge Coverage Ratio shall be
calculated giving pro forma effect to such incurrence, assumption, Guarantee or
redemption of Indebtedness, or such issuance or redemption of preferred stock,
as if the same had occurred at the beginning of the applicable four-quarter
reference period. In addition, for purposes of making the computation referred
to above, (i) acquisitions that have been made by the Company or any of its
Subsidiaries, including through mergers or consolidations and including any
related financing transactions, during the four-quarter reference period or
subsequent to such reference period and on or prior to the Calculation Date
shall be deemed to have occurred on the first day of the four-quarter reference
period and Consolidated Cash Flow for such reference period shall be calculated
without giving effect to clause (iii) of the proviso set forth in the definition
of Consolidated Net Income, and (iii) the Consolidated Cash Flow attributable to
discontinued operations, as determined in accordance with GAAP, and operations
or businesses disposed of prior to the Calculation Date, shall be excluded, and
(iv) the Fixed Charges attributable to discontinued operations, as determined in
accordance with GAAP, and operations or businesses disposed of prior to the
Calculation Date, shall be excluded, but only to the extent that the obligations
giving rise to such Fixed Charges will not be obligations of the referent Person
or any of its Subsidiaries following the Calculation Date.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the date of the Indenture.
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, by way of a pledge of
assets or through letters of credit or reimbursement agreements in respect
thereof), of all or any part of any Indebtedness.
"Guarantors" means any Subsidiary that executes a Subsidiary Guarantee in
accordance with the provisions of the Indenture, and their respective successors
and assigns.
"Hedging Obligations" means, with respect to any Person, the obligations of
such Person under (i) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements and (ii) other agreements or
arrangements designed to protect such Person against fluctuations in interest
rates.
"Indebtedness" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of borrowed money or evidenced by
bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or banker's acceptances or
representing
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Capital Lease Obligations or the balance deferred and unpaid of the purchase
price of any property or representing any Hedging Obligations, except any such
balance that constitutes an accrued expense or trade payable, if and to the
extent any of the foregoing (other than letters of credit and Hedging
Obligations) would appear as a liability upon a balance sheet of such Person
prepared in accordance with GAAP, as well as all Indebtedness of others secured
by a Lien on any asset of such Person (whether or not such Indebtedness is
assumed by such Person) and, to the extent not otherwise included, the Guarantee
by such Person of any indebtedness of any other Person. The amount of any
Indebtedness outstanding as of any date shall be (i) the accreted value thereof,
in the case of any Indebtedness issued with original issue discount, and (ii)
the principal amount thereof, together with any interest thereon that is more
than 30 days past due, in the case of any other Indebtedness.
"Investment Banking Fee" means $1.35 million paid by the Company to CGW
Southeast Management III, L.L.C. or its designees on the Closing Date.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
If the Company or any Subsidiary of the Company sells or otherwise disposes of
any Equity Interests of any direct or indirect Subsidiary of the Company such
that, after giving effect to any such sale or disposition, such Person is no
longer a Subsidiary of the Company, the Company shall be deemed to have made an
Investment on the date of any such sale or disposition equal to the fair market
value of the Equity Interests of such Subsidiary not sold or disposed of in an
amount determined as provided in the final paragraph of the covenant described
above under "-- Certain Covenants -- Restricted Payments."
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction).
"Management Fee" means management and consulting service fees in an amount
not to exceed $680,000 annually payable by the Company to CGW Southeast III,
L.L.C. or its designees.
"Net Income" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (i) any gain (but not
loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with (a) any Asset Sale (including, without
limitation, dispositions pursuant to sale and leaseback transactions) or (b) the
disposition of any securities by such Person or any of its Subsidiaries or the
extinguishment of any Indebtedness of such Person or any of its Subsidiaries and
(ii) any extraordinary gain (but not loss), together with any related provision
for taxes on such extraordinary gain (but not loss).
"Net Proceeds" means the aggregate cash proceeds received by the Company or
any of its Subsidiaries in respect of any Asset Sale (including, without
limitation, any cash received upon the sale or other disposition of any non-cash
consideration received in any Asset Sale), net of the direct costs relating to
such Asset Sale (including, without limitation, legal, accounting and investment
banking fees, and sales commissions) and any relocation expenses incurred as a
result thereof, taxes paid or payable as a result thereof (after taking into
account any available tax credits or deductions and any tax sharing
arrangements), amounts required to be applied to the repayment of Indebtedness
secured by a Lien on the asset or assets that were the subject of such Asset
Sale and any reserve for adjustment in respect of the sale price of such asset
or assets established in accordance with GAAP.
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"New Credit Facility" means that certain Credit Agreement, by and among the
Company, the lenders named therein and NationsBank, N.A., as Agent, providing
for up to $15.0 million of revolving credit borrowings and letter of credit
issuances, including any related notes, guarantees, collateral documents,
instruments and agreements executed in connection therewith, and in each case as
amended, modified, renewed, refunded, replaced or refinanced, in whole or in
part, from time to time.
"Non-Recourse Debt" means Indebtedness (i) as to which neither the Company
nor any of its Subsidiaries (a) provides credit support of any kind (including
any undertaking, agreement or instrument that would constitute Indebtedness),
(b) is directly or indirectly liable (as a guarantor or otherwise), or (c)
constitutes the lender; and (ii) no default with respect to which (including any
rights that the holders thereof may have to take enforcement action against a
Subsidiary) would permit (upon notice, lapse of time or both) any holder of any
other Indebtedness of the Company or any of its Subsidiaries to declare a
default on such other Indebtedness or cause the payment thereof to be
accelerated or payable prior to its stated maturity; and (iii) as to which the
lenders have been notified in writing that they will not have any recourse to
the stock or assets of the Company or any of its Subsidiaries.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Permitted Business" means any business that manufactures and/or sells
silicon metal or microsilica, or any business that is reasonably similar thereto
or a reasonable extension, development or expansion thereof or ancillary
thereto.
"Permitted Investments" means (a) any Investment in the Company or in a
Subsidiary of the Company that is a guarantor (or, if such Subsidiary is a
foreign Subsidiary, 65% of the capital stock of which has been pledged to the
Trustee pursuant to a pledge agreement, in form and substance reasonably
satisfactory to the Trustee, securing the payment in full of all Obligations
with respect to the Notes); (b) any Investment in Cash Equivalents; (c) any
Investment by the Company or any Subsidiary of the Company in a Person, if as a
result of such Investment (i) such Person becomes a Subsidiary of the Company
and a guarantor or (ii) such Person is merged, consolidated or amalgamated with
or into, or transfers or conveys substantially all of its assets to, or is
liquidated into, the Company or a Subsidiary of the Company that is a guarantor;
(d) any Investment made as a result of the receipt of non-cash consideration
from an Asset Sale that was made pursuant to and in compliance with the covenant
described above under "-- Repurchase at the Option of Holders -- Asset Sales";
(e) any acquisition of assets solely in exchange for the issuance of Equity
Interests (other than Disqualified Stock) of the Company; and (f) other
Investments in any Person having an aggregate fair market value (measured on the
date each such Investment was made and without giving effect to subsequent
changes in value), when taken together with all other Investments made pursuant
to this clause (f) that are at the time outstanding, not to exceed $5.0 million.
"Permitted Liens" means (i) Liens on assets of the Company or any of its
Subsidiaries securing obligations under any Credit Facility that were permitted
by the terms of the Indenture to be incurred; (ii) Liens in favor of the
Company; (iii) Liens on property of a Person existing at the time such Person is
merged into or consolidated with the Company or any Subsidiary of the Company;
provided that such Liens were in existence prior to the contemplation of such
merger or consolidation and do not extend to any assets other than those of the
Person merged into or consolidated with the Company; (iv) Liens on property
existing at the time of acquisition thereof by the Company or any Subsidiary of
the Company, provided that such Liens were in existence prior to the
contemplation of such acquisition; (v) Liens to secure the performance of
statutory obligations, surety or appeal bonds, performance bonds or other
obligations of a like nature incurred in the ordinary course of business; (v)
Liens to secure Indebtedness (including Capital Lease Obligations) permitted by
clause (iv) of the second paragraph of the covenant entitled "Incurrence of
Indebtedness and Issuance of Preferred Stock" covering only the assets acquired
with such Indebtedness; (vi) Liens existing on the date of the Indenture and
replacement, refinancing or renewals thereof, in whole or in part; (vii) Liens
for taxes, assessments or governmental charges or claims that are not yet
delinquent or that are being contested in good faith by appropriate proceedings
promptly instituted and diligently concluded, provided that any reserve or other
appropriate provision as shall be required in conformity with GAAP shall have
been made therefor;
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(viii) Liens to secure Indebtedness permitted by clause (v) or (vii) of the
second paragraph of the covenant entitled "Incurrence of Indebtedness and
Issuance of Preferred Stock;" and (ix) other Liens with respect to obligations
that do not exceed $5.0 million at any one time outstanding.
"Permitted Refinancing Indebtedness" means any Indebtedness of the Company
or any of its Subsidiaries issued in exchange for, or the net proceeds of which
are used to extend, refinance, renew, replace, defease or refund other
Indebtedness of the Company or any of its Subsidiaries (other than intercompany
Indebtedness); provided that: (i) the principal amount (or accreted value, if
applicable) of such Permitted Refinancing Indebtedness does not exceed the
principal amount of (or accreted value, if applicable), plus accrued interest
on, the Indebtedness so extended, refinanced, renewed, replaced, defeased or
refunded (plus the amount of reasonable expenses incurred in connection
therewith); (ii) such Permitted Refinancing Indebtedness has a final maturity
date later than the final maturity date of, and has a Weighted Average Life to
Maturity equal to or greater than the Weighted Average Life to Maturity of, the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded; (iii) if the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded is subordinated in right of payment to the Notes,
such Permitted Refinancing Indebtedness has a final maturity date later than the
final maturity date of, and is subordinated in right of payment to, the Notes on
terms at least as favorable to the holders of Notes as those contained in the
documentation governing the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded; and (iv) such Indebtedness is incurred either by
the Company or by the Subsidiary who is the obligor on the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Significant Subsidiary" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Act, as such Regulation is in effect on the date hereof.
"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof) and (ii) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or (b)
the only general partners of which are such Person or of one or more
Subsidiaries of such Person (or any combination thereof).
"Trading Day," with respect to a securities exchange or automated quotation
system, means a day on which such exchange or system is open for a full day of
trading.
"Voting Stock" of any Person as of any date means the Capital Stock of such
Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) the sum of the
products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
"Wholly Owned Subsidiary" of any Person means a Subsidiary of such Person
all of the outstanding Capital Stock or other ownership interests of which
(other than directors' qualifying shares) shall at the time
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be owned by such Person or by one or more Wholly Owned Subsidiaries of such
Person and one or more Wholly Owned Subsidiaries of such Person.
DESCRIPTION OF OTHER INDEBTEDNESS
CREDIT FACILITIES
In connection with the Acquisition, the Company replaced the Terminated
Credit Facility and the Terminated Reimbursement Agreement with the New Credit
Facility. The closing of the New Credit Facility was completed simultaneously
with the Acquisition Closing. The New Credit Facility is being provided by
NationsBank, N.A., and provides availability for revolving borrowings and
letters of credit in an aggregate principal amount of up to $15.0 million (the
"Commitment"). The total amount of (i) revolving borrowings, (ii) undrawn
amounts of letters of credit and (iii) reimbursement obligations in respect of
letters of credit, may not exceed the Commitment.
The Commitment will expire in March 2003. In addition, the New Credit
Facility requires that outstanding revolving loans be repaid, and the Commitment
be permanently reduced, upon certain non-ordinary course asset sales by
Holdings, the Company or any future subsidiary of the Company. Revolving loans
bear interest at a variable rate equal, at the option of the Company, to (i)
LIBOR (having interest periods of 1, 2, 3 or 6 months, at the Company's option)
plus a margin of up to 2.25% per annum or (ii) the base rate (defined to mean
the higher of (a) NationsBank's publicly announced "prime rate" and (b) a rate
tied to the rates on overnight Federal funds transactions with members of the
Federal Reserve System) plus a margin of up to 1.25% per annum. Drawings under
letters of credit which are not promptly reimbursed by the Company accrue
interest at a variable rate equal to the base rate plus a margin of up to 3.25%
per annum. Beginning one year after the closing of the New Credit Facility,
these margins may be reduced based on the financial performance of the Company.
The New Credit Facility contains a number of covenants, including, among
others, covenants restricting the Company and its subsidiaries with respect to
the incurrence of indebtedness (including contingent obligations); the creation
of liens; substantially changing the nature of its business; the consummation of
certain transactions such as dispositions of substantial assets, mergers or
consolidations; the making of certain investments and loans; the making of
dividends and other distributions; the prepayment of indebtedness; transactions
with affiliates; agreeing to certain restrictions on its actions (including
agreeing not to grant liens); and limitations on sale leaseback transactions. In
addition, the New Credit Facility contains affirmative covenants including,
among others, requirements regarding compliance with laws; preservation of
corporate existence; maintenance of insurance; payment of taxes and other
obligations; maintenance of properties; environmental compliance; the keeping of
books and records; the maintenance of intellectual property; and the delivery of
financial and other information to the agent and the lenders under the New
Credit Facility.
The Company is also required to comply with certain financial tests and
maintain certain financial ratios. Certain of these financial tests and ratios
include: (i) maintaining a minimum net worth; (ii) maintaining a maximum ratio
of indebtedness (less cash and cash equivalents) to EBITDA; and (iii)
maintaining a minimum ratio of EBITDA to interest expense.
The New Credit Facility contains customary events of default. An event of
default under the New Credit Facility would allow the lenders thereunder to
accelerate or, in certain cases, would automatically cause the acceleration of,
the maturity of the indebtedness under the New Credit Facility and would
restrict the ability of the Company to meet its obligations to the holders of
the Notes.
Credit extended under the New Credit Facility is secured by substantially
all of the Company's assets and the real and personal property used in the
Company's operations which is, as a result of the IRB Financing, owned by the
Montgomery IDB and leased to the Company. In addition, the payment of principal
of, and interest on, indebtedness under the New Credit Facility is guaranteed on
a senior basis by Holdings and each of the Company's future subsidiaries. In
connection with its guarantee, Holdings has agreed that it will not, among other
things, engage in any business, activity or operation other than owning the
capital stock of
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SIMCALA, and that it will not merge or consolidate with any other person or
entity. In addition, Holdings' guarantee is secured by substantially all of
Holdings' assets, including all of the capital stock of SIMCALA.
INDUSTRIAL REVENUE BOND FINANCING
General
In connection with the Company's acquisition of the Facility, the SIDA
issued $6.0 million aggregate principal amount of the IRBs under the Bond
Indenture. Simultaneously with the issuance of the IRBs, the SIDA entered into a
Loan Agreement dated as of January 1, 1995 (the "Bond Loan Agreement") with the
Montgomery IDB and SIMCALA, pursuant to which the SIDA loaned the proceeds from
the sale of the IRBs to SIMCALA and the Montgomery IDB (the "Bond Loan") and
SIMCALA and the Montgomery IDB agreed to pay the principal of, and interest on,
the Bond Loan in an amount sufficient for the SIDA to pay the principal of,
premium, if any, and interest on the IRBs when the same become due and payable,
together with all amounts necessary to pay the holders of the IRBs upon an
Optional or Mandatory Tender (as defined herein). The right of the SIDA to
receive such payments from SIMCALA and the Montgomery IDB in amounts sufficient
to satisfy such obligations of the SIDA has been assigned to the Bond Trustee.
The proceeds of the Bond Loan were used by SIMCALA and the Montgomery IDB to
finance or refinance (i) the acquisition of the Facility, the improvements
thereon and certain equipment used in SIMCALA's operations and (ii) the
acquisition and construction of improvements thereof, including renovating,
expanding and refurbishing the Facility, such improvements and such equipment
(collectively, the "Project").
As required by the Bond Loan Agreement, SIMCALA caused the Terminated Bond
Letter of Credit to be issued pursuant to the Terminated Reimbursement Agreement
to the Bond Trustee to provide credit support for the obligations of the SIDA
under the Bond Indenture to the holders of the IRBs. As part of the
Transactions, SIMCALA replaced the Terminated Bond Letter of Credit with the New
Bond Letter of Credit issued under the New Credit Facility. In addition, as a
consequence of the IRB Financing, substantially all of the real and personal
property used in SIMCALA's operations (including the Facility) is owned by the
Montgomery IDB and leased to SIMCALA under the Consolidated, Amended and
Restated Lease dated as of January 1, 1995 between the Montgomery IDB, as
lessor, and SIMCALA, as lessee (the "Lease Agreement").
IRBs, Bond Indenture and Bond Loan Agreement
The IRBs, which mature on December 1, 2019, currently accrue interest at a
rate which is reset every seven days (a "Seven-Day Rate") as determined by the
Remarketing Agent based on its evaluation of applicable Rate Determination
Factors. Interest on the IRBs is payable monthly. Under certain circumstances
and subject to certain restrictions, SIMCALA may elect to have the IRBs accrue
interest (i) at a fixed rate for a one year period or (ii) at a permanent fixed
rate until the IRBs mature, in both cases determined by the Remarketing Agent
based on the Remarketing Agent's evaluation of the applicable Rate Determination
Factors. However, interest borne by the IRBs cannot exceed the lower of 15% per
annum and the maximum rate per annum specified in any letter of credit which
provides credit support for the IRBs. As of March 31, 1998, interest on the IRBs
accrued at a Seven-Day Rate equal to approximately 5.8% per annum. Whenever the
IRBs accrue interest at a Seven-Day Rate, they are redeemable at par at the
option of the Company at any time upon 30 days' notice.
Upon seven days' notice, each holder of IRBs may, whenever the IRBs accrue
interest at a Seven-Day Rate, tender all or part of the IRBs held by such holder
for purchase at a purchase price equal to 100% of the principal amount thereof,
together with accrued interest thereon to the purchase date (an "Optional
Tender"). In addition, under certain circumstances, each holder of IRBs will be
required to tender such holder's IRBs for a purchase price equal to 100% of the
principal amount thereof, together with accrued interest thereon to the purchase
date (a "Mandatory Tender"). Upon any Optional or Mandatory Tender of the IRBs,
the Remarketing Agent will use its best efforts to remarket the IRBs tendered
for purchase, unless an event of default exists under the Bond Indenture. If the
Remarketing Agent is unable to remarket any of the IRBs so tendered, the Bond
Trustee is required under the Indenture to draw sufficient funds under the
letter of credit
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then providing credit support for the IRBs to pay the purchase price of the IRBs
tendered. If the bank issuing such letter of credit fails to pay any such draw,
SIMCALA would be obligated to directly pay such purchase price. The Company's
failure to make such payment would constitute an event of default under the Bond
Loan Agreement and the Bond Indenture.
The Bond Indenture and the Bond Loan Agreement contain customary covenants
and events of default. Upon the occurrence of an event of default under the Bond
Indenture, the Bond Trustee (i) may, and under certain circumstances is required
to, (a) declare the principal of, premium, if any, and interest on, all IRBs to
be immediately due and payable and (b) make a drawing under the letter of credit
which then supports the IRBs to pay such amounts, and (ii) may exercise the
other remedies available to it under the Bond Indenture. Similarly, upon the
occurrence of an event of default under the Bond Loan Agreement, the Bond
Trustee, as assignee of the SIDA's right to receive payments thereunder, may
declare the principal of, premium, if any, and interest on, the Bond Loan to be
immediately due and payable and may exercise the other remedies available to it
under the Bond Indenture. In addition, the New Credit Facility, the Bond
Indenture and the Bond Loan Agreement are cross-defaulted to each other.
Accordingly, an event of default under the Bond Indenture, the Bond Loan
Agreement or the New Credit Facility could result in a drawing on the New Bond
Letter of Credit, thus resulting in a reimbursement obligation of SIMCALA under
the New Credit Facility. Such an obligation would be a secured obligation of
SIMCALA to the extent of the collateral securing the New Credit Facility. Also,
an event of default under either the Bond Indenture or the Bond Loan Agreement
would cause an event of default under the New Credit Facility, thus allowing the
lenders thereunder to accelerate the maturity of the indebtedness thereunder
(including the reimbursement obligation resulting from the drawing under the New
Bond Letter of Credit) and restricting the ability of the Company to meet its
obligations to the holders of the Notes.
Lease Agreement
The Lease Agreement expires on June 1, 2010, unless terminated earlier
pursuant to its terms, and requires rental payments equal to the sum of (i)
amounts necessary to service indebtedness incurred to pay or reimburse costs
related to the Project (including indebtedness incurred under the Bond Loan
Agreement) and (ii) $2,000 per year, together with all costs and expenses of the
Montgomery IDB incurred in connection with the Lease Agreement. The former
amounts are payable directly to the party to whom such amounts are due when they
become due, but nevertheless constitute rental payments to the Montgomery IDB,
while the latter amounts are payable to the Montgomery IDB annually in advance
on June 1 of each year. The Lease Agreement further provides that SIMCALA must,
at its expense, (i) keep the Project in as reasonably safe a condition as its
operations permit; (ii) maintain the Project in good condition, repair and
working order; (iii) make or cause to be made all needful and proper repairs,
renewals and replacements to the Project; (iv) pay all utility and other charges
for the operation, use and upkeep of the Project; and (v) pay all taxes and
governmental charges lawfully assessed or levied against the Project. In
addition, SIMCALA is required to keep the Project insured in an amount equal to
the full replacement cost thereof against customary casualties, is required to
maintain public liability insurance in the minimum amount of $2.0 million
combined single limit coverage and is required to maintain public liability
insurance in such amount with respect to each vehicle used in connection with
the Project.
At all times, SIMCALA has the right to terminate the Lease Agreement and
purchase the Project from the Montgomery IDB upon 30 days' notice for a purchase
price of $2,000 plus the amount necessary to pay in full the principal of,
premium, if any, and interest on, the IRBs. If this purchase option has not been
exercised by the last day of the lease term, it is automatically deemed
exercised.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of certain United States federal income tax
considerations relating to the purchase, ownership and disposition of the
Exchange Notes, but does not purport to be a complete analysis of all the
potential tax considerations relating thereto. This summary is based on the
Internal Revenue Code of 1986, as amended (the "Code"), existing, temporary, and
proposed Treasury Regulations, and laws, rulings
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and decisions now in effect, all of which are subject to change. This summary
deals only with holders that will hold Exchange Notes as "capital assets"
(within the meaning of Section 1221 of the Code). This summary does not address
tax considerations applicable to investors that may be subject to special tax
rules, such as banks, tax-exempt organizations, insurance companies, dealers in
securities or currencies, or persons that will hold Exchange Notes as a position
in a hedging transaction, "straddle" or "conversion transaction" for tax
purposes.
For the purposes of this discussion, a "U.S. Holder" means any holder of an
Exchange Note that is (a) a citizen or resident of the United States, (b) a
corporation, partnership or other entity created or organized in or under the
laws of the United States or any state thereof (except, in the case of a
partnership, to the extent future Treasury Regulations provide otherwise), (c)
an estate the income of which is subject to United States federal income
taxation regardless of its source, or (d) a trust other than a "foreign trust,"
as such term is defined in Section 7701(a)(31) of the Code. A "U.S. Alien
Holder" means any holder of an Exchange Note that is not a U.S. Holder.
THE FOLLOWING DISCUSSION OF CERTAIN FEDERAL INCOME TAX CONSEQUENCES IS FOR
GENERAL INFORMATION ONLY AND IS NOT TAX ADVICE. ACCORDINGLY, INVESTORS
CONSIDERING THE PURCHASE OF EXCHANGE NOTES SHOULD CONSULT THEIR OWN TAX ADVISORS
WITH RESPECT TO THE APPLICATION OF THE UNITED STATES FEDERAL INCOME AND ESTATE
TAX LAWS TO THEIR PARTICULAR SITUATIONS AS WELL AS ANY TAX CONSEQUENCES ARISING
UNDER THE LAWS OF ANY STATE, LOCAL OR FOREIGN TAXING JURISDICTION OR UNDER ANY
APPLICABLE TAX TREATY.
UNITED STATES FEDERAL INCOME TAXATION OF U.S. HOLDERS
Payment of Interest
Interest on an Exchange Note generally will be includable in the income of
the U.S. Holder of such Exchange Note as ordinary income at the time such
interest is received or accrued, in accordance with such holder's method of
accounting for United States federal income tax purposes.
Market Discount on Resale of Exchange Notes
A U.S. Holder of an Exchange Note should be aware that the purchase or
resale of an Exchange Note may be affected by the "market discount" provisions
of the Code. The market discount rules generally provide that if a U.S. Holder
of an Exchange Note purchases the Exchange Note at a market discount (i.e., a
discount other than at original issue), any gain recognized upon the disposition
of the Exchange Note by the U.S. Holder will be taxable as ordinary interest
income, rather than as capital gain, to the extent such gain does not exceed the
accrued market discount on such Exchange Note at the time of such disposition.
"Market discount" generally means the excess, if any, of an Exchange Note's
stated redemption price at maturity over the price paid by the holder therefor,
subject to a de minimis exception. A U.S. Holder who acquires an Exchange Note
at a market discount also may be required to defer the deduction of a portion of
the amount of interest that the holder paid or accrued during the taxable year
on indebtedness incurred or maintained to purchase or carry such Exchange Note,
if any.
Any principal payment on an Exchange Note acquired by a U.S. Holder at a
market discount will be included in gross income as ordinary income (generally,
as interest income) to the extent that it does not exceed the accrued market
discount at the time of such payment. The amount of the accrued market discount
for purposes of determining the tax treatment of subsequent payments on, or
dispositions of, an Exchange Note is to be reduced by the amounts so treated as
ordinary income.
A U.S. Holder of an Exchange Note acquired at a market discount may elect
to include market discount in gross income, for federal income tax purposes, as
such market discount accrues, either on a straight-line basis or on a constant
interest rate basis. This current inclusion election, once made, applies to all
market discount obligations acquired on or after the first day of the first
taxable year to which the election applies, and
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may not be revoked without the consent of the IRS. If a U.S. Holder of an
Exchange Note makes such an election, the foregoing rules regarding the
recognition of ordinary interest income on sales and other dispositions and the
receipt of principal payments with respect to such Exchange Note, and regarding
the deferral of interest deductions on indebtedness incurred or maintained to
purchase or carry such Exchange Note, will not apply.
Exchange Notes Purchased at a Premium
In general, if a U.S. Holder purchases an Exchange Note for an amount in
excess of its stated redemption price at maturity, then such holder may elect to
treat such excess as "amortizable bond premium," in which case the amount
required to be included in such holder's income each year with respect to
interest on the Exchange Note will be reduced by the amount of amortizable bond
premium allocable to such year. Any such election would apply to all bonds
(other than bonds the interest on which is excludable from gross income) held by
the holder at the beginning of the first taxable year to which the election
applies or which thereafter are acquired by the holder, and such election is
irrevocable without the consent of the IRS. On December 30, 1997, final Treasury
Regulations were published, effective generally for debt instruments acquired on
or after March 2, 1998, relating to the amortization of bond premium. All U.S.
Holders who purchase Exchange Notes at a premium should consult their tax
advisors regarding the election to amortize premium and the method of
amortization to be employed.
Sale, Exchange or Retirement of the Exchange Notes
Upon the sale, exchange or redemption of an Exchange Note, a U.S. Holder
generally will recognize capital gain or loss equal to the difference between
(i) the amount of cash proceeds and the fair market value of any property
received on the sale, exchange or redemption (except to the extent such amount
is attributable to either Liquidated Damages, discussed below, or accrued
interest income not previously included in income which is taxable as ordinary
income) and (ii) such holder's adjusted tax basis in the Exchange Note. A
holder's adjusted tax basis in an Exchange Note generally will equal the cost of
the Exchange Note to such holder. Such capital gain or loss will be long-term
capital gain or loss if the holder's holding period in the Exchange Note is more
than one year at the time of sale, exchange or redemption. Under recently
enacted legislation, the net capital gain of an individual derived in respect of
the Exchange Notes generally will be taxed at a maximum rate of 28% if the
holding period for the Exchange Notes was greater than one year but not more
than 18 months, or 20% if the holding period was greater than 18 months.
Exchange of Notes for Exchange Notes
The exchange of Notes for Exchange Notes pursuant to the Exchange Offer
should not be considered a taxable exchange for federal income tax purposes
because the Exchange Notes should not constitute a material modification of the
terms of the Notes. Accordingly, such exchange should have no federal income tax
consequences to U.S. Holders of Notes, and the basis of such a holder in an
Exchange Note will be the same as such holder's adjusted tax basis in the Note
exchanged therefor.
Information Reporting and Backup Withholding
In general, information reporting requirements will apply to payments of
principal, premium, if any, and interest on an Exchange Note and payments of the
proceeds of the sale of an Exchange Note to certain noncorporate holders, and a
31% backup withholding tax may apply to such payments if the U.S. Holder (a)
fails to furnish or certify his correct taxpayer identification number to the
payer in the manner required, (b) is notified by the IRS that he has failed to
report payments of interest and dividends properly or (c) under certain
circumstances, fails to certify that he has not been notified by the IRS that he
is subject to backup withholding for failure to report interest and dividend
payments. Any amounts withheld under the backup withholding rules from a payment
to a U.S. Holder will be allowed as a credit against such holder's United States
federal income tax and may entitle the holder to a refund, provided that the
required minimum information is furnished to the IRS.
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Liquidated Damages
The Company believes that Liquidated Damages, if any, described above under
"Description of Senior Notes -- Registration Rights; Liquidated Damages" will be
taxable to the U.S. Holder as ordinary income in accordance with the holder's
method of accounting for federal income tax purposes. The IRS may take a
different position, however, which could affect the timing of a holder's income
with respect to Liquidated Damages, if any.
UNITED STATES FEDERAL INCOME TAXATION OF U.S. ALIEN HOLDERS
Payment of Interest
The payment of interest on an Exchange Note generally will not be subject
to United States federal income tax withholding, if (1) the interest is not
effectively connected with the conduct of a trade or business within the United
States, (2) the U.S. Alien Holder does not actually or constructively own 10% or
more of the total combined voting power of all classes of stock of the Company
entitled to vote, (3) the U.S. Alien Holder is not a controlled foreign
corporation that is related to the Company actually or constructively through
stock ownership and (4) either (i) the beneficial owner of the Exchange Note
certifies to the Company or its agent, under penalties of perjury, that it is
not a U.S. Holder and provides its name and address on United States Treasury
Form W-8 (or on a suitable substitute form) or (ii) a securities clearing
organization, bank or other financial institution that holds customers'
securities in the ordinary course of its trade or business (a "financial
institution") and holds the Exchange Note certifies under penalties of perjury
that such a Form W-8 (or suitable substitute form) has been received from the
beneficial owner by it or by a financial institution between it and the
beneficial owner and furnishes the payer with a copy thereof. Payments to a U.S.
Alien Holder not described in clauses (2) through (4) above will be subject to
withholding at a rate of 30% on the gross amount of such payment, unless the
rate of withholding is reduced or eliminated by an applicable income tax treaty
and the U.S. Alien Holder provides the Company with a properly completed Form
1001 certifying to its exemption from withholding under such treaty. For a U.S.
Alien Holder for which payments on the Exchange Notes constitute income
effectively connected with a United States trade or business of such holder,
such holder may provide a properly executed Form 4224 (or such successor forms
as the IRS designates) in order to avoid imposition of withholding tax at a rate
of 30%. Unless an applicable treaty provides otherwise, U.S. Alien Holders
providing such certification will be subject to United States net income
taxation at regular graduated rates on such effectively connected income (and,
in the case of corporate holders, may in addition be subject to the branch
profits tax).
Recently issued Treasury Regulations (the "Final Withholding Regulations")
modify the currently effective information reporting and backup withholding
procedures and requirements. The Final Withholding Regulations were originally
scheduled to be effective for payments made after December 31, 1998, subject to
certain transition rules. The IRS recently issued a notice, however, announcing
the intent of the Treasury Department and the IRS to amend the Final Withholding
Regulations so that they generally will not apply to payments made before
January 1, 2000. All U.S. Alien Holders should consult their tax advisors
regarding the application of the Final Withholding Regulations.
Sale, Exchange or Retirement of Exchange Notes
A U.S. Alien Holder generally will not be subject to United States federal
income tax on any capital gain realized in connection with the sale, exchange,
retirement, or other disposition of an Exchange Note, provided (i) such gain is
not effectively connected with the conduct by such holder of a trade or business
in the United States, and (ii) in the case of a U.S. Alien Holder that is an
individual, such holder is not present in the United States for 183 days or more
in the taxable year of the disposition.
Information Reporting and Backup Withholding
Payments on the Exchange Notes to U.S. Alien Holders generally should not
be subject to information reporting and backup withholding at the rate of 31% if
the certification described under "--Payment of Interest" above is received and
the payer does not have actual knowledge that the holder is a U.S. Holder.
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Payment outside the United States of the proceeds of the sale of an Exchange
Note to or through a foreign office of a "broker" (as defined in applicable
United States Treasury Regulations) should not be subject to information
reporting or backup withholding, except that if the broker is a United States
person, a controlled foreign corporation for United States federal income tax
purposes or a foreign person 50% or more of whose gross income is from a United
States trade or business, information reporting should apply to such payment
unless the broker has documentary evidence in its records that the beneficial
owner is not a U.S. Holder and certain other conditions are met, or the
beneficial owner otherwise establishes an exemption. Payment of proceeds from a
sale of an Exchange Note to or through the United States office of a broker is
subject to information reporting and backup withholding unless the U.S. Alien
Holder certifies as to its U.S. Alien Holder status or otherwise establishes an
exemption from information reporting and backup withholding. All U.S. Alien
Holders are urged to consult their own tax advisors regarding the possible
application of information reporting and backup withholding in light of their
particular circumstances under the Final Withholding Regulations.
LEGAL MATTERS
Certain legal matters in connection with the issuance of the Exchange Notes
have been passed upon for the Company by Alston & Bird LLP, Atlanta, Georgia.
EXPERTS
The financial statements for SIMCALA, Inc. as of December 31, 1997 and for
the year then ended included in this Prospectus and the related financial
statement schedule included elsewhere in this Registration Statement have been
audited by Deloitte & Touche LLP, independent auditors, as stated in their
reports appearing herein and elsewhere in the Registration Statement, and have
been so included in reliance upon the reports of such firm given upon their
authority as experts in accounting and auditing.
The financial statements for SIMCALA, Inc. as of December 31, 1996, and for
the year then ended included in this Prospectus and the related financial
statement schedule included elsewhere in this Registration Statement have been
audited by Crowe, Chizek and Company LLP, independent auditors, as stated in
their reports appearing herein and elsewhere in the Registration Statement, and
have been so included in reliance upon the reports of such firm given upon their
authority as experts in accounting and auditing.
The financial statements of SIMCALA, Inc. appearing in this Prospectus and
Registration Statement have been audited by Ernst & Young LLP, independent
auditors, to the extent indicated in their report thereon dated March 8, 1996
also appearing elsewhere herein and in the Registration Statement. Such
financial statements have been included herein in reliance upon such reports
given upon the authority of such firm as experts in accounting and auditing.
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INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SIMCALA, Inc. (The Company):
Unaudited Interim Balance Sheet
Balance Sheet as of March 31, 1998........................ F-2
Notes to Balance Sheet.................................... F-3
SIMCALA, Inc. (The Predecessor):
Audited Financial Statements
Independent Auditors' Report.............................. F-8
Independent Auditors' Report.............................. F-9
Independent Auditors' Report.............................. F-10
Balance Sheets as of December 31, 1997 and December 31,
1996................................................... F-11
Statements of Operations for the years ended December 31,
1997 and December 31, 1996 and for the period from
February 10, 1995 (date of inception) to December 31,
1995 and the three-months ended March 31, 1998 and 1997
(unaudited)............................................ F-12
Statements of Changes in Stockholders' Equity for the
years ended December 31, 1997 and December 31, 1996 and
for the period from February 10, 1995 (date of
inception) through December 31, 1995................... F-13
Statements of Cash Flows for the years ended December 31,
1997 and December 31, 1996 and for the period from
February 10, 1995 (date of inception) to December 31,
1995 and the three-months ended March 31, 1998 and 1997
(unaudited)............................................ F-14
Notes to Financial Statements............................... F-15
</TABLE>
F-1
<PAGE> 97
SIMCALA, INC.
BALANCE SHEET
AS OF MARCH 31, 1998
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 15,796,000
Accounts receivable....................................... 5,809,000
Receivables from employees................................ 1,800,000
Taxes receivable.......................................... 1,007,000
Inventories............................................... 2,871,000
Deferred income taxes..................................... 2,246,000
Other current assets...................................... 355,000
------------
Total current assets.............................. 29,884,000
Property, plant and equipment............................... 53,075,000
Intangible assets........................................... 39,708,000
------------
Total assets...................................... $122,667,000
============
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable and accrued expenses....................... $ 9,348,000
Current maturities of long-term debt........................ 90,000
------------
Total current liabilities......................... 9,438,000
Long-term debt, net of current portion...................... 81,083,000
Deferred income taxes....................................... 13,339,000
------------
Total liabilities................................. 103,860,000
------------
Commitments and Contingencies (Note 6)
Stockholder's equity:
Common stock, par value $.01 per share;
20,000 shares authorized; 10,889 shares issued and
outstanding............................................... 109
Additional paid-in capital.................................. 18,806,891
Retained earnings........................................... --
------------
Total stockholder's equity........................ 18,807,000
------------
Total liabilities and stockholder's equity........ $122,667,000
============
</TABLE>
F-2
<PAGE> 98
SIMCALA, INC.
(THE COMPANY)
NOTES TO BALANCE SHEET
1. ORGANIZATION AND OPERATIONS
On March 31, 1998, SAC Acquisition Corp. ("SAC"), a subsidiary of Simcala
Holdings, Inc. ("Holdings") purchased all of the outstanding common stock of
SIMCALA, Inc. ("SIMCALA" or the "Company") (the "Acquisition"). On such date,
SAC was merged into SIMCALA. Holdings and SAC conducted no significant business
other than in connection with the Acquisition.
The Company is a producer of silicon metal for sale to the aluminum and
silicone industries. The Company sells to customers in the metal industry who
are located primarily throughout the United States. Credit is extended based on
an evaluation of the customer's financial condition. At March 31, 1998, three
customers accounted for 40.7%, 17.3%, and 9.5% of the outstanding receivables.
The Company maintains credit insurance for all customer accounts receivable.
The Acquisition of the Predecessor for approximately $66.7 million in cash,
including approximately $6 million for fees and other costs directly associated
with the Acquisition, has been accounted for as a purchase. Accordingly, the
purchase price has been allocated to the identifiable assets and liabilities
based on fair values at the acquisition date. The excess of the purchase price
over the fair value of the identifiable net assets in the amount of $35.0
million has been classified as goodwill. Additionally, the effect of the
carryover basis of senior management of $3.2 million has been considered in the
allocation of the purchase price.
The Acquisition was financed through the issuance of senior notes in the
amount of $75,000,000 (see Note 4) and equity contributed of $22,000,000.
In connection with the Acquisition, the purchase method of accounting was
used to establish and record a new cost basis for the assets acquired and
liabilities assumed. The allocation of the purchase price and acquisition costs
to the assets acquired and liabilities assumed is preliminary at March 31, 1998,
and is subject to change pending the finalization of appraisals and other
studies of fair value and finalization of management's plans which may result in
the recording of additional liabilities as part of the allocation of the
purchase price. The excess of the purchase price over the preliminary fair
market value of assets acquired and liabilities assumed was recorded as
goodwill.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Unaudited Balance Sheet. In the opinion of management, the unaudited
balance sheet included herein reflects all normal recurring accruals necessary
for a fair statement of the financial position of the interim period reflected.
Certain information and footnote disclosure normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been omitted from this balance sheet pursuant to applicable rules and
regulations of the Securities and Exchange Commission.
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 as of the date
of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Cash Equivalents. The Company considers all highly liquid debt instruments
with a maturity of three months or less when purchased to be cash equivalents.
Inventories. Inventories are stated using the average cost method which
approximates the first-in, first-out (FIFO) inventory cost method.
Property, Plant, and Equipment. It is the policy of the Company to
capitalize expenditures for major renewals and betterments and to charge to
operating expenses the cost of current maintenance and repairs.
F-3
<PAGE> 99
SIMCALA, INC.
(THE COMPANY)
NOTES TO BALANCE SHEET -- (CONTINUED)
Interest costs associated with major property additions are capitalized while
the projects are in the process of acquisition and construction. The Company
evaluates the estimated useful lives and the carrying value of assets on a
periodic basis to determine whether events or circumstances warrant revised
estimated useful lives or whether any impairment exists. Management believes no
material impairment existed at March 31, 1998.
The Company provides for depreciation over the estimated useful lives of
plant and equipment by the straight-line method using the following useful lives
(in years):
<TABLE>
<CAPTION>
USEFUL
ASSET CATEGORY LIFE
- -------------- ------
<S> <C>
Land Improvements........................................... 20
Buildings................................................... 40
Machinery and equipment..................................... 14
Mobile equipment and vehicles............................... 6
Furniture and fixtures...................................... 10
Computer equipment.......................................... 7
Computer software........................................... 5
</TABLE>
The cost and accumulated depreciation and amortization relating to assets
retired or otherwise disposed of is eliminated from the respective accounts at
the time of disposition. Gains or losses from disposition are included in
current operating results.
Intangible Assets. Intangible assets include the excess of the cash
consideration over the estimated fair market value of the net assets acquired in
the Acquisition of $35.0 million which are amortized over twenty-five years. In
addition, debt issuance costs of $4.8 million have been recorded which are
amortized over 8 years. The Company evaluates the amortization period and the
carrying value of intangible assets on a periodic basis to determine whether
events or circumstances warrant revised estimates of useful lives or whether
impairment exists.
New Accounting Pronouncements. In June 1997, the Financial Accounting
Standards Board issued Statements of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income" (SFAS 130), and Statement of Financial
Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and
Related Information" (SFAS 131). SFAS 130 establishes standards for reporting
and displaying of comprehensive income and its components (revenues, expenses,
gains, and losses) in a full set of general-purpose financial statements. SFAS
131 establishes standards for the way public business enterprises report
information about operating segments. The Company adopted SFAS 130 at inception.
The adoption of this standard did not have an effect on its financial
statements. The Company will adopt SFAS 131 in its annual financial statements
for 1998. Management does not anticipate that the adoption of this standard will
have a significant effect on the financial statements.
Stock-Based Compensation. Stock-based compensation is accounted for in
accordance with APB Opinion No. 25, "Accounting for Stock Issued to Employees,"
and related interpretations. The Company has adopted the disclosure-only
provisions of SFAS 123, "Accounting for Stock-Based Compensation."
3. INVENTORIES
Inventories consist of the following as of March 31, 1998:
<TABLE>
<S> <C>
Raw Materials............................................... $1,283,000
Finished Goods.............................................. 1,292,000
Supplies.................................................... 296,000
----------
$2,871,000
==========
</TABLE>
F-4
<PAGE> 100
SIMCALA, INC.
(THE COMPANY)
NOTES TO BALANCE SHEET -- (CONTINUED)
4. LONG-TERM DEBT
As of March 31, 1998, long-term debt consists of the following:
<TABLE>
<S> <C>
Senior Notes which bear interest at 9 5/8% and are due
April 2006............................................ $75,000,000
Industrial development bonds which bear interest at a
variable rate. At March 31, 1998, the interest rate
was 5.75%. The bonds mature on December 1, 2019. Bonds
and applicable interest are secured by a letter of
credit................................................ 6,000,000
Various capital leases payable at interest rate of
9.91% to 10.0% expiring at various dates through 1999.
Aggregate monthly payments approximate $6000.......... 173,000
-----------
81,173,000
Less current portion................................... (90,000)
-----------
Long-term debt......................................... $81,083,000
===========
</TABLE>
The Senior Notes (the "Notes") mature on April 15, 2006, unless previously
redeemed. Interest on the Notes is payable semiannually on April 15 and October
15, commencing October 15, 1998. The Notes are redeemable at the option of the
Company, in whole or in part, on or after April 15, 2002, at the redemption
price, plus accrued interest and liquidated damages, as defined, if any. At any
time on or before April 15, 2001, the Company may redeem up to 30% of the
original aggregate principal amount of the Notes with the net proceeds of a
public offering of common stock of the Company or Holdings, provided that at
least 70% of the original aggregate principal amount of Notes remains
outstanding immediately after the occurrence of such redemption.
The Notes are generally unsecured obligations of the Company and rank
senior to all existing and future subordinated indebtedness of the Company.
In connection with the Acquisition, the Company entered into a credit
facility which provides availability for revolving borrowings and letters of
credit in an aggregate amount of up to $15,000,000 (the "Commitment"). The
credit facility expires in March 2003. At March 31, 1998, $6.1 million related
to letters of credit was outstanding under the credit facility.
The credit facility requires that the Commitment be permanently reduced,
upon certain non-ordinary course asset sales by Holdings, the Company or any
future subsidiary of the Company. Revolving loans will bear interest at a
variable rate equal, at the option of the Company, to (i) LIBOR (having interest
periods of 1, 2, 3, or 6 months, at the Company's option) plus a margin of up to
2.25% per annum or (ii) the base rate (defined to mean the higher of (i)
publicly announced "prime rate" and (ii) a rate tied to overnight Federal funds
transactions with members of the Federal Reserve System) plus a margin of up to
1.25% per annum. Drawings under letters of credit which are not promptly
reimbursed by the Company are expected to accrue interest at a variable rate
equal to the base rate plus a margin up to 3.25% per annum. Beginning 36 months
after the closing of the credit facility, these margins may be reduced based on
the financial performance of the Company.
The Notes and the credit facility contain a number of covenants, including,
among others, covenants restricting the Company and its subsidiaries with
respect to the incurrence of indebtedness (including contingent obligations);
the creation of liens; substantially changing the nature of its business; the
consummation of certain transactions such as dispositions of substantial assets,
mergers or consolidations; the making of certain investments and loans; the
making of dividends and other distributions; the prepayment of indebtedness;
transactions with affiliates; agreeing to certain restrictions on its actions
(including agreeing not to grant liens); and limitations on sale leaseback
transactions. In addition, the credit facility contains affirmative covenants
including, among others, requirements regarding compliance with laws;
preservation of corporate existence;
F-5
<PAGE> 101
SIMCALA, INC.
(THE COMPANY)
NOTES TO BALANCE SHEET -- (CONTINUED)
maintenance of insurance; payment of taxes and other obligations; maintenance of
properties; environmental compliance; the keeping of the books and records; the
maintenance of intellectual property; and the delivery of financial and other
information to the agent and the lenders under the credit facility.
The Company is required to comply with certain financial tests and maintain
certain financial ratios. Certain of these test and ratios include: (i)
maintaining a minimum net worth; (ii) maintaining a maximum ratio of
indebtedness to EBITDA; and (iii) maintaining a minimum ratio of EBITDA to
interest expense.
Credit extended under the credit facility is secured by substantially all
of the Company's assets and the real and personal property used in the Company's
operations.
The Company is a party to a capital lease for land and buildings at its
manufacturing facility in Mt. Meigs, Alabama (the "Lease"). The Lease is with
the Industrial Development Board ("IBD") for the city of Montgomery. Rental
payments of $2,000 a year are required and the term of the Lease expires June 1,
2010. The Lease contains a bargain purchase option whereby the property can be
purchased from the IDB for $1.
5. INCOME TAXES
The significant component of the Company's deferred tax assets and
liabilities are as follows:
<TABLE>
<S> <C>
Deferred tax liabilities
Accelerated tax depreciation.............................. $13,238,000
Other liabilities......................................... 101,000
-----------
13,339,000
Deferred tax assets
ATM credit carryforward................................... 1,090,000
Net operating loss carryforwards.......................... 861,000
Other assets.............................................. 295,000
-----------
2,246,000
-----------
Net deferred tax liability........................ $11,093,000
===========
</TABLE>
The Company has recorded a tax receivable of $1,007,000 at March 31, 1998
related to net operating loss and AMT carrybacks. Such amounts are payable to
the selling shareholders and as a result a corresponding payable has been
recorded at March 31, 1998.
6. COMMITMENTS AND CONTINGENCIES
As of March 31, 1998, the Company had entered into contracts totaling
approximately $1 million for the construction of certain production equipment
and had a commitment to purchase lumber totaling approximately $145,000.
The Company is involved in litigation arising in the normal course of
business. Management believes that the ultimate resolution of such litigation
will not have a material adverse effect on the financial statements.
7. STOCK INCENTIVE PLAN OF HOLDINGS
Holdings has adopted a Stock Incentive Plan (the "Plan") pursuant to which
options to purchase up to 8,000 shares of Holdings Stock (the "Option") may be
granted to the Senior Management or other employees (each an "Optionee")
selected for participation in the Plan by the Compensation Committee of the
Company's Board of Directors. At the time of the Acquisition, senior management
collectively was issued Options to acquire 3,070 shares of Holdings stock. The
Options are subject to a five-year vesting period and
F-6
<PAGE> 102
SIMCALA, INC.
(THE COMPANY)
NOTES TO BALANCE SHEET -- (CONTINUED)
the Options issued on the date of the Acquisition are exercisable at an initial
price per share of $1,000. The period in which the options may be exercised
terminates ten years subsequent to the grant date, if not earlier terminated due
to termination of employment. The Options will immediately and fully vest in the
event of a merger or consolidation of Holdings with, or the sale of
substantially all of the assets or stock of Holdings to, any person other than
Cravey, Green & Wahlen, Inc. ("CGW") or a CGW affiliate. The Plan also provides
for other equity-based forms of incentive compensation in addition to the
Options.
8. RELATED PARTY TRANSACTIONS
At March 31, 1998, the Company entered into a consulting agreement with CGW
Southeast Management III, L.L.C. ("CGW Management") whereby the Company will pay
a monthly retainer fee of $15,000 for financial and management consulting
services. The consulting agreement expires in 2003. At the Acquisition closing,
the Company paid to CGW Management an investment banking fee of $1.35 million
for its services in assisting the Company in structuring and negotiating the
Acquisition.
In connection with the exercise of stock options by certain members of
management, the Company is owed $1,800,000 by management. Such amount has been
recorded as a receivable as of March 31, 1998 and is expected to be repaid
within one year.
F-7
<PAGE> 103
INDEPENDENT AUDITORS' REPORT
Board of Directors
SIMCALA, Inc.
We have audited the accompanying balance sheet of SIMCALA, Inc. (the
"Company") as of December 31, 1997 and the related statements of operations,
changes in stockholders' equity, and cash flows for the year then ended. 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 audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the 1997 financial statements present fairly, in all
material respects, the financial position of the Company as of December 31,
1997, and the results of its operations and its cash flows for the year then
ended in conformity with generally accepted accounting principles.
/s/ DELOITTE & TOUCHE LLP
February 27, 1998
Atlanta, Georgia
F-8
<PAGE> 104
INDEPENDENT AUDITORS' REPORT
Board of Directors
SIMCALA, Inc.
We have audited the accompanying balance sheet of SIMCALA, Inc. (the
"Company") as of December 31, 1996 and the related statements of operations,
changes in stockholders' equity, and cash flows for the year then ended. 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 audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the 1996 financial statements present fairly, in all
material respects, the financial position of the Company as of December 31,
1996, and the results of its operations and its cash flows for the year then
ended in conformity with generally accepted accounting principles.
/s/ CROWE, CHIZEK AND COMPANY LLP
Oak Brook, Illinois
January 17, 1997, except for
Note 4 as to which the date
is January 22, 1997.
F-9
<PAGE> 105
REPORT OF INDEPENDENT AUDITORS
Board of Directors
SIMCALA, Inc.
We have audited the accompanying statements of operations, changes in
stockholders' equity and cash flows for the period from February 10, 1995 (date
of inception) through December 31, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the balance sheet is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the balance sheet. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall balance sheet presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the results of SIMCALA, Inc.'s operations and cash
flows for the period from February 10, 1995 through December 31, 1995, in
conformity with generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
Cleveland, Ohio
March 8, 1996
F-10
<PAGE> 106
SIMCALA, INC.
BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 634,877 $ 186,291
Accounts receivable (less allowance for doubtful accounts
of $77,436 and $107,000 in 1997 and 1996,
respectively).......................................... 5,830,386 5,045,578
Inventories............................................... 2,663,941 1,961,351
Prepaid income taxes...................................... 110,000
Deferred income taxes..................................... 1,288,000 280,000
Other current assets...................................... 127,628 118,435
----------- -----------
Total current assets.............................. 10,544,832 7,701,655
PROPERTY, PLANT, AND EQUIPMENT:
Land, building, and improvements.......................... 1,294,032 899,731
Machinery and equipment, furniture and fixtures........... 24,917,520 23,109,362
Construction in-progress.................................. 281,876 373,131
----------- -----------
26,493,428 24,382,224
Accumulated depreciation.................................. (4,045,499) (2,242,439)
----------- -----------
Property, plant, and equipment, net............... 22,447,929 22,139,785
INTANGIBLE ASSETS (net of accumulated amortization of
$540,297 and $293,853 in 1997 and 1996, respectively)..... 669,778 739,281
----------- -----------
$33,662,539 $30,580,721
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses..................... $ 6,124,945 $ 6,178,977
Revolving line of credit.................................. 3,243,692
Current maturities of interest-bearing long-term debt..... 2,340,752 577,853
Current maturities of noninterest-bearing debt due to
related party.......................................... 1,048,500
Income taxes payable...................................... 1,194,000
----------- -----------
Total current liabilities......................... 9,659,697 11,049,022
INTEREST-BEARING, LONG-TERM DEBT -- Net of current
portion................................................... 12,763,170 8,748,009
NONINTEREST-BEARING DEBT DUE TO RELATED PARTY -- Net of
current portion........................................... 4,459,348
DEFERRED INCOME TAXES....................................... 2,964,000 689,000
----------- -----------
Total liabilities................................. 25,386,867 24,945,379
COMMITMENTS AND CONTINGENCIES (Notes 4 and 13)
STOCKHOLDERS' EQUITY:
Preferred stock (Series B preferred stock, 3,000 shares
authorized -- 1,500 shares issued and outstanding at
December 31, 1996, par value $1.00 per share).......... 1,500,000
Common stock, 20,000 shares authorized -- 10,000 shares
issued and 10,000 outstanding, respectively, par value
$.01 per share)........................................ 100 100
Additional paid-in capital................................ 2,250,189 1,903,466
Retained earnings......................................... 6,025,383 2,231,776
----------- -----------
Total stockholders' equity........................ 8,275,672 5,635,342
----------- -----------
$33,662,539 $30,580,721
=========== ===========
</TABLE>
See notes to financial statements.
F-11
<PAGE> 107
SIMCALA, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
PERIOD FROM
YEAR ENDED FEBRUARY 10,
THREE MONTHS ENDED --------------------------- 1995
MARCH 31, (DATE OF
------------------------- DECEMBER 31, DECEMBER 31, INCEPTION) TO
1998 1997 1997 1996 1995
----------- ----------- ------------ ------------ -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net sales....................... $14,854,000 $15,655,000 $62,184,345 $52,407,269 $31,523,036
Cost of goods sold.............. 11,679,000 12,225,000 47,972,065 42,797,540 32,391,263
----------- ----------- ----------- ----------- -----------
Gross profit.......... 3,175,000 3,430,000 14,212,280 9,609,729 (868,227)
Selling and administrative
expense....................... 3,824,000 682,000 2,845,842 1,923,466 1,598,577
----------- ----------- ----------- ----------- -----------
Operating income (loss)......... (649,000) 2,748,000 11,366,438 7,686,263 (2,466,804)
Interest expense................ 314,000 415,000 1,709,586 1,511,596 1,110,592
Other income, net............... 282,000 30,000 228,461 444,451 359,054
----------- ----------- ----------- ----------- -----------
Income (loss) before income
taxes......................... (681,000) 2,363,000 9,885,313 6,619,118 (3,218,342)
Income tax provision
(benefit)..................... (100,000) 793,000 3,514,000 1,169,000
----------- ----------- ----------- ----------- -----------
Net income (loss)............... $ (581,000) $ 1,570,000 $ 6,371,313 $ 5,450,118 $(3,218,342)
=========== =========== =========== =========== ===========
</TABLE>
See notes to financial statements.
F-12
<PAGE> 108
SIMCALA, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
AND FOR THE PERIOD FEBRUARY 10, 1995
(DATE OF INCEPTION) THROUGH DECEMBER 31, 1995
<TABLE>
<CAPTION>
SERIES B ADDITIONAL RETAINED
PREFERRED COMMON PAID-IN EARNINGS
STOCK STOCK CAPITAL (DEFICIT) TOTAL
----------- ------ ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
BALANCE -- February 10, 1995......... $ 1,500,000 $100 $ 999,900 $ $ 2,500,000
Net loss................... $(3,218,342) (3,218,342)
----------- ---- ---------- ----------- -----------
BALANCE -- January 1, 1996........... 1,500,000 100 999,900 (3,218,342) (718,342)
Conversion of preferred stock...... 903,566 903,566
Net income................. 5,450,118 5,450,118
----------- ---- ---------- ----------- -----------
BALANCE -- December 31, 1996......... 1,500,000 100 1,903,466 2,231,776 5,635,342
Redemption of preferred stock...... (1,500,000) (1,500,000)
Preferred stock dividend........... (270,000) (270,000)
Payment to stockholders in
conjunction with extinguishment
of debt
(Note 7)........................ (2,307,706) (2,307,706)
Compensation expense stock
options......................... 346,723 346,723
Net income................. 6,371,313 6,371,313
----------- ---- ---------- ----------- -----------
BALANCE -- December 31, 1997......... $ -- $100 $2,250,189 $ 6,025,383 $ 8,275,672
=========== ==== ========== =========== ===========
</TABLE>
See notes to financial statements.
F-13
<PAGE> 109
SIMCALA, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
PERIOD FROM
FEBRUARY 10,
THREE MONTHS ENDED 1995
MARCH 31, YEAR ENDED DECEMBER 31, (DATE OF
------------------------- --------------------------- INCEPTION) TO
1998 1997 1997 1996 1995
----------- ----------- ------------ ------------ -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss)............................... $ (581,000) $ 1,570,000 $ 6,371,313 $ 5,450,118 $(3,218,342)
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating
activities:
Depreciation.................................. 448,000 360,000 1,766,377 1,350,782 1,069,857
Amortization of intangible assets............. 9,000 9,000 401,200 242,519 --
Debt discount................................. 14,000 55,000 89,349 332,396 206,876
Provision for doubtful accounts............... -- -- -- 91,644 1,644
Deferred income taxes......................... 800,000 702,000 1,267,000 409,000 --
Noncash stock option compensation............. 904,000 87,000 346,723 -- --
Change in assets and liabilities:
Increase (decrease) in accounts
receivable................................ 21,000 (990,000) (784,808) (758,012) (1,028,259)
Increase in taxes receivable................ (1,007,000) -- -- -- --
Increase in receivables from employees...... (1,800,000) -- -- -- --
Decrease (increase) in inventory............ (207,000) 134,000 (702,590) 524,124 (1,402,245)
Decrease (increase) in prepaid income
taxes..................................... -- 110,000 110,000 (110,000) --
Decrease (increase) in other assets......... 202,000 (191,000) (9,193) (183,550) 521,465
Increase in accounts payable and other
accrued expenses.......................... 2,365,000 (854,000) 1,139,968 1,885,802 2,440,736
----------- ----------- ----------- ----------- -----------
Net cash provided by (used in) operating
activities.............................. 1,168,000 992,000 9,995,339 9,234,823 (1,408,268)
INVESTING ACTIVITIES --
Purchase of property, plant, and equipment...... (1,184,000) (438,000) (2,074,521) (6,913,146) (4,153,831)
FINANCING ACTIVITIES:
Payments on non-interest-bearing debt........... -- (3,276,000) (5,597,197) -- --
Borrowings (repayments) under line of credit,
net........................................... -- 62,000 (3,243,692) (1,816,196) 2,579,856
Repayments of long-term debt.................... 39,000 3,095,000 (7,221,940) (341,941) --
Additional long-term borrowings................. -- -- 13,000,000 14,392 485,609
Redemption of preferred stock................... -- -- (1,500,000) -- --
Preferred stock dividend........................ -- -- (270,000) -- --
Payment to stockholders......................... -- -- (2,307,706) -- --
Debt issuance cost.............................. -- -- (331,697) -- (280,000)
----------- ----------- ----------- ----------- -----------
Net cash provided by (used in) financing
activities.............................. 39,000 (119,000) (7,472,232) (2,143,745) 2,785,465
----------- ----------- ----------- ----------- -----------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS..................................... 23,000 435,000 448,586 177,932 (2,776,634)
CASH AND CASH EQUIVALENTS:
Beginning of period............................. 635,000 186,000 186,291 8,359 2,784,993
----------- ----------- ----------- ----------- -----------
End of period................................... $ 658,000 $ 621,000 $ 634,877 $ 186,291 $ 8,359
=========== =========== =========== =========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for:
Interest...................................... $ 161,000 $ 421,000 $ 1,559,742 $ 1,237,845 $ 928,553
=========== =========== =========== =========== ===========
Income taxes.................................. 112,000 $ -- $ 770,000 $ 870,000 $ --
=========== =========== =========== =========== ===========
Noncash transactions:
Conversion of preferred stock into debt....... $ -- $ -- $ -- $ 3,000,000 $ --
=========== =========== =========== =========== ===========
Equipment acquired under capital lease........ $ -- $ -- $ 70,000 $ 150,250 $ --
=========== =========== =========== =========== ===========
</TABLE>
See notes to financial statements.
F-14
<PAGE> 110
SIMCALA, INC.
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND OPERATIONS
Organization. SIMCALA, Inc. (the "Company") commenced operations on
February 10, 1995 and purchased certain net assets from SiMETCO, Inc. (the
"Seller"), which had been operating under Chapter 11 of the Federal Bankruptcy
Code since September 1993.
The purchase price for this transaction was approximately $20 million and
included the assumption of approximately $2.9 million of debt from the estate of
the trustee (the "Estate"); the assumption of approximately $3.0 million of
third-party debt; the issuance of $6.0 million of third-party debt; the issuance
of $3.0 million of preferred stock to the Estate; the cash payment of
approximately $2.75 million to the Estate; and the assumption of approximately
$2.0 million of vendor debt and accrued expenses.
The acquisition was accounted for as a purchase, and accordingly, the
purchase price was allocated to assets acquired and liabilities assumed in
accordance with Accounting Principles Board ("APB") Opinion 16, "Business
Combinations." As a result, as of February 10, 1995, inventories were stated at
fair value and property, plant, and equipment were stated at allocated
acquisition cost.
Nature of Operations and Customer Concentration. The Company is a producer
of silicon metal for sale to the aluminum and silicone industries. The Company
sells to customers in the metals industry who are located primarily throughout
the United States. Credit is extended based on an evaluation of the customer's
financial condition. During 1997, three customers accounted for 29%, 24%, and
16% of net sales. During 1996, three customers accounted for 27%, 24%, and 12%
of net sales. During the period ended December 31, 1995, two customers accounted
for 42% and 19% of net sales, respectively. At December 31, 1997, three
customers accounted for 31%, 26%, and 12% of outstanding receivables. At
December 31, 1996, three customers accounted for 20%, 15%, and 14% of
outstanding receivables. The Company maintains credit insurance for all customer
accounts receivable.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 as of the date
of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Interim Financial Statements. In the opinion of management, the unaudited
condensed statements of operations and cash flows included herein reflect all
normal recurring accruals necessary for a fair statement of the results of the
interim periods reflected. Certain information and footnote disclosure normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been omitted from the condensed financial statements
pursuant to applicable rules and regulations of the Securities and Exchange
Commission.
Cash Equivalents. The Company considers all highly liquid debt instruments
with a maturity of three months or less when purchased to be cash equivalents.
Inventories. Inventories are stated using the average cost method which
approximates the first-in, first-out (FIFO) inventory cost method.
Property, Plant, and Equipment. It is the policy of the Company to
capitalize expenditures for major renewals and betterments and to charge to
operating expenses the cost of current maintenance and repairs. Interest costs
associated with major property additions are capitalized while the projects are
in the process of acquisition and construction. The Company evaluates the
estimated useful lives and the carrying value of assets on a periodic basis to
determine whether events or circumstances warrant revised estimated useful lives
F-15
<PAGE> 111
SIMCALA, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
or whether any impairment exists. Management believes no material impairment
existed at December 31, 1997.
The Company provides for depreciation over the estimated useful lives of
plant and equipment by the straight-line method using the following useful lives
(in years):
<TABLE>
<CAPTION>
USEFUL
ASSET CATEGORY LIFE
- -------------- ------
<S> <C>
Land improvements........................................... 20
Buildings................................................... 40
Machinery and equipment..................................... 14
Mobile equipment and vehicles............................... 6
Furniture and fixtures...................................... 10
Computer equipment.......................................... 7
Computer software........................................... 5
</TABLE>
The cost and the accumulated depreciation and amortization relating to
assets retired or otherwise disposed of is eliminated from the respective
accounts at the time of disposition. Gains or losses from disposition are
included in current operating results.
Intangible Assets. Intangible assets represent the costs of organizing and
forming the Company and the costs of issuing and assuming various debt
instruments. These costs are amortized over five years. The Company evaluates
the amortization period and the carrying value of intangible assets on a
periodic basis to determine whether events or circumstances warrant revised
estimates of useful lives or whether impairment exists. Management believes that
no material impairment of intangible assets existed at December 31, 1997.
New Accounting Standards. In June 1997, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards ("SFAS") 130,
"Reporting Comprehensive Income," and SFAS 131, "Disclosures about Segments of
an Enterprise and Related Information." SFAS 130 establishes standards for the
reporting and displaying of comprehensive income and its components (revenues,
expenses, gains and losses) in a full set of general-purpose financial
statements. SFAS 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 financial reports issued to stockholders. The Company will
adopt SFAS 130 and SFAS 131 in 1998. Management does not expect these new
pronouncements to significantly impact the presentation of the Company's
financial statements and notes thereto.
Stock-Based Compensation. Stock-based compensation is accounted for in
accordance with APB 25, "Accounting for Stock Issued to Employees," and related
interpretations. Effective January 1, 1996, the Company adopted the
disclosure-only provisions of SFAS 123, "Accounting for Stock-Based
Compensation." See Note 9 to the financial statements.
3. INVENTORIES
Inventories at December 31, 1997 and 1996 consisted of the following:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Raw materials............................................... $ 948,627 $ 630,262
Finished goods.............................................. 1,419,668 981,508
Supplies.................................................... 295,646 349,581
---------- ----------
$2,663,941 $1,961,351
========== ==========
</TABLE>
F-16
<PAGE> 112
SIMCALA, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
4. REVOLVING LINE OF CREDIT AND CREDIT AGREEMENT
On April 10,1997, the Company entered into a new credit agreement that
includes a $5,000,000 revolving line of credit (the "Revolving Line") through
June 1998, a $13,000,000 term loan payable through 2002, and a letter of credit
supporting the industrial development bonds. The borrowings under the Revolving
Line are limited to 85% of eligible accounts receivable and up to 60% of
eligible inventory, as defined. At December 31, 1997, the interest rate was
determined as the lower of prime (8.50% at December 31, 1997) plus .50% or the
advance rate on Eurodollars (5.90% at December 31, 1997) plus 2.50%. At December
31, 1997, the Company has not utilized any portion of the revolving line. To
maintain the Revolving Line, the Company must pay a fee of 1/2 of 1% of the
unused balance of the Revolving Line and to maintain the letter of credit the
Company must pay a fee of 2.50% of the letter of credit balance.
The credit agreement contains certain financial covenants requiring
limitations on capital expenditures, maintenance of the required fixed charge
coverage ratio, cash flow coverage ratio, and net worth requirements, as
defined. In addition, the Company is obligated to pay additional principal equal
to 50% of excess cash flows, as defined, at the end of the year. Due to a
prepayment of principal in December 1997, the Company was not obligated to pay
this amount. The Company was not in compliance with the debt agreement due to a
capital expenditure covenant violation at December 31, 1997; however, as of
January 9, 1998, the Company had obtained the appropriate waivers. The Company
was also not in compliance with the debt agreement at December 31, 1996,
however, as of January 22, 1997 the Company had obtained the appropriate
waivers.
5. INTEREST-BEARING, LONG-TERM DEBT
The following is a summary of interest-bearing, long-term debt:
<TABLE>
<CAPTION>
1997 1996
----------- ----------
<S> <C> <C>
Industrial development bonds which bear interest at a
variable rate. At December 31, 1997 and 1996, the interest
rate was 5.90%. The bonds mature on December 1, 2019.
Bonds and applicable interest secured by a letter of
credit.................................................... $ 6,000,000 $6,000,000
Note payable to the state of Alabama which bears interest at
8% and is secured by certain machinery and equipment.
Interest only payments of $3,333 payable monthly through
September 1997. Paid in full during 1997.................. 500,000
Various notes payable to former creditors of the Seller,
with interest rates ranging from prime plus 2% to prime
plus 3%, with a maximum of 14% on approximately $2,100,000
of this debt. Paid in full during 1997.................... 2,698,487
Term loan with a bank which bears interest at the current
Eurodollar advance rate plus a variable rate dictated by
the Company's cash flow leverage ratio (2.50% at December
31, 1997). Principal payments are due quarterly in varying
amounts through March 31, 2002. (See Note 4).............. 9,000,000
Various capital leases payable with interest rates of 9.91%
to 10.00% expiring at various dates through 1999.
Aggregate monthly payments approximate $6,000............. 103,922 127,375
----------- ----------
15,103,922 9,325,862
Less current portion........................................ 2,340,752 577,853
----------- ----------
Long-term debt.................................... $12,763,170 $8,748,009
=========== ==========
</TABLE>
F-17
<PAGE> 113
SIMCALA, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The future maturities of interest-bearing, long-term debt are as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
- ------------------------
<S> <C>
1998........................................................ $ 2,340,752
1999........................................................ 2,794,420
2000........................................................ 2,875,000
2001........................................................ 1,093,750
2002........................................................
Thereafter.................................................. 6,000,000
-----------
$15,103,922
===========
</TABLE>
The Company established an irrevocable letter of credit for $6,148,000
expiring on the earliest of December 31, 1999 or the cancellation date. This
letter of credit fully supports the industrial development bonds plus applicable
interest.
The Company is a party to a capital lease for land and buildings at its
manufacturing facility in Mt. Meigs, Alabama (the "Lease"). The Lease is with
the Industrial Development Board ("IDB") for the city of Montgomery. Rental
payments of $2,000 a year are required and the term of the Lease expires June 1,
2010. The Lease contains a bargain purchase option whereby the property can be
purchased from the IDB for $1.
The Company capitalized $66,000 and $102,000 of interest expense in 1996
and 1995, respectively.
6. NONINTEREST BEARING DEBT DUE TO RELATED PARTY
The following is a summary of noninterest-bearing, long-term debt due to
related party as of December 31, 1996:
<TABLE>
<S> <C>
Series A noninterest-bearing note payable with face value of
$3,210,000. Face value discounted at approximately 8% to
reflect the net present value of future payments at the
market rate of interest at the date of acquisition........ $2,215,272
Series B noninterest-bearing note payable with face value of
$1,465,000. Face value discounted at approximately 8% to
reflect the net present value of future payments at the
market rate of interest at the date of acquisition........ 1,104,376
Noninterest-bearing subordinated note payable with face
value of $3,000,000. Face value discounted at
approximately 8% to reflect the net present value of
future payments at the market rate of interest at the date
of conversion............................................. 2,188,200
----------
5,507,848
Less current portion........................................ 1,048,500
----------
$4,459,348
==========
</TABLE>
See Note 7 to the financial statements regarding repayment of these notes.
7. RELATED PARTY TRANSACTIONS
During October 1996, a partnership formed primarily by the stockholders of
the Company purchased from the Estate the Series A and Series B notes payable
and the noninterest-bearing subordinated note with face amounts aggregating
$7,675,000 for $3,130,000, respectively. With the proceeds from the refinancing
discussed in Note 4, the Company paid the face amount of the obligations due
under these note arrangements. Prepayment penalties and other fees of $464,000
were also paid to the partnership in 1997. The stockholders' portion of the
payment amount greater than the recorded carrying value of the notes of
$2,307,706 has been recorded as a reduction of stockholders' equity.
In connection with the commencement of operations, the Company entered into
a Management Agreement (the "Agreement") with its majority stockholder to
provide management services to the
F-18
<PAGE> 114
SIMCALA, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Company. The Agreement is for five years expiring in 2000, with one-year renewal
options thereafter. The Company incurred stockholder management fees of
$250,000, $250,000 and $50,000 during the years ended December 31, 1997 and 1996
and the period ended December 31, 1995, respectively. At December 31, 1997 and
1996, the Company has a liability of $31,250 and $93,750, respectively, payable
to this stockholder for these management services.
8. FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company has estimated the fair value of its financial instruments, the
carrying value of which differed from fair value, using available market
information and appropriate valuation methodologies. Considerable judgment is
required in developing the estimates of fair value presented herein and,
therefore, the values are not necessarily indicative of the amounts that could
be realized in a current market exchange.
The carrying amount and the estimated fair value of such financial
instruments as of December 31, 1997 and 1996 is as follows:
<TABLE>
<CAPTION>
CARRYING ESTIMATED
AMOUNT FAIR VALUE
----------- -----------
<S> <C> <C>
December 31, 1997:
Long-term debt, including current portion................. $15,103,922 $15,097,497
=========== ===========
December 31, 1996:
Long-term debt, including current portion................. $14,833,710 $14,017,686
=========== ===========
</TABLE>
The estimated fair value of the long-term debt is based upon interest rates
that currently are available for issuance of debt with similar terms and
remaining maturities.
9. STOCKHOLDERS' EQUITY AND STOCK OPTIONS
In 1995, the Company established the Simcala, Inc. 1995 Stock Option Plan
(the "Plan") under which stock options for 889 shares of common stock could be
granted. In connection with this Plan, the Company granted options to purchase
671 shares at an exercise price of $100 per share. In 1996, the Company granted
additional options to acquire 109 shares at $100 per share. Of the total
options, 211 options vest based on performance criteria. Compensation expense of
$346,723 associated with such options was recognized in 1997. As of December 31,
1997 and 1996, 415 and 296 options, respectively, are exercisable; however, none
have been exercised. The remaining options vest over the next four years. Unless
exercised, all options expire in 2001.
The Company applies APB 25 in accounting for its stock-based compensation
plans. Effective January 1, 1996, the Company adopted the disclosure-only
provisions of SFAS 123. Had compensation costs for the Company's stock-based
compensation plans been determined based on the fair value at the grant date
consistent with the method set forth in SFAS 123, the Company's net income
(loss) for the years ended December 31, 1997 and 1996 and the period ended
December 31, 1995 would have been $6,366,324, $5,445,220, and $(3,224,097),
respectively.
The fair value of the options granted under the Plan during 1995 was
estimated at $19,957 using the Black-Scholes Option Pricing Model and the
following weighted average assumptions: risk-free interest rate of 7.1%;
dividend yield, expected volatility, and assumed forfeiture rate of 0%; and an
expected life of five years. The fair value of options granted under the Plan
during 1996 was estimated at $3,064 using the Black-Scholes Option Pricing Model
and the following weighted average assumptions: risk-free interest rate of 6.6%;
dividend yield, expected volatility, and assumed forfeiture rate of 0%; and an
expected life of five years.
F-19
<PAGE> 115
SIMCALA, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
10. RETIREMENT PLAN
The Company sponsors a qualified 401(k) savings plan covering all employees
who have completed six months of employment. If a participating employee decides
to contribute, a portion of the contribution is matched by the Company. Total
retirement plan expense for the years ended December 31, 1997 and 1996 and the
period ended December 31, 1995 was $97,217, $81,846 and $38,836, respectively.
11. INCOME TAXES
The provision for income taxes for the years ended December 31, 1997 and
1996 and the period ended December 31, 1995 consisted of the following:
<TABLE>
<CAPTION>
1997 1996 1995
---------- ----------- -----------
<S> <C> <C> <C>
Current.......................................... $2,247,000 $ 760,000
Deferred......................................... 1,267,000 1,490,753 $(1,081,753)
Change in valuation allowance.................... (1,081,753) 1,081,753
---------- ----------- -----------
Provision for income taxes............. $3,514,000 $ 1,169,000 $ --
========== =========== ===========
</TABLE>
The difference between the effective tax rate and the statutory rate is
reconciled below (amounts in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
-------------------- -------------------- --------------------
DOLLARS PERCENTAGE DOLLARS PERCENTAGE DOLLARS PERCENTAGE
------- ---------- ------- ---------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
Statutory rate............. $3,361 34.0% $ 2,250 34.0% $(1,094) (34.0)%
Permanent items............ 153 1.5 1 12 0.4
Valuation allowance........ (1,082) (16.3) 1,082 33.6
------ ----- ------- ------ ------- ------
Recorded tax
expense........ $3,514 35.5% $ 1,169 17.7% $ -- --%
====== ===== ======= ====== ======= ======
</TABLE>
The Company paid no Alabama state income taxes the years ended December 31,
1997 and 1996 and the period ended December 31, 1995 due to benefits granted by
the State of Alabama under the Mercedes Act.
Significant components of the Company's deferred tax assets and liabilities
at December 31, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
1997 1996
----------- ----------
<S> <C> <C>
Deferred tax liabilities:
Accelerated tax depreciation.............................. $ 2,918,000 $1,443,000
Other liabilities......................................... 8,000 37,000
----------- ----------
2,926,000 1,480,000
Deferred tax assets:
AMT credit carryforwards.................................. 1,090,000 760,000
Net operating loss carryforwards.......................... 118,000
Other assets.............................................. 160,000 193,000
----------- ----------
1,250,000 1,071,000
----------- ----------
Net deferred tax liability........................ $(1,676,000) $ (409,000)
=========== ==========
</TABLE>
12. MANDATORILY REDEEMABLE PREFERRED STOCK
In connection with the acquisition of the Company from the Estate, the
Company issued 1,500 shares of mandatory redeemable Series A preferred stock
with a par value of $2,000 per share to the Estate. The stock,
F-20
<PAGE> 116
SIMCALA, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
which has no dividend requirement and a liquidation preference of $2,000 per
share, was redeemable at a redemption price of $2,000 per share at various dates
through 2005.
During June 1996, the preferred stock was converted to a noninterest
bearing note, payable in nine installments beginning February 1997. The note was
recorded at the net present value of the future payments assuming interest at
the Company's market rate of 8.0%. The difference between the discounted and
face amount upon conversion was considered an addition to paid-in capital of the
Company.
13. COMMITMENTS AND CONTINGENCIES
At December 31, 1997, the Company had approximately 170 employees,
approximately 100 of which are covered by provisions of a collective bargaining
agreement. The collective bargaining agreement expires in 2000.
Total rental expense for property and equipment was $219,087 and, $229,273
for the years ended December 31, 1997 and 1996 respectively and $110,104 for the
period from February 10, 1995 to December 31, 1995. Minimum annual rentals under
noncancelable operating leases are $93,000 and $22,000 for the years ended 1998
and 1999, respectively.
As of December 31, 1997, the Company has entered into contracts totaling
approximately $2 million for the construction of certain production equipment.
The Company is involved in litigation arising in the normal course of
business. Management believes that the ultimate resolution of such litigation
will not have a material adverse effect on the financial statements.
14. SUBSEQUENT EVENT
On February 10, 1998, the Company's stockholders entered into an agreement
to sell the outstanding capital stock of the Company (the "Acquisition"). The
purchase price of the Acquisition is $82 million less indebtedness at the
acquisition closing date, less certain legal and investment banking fees
incurred by the stockholders and less an approximate $1 million price
adjustment. It is expected that the Acquisition will close on or about March 31,
1998. A majority of the Company's long-term debt is expected to be refinanced in
connection with the Acquisition. The Company granted an additional 109 shares of
options on March 31, 1998. All options were exercised in conjunction with the
Acquisition and the Company recognized $904,000 of compensation expense in the
three months ended March 31, 1998.
15. UNAUDITED PRO FORMA FINANCIAL INFORMATION
In connection with the Acquisition, the purchase method of accounting was
used to establish and record a new cost basis for the assets acquired and
liabilities assumed. The allocation of the purchase price and acquisition costs
to the assets acquired and liabilities assumed is preliminary at March 31, 1998,
and is subject to change pending the finalization of appraisals and other
studies of fair value and finalization of management's plans which may result in
the recording of additional liabilities. The excess of the purchase price over
the preliminary fair market value of assets acquired and liabilities assumed was
recorded as goodwill.
F-21
<PAGE> 117
SIMCALA, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The following unaudited pro forma financial data for the three months ended
March 31, 1997 and 1998 and twelve months ended December 31, 1997 has been
prepared assuming that the Acquisition was consummated on January 1, 1997 and
pro forma financial data for the twelve months ended December 31, 1996 has been
prepared assuming that the Acquisition was consummated on January 1, 1996. This
pro forma financial data is presented for informational purposes and is not
necessarily indicative of the operating results that would have occurred had the
Acquisition been consummated on January 1, 1997 or 1996, nor is it necessarily
indicative of future operations.
<TABLE>
<CAPTION>
THREE MONTHS ENDED TWELVE MONTHS ENDED
------------------------- ---------------------------
MARCH 31, MARCH 31, DECEMBER 31, DECEMBER 31,
1998 1997 1997 1996
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
Net Sales................................... $14,854,000 $15,655,000 $62,184,000 $52,407,000
Net Loss.................................... $(2,378,000) $ (302,000) $ (890,000) $(3,176,000)
</TABLE>
F-22
<PAGE> 118
------------------------------------------------------
- ------------------------------------------------------
NO DEALER, SALESPERSON, OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE INITIAL
PURCHASER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO
WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE AN IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY
TIME SUBSEQUENT TO THE DATE HEREOF.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Explanatory Note...................... 2
Available Information................. 3
Cautionary Notice Regarding Forward-
Looking Statements.................. 3
Certain Market and Industry Data...... 4
Prospectus Summary.................... 5
Risk Factors.......................... 17
The Exchange Offer.................... 21
Plan of Distribution.................. 33
The Transactions...................... 33
Use of Proceeds....................... 35
Capitalization........................ 36
Unaudited Condensed Pro Forma
Financial Information............... 37
Selected Historical Financial
Information......................... 40
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 43
Business.............................. 50
Management............................ 60
Certain Transactions.................. 63
Principal Stockholder................. 64
Description of the Notes.............. 65
Description of Other Indebtedness..... 88
Certain United States Federal Income
Tax Considerations.................. 90
Legal Matters......................... 94
Experts............................... 95
Index to Financial Statements......... F-1
</TABLE>
UNTIL , 1998 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS) ALL DEALERS
EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS OR AS REQUIRED BY THE TERMS OF THE EXCHANGE OFFER.
======================================================
------------------------------------------------------
- ------------------------------------------------------
SIMCALA
[LOGO]
OFFER TO EXCHANGE
$75,000,000 IN AGGREGATE PRINCIPAL
AMOUNT OF
9 5/8% SENIOR NOTES
DUE 2006, SERIES B
FOR ALL $75,000,000 IN
AGGREGATE OUTSTANDING
PRINCIPAL AMOUNT
OF
9 5/8% SENIOR NOTES
DUE 2006, SERIES A
--------------------
PROSPECTUS
--------------------
, 1998
======================================================
<PAGE> 119
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
All amounts are estimates except the SEC registration fee.*
<TABLE>
<S> <C>
SEC Registration Fee........................................ $ 22,125
Accounting fees and expenses................................ 300,000
Legal fees and expenses..................................... 300,000
Printing and engraving expenses............................. 110,000
Blue Sky fees and expenses.................................. 5,000
Trustee, Exchange Agent, Transfer Agent and Registrar fees
and expenses.............................................. 10,000
Miscellaneous............................................... 100,000
--------
Total............................................. $847,125
========
</TABLE>
- ---------------
* Includes amounts incurred in connection with the original issuance of the
Notes.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 102 of the Delaware General Corporation Law ("DGCL") allows a
corporation to eliminate or limit the personal liability of directors of a
corporation to the corporation or to its stockholders for monetary damages for a
breach of fiduciary duty as a director, except (i) for breach of the director's
duty of loyalty, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) for certain unlawful
dividends and stock repurchases or (iv) for any transaction from which the
director derived an improper personal benefit. Article Sixth of the Certificate
of Incorporation of the Company provides that, to the full extent permitted by
the DGCL or any other applicable law, no director of the Company shall be
personally liable to the Company or its stockholders for or with respect to any
acts or omissions in the performance of his duties as a director of the Company.
Section 145 of the DGCL provides that in the case of any action other than
one by or in the right of the corporation, a corporation may indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that such
person is or was a director, officer, employee or agent of the corporation, or
is or was serving at the request of the corporation in such capacity on behalf
of another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action if he acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the corporation and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful.
Section 145 of the DGCL provides that in the case of an action by or in the
right of a corporation to procure a judgment in its favor, a corporation may
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by reason of the fact
that such person is or was a director, officer, employee or agent of the
corporation, or is or was surviving at the request of the corporation in such
capacity on behalf of another corporation, partnership, joint venture, trust or
other enterprise, against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection with the defense or settlement of such
action or suit if he acted under standards similar to those set forth in the
preceding paragraph, except that no indemnification may be made in respect of
any action or claim as to which such person shall have been adjudged to be
liable to the corporation unless a court determines that such person is fairly
and reasonably entitled to indemnification.
Article Seventh of the Certificate of Incorporation of the Company provides
that each person who is or was or had agreed to become a director or officer of
the Company, or each such person who is or was serving or who had agreed to
serve at the request of the Board of Directors or an officer of the Company as
an employee
II-1
<PAGE> 120
or agent of the Company or as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise (including
the heirs, executors, administrators or estate of such person), shall be
indemnified by the Company to the full extent permitted by the DGCL or other
applicable law. The Company may enter into one or more agreements with any
person which provide for indemnification greater or different than that provided
in Article Seventh of the Company's Certificate of Incorporation.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
On March 31, 1998, the Company issued and sold to the Initial Purchaser
$75.0 million aggregate principal amount of 9 5/8% Senior Notes due 2006, Series
A. These sales were exempt from registration under Section 4(2) of the
Securities Act. The Initial Purchaser offered those securities for resale in
transactions not requiring registration under the Securities Act to persons they
reasonably believed to be "Qualified Institutional Buyers" as defined in Rule
144A under the Securities Act or institutional "Accredited Investors" as defined
in subparagraph (a)(1), (2), (3) or (7) of Commission Rule 501 under the
Securities Act. The aggregate price to investors for those securities was $75.0
million and the Initial Purchaser received $2.25 million in discounts and
commissions.
On March 31, 1998, the Company also issued and sold pursuant to the
exercise of stock options, an aggregate of 889 shares of common stock to C.
Edward Boardwine, its President and Chief Executive Officer, Dwight L. Goff, its
Vice President, and R. Myles Cowan, II, its Vice President -- Finance. The
exercise price for each share subject to an option was $100. The Company relied
upon Section 4(2) and Regulation D to issue the securities.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) The following exhibits are filed as a part of this Registration
Statement:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
2.1 -- Stock Purchase Agreement dated as of February 10, 1998, as
amended by the amendment thereto dated as of March 4, 1998,
among SIMCALA, Inc., SAC Acquisition Corp. and the selling
stockholders party thereto.
2.2 -- Purchase Agreement dated March 24, 1998 between SAC
Acquisition Corp. and NationsBanc Montgomery Securities LLC.
2.3 -- Purchase Agreement Supplement dated as of March 31, 1998
between SIMCALA, Inc. and NationsBanc Montgomery Securities
LLC.
2.4 -- Agreement and Plan of Merger dated as of March 31, 1998
between SAC Acquisition Corp. and SIMCALA, Inc.
3.1 -- Certificate of Incorporation of the Company, as amended.
3.2 -- Bylaws of the Company.
4.1 -- Indenture dated as of March 31, 1998 between SAC Acquisition
Corp. and IBJ Schroder Bank & Trust Company, as trustee.
4.2 -- Supplemental Indenture dated as of March 31, 1998 between
SIMCALA, Inc. and IBJ Schroder Bank & Trust Company, as
trustee.
4.3 -- Registration Rights Agreement dated as of March 31, 1998
between SAC Acquisition Corp. and NationsBanc Montgomery
Securities LLC.
4.4 -- Registration Rights Agreement Supplement dated as of March
31, 1998 between SIMCALA, Inc. and NationsBanc Montgomery
Securities LLC.
4.5 -- Form of 9 5/8% Senior Notes due 2006, Series A (included in
Exhibit 4.1 as exhibit A-1 thereto).
5.1 -- Opinion and Consent of Alston & Bird LLP.*
10.1 -- Agreement for Investment Banking Services dated March 31,
1998 between SIMCALA, Inc. and CGW Southeast Management III,
L.L.C.
</TABLE>
II-2
<PAGE> 121
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
10.2 -- Agreement for Consulting Services dated March 31, 1998
between SIMCALA, Inc. and CGW Southeast III, L.L.C.
10.3 -- Credit Agreement dated as of March 31, 1998 among SIMCALA,
Inc., as borrower, SIMCALA Holdings, Inc., as guarantor, the
lenders party thereto, and NationsBank, N.A., as agent.
10.4 -- Pledge Agreement dated as of March 31, 1998 among SIMCALA
Holdings, Inc., SIMCALA, Inc. and NationsBank, N.A., as
agent.
10.5 -- Security Agreement dated as of March 31, 1998 among SIMCALA
Holdings, Inc., SIMCALA, Inc. and NationsBank, N.A., as
agent.
10.6 -- Mortgage, Security Agreement, Assignment of Leases and Rents
and Fixture Financing Statement given as of March 31, 1998
by SIMCALA, Inc. and The Industrial Development Board of the
City of Montgomery in favor of NationsBank, N.A.
10.7 -- Consolidated, Amended, and Restated Lease Agreement dated as
of January 1, 1995 between the Industrial Development Board
of the City of Montgomery, as lessor, and SIMCALA, Inc., as
lessee.
10.8 -- Loan Agreement dated as of January 1, 1995 between the State
Industrial Development Authority, as lender, and SIMCALA,
Inc. and the Industrial Development Board of the City of
Montgomery, as borrowers.
10.9 -- Contract for Electric Power dated February 8, 1995 between
Alabama Power Company and SIMCALA, Inc., as amended by the
amendment thereto dated July 8, 1997.**
10.10 -- Supply Agreement dated August 3, 1997 between Alcan Ingot &
Recycling and SIMCALA, Inc.**
10.11 -- Supply Agreement dated December 10, 1996 between Wabash
Alloys, L.L.C. and SIMCALA, Inc.**
10.12 -- Supply Agreement dated December 10, 1996 between Wabash
Alloys, L.L.C. and SIMCALA, Inc.**
10.13 -- Employment and Confidentiality Agreement dated February 10,
1998 between SAC Acquisition Corp. and Dwight L. Goff.
10.14 -- Employment and Confidentiality Agreement dated February 10,
1998 between SAC Acquisition Corp. and R. Myles Cowan.
10.15 -- Employment and Confidentiality Agreement dated February 10,
1998 between SAC Acquisition Corp. and C. Edward Boardwine.
10.16 -- 1995-2000 Basic Labor Agreement and Seniority Rules and
Regulations dated August 8, 1995 between United Steelworkers
of America (AFL-CIO) and SIMCALA, Inc.
10.17 -- Escrow Agreement dated as of March 31, 1998 between (i) the
selling stockholders party to the Stock Purchase Agreement
dated as of February 10, 1998 among SIMCALA, Inc., SAC
Acquisition Corp. and such selling stockholders and (ii)
SIMCALA, Inc.
10.18 -- Shareholders Agreement dated as of March 31, 1998 among
SIMCALA Holdings, Inc., CGW Southeast Partners III, L.P.,
Carl Edward Boardwine, Dwight L. Goff and R. Myles Cowan.
12.1 -- Computation of Ratios.
23.1 -- Consent of Alston & Bird LLP (included in Exhibit 5.1).*
23.2 -- Consent of Deloitte & Touche LLP.
23.3 -- Consent of Crowe, Chizek and Company LLP.
23.4 -- Consent of Ernst & Young LLP.
24.1 -- Power of Attorney (included in Part II of the Registration
Statement).
</TABLE>
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<PAGE> 122
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
25.1 -- Forms T-1 -- Statement of Eligibility of Trustee.
27.1 -- Financial Data Schedule (for SEC use only).
27.2 -- Financial Data Schedule (for SEC use only)
99.1 -- Form of Non-Qualified Stock Option Agreement of SIMCALA
Holdings, Inc.
99.2 -- SIMCALA Holdings, Inc. 1998 Stock Incentive Plan.
99.3 -- Form of Letter of Transmittal.
</TABLE>
- ---------------
* To be filed by amendment
** Certain portions of this Exhibit have been deleted and confidentially filed
with the Commission pursuant to a confidential treatment request under Rule
406 under the Securities Act.
(b) The following financial statement schedules are filed as a part of this
Registration Statement:
Schedule II -- Valuation and Qualifying Account of SIMCALA, Inc. for
the years ended December 31, 1995, 1996 and 1997.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in
the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(4) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing provisions,
or otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense
of any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
II-4
<PAGE> 123
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Atlanta, State of
Georgia, on May 21, 1998.
SIMCALA, INC.
By: /s/ WILLIAM A. DAVIES
------------------------------------
William A. Davies
Chairman of the Board
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints William A. Davies his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities, to sign any
or all amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with all exhibits thereto and other documents
in connection therewith, including any Registration Statement filed pursuant to
Rule 462(b) of the Securities Act of 1933, as amended, with the Securities and
Exchange Commission, granting unto said attorney-in-fact and agent, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorney-in-fact, agent or his substitutes may lawfully do or cause to
be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ WILLIAM A. DAVIES Chairman of the Board May 21, 1998
- -----------------------------------------------------
William A. Davies
/s/ C. EDWARD BOARDWINE President, Chief Executive May 18, 1998
- ----------------------------------------------------- Officer and Director
C. Edward Boardwine
/s/ DWIGHT L. GOFF Vice President May 19, 1998
- -----------------------------------------------------
Dwight L. Goff
/s/ R. MYLES COWAN, II Vice President of Finance May 18, 1998
- -----------------------------------------------------
R. Myles Cowan, II
/s/ EDWIN A. WAHLEN, JR. Director May 21, 1998
- -----------------------------------------------------
Edwin A. Wahlen, Jr.
/s/ JAMES A. O'DONNELL Director May 21, 1998
- -----------------------------------------------------
James A. O'Donnell
</TABLE>
II-5
<PAGE> 124
SCHEDULE II
SIMCALA, INC.
VALUATION AND QUALIFYING ACCOUNT
ALLOWANCE FOR UNCOLLECTIBLE ACCOUNTS
FOR THE PERIOD FROM FEBRUARY 10, 1995 TO DECEMBER 31, 1995 AND
THE YEARS ENDED, 1996, AND 1997
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Column A Column B Column C Column D Column E
- ------------------------------------------------------------------------------------------------------------------------
Description Balance at Additions Deductions - Balance at
Beginning Amounts end
of Period Written Off of period
------------------------------ as Uncollectible
(1) (2)
Charged to Recovery
costs and of amounts
expenses from insurance
policy
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Period Ended December 31, 1995 $100,000 $ 1,644 $ - $ - $ 101,644
Year Ended December 31, 1996 $101,644 90,000 - 84,372 $ 107,272
Year Ended December 31, 1997 $107,272 - 8,846 38,682 $ 77,436
</TABLE>
<PAGE> 1
EXHIBIT 2.1
================================================================================
STOCK PURCHASE AGREEMENT
AMONG
SIMCALA, INC.,
THE SELLERS NAMED HEREIN AND
SAC ACQUISITION CORP.
DATED AS OF: FEBRUARY 10, 1998
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE 1 DEFINITIONS......................................................................1
1.1. Definitions.....................................................................1
ARTICLE 2 PURCHASE AND SALE OF SHARES AND OPTIONS..........................................7
2.1. Deemed Exercise of Options......................................................7
2.2. Purchase and Sale of Shares.....................................................7
2.3. Purchase Price..................................................................8
2.4. Payment of Purchase Price.......................................................8
2.5. Adjustment Amount...............................................................8
2.6. Adjustment Procedure............................................................8
2.7. Closing........................................................................10
2.8. Closing Deliveries by the Sellers..............................................10
2.9. Closing Deliveries by the Company..............................................10
2.10. Closing Deliveries by Buyer....................................................11
ARTICLE 3 PRE-CLOSING ESCROW..............................................................12
3.1 Pre-Closing Escrow.............................................................12
ARTICLE 4 ESCROW..........................................................................12
4.1. Deposit Into Escrow Account....................................................12
4.2. Disputes Regarding Adjustment Amounts..........................................12
4.3. Payments Relating to Adjustment Amount.........................................13
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF THE COMPANY...................................13
5.1. Incorporation; Qualification and Corporate Authority...........................13
5.2. Subsidiaries; Joint Ventures...................................................14
5.3. Financial Statements...........................................................14
5.4. Absence of Certain Changes or Events...........................................14
5.5. Capitalization.................................................................17
5.6. Options and Other Rights.......................................................17
5.7. Binding Obligation.............................................................17
5.8. No Defaults or Conflicts.......................................................18
5.9. No Governmental Authorization or Consents Required.............................18
5.10. Permits........................................................................18
5.11. No Actions, Suits or Proceedings...............................................18
5.12. Contracts......................................................................19
5.13. Title to Leased Real Property & Liens..........................................20
5.14. Intellectual Property..........................................................22
5.15. Employment Matters.............................................................22
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C> <C>
5.16. Environmental and OSHA Compliance...............................................23
5.17. Taxes...........................................................................25
5.18. Employee Benefits...............................................................26
5.19. No Other Broker.................................................................29
5.20. Inventories.....................................................................29
5.21. Accounts Receivable.............................................................29
5.22. Personal Property...............................................................30
5.23. Insurance.......................................................................30
5.24. Compliance with Laws............................................................31
5.25. Product Warranty................................................................31
5.26. Product Liability...............................................................31
5.27. Compliance with the Immigration Reform and Control..............................31
5.28. Transactions with Related Parties...............................................31
5.29. Corporate Records...............................................................32
5.30. Undisclosed Liabilities.........................................................32
5.31. Indebtedness....................................................................32
5.32. Correctness of Representations..................................................32
5.33. Definition of "Knowledge".......................................................33
5.34. Unclaimed Property..............................................................33
ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF SELLER.........................................33
6.1. Authority.......................................................................33
6.2. Title...........................................................................33
6.3. Broker or Finders...............................................................34
6.4. No Violation....................................................................34
6.5. Third Party Approvals...........................................................34
6.6. Sale of Shares..................................................................34
6.7. Foreign Status..................................................................34
ARTICLE 7 REPRESENTATIONS AND WARRANTIES OF BUYER..........................................35
7.1. Incorporation and Corporate Authority...........................................35
7.2. Binding Obligation..............................................................35
7.3. No Defaults or Conflicts........................................................35
7.4. No Governmental Authorization or Consents Required..............................35
7.5. No Actions, Suits or Proceedings................................................36
7.6. Investment Purpose..............................................................36
7.7. Sufficient Funds................................................................36
7.8. Solvency........................................................................36
7.9. No Broker.......................................................................36
ARTICLE 8 COVENANTS........................................................................36
8.1. Conduct of Business.............................................................36
8.2. Access to Information; Confidentiality..........................................37
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<S> <C> <C>
8.3. Further Assurances..............................................................38
8.4. Notice of Events................................................................38
8.5. Indemnification.................................................................39
8.6. Filings and Authorizations......................................................39
8.7. Tax Matters.....................................................................39
8.8. Severance.......................................................................42
8.9. Sales and Transfer Taxes........................................................42
8.10. Public Announcements............................................................42
8.11. Records.........................................................................43
8.12. No Section 338 Election; Certain Transactions Prohibited........................43
8.13. WARN Act Notice.................................................................43
8.14. Other Transactions..............................................................43
8.15. Supplemental Disclosure.........................................................43
8.16. Contracts and Capital Expenditures..............................................44
8.17. Discharge of Liens and Encumbrances.............................................44
8.18. Environmental Fines.............................................................44
8.19. Payment of Bonus................................................................44
8.20. Financing Cooperation...........................................................44
8.21. Asset Appraisal.................................................................45
ARTICLE 9 CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER.....................................45
9.1. Representations and Warranties..................................................45
9.2. Performance.....................................................................45
9.3. Opinion of Counsel..............................................................45
9.4. HSR Act; Authorizations; Consents; Legal Prohibition............................45
9.5. Incumbency......................................................................46
9.6. Certified Resolutions...........................................................46
9.7. Basic Corporate Documents.......................................................46
9.8. No Adverse Change...............................................................46
9.9. Acquisition Documents...........................................................47
9.10. Releases........................................................................47
9.11. Termination of Agreements.......................................................47
9.12. Substitute Letter of Credit.....................................................47
9.13. FIRPTA Certificates.............................................................47
9.14. Comfort Letter..................................................................47
ARTICLE 10 CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY AND THE SELLER................47
10.1. Representations and Warranties Accurate.........................................48
10.2. Performance by Others...........................................................48
10.3. Opinion of Counsel for Buyer....................................................48
10.4. HSR Act; Authorization; Consents; Legal Prohibition.............................48
10.5. Acquisition Documents...........................................................49
</TABLE>
-iii-
<PAGE> 5
<TABLE>
<S> <C> <C>
ARTICLE 11 TERMINATION OF AGREEMENT.........................................................49
11.1. Termination.....................................................................49
11.2. Survival After Termination......................................................49
ARTICLE 12 INDEMNIFICATION..................................................................50
12.1. Definitions.....................................................................50
12.2. Agreement of the Indemnitors to Indemnify.......................................51
12.3. Procedures for Indemnification..................................................51
12.4. Third Party Claims..............................................................52
12.5. Other Rights and Remedies.......................................................54
12.6. Duration........................................................................54
12.7. Limitations.....................................................................54
12.8. Subrogation.....................................................................55
12.9. Cooperation.....................................................................55
ARTICLE 13 MISCELLANEOUS....................................................................55
13.1. Expenses........................................................................55
13.2. Investigation...................................................................55
13.3. Governing Law...................................................................56
13.4. Binding Effect; Persons Benefiting; No Assignment...............................56
13.5. Amendments......................................................................57
13.6. Interpretation..................................................................57
13.7. Counterparts....................................................................57
13.8. Entire Agreement................................................................57
13.9. Severability....................................................................57
13.10. Waiver..........................................................................57
13.11. Notices.........................................................................57
</TABLE>
-iv-
<PAGE> 6
EXHIBITS
<TABLE>
<S> <C>
Exhibit A Agreement for Release of Claims
Exhibit B Escrow Agreement
</TABLE>
-v-
<PAGE> 7
SCHEDULES
<TABLE>
<S> <C>
Schedule 1 Management Employees
Schedule 1.1A Modifications to Commitment
Schedule 1.1B Assumed Indebtedness
Schedule 2.2 Equity Ownership
Schedule 5.1A Jurisdictions Where Qualified As a Foreign Corporation
Schedule 5.1B Locations of the Company's Assets and Trade Names
Schedule 5.3A Financial Statements
Schedule 5.3B Accounting Deviations
Schedule 5.5 Capitalization
Schedule 5.8 Defaults or Conflicts
Schedule 5.9 Governmental Authorization; Consents
Schedule 5.10 Permits
Schedule 5.11 Actions, Suits or Proceedings
Schedule 5.12A Contracts
Schedule 5.12B Commitments
Schedule 5.12C Breaches, Terminations
Schedule 5.12D Customers
Schedule 5.13A Other Property Leases
Schedule 5.13B Title Policy
Schedule 5.14 Intellectual Property
Schedule 5.15A Employment Matters
Schedule 5.15B Severance Payments
Schedule 5.16A Environmental Assessments
Schedule 5.16B Environmental Matters
Schedule 5.16C Releases
Schedule 5.16D Tanks
Schedule 5.17 Taxes
Schedule 5.18 Employee Benefit Plans
Schedule 5.20 Liens on Inventory
Schedule 5.22A Personal Property
Schedule 5.22B Liens on Personal Property
Schedule 5.22C Personal Property Leases
Schedule 5.23A Insurance Policies
Schedule 5.23B Insurance Claims
Schedule 5.23C Self-Insurance Arrangements
Schedule 5.24 Compliance with Laws
Schedule 5.28 Transactions with Related Parties
Schedule 5.29 Corporate Records
Schedule 5.31 Indebtedness
Schedule 6.5 Third Party Approvals
</TABLE>
-vi-
<PAGE> 8
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT, dated as of February 10, 1998 (this
"Agreement"), by and among SIMCALA, INC., a Delaware corporation (the
"Company"), each of the individuals and entities listed under the heading
"Sellers" on the signature pages hereto (each being a "Seller", and all of them
together being the "Sellers"), and SAC ACQUISITION CORP., a Georgia corporation
(the "Buyer").
RECITALS:
The holders of (i) the Shares representing in the aggregate
100% of the issued and outstanding capital stock of the Company and (ii) the
outstanding Options (which are deemed exercised and converted to Option Shares
as described in Section 2.1), have executed this Agreement agreeing to the
purchase of their Shares for the Purchase Price and on the terms and conditions
set forth in this Agreement.
Concurrently herewith, the employees of the Company identified
on SCHEDULE 1 are entering into employment agreements with the Buyer which will
be effective upon and subject to the Closing, as defined herein.
NOW, THEREFORE, in consideration of and premised upon the
various representations, warranties, covenants and other agreements and
undertakings of Buyer, the Sellers and the Company contained in this Agreement,
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, Buyer, the Sellers and the Company agree as follows:
ARTICLE 1
DEFINITIONS
1.1. Definitions
(a) The following terms, whenever used herein, shall
have the following meanings for all purposes of this Agreement (such definitions
to be equally applicable to both the singular and plural forms of the terms
herein defined):
"Accounts Receivable" means all accounts, notes and
other receivables of the Company.
"Affiliate" means as applied to any person, any other
person directly or indirectly controlling, controlled by, or under
common control with, that person; for purposes of this definition,
"control" (including, with correlative meanings, the terms
"controlling," "controlled by" and "under common control with"), as
applied to any person, means the possession, directly or indirectly, of
the power to direct or cause the direction of the management and
policies of that person, whether through the ownership of voting
securities, by contract or otherwise.
<PAGE> 9
"Antitrust Laws" means any federal or state law of
the United States governing competition, monopolies or restrictive
trade practices, including without limitation the Sherman Antitrust Act
(15 U.S.C. ss.1-7), the Clayton Act (15 U.S.C. ss.ss.12-27), the
Federal Trade Commission Act (15 U.S.C. ss.41-58) and the HSR Act, in
each case including any rules and regulations thereunder.
"Business Day" means any day that is not a Saturday,
Sunday or other day on which banking institutions in New York, New York
are authorized or required by law or executive order to close.
"Closing" means the completion of the purchase of the
Shares by Buyer.
"Closing Date" means the date the Closing takes place
in accordance with Section 2.7.
"Code" means the Internal Revenue Code of 1986, as
amended.
"Commitment" means the Commitment for Title Insurance
of Lawyers Title Insurance Corporation, dated December 15, 1997, case
no. 28885.
"Common Stock" means the common stock, par value $.01
per share, of the Company.
"Contract" or "Contracts" means, to the extent
permitted by applicable law, all of the contracts, leases, collective
bargaining agreements, warranties, commitments, agreements, credit
guaranties and purchase and sales orders, whether oral or written,
pursuant to which the Company enjoys any right or benefit.
"Environmental Law" means any United States (or other
applicable jurisdiction's) federal, state, local or municipal statute,
law, rule, regulation, ordinance, code or rule of common law and any
judicial interpretation thereof including any judicial or
administrative order or judgment relating to the environment, health or
safety, including, without limitation, the following: (i) the
Environmental Response, Compensation, and Liability Act (42 U.S.C.
ss.ss. 9601 et seq.); (ii) the Solid Waste Disposal Act, as amended by
the Resource Conservation and Recovery Act (42 U.S.C. ss.ss. 6901 et
seq.); (iii) the Emergency Planning and Community Right to Know Act (42
U.S.C. ss.ss. 11001 et seq.); (iv) the Clean Air Act (42 U.S.C. ss.ss.
7401 et seq.); (v) the Clean Water Act (33 U.S.C. I 1251 et seq.); (vi)
the Toxic Substances Control Act (15 U.S.C. I 2601 et seq.); (vii) the
Hazardous Materials Transportation Act (49 U.S.C. ss.ss. 1801 et seq.);
(viii) the Safe Drinking Water Act (41 U.S.C. I 300f et seq.); (ix) any
state, county, municipal or local statutes, laws or ordinances similar
or analogous to the federal statutes listed in parts (i) - (viii) of
this subparagraph; (x) any amendments to the statutes, laws or
ordinances in effect at the time of the Closing Date listed in parts
-2-
<PAGE> 10
(i) - (ix) of this subparagraph, regardless of whether in existence on
the date hereof; and (xi) any rules, regulations, guidelines,
directives, orders or the like adopted pursuant to or implementing the
statutes, laws, ordinances and amendments listed in parts (i) - (x) of
this subparagraph.
"Equipment" means all machinery, equipment, tools,
computers, terminals, computer equipment, office equipment, business
machines, telephones and telephone systems, parts, accessories, and the
like, wherever located, and any and all warranties of third parties
with respect thereto owned by the Company or in which the Company has
an ownership or leasehold interest.
"ERISA" means the Employee Retirement Income Security
Act of 1974, as amended.
"Financial Statements" means the audited balance
sheets of the Company as at December 31, 1997, 1996 and 1995, and the
related statements of operations, cash flows and changes in
shareholders' equity for the years ended December 31, 1997 and 1996,
certified by Crowe, Chizek and Company LLP, and the period from
February 10, 1995 through December 31, 1995, certified by Ernst & Young
LLP, in each case, independent certified public accountants, whose
opinion thereon is included therewith, together with the notes and
schedules thereto.
"First Bank Credit Facility" means the Credit
Agreement by and between the Company and First Bank National
Association, dated April 10, 1997.
"Furniture and Fixtures" means all furniture,
fixtures, and leasehold improvements wherever located, and any and all
assignable warranties covering such furniture, fixtures, and leasehold
improvements owned by the Company or in which the Company has an
interest.
"Governmental Authority" means any nation or
government, any state or other political subdivision thereof, any
entity exercising executive, legislative, judicial, regulatory or
administration functions of or pertaining to government, including any
government authority, agency, department, board, commission or
instrumentality of the United States, any foreign government, any State
of the United States or any political subdivision thereof, and any
court, tribunal or arbitrator(s) of competent jurisdiction.
"Hazardous Materials" shall mean any chemical,
substance, waste or material defined as or deemed hazardous, toxic, a
pollutant, a contaminant under any Environmental Law, including, but
not limited to, petroleum and petroleum products, waste oil,
halogenated and non-halogenated solvents, PCBs, and exposed and friable
asbestos containing material.
-3-
<PAGE> 11
"HSR Act" means the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the rules and regulations
promulgated thereunder.
"Indebtedness" means all outstanding bank
indebtedness, capital leases, bond indebtedness related to the Leased
Real Property and all other funded indebtedness, including interest
payable thereon, of the Company for borrowed money as listed on
SCHEDULE 5.31 attached hereto, including fees and costs, if any,
payable in connection with prepayment of the First Bank Credit
Facility.
"Intellectual Property" means all patents, art work,
labels, designs, specifications, designs-in-progress, formulations,
know-how, prototypes, inventions, trademarks, trade names, trade
styles, service marks, and copyrights; all registrations and
applications therefor, both registered and unregistered, foreign and
domestic; all trade secrets, technology or processes; all computer
software (including documentation and related object and, if
applicable, source codes); and all confidential or proprietary
information that are either (i) owned by or negotiated in the name of
the Company or (ii) as to which the Company has rights as licensee,
constituting all of the intellectual property of the Company.
"Inventory" means all raw materials,
work-in-progress, finished goods, goods held for resale, spare parts,
waste materials, scrap, samples, promotional literature, and supplies
wherever located.
"IRS" means the United States Internal Revenue
Service.
"Leased Real Property" means all of the Company's
rights in, to and under the real estate leases (including, without
limitation, any assignment of a real estate lease or sublease) to which
the Company is a party, which are listed on SCHEDULE 5.13A, together
with all of the Company's right, title, and interest in the buildings,
fixtures and improvements, including construction-in-progress, and
appurtenances thereto, located on the real property subject to such
real estate leases, and any and all warranties of third parties with
respect thereto.
"Legal Requirement" means any federal, state, local,
municipal, foreign, international, multinational, or other
administrative order, constitution, law, ordinance, principle of common
law, rule, regulation, statute, or treaty.
"Material Adverse Effect" means a material adverse
effect upon the business, operations, properties, assets or condition
(financial or otherwise) or prospects of the Company, without regard to
changes in conditions generally applicable to the industries in which
the Company is involved or general economic conditions.
"Options" means the options to purchase shares of
Common Stock outstanding on the Closing Date, which options are deemed
exercised as described in Section 2.1 prior to the Closing.
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<PAGE> 12
"Permits" means, to the extent permitted under
applicable law or regulation, all licenses, franchises, permits,
certificates, consents, and other governmental or quasi-governmental
authorizations of the Company.
"Permitted Encumbrances" means (i) exceptions set
forth in the Commitment (subject to the modifications set forth in
SCHEDULE 1.1A); (ii) liens of current Taxes not yet due and payable or
the liens of Taxes the validity of which is being contested in good
faith by appropriate proceedings and which are set forth on SCHEDULE
5.17 hereto; (iii) liens related to Indebtedness outlined on SCHEDULE
1.1B attached hereto; and (iv) such minor imperfections of title
(excluding monetary liens) which do not materially and adversely
interfere with the present use of the Leased Real Property.
"Professional Fees" means the fees and disbursements
of Schulte Roth & Zabel LLP, BT Wolfensohn and Crowe Chizek in
connection with the transactions contemplated by this Agreement, to the
extent not paid prior to the Closing.
"Purchase Price Per Share" means the amount
determined by dividing (a) the sum of (i) the Purchase Price plus (ii)
the aggregate exercise price of all Options outstanding as of the
Closing Date plus (iii) the aggregate exercise price received by the
Company of all Options exercised from the date hereof to the Closing
Date by (b) the sum of (i) the number of shares of Common Stock
outstanding and (ii) the number of shares of Common Stock subject to
Options as of the Closing Date.
"Release" shall have the meaning found in 42
U.S.C.ss. 9601 (22) and shall include migration.
"Securities Act" means the Securities Act of 1933 or
any successor law, and regulations and rules issued pursuant to that
Act or any successor law.
"Shares" means the Common Stock representing 100% of
the issued and outstanding capital stock of the Company, including,
without limitation, those shares of Common Stock issued upon the deemed
exercise of the Options as described in Section 2.1.
"Tax Returns" means any return, declaration, report,
claim for refund, or information return or statement relating to Taxes,
including any schedule or attachment thereto, and including any
amendment thereof.
"Taxes" means all taxes, however denominated,
including, without limitation, any federal, state, local or foreign
income, gross receipts, payroll, employment, excise, stamp, franchise,
profits, business license, occupation, environmental, withholding,
social security (or similar), unemployment, disability, real property,
personal property, sales, use, transfer, registration, value added,
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customs duties, alternative or add-on minimum or estimated tax, and
other obligations of the same or of a similar nature to any of the
foregoing, including any interest, penalty, or addition thereto,
whether disputed or not.
"Vehicles" means all motor vehicles, trucks,
forklifts, and other rolling stock, and all warranties of third parties
related thereto.
(b) The following terms shall have the meaning
specified in the indicated section of this Agreement.
<TABLE>
<CAPTION>
Term Section
---- -------
<S> <C>
Accountants...........................................Section 4.2(b)
Acquisition Documents.................................Section 5.7
Acquisition Proposal..................................Section 8.14
Adjustment Amount.....................................Section 2.5
Agreement.............................................Preamble
Benefit Plans.........................................Section 5.18(a)
Bonus.................................................Section 2.6(c)
Buyer.................................................Preamble
Buyer Indemnitees.....................................Section 12.1(e)
Buyer Opinion.........................................Section 2.10(a)(iv)
CERCLA................................................Section 5.16(b)(i)
Closing Balance Sheet.................................Section 2.6
Closing Payment.......................................Section 2.4
Company...............................................Preamble
Company Opinion.......................................Section 2.9(c)
Confidentiality Agreement.............................Section 8.2(b)
Crowe Chizek..........................................Section 4.2
D&T...................................................Section 2.6
Disputing Sellers.....................................Section 4.2(b)
Employees.............................................Section 5.18(a)
Environmental Audit Report............................Section 9.19
Environmental Fines...................................Section 8.18
Environmental Permits.................................Section 5.16(b)(v)
ERISA Affiliate.......................................Section 5.18(b)(vi)
Escrow Account........................................Section 2.4
Escrow Agent..........................................Section 2.10(b)
Escrow Agreement......................................Section 2.8(e)
Escrowed Funds........................................Section 2.4
Estimated Indebtedness................................Section 2.4
GAAP..................................................Section 2.5
IDB...................................................Section 5.13
Immigration Laws......................................Section 5.27
Indemnification Claim.................................Section 12.1(a)
Indemnitee............................................Section 12.1(b)
</TABLE>
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<PAGE> 14
<TABLE>
<S> <C>
Indemnitor............................................Section 12.1(c)
Information...........................................Section 8.2(b)
Knowledge.............................................Section 5.33
Lease.................................................Section 5.13(a)
Liens.................................................Section 5.8
Loan Agreement........................................Section 9.12
Losses................................................Section 12.1(d)
Maximum Amount........................................Section 12.7(a)
Negotiation Period....................................Section 12.3(c)
Net Assets............................................Section 2.5
New Options...........................................Section 5.4
Option Shares.........................................Section 2.1
Permits...............................................Section 5.10
Person................................................Section 13.6
Plant.................................................Section 5.13
Policy................................................Section 5.13(a)
Pre-Closing Escrow Agreement..........................Section 3.1
Proceeding............................................Section 5.11
Purchase Price........................................Section 2.3
Qualified Plan........................................Section 5.18(b)(ii)
Related Party(ies)....................................Section 5.28(a)
Releases..............................................Section 2.8(b)
Seller(s).............................................Preamble
Threshold Amount......................................Section 12.7(a)
Third Party Claim.....................................Section 12.1(f)
</TABLE>
(c) All references herein to dollars or "$" shall
be to United States dollars.
ARTICLE 2
PURCHASE AND SALE OF SHARES AND OPTIONS
2.1. Deemed Exercise of Options. On the Closing Date, each
Option shall, effective immediately prior to the Closing, without any action on
the part of the holder thereof but upon notice by the Company, be deemed
exercised pursuant to the terms thereof and such that the holders of Options
shall become owners of the Shares issuable upon exercise of such Options
("Option Shares"), no exercise price shall be payable to the Company in respect
thereof.
2.2. Purchase and Sale of Shares. Upon the terms and subject
to the conditions contained herein, at the Closing each Seller shall sell,
assign, transfer, convey and deliver to Buyer, and Buyer shall purchase and
accept from each Seller, such Seller's Shares (including the Option Shares) each
in an amount set forth next to such Seller's name on SCHEDULE 2.2 hereto.
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<PAGE> 15
2.3. Purchase Price. The purchase price (the "Purchase Price")
for the Shares will be Eighty Two Million Dollars ($82,000,000), (a) less an
amount equal to the Indebtedness outstanding as of the Closing Date, (b) less
the outstanding amount of Professional Fees, and (c) less $1,009,423 and (i) if
the Adjustment Amount (as defined below) is a positive number, plus the
Adjustment Amount, and (ii) if the Adjustment Amount is a negative number, minus
the Adjustment Amount.
2.4. Payment of Purchase Price. At the Closing: (i) the funds
necessary to pay off all Indebtedness owed with respect to the First Bank Credit
Facility shall be paid by the Buyer; (ii) the funds necessary to pay the
Professional Fees shall be paid by the Buyer; (iii) an aggregate amount equal to
the Purchase Price (calculated (A) as if the Adjustment Amount is zero, (B)
based upon the Company's good faith estimate of the outstanding Indebtedness as
of the Closing Date (which good faith estimate shall include "payoff
information" related to the First Bank Credit Facility and shall have been
delivered to Buyer no less than four (4) Business Days prior to the Closing)
(the "Estimated Indebtedness"), and (C) by reducing the Purchase Price by
$4,000,000 (the "Escrowed Funds")), shall be paid at the Closing by Buyer by
wire transfer of immediately available funds to an account or accounts which are
designated in writing by each Seller at least two (2) Business Days prior to the
Closing Date (the "Closing Payment") as follows: (X) in respect of each Share
that is not an Option Share, at the Purchase Price Per Share (assuming the
foregoing calculations) and (Y) in respect of each Option Share, the excess of
such Purchase Price Per Share over the exercise price per Share of the Option
related to such Option Share; and (iv) the Escrowed Funds shall be paid by Buyer
into an escrow account ("Escrow Account") as provided for in Section 4.1. The
Adjustment Amount, which shall be deemed additional Purchase Price or a
reduction of the Purchase Price, shall be paid by Buyer to Sellers or refunded
to Buyer by the Escrow Agent as provided in Section 4.3.
2.5. Adjustment Amount. The "Adjustment Amount" (which may be
a positive or negative number) will be equal to (a) the audited Net Assets (as
adjusted as described herein) as of the Closing Date determined as provided in
Section 2.6 below, minus (b) (i) the Net Assets as shown on the audited December
31, 1997 balance sheet of the Company attached to SCHEDULE 5.3A plus (ii)
$1,009,423.00. "Net Assets" means (y) the value of all of the total assets of
the Company minus (z) the total liabilities of the Company other than
Indebtedness, all as determined in accordance with generally accepted accounting
principles applied on a consistent basis ("GAAP"), as adjusted (in the case of
the Closing Date) for the specific policies in Section 2.6. In computing the
Adjustment Amount, the amount, if any, by which (i) Estimated Indebtedness
exceeds Indebtedness reflected on the Closing Balance Sheet shall be added to
Net Assets as of the Closing Date or (ii) Indebtedness reflected on the Closing
Balance Sheet exceeds Estimated Indebtedness shall be subtracted from Net Assets
as of the Closing Date.
2.6. Adjustment Procedure.
(a) The Company will prepare and will cause
Deloitte & Touche LLP ("D&T"), Buyer's certified public accountants, to audit
the balance sheet of
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<PAGE> 16
the Company as of the Closing Date (the "Closing Balance Sheet"), including a
computation of Net Assets as of the Closing Date. The Closing Balance Sheet
shall be prepared in accordance with GAAP consistently applied on the same basis
as the Company's financial statements for the year ended December 31, 1997. The
following specific policies will be followed in preparing the computation of Net
Assets as of the Closing Date:
(i) The fair market value of the Common Stock as
of the date of the grant for all of the Options granted to the various employees
during 1995 and 1996 shall be deemed to be equal to the original capital
contributed by the stockholders of the Company on the day the Company began
operations (i.e., $100 per share);
(ii) Accrued vacation pay for salaried employees
will not be accrued;
(iii) The purchase accounting allocations in the
February 10, 1995 opening balance sheet including costs allocated to intangible
assets and property plant and equipment will not be adjusted;
(iv) Stores and supplies inventory will not be
capitalized; and
(v) The ratable portion of the 1999 Alabama
franchise taxes shall be accrued;
(vi) All unpaid costs and expenses associated
with this transaction that the Company will pay on behalf of the Sellers
(including all legal, accounting, broker, finder and investment banker fees)
shall be accrued other than Professional Fees paid at Closing;
(vii) The approximate $160,000 liability related
to remaining tax liabilities assumed with respect to Simetco as set forth on
SCHEDULE 5.17 shall be accrued;
(viii) To the extent deferred tax assets as of the
Closing Date exceed such assets as of December 31, 1997, the excess, if any,
will not be recorded; and
(ix) An amount equal to the tax refund receivable
as a result of the carryback of tax losses will be reflected as a liability
payable to the Sellers and the corresponding refund will be reflected as an
asset.
(b) The Closing Balance Sheet will further include all
accruals and pre-paid expenses that would normally be included pursuant to
year-end closing procedures calculated on a pro rata basis from January 1, 1998
through the Closing Date.
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<PAGE> 17
(c) The Closing Balance Sheet will include an
accrual for compensation to employees for the special one time bonus (the
"Bonus") equal to $1,486,000 or such other amount as may be agreed upon by the
Buyer and the Sellers prior to Closing.
(d) The Adjustment Amount will be finalized, and
the Purchase Price will be adjusted as provided for in Sections 2.3, 4.3 and
4.4.
2.7. Closing. The Closing shall take place at the offices
of Alston & Bird, One Atlantic Center, 1201 West Peachtree Street, Atlanta,
Georgia 30309 at 10:00 a.m., local time, on March 31, 1998, or, at such other
place, time and date as the parties hereto may agree in writing.
2.8. Closing Deliveries by the Sellers. At the Closing,
each of the Sellers shall deliver, or cause to be delivered, to Buyer:
(a) one or more stock certificates representing
those Shares owned by such Seller duly endorsed in blank or accompanied by stock
powers duly executed in blank, in proper form for transfer;
(b) an executed agreement for the mutual release
of claims in substantially the form of EXHIBIT A hereto (the "Releases");
(c) the opinions, certificates and other
documents required to be delivered by or on behalf of such Seller pursuant to
Article 9;
(d) copies of the consents, waivers and
approvals described in Section 6.5 hereof;
(e) the executed escrow agreement in
substantially the form of EXHIBIT B hereto (the "Escrow Agreement"); and
(f) any other items specifically identified in
this Agreement.
The documents and certificates to be delivered
hereunder or on behalf of the Sellers on the Closing Date, shall be in form and
substance reasonably satisfactory to Buyer and its counsel.
2.9. Closing Deliveries by the Company. The Company shall
deliver to Buyer the following:
(a) the written resignation of each of the
directors and officers of the Company;
(b) the opinions, certificates and other
documents required to be delivered by or on behalf of the Company pursuant to
Article 9;
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<PAGE> 18
(c) the opinions of Schulte Roth & Zabel LLP and Roy
S. Goldfinger, P.C., counsel to the Company, in customary form for transactions
of this nature (collectively, the "Company Opinion");
(d) copies of the consents, waivers and approvals
described in Section 5.9 hereof;
(e) satisfactory evidence of the discharge of Liens
described in Section 8.17 hereof;
(f) certified copy of the Company's Certificate of
Incorporation and certificates of existence or certificates of good standing of
the Company, as of a date within twenty (20) days prior to the Closing Date,
from the State of Delaware and each jurisdiction listed in SCHEDULE 5.1A hereto;
(g) the executed Escrow Agreement;
(h) the executed Releases; and
(i) any other items specifically identified in this
Agreement.
The documents and certificates to be delivered
hereunder by or on behalf of the Company on the Closing Date shall be in form
and substance reasonably satisfactory to Buyer and its counsel.
2.10. Closing Deliveries by Buyer.
(a) At the Closing, Buyer shall deliver to, or to
the order of, each of the Sellers or the Company, as applicable:
(i) an amount equal to such Seller's portion
of the Closing Payment as calculated pursuant to Section 2.4;
(ii) the opinions, certificates and other
documents required to be delivered by or on behalf of Buyer pursuant to Article
10;
(iii) the executed Escrow Agreement;
(iv) the opinion of Alston & Bird LLP, counsel
to Buyer, in customary form for transactions of this nature (the "Buyer
Opinion");
(v) the executed Releases; and
(vi) any other items specifically identified in
this Agreement.
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<PAGE> 19
(b) At the Closing, Buyer shall deliver to SunTrust
Bank, Atlanta (the "Escrow Agent"), in accordance with the Escrow Agreement, the
Escrowed Funds by wire transfer in immediately available funds to the account
designated by the Escrow Agent.
The documents and certificates to be delivered hereunder by or
on behalf of Buyer on the Closing Date shall be in form and substance reasonably
satisfactory to the Company, the Sellers and their counsel.
ARTICLE 3
PRE-CLOSING ESCROW
3.1. Pre-Closing Escrow. On the date of this Agreement, Buyer
has deposited Five Hundred Thousand Dollars ($500,000) into an escrow account,
which shall be governed by the terms of the escrow agreement dated the date
hereof by and among Buyer, the Company and the Escrow Agent (the "Pre-Closing
Escrow Agreement").
ARTICLE 4
ESCROW
4.1. Deposit Into Escrow Account. At the Closing, Buyer shall
deposit the principal amount of the Escrowed Funds into the Escrow Account,
which shall be governed by the terms of the Escrow Agreement.
4.2. Disputes Regarding Adjustment Amounts.
(a) Within thirty (30) days after the Closing Date, Buyer
will deliver a final draft of the Closing Balance Sheet, calculation of Net
Assets and Adjustment Amount calculation to the Sellers and Crowe, Chizek and
Company LLP ("Crowe Chizek"). Crowe Chizek shall be provided with reasonable
access to (i) the workpapers of D&T supporting the audit of the Closing Balance
Sheet and the computation of Net Assets as of the Closing Date, (ii) management
of the Company and (iii) the books and records of the Company.
(b) To the extent that Sellers owning two-thirds of the
aggregate of the Shares and Option Shares dispute (the "Disputing Sellers")
either the amount of, or basis for, the Adjustment Amount or object to the
Closing Balance Sheet, then, within thirty (30) days from the date of receipt by
Crowe Chizek and the Sellers of the Closing Balance Sheet, the Disputing Sellers
shall provide joint written notice thereof to Buyer, stating any objection and
the basis for such objection. If the Adjustment Amount is a negative number and
the Sellers do not timely deliver a notice of objection to Buyer, Buyer and each
of the Sellers shall jointly and immediately provide notice to the Escrow Agent
of the final Adjustment Amount. If any amount claimed as an Adjustment Amount is
timely disputed in a notice of objection delivered to Buyer, then the parties
shall undertake to resolve the amount so disputed. If the Buyer and the
Disputing Sellers
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<PAGE> 20
are able to agree on a final Adjustment Amount and the final Adjustment Amount
is a negative number, Buyer and each of the Sellers shall jointly and
immediately provide notice to the Escrow Agent of the agreed-upon final
Adjustment Amount. If the Buyer and the Disputing Sellers are unable to resolve
any part of the amount so disputed within thirty (30) days from the date of
Buyer's receipt of the Disputing Sellers' notice of objection, then the issues
in dispute will be submitted to the Birmingham, Alabama office of Arthur
Andersen LLP, certified public accountants (the "Accountants"), for resolution.
If issues in dispute are submitted to the Accountants for resolution, (x) each
party will furnish to the Accountants such workpapers and other documents and
information relating to the disputed issues as the Accountants may request and
are available to that party (or its independent public accountants), and will be
afforded the opportunity to present to the Accountants any material relating to
the determination and to discuss the determination with the Accountants; (y) the
determination by the Accountants, as set forth in a notice delivered to Buyer,
each of the Sellers and the Escrow Agent (if the Adjustment Amount is a negative
number) by the Accountants, will be binding and conclusive on the parties; and
(z) Buyer and the Sellers will each bear 50% of the fees of the Accountants for
such determination. Until resolution of the disputed Adjustment Amount, the
disputed amount thereof will not be disbursed by the Escrow Agent.
4.3. Payments Relating to Adjustment Amount. Within ten (10)
business days following a final determination of the Adjustment Amount as
provided in Section 4.2, (i) if the Adjustment Amount is a positive number,
Buyer will pay the Adjustment Amount to the Sellers, or (ii) if the Adjustment
Amount is a negative number, the Escrow Agent will pay the Adjustment Amount to
Buyer. Payments to the Sellers will be made in the manner and will be allocated
in the proportions set forth in Section 2.4 and SCHEDULE 2.2. Payments to Buyer
will be made by wire transfer to such bank account as Buyer will specify. If the
parties are disputing the final determination of the Adjustment Amount, to the
extent part of any payment that would be payable pursuant to Section 4.2 is not
in dispute, the payor shall pay the amount not in dispute within three (3)
Business Days of the determination that no such dispute exists.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Buyer as follows:
5.1. Incorporation; Qualification and Corporate Authority. The
Company has been duly incorporated and is validly existing and in good standing
under the laws of the State of Delaware with corporate power and authority to
conduct its business in all material respects as presently conducted. The
Company is duly qualified to transact business as a foreign corporation and is
in good standing in each jurisdiction set forth on SCHEDULE 5.1A, which
(together with the locations set forth on SCHEDULE 5.1B) constitute all of the
jurisdictions where the Company owns or leases property, and there exists no
other jurisdictions in which a failure to qualify to do business would have a
Material Adverse Effect. SCHEDULE 5.1B hereto contains the address (including
city, county, state, or other jurisdiction and zip code) of each location where
any of the
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<PAGE> 21
Company's assets are located and each trade name under which the Company
operates at each such address and any additional business and trade names under
which the Company has operated at each such address.
5.2. Subsidiaries; Joint Ventures. The Company does not own,
directly or indirectly, any capital stock or other proprietary interest, in any
corporation, association, trust, partnership, joint venture or other legal
entity, and has no agreement to acquire any such capital stock or proprietary
interest.
5.3. Financial Statements. Attached as SCHEDULE 5.3A are true,
correct and complete copies of the Financial Statements, which have been
prepared from the books and records of the Company. The balance sheets included
in the Financial Statements present fairly the financial position of the Company
as of their respective dates, the deferred tax assets recorded on the December
31, 1997 balance sheet of the Company are available for utilization, and the
other related statements included in the Financial Statements present fairly the
results of operations and cash flows for the periods indicated, in each case in
accordance with GAAP, applied on a consistent basis, with only such deviations
from such accounting principles and/or their consistent application as are
referred to in SCHEDULE 5.3B hereto. Except as set forth in Schedule 5.3B, the
Company has not received any advice or notification from its independent
certified public accountants that the Company has used any improper accounting
practice that would have the effect of not reflecting or incorrectly reflecting
in the Financial Statements or the books and records, any properties, assets,
liabilities, revenues, or expenses. The books, records, and accounts of the
Company in all material respects accurately and fairly reflect, in reasonable
detail, the transactions and the assets and liabilities of the Company.
5.4. Absence of Certain Changes or Events. Except with respect
to (i) the grant of authorized but unissued options (the "New Options") to
purchase up to 109 shares of Common Stock, (ii) the deemed exercise of the
currently outstanding Options and the New Options as described in Section 2.1,
(iii) the Bonus to be paid by the Company in connection with the exercise of the
New Options and the Options as described in Section 2.6(c) and Section 8.19, and
(iv) the costs and expenses relating to this Agreement and the transactions
contemplated by this Agreement, since December 31, 1997, there has not been any
transaction or occurrence in which the Company has:
(a) suffered any material adverse change in its business,
operations, financial condition, liabilities, assets, or earnings nor has there
been any event which has had or may reasonably be expected to have a Material
Adverse Effect;
(b) incurred any obligations or liabilities of any nature
other than items incurred in the regular and ordinary course of business,
consistent with past practice, or increased (or experienced any change in the
assumptions underlying or the methods of calculating) any bad debt, contingency,
or other reserve, other than in the ordinary course of business consistent with
past practice;
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<PAGE> 22
(c) except for the prepayment of Indebtedness incurred in
connection with the First Bank Credit Facility on the Closing Date, paid,
discharged, or satisfied the principal amount of any Indebtedness (if such
payment would result in Indebtedness on the Closing Date being less than
Indebtedness on the December 31, 1997 balance sheet), or paid, discharged, or
satisfied interest not otherwise due and payable;
(d) paid, discharged, or satisfied any non-Indebtedness
related claim, lien, encumbrance, obligation, or liability (whether absolute,
accrued, contingent, and whether due or to become due), other than the payment,
discharge, or satisfaction in the ordinary course of business consistent with
past practice of claims, liens, encumbrances, obligations, or liabilities of the
type reflected or reserved against in the Financial Statements or which were
incurred in the ordinary course of business consistent with past practice;
(e) permitted, allowed, or suffered any of its properties
or assets (real, personal or mixed, tangible, or intangible) to be subjected to
any mortgage, pledge, lien, encumbrance, restriction, or charge of any kind,
other than Permitted Encumbrances;
(f) written down or written up the value of any Inventory
(including write-downs by reason of shrinkage or markdowns), determined as
collectible any Accounts Receivable or any portion thereof which were previously
considered uncollectible, or written off as uncollectible any Accounts
Receivable or any portion thereof, except for write-downs, write-ups, and
write-offs in the ordinary course of business consistent with past practice;
(g) canceled any debts or waived any claims or rights
other than in the ordinary course of business consistent with past practice;
(h) disposed of or permitted to lapse any right to the
use of any material patent, trademark, assumed name, service mark, trade name,
copyright, license, or application therefor or disposed of or disclosed to any
person not authorized to have such information any trade secret, proprietary
information, formula, process, or know-how not previously a matter of public
knowledge or existing in the public domain;
(i) except for the capital expenditure commitments
described on SCHEDULE 5.12B and the capital expenditures related to the gantry
crane, made any significant capital expenditure or commitment for additions to
property, plant, equipment, intangible, or capital assets or for any other
purpose in excess of $25,000, other than for emergency repairs or replacement;
(j) except for indebtedness incurred under the First Bank
Credit Facility to pay liabilities incurred in the ordinary course of business,
which indebtedness will be repaid prior to Closing, incurred any long term
indebtedness;
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<PAGE> 23
(k) paid, loaned, distributed, or advanced any amounts
to, sold, transferred, or leased any properties or assets (real, personal or
mixed, tangible or intangible) to, purchased, leased, licensed, or otherwise
acquired any properties or assets from, or entered into any other agreement or
arrangement with (i) any stockholder, officer, employee, or director of the
Company, (ii) any corporation or partnership in which any Affiliate is an
officer, director, or holder directly or indirectly of five percent (5%) or more
of the outstanding equity or debt securities of the Company, or (iii) any person
controlling, controlled by, or under common control with any such partner,
stockholder, officer, director, or Affiliate except for compensation or fees not
exceeding the 1997 rate of compensation or fees or as permitted by Section
5.4(p) and for routine travel expenses to officers, employees, directors and
stockholders;
(l) declared, set aside or paid any dividend or other
distribution (whether in cash, stock or property) with respect to any of the
Shares, or made any redemption, purchase or other acquisition of any of its
equity securities;
(m) made or instituted any change in accounting methods,
principles or practices by the Company materially affecting its assets,
liabilities or business, except insofar as may have been required by a change in
GAAP;
(n) entered into any collective bargaining or labor
agreement (oral and legally binding or written), or experienced any organized
slowdown, work interruption, strike, or work stoppage;
(o) sold, transferred, or otherwise disposed of any of
the Company's assets except in the ordinary course of business consistent with
past practice;
(p) granted or incurred any obligation for any increase
in the compensation of any officer or employee of the Company (including,
without limitation, any increase pursuant to any bonus, pension, profit-sharing,
retirement, or other plan or commitment) except for raises to employees in the
ordinary course of business consistent with past practice and bonuses for the
year ending December 31, 1997;
(q) suffered any casualty loss or damage in excess of
$100,000 in the aggregate (whether or not insured against);
(r) agreed to make charitable contributions in excess of
$20,000;
(s) amended any provision of its Certificate of
Incorporation or Bylaws or changed any of its authorized or issued capital
stock, except as specifically required by this Agreement;
(t) taken any other action neither in the ordinary course
of business and consistent with past practice nor provided for in this
Agreement; or
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<PAGE> 24
(u) agreed, so as to legally bind the Company whether in
writing or otherwise, to take any of the actions set forth in this Section 5.4
and not otherwise permitted by this Agreement.
5.5. Capitalization.
(a) SCHEDULE 5.5 sets forth the authorized, issued,
outstanding and treasury capital stock of the Company, as of the date hereof.
Each Seller is the record owner of the Shares set forth opposite his or its name
on SCHEDULE 2.2.
(b) All of the issued and outstanding shares of Common
Stock have been duly authorized and validly issued and are fully paid and
non-assessable.
(c) Except as set forth on SCHEDULE 5.5, no other shares
of capital stock have been issued and remain outstanding, no other class of
capital stock is authorized or outstanding, and the Sellers executing this
Agreement on the date hereof represent all of the holders of capital stock or
rights to acquire shares of capital stock of the Company. None of the
outstanding shares of capital stock of the Company was issued in violation of
the Securities Act or any other material Legal Requirement.
5.6. Options and Other Rights. Except for ownership of the
Options as set forth on SCHEDULE 2.2 and as otherwise set forth in SCHEDULE 5.5,
there are (a) no outstanding options, warrants, agreements, calls, conversion
rights, exchange rights, preemptive rights or other rights to subscribe for,
purchase or otherwise acquire, or any other agreements or commitments of any
character relating to the sale, issuance or voting of, any shares of capital
stock of the Company, whether issued or unissued, or any securities convertible
into or evidencing the right to purchase any shares of capital stock of the
Company to which the Company is a party, and (b) no existing agreements,
options, commitments or rights with, of or to any person to acquire any of the
Company's assets, properties or rights or any interest therein, other than sales
of the goods and services of the Company in the ordinary course of business
consistent with past practices.
5.7. Binding Obligation. The Company has full power and
authority to enter into this Agreement and the agreements to which it is a party
contemplated hereby, or executed in connection herewith (collectively, this
Agreement, the Pre-Closing Escrow Agreement and the Escrow Agreement shall be
referred to hereinafter as the "Acquisition Documents"), and to consummate the
transactions contemplated hereby and thereby. The execution, delivery and
performance by the Company of each of the Acquisition Documents to which the
Company is a party have been duly and validly authorized and approved by all
necessary action on the part of the Company. Each of the Acquisition Documents
to which the Company is a party, assuming each of the Acquisition Documents
constitutes a valid and binding obligation of the other parties thereto,
constitutes the legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, except to the extent that the
enforceability thereof may be limited by: (i) applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium or similar laws from time to
time in effect affecting generally
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the enforcement of creditors' rights and remedies; and (ii) general principles
of equity, including, without limitation, principles of reasonableness, good
faith and fair dealing (regardless of whether enforcement is sought in equity or
at law).
5.8. No Defaults or Conflicts. Other than as listed in
SCHEDULE 5.8, the execution and delivery of any of the Acquisition Documents by
the Company and the performance by the Company of its obligations hereunder (i)
does not and, on the Closing Date, will not result in any violation of the
charter or by-laws of the Company; (ii) does not and, on the Closing Date, will
not conflict with, or result in a breach of any of the terms or provisions of,
or constitute a default under, or result in the creation or imposition of any
lien, claim, charge, encumbrance or other security interest (collectively
referred to herein as "Liens"), upon any property or assets of the Company
under: (A) any indenture, mortgage, lease or loan agreement or any other
agreement or instrument to which the Company is a party or by which it may be
bound or to which any of its respective properties may be subject; or (B) any
existing applicable law, rule, regulation, judgment, order or decree of any
Governmental Authority to which the Company or any of its properties is subject,
other than such conflicts, breaches and defaults as would be waived or avoided
by the consents, approvals, authorizations, filings or notices described in
Section 5.9; and (iii) does not and, on the Closing Date, will not result
pursuant to the terms of any Contract to which the Company is a party in the
acceleration of the maturity of any payment date of, or increase or adversely
affect, any liability of the Company other than Indebtedness paid in connection
herewith.
5.9. No Governmental Authorization or Consents Required.
Other than as listed in SCHEDULE 5.9, no consent, authorization or approval or
other action by, and no notice to or declaration, filing or registration with,
any Governmental Authority or any third party will be required to be obtained or
made by the Company in connection with the due execution and delivery and
performance by the Company or the Sellers of this Agreement or the consummation
by the Company or the Sellers of the transactions contemplated hereby.
5.10. Permits. SCHEDULE 5.10 lists and Buyer has been
furnished access to all material Federal, state, local and foreign governmental
approvals, consents, authorizations, orders, certificates, filings, franchises,
licenses, notices, permits and rights (collectively, "Permits") which the
Company has obtained. Except as set forth on SCHEDULE 5.10, there are no other
Permits that are required for the conduct of the business of the Company as
presently conducted and its business as presently conducted. There has occurred
no default under any Permit. There are no proceedings relating to the
suspension, revocation or modification of any Permit.
5.11. No Actions, Suits or Proceedings. Except as disclosed on
SCHEDULE 5.11, (i) there is no action, suit or proceeding (a "Proceeding")
pending against, nor, to the Company's knowledge, threatened or alleged against,
the Company, and to the Company's knowledge no basis exists for any claim
relating to any Antitrust Law as to which the Company would be responsible.
There is no Proceeding pending or, to the
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knowledge of the Company threatened, which questions the validity or legality of
this Agreement or of the transactions contemplated hereby or which seeks to
prevent the consummation of the transactions contemplated hereby or which if
decided adversely to the Company could reasonably be expected to have a Material
Adverse Effect and (ii) the Company (or any officer thereof in such capacity) is
not subject to any judgment, decree, writ, injunction or order of any
Governmental Authority.
5.12. Contracts.
(a) SCHEDULE 5.12A contains a true and correct list of
all Contracts not otherwise listed on SCHEDULE 5.13A, 5.15A, 5.15B, 5.18, 5.22C,
5.23A, 5.23C, 5.28 or 5.31, including but not limited to the following:
(i) any Contract with any present or former
employee or consultant or for the employment of any person, including any
consultant;
(ii) any Contract for the future purchase of, or
payment for, supplies or products, or for the performance of services by a third
party involving in any one case $50,000 or more;
(iii) any Contract to sell or supply products or to
perform maintenance, services or similar duties involving in any one case
$50,000 or more;
(iv) any distribution, marketing, dealer,
representative, or sales agency Contract;
(v) any lease under which the Company is lessor
relating to the assets of the Company or any property at which assets of the
Company are located;
(vi) any note, debenture, bond, equipment trust
agreement, letter of credit agreement, loan agreement, or other Contract for the
borrowing or lending of money or agreement or arrangement for a line of credit
or guarantee, pledge, or undertaking of the indebtedness of any other person;
(vii) any Contract for any charitable or political
contribution;
(viii) any Contract limiting or restraining the
Company, its business or any successor thereto from engaging or competing in any
manner or in any business, nor, to the Company's knowledge, is any employee of
the Company engaged in the conduct of the Company's business subject to any such
agreement, contract, or commitment;
(ix) any Contract that has a duration of twelve
(12) months or more; or
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<PAGE> 27
(x) any agreement, contract or transaction with
any officer, stockholder, director or Affiliate of the Company.
(b) SCHEDULE 5.12B contains a true and correct list of
all commitments for capital expenditures that have been approved by the Board of
Directors of the Company prior to the date of this Agreement in excess of
$50,000 by the Company and that remain outstanding as of the date hereof.
(c) Except for the potential unenforceability of the
Cahaba Woodchip agreement listed on SCHEDULE 5.12A, each of the Contracts is in
full force and effect and there exists no breach or violation of or default
under any of such Contracts by the Company or, to the knowledge of the Company,
any other party to such Contracts or any event which, with notice or the lapse
of time, or both, will create a breach or violation thereof or default
thereunder by the Company or, to the knowledge of the Company, any other party
to such Contracts.
(d) Except as indicated on SCHEDULE 5.12C, there exists
no actual or, to the best knowledge of the Company, any threatened termination,
cancellation, or limitation of, or any material amendment, modification, or
change to any Contract, including without limitation, (i) the business
relationship of the Company with any customer, distributor, or related group of
customers or distributors whose purchases individually or in the aggregate are
material to the operations and financial condition of the Company, (ii) the
requirements of any customer or related group of customers of the Company whose
purchases individually or in the aggregate are material to the operations and
financial condition of the Company, or (iii) the business relationship of the
Company with any material supplier to the Company.
(e) As of the Closing, the Company has not granted any
power of attorney affecting or with respect to the Company, its business or its
assets that remains outstanding.
(f) SCHEDULE 5.12D contains a true and correct list of
customers which collectively accounted for eighty percent (80%) of the Company's
revenues during the fiscal year ended December 31, 1997, and for the period
commencing January 1, 1998 through the last day of the month preceding the date
hereof, together with the dollar amount of sales made to each customer for each
such period.
5.13. Title to Leased Real Property & Liens.
(a) The Company does not own any real property. With
respect to the real and personal property constituting the Company's physical
plant (the "Plant"), the Company leases the Plant from The Industrial
Development Board of the City of Montgomery (the "IDB") under the Consolidated,
Amended and Restated Lease Agreement dated as of January 1, 1995 (the "Lease")
between the IDB and the Company. SCHEDULE 5.13A lists the only real estate
leases of the Company. Pursuant to the terms of the Lease taken as a whole, the
Company is deemed to be the owner of the Plant for
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federal tax purposes. The leases of the Company listed on SCHEDULE 5.13A are in
full force and effect and, to the knowledge of the Company, there is no existing
actual or claimed default or event of default or event which with notice or
lapse of time or both would constitute a default thereunder by the Company or
any other party to such leases. Attached as SCHEDULE 5.13B hereto is the
Leasehold Owner's Title Policy issued by Lawyers Title Insurance Corporation on
February 10, 1995 (the "Policy") insuring the Company's interest in the Plant,
subject to the exceptions described in Schedule B, Part I of the Policy. To the
knowledge of the Company, except for the Permitted Encumbrances, the Leased Real
Property is free and clear of any Lien, and is not subject to any deeds of
trust, assignments, subleases, or rights of any third parties known to or
created or permitted by the Company other than the lessors thereof, and to the
Company's knowledge, there are no defaults with respect to any leases of real
property under which the Company is lessee or lessor which, in the aggregate,
could reasonably be expected to have a Material Adverse Effect.
(b) To the knowledge of the Company, all improvements on
the Leased Real Property conform to all applicable state and local laws, use
restrictions, building ordinances, and health and safety ordinances the
noncompliance of which would have a Material Adverse Effect on the Company's
current ownership or use of such property by the Company.
(c) Other than as may be set forth in the Permitted
Encumbrances, the Company has received no written notice of any pending or
threatened condemnations, planned public improvements, annexation, special
assessments, zoning or subdivision changes, or other adverse claims affecting
the Leased Real Property.
(d) Other than may be set forth in the Permitted
Encumbrances, to the knowledge of the Company, there is no private restrictive
covenant or governmental use restriction (including zoning) on all or any
portion of the Leased Real Property which prohibits the current use of the
Leased Real Property.
(e) To the knowledge of the Company, all licenses,
permits and approvals required for the occupancy and operation of the Leased
Real Property (with appurtenant parking uses) as presently being used have been
obtained and are in full force and effect and the Company has received no
notices of violations in connection with such items.
(f) Except as may have been disclosed to Buyer or
contained in any report prepared for the Benefit of Buyer, the Company does not
have in its possession any studies or reports which indicate any material
defects in the design or construction of any of the improvements on the Leased
Real Property.
(g) Other than as may be set forth in the Permitted
Encumbrances, the Company has not granted to any person or entity, other than
Buyer, any right, agreement, commitment, option, or right of first refusal,
whether oral or written,
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with respect to the purchase, assignment or transfer of all or any portion of
the Leased Real Property.
(h) Other than as may be set forth in the Permitted
Encumbrances, to the knowledge of the Company, the Leased Real Property is not
subject to any special assessment for public improvements or otherwise, whether
or not presently a lien upon the Leased Real Property. The Company has made no
commitment to any governmental authority, utility company, school board, church
or other religious body, homeowner or homeowner's association or any other
organization, group or individual relating to the Leased Real Property which
would impose a material obligation upon the Company or its successors or assigns
to make any contributions or dedications of money or land, or to construct,
install or maintain any improvements of a public or private nature as part of
the Leased Real Property or upon separate lands. To the knowledge of the
Company, except under the Lease, no governmental authority has imposed any
requirement that the Company pay, directly or indirectly, any special fees or
contributions or incur any expenses or obligations in connection with the
development of the Leased Real Property or any portion thereof, other than the
Permitted Encumbrances. Other than as may be set forth in the Permitted
Encumbrances, the Company has not received written notice of any contemplated or
actual reassessment of the Leased Real Property or any portion thereof for
general real estate tax purposes.
(i) To the knowledge of the Company, there have been no
additional matters of title put of record from the effective date of the
Commitment (i.e., December 15, 1997) through the date hereof.
5.14. Intellectual Property. SCHEDULE 5.14 contains a true and
correct list of the material Intellectual Property used or owned by the Company.
None of the Intellectual Property listed on SCHEDULE 5.14 has been declared
invalid or is the subject of a pending or, to the knowledge of the Seller,
threatened action for cancellation or a declaration of invalidity, and there is
no pending judicial proceeding involving any claim, and the Company has not
received any written notice or claim of infringement, misuse or misappropriation
of such Intellectual Property by the Company.
5.15. Employment Matters. SCHEDULE 5.15A lists, and Buyer has
been furnished access to, all written or legally binding oral employment,
collective bargaining and consulting contracts to which the Company is a party
or by which it is bound, and, with respect to all such contracts, the Company is
not in material breach thereof or material default thereunder and there does not
exist under any such contract any event which, with the giving of notice or the
lapse of time, would constitute such a breach or default by the Company, except
for such breaches, defaults and events as to which requisite waivers or consents
have been obtained. The Company is in material compliance with all applicable
Legal Requirements concerning the employer-employee relationship and with all
agreements relating to the employment of the Company's employees, including
applicable wage and hour laws, fair employment laws, safety laws, worker
compensation statutes, unemployment laws, and social security laws. Except as
set forth on SCHEDULE 5.15A, the Company is not a party to nor does the Company
have any
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obligation pursuant to any other agreement with any party regarding the rates of
pay or working conditions of any of the employees of the Company, nor is the
Company obligated under any agreement to recognize or bargain with any labor
organization or union on behalf of such employees. The Company, since
incorporation, has not experienced any organized slowdown, work interruption,
strike, or work stoppage by employees of the Company. Except as described on
SCHEDULE 5.15B, there is no outstanding agreement or arrangement with respect to
severance payments with respect to any employee of the Company.
5.16. Environmental and OSHA Compliance.
(a) SCHEDULE 5.16A contains a true, complete and accurate
listing of, and the Company represents that it has delivered to the Buyer true
and complete copies of, all environmental site assessments, test results,
analytical data, boring logs, and other environmental reports and studies
conducted by, at the expense of, or on behalf of the Company or that are
otherwise in the Company's possession.
(b) Except as set forth on SCHEDULE 5.16B, the Company:
(i) is in compliance with all applicable
Environmental Laws. The Company has not (A) received written notice that it is
potentially liable under or (B) received any requests for information or other
correspondence concerning any site or facility under, nor has the Company
received any written notice that it is considered potentially liable under the
Comprehensive Environmental Response, Compensation, and Liability Act (42 U.S.C.
ss.ss. 9601 et seq.), as amended ("CERCLA"), or any similar state law;
(ii) has accurately prepared and timely filed with
the appropriate Governmental Authorities all reports, notifications,
applications, and filings required pursuant to any applicable Environmental Law;
(iii) has not entered into or received any consent
decree, compliance order, administrative order, or settlement, indemnification,
or release agreement or proposed agreement from any Governmental Authority or
other third party relating to violations of Environmental Law;
(iv) has not entered into or received nor is the
Company in default under any judgment, order, writ, injunction or decree of any
federal, state, or municipal court or other Governmental Authority relating to
violations of Environmental Laws;
(v) has obtained all permits, licenses, approvals,
consents, orders, and authorizations required under Environmental Laws
("Environmental Permits") that are required to operate the Company's facilities,
assets and business. The Company is in compliance with each such Environmental
Permit. No Environmental Permit has a material effect on the Company's ability
to operate any equipment, facility, improvement or process covered by such
Environmental Permit as currently being conducted; and
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<PAGE> 31
(vi) has not been, and currently is not, a
"generator" of "hazardous waste" (as those terms are defined by the Resource
Conservation and Recovery Act of 1976 and the regulations promulgated
thereunder), for the purposes of obtaining an EPA identification number under 40
C.F.R. ss.262.12(a) or complying with the manifest system under Subpart 8 of 40
C.F.R. Part 262.
(c) With respect to the Company,
(i) there are no actions, suits, claims,
arbitration proceedings, or complaints pending or threatened by any Governmental
Authority, municipality, community, citizen or citizen's group, or other entity,
against the Company relating to any violation of Environmental Laws;
(ii) except as set forth on SCHEDULE 5.16C, there
has been no disposal, Release, burial, or placement of any Hazardous Materials
by the Company or, to the Company's knowledge, by any other party on, in, at, or
about the Plant or any facilities used by the Company or in connection with its
business;
(iii) all active, inactive, closed, or abandoned
above-ground and underground storage tanks located at the Plant have been
identified on SCHEDULE 5.16D, together with a description of the materials
stored therein and a statement as to whether such tanks are currently used by
the Company, and all such tanks are in compliance with all Environmental Laws;
(iv) no lien has arisen on any of the Company's
assets under or as a result of any Environmental Law;
(v) no environmental audit or remedial
investigation has been conducted as to environmental matters at any of the
Company's properties by any Governmental Authority during or, to the best of the
Company's knowledge, prior to the period during which the Company owned, leased
or operated such properties; and
(vi) the Leased Real Property is not listed or
proposed for listing on the National Priorities List pursuant to CERCLA, on the
CERCLIS, or on any other similar state environmental list of potentially
hazardous sites.
(d) The Company is in material compliance with all
applicable Legal Requirements relating to employee health and safety, and the
Company has not received any notice that past or present conditions of the
Company's assets violate any applicable Legal Requirements as of the Closing
Date.
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5.17. Taxes.
(a) Except as set forth on SCHEDULE 5.17: (i) all
United States federal income Tax Returns of the Company required by law to be
filed have been timely filed and all such federal income Taxes and assessments
(including penalties and interest in respect thereof, if any) that have become
or are due with respect to any period ended on or prior to the Closing Date
whether shown as due on such Returns or not have been paid except (x) Tax
assessments against which appeals have been or will be promptly taken in good
faith, in which event the Company has disclosed the details of such appeals on
SCHEDULE 5.17, and as to which adequate reserves have been provided in
accordance with GAAP and (y) Taxes to the extent accrued or reserved for in the
Financial Statements or included in current liabilities for purposes of
calculating Net Assets; (ii) all other Tax Returns of the Company required to be
filed pursuant to applicable foreign, state, local or other law have been timely
filed, and all such Taxes that have become or are due with respect to any period
ended on or prior to the Closing Date whether shown as due on such returns or
not have been paid except (x) Tax assessments against which appeals have been or
will be promptly taken in good faith, in which event the Company has disclosed
the details of such appeals on SCHEDULE 5.17, and as to which adequate reserves
have been provided in accordance with GAAP and (y) Taxes to the extent accrued
or reserved for in the Financial Statements or included in current liabilities
for purposes of calculating Net Assets; and (iii) the charges, accruals and
reserves on the books of the Company in respect of any Tax liability for any
years not finally determined or with respect to which the applicable statute of
limitations has not expired are believed to be adequate to meet any assessments
or re-assessments for additional income or corporate franchise tax for any such
years. All Tax Returns that have been filed by the Company are true, complete
and correct in all material respects for the periods covered thereby.
(b) SCHEDULE 5.17 provides a brief description of any
pending federal or state Tax dispute in which the Company is alleged to be
liable or in which the Company is claiming a refund, including the nature and
amount of the controversy, the respective positions of the parties as to any
amounts claimed to be due thereunder, and the current status thereof.
(c) All Taxes required to be withheld prior to the
Closing Date from employees, independent contractors, creditors, shareholders
and other third parties for income, social security, payroll or other Taxes have
been properly withheld and, if required prior to the Closing Date, have been
deposited with the appropriate governmental agency.
(d) No claim is pending, and, to the best of the
Company's knowledge, no investigation is pending or threatened and no claim is
threatened, by any state, local, or other jurisdiction alleging that the Company
has a duty to file Tax Returns and pay Taxes or is otherwise subject to the
taxing authority of any jurisdiction not included in SCHEDULE 5.17, nor, except
as set forth in SCHEDULE 5.17, has the Company received any notice or
questionnaire from any such jurisdiction which suggests or asserts
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<PAGE> 33
that the Company may have a duty to file such Returns and pay such Taxes, or
otherwise is subject to the taxing authority of such jurisdiction.
(e) The Company has not granted any extension to any
Tax authority of the limitation period during which any Tax liability may be
asserted after the Closing Date. No Taxes of the Company will become due as a
result of the transactions contemplated by this Agreement. The Company is not a
party to any Tax sharing or Tax allocation agreement, understanding, arrangement
or commitment and, except as set forth on SCHEDULE 5.17, is under no contractual
obligation to pay the Tax liability of any other Person. The Company is not a
consenting corporation under Section 341(f) of the Code. The Company has not
agreed to, nor is it required to make, any adjustment under Code Section 481(a)
by reason of a change in accounting method or otherwise. All positions that
could give rise to substantial understatement penalties have been disclosed
under Section 6662 of the Code. The Company has not entered into any
compensatory agreements with respect to the performance of services that could
obligate it to make a payment that would be nondeductible pursuant to Section
280G of the Code.
(f) Each of the representations contained in this
Section 5.17 relates solely to operations and actions of the Company prior to or
on the Closing Date and in no way will be construed to relate to any period
following the Closing Date or create any liability of Sellers for actions taken
by Buyer or the Company consistent with prior practice but occurring following
the Closing Date.
(g) Each Seller is and shall be able to and will
deliver to Buyer a certificate substantially in the form required by Section
1.1445-2(b)(2)(iii) of the regulations under the Code.
5.18. Employee Benefits.
(a) SCHEDULE 5.18 contains a true and complete list
of all the following agreements or plans hereinafter collectively referred to as
the "Benefit Plans" which are presently in effect and which cover employees of
the Company ("Employees"):
(i) Any employee benefit plan as defined in
Section 3(3) of ERISA; or
(ii) Any other pension, profit sharing,
retirement, deferred compensation, stock purchase, stock option, stock
appreciation, phantom stock or other equity-based, incentive, bonus,
performance, vacation, termination, retention, change of control, severance,
"golden parachute," disability, hospitalization, medical, life insurance, or
other employee benefit plan, program, policy, or arrangement, which the Company
maintains or to which the Company has any outstanding, present, or future
obligations to contribute or make payments under, whether voluntary, contingent,
or otherwise.
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<PAGE> 34
(b) With respect to all Benefit Plans, the Company
makes the following representations and warranties:
(i) The Benefit Plans have been made available
to Buyer for review, including correct and complete copies of: (A) all trust
agreements or other funding arrangements for such Benefit Plans (including
insurance contracts), and all amendments thereto, (B) all current determination
letters and, if any, rulings, opinion letters, information letters, or advisory
opinions issued by the IRS, the United States Department of Labor, or the
Pension Benefit Guaranty Corporation, (C) annual reports or returns, audited or
unaudited financial statements, actuarial valuations and reports, and summary
annual reports prepared for any Benefit Plan with respect to the most recent
three (3) plan years, and (d) the most recent summary plan descriptions and any
modifications thereto.
(ii) Except with respect to the failure to file
certain IRS Forms 5500 as referenced on SCHEDULE 5.17, all the Benefit Plans and
the related trusts subject to ERISA comply with and have been administered in
compliance with, (A) the applicable provisions of ERISA, (B) with respect to
each Benefit Plan that is intended to be a qualified plan under Section 401(a)
of the Code ("Qualified Plan"), all applicable provisions of the Code relating
to qualification and tax exemption under Code Sections 401(a) and 501(a) or
otherwise applicable to secure intended tax consequences, and (C) all other
applicable laws and collective bargaining agreements, and the Company has not
received any notice from any governmental authority questioning or challenging
such compliance. Each Benefit Plan that is a Qualified Plan either (I) has a
current determination letter from the IRS or (II) is a standardized, prototype
plan and the Company is permitted to rely on an opinion letter issued by the IRS
on the qualified status of the prototype plan. No event has occurred which will
or could reasonably be expected to give rise to disqualification of any such
plan or loss of intended Tax consequences under the Code or to any Tax under
Section 511 of the Code. Other than with respect to claims for benefits under
the Benefits Plans, no event has occurred which will or could reasonably be
expected to result in a liability in excess of $50,000.
(iii) No oral or written representation or
communication with respect to any aspect of the Benefit Plans has been made to
Employees prior to the date hereof that is not in accordance with the written or
otherwise preexisting terms and provisions of such plans. Neither the Company
nor any administrator or fiduciary of any Benefit Plan (or any agent of any of
the foregoing) has engaged in any transaction, or acted or failed to act in any
manner that could subject Buyer to any direct or indirect liability or excise
tax (by indemnity or otherwise) for breach of any fiduciary, co-fiduciary or
other duty under ERISA or prohibited transaction under Section 4975 of the Code
or Section 406 of ERISA. The representation in the preceding sentence is made
subject to the Company's knowledge when such representation is made with respect
to a non-employee of the Company. There are no unresolved claims or disputes
under the terms of, or in connection with, the Benefit Plans other than claims
for benefits which are payable in
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the ordinary course and no litigation has been commenced with respect to any
Benefit Plans.
(iv) Except with respect to the failure to file
certain IRS Forms 5500 as referenced on SCHEDULE 5.17, all Benefit Plan
documents and annual reports or returns, audited or unaudited financial
statements, actuarial valuations, summary annual reports, and summary plan
descriptions issued with respect to the Benefit Plans are correct and complete,
and, to the extent required under applicable law, have been timely filed with
the IRS and the United States Department of Labor, have been timely distributed
to participants in the Benefit Plans, and there have been no changes in the
information set forth therein.
(v) There has been no termination or partial
termination, withdrawal or partial withdrawal with respect to any of the Benefit
Plans.
(vi) Neither the Company nor any entity
aggregated with the Company under Code Section 414 (an "ERISA Affiliate") has at
any time sponsored, contributed to, or been obligated under Title I or Title IV
of ERISA to contribute to a "defined benefit plan" (as defined in ERISA 3(35)).
On or after September 26, 1980, neither the Company nor its ERISA Affiliates
have had an "obligation to contribute" (as defined in ERISA Section 4212) to a
"multiemployer plan" (as defined in ERISA Sections 4001(a)(3) and 3(37)(A)). The
Company has no liability under Title IV of ERISA either directly or through its
ERISA Affiliates.
(vii) The Company has neither maintained in the
past nor currently maintains a Benefit Plan providing welfare benefits (as
defined in ERISA Section 3(1)) to employees after retirement or other separation
of service except to the extent required under Part 6 of Title I of ERISA or
Code Section 4980B or their successors. No tax under Code Sections 4980B or 5000
has been incurred with respect to any Benefit Plan and to the best of the
Company's knowledge no circumstances exist which could reasonably be expected to
give rise to such taxes.
(viii) Except as disclosed on SCHEDULE 5.18
hereto, neither the execution and delivery of this Agreement or the Acquisition
Documents, nor the consummation of the transactions contemplated hereby or
thereby, will (i) entitle any current or former employee or director of the
Company to severance pay, unemployment compensation or any payment contingent
upon a change in control or ownership of the Company, (ii) increase or enhance
any benefits payable under any Benefit Plan, or (iii) accelerate the time of
payment or vesting, or increase the amount, of any compensation due to any such
employee or former employee.
(c) The Company has complied in all material respects
with the continuation coverage requirements of Section 1001 of the Consolidated
Omnibus Budget Reconciliation Act of 1985, as amended, and ERISA Sections 601
through 608. The Company shall be responsible for complying with the
requirements of Code Section 4980B and Part 6 of Title I of ERISA for its
employees and their "qualified beneficiaries"
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whose "qualifying event" (as such terms are defined in Code Section 4980B)
occurs on or prior to the Closing Date.
(d) The Company has complied in all material respects
with the Health Insurance Portability and Accountability Act of 1996, as amended
and ERISA Sections 700 et. seq.
5.19. No Other Broker. Other than BT Wolfensohn, a division
of BT Alex. Brown Incorporated, the fees and expenses of which are payable by
the Company, no broker, finder, agent or similar intermediary has acted for or
on behalf of the Company or an Affiliate in connection with this Agreement, the
Acquisition Documents or the transactions contemplated hereby or thereby, and no
broker, finder, agent or similar intermediary is entitled to any broker's,
finder's or similar fee or other commission in connection therewith based on any
agreement, arrangement or understanding with the Company or an Affiliate or any
action taken by either of them.
5.20. Inventories. Except as described in SCHEDULE 5.1B, (a)
all Inventory, whether reflected on the Financial Statements or subsequently
acquired, is now and at the Closing Date will be located at the Plant consistent
with past practices, (b) has been or will be acquired by the Company only in
bona fide transactions entered into in the ordinary course of business, (c) is
of good and merchantable quality except to the extent adequately reserved for in
the Financial Statements, consistent with past practice, (d) is not now and at
the Closing Date will not be subject to any write-down or write-off in excess of
the reserves established based on past practice, and (e) is valued at the lesser
of cost or net realizable market value, with appropriate adjustments for
obsolete and slow moving Inventory in accordance with GAAP. Except as described
in SCHEDULE 5.20, the Company has now and on the Closing Date will have valid
legal title to its Inventory free and clear of any consignments, liens, claims,
charges, and encumbrances. The Company is not under any liability or obligation
with respect to the return of inventory in the possession of wholesalers,
retailers, or other customers which is not reserved against in the Financial
Statements.
5.21. Accounts Receivable. All Accounts Receivable shown on
the Financial Statements represent, and the Accounts Receivable of the Company
outstanding on the Closing Date will represent, sales actually made or services
actually performed in the ordinary course of business in bona fide transactions
completed in accordance with the terms and provisions contained in any documents
relating thereto, if any, and, to the knowledge of the Company, are fully
collectible to the extent not reserved for in the Company's balance sheet as of
December 31, 1997 included in the Financial Statements. The reserves for
uncollectible Accounts Receivable reflected on the Financial Statements were
established in accordance with GAAP and are adequate in light of all the facts
then known to the Company and the Company's historical methods and practices in
establishing such reserves. The Accounts Receivable outstanding on the Closing
Date are subject to no defenses, counterclaims, or rights of setoff other than
those arising in the ordinary course of business and for which adequate reserves
have been established.
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5.22. Personal Property.
(a) As referenced in Section 5.13(a) and except as
set forth in Schedule 5.22C, all of the personal property comprising part of, or
situated at, the Plant is leased by the Company from the IDB under and pursuant
to the Lease. SCHEDULE 5.22A contains a true and correct list and a description
(including serial number, vehicle registration and tag number, if available) of
such personal property. The Company has good leasehold title to all of the
personal property listed in SCHEDULE 5.22A, free and clear of all Liens, except
as disclosed on SCHEDULE 5.22B.
(b) SCHEDULE 5.22C contains a list of all leases for
Vehicles, Equipment, Furniture and Fixtures, or other items of personal property
leased by the Company other than pursuant to the Lease (except miscellaneous
leases having an aggregate value, if capitalized, of less than $50,000). Each of
the leases described on SCHEDULE 5.22C is in full force and effect and there are
no existing defaults or events of default, real or claimed, or events which with
notice or lapse of time or both would constitute defaults, the consequences of
which, severally or in the aggregate, could reasonably be expected to have a
Material Adverse Effect.
5.23. Insurance.
(a) The Company and its assets are insured under
various policies of general liability and other forms of insurance which
policies are in amounts adequate in the reasonable judgment of the Sellers. Set
forth in SCHEDULE 5.23A is a true and complete list and description of all
insurance policies of the Company in force on the date hereof, together with a
statement of the aggregate amount of claims paid out, and claims pending, under
each such policy through the date hereof. All such policies are in full force
and effect, all premiums due thereon have been paid by the Company, and the
Company has complied in all material respects with the provisions of such
policies. The Company has not received any notice of cancellation or non-renewal
of any such policy, nor has the Company received any notice from any of its
insurance carriers that any insurance premiums will be increased in the future
or that any insurance coverage presently provided for will not be available to
the Company in the future on substantially the same terms as now in effect. Set
forth on SCHEDULE 5.23B is a true and complete list of all claims for medical
expenses in excess of $25,000 for any employee of the Company. The Company has
not been refused any insurance by any insurance carrier to which it has applied
for insurance since incorporation. There are no outstanding requirements or
recommendations by any current insurer or underwriter of the Company which
require or recommend changes in the conduct of the Company's business, or
require any repairs or other work to be done with respect to any of the
Company's assets or operations of the Company's business since incorporation.
(b) The Company has delivered to Buyer (i) true and
complete copies of all current policies of insurance to which either the Company
is a party or under which either the Company, or any director of the Company, is
or has been covered at any time since incorporation of the Company; and (ii) any
statement by the auditor of the
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Company's financial statements with regard to the adequacy of such entity's
coverage or of the reserves for claims.
(c) SCHEDULE 5.23C sets forth (i) any contract or
arrangement, other than a policy of insurance, for the transfer or sharing of
any risk by the Company or (ii) all obligations of the Company to third parties
with respect to insurance (including such obligations under leases and service
agreements) and identifies the policy under which such coverage is provided.
5.24. Compliance with Laws. Except as disclosed in SCHEDULE
5.24, the Company since its incorporation has not engaged in and is not engaging
in any activity or omitting to take any action that is or creates a violation of
any law, statute, ordinance, or regulation applicable to the Company, its
business or its assets.
5.25. Product Warranty. Each product manufactured, sold,
leased or delivered in connection with the operation of the Company's business
is in conformity with all applicable contracts and all express and implied
warranties, and the Company has no liability (and to the Company's knowledge
there is no basis for any assertion of liability) for replacement or repair
thereof or other damages in connection therewith.
5.26. Product Liability. The Company has no liability (and to
the Company's knowledge there is no basis for any assertion of liability)
arising from any claims related to the manufacture, sale or supply of the
Company's products, including, but not limited to, claims of professional
negligence, manufacturing negligence or improper workmanship, or claims in whole
or in part premised upon product liability.
5.27. Compliance with the Immigration Reform and Control. To
the knowledge of the Company, the Company is in full material compliance with
and has not materially violated the terms and provisions of the Immigration
Reform and Control Act of 1986, and all related regulations promulgated
thereunder (the "Immigration Laws"). With respect to each employee (as defined
in Section 274a.1(f) of Title 8, Code of Federal Regulations) of the Company for
whom compliance with the Immigration Laws by an employer (as defined in Section
274a.1(g) of Title 8, Code of Federal Regulations) is required, the Company,
upon request of Buyer, will make available to Buyer prior to the Closing Date
such employee's Form I-9 (Employment Eligibility Verification Form) and all
other records, documents or other papers which are retained with the Form I-9 by
the employer pursuant to the Immigration Laws.
5.28. Transactions with Related Parties. SCHEDULE 5.28 sets
forth all:
(a) Current agreements or transactions between the
Company and (i) any director, officer, stockholder or Affiliate of the Company,
or (ii) any relative or spouse (or relative of such spouse) of any such
director, officer, stockholder or Affiliate (such persons in (i) and (ii) being
referred to herein as a "Related Party" or collectively as the "Related
Parties").
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(b) To the Company's knowledge, no Related Party is a
director or officer of, or has any direct or indirect interest in (other than
the ownership of not more than 5% of the publicly traded shares of), any person
or entity which is a supplier, vendor, landlord, sales agent or competitor of
the Company;
(c) No Related Party owns or has any interest in,
directly or indirectly, in whole or in part, any tangible or intangible property
used in the conduct of the Company's business.
(d) Other than expense advance reimbursements not
exceeding $2,000 in the aggregate and compensation, no stockholder owes any
money or other amounts to, nor is any stockholder owed any money or other
amounts by, the Company;
(e) The Company does not currently, directly or
indirectly, guarantee or assume any indebtedness for borrowed money or otherwise
for the benefit of any Related Party; and
(f) The Company does not have an agreement to make any
loans, payments or transfers of the Company's assets to any Related Party.
5.29. Corporate Records. Attached to SCHEDULE 5.29 hereto are
true and complete copies of (i) the Certificate of Incorporation of the Company,
with all amendments thereto, certified by the appropriate official, and (ii) the
Bylaws of the Company, certified by the Secretary of the Company. The minute
books of the Company since incorporation, heretofore made available to Buyer for
examination, are complete and accurately reflect the stock ownership of the
Company, the transfer of any shares of capital stock of the Company, and all
proceedings of the shareholders and directors and all committees thereto of the
Company.
5.30. Undisclosed Liabilities. Except for (w) liabilities and
obligations which are insured against (subject to immaterial deductibles) or as
to which the Company is entitled to be indemnified, (x) liabilities and
obligations reflected on the Company's balance sheet as at December 31, 1997
included in the Financial Statements or the Schedules hereto, (y) obligations
arising in the ordinary course pursuant to Contracts (but excluding those
arising as a result of the breach of a Contract) and (z) liabilities and
obligations arising since December 31, 1997 in accordance with this Agreement,
the Company has no material liabilities or obligations of any kind, fixed, or
contingent.
5.31. Indebtedness. Except for the Indebtedness listed on
SCHEDULE 5.31, the Company has no liabilities or obligations in respect of
borrowed money.
5.32. Correctness of Representations. No representation or
warranty of the Company in this Agreement, the other Acquisition Documents, or
in any Exhibit or certificate or furnished pursuant hereto or thereto, contains,
or on the Closing Date will contain, any untrue statement of material fact or
omits, or on the Closing Date will omit,
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to state any fact necessary in order to make the statements contained therein
not misleading in any material respect, and all such statements,
representations, warranties, Exhibits, certificates, and Schedules shall be true
and complete in all material respects on and as of the Closing Date as though
made on that date. True copies of all written mortgages, indentures, notes,
leases, agreements, plans, Contracts, and other instruments listed on the
Schedules pursuant to this Agreement have been (or will be prior to the Closing
Date) delivered to Buyer.
5.33. Definition of "Knowledge". The phrases "to the knowledge
of the Company", "the Company has not received notice", "to the Company's
knowledge", "the Company has not been notified" and any other similar phrases as
used in this Article 5 refer to the knowledge, after due inquiry, of Carl Edward
Boardwine, Myles Cowan and Dwight Goff.
5.34. Unclaimed Property. The Company has complied in all
material respects with any applicable unclaimed property escheat, or similar
law, and has no material liability under any such law.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF SELLERS
Each Seller, severally but not jointly, represents and
warrants to Buyer as follows:
6.1. Authority. Such Seller has all requisite power and
authority or (in the case of any Seller who is a natural person) all requisite
capacity to enter into and perform its obligations under the Acquisition
Documents and to consummate the transactions contemplated therein, and each of
the Acquisition Documents to which such Seller is a party has been duly executed
and delivered by such Seller pursuant to any necessary authorization. Each of
the Acquisition Documents to which such Seller is a party constitutes the legal,
valid and binding obligation of such Seller enforceable against such Seller in
accordance with its terms, except to the extent that enforceability thereof may
be limited by: (i) applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium or similar laws from time to time in effect affecting
generally the enforcement of creditors' rights and remedies; and (ii) general
principles of equity, including, without limitation, principles of
reasonableness, good faith and fair dealing (regardless of whether
enforceability is considered in a proceeding at law or in equity).
6.2. Title. Such Seller is, directly or indirectly, the record
and beneficial owner of the Shares and/or the Options set forth opposite such
Seller's name on SCHEDULE 2.2 free and clear of any Lien, and, upon delivery of
and payment for the Shares and/or the Options as herein provided, such Seller
shall convey to Buyer valid and marketable title thereto, free and clear of any
and all Liens. Such Seller has no interest in any shares of capital stock, or
any rights to acquire shares of capital stock, of the Company, except as set
forth on SCHEDULE 2.2. No other person or entity, including
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Affiliates of such Seller shall to the best knowledge of such Seller, as of the
Closing Date, have any rights in, to or under the Shares or the Options.
6.3. Broker or Finders. Except as set forth in Section 5.19,
no broker or finder is entitled to any brokerage or other fee from Buyer or the
Company based upon arrangements made by or on behalf of such Seller in
connection with the transactions contemplated hereby.
6.4. No Violation. The execution, delivery and performance by
the Sellers of this Agreement and the transactions contemplated hereby
(including under the Acquisition Documents), do not and will not conflict with
or result in, with or without the giving of notice or lapse of time or both, any
violation of or constitute a breach or default, or give rise to any right of
acceleration, payment, cancellation or termination, under (a) any agreement or
other instrument to which any Seller is a party or by which any Seller is bound,
or (b) any order, judgment or decree of any court or other governmental or
regulatory authority to which any Seller is bound or subject, or (c) any Legal
Requirement applicable to any Seller.
6.5. Third Party Approvals. Except as set forth on SCHEDULE
6.5, the execution, delivery and performance by the Sellers of this Agreement
and the transactions contemplated hereby (including under the Acquisition
Documents) do not require any consents, waivers, authorizations or approvals of
any third persons or entities which have not been obtained by the Sellers. Any
consent or approval required to be obtained from the Company to effect the
transfer of the Shares and Options in accordance with the terms of this
Agreement is hereby waived by the Sellers and the Company (including, without
limitation, the required consents and approvals under the Shareholders Agreement
dated February 9, 1995 by and among the Company, Capital One Investors, Charter
Oak Partners and Carl Edward Boardwine, and the Subscription Agreements of the
Sellers), but such waiver is effective only in respect to the transfers
contemplated by this Agreement.
6.6. Sale of Shares. Except as otherwise expressly provided
for in this Agreement, such Seller will not, prior to termination of this
Agreement pursuant to the terms hereof or consummation of the transactions
contemplated herein, make or agree to any transfers of his or its respective
Shares or Options or exercise or agree to exercise his Options.
6.7. Foreign Status. Such Seller is not a "foreign person"
within the meaning of Section 1445(b)(2) of the Code and will deliver to Buyer
prior to Closing certification of non-foreign status meeting the requirements of
Treasury Regulation Section 1.1445-2(b)(2)(iii).
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ARTICLE 7
REPRESENTATIONS AND WARRANTIES OF BUYER
The Buyer represents and warrants to the Company and each
Seller that:
7.1. Incorporation and Corporate Authority. Buyer has been
duly incorporated and is validly existing and in good standing under the laws of
the State of Georgia with all requisite corporate power and authority to enter
into this Agreement and perform its obligations hereunder.
7.2. Binding Obligation. Buyer has full power and authority to
enter into each of the Acquisition Documents to which it is a party and to
consummate the transactions contemplated thereby. The execution, delivery and
performance by Buyer of each of the Acquisition Documents to which it is a party
have been duly and validly authorized and approved by all necessary action on
the part of Buyer. Each of the Acquisition Documents to which Buyer is a party,
assuming such Acquisition Document constitutes a valid and binding obligation of
the other parties thereto, constitutes the legal, valid and binding obligation
of the Buyer, enforceable against the Buyer in accordance with its terms, except
to the extent that the enforceability thereof may be limited by: (i) applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or
similar laws from time to time in effect affecting generally the enforcement of
creditors' rights and remedies; and (ii) general principles of equity,
including, without limitation, principles of reasonableness, good faith and fair
dealing (regardless of whether enforcement is sought in equity or at law).
7.3. No Defaults or Conflicts. The execution and delivery of
each of the Acquisition Documents to which Buyer is a party and performance by
Buyer of its obligations thereunder have been duly authorized by all necessary
corporate action on the part of Buyer and: (i) do not and, on the Closing Date,
will not result in any violation of the charter or by-laws or other constituent
documents of Buyer; and (ii) on the Closing Date, will not conflict with, or
result in a breach of any of the terms or provisions of, or constitute a default
under, or result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of Buyer (except for such conflicts,
breaches or defaults or liens, charges or encumbrances as would not adversely
affect the consummation of the transactions contemplated hereby) under: (A) any
indenture, mortgage, lease or loan or any other agreement or instrument to which
the Buyer is a party or by which either of them may be bound or to which any of
their respective properties may be subject; or (B) any existing applicable law,
rule, regulation, judgment, order or decree of any Governmental Authority having
jurisdiction over Buyer or any of their respective properties, other than such
conflicts, breaches and defaults as would be waived or avoided by the consents,
approvals and notices, which are described in Section 7.4.
7.4. No Governmental Authorization or Consents Required. Other
than consents required under the HSR Act, as of the Closing Date, no consent,
authorization or approval or other action by, and no notice to or declaration,
filing or registration with, any
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Governmental Authority or any third party will be required to be obtained or
made by Buyer in connection with the due execution and delivery and performance
by Buyer of this Agreement or the consummation by Buyer of the transactions as
contemplated hereby.
7.5. No Actions, Suits or Proceedings. There is no action,
suit or proceeding pending against, nor, to Buyer's knowledge, threatened
against Buyer before any Governmental Authority which questions the validity or
legality of this Agreement or of the transactions contemplated hereby or which
seeks to prevent the consummation of the transactions contemplated hereby.
7.6. Investment Purpose. Buyer is buying the Shares for
investment only and not with a view to resale in connection with any
distribution of any of the Shares except in compliance with the Securities Act,
and all other applicable securities laws. Buyer understands that the Shares have
not been registered under the Securities Act or under the securities laws of any
state and that the Shares may not be sold, transferred, offered for sale,
pledged, hypothecated or otherwise disposed of in the absence of an effective
registration under the Securities Act except pursuant to a valid exemption from
such registration. Buyer is an "accredited investor" as defined in Rule 501(a)
under the Securities Act.
7.7. Sufficient Funds. Buyer will have on the Closing Date
sufficient funds to purchase all of the Shares in accordance with the terms of
this Agreement.
7.8. Solvency. Upon the consummation of the transactions
contemplated by this Agreement, neither Buyer nor the Company will be insolvent
and each of them will continue to be able to pay their respective debts as they
mature and will have sufficient capital to be engaged in their respective
businesses as presently conducted.
7.9. No Broker. No broker, finder, agent or similar
intermediary has acted for or on behalf of Buyer or an Affiliate in connection
with this Agreement, the Acquisition Documents or the transactions contemplated
hereby or thereby, and no broker, finder, agent or similar intermediary is
entitled to any broker's, finder's or similar fee or other commission in
connection therewith based on any agreement, arrangement or understanding with
Buyer or an Affiliate or any action taken by either of them.
ARTICLE 8
COVENANTS
The parties hereto covenant and agree as follows:
8.1. Conduct of Business. Except as contemplated by this
Agreement, during the period from the date of this Agreement to the Closing
Date, the Company shall:
(a) operate the business substantially as previously
operated and only in the regular and ordinary course;
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(b) not purchase or acquire any assets or properties,
whether real or personal, tangible or intangible, and not sell or otherwise
dispose of any real or personal property or asset, except in the ordinary course
of business and consistent with past practices;
(c) use reasonable efforts to maintain its assets in
their present order and condition, reasonable wear and use excepted;
(d) maintain all policies of insurance in amounts and on
terms substantially equivalent to those in effect on the date hereof;
(e) comply with all laws applicable to the Company and
the conduct of its business where the failure to so comply would have a Material
Adverse Effect;
(f) maintain the books and records of the Company in the
usual, regular, and ordinary manner and prepare and file all foreign, federal,
state, and local tax returns and amendments thereto required to be filed by the
Company after taking into account any extensions of time granted by such taxing
authorities on a basis consistent with past practices;
(g) use reasonable efforts to preserve the goodwill and
patronage of its customers, Employees, suppliers and others having a business
relationship with the Company;
(h) not, without the prior written consent of Buyer,
take any of the actions described in Section 5.4 hereof; and
(i) use reasonable efforts to obtain the consent of the
IDB to construct a fourth furnace.
8.2. Access to Information; Confidentiality.
(a) During the period from the date of this Agreement to
the Closing Date, the Company shall, during regular business hours and upon
reasonable written request, give Buyer, its lenders, counsel, accountants and
other authorized representatives reasonable access to all books and records,
offices, facilities, properties, vendors and customers of the Company, and shall
furnish such persons with all information (including financial and operating
data) concerning the Company as they reasonably may request; provided, however,
that any such access shall not unreasonably interfere with the business or
operations of the Company. Requests for such information shall be coordinated
with the Company's designated representatives.
(b) Any information provided to or obtained by Buyer or
its financing sources, accountants counsel, representatives and agents pursuant
to paragraph (a) above shall be "Information" as defined under the
Confidentiality
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Agreement, dated October 1, 1997, between the Company and Buyer (the
"Confidentiality Agreement"), and shall be held by Buyer or its financing
sources, accountants counsel, representatives and agents in accordance with and
be subject to the terms of the Confidentiality Agreement.
(c) Buyer agrees to be bound by and comply with the
provisions set forth in the Confidentiality Agreement as if such provisions were
set forth herein, and such provisions are hereby incorporated herein by
reference.
(d) Buyer shall indemnify the Seller and the Company and
hold the Seller and the Company harmless from and against any and all claims,
demands, causes of action, losses, damages, liabilities, costs and expenses
(including, without limitation, attorneys' fees and disbursements) suffered or
incurred by the Sellers or the Company arising out of or in connection with any
inspection or other activities conducted by Buyer or Buyer's authorized
representatives pursuant to this Section 8.2.
8.3. Further Assurances. Each of the parties hereto shall
execute such documents and other papers and perform such further acts as may be
reasonably required to carry out the provisions hereof and the transactions
contemplated hereby. Subject to such party's right to terminate this Agreement
pursuant to Article 11 hereof, each party shall do all things reasonably
necessary to effect the consummation of the transactions contemplated by this
Agreement. Each such party shall, on or prior to the Closing, use its best
efforts to fulfill or obtain the fulfillment of the conditions precedent to the
consummation of the transactions contemplated hereby, including the execution
and delivery of any documents, certificates, instruments or other papers that
are reasonably required for the consummation of the transactions contemplated
hereby. Each party shall promptly notify each of the other parties of any
action, suit, or proceeding that shall be instituted or threatened against such
party to restrain, prohibit, or otherwise challenge the legality of any
transaction contemplated by this Agreement.
8.4. Notice of Events. During the period from the date of this
Agreement to the Closing Date, the Company shall give prompt notice to Buyer,
and Buyer shall give prompt notice to the Company, of: (i) the occurrence or
non-occurrence of any event of which it has knowledge, the occurrence or
non-occurrence of which would be likely to result in any of the conditions
specified in (x) in the case of the Buyer, Sections 9.1 and 9.4, or (y) in the
case of the Company, Sections 10.1 and 10.4, not being satisfied so as to permit
the consummation of the transfer of Shares in accordance with the time schedule
contemplated by this Agreement; and (ii) any material failure on its part, or on
the part of the other party hereto of which it has knowledge, to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it hereunder; provided, however, that the delivery of any notice pursuant to
this Section 8.4 shall not limit or otherwise affect the remedies available
hereunder to any party. Without in any way limiting the foregoing, during the
period from the date of this Agreement to the Closing Date, the Company shall
promptly notify Buyer in writing of any Material Adverse Effect, any material
damage to or loss of any of the Company's assets (whether owned or leased), or
the institution of or, if known by the Company, the overt threat in writing of
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institution of legal, administrative, or other proceedings against the Company,
except that if the Closing occurs and the Company or the Sellers have excluded
the matters covered by such notice from the coverage of the Certificates
delivered to Buyer pursuant to Section 9.1 or 9.2, Buyer shall have no available
remedy with respect to such matters.
8.5. Indemnification. Subject to obtaining Releases from all
current directors of the Company, and from all Sellers, Buyer agrees that all
rights to indemnification and exculpation from liability for acts or omissions
occurring prior to the Closing Date now existing in favor of the current or
former directors, officers or employees acting as fiduciaries for any 401(k)
plan of the Company, as provided in the certificate of incorporation or by-laws,
or under any document or agreement relating to any Benefit Plan to which it is a
party, shall survive the Closing Date and shall continue in full force and
effect in accordance with their respective terms for a period of not less than
three (3) years and six (6) months after the Closing Date. As of the Closing
Date, Buyer shall, without any further action, be jointly and severally liable
with the Company for all obligations of the Company with respect to such
indemnification and exculpation from liability as are provided for in this
Section 8.5.
8.6. Filings and Authorizations. Each of the Company and Buyer
within five (5) Business Days of the date hereof, shall, if required, file or
supply, or cause to be filed or supplied, all notifications and information
required to be filed or supplied pursuant to the HSR Act in connection with the
sale and transfer of the Shares pursuant to this Agreement and consummation of
the other transactions contemplated hereby, and request early termination of the
waiting period under the HSR Act. Each of the Company and Buyer, as promptly as
practicable, shall (a) make, or cause to be made, all such other filings and
submissions under laws, rules and regulations applicable to it, or to its
subsidiaries and Affiliates, as may be required for it to consummate the
transfer of Shares and other transactions contemplated hereby in accordance with
the terms of this Agreement; (b) use its best efforts to obtain, or cause to be
obtained, at its sole cost and expense, all authorizations, approvals, consents
and waivers from all persons and Governmental Authorities necessary or
appropriate (as determined in the reasonable judgment of the other party) to be
obtained by it, or its subsidiaries or Affiliates, in order for it so to
consummate such transactions; and (c) use its best efforts to take, or cause to
be taken, all other action necessary, proper or advisable in order for it to
fulfill its obligations hereunder. The Company, the Sellers and Buyer shall
coordinate and cooperate with one another in exchanging such information and
supplying such reasonable assistance as may be reasonably requested by each in
connection with the foregoing.
8.7. Tax Matters.
(a) Buyer will cause the Company to file a federal
income Tax Return for the period from January 1, 1998 through the Closing Date.
Buyer and the Company shall prepare or cause to be prepared and file or cause to
be filed all Tax Returns for the Company for all periods ending on or prior to
the Closing Date that are filed after the Closing Date. Buyer shall deliver to
Sellers drafts of each such Tax Return (and supporting work papers) at least 60
days prior to the due date for such Tax Return
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(provided that with respect to the Tax Return for 1997, if not previously filed,
and the period ending on the Closing Date, Buyer shall deliver to the Sellers
such draft within thirty (30) days after final determination of the Closing
Balance Sheet and the Adjustment Amount) and shall permit Sellers to review and
comment on each such Tax Return and shall not file any such Tax Return without
incorporating Sellers' reasonable requests for changes therein. Buyer shall
cause the Company to file such Tax Returns within fifteen (15) days after
agreement on such proposed changes. Sellers shall reimburse Buyer for (or Buyer
or the Company shall refund to Sellers the amount of) Taxes of the Company with
respect to such periods within fifteen (15) days after payment by Buyer or the
Company after the Closing Date of such Taxes (or within fifteen (15) days after
the date Buyer or the Company files such Tax Return) to the extent such Taxes
exceed (or are less than) the sum of (i) Taxes paid with respect to the periods
covered by such Tax Returns prior to or on the Closing Date and (ii) any accrual
or reserve for Tax liability (rather than any reserve for deferred Taxes
established to reflect timing differences between book and Tax income) contained
in the Closing Balance Sheet. Buyer, the Company and Sellers agree that all Tax
Returns filed pursuant to this paragraph (a) or the succeeding paragraph (b)
shall be filed on the basis that a compensation deduction relating to amounts
paid to employees in respect of the Option exercise and the Bonus shall be
allocable only to the period that ends on the Closing Date (or the portion
ending on the Closing Date of any period that includes, but does not end on, the
Closing Date).
(b) Buyer and the Company shall prepare or cause to be
prepared and file or cause to be filed any Tax Returns of the Company for Tax
periods which begin before the Closing Date and end after the Closing Date.
Buyer shall deliver to Sellers drafts of each such Tax Return (and supporting
work papers) at least 60 days prior to the due date of such Tax Return, and
shall permit Sellers to review and comment on each such Tax Return and shall not
file any such Tax Return without incorporating Sellers' reasonable requests for
changes therein. Sellers shall pay to Buyer (or Buyer or the Company shall
refund to Sellers) within fifteen (15) days after the date on which Taxes are
paid with respect to such periods an amount equal to the portion of such Taxes
which relates to the portion of such Taxable period ending on the Closing Date
to the extent such Taxes exceed (or are less than) (i) Taxes paid with respect
to the periods covered by such Tax Returns prior to or on the Closing Date and
(ii) any accrual or reserve for Tax Liability (rather than any reserve for
deferred Taxes established to reflect timing differences between book and Tax
income) shown on the face of the Closing Balance Sheet. For purposes of this
Section, in the case of any Taxes that are imposed on a periodic basis and are
payable for a Taxable period that includes (but does not end on) the Closing
Date, the portion of such Tax which relates to the portion of such Taxable
period ending on the Closing Date shall (x) in the case of any Taxes other than
Taxes based upon or related to income or receipts, be deemed to be the amount of
such Tax for the entire Taxable period multiplied by a fraction the numerator of
which is the number of days in the Taxable period ending on the Closing Date and
the denominator of which is the number of days in the entire Taxable period, and
(y) in the case of any Tax based upon or related to income or receipts be deemed
equal to the amount which would be payable if the relevant Taxable period ended
on the Closing Date. Any credit relating to a Taxable
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period that begins before and ends after the Closing Date shall be taken into
account as though the relevant Taxable period ended on the Closing Date. All
determinations necessary to give effect to the foregoing allocations shall be
made in a manner consistent with prior practice of the Company. On and after the
Closing Date, Buyer shall be liable for, and shall hold the Sellers harmless
against, any and all Taxes due or payable by the Company related to periods that
begin after the Closing Date and the portion beginning on the day after the
Closing Date of any period that includes (but does not end on) the Closing Date.
(c) (i) Buyer, the Company and Sellers shall cooperate
fully, as and to the extent reasonably requested by the other party, in
connection with the filing of Tax Returns pursuant to this Section and any
audit, litigation or other proceeding with respect to Taxes. Such cooperation
shall include the retention and (upon the other party's request) the provision
of records and information which are reasonably requested by another party and
making employees available on a mutually convenient basis to provide additional
information and explanation of any material provided hereunder. Buyer, the
Company and Sellers agree (A) to retain all books and records with respect to
Tax matters pertinent to the Company relating to any taxable period beginning
before the Closing Date until the expiration of the statute of limitations (and,
to the extent notified by Buyer or Sellers, any extensions thereof) of the
respective taxable periods, and to abide by all record retention agreements
entered into with any taxing authority, and (B) to give the other party
reasonable written notice prior to transferring, destroying or discarding any
such books and records and, if the other party so requests, the Company or
Sellers, as the case may be, shall allow the other party to take possession of
such books and records.
(ii) Buyer, the Company and Sellers further agree,
upon request, to use all commercially reasonable efforts to obtain any
certificate or other document from any governmental authority or any other
Person as may be necessary to mitigate, reduce or eliminate any Tax that could
be imposed (including, but not limited to, with respect to the transactions
contemplated hereby).
(iii) Buyer, the Company and Sellers further agree,
upon request, to provide the other party with all information that either party
may be required to report pursuant to Section 6043 of the Code and all Treasury
Department Regulations promulgated thereunder.
(d) To the extent the Tax Return for the period ending
on the Closing Date reflects a net operating loss, Buyer agrees to cause the
Company, to the maximum extent permitted by law, to carry-back any such net
operating loss and promptly seek a refund for Taxes for periods prior to the
Closing Date by preparing appropriate claims for refund. To the extent that such
claims for refund result in a refund by a taxing authority to the Company of any
amount, , the Company shall pay such amount to Sellers within five (5) days
after receipt thereof, together with any interest actually received from the
taxing authority.
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(e) Any payment by Sellers to Buyer pursuant to this
Section 8.7 shall be made from the Escrow Account and shall be subject to (and
included in) the Maximum Amount, but shall not be included in the Threshhold
Amount described in Section 12.7(a).
8.8. Severance. Buyer agrees that, for a period of one year
after the Closing Date, if any employee not covered by an existing collective
bargaining agreement with the Company other than an officer is (a) terminated as
determined in the Buyer's sole discretion (other than for cause relating to that
employee's failure to perform duties) or (b) resigns because such employee was
required to transfer to a work location more than 50 miles from that employee's
current work location, the employee shall receive, and the Buyer shall pay, as
severance the following: the greater of (a) one week of severance pay per year
of service, or (b) severance pay equal to payment of base pay (i.e., wages for
40 hours of employment per week based on the employee's wage scale as of the
employee's termination of employment) for the balance of the period until the
six month anniversary of the Closing Date. Health and life insurance programs
and pension benefit accruals will continue during the period of severance
payments to the extent permitted by law and by the terms of the applicable plan
documents and to the extent the terminated employee pays any insurance premiums
applicable to their continued participation in such plans. Any employee covered
by this Section 8.8 shall be an intended third party beneficiary of this
Agreement.
8.9. Sales and Transfer Taxes. All transfer taxes (including
all stock transfer taxes, if any) exclusive of income taxes incurred in
connection with this Agreement and the transactions contemplated hereby will be
borne fifty (50%) percent by Sellers and fifty (50%) percent by Buyer. Buyer and
Sellers shall cooperate to file all necessary tax returns and other
documentation with respect to all such transfer taxes and, if required by
applicable law, Buyer and Sellers shall join in the execution of any such tax
return or other documentation.
8.10. Public Announcements. The Company, the Sellers and Buyer
shall consult with each other before issuing any press release or otherwise
making any public statement or filings with governmental entities with respect
to this Agreement or the transactions contemplated hereby, and shall not issue
any such press release or make any such public statement or filing without prior
approval thereof by the other parties, which approval shall not be unreasonably
withheld or delayed. The parties shall not issue any press release or public
statement (other than pursuant to the HSR Act) prior to the Closing. In no event
shall Buyer disclose any of the terms or conditions of this Agreement
(including, without limitation, the identity of any of the Sellers or the
allocation of the Purchase Price among them, or any other matter relating to
their affairs) to anyone other than its lenders, advisors or representatives
without the prior written approval of the Company or the Sellers. Nothing in
this Section 8.10 shall prevent such disclosure by Buyer, and the Company or the
Sellers with respect to this Agreement and the transactions contemplated hereby
as Buyer, the Company or the Sellers may be required to make by applicable law;
provided, however, that the party required to make such
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disclosure shall give prompt notice to the other parties hereto of the nature of
the requirement, the identity of the person or persons to whom such disclosure
is required to be made and the information so disclosed.
8.11. Records. With respect to the financial books and records
and minute books of the Company relating to matters on or prior to the Closing
Date: (a) for a period of ten years after the Closing Date, Buyer shall not
cause or permit their destruction or disposal except for a transfer that may be
required in the event of a sale of stock of the Company to a party that will
assume Buyer's obligations under this Agreement, without first offering to
surrender them to the Sellers, and (b) where there is legitimate purpose,
including, without limitation, an audit of any of the Sellers by the IRS or any
other taxing authority, Buyer shall allow the Sellers and their respective
representatives or agents, during regular business hours, access to such books
and records and the ability to inspect and copy same or (if required) obtain the
originals thereof.
8.12. No Section 338 Election; Certain Transactions
Prohibited. Neither Buyer nor any Affiliate thereof shall make an election under
Section 338 of the Code or any similar provision of state or local law, in
respect of the purchase of the Shares or the other transactions contemplated by
this Agreement. In addition, neither Buyer nor any Affiliate thereof shall cause
the Company to engage in any transaction (including, without limitation, the
merger of the Company with a direct or indirect subsidiary of Buyer) that could
cause the purchase of the Shares or the other transactions contemplated by this
Agreement to be treated as a purchase or sale of assets of the Company.
8.13. WARN Act Notice. Buyer shall be solely responsible for
providing any notice required under the Worker Adjustment and Retraining
Notification Act and shall indemnify and hold Sellers harmless from any
liability arising from any failure of the Buyer to comply fully with the
requirements of such Act.
8.14. Other Transactions. The Company shall deal exclusively
and in good faith with Buyer with regard to the transactions contemplated by
this Agreement and will not, and will direct its officers, directors, financial
advisors, accountants, agents, and counsel not to, (i) solicit submission of
proposals or offers from any person other than Buyer relating to any acquisition
of all or any part of the Shares or the Options or any acquisition of
substantially all of the assets of the Company (an "Acquisition Proposal"), or
(ii) participate in any discussions or negotiations regarding, or furnish any
non-public information to any other person contemplating an Acquisition Proposal
regarding the Company or its business other than Buyer and its representatives
or otherwise cooperate in any way or assist, facilitate, or encourage any
Acquisition Proposal by any person other than Buyer.
8.15. Supplemental Disclosure. The Company shall have the
continuing obligation up to and including the Closing Date to supplement
promptly or amend the Schedules with respect to any matter hereafter arising or
discovered which, if existing or known at the date of this Agreement, would have
been required to be set forth or listed in the Schedule; provided, however, that
for the purpose of the rights and obligations of the
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parties hereunder, any such supplemental disclosure shall not be deemed to have
been disclosed as of the date of this Agreement unless so agreed to in writing
by Buyer. A breach of this covenant shall not in and of itself constitute a
breach which would entitle the Buyer to terminate this Agreement pursuant to
Section 11.1(a)(iii) hereof.
8.16. Contracts and Capital Expenditures. Except for the
capital expenditures related to the gantry crane reflected on SCHEDULE 5.12B,
the Company shall cause its management to discuss with Buyer any significant
Contract to be executed, or any proposed significant capital expenditure to be
made prior to the Closing Date prior to entering into any contract (including
any Contract relating to any commitment described in SCHEDULE 5.12B other than
the commitments with respect to the gantry crane) or commitment for such capital
expenditure, other than emergency capital expenditures. No significant capital
expenditure (other than emergency capital expenditures and expenditures related
to the gantry crane) shall be made by the Company prior to the Closing Date
without the prior written consent of Buyer, which consent shall not be
unreasonably withheld or delayed. The Company will promptly notify Buyer of the
nature and extent of emergency capital expenditures or gantry crane capital
expenditures made by the Company without the prior written consent of Buyer.
8.17. Discharge of Liens and Encumbrances. All Liens that are
not Permitted Encumbrances, and all Liens that evidence Indebtedness which is to
be paid off at Closing, or the existence or persistence of which the Buyer
expressly waived in writing, shall be satisfied, terminated, and discharged by
the Company on or prior to the Closing Date and evidence reasonably satisfactory
to Buyer and its counsel of such satisfaction, termination, and discharge shall
be delivered to Buyer at or prior to the Closing.
8.18. Environmental Fines. The Company shall upon demand,
promptly (but not before due) pay all fines, penalties, and assessments due on
or before the Closing ("Environmental Fines") that the Company is not disputing
in good faith and by appropriate proceedings, and that are attributable to (a)
the Company's operation of Equipment which was not in compliance with applicable
Environmental Laws, (b) the Company's failure to possess all required
Environmental Permits, or (c) violation of applicable Environmental Laws; such
Environmental Fines shall be paid directly to any agency enforcing compliance
with such Environmental Laws and Environmental Permits.
8.19. Payment of Bonus. The Buyer shall pay the Bonus within
thirty (30) days of the Closing Date or such other date as mutually agreed upon
by the Buyer and the employees receiving any portion of the Bonus.
8.20. Financing Cooperation. The Company and management of the
Company shall cooperate (and the Sellers shall cause the Company and management
of the Company to cooperate) in all reasonable respects with the Buyer and the
Buyer's agents to facilitate the consummation of the financing conducted by
Buyer (the expense of such cooperation to be borne by the Buyer), including
without limitation, the preparation of any offering memorandum, any audited
financial statements, and any marketing efforts necessary in connection with the
financing.
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8.21. Asset Appraisal. Buyer shall deliver the asset appraisal
to the parties referenced in the commitment letter dated the date hereof between
Buyer and NationsBank, N.A. and NationsBanc Montgomery Securities LLC on or
before March 13, 1998.
ARTICLE 9
CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER
The obligation of Buyer under this Agreement to consummate the
purchase of the Shares and Options at the Closing shall be subject to the
satisfaction, at or prior to the Closing, of all of the following conditions,
any one or more of which (other than performance and compliance by all of the
Sellers as required by Section 9.2 which waiver requires the approval of the
other Sellers to be effective) may be waived in writing, in whole or in part, by
Buyer:
9.1. Representations and Warranties Accurate. All
representations and warranties of the Company and the Sellers contained in
Articles 5 and 6 shall be true and correct in all material respects (except that
representations and warranties qualified by materiality or Material Adverse
Effect shall be true and correct in all respects) on and as of the Closing Date
with the same force and effect as though such representations and warranties had
been made on and as of the Closing Date. Buyer shall have received certificates
dated as of the Closing Date executed by an authorized officer of the Company
(in the case of Article 5) and each of the Sellers (in the case of Article 6) to
such respective effect.
9.2. Performance. The Company and each of the Sellers,
respectively, shall have performed and complied with, in all material respects,
all agreements, covenants and conditions required by this Agreement to be
performed and complied with by them prior to or on the Closing Date, and Buyer
shall have received certificates, dated as of the Closing Date, executed by an
authorized officer of the Company and each of the Sellers, to such respective
effect.
9.3. Opinion of Counsel. Buyer shall have received the Company
Opinion dated the Closing Date.
9.4. HSR Act; Authorizations; Consents; Legal Prohibition.
(a) With respect to the transactions contemplated hereby,
all applicable waiting periods under the HSR Act shall have expired or been
terminated.
(b) Buyer shall have obtained all governmental
authorizations, approvals, orders, consents and waivers, the lack of which prior
to the Closing, under any applicable law, rule or regulation, would render
legally impermissible the purchase hereunder of the Shares by Buyer.
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(c) The Sellers and the Company shall have obtained or
made all governmental authorizations, approvals, orders, consents, waivers and
filings, the lack of which prior to the Closing, under any applicable law, rule
or regulation, would render legally impermissible the sale hereunder of the
Shares by the Sellers.
(d) Buyer shall have received a true and correct copy of
each consent and waiver identified on any Schedule hereto as being requested by
Buyer that is (i) required for the transfer of the Shares or (ii) otherwise
required for the execution, delivery and performance of this Agreement and the
other Acquisition Documents by the Company and the Sellers.
(e) On the Closing Date, there shall exist no, injunction
or other order issued by a court of competent jurisdiction, regulation or
legislation, which would prohibit the purchase and sale of any of the Shares
contemplated by this Agreement.
9.5. Incumbency. Buyer shall have received a certificate of
incumbency of the Company executed by an executive officer and Secretary or
Assistant Secretary of the Company listing the officers of the Company
authorized to execute this Agreement and the other Acquisition Documents to
which the Company is a party and all instruments on behalf of the Company and
certifying the authority of each such officer to execute the agreements,
documents, and instruments on behalf of the Company in connection with the
consummation of the transactions contemplated herein.
9.6. Certified Resolutions. Buyer shall have received a
certificate of the Secretary or Assistant Secretary of the Company containing a
true and correct copy of the resolutions duly adopted by the board of directors
of the Company, approving and authorizing this Agreement and each other
Acquisition Document to which the Company is a party and the transactions
contemplated hereby and thereby. The Secretary or Assistant Secretary of the
Company shall also certify that such resolutions have not been rescinded,
revoked, modified, or otherwise affected and remain in full force and effect.
9.7. Basic Corporate Documents. The Company shall have
delivered to Buyer on the Closing Date a certified copy from the Secretary of
State of Delaware of the Company's Certificate of Incorporation dated within
twenty (20) days prior to the Closing Date and certificates from the Secretaries
of State in each jurisdiction listed on SCHEDULE 5.1A, indicating that, as of a
date within twenty (20) days prior to the Closing Date, the Company was in good
standing and had paid all taxes required to have been paid as of such date.
9.8. No Adverse Change. Since December 31, 1997, there shall
not have been any change in the Company as would have a Material Adverse Effect,
and Buyer shall have received a certificate dated as of the Closing Date,
executed by an authorized officer of the Company to such effect.
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9.9. Acquisition Documents. Buyer shall have received the
Acquisition Documents to which the Company or the Sellers are a party, executed
by the Company and/or the Sellers as applicable.
9.10. Releases. Buyer shall have received executed
Releases from each of the Sellers and each of the current directors of the
Company.
9.11. Termination of Agreements. Buyer shall have received
executed written terminations of all guarantees of the Company and all
agreements between the Company and any Seller, any Affiliate of a Seller, or any
employee of the Company, including, without limitation the Contracts listed on
SCHEDULE 5.28 (except for the Company's agreement with Paul Selmon dated January
27, 1998 and the Company's agreement with Gene Simms dated January 22, 1998).
9.12. Substitute Letter of Credit. Buyer shall have received
from the Trustee and the Bondholder a waiver of the timing requirements for
substitution of a letter of credit pursuant to Section 5.4 of the Loan Agreement
by and among State Industrial Development Authority, as lender, and SIMCALA,
Inc. and The Industrial Development Board of the City of Montgomery, as
borrowers, dated as of January 1, 1995, relating to $6,000,000 State Industrial
Development Authority Taxable Industrial Revenue Bonds (SIMCALA, Inc. Project)
Series 1995 (the "Loan Agreement"); provided, however, Buyer shall be
responsible for satisfying or causing to be satisfied the requirements of
Section 5.4(c) and (d) of the Loan Agreement.
9.13. FIRPTA Certificates. Each Seller shall deliver to Buyer
a duly executed certificate substantially in the form required by Section
1.1445-2(b)(2)(iii) of the Treasury Regulations promulgated under the Code.
9.14. Comfort Letter. The Buyer shall have received from Crowe
Chizek (at Buyer's expense and which amount shall not be included in
Professional Fees) a letter dated such date, together with signed or reproduced
copies of such letter, containing statements and information of the type
ordinarily included in an accountants' "comfort letter" to the initial purchaser
consistent with the provisions of SAS 72 (provided that the initial purchaser
provides a letter indicating that it is a party entitled to receive a comfort
letter under SAS 72) with respect to the financial statements audited by such
firm included in the Financial Statements and certain financial information with
respect to the periods covered thereby contained in a final offering memorandum
related to the Rule 144A/High Yield financing obtained by Buyer.
ARTICLE 10
CONDITIONS PRECEDENT TO OBLIGATIONS
OF THE COMPANY AND THE SELLERS
The obligations (i) of the Company to consummate the
transactions contemplated by this Agreement and (ii) of each of the Sellers
under this Agreement to consummate the sale of the Shares and Options owned by
such Seller at the Closing shall
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be subject to the satisfaction, at or prior to the Closing, of all of the
following conditions, any one or more of which (other than performance and
compliance by each of the other Sellers as required by Section 10.2) may be
waived in writing, in whole or in part, by the Company (on its own behalf or on
behalf of the Sellers) or the Sellers:
10.1. Representations and Warranties Accurate. All
representations and warranties of Buyer contained in Article 7 shall be true and
correct in all material respects (except that representations and warranties
qualified by materiality shall be true and correct in all respects), on and as
of the Closing Date with the same force and effect as though such
representations and warranties had been made on and as of the Closing Date. Each
of the Company and the Sellers shall have received a certificate dated as of the
Closing Date executed by an authorized officer of Buyer to such effect.
10.2. Performance by Others. Buyer shall have performed and
complied with, in all material respects, all agreements, covenants and
conditions required by this Agreement to be performed and complied with by it
prior to or on the Closing Date, and each of the Company and the Sellers shall
have received a certificate, dated as of the Closing Date, executed by an
authorized officer of Buyer to such effect.
10.3. Opinion of Counsel for Buyer. Each of the Company and
the Sellers shall have received the Buyer Opinion, executed by Alston & Bird,
counsel for Buyer, and dated the Closing Date.
10.4. HSR Act; Authorization: Consents; Legal Prohibition.
(a) With respect to the transactions contemplated hereby,
all applicable waiting periods under the HSR Act shall have expired or been
terminated.
(b) Buyer shall have obtained or made all governmental
authorizations, approvals, orders, consents, waivers and filings, the lack of
which prior to the Closing, under any applicable law, rule or regulation, would
render legally impermissible the purchase hereunder of the Shares by Buyer.
(c) The Company and the Sellers shall have received a
true and correct copy of each consent and waiver identified on any Schedule
hereto as being requested by the Company or the Sellers that is (i) required for
the transfer of the Shares or (ii) otherwise required for the execution,
delivery and performance of this Agreement and the other Acquisition Documents
by Buyer.
(d) On the Closing Date, there shall exist no injunction
or other order issued by a court of competent jurisdiction, regulation or
legislation, which would prohibit the purchase and sale of any of the Shares
contemplated by this Agreement.
(e) Each of the Sellers and the current directors of the
Company shall have received executed Releases from Buyer and the Company.
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10.5. Acquisition Documents. Sellers shall have received the
Acquisition Documents to which the Buyer is a party, executed by the Buyer.
ARTICLE 11
TERMINATION OF AGREEMENT
11.1. Termination.
(a) This Agreement may be terminated on or prior to the
Closing as follows:
(i) by consent of Buyer and the Company (acting on
its behalf and for the Sellers);
(ii) at the election of Buyer or the Company
(acting on its behalf and for the Sellers), if the Closing Date shall not have
occurred on or before March 31, 1998, because (A) the conditions thereto have
not been satisfied on or before that date unless the failure to consummate the
transactions contemplated hereby is the result of a breach of this Agreement by
the party seeking to terminate this Agreement or (B) the other party wrongfully
refuses to close the transactions contemplated hereby;
(iii) by Buyer if any condition in Article 9 becomes
impossible of performance or has not been satisfied in full or previously waived
by Buyer in writing at or prior to the Closing Date; and
(iv) by the Company or all of the Sellers if any
condition in Article 10 becomes impossible of performance or has not been
satisfied in full or previously waived by the Company or all of the Sellers, as
applicable in writing at or prior to the Closing Date.
(b) The termination of this Agreement shall be
effectuated by the delivery by the party terminating this Agreement to each
other party of a written notice of such termination. If this Agreement so
terminates, it shall become null and void and have no further force or effect,
except as provided in Section 11.2.
11.2. Survival After Termination. If this Agreement is
terminated in accordance with Section 11.1 hereof and the transactions
contemplated hereby are not consummated, this Agreement shall become void and of
no further force and effect, except that the provisions set forth in Section
3.1, Section 8.2(b), (c), (d), 8.20 and this Section 11.2 shall survive the
termination of this Agreement. None of the parties hereto shall have any
liability in respect of a termination of this Agreement, except with respect to
Section 8.2(b) and (c) of this Agreement and except to the extent that failure
to satisfy the conditions of Articles 9 or 10 result from a breach of or default
under any representation, warranty or covenant made by such party under this
Agreement or a breach of or default under the provisions of any agreement made
or to be made pursuant to this Agreement. In the event of a termination of this
Agreement based on a failure to satisfy one or more of
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the conditions of Article 10 (other than with respect to a failure to obtain
expiration or termination of the waiting periods under the HSR Act after filings
have been made) resulting from Buyer's breach of or default under any
representation, warranty or covenant made under this Agreement or a breach of or
default under the provisions of any agreement made or to be made pursuant to
this Agreement, the Company may exercise its rights under the Pre-Closing Escrow
Agreement. Such amount is being fixed as liquidated damages in any such event by
reason of the fact that the actual damages to be suffered by the Company and the
Sellers are by their nature uncertain and unascertainable with exactness. In the
event of a termination of this Agreement based on a failure to satisfy one or
more of the conditions of Article 9 (other than with respect to a failure to
obtain expiration or termination of the waiting periods under the HSR Act after
filings have been made) resulting from the Company's or a Seller's breach of or
default under any representation, warranty or covenant made by such party under
this Agreement or a breach of or default under the provisions of any agreement
made or to be made pursuant to this Agreement, liability of the Company and the
Sellers for such termination shall not exceed the lesser of (i) $500,000, or
(ii) Buyer's actual damages, costs and expenses related to the preparation of
the Acquisition Documents (including those related to the negotiations, due
diligence, and expenses related to obtaining financing). Except as set forth in
this Section 11.2, no party in relation to the termination of this Agreement
shall seek any money or other judgment against the other party, or against any
officer, director, shareholder or partner of any of them or against their
assets, and the sole recourse of the party seeking damages shall be to recover
damages in the foregoing amount.
ARTICLE 12
INDEMNIFICATION
12.1. Definitions.
For the purposes of this Article:
(a) "Indemnification Claim" shall mean a claim for
indemnification hereunder.
(b) "Indemnitee" shall mean the party or parties
seeking indemnification hereunder.
(c) "Indemnitor" shall mean the party or parties
against whom indemnification hereunder is sought.
(d) "Losses" shall mean any and all demands, claims,
actions or causes of action, assessments, losses, fines, judgments, costs,
damages (including consequential damages), liabilities, costs, removal and
remediation requirements and expenses, including without limitation, interest,
penalties, cost of investigation and defense, and reasonable attorneys' and
other professional fees and expenses.
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(e) "Buyer Indemnitees" shall mean Buyer, the Company
and Affiliates.
(f) "Third Party Claim" shall mean any claim, suit or
proceeding (including, without limitation, a binding arbitration or an audit by
any taxing authority) that is instituted against the Indemnitee which, if
prosecuted successfully, would result in a Loss for which the Indemnitee is
entitled to indemnification hereunder.
12.2 Agreement of the Indemnitors to Indemnify.
(a) Subject to the terms and conditions of this
Article 12, each Seller severally (in proportion of the percentage of the
Purchase Price paid to such Seller) but not jointly agrees to indemnify, defend
and hold harmless the Buyer Indemnitees from, against, for and in respect of any
and all Losses asserted against, paid, suffered or incurred by the Buyer
Indemnitees, or any of them, and resulting from, based upon, or arising out of:
(i) the breach of any representation or warranty
of the Company or a Seller contained in or made pursuant to this Agreement or
any other Acquisition Document or in any certificate, Schedule or Exhibit
furnished by the Company or such Seller in connection herewith or therewith; and
(ii) a breach of or failure to perform any
covenant or agreement of the Company or such Seller made pursuant to this
Agreement or any other Acquisition Document or any certificate, Schedule or
Exhibit furnished by the Company or such Seller in connection herewith or
therewith
(b) Subject to the terms and conditions of this
Article 12, Buyer agrees to indemnify, defend and hold harmless the Sellers
from, against, for and in respect of any and all Losses asserted against, paid,
suffered or incurred by any of the Sellers, and resulting from, based upon, or
arising out of:
(i) the breach of any representation or warranty
of Buyer contained in or made pursuant to this Agreement or any other
Acquisition Document or in any certificate, Schedule or Exhibit furnished by
Buyer in connection herewith or therewith; and
(ii) a breach of or failure to perform any
covenant or agreement of Buyer made pursuant to this Agreement or any other
Acquisition Document or in any certificate, Schedule or Exhibit furnished by
Buyer in connection herewith or therewith.
12.3. Procedures for Indemnification.
(a) An Indemnification Claim shall be made by the
Indemnitee, promptly upon becoming aware of such Indemnification Claim, by
delivery of a written
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notice to the Indemnitor requesting indemnification and specifying the basis on
which indemnification is sought and the amount of asserted Losses and, in the
case of a Third Party Claim, containing (by attachment or otherwise) such other
information as the Indemnitee shall have concerning such Third Party Claim.
(b) If the Indemnification Claim involves a Third Party
Claim, the procedures set forth in Section 12.4 hereof shall be observed by the
Indemnitee and the Indemnitor.
(c) If the Indemnification Claim involves a matter other
than a Third Party Claim, the Indemnitor shall have thirty (30) Business Days to
object to such Indemnification Claim by delivery of a written notice of such
objection to the Indemnitee specifying in reasonable detail the basis for such
objection. Failure to timely so object shall constitute a final and binding
acceptance of the Indemnification Claim by the Indemnitor, and the
Indemnification Claim shall be paid in accordance with Section 12.3(d) hereof.
If an objection is timely interposed by the Indemnitor, then the Indemnitee and
the Indemnitor shall negotiate in good faith for a period of sixty (60) business
days from the date (such period is hereinafter referred to as the "Negotiation
Period") the Indemnitee receives such objection prior to commencing any formal
legal action, suit or proceeding with respect to such Indemnification Claim.
(d) Upon determination of the amount of an
Indemnification Claim that is binding on both the Indemnitor and the Indemnitee,
the amount of such Indemnification Claim shall be paid within ten (10) Business
Days of the date such amount is determined. If the Indemnitor responsible for
payment of such Indemnification Claim is Buyer, such payment shall be made by
wire transfer to the Indemnitee to an account designated by the Indemnitee. If
the Indemnitor responsible for payment of such Indemnification Claim is a
Seller, and the payment relates to a Loss arising from a breach of any
representation, warranty or covenant of the Company, such payment shall be made
first by wire transfer by the Escrow Agent to an account designated by Buyer in
accordance with the terms of the Escrow Agreement until Seller's portion of the
Escrowed Funds is exhausted and such Loss shall be shared on a pro rata basis
among all Sellers. Such payment shall otherwise be made at the sole option of
Buyer either by wire transfer by the Escrow Agent to an account designated by
Buyer in accordance with the terms of the Escrow Agreement or by wire transfer
by the Seller to an account designated by Buyer.
12.4. Third Party Claims. The obligations and liabilities of
the Indemnitee and Indemnitor hereunder with respect to a Third Party Claim
shall be subject to the following terms and conditions:
(a) The Indemnitee seeking indemnification for such
Third Party Claim shall give the Indemnitor written notice of the Third Party
Claim promptly after receipt by the Indemnitee of notice thereof, and the
Indemnitor may undertake the defense, compromise and settlement thereof by
representatives of its own choosing reasonably acceptable to the Indemnitee. The
failure of the Indemnitee to notify the
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Indemnitor of such claim shall not relieve the Indemnitor of any liability that
the Indemnitor may have with respect to such claim except to the extent the
Indemnitor demonstrates that the defense of such claim is prejudiced by such
failure. The assumption of the defense, compromise and settlement of any such
Third Party Claim by the Indemnitor shall not be an acknowledgment of the
obligation of the Indemnitor to indemnify such Indemnitee with respect to such
claim hereunder. If the Indemnitee desires to participate in, but not control,
any such defense, compromise and settlement, it may do so at its sole cost and
expense. If, however, the Indemnitor fails or refuses to undertake the defense
of such Third Party Claim within fifteen (15) days after written notice of such
claim has been given to the Indemnitor by the Indemnitee, the Indemnitee shall
have the right to undertake the defense, compromise and settlement of such claim
with counsel of its own choosing. In the circumstances described in the
preceding sentence, the Indemnitee shall, promptly upon its assumption of the
defense of such claim, make an Indemnification Claim as specified in Section
12.3 which shall be deemed an Indemnification Claim that is not a Third Party
Claim for the purposes of the procedures set forth herein.
(b) If, in the reasonable opinion of the Indemnitee, any
Third Party Claim or the litigation or resolution thereof involves an issue or
matter which could reasonably be expected to have a material adverse effect on
the business, operations, assets, properties or prospects of the Indemnitee
(including, without limitation, the administration of the Tax Returns and
responsibilities under the Tax laws of the Indemnitee), the Indemnitee shall
have the right to control the defense, compromise and settlement of such Third
Party Claim undertaken by the Indemnitor, and the costs and expenses of the
Indemnitee in connection therewith shall not be included as part of the
indemnification obligations of the Indemnitor hereunder. If the Indemnitee
elects to exercise such rights, the Indemnitor shall have the right to
participate in, but not control, the defense, compromise and settlement of such
Third Party Claim at its sole cost and expense.
(c) No settlement of a Third Party Claim involving the
asserted liability of the Indemnitor under this Article 12 shall be made without
the prior written consent of the Indemnitor, which consent shall not be
unreasonably withheld or delayed. Consent shall be presumed in the case of
settlements of $100,000 or less where the Indemnitor has not responded within
thirty (30) business days of notice of a proposed settlement. If the Indemnitor
assumes the defense of such a Third Party Claim, (i) no compromise or settlement
thereof may be effected by the Indemnitor without the Indemnitee's consent
unless (A) there is no finding or admission of any violation of law or any
violation of the rights of any person and no effect on any other claim that may
be made against the Indemnitee, (B) the sole relief provided is monetary damages
that are paid in full by the Indemnitor, and (C) the compromise or settlement
includes, as an unconditional term thereof, the giving by the claimant or the
plaintiff to the Indemnitee of a release, in form and substance satisfactory to
the Indemnitee, from all liability in respect of such Third Party Claim, and
(ii) the Indemnitee shall have no liability with respect to any compromise or
settlement thereof effected without its consent.
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(d) In connection with the defense, compromise or
settlement of any Third Party Claim, the Indemnitee and the Indemnitor shall
execute such powers of attorney as may reasonably be necessary or appropriate to
permit participation of counsel selected by such Indemnitee or Indemnitor and,
as may reasonably be related to any such Third Party Claim, shall provide access
to the counsel, accountants and other representatives of such Indemnitee or
Indemnitor during normal business hours to all properties, personnel, books, tax
records, contracts, commitments and all other business records of such
Indemnitee or Indemnitor and will furnish to such Indemnitee or Indemnitor
copies of all such documents as may reasonably be requested (certified, if
requested).
12.5. Other Rights and Remedies. Except for the rights of
Buyer described in Section 11.2 hereof, the rights of Buyer Indemnitees under
this Article 12 are the sole and exclusive rights and remedies of the Buyer
Indemnitees as to the Sellers for the inaccuracy or breach of any representation
or warranty of the Company or any Seller contained herein or in any certificate,
Schedule or Exhibit furnished by the Company or any Seller in connection
herewith, or for the failure of the Company or any Seller to perform any
agreement, covenant or undertaking required by the terms hereof to be performed
by the Company or any Seller. Except for the rights of the Company and/or the
Sellers described in Section 11.2 hereof, the rights and remedies of the Sellers
under this Article 12 are the sole and exclusive rights and remedies of such
parties for the inaccuracy or breach of any representation and warranty of Buyer
contained herein, or in any certificate, Schedule or Exhibit furnished by Buyer
in connection herewith, or for the failure of Buyer to perform any agreement,
covenant or undertaking required by the terms hereof to be performed by Buyer.
12.6 Duration. The indemnification rights of the parties
hereto for Losses resulting from a breach of representations and warranties or
for breaches of covenants contained in this Agreement or any other Acquisition
Document or in any certificate, Schedule or Exhibit furnished in connection
herewith or therewith (other than for tax matters) are subject to the condition
that the Indemnitor shall have received written notice of the Losses for which
indemnity is sought on or before the date which is eighteen (18) months from the
Closing Date. The indemnification rights of the parties hereto for Losses
resulting from a breach of representations and warranties or for breaches of
covenants that are related to tax, is subject to the condition that the
Indemnitor shall have received written notice of the Losses for which indemnity
is sought on or before September 15, 2002. The indemnification rights of the
parties hereto for Losses resulting from a breach of any representation and
warranty with respect to title to the Shares and Options shall be effective for
all purposes hereunder without limitation as to the time within which such
notice may be given.
12.7. Limitations.
(a) The Indemnitor shall be obligated to indemnify the
Indemnitee only when the aggregate of all Losses suffered or incurred by the
Indemnitee as to which a right of indemnification is provided under this Article
12 and Section 8.7
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exceeds Five Hundred Thousand Dollars ($500,000) (the "Threshold Amount"). After
the aggregate of all Losses suffered or incurred by the Indemnitee exceeds the
Threshold Amount, the Indemnitor shall be obligated to indemnify the Indemnitee
for all such Losses reduced by Two Hundred Fifty Thousand Dollars ($250,000).
Except with respect to a breach of any representation and warranty with respect
to title to any of the Company's assets and title to the Shares and Options, for
which the aggregate liability of the Sellers shall not exceed Seventy Six
Million Dollars ($76,000,000), in no event shall the aggregate liability of the
Sellers, or the aggregate liability of Buyer, under this Article 12 and Sections
8.7(a) or 8.7(b) (other than the last sentence of Section 8.7(b) thereof) exceed
Eight Million Two Hundred Thousand ($8,200,000) Dollars (the "Maximum Amount").
(b) The Indemnitor shall not be liable for damages in
excess of the actual damages suffered by the Indemnitee as a result of the act,
circumstance, or condition for which indemnification is sought net of any
insurance proceeds received by the Indemnitee or any tax benefits realized by
the Indemnitee as a result of the Losses for which indemnification is claimed.
12.8. Subrogation. Upon payment in full of any Indemnification
Claim, whether such payment is effected by set-off or otherwise, or the payment
of any judgment or settlement with respect to a Third Party Claim, the rights of
the Indemnitors shall be subrogated to the extent of such payment to the rights
of the Indemnitee against any person or entity with respect to the subject
matter of such Indemnification Claim or Third Party Claim.
12.9. Cooperation. The Company, the Sellers and Buyer shall
cooperate with each other in all reasonable respects in connection with the
defense of any claim, including making available records relating to such claim
and furnishing, without expense, management employees of the party as may be
reasonably necessary for the preparation of the defense of any such claim or for
testimony as a witness in any proceeding relating to such claim; provided,
however, that the foregoing right to cooperation shall not be exercisable by one
party in such a manner as to interfere unreasonably with the normal operations
and business of the other party.
ARTICLE 13
MISCELLANEOUS
13.1. Expenses. Each party to this Agreement shall pay its own
costs and expenses (including all legal, accounting, broker, finder and
investment banker fees) relating to this Agreement, the negotiations leading up
to this Agreement and the transactions contemplated by this Agreement; provided
that the Company shall pay the expenses of the Sellers.
13.2. Investigation. Buyer acknowledges that Buyer and its
representatives have received or been given access to all information, documents
and other materials concerning the Company which Buyer and its representatives
deem appropriate
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in the circumstances and have been afforded the opportunity to ask questions of
and receive answers from management employees of the Company regarding the
Company and its business in connection with Buyer's determination to enter into
this Agreement and to consummate the transactions contemplated hereby. Any
inspection, preparation, or compilation of information or Schedules, or audit of
the inventories, properties, financial condition, or other matters relating to
the Company conducted by or on behalf of Buyer pursuant to this Agreement shall
in no way limit, affect, or impair the ability of Buyer to rely on the
representations, warranties, covenants, and agreements of the Company and the
Sellers set forth herein, except that Buyer may not assert any claim hereunder
for a breach of or a default under any of the Company's or any of the Sellers'
representations, warranties or covenants if, prior to the Closing, Buyer knows
of such breach or default and such breach or default would have resulted in the
failure of Sellers to deliver the certificate described in Section 9.1 hereof,
and Buyer does not give to the Company or the Sellers notice thereof pursuant to
Section 8.4. Any disclosure made on one Schedule shall not be deemed made on any
other Schedule, unless appropriate cross-referencing is made. The covenants and
representations and warranties of the Company, the Sellers and Buyer shall
survive the Closing and the execution and delivery of all instruments for the
periods set forth in Section 12.6.
13.3. Governing Law.
(a) This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware without giving effect to the
principles of conflict of laws thereof.
(b) To the extent permitted by law, each of the Buyer,
the Sellers, and the Company hereby irrevocably submits to the jurisdiction of
any Delaware State court or United States federal court over any suit, action or
other proceeding brought by any party arising out of or relating to this
Agreement and each of the Company and the Buyer hereby irrevocably agrees that
all claims with respect to such suit, action or other proceeding shall be heard
and determined in such courts.
13.4. Binding Effect; Persons Benefiting; No Assignment. This
Agreement shall inure to the benefit of and be binding upon the parties hereto
and the respective successors and assigns of the parties and such persons.
Nothing in this Agreement is intended or shall be construed to confer upon any
entity or person other than the parties hereto and their respective successors
and permitted assigns any right, remedy or claim under or by reason of this
Agreement or any part hereof. Except as provided in this Section 13.4, prior to
the Closing, without the prior written consent of the parties hereto, this
Agreement may not be assigned by any of the parties hereto; provided, however,
that at the Closing, Buyer may assign all of its rights to be indemnified as
provided in Article 12 to any lender or lenders providing financing to Buyer
subject to all of the provisions hereof and all rights, remedies and defenses
that the Sellers or the Company could assert against Buyer. From and after any
such assignment, the word "Buyer" shall mean such assignee.
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13.5. Amendments. This Agreement may not be amended, altered
or modified except by a written instrument executed by all of the Sellers, Buyer
and the Company.
13.6. Interpretation. When a reference is made in this
Agreement to a Section or Schedule, such reference shall be to a Section of, or
a Schedule to, this Agreement unless otherwise indicated. The table of contents
and headings contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this Agreement.
Whenever the words "include", "includes" or "including" are used in this
Agreement, they shall be deemed to be followed by the words "without
limitation". Words used herein, regardless of the number and gender specifically
used, shall be deemed and construed to include any other number, singular or
plural, and any other gender, masculine, feminine, or neuter, as the context
requires. Any reference to a "person" herein shall include an individual, firm,
corporation, partnership, trust, governmental authority or body, association,
unincorporated organization or any other entity.
13.7. Counterparts. This Agreement may be executed in two (2)
or more counterparts, each of which shall be deemed an original and all of which
shall constitute one and the same instrument, and shall become effective when
one counterpart has been signed by each party and delivered to the other parties
hereto.
13.8. Entire Agreement. This Agreement, including the
Schedules, Exhibits, certificates and lists referred to herein, and any
documents executed by the parties simultaneously herewith or pursuant thereto,
constitute the entire understanding and agreement of the parties hereto with
respect to the subject matter hereof and supersede all other prior agreements
and understandings, written or oral, between the parties with respect to such
subject matter.
13.9. Severability. If any provisions of this Agreement, or
the application thereof to any person or circumstance, is invalid or
unenforceable in any jurisdiction, (i) a substitute and equitable provision
shall be substituted therefor in order to carry out, so far as may be valid and
enforceable in such jurisdiction, the intent and purpose of the invalid or
unenforceable provision; and (ii) the remainder of this Agreement and the
application of such provision to other persons or circumstances shall not be
affected by such invalidity or unenforceability, nor shall such invalidity or
unenforceability of such provision affect the validity or enforceability of such
provision, or the application thereof, in any other jurisdiction.
13.10. Waiver. Waiver of any term or condition of this
Agreement by any party shall only be effective if in writing and shall not be
construed as a waiver of any subsequent breach or failure of the same term or
condition, or a waiver of any other term or condition of this Agreement.
13.11. Notices. All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given when delivered
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(a) by hand, (b) by telex or telecopier (with receipt confirmed), provided a
copy is also sent by registered mail, return receipt requested, (c) by courier,
or (d) by overnight service, addressed as follows (or to such other address as a
party may designate by notice to the other):
(a) If to the Buyer:
SAC Acquisition Corp.
c/o CGW Southeast Partners III, L.P.
Twelve Piedmont Center, Suite 210
Atlanta, Georgia 30305
Attention: William A. Davies
Telecopier: (404) 816-3258
with copies (which shall not constitute notice) to:
Alston & Bird
One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309
Attention: Teri L. McMahon, Esq.
Telecopier: (404) 881-4777
(b) If to the Company:
SIMCALA, Inc.
P.O. Box 68
Mt. Meigs, Alabama 36057
Attention: Carl Edward Boardwine
Telecopier: (334) 215-8232
with copies (which shall not constitute notice) to:
Schulte Roth & Zabel LLP
900 Third Avenue
New York, New York 10022
Attention: Andre Weiss, Esq.
Telecopier: 212-593-5955
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<PAGE> 66
and copies (which shall not constitute notice) to:
Roy S. Goldfinger, P.C.
4137 Carmichael Road, Suite 210
P. O. Box 231555 (36123-1555)
Montgomery, Alabama 36106
Attention: Roy S. Goldfinger, Esq.
Telecopier: (334) 277-7007
(c) If to Charter Oak Partners:
P.O. Box 5147
10 Wright Street, Building B
Westport, Connecticut 06880
Attention: Anthony J. Dowd
Telecopier: (203) 222-2720
(d) If to Capital One Investors:
111 Chester Avenue, Suite 815
Cleveland, Ohio 44144
Attention: James Petras
Telecopier: (216) 781-0158
(e) If to Carl Edward Boardwine:
c/o SIMCALA, Inc.
P.O. Bo 68
Mt. Meigs, Alabama 36057
Attention: Carl Edward Boardwine
Telecopier: (334) 215-2969
(f) If to Dwight L. Goff:
c/o SIMCALA, Inc.
P.O. Box 68
Mt. Meigs, Alabama 36057
Attention: Dwight L. Goff
Telecopier: (334) 215-8969
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(g) If to R. Myles Cowan:
c/o SIMCALA, Inc.
P.O. Box 68
Mt. Meigs, Alabama 36057
Attention: R. Myles Cowan
Telecopier: (334) 215-8969
(h) If to George W. Rapp, Jr.:
c/o SIMCALA, Inc.
P.O. Box 68
Mt. Meigs, Alabama 36057
Attention: George W. Rapp, Jr.
Telecopier: (334) 215-8969
(The remainder of this page was intentionally left blank.)
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<PAGE> 68
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the day and year first above written.
SAC ACQUISITION CORP.
By: /s/ William A. Davies
---------------------------------------
Name:
Title:
SIMCALA, INC.
By: /s/ C. Edward Boardwine
---------------------------------------
Name:
Title:
SELLERS:
Charter Oak Partners
--------------------
Jerrold N. Fine
Managing Partner of Fine Partners L.P.,
the Managing Partner of Charter Oak Partners
/s/ Jerrold N. Fine
--------------------------------------------
Capital One Investors
---------------------
By: MCK Corporation, General Partner
By: /s/ James M. Petras
-----------------------------------
James M. Petras, President of
MCK Corporation
By: Briseis Capital Corporation, General
Partner
By: /s/ James D. Ireland III
-----------------------------------
James D. Ireland III, President of
Briseis Capital Corporation
<PAGE> 69
Carl Edward Boardwine
---------------------
/s/ Carl Edward Boardwine
-----------------------------------------------
Dwight L. Goff
--------------
/s/ Dwight L. Goff
-----------------------------------------------
R. Myles Cowan
--------------
/s/ R. Myles Cowan
-----------------------------------------------
George W. Rapp, Jr.
-------------------
/s/ George W. Rapp, Jr.
-----------------------------------------------
<PAGE> 70
AMENDMENT
TO THE
STOCK PURCHASE AGREEMENT
AMENDMENT, dated as of March 4, 1998, to the Stock Purchase
Agreement, dated as of February 10, 1998 (the "Purchase Agreement"), by and
among SIMCALA, Inc., a Delaware corporation (the "Company"), each of the
individuals and entities listed under the heading "Sellers" on the signature
pages hereto (each being a "Seller", and all of them together being the
"Sellers"), and SAC ACQUISITION CORP., a Georgia corporation (the "Buyer").
WHEREAS, all capitalized terms used herein without definition
shall have their respective meanings in the Purchase Agreement;
WHEREAS, in connection with the acquisition of all of the
issued and outstanding capital stock of the Company pursuant to the Purchase
Agreement, the Buyer is proposing to issue certain debt securities (the "Debt
Financing") and merge into the Company (the "Merger");
WHEREAS, in connection with the Debt Financing, Deloitte &
Touche, LLP, the certified independent public accountants for the Buyer, has
audited new financial statements for the fiscal year ended December 31, 1997
(the "D&T Financial Statements") which differ from the Financial Statements,
including changes in the treatment of certain interest expenses, compensation
from employee options and tax reserves; and
WHEREAS, the parties desire to reaffirm certain aspects of the
Purchase Price adjustment and the adjustment procedures as set forth in the
Purchase Agreement.
NOW, THEREFORE, the parties hereto agree as follows:
1. The Buyer hereby confirms that the use of the D&T Financial
Statements by the Company does not and will not constitute a breach of any
representation, warranty or covenant in the Purchase Agreement. Delivery by the
management of the Company of the representation letter relating to the D&T
Financial Statements shall not be used as evidence with respect to any claim by
the Buyer of a breach of any representation or warranty under the Purchase
Agreement. The foregoing shall in no other way affect or limit any rights of the
Buyer under the Purchase Agreement, including, without limitation, the right to
cite to any item disclosed by the D&T Financial Statements as a basis for a
claim of a breach of any representation or warranty in the Purchase Agreement.
2. The accounting principles, policies and estimates used by
the Company in preparing the December 31, 1997 Financial Statements audited by
Crowe Chizek will be consistently used to determine the Adjustment Amount at the
Closing without regard to the D&T Financial Statements.
<PAGE> 71
3. None of the differences between the Financial Statements
and the D&T Financial Statements will be used to revise the Adjustment Amount
pursuant to Section 2.6 of the Purchase Agreement.
4. The Sellers consent to the Merger. The Agreement, as
amended hereby, is in all respects ratified and confirmed, and shall continue to
be in full force and effect.
5. This Amendment shall be governed by and construed in
accordance with the laws of the State of Delaware without giving effect to the
principles of conflict of laws thereof.
6. This Amendment may be executed in two or more counterparts,
each of which shall be deemed to be an original, but all of which together shall
constitute one and the same instrument.
[End of Text]
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<PAGE> 72
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed as of the date first written above.
SAC ACQUISITION CORP.
By: /s/ William A. Davies
----------------------------------------------
Name:
Title:
SIMCALA, INC.
By: /s/ C. Edward Boardwine
----------------------------------------------
Name:
Title:
SELLERS:
CHARTER OAK PARTNERS
Jerrold N. Fine
Managing Partner of Fine Partners L.P.
the Managing Partner of Charter Oak Partners
CAPITAL ONE INVESTORS
By: MCK Corporation, General Partner
By: /s/ James M. Petras
------------------------------------------
James M. Petras, President
By: Briseis Capital Corporation, General Partner
By: /s/ James D. Ireland III
------------------------------------------
James D. Ireland III, President
CARL EDWARD BOARDWINE
/s/ Carl Edward Boardwine
--------------------------------------------------
DWIGHT L. GOFF
/s/ Dwight L. Goff
--------------------------------------------------
R. MYLES COWAN
/s/ R. Myles Cowan
--------------------------------------------------
GEORGE W. RAPP, JR.
/s/ George W. Rapp, Jr.
--------------------------------------------------
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<PAGE> 1
EXHIBIT 2.2
SAC Acquisition Corp.
as Acquiror of
SIMCALA, Inc.
$75,000,000
9 5/8% SENIOR NOTES DUE 2006
PURCHASE AGREEMENT
March 24, 1998
NationsBanc Montgomery Securities LLC
100 North Tryon Street
Charlotte, North Carolina 28255
Ladies and Gentlemen:
SAC Acquisition Corp., a Georgia corporation ("SAC"), proposes
to issue and sell to you (the "Initial Purchaser") $75,000,000 aggregate
principal amount of its 9 5/8% Senior Notes due 2006 (the "Securities") in
connection with SAC's acquisition (the "Acquisition") of SIMCALA, Inc., a
Delaware corporation (the "Company"). Upon consummation of the Acquisition, SAC
will be merged with and into the Company, with the Company being the surviving
corporation (the "Merger"). The Securities are to be issued pursuant to an
indenture, dated as of March 31, 1998 (the "Indenture"), between SAC and IBJ
Schroder Bank & Trust Company, as trustee (the "Trustee"). Immediately after
consummation of the Acquisition, the Company and the Initial Purchaser will
enter into the Purchase Agreement Supplement (the "Purchase Agreement
Supplement"), in substantially the form attached as Exhibit A hereto, pursuant
to which the Company will assume all the rights and obligations of SAC under
this Agreement.
The sale of the Securities to the Initial Purchaser will be
made without registration of the Securities under the Securities Act of 1933, as
amended (the "Securities Act"), in reliance upon exemptions from the
registration requirements of the Securities Act. You have advised SAC that you
will offer and sell the Securities purchased by you hereunder in accordance with
Section 3 hereof as soon as you deem advisable.
In connection with the sale of the Securities, SAC has
prepared a preliminary offering memorandum, dated March 6, 1998 (the
"Preliminary Memorandum") and a final offering memorandum, dated March 24, 1998
(the "Final Memorandum"). Each of the Preliminary Memorandum and the Final
Memorandum sets forth certain information concerning the Company and the
Securities. SAC hereby confirms that it has authorized the use of the
Preliminary Memorandum and the Final Memorandum, and any amendment or supplement
thereto, in connection with the offer and sale of the Securities by the Initial
Purchaser. Unless stated to the contrary, all references herein to the Final
Memorandum are to the Final Memorandum at the time of execution and delivery of
this
<PAGE> 2
Agreement (the "Execution Time") and are not meant to include any amendment or
supplement thereof, subsequent to the Execution Time.
The Initial Purchaser and its direct and indirect transferees
will be entitled to the benefits of the Registration Rights Agreement,
substantially in the form attached hereto as Exhibit B (the "Registration Rights
Agreement"), pursuant to which SAC will agree to use commercially reasonable
efforts to commence an offer to exchange the Securities for the Series B Notes
(as defined in the Registration Rights Agreement) that have been registered
under the Securities Act, and that otherwise are identical in all respects to
the Securities (except that holders of the Series B Notes shall not generally
have the registration rights provided by the Registration Rights Agreement), or
to cause a shelf registration statement to become effective under the Securities
Act and to remain effective for the period designated in such Registration
Rights Agreement. Immediately after consummation of the Acquisition, the Company
and the Initial Purchaser will enter into the Registration Rights Agreement
Supplement (the "Registration Rights Agreement Supplement"), in substantially
the form attached as Exhibit A thereto, pursuant to which the Company will
assume all the rights and obligations of SAC under the Registration Rights
Agreement.
1. REPRESENTATIONS AND WARRANTIES. SAC represents and warrants to the
Initial Purchaser as follows:
(a) The Preliminary Memorandum, at the date thereof, did not
contain any untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading. The Final
Memorandum, at the date hereof, does not, and at the Closing Date (as
defined below) will not (and any amendment or supplement thereto, at
the date thereof and at the Closing Date, will not), contain any untrue
statement of a material fact or omit to state any material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided,
however that SAC makes no representation or warranty as to the
information relating to the Initial Purchaser contained in or omitted
from the Preliminary Memorandum or the Final Memorandum, or any
amendment or supplement thereto, in reliance upon and in conformity
with information furnished in writing to SAC by or on behalf of the
Initial Purchaser specifically for inclusion therein.
(b) Neither SAC nor the Company, nor any of their "Affiliates"
(as defined in Rule 501(b) of Regulation D under the Securities Act
("Regulation D")), nor any person acting on their behalf has, directly
or indirectly, made offers or sales of any security, or solicited
offers to buy any security, under circumstances that would require the
registration of the Securities under the Securities Act. Neither SAC
nor the Company, nor any of their Affiliates, nor any person acting on
their behalf has engaged in any form of general solicitation or general
advertising (within the meaning of Regulation D) in connection with any
offer or sale of the Securities, provided, that SAC makes no
representation in this sentence regarding the Initial Purchaser. The
Securities satisfy the eligibility requirements of Rule 144A(d)(3)
under the Securities Act. The Final Memorandum and each amendment or
supplement thereto, as of its date, contains the information specified
in Rule 144A(d)(4) under the Act.
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<PAGE> 3
(c) Neither SAC nor the Company nor any of their Affiliates or
any person acting on its or their behalf (other than the Initial
Purchaser, as to whom SAC makes no representation) has engaged or will
engage in any directed selling efforts within the meaning of Regulation
S under the Securities Act ("Regulation S") with respect to the
Securities. The Securities offered and sold in reliance on Regulation S
have been and will be offered and sold only in offshore transactions.
The sale of the Securities pursuant to Regulation S is not part of a
plan or scheme to evade the registration provisions of the Securities
Act. No registration under the Securities Act of the Securities is
required for the sale of the Securities to the Initial Purchaser as
contemplated hereby or for the Exempt Resales (as defined below)
assuming the accuracy of, and compliance with, the Initial Purchaser's
representations, warranties and agreements set forth in this Agreement.
The Securities sold pursuant to Regulation S will initially be
represented by a temporary global security as required by Rule
903(c)(3)(ii) of Regulation S.
(d) Neither SAC nor the Company is, or will be after giving
effect to the offering and sale of the Securities and the application
of the net proceeds therefrom as described in the Final Memorandum, an
"investment company" within the meaning of the Investment Company Act
of 1940, as amended (the "Investment Company Act").
(e) Assuming (i) that the representations and warranties and
covenants of the Initial Purchaser contained in Section 3 hereof are
true and correct; (ii) that the Initial Purchaser complies with its
agreements contained in Section 3 hereof and (iii) that the
representations and warranties by each Accredited Investor (as defined
herein) in the letter to be delivered by Accredited Investors,
substantially in the form of Annex A to the Final Memorandum (each, an
"AI Letter"), of such Accredited Investor are true and correct, and
compliance by such Accredited Investor therewith, registration under
the Securities Act of the Securities or qualification of the Indenture
under the Trust Indenture Act of 1939, as amended (the "Trust Indenture
Act"), is not required in connection with (A) the offer and sale of the
Securities to the Initial Purchaser in the manner contemplated by the
Final Memorandum or this Agreement and (B) initial resales of the
Securities by the Initial Purchaser on the terms and in the manner set
forth in the Final Memorandum and Section 3 hereof are exempt from the
registration requirements of the Securities Act.
(f) Since the respective dates as of which information is
given in the Preliminary Memorandum and the Final Memorandum, except as
otherwise stated therein, (i) there has been no material adverse change
in the condition (financial or otherwise), results of operations or
affairs of the Company, whether or not arising in the ordinary course
of business (a "Material Adverse Change") and (ii) there have been no
material transactions entered into by the Company.
(g) Each of the Company and SAC has been duly organized and is
validly existing as a corporation in good standing under the laws of
the state of its incorporation with corporate power and authority to
own, lease and operate its properties and conduct its business as
described in the Preliminary Memorandum and the Final Memorandum; and
each of the Company and SAC is duly qualified as a foreign corporation
to transact business and is in good standing in each jurisdiction in
which the conduct of its business requires such
3
<PAGE> 4
qualification, except to the extent that the failure to be so qualified
or be in good standing would not, singly or in the aggregate,
reasonably be expected to have a material adverse effect on the
condition (financial or otherwise), results of operations or affairs of
the Company (a "Material Adverse Effect").
(h) All of the issued and outstanding capital stock of the
Company at December 31, 1997 was, in all material respects, as set
forth in the "Historical" column under the caption "Capitalization" in
the Preliminary Memorandum and the Final Memorandum. All of the
outstanding shares of capital stock of the Company have been duly
authorized and validly issued and are fully paid and nonassessable.
There are no subsidiaries of the Company.
(i) This Agreement has been duly authorized, executed and
delivered by SAC. Immediately after the Acquisition is consummated on
the Closing Date, the Purchase Agreement Supplement will have been duly
authorized, executed and delivered by the Company.
(j) The Securities have been duly authorized by SAC, and, when
executed and authenticated in accordance with the provisions of the
Indenture and delivered to and paid for by the Initial Purchaser in
accordance with this Agreement, will constitute the valid and binding
obligations of SAC enforceable against SAC in accordance with their
terms, and will be entitled to the benefits of the Indenture, except
that enforcement thereof may be subject to (A) bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar
laws now or hereafter in effect relating to or affecting creditors'
rights generally and (B) general principles of equity (regardless of
whether enforceability is considered in a proceeding in equity or at
law).
(k) The Indenture has been duly authorized by SAC and, when
duly executed and delivered by SAC (assuming the due execution and
delivery by the Trustee), will constitute a valid and binding agreement
of SAC, enforceable against SAC in accordance with its terms, except
that enforcement thereof may be subject to (A) bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar
laws now or hereafter in effect relating to or affecting creditors'
rights generally and (B) general principles of equity (regardless of
whether enforceability is considered in a proceeding in equity or at
law). When the Merger is consummated on the Closing Date, the
Supplemental Indenture, dated as of March 31, 1998, by and between the
Company and the Trustee (the "Supplemental Indenture") will have been
duly authorized, executed and delivered by the Company.
(l) The Series B Notes have been duly authorized and, when
duly executed and authenticated in accordance with the provisions of
the Indenture, and issued and delivered, will be validly issued and
outstanding, and will constitute the valid and binding obligations of
SAC, entitled to the benefits of the Indenture and enforceable against
SAC in accordance with their terms except that enforcement thereof may
be subject to (A) bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws now or hereafter in
effect relating to or affecting creditors' rights generally and (B)
general principles of equity (regardless of whether enforceability is
considered in a proceeding in equity or at law).
4
<PAGE> 5
(m) The Registration Rights Agreement has been duly authorized
by SAC and when duly executed and delivered by SAC (assuming the due
execution and delivery by the Initial Purchaser), will constitute a
valid and binding agreement of SAC, enforceable against SAC in
accordance with its terms except that (i) enforcement thereof may be
subject to (A) bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws now or hereafter in
effect relating to or affecting creditors' rights generally and (B)
general principles of equity (regardless of whether enforceability is
considered in a proceeding in equity or at law) and (ii) the
enforceability of any indemnification or contribution provisions
thereof may be limited under applicable securities laws or the public
policies underlying such laws. Immediately after the Acquisition is
consummated on the Closing Date, the Registration Rights Agreement
Supplement will have been duly authorized, executed and delivered by
the Company.
(n) On the Closing Date, when duly authorized, executed and
delivered by the Company (assuming the due execution and delivery by
the other parties thereto) the credit agreement (the "New Credit
Agreement") governing the New Credit Facility (as defined in the Final
Memorandum) will constitute the valid and binding agreement of the
Company enforceable against the Company in accordance with its terms
except that (i) enforcement thereof may be subject to (A) bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other
similar laws now or hereafter in effect relating to or affecting
creditors' rights generally and (B) general principles of equity
(regardless of whether enforceability is considered in a proceeding in
equity or at law) and (ii) the enforceability of any indemnification or
contribution provisions thereof may be limited under applicable
securities laws or public policies.
(o) The stock purchase agreement, dated February 10, 1998,
among SAC, the Company and the Selling Stockholders (as defined in the
Final Memorandum) (the "Stock Purchase Agreement"), pursuant to which
SAC will purchase all of the outstanding capital stock of the Company,
has been duly authorized, executed and delivered by, and constitutes
the valid and binding agreement of, the parties thereto, enforceable
against them in accordance with its terms except as enforcement thereof
may be subject to (A) bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws now or hereafter in
effect relating to or affecting creditors' rights generally and (B)
general principles of equity (regardless of whether enforceability is
considered in a proceeding in equity or at law). The Stock Purchase
Agreement is in full force and effect and, to the knowledge of SAC,
there exists no breach by any of the parties thereto of any
representation or covenant thereunder and no facts have come to the
attention of SAC that have led SAC to believe that the conditions to
the consummation of the transactions contemplated thereby will not be
satisfied or waived in accordance with the terms thereof.
(p) When duly authorized, executed and delivered by SAC and
the Company, the merger agreement (the "Merger Agreement"), pursuant to
which the Merger will be consummated, will be the valid and binding
agreement of SAC and the Company, enforceable against SAC and the
Company in accordance with its terms except as enforcement thereof may
be subject to (A) bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws now or hereafter in
effect relating to or affecting creditors' rights
5
<PAGE> 6
generally and (B) general principles of equity (regardless of whether
enforceability is considered in a proceeding in equity or at law).
(q) The execution, delivery and performance of this Agreement,
the Purchase Agreement Supplement, the Indenture, the Supplemental
Indenture, the Registration Rights Agreement, the Registration Rights
Agreement Supplement, the Merger Agreement, the Stock Purchase
Agreement and the New Credit Agreement (collectively, the "Transaction
Documents") by SAC or the Company, as the case may be, and the
consummation of the transactions contemplated hereby and thereby will
not conflict with or result in a breach or violation of any of the
terms or provisions of, or constitute a default under, any indenture,
mortgage, deed of trust, loan or credit agreement or other agreement or
instrument to which the Company is a party or by which the Company or
is bound or to which any of the properties or assets of the Company are
subject, nor will such actions result in any violation of the
provisions of the charter or by-laws of the Company or any statute to
which it is subject or any order, rule or regulation of any court or
governmental agency or body having jurisdiction over the Company or any
of its properties or assets (except to the extent any such conflict,
breach, violation or default singly or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect); and except
(A) for such consents, approvals, authorizations, registrations or
qualifications as may be required under applicable state securities and
Blue Sky laws in connection with the purchase and distribution of the
Securities by the Initial Purchaser or as set forth in the Registration
Rights Agreement and (B) in connection with the registration under the
Securities Act of the Series B Notes pursuant to the Registration
Rights Agreement (including, without limitation, the qualification of
the Indenture under the Trust Indenture Act and any filings with the
NASD), no consent, approval, authorization or order of, or filing or
registration with, any such court or governmental agency or body is
required for the execution, delivery and performance of the Transaction
Documents by SAC or the Company (to the extent a party thereto), the
consummation of the transactions contemplated hereby and thereby, and
the issuance and sale of the Notes and the Series B Notes by SAC.
(r) The Company is not in breach or violation of any of the
terms or provisions of any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which the Company is a
party or by which the Company is bound or to which any of the
properties or assets of the Company are subject, nor is the Company in
violation of the provisions of its charter or by-laws or any statute or
any judgment, order, rule or regulation of any court or governmental
agency or body having jurisdiction over the Company, or any of its
properties or assets (except to the extent any such conflict, breach,
violation or default is cured at or prior to the Closing Date and
within the grace period applicable thereto or would not, singly or in
the aggregate, reasonably be expected to have a Material Adverse
Effect).
(s) As of the Closing Date, the Securities and the Indenture
will conform in all material respects to the descriptions thereof
contained in the Final Memorandum. As of the Closing Date, the
provisions of the Registration Rights Agreement, the Merger Agreement
the Stock Purchase Agreement and the New Credit Agreement (as defined
in the Final Memorandum), to the extent that such provisions are
summarized in the Final Memorandum, will conform in all material
respects to the descriptions thereof contained in the Final Memorandum.
6
<PAGE> 7
(t) Except as set forth in the Registration Rights Agreement,
there are no contracts, agreements or understandings between the
Company and any person granting such person the right to require the
Company to file a registration statement under the Securities Act with
respect to any securities owned or to be owned by such person or to
require the Company to include such securities in any securities being
registered pursuant to any registration statement filed by the Company
under the Securities Act.
(u) Except as set forth in the Preliminary Memorandum and the
Final Memorandum, there is no action, suit or proceeding before or by
any court or governmental agency or body, domestic or foreign, now
pending or, to the knowledge of SAC and the Company, threatened against
or affecting the Company which would reasonably be expected to result
in a Material Adverse Change or, singly or in the aggregate, reasonably
be expected to have a Material Adverse Effect or materially and
adversely affect the initial resale of the Securities by the Initial
Purchaser.
(v) The Company has good title to all personal property owned
by it and necessary in the conduct of the business of the Company free
and clear of all liens, encumbrances and defects except (i) such as are
referred to in the Final Memorandum or (ii) such as do not materially
and adversely affect the value of such property to the Company and do
not interfere with the use made and proposed to be made of such
property by the Company to an extent that such interference would,
singly or in the aggregate, reasonably be expected to have a Material
Adverse Effect. All leases to which the Company is a party are valid
and binding, and no default has occurred and is continuing thereunder
which could, singly or in the aggregate, reasonably be expected to have
a Material Adverse Effect or materially and adversely affect the
offering of the Securities, and the Company and its subsidiaries enjoy
peaceful and undisturbed possession under all such leases to which any
of them is a party as lessee (with such exceptions as do not materially
interfere with the use made by the Company). The Company possesses
adequate certificates, authorizations or permits issued by the
appropriate state, federal or foreign regulatory agencies or bodies
necessary to conduct the business now operated by it, and except as set
forth in the Final Memorandum, the Company has not received any notice
of proceedings relating to the revocation or modification of any such
certificate, authority or permit which, singly or in the aggregate, if
the subject of an unfavorable decision, ruling or finding, would,
singly or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
(w) Each of Ernst & Young LLP, Crowe Chizek & Company LLP and
Deloitte & Touche LLP, who have certified certain financial statements
of the Company are independent public accountants within the meaning of
the Securities Act and the rules and regulations thereunder. The
financial statements included in the Preliminary Memorandum and the
Final Memorandum present fairly in all material respects the financial
position of the Company as at the dates and for the periods indicated;
said financial statements have been prepared in conformity with
generally accepted accounting principles applied on a consistent basis
during the periods involved, except as indicated therein, and comply as
to form in all material respects with the requirements applicable to
such financial statements included in registration statements under the
Securities Act. The Company maintains a system of internal accounting
controls
7
<PAGE> 8
sufficient to provide reasonable assurances that (i) transactions are
executed in accordance with management's general or specific
authorizations; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability;
(iii) access to assets is permitted only in accordance with
management's general or specific authorization; and (iv) the recorded
accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to
any differences.
The pro forma financial information included in the
Preliminary Memorandum and the Final Memorandum have been prepared on a
basis consistent with the historical financial statements of the
Company and give effect to assumptions used in the preparation thereof
on a reasonable basis and in good faith and present fairly, in all
material respects, the historical and proposed transactions
contemplated by the Preliminary Memorandum and the Final Memorandum;
and such pro forma financial information comply as to form in all
material respects with the requirements applicable to pro forma
financial information included in registration statements on Form S-1
under the Act. The other pro forma financial and statistical
information and data included in the Preliminary Memorandum and the
Final Memorandum are, in all material respects, accurately presented
and prepared on a basis consistent with the pro forma financial
statements.
The historical and pro forma financial information
included in the Preliminary Memorandum and the Final Memorandum
constitute all of the financial statements that would be required to be
included in a registration statement on Form S-1 under the Securities
Act.
(x) The Company is not now and, after giving effect to the
issuance of the Securities, and the application of the net proceeds
thereof, will not be (i) insolvent, (ii) left with unreasonably small
capital with which to engage in its anticipated businesses or (iii)
incurring debts beyond its ability to pay such debts as they become
due.
(y) Except as would not reasonably be expected to have a
Material Adverse Effect, the Company owns, or otherwise possesses the
right to use, all patents, trademarks, service marks, trade names and
copyrights, all applications and registrations for each of the
foregoing, and all other proprietary rights and confidential
information used in the conduct of its business as currently conducted;
and the Company has not received any notice, or is otherwise aware, of
any infringement of or conflict with the rights of any third party with
respect to any of the foregoing which, singly or in the aggregate, if
the subject of an unfavorable decision, ruling or finding, would
reasonably be expected to have a Material Adverse Effect. The Company
does not own or otherwise possess the right to use any patents,
trademarks, service marks, trade names and copyrights, the loss of
which would result in a Material Adverse Effect.
(z) The Company is (i) in compliance with any and all
applicable foreign, federal, state and local laws and regulations
relating to the protection of human health and safety, the environment
or hazardous or toxic substances or wastes, pollutants or contaminants
("Environmental Laws"), (ii) has received all permits, licenses or
other approvals required under applicable Environmental Laws to conduct
its business and (iii) is in compliance with all terms and conditions
of any such permit, license or approval, except where such
8
<PAGE> 9
noncompliance with Environmental Laws, failure to receive required
permits, licenses or other approvals or failure to comply with the
terms and conditions of such permits, licenses or approvals would not,
singly or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
(aa) No labor dispute between the Company and its employees
exists or, to the knowledge of SAC, is threatened which, singly or in
the aggregate, would reasonably be expected to have a Material Adverse
Effect.
(ab) Neither the Company nor, to SAC's knowledge, any
director, officer, agent, employee, stockholder or other person, in any
such case, acting on behalf of the Company has used any corporate funds
during the last five years for any unlawful contribution, gift,
entertainment or other unlawful expense relating to political activity;
made any unlawful payment to any foreign or domestic government
official or employee from corporate funds; violated or is in violation
of any provision of the Foreign Corrupt Practices Act of 1977, as
amended; or made any bribe, payoff, influence payment, kickback or
other payment that is unlawful.
(ac) The Company has not taken and will not take, any action
that would cause this Agreement or the issuance or sale of the
Securities and the Series B Notes to violate Regulation G, T, U or X of
the Board of Governors of the Federal Reserve System or analogous
foreign laws and regulations.
(ad) Other than as set forth on Schedule I hereto, the Company
is not a party to any contract or agreement that would be required to
be filed with the Securities and Exchange Commission (the "Commission")
as an exhibit to a registration statement on Form S-1 pursuant to
entries (2), (4) and (10) of the Exhibit Table of Item 601 of
Regulation S-K under the Securities Act.
(ae) Neither SAC nor any Affiliate of SAC has sold, offered
for sale or solicited offers to buy or otherwise negotiated in respect
of any security (as defined in the Securities Act) in a transaction
that would require the registration under the Securities Act of the
Securities.
(af) Neither the issuance or sale of the Securities nor the
application by SAC or the Company of the net proceeds therefrom as set
forth in the Final Memorandum will violate Regulation G, T, U or X of
the Board of Governors of the Federal Reserve System.
2. PURCHASE AND SALE. On the basis of the representations
and warranties contained in, and subject to the terms and conditions of, this
Agreement, SAC agrees to sell to the Initial Purchaser and the Initial Purchaser
agrees to purchase from SAC the aggregate principal amount of Securities set
forth opposite its name as shown in Schedule II hereto, at a purchase price
equal to 97.0% of the principal amount thereof.
SAC shall not be obligated to deliver any of the Securities to
be delivered except upon payment for all the Securities to be purchased as
provided herein.
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<PAGE> 10
3. SALE AND RESALE OF THE SECURITIES BY THE INITIAL PURCHASER.
The Initial Purchaser represents and warrants to SAC that:
(a) It will offer the Securities to be purchased hereunder for
resale only upon the terms and conditions set forth in this Agreement
and in the Final Memorandum.
(b) It (i) will not solicit offers for, or offer or sell, the
Securities by means of any form of general solicitation or general
advertising within the meaning of Regulation D or in any manner
involving a public offering within the meaning of Section 4(2) of the
Securities Act, and (ii) will solicit offers for the Securities only
from, and will offer, sell or deliver the Securities, as part of its
initial offering, only to the following persons (each an "Eligible
Purchaser"): (A) persons whom the Initial Purchaser reasonably believes
to be qualified institutional buyers ("QIBs") as defined in Rule 144A
under the Securities Act, as such rule may be amended from time to time
("Rule 144A") or, if any such person is buying for one or more
institutional accounts for which such person is acting as fiduciary or
agent, only when such person has represented to the Initial Purchaser
that each such account is a QIB, to whom notice has been given that
such sale or delivery is being made in reliance on Rule 144A, (B) to a
limited number of institutional accredited investors as defined in Rule
501(a) (1), (2), (3) or (7) under Regulation D ("Accredited Investors")
that, prior to their purchase of the Securities, execute and deliver an
AI Letter and (C) outside the United States in offshore transactions in
reliance on Regulation S ((A), (B) and (C) are, collectively, "Exempt
Resales").
(c) With respect to Securities sold in reliance on Regulation
S, (i) neither the Initial Purchaser nor any of its affiliates nor
anyone acting on its behalf has offered or sold, or will offer or sell,
any Securities by means of any directed selling efforts (as defined in
Rule 902 of Regulation S) in the United States, (ii) at or prior to
confirmation of all sales of Securities made in reliance on Regulation
S, it will have sent to each distributor, dealer or person receiving a
selling concession, fee or other remuneration that purchases the
Securities from it during the restricted period a confirmation or
notice to substantially the following effect:
"The Securities covered hereby have not been registered under
the U.S. Securities Act of 1933 (the "Securities Act") and may
not be offered or sold within the United States or to, or for
the account or benefit of, U.S. persons (i) as part of a
distribution thereof at any time or (ii) until 40 days after
the later of the date of the commencement of the offering and
the closing date, except in either case in accordance with an
exemption from or in a transaction not subject to the
Securities Act. Terms used above have the meanings given them
by Regulation S under the Securities Act."
The sale of the Securities to non-U.S. persons in offshore transactions
is not part of a plan or scheme to avoid the registration requirements
of the Securities Act.
(d) (i) It has not solicited, and will not solicit, offers to
purchase any of the Securities from, (ii) it has not sold, and will not
sell, any of the Securities to, and (iii) it has
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<PAGE> 11
not distributed, and will not distribute, the Preliminary Memorandum or
the Final Memorandum to, any person or entity in any jurisdiction
outside of the United States except, in each case, in compliance in all
material respects with all applicable laws of such jurisdiction. For
purposes of this Agreement, "United States" means the United States of
America, its territories, its possessions (including the Commonwealth
of Puerto Rico), and other areas subject to its jurisdiction.
(e) Unless prohibited by applicable law, (i) it will furnish
to each person to whom it offers any Securities, a copy of the
Preliminary Memorandum (as amended or supplemented) or Final Memorandum
or (unless delivery of such Preliminary Memorandum is required by
applicable law) shall inform each such person that a copy of such
Preliminary Memorandum or the Final Memorandum will be available upon
request and (ii) it will furnish to each person to whom it sells
Securities a copy of the Final Memorandum (as then amended or
supplemented by applicable law) and shall inform each such person that
a copy of such Final Memorandum will be available upon request.
4. DELIVERY OF AND PAYMENT FOR THE SECURITIES. Delivery of
and payment for the Securities shall be made at the office of Alston & Bird LLP,
1201 W. Peachtree Street, Atlanta, Georgia at 9:00 A.M., on March 31, 1998, or
at such other date or place as shall be determined by agreement between the
Initial Purchaser and SAC. This date and time are sometimes referred to as the
"Closing Date." On the Closing Date, SAC shall deliver or cause to be delivered
the Securities to the Initial Purchaser for the account of the Initial Purchaser
against payment to or upon the order of SAC of the purchase price by wire
transfer in immediately available funds. Time shall be of the essence, and
delivery at the time and place specified pursuant to this Agreement is a further
condition of the obligation of the Initial Purchaser hereunder. Upon delivery,
the Securities shall be in definitive fully registered form and registered in
the name of Cede & Co., as nominee of the Depositary Trust Company ("DTC"), or
such other name or names and in such denominations as the Initial Purchaser
shall request in writing not less than one business day prior to the Closing
Date. For the purpose of expediting the checking and packaging of the
Securities, SAC shall make the Securities available for inspection by the
Initial Purchaser in Atlanta, Georgia, not later than 2:00 P.M., on the business
day prior to the Closing Date.
5. FURTHER AGREEMENTS OF SAC. SAC agrees with the Initial
Purchaser as set forth below in this Section 5:
(a) SAC will furnish to the Initial Purchaser,
without charge, as many copies of the Final Memorandum and any
supplements and amendments thereto as the Initial Purchaser may
reasonably request.
(b) Prior to making any amendment or supplement to
the Preliminary Memorandum or the Final Memorandum, SAC shall furnish a
copy thereof to the Initial Purchaser and counsel to the Initial
Purchaser and will not effect any such amendment or supplement to which
the Initial Purchaser shall reasonably object by notice to SAC after a
reasonable period to review.
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<PAGE> 12
(c) If, at any time prior to completion of the
distribution of the Securities by the Initial Purchaser, any event
shall occur or condition exist as a result of which it is necessary, in
the opinion of counsel for the Initial Purchaser or counsel for SAC, to
amend or supplement the Final Memorandum in order that the Final
Memorandum will not include an untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements
therein not misleading in light of the circumstances existing at the
time it is delivered to a purchaser, or if it is necessary to amend or
supplement the Final Memorandum to comply with applicable law, SAC will
promptly prepare such amendment or supplement as may be necessary to
correct such untrue statement or omission or so that the Final
Memorandum, as so amended or supplemented, will comply in all material
respects with applicable law and furnish to the Initial Purchaser such
number of copies of such amendment or supplement as they may reasonably
request.
(d) So long as any Securities are outstanding and are
"Restricted Securities" within the meaning of Rule 144(a)(3) under the
Securities Act and during any period in which SAC is not subject to
Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), SAC will furnish to holders of the Securities and
prospective purchasers of Securities designated by such holders, upon
request of such holders or such prospective purchasers, the
information, if any, required to be delivered pursuant to Rule
144A(d)(4) under the Securities Act.
(e) So long as the Securities and the Series B Notes
are outstanding, SAC will furnish to the Initial Purchaser copies of
any annual reports, quarterly reports and current reports filed with
the Commission on Forms 10-K, 10-Q and 8-K, or such other similar forms
as may be designated by the Commission as the successor or successors
to such forms, and such other documents, reports and information as
shall be furnished by SAC to the Trustee or to the holders of the
Securities and the Series B Notes pursuant to the Indenture.
(f) SAC will use commercially reasonable efforts to
qualify the Securities for sale under the securities or Blue Sky laws
of such jurisdictions as the Initial Purchaser reasonably designates
and to continue such qualifications in effect so long as reasonably
required for the distribution of the Securities. SAC will also arrange
for the determination of the eligibility for investment of the
Securities under the laws of such jurisdictions as the Initial
Purchaser reasonably requests. Notwithstanding the foregoing, SAC shall
not be obligated to (i) qualify as a foreign corporation or as a broker
or dealer in securities in any jurisdiction in which it would not
otherwise be required to so qualify, (ii) file a general consent to
service of process or (iii) subject itself to taxation in respect of
doing business in any jurisdiction in which it is not otherwise
subject.
(g) SAC will use commercially reasonable efforts to
permit the Securities to be designated National Association of
Securities Dealers, Inc. Private Offerings, Resales and Trading through
Automated Linkages Market ("PORTAL") securities in accordance with the
rules and regulations adopted by the National Association of Securities
Dealers, Inc. relating to trading in the PORTAL market and to permit
the Securities to be eligible for clearance and settlement through DTC.
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<PAGE> 13
(h) Except following the effectiveness of any
Registration Statement (as defined in the Registration Rights
Agreement) and except for such offers as may be made as a result of, or
subsequent to, filing such Registration Statement or amendments thereto
in accordance with the Registration Rights Agreement prior to the
effectiveness of such filings, SAC will not solicit any offer to buy or
offer to sell the Securities by means of any form of general
solicitation or general advertising (as those terms are used in
Regulation D under the Securities Act) or in any manner involving a
public offering within the meaning of Section 4(2) of the Securities
Act.
(i) SAC will consummate the transactions contemplated
by the Stock Purchase Agreement in accordance with the terms thereof,
and apply the net proceeds from the sale of the Securities, in each
case, as set forth in the Final Memorandum.
(j) The Company will not take any action that would
require the registration under the Securities Act of the Securities
(other than pursuant to the Registration Rights Agreement) including,
without limitation, (i) engaging in any directed selling efforts
(within the meaning of Regulation S) during any applicable restricted
period or (ii) offering any other securities in a manner that would be
integrated with the transactions contemplated hereby.
(k) Prior to the consummation of the Exchange Offer
or the effectiveness of an applicable shelf registration statement
pursuant to the Registration Rights Agreement, if, in the reasonable
judgment of the Initial Purchaser, the Initial Purchaser or any of its
affiliates are required to deliver an offering memorandum in connection
with sales of, or market-making activities with respect to, the
Securities, (A) SAC will periodically amend or supplement the Final
Memorandum so that the information contained in the Final Memorandum
complies with the requirements of Rule 144A of the Securities Act, (B)
SAC will amend or supplement the Final Memorandum when necessary to
reflect any material changes in the information provided therein so
that the Final Memorandum will not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to
make the statements therein, in light of the circumstances existing as
of the date the Final Memorandum is so delivered, not misleading and
(C) SAC will provide the Initial Purchaser with copies of each such
amended or supplemented Final Memorandum, as the Initial Purchaser may
reasonably request.
SAC hereby expressly acknowledges that the indemnification and
contribution provisions of Section 8 hereof are specifically applicable
and relate to each offering memorandum, registration statement,
prospectus, amendment or supplement referred to in this Section 5(m).
(l) On the Closing Date, immediately after
consummation of the Acquisition, the Company shall authorize, execute
and deliver the New Credit Agreement, and satisfy the conditions
precedent to the initial extension of credit thereunder (unless such
conditions shall have been waived).
(m) On the Closing Date, immediately after
consummation of the Acquisition, SAC shall cause the Company to, and
the Company shall, authorize, execute
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<PAGE> 14
and deliver the Purchase Agreement Supplement, the Registration Rights
Agreement Supplement and the Supplemental Indenture.
(n) On the Closing Date, no event of default or event
which, with the giving of notice or passage of time or both, would
constitute an event of default, shall have occurred and be continuing
under the New Credit Agreement and all conditions to the extension of
credit thereunder shall have been satisfied or waived.
(o) On the Closing Date and immediately after
consummation of the Acquisition and the Merger, Alston & Bird LLP,
counsel for the Company, shall have furnished to the Initial Purchaser
its written opinion (containing customary limitations that shall be
reasonably satisfactory to the Initial Purchaser's counsel), addressed
to the Initial Purchaser and dated the Closing Date, in form and
substance reasonably satisfactory to the Initial Purchaser, to the
effect that:
(i) The Company has the corporate power and authority
to execute and deliver the Purchase Agreement Supplement, the
Supplemental Indenture, the Series B Notes and the
Registration Rights Agreement Supplement and to consummate the
transactions contemplated thereby.
(ii) The execution and delivery of the Purchase
Agreement Supplement and the Registration Rights Agreement
Supplement have been duly authorized by all requisite
corporate action of the Company. The Purchase Agreement
Supplement and the Registration Rights Agreement Supplement
have been duly executed and delivered by the Company.
(iii) The execution and delivery of the Supplemental
Indenture have been duly authorized by all requisite corporate
action of the Company. The Supplemental Indenture has been
duly executed and delivered by the Company and assuming due
authorization, execution and delivery by the Trustee, is a
valid and binding agreement of the Company, enforceable
against the Company in accordance with its terms, subject to
(A) bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws now or
hereafter in effect relating to or affecting creditors' rights
generally and (B) general principles of equity (regardless of
whether enforceability is considered in proceeding n equity or
at law) and the exercise of discretionary authority of any
court before which a proceeding may be brought.
(iv) Assuming due authorization thereof by the
Trustee in accordance with the Indenture and payment therefor
by the Initial Purchaser in accordance with the Agreement, the
Securities are valid and binding obligations of the Company
enforceable against the Company in accordance with their
terms, except that enforcement thereof may be subject to (A)
bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws now or hereafter in effect
relating to or affecting creditors' rights generally and (B)
general principles of equity (regardless of whether
enforceability is considered in a proceeding in equity or
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<PAGE> 15
at law) and the exercise of discretionary authority of any
court before which a proceeding may be brought.
(v) The execution and delivery of the Series B Notes
have been duly authorized by all requisite corporate action of
the Company and, when duly executed and delivered by the
Company and duly authenticated by the Trustee in accordance
with the Indenture, will be valid and binding obligations of
the Company entitled to the benefits of the Indenture and will
be enforceable against the Company in accordance with their
terms, subject to (A) bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws
now or hereafter in effect relating to or affecting creditors'
rights generally and (B) general principles of equity
(regardless of whether enforceability is considered in a
proceeding in equity or at law) and the exercise of
discretionary authority of any court before which a proceeding
may be brought.
(vi) Upon the filing of the Certificate of Merger
with the Secretary of State of the State of Delaware and the
Articles of Merger with the Secretary of State of the State of
Georgia, each relating to the Merger, the Merger will be
effective.
(p) On the Closing Date and immediately after
consummation of the Acquisition and the Merger, Wolf, Block, Schorr &
Solis-Cohen LLP, special New York counsel to the Company, shall have
furnished to the Initial Purchaser its written opinion (containing
customary limitations that shall be reasonably satisfactory to the
Initial Purchaser's counsel), addressed to the Initial Purchaser and
dated the Closing Date, in form and substance reasonably satisfactory
to the Initial Purchaser, to the effect that:
(i) Assuming the due authorization, execution and
delivery thereof by the Company and Initial Purchaser, the
Registration Rights Agreement Supplement is a legal, valid and
binding obligation of the Company, enforceable against the
Company in accordance with its terms, except that (A)
enforceability of the Registration Rights Agreement Supplement
may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the enforcement of
creditors' rights generally and by general principles of
equity and the discretion of the court before which any
proceedings therefor may be brought and (B) any rights to
indemnity or contribution thereunder may be limited by public
policy considerations.
(q) SAC will take all commercially reasonable
measures necessary to satisfy the closing conditions set forth in
Section 7 on its part to be fulfilled.
(r) The Initial Purchaser shall have received a
certificate, dated the Closing Date, signed on behalf of the Company by
(i) C. Edward Boardwine, President and Chief Executive Officer and (ii)
R. Myles Cowan, II, Vice President of Finance, confirming that (A) such
officers have participated in conferences with other officers and
representatives of the Company, representatives of the independent
public accountants of the Company and representatives of counsel to the
Company at which the contents of the Final Memorandum and related
matters were discussed and (B) the matters set forth in paragraphs (c)
and (d) of Section
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<PAGE> 16
7 of this Agreement are true and correct in material respects as of the
Closing Date, except as such matters relate to SAC.
6. EXPENSES. SAC agrees to pay (a) the costs incident to the
authorization, issuance, sale and delivery of the Securities and the Series B
Notes and any issue or stamp taxes payable in that connection; (b) the printer
costs incident to the preparation and printing of the Preliminary Memorandum,
the Final Memorandum and any amendments, supplements and exhibits thereto; (c)
the costs of distributing the Preliminary Memorandum, the Final Memorandum and
any amendment or supplement thereto; (d) the fees and expenses of qualifying the
Securities and the Series B Notes under the securities laws of the several
jurisdictions as provided in Section 5(f) and of preparing, printing and
distributing a Blue Sky Memorandum (including reasonable related fees and
expenses of counsel to the Initial Purchaser); (e) the cost of printing the
Securities and the Series B Notes; (f) the fees and expenses of the Trustee and
any agent of the Trustee and the fees and disbursements of any counsel for the
Trustee in connection with the Indenture and the Securities and the Series B
Notes; (g) any fees paid to rating agencies in connection with the rating of the
Securities and the Series B Notes; (h) the costs and expenses of DTC and its
nominee, including its book-entry system; (i) all expenses and listing fees
incurred in connection with the application for quotation of the Securities on
the PORTAL market; and (j) all other costs and expenses incident to the
performance of the obligations of SAC under this Agreement.
7. CONDITIONS OF INITIAL PURCHASER'S OBLIGATIONS. The
obligations of the Initial Purchaser to purchase the Securities shall be subject
to the accuracy of the representations and warranties on the part of SAC
contained herein at the Execution Time and the Closing Date, to the accuracy of
the statements of SAC made in any certificates pursuant to the provisions
hereof, to the performance by SAC of its obligations hereunder in all material
respects and to the following additional conditions:
(a) The Initial Purchaser shall not have discovered
and disclosed to SAC on or prior to the Closing Date that the Final
Memorandum or any amendment or supplement thereto contains an untrue
statement of a fact which, in the opinion of Latham & Watkins, counsel
for the Initial Purchaser, is material or omits to state a fact which,
in the opinion of such counsel, is material and is necessary to make
the statements therein, in light of the circumstances under which they
were made, not misleading.
(b) The Final Memorandum shall have been printed and
copies distributed to the Initial Purchaser as soon as practicable but
in no event later than the Business Day following the date of this
Agreement or at such later date and time as to which the Initial
Purchaser may agree.
(c) No action shall have been taken and no statute,
rule, regulation or order shall have been enacted, adopted or issued by
any governmental agency which would, as of the Closing Date, singly or
in the aggregate, reasonably be expected to have a Material Adverse
Effect; no action, suit or proceeding shall have been commenced and be
pending against or affecting or, to the knowledge of SAC or the
Company, threatened against, the Company before any court or arbitrator
or any governmental body, agency or official that, singly or in the
aggregate, if adversely determined, would reasonably be expected to
result in a
16
<PAGE> 17
Material Adverse Effect; and no stop order shall have been issued by
the Commission or any governmental agency of any jurisdiction referred
to in Section 5(f) preventing the use of the Final Memorandum, or any
amendment or supplement thereto, or which would reasonably be expected
to have a Material Adverse Effect.
(d) Since the dates as of which information is given
in the Final Memorandum and other than as set forth in the Final
Memorandum, (i) there shall not have been any Material Adverse Change,
or any development that is reasonably likely to result in a Material
Adverse Change, or any material increase in the long-term debt, or
material increase in the short-term debt, from that set forth in the
Final Memorandum; (ii) no dividend or distribution of any kind shall
have been declared, paid or made by the Company on any class of its
capital stock; (iii) the Company shall not have incurred any
liabilities or obligations, direct or contingent, that are material,
individually or in the aggregate, to the Company and that are required
to be disclosed on a balance sheet or notes thereto in accordance with
generally accepted accounting principles and are not disclosed on the
latest balance sheet or notes thereto included in the Final Memorandum.
(e) The Initial Purchaser shall have received a
certificate, dated the Closing Date, signed on behalf of SAC by (i)
William A. Davies, Chairman of the Board and (ii) James A. O'Donnell,
President, confirming that (A) such officers have participated in
conferences with other officers and representatives of SAC and the
Company, representatives of the independent public accountants of SAC
and the Company and representatives of counsel to SAC and the Company
at which the contents of the Final Memorandum and related matters were
discussed and (B) the matters set forth in paragraphs (c) and (d) of
this Section 7 are true and correct in material respects as of the
Closing Date.
(f) All corporate proceedings and other legal matters
incident to the authorization, form and validity of the Transaction
Documents, the Securities, the Series B Notes, the Final Memorandum and
all other legal matters relating to this Agreement and the transactions
contemplated hereby and thereby, shall be reasonably satisfactory in
all material respects to counsel for the Initial Purchaser, and SAC and
the Company shall have furnished to such counsel all documents and
information that they may reasonably request to enable them to pass
upon such matters.
(g) Alston & Bird LLP, counsel for SAC, shall have
furnished to the Initial Purchaser its written opinion (containing
customary limitations that shall be reasonably satisfactory to the
Initial Purchaser's counsel), addressed to the Initial Purchaser and
dated the Closing Date, in form and substance reasonably satisfactory
to the Initial Purchaser, to the effect that:
(i) SAC is validly existing as a corporation
and is in good standing under the laws of the jurisdiction of
its incorporation. SAC is duly qualified to do business as a
foreign corporation and is in good standing in each of the
jurisdictions listed on an exhibit to such opinion.
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<PAGE> 18
(ii) The Company is validly existing as a
corporation and is in good standing under the laws of its
jurisdiction of incorporation. The Company is duly qualified
to do business as a foreign corporation and is in good
standing in each of the jurisdictions listed on an exhibit to
such opinion.
(iii) Assuming, (a) the accuracy of and
compliance with the representations, warranties and covenants
of SAC set forth in Section 1 of this Agreement, and (b) the
accuracy of and compliance with the representations,
warranties and covenants of the Initial Purchaser set forth in
this Agreement, the offer, sale and delivery of the Securities
to the Initial Purchaser, and the initial reoffer, resale and
delivery of the Securities by the Initial Purchaser, as
contemplated by this Agreement and the Final Memorandum, do
not require registration under the Securities Act, or
qualification of the Indenture under the Trust Indenture Act,
it being understood that no opinion is expressed as to any
subsequent resale of Securities or any resale of Securities by
any person other than the Initial Purchaser.
(iv) SAC has the corporate power and
authority to execute and deliver and to consummate the
transactions contemplated by this Agreement. The execution and
delivery of this Agreement have been duly authorized by all
requisite corporate action of SAC. This Agreement has been
duly executed and delivered by SAC.
(v) SAC has the corporate power and
authority to execute and deliver and to consummate the
transactions contemplated by the Indenture. The execution and
delivery of the Indenture have been duly authorized by all
requisite corporate action of SAC. The Indenture has been duly
executed and delivered by SAC and assuming due authorization,
execution and delivery by the Trustee is a valid and binding
agreement of SAC, enforceable against SAC in accordance with
its terms, except that enforcement thereof may be subject to
(A) bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws now or
hereafter in effect relating to or affecting creditors' rights
generally and (B) general principles of equity (regardless of
whether enforceability is considered in a proceeding in equity
or at law) and the exercise of discretionary authority of any
court before which a proceeding may be brought.
(vi) SAC has the corporate power and
authority to issue and deliver the Securities as contemplated
by the Purchase Agreement. The execution and delivery of the
Securities have been duly authorized by all requisite
corporate action of SAC. The Securities have been duly
executed and delivered by SAC and, when authenticated by the
Trustee in accordance with the Indenture and paid for by the
Initial Purchaser in accordance with this Agreement, the
Securities will be valid and binding obligations of SAC
entitled to the benefits of the Indenture, and be enforceable
against SAC in accordance with their terms, except that
enforcement thereof may be subject to (A) bankruptcy,
insolvency, fraudulent, conveyance, reorganization, moratorium
and other similar laws now or hereafter in effect relating to
or affecting creditors' rights generally and (B) general
principles of equity (regardless of whether enforceability is
18
<PAGE> 19
considered in a proceeding in equity or at law) and the
exercise of discretionary authority of any court before which
a proceeding may be brought.
(vii) SAC has the corporate power and
authority to execute and deliver and to consummate the
transactions contemplated by the Registration Rights
Agreement. The execution and delivery of the Registration
Rights Agreement have been duly authorized by all requisite
corporate action of SAC. The Registration Rights Agreement has
been duly executed and delivered by SAC.
(viii) SAC and the Company have the
corporate power and authority to execute and deliver and to
consummate the transactions contemplated by the Stock Purchase
Agreement. The execution and delivery of the Stock Purchase
Agreement have been duly authorized by all requisite corporate
action of SAC and the Company. The Stock Purchase Agreement
has been duly executed and delivered by SAC and the Company
and, assuming the due authorization, execution and delivery by
the other parties thereto, is a valid and binding agreement of
the Company and SAC, enforceable against the Company and SAC
in accordance with its terms, except that enforcement thereof
may be subject to (A) bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws
now or thereafter in effect relating to or affecting
creditors' rights generally and (B) general principles of
equity (regardless of whether enforceability is considered in
a proceeding in equity or at law) and the exercise of
discretionary authority of any court proceeding in equity or
at law) and the exercise of discretionary authority of any
court before which a proceeding may be brought. The foregoing
opinion shall be based on the assumption that the relevant
provisions of Georgia and Delaware law are the same.
(ix) The execution and delivery by SAC and
the Company of the Transaction Documents to which they are or
will be parties, respectively, and the consummation by SAC and
the Company of the transactions contemplated hereby and
thereby and by the Final Memorandum will not (A) to the
knowledge of such counsel, result in a breach or violation of
any of the terms or provisions of, or constitute a default
under, any agreement listed on an exhibit to such opinion or
(B) result in any violation of the provisions of the charter
or by-laws of SAC or the Company or, to the knowledge of such
counsel, any material statute, rule or regulation (other than
Securities Laws (as defined below) as to which an opinion is
given in paragraph (iii) above) with respect to SAC or the
Company or, to the knowledge of such counsel, any order of any
court or governmental agency having jurisdiction over SAC or
the Company, except in each of the foregoing cases, for such
breaches and violations that would not, singly or in the
aggregate, reasonably be expected to have a Material Adverse
Effect.
(x) To the knowledge of such counsel, except
for such consents, approvals or authorizations of, or filings,
registrations or qualifications with, governmental authorities
as may be required under the Securities Act and the rules and
regulations thereunder, the Trust Indenture Act and the rules
and regulations thereunder, pursuant to the rules and
regulations of the NASD or applicable states
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<PAGE> 20
securities or Blue Sky laws, rules or regulations (all of such
laws, rules and regulations are collectively referred to
herein as "Securities Laws") in connection with the purchase
and distribution of the Securities by the Initial Purchaser
and as set forth in and in order to consummate the
transactions contemplated by, the Registration Rights
Agreement and the Registration Rights Agreement Supplement, no
consent, approval, authorization or order of, or filing or
registration with, any such court or governmental agency or
body is required in connection with the execution and delivery
by SAC and the Company of the Transaction Documents to which
they are or will be party, and the consummation by SAC and the
Company of the transactions contemplated hereby and thereby.
(xi) The descriptions in the Final
Memorandum of the Indenture, the Securities, the Registration
Rights Agreement, the Merger Agreement, the Stock Purchase
Agreement and the New Credit Agreement are accurate summaries
of such documents in all material respects.
(xii) The Company is not an "investment
company" within the meaning of the Investment Company Act.
(xiii) When the Securities are issued and
delivered pursuant to this Agreement and the Purchase
Agreement Supplement such Securities will not be of the same
class (within the meaning of Rule 144A(d)(3) under the
Securities Act) as securities of the Company that are listed
on a national securities exchange registered under Section 6
of the Exchange Act or quoted on an automated inter-dealer
quotation system.
(xiv) Neither the issuance or sale of the
Securities nor the application by the Company of the net
proceeds therefrom as set forth in the Final Memorandum will
violate Regulation G, T, U or X of the Board of Governors of
the Federal Reserve System.
In addition, such counsel shall also state that such counsel
has participated in conferences with officers and representatives of
SAC and the Company, representatives of the independent public
accountants for SAC and the Company and the Initial Purchaser and its
counsel at which the contents of the Final Memorandum and related
matters were discussed and, although such counsel is not passing upon
and does not assume any responsibility for and has not verified the
accuracy, completeness or fairness of the statements contained in the
Final Memorandum, and has not made any independent check or
verification thereof, on the basis of the foregoing (relying as to
materiality to the extent they deemed appropriate upon facts provided
by officers and other representatives of SAC and the Company), no facts
have come to the attention of such counsel that lead such counsel to
believe that the Final Memorandum, as of its date or the Closing Date,
contained an untrue statement of a material fact or omitted to state
any material fact necessary to make the statements therein, in light of
the circumstances under which there were made, not misleading (it being
understood that such counsel need express no belief or opinion with
respect to (i) the financial statements and notes and schedules thereto
and other financial and statistical data included or referred to
therein and (ii) the
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<PAGE> 21
matters disclosed in the Final Memorandum under "Risk
Factors--Anti-Dumping Duties on Foreign Competitors' Products" and
"Business--Environmental and Regulatory Matters--Anti-Dumping Duties on
Foreign Competitors' Products").
(h) On the Closing Date, Wolf, Block, Schorr &
Solis-Cohen LLP, special New York counsel to the Company, shall have
furnished to the Initial Purchaser its written opinion (containing
customary limitations that shall be reasonably satisfactory in all
material respects to the Initial Purchaser's counsel), addressed to the
Initial Purchaser and dated the Closing Date, in form and substance
reasonably satisfactory to the Initial Purchaser, to the effect that:
(i) Assuming the due authorization, execution and
delivery thereof by SAC and Initial Purchaser, the
Registration Rights Agreement is a legal, valid and binding
obligation of SAC, enforceable against SAC in accordance with
its terms, except that (A) enforceability of the Registration
Rights Agreement may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally and by general
principles of equity and the discretion of the court before
which any proceedings therefor may be brought and (B) any
rights to indemnity or contribution thereunder may be limited
by public policy considerations.
(i) On the Closing Date, Baker & Botts LLP, special
regulatory counsel to the Company, shall have furnished to the Initial
Purchaser its written opinion (containing customary limitations that
shall be reasonably satisfactory in all material respects to the
Initial Purchaser's counsel), addressed to the Initial Purchaser and
dated the Closing Date, in form and substance reasonably satisfactory
to the Initial Purchaser, to the effect that such counsel has reviewed
the portions of the Preliminary Memorandum and the Final Memorandum set
forth under the captions "Risk Factors--Anti-Dumping Duties on Foreign
Competitors' Products" and "Business--Environmental and Regulatory
Matters--Anti-Dumping Duties on Foreign Competitors' Products"
(collectively, the "Antidumping Provisions") and, although such counsel
is not passing upon and does not assume any responsibility for the
accuracy, completeness or fairness of the statements contained in the
Preliminary Memorandum and the Final Memorandum, no facts have come to
such counsel's attention which lead such counsel to believe that the
Antidumping Provisions of the Preliminary Memorandum and the Final
Memorandum contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which
they were made, not misleading.
(j) You shall have received on the Closing Date an
opinion of Latham & Watkins, counsel for the Initial Purchaser, dated
the Closing Date and addressed to you, in form and substance reasonably
satisfactory to you.
(k) SAC and the Trustee shall have entered into the
Indenture and the Initial Purchaser shall have received executed
counterparts thereof.
(l) SAC and the Initial Purchaser shall have entered
into the Registration Rights Agreement and the Initial Purchaser shall
have received executed counterparts, thereof.
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<PAGE> 22
(m) At the Execution Time and at the Closing Date,
Ernst & Young LLP, Crowe, Chizek and Company LLP and Deloitte & Touche
LLP shall have furnished to the Initial Purchaser a letter or letters,
dated respectively as of the Execution Time and as of the Closing Date,
in form and substance reasonably satisfactory to the Initial Purchaser,
confirming that they are independent accountants within the meaning of
the Securities Act and the Exchange Act and the applicable rules and
regulations thereunder and Rule 101 of the Code of Professional Conduct
of the American Institute of Certified Public Accountants (the "AICPA")
and otherwise reasonably satisfactory in form and substance to the
Initial Purchaser and their counsel.
(n) (i) The Company shall not have sustained since
the date of the latest financial statements included in the Final
Memorandum losses or interferences with its businesses, from fire,
explosion, flood or other calamity, whether or not covered by
insurance, or from any labor dispute or court or governmental action,
order or decree, otherwise than as set forth or contemplated in the
Final Memorandum and (ii) since such date there shall not have been any
change in the capital stock or long-term debt of the Company or any
change, or any development involving a prospective change, in or
affecting the general affairs, management, financial position,
stockholders' equity or results of operations of the Company otherwise
than as set forth or contemplated in the Final Memorandum, the effect
of which, in any such case described in clause (i) or (ii), is, in the
reasonable judgment of the Initial Purchaser, so material and adverse
as to make it impracticable or inadvisable to proceed with the offering
or the delivery of the Securities being delivered on the Closing Date
on the terms and in the manner contemplated herein and in the Final
Memorandum.
(o) Subsequent to the execution and delivery of this
Agreement there shall not have occurred any of the following: (i)
trading in securities generally on the New York Stock Exchange or The
NASDAQ Stock Market's National Market or in the over-the-counter market
shall have been suspended or materially limited, or minimum prices
shall have been established on such exchange by the Commission, or by
such exchange or by any other regulatory body or governmental authority
having jurisdiction, (ii) a banking moratorium shall have been declared
by Federal or New York state authorities, (iii) the United States shall
have become engaged in hostilities, there shall have been an escalation
in hostilities involving the United States or there shall have been a
declaration of a national emergency or war by the United States or (iv)
there shall have occurred such a material adverse change in general
economic, political or financial conditions (or the effect of
international conditions on the financial markets in the United States
shall be such) as to make it, in the reasonable judgment of the Initial
Purchaser, impracticable or inadvisable to proceed with the offering or
delivery of the Securities being delivered on the Closing Date on the
terms and in the manner contemplated herein and in the Final
Memorandum.
(p) As of the Closing Date, no "nationally recognized
statistical rating organization" as such term is defined for purposes
of Rule 436(g)(2) under the Securities Act (i) will have imposed (or
will have informed the Company that it is considering imposing) any
condition (financial or otherwise) on the Company's retaining any
rating assigned to the Company any securities of the Company or (ii)
will have indicated to the Company that it is
22
<PAGE> 23
considering (a) the downgrading, suspension, or withdrawal of, or any
review for a possible change that does not indicate the direction of
the possible change in, any rating so assigned or (b) any change in the
outlook for any rating of the Company, or any securities of the
Company.
(q) Latham & Watkins shall have been furnished with
such documents, in addition to those set forth above, as they may
reasonably require for the purpose of enabling them to review or pass
upon the matters referred to in this Section 7 and in order to evidence
the accuracy, completeness or satisfaction in all material respects of
any of the representations, warranties or conditions herein contained.
(r) On the Closing Date, the Acquisition shall have
been consummated.
(s) Prior to the Closing Date, SAC and the Company
shall have furnished to the Initial Purchaser such further information,
certificates and documents as the Initial Purchaser may reasonably
request.
All opinions, letters, evidence and certificates mentioned
above or elsewhere in this Agreement shall be deemed to be in compliance with
the provisions hereof only if they are in form and substance reasonably
satisfactory to counsel for the Initial Purchasers.
8. INDEMNIFICATION AND CONTRIBUTION. (a) SAC agrees to
indemnify and hold harmless the Initial Purchaser, the directors, officers,
employees and agents (including, without limitation, attorneys) of the Initial
Purchaser and each person who controls the Initial Purchaser within the meaning
of either the Securities Act or the Exchange Act against any and all losses,
claims, damages or liabilities, joint or several, to which they or any of them
may become subject under the Securities Act, the Exchange Act or other Federal
or state statutory law or regulation, at common law or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of a material fact contained in the Preliminary Memorandum, the Final Memorandum
or any information provided by the SAC to any holder or prospective purchaser of
Securities pursuant to Section 5(e), or in any amendment thereof or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances under which they were
made, not misleading, and agrees to reimburse each such indemnified party, as
incurred, for any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, damage,
liability or action: provided, however, that SAC will not be liable in any such
case to the Initial Purchaser to the extent that any such loss, claim, damage,
liability or action arises out of or is based upon any such untrue statement or
alleged untrue statement or omission or alleged omission relating to such
Initial Purchaser made in the Preliminary Memorandum or the Final Memorandum, or
in any amendment thereof or supplement thereto, in reliance upon and in
conformity with written information furnished to SAC by or on behalf of the
Initial Purchaser specifically for inclusion therein; and, provided, further,
that neither SAC nor the Company will be liable in any such case if a copy of
the Preliminary Memorandum or the Final Memorandum (including any amendment or
supplement thereto delivered to the Initial Purchaser prior to the date such
Preliminary Memorandum or Final Memorandum was sent or given to such purchaser)
was not sent or given by or on behalf of the Initial Purchaser to such
23
<PAGE> 24
person at or prior to the written confirmation of the sale of Notes to such
person, and the Preliminary Memorandum or Final Memorandum (including any
amendment or supplement thereto delivered to the Initial Purchaser prior to the
date such Preliminary Memorandum or Final Memorandum was sent or given to such
purchaser) cured the defect giving rise to such losses, claims, damages,
liabilities or expenses.
(b) The Initial Purchaser agrees to indemnify and hold
harmless SAC, its directors, officers, employees and agents (including, without
limitation, attorneys), and each person who controls SAC within the meaning of
either the Securities Act or the Exchange Act, to the same extent as the
foregoing indemnity from SAC to the Initial Purchaser, but only with reference
to written information relating to the Initial Purchaser furnished to SAC by or
on behalf of the Initial Purchaser specifically for inclusion in the Preliminary
Memorandum or the Final Memorandum (or in any amendment or supplement thereto).
This indemnity agreement will be in addition to any liability which any Initial
Purchaser may otherwise have. SAC and the Initial Purchaser acknowledge that the
statements set forth in the last paragraph of the cover page and under the
heading "Plan of Distribution" in the Preliminary Memorandum and the Final
Memorandum constitute the only information furnished in writing by or on behalf
of the Initial Purchaser for inclusion in the Preliminary Memorandum or the
Final Memorandum (or any amendment or supplement thereto).
(c) Promptly after receipt by an indemnified party under this
Section 8 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under this Section 8, notify the indemnifying party in writing of the
commencement thereof, but the failure so to notify the indemnifying party (i)
will not relieve it from liability under paragraph (a) or (b) above unless and
to the extent it did not otherwise learn of such action and such failure results
in the forfeiture by the indemnifying party of substantial rights and defenses
and (ii) will not, in any event, relieve the indemnifying party from any
obligations to any indemnified party other than the indemnification obligation
provided in paragraph (a) or (b) above. The indemnifying party shall be entitled
to appoint counsel of the indemnifying party's choice at the indemnifying
party's expense to represent the indemnified party in any action for which
indemnification is sought (in which case the indemnifying party shall not
thereafter be responsible for the fees and expenses of any separate counsel
retained by the indemnified party or parties except as set forth below);
provided, however that such counsel shall be reasonably satisfactory to the
indemnified party. Notwithstanding the indemnifying party's election to appoint
counsel to represent the indemnified party in an action, the indemnified party
shall have the right to employ separate counsel (including local counsel), and
the indemnifying party shall bear the reasonable fees, costs and expenses of
such separate counsel if (i) the use of counsel chosen by the indemnifying party
to represent the indemnified party would, in the opinion of legal counsel to the
indemnified party, present such counsel with a conflict of interest, (ii) the
actual or potential defendants in, or targets of, any such action include both
the indemnified party and the indemnifying party and the indemnified party shall
have been informed in writing by legal counsel that there may be legal defenses
available to it and/or other indemnified parties which are different from or
additional to those available to the indemnifying party, (iii) the indemnifying
party shall not have employed counsel reasonably satisfactory to the indemnified
party to represent the indemnified party within a reasonable time after notice
of the institution of such action or (iv) the indemnifying party shall authorize
the indemnified party to employ separate counsel at the expense of the
indemnifying party. An indemnifying party or an indemnified party will not,
without the prior written consent of the indemnified parties or the indemnifying
parties, as the case
24
<PAGE> 25
may be, settle or compromise or consent to the entry of any judgment with
respect to any pending or threatened claim, action, suit or proceeding in
respect of which indemnification or contribution may be sought hereunder
(whether or not the indemnified parties are actual or potential parties to such
claim or action) unless such settlement, compromise or consent includes an
unconditional release of each indemnified party or indemnifying party from all
liability arising out of such claim, action, suit or proceeding.
(d) In the event that the indemnity provided in paragraph (a)
or (b) of this Section 8 is unavailable to or insufficient to hold harmless an
indemnified party for any reason, SAC and the Initial Purchaser agree to
contribute to the aggregate losses, claims, damages and liabilities (including
legal or other expenses reasonably incurred in connection with investigating or
defending same) (collectively "Losses") to which SAC and the Initial Purchaser
may be subject in such proportion as is appropriate to reflect the relative
benefits received by SAC and by the Initial Purchaser from the offering of the
Securities; provided, however, that in no case shall the Initial Purchaser be
responsible for any amount in excess of the purchase discount or commission
applicable to the Securities purchased by the Initial Purchaser hereunder. If
the allocation provided by the immediately preceding sentence is unavailable for
any reason, SAC and the Initial Purchaser shall contribute in such proportion as
is appropriate to reflect not only such relative benefits but also the relative
fault of the Issuer and of the Initial Purchaser in connection with the
statements or omissions which resulted in such Losses as well as any other
relevant equitable considerations. Benefits received by SAC shall be deemed to
be equal to the total net proceeds from the offering (before deducting
expenses), and benefits received by the Initial Purchaser shall be deemed to be
equal to the total purchase discounts and commissions received by the Initial
Purchaser from the Issuer in connection with the purchase of the Securities
hereunder. Relative fault shall be determined by reference to whether any
alleged untrue statement or omission relates to information provided by SAC or
the Initial Purchaser and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
SAC and the Initial Purchaser agree that it would not be just and equitable if
contribution were determined by pro rata allocation or any other method of
allocation that does not take account of the equitable considerations referred
to above. Notwithstanding the provisions of this paragraph (d), no person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. For purposes of this Section 8,
each person who controls the Initial Purchaser within the meaning of either the
Securities Act or the Exchange Act and each director, officer, employee and
agent of the Initial Purchaser shall have the same rights to contribution as the
Initial Purchaser, and each person who controls SAC within the meaning of either
the Securities Act or the Exchange Act and each partner, officer, director,
employee and agent of SAC shall have the same rights to contribution as the
Issuer, subject in each case to the applicable terms and conditions of this
paragraph (d).
9. TERMINATION. The obligations of the Initial Purchaser
hereunder may be terminated by the Initial Purchaser by notice given to and
received by the Company prior to delivery of and payment for the Securities if,
prior to that time, any of the events described in Section 7(n) shall have
occurred or if the Initial Purchaser shall decline to purchase the Securities
for any reason permitted under this Agreement.
25
<PAGE> 26
10. NOTICES, ETC. All statements, requests, notices and
agreements hereunder shall be in writing, and:
(a) if to the Initial Purchaser, shall be delivered
or sent by mail, telex or facsimile transmission to NationsBanc
Montgomery Securities, LLC., 100 North Tryon Street, 20th Floor,
Charlotte, North Carolina 28255, Attention: Mark Wilson, with a copy to
Latham & Watkins, 885 Third Avenue, New York, New York 10022,
Attention: Kirk A. Davenport;
(b) if to SAC, shall be delivered or sent by mail,
telex or facsimile transmission to SAC Acquisition Corp., c/o CGW
Southeast Partners III, L.P., Twelve Piedmont Center, Suite 210,
Atlanta, Georgia 30305, Attention: William A. Davies, with a copy to
Alston & Bird LLP, 1201 West Peachtree Street, Atlanta, Georgia
30309-3424, Attention: Teri McMahon.
Any such statements, requests, notices or agreements shall
take effect at the time of receipt thereof. SAC shall be entitled to act and
rely upon any request, consent, notice or agreement given or made on behalf of
the Initial Purchaser.
11. PERSONS ENTITLED TO BENEFIT OF AGREEMENT. This Agreement
shall inure to the benefit of and be binding upon the Initial Purchaser, SAC and
their respective successors. This Agreement and the terms and provisions hereof
are for the sole benefit of only those persons, except that (A) the
representations, warranties, indemnities and agreements of SAC contained in this
Agreement shall also be deemed to be for the benefit of directors, officers,
employees and agents (including, without limitation, attorneys) of the Initial
Purchaser and the person or persons, if any, who control the Initial Purchaser
within the meaning of Section 15 of the Securities Act and (B) the indemnity
agreement of the Initial Purchaser contained in Section 8(b) of this Agreement
shall be deemed to be for the benefit of directors of the Issuer, officers,
employees and agents (including, without limitation, attorneys) of SAC and any
person controlling any of SAC within the meaning of Section 15 of the Securities
Act. Nothing in this Agreement is intended or shall be construed to give any
person, other than the persons referred to in this Section 12, any legal or
equitable right, remedy or claim under or in respect of this Agreement or any
provision contained herein.
12. SURVIVAL. The respective indemnities, representations,
warranties and agreements of SAC and the Initial Purchaser contained in this
Agreement or made by or on behalf on them, respectively, pursuant to this
Agreement, shall survive the delivery of and payment for the Securities and
shall remain in full force and effect, regardless of any investigation made by
or on behalf of any of them or any person controlling any of them.
13. DEFINITION OF "BUSINESS DAY." For purposes of this
Agreement, "business day" means each Monday, Tuesday, Wednesday, Thursday and
Friday that is not a day on which banking institutions in The City of New York,
New York are authorized or obligated by law, executive order or regulation to
close.
14. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD
TO THE CONFLICT OF LAW RULES THEREOF.
26
<PAGE> 27
15. COUNTERPARTS. This Agreement may be executed in one or
more counterparts and, if executed in more than one counterpart, the executed
counterparts shall each be deemed to be an original but all such counterparts
shall together constitute one and the same instrument.
16. HEADINGS. The headings herein are inserted for convenience
of reference only and are not intended to be part of, or to affect the meaning
or interpretation of, this Agreement.
27
<PAGE> 28
If the foregoing correctly sets forth the agreement between
SAC and the Initial Purchaser, please indicate your acceptance in the space
provided for that purpose below.
Very truly yours,
SAC ACQUISITION CORP.
By: /s/ William A. Davies
------------------------------------
Name: William A. Davis
Title: Chairman of the Board
<PAGE> 29
The foregoing Agreement is hereby
confirmed, accepted and agreed as
of the date first above written.
NATIONSBANC MONTGOMERY SECURITIES LLC
By: /s/ Mark Wilson
---------------------------------------
Name: Mark Wilson
Title: Managing Director
<PAGE> 1
EXHIBIT 2.3
PURCHASE AGREEMENT SUPPLEMENT
THIS PURCHASE AGREEMENT SUPPLEMENT is a supplement to that
certain Purchase Agreement, dated March 31, 1998 (the "Purchase Agreement"),
between SAC Acquisition Corp., a Georgia corporation ("SAC"), and NationsBanc
Montgomery Securities LLC. (the "Initial Purchaser"). Unless otherwise defined
herein, defined terms are used herein as defined in the Purchase Agreement.
As a result of the consummation of the Merger, SAC was merged
with and into SIMCALA, Inc., a Delaware corporation (the "Company"), with the
Company being the surviving corporation.
The Company and the Initial Purchaser hereby agree as follows:
(a) the Company hereby (i) assumes the obligations, and makes
the agreements, of SAC under the Purchase Agreement (including, without
limitation, the agreements and obligations in Sections 5 and 8
thereof), and (ii) makes the representations and warranties of SAC to
the Initial Purchaser contained therein; and
(b) the Initial Purchaser hereby (i) reaffirms its obligations
and agreements under the Purchase Agreement (including without
limitation, the agreements and obligations in Section 8 thereof), and
(ii) reaffirms to the Company its representations and warranties
contained therein.
For the purposes of Section 11 of the Purchase Agreement, the address
of the Company shall be the address of the Company set forth in the Final
Memorandum, Attention: C. Edward Boardwine, with copies to: (i) CGW Southeast
Partners III, L.P., Twelve Piedmont Center, Suite 210, Atlanta, Georgia 30305,
Attention: William A. Davies; and (ii) Alston & Bird LLP, 1201 West Peachtree
Street, Atlanta Georgia 30309-3424, Attention Terri McMahon, Esq.
This Purchase Agreement Supplement does not cancel or extinguish any
right or obligation of the parties to the Purchase Agreement. The parties hereto
agree that the Purchase Agreement shall be supplemented only with respect to the
matters referred to herein and the provisions of the Purchase Agreement are
otherwise in full force and effect.
This Purchase Agreement Supplement may be executed in one or
more counterparts and, if executed in more than one counterpart, the executed
counterparts shall each be deemed to be an original and all such counterparts
shall together constitute one and the same instrument.
THIS PURCHASE AGREEMENT SUPPLEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF NEW YORK, WITHOUT REGARD TO THE
CONFLICT OF LAW RULES THEREOF.
<PAGE> 2
IN WITNESS WHEREOF, the undersigned has executed this Purchase
Agreement Supplement as of March 31, 1998.
SIMCALA, INC.
BY: /s/ C. E. Boardwine
------------------------------------
NAME: C. EDWARD BOARDWINE
TITLE: CHIEF EXECUTIVE OFFICER
<PAGE> 3
The foregoing Agreement is hereby
confirmed and accepted as of the
date first above written.
NATIONSBANC MONTGOMERY SECURITIES LLC
By: /s/ Mark Wilson
----------------------------------------
Name: Mark Wilson
Title: Managing Director
<PAGE> 1
EXHIBIT 2.4
AGREEMENT AND PLAN OF MERGER
BETWEEN SAC ACQUISITION CORP. AND SIMCALA, INC.
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") dated as of March
31, 1998 between SAC ACQUISITION CORP., a Georgia corporation ("SAC"), and
SIMCALA, INC., a Delaware corporation ("SIMCALA"; together with SAC, the
"Constituent Corporations") and a wholly-owned subsidiary of SAC, sets forth
certain agreements in connection with the merger of SAC with and into SIMCALA
(the "Merger").
W I T N E S S E T H:
WHEREAS, as of the date hereof, SAC has the following authorized
capital stock: 1,000,000 shares of common stock, no par value per share ("SAC
Stock").
WHEREAS, as of the date hereof, there are outstanding 1,000 shares of
SAC Stock, all of which are owned by SIMCALA Holdings, Inc., a Georgia
corporation ("Holdings").
WHEREAS, as of the date hereof, SIMCALA has the following authorized
capital stock: (a) 20,000 shares of common stock, par value $.01 per share
("SIMCALA Common Stock"), and (b) 4,500 shares of preferred stock ("SIMCALA
Preferred Stock"), consisting of (i) 1,500 shares of Series A Preferred Stock,
par value $1.00 per share, and (ii) 3,000 shares Series B Preferred Stock, par
value $1.00 per share. The SIMCALA Common Stock and the SIMCALA Preferred Stock
are collectively referred to herein as the "SIMCALA Stock."
WHEREAS, as of the date hereof, there are outstanding 10,889 shares of
SIMCALA Common Stock, all of which are owned by SAC, and no outstanding shares
of SIMCALA Preferred Stock.
WHEREAS, the respective boards of directors and stockholders of the
Constituent Corporations have approved this Agreement, the Merger and the other
transactions contemplated hereby.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein contained, and for the purpose of setting forth
the terms and conditions of the Merger, the method by which the Merger will be
effected, the manner and basis of converting the shares of SAC Stock into shares
of SIMCALA Stock, the manner of determining the effective date of the Merger and
such other provisions as are deemed necessary or desirable, the parties hereto
do hereby agree as follows:
<PAGE> 2
ARTICLE I
THE MERGER
1.1 Upon the terms and subject to the conditions of this Agreement and
in accordance with applicable law, on the Effective Date (as defined below) SAC
shall be merged with and into SIMCALA and the separate existence of SAC shall
thereupon cease. SIMCALA shall be the surviving corporation in the Merger
(hereinafter sometimes referred to as the "Surviving Corporation"), and the
Surviving Corporation shall retain the name "SIMCALA, Inc."
1.2 On the Effective Date, the Surviving Corporation shall thereupon
and thereafter possess all of the rights, privileges, immunities and franchises
of a public and a private nature of each of the Constituent Corporations; all
property, real, personal and mixed, tangible and intangible and all and every
other interest of or due to each of the Constituent Corporations shall be taken
and deemed to be transferred to and vested in the Surviving Corporation without
further action. The title to any real estate, or any interest therein, vested in
any of the Constituent Corporations shall not revert or in any way be impaired
by reason of the Merger. The Surviving Corporation shall thenceforth be
responsible and liable for all the liabilities and obligations of each of the
Constituent Corporations. Neither the rights of creditors nor any liens upon the
property of any of the Constituent Corporations shall be impaired by the Merger.
1.3 The Merger shall be effective as of the date on which the Articles
of Merger are filed with the Secretary of State of Georgia and the Certificate
of Ownership and Merger is filed with the Secretary of State of Delaware (the
"Effective Date").
1.4 On the Effective Date, (a) all of the issued and outstanding shares
of SIMCALA Stock shall be canceled, and no consideration shall be paid or
delivered in exchange therefor; and (b) each of the authorized, issued and
outstanding shares of SAC Stock shall be converted into and become 10.889 shares
of SIMCALA Stock, which shares of SIMCALA Stock shall be the capital stock of
the Surviving Corporation on the Effective Date. SIMCALA shall issue to Holdings
a new certificate for 10,889 shares of SIMCALA Common Stock upon surrender of
Holdings' certificate for 1,000 shares of SAC Stock.
ARTICLE II
CERTIFICATE OF INCORPORATION, BYLAWS, DIRECTORS AND
OFFICERS OF THE SURVIVING CORPORATION
2.1 The Articles of Incorporation of SIMCALA in effect immediately
prior to the Effective Date of the Merger shall be the Articles of Incorporation
of the Surviving Corporation unless and until amended as provided by law and by
such Articles of Incorporation.
2.2 The Bylaws of SIMCALA in effect immediately prior to the Effective
Date of the Merger shall be the Bylaws of the Surviving Corporation unless and
until amended or repealed as provided by law, by the Articles of Incorporation
of the Surviving Corporation and by such Bylaws.
-2-
<PAGE> 3
2.3 The directors of SIMCALA immediately prior to the Effective Date of
the Merger shall be the directors of the Surviving Corporation, and the officers
of SIMCALA immediately prior to the Effective Date of the Merger shall be the
officers of the Surviving Corporation, in both cases until their successors
shall have been elected and shall qualify or until otherwise provided by law, by
the Articles of Incorporation of the Surviving Corporation and by the Bylaws of
the Surviving Corporation.
ARTICLE III
FURTHER ACTIONS AND AGREEMENTS
3.1 If at any time after the Effective Date of the Merger the Surviving
Corporation shall consider or be advised that any deeds, bills of sale,
assignments, assurances or any other actions or things are necessary or
desirable to vest, perfect or confirm of record or otherwise in the Surviving
Corporation its right, title or interest in, to or under any of the rights,
properties or assets of either Constituent Corporation acquired by the Surviving
Corporation as a result of, or in connection with, the Merger or to otherwise
carry out this Agreement, the officers and directors of the Surviving
Corporation shall, and hereby are authorized to, execute and deliver, in the
name and on behalf of the Constituent Corporations or otherwise, all such deeds,
bills of sale, assignments and assurances and to take and do, in the name and on
behalf of the Constituent Corporations or otherwise, all such other actions and
things as may be necessary or desirable to vest, perfect or confirm any and all
right, title and interest in, to and under such rights, properties or assets in
the Surviving Corporation or to otherwise carry out this Agreement.
ARTICLE IV
MISCELLANEOUS
4.1 This Agreement shall be governed by and construed in accordance
with the laws of the State of Georgia.
4.2 The parties hereto, by resolution of their respective boards of
directors, may amend, modify or supplement this Agreement, or waive the
application of any provision hereof, provided that any such amendment,
modification, supplement or waiver is in writing and signed by the parties
hereto.
4.3 By written notice to the other party hereto at any time prior to
the Effective Date, whether before or after approval by the stockholders of the
Constituent Corporations of this Agreement, the Merger and the other
transactions contemplated hereby for any reason, either of the Constituent
Corporations, by resolution of their respective boards of directors, may
terminate this Agreement and abandon the Merger and the other transactions
contemplated hereby, and in that event, neither party shall have any further
obligation to the other party or to the stockholders of the other party.
-3-
<PAGE> 4
IN WITNESS WHEREOF, each Constituent Corporation has caused this
Agreement to be executed by its duly authorized officers as of the date first
above written.
SAC ACQUISITION CORP., a Georgia corporation
By: /s/ William A. Davies
-----------------------------------------
William A. Davies
Chairman of the Board
SIMCALA, INC., a Delaware corporation
By: /s/ William A. Davies
-----------------------------------------
William A. Davies
Chairman of the Board
-4-
<PAGE> 1
EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
OF
SIMETAL CORP.
A STOCK CORPORATION
I, the undersigned, for the purpose of incorporating and organizing a
corporation under the General Corporation Law of the State of Delaware, do
hereby certify as follow:
FIRST: The name of the corporation (the "Corporation") is SiMetal
Corp.
SECOND: The address of the Corporation's registered office in the State
of Delaware is Corporation Service Company, City of Wilmington, County of New
Castle, Delaware 19805. The name of the Corporation's registered agent at such
address is Corporation Service Company.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
FOURTH: The total number of shares which the Corporation shall have
authority to issue is One Thousand (1,000) shares of Common Stock, par value of
$.01 per share.
FIFTH: Elections of directors need not be by written ballot except and
to the extent provided in the by-laws of the Corporation.
SIXTH: To the full extent permitted by the General Corporation Law of
the State of Delaware or any other applicable laws presently or hereafter in
effect, no director of the Corporation shall be personally liable to the
Corporation or its stockholders for or with respect to any acts or omissions in
the performance of his or her duties as a director of the Corporation. Any
repeal or modification of this Article Sixth shall not adversely affect any
right or protection of a director of the corporation existing immediately prior
to such repeal or modification.
<PAGE> 2
SEVENTH: Each person who is or was or had agreed to became a director
or officer of the Corporation, or each such person who is or was serving or who
had agreed to serve at the request of the Board of Directors or an officer of
the Corporation as an employee or agent of the Corporation or as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise (including the heirs, executors, administrators or
estate of such person), shall be indemnified by the corporation to the full
extent permitted by the General Corporation Law of the State of Delaware or any
other applicable laws as presently or hereafter in effect. Without limiting the
generality or the effect of the foregoing, the Corporation may enter into one or
more agreements with any person which provide for indemnification greater or
different than that provided in this Article. Any repeal or modification of this
Article Seventh shall not adversely affect any right or protection existing
hereunder immediately prior to such repeal or modification.
EIGHTH: In furtherance and not in limitation of the rights, powers,
privileges, and discretionary authority granted or conferred by the General
Corporation Law of the State of Delaware or other statutes or laws of the State
of Delaware, the Board of Directors is expressly authorized to make, alter,
amend or repeal the by-laws of the Corporation, without any action on the part
of the stockholders, but the stockholders may make additional by-laws and may
alter, amend or repeal any by-law whether adopted by them or otherwise. The
Corporation may in its by-laws confer powers upon its Board of Directors in
addition to the foregoing and in addition to the powers and authorities
expressly conferred upon the Board of Directors by applicable law.
NINTH: The Corporation reserves the right at any time and from time to
time to amend, alter, change or repeal any provision contained in this
Certificate of Incorporation, and other provisions authorized by the laws of the
State of Delaware at the time in force may be added or inserted, in the manner
now or hereafter prescribed herein or by
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<PAGE> 3
applicable law; and all rights, preferences and privileges of whatsoever nature
conferred upon stockholders, directors or any other persons whomsoever by and
pursuant to this Certificate of Incorporation in its present form or as
hereafter amended are granted subject to this reservation.
TENTH: The name and mailing address of the Incorporator is Sally A.
Jamieson, North Point, 901 Lakeside Avenue, Cleveland, Ohio 44114.
ELEVENTH: The name and mailing addresses of the persons who are to
serve as directors of the corporation until the first annual meeting of
stockholders or until their successors are elected and qualified are as follows:
<TABLE>
<CAPTION>
NAME MAILING ADDRESS
---- ---------------
<S> <C>
James M. Petras c/o Capital One Investors
1111 Chester Avenue, Suite 550
Cleveland, Ohio 44114
James D. Ireland c/o Capital One Investors
1111 Chester Avenue, Suite 550
Cleveland, Ohio 44114
</TABLE>
IN WITNESS WHEREOF, I the undersigned, being the incorporator
hereinabove named, do hereby execute this Certificate of Incorporation this 29th
day of August, 1994.
/s/ Sally A. Jamieson
---------------------------------------
Sally A. Jamieson
-3-
<PAGE> 4
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
SIMCALA, INC.
The undersigned, being all of the Directors of SIMCALA, Inc. (the
"Corporation"), a corporation organized and existing under the General
Corporation Law of the State of Delaware, DO HEREBY CERTIFY:
A. That on February 9, 1995, in lieu of a meeting and pursuant to
Section 141(f) of the General Corporation Law of the State of Delaware, the
Board of Directors of the Corporation did unanimously recommend the adoption of
the following amendment to the Certificate of Incorporation of the Corporation:
RESOLVED, that the Certificate of Incorporation of the Corporation, as
amended, be amended by deleting Article FOURTH in its entirety and replacing it
so as to read as follows:
FOURTH: The total number of shares which the Corporation shall have the
authority to issue is 24,500 and the shares shall be divided into classes as
follows: (i) 20,000 shares of Common Stock, par value $.01 per share; and (ii)
4,500 shares of Preferred Stock (the "Preferred Stock") consisting initially of:
(X) 1,500 shares of Series A Preferred Stock, par value $1.00 per share; and (Y)
3,000 shares of Series B Preferred Stock, par value $1.00 per share.
The voting powers, designations, preferences and relative,
participating, optional or other special rights, and qualifications, limitations
or restrictions of the shares and the authority of the Board of Directors to
provide for such powers, designations, preferences, rights and qualifications,
limitations or restrictions are as follows (as used herein, references to a
specific Paragraph refer to the applicable paragraph within the Division
identified by the capitalized letter contained in the paragraph reference):
<PAGE> 5
DIVISION A
Express Terms of
Series A Preferred Stock
The express terms of SIMCALA, INC.'s (the "Company") series A Preferred
stock (the "Series A Preferred Shares") are as follows:
1. Number. The total number of Series A Preferred Shares that this
Company shall have authority to issue is one thousand five hundred (1,500),
$1.00 par value per share. All Series A Preferred Shares redeemed, purchased,
surrendered upon exchange or otherwise acquired by the Company shall be
cancelled, retired and eliminated from the Series A Preferred Shares that the
Company shall be authorized to issue. The Company may from time to time take
such appropriate corporate action as may be necessary to reduce the authorized
number of Series A Preferred Shares to reflect any such cancellation, retirement
and elimination of Series A Preferred Shares.
2. Dividends. No dividends shall be paid on the Series A Preferred
Shares.
3. Liquidation Preference. In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the Company (a
"Liquidation Event"), the holders of series A Preferred Shares shall be entitled
to receive $2,000 (as adjusted to reflect any share split, combination,
reclassification or similar event affecting the Series A Preferred Shares) (the
"Liquidation Value") for each Series A Preferred Share outstanding. If the
assets of the Company available for distribution to the holders of its capital
stock shall be insufficient to permit payment to the holders of all outstanding
Series A Preferred Shares of the full amount to which they are entitled, then
all of the assets of the Company so available for distribution shall be
distributed ratably among holders of Series A Preferred Shares based upon the
aggregate liquidation preference of the Series A preferred Shares held by each
such holder and the aggregate liquidation preference of all Series A Preferred
Shares. The Liquidation Value shall be paid to holders of Series A Preferred
Shares before any distribution may be made to the holders of common stock or any
other stock of the Company ranking junior to the Series A Preferred Shares as to
distribution of assets upon the occurrence of a Liquidation Event ("Junior
Stock"). After the Liquidation Value shall have been paid to the holders of the
Series A Preferred Shares or funds necessary for such payment shall have been
set aside by the Company in trust for the benefit of the holders of the Series A
Preferred Shares so as to be available for such payment, the holders of Series A
Preferred Shares shall have no further rights with respect to any remaining
assets of the Company legally available for distribution to the holders of its
capital stock. A reorganization, consolidation or merger of the Company or a
sale or other disposition of all or substantially all of the assets of the
Company shall not be treated as a Liquidation Event. The Company shall not make
distributions to the holders of common stock or Junior Stock upon the sale or
other disposition of all or substantially all of the assets of the Company
unless the Company
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<PAGE> 6
shall have paid the Liquidation Value or set aside funds equal to the
Liquidation Value for each of the outstanding Series A Preferred Shares.
4. Voting Rights. Except as specifically required by law, the holders
of the Series A Preferred Shares shall not have any right or power to vote on
any question or in any proceeding or to be represented at, or to receive notice
of, any meeting of the Company's shareholders.
5. Exchange of Shares.
(a) The Company, at its option, may at any time from time to time,
exchange outstanding Series A Preferred Shares for Subordinated Promissory
Notes, in the form attached hereto as Exhibit A (the "Exchange Notes"). In the
event that the Company exercises its right to exchange Series A Preferred Shares
into Exchange Notes, each holder of outstanding Series A Preferred shares shall
receive Exchange Notes in an aggregate principal amount equal to the product of
(i) the Liquidation Value times (ii) the number of Series A Preferred Shares
then held by such holder.
(b) The Company shall mail written notice of its intention to exchange
Exchange Notes for Series A Preferred Shares to each holder of Series A
Preferred Shares not less than 10 days prior to the date on which such exchange
is to be made (the "Exchange Date"). Such notice shall state the Exchange Date
and the place where certificates for such series A Preferred Shares are to be
surrendered in exchange for Exchange Notes.
(c) From and after the Exchange Date, the Series A Preferred Shares
exchanged for Exchange Notes shall no longer be deemed to be issued and
outstanding, and all rights of the holders of Series A Preferred Shares so
exchanged as stockholders of the Company with respect to such Series A Preferred
Shares (except for the right to receive Exchange Notes) shall cease and
terminate. Upon surrender of the certificates for Series A Preferred Shares so
exchanged (properly endorsed for transfer) in accordance with the Company's
notice, the Company shall cause the Exchange Notes to be duly executed and
delivered as provided above.
6. Redemption.
(a) The Company shall redeem 230 of the issued and outstanding Series A
Preferred Shares on the earlier to occur of the following (the "Initial
Redemption Date"): (i) the date which in six months following the date, as
determined in good faith by the Board of Directors of the Company, that all
three of the Company's furnaces located in Mt. Meigs, Alabama are in operation
or (ii) the second anniversary of the date on which the Series A Preferred
Shares were originally issued. Thereafter, the Company shall redeem Series A
Preferred Shares, as follows:
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<PAGE> 7
(i) 100 of the issued and outstanding Series A Preferred
Shares on each of the first, second and third anniversary of the
Initial Redemption Date;
(ii) 160 of the issued and outstanding Series A Preferred
shares on each of the fourth and fifth anniversary of the Initial
Redemption Date; and
(iii) 210 of the issued and outstanding Series A Preferred
Shares on each of the sixth, seventh and eighth anniversary of the
Initial Redemption Date (the Initial Redemption Date and each other
date on which Series A Preferred Shares are redeemed under this Section
6(a) or Section 6(b) shall be referred to as a "Redemption Date").
The redemption price for each series A Preferred Share redeemed shall be the
Liquidation Value at the time of such redemption (the "Redemption Price"). The
number of Series A Preferred Shares required to be redeemed on any Redemption
Date under this Section 6(a) shall be reduced by the number of Series A
Preferred Shares (i) redeemed by the Company under Section 6(b), (ii) exchanged
for Exchange Notes under Section 5, (iii) or otherwise acquired by the Company
at any time prior to such Redemption Date.
(b) The Company may, at its option at any time from time to time,
redeem any or all of the outstanding Series A Preferred Shares at the Redemption
Price.
(c) If on any Redemption Date the funds of the Company legally
available for the redemption of Series A Preferred Shares are insufficient to
redeem all Series A Preferred Shares required to be redeemed on such date, the
number of Series A Preferred Shares legally permitted to be redeemed shall be
redeemed, and any Series A Preferred Shares that the Company is legally unable
to redeem shall be redeemed as soon thereafter as funds become legally available
for such redemption.
(d) At least 10 days prior to a Redemption Date the Company shall mail
written notice of such redemption (the "Redemption Notice") to each holder of
record of the Series A Preferred Shares that are to be redeemed, at its address
shown on the records of the Company; provided, however, that the Company's
failure to give such Redemption Notice with respect to a redemption under
Section 6(a) shall in no way affect its obligation to redeem Series A Preferred
Shares as provided in Section 6(a). The Redemption Notice shall state the
Redemption Date and the Redemption Price, the number of Series A Preferred
Shares to be redeemed, and the place where such holders of Series A Preferred
Shares shall deliver certificates representing the Series A Preferred Shares to
be redeemed.
(e) Each holder of Series A Preferred Shares to be redeemed shall
surrender the certificate or certificates representing such Series A Preferred
Shares to the Company in proper form for transfer, and thereupon the applicable
Redemption Price for such Series A Preferred Shares shall be paid to such
holder. Each surrendered certificate shall be cancelled and retired and new
certificates representing any Series A Preferred Shares not redeemed shall be
issued to such holder. From and after the date on which the
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<PAGE> 8
Redemption Price for Series A Preferred Shares shall have been paid to the
holders of the Series A Preferred Shares or funds or other property necessary
for such payment shall have been set aside by the Company in trust for the
benefit of the holders of the Series A Preferred Shares so as to be available
for such payment, the Series A Preferred Shares so redeemed shall no longer be
deemed to be outstanding.
7. Transfer Restrictions. No holder of Series A Preferred Shares may
transfer, assign, sell, pledge, encumber or otherwise dispose of any Series A
Preferred Shares other than as approved in writing by the Board of Directors of
the Company. All certificates representing Series A Preferred Shares shall bear
a legend reflecting these transfer restrictions and all restrictions required by
law.
8. No Other Rights, Preferences or Privileges. Unless otherwise
required by law, the Series A Preferred Shares shall not have any rights,
preferences or privileges other than those expressly set forth herein.
-5-
<PAGE> 9
DIVISION B
Express Terms of
Series B Preferred Stock
The express terms of SIMCALA, INC.'s (the "Company") Series B Preferred
stock (the "Series B Preferred Shares") are as follows:
1. Number. The total number of Series B Preferred Shares that the
Company shall have authority to issue is three thousand (3,000), $1.00 par value
per share. All Preferred shares redeemed, purchased or otherwise acquired by the
Company shall be cancelled, retired and eliminated from the Series B Preferred
Shares that the Company shall be authorized to issue. The Company may from time
to time take such appropriate corporate action as may be necessary to reduce the
authorized number of Series B Preferred Shares to reflect any such cancellation,
retirement and elimination of Series B Preferred Shares.
2. Dividends. The holders of record of Series B Preferred Shares shall
be entitled to receive, when and as declared by the Board of Directors out of
funds legally available therefore, cumulative preferential cash dividends in the
amount per share of $80.00 per annum payable quarterly, in arrears, on the last
business day of March, June, September, and December commencing June 30, 1995.
Dividends payable for any partial dividend period shall be computed on the basis
of a 360-day year of twelve 30-day months. Dividends not declared and paid shall
cumulate and accrue an a daily basis and interest shall accrue on such accrued
dividends at the rate of eight percent (8%) per annum. Any and all such accrued
dividends and interest thereon shall be paid as provided in Sections 3 and 5
hereof.
3. Liquidation Preference. In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the company (a "Liquidation Event"),
the holders of Series B Preferred Shares shall be entitled to receive before any
payment or declaration and setting apart for payment of any amount shall be made
in respect of any of the Company's shares of capital stock (other than the
Company's outstanding Series A Preferred Stock, to which the Series B Preferred
Shares are junior) $1,000 (as adjusted to reflect any share split, combination,
reclassification or similar event involving the Series B Preferred Shares) for
each Series B Preferred Share outstanding, plus all accrued and unpaid dividends
thereon to and including the date full payment shall be tendered to the holders
of the Series B Preferred Shares with respect to such Liquidation Event (the
"Liquidation Value"). If, after the holders of the Company's Series A Preferred
Shares have been paid, the assets of the Company are insufficient to permit the
payment in full to the holders of the Series B Preferred Shares of the amounts
thus distributable, then the remaining assets of the Company available for such
distribution shall be distributed ratably among the holders of the Series B
Preferred Shares based upon the aggregate liquidation preference of the Series B
Preferred Shares held by each such holder and the aggregate
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<PAGE> 10
liquidation preference of all Series B Preferred Shares. After such payment
shall have been made in full to the holders of the Series B Preferred Shares, or
funds necessary for such payment shall have been set aside by the Company in
trust for the account of holders of the Series B Preferred Shares so as to be
available for such payment, the holders of Series A Preferred Shares shall have
no further rights with respect to any remaining assets of the company legally
available for distribution to the holders of its capital stock. A
reorganization, consolidation or merger of the Company or a sale or other
disposition of all or substantially all of the assets of the Corporation shall
not be treated as a Liquidation Event. The Corporation shall not make
distributions to the holders of common stock upon the sale or other disposition
of all or substantially all of the assets of the Company unless the Company
shall have paid the Liquidation Value or set aside funds equal to the
Liquidation Value for each of the outstanding Series A Preferred Shares and
Series B Preferred Shares.
4. Voting Rights. Except as specifically required by law, the holders
of Series B Preferred Shares shall not have. any right or power to vote on any
question or in any proceeding or to be represented at, or to receive notice of,
any meeting of the Company's shareholders.
5. Redemption of Series B Preferred Shares.
(a) The Company may redeem, at any time from time to time, any and all
of the outstanding Series B Preferred Shares at a price per share of $1,000 plus
all accrued but unpaid cumulative dividends in 100 share increments (the
"Redemption Price"). The Series B Preferred Shares to be redeemed shall be
selected pro rata in accordance with the ratio the number of Series B Preferred
Shares hold by each respective holder bears to the total number of Series B
Preferred Shares then issued and outstanding. Each date on which Series B
Preferred Shares are redeemed shall be referred to as a "Redemption Date."
(b) At least 30 days prior to a Redemption Date, the Company shall mail
written notice of such redemption (the "Redemption Notice") to each holder of
record of the Series B Preferred Shares that are to be redeemed, at its address
shown on the records of the Company. The Redemption Notice shall state the
Redemption Date and the Redemption Price, the number of Series B Preferred
Shares to be redeemed, and the place where such holders of Series B Preferred
Shares shall deliver certificates representing the Series B Preferred Shares to
be redeemed.
(c) Each holder of Series B Preferred Shares to be redeemed shall
surrender the certificate or certificates representing such Series B Preferred
Shares to the Company, in proper form for transfer, and thereupon the applicable
Redemption Price for such Series B Preferred Shares shall be paid to such
holder. Each surrendered certificate shall be cancelled and retired and new
certificates representing any Series B Preferred Shares not redeemed shall be
issued to such holder. From and after the date on which the Redemption Price for
Series B Preferred Shares shall have been paid to the holders of the
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<PAGE> 11
Series B Preferred Shares or funds or other property necessary for such payment
shall have been set aside by the Company in trust for the benefit of the holders
of the Series B Preferred Shares so as to be available for such payment, the
Series B Preferred Shares so redeemed shall no longer be deemed to be
outstanding.
6. Transfer Restrictions. No holder of Series B Preferred Shares may
transfer, assign, sell, pledge, encumber or otherwise dispose of any Series B
Preferred Shares other than as approved in writing by the Board of Directors of
the Company. All certificates representing Series B Preferred Shares shall bear
a legend reflecting these transfer restrictions and all other restrictions
required by law.
7. No Other Rights, Preferences or Privileges. Unless otherwise
required by law, the Series B Preferred Shares shall not have any rights,
preferences or privileges other than those expressly set forth herein.
B. That in lieu of a meeting and vote of stockholders, the sole
stockholder has given written consent to such amendment in accordance with the
provisions of Section 228 of the General Corporation Law of the State of
Delaware.
C. That no part of the capital of said corporation having been paid,
this certificate is filed pursuant to Section 241 of Title 8 of the Delaware
Code, as amended.
IN WITNESS WHEREOF, the undersigned do make this Certificate of
Amendment, hereby declaring and certifying under penalties of perjury that this
is their act and deed and the facts stated herein are true, and accordingly have
hereunto set their hands this 9th day of February, 1995.
/s/ James M. Petras
------------------------------------
James M. Petras
/s/ James D. Ireland, III
------------------------------------
James D. Ireland, III
-8-
<PAGE> 12
EXHIBIT A TO PREFERRED STOCK TERMS
----------------------------------
PROMISSORY NOTE
---------------
$ ____________, ____
--------------------------
Cleveland, Ohio
FOR VALUE RECEIVED, SIMCALA, INC., a Delaware corporation ("Maker"),
promises to pay in lawful money of the United States to [holder of Preferred
Shares] ("Payee"), with offices at _____________________________, at such
offices or at such other place as Payee may from time to time designate in
writing, the principal sum of
____________________________________($____________). No interest shall be
charged thereon.
(This Note shall be repaid in the amounts and at the times that shares
of the Series A Preferred Stock of Maker was to be redeemed under the terms
thereof.)
This Note may be prepaid, in whole or in part by Payor at any time
prior to maturity without penalty or premium.
The indebtedness evidenced by this Note is subordinated to all current
and future secured indebtedness of Maker.
This Note is given in exchange for shares of Series A Preferred Stock
of Maker pursuant to the provisions of Section 5 of the terms of such stock.
Neither this Note nor any rights under this Note may be sold,
transferred, pledged, assigned or otherwise disposed of by Payee without the
prior written consent of Maker.
This Note shall be governed by and construed in accordance with the
laws of the State of Ohio.
IN WITNESS WHEREOF, Maker has caused this Note to be executed as of the
day and year first above written.
SIMCALA, INC.
By:
------------------------------------
Name:
<PAGE> 13
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
SIMETAL CORP.
The undersigned, being all of the Directors of SiMetal Corp. (the
"Corporation"), a corporation organized and existing under the General
Corporation Law of the State of Delaware, DO HEREBY CERTIFY:
A. That a resolution was adopted by a Consent of the Board of Directors
Without a Meeting dated September 7, 1994 proposing and declaring advisable the
following amendment to the Certificate of Incorporation of the Corporation:
FIRST: The name of the Corporation shall be SIMCALA, Inc.
B. The Corporation has not received any payment for any of its stock.
C. That such amendment bas been duly adopted in accordance with the
provisions of Section 241 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, the undersigned do make this Certificate of
Amendment, hereby declaring and certifying under penalty of perjury that this is
their act and deed and the facts stated herein are true, and accordingly have
hereunto set their hands this 7th day of September, 1994.
/s/ James M. Petras
---------------------------------------
James M. Petras
/s/ James D. Ireland
---------------------------------------
James D. Ireland
<PAGE> 1
EXHIBIT 3.2
SIMCALA, INC.
BY-LAWS
<PAGE> 2
SIMCALA, INC.
BY-LAWS
Table of Contents
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I - MEETINGS OF STOCKHOLDERS
Section 1. Time and Place of Meetings.......................................... 1
Section 2. Annual Meeting ..................................................... 1
Section 3. Special Meetings ................................................... 1
Section 4. Notice of Meetings ................................................. 2
Section 5. Quorum ............................................................. 2
Section 6. Voting ............................................................. 2
ARTICLE II - DIRECTORS
Section 1. Powers ............................................................. 3
Section 2. Number and Term of Office .......................................... 3
Section 3. Vacancies and New Directorships..................................... 4
Section 4. Regular Meetings ................................................... 4
Section 5. Special Meetings ................................................... 4
Section 6. Quorum.............................................................. 4
Section 7. Written Action ..................................................... 4
Section 8. Participation in Meetings by Conference Telephone .................. 5
Section 9. Committees ......................................................... 5
Section 10. Compensation ....................................................... 6
Section 11. Rules .............................................................. 6
ARTICLE III - NOTICES
Section 1. Generally........................................................... 6
Section 2. Waivers............................................................. 6
ARTICLE IV - OFFICERS
Section 1. Generally .......................................................... 7
Section 2. Compensation ....................................................... 7
Section 3. Succession ......................................................... 7
Section 4. Authority and Duties ............................................... 7
Section 5. President .......................................................... 7
Section 6. Execution of Documents and Action with
Respect to Securities of Other Corporations ........................ 7
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
Section 7. Vice President ..................................................... 8
Section 8. Secretary and Assistant Secretaries ................................ 8
Section 9. Treasurer and Assistant Treasurers ................................. 9
ARTICLE V - STOCK
Section 1. Certificates ....................................................... 9
Section 2. Transfer ........................................................... 10
Section 3. Lost, Stolen or Destroyed Certificates ............................. 10
Section 4. Record Date ........................................................ 10
ARTICLE VI - GENERAL PROVISIONS
Section 1. Fiscal Year ........................................................ 12
Section 2. Corporate Seal ..................................................... 12
Section 3. Reliance upon Books, Reports and Records............................ 12
Section 4. Time Periods........................................................ 12
Section 5. Dividends........................................................... 12
ARTICLE VII - AMENDMENTS
Section 1. Amendments ......................................................... 13
</TABLE>
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<PAGE> 4
SIMCALA, INC.
BY-LAWS
ARTICLE I
MEETINGS OF STOCKHOLDERS
Section 1. Time and Place of Meetings. All meetings of the stockholders
for the election of directors or for any other purpose shall be held at such
time and place, within or without the State of Delaware, as may be designated by
the Board of Directors, or by the Chairman of the Board,, the President or the
Secretary in the absence of a designation by the Board of Directors, and stated
in the notice of the meeting or in a duly executed waiver of notice thereof.
Section 2. Annual Meeting. An annual meeting of the stockholders,
commencing with the year 1995, shall be held on the first Monday in April if not
a legal holiday, and if a legal holiday, then on the next business day
following, at 10:00 a.m., or at such other date and time as shall be designated
from time to time by the Board of Directors, at which meeting the stockholders
shall elect by a plurality vote the directors to succeed those whose terms
expire and shall transact such other business as may properly be brought before
the meeting.
Section 3. Special Meetings. Special meetings of the stockholders, for
any purpose or purposes, unless otherwise prescribed by law or by Certificate of
Incorporation, may be called by the Board of Directors, the Chairman of the
Board or the President, and shall be called by the President or the secretary at
the request in writing of stockholders owning a majority in interest of the
entire capital stock of the Corporation issued and outstanding and entitled to
vote. Such request shall be sent to the President and the secretary and shall
state the purpose or purposes of the proposed meeting.
<PAGE> 5
Section 4. Notice of Meeting. Written notice of every meeting of the
stockholders, 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 nor more than sixty days before the date of the
meeting to each stockholder entitled to vote at such meeting, except as
otherwise provided herein or by law. When a meeting is adjourned to another
place, date or time, written notice need not be given of the adjourned meeting
if the place, date and time thereof are announced at the meeting at which the
adjournment is taken; provided, however, that if the adjournment is for more
than thirty days, or if after the adjournment a new record date is fixed for the
adjourned meeting, written notice of the place, date and time of the adjourned
meeting shall be given in conformity herewith. At any adjourned meeting, any
business may be transacted which might have been transacted at the original
meeting.
Section 5. Quorum. The holders of a majority of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by law or by the
Certificate of Incorporation. If, however, such quorum shall not be present or
represented at any meeting of the stockholders, the stockholders entitled to
vote thereat, present in person or represented by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall be present or represented.
Section 6. Voting. Except as otherwise provided by law or by the
Certificate of Incorporation, each stockholder shall be entitled at every
meeting of the stockholders to one vote for each share of stock having voting
power standing in the name of such stockholder on the books of the Corporation
on the record date for the meeting and such votes may be cast either in person
or by written proxy. Every proxy must be duly executed and filed with the
Secretary of the Corporation. A stockholder may revoke any
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<PAGE> 6
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. The vote upon
any question brought before a meeting of the stockholders may be by voice vote,
unless the holders of a majority of the outstanding shares of all classes of
stock entitled to vote thereon present in person or by proxy at such meeting
shall so determine. Every vote taken by written ballot shall be counted by one
or more inspectors of election appointed by the Board of Directors. When a
quorum is present at any meeting, the vote of the holders of a majority of the
stock which has voting power present in person or represented by proxy and which
has actually voted shall decide any question properly brought before such
meeting, unless the question is one upon which by express provision of law, the
Certificate of Incorporation or these by-laws, a different vote is required, in
which case such express provision shall govern and control the decision of such
question.
ARTICLE II
DIRECTORS
Section 1. Powers. The business and affairs of the Corporation shall be
managed by or under the direction of its Board of Directors, which may exercise
all such powers of the Corporation and do all such lawful acts and things as are
not by law or by the Certificate of Incorporation directed or required to be
exercised or done by the stockholders.
Section 2. Number and Term of Office. The Board of Directors shall
consist of one or more members. The number of directors shall be fixed by
resolution of the Board of Directors or by the stockholders at the annual
meeting or a special meeting. The directors shall be elected at the annual
meeting of the stockholders, except as provided in Section 3 of this Article,
and each director elected shall hold office until his successor is elected and
qualified, except as required by law. Any decrease in the authorized number
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of directors shall not be effective until the expiration of the term of the
directors then in office, unless, at the time of such decrease, there shall be
vacancies on the Board which are being eliminated by such decrease.
Section 3. Vacancies and Key Directorships. Vacancies and newly created
directorships resulting from any increase in the authorized number of directors
which occur between annual meetings of the stockholders may be filled by a
majority of the directors then in office, though less than a quorum, or by a
sole remaining director, and the directors so elected shall hold office until
the next annual meeting of the stockholders and until their successors are
elected and qualified, except as required by law.
Section 4. Regular Meetings. Regular meetings of the Board of Directors
may be held without notice immediately after the annual meeting of the
stockholders and at such other time and place as shall from time to time be
determined by the Board of Directors.
Section 5. Special Meetings. Special meetings of the Board of Directors
may be called by the Chairman of the Board or the President on one day's written
notice to each director by whom such notice is not waived, given either
personally or by mail or telegram, and shall be called by the President or the
Secretary in like manner and on like notice on the written request of any two
directors.
Section 6. Quorum. At all meetings of the Board of Directors, a
majority of the total number of directors then in office shall constitute a
quorum for the transaction of business, and the act of a majority of the
directors present at any meeting at which there is a quorum shall be the act of
the Board of Directors. If a quorum shall not be present at any meeting of the
Board of Directors, the directors present thereat may adjourn the meeting from
time to time to another place, time or date, without notice other than
announcement at the meeting, until a quorum shall be present.
Section 7. Written Action. Any action required or permitted to be taken
at any meeting of the Board of Directors or of any committee thereof may be
taken without a
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meeting if all members of the Board or committee, as the case may be, consent
thereto in writing, and the writing or writings are filed with the minutes or
proceedings of the Board or Committee.
Section 8. Participation in Meetings by Conference Telephone. Members
of the Board of Directors, or any committee designated by the Board of
Directors, may participate in a meeting of the Board of Directors, 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 such participation in a meeting shall constitute presence in person at the
meeting.
Section 9. Committees. The Board of Directors may, by resolution passed
by a majority of the whole Board, designate one or more committees, each
committee to consist of one or more of the directors of the Corporation and each
to have such lawfully delegable powers and duties as the Board may confer. Each
such committee shall serve at the pleasure of the Board of 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.
Except as otherwise provided by law, any such committee, to the extent provided
in the resolution of the Board of Directors, shall have and may exercise all the
powers 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. Any committee or committees so
designated by the Board shall have such name or names as may be determined from
time to tine by resolution adopted by the Board of Directors. Unless otherwise
prescribed by the Board of Directors, a majority of the members of the committee
shall constitute a quorum for the transaction of business, and the act of a
majority of the members present at a meeting at which there is a quorum shall be
the act of such committee. Each committee shall prescribe its own rules for
calling and holding
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meetings and its method of procedure, subject to any rules prescribed by the
Board of Directors, and shall keep a written record of all actions taken by it.
Section 10. Compensation. The Board of Directors may establish such
compensation for, and reimbursement of the expenses of, directors for attendance
at meetings of the Board of Directors or committees, or for other services by
directors to the Corporation, as the Board of Directors may determine.
Section 11. Rules. The Board of Directors may adopt such special rules
and regulations for the conduct of their meetings and the management of the
affairs of the Corporation as they may deem proper, not inconsistent with law or
these by-laws.
ARTICLE III
NOTICES
Section 1. Generally. Whenever by law or under the provisions of the
Certificate of Incorporation or these by-laws, notice is required to be given to
any director or stockholder, it shall not be construed to mean personal notice,
but such notice may be given in writing, by mail, addressed to such director or
stockholder, at his address as it appears on the records of the Corporation,
with postage thereon prepaid, and such notice shall be deemed to be given at the
time when the same shall be deposited in the United States mail. Notice to
directors may also be given by telegram or telephone.
Section 2. Waivers. Whenever any notice is required to be given by law
or under the provisions of the Certificate of Incorporation or these by-laws, a
waiver thereof in writing, signed by the person or persons entitled to such
notice, whether before or after the time of the event for which notice is to be
given, shall be deemed equivalent to such notice. Attendance of a person at a
meeting shall constitute a waiver of notice of such meeting, except when the
person 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.
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ARTICLE IV
OFFICERS
Section 1. Generally. The officers of the Corporation shall be elected
by the Board of Directors and shall consist of a President, a Secretary and a
Treasurer. The Board of Directors may also choose any or all of the following: a
Chairman of the Board of Directors, one or more Vice Presidents, and one or more
Assistant Secretaries and Assistant Treasurers. Any number of offices may be
held by the same person.
Section 2. Compensation. The compensation of all officers and agents of
the Corporation who are also directors of the Corporation shall be fixed by the
Board of Directors. The Board of Directors may delegate the power to fix the
compensation of other officers and agents of the Corporation to an officer of
the Corporation.
Section 3. Succession. The officers of the Corporation shall hold
office until their successors are elected and qualified. Any officer elected or
appointed by the Board of Directors may be removed at any time by the
affirmative vote of a majority of the directors. Any vacancy occurring in any
office of the Corporation may be filled by the Board of Directors.
Section 4. Authority and Duties. Each of the officers of the
Corporation shall have such authority and shall perform such duties as are
customarily incident to their respective offices, or as may be specified from
time to time by the Board of Directors in a resolution which is not inconsistent
with these by-laws.
Section 5. President. The President shall be responsible for the active
management and direction of the business and affairs of the Corporation.
Section 6. Execution of Documents and Action with Respect to Securities
of Other Corporations. The President shall have and is hereby given, full power
and authority, except as otherwise required by law or directed by the Board of
Directors, (a) to execute, on behalf of the Corporation, all duly authorized
contracts, agreements,
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deeds, conveyances or other obligations of the Corporation, applications,
consents, proxies and other powers of attorney, and other documents and
instruments, and (b) to vote and otherwise act on behalf of the Corporation, in
person or by proxy, at any meeting of stockholders (or with respect to any
action of such stockholders) of any other corporation in which the Corporation
may hold securities and otherwise to exercise any and all rights and powers
which the Corporation may possess by reason of its ownership of securities of
such other corporation. In addition, the President may delegate to other
officers, employees and agents of the Corporation the power and authority to
take any action which the President is authorized to take under this Section 6,
with such limitations as the President may specify; such authority so delegated
by the President shall not be re-delegated by the person to whom such execution
authority has been delegated.
Section 7. Vice President. Each Vice President, however titled, shall
perform such duties and services and shall have such authority and
responsibilities as shall be assigned to or required from time to time by the
Board of Directors or the President.
Section 8. Secretary and Assistant Secretaries. (a) The Secretary shall
attend all meetings of the stockholders and all meetings of the Board of
Directors and record all proceedings of the meetings of the stockholders and of
the Board of Directors and shall perform like duties for the standing committees
when requested by the Board of Directors or the President. The Secretary shall
give, or cause to be given, notice of all meetings of the stockholders and
meetings of the Board of Directors. The Secretary shall perform such duties as
may be prescribed by the Board of Directors or the President. The Secretary
shall have charge of the seal of the Corporation and authority to affix the seal
to any instrument. The Secretary or any Assistant Secretary may attest to the
corporate seal by handwritten or facsimile signature. The Secretary shall keep
and account for all books, documents, papers and records of the Corporation
except those for which some other
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<PAGE> 12
officer or agent has been designated or is otherwise properly accountable. The
Secretary shall have authority to sign stock certificates.
(b) Assistant Secretaries, in the order of their seniority, shall
assist the Secretary and, if the Secretary is unavailable or fails to act,
perform the duties and exercise the authorities of the Secretary.
Section 9. Treasurer and Assistant Treasurers. (a) The Treasurer shall
have the custody of the funds and securities belonging to the Corporation and
shall deposit all moneys and other valuable effects in the name and to the
credit of the Corporation in such depositories as may be designated by the
Treasurer with the prior approval of the Board of Directors or the President.
The Treasurer shall disburse the funds and pledge the credit of the Corporation
as may be directed by the Board of Directors and shall render to the Board of
Directors and the President, as and when required by them, or any of them, an
account of all transactions by the Treasurer.
(b) Assistant Treasurers, in the order of their seniority, shall assist
the Treasurer and, if the Treasurer is unable or fails to act, perform the
duties and exercise the powers of the Treasurer.
ARTICLE V
STOCK
Section 1. Certificates. Certificates representing shares of stock of
the Corporation shall be in such form as shall be determined by the Board of
Directors, subject to applicable legal requirements. Such certificates shall be
numbered and their issuance recorded in the books of the Corporation, and such
certificate shall exhibit the holder's name and the number of shares and shall
be signed by, or in the name of the Corporation by the President and the
Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer
of the Corporation. Any or all of the signatures and the seal of the
Corporation, if any, upon such certificates may be facsimiles, engraved or
printed.
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Section 2. Transfer. Upon surrender to the Corporation or the transfer
agent of the Corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the Corporation to issue, or to cause its
transfer agent to issue, a new certificate to the person entitled thereto,
cancel the old certificate and record the transaction upon its books.
Section 3. Lost, Stolen or Destroyed Certificates. The Secretary may
direct a new certificate or certificates to be issued in place of any
certificate or certificates theretofore issued by the Corporation alleged to
have been lost, stolen or destroyed upon the making of an affidavit of that
fact, satisfactory to the Secretary, by the person claiming the certificate of
stock to be lost, stolen or destroyed. As a condition precedent to the issuance
of a new certificate or certificates the Secretary may require the owner of such
lost, stolen or destroyed certificate or certificates to give the Corporation a
bond in such sum and with such surety or sureties as the Secretary may direct as
indemnity against any claims that may be made against the Corporation with
respect to the certificate alleged to have been lost, stolen or destroyed or the
issuance of the new certificate.
Section 4. Record Date. (a) In order that the Corporation may determine
the stockholders entitled to notice of or to vote at any meeting of stockholders
or any adjournment thereof, the Board of Directors 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 shall
not be more than sixty nor less than ten days before the date of such meeting.
If no record is fixed by the Board of Directors, 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. 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
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meeting; provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting.
(b) In order that the Corporation may determine the stockholders
entitled to consent to corporate action in writing without a meeting, the Board
of Directors 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 date shall not be more than ten days after the date upon
which the resolution fixing the record date is adopted by the Board of
Directors. If no record date has been fixed by the Board of Directors, the
record date for determining stockholders entitled to consent to corporate action
in writing without a meeting, when no prior action by the Board of Directors is
required, 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
by delivery to its registered office in Delaware, its principal place of
business, or an officer or agent of the Corporation having custody of the book
in which proceedings of meetings of stockholders are recorded. Delivery made to
a Corporation's registered office shall be by hand or by certified or registered
mail, return receipt requested. If no record date has been fixed by the Board of
Directors and prior action by the Board of Directors is required by law, the
record date for determining stockholders entitled to consent to corporate action
in writing without a meeting shall be at the close of business on the day on
which the Board of Directors adopts the resolution taking such prior action.
(c) In order that the Corporation may determine the stockholders
entitled to receive payment of any dividend or other distribution or allotment
of any rights or the stockholders entitled to exercise any rights in respect of
any change, conversion or exchange of stock, or for the purpose of any other
lawful action, the Board of Directors may fix a record date, which record date
shall not precede the date upon which the resolution fixing the record date is
adopted, and which record date shall be not more than
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<PAGE> 15
sixty days prior to such action. If no record date is fixed, the record date for
determining stockholders for any such purpose shall be at the close of business
on the day on which the Board of Directors adopts the resolution relating
thereto.
ARTICLE VI
GENERAL PROVISIONS
Section 1. Fiscal Year. The fiscal year of the Corporation shall be
fixed from time to time by the Board of Directors.
Section 2. Corporate Seal. The Board of Directors may adopt a corporate
seal and use the same by causing it or a facsimile thereof to be impressed or
affixed or reproduced or otherwise.
Section 3. Reliance upon Books, Reports and Records. Each director,
each member of a committee designated by the Board of Directors, and each
officer of the Corporation shall, in the performance of his or her duties, be
fully protected in relying in good faith upon the records of the Corporation and
upon such information, opinions, reports or statements presented to the
Corporation by any of the Corporation's officers or employees, or committees of
the Board of Directors, or by any other person as to matters the director,
committee member or officer believes are within such other person's professional
or expert competence and who has been selected with reasonable care by or on
behalf of the Corporation.
Section 4. Time Periods. In applying any provision of these by-laws
which requires that an act be done or not be done a specified number of days
prior to an event or that an act be done during a period of a specified number
of days prior to an event, calendar days shall be used, the day of the doing of
the act shall be excluded and the day of the event shall be included.
Section 5. Dividends. The Board of Directors may from time to time
declare and the corporation may pay dividends upon its outstanding shares of
capital stock, in the
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manner and upon the terms and conditions provided by law and the Certificate of
Incorporation.
ARTICLE VII
AMENDMENTS
Section 1. Amendments. These by-laws may be altered, amended or
repealed, or new by-laws may be adopted, by the stockholders or by the Board of
Directors.
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EXHIBIT 4.1
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SAC ACQUISITION CORP.
AS ACQUIROR OF
SIMCALA, INC.
----------------------------------------------
SERIES A AND SERIES B
9 5/8% SENIOR NOTES DUE 2006
------------------------------
INDENTURE
------------------------------
Dated as of March 31, 1998
------------------------------
IBJ Schroder Bank & Trust Company
Trustee
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<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
ARTICLE 1. DEFINITIONS AND INCORPORATION BY REFERENCE.............................................................1
SECTION 1.01. DEFINITIONS......................................................................................1
SECTION 1.02. OTHER DEFINITIONS...............................................................................14
SECTION 1.03..................................................................................................14
SECTION 1.04. RULES OF CONSTRUCTION...........................................................................15
ARTICLE 2. THE NOTES.............................................................................................15
SECTION 2.01. FORM AND DATING.................................................................................15
SECTION 2.02. EXECUTION AND AUTHENTICATION....................................................................17
SECTION 2.03. REGISTRAR AND PAYING AGENT......................................................................17
SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST.............................................................18
SECTION 2.05. HOLDER LISTS....................................................................................18
SECTION 2.06. TRANSFER AND EXCHANGE...........................................................................18
SECTION 2.07. REPLACEMENT NOTES...............................................................................30
SECTION 2.08. OUTSTANDING NOTES...............................................................................31
SECTION 2.09. TREASURY NOTES..................................................................................31
SECTION 2.10. TEMPORARY NOTES.................................................................................31
SECTION 2.11. CANCELLATION....................................................................................31
SECTION 2.12. DEFAULTED INTEREST..............................................................................32
ARTICLE 3. REDEMPTION AND PREPAYMENT.............................................................................32
SECTION 3.01. NOTICES TO TRUSTEE..............................................................................32
SECTION 3.02. SELECTION OF NOTES TO BE REDEEMED...............................................................32
SECTION 3.03. NOTICE OF REDEMPTION............................................................................33
SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION..................................................................33
</TABLE>
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<TABLE>
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SECTION 3.05. DEPOSIT OF REDEMPTION PRICE.....................................................................33
SECTION 3.06. NOTES REDEEMED IN PART..........................................................................34
SECTION 3.07. OPTIONAL REDEMPTION.............................................................................34
SECTION 3.08. MANDATORY REDEMPTION............................................................................35
SECTION 3.09. OFFER TO PURCHASE BY APPLICATION OF EXCESS PROCEEDS.............................................35
ARTICLE 4. COVENANTS.............................................................................................36
SECTION 4.01. PAYMENT OF NOTES................................................................................36
SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY.................................................................37
SECTION 4.03. REPORTS.........................................................................................37
SECTION 4.04. COMPLIANCE CERTIFICATE..........................................................................38
SECTION 4.05. TAXES...........................................................................................38
SECTION 4.06. STAY, EXTENSION AND USURY LAWS..................................................................38
SECTION 4.07. RESTRICTED PAYMENTS.............................................................................39
SECTION 4.08. DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES..................................41
SECTION 4.09. INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK......................................42
SECTION 4.10. ASSET SALES.....................................................................................44
SECTION 4.11. TRANSACTIONS WITH AFFILIATES....................................................................45
SECTION 4.12. LIENS...........................................................................................45
SECTION 4.13. CORPORATE EXISTENCE.............................................................................45
SECTION 4.14. OFFER TO REPURCHASE UPON CHANGE OF CONTROL......................................................46
SECTION 4.15. LIMITATION ON ISSUANCES AND SALES OF CAPITAL STOCK OF WHOLLY OWNED SUBSIDIARIES.................47
SECTION 4.16. LIMITATION ON ISSUANCES OF GUARANTEES OF INDEBTEDNESS...........................................47
SECTION 4.17. PAYMENTS FOR CONSENT............................................................................47
ARTICLE 5. SUCCESSORS............................................................................................47
SECTION 5.01. MERGER, CONSOLIDATION, OR SALE OF ASSETS........................................................47
SECTION 5.02. SUCCESSOR CORPORATION SUBSTITUTED...............................................................48
</TABLE>
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<TABLE>
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ARTICLE 6. DEFAULTS AND REMEDIES.................................................................................48
SECTION 6.01. EVENTS OF DEFAULT...............................................................................48
SECTION 6.02. ACCELERATION....................................................................................50
SECTION 6.03. OTHER REMEDIES..................................................................................51
SECTION 6.04. WAIVER OF PAST DEFAULTS.........................................................................51
SECTION 6.05. CONTROL BY MAJORITY.............................................................................51
SECTION 6.06. LIMITATION ON SUITS.............................................................................51
SECTION 6.07. RIGHTS OF HOLDERS OF NOTES TO RECEIVE PAYMENT...................................................52
SECTION 6.08. COLLECTION SUIT BY TRUSTEE......................................................................52
SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM................................................................52
SECTION 6.10. PRIORITIES......................................................................................53
SECTION 6.11. UNDERTAKING FOR COSTS...........................................................................53
ARTICLE 7. TRUSTEE...............................................................................................53
SECTION 7.01. DUTIES OF TRUSTEE...............................................................................53
SECTION 7.02. RIGHTS OF TRUSTEE...............................................................................54
SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE....................................................................55
SECTION 7.04. TRUSTEE'S DISCLAIMER............................................................................55
SECTION 7.05. NOTICE OF DEFAULTS..............................................................................55
SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS OF THE NOTES......................................................55
SECTION 7.07. COMPENSATION AND INDEMNITY......................................................................56
SECTION 7.08. REPLACEMENT OF TRUSTEE..........................................................................56
SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC................................................................57
SECTION 7.10. ELIGIBILITY; DISQUALIFICATION...................................................................58
SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY...............................................58
ARTICLE 8. LEGAL DEFEASANCE AND COVENANT DEFEASANCE..............................................................58
SECTION 8.01. OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT DEFEASANCE........................................58
</TABLE>
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<TABLE>
<S> <C>
SECTION 8.02. LEGAL DEFEASANCE AND DISCHARGE..................................................................58
SECTION 8.03. COVENANT DEFEASANCE.............................................................................59
SECTION 8.04. CONDITIONS TO LEGAL OR COVENANT DEFEASANCE......................................................59
SECTION 8.05. DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE HELD IN TRUST; OTHER MISCELLANEOUS PROVISIONS...60
SECTION 8.06. REPAYMENT TO COMPANY............................................................................61
SECTION 8.07. REINSTATEMENT...................................................................................61
ARTICLE 9. AMENDMENT, SUPPLEMENT AND WAIVER......................................................................61
SECTION 9.01. WITHOUT CONSENT OF HOLDERS OF NOTES.............................................................61
SECTION 9.02. WITH CONSENT OF HOLDERS OF NOTES................................................................62
SECTION 9.03. COMPLIANCE WITH TRUST INDENTURE ACT.............................................................63
SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS...............................................................63
SECTION 9.05. NOTATION ON OR EXCHANGE OF NOTES................................................................64
SECTION 9.06. TRUSTEE TO SIGN AMENDMENTS, ETC.................................................................64
ARTICLE 10. MISCELLANEOUS........................................................................................64
SECTION 10.01. TRUST INDENTURE ACT CONTROLS...................................................................64
SECTION 10.02. NOTICES........................................................................................64
SECTION 10.03. COMMUNICATION BY HOLDERS OF NOTES WITH OTHER HOLDERS OF NOTES..................................66
SECTION 10.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.............................................66
SECTION 10.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION..................................................66
SECTION 10.06. RULES BY TRUSTEE AND AGENTS....................................................................66
SECTION 10.07. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS.......................67
SECTION 10.08. GOVERNING LAW..................................................................................67
SECTION 10.09. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS..................................................67
SECTION 10.10. SUCCESSORS.....................................................................................67
SECTION 10.11. SEVERABILITY...................................................................................67
SECTION 10.12. COUNTERPART ORIGINALS..........................................................................67
</TABLE>
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<TABLE>
<S> <C>
SECTION 10.13. TABLE OF CONTENTS, HEADINGS, ETC...............................................................67
SECTION 10.14. ERISA RELATED RESTRICTIONS.....................................................................68
</TABLE>
EXHIBITS
EXHIBIT A-1 FORM OF GLOBAL NOTE
EXHIBIT A-2 FORM OF REGULATION S TEMPORARY GLOBAL NOTE
EXHIBIT B FORM OF CERTIFICATE OF TRANSFER
EXHIBIT C FORM OF CERTIFICATE OF EXCHANGE
EXHIBIT D FORM OF CERTIFICATE OF ACQUIRING INSTITUTIONAL ACCREDITED
INVESTOR
EXHIBIT E FORM OF SUPPLEMENTAL INDENTURE
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INDENTURE, dated as of March 31, 1998 between SAC Acquisition
Corp., a Georgia corporation (the "Company"), and IBJ Schroder Bank & Trust
Company, a New York Banking Corporation, as trustee (the "Trustee").
The Company and the Trustee agree as follows for the benefit
of each other and for the equal and ratable benefit of the Holders of the 9 5/8%
Series A Senior Notes due 2006 (the "Series A Notes") and the Series B Notes (as
defined):
ARTICLE 1.
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. DEFINITIONS.
"144A Global Note" means a global note in the form of Exhibit
A-1 hereto bearing the Global Note Legend and the Private Placement Legend and
deposited with or on behalf of, and registered in the name of, the Depositary or
its nominee that will be issued in a denomination equal to the outstanding
principal amount of the Notes sold in reliance on Rule 144A.
"Acquired Debt" means, with respect to any specified Person,
(i) Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, including,
without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person and (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person.
"Affiliate" of any specified Person means any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person. For purposes of this definition,
"control" (including, with correlative meanings, the terms "controlling,"
"controlled by" and "under common control with"), as used with respect to any
Person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of such Person,
whether through the ownership of voting securities, by agreement or otherwise;
provided,, that beneficial ownership of 10% or more of the Voting Stock of a
Person shall be deemed to be control.
"Agent" means any Registrar, Paying Agent or co-registrar.
"Applicable Procedures" means, with respect to any transfer or
exchange of or for beneficial interests in any Global Note, the rules and
procedures of the Depositary, Euroclear and Cedel that apply to such transfer or
exchange.
"Asset Sale" means (i) the sale, lease, conveyance or other
disposition of any assets or rights (including, without limitation, by way of a
sale and leaseback) other than sales of inventory or obsolete or excess
equipment or equipment that is not longer useable, in each case, in the ordinary
course of business (provided that the sale, lease, conveyance or other
disposition of all or substantially all of the assets of the Company and its
Subsidiaries taken as a whole will be governed by Section 4.14 and/or Section
5.01 hereof and not by Section 4.10 hereof), and (ii) the issue or sale by the
Company or any of its Subsidiaries of Equity Interests of any of the Company's
Subsidiaries, in the case of either clause (i) or (ii), whether in a single
transaction or a series of related transactions (a) that have a fair market
value in excess of $1.0 million or (b) for net proceeds in excess of $1.0
million. Notwithstanding the foregoing, the following items shall not be deemed
to be Asset Sales: (i) a transfer of assets by the Company to a Wholly Owned
Subsidiary or by a Wholly Owned Subsidiary to the Company or to another Wholly
Owned
<PAGE> 8
Subsidiary, (ii) an issuance of Equity Interests by a Wholly Owned Subsidiary to
the Company or to another Wholly Owned Subsidiary, and (iii) a Restricted
Payment that is permitted by Section 4.07 hereof.
"Bankruptcy Law" means Title 11, U.S. Code or any similar
federal or state law for the relief of debtors.
"Board of Directors" means the Board of Directors of the
Company, or any authorized committee of the Board of Directors.
"Business Day" means any day other than a Legal Holiday.
"Capital Lease Obligation" means, at the time any
determination thereof is to be made, the amount of the liability in respect of a
capital lease that would at such time be required to be capitalized on a balance
sheet in accordance with GAAP.
"Capital Stock" means (i) in the case of a corporation,
corporate stock, (ii) in the case of an association or business entity, any and
all shares, interests, participations, rights or other equivalents (however
designated) of corporate stock, (iii) in the case of a partnership or limited
liability company, partnership or membership interests (whether general or
limited) and (iv) any other interest or participation that confers on a Person
the right to receive a share of the profits and losses of, or distributions of
assets of, the issuing Person.
"Cash Equivalents" means (i) United States dollars, (ii)
securities issued or directly and fully guaranteed or insured by the United
States government or any agency or instrumentality thereof (provided that the
full faith and credit of the United States is pledged in support thereof) having
maturities of not more than six months from the date of acquisition, (iii)
certificates of deposit and eurodollar time deposits with maturities of six
months or less from the date of acquisition, bankers' acceptances with
maturities not exceeding six months and overnight bank deposits, in each case
with any lender party to the New Credit Facility or with any domestic commercial
bank having capital and surplus in excess of $500,000,000 and a Thompson Bank
Watch Rating of "B" or better, (iv) repurchase obligations with a term of not
more than seven days for underlying securities of the types described in clauses
(ii) and (iii) above entered into with any financial institution meeting the
qualifications specified in clause (iii) above, (v) commercial paper having the
highest rating obtainable from Moody's Investors Service, Inc. or Standard &
Poor's Corporation and in each case maturing within six months after the date of
acquisition and (vi) money market funds at least 95% of the assets of which
constitute Cash Equivalents of the kinds described in clauses (i)-(v) of this
definition.
"Cedel" means Cedel Bank, Societe Anonyme.
"Change of Control" means the occurrence of any of the
following: (i) the sale, lease, transfer, conveyance or other disposition (other
than by way of merger or consolidation), in one or a series of related
transactions, of all or substantially all of the assets of the Company and its
Subsidiaries taken as a whole to any "person" (as such term is used in Section
13(d)(3) of the Exchange Act); (ii) the adoption of a plan relating to the
liquidation or dissolution of the Company; (iii) the consummation of any
transaction (including, without limitation, any merger or consolidation) the
result of which is that any "person" (as defined above) becomes the "beneficial
owner" (as such term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange
Act, except that a person shall be deemed to have "beneficial ownership" of all
securities that such person has the right to acquire, whether such right is
currently exercisable or is exercisable only upon the occurrence of a subsequent
condition), directly or indirectly, of more than 50% of
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<PAGE> 9
the Voting Stock of the Company (measured by voting power rather than number of
shares); (iv) the first day on which a majority of the members of the Board of
Directors of the Company are not Continuing Directors or; (v) the Company
consolidates with, or merges with or into, any Person, or any Person
consolidates with, or merges with or into, the Company, in any such event
pursuant to a transaction in which any of the outstanding Voting Stock of the
Company is converted into or exchanged for cash, securities or other property,
other than any such transaction where the Voting Stock of the Company
outstanding immediately prior to such transaction is converted into or exchanged
for Voting Stock (other than Disqualified Stock) of the surviving or transferee
Person constituting a majority of the outstanding shares of such Voting Stock of
such surviving or transferee Person (immediately after giving effect to such
issuance).
"Company" means SAC Acquisition Corp., a Georgia corporation,
and any and all successors thereto.
"Consolidated Cash Flow" means, with respect to any Person for
any period, the Consolidated Net Income of such Person for such period plus (i)
an amount equal to any extraordinary loss plus any net loss realized in
connection with an Asset Sale (to the extent such losses were deducted in
computing such Consolidated Net Income), plus (ii) provision for taxes based on
income or profits of such Person and its Subsidiaries for such period, to the
extent that such provision for taxes was included in computing such Consolidated
Net Income, plus (iii) consolidated interest expense of such Person and its
Subsidiaries for such period, whether paid or accrued and whether or not
capitalized (including, without limitation, amortization of debt issuance costs
and original issue discount, non-cash interest payments, the interest component
of any deferred payment obligations, the interest component of all payments
associated with Capital Lease Obligations, commissions, discounts and other fees
and charges incurred in respect of letter of credit or bankers' acceptance
financings, and net payments (if any) pursuant to Hedging Obligations), to the
extent that any such expense was deducted in computing such Consolidated Net
Income, plus (iv) depreciation, amortization (including amortization of
transaction fees, goodwill and other intangibles but excluding amortization of
prepaid cash expenses that were paid in a prior period) and other non-cash
expenses (excluding any such non-cash expense to the extent that it represents
an accrual of or reserve for cash expenses in any future period or amortization
of a prepaid cash expense that was paid in a prior period) of such Person and
its Subsidiaries for such period to the extent that such depreciation,
amortization and other non-cash expenses were deducted in computing such
Consolidated Net Income, minus (v) non-cash items increasing such Consolidated
Net Income for such period, in each case, on a consolidated basis and determined
in accordance with GAAP. Notwithstanding the foregoing, the provision for taxes
on the income or profits of, and the depreciation and amortization and other
non-cash expenses of, a Subsidiary of the referent Person shall be added to
Consolidated Net Income to compute Consolidated Cash Flow only to the extent
that a corresponding amount would be permitted at the date of determination to
be dividended to the Company by such Subsidiary without prior governmental
approval (that has not been obtained), and without direct or indirect
restriction pursuant to the terms of its charter and all agreements,
instruments, judgments, decrees, orders, statutes, rules and governmental
regulations applicable to that Subsidiary or its stockholders.
"Consolidated Net Income" means, with respect to any Person
for any period, the aggregate of the Net Income of such Person and its
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP; provided that (i) the Net Income (but not loss) of any Person that is
not a Subsidiary or that is accounted for by the equity method of accounting
shall be included only to the extent of the amount of dividends or distributions
paid in cash to the referent Person or a Wholly Owned Subsidiary thereof that is
a guarantor, (ii) the Net Income of any Subsidiary shall be excluded to the
extent that the declaration or payment of dividends or similar distributions by
that Subsidiary of that Net Income
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<PAGE> 10
is not at the date of determination permitted without any prior governmental
approval (that has not been obtained) or, directly or indirectly, by operation
of the terms of its charter or any agreement, instrument, judgment, decree,
order, statute, rule or governmental regulation applicable to that Subsidiary or
its stockholders, (iii) the Net Income of any Person acquired in a pooling of
interests transaction for any period prior to the date of such acquisition shall
be excluded and (iv) the cumulative effect of a change in accounting principles
shall be excluded.
"Consolidated Net Worth" means, with respect to any Person as
of any date, the sum of (i) the consolidated equity of the common stockholders
of such Person and its consolidated Subsidiaries as of such date plus (ii) the
respective amounts reported on such Person's balance sheet as of such date with
respect to any series of preferred stock (other than Disqualified Stock) that by
its terms is not entitled to the payment of dividends unless such dividends may
be declared and paid only out of net earnings in respect of the year of such
declaration and payment, but only to the extent of any cash received by such
Person upon issuance of such preferred stock, less (x) all write-ups (other than
write-ups resulting from foreign currency translations and write-ups of tangible
assets of a going concern business made within 12 months after the acquisition
of such business) subsequent to the date of this Indenture in the book value of
any asset owned by such Person or a consolidated Subsidiary of such Person, (y)
all investments as of such date in unconsolidated Subsidiaries and in Persons
that are not Subsidiaries (except, in each case, Permitted Investments), and (z)
all unamortized debt discount and expense and unamortized deferred charges as of
such date, all of the foregoing determined in accordance with GAAP.
"Continuing Directors" means, as of any date of determination,
any member of the Board of Directors of the Company who (i) was a member of such
Board of Directors on the date of this Indenture or (ii) was nominated for
election or elected to such Board of Directors with the approval of a majority
of the Continuing Directors who were members of such Board at the time of such
nomination or election.
"Corporate Trust Office of the Trustee" shall be at the
address of the Trustee specified in Section 10.02 hereof or such other address
as to which the Trustee may give notice to the Company.
"Credit Facilities" means, with respect to the Company, one or
more debt facilities (including, without limitation, the New Credit Facility) or
commercial paper facilities with banks or other institutional lenders providing
for revolving credit loans, term loans, receivables financing (including through
the sale of receivables to such lenders or to special purpose entities formed to
borrow from such lenders against such receivables) or letters of credit, in each
case, as amended, restated, modified, renewed, refunded, replaced or refinanced
in whole or in part from time to time. Indebtedness under Credit Facilities
outstanding on the date on which Notes are first issued and authenticated under
this Indenture shall be deemed to have been incurred on such date in reliance on
the exception provided by clause (i) or (ii) of the definition of Permitted
Debt.
"Custodian" means the Trustee, as custodian with respect to
the Notes in global form, or any successor entity thereto.
"Default" means any event that is or with the passage of time
or the giving of notice or both would be an Event of Default.
"Definitive Note" means a certificated Note registered in the
name of the Holder thereof and issued in accordance with Section 2.06 hereof, in
the form of Exhibit A-1 hereto except that such Note shall not bear the Global
Note Legend and shall not have the "Schedule of Exchanges of Interests in the
Global Note" attached thereto.
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<PAGE> 11
"Depositary" means, with respect to the Notes issuable or
issued in whole or in part in global form, the Person specified in Section 2.03
hereof as the Depositary with respect to the Notes, and any and all successors
thereto appointed as depositary hereunder and having become such pursuant to the
applicable provision of this Indenture.
"Disqualified Stock" means any Capital Stock that, by its
terms (or by the terms of any security into which it is convertible, or for
which it is exchangeable, at the option of the holder thereof), or upon the
happening of any event, matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or redeemable at the option of the holder
thereof, in whole or in part, on or prior to the date that is 91 days after the
date on which the Notes mature; provided, however, that any Capital Stock that
would constitute Disqualified Stock solely because the holders thereof have the
right to require the Company to repurchase such Capital Stock upon the
occurrence of a Change of Control or an Asset Sale shall not constitute
Disqualified Stock if the terms of such Capital Stock provide that the Company
may not repurchase or redeem any such Capital Stock pursuant to such provisions
unless such repurchase or redemption complies with Section 4.07 hereof.
"Domestic Subsidiary" means any Subsidiary of the Company that
either (a) is organized within any state of the United States of America, or (b)
has guaranteed any Indebtedness of the Company or any other Domestic Subsidiary.
"Equity Interests" means Capital Stock and all warrants,
options or other rights to acquire Capital Stock (but excluding any debt
security that is convertible into, or exchangeable for, Capital Stock).
"Euroclear" means Morgan Guaranty Trust Company of New York,
Brussels office, as operator of the Euroclear system.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exchange Offer" has the meaning set forth in the Registration
Rights Agreement.
"Exchange Offer Registration Statement" has the meaning set
forth in the Registration Rights Agreement.
"Existing Indebtedness" means up to $6.1 million in aggregate
principal amount of Indebtedness of the Company and its Subsidiaries (other than
Indebtedness under the New Credit Facility) in existence on the date hereof,
until such amounts are repaid.
"Fixed Charges" means, with respect to any Person for any
period, the sum, without duplication, of (i) the consolidated interest expense
of such Person and its Subsidiaries for such period, whether paid or accrued
(including, without limitation, amortization of debt issuance costs and original
issue discount, non-cash interest payments, the interest component of any
deferred payment obligations, the interest component of all payments associated
with Capital Lease Obligations, commissions, discounts and other fees and
charges incurred in respect of letter of credit or bankers' acceptance
financings, and net payments (if any) pursuant to Hedging Obligations) and (ii)
the consolidated interest of such Person and its Subsidiaries that was
capitalized during such period, and (iii) any interest expense on Indebtedness
of another Person that is Guaranteed by such Person or one of its Subsidiaries
or secured by a Lien on assets of such Person or one of its Subsidiaries
(whether or not such Guarantee or Lien is called upon) and (iv) the product of
(a) all dividend payments, whether or not in cash, on any series of preferred
stock of such Person or any of its Subsidiaries, other than dividend payments on
Equity Interests payable solely in
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<PAGE> 12
Equity Interests of the Company (other than Disqualified Stock) or to the
Company or a Subsidiary of the Company, times (b) a fraction, the numerator of
which is one and the denominator of which is one minus the then current combined
federal, state and local statutory tax rate of such Person, expressed as a
decimal, in each case, on a consolidated basis and in accordance with GAAP.
"Fixed Charge Coverage Ratio" means with respect to any Person
for any period, the ratio of the Consolidated Cash Flow of such Person for such
period to the Fixed Charges of such Person for such period. In the event that
the referrent Person or any of its Subsidiaries incurs, assumes, Guarantees or
redeems any Indebtedness (other than revolving credit borrowings) or issues or
redeems preferred stock subsequent to the commencement of the period for which
the Fixed Charge Coverage Ratio is being calculated but prior to the date on
which the event for which the calculation of the Fixed Charge Coverage Ratio is
made (the "Calculation Date"), then the Fixed Charge Coverage Ratio shall be
calculated giving pro forma effect to such incurrence, assumption, Guarantee or
redemption of Indebtedness, or such issuance or redemption of preferred stock,
as if the same had occurred at the beginning of the applicable four-quarter
reference period. In addition, for purposes of making the computation referred
to above, (i) acquisitions that have been made by the Company or any of its
Subsidiaries, including through mergers or consolidations and including any
related financing transactions, during the four-quarter reference period or
subsequent to such reference period and on or prior to the Calculation Date
shall be deemed to have occurred on the first day of the four-quarter reference
period and Consolidated Cash Flow for such reference period shall be calculated
without giving effect to clause (iii) of the proviso set forth in the definition
of Consolidated Net Income, and (iii) the Consolidated Cash Flow attributable to
discontinued operations, as determined in accordance with GAAP, and operations
or businesses disposed of prior to the Calculation Date, shall be excluded, and
(iv) the Fixed Charges attributable to discontinued operations, as determined in
accordance with GAAP, and operations or businesses disposed of prior to the
Calculation Date, shall be excluded, but only to the extent that the obligations
giving rise to such Fixed Charges will not be obligations of the referent Person
or any of its Subsidiaries following the Calculation Date.
"GAAP" means generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as have been approved by a significant segment
of the accounting profession, which are in effect on the date of this Indenture.
"Global Notes" means, individually and collectively, each of
the Restricted Global Notes and the Unrestricted Global Notes, in the form of
Exhibit A-1 hereto issued in accordance with Section 2.01, 2.06(b)(iv),
2.06(d)(ii) or 2.06(f) hereof.
"Global Note Legend" means the legend set forth in Section
2.06(g)(ii), which is required to be placed on all Global Notes issued under
this Indenture.
"Government Securities" means direct obligations of, or
obligations guaranteed by, the United States of America, and the payment for
which the United States pledges its full faith and credit.
"Guarantee" means a guarantee (other than by endorsement of
negotiable instruments for collection in the ordinary course of business),
direct or indirect, in any manner (including, without limitation, by way of a
pledge of assets or through letters of credit or reimbursement agreements in
respect thereof), of all or any part of any Indebtedness.
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<PAGE> 13
"Guarantor" means any Subsidiary that executes a Subsidiary
Guarantee in accordance with the provisions of this Indenture, and its
respective successors and assigns.
"Hedging Obligations" means, with respect to any Person, the
obligations of such Person under (i) interest rate swap agreements, interest
rate cap agreements and interest rate collar agreements and (ii) other
agreements or arrangements designed to protect such Person against fluctuations
in interest rates.
"Holder" means a Person in whose name a Note is registered.
"Holdings" means SIMCALA Holdings, Inc., a Georgia
corporation.
"IAI Global Note" means the global Note in the form of Exhibit
A-1 hereto bearing the Global Note Legend and the Private Placement Legend and
deposited with or on behalf of and registered in the name of the Depositary or
its nominee that will be issued in a denomination equal to the outstanding
principal amount of the Notes sold to Institutional Accredited Investors.
"Indebtedness" means, with respect to any Person, any
indebtedness of such Person, whether or not contingent, in respect of borrowed
money or evidenced by bonds, notes, debentures or similar instruments or letters
of credit (or reimbursement agreements in respect thereof) or banker's
acceptances or representing Capital Lease Obligations or the balance deferred
and unpaid of the purchase price of any property or representing any Hedging
Obligations, except any such balance that constitutes an accrued expense or
trade payable, if and to the extent any of the foregoing (other than letters of
credit and Hedging Obligations) would appear as a liability upon a balance sheet
of such Person prepared in accordance with GAAP, as well as all Indebtedness of
others secured by a Lien on any asset of such Person (whether or not such
Indebtedness is assumed by such Person) and, to the extent not otherwise
included, the Guarantee by such Person of any indebtedness of any other Person.
The amount of any Indebtedness outstanding as of any date shall be (i) the
accreted value thereof, in the case of any Indebtedness issued with original
issue discount, and (ii) the principal amount thereof, together with any
interest thereon that is more than 30 days past due, in the case of any other
Indebtedness.
"Indenture" means this Indenture, as amended or supplemented
from time to time.
"Indirect Participant" means a Person who holds a beneficial
interest in a Global Note through a Participant.
"Institutional Accredited Investor" means an institution that
is an "accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under
the Securities Act, who are not also QIBs.
"Investment Banking Fee" means $1.35 million to be paid by the
Company to CGW Southeast Management III, L.L.C. or its designees on the Closing
Date.
"Investments" means, with respect to any Person, all
investments by such Person in other Persons (including Affiliates) in the forms
of direct or indirect loans (including guarantees of Indebtedness or other
obligations), advances or capital contributions (excluding commission, travel
and similar advances to officers and employees made in the ordinary course of
business), purchases or other acquisitions for consideration of Indebtedness,
Equity Interests or other securities, together with all items that are or would
be classified as investments on a balance sheet prepared in accordance with
GAAP. If the Company or any Subsidiary of the Company sells or otherwise
disposes of any Equity Interests of any direct or indirect Subsidiary of the
Company such that, after giving effect to any such sale or disposition, such
Person is no longer a Subsidiary of the Company, the Company shall be deemed to
have made an Investment on the date
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<PAGE> 14
of any such sale or disposition equal to the fair market value of the Equity
Interests of such Subsidiary not sold or disposed of in an amount determined as
provided in the final paragraph of Section 4.07 hereof.
"Legal Holiday" means a Saturday, a Sunday or a day on which
banking institutions in the City of New York or at a place of payment are
authorized by law, regulation or executive order to remain closed. If a payment
date is a Legal Holiday at a place of payment, payment may be made at that place
on the next succeeding day that is not a Legal Holiday, and no interest shall
accrue on such payment for the intervening period.
"Letter of Transmittal" means the letter of transmittal to be
prepared by the Company and sent to all Holders of the Notes for use by such
Holders in connection with the Exchange Offer.
"Lien" means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of such
asset, whether or not filed, recorded or otherwise perfected under applicable
law (including any conditional sale or other title retention agreement, any
lease in the nature thereof, any option or other agreement to sell or give a
security interest in and any filing of or agreement to give any financing
statement under the Uniform Commercial Code (or equivalent statutes) of any
jurisdiction).
"Liquidated Damages" means all liquidated damages then owing
pursuant to Section 5 of the Registration Rights Agreement.
"Management Fee" means management and consulting service fees
in an amount not to exceed $680,000 annually payable by the Company to CGW
Southeast III, L.L.C. or its designees.
"Net Income" means, with respect to any Person, the net income
(loss) of such Person, determined in accordance with GAAP and before any
reduction in respect of preferred stock dividends, excluding, however, (i) any
gain (but not loss), together with any related provision for taxes on such gain
(but not loss), realized in connection with (a) any Asset Sale (including,
without limitation, dispositions pursuant to sale and leaseback transactions),
or (b) the disposition of any securities by such Person or any of its
Subsidiaries or the extinguishment of any Indebtedness of such Person or any of
its Subsidiaries, and (ii) any extraordinary gain (but not loss), together with
any related provision for taxes on such extraordinary gain (but not loss).
"Net Proceeds" means the aggregate cash proceeds received by
the Company or any of its Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash received upon the sale or other disposition of any
non-cash consideration received in any Asset Sale), net of the direct costs
relating to such Asset Sale (including, without limitation, legal, accounting
and investment banking fees, and sales commissions) and any relocation expenses
incurred as a result thereof, taxes paid or payable as a result thereof (after
taking into account any available tax credits or deductions and any tax sharing
arrangements), amounts required to be applied to the repayment of Indebtedness
secured by a Lien on the asset or assets that were the subject of such Asset
Sale and any reserve for adjustment in respect of the sale price of such asset
or assets established in accordance with GAAP.
"New Credit Facility" means that certain Credit Agreement, by
and among the Company, the lenders named therein and NationsBank, N.A., as
Agent, providing for up to $15.0 million of revolving credit borrowings and
letter of credit issuances, including any related notes, guarantees, collateral
documents, instruments and agreements executed in connection therewith, and in
each case as amended, modified, renewed, refunded, replaced or refinanced, in
whole or in part, from time to time.
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<PAGE> 15
"Non-Recourse Debt" means Indebtedness (i) as to which neither
the Company nor any of its Subsidiaries (a) provides credit support of any kind
(including any undertaking, agreement or instrument that would constitute
Indebtedness), (b) is directly or indirectly liable (as a guarantor or
otherwise), or (c) constitutes the lender; and (ii) no default with respect to
which (including any rights that the holders thereof may have to take
enforcement action against a Subsidiary) would permit (upon notice, lapse of
time or both) any holder of any other Indebtedness of the Company or any of its
Subsidiaries to declare a default on such other Indebtedness or cause the
payment thereof to be accelerated or payable prior to its stated maturity; and
(iii) as to which the lenders have been notified in writing that they will not
have any recourse to the stock or assets of the Company or any of its
Subsidiaries.
"Non-U.S. Person" means a Person who is not a U.S. Person.
"Notes" means the Series A Notes and the Series B Notes.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Offering" means the offering of the Notes by the Company.
"Officer" means, with respect to any Person, the Chairman of
the Board, the Chief Executive Officer, the President, the Chief Operating
Officer, the Chief Financial Officer, the Treasurer, any Assistant Treasurer,
the Controller, the Secretary, any Assistant Secretary or any Vice-President of
such Person.
"Officers' Certificate" means a certificate signed on behalf
of the Company by two Officers of the Company, one of whom must be the principal
executive officer, the principal financial officer, the treasurer or the
principal accounting officer of the Company, that meets the requirements of
Section 10.05 hereof.
"Opinion of Counsel" means an opinion from legal counsel who
is reasonably acceptable to the Trustee, that meets the requirements of Section
10.05 hereof. The counsel may be an employee of or counsel to the Company, any
Subsidiary of the Company or the Trustee.
"Participant" means, with respect to the Depositary, Euroclear
or Cedel, a Person who has an account with the Depositary, Euroclear or Cedel,
respectively (and, with respect to The Depository Trust Company, shall include
Euroclear and Cedel).
"Participating Broker-Dealer" has the meaning set forth in the
Registration Rights Agreement.
"Paying Agent" has the meaning set forth in Section 2.03.
"Permitted Business" means any business that manufactures
and/or sells silicon metal or microsilica, or any business that is reasonably
similar thereto or a reasonable extension, development or expansion thereof or
ancillary thereto.
"Permitted Investments" means (a) any Investment in the
Company or in a Subsidiary of the Company that is a guarantor (or, if such
Subsidiary is a foreign Subsidiary, 65% of the capital stock of which has been
pledged to the Trustee pursuant to a pledge agreement, in form and substance
reasonably
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<PAGE> 16
satisfactory to the Trustee, securing the payment in full of all Obligations
with respect to the Notes); (b) any Investment in Cash Equivalents; (c) any
Investment by the Company or any Subsidiary of the Company in a Person, if as a
result of such Investment (i) such Person becomes a Subsidiary of the Company
and a guarantor or (ii) such Person is merged, consolidated or amalgamated with
or into, or transfers or conveys substantially all of its assets to, or is
liquidated into, the Company or a Subsidiary of the Company that is a guarantor;
(d) any Investment made as a result of the receipt of non-cash consideration
from an Asset Sale that was made pursuant to and in compliance with Section 4.10
hereof; (e) any acquisition of assets solely in exchange for the issuance of
Equity Interests (other than Disqualified Stock) of the Company; and (f) other
Investments in any Person having an aggregate fair market value (measured on the
date each such Investment was made and without giving effect to subsequent
changes in value), when taken together with all other Investments made pursuant
to this clause (f) that are at the time outstanding, not to exceed $5.0 million.
"Permitted Liens" means (i) Liens on assets of the Company or
any of its Subsidiaries securing obligations under any Credit Facility that were
permitted by the terms of this Indenture to be incurred; (ii) Liens in favor of
the Company; (iii) Liens on property of a Person existing at the time such
Person is merged into or consolidated with the Company or any Subsidiary of the
Company; provided that such Liens were in existence prior to the contemplation
of such merger or consolidation and do not extend to any assets other than those
of the Person merged into or consolidated with the Company; (iv) Liens on
property existing at the time of acquisition thereof by the Company or any
Subsidiary of the Company, provided that such Liens were in existence prior to
the contemplation of such acquisition; (v) Liens to secure the performance of
statutory obligations, surety or appeal bonds, performance bonds or other
obligations of a like nature incurred in the ordinary course of business; (v)
Liens to secure Indebtedness (including Capital Lease Obligations) permitted by
clause (iv) of the second paragraph of Section 4.09 hereof covering only the
assets acquired with such Indebtedness; (vi) Liens existing on the date hereof
and replacement, refinancing or renewals thereof, in whole or in part; (vii)
Liens for taxes, assessments or governmental charges or claims that are not yet
delinquent or that are being contested in good faith by appropriate proceedings
promptly instituted and diligently concluded, provided that any reserve or other
appropriate provision as shall be required in conformity with GAAP shall have
been made therefor; (viii) Liens to secure Indebtedness permitted by clause (v)
or (vii) of the second paragraph of Section 4.09 hereof and (ix) other Liens
with respect to obligations that do not exceed $5.0 million at any one time
outstanding.
"Permitted Refinancing Indebtedness" means any Indebtedness of
the Company or any of its Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness of the Company or any of its Subsidiaries (other than
intercompany Indebtedness); provided that: (i) the principal amount (or accreted
value, if applicable) of such Permitted Refinancing Indebtedness does not exceed
the principal amount of (or accreted value, if applicable), plus accrued
interest on, the Indebtedness so extended, refinanced, renewed, replaced,
defeased or refunded (plus the amount of reasonable expenses incurred in
connection therewith); (ii) such Permitted Refinancing Indebtedness has a final
maturity date later than the final maturity date of, and has a Weighted Average
Life to Maturity equal to or greater than the Weighted Average Life to Maturity
of, the Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded; (iii) if the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded is subordinated in right of payment to the Notes,
such Permitted Refinancing Indebtedness has a final maturity date later than the
final maturity date of, and is subordinated in right of payment to, the Notes on
terms at least as favorable to the holders of Notes as those contained in the
documentation governing the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded; and (iv) such Indebtedness is incurred either by
the Company or
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<PAGE> 17
by the Subsidiary who is the obligor on the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded.
"Person" means any individual, corporation, partnership,
limited liability company, joint venture, association, joint-stock company,
trust, unincorporated organization or government or agency or political
subdivision thereof (including any subdivision or ongoing business of any such
entity or substantially all of the assets of any such entity, subdivision or
business).
"Private Placement Legend" means the legend set forth in
Section 2.06(g)(i) to be placed on all Notes issued under this Indenture except
where otherwise permitted by the provisions of this Indenture.
"QIB" means a "qualified institutional buyer" as defined in
Rule 144A.
"Registrar" has the meaning set forth in Section 2.03.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of March 31, 1998, between the Company and NationsBanc
Mongomery Securities LLC, as such agreement may be amended, modified or
supplemented from time to time.
"Regulation S" means Regulation S under the Securities Act.
"Regulation S Global Note" means a Regulation S Temporary
Global Note or Regulation S Permanent Global Note, as appropriate.
"Regulation S Permanent Global Note" means a permanent global
Note in the form of Exhibit A-1 hereto bearing the Global Note Legend and the
Private Placement Legend and deposited with or on behalf of and registered in
the name of the Depositary or its nominee, issued in a denomination equal to the
outstanding principal amount of the Regulation S Temporary Global Note upon
expiration of the Restricted Period.
"Regulation S Temporary Global Note" means a temporary global
Note in the form of Exhibit A-2 hereto bearing the Private Placement Legend and
deposited with or on behalf of and registered in the name of the Depositary or
its nominee, issued in a denomination equal to the outstanding principal amount
of the Notes initially sold in reliance on Rule 903 of Regulation S.
"Responsible Officer, " when used with respect to the Trustee,
means any officer within the Corporate Trust Administration of the Trustee (or
any successor group of the Trustee) or any other officer of the Trustee
customarily performing functions similar to those performed by any of the above
designated officers and also means, with respect to a particular corporate trust
matter, any other officer to whom such matter is referred because of his
knowledge of and familiarity with the particular subject.
"Restricted Definitive Note" means a Definitive Note bearing
the Private Placement Legend.
"Restricted Global Note" means a Global Note bearing the
Private Placement Legend.
"Restricted Investment" means any Investment other than a
Permitted Investment.
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<PAGE> 18
"Restricted Period" means the 40-day restricted period imposed
pursuant to Rule 901(c)(3) (ii) under the Securities Act.
"Rule 144" means Rule 144 under the Securities Act.
"Rule 144A" means Rule 144A under the Securities Act.
"Rule 903" means Rule 903 under the Securities Act.
"Rule 904" means Rule 904 the Securities Act.
"SEC" or the "Commission" means the Securities and Exchange
Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Series B Notes" means the 9 5/8% Series B Senior Notes due
2006 issued in the Exchange Offer pursuant to Section 2.06(f) hereof.
"Shelf Registration Statement" means the Shelf Registration
Statement as defined in the Registration Rights Agreement.
"Significant Subsidiary" means any Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Securities Act, as such Regulation is in effect on
the date of this Indenture.
"Stated Maturity" means, with respect to any installment of
interest or principal on any series of Indebtedness, the date on which such
payment of interest or principal was scheduled to be paid in the original
documentation governing such Indebtedness, and shall not include any contingent
obligations to repay, redeem or repurchase any such interest or principal prior
to the date originally scheduled for the payment thereof.
"Subsidiary" means, with respect to any Person, (i) any
corporation, association or other business entity of which more than 50% of the
total voting power of shares of Capital Stock entitled (without regard to the
occurrence of any contingency) to vote in the election of directors, managers or
trustees thereof is at the time owned or controlled, directly or indirectly, by
such Person or one or more of the other Subsidiaries of such Person (or a
combination thereof) and (ii) any partnership (a) the sole general partner or
the managing general partner of which is such Person or a Subsidiary of such
Person or (b) the only general partners of which are such Person or of one or
more Subsidiaries of such Person (or any combination thereof).
"Subsidiary Guarantee" means the Guarantee by each Guarantor
of the Company's payment obligations under this Indenture and the Notes,
executed pursuant to Section 4.16.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C.ss.ss.
77aaa-77bbbb) as in effect on the date on which this Indenture is qualified
under the TIA.
"Trading Day" with respect to a securities exchange or
automated quotation system, means a day on which such exchange or system is open
for a full day of trading.
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<PAGE> 19
"Trustee" means the party named as such above until a
successor replaces it in accordance with the applicable provisions of this
Indenture and thereafter means the successor serving hereunder.
"Unrestricted Global Note" means a permanent global Note in
the form of Exhibit A-1 attached hereto that bears the Global Note Legend and
that has the "Schedule of Exchanges of Interests in the Global Note" attached
thereto, and that is deposited with or on behalf of and registered in the name
of the Depositary, representing a series of Notes that do not bear the Private
Placement Legend.
"Unrestricted Definitive Note" means one or more Definitive
Notes that do not bear and are not required to bear the Private Placement
Legend.
"U.S. Person" means a U.S. person as defined in Rule 902(o)
under the Securities Act.
"Voting Stock" of any Person as of any date means the Capital
Stock of such Person that is at the time entitled to vote in the election of the
Board of Directors of such Person.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (a) the sum
of the products obtained by multiplying (x) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (y) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (b) the then outstanding principal
amount of such Indebtedness.
"Wholly Owned Subsidiary" of any Person means a Subsidiary of
such Person all of the outstanding Capital Stock or other ownership interests of
which (other than directors' qualifying shares) shall at the time be owned by
such Person or by one or more Wholly Owned Subsidiaries of such Person or by
such Person and one or more Wholly Owned Subsidiaries of such Person.
SECTION 1.02. OTHER DEFINITIONS.
<TABLE>
<CAPTION>
Defined in
Term Section
<S> <C>
"Affiliate Transaction"......................................................4.11
"Asset Sale".................................................................4.10
"Asset Sale Offer"...........................................................3.09
"Authentication Order".......................................................2.02
"Bankruptcy Law".............................................................4.01
"Change of Control Offer"....................................................4.15
"Change of Control Payment"..................................................4.15
"Change of Control Payment Date" ............................................4.15
"Covenant Defeasance"........................................................8.03
"Event of Default"...........................................................6.01
"Excess Proceeds"............................................................4.10
"incur"......................................................................4.09
"Legal Defeasance" ..........................................................8.02
"Offer Amount"...............................................................3.09
"Offer Period"...............................................................3.09
"Paying Agent"...............................................................2.03
"Permitted Debt".............................................................4.09
"Purchase Date"..............................................................3.09
"Registrar"..................................................................2.03
"Restricted Payments"........................................................4.07
</TABLE>
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<PAGE> 20
SECTION 1.03.
Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the
following meanings:
"indenture securities" means the Notes;
"indenture security Holder" means a Holder of a Note;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the
Trustee; and
"obligor" on the Notes and the Subsidiary Guarantees means the
Company and the Guarantors, respectively, and any successor obligor upon the
Notes and the Subsidiary Guarantees, respectively.
All other terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by SEC rule under
the TIA have the meanings so assigned to them.
SECTION 1.04. RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the
meaning assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the
plural include the singular;
(5) provisions apply to successive events and
transactions; and
(6) references to sections of or rules under the
Securities Act shall be deemed to include substitute, replacement of
successor sections or rules adopted by the SEC from time to time.
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<PAGE> 21
ARTICLE 2.
THE NOTES
SECTION 2.01. FORM AND DATING.
(a) General. The Notes and the Trustee's certificate of authentication
shall be substantially in the form of Exhibit A-1 hereto. The Notes may have
notations, legends or endorsements required by law, stock exchange rule or
usage. Each Note shall be dated the date of its authentication. The Notes shall
be in denominations of $1,000 and integral multiples thereof.
The terms and provisions contained in the Notes shall
constitute, and are hereby expressly made, a part of this Indenture and the
Company and the Trustee, by their execution and delivery of this Indenture,
expressly agree to such terms and provisions and to be bound thereby. However,
to the extent any provision of any Note conflicts with the express provisions of
this Indenture, the provisions of this Indenture shall govern and be
controlling.
(b) Global Notes. Notes issued in global form shall be substantially
in the form of Exhibits A-1 or A-2 attached hereto (including the Global Note
Legend thereon and the "Schedule of Exchanges of Interests in the Global Note"
attached thereto). Notes issued in definitive form shall be substantially in the
form of Exhibit A-1 attached hereto (but without the Global Note Legend thereon
and without the "Schedule of Exchanges of Interests in the Global Note" attached
thereto). Each Global Note shall represent such of the outstanding Notes as
shall be specified therein and each shall provide that it shall represent the
aggregate principal amount of outstanding Notes from time to time endorsed
thereon and that the aggregate principal amount of outstanding Notes represented
thereby may from time to time be reduced or increased, as appropriate, to
reflect exchanges and redemptions. Any endorsement of a Global Note to reflect
the amount of any increase or decrease in the aggregate principal amount of
outstanding Notes represented thereby shall be made by the Trustee or the Note
Custodian, at the direction of the Trustee, in accordance with instructions
given by the Holder thereof as required by Section 2.06 hereof.
(c) Temporary Global Notes. Notes offered and sold in reliance on
Regulation S shall be issued initially in the form of the Regulation S Temporary
Global Note, which shall be deposited on behalf of the purchasers of the Notes
represented thereby with the Trustee, at its New York office, as custodian for
the Depositary, and registered in the name of the Depositary or the nominee of
the Depositary for the accounts of designated agents holding on behalf of
Euroclear or Cedel Bank, duly executed by the Company and authenticated by the
Trustee as hereinafter provided. The Restricted Period shall be terminated upon
the receipt by the Trustee of (i) a written certificate from the Depositary,
together with copies of certificates from Euroclear and Cedel Bank certifying
that they have received certification of non-United States beneficial ownership
of 100% of the aggregate principal amount of the Regulation S Temporary Global
Note (except to the extent of any beneficial owners thereof who acquired an
interest therein during the Restricted Period pursuant to another exemption from
registration under the Securities Act and who will take delivery of a beneficial
ownership interest in a 144A Global Note or an IAI Global Note bearing a Private
Placement Legend, all as contemplated by Section 2.06(a)(ii) hereof), and (ii)
an Officers' Certificate from the Company. Following the termination of the
Restricted Period, beneficial interests in the Regulation S Temporary Global
Note shall be exchanged for beneficial interests in Regulation S Permanent
Global Notes pursuant to the Applicable Procedures. Simultaneously with the
authentication of Regulation S Permanent Global Notes, the Trustee shall cancel
the Regulation S Temporary Global Note. The aggregate principal amount of the
Regulation S Temporary Global Note and the Regulation S Permanent Global Notes
may from time to time be increased or decreased by adjustments made on the
records of the Trustee and the Depositary or its nominee, as the case may be, in
connection with transfers of interest as hereinafter provided.
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<PAGE> 22
(d) Euroclear and Cedel Procedures Applicable. The provisions of the
"Operating Procedures of the Euroclear System" and "Terms and Conditions
Governing Use of Euroclear" and the "General Terms and Conditions of Cedel Bank"
and "Customer Handbook" of Cedel Bank shall be applicable to transfers of
beneficial interests in the Regulation S Temporary Global Note and the
Regulation S Permanent Global Notes that are held by Participants through
Euroclear or Cedel Bank.
SECTION 2.02. EXECUTION AND AUTHENTICATION.
One Officer shall sign the Notes for the Company by manual or
facsimile signature. The Company's seal may be reproduced on the Notes and may
be in facsimile form.
If an Officer whose signature is on a Note no longer holds
that office at the time a Note is authenticated, the Note shall nevertheless be
valid.
A Note shall not be valid until authenticated by the manual
signature of the Trustee. The signature shall be conclusive evidence that the
Note has been authenticated under this Indenture.
The Trustee shall, upon a written order of the Company signed
by one Officer (an "Authentication Order"), authenticate Notes for original
issue up to the aggregate principal amount stated in paragraph 4 of the Notes.
The aggregate principal amount of Notes outstanding at any time may not exceed
such amount except as provided in Section 2.07 hereof.
The Trustee may appoint an authenticating agent acceptable to
the Company to authenticate Notes. An authenticating agent may authenticate
Notes whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as an Agent to deal with Holders or an
Affiliate of the Company.
SECTION 2.03. REGISTRAR AND PAYING AGENT.
The Company shall maintain an office or agency where Notes may
be presented for registration of transfer or for exchange ("Registrar") and an
office or agency where Notes may be presented for payment ("Paying Agent"). The
Registrar shall keep a register of the Notes and of their transfer and exchange.
The Company may appoint one or more co-registrars and one or more additional
paying agents. The term "Registrar" includes any co-registrar and the term
"Paying Agent" includes any additional paying agent. The Company may change any
Paying Agent or Registrar without notice to any Holder. The Company shall notify
the Trustee in writing of the name and address of any Agent not a party to this
Indenture. If the Company fails to appoint or maintain another entity as
Registrar or Paying Agent, the Trustee shall act as such. The Company or any of
its Subsidiaries may act as Paying Agent or Registrar.
The Company initially appoints The Depository Trust Company
("DTC") to act as Depositary with respect to the Global Notes.
The Company initially appoints the Trustee to act as the
Registrar and Paying Agent and to act as Note Custodian with respect to the
Global Notes.
SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST.
The Company shall require each Paying Agent other than the
Trustee to agree in writing that the Paying Agent will hold in trust for the
benefit of Holders or the Trustee all money held by the
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<PAGE> 23
Paying Agent for the payment of principal, premium or Liquidated Damages, if
any, or interest on the Notes, and will notify the Trustee of any default by the
Company in making any such payment. While any such default continues, the
Trustee may require a Paying Agent to pay all money held by it to the Trustee.
The Company at any time may require a Paying Agent to pay all money held by it
to the Trustee. Upon payment over to the Trustee, the Paying Agent (if other
than the Company or a Subsidiary) shall have no further liability for the money.
If the Company or a Subsidiary acts as Paying Agent, it shall segregate and hold
in a separate trust fund for the benefit of the Holders all money held by it as
Paying Agent. Upon any bankruptcy or reorganization proceedings relating to the
Company, the Trustee shall serve as Paying Agent for the Notes.
SECTION 2.05. HOLDER LISTS.
The Trustee shall preserve in as current a form as is
reasonably practicable the most recent list available to it of the names and
addresses of all Holders and shall otherwise comply with TIA ss. 312(a). If the
Trustee is not the Registrar, the Company shall furnish to the Trustee at least
seven Business Days before each interest payment date and at such other times as
the Trustee may request in writing, a list in such form and as of such date as
the Trustee may reasonably require of the names and addresses of the Holders of
Notes and the Company shall otherwise comply with TIA ss. 312(a).
SECTION 2.06. TRANSFER AND EXCHANGE.
(a) Transfer and Exchange of Global Notes. A Global Note may not be
transferred as a whole except by the Depositary to a nominee of the Depositary,
by a nominee of the Depositary to the Depositary or to another nominee of the
Depositary, or by the Depositary or any such nominee to a successor Depositary
or a nominee of such successor Depositary. All Global Notes will be exchanged by
the Company for Definitive Notes if (i) the Company delivers to the Trustee
notice from the Depositary that it is unwilling or unable to continue to act as
Depositary or that it is no longer a clearing agency registered under the
Exchange Act and, in either case, a successor Depositary is not appointed by the
Company within 120 days after the date of such notice from the Depositary or
(ii) the Company in its sole discretion determines that the Global Notes (in
whole but not in part) should be exchanged for Definitive Notes and delivers a
written notice to such effect to the Trustee; provided that in no event shall
the Regulation S Temporary Global Note be exchanged by the Company for
Definitive Notes prior to (x) the expiration of the Restricted Period and (y)
the receipt by the Registrar of any certificates required pursuant to Rule
903(c)(3)(ii)(B) under the Securities Act. Upon the occurrence of either of the
preceding events in (i) or (ii) above, Definitive Notes shall be issued in such
names as the Depositary shall instruct the Trustee. Global Notes also may be
exchanged or replaced, in whole or in part, as provided in Sections 2.07 and
2.10 hereof. Every Note authenticated and delivered in exchange for, or in lieu
of, a Global Note or any portion thereof, pursuant to this Section 2.06 or
Section 2.07 or 2.10 hereof, shall be authenticated and delivered in the form
of, and shall be, a Global Note. A Global Note may not be exchanged for another
Note other than as provided in this Section 2.06(a), however, beneficial
interests in a Global Note may be transferred and exchanged as provided in
Section 2.06(b),(c) or (f) hereof.
(b) Transfer and Exchange of Beneficial Interests in the Global Notes.
The transfer and exchange of beneficial interests in the Global Notes shall be
effected through the Depositary, in accordance with the provisions of this
Indenture and the Applicable Procedures. Beneficial interests in the Restricted
Global Notes shall be subject to restrictions on transfer comparable to those
set forth herein to the extent required by the Securities Act. Transfers of
beneficial interests in the Global Notes also shall require compliance with
either subparagraph (i) or (ii) below, as applicable, as well as one or more of
the other following subparagraphs, as applicable:
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<PAGE> 24
(i) Transfer of Beneficial Interests in the Same Global Note.
Beneficial interests in any Restricted Global Note may be transferred
to Persons who take delivery thereof in the form of a beneficial
interest in the same Restricted Global Note in accordance with the
transfer restrictions set forth in the Private Placement Legend;
provided, however, that prior to the expiration of the Restricted
Period, transfers of beneficial interests in the Temporary Regulation S
Global Note may not be made to a U.S. Person or for the account or
benefit of a U.S. Person (other than an Initial Purchaser). Beneficial
interests in any Unrestricted Global Note may be transferred to Persons
who take delivery thereof in the form of a beneficial interest in an
Unrestricted Global Note. No written orders or instructions shall be
required to be delivered to the Registrar to effect the transfers
described in this Section 2.06(b)(i).
(ii) All Other Transfers and Exchanges of Beneficial Interests in
Global Notes. In connection with all transfers and exchanges of
beneficial interests that are not subject to Section 2.06(b)(i) above,
the transferor of such beneficial interest must deliver to the
Registrar either (A) (1) a written order from a Participant or an
Indirect Participant given to the Depositary in accordance with the
Applicable Procedures directing the Depositary to credit or cause to be
credited a beneficial interest in another Global Note in an amount
equal to the beneficial interest to be transferred or exchanged and (2)
instructions given in accordance with the Applicable Procedures
containing information regarding the Participant account to be credited
with such increase or (B) (1) a written order from a Participant or an
Indirect Participant given to the Depositary in accordance with the
Applicable Procedures directing the Depositary to cause to be issued a
Definitive Note in an amount equal to the beneficial interest to be
transferred or exchanged and (2) instructions given by the Depositary
to the Registrar containing information regarding the Person in whose
name such Definitive Note shall be registered to effect the transfer or
exchange referred to in (1) above; provided that in no event shall
Definitive Notes be issued upon the transfer or exchange of beneficial
interests in the Regulation S Temporary Global Note prior to (x) the
expiration of the Restricted Period and (y) the receipt by the
Registrar of any certificates required pursuant to Rule 903 under the
Securities Act. Upon consummation of an Exchange Offer by the Company
in accordance with Section 2.06(f) hereof, the requirements of this
Section 2.06(b)(ii) shall be deemed to have been satisfied upon receipt
by the Registrar of the instructions contained in the Letter of
Transmittal delivered by the Holder of such beneficial interests in the
Restricted Global Notes. Upon satisfaction of all of the requirements
for transfer or exchange of beneficial interests in Global Notes
contained in this Indenture and the Notes or otherwise applicable under
the Securities Act, the Trustee shall adjust the principal amount of
the relevant Global Note(s) pursuant to Section 2.06(h) hereof.
(iii) Transfer of Beneficial Interests to Another Restricted
Global Note. A beneficial interest in any Restricted Global Note may be
transferred to a Person who takes delivery thereof in the form of a
beneficial interest in another Restricted Global Note if the transfer
complies with the requirements of Section 2.06(b)(ii) above and the
Registrar receives the following:
(A) if the transferee will take delivery in the form of a
beneficial interest in the 144A Global Note, then the transferor
must deliver a certificate in the form of Exhibit B hereto,
including the certifications in item (1) thereof;
(B) if the transferee will take delivery in the form of a
beneficial interest in the Regulation S Temporary Global Note or
the Regulation S Global Note, then the transferor must deliver a
certificate in the form of Exhibit B hereto, including the
certifications in item (2) thereof; and
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<PAGE> 25
(C) if the transferee will take delivery in the form of a
beneficial interest in the IAI Global Note, then the transferor
must deliver a certificate in the form of Exhibit B hereto,
including the certificates and Opinion of Counsel required by item
(3) thereof, if applicable.
(iv) Transfer and Exchange of Beneficial Interests in a Restricted
Global Note for Beneficial Interests in the Unrestricted Global Note. A
beneficial interest in any Restricted Global Note may be exchanged by
any holder thereof for a beneficial interest in an Unrestricted Global
Note or transferred to a Person who takes delivery thereof in the form
of a beneficial interest in an Unrestricted Global Note if the exchange
or transfer complies with the requirements of Section 2.06(b)(ii) above
and:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights
Agreement and the holder of the beneficial interest to be
transferred, in the case of an exchange, or the transferee, in the
case of a transfer, certifies in the applicable Letter of
Transmittal that it is not (1) a broker-dealer, (2) a Person
participating in the distribution of the Series B Notes or (3) a
Person who is an affiliate (as defined in Rule 144) of the
Company;
(B) such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) such transfer is effected by a Participating Broker-Dealer
pursuant to the Exchange Offer Registration Statement in
accordance with the Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial interest in a
Restricted Global Note proposes to exchange such beneficial interest
for a beneficial interest in an Unrestricted Global Note, a certificate
from such holder in the form of Exhibit C hereto, including the
certifications in item (1)(a) thereof; or
(2) if the holder of such beneficial interest in a
Restricted Global Note proposes to transfer such beneficial interest to
a Person who shall take delivery thereof in the form of a beneficial
interest in an Unrestricted Global Note, a certificate from such holder
in the form of Exhibit B hereto, including the certifications in item
(4) thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar or the Company so requests or if the Applicable Procedures so
require, an Opinion of Counsel in form reasonably acceptable to the
Registrar and the Company to the effect that such exchange or transfer
is in compliance with the Securities Act and that the restrictions on
transfer contained herein and in the Private Placement Legend are no
longer required in order to maintain compliance with the Securities
Act.
If any such transfer is effected pursuant to subparagraph (B)
or (D) above at a time when an Unrestricted Global Note has not yet been issued,
the Company shall issue and, upon receipt of an Authentication Order in
accordance with Section 2.02 hereof, the Trustee shall authenticate one or more
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<PAGE> 26
Unrestricted Global Notes in an aggregate principal amount equal to the
aggregate principal amount of beneficial interests transferred pursuant to
subparagraph (B) or (D) above.
Beneficial interests in an Unrestricted Global Note cannot be
exchanged for, or transferred to Persons who take delivery thereof in the form
of, a beneficial interest in a Restricted Global Note.
(c) Transfer or Exchange of Beneficial Interests for Definitive
Notes.
(v) Beneficial Interests in Restricted Global Notes to Restricted
Definitive Notes. If any holder of a beneficial interest in a
Restricted Global Note proposes to exchange such beneficial interest
for a Restricted Definitive Note or to transfer such beneficial
interest to a Person who takes delivery thereof in the form of a
Restricted Definitive Note, then, upon receipt by the Registrar of the
following documentation:
(A) if the holder of such beneficial interest in a Restricted
Global Note proposes to exchange such beneficial interest for a
Restricted Definitive Note, a certificate from such holder in the
form of Exhibit C hereto, including the certifications in item
(2)(a) thereof;
(B) if such beneficial interest is being transferred to a QIB
in accordance with Rule 144A under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto, including
the certifications in item (1) thereof;
(C) if such beneficial interest is being transferred to a
Non-U.S. Person in an offshore transaction in accordance with Rule
903 or Rule 904 under the Securities Act, a certificate to the
effect set forth in Exhibit B hereto, including the certifications
in item (2) thereof;
(D) if such beneficial interest is being transferred pursuant
to an exemption from the registration requirements of the
Securities Act in accordance with Rule 144 under the Securities
Act, a certificate to the effect set forth in Exhibit B hereto,
including the certifications in item (3)(a) thereof;
(E) if such beneficial interest is being transferred to an
Institutional Accredited Investor in reliance on an exemption from
the registration requirements of the Securities Act other than
those listed in subparagraphs (B) through (D) above, a certificate
to the effect set forth in Exhibit B hereto, including the
certifications, certificates and Opinion of Counsel required by
item (3) thereof, if applicable;
(F) if such beneficial interest is being transferred to the
Company or any of its Subsidiaries, a certificate to the effect
set forth in Exhibit B hereto, including the certifications in
item (3)(b) thereof; or
(G) if such beneficial interest is being transferred pursuant
to an effective registration statement under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto, including
the certifications in item (3)(c) thereof,
the Trustee shall cause the aggregate principal amount of the
applicable Global Note to be reduced accordingly pursuant to Section
2.06(h) hereof, and the Company shall execute and the Trustee shall
authenticate and deliver to the Person designated in the instructions a
Definitive Note in the
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appropriate principal amount. Any Definitive Note issued in exchange
for a beneficial interest in a Restricted Global Note pursuant to this
Section 2.06(c) shall be registered in such name or names and in such
authorized denomination or denominations as the holder of such
beneficial interest shall instruct the Registrar through instructions
from the Depositary and the Participant or Indirect Participant. The
Trustee shall deliver such Definitive Notes to the Persons in whose
names such Notes are so registered. Any Definitive Note issued in
exchange for a beneficial interest in a Restricted Global Note pursuant
to this Section 2.06(c)(i) shall bear the Private Placement Legend and
shall be subject to all restrictions on transfer contained therein.
(ii) Notwithstanding Sections 2.06(c)(i)(A) and (C) hereof, a
beneficial interest in the Regulation S Temporary Global Note may not be
exchanged for a Definitive Note or transferred to a Person who takes
delivery thereof in the form of a Definitive Note prior to (x) the
expiration of the Restricted Period and (y) the receipt by the Registrar of
any certificates required pursuant to Rule 903(c)(3)(ii)(B) under the
Securities Act, except in the case of a transfer pursuant to an exemption
from the registration requirements of the Securities Act other than Rule
903 or Rule 904.
(vi) Beneficial Interests in Restricted Global Notes to
Unrestricted Definitive Notes. A holder of a beneficial interest in a
Restricted Global Note may exchange such beneficial interest for an
Unrestricted Definitive Note or may transfer such beneficial interest
to a Person who takes delivery thereof in the form of an Unrestricted
Definitive Note only if:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights
Agreement and the holder of such beneficial interest, in the case
of an exchange, or the transferee, in the case of a transfer,
certifies in the applicable Letter of Transmittal that it is not
(1) a broker-dealer, (2) a Person participating in the
distribution of the Series B Notes or (3) a Person who is an
affiliate (as defined in Rule 144) of the Company;
(B) such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) such transfer is effected by a Participating Broker-Dealer
pursuant to the Exchange Offer Registration Statement in
accordance with the Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial interest in a
Restricted Global Note proposes to exchange such beneficial interest
for a Definitive Note that does not bear the Private Placement Legend,
a certificate from such holder in the form of Exhibit C hereto,
including the certifications in item (1)(b) thereof; or
(2) if the holder of such beneficial interest in a
Restricted Global Note proposes to transfer such beneficial interest to
a Person who shall take delivery thereof in the form of a Definitive
Note that does not bear the Private Placement Legend, a certificate
from such holder in the form of Exhibit B hereto, including the
certifications in item (4) thereof;
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and, in each such case set forth in this subparagraph (D), if the
Registrar so requests or if the Applicable Procedures so require, an
Opinion of Counsel in form reasonably acceptable to the Registrar to
the effect that such exchange or transfer is in compliance with the
Securities Act and that the restrictions on transfer contained herein
and in the Private Placement Legend are no longer required in order to
maintain compliance with the Securities Act.
(vii) Beneficial Interests in Unrestricted Global Notes to
Unrestricted Definitive Notes. If any holder of a beneficial interest
in an Unrestricted Global Note proposes to exchange such beneficial
interest for a Definitive Note or to transfer such beneficial interest
to a Person who takes delivery thereof in the form of a Definitive
Note, then, upon satisfaction of the conditions set forth in Section
2.06(b)(ii) hereof, the Trustee shall cause the aggregate principal
amount of the applicable Global Note to be reduced accordingly pursuant
to Section 2.06(h) hereof, and the Company shall execute and the
Trustee shall authenticate and deliver to the Person designated in the
instructions a Definitive Note in the appropriate principal amount. Any
Definitive Note issued in exchange for a beneficial interest pursuant
to this Section 2.06(c)(iii) shall be registered in such name or names
and in such authorized denomination or denominations as the holder of
such beneficial interest shall instruct the Registrar through
instructions from the Depositary and the Participant or Indirect
Participant. The Trustee shall deliver such Definitive Notes to the
Persons in whose names such Notes are so registered. Any Definitive
Note issued in exchange for a beneficial interest pursuant to this
Section 2.06(c)(iii) shall not bear the Private Placement Legend.
(D) Transfer and Exchange of Definitive Notes for Beneficial
Interests.
(viii) Restricted Definitive Notes to Beneficial Interests in
Restricted Global Notes. If any Holder of a Restricted Definitive Note
proposes to exchange such Note for a beneficial interest in a
Restricted Global Note or to transfer such Restricted Definitive Notes
to a Person who takes delivery thereof in the form of a beneficial
interest in a Restricted Global Note, then, upon receipt by the
Registrar of the following documentation:
(A) if the Holder of such Restricted Definitive Note proposes
to exchange such Note for a beneficial interest in a Restricted
Global Note, a certificate from such Holder in the form of Exhibit
C hereto, including the certifications in item (2)(b) thereof;
(B) if such Restricted Definitive Note is being transferred to
a QIB in accordance with Rule 144A under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto, including
the certifications in item (1) thereof;
(C) if such Restricted Definitive Note is being transferred to
a Non-U.S. Person in an offshore transaction in accordance with
Rule 903 or Rule 904 under the Securities Act, a certificate to
the effect set forth in Exhibit B hereto, including the
certifications in item (2) thereof;
(D) if such Restricted Definitive Note is being transferred
pursuant to an exemption from the registration requirements of the
Securities Act in accordance with Rule 144 under the Securities
Act, a certificate to the effect set forth in Exhibit B hereto,
including the certifications in item (3)(a) thereof;
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(E) if such Restricted Definitive Note is being transferred to
an Institutional Accredited Investor in reliance on an exemption
from the registration requirements of the Securities Act other
than those listed in subparagraphs (B) through (D) above, a
certificate to the effect set forth in Exhibit B hereto, including
the certifications, certificates and Opinion of Counsel required
by item (3) thereof, if applicable;
(F) if such Restricted Definitive Note is being transferred to
the Company or any of its Subsidiaries, a certificate to the
effect set forth in Exhibit B hereto, including the certifications
in item (3)(b) thereof; or
(G) if such Restricted Definitive Note is being transferred
pursuant to an effective registration statement under the
Securities Act, a certificate to the effect set forth in Exhibit B
hereto, including the certifications in item (3)(c) thereof,
the Trustee shall cancel the Restricted Definitive Note, increase or
cause to be increased the aggregate principal amount of, in the case of
clause (A) above, the appropriate Restricted Global Note, in the case
of clause (B) above, the 144A Global Note, in the case of clause (c)
above, the Regulation S Global Note, and in all other cases, the IAI
Global Note.
(ix) Restricted Definitive Notes to Beneficial Interests in
Unrestricted Global Notes. A Holder of a Restricted Definitive Note may
exchange such Note for a beneficial interest in an Unrestricted Global
Note or transfer such Restricted Definitive Note to a Person who takes
delivery thereof in the form of a beneficial interest in an
Unrestricted Global Note only if:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights
Agreement and the Holder, in the case of an exchange, or the
transferee, in the case of a transfer, certifies in the applicable
Letter of Transmittal that it is not (1) a broker-dealer, (2) a
Person participating in the distribution of the Series B Notes or
(3) a Person who is an affiliate (as defined in Rule 144) of the
Company;
(B) such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) such transfer is effected by a Participating Broker-Dealer
pursuant to the Exchange Offer Registration Statement in
accordance with the Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Definitive Notes proposes to
exchange such Notes for a beneficial interest in the Unrestricted
Global Note, a certificate from such Holder in the form of Exhibit C
hereto, including the certifications in item (1)(c) thereof; or
(2) if the Holder of such Definitive Notes proposes to
transfer such Notes to a Person who shall take delivery thereof in the
form of a beneficial interest in the Unrestricted Global Note, a
certificate from such Holder in the form of Exhibit B hereto, including
the certifications in item (4) thereof;
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and, in each such case set forth in this subparagraph (D), if the
Registrar so requests or if the Applicable Procedures so require, an
Opinion of Counsel in form reasonably acceptable to the Registrar to
the effect that such exchange or transfer is in compliance with the
Securities Act and that the restrictions on transfer contained herein
and in the Private Placement Legend are no longer required in order to
maintain compliance with the Securities Act.
Upon satisfaction of the conditions of any of the subparagraphs in this
Section 2.06(d)(ii), the Trustee shall cancel the Definitive Notes and
increase or cause to be increased the aggregate principal amount of the
Unrestricted Global Note.
(x) Unrestricted Definitive Notes to Beneficial Interests in
Unrestricted Global Notes. A Holder of an Unrestricted Definitive Note
may exchange such Note for a beneficial interest in an Unrestricted
Global Note or transfer such Definitive Notes to a Person who takes
delivery thereof in the form of a beneficial interest in an
Unrestricted Global Note at any time. Upon receipt of a request for
such an exchange or transfer, the Trustee shall cancel the applicable
Unrestricted Definitive Note and increase or cause to be increased the
aggregate principal amount of one of the Unrestricted Global Notes.
If any such exchange or transfer from a Definitive Note to a
beneficial interest is effected pursuant to subparagraphs (ii)(B), (ii)(D) or
(iii) above at a time when an Unrestricted Global Note has not yet been issued,
the Company shall issue and, upon receipt of an Authentication Order in
accordance with Section 2.02 hereof, the Trustee shall authenticate one or more
Unrestricted Global Notes in an aggregate principal amount equal to the
principal amount of Definitive Notes so transferred.
(e) Transfer and Exchange of Definitive Notes for Definitive Notes.
Upon request by a Holder of Definitive Notes and such Holder's compliance with
the provisions of this Section 2.06(e), the Registrar shall register the
transfer or exchange of Definitive Notes. Prior to such registration of transfer
or exchange, the requesting Holder shall present or surrender to the Registrar
the Definitive Notes duly endorsed or accompanied by a written instruction of
transfer in form satisfactory to the Registrar duly executed by such Holder or
by his attorney, duly authorized in writing. In addition, the requesting Holder
shall provide any additional certifications, documents and information, as
applicable, required pursuant to the following provisions of this Section
2.06(e).
(i) Restricted Definitive Notes to Restricted Definitive Notes.
Any Restricted Definitive Note may be transferred to and registered in
the name of Persons who take delivery thereof in the form of a
Restricted Definitive Note if the Registrar receives the following:
(A) if the transfer will be made pursuant to Rule 144A under
the Securities Act, then the transferor must deliver a certificate
in the form of Exhibit B hereto, including the certifications in
item (1) thereof;
(B) if the transfer will be made pursuant to Rule 903 or Rule
904, then the transferor must deliver a certificate in the form of
Exhibit B hereto, including the certifications in item (2)
thereof; and
(C) if the transfer will be made pursuant to any other
exemption from the registration requirements of the Securities
Act, then the transferor must deliver a certificate in the form of
Exhibit B hereto, including the certifications, certificates and
Opinion of Counsel required by item (3) thereof, if applicable.
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(ii) Restricted Definitive Notes to Unrestricted Definitive
Notes. Any Restricted Definitive Note may be exchanged by the Holder
thereof for an Unrestricted Definitive Note or transferred to a Person
or Persons who take delivery thereof in the form of an Unrestricted
Definitive Note if:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights
Agreement and the Holder, in the case of an exchange, or the
transferee, in the case of a transfer, certifies in the applicable
Letter of Transmittal that it is not (1) a broker-dealer, (2) a
Person participating in the distribution of the Series B Notes or
(3) a Person who is an affiliate (as defined in Rule 144) of the
Company;
(B) any such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) any such transfer is effected by a Participating
Broker-Dealer pursuant to the Exchange Offer Registration
Statement in accordance with the Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Restricted Definitive Notes
proposes to exchange such Notes for an Unrestricted Definitive Note, a
certificate from such Holder in the form of Exhibit C hereto, including
the certifications in item (1)(d) thereof; or
(2) if the Holder of such Restricted Definitive Notes
proposes to transfer such Notes to a Person who shall take delivery
thereof in the form of an Unrestricted Definitive Note, a certificate
from such Holder in the form of Exhibit B hereto, including the
certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the
Company or the Registrar so requests, an Opinion of Counsel in form
reasonably acceptable to the Company or the Registrar, as the case may
be, to the effect that such exchange or transfer is in compliance with
the Securities Act and that the restrictions on transfer contained
herein and in the Private Placement Legend are no longer required in
order to maintain compliance with the Securities Act.
(iii) Unrestricted Definitive Notes to Unrestricted Definitive
Notes. A Holder of Unrestricted Definitive Notes may transfer such
Notes to a Person who takes delivery thereof in the form of an
Unrestricted Definitive Note. Upon receipt of a request to register
such a transfer, the Registrar shall register the Unrestricted
Definitive Notes pursuant to the instructions from the Holder thereof.
(f) Exchange Offer. Upon the occurrence of the Exchange Offer in
accordance with the Registration Rights Agreement, the Company shall issue and,
upon receipt of an Authentication Order in accordance with Section 2.02, the
Trustee shall authenticate (i) one or more Unrestricted Global Notes in an
aggregate principal amount equal to the principal amount of the beneficial
interests in the Restricted Global Notes tendered for acceptance by Persons that
certify in the applicable Letters of Transmittal that (x) they are not
broker-dealers, (y) they are not participating in a distribution of the Series B
Notes and (z) they are not affiliates (as defined in Rule 144) of the Company,
and accepted for exchange in the Exchange Offer and (ii) Definitive Notes in an
aggregate principal amount equal to the principal amount of the Restricted
Definitive Notes accepted for exchange in the Exchange Offer. Concurrently with
the issuance
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of such Notes, the Trustee shall cause the aggregate principal amount of the
applicable Restricted Global Notes to be reduced accordingly, and the Company
shall execute and the Trustee shall authenticate and deliver to the Persons
designated by the Holders of Definitive Notes so accepted Definitive Notes in
the appropriate principal amount.
(g) Legends. The following legends shall appear on the face of all
Global Notes and Definitive Notes issued under this Indenture unless
specifically stated otherwise in the applicable provisions of this Indenture.
(i) Private Placement Legend.
(A) Except as permitted by subparagraph (B) below, each Global
Note and each Definitive Note (and all Notes issued in exchange
therefor or substitution thereof) shall bear the legend in
substantially the following form:
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND THIS NOTE MAY NOT BE OFFERED, SOLD,
PLEDGED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT OR IN ACCORDANCE WITH AN APPLICABLE EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (SUBJECT TO
THE DELIVERY OF SUCH EVIDENCE, IF ANY, REQUIRED UNDER THE INDENTURE
PURSUANT TO WHICH THIS NOTE IS ISSUED) AND IN ACCORDANCE WITH ANY
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY
OTHER JURISDICTION. EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS
HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM
THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A
THEREUNDER OR ANOTHER EXEMPTION UNDER THE SECURITIES ACT. THE HOLDER OF
THE SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF SAC ACQUISITION
CORP. ("SAC") AND SIMCALA, INC. THAT (A) SUCH SECURITY MAY BE RESOLD,
PLEDGED OR OTHERWISE TRANSFERRED ONLY (1)(a) TO A PERSON WHO THE SELLER
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN
RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A, (b) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (c) OUTSIDE THE
UNITED STATES TO A PERSON THAT IS NOT A U.S. PERSON (WITHIN THE MEANING
OF REGULATION S UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT OR (d) IN ACCORDANCE
WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL IF THE COMPANY SO
REQUESTS), SUBJECT IN CASE OF SUBSECTIONS (c) AND (d) TO THE RECEIPT BY
THE REGISTRAR, TRANSFER AGENT, TRUSTEE, SIMCALA, INC. AND SAC OF
CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM (2)
TO SIMCALA, INC. OR SAC OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER
APPLICABLE JURISDICTION AND (B) THE HOLDER WILL AND EACH SUBSEQUENT
HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF
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<PAGE> 33
THE SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN
(A) ABOVE.
(B) Notwithstanding the foregoing, any Global Note or
Definitive Note issued pursuant to subparagraphs (b)(iv), (c)(ii),
(c)(iii), (d)(ii), (d)(iii), (e)(ii), (e)(iii) or (f) to this
Section 2.06 (and all Notes issued in exchange therefor or
substitution thereof) shall not bear the Private Placement Legend.
(ii) Global Note Legend. Each Global Note shall bear a legend in
substantially the following form:
"THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE
INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE
BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY
PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE
SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.07 OF
THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT
IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE, (III) THIS GLOBAL
NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO
SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE
TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF
SIMCALA, INC. OR SAC."
(iii) Regulation S Temporary Global Note Legend. The Regulation S
Temporary Global Note shall bear a legend in substantially the
following form:
"THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND
THE CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED
NOTES, ARE AS SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER
THE HOLDER NOR THE BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY
GLOBAL NOTE SHALL BE ENTITLED TO RECEIVE PAYMENT OF INTEREST HEREON."
(h) Cancellation and/or Adjustment of Global Notes.At such time as all
beneficial interests in a particular Global Note have been exchanged for
Definitive Notes or a particular Global Note has been redeemed, repurchased or
canceled in whole and not in part, each such Global Note shall be returned to or
retained and canceled by the Trustee in accordance with Section 2.11 hereof. At
any time prior to such cancellation, if any beneficial interest in a Global Note
is exchanged for or transferred to a Person who will take delivery thereof in
the form of a beneficial interest in another Global Note or for Definitive
Notes, the principal amount of Notes represented by such Global Note shall be
reduced accordingly and an endorsement shall be made on such Global Note by the
Trustee or by the Depositary at the direction of the Trustee to reflect such
reduction; and if the beneficial interest is being exchanged for or transferred
to a Person who will take delivery thereof in the form of a beneficial interest
in another Global Note, such other Global Note shall be increased accordingly
and an endorsement shall be made on such Global Note by the Trustee or by the
Depositary at the direction of the Trustee to reflect such increase.
(i) General Provisions Relating to Transfers and Exchanges.
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(i) To permit registrations of transfers and exchanges, the
Company shall execute and the Trustee shall authenticate Global Notes
and Definitive Notes upon the Company's order or at the Registrar's
request.
(ii) No service charge shall be made to a holder of a beneficial
interest in a Global Note or to a Holder of a Definitive Note for any
registration of transfer or exchange, but the Company may require
payment of a sum sufficient to cover any transfer tax or similar
governmental charge payable in connection therewith (other than any
such transfer taxes or similar governmental charge payable upon
exchange or transfer pursuant to Sections 2.10, 3.06, 3.09, 4.10, 4.15
and 9.05 hereof).
(iii) The Registrar shall not be required to register the
transfer of or exchange any Note selected for redemption in whole or in
part, except the unredeemed portion of any Note being redeemed in part.
(iv) All Global Notes and Definitive Notes issued upon any
registration of transfer or exchange of Global Notes or Definitive
Notes shall be the valid obligations of the Company, evidencing the
same debt, and entitled to the same benefits under this Indenture, as
the Global Notes or Definitive Notes surrendered upon such registration
of transfer or exchange.
(v) The Company shall not be required (A) to issue, to register
the transfer of or to exchange any Notes during a period beginning at
the opening of business 15 days before the day of any selection of
Notes for redemption under Section 3.02 hereof and ending at the close
of business on the day of selection, (B) to register the transfer of or
to exchange any Note so selected for redemption in whole or in part,
except the unredeemed portion of any Note being redeemed in part or (C)
to register the transfer of or to exchange a Note between a record date
and the next succeeding Interest Payment Date.
(vi) Prior to due presentment for the registration of a transfer
of any Note, the Trustee, any Agent and the Company may deem and treat
the Person in whose name any Note is registered as the absolute owner
of such Note for the purpose of receiving payment of principal of and
interest on such Notes and for all other purposes, and none of the
Trustee, any Agent or the Company shall be affected by notice to the
contrary.
(vii) The Trustee shall authenticate Global Notes and Definitive
Notes in accordance with the provisions of Section 2.02 hereof.
(viii) All certifications, certificates and Opinions of Counsel
required to be submitted to the Registrar pursuant to this Section 2.06
to effect a registration of transfer or exchange may be submitted by
facsimile.
SECTION 2.07. REPLACEMENT NOTES.
If any mutilated Note is surrendered to the Trustee or the
Company and the Trustee receives evidence to its satisfaction of the
destruction, loss or theft of any Note, the Company shall issue and the Trustee,
upon receipt of an Authentication Order, shall authenticate a replacement Note.
If required by the Trustee or the Company, an indemnity bond must be supplied by
the Holder that is sufficient in the judgment of the Trustee and the Company to
protect the Company, the Trustee, any Agent
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and any authenticating agent from any loss that any of them may suffer if a Note
is replaced. The Company may charge for its expenses in replacing a Note.
Every replacement Note is an obligation of the Company which
shall replace and extinguish the obligation evidenced by the Note such
replacement Note replaces, and such replacement Note shall be entitled to all of
the benefits of this Indenture equally and proportionately with all other Notes
duly issued hereunder.
SECTION 2.08. OUTSTANDING NOTES.
The Notes outstanding at any time are all the Notes
authenticated by the Trustee except for those canceled by it, those delivered to
it for cancellation, those reductions in the interest in a Global Note effected
by the Trustee in accordance with the provisions hereof, and those described in
this Section as not outstanding. Except as set forth in Section 2.09 hereof, a
Note does not cease to be outstanding because the Company or an Affiliate of the
Company holds the Note; however, Notes held by the Company or a Subsidiary of
the Company shall not be deemed to be outstanding for purposes of Section
3.07(b) hereof.
If a Note is replaced pursuant to Section 2.07 hereof, it
ceases to be outstanding unless the Trustee receives proof satisfactory to it
that the replaced Note is held by a bona fide purchaser.
If the principal amount of any Note is considered paid under
Section 4.01 hereof, it ceases to be outstanding and interest on it ceases to
accrue.
If the Paying Agent (other than the Company, a Subsidiary or
an Affiliate of any thereof) holds, on a redemption date or maturity date, money
sufficient to pay Notes payable on that date, then on and after that date such
Notes shall be deemed to be no longer outstanding and shall cease to accrue
interest.
SECTION 2.09. TREASURY NOTES.
In determining whether the Holders of the required principal
amount of Notes have concurred in any direction, waiver or consent, Notes owned
by the Company, or by any Person directly or indirectly controlling or
controlled by or under direct or indirect common control with the Company, shall
be considered as though not outstanding, except that for the purposes of
determining whether the Trustee shall be protected in relying on any such
direction, waiver or consent, only Notes that the Trustee knows are so owned
shall be so disregarded.
SECTION 2.10. TEMPORARY NOTES.
Until certificates representing Notes are ready for delivery,
the Company may prepare and the Trustee, upon receipt of an Authentication
Order, shall authenticate temporary Notes. Temporary Notes shall be
substantially in the form of certificated Notes but may have variations that the
Company considers appropriate for temporary Notes and as shall be reasonably
acceptable to the Trustee. Without unreasonable delay, the Company shall prepare
and the Trustee shall authenticate definitive Notes in exchange for temporary
Notes.
Holders of temporary Notes shall be entitled to all of the
benefits of this Indenture.
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SECTION 2.11. CANCELLATION.
The Company at any time may deliver Notes to the Trustee for
cancellation. The Registrar and Paying Agent shall forward to the Trustee any
Notes surrendered to them for registration of transfer, exchange or payment. The
Trustee and no one else shall cancel all Notes surrendered for registration of
transfer, exchange, payment, replacement or cancellation and shall destroy
canceled Notes (subject to the record retention requirement of the Exchange
Act). Certification of the destruction of all canceled Notes shall be delivered
to the Company. The Company may not issue new Notes to replace Notes that it has
paid or that have been delivered to the Trustee for cancellation.
SECTION 2.12. DEFAULTED INTEREST.
If the Company defaults in a payment of interest on the Notes,
it shall pay the defaulted interest in any lawful manner plus, to the extent
lawful, interest payable on the defaulted interest, to the Persons who are
Holders on a subsequent special record date, in each case at the rate provided
in the Notes and in Section 4.01 hereof. The Company shall notify the Trustee in
writing of the amount of defaulted interest proposed to be paid on each Note and
the date of the proposed payment. The Company shall fix or cause to be fixed
each such special record date and payment date, provided that no such special
record date shall be less than 10 days prior to the related payment date for
such defaulted interest. At least 15 days before the special record date, the
Company (or, upon the written request of the Company, the Trustee in the name
and at the expense of the Company) shall mail or cause to be mailed to Holders a
notice that states the special record date, the related payment date and the
amount of such interest to be paid.
ARTICLE 3.
REDEMPTION AND PREPAYMENT
SECTION 3.01. NOTICES TO TRUSTEE.
If the Company elects to redeem Notes pursuant to the optional
redemption provisions of Section 3.07 hereof, it shall furnish to the Trustee,
at least 45 days but not more than 60 days before a redemption date, an
Officers' Certificate setting forth (i) the clause of this Indenture pursuant to
which the redemption shall occur, (ii) the redemption date, (iii) the principal
amount of Notes to be redeemed and (iv) the redemption price.
SECTION 3.02. SELECTION OF NOTES TO BE REDEEMED.
If less than all of the Notes are to be redeemed , the Trustee
shall select the Notes to be redeemed among the Holders of the Notes in
compliance with the requirements of the principal national securities exchange,
if any, on which the Notes are listed or, if the Notes are not so listed, on a
pro rata basis, by lot or in accordance with any other method the Trustee
considers fair and appropriate. In the event of partial redemption by lot, the
particular Notes to be redeemed shall be selected, unless otherwise provided
herein, not less than 30 nor more than 60 days prior to the redemption date by
the Trustee from the outstanding Notes not previously called for redemption.
The Trustee shall promptly notify the Company in writing of
the Notes selected for redemption and, in the case of any Note selected for
partial redemption, the principal amount thereof to be redeemed. Notes and
portions of Notes selected shall be in amounts of $1,000 or whole multiples of
$1,000; except that if all of the Notes of a Holder are to be redeemed, the
entire outstanding amount of Notes held by such Holder, even if not a multiple
of $1,000, shall be redeemed. Except as provided in the
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preceding sentence, provisions of this Indenture that apply to Notes called for
redemption also apply to portions of Notes called for redemption.
SECTION 3.03. NOTICE OF REDEMPTION.
Subject to the provisions of Section 3.09 hereof, at least 30
days but not more than 60 days before a redemption date, the Company shall mail
or cause to be mailed, by first class mail, a notice of redemption to each
Holder whose Notes are to be redeemed at its registered address.
The notice shall identify the Notes to be redeemed and shall
state:
(a) the redemption date;
(b) the redemption price;
(c) if any Note is being redeemed in part, the portion of the
principal amount of such Note to be redeemed and that, after the redemption date
upon surrender of such Note, a new Note or Notes in principal amount equal to
the unredeemed portion shall be issued upon cancellation of the original Note;
(d) the name and address of the Paying Agent;
(e) that Notes called for redemption must be surrendered to the Paying
Agent to collect the redemption price;
(f) that, unless the Company defaults in making such redemption
payment, interest on Notes called for redemption ceases to accrue on and after
the redemption date;
(g) the paragraph of the Notes and/or Section of this Indenture
pursuant to which the Notes called for redemption are being redeemed; and
(h) that no representation is made as to the correctness or accuracy
of the CUSIP number, if any, listed in such notice or printed on the Notes.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at its expense; provided, however, that the
Company shall have delivered to the Trustee, at least 45 days prior to the
redemption date, an Officers' Certificate requesting that the Trustee give such
notice and setting forth the information to be stated in such notice as provided
in the preceding paragraph.
SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION.
Once notice of redemption is mailed in accordance with Section
3.03 hereof, Notes called for redemption become irrevocably due and payable on
the redemption date at the redemption price. A notice of redemption may not be
conditional.
SECTION 3.05. DEPOSIT OF REDEMPTION PRICE.
One Business Day prior to the redemption date, the Company
shall deposit with the Trustee or with the Paying Agent money sufficient to pay
the redemption price of and accrued interest on all Notes to be redeemed on that
date. The Trustee or the Paying Agent shall promptly return to the
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Company any money deposited with the Trustee or the Paying Agent by the Company
in excess of the amounts necessary to pay the redemption price of, and accrued
interest on, all Notes to be redeemed.
If the Company complies with the provisions of the preceding
paragraph, on and after the redemption date, interest shall cease to accrue on
the Notes or the portions of Notes called for redemption. If a Note is redeemed
on or after an interest record date but on or prior to the related interest
payment date, then any accrued and unpaid interest shall be paid to the Person
in whose name such Note was registered at the close of business on such record
date. If any Note called for redemption shall not be so paid upon surrender for
redemption because of the failure of the Company to comply with the preceding
paragraph, interest shall be paid on the unpaid principal, from the redemption
date until such principal is paid, and to the extent lawful on any interest not
paid on such unpaid principal, in each case at the rate provided in the Notes
and in Section 4.01 hereof.
SECTION 3.06. NOTES REDEEMED IN PART.
Upon surrender of a Note that is redeemed in part, the Company
shall issue and, upon the Company's written request, the Trustee shall
authenticate for the Holder at the expense of the Company a new Note equal in
principal amount to the unredeemed portion of the Note surrendered.
SECTION 3.07. OPTIONAL REDEMPTION.
(a) Except as set forth in clause (b) of this Section 3.07, the
Company shall not have the option to redeem the Notes pursuant to this Section
3.07 prior to April 15, 2002. Thereafter, the Company shall have the option to
redeem the Notes, in whole or in part, at the redemption prices (expressed as
percentages of principal amount) set forth below plus accrued and unpaid
interest and Liquidated Damages thereon, if any, to the applicable redemption
date, if redeemed during the twelve-month period beginning on April 15 of the
years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2002...................................................................104.8125%
2003...................................................................103.2803%
2004...................................................................101.6042%
2005 and thereafter....................................................100.0000%
</TABLE>
(b) Notwithstanding the provisions of clause (a) of this Section
3.07, at any time on or before April 15, 2001, the Company may redeem up to 30%
of the aggregate principal amount of the Notes originally issued under this
Indenture at a redemption price of 109.6250% of the principal amount thereof,
plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the
redemption date, with the net proceeds of a public offering of common stock of
the Company or Holdings (to the extent the net proceeds thereof are contributed
to the Company as common equity); provided that at least 70% of the original
aggregate principal amount of the Notes remain outstanding immediately after the
occurrence of such redemption (excluding Notes held by the Company and its
Subsidiaries); and provided, further, that such redemption shall occur within 60
days of the date of the closing of such public offering.
(c) Any redemption pursuant to this Section 3.07 shall be made
pursuant to the provisions of Section 3.01 through 3.06 hereof.
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SECTION 3.08. MANDATORY REDEMPTION.
The Company shall not be required to make mandatory redemption
payments with respect to the Notes.
SECTION 3.09. OFFER TO PURCHASE BY APPLICATION OF EXCESS PROCEEDS.
In the event that, pursuant to Section 4.10 hereof, the
Company shall be required to commence an offer to all Holders to purchase Notes
(an "Asset Sale Offer"), it shall follow the procedures specified below.
The Asset Sale Offer shall remain open for a period of 20
Business Days following its commencement and no longer, except to the extent
that a longer period is required by applicable law (the "Offer Period"). No
later than five Business Days after the termination of the Offer Period (the
"Purchase Date"), the Company shall purchase the principal amount of Notes
required to be purchased pursuant to Section 4.10 hereof (the "Offer Amount")
or, if less than the Offer Amount has been tendered, all Notes tendered in
response to the Asset Sale Offer. Payment for any Notes so purchased shall be
made in the same manner as interest payments are made.
If the Purchase Date is on or after an interest record date
and on or before the related interest payment date, any accrued and unpaid
interest shall be paid to the Person in whose name a Note is registered at the
close of business on such record date, and no additional interest shall be
payable to Holders who tender Notes pursuant to the Asset Sale Offer.
Upon the commencement of an Asset Sale Offer, the Company
shall send, by first class mail, a notice to the Trustee and each of the
Holders, with a copy to the Trustee. The notice shall contain all instructions
and materials necessary to enable such Holders to tender Notes pursuant to the
Asset Sale Offer. The Asset Sale Offer shall be made to all Holders. The notice,
which shall govern the terms of the Asset Sale Offer, shall state:
(a) that the Asset Sale Offer is being made pursuant to this Section
3.09 and Section 4.10 hereof and the length of time the Asset Sale Offer shall
remain open;
(b) the Offer Amount, the purchase price and the Purchase Date;
(c) that any Note not tendered or accepted for payment shall continue
to accrete or accrue interest;
(j) that, unless the Company defaults in making such payment, any
Note accepted for payment pursuant to the Asset Sale Offer shall cease to
accrete or accrue interest after the Purchase Date;
(d) that Holders electing to have a Note purchased pursuant to an
Asset Sale Offer may only elect to have all of such Note purchased and may not
elect to have only a portion of such Note purchased;
(e) that Holders electing to have a Note purchased pursuant to any
Asset Sale Offer shall be required to surrender the Note, with the form entitled
"Option of Holder to Elect Purchase" on the reverse of the Note completed, or
transfer the Note by book-entry transfer, to the Company, a Depositary, if
appointed by the Company, or a Paying Agent at the address specified in the
notice at least three days before the Purchase Date;
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<PAGE> 40
(f) that Holders shall be entitled to withdraw their election if the
Company, the Depositary or the Paying Agent, as the case may be, receives, not
later than the expiration of the Offer Period, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder, the principal
amount of the Note the Holder delivered for purchase and a statement that such
Holder is withdrawing his election to have such Note purchased;
(g) that, if the aggregate principal amount of Notes surrendered by
Holders exceeds the Offer Amount, the Company shall select the Notes to be
purchased on a pro rata basis (with such adjustments as may be deemed
appropriate by the Company so that only Notes in denominations of $1,000, or
integral multiples thereof, shall be purchased); and
(h) that Holders whose Notes were purchased only in part shall be
issued new Notes equal in principal amount to the unpurchased portion of the
Notes surrendered (or transferred by book-entry transfer).
On or before the Purchase Date, the Company shall, to the
extent lawful, accept for payment, on a pro rata basis to the extent necessary,
the Offer Amount of Notes or portions thereof tendered pursuant to the Asset
Sale Offer, or if less than the Offer Amount has been tendered, all Notes
tendered, and shall deliver to the Trustee an Officers' Certificate stating that
such Notes or portions thereof were accepted for payment by the Company in
accordance with the terms of this Section 3.09. The Company, the Depositary or
the Paying Agent, as the case may be, shall promptly (but in any case not later
than five days after the Purchase Date) mail or deliver to each tendering Holder
an amount equal to the purchase price of the Notes tendered by such Holder and
accepted by the Company for purchase, and the Company shall promptly issue a new
Note, and the Trustee, upon written request from the Company shall authenticate
and mail or deliver such new Note to such Holder, in a principal amount equal to
any unpurchased portion of the Note surrendered. Any Note not so accepted shall
be promptly mailed or delivered by the Company to the Holder thereof.
Other than as specifically provided in this Section 3.09, any
purchase pursuant to this Section 3.09 shall be made pursuant to the provisions
of Sections 3.01 through 3.06 hereof.
ARTICLE 4.
COVENANTS
SECTION 4.01. PAYMENT OF NOTES.
The Company shall pay or cause to be paid the principal of,
premium, if any, and interest on the Notes on the dates and in the manner
provided in the Notes. Principal, premium, if any, and interest shall be
considered paid on the date due if the Paying Agent, if other than the Company
or a Subsidiary thereof, holds as of 10:00 a.m. Eastern Time on the due date,
money deposited by the Company in immediately available funds and designated for
and sufficient to pay all principal, premium, if any, and interest then due. The
Company shall pay all Liquidated Damages, if any, in the same manner on the
dates and in the amounts set forth in the Registration Rights Agreement.
The Company shall pay interest (including post-petition
interest in any proceeding under any Bankruptcy Law) on overdue principal at the
rate equal to 1% per annum in excess of the then applicable interest rate on the
Notes to the extent lawful; it shall pay interest (including post-petition
interest in any proceeding under any Bankruptcy Law) on overdue installments of
interest and Liquidated Damages (without regard to any applicable grace period)
at the same rate to the extent lawful.
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<PAGE> 41
SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY.
The Company shall maintain in the Borough of Manhattan, the
City of New York, an office or agency (which may be an office of the Trustee or
an affiliate of the Trustee, Registrar or co-registrar) where Notes may be
surrendered for registration of transfer or for exchange and where notices and
demands to or upon the Company in respect of the Notes and this Indenture may be
served. The Company shall give prompt written notice to the Trustee of the
location, and any change in the location, of such office or agency. If at any
time the Company shall fail to maintain any such required office or agency or
shall fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the Corporate Trust
Office of the Trustee.
The Company may also from time to time designate one or more
other offices or agencies where the Notes may be presented or surrendered for
any or all such purposes and may from time to time rescind such designations;
provided, however, that no such designation or rescission shall in any manner
relieve the Company of its obligation to maintain an office or agency in the
Borough of Manhattan, the City of New York for such purposes. The Company shall
give prompt written notice to the Trustee of any such designation or rescission
and of any change in the location of any such other office or agency.
The Company hereby designates the Corporate Trust Office of
the Trustee as one such office or agency of the Company in accordance with
Section 2.03.
SECTION 4.03. REPORTS.
(a) Whether or not required by the rules and regulations of the SEC,
so long as any Notes are outstanding, the Company shall furnish to the Holders
of Notes (i) all quarterly and annual financial information that would be
required to be contained in a filing with the SEC on Forms 10-Q and 10-K if the
Company were required to file such forms, including a "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and, with respect
to the annual information only, a report thereon by the Company's certified
independent accountants and (ii) all current reports that would be required to
be filed with the SEC on Form 8-K if the Company were required to file such
reports, in each case, within the time periods specified in the SEC's rules and
regulations. In addition, following consummation of the Exchange Offer, whether
or not required by the rules and regulations of the SEC, the Company shall file
a copy of all such information and reports with the SEC for public availability
within the time periods specified in the SEC's rules and regulations (unless the
SEC will not accept such a filing) and make such information available to
securities analysts and prospective investors upon request. The Company shall at
all times comply with TIA ss. 314(a).
(b) For so long as any Notes remain outstanding, the Company shall
furnish to the Holders and to securities analysts and prospective investors,
upon their request, the information required to be delivered pursuant to Rule
144A(d)(4) under the Securities Act.
SECTION 4.04. COMPLIANCE CERTIFICATE.
(a) The Company shall deliver to the Trustee, within 90 days after
the end of each fiscal year, an Officers' Certificate stating that a review of
the activities of the Company and its Subsidiaries during the preceding fiscal
year has been made under the supervision of the signing Officers with a view to
determining whether the Company has kept, observed, performed and fulfilled its
obligations under this Indenture, and further stating, as to each such Officer
signing such certificate, that to the best of his or her knowledge the Company
has kept, observed, performed and fulfilled each and every covenant contained in
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<PAGE> 42
this Indenture and is not in default in the performance or observance of any of
the terms, provisions and conditions of this Indenture (or, if a Default or
Event of Default shall have occurred, describing all such Defaults or Events of
Default of which he or she may have knowledge and what action the Company is
taking or proposes to take with respect thereto) and that to the best of his or
her knowledge no event has occurred and remains in existence by reason of which
payments on account of the principal of or interest, if any, on the Notes is
prohibited or if such event has occurred, a description of the event and what
action the Company is taking or proposes to take with respect thereto.
(b) So long as not contrary to the then current recommendations of the
American Institute of Certified Public Accountants, the year-end financial
statements delivered pursuant to Section 4.03(a) above shall be accompanied by a
written statement of the Company's independent public accountants (who shall be
a firm of established national reputation) that in making the examination
necessary for certification of such financial statements, nothing has come to
their attention that would lead them to believe that the Company has violated
any provisions of Article 4 or Article 5 hereof or, if any such violation has
occurred, specifying the nature and period of existence thereof, it being
understood that such accountants shall not be liable directly or indirectly to
any Person for any failure to obtain knowledge of any such violation.
(c) The Company shall, so long as any of the Notes are outstanding,
deliver to the Trustee, forthwith upon any Officer becoming aware of any Default
or Event of Default, an Officers' Certificate specifying such Default or Event
of Default and what action the Company is taking or proposes to take with
respect thereto.
SECTION 4.05. TAXES.
The Company shall pay, and shall cause each of its
Subsidiaries to pay, prior to delinquency, all material taxes, assessments, and
governmental levies except such as are contested in good faith and by
appropriate proceedings or where the failure to effect such payment is not
adverse in any material respect to the Holders of the Notes.
SECTION 4.06. STAY, EXTENSION AND USURY LAWS.
The Company covenants (to the extent that it may lawfully do
so) that it shall not at any time insist upon, plead, or in any manner
whatsoever claim or take the benefit or advantage of, any stay, extension or
usury law wherever enacted, now or at any time hereafter in force, that may
affect the covenants or the performance of this Indenture; and the Company (to
the extent that it may lawfully do so) hereby expressly waives all benefit or
advantage of any such law, and covenants that it shall not, by resort to any
such law, hinder, delay or impede the execution of any power herein granted to
the Trustee, but shall suffer and permit the execution of every such power as
though no such law has been enacted.
SECTION 4.07. RESTRICTED PAYMENTS.
The Company shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly: (i) declare or pay any dividend or make
any other payment or distribution on account of the Company's or any of its
Subsidiaries' Equity Interests (including, without limitation, any payment in
connection with any merger or consolidation involving the Company or any of its
Subsidiaries) or to the direct or indirect holders of the Company's or any of
its Subsidiaries' Equity Interests in their capacity as such (other than
dividends or distributions payable in Equity Interests (other than Disqualified
Stock) of the Company or to the Company or a Subsidiary of the Company); (ii)
purchase, redeem or otherwise acquire or retire for value (including, without
limitation, in connection with any merger or consolidation involving
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<PAGE> 43
the Company) any Equity Interests of the Company or any direct or indirect
parent of the Company or other Affiliate of the Company (other than any such
Equity Interests owned by the Company or any Wholly Owned Subsidiary of the
Company); (iii) make any payment on or with respect to, or purchase, redeem,
defease or otherwise acquire or retire for value any Indebtedness that is pari
passu with or subordinated to the Notes (other than Notes), except a payment of
interest or principal at Stated Maturity; or (iv) make any Restricted Investment
(all such payments and other actions set forth in clauses (i) through (iv) above
being collectively referred to as "Restricted Payments," unless, at the time of
and after giving effect to such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof; and
(b) the Company would, at the time of such Restricted Payment and
after giving pro forma effect thereto as if such Restricted Payment had been
made at the beginning of the applicable four-quarter period, have been permitted
to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge
Coverage Ratio test set forth in the first paragraph of Section 4.09 hereof; and
(c) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by the Company and its Subsidiaries after the
date hereof (excluding Restricted Payments permitted by clauses (ii), (iii) and
(iv) of the next succeeding paragraph), is less than the sum, without
duplication, of (i) 50% of the Consolidated Net Income of the Company for the
period (taken as one accounting period) from the beginning of the first fiscal
quarter commencing after the date hereof to the end of the Company's most
recently ended fiscal quarter for which internal financial statements are
available at the time of such Restricted Payment (or, if such Consolidated Net
Income for such period is a deficit, less 100% of such deficit), plus (ii) 100%
of the aggregate net cash proceeds received by the Company since the date hereof
as a contribution to its common equity capital or from the issue or sale of
Equity Interests of the Company (other than Disqualified Stock) or from the
issue or sale of Disqualified Stock or debt securities of the Company that have
been converted into such Equity Interests (other than Equity Interests (or
Disqualified Stock or convertible debt securities) sold to a Subsidiary of the
Company), plus (iii) to the extent that any Restricted Investment that was made
after the date hereof is sold for cash or otherwise liquidated or repaid for
cash, the lesser of (A) the cash return of capital with respect to such
Restricted Investment (less the cost of disposition, if any) and (B) the initial
amount of such Restricted Investment, plus (iv) $5.0 million.
The foregoing provisions shall not prohibit (i) the payment of
any dividend within 60 days after the date of declaration thereof, if at said
date of declaration such payment would have complied with the provisions of this
Indenture; (ii) the redemption, repurchase, retirement, defeasance or other
acquisition of any pari passu or subordinated Indebtedness or Equity Interests
of the Company in exchange for, or out of the net cash proceeds of the
substantially concurrent sale (other than to a Subsidiary of the Company) of,
other Equity Interests of the Company (other than any Disqualified Stock);
provided that the amount of any such net cash proceeds that are utilized for any
such redemption, repurchase, retirement, defeasance or other acquisition shall
be excluded from clause (c) (ii) of the immediately preceding paragraph; (iii)
the defeasance, redemption, repurchase or other acquisition of pari passu or
subordinated Indebtedness with the net cash proceeds from an incurrence of
Permitted Refinancing Indebtedness; (iv) the payment of any dividend by a
Subsidiary of the Company to the holders of its common Equity Interests on a pro
rata basis; and (v) the repurchase, redemption or other acquisition or
retirement for value of any Equity Interests of the Company or any Subsidiary of
the Company held by any member of the Company's (or any of its Subsidiaries')
management pursuant to any management equity subscription agreement or stock
option agreement in effect as of the date hereof or entered into after the
Closing Date with members of the
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<PAGE> 44
management of any Person acquired after the Closing Date in connection with the
acquisition of such Person or the repurchase of Equity Interests of the Company
or any Subsidiary of the Company held by employees, former employees, directors
or former directors pursuant to the terms of agreements (including employment
agreements) approved by the Board of Directors; provided that the aggregate
price paid for all such repurchased, redeemed, acquired or retired Equity
Interests shall not exceed $500,000 in any twelve-month period and no Default or
Event of Default shall have occurred and be continuing immediately after any
such transaction; (vi) payments to Holdings in an amount not to exceed the
amount of the Company's federal and state income tax liability that the Company
would owe if it were filing a separate income tax return as a stand alone
company (or, if there are any subsidiaries of the Company, the amount of the
federal and state income tax liability for which the Company and such
subsidiaries would be liable if the Company and such subsidiaries were filing a
separate consolidated (or combined) income tax return) plus $100,000; provided,
that any such payment shall not exceed the tax liability of Holdings that is
actually then due and payable; (vii) loans, advances, dividends or distributions
by the Company or any of its Subsidiaries to Holdings to pay for corporate,
administrative and operating expenses in the ordinary course of business,
including payment of directors' and officers liability insurance premiums,
directors' fees, and fees, expenses and indemnities in connection with the
Transactions, in an aggregate amount not to exceed $250,000 in any fiscal year;
and (viii) (A) loans, advances, dividends or distributions by the Company or any
of its Subsidiaries to Holdings not to exceed an amount necessary to permit
Holdings to pay (1) its costs (including all professional fees and expenses)
incurred to comply with its reporting obligations under federal or state laws or
in connection with reporting or other obligations under the New Credit Facility
or any related collateral documents or guarantees, (2) its expenses incurred in
connection with any public offering of equity securities which has been
terminated by the board of directors of Holdings, the net proceeds of which were
specifically intended to be received by or contributed or loaned to the Company
as evidenced by a resolution of the Board of Directors of Holdings and (B) loans
or advances by the Company or any of its Subsidiaries to Holdings not to exceed
an amount necessary to permit Holdings to pay its interim expenses incurred in
connection with any public offering of equity securities the net proceeds of
which are specifically intended to be received by or contributed or loaned to
the Company, which, unless such offering shall have been terminated by the board
of directors of Holdings shall be repaid to the Company promptly out of the
proceeds of such offering; provided, that no Default or Event of Default shall
have occurred and be continuing immediately after any of the foregoing payments.
The amount of all Restricted Payments (other than cash) shall
be the fair market value on the date of the Restricted Payment of the asset(s)
or securities proposed to be transferred or issued by the Company or such
Subsidiary, as the case may be, pursuant to the Restricted Payment. The fair
market value of any non-cash Restricted Payment shall be determined by the Board
of Directors whose resolution with respect thereto shall be delivered to the
Trustee, such determination to be based upon an opinion or appraisal issued by
an accounting, appraisal or investment banking firm of national standing if such
fair market value exceeds $1.0 million. Not later than the date of making any
Restricted Payment, the Company shall deliver to the Trustee an Officers'
Certificate stating that such Restricted Payment is permitted and setting forth
the basis upon which the calculations required by this Section 4.07 were
computed, together with a copy of any fairness opinion or appraisal required by
this Indenture.
SECTION 4.08. DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING
SUBSIDIARIES.
The Company shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any encumbrance or restriction on the ability of any
Subsidiary to (a)(i) pay dividends or make any other distributions to the
Company or any of its Subsidiaries (A) on its Capital Stock or (B) with respect
to any other interest or participation in, or measured by, its profits or (ii)
pay any indebtedness owed to the Company or any of its Subsidiaries, (b)
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<PAGE> 45
make loans or advances to the Company or any of its Subsidiaries or (c) transfer
any of its properties or assets to the Company or any of its Subsidiaries.
However, the foregoing restrictions will not apply to encumbrances or
restrictions existing under or by reason of (i) Existing Indebtedness as in
effect on the date hereof, (ii) the New Credit Facility as in effect on the date
hereof and any amendments, modifications, restatements, renewals, increases,
supplements, refundings, replacements or refinancings thereof, provided that
such amendments, modifications, restatements, renewals, increases, supplements,
refundings, replacements and refinancings are no more restrictive, taken as a
whole, with respect to such dividend and other payment restrictions than those
contained in the New Credit Facility as in effect on the date hereof, (iii) this
Indenture and the Notes, (iv) applicable law, (v) any instrument governing
Indebtedness or Capital Stock of a Person acquired by the Company or any of its
Subsidiaries as in effect at the time of such acquisition (except to the extent
such Indebtedness was incurred in connection with or in contemplation of such
acquisition), which encumbrance or restriction is not applicable to any Person,
or the properties or assets of any Person, other than the Person, or the
property or assets of the Person, so acquired, provided that in the case of
Indebtedness, such Indebtedness was permitted by the terms of hereof, (vi)
customary non-assignment provisions in leases entered into in the ordinary
course of business and consistent with past practices, (vii) purchase money
obligations for property acquired in the ordinary course of business that impose
restrictions of the nature described in clause (c) above on the property so
acquired, or (viii) any agreement for the sale of a Subsidiary that restricts
distributions by that Subsidiary pending its sale, (ix) Permitted Refinancing
Indebtedness, provided that the restrictions contained in the agreements
governing such Permitted Refinancing Indebtedness are no more restrictive, taken
as a whole, than those contained in the agreements governing the Indebtedness
being refinanced, (x) Liens securing Indebtedness otherwise permitted to be
incurred pursuant to the provisions of Section 4.12 hereof that limits the right
of the debtor to dispose of the assets securing such Indebtedness, (xi)
provisions with respect to the disposition or distribution of assets or property
in joint venture agreements and other similar agreements entered into in the
ordinary course of business and (xii) restrictions on cash or other deposits or
net worth imposed by customers under contracts entered into in the ordinary
course of business.
SECTION 4.09. INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK.
The Company shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee
or otherwise become directly or indirectly liable, contingently or otherwise,
with respect to (collectively, "incur") any Indebtedness (including Acquired
Debt) and the Company shall not issue any Disqualified Stock and shall not
permit any of its Subsidiaries to issue any shares of preferred stock; provided
that the Company may incur Indebtedness (including Acquired Debt) or issue
shares of Disqualified Stock if the Fixed Charge Coverage Ratio for the
Company's most recently ended four full fiscal quarters for which internal
financial statements are available immediately preceding the date on which such
additional Indebtedness is incurred or such Disqualified Stock is issued would
have been (A) on or prior to April 15, 2000, at least 2.0 to 1 and (B) after
April 15, 2000, 2.25 to 1; determined on a pro forma basis (including a pro
forma application of the net proceeds therefrom), as if the additional
Indebtedness had been incurred, or the Disqualified Stock had been issued, as
the case may be, at the beginning of such four-quarter period;
The Company shall not incur any Indebtedness that is
contractually subordinated in right of payment to any other Indebtedness of the
Company unless such Indebtedness is also contractually subordinated in right of
payment to the Notes on substantially identical terms; provided that no
Indebtedness of the Company shall be deemed to be contractually subordinated in
right of payment to any other Indebtedness of the Company solely by virtue of
being unsecured.
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<PAGE> 46
The provisions of the first paragraph of this covenant will
not apply to the incurrence of any of the following items of Indebtedness
(collectively, "Permitted Debt"):
(i) the incurrence by the Company of Indebtedness and letters
of credit pursuant to Credit Facilities; provided that the aggregate
principal amount of all Indebtedness and letters of credit (with
letters of credit being deemed to have a principal amount equal to the
maximum potential liability of the Company and its Subsidiaries
thereunder) outstanding under all Credit Facilities after giving effect
to such incurrence does not exceed an amount equal to $20.0 million
less the aggregate amount of all Net Proceeds of Asset Sales applied to
repay Indebtedness under a Credit Facility or a credit agreement
pursuant to Section 4.10 hereof;
(ii) the incurrence by the Company of the Existing Indebtedness;
(iii) the incurrence by the Company of Indebtedness represented
by the Notes and the Series B Notes;
(iv) the incurrence by the Company or any of its Subsidiaries of
Indebtedness represented by Capital Lease Obligations, mortgage
financings or purchase money obligations, in each case incurred for the
purpose of financing all or any part of the purchase price or cost of
construction or improvement of property, plant or equipment used in the
business of the Company or such Subsidiary, in an aggregate principal
amount not to exceed 5% of total assets;
(v) the incurrence by the Company or any of its Subsidiaries of
Permitted Refinancing Indebtedness in exchange for, or the net proceeds
of which are used to refund, refinance or replace Indebtedness (other
than intercompany Indebtedness) that was permitted by this Indenture to
be incurred under the first paragraph hereof or clauses (ii), (iii),
(iv) or (x) of this paragraph;
(vi) the incurrence by the Company or any of its Subsidiaries of
intercompany Indebtedness between or among the Company and any of its
Wholly Owned Subsidiaries; provided that (i) if the Company is the
obligor on such Indebtedness, such Indebtedness is expressly
subordinated to the prior payment in full in cash of all Obligations
with respect to the Notes and (ii)(A) any subsequent issuance or
transfer of Equity Interests that results in any such Indebtedness
being held by a Person other than the Company or a Subsidiary thereof
and (B) any sale or other transfer of any such Indebtedness to a Person
that is not either the Company or a Wholly Owned Subsidiary thereof
shall be deemed, in each case, to constitute an incurrence of such
Indebtedness by the Company or such Subsidiary, as the case may be,
that was not permitted by this clause (vi);
(vii) the incurrence by the Company or any of its Subsidiaries of
Hedging Obligations that are incurred for the purpose of fixing or
hedging interest rate risk with respect to any floating rate
Indebtedness that is permitted by the terms of this Indenture to be
outstanding;
(viii) the guarantee by the Company or any of the Guarantors of
Indebtedness of the Company or a Subsidiary of the Company that was
permitted to be incurred by another provision of Section 4.09;
(ix) Indebtedness of the Company or any of its Subsidiaries
represented by letters of credit or guarantees by or for the account of
the Company or such Subsidiary as the case may be, in each case, in
order to provide security for workers' compensation claims, payment
obligations in connection with self-insurance or similar requirements
in the ordinary course of business;
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<PAGE> 47
(x) Acquired Debt of a Subsidiary, which Subsidiary was
acquired after the Closing Date and which Acquired Debt was in
existence at the time of acquisition of such Subsidiary, and not
incurred in contemplation of such acquisition, if such Acquired
Indebtedness is Non-Recourse Debt (except with respect to such
Subsidiary and its Subsidiaries) and such Acquired Debt does not exceed
$5.0 million in the aggregate outstanding at any time;
(xi) Indebtedness in the form of holdback notes or deferred
purchase price in connection with an acquisition in an amount not to
exceed the lesser of $5.0 million or 20% of the purchase price at any
time outstanding;
(xii) Indebtedness arising from agreements of the Company or a
Subsidiary of the Company providing for indemnification, adjustment of
purchase price or similar obligations, in each case, incurred in
connection with the disposition of any business, assets or subsidiary,
other than guarantees of Indebtedness incurred by any Person acquiring
all or any portion of such business, assets or subsidiary for the
purpose of financing such acquisition; provided that the maximum
aggregate liability in respect of all such Indebtedness shall at no
time exceed the gross proceeds actually received by the Company in
connection with such disposition;
(xiii) Obligations in respect of performance bonds and completion
guarantees provided by the Company or any Subsidiary of the Company in
the ordinary course of business;
(xiv) the incurrence by the Company or any of its Subsidiaries of
additional Indebtedness in an aggregate principal amount (or accreted
value, as applicable) at any time outstanding, including all Permitted
Refinancing Indebtedness incurred to refund, refinance or replace any
Indebtedness incurred pursuant to this clause (xiv), not to exceed $5.0
million.
For purposes of determining compliance with this Section 4.09,
in the event that an item of Indebtedness meets the criteria of more than one of
the categories of Permitted Debt described in clauses (i) through (xiv) above or
is entitled to be incurred pursuant to the first paragraph of this Section 4.09,
the Company shall, in its sole discretion, classify such item of Indebtedness in
any manner that complies with this Section 4.09. Accrual of interest, accretion
or amortization of original issue discount, the payment of interest on any
Indebtedness in the form of additional Indebtedness with the same terms, and the
payment of dividends on Disqualified Stock in the form of additional shares of
the same class of Disqualified Stock will not be deemed to be an incurrence of
Indebtedness or an issuance of Disqualified Stock for purposes of this Section
4.07; provided, in each such case, that the amount thereof is included in Fixed
Charges of the Company as accrued.
SECTION 4.10. ASSET SALES.
The Company shall not, and shall not permit any of its
Subsidiaries to, consummate an Asset Sale unless (i) the Company (or the
Subsidiary, as the case may be) receives consideration at the time of such Asset
Sale at least equal to the fair market value (evidenced by a resolution of the
Board of Directors (whose determination, if made in good faith, shall be
conclusive) set forth in an Officers' Certificate delivered to the Trustee) of
the assets or Equity Interests issued or sold or otherwise disposed of and (ii)
at least 75% of the consideration therefor received by the Company or such
Subsidiary is in the form of cash; provided that the amount of (x) any
liabilities (as shown on the Company's or such Subsidiary's most recent balance
sheet) of the Company or any Subsidiary (other than contingent liabilities and
liabilities that are by their terms subordinated to the Notes) that are assumed
by the transferee of any such assets pursuant to a customary novation agreement
that releases the Company or such Subsidiary
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<PAGE> 48
from further liability and (y) any securities, notes or other obligations
received by the Company or any such Subsidiary from such transferee that are
contemporaneously (subject to ordinary settlement periods) converted by the
Company or such Subsidiary into cash (to the extent of the cash received), shall
be deemed to be cash for purposes of this provision.
Within 270 days after the receipt of any Net Proceeds from an
Asset Sale, the Company may apply such Net Proceeds at its option, (a) to
permanently reduce, repurchase, repay or redeem any Indebtedness (and other
amounts) under the New Credit Facility or any one or more successor or
additional Credit Facilities, or (b) to the acquisition of a majority of the
assets of, or a majority of the Voting Stock of, another Permitted Business, the
making of a capital expenditure or the acquisition of other long-term assets
that are used or useful in a Permitted Business. Pending the final application
of any such Net Proceeds, the Company may temporarily reduce revolving credit
borrowings or otherwise invest such Net Proceeds in any manner that is not
prohibited by this Indenture. Any Net Proceeds from Asset Sales that are not
applied or invested as provided in the first sentence of this paragraph will be
deemed to constitute "Excess Proceeds." When the aggregate amount of Excess
Proceeds exceeds $5.0 million, the Company shall commence a pro rata Asset Sale
Offer pursuant to Section 3.09 hereof to purchase the maximum principal amount
of Notes and such other Indebtedness that may be purchased out of the Excess
Proceeds, at an offer price in cash in an amount equal to 100% of the principal
amount thereof plus accrued and unpaid interest and Liquidated Damages thereon,
if any, to the date of purchase, in accordance with the procedures set forth in
Section 3.09 hereof. To the extent that any Excess Proceeds remain after
consummation of an Asset Sale Offer, the Company may use such Excess Proceeds
for any purpose not otherwise prohibited by the Indenture. If the aggregate
principal amount of Notes and such other Indebtedness tendered into such Asset
Sale Offer surrendered by holders thereof exceeds the amount of Excess Proceeds,
the Trustee shall select the Notes and such other Indebtedness to be purchased
on a pro rata basis. Upon completion of such offer to purchase, the amount of
Excess Proceeds shall be reset at zero.
SECTION 4.11. TRANSACTIONS WITH AFFILIATES.
The Company shall not, and shall not permit any of its
Subsidiaries to make any payment to, or sell, lease, transfer or otherwise
dispose of any of its properties or assets to, or purchase any property or
assets from, or enter into or make or amend any transaction, contract,
agreement, understanding, loan, advance or guarantee with, or for the benefit
of, any Affiliate (each of the foregoing, an "Affiliate Transaction"), unless
(a) such Affiliate Transaction is on terms that are no less favorable to the
Company or the relevant Subsidiary than those that would have been obtained in a
comparable transaction by the Company or such Subsidiary with an unrelated
Person and (b) the Company delivers to the Trustee (i) with respect to any
Affiliate Transaction or series of related Affiliated Transactions involving
aggregate consideration in excess of $1 million, a resolution of the Board of
Directors set forth in an Officers' Certificate certifying that such Affiliate
Transaction complies with clause (a) above and that such Affiliate Transaction
has been approved by a majority of the disinterested members of the Board of
Directors and (ii) with respect to any Affiliate Transaction or series of
related Affiliated Transactions involving aggregate consideration in excess of
$5 million, an opinion as to the fairness to the holders of the Notes of such
Affiliate Transaction from a financial point of view issued by an accounting,
appraisal or investment banking firm of national standing. Notwithstanding the
foregoing, the following shall not be deemed Affiliate Transactions: (i) any
employment agreement entered into by the Company or any of its Subsidiaries in
the ordinary course of business and consistent with the past practice of the
Company or such Subsidiary, (ii) transactions between or among the Company
and/or its Subsidiaries, (iii) payment of reasonable directors fees to Persons
who are not otherwise Affiliates of the Company, (iv) Restricted Payments that
are permitted by Section 4.09, (v) the payment to CGW Southeast Management III,
L.L.C.
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<PAGE> 49
or its designees of the Investment Banking Fee, and (vi) the payment to CGW
Southeast III, L.L.C. or its designees of the Management Fee.
SECTION 4.12. LIENS.
The Company shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly create, incur, assume or suffer to exist
any Lien securing Indebtedness and trade payables on any asset now owned or
hereafter acquired, or any income or profits therefrom or assign or convey any
right to receive income therefrom, except Permitted Liens.
SECTION 4.13. CORPORATE EXISTENCE.
Subject to Article 5 hereof, the Company shall do or cause to
be done all things necessary to preserve and keep in full force and effect (i)
its corporate existence, and the corporate, partnership or other existence of
each of its Subsidiaries, in accordance with the respective organizational
documents (as the same may be amended from time to time) of the Company or any
such Subsidiary and (ii) the rights (charter and statutory), licenses and
franchises of the Company and its Subsidiaries; provided, however, that the
Company shall not be required to preserve any such right, license or franchise,
or the corporate, partnership or other existence of any of its Subsidiaries, if
the Board of Directors shall determine that the preservation thereof is no
longer desirable in the conduct of the business of the Company and its
Subsidiaries, taken as a whole, and that the loss thereof is not adverse in any
material respect to the Holders of the Notes.
SECTION 4.14. OFFER TO REPURCHASE UPON CHANGE OF CONTROL.
(a) Upon the occurrence of a Change of Control, the Company shall make
an offer (a "Change of Control Offer") to each Holder to repurchase all or any
part (equal to $1,000 or an integral multiple thereof) of each Holder's Notes at
a purchase price equal to 101% of the aggregate principal amount thereof plus
accrued and unpaid interest and Liquidated Damages thereon, if any, to the date
of purchase (the "Change of Control Payment"). Within 10 days following any
Change of Control, the Company shall mail a notice to each Holder stating: (1)
that the Change of Control Offer is being made pursuant to this Section 4.14 and
that all Notes tendered will be accepted for payment; (2) the purchase price and
the purchase date, which shall be no later than 30 business days from the date
such notice is mailed (the "Change of Control Payment Date"); (3) that any Note
not tendered will continue to accrue interest; (4) that, unless the Company
defaults in the payment of the Change of Control Payment, all Notes accepted for
payment pursuant to the Change of Control Offer shall cease to accrue interest
after the Change of Control Payment Date; (5) that Holders electing to have any
Notes purchased pursuant to a Change of Control Offer will be required to
surrender the Notes, with the form entitled "Option of Holder to Elect Purchase"
on the reverse of the Notes completed, to the Paying Agent at the address
specified in the notice prior to the close of business on the third Business Day
preceding the Change of Control Payment Date; (6) that Holders will be entitled
to withdraw their election if the Paying Agent receives, not later than the
close of business on the second Business Day preceding the Change of Control
Payment Date, a telegram, telex, facsimile transmission or letter setting forth
the name of the Holder, the principal amount of Notes delivered for purchase,
and a statement that such Holder is withdrawing his election to have the Notes
purchased; and (7) that Holders whose Notes are being purchased only in part
will be issued new Notes equal in principal amount to the unpurchased portion of
the Notes surrendered, which unpurchased portion must be equal to $1,000 in
principal amount or an integral multiple thereof. The Company shall comply with
the requirements of Rule 14e-1 under the Exchange Act and any other
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<PAGE> 50
securities laws and regulations thereunder to the extent such laws and
regulations are applicable in connection with the repurchase of Notes in
connection with a Change of Control.
(b) On the Change of Control Payment Date, the Company shall, to the
extent lawful, (1) accept for payment all Notes or portions thereof properly
tendered pursuant to the Change of Control Offer, (2) deposit with the Paying
Agent an amount equal to the Change of Control Payment in respect of all Notes
or portions thereof so tendered and (3) deliver or cause to be delivered to the
Trustee the Notes so accepted together with an Officers' Certificate stating the
aggregate principal amount of Notes or portions thereof being purchased by the
Company. The Paying Agent shall promptly mail to each Holder of Notes so
tendered the Change of Control Payment for such Notes, and the Trustee shall
promptly authenticate and mail (or cause to be transferred by book entry) to
each Holder a Series B Note equal in principal amount to any unpurchased portion
of the Notes surrendered by such Holder, if any; provided, that each such Series
B Note shall be in a principal amount of $1,000 or an integral multiple thereof.
The Company shall publicly announce the results of the Change of Control Offer
on or as soon as practicable after the Change of Control Payment Date.
SECTION 4.15. LIMITATION ON ISSUANCES AND SALES OF CAPITAL STOCK OF WHOLLY
OWNED SUBSIDIARIES.
The Company (i) shall not, and shall not permit any Wholly
Owned Subsidiary of the Company to, transfer, convey, sell, lease or otherwise
dispose of any Capital Stock of any Wholly Owned Subsidiary of the Company to
any Person (other than the Company or a Wholly Owned Subsidiary of the Company),
unless (a) such transfer, conveyance, sale, lease or other disposition is of all
the Equity Interests of such Wholly Owned Subsidiary and (b) the cash Net
Proceeds from such transfer, conveyance, sale, lease or other disposition are
applied in accordance with Section 4.10 hereof and (ii) will not permit any
Wholly Owned Subsidiary of the Company to issue any of its Equity Interests
(other than, if necessary, shares of its Capital Stock constituting directors'
qualifying shares) to any Person other than to the Company or a Wholly Owned
Subsidiary of the Company.
SECTION 4.16. LIMITATION ON ISSUANCES OF GUARANTEES OF INDEBTEDNESS.
The Company shall not permit any Domestic Subsidiary, directly
or indirectly, to Guarantee or pledge any assets to secure the payment of any
other Indebtedness of the Company unless such Domestic Subsidiary simultaneously
executes and delivers a supplemental indenture to this Indenture in
substantially the form of Exhibit E hereto providing for the Guarantee of the
payment of the Notes by such Domestic Subsidiary, which Guarantee shall be
senior to or pari passu with such Domestic Subsidiary's Guarantee of or pledge
to secure such other Indebtedness. Notwithstanding the foregoing, in the event
of a sale or other disposition of all of the assets of any such Guarantor by way
of merger, consolidation or otherwise, or a sale or other disposition of all of
the capital stock of any such Guarantor, then such Guarantor (in the event of a
sale or other disposition, by way of such a merger, consolidation or otherwise,
of all of the capital stock of such Guarantor) or the corporation acquiring the
property (in the event of a sale or other disposition of all of the assets of
such Guarantor) will be released and relieved of any obligations under its
Subsidiary Guarantee; provided that the Net Proceeds of such sale or other
disposition are applied in accordance with Section 4.10 (other than in the case
of a sale from such a Guarantor to the Company or a Subsidiary of the Company).
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<PAGE> 51
SECTION 4.17. PAYMENTS FOR CONSENT.
Neither the Company nor any of its Subsidiaries shall,
directly or indirectly, pay or cause to be paid any consideration, whether by
way of interest, fee or otherwise, to any Holder of any Notes for or as an
inducement to any consent, waiver or amendment of any of the terms or provisions
of the Indenture or the Notes unless such consideration is offered to be paid or
is paid to all Holders of the Notes that consent, waive or agree to amend in the
time frame set forth in the solicitation documents relating to such consent,
waiver or agreement.
ARTICLE 5.
SUCCESSORS
SECTION 5.01. MERGER, CONSOLIDATION, OR SALE OF ASSETS.
The Company shall not consolidate or merge with or into
(whether or not the Company is the surviving corporation) or sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of its
properties or assets in one or more related transactions to another corporation,
Person or entity unless (i) the Company is the surviving corporation or the
entity or the Person formed by or surviving any such consolidation or merger (if
other than the Company) or to which such sale, assignment, transfer, lease,
conveyance or other disposition shall have been made is a corporation organized
or existing under the laws of the United States, any state thereof or the
District of Columbia, (ii) the entity or Person formed by or surviving any such
consolidation or merger (if other than the Company) or the entity or Person to
which such sale, assignment, transfer, lease, conveyance or other disposition
shall have been made assumes all the obligations of the Company under the
Registration Rights Agreement, the Notes and this Indenture pursuant to a
supplemental indenture in a form reasonably satisfactory to the Trustee, (iii)
immediately after such transaction, no Default or Event of Default exists and
(iv) except in the case of a merger of the Company with or into a Wholly Owned
Subsidiary of the Company, the Company or the entity or Person formed by or
surviving any such consolidation or merger (if other than the Company), or to
which such sale, assignment, transfer, lease, conveyance or other disposition
shall have been made (A) shall have Consolidated Net Worth (immediately after
the transaction) equal to or greater than the Consolidated Net Worth of the
Company immediately preceding the transaction and (B) shall, at the time of such
transaction and after giving pro forma effect thereto as if such transaction had
occurred at the beginning of the applicable four-quarter period, be permitted to
incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge
Coverage Ratio test set forth in the first paragraph of Section 4.09 hereof;
provided, however, that neither this Section 5.01 nor any other provision of
this Indenture shall prohibit or otherwise restrict the merger of the Company
with and into SIMCALA, Inc., a Delaware corporation ("SIMCALA"), with SIMCALA
being the surviving corporation.
SECTION 5.02. SUCCESSOR CORPORATION SUBSTITUTED.
Upon any consolidation or merger, or any sale, assignment,
transfer, lease, conveyance or other disposition of all or substantially all of
the assets of the Company in accordance with Section 5.01 hereof, the successor
corporation formed by such consolidation or into or with which the Company is
merged or to which such sale, assignment, transfer, lease, conveyance or other
disposition is made shall succeed to, and be substituted for (so that from and
after the date of such consolidation, merger, sale, lease, conveyance or other
disposition, the provisions of this Indenture referring to the "Company" shall
refer instead to the successor corporation and not to the Company), and may
exercise every right and power of the Company under this Indenture with the same
effect as if such successor Person had been named as the Company herein;
provided, however, that the predecessor Company shall not be relieved from the
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<PAGE> 52
obligation to pay the principal of and interest on the Notes except in the case
of a sale of all of the Company's assets that meets the requirements of Section
5.01 hereof.
ARTICLE 6.
DEFAULTS AND REMEDIES
SECTION 6.01. EVENTS OF DEFAULT.
An "Event of Default" occurs if:
(a) the Company defaults in the payment when due of interest on, or
Liquidated Damages with respect to, the Notes and such default continues for a
period of 30 days;
(b) the Company defaults in the payment when due of principal of or
premium, if any, on the Notes when the same becomes due and payable at maturity,
upon redemption (including in connection with an offer to purchase) or
otherwise;
(c) the Company fails to comply with any of the provisions of Section
4.07, 4.09, 4.10 or 5.01 hereof;
(c) the Company fails to observe or perform any other covenant,
representation, warranty or other agreement in this Indenture or the Notes for
60 days after notice to the Company by the Trustee or the Holders of at least
25% in aggregate principal amount of the Notes then outstanding voting as a
single class;
(e) a default occurs under any mortgage, indenture or instrument
under which there may be issued or by which there may be secured or evidenced
any Indebtedness for money borrowed by the Company or any of its Subsidiaries
(or the payment of which is guaranteed by the Company or any of its
Subsidiaries), whether such Indebtedness or guarantee now exists, or is created
after the date of this Indenture, which default (a) is caused by a failure to
pay principal of or premium, if any, or interest on such indebtedness prior to
the expiration of the grace period provided in such Indebtedness on the date of
such default (a "Payment Default") or (b) results in the acceleration of such
Indebtedness prior to its express maturity and, in each case, the principal
amount of any such Indebtedness, together with the principal amount of any such
Indebtedness under which there has been a Payment Default or the maturity of
which has been so accelerated, aggregates $5.0 million or more;
(f) a final judgment or final judgments for the payment of money are
entered by a court or courts of competent jurisdiction against the Company or
any of its Significant Subsidiaries or any group of Subsidiaries that, taken as
a whole, would constitute a Significant Subsidiary and such judgment or
judgments remain unpaid, unbonded or undischarged for a period (during which
execution shall not be effectively stayed) of 60 days, provided that the
aggregate of all such undischarged judgments not covered by insurance exceeds
$5.0 million;
(g) the Company or any of its Significant Subsidiaries or any group of
Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary
pursuant to or within the meaning of Bankruptcy Law:
(i) commences a voluntary case,
(ii) consents to the entry of an order for relief against it in an
involuntary case,
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(iii) consents to the appointment of a custodian of it or for all
or substantially all of its property, or
(iv) makes a general assignment for the benefit of its creditors;
or
(h) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
(i) is for relief against the Company or any of its Significant
Subsidiaries or any group of Subsidiaries that, taken as a whole, would
constitute a Significant Subsidiary in an involuntary case;
(ii) appoints a custodian of the Company or any of its
Significant Subsidiaries or any group of Subsidiaries that, taken as a
whole, would constitute a Significant Subsidiary or for all or
substantially all of the property of the Company or any of its
Significant Subsidiaries or any group of Subsidiaries that, taken as a
whole, would constitute a Significant Subsidiary; or
(iii) orders the liquidation of the Company or any of its
Significant Subsidiaries or any group of Subsidiaries that, taken as a
whole, would constitute a Significant Subsidiary;
and the order or decree remains unstayed and in effect for 60 consecutive
days; or
(i) except as permitted by this Indenture, any Subsidiary Guarantee
issued by a Significant Subsidiary is held in any judicial proceeding to be
unenforceable or invalid or shall cease for any reason to be in full force and
effect or any Guarantor that is a Significant Subsidiary, or any Person acting
on behalf of any Guarantor that is a Significant Subsidiary, shall deny or
disaffirm its obligations under such Guarantor's Subsidiary Guarantee.
SECTION 6.02. ACCELERATION.
If any Event of Default (other than an Event of Default
specified in clause (g) or (h) of Section 6.01 hereof with respect to the
Company, any Significant Subsidiary or any group of Significant Subsidiaries
that, taken as a whole, would constitute a Significant Subsidiary) occurs and is
continuing, the Trustee or the Holders of at least 25% in principal amount of
the then outstanding Notes may declare all the Notes to be due and payable
immediately. Notwithstanding the foregoing, if an Event of Default specified in
clause (g) or (h) of Section 6.01 hereof occurs with respect to the Company, any
of its Significant Subsidiaries or any group of Subsidiaries that, taken as a
whole, would constitute a Significant Subsidiary, all outstanding Notes shall be
due and payable immediately without further action or notice. The Holders of a
majority in aggregate principal amount of the then outstanding Notes by written
notice to the Trustee may on behalf of all of the Holders rescind an
acceleration and its consequences if the rescission would not conflict with any
judgment or decree and if all existing Events of Default (except nonpayment of
principal, interest or premium that has become due solely because of the
acceleration) have been cured or waived.
If an Event of Default occurs on or after April 15, 2002 by
reason of any willful action (or inaction) taken (or not taken) by or on behalf
of the Company with the intention of avoiding payment of the premium that the
Company would have had to pay if the Company then had elected to redeem the
Notes pursuant to Section 3.07 hereof, then, upon acceleration of the Notes, an
equivalent premium shall also become and be immediately due and payable, to the
extent permitted by law, anything in this Indenture or in the Notes to the
contrary notwithstanding. If an Event of Default occurs prior to April 15, 2002
by reason of any willful action (or inaction) taken (or not taken) by or on
behalf of the Company with the
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<PAGE> 54
intention of avoiding the prohibition on redemption of the Notes prior to such
date, then, upon acceleration of the Notes, an additional premium shall also
become and be immediately due and payable in an amount, for each of the years
beginning on April 15 of the years set forth below, as set forth below
(expressed as a percentage of the amount that would otherwise be due but for the
provisions of this paragraph, plus accrued interest, if any, to the date of
payment):
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
1998.......................................................................109.6250%
1999.......................................................................108.4219%
2000.......................................................................107.2188%
2001.......................................................................106.0156%
</TABLE>
SECTION 6.03. OTHER REMEDIES.
If an Event of Default occurs and is continuing, the Trustee
may pursue any available remedy to collect the payment of principal, premium, if
any, and interest on the Notes or to enforce the performance of any provision of
the Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not
possess any of the Notes or does not produce any of them in the proceeding. A
delay or omission by the Trustee or any Holder of a Note in exercising any right
or remedy accruing upon an Event of Default shall not impair the right or remedy
or constitute a waiver of or acquiescence in the Event of Default. All remedies
are cumulative to the extent permitted by law.
SECTION 6.04. WAIVER OF PAST DEFAULTS.
Holders of not less than a majority in aggregate principal
amount of the then outstanding Notes by notice to the Trustee may on behalf of
the Holders of all of the Notes waive an existing Default or Event of Default
and its consequences hereunder, except a continuing Default or Event of Default
in the payment of the principal of, premium and Liquidated Damages, if any, or
interest on, the Notes (including in connection with an offer to purchase)
(provided, however, that the Holders of a majority in aggregate principal amount
of the then outstanding Notes may rescind an acceleration and its consequences,
including any related payment default that resulted from such acceleration).
Upon any such waiver, such Default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been cured for every purpose
of this Indenture; but no such waiver shall extend to any subsequent or other
Default or impair any right consequent thereon.
SECTION 6.05. CONTROL BY MAJORITY.
Holders of a majority in principal amount of the then
outstanding Notes may direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee or exercising any
trust or power conferred on it. However, the Trustee may refuse to follow any
direction that conflicts with law or this Indenture that the Trustee determines
may be unduly prejudicial to the rights of other Holders of Notes or that may
involve the Trustee in personal liability.
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SECTION 6.06. LIMITATION ON SUITS.
No Holder of any Notes shall have any right to initiate a
preceeding, judicial or otherwise, with respect to this Indenture or the Notes,
or for the appointment of a receiver or trustee, or for any other remedy
hereunder, unless:
(a) such Holder of a Note gives to the Trustee written notice
of a continuing Event of Default;
(b) the Holders of at least 25% in principal amount of the
then outstanding Notes make a written request to the Trustee to pursue the
remedy;
(c) such Holder of a Note or Holders of Notes offer and, if
requested, provide to the Trustee indemnity satisfactory to the Trustee against
any loss, liability or expense;
(d) the Trustee does not comply with the request within 60
days after receipt of the request and the offer and, if requested, the provision
of indemnity; and
(e) during such 60-day period the Holders of a majority in
principal amount of the then outstanding Notes do not give the Trustee a
direction inconsistent with the request.
A Holder of a Note may not use this Indenture to prejudice the
rights of another Holder of a Note or to obtain a preference or priority over
another Holder of a Note.
SECTION 6.07. RIGHTS OF HOLDERS OF NOTES TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, the
right of any Holder of a Note to receive payment of principal, premium and
Liquidated Damages, if any, and interest on the Note, on or after the respective
due dates expressed in the Note (including in connection with an offer to
purchase), or to bring suit for the enforcement of any such payment on or after
such respective dates, shall not be impaired or affected without the consent of
such Holder.
SECTION 6.08. COLLECTION SUIT BY TRUSTEE.
If an Event of Default specified in Section 6.01(a) or (b)
occurs and is continuing, the Trustee is authorized to recover judgment in its
own name and as trustee of an express trust against the Company for the whole
amount of principal of, premium and Liquidated Damages, if any, and interest
remaining unpaid on the Notes and interest on overdue principal and, to the
extent lawful, interest and such further amount as shall be sufficient to cover
the costs and expenses of collection, including the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel.
SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM.
The Trustee is authorized to file such proofs of claim and
other papers or documents as may be necessary or advisable in order to have the
claims of the Trustee (including any claim for the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel) and
the Holders of the Notes allowed in any judicial proceedings relative to the
Company (or any other obligor upon the Notes), its creditors or its property and
shall be entitled and empowered to collect, receive and distribute any money or
other property payable or deliverable on any such claims and any custodian in
any such judicial proceeding is hereby authorized by each Holder to make such
payments to the Trustee, and in
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the event that the Trustee shall consent to the making of such payments directly
to the Holders, to pay to the Trustee any amount due to it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, and any other amounts due the Trustee under Section 7.07 hereof. To
the extent that the payment of any such compensation, expenses, disbursements
and advances of the Trustee, its agents and counsel, and any other amounts due
the Trustee under Section 7.07 hereof out of the estate in any such proceeding,
shall be denied for any reason, payment of the same shall be secured by a Lien
on, and shall be paid out of, any and all distributions, dividends, money,
securities and other properties that the Holders may be entitled to receive in
such proceeding whether in liquidation or under any plan of reorganization or
arrangement or otherwise. Nothing herein contained shall be deemed to authorize
the Trustee to authorize or consent to or accept or adopt on behalf of any
Holder any plan of reorganization, arrangement, adjustment or composition
affecting the Notes or the rights of any Holder, or to authorize the Trustee to
vote in respect of the claim of any Holder in any such proceeding.
SECTION 6.10. PRIORITIES.
If the Trustee collects any money pursuant to this Article, it
shall pay out the money in the following order:
First: to the Trustee, its agents and attorneys for amounts
due under Section 7.07 hereof, including payment of all compensation, expense
and liabilities incurred, and all advances made, by the Trustee and the costs
and expenses of collection;
Second: to Holders of Notes for amounts due and unpaid on the
Notes for principal, premium and Liquidated Damages, if any, and interest,
ratably, without preference or priority of any kind, according to the amounts
due and payable on the Notes for principal, premium and Liquidated Damages, if
any and interest, respectively; and
Third: to the Company or to such party as a court of competent
jurisdiction shall direct.
The Trustee may fix a record date and payment date for any
payment to Holders of Notes pursuant to this Section 6.10.
SECTION 6.11. UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under
this Indenture or in any suit against the Trustee for any action taken or
omitted by it as a Trustee, a court in its discretion may require the filing by
any party litigant in the suit of an undertaking to pay the costs of the suit,
and the court in its discretion may assess reasonable costs, including
reasonable attorneys' fees, against any party litigant in the suit, having due
regard to the merits and good faith of the claims or defenses made by the party
litigant. This Section does not apply to a suit by the Trustee, a suit by a
Holder of a Note pursuant to Section 6.07 hereof, or a suit by Holders of more
than 10% in principal amount of the then outstanding Notes.
ARTICLE 7.
TRUSTEE
SECTION 7.01. DUTIES OF TRUSTEE.
(a) If an Event of Default has occurred and is continuing, the Trustee
shall exercise such of the rights and powers vested in it by this Indenture, and
use the same degree of care and skill in its exercise, as a prudent man would
exercise or use under the circumstances in the conduct of his own affairs.
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(b) Except during the continuance of an Event of Default:
(i) the duties of the Trustee shall be determined solely by the
express provisions of this Indenture and the Trustee need perform only
those duties that are specifically set forth in this Indenture and no
others, and no implied covenants or obligations shall be read into this
Indenture against the Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements of
this Indenture. However, the Trustee shall examine the certificates and
opinions to determine whether or not they conform to the requirements
of this Indenture.
(c) The Trustee may not be relieved from liabilities for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(i) this paragraph does not limit the effect of paragraph (b) of
this Section;
(ii) the Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer, unless it is proved that
the Trustee was negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any action
it takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.05 hereof.
(d) Whether or not therein expressly so provided, every provision of
this Indenture that in any way relates to the Trustee is subject to paragraphs
(a), (b), and (c) of this Section.
(e) No provision of this Indenture shall require the Trustee to expend
or risk its own funds or incur any liability. The Trustee shall be under no
obligation to exercise any of its rights and powers under this Indenture at the
request of any Holders, unless such Holder shall have offered to the Trustee
security and indemnity satisfactory to it against any loss, liability or
expense.
(f) The Trustee shall not be liable for interest on any money received
by it except as the Trustee may agree in writing with the Company. Money held
in trust by the Trustee need not be segregated from other funds except to the
extent required by law.
SECTION 7.02. RIGHTS OF TRUSTEE.
(a) The Trustee may conclusively rely upon any document believed by it
to be genuine and to have been signed or presented by the proper Person. The
Trustee need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require an
Officers' Certificate or an Opinion of Counsel or both. The Trustee shall not be
liable for any action it takes or omits to take in good faith in reliance on
such Officers' Certificate or Opinion of Counsel. The Trustee may consult with
counsel and the written advice of such counsel or any Opinion of Counsel shall
be full and complete authorization and protection from liability in respect of
any action taken, suffered or omitted by it hereunder in good faith and in
reliance thereon.
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(c) The Trustee may act through its attorneys and agents and shall
not be responsible for the misconduct or negligence of any agent appointed with
due care.
(d) The Trustee shall not be liable for any action it takes or omits
to take in good faith that it believes to be authorized or within the rights or
powers conferred upon it by this Indenture.
(e) Unless otherwise specifically provided in this Indenture, any
demand, request, direction or notice from the Company shall be sufficient if
signed by an Officer of the Company.
(f) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction of
any of the Holders unless such Holders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and liabilities
that might be incurred by it in compliance with such request or direction.
SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may become
the owner or pledgee of Notes and may otherwise deal with the Company or any
Affiliate of the Company with the same rights it would have if it were not
Trustee. However, in the event that the Trustee acquires any conflicting
interest it must eliminate such conflict within 90 days, apply to the SEC for
permission to continue as trustee or resign. Any Agent may do the same with like
rights and duties. The Trustee is also subject to Sections 7.10 and 7.11 hereof.
SECTION 7.04. TRUSTEE'S DISCLAIMER.
The Trustee shall not be responsible for and makes no
representation as to the validity or adequacy of this Indenture or the Notes, it
shall not be accountable for the Company's use of the proceeds from the Notes or
any money paid to the Company or upon the Company's direction under any
provision of this Indenture, it shall not be responsible for the use or
application of any money received by any Paying Agent other than the Trustee,
and it shall not be responsible for any statement or recital herein or any
statement in the Notes or any other document in connection with the sale of the
Notes or pursuant to this Indenture other than its certificate of
authentication.
SECTION 7.05. NOTICE OF DEFAULTS.
If a Default or Event of Default occurs and is continuing and
if it is known to the Trustee, the Trustee shall mail to Holders of Notes a
notice of the Default or Event of Default within 90 days after it occurs. Except
in the case of a Default or Event of Default in payment of principal of,
premium, if any, or interest on any Note, the Trustee may withhold the notice if
and so long as a committee of its Responsible Officers in good faith determines
that withholding the notice is in the interests of the Holders of the Notes.
SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS OF THE NOTES.
Within 60 days after each May 15 beginning with the May 15
following the date of this Indenture, and for so long as Notes remain
outstanding, the Trustee shall mail to the Holders of the Notes a brief report
dated as of such reporting date that complies with TIA ss. 313(a) (but if no
event described in TIA ss. 313(a) has occurred within the twelve months
preceding the reporting date, no report need be transmitted). The Trustee also
shall comply with TIA ss. 313(b)(2). The Trustee shall also transmit by mail all
reports as required by TIA ss. 313(c).
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A copy of each report at the time of its mailing to the
Holders of Notes shall be mailed to the Company and filed with the SEC and each
stock exchange on which the Notes are listed in accordance with TIA ss. 313(d).
The Company shall promptly notify the Trustee when the Notes are listed on any
stock exchange.
SECTION 7.07. COMPENSATION AND INDEMNITY.
The Company shall pay to the Trustee from time to time
reasonable compensation for its acceptance of this Indenture and services
hereunder. The Trustee's compensation shall not be limited by any law on
compensation of a trustee of an express trust. The Company shall reimburse the
Trustee promptly upon request for all reasonable disbursements, advances and
expenses incurred or made by it in addition to the compensation for its
services. Such expenses shall include the reasonable compensation, disbursements
and expenses of the Trustee's agents and counsel.
The Company shall indemnify the Trustee against any and all
losses, liabilities or expenses incurred by it arising out of or in connection
with the acceptance or administration of its duties under this Indenture,
including the costs and expenses of enforcing this Indenture against the Company
(including this Section 7.07) and defending itself against any claim (whether
asserted by the Company or any Holder or any other person) or liability in
connection with the exercise or performance of any of its powers or duties
hereunder, except to the extent any such loss, liability or expense may be
attributable to its negligence or bad faith. The Trustee shall notify the
Company promptly of any claim for which it may seek indemnity. Failure by the
Trustee to so notify the Company shall not relieve the Company of its
obligations hereunder. The Company may, at its option, defend the claim and the
Trustee shall cooperate in the defense. If the Company chooses not to defend
such claim, the Trustee may have separate counsel and the Company shall pay the
reasonable fees and expenses of such counsel. The Company need not pay for any
settlement made without its consent, which consent shall not be unreasonably
withheld.
The obligations of the Company under this Section 7.07 shall
survive the satisfaction and discharge of this Indenture.
To secure the Company's payment obligations in this Section,
the Trustee shall have a Lien prior to the Notes on all money or property held
or collected by the Trustee, except that held in trust to pay principal and
interest on particular Notes. Such Lien shall survive the satisfaction and
discharge of this Indenture.
When the Trustee incurs expenses or renders services after an
Event of Default specified in Section 6.01(g) or (h) hereof occurs, the expenses
and the compensation for the services (including the fees and expenses of its
agents and counsel) are intended to constitute expenses of administration under
any Bankruptcy Law.
The Trustee shall comply with the provisions of TIA ss.
313(b)(2) to the extent applicable.
SECTION 7.08. REPLACEMENT OF TRUSTEE.
A resignation or removal of the Trustee and appointment of a
successor Trustee shall become effective only upon the successor Trustee's
acceptance of appointment as provided in this Section.
The Trustee may resign in writing at any time and be
discharged from the trust hereby created by so notifying the Company. The
Holders of Notes of a majority in principal amount of the then outstanding Notes
may remove the Trustee by so notifying the Trustee and the Company in writing;
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provided that each Holder seeking removal of the Trustee has been a bona fide
Holder of the aggregate principal amount of the Notes such Holder is voting for
removal of the Trustee for at least six months. The Company may remove the
Trustee if:
(a) the Trustee fails to comply with Section 7.10 hereof;
(b) the Trustee is adjudged a bankrupt or an insolvent or an order for
relief is entered with respect to the Trustee under any Bankruptcy Law;
(c) a custodian or public officer takes charge of the Trustee or its
property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in
the office of Trustee for any reason, the Company shall promptly appoint a
successor Trustee. Within one year after the successor Trustee takes office, the
Holders of a majority in principal amount of the then outstanding Notes may
appoint a successor Trustee to replace the successor Trustee appointed by the
Company; provided that the successor Trustee appointed by the Holders is
reasonably acceptable to the Company.
If a successor Trustee does not take office within 60 days
after the retiring Trustee resigns or is removed, the retiring Trustee, the
Company, or the Holders of Notes of at least 10% in principal amount of the then
outstanding Notes may petition any court of competent jurisdiction for the
appointment of a successor Trustee.
If the Trustee, after written request by any Holder of a Note
who has been a Holder of a Note for at least six months, fails to comply with
Section 7.10, such Holder of a Note may petition any court of competent
jurisdiction for the removal of the Trustee and the appointment of a successor
Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon, the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Holders of the Notes. The retiring Trustee shall promptly transfer
all property held by it as Trustee to the successor Trustee, provided all sums
owing to the Trustee hereunder have been paid and subject to the Lien provided
for in Section 7.07 hereof. Notwithstanding replacement of the Trustee pursuant
to this Section 7.08, the Company's obligations under Section 7.07 hereof shall
continue for the benefit of the retiring Trustee.
SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates, merges or converts into, or
transfers all or substantially all of its corporate trust business to, another
corporation, the successor corporation without any further act shall be the
successor Trustee.
SECTION 7.10. ELIGIBILITY; DISQUALIFICATION.
There shall at all times be a Trustee hereunder that is a
corporation organized and doing business under the laws of the United States of
America or of any state thereof that is authorized under such laws to exercise
corporate trustee power, that is subject to supervision or examination by
federal or state authorities and that has a combined capital and surplus of at
least $100 million as set forth in its most recent published annual report of
condition.
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This Indenture shall always have a Trustee who satisfies the
requirements of TIA ss. 310(a)(1), (2) and (5). The Trustee is subject to TIA
ss. 310(b).
SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.
The Trustee is subject to TIA ss. 311(a), excluding any
creditor relationship listed in TIA ss. 311(b). A Trustee who has resigned or
been removed shall be subject to TIA ss. 311(a) to the extent indicated therein.
ARTICLE 8.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SECTION 8.01. OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT DEFEASANCE.
The Company may, at the option of its Board of Directors
evidenced by a resolution set forth in an Officers' Certificate, at any time,
elect to have either Section 8.02 or 8.03 hereof be applied to all outstanding
Notes upon compliance with the conditions set forth below in this Article Eight.
SECTION 8.02. LEGAL DEFEASANCE AND DISCHARGE.
Upon the Company's exercise under Section 8.01 hereof of the
option applicable to this Section 8.02, the Company shall, subject to the
satisfaction of the conditions set forth in Section 8.04 hereof, be deemed to
have been discharged from its obligations with respect to all outstanding Notes
on the date the conditions set forth below are satisfied (hereinafter, "Legal
Defeasance"). For this purpose, Legal Defeasance means that the Company shall be
deemed to have paid and discharged the entire Indebtedness represented by the
outstanding Notes, which shall thereafter be deemed to be "outstanding" only for
the purposes of Section 8.05 hereof and the other Sections of this Indenture
referred to in (a) and (b) below, and to have satisfied all its other
obligations under such Notes and this Indenture (and the Trustee, on demand of
and at the expense of the Company, shall execute proper instruments
acknowledging the same), except for the following provisions which shall survive
until otherwise terminated or discharged hereunder: (a) the rights of Holders of
outstanding Notes to receive solely from the trust fund described in Section
8.04 hereof, and as more fully set forth in such Section, payments in respect of
the principal of, premium and Liquidated Damages, if any, and interest on such
Notes when such payments are due, (b) the Company's obligations with respect to
such Notes under Article 2 and Section 4.02 hereof, (c) the rights, powers,
trusts, duties and immunities of the Trustee hereunder and the Company's
obligations in connection therewith and (d) this Article Eight. Subject to
compliance with this Article Eight, the Company may exercise its option under
this Section 8.02 notwithstanding the prior exercise of its option under Section
8.03 hereof.
SECTION 8.03. COVENANT DEFEASANCE.
Upon the Company's exercise under Section 8.01 hereof of the
option applicable to this Section 8.03, the Company shall, subject to the
satisfaction of the conditions set forth in Section 8.04 hereof, be released
from its obligations under the covenants contained in Sections 4.07, 4.08, 4.09,
4.10, 4.11, 4.12, 4.13, 4.15, 4.16 and 4.17 hereof with respect to the
outstanding Notes on and after the date the conditions set forth in Section 8.04
are satisfied (hereinafter, "Covenant Defeasance"), and the Notes shall
thereafter be deemed not "outstanding" for the purposes of any direction,
waiver, consent or declaration or act of Holders (and the consequences of any
thereof) in connection with such covenants, but shall continue to be deemed
"outstanding" for all other purposes hereunder (it being understood that such
Notes shall not be deemed outstanding for accounting purposes). For this
purpose, Covenant Defeasance means that, with
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respect to the outstanding Notes, the Company may omit to comply with and shall
have no liability in respect of any term, condition or limitation set forth in
any such covenant, whether directly or indirectly, by reason of any reference
elsewhere herein to any such covenant or by reason of any reference in any such
covenant to any other provision herein or in any other document and such
omission to comply shall not constitute a Default or an Event of Default under
Section 6.01 hereof, but, except as specified above, the remainder of this
Indenture and such Notes shall be unaffected thereby. In addition, upon the
Company's exercise under Section 8.01 hereof of the option applicable to this
Section 8.03 hereof, subject to the satisfaction of the conditions set forth in
Section 8.04 hereof, Sections 6.01(c) through 6.01(f) hereof shall not
constitute Events of Default.
SECTION 8.04. CONDITIONS TO LEGAL OR COVENANT DEFEASANCE.
The following shall be the conditions to the application of
either Section 8.02 or 8.03 hereof to the outstanding Notes:
(a) the Company must irrevocably deposit with the Trustee, in trust,
for the benefit of the Holders, cash in United States dollars, non-callable
Government Securities, or a combination thereof, in such amounts as will be
sufficient, in the opinion of a nationally recognized firm of independent public
accountants, to pay the principal of, premium and Liquidated Damages, if any,
and interest on the outstanding Notes on the stated date for payment thereof or
on the applicable redemption date, as the case may be;
(b) in the case of an election under Section 8.02 hereof, the Company
shall have delivered to the Trustee an Opinion of Counsel in the United States
reasonably acceptable to the Trustee confirming that (A) the Company has
received from, or there has been published by, the Internal Revenue Service a
ruling or (B) since the date of this Indenture, there has been a change in the
applicable federal income tax law, in either case to the effect that, and based
thereon such Opinion of Counsel shall confirm that, the Holders of the
outstanding Notes will not recognize income, gain or loss for federal income tax
purposes as a result of such election and will be subject to federal income tax
on the same amounts, in the same manner and at the same times as would have been
the case if such Legal Defeasance had not occurred;
(c) in the case of an election under Section 8.03 hereof, the Company
shall have delivered to the Trustee an Opinion of Counsel in the United States
reasonably acceptable to the Trustee confirming that the Holders of the
outstanding Notes will not recognize income, gain or loss for federal income tax
purposes as a result of such election and will be subject to federal income tax
on the same amounts, in the same manner and at the same times as would have been
the case if such Covenant Defeasance had not occurred;
(d) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default or Event of Default
resulting from the incurrence of Indebtedness all or a portion of the proceeds
of which will be used to defease the Notes pursuant to this Article Eight
concurrently with such incurrence) or insofar as Sections 6.01(g) or 6.01(h)
hereof is concerned, at any time in the period ending on the 91st day after the
date of deposit;
(e) such Legal Defeasance or Covenant Defeasance shall not result in a
breach or violation of, or constitute a default under, any material agreement or
instrument (other than this Indenture) to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries is
bound;
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(f) the Company shall have delivered to the Trustee an Opinion of
Counsel (which may be subject to customary exceptions) to the effect that on the
91st day following the deposit, the trust funds will not be subject to the
effect of any applicable bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights generally;
(g) the Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the intent
of preferring the Holders over any other creditors of the Company or with the
intent of defeating, hindering, delaying or defrauding any other creditors of
the Company; and
(h) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for or relating to the Legal Defeasance or the Covenant
Defeasance have been complied with.
SECTION 8.05. DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE HELD IN TRUST;
OTHER MISCELLANEOUS PROVISIONS.
Subject to Section 8.06 hereof, all money and non-callable
Government Securities (including the proceeds thereof) deposited with the
Trustee (or other qualifying trustee, collectively for purposes of this Section
8.05, the "Trustee") pursuant to Section 8.04 hereof in respect of the
outstanding Notes shall be held in trust and applied by the Trustee, in
accordance with the provisions of such Notes and this Indenture, to the payment,
either directly or through any Paying Agent (including the Company acting as
Paying Agent) as the Trustee may determine, to the Holders of such Notes of all
sums due and to become due thereon in respect of principal, premium, if any, and
interest, but such money need not be segregated from other funds except to the
extent required by law.
The Company shall pay and indemnify the Trustee against any
tax, fee or other charge imposed on or assessed against the cash or non-callable
Government Securities deposited pursuant to Section 8.04 hereof or the principal
and interest received in respect thereof other than any such tax, fee or other
charge which by law is for the account of the Holders of the outstanding Notes.
Anything in this Article Eight to the contrary
notwithstanding, the Trustee shall deliver or pay to the Company from time to
time upon the request of the Company any money or non-callable Government
Securities held by it as provided in Section 8.04 hereof which, in the opinion
of a nationally recognized firm of independent public accountants expressed in a
written certification thereof delivered to the Trustee (which may be the opinion
delivered under Section 8.04(a) hereof), are in excess of the amount thereof
that would then be required to be deposited to effect an equivalent Legal
Defeasance or Covenant Defeasance.
SECTION 8.06. REPAYMENT TO COMPANY.
Any money deposited with the Trustee or any Paying Agent, or
then held by the Company, in trust for the payment of the principal of, premium,
if any, or interest on any Note and remaining unclaimed for two years after such
principal, and premium, if any, or interest has become due and payable shall be
paid to the Company on its request or (if then held by the Company) shall be
discharged from such trust; and the Holder of such Note shall thereafter, as a
secured creditor, look only to the Company for payment thereof, and all
liability of the Trustee or such Paying Agent with respect to such trust money,
and all liability of the Company as trustee thereof, shall thereupon cease;
provided, however, that the Trustee or such Paying Agent, before being required
to make any such repayment, may at the expense of the
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Company cause to be published once, in the New York Times and The Wall Street
Journal (national edition), notice that such money remains unclaimed and that,
after a date specified therein, which shall not be less than 30 days from the
date of such notification or publication, any unclaimed balance of such money
then remaining will be repaid to the Company.
SECTION 8.07. REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any United
States dollars or non-callable Government Securities in accordance with Section
8.02 or 8.03 hereof, as the case may be, by reason of any order or judgment of
any court or governmental authority enjoining, restraining or otherwise
prohibiting such application, then the Company's obligations under this
Indenture and the Notes shall be revived and reinstated as though no deposit had
occurred pursuant to Section 8.02 or 8.03 hereof until such time as the Trustee
or Paying Agent is permitted to apply all such money in accordance with Section
8.02 or 8.03 hereof, as the case may be; provided, however, that, if the Company
makes any payment of principal of, premium, if any, or interest on any Note
following the reinstatement of its obligations, the Company shall be subrogated
to the rights of the Holders of such Notes to receive such payment from the
money held by the Trustee or Paying Agent.
ARTICLE 9.
AMENDMENT, SUPPLEMENT AND WAIVER
SECTION 9.01. WITHOUT CONSENT OF HOLDERS OF NOTES.
Notwithstanding Section 9.02 of this Indenture, the Company,
the Guarantors and the Trustee may amend or supplement this Indenture, the
Subsidiary Guarantees or the Notes without the consent of any Holder of a Note:
(a) to cure any ambiguity, defect or inconsistency;
(b) to provide for uncertificated Notes in addition to or in place of
certificated Notes or to alter the provisions of Article 2 hereof (including
the related definitions) in a manner that does not materially adversely affect
any Holder;
(c) to provide for the assumption of the Company's obligations to the
Holders of the Notes by a successor to the Company pursuant to Article 5 hereof;
(d) to make any change that would provide any additional rights or
benefits to the Holders of the Notes or that does not adversely affect the legal
rights hereunder of any Holder of the Note; or
(e) to comply with requirements of the SEC in order to effect or
maintain the qualification of this Indenture under the TIA.
Upon the request of the Company accompanied by a resolution of
its Board of Directors authorizing the execution of any such amended or
supplemental Indenture, and upon receipt by the Trustee of the documents
described in Section 7.02 hereof, the Trustee shall join with the Company and
each Guarantor, if any, in the execution of any amended or supplemental
Indenture authorized or permitted by the terms of this Indenture and to make any
further appropriate agreements and stipulations that may be therein contained,
but the Trustee shall not be obligated to enter into such amended or
supplemental Indenture that affects its own rights, duties or immunities under
this Indenture or otherwise.
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SECTION 9.02. WITH CONSENT OF HOLDERS OF NOTES.
Except as provided below in this Section 9.02, the Company and
the Trustee may amend or supplement this Indenture (including Section 3.09, 4.10
and 4.15 hereof), and any supplemental indenture pursuant to which a Guarantor
provides a Subsidiary Guarantee pursuant to Section 4.16 and the Notes may be
amended or supplemented with the consent of the Holders of at least a majority
in principal amount of the Notes then outstanding voting as a single class
(including consents obtained in connection with a tender offer or exchange offer
for, or purchase of, the Notes), and, subject to Sections 6.04 and 6.07 hereof,
any existing Default or Event of Default (other than a Default or Event of
Default in the payment of the principal of, premium, if any, or interest on the
Notes, except a payment default resulting from an acceleration that has been
rescinded) or compliance with any provision of this Indenture, the Subsidiary
Guarantees, if any, or the Notes may be waived with the consent of the Holders
of a majority in principal amount of the then outstanding Notes voting as a
single class (including consents obtained in connection with a tender offer or
exchange offer for, or purchase of, the Notes).
Upon the request of the Company accompanied by a resolution of
its Board of Directors authorizing the execution of any such amended or
supplemental Indenture, and upon the filing with the Trustee of evidence
satisfactory to the Trustee of the consent of the Holders of Notes as aforesaid,
and upon receipt by the Trustee of the documents described in Section 7.02
hereof, the Trustee shall join with the Company in the execution of such amended
or supplemental Indenture unless such amended or supplemental Indenture directly
affects the Trustee's own rights, duties or immunities under this Indenture or
otherwise, in which case the Trustee may in its discretion, but shall not be
obligated to, enter into such amended or supplemental Indenture.
It shall not be necessary for the consent of the Holders of
Notes under this Section 9.02 to approve the particular form of any proposed
amendment or waiver, but it shall be sufficient if such consent approves the
substance thereof.
After an amendment, supplement or waiver under this Section
becomes effective, the Company shall mail to the Holders of Notes affected
thereby a notice briefly describing the amendment, supplement or waiver. Any
failure of the Company to mail such notice, or any defect therein, shall not,
however, in any way impair or affect the validity of any such amended or
supplemental Indenture or waiver. Subject to Sections 6.04 and 6.07 hereof, the
Holders of a majority in aggregate principal amount of the Notes then
outstanding voting as a single class may waive compliance in a particular
instance by the Company with any provision of this Indenture or the Notes.
However, without the consent of each Holder affected, an amendment or waiver
under this Section 9.02 may not (with respect to any Notes held by a
non-consenting Holder):
(a) reduce the principal amount of Notes whose Holders must consent to
an amendment, supplement or waiver;
(b) reduce the principal of or change the fixed maturity of any Note
or alter or waive any of the provisions with respect to the redemption of the
Notes (other than Section 3.09, 4.10 and 4.14);
(c) reduce the rate of or change the time for payment of interest,
including default interest, on any Note;
(d) waive a Default or Event of Default in the payment of principal of
or premium, if any, or interest on the Notes (except a rescission of
acceleration of the Notes by the Holders of at least a majority
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in aggregate principal amount of the then outstanding Notes and a waiver of the
payment default that resulted from such acceleration);
(e) make any Note payable in money other than that stated in the
Notes;
(f) make any change in the provisions of this Indenture relating to
waivers of past Defaults or the rights of Holders of Notes to receive payments
of principal of or premium, if any, or interest on the Notes; or
(g) waive a redemption payment with respect to any Note (other than a
payment required by Section 3.09, 4.10 or 4.14) or make any change in the
foregoing amendment and waiver provisions
SECTION 9.03. COMPLIANCE WITH TRUST INDENTURE ACT.
Every amendment or supplement to this Indenture or the Notes
shall be set forth in a amended or supplemental Indenture that complies with the
TIA as then in effect.
SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS.
Until an amendment, supplement or waiver becomes effective, a
consent to it by a Holder of a Note is a continuing consent by the Holder of a
Note and every subsequent Holder of a Note or portion of a Note that evidences
the same debt as the consenting Holder's Note, even if notation of the consent
is not made on any Note. However, any such Holder of a Note or subsequent Holder
of a Note may revoke the consent as to its Note if the Trustee receives written
notice of revocation before the date the waiver, supplement or amendment becomes
effective. An amendment, supplement or waiver becomes effective in accordance
with its terms and thereafter binds every Holder.
SECTION 9.05. NOTATION ON OR EXCHANGE OF NOTES.
The Trustee may place an appropriate notation about an
amendment, supplement or waiver on any Note thereafter authenticated. The
Company in exchange for all Notes may issue and the Trustee shall, upon receipt
of an Authentication Order, authenticate new Notes that reflect the amendment,
supplement or waiver.
Failure to make the appropriate notation or issue a new Note
shall not affect the validity and effect of such amendment, supplement or
waiver.
SECTION 9.06. TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall sign any amended or supplemental Indenture
authorized pursuant to this Article Nine if the amendment or supplement does not
adversely affect the rights, duties, liabilities or immunities of the Trustee.
The Company may not sign an amendment or supplemental Indenture until the Board
of Directors approves it. In executing any amended or supplemental indenture,
the Trustee shall be entitled to receive and (subject to Section 7.01 hereof)
shall be fully protected in relying upon, in addition to the documents required
by Section 10.04 hereof, an Officer's Certificate and an Opinion of Counsel
stating that the execution of such amended or supplemental indenture is
authorized or permitted by this Indenture.
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ARTICLE 10.
MISCELLANEOUS
SECTION 10.01. TRUST INDENTURE ACT CONTROLS.
If any provision of this Indenture limits, qualifies or
conflicts with the duties imposed by TIA ss. 318(c), the imposed duties shall
control.
SECTION 10.02. NOTICES.
Any notice or communication by the Company, any Guarantor or
the Trustee to the others is duly given if in writing and delivered in Person or
mailed by first class mail (registered or certified, return receipt requested),
telex, telecopier or overnight air courier guaranteeing next day delivery, to
the others' address
If to the Company and/or any Guarantor:
SAC Acquisition Corp.
c/o CGW Southeast Partners III, L.P.
Twelve Piedmont Center
Suite 210
Atlanta, Georgia 30305
Attention: William A. Davies
With a copy to:
Alston & Bird LLP
1201 W. Peachtree Street
Atlanta , Georgia 30309-3424
Telecopier No.: (404) 881-7777
Attention: Teri McMahon, Esq.
If to the Trustee:
IBJ Schroder Bank & Trust Co.
1 State Street Plaza
New York, New York 10004
Telecopier No.: (212) 858-2952
Attention: Corporate Trust Administration
The Company, any Guarantor or the Trustee, by notice to the
others may designate additional or different addresses for subsequent notices or
communications.
All notices and communications (other than those sent to
Holders) shall be deemed to have been duly given: at the time delivered by hand,
if personally delivered; five Business Days after being deposited in the mail,
postage prepaid, if mailed; when answered back, if telexed; when receipt
acknowledged, if telecopied; and the next Business Day after timely delivery to
the courier, if sent by overnight air courier guaranteeing next day delivery.
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Any notice or communication to a Holder shall be mailed by
first class mail, certified or registered, return receipt requested, or by
overnight air courier guaranteeing next day delivery to its address shown on the
register kept by the Registrar. Any notice or communication shall also be so
mailed to any Person described in TIA ss. 313(c), to the extent required by the
TIA. Failure to mail a notice or communication to a Holder or any defect in it
shall not affect its sufficiency with respect to other Holders.
If a notice or communication is mailed in the manner provided
above within the time prescribed, it is duly given, whether or not the addressee
receives it.
If the Company mails a notice or communication to Holders, it
shall mail a copy to the Trustee and each Agent at the same time.
SECTION 10.03. COMMUNICATION BY HOLDERS OF NOTES WITH OTHER HOLDERS OF NOTES.
Holders may communicate pursuant to TIA ss. 312(b) with other
Holders with respect to their rights under this Indenture or the Notes. The
Company, the Trustee, the Registrar and anyone else shall have the protection of
TIA ss. 312(c).
SECTION 10.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by the Company to the Trustee
to take any action under this Indenture, the Company shall, upon the Trustee's
request therefor, furnish to the Trustee:
(a) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth in
Section 10.05 hereof) stating that, in the opinion of the signers, all
conditions precedent and covenants, if any, provided for in this Indenture
relating to the proposed action have been satisfied; and
(b) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth in
Section 10.05 hereof) stating that, in the opinion of such counsel, all such
conditions precedent and covenants have been satisfied.
SECTION 10.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than a certificate
provided pursuant to TIA ss. 314(a)(4)) shall comply with the provisions of TIA
ss. 314(e) and shall include:
(a) a statement that the Person making such certificate or
opinion has read such covenant or condition;
(b) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions contained in
such certificate or opinion are based;
(c) a statement that, in the opinion of such Person, he or she
has made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or condition has
been satisfied; and
(d) a statement as to whether or not, in the opinion of such
Person, such condition or covenant has been satisfied.
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SECTION 10.06. RULES BY TRUSTEE AND AGENTS.
The Trustee may make reasonable rules for action by or at a
meeting of Holders. The Registrar or Paying Agent may make reasonable rules and
set reasonable requirements for its functions.
SECTION 10.07. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND
STOCKHOLDERS.
No past, present or future director, officer, employee,
incorporator or stockholder of the Company or any Guarantor, as such, shall have
any liability for any obligations of the Company or such Guarantor under the
Notes, the Subsidiary Guarantees, this Indenture or for any claim based on, in
respect of, or by reason of, such obligations or their creation. Each Holder by
accepting a Note waives and releases all such liability.
The waiver and release are part of the consideration for issuance of the Notes.
SECTION 10.08. GOVERNING LAW.
THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE
USED TO CONSTRUE THIS INDENTURE, THE NOTES AND THE SUBSIDIARY GUARANTEES, IF
ANY, WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE
EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE
REQUIRED THEREBY.
SECTION 10.09. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret any other
indenture, loan or debt agreement of the Company or its Subsidiaries or of any
other Person. Any such indenture, loan or debt agreement may not be used to
interpret this Indenture.
SECTION 10.10. SUCCESSORS.
All agreements of the Company in this Indenture and the Notes
shall bind its successors. All agreements of the Trustee in this Indenture shall
bind its successors. All obligations and duties of the Holders hereunder and
under the Notes and the Registration Rights Agreement shall accrue to the
benefit of the Company, the Trustee and their respective successors and assigns.
SECTION 10.11. SEVERABILITY.
In case any provision in this Indenture or in the Notes shall
be invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
SECTION 10.12. COUNTERPART ORIGINALS.
The parties may sign any number of copies or counterparts of
this Indenture. Each signed copy or counterparts shall be an original, but all
of them together represent the same agreement.
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SECTION 10.13. TABLE OF CONTENTS, HEADINGS, ETC..
The Table of Contents, Cross-Reference Table and Headings of
the Articles and Sections of this Indenture have been inserted for convenience
of reference only, are not to be considered a part of this Indenture and shall
in no way modify or restrict any of the terms or provisions hereof.
SECTION 10.14. ERISA RELATED RESTRICTIONS
The Notes may not be sold or transferred to, and each Holder,
by its purchase of the
Notes hereby represents and covenants that it is not acquiring
the Notes for or on behalf of, and will not transfer the Notes to, any pension
or welfare plan (as defined in Section 3 of the Employee Retirement Income
Security Act of 1974, as amended, "ERISA") or any entity whose assets include
assets of such a plan pursuant to 29 C.F.R. Section 2510.3-101 or otherwise
(each, a "Plan Entity") except that such a purchase for or on behalf of a Plan
Entity shall be permitted:
(1) to the extent purchase is made by or on behalf of a bank
collective investment fund maintained by the purchaser
(provided such Holder is not the bank that maintains the
collective investment fund, or an affiliate of such bank) in
which no Plan Entity (together with any other plans maintained
by the same employer or employee organization) has an interest
in excess of 10.0% of the total assets in such collective
investment fund and the conditions of Section III of the
Prohibited Transaction Class Exemption 91-38 issued by the
Department of Labor are satisfied;
(2) to the extent such purchase is made by or on behalf of an
insurance company pooled separate account maintained by such
Holder (provided such Holder is not the insurance company that
holds the plan assets in its pooled separate account or any
other of its separate accounts, or an affiliate of such
insurance company) in which, at any time while the Notes are
outstanding, no Plan Entity (together with any other plans
maintained by the same employer or employee organization) has
an interest in excess of 10.0% of the total of the assets in
such pooled separate account and the conditions of Section III
of Prohibited Transaction Class Exemption 90-1 issued by the
Department of Labor are satisfied;
(3) to the extent such purchase is made on behalf of a Plan
Entity by (i) an investment advisor registered under the
Investment Advisers Act of 1940 that had as of the last day of
its most recent fiscal year total assets under its management
and control in excess of $50.0 million and had stockholders'
or partners equity in excess of $0.75 million, as shown in its
most recent balance sheet prepared in accordance with
generally accepted accounting principles or (ii) a bank as
defined in Section 202(a)(2) of the Investment Advisers Act of
1940 with equity capital in excess of $1.0 million as of the
last day of its most recent fiscal year or (iii) an insurance
company which is qualified under the laws of more than one
state to manage, acquire or dispose of any assets of a Plan
Entity, which insurance company had as of the last day of its
most recent fiscal year, net worth in excess of $1.0 million
and which is subject to supervision and examination by a state
authority having supervision over insurance companies and, in
any case, such investment advisor, bank or insurance company
is otherwise a qualified professional asset manager, as such
term is used in Prohibited Transaction Class Exemption 84-14
issued by the Department of Labor, and the assets of such Plan
Entity, when combined with the assets of other plans
established or
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maintained by the same employer (or affiliate thereof) or
employee organization and managed by such investment advisor,
bank or insurance company, do not represent more than 20.0% of
the total client assets managed by such investment advisor,
bank or insurance company, and the conditions of Part 1 of
such exemption are otherwise satisfied;
(4) to the extent such purchase is made with funds from an
insurance company general account in which the Plan Entity has
an interest either as a contract holder or beneficial owner of
a contract, if at the time of such purchase, the amount of
reserves and liabilities for the general account contracts
held by or on behalf of the Plan Entity (as such amount is
determined by the National Association of Insurance
Commissioners Annual Statement) ("NAIC Annual Statement"),
together with the amount of reserves and liabilities for the
general account contracts held by or on behalf of any other
plans maintained by the same employer (or affiliate thereof)
or by the same employee organization (as such amount is
determined by the NAIC Annual Statement) in the general
account do not exceed 10.0% of the total reserves and
liabilities of the general account (exclusive of separate
account liabilities) plus surplus (as set forth in the NAIC
Annual Statement filed with the insurer's state of domicile),
and the conditions of Sections I and IV of Prohibited
Transactions Class Exemption 95-60 issued by the Department of
Labor are satisfied (For purposes of this subparagraph (4),
the amount of reserves and liabilities for the general account
contracts held by or on behalf of a Plan Entity shall be
determined before reduction for credits on account of any
reinsurance ceded on a coinsurance basis);
(5) to the extent such Plan Entity is a governmental plan (as
defined in Section 3 of ERISA) which is not subject to the
provisions of Title I of ERISA or Section 401 of the Internal
Revenue Code; or
(6) to the extent such purchase is made on behalf of a Plan
Entity by an in-house asset manager and the conditions of Part
I of the Prohibited Transactions Class Exemption 96-23 issued
by the Department of Labor are satisfied.
[Signatures on following page]
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SIGNATURES
Dated as of March 31, 1998
SAC ACQUISITION CORP.
BY: /s/ William A. Davies
----------------------------
Name: William A. Davies
Title: Chairman of the Board
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<PAGE> 73
IBJ SCHRODER BANK & TRUST COMPANY,
AS TRUSTEE
BY: /s/ Stephen J. Giurlando
-------------------------------
Name: Stephen J. Giurlando
Title: Assistant Vice President
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EXHIBIT A-1
(Face of Note)
================================================================================
CUSIP/CINS
-----------------
9 5/8% [Series A] [Series B] Senior Notes due 2006
No. $
----- ----------------
SAC ACQUISITION CORP.
promises to pay to
--------------------------------------------------------------
or registered assigns,
the principal sum of
---------------------------------------------------
Dollars on April 15, 2006.
Interest Payment Dates: April 15 and October 15.
Record Dates: April 1 and October 1.
DATED: March 31, 1998
SAC ACQUISITION CORP.
BY:
-----------------------------------------
Name:
Title:
This is one of the Global
Notes referred to in the
within-mentioned Indenture:
IBJ Schroder Bank & Trust Company
as Trustee
By:
---------------------------------
================================================================================
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(Back of Note)
9 5/8% [Series A] [Series B] Senior Notes due 2006
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND THIS NOTE MAY NOT BE OFFERED, SOLD,
PLEDGED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT OR IN ACCORDANCE WITH AN APPLICABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT (SUBJECT TO THE DELIVERY OF SUCH EVIDENCE, IF
ANY, REQUIRED UNDER THE INDENTURE PURSUANT TO WHICH THIS NOTE IS ISSUED) AND IN
ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES
OR ANY OTHER JURISDICTION. EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS
HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE
PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER
OR ANOTHER EXEMPTION UNDER THE SECURITIES ACT. THE HOLDER OF THE SECURITY
EVIDENCED HEREBY AGREES FOR THE BENEFIT OF SAC ACQUISITION CORP. ("SAC") AND
SIMCALA, INC. THAT (A) SUCH SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE
TRANSFERRED ONLY (1)(a) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT)
IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (b) IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (c) OUTSIDE THE
UNITED STATES TO A PERSON THAT IS NOT A U.S. PERSON (WITHIN THE MEANING OF
REGULATION S UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS
OF RULE 904 UNDER THE SECURITIES ACT OR (d) IN ACCORDANCE WITH ANOTHER EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN
OPINION OF COUNSEL IF THE COMPANY SO REQUESTS), SUBJECT IN CASE OF SUBSECTIONS
(c) AND (d) TO THE RECEIPT BY THE REGISTRAR, TRANSFER AGENT, TRUSTEE, SIMCALA,
INC. AND SAC OF CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF
THEM (2) TO SIMCALA, INC. OR SAC OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS
OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B)
THE HOLDER WILL AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER
FROM IT OF THE SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN
(A) ABOVE.
THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE
INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE
BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY
CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY
BE REQUIRED PURSUANT TO SECTION 2.07 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY
BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE
INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR
CANCELLATION PURSUANT TO SECTION 2.11 OF THE
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<PAGE> 76
INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY
WITH THE PRIOR WRITTEN CONSENT OF SIMCALA, INC. OR SAC.
Capitalized terms used herein shall have the meanings assigned
to them in the Indenture referred to below unless otherwise indicated.
1. INTEREST. SAC Acquisition Corp., a Georgia corporation (the
"Company"), promises to pay interest on the principal amount of this Note at 9
5/8% per annum from March 31, 1998 until maturity and shall pay the Liquidated
Damages payable pursuant to Section 5 of the Registration Rights Agreement
referred to below. The Company will pay interest and Liquidated Damages
semi-annually on April 15 and October 15 of each year, or if any such day is not
a Business Day, on the next succeeding Business Day (each an "Interest Payment
Date"). Interest on the Notes will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from the date of
issuance; provided that if there is no existing Default in the payment of
interest, and if this Note is authenticated between a record date referred to on
the face hereof and the next succeeding Interest Payment Date, interest shall
accrue from such next succeeding Interest Payment Date; provided, further, that
the first Interest Payment Date shall be October 15, 1998. The Company shall pay
interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue principal and premium, if any, from time to time on
demand at a rate that is 1% per annum in excess of the rate then in effect; it
shall pay interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue installments of interest and Liquidated Damages
(without regard to any applicable grace periods) from time to time on demand at
the same rate to the extent lawful. Interest will be computed on the basis of a
360-day year of twelve 30-day months.
2. METHOD OF PAYMENT. The Company will pay interest on the
Notes (except defaulted interest) and Liquidated Damages to the Persons who are
registered Holders of Notes at the close of business on the April 1 or October 1
next preceding the Interest Payment Date, even if such Notes are canceled after
such record date and on or before such Interest Payment Date, except as provided
in Section 2.12 of the Indenture with respect to defaulted interest. The Notes
will be payable as to principal, premium and Liquidated Damages, if any, and
interest at the office or agency of the Company maintained for such purpose
within or without the City and State of New York, or, at the option of the
Company, payment of interest and Liquidated Damages may be made by check mailed
to the Holders at their addresses set forth in the register of Holders, and
provided that payment by wire transfer of immediately available funds will be
required with respect to principal of and interest, premium and Liquidated
Damages on, all Global Notes and all other Notes the Holders of which shall have
provided wire transfer instructions to the Company or the Paying Agent. Such
payment shall be in such coin or currency of the United States of America as at
the time of payment is legal tender for payment of public and private debts.
3. PAYING AGENT AND REGISTRAR. Initially, IBJ Schroder Bank &
Trust Company, the Trustee under the Indenture, will act as Paying Agent and
Registrar. The Company may change any Paying Agent or Registrar without notice
to any Holder. The Company or any of its Subsidiaries may act in any such
capacity.
4. INDENTURE. The Company issued the Notes under an Indenture
dated as of March 31, 1998 ("Indenture") between the Company and the Trustee.
The terms of the Notes include those stated in the Indenture and those made part
of the Indenture by reference to the Trust Indenture Act of 1939, as amended (15
U.S. Code ss.ss. 77aaa-77bbbb). The Notes are subject to all such terms, and
Holders
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are referred to the Indenture and such Act for a statement of such terms. To the
extent any provision of this Note conflicts with the express provisions of the
Indenture, the provisions of the indenture shall govern and be controlling. The
Notes are obligations of the Company limited to $75.0 million in aggregate
principal amount, plus amounts, if any, issued to pay Liquidated Damages on
outstanding Notes as set forth in Paragraph 2 hereof.
5. OPTIONAL REDEMPTION.
(a) Except as set forth in subparagraph (b) of this Paragraph
5, the Company shall not have the option to redeem the Notes prior to April 15,
2002. Thereafter, the Company shall have the option to redeem the Notes, in
whole or in part, upon not less than 30 nor more than 60 days' notice, at the
redemption prices (expressed as percentages of principal amount) set forth below
plus accrued and unpaid interest and Liquidated Damages thereon to the
applicable redemption date, if redeemed during the twelve-month period beginning
on April 15 of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ---- ----------
<S> <C>
2002........................................................ 104.8125%
2003........................................................ 103.2803%
2004........................................................ 101.6042%
2005 and thereafter......................................... 100.0000%
</TABLE>
(b) Notwithstanding the provisions of clause (a) of this
Paragraph 5, at any time prior to April 15, 2001, the Company may redeem up to
30% of the aggregate principal amount of the Notes originally issued under the
Indenture at a redemption price of 109.6250% of the principal amount thereof,
plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the
redemption date, with the net proceeds of public offering of its common stock;
provided that at least 70% of the original aggregate principal amount of the
Notes remain outstanding immediately after the occurrence of such redemption
(excluding Notes held by the Company and its Subsidiaries); and provided,
further, that such redemption shall occur within 60 days of the date of the
closing of such public offering.
6. MANDATORY REDEMPTION.
Except as set forth in paragraph 7 below, the Company shall
not be required to make mandatory redemption payments with respect to the Notes.
7. REPURCHASE AT OPTION OF HOLDER.
(a) If there is a Change of Control, the Company shall be
required to make an offer (a "Change of Control Offer") to repurchase all or any
part (equal to $1,000 or an integral multiple thereof) of each Holder's Notes at
a purchase price equal to 101% of the aggregate principal amount thereof plus
accrued and unpaid interest and Liquidated Damages thereon, if any, to the date
of purchase (in either case, the "Change of Control Payment"). Within 10 days
following any Change of Control, the Company shall mail a notice to each Holder
setting forth the procedures governing the Change of Control Offer as required
by the Indenture.
A1-4
<PAGE> 78
(b) If the Company or a Subsidiary consummates any Asset
Sales, within five days of each date on which the aggregate amount of Excess
Proceeds exceeds $5 million, the Company shall commence an offer to all Holders
of Notes (as "Asset Sale Offer") pursuant to Sections 3.09 and 4.10 of the
Indenture to purchase the maximum principal amount of Notes that may be
purchased out of the Excess Proceeds at an offer price in cash in an amount
equal to 100% of the principal amount thereof plus accrued and unpaid interest
and Liquidated Damages thereon, if any, to the date fixed for the closing of
such offer, in accordance with the procedures set forth in the Indenture. To the
extent that the aggregate amount of Notes tendered pursuant to an Asset Sale
Offer is less than the Excess Proceeds, the Company (or such Subsidiary) may use
such deficiency for general corporate purposes. If the aggregate principal
amount of Notes surrendered by Holders thereof exceeds the amount of Excess
Proceeds, the Trustee shall select the Notes to be purchased on a pro rata
basis. Holders of Notes that are the subject of an offer to purchase will
receive an Asset Sale Offer from the Company prior to any related purchase date
and may elect to have such Notes purchased by completing the form entitled
"Option of Holder to Elect Purchase" on the reverse of the Notes.
8. NOTICE OF REDEMPTION. Notice of redemption will be mailed
at least 30 days but not more than 60 days before the redemption date to each
Holder whose Notes are to be redeemed at its registered address. Notes in
denominations larger than $1,000 may be redeemed in part but only in whole
multiples of $1,000, unless all of the Notes held by a Holder are to be
redeemed. On and after the redemption date interest ceases to accrue on Notes or
portions thereof called for redemption.
9. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in
registered form without coupons in denominations of $1,000 and integral
multiples of $1,000. The transfer of Notes may be registered and Notes may be
exchanged as provided in the Indenture. The Registrar and the Trustee may
require a Holder, among other things, to furnish appropriate endorsements and
transfer documents and the Company may require a Holder to pay any taxes and
fees required by law or permitted by the Indenture. The Company need not
exchange or register the transfer of any Note or portion of a Note selected for
redemption, except for the unredeemed portion of any Note being redeemed in
part. Also, the Company need not exchange or register the transfer of any Notes
for a period of 15 days before a selection of Notes to be redeemed or during the
period between a record date and the corresponding Interest Payment Date.
10. PERSONS DEEMED OWNERS. The registered Holder of a Note may
be treated as its owner for all purposes.
11. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain
exceptions, the Indenture, the Subsidiary Guarantees or the Notes may be amended
or supplemented with the consent of the Holders of at least a majority in
principal amount of the then outstanding Notes voting as a single class, and any
existing default or compliance with any provision of the Indenture, the
Subsidiary Guarantees or the Notes may be waived with the consent of the Holders
of a majority in principal amount of the then outstanding Notes if any, voting
as a single class. Without the consent of any Holder of a Note, the Indenture,
the Subsidiary Guarantees or the Notes may be amended or supplemented to cure
any ambiguity, defect or inconsistency, to provide for uncertificated Notes in
addition to or in place of certificated Notes, to provide for the assumption of
the Company's obligations to Holders of the Notes in case of a merger or
consolidation, to make any change that would provide any additional rights or
benefits to the Holders of the Notes or that does not adversely affect the legal
rights under the Indenture of any such Holder, to comply with the requirements
of the Commission in order to effect or maintain the qualification of the
Indenture
A1-5
<PAGE> 79
under the Trust Indenture Act, or to allow any Guarantor to execute a
supplemental indenture to the Indenture and/or a Subsidiary Guarantee with
respect to the Notes.
12. DEFAULTS AND REMEDIES. Events of Default include: (i)
default for 30 days in the payment when due of interest on the Notes; (ii)
default in payment when due of principal of or premium, if any, on the Notes
when the same becomes due and payable at maturity, upon redemption (including in
connection with an offer to purchase) or otherwise, (iii) failure by the Company
to comply with Section 4.07, 4.09, 4.10 or 5.01 of the Indenture; (iv) failure
by the Company for 60 days after notice to the Company by the Trustee or the
Holders of at least 25% in principal amount of the Notes then outstanding voting
as a single class to comply with certain other agreements in the Indenture or
the Notes; (v) default under certain other agreements relating to Indebtedness
of the Company which default results in the acceleration of such Indebtedness
prior to its express maturity; (vi) certain final judgments for the payment of
money that remain undischarged for a period of 60 days; (vii) certain events of
bankruptcy or insolvency with respect to the Company or any of its Significant
Subsidiaries; and (viii) except as permitted by the Indenture, any Subsidiary
Guarantee issued by a Significant Subsidiary shall be held in any judicial
proceeding to be unenforceable or invalid or shall cease for any reason to be in
full force and effect or any Guarantor that is a Significant Subsidiary or any
Person acting on its behalf shall deny or disaffirm its obligations under such
Guarantor's Subsidiary Guarantee. If any Event of Default occurs and is
continuing, the Trustee or the Holders of at least 25% in principal amount of
the then outstanding Notes may declare all the Notes to be due and payable.
Notwithstanding the foregoing, in the case of an Event of Default arising from
certain events of bankruptcy or insolvency, all outstanding Notes will become
due and payable without further action or notice. Holders may not enforce the
Indenture or the Notes except as provided in the Indenture. Subject to certain
limitations, Holders of a majority in principal amount of the then outstanding
Notes may direct the Trustee in its exercise of any trust or power. The Trustee
may withhold from Holders of the Notes notice of any continuing Default or Event
of Default (except a Default or Event of Default relating to the payment of
principal or interest) if it determines that withholding notice is in their
interest. The Holders of a majority in aggregate principal amount of the Notes
then outstanding by notice to the Trustee may on behalf of the Holders of all of
the Notes waive any existing Default or Event of Default and its consequences
under the Indenture except a continuing Default or Event of Default in the
payment of interest on, or the principal of, the Notes. The Company is required
to deliver to the Trustee annually a statement regarding compliance with the
Indenture, and the Company is required upon becoming aware of any Default or
Event of Default, to deliver to the Trustee a statement specifying such Default
or Event of Default.
13. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its
individual or any other capacity, may make loans to, accept deposits from, and
perform services for the Company or its Affiliates, and may otherwise deal with
the Company or its Affiliates, as if it were not the Trustee.
14. NO RECOURSE AGAINST OTHERS. A director, officer, employee,
incorporator or stockholder, of the Company, as such, shall not have any
liability for any obligations of the Company under the Notes or the Indenture or
for any claim based on, in respect of, or by reason of, such obligations or
their creation. Each Holder by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for the issuance
of the Notes.
15. AUTHENTICATION. This Note shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating agent.
A1-6
<PAGE> 80
16. ABBREVIATIONS. Customary abbreviations may be used in the
name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT
(= tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (=
Uniform Gifts to Minors Act).
17. ADDITIONAL RIGHTS OF HOLDERS OF RESTRICTED GLOBAL NOTES
AND RESTRICTED DEFINITIVE NOTES. In addition to the rights provided to Holders
of Notes under the Indenture, Holders of Restricted Global Notes and Restricted
Definitive Notes shall have all the rights set forth in the Registration Rights
Agreement dated as of March 31, 1998, between the Company and NationsBanc
Montgomery Securities LLC.
18. CUSIP NUMBERS. Pursuant to a recommendation promulgated by
the Committee on Uniform Security Identification Procedures, the Company has
caused CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP
numbers in notices of redemption as a convenience to Holders. No representation
is made as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
The Company will furnish to any Holder upon written request
and without charge a copy of the Indenture and/or the Registration Rights
Agreement. Requests may be made to:
SAC Acquisition Corp.
c/o CGW Southeast Partners III, L.P.
Twelve Piedmont Center
Suite 210
Atlanta, Georgia 30305
Attention: William A. Davies
A1-7
<PAGE> 81
ASSIGNMENT FORM
To assign this Note, fill in the form below: (I) or (we) assign and transfer
this Note to
- --------------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. no.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint _______________________________________________________
to transfer this Note on the books of the Company. The agent may substitute
another to act for him.
- --------------------------------------------------------------------------------
Date:
------------------
Your Signature:____________________________
(Sign exactly as your name appears on the
face of this Note)
- ---------------------------
SIGNATURE GUARANTEE*
* Signature must be guaranteed by a participant in a recognized signature
guaranty medallion program or other signature guarantor acceptable to the
Trustee.
A1-8
<PAGE> 82
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the
Company pursuant to Section 4.10 or 4.14 of the Indenture, check the box below:
[ ] Section 4.10 [ ] Section 4.14
If you want to elect to have only part of the Note purchased
by the Company pursuant to Section 4.10 or Section 4.14 of the Indenture, state
the amount you elect to have purchased: $________
Date: Your Signature:
------------- ----------------------------
(Sign exactly as your name appears
on the Note)
Tax Identification No:
---------------------
- ---------------------------
Signature Guarantee.*
* Signature must be guaranteed by a participant in a recognized signature
guaranty medallion program or other signature guarantor acceptable to the
Trustee.
A1-9
<PAGE> 83
SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE
The following exchanges of a part of this Global Note for an
interest in another Global Note or for a Definitive Note, or exchanges of a part
of another Global Note or Definitive Note for an interest in this Global Note,
have been made:
<TABLE>
<CAPTION>
Principal Amount
of this Global Note Signature of
Amount of decrease in Amount of increase in following authorized officer
Principal Amount Principal Amount such decrease (or of Trustee or Note
Date of Exchange of this Global Note of this Global Note increase) Custodian
---------------- --------------------- --------------------- ------------------- ------------------
<S> <C> <C> <C> <C>
</TABLE>
A1-10
<PAGE> 84
EXHIBIT A-2
(Face of Regulation S Temporary Global Note)
================================================================================
CUSIP/CINS
------------------
9 5/8% [Series A] [Series B] Senior Notes due 2006
No. $
----- ----------------
SAC ACQUISITION CORP.
promises to pay to
or registered assigns,
the principal sum of
--------------------------------------------------
Dollars on April 15 , 2006.
Interest Payment Dates: April 15 and October 15.
Record Dates: April 1 and October 1.
Dated: March 31, 1998
SAC ACQUISITION CORP.
By:
-------------------------------
Name:
Title:
This is one of the Global
Notes referred to in the
within-mentioned Indenture:
IBJ Schroder Bank & Trust Company
as Trustee
By:
------------------------
================================================================================
A2-1
<PAGE> 85
(Back of Regulation S Temporary Global Note)
9 5/8% [Series A] [Series B] Senior Notes due 2006
THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND THE
CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED NOTES, ARE AS
SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER THE HOLDER NOR THE
BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL NOTE SHALL BE ENTITLED
TO RECEIVE PAYMENT OF INTEREST HEREON.
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN DEFINITIVE
FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A
NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR
ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A
SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. UNLESS THIS
CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
COMPANY (55 WATER STREET, NEW YORK, NEW YORK) ("DTC"), TO THE COMPANY OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS MAY BE
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO. OR SUCH OTHER ENTITY AS MAY BE REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), AND THIS NOTE MAY NOT BE OFFERED, SOLD, PLEDGED OR
OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR
IN ACCORDANCE WITH AN APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT (SUBJECT TO THE DELIVERY OF SUCH EVIDENCE, IF ANY, REQUIRED
UNDER THE INDENTURE PURSUANT TO WHICH THIS NOTE IS ISSUED) AND IN ACCORDANCE
WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY
OTHER JURISDICTION. EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY
NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF
SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER OR ANOTHER
EXEMPTION UNDER THE SECURITIES ACT. THE HOLDER OF THE SECURITY EVIDENCED HEREBY
AGREES FOR THE BENEFIT OF SAC ACQUISITION CORP. ("SAC") AND SIMCALA, INC. THAT
(A) SUCH SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (1)(a) TO
A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER
(AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A, (b) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
144 UNDER THE SECURITIES ACT, (c) OUTSIDE THE UNITED STATES TO A PERSON THAT IS
NOT A U.S. PERSON (WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT)
IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT
OR (d) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL IF THE COMPANY SO
REQUESTS), SUBJECT IN CASE OF SUBSECTIONS (c) AND (d) TO THE RECEIPT BY THE
REGISTRAR, TRANSFER AGENT, TRUSTEE, SIMCALA, INC. AND SAC OF CERTIFICATION
AND/OR OTHER INFORMATION
A2-2
<PAGE> 86
SATISFACTORY TO EACH OF THEM (2) TO SIMCALA, INC. OR SAC OR (3) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH ANY
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER
APPLICABLE JURISDICTION AND (B) THE HOLDER WILL AND EACH SUBSEQUENT HOLDER IS
REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE SECURITY EVIDENCED HEREBY OF
THE RESALE RESTRICTIONS SET FORTH IN (A) ABOVE.
Until this Regulation S Temporary Global Note is exchanged for
one or more Regulation S Permanent Global Notes, the Holder hereof shall not be
entitled to receive payments of interest hereon; until so exchanged in full,
this Regulation S Temporary Global Note shall in all other respects be entitled
to the same benefits as other Senior Subordinated Notes under the Indenture.
1. INTEREST. SAC Acquisition Corp., a Georgia corporation (the
"Company"), promises to pay interest on the principal amount of this Note at 9
5/8% per annum from March 31, 1998 until maturity and shall pay the Liquidated
Damages payable pursuant to Section 5 of the Registration Rights Agreement
referred to below. The Company will pay interest and Liquidated Damages
semi-annually on April 15 and October 15 of each year, or if any such day is not
a Business Day, on the next succeeding Business Day (each an "Interest Payment
Date"). Interest on the Notes will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from the date of
issuance; provided that if there is no existing Default in the payment of
interest, and if this Note is authenticated between a record date referred to on
the face hereof and the next succeeding Interest Payment Date, interest shall
accrue from such next succeeding Interest Payment Date; provided, further, that
the first Interest Payment Date shall be October 15, 1998. The Company shall pay
interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue principal and premium, if any, from time to time on
demand at a rate that is 1% per annum in excess of the rate then in effect; it
shall pay interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue installments of interest and Liquidated Damages
(without regard to any applicable grace periods) from time to time on demand at
the same rate to the extent lawful. Interest will be computed on the basis of a
360-day year of twelve 30-day months.
2. METHOD OF PAYMENT. The Company will pay interest on the
Notes (except defaulted interest) and Liquidated Damages to the Persons who are
registered Holders of Notes at the close of business on the April 1 or October 1
next preceding the Interest Payment Date, even if such Notes are canceled after
such record date and on or before such Interest Payment Date, except as provided
in Section 2.12 of the Indenture with respect to defaulted interest. The Notes
will be payable as to principal, premium and Liquidated Damages, if any, and
interest at the office or agency of the Company maintained for such purpose
within or without the City and State of New York, or, at the option of the
Company, payment of interest and Liquidated Damages may be made by check mailed
to the Holders at their addresses set forth in the register of Holders, and
provided that payment by wire transfer of immediately available funds will be
required with respect to principal of and interest, premium and Liquidated
Damages on, all Global Notes and all other Notes the Holders of which shall have
provided wire transfer instructions to the Company or the Paying Agent. Such
payment shall be in such coin or currency of the United States of America as at
the time of payment is legal tender for payment of public and private debts.
3. PAYING AGENT AND REGISTRAR. Initially, IBJ Schroder Bank &
Trust Company, the Trustee under the Indenture, will act as Paying Agent and
Registrar. The Company may change any Paying Agent or Registrar without notice
to any Holder. The Company or any of its Subsidiaries may act in any such
capacity.
A2-3
<PAGE> 87
4. INDENTURE. The Company issued the Notes under an Indenture
dated as of March 31, 1998 ("Indenture") between the Company and the Trustee.
The terms of the Notes include those stated in the Indenture and those made part
of the Indenture by reference to the Trust Indenture Act of 1939, as amended (15
U.S. Code ss.ss. 77aaa-77bbbb). The Notes are subject to all such terms, and
Holders are referred to the Indenture and such Act for a statement of such
terms. To the extent any provision of this Note conflicts with the express
provisions of the Indenture, the provisions of the indenture shall govern and be
controlling. The Notes are obligations of the Company limited to $75.0 million
in aggregate principal amount, plus amounts, if any, issued to pay Liquidated
Damages on outstanding Notes as set forth in Paragraph 2 hereof.
5. OPTIONAL REDEMPTION.
(a) Except as set forth in subparagraph (b) of this Paragraph
5, the Company shall not have the option to redeem the Notes prior to April 15,
2002. Thereafter, the Company shall have the option to redeem the Notes, in
whole or in part, upon not less than 30 nor more than 60 days' notice, at the
redemption prices (expressed as percentages of principal amount) set forth below
plus accrued and unpaid interest and Liquidated Damages thereon to the
applicable redemption date, if redeemed during the twelve-month period beginning
on April 15 of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ---- ----------
<S> <C>
2002........................................................ 104.8125%
2003........................................................ 103.2803%
2004........................................................ 101.6042%
2005 and thereafter......................................... 100.0000%
</TABLE>
(b) Notwithstanding the provisions of clause (a) of this
Paragraph 5, at any time prior to April 15, 2001, the Company may redeem up to
30% of the aggregate principal amount of the Notes originally issued under the
Indenture at a redemption price of 109.6250% of the principal amount thereof,
plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the
redemption date, with the net proceeds of public offering of its common stock;
provided that at least 70% of the original aggregate principal amount of the
Notes remain outstanding immediately after the occurrence of such redemption
(excluding Notes held by the Company and its Subsidiaries); and provided,
further, that such redemption shall occur within 60 days of the date of the
closing of such public offering.
6. MANDATORY REDEMPTION.
Except as set forth in paragraph 7 below, the Company shall
not be required to make mandatory redemption payments with respect to the Notes.
7. REPURCHASE AT OPTION OF HOLDER.
(a) If there is a Change of Control, the Company shall be
required to make an offer (a "Change of Control Offer") to repurchase all or any
part (equal to $1,000 or an integral multiple thereof) of each Holder's Notes at
a purchase price equal to 101% of the aggregate principal amount thereof plus
A2-4
<PAGE> 88
accrued and unpaid interest and Liquidated Damages thereon, if any, to the date
of purchase (in either case, the "Change of Control Payment"). Within 10 days
following any Change of Control, the Company shall mail a notice to each Holder
setting forth the procedures governing the Change of Control Offer as required
by the Indenture.
(b) If the Company or a Subsidiary consummates any Asset
Sales, within five days of each date on which the aggregate amount of Excess
Proceeds exceeds $5 million, the Company shall commence an offer to all Holders
of Notes (as "Asset Sale Offer") pursuant to Sections 3.09 and 4.10 of the
Indenture to purchase the maximum principal amount of Notes that may be
purchased out of the Excess Proceeds at an offer price in cash in an amount
equal to 100% of the principal amount thereof plus accrued and unpaid interest
and Liquidated Damages thereon, if any, to the date fixed for the closing of
such offer, in accordance with the procedures set forth in the Indenture. To the
extent that the aggregate amount of Notes tendered pursuant to an Asset Sale
Offer is less than the Excess Proceeds, the Company (or such Subsidiary) may use
such deficiency for general corporate purposes. If the aggregate principal
amount of Notes surrendered by Holders thereof exceeds the amount of Excess
Proceeds, the Trustee shall select the Notes to be purchased on a pro rata
basis. Holders of Notes that are the subject of an offer to purchase will
receive an Asset Sale Offer from the Company prior to any related purchase date
and may elect to have such Notes purchased by completing the form entitled
"Option of Holder to Elect Purchase" on the reverse of the Notes.
8. NOTICE OF REDEMPTION. Notice of redemption will be mailed
at least 30 days but not more than 60 days before the redemption date to each
Holder whose Notes are to be redeemed at its registered address. Notes in
denominations larger than $1,000 may be redeemed in part but only in whole
multiples of $1,000, unless all of the Notes held by a Holder are to be
redeemed. On and after the redemption date interest ceases to accrue on Notes or
portions thereof called for redemption.
9. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in
registered form without coupons in denominations of $1,000 and integral
multiples of $1,000. The transfer of Notes may be registered and Notes may be
exchanged as provided in the Indenture. The Registrar and the Trustee may
require a Holder, among other things, to furnish appropriate endorsements and
transfer documents and the Company may require a Holder to pay any taxes and
fees required by law or permitted by the Indenture. The Company need not
exchange or register the transfer of any Note or portion of a Note selected for
redemption, except for the unredeemed portion of any Note being redeemed in
part. Also, the Company need not exchange or register the transfer of any Notes
for a period of 15 days before a selection of Notes to be redeemed or during the
period between a record date and the corresponding Interest Payment Date.
10. PERSONS DEEMED OWNERS. The registered Holder of a Note may
be treated as its owner for all purposes.
11. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain
exceptions, the Indenture, the Subsidiary Guarantees or the Notes may be amended
or supplemented with the consent of the Holders of at least a majority in
principal amount of the then outstanding Notes voting as a single class, and any
existing default or compliance with any provision of the Indenture, the
Subsidiary Guarantees or the Notes may be waived with the consent of the Holders
of a majority in principal amount of the then outstanding Notes if any, voting
as a single class. Without the consent of any Holder of a Note, the Indenture,
the Subsidiary Guarantees or the Notes may be amended or supplemented to cure
any ambiguity, defect or inconsistency, to provide for uncertificated Notes in
addition to or in place of certificated Notes,
A2-5
<PAGE> 89
to provide for the assumption of the Company's obligations to Holders of the
Notes in case of a merger or consolidation, to make any change that would
provide any additional rights or benefits to the Holders of the Notes or that
does not adversely affect the legal rights under the Indenture of any such
Holder, to comply with the requirements of the Commission in order to effect or
maintain the qualification of the Indenture under the Trust Indenture Act, or to
allow any Guarantor to execute a supplemental indenture to the Indenture and/or
a Subsidiary Guarantee with respect to the Notes.
12. DEFAULTS AND REMEDIES. Events of Default include: (i)
default for 30 days in the payment when due of interest on the Notes; (ii)
default in payment when due of principal of or premium, if any, on the Notes
when the same becomes due and payable at maturity, upon redemption (including in
connection with an offer to purchase) or otherwise, (iii) failure by the Company
to comply with Section 4.07, 4.09, 4.10 or 5.01 of the Indenture; (iv) failure
by the Company for 60 days after notice to the Company by the Trustee or the
Holders of at least 25% in principal amount of the Notes then outstanding voting
as a single class to comply with certain other agreements in the Indenture or
the Notes; (v) default under certain other agreements relating to Indebtedness
of the Company which default results in the acceleration of such Indebtedness
prior to its express maturity; (vi) certain final judgments for the payment of
money that remain undischarged for a period of 60 days; (vii) certain events of
bankruptcy or insolvency with respect to the Company or any of its Significant
Subsidiaries; and (viii) except as permitted by the Indenture, any Subsidiary
Guarantee issued by a Significant Subsidiary shall be held in any judicial
proceeding to be unenforceable or invalid or shall cease for any reason to be in
full force and effect or any Guarantor that is a Significant Subsidiary or any
Person acting on its behalf shall deny or disaffirm its obligations under such
Guarantor's Subsidiary Guarantee. If any Event of Default occurs and is
continuing, the Trustee or the Holders of at least 25% in principal amount of
the then outstanding Notes may declare all the Notes to be due and payable.
Notwithstanding the foregoing, in the case of an Event of Default arising from
certain events of bankruptcy or insolvency, all outstanding Notes will become
due and payable without further action or notice. Holders may not enforce the
Indenture or the Notes except as provided in the Indenture. Subject to certain
limitations, Holders of a majority in principal amount of the then outstanding
Notes may direct the Trustee in its exercise of any trust or power. The Trustee
may withhold from Holders of the Notes notice of any continuing Default or Event
of Default (except a Default or Event of Default relating to the payment of
principal or interest) if it determines that withholding notice is in their
interest. The Holders of a majority in aggregate principal amount of the Notes
then outstanding by notice to the Trustee may on behalf of the Holders of all of
the Notes waive any existing Default or Event of Default and its consequences
under the Indenture except a continuing Default or Event of Default in the
payment of interest on, or the principal of, the Notes. The Company is required
to deliver to the Trustee annually a statement regarding compliance with the
Indenture, and the Company is required upon becoming aware of any Default or
Event of Default, to deliver to the Trustee a statement specifying such Default
or Event of Default.
13. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its
individual or any other capacity, may make loans to, accept deposits from, and
perform services for the Company or its Affiliates, and may otherwise deal with
the Company or its Affiliates, as if it were not the Trustee.
14. NO RECOURSE AGAINST OTHERS. A director, officer, employee,
incorporator or stockholder, of the Company, as such, shall not have any
liability for any obligations of the Company under the Notes or the Indenture or
for any claim based on, in respect of, or by reason of, such obligations or
their creation. Each Holder by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for the issuance
of the Notes.
A2-6
<PAGE> 90
15. AUTHENTICATION. This Note shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating agent.
16. ABBREVIATIONS. Customary abbreviations may be used in the
name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT
(= tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (=
Uniform Gifts to Minors Act).
17. ADDITIONAL RIGHTS OF HOLDERS OF RESTRICTED GLOBAL NOTES
AND RESTRICTED DEFINITIVE NOTES. In addition to the rights provided to Holders
of Notes under the Indenture, Holders of Restricted Global Notes and Restricted
Definitive Notes shall have all the rights set forth in the Registration Rights
Agreement dated as of March 31, 1998, between the Company and NationsBanc
Montgomery Securities LLC.
18. CUSIP NUMBERS. Pursuant to a recommendation promulgated by
the Committee on Uniform Security Identification Procedures, the Company has
caused CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP
numbers in notices of redemption as a convenience to Holders. No representation
is made as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
A2-7
<PAGE> 91
The Company will furnish to any Holder upon written request
and without charge a copy of the Indenture and/or the Registration Rights
Agreement. Requests may be made to:
SAC Acquisition Corp.
c/o CGW Southeast Partners III, L.P.
Twelve Piedmont Center
Suite 210
Atlanta, Georgia 30305
Attention: William A. Davies
A2-8
<PAGE> 92
ASSIGNMENT FORM
To assign this Note, fill in the form below: (I) or (we) assign and transfer
this Note to
- --------------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. no.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint_________________________________________________________
to transfer this Note on the books of the Company. The agent may substitute
another to act for him.
- --------------------------------------------------------------------------------
Date:
---------------------
Your Signature:
--------------------
(Sign exactly as your name appears
on the face of this Note)
- ---------------------------
SIGNATURE GUARANTEE*
* Signature must be guaranteed by a participant in a recognized signature
guaranty medallion program or other signature guarantor acceptable to the
Trustee.
A2-9
<PAGE> 93
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the
Company pursuant to Section 4.10 or 4.14 of the Indenture, check the box below:
[ ] Section 4.10 [ ] Section 4.14
If you want to elect to have only part of the Note purchased
by the Company pursuant to Section 4.10 or Section 4.14 of the Indenture, state
the amount you elect to have purchased: $________
Date: Your Signature:
------------- -----------------------------
(Sign exactly as your name appears
on the Note)
Tax Identification No:
----------------------
- ---------------------------
Signature Guarantee.*
* Signature must be guaranteed by a participant in a recognized signature
guaranty medallion program or other signature guarantor acceptable to the
Trustee.
A2-10
<PAGE> 94
SCHEDULE OF EXCHANGES OF REGULATION S TEMPORARY GLOBAL NOTE
The following exchanges of a part of this Regulation S
Temporary Global Note for an interest in another Global Note, or of other
Restricted Global Notes for an interest in this Regulation S Temporary Global
Note, have been made:
<TABLE>
<CAPTION>
Principal Amount
Amount of of this Global Note Signature of
decrease in Amount of increase in following such authorized officer
Principal Amount Principal Amount decrease (or of Trustee or Note
Date of Exchange of this Global Note of this Global Note increase) Custodian
---------------- ------------------- --------------------- ------------------- ------------------
<S> <C> <C> <C> <C>
</TABLE>
A2-11
<PAGE> 95
EXHIBIT B
FORM OF CERTIFICATE OF TRANSFER
SAC Acquisition Corp.
c/o CGW Southeast Partners III, L.P.
Twelve Piedmont Center
Suite 210
Atlanta, Georgia 30305
IBJ Schroder Bank & Trust Co.
One State Street
New York, New York 10004
Re: 9 5/8% Senior Notes due 2006
Reference is hereby made to the Indenture, dated as of March
31, 1998 (the "Indenture"), between SAC Acquisition Corp., as issuer (the
"Company"), and IBJ Schroder Bank & Trust Co., as trustee. Capitalized terms
used but not defined herein shall have the meanings given to them in the
Indenture.
______________, (the "Transferor") owns and proposes to
transfer the Note[s] or interest in such Note[s] specified in Annex A hereto, in
the principal amount of $___________ in such Note[s] or interests (the
"Transfer"), to __________ (the "Transferee"), as further specified in Annex A
hereto. In connection with the Transfer, the Transferor hereby certifies that:
[CHECK ALL THAT APPLY]
1. [ ] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE
144A GLOBAL NOTE OR A DEFINITIVE NOTE PURSUANT TO RULE 144A. The Transfer is
being effected pursuant to and in accordance with Rule 144A under the United
States Securities Act of 1933, as amended (the "Securities Act"), and,
accordingly, the Transferor hereby further certifies that the beneficial
interest or Definitive Note is being transferred to a Person that the Transferor
reasonably believed and believes is purchasing the beneficial interest or
Definitive Note for its own account, or for one or more accounts with respect to
which such Person exercises sole investment discretion, and such Person and each
such account is a "qualified institutional buyer" within the meaning of Rule
144A in a transaction meeting the requirements of Rule 144A and such Transfer is
in compliance with any applicable blue sky securities laws of any state of the
United States. Upon consummation of the proposed Transfer in accordance with the
terms of the Indenture, the transferred beneficial interest or Definitive Note
will be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the 144A Global Note and/or the Definitive Note and
in the Indenture and the Securities Act.
2. [ ] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE
TEMPORARY REGULATION S GLOBAL NOTE, THE REGULATION S GLOBAL NOTE OR A DEFINITIVE
NOTE PURSUANT TO REGULATION S. The Transfer is being effected pursuant to and in
accordance with Rule 903 or Rule 904 under the Securities Act and, accordingly,
the Transferor hereby further certifies that (i) the Transfer is not being made
to a person in the United States and (x) at the time the buy order was
originated, the Transferee was outside the United States or such Transferor and
any Person acting on its behalf reasonably believed and believes that
B-1
<PAGE> 96
the Transferee was outside the United States or (y) the transaction was executed
in, on or through the facilities of a designated offshore securities market and
neither such Transferor nor any Person acting on its behalf knows that the
transaction was prearranged with a buyer in the United States, (ii) no directed
selling efforts have been made in contravention of the requirements of Rule
903(b) or Rule 904(b) of Regulation S under the Securities Act (iii) the
transaction is not part of a plan or scheme to evade the registration
requirements of the Securities Act and (iv) if the proposed transfer is being
made prior to the expiration of the Restricted Period, the transfer is not being
made to a U.S. Person or for the account or benefit of a U.S. Person (other than
an Initial Purchaser) Upon consummation of the proposed transfer in accordance
with the terms of the Indenture, the transferred beneficial interest or
Definitive Note will be subject to the restrictions on Transfer enumerated in
the Private Placement Legend printed on the Regulation S Global Note, the
Temporary Regulation S Global Note and/or the Definitive Note and in the
Indenture and the Securities Act.
3. [ ] CHECK AND COMPLETE IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL
INTEREST IN THE IAI GLOBAL NOTE OR A DEFINITIVE NOTE PURSUANT TO ANY PROVISION
OF THE SECURITIES ACT OTHER THAN RULE 144A OR REGULATION S. The Transfer is
being effected in compliance with the transfer restrictions applicable to
beneficial interests in Restricted Global Notes and Restricted Definitive Notes
and pursuant to and in accordance with the Securities Act and any applicable
blue sky securities laws of any state of the United States, and accordingly the
Transferor hereby further certifies that (check one):
(a) [ ] such Transfer is being effected pursuant to and in
accordance with Rule 144 under the Securities Act;
or
(b) [ ] such Transfer is being effected to the Company or a
subsidiary thereof;
or
(c) [ ] such Transfer is being effected pursuant to an
effective registration statement under the Securities Act and in compliance with
the prospectus delivery requirements of the Securities Act;
or
(d) [ ] such Transfer is being effected to an Institutional
Accredited Investor and pursuant to an exemption from the registration
requirements of the Securities Act other than Rule 144A, Rule 144 or Rule 904,
and the Transferor hereby further certifies that it has not engaged in any
general solicitation within the meaning of Regulation D under the Securities Act
and the Transfer complies with the transfer restrictions applicable to
beneficial interests in a Restricted Global Note or Restricted Definitive Notes
and the requirements of the exemption claimed, which certification is supported
by (1) a certificate executed by the Transferee in the form of Exhibit D to the
Indenture and (2) if such Transfer is in respect of a principal amount of Notes
at the time of transfer of less than $250,000, an Opinion of Counsel provided by
the Transferor or the Transferee (a copy of which the Transferor has attached to
this certification), to the effect that such Transfer is in compliance with the
Securities Act. Upon consummation of the proposed transfer in accordance with
the terms of the Indenture, the transferred beneficial interest or Definitive
Note will be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the IAI Global Note and/or the Definitive Notes and
in the Indenture and the Securities Act.
B-2
<PAGE> 97
4. [ ] Check if Transferee will take delivery of a beneficial interest in an
Unrestricted Global Note or of an Unrestricted Definitive Note.
(a) [ ] CHECK IF TRANSFER IS PURSUANT TO RULE 144. (i) The
Transfer is being effected pursuant to and in accordance with Rule 144 under the
Securities Act and in compliance with the transfer restrictions contained in the
Indenture and any applicable blue sky securities laws of any state of the United
States and (ii) the restrictions on transfer contained in the Indenture and the
Private Placement Legend are not required in order to maintain compliance with
the Securities Act. Upon consummation of the proposed Transfer in accordance
with the terms of the Indenture, the transferred beneficial interest or
Definitive Note will no longer be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the Restricted Global
Notes, on Restricted Definitive Notes and in the Indenture.
(b) [ ] CHECK IF TRANSFER IS PURSUANT TO REGULATION S. (i) The
Transfer is being effected pursuant to and in accordance with Rule 903 or Rule
904 under the Securities Act and in compliance with the transfer restrictions
contained in the Indenture and any applicable blue sky securities laws of any
state of the United States and (ii) the restrictions on transfer contained in
the Indenture and the Private Placement Legend are not required in order to
maintain compliance with the Securities Act. Upon consummation of the proposed
Transfer in accordance with the terms of the Indenture, the transferred
beneficial interest or Definitive Note will no longer be subject to the
restrictions on transfer enumerated in the Private Placement Legend printed on
the Restricted Global Notes, on Restricted Definitive Notes and in the
Indenture.
(c) [ ] CHECK IF TRANSFER IS PURSUANT TO OTHER EXEMPTION. (i)
The Transfer is being effected pursuant to and in compliance with an exemption
from the registration requirements of the Securities Act other than Rule 144,
Rule 903 or Rule 904 and in compliance with the transfer restrictions contained
in the Indenture and any applicable blue sky securities laws of any State of the
United States and (ii) the restrictions on transfer contained in the Indenture
and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act. Upon consummation of the proposed Transfer
in accordance with the terms of the Indenture, the transferred beneficial
interest or Definitive Note will not be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the Restricted Global
Notes or Restricted Definitive Notes and in the Indenture.
This certificate and the statements contained herein are made
for your benefit and the benefit of the Company.
---------------------------------------
[Insert Name of Transferor]
By:
-----------------------------------
Name:
Title:
Dated: ,
------------ ----
B-3
<PAGE> 98
ANNEX A TO CERTIFICATE OF TRANSFER
1. The Transferor owns and proposes to transfer the following:
[CHECK ONE OF (a) OR (b)]
(a) [ ] a beneficial interest in the:
(i) [ ] 144A Global Note (CUSIP 828595 AA 6), or
(ii) [ ] Regulation S Global Note (CUSIP ), or
(iii) [ ] IAI Global Note (CUSIP ); or
(b) [ ] a Restricted Definitive Note.
2. After the Transfer the Transferee will hold:
[CHECK ONE]
(a) [ ] a beneficial interest in the:
(i) [ ] 144A Global Note (CUSIP ), or
(ii) [ ] Regulation S Global Note (CUSIP ), or
(iii) [ ] IAI Global Note (CUSIP ); or
(iv) [ ] Unrestricted Global Note
(CUSIP 828595 AC 2); or
(b) [ ] a Restricted Definitive Note; or
(c) [ ] an Unrestricted Definitive Note,
in accordance with the terms of the Indenture.
B-4
<PAGE> 99
EXHIBIT C
FORM OF CERTIFICATE OF EXCHANGE
SAC Acquisition Corp.
c/o CGW Southeast Partners III, L.P.
Twelve Piedmont Center
Suite 210
Atlanta, Georgia 30305
IBJ Schroder Bank & Trust Co.
One State Street
New York, New York 10004
Re: 9 5/8% Senior Notes due 2006
(CUSIP______________)
Reference is hereby made to the Indenture, dated as of March
31, 1998 (the "Indenture"), between SAC Acquisition Corp., as issuer (the
"Company"), and IBJ Schroder Bank & Trust Co., as trustee. Capitalized terms
used but not defined herein shall have the meanings given to them in the
Indenture.
____________, (the "Owner") owns and proposes to exchange the
Note[s] or interest in such Note[s] specified herein, in the principal amount of
$____________ in such Note[s] or interests (the "Exchange"). In connection with
the Exchange, the Owner hereby certifies that:
1. EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN A
RESTRICTED GLOBAL NOTE FOR UNRESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS
IN AN UNRESTRICTED GLOBAL NOTE
(a) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A
RESTRICTED GLOBAL NOTE TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In
connection with the Exchange of the Owner's beneficial interest in a Restricted
Global Note for a beneficial interest in an Unrestricted Global Note in an equal
principal amount, the Owner hereby certifies (i) the beneficial interest is
being acquired for the Owner's own account without transfer, (ii) such Exchange
has been effected in compliance with the transfer restrictions applicable to the
Global Notes and pursuant to and in accordance with the United States Securities
Act of 1933, as amended (the "Securities Act"), (iii) the restrictions on
transfer contained in the Indenture and the Private Placement Legend are not
required in order to maintain compliance with the Securities Act and (iv) the
beneficial interest in an Unrestricted Global Note is being acquired in
compliance with any applicable blue sky securities laws of any state of the
United States.
(b) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A
RESTRICTED GLOBAL NOTE TO UNRESTRICTED DEFINITIVE NOTE. In connection with the
Exchange of the Owner's beneficial interest in a Restricted Global Note for an
Unrestricted Definitive Note, the Owner hereby certifies (i) the Definitive Note
is being acquired for the Owner's own account without transfer, (ii) such
Exchange has been effected in compliance with the transfer restrictions
applicable to the Restricted Global Notes and pursuant to and in accordance with
the Securities Act, (iii) the restrictions on transfer contained in the
C-1
<PAGE> 100
Indenture and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act and (iv) the Definitive Note is being
acquired in compliance with any applicable blue sky securities laws of any state
of the United States.
(c) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE
NOTE TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In connection with
the Owner's Exchange of a Restricted Definitive Note for a beneficial interest
in an Unrestricted Global Note, the Owner hereby certifies (i) the beneficial
interest is being acquired for the Owner's own account without transfer, (ii)
such Exchange has been effected in compliance with the transfer restrictions
applicable to Restricted Definitive Notes and pursuant to and in accordance with
the Securities Act, (iii) the restrictions on transfer contained in the
Indenture and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act and (iv) the beneficial interest is being
acquired in compliance with any applicable blue sky securities laws of any state
of the United States.
(d) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE
NOTE TO UNRESTRICTED DEFINITIVE NOTE. In connection with the Owner's Exchange of
a Restricted Definitive Note for an Unrestricted Definitive Note, the Owner
hereby certifies (i) the Unrestricted Definitive Note is being acquired for the
Owner's own account without transfer, (ii) such Exchange has been effected in
compliance with the transfer restrictions applicable to Restricted Definitive
Notes and pursuant to and in accordance with the Securities Act, (iii) the
restrictions on transfer contained in the Indenture and the Private Placement
Legend are not required in order to maintain compliance with the Securities Act
and (iv) the Unrestricted Definitive Note is being acquired in compliance with
any applicable blue sky securities laws of any state of the United States.
2. EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN RESTRICTED
GLOBAL NOTES FOR RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN
RESTRICTED GLOBAL NOTES
(a) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A
RESTRICTED GLOBAL NOTE TO RESTRICTED DEFINITIVE NOTE. In connection with the
Exchange of the Owner's beneficial interest in a Restricted Global Note for a
Restricted Definitive Note with an equal principal amount, the Owner hereby
certifies that the Restricted Definitive Note is being acquired for the Owner's
own account without transfer. Upon consummation of the proposed Exchange in
accordance with the terms of the Indenture, the Restricted Definitive Note
issued will continue to be subject to the restrictions on transfer enumerated in
the Private Placement Legend printed on the Restricted Definitive Note and in
the Indenture and the Securities Act.
(b) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE
NOTE TO BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE. In connection with the
Exchange of the Owner's Restricted Definitive Note for a beneficial interest in
the [CHECK ONE] [ ] 144A Global Note, [ ] Regulation S Global Note, [ ]
IAI Global Note with an equal principal amount, the Owner hereby certifies (i)
the beneficial interest is being acquired for the Owner's own account without
transfer and (ii) such Exchange has been effected in compliance with the
transfer restrictions applicable to the Restricted Global Notes and pursuant to
and in accordance with the Securities Act, and in compliance with any applicable
blue sky securities laws of any state of the United States. Upon consummation of
the proposed Exchange in accordance with the terms of the Indenture, the
beneficial interest issued will be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the relevant Restricted
Global Note and in the Indenture and the Securities Act.
C-2
<PAGE> 101
This certificate and the statements contained herein are made
for your benefit and the benefit of the Company.
-----------------------------------
[Insert Name of Owner]
By:
--------------------------------
Name:
Title:
Dated: ________________, ____
C-3
<PAGE> 102
EXHIBIT D
FORM OF CERTIFICATE FROM
ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR
SAC Acquisition Corp.
c/o CGW Southeast Partners III, L.P.
Twelve Piedmont Center
Suite 210
Atlanta, Georgia 30305
IBJ Schroder Bank & Trust Co.
One State Street
New York, New York 10004
Re: 9 5/8% Senior Notes due 2006
Reference is hereby made to the Indenture, dated as of March
31, 1998 (the "Indenture"), between SAC Acquisition Corp., as issuer (the
"Company"), and IBJ Schroder Bank & Trust Co., as trustee. Capitalized terms
used but not defined herein shall have the meanings given to them in the
Indenture.
In connection with our proposed purchase of $____________
aggregate principal amount of:
(a) [ ] a beneficial interest in a Global Note, or
(b) [ ] a Definitive Note,
we confirm that:
1. We understand that any subsequent transfer of the
Notes or any interest therein is subject to certain restrictions and conditions
set forth in the Indenture and the undersigned agrees to be bound by, and not to
resell, pledge or otherwise transfer the Notes or any interest therein except in
compliance with, such restrictions and conditions and the United States
Securities Act of 1933, as amended (the "Securities Act").
2. We understand that the offer and sale of the Notes
have not been registered under the Securities Act, and that the Notes and any
interest therein may not be offered or sold except as permitted in the following
sentence. We agree, on our own behalf and on behalf of any accounts for which we
are acting as hereinafter stated, that if we should sell the Notes or any
interest therein, we will do so only (A) to the Company or any subsidiary
thereof, (B) in accordance with Rule 144A under the Securities Act to a
"qualified institutional buyer" (as defined therein), (c) to an institutional
"accredited investor" (as defined below) that, prior to such transfer, furnishes
(or has furnished on its behalf by a U.S. broker-dealer) to you and to the
Company a signed letter substantially in the form of this letter and, if such
D-1
<PAGE> 103
transfer is in respect of a principal amount of Notes, at the time of transfer
of less than $250,000, an Opinion of Counsel in form reasonably acceptable to
the Company to the effect that such transfer is in compliance with the
Securities Act, (D) outside the United States in accordance with Rule 904 of
Regulation S under the Securities Act, (E) pursuant to the provisions of Rule
144(k) under the Securities Act or (F) pursuant to an effective registration
statement under the Securities Act, and we further agree to provide to any
person purchasing the Definitive Note or beneficial interest in a Global Note
from us in a transaction meeting the requirements of clauses (A) through (E) of
this paragraph a notice advising such purchaser that resales thereof are
restricted as stated herein.
3. We understand that, on any proposed resale of the Notes or
beneficial interest therein, we will be required to furnish to you and the
Company such certifications, legal opinions and other information as you and the
Company may reasonably require to confirm that the proposed sale complies with
the foregoing restrictions. We further understand that the Notes purchased by us
will bear a legend to the foregoing effect.
4. We are an institutional "accredited investor" (as defined
in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and
have such knowledge and experience in financial and business matters as to be
capable of evaluating the merits and risks of our investment in the Notes, and
we and any accounts for which we are acting are each able to bear the economic
risk of our or its investment.
5. We are acquiring the Notes or beneficial interest therein
purchased by us for our own account or for one or more accounts (each of which
is an institutional "accredited investor") as to each of which we exercise sole
investment discretion.
You and the Company are entitled to rely upon this letter and
are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official inquiry
with respect to the matters covered hereby.
------------------------------------------
[Insert Name of Accredited Investor]
By:
--------------------------------------
Name:
Title:
Dated: __________________, ____
D-2
<PAGE> 104
EXHIBIT E
FORM OF SUPPLEMENTAL INDENTURE
TO BE DELIVERED BY SUBSEQUENT GUARANTORS
SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated
as of ________________, among (a) __________________ (the "Guaranteeing
Subsidiary"), a subsidiary of SAC Acquisition Corp., a Georgia corporation
(together with its successors, the "Company"), (b) the Company, (c) the other
Guarantors (as defined in the Indenture referred to below) that have heretofore
issued Guarantees pursuant to Section 4.16 of the indenture referred to below
and (d) IBJ Schroder Bank & Trust Company, as trustee under the indenture
referred to below (the "Trustee").
W I T N E S S E T H
WHEREAS, the Company has heretofore executed and delivered to
the Trustee an indenture (the "Indenture"), dated as of March 31, 1998 providing
for the issuance of an aggregate principal amount of up to $75.0 million of 9
5/8% Notes due 2006 (the "Notes");
WHEREAS, Section 4.16 of the Indenture provides that under
certain circumstances the Guaranteeing Subsidiary shall execute and deliver to
the Trustee a supplemental indenture pursuant to which the Guaranteeing
Subsidiary shall unconditionally guarantee all of the Company's Obligations
under the Notes and the Indenture on the terms and conditions set forth herein
(the "Note Guarantee"); and
WHEREAS, pursuant to Section 9.01 of the Indenture, the
Trustee is authorized to execute and deliver this Supplemental Indenture.
NOW THEREFORE, in consideration of the foregoing and for other
good and valuable consideration, the receipt of which is hereby acknowledged,
the Guaranteeing Subsidiary and the Trustee mutually covenant and agree for the
equal and ratable benefit of the Holders of the Notes as follows:
1. CAPITALIZED TERMS. Capitalized terms used herein without
definition shall have the meanings assigned to them in the Indenture.
2. AGREEMENT TO GUARANTEE. The Guaranteeing Subsidiary hereby
agrees as follows:
(a) To jointly and severally Guarantee with each other
Guarantor to each Holder of a Note authenticated and
delivered by the Trustee and to the Trustee and its
successors and assigns, irrespective of the validity
and enforceability of the Indenture, the Notes or the
obligations of the Company hereunder or thereunder,
that:
(i) the principal of and interest on the Notes
will be promptly paid in full when due,
whether at maturity, by acceleration,
redemption or otherwise, and interest on the
overdue principal of and interest on the
Notes, if any, if lawful, and all other
obligations of the Company to the Holders or
the
E-6
<PAGE> 105
Trustee hereunder or thereunder will be
promptly paid in full or performed, all in
accordance with the terms hereof and
thereof; and
(ii) in case of any extension of time of payment
or renewal of any Notes or any of such other
obligations, that same will be promptly paid
in full when due or performed in accordance
with the terms of the extension or renewal,
whether at stated maturity, by acceleration
or otherwise. Failing payment when due of
any amount so guaranteed or any performance
so guaranteed for whatever reason, the
Guarantors shall be jointly and severally
obligated to pay the same immediately.
(b) The obligations hereunder shall be unconditional,
irrespective of the validity, regularity or
enforceability of the Notes or the Indenture, the
absence of any action to enforce the same, any waiver
or consent by any Holder of the Notes with respect to
any provisions hereof or thereof, the recovery of any
judgment against the Company, any action to enforce
the same or any other circumstance which might
otherwise constitute a legal or equitable discharge
or defense of a guarantor.
(c) The following is hereby waived: diligence
presentment, demand of payment, filing of claims with
a court in the event of insolvency or bankruptcy of
the Company, any right to require a proceeding first
against the Company, protest, notice and all demands
whatsoever.
(d) This Note Guarantee shall not be discharged except by
complete performance of the obligations contained in
the Notes and the Indenture.
(e) If any Holder or the Trustee is required by any court
or otherwise to return to the Company, the
Guarantors, or any Custodian, Trustee, liquidator or
other similar official acting in relation to either
the Company or the Guarantors, any amount paid by
either to the Trustee or such Holder, this Note
Guarantee, to the extent theretofore discharged,
shall be reinstated in full force and effect.
(f) The Guaranteeing Subsidiary shall not be entitled to
any right of subrogation in relation to the Holders
in respect of any obligations guaranteed hereby until
payment in full of all obligations guaranteed hereby.
(g) As between the Guarantors, on the one hand, and the
Holders and the Trustee, on the other hand, (x) the
maturity of the obligations guaranteed hereby may be
accelerated as provided in Article 6 of the Indenture
for the purposes of this Note Guarantee,
notwithstanding any stay, injunction or other
prohibition preventing such acceleration in respect
of the obligations guaranteed hereby, and (y) in the
event of any declaration of acceleration of such
obligations as provided in Article 6 of the
Indenture, such obligations (whether or not due and
payable) shall forthwith become due and payable by
the Guarantors for the purpose of this Note
Guarantee.
<PAGE> 106
(h) The Guaranteeing Subsidiary shall have the right to
seek contribution from any non-paying Guarantor so
long as the exercise of such right does not impair
the rights of the Holders under this Note Guarantee.
(i) Each party hereto, and each Holder, by its acceptance
of the Notes, hereby confirms that it is the
intention of all such parties that this Note
Guarantee not constitute a fraudulent transfer or
conveyance for purposes of Bankruptcy Law, the
Uniform Fraudulent Conveyance Act, the Uniform
Fraudulent Transfer Act or any similar federal or
state law to the extent applicable to this Note
Guarantee. To effectuate the foregoing intention, the
Trustee, the Holders and the Guaranteeing Subsidiary
hereby irrevocably agree that the obligations of the
Guaranteeing Subsidiary under this Note Guarantee
shall be limited to the maximum amount as will, after
giving effect to such maximum amount and all other
contingent and fixed liabilities of the Guaranteeing
Subsidiary that are relevant under such laws, and
after giving effect to any collections from, rights
to receive contribution from or payments made by or
on behalf of any other Guarantor in respect of the
obligations of such other Guarantor under such other
Guarantor's Subsidiary Guarantee and the Indenture,
not result in the obligations of the Guaranteeing
Subsidiary under this Note Guarantee constituting a
fraudulent transfer or conveyance.
3. EXECUTION AND DELIVERY. The Guaranteeing Subsidiary agrees
that the Note Guarantees shall remain in full force and effect notwithstanding
any failure to endorse on each Note a notation of such Note Guarantee.
4. GUARANTEEING SUBSIDIARY MAY CONSOLIDATE, ETC. ON CERTAIN
TERMS.
(a) The Guaranteeing Subsidiary may not consolidate with or merge
with or into (whether or not the Guaranteeing Subsidiary is
the surviving Person) another corporation, Person or entity
whether or not affiliated with the Guaranteeing Subsidiary
unless:
(i) subject to Section 5 hereof, the Person formed by or
surviving any such consolidation or merger (if other
than the Guaranteeing Subsidiary or the Company)
unconditionally assumes all the obligations of the
Guaranteeing Subsidiary, pursuant to a supplemental
indenture in form and substance reasonably
satisfactory to the Trustee, under the Notes, the
Indenture and the Registration Rights Agreement on
the terms set forth herein or therein;
(ii) immediately after giving effect to such transaction,
no Default or Event of Default exists;
(iii) the Guaranteeing Subsidiary, or any Person formed by
or surviving any such consolidation or merger, shall
have Consolidated Net Worth (immediately after giving
effect to such transaction), equal to or greater than
the Consolidated Net Worth of the Guaranteeing
Subsidiary immediately preceding the transaction; and
(iv) the Company would be permitted by virtue of the
Company's pro forma Fixed Charge Coverage Ratio,
immediately after giving effect to such transaction,
to
<PAGE> 107
incur at least $1.00 of additional Indebtedness
pursuant to Section 4.09 of the Indenture.
(b) In case of any such consolidation, merger, sale or conveyance
and upon the assumption by the successor corporation, by
supplemental indenture, executed and delivered to the Trustee
and satisfactory in form to the Trustee, of the Note Guarantee
endorsed upon the Notes and the due and punctual performance
of all of the covenants and conditions of the Indenture to be
performed by the Guaranteeing Subsidiary, such successor
corporation shall succeed to and be substituted for the
Guaranteeing Subsidiary with the same effect as if it had been
named herein as the Guaranteeing Subsidiary. Such successor
corporation thereupon may cause to be signed any or all of the
Note Guarantees to be endorsed upon all of the Notes issuable
hereunder which theretofore shall not have been signed by the
Company and delivered to the Trustee. All the Note Guarantees
so issued shall in all respects have the same legal rank and
benefit under the Indenture as the Note Guarantees theretofore
and thereafter issued in accordance with the terms of the
Indenture as though all of such Note Guarantees had been
issued at the date of the execution hereof.
(c) Notwithstanding clauses (a) and (b) above, nothing
contained in the Indenture or in any of the Notes shall prevent any
consolidation or merger of the Guaranteeing Subsidiary with or into the Company
or another Guarantor or Subsidiary of the Company, or shall prevent any sale or
conveyance of the property of the Guaranteeing Subsidiary as an entirety or
substantially as an entirety to the Company or another Guarantor or Subsidiary
of the Company.
5. RELEASES. In the event of a sale or other disposition of
all of the assets of the Guaranteeing Subsidiary, by way of merger,
consolidation or otherwise, or a sale or other disposition of all to the capital
stock of the Guaranteeing Subsidiary, then the Guaranteeing Subsidiary (in the
event of a sale or other disposition, by way of merger, consolidation or
otherwise, of all of the capital stock of the Guaranteeing Subsidiary) or the
corporation acquiring the property (in the event of a sale or other disposition
of all or substantially all of the assets of the Guaranteeing Subsidiary) will
be released and relieved of any obligations under its Note Guarantee; provided
that the Net Proceeds of such sale or other disposition are applied in
accordance with Section 4.10 of the Indenture. Upon delivery by the Company to
the Trustee of an Officers' Certificate to the effect that such sale or other
disposition was made by the Company in accordance with the provisions hereof,
the Trustee shall execute any documents reasonably required in order to evidence
the release of the Guaranteeing Subsidiary from its obligations under the Note
Guarantee.
6. NO RECOURSE AGAINST OTHERS. No past, present or future
director, officer, employee, incorporator, stockholder or agent of the
Guaranteeing Subsidiary, as such, shall have any liability for any obligations
of the Company or any Guaranteeing Subsidiary under the Notes, any Note
Guarantees, the Indenture or this Note Guarantee or for any claim based on, in
respect of, or by reason of, such obligations or their creation. Each Holder of
the Notes by accepting a Note waives and releases all such liability. The waiver
and release are part of the consideration for issuance of the Notes. Such waiver
may not be effective to waive liabilities under the federal securities laws and
it is the view of the Commission that such a waiver is against public policy.
7. NEW YORK LAW TO GOVERN. THE INTERNAL LAW OF THE STATE OF
NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS NOTE GUARANTEE BUT WITHOUT
GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO
<PAGE> 108
THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE
REQUIRED THEREBY.
8. COUNTERPARTS. The parties may sign any number of copies or
counterparts of this Note Guarantee. Each signed copy or counterparts shall be
an original, but all of them together represent the same agreement.
9. EFFECT OF HEADINGS. The Section headings herein are for
convenience only and shall not affect the construction hereof.
10. THE TRUSTEE. The Trustee shall not be responsible in any
manner whatsoever for or in respect of the validity or sufficiency of this Note
Guarantee or for or in respect of the recitals contained herein, all of which
recitals are made solely by the Guaranteeing Subsidiary and the Company.
IN WITNESS WHEREOF, the parties hereto have caused this
Supplemental Indenture to be duly executed and attested, all as of the date
first above written.
Dated: _______________, ____
[Guaranteeing Subsidiary]
By:
------------------------------------------
Name:
Title:
SAC ACQUISITION CORP. (OR ITS PERMITTED
SUCCESSOR)
By:
------------------------------------------
Name: William A. Davies
Title: Chairman of the Board
IBJ SCHRODER BANK & TRUST COMPANY, AS TRUSTEE
By:
------------------------------------------
Name: Stephen J. Giurlando
Title: Assistant Vice President
<PAGE> 1
EXHIBIT 4.2
SUPPLEMENTAL INDENTURE
March 31, 1998
by and between
SIMCALA, INC.
and
IBJ SCHRODER BANK & TRUST COMPANY, INC.
<PAGE> 2
SUPPLEMENTAL INDENTURE, dated as of March 31, 1998 (the "Supplemental
Indenture") between SIMCALA, Inc., a Delaware corporation (the "Company"), and
IBJ Schroder Bank & Trust Company, a New York Banking Corporation, as trustee
("Trustee").
W I T N E S S E T H:
WHEREAS, SAC Acquisition Corp., a Georgia corporation ("SAC"), and the
Trustee entered into the Indenture, dated as of March 31, 1998 (the
"Indenture"), with respect to $75,000,000 aggregate principal amount of SAC's 9
5/8% Senior Notes due 2006 (the "Notes");
WHEREAS, pursuant to the Stock Purchase Agreement, dated February 10,
1998, among SAC, the Company and the selling stockholders named therein, SAC
acquired all of the outstanding capital stock of the Company;
WHEREAS, pursuant to an Agreement and Plan of Merger, dated as of March
31, 1998, SAC was merged with and into the Company, with the Company being the
surviving corporation;
WHEREAS, the Company desires to assume all of SAC's rights and
obligations under the Indenture; and
WHEREAS, the Company and the Trustee desire to execute and deliver this
Supplemental Indenture pursuant to, and in accordance with, Section 9.01(d) of
the Indenture.
NOW THEREFORE, in consideration of good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties hereto agree
as follows:
SECTION 1. ASSUMPTION OF RIGHTS AND OBLIGATIONS.
The Company and the Trustee agree, for the benefit of each other and
for the equal and ratable benefit of the Holders of the Notes, that the Company
shall assume all of the rights and obligations of SAC under the Indenture.
SECTION 2. MISCELLANEOUS.
(a) Operative Date. This Supplemental Indenture shall become
effective as of the date hereof upon due execution by the Company and the
Trustee.
(b) Governing Law. The internal law of the State of New York shall
govern and be used to construe this Supplemental Indenture.
(c) Counterpart Originals. The parties may sign any number of
copies of this Supplemental Indenture. Each signed copy shall be an original,
but all of them together represent the same agreement.
<PAGE> 3
SIGNATURES
Dated as of March 31, 1998 SIMCALA, INC.
By:/s/ C. E. Boardwine
---------------------------------
Name: C. Edward Boardwine
Title: Chief Executive Officer
-2-
<PAGE> 4
Dated as of March 31, 1998 IBJ SCHRODER BANK & TRUST
COMPANY, AS TRUSTEE
By: /s/ Stephen J. Giurlando
--------------------------------
Name: Stephen J. Giurlando
Title: Assistant Vice President
-3-
<PAGE> 1
EXHIBIT 4.3
REGISTRATION RIGHTS AGREEMENT
DATED AS OF MARCH 31, 1998
BY AND AMONG
SAC ACQUISITION CORP.
AND
NATIONSBANC MONTGOMERY SECURITIES LLC
<PAGE> 2
This Registration Rights Agreement (this "Agreement") is made and
entered into as of March 31, 1998 by and among SAC Acquisition Corp., a Georgia
corporation (the "Company"), and NationsBanc Montgomery Securities LLC (the
"Initial Purchaser"), who has agreed to purchase the Company's 9_% Series A
Senior Notes due 2006 (the "Series A Notes") pursuant to the Purchase Agreement
(as defined below).
This Agreement is made pursuant to the Purchase Agreement, dated
March 24, 1998 (the "Purchase Agreement"), by and between the Company and the
Initial Purchaser. In order to induce the Initial Purchaser to purchase the
Series A Notes, the Company has agreed to provide the registration rights set
forth in this Agreement. In addition, SIMCALA, Inc., a Delaware corporation
("SIMCALA"), will agree, immediately after consummation of the Acquisition, to
enter into the Registration Rights Agreement Supplement, in substantially the
form attached hereto as Exhibit A, pursuant to which SIMCALA will assume the
rights and obligations of the Company hereunder. The execution and delivery of
this Agreement is a condition to the obligations of the Initial Purchaser set
forth in Section 7 of the Purchase Agreement.
The parties hereby agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following capitalized terms shall
have the following meanings:
Acquisition: The acquisition by the Company of SIMCALA to occur on
March 31, 1998.
Act: The Securities Act of 1933, as amended.
Broker-Dealer: Any broker or dealer registered under the Exchange
Act.
Closing Date: The date of this Agreement.
Commission: The Securities and Exchange Commission.
Company Indemnified Person: As defined in Section 8(a) hereof.
Consummate: A Registered Exchange Offer shall be deemed
"Consummated" for purposes of this Agreement upon the occurrence of (i) the
filing and effectiveness under the Act of the Exchange Offer Registration
Statement relating to the Series B Notes to be issued in the Exchange Offer,
(ii) the maintenance of such Registration Statement continuously effective and
the keeping of the Exchange Offer open for a period not less than the minimum
period required pursuant to Section 3(b) hereof, and (iii) the delivery by the
Company to the Registrar under the Indenture of Series B Notes in the same
aggregate principal amount as the aggregate principal amount of Series A Notes
that were tendered by Holders thereof pursuant to the Exchange Offer.
Damages Payment Date: With respect to the Series A Notes, each
Interest Payment Date.
<PAGE> 3
Effectiveness Target Date: As defined in Section 5.
Exchange Act: The Securities Exchange Act of 1934, as amended.
Exchange Offer: The registration by the Company under the Act of the
Series B Notes pursuant to the Exchange Offer Registration Statement pursuant to
which the Company offers (subject to the provisions of Section 4 hereof) the
Holders of all outstanding Transfer Restricted Securities the opportunity to
exchange all such outstanding Transfer Restricted Securities held by such
Holders for Series B Notes in an aggregate principal amount equal to the
aggregate principal amount of the Transfer Restricted Securities tendered in
such exchange offer by such Holders.
Exchange Offer Registration Statement: The Registration Statement
relating to the Exchange Offer, including the related Prospectus.
Exempt Resales: The transactions in which the Initial Purchaser
proposes to sell the Series A Notes (i) to certain "qualified institutional
buyers," as such term is defined in Rule 144A under the Act and (ii) to certain
institutional "accredited investors," as such term is defined in Rule 501(a)(1),
(2), (3) or (7) of Regulation D under the Act ("Accredited Institutions").
Holder: As defined in Section 2(b) hereof.
Holder Indemnified Person: As defined in Section 8(b) hereof.
Indemnified Holder: As defined in Section 8(a) hereof.
Indentures: The Indenture, dated as of March 31, 1998, between the
Company and IBJ Schroder Bank & Trust Company, as trustee (the "Trustee"),
pursuant to which the Notes are to be issued, and the Supplemental Indenture,
dated as of March 31, 1998 (the "Supplemental Indenture"), between SIMCALA and
the Trustee, as such Indentures are amended or supplemented from time to time in
accordance with the terms thereof.
Initial Purchaser: As defined in the preamble hereto.
Interest Payment Date: As defined in the Indentures and the Notes.
NASD: National Association of Securities Dealers, Inc.
Notes: The Series A Notes and the Series B Notes.
Person: An individual, partnership, corporation, trust or
unincorporated organization, or a government or agency or political subdivision
thereof.
Prospectus: The prospectus included in a Registration Statement, as
amended or supplemented by any prospectus supplement and by all other amendments
thereto, including post-effective amendments, and all material incorporated by
reference into such Prospectus.
-2-
<PAGE> 4
Record Holder: With respect to any Damages Payment Date relating to
the Notes, each Person who is a Holder of Notes on the record date with respect
to the Interest Payment Date on which such Damages Payment Date shall occur.
Registration Default: As defined in Section 5 hereof.
Registration Statement: Any registration statement of the Company
filed with the Commission relating to (a) an offering of Series B Notes pursuant
to an Exchange Offer or (b) the registration for resale of Transfer Restricted
Securities pursuant to the Shelf Registration Statement, which is filed pursuant
to the provisions of this Agreement, in each case, including the Prospectus
included therein, all amendments and supplements thereto (including
post-effective amendments) and all exhibits and material incorporated by
reference therein.
Series B Notes: The Company's 9_% Series B Senior Notes due 2006 to
be issued pursuant to the Indenture in the Exchange Offer or (b) pursuant to a
Shelf Registration Statement in exchange for Series A Notes.
Shelf Filing Deadline: As defined in Section 4 hereof.
Shelf Registration Statement: As defined in Section 4 hereof.
TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section
77aaa-77bbbb) as in effect on the date of the Indenture.
Transfer Restricted Securities: Each Note, until the earliest to
occur of (a) the date on which such Note is exchanged in the Exchange Offer and
entitled to be resold to the public by the Holder thereof without complying with
the prospectus delivery requirements of the Act, (b) the date on which such Note
has been effectively registered under the Act and disposed of in accordance with
a Shelf Registration Statement or (c) the date on which such Note is distributed
to the public pursuant to Rule 144 under the Act or by a Broker-Dealer pursuant
to the "Plan of Distribution" contemplated by the Exchange Offer Registration
Statement (including delivery of the Prospectus contained therein).
Underwriter(s): The underwriter(s) in an Underwritten Offering.
Underwritten Registration or Underwritten Offering: A registration
in which securities of the Company are sold to an underwriter for reoffering to
the public pursuant to an effective registration statement filed with the
Commission.
SECTION 2. SECURITIES SUBJECT TO THIS AGREEMENT
(a) Transfer Restricted Securities. The securities entitled to the
benefits of this Agreement are the Transfer Restricted Securities.
(b) Holders of Transfer Restricted Securities. A Person is deemed
to be a holder of Transfer Restricted Securities (each, a "Holder") whenever
such Person owns Transfer Restricted Securities.
-3-
<PAGE> 5
SECTION 3. REGISTERED EXCHANGE OFFER
(a) Unless the Exchange Offer shall not be permissible under
applicable law or Commission policy (after the procedures set forth in Section
6(a) below have been complied with), the Company shall (i) use all commercially
reasonable efforts to cause to be filed with the Commission as soon as
practicable after the Closing Date, but in no event later than 60 days after the
Closing Date, the Exchange Offer Registration Statement, (ii) use all
commercially reasonable efforts to cause such Exchange Offer Registration
Statement to be declared effective by the Commission no later than 120 days
after the Closing Date, (iii) in connection with the foregoing, file (A) all
pre-effective amendments to such Exchange Offer Registration Statement as may be
necessary in order to cause such Exchange Offer Registration Statement to be
declared effective, (B) if applicable, a post-effective amendment to such
Exchange Offer Registration Statement pursuant to Rule 430A under the Act and
(C) cause all necessary filings in connection with the registration and
qualification of the Series B Notes to be made under the Blue Sky laws of such
jurisdictions as are necessary to permit Consummation of the Exchange Offer, and
(iv) upon the effectiveness of such Exchange Offer Registration Statement,
commence the Exchange Offer. The Exchange Offer shall be on the appropriate form
permitting registration of the Series B Notes to be offered in exchange for the
Transfer Restricted Securities and to permit resales of Notes held by
Broker-Dealers as contemplated by Section 3(c) below.
(b) The Company shall use commercially reasonable efforts to cause
the Exchange Offer Registration Statement to be effective continuously and shall
keep the Exchange Offer open for a period of not less than the minimum period
required under applicable federal and state securities laws to Consummate the
Exchange Offer; provided, however, that in no event shall such period be less
than 20 business days. The Company shall cause the Exchange Offer to comply with
all applicable federal and state securities laws. No securities other than the
Notes shall be included in the Exchange Offer Registration Statement. The
Company shall use commercially reasonable efforts to cause the Exchange Offer to
be Consummated no later than 45 business days after the Exchange Offer
Registration Statement has been declared effective.
(c) The Company shall indicate in a "Plan of Distribution" section
contained in the Prospectus contained in the Exchange Offer Registration
Statement that any Broker-Dealer who holds Series A Notes that are Transfer
Restricted Securities and that were acquired for its own account as a result of
market-making activities or other trading activities (other than Transfer
Restricted Securities acquired directly from the Company), may exchange such
Series A Notes pursuant to the Exchange Offer; however, such Broker-Dealer may
be deemed to be an "underwriter" within the meaning of the Act and must,
therefore, deliver a prospectus meeting the requirements of the Act in
connection with any resales of the Series B Notes received by such Broker-Dealer
in the Exchange Offer, which prospectus delivery requirement may be satisfied by
the delivery by such Broker-Dealer of the Prospectus contained in the Exchange
Offer Registration Statement. Such "Plan of Distribution" section shall also
contain all other information with respect to such resales by Broker-Dealers
that the Commission may require in order to permit such resales pursuant
thereto, but such "Plan of Distribution" shall not name any such Broker-Dealer
or disclose the amount of Notes held by any such Broker-Dealer except to the
extent required by the Commission as a result of a change in policy after the
date of this Agreement.
-4-
<PAGE> 6
The Company shall use commercially reasonable efforts to keep the
Exchange Offer Registration Statement continuously effective, supplemented and
amended as required by the provisions of Section 6(c) below to the extent
necessary to ensure that it is available for resales of Notes acquired by
Broker-Dealers for their own accounts as a result of market-making activities or
other trading activities, and to ensure that it conforms with the requirements
of this Agreement, the Act and the policies, rules and regulations of the
Commission as announced from time to time, for a period of 180 days from the
date on which the Exchange Offer Registration Statement is declared effective.
The Company shall provide sufficient copies of the latest version of
such Prospectus to Broker-Dealers promptly upon reasonable request at any time
during such 180 day period in order to facilitate such resales.
SECTION 4. SHELF REGISTRATION
(a) Shelf Registration. If (i) the Company is not required to file
an Exchange Offer Registration Statement or to consummate the Exchange Offer
because the Exchange Offer is not permitted by applicable law or Commission
policy (after the procedures set forth in Section 6(a) below have been complied
with) or (ii) if any Holder of Transfer Restricted Securities shall notify the
Company within 20 business days of the Consummation of the Exchange Offer (A)
that such Holder is prohibited by applicable law or Commission policy from
participating in the Exchange Offer, or (B) that such Holder may not resell the
Series B Notes acquired by it in the Exchange Offer to the public without
delivering a prospectus and that the Prospectus contained in the Exchange Offer
Registration Statement is not appropriate or available for such resales by such
Holder, or (C) that such Holder is a Broker-Dealer and holds Series A Notes
acquired directly from the Company or one of its affiliates, then the Company
shall
(x) use commercially reasonable efforts to file a shelf
registration statement on the appropriate Commission form available to
the Company with the Commission pursuant to Rule 415 under the Act,
which may be an amendment to the Exchange Offer Registration Statement
(in either event, the "Shelf Registration Statement") on or prior to
the earliest to occur of (1) the 60th day after the date on which the
Company determines that it is not required to file the Exchange Offer
Registration Statement or (2) the 60th day after the date on which the
Company receives notice from a Holder of Transfer Restricted Securities
as contemplated by clause (ii) above (such earliest date being the
"Shelf Filing Deadline"), which Shelf Registration Statement shall
provide for resales of all Transfer Restricted Securities the Holders
of which shall have provided the information required pursuant to
Section 4(b) hereof; and
(y) use commercially reasonable efforts to cause such Shelf
Registration Statement to be declared effective by the Commission on or
before the 105th day after the Shelf Filing Deadline.
The Company shall use commercially reasonable efforts to keep such Shelf
Registration Statement continuously effective, supplemented and amended as
required by the provisions of Sections 6(b) and
-5-
<PAGE> 7
(c) hereof to the extent necessary to ensure that it is available for resales of
Notes by the Holders of Transfer Restricted Securities entitled to the benefit
of this Section 4(a), and to ensure that it conforms with the requirements of
this Agreement, the Act and the policies, rules and regulations of the
Commission as announced from time to time, for a period of at least two years
following the Closing Date or such shorter period ending when all Transfer
Restricted Securities covered by such Shelf Registration Statement have been
sold in the manner set forth and as contemplated by such Shelf Registration
Statement.
(b) Provision by Holders of Certain Information in Connection with
the Shelf Registration Statement. No Holder of Transfer Restricted Securities
may include any of its Transfer Restricted Securities in any Shelf Registration
Statement pursuant to this Agreement unless and until such Holder furnishes to
the Company in writing, within 15 business days after receipt of a request
therefor, such information as the Company may reasonably request for use in
connection with any Shelf Registration Statement or Prospectus or preliminary
Prospectus included therein. No Holder of Transfer Restricted Securities shall
be entitled to Liquidated Damages pursuant to Section 5 hereof unless and until
such Holder shall have used commercially reasonable efforts to provide all such
reasonably requested information. Each Holder as to which any Shelf Registration
Statement is being effected agrees to furnish promptly to the Company all
information required to be disclosed in order to make the information previously
furnished to the Company by such Holder not materially misleading. No Holder of
Transfer Restricted Securities shall be entitled to use a Prospectus unless and
until such Holder shall have furnished the reasonably requested information
required by this Section 4(b), and shall have committed to notify the Company
promptly of any change in such information.
SECTION 5. LIQUIDATED DAMAGES
If (i) any of the Registration Statements required by this Agreement
is not filed with the Commission on or prior to the date specified for such
filing in this Agreement, (ii) any of such Registration Statements has not been
declared effective by the Commission on or prior to the date specified for such
effectiveness in this Agreement (the "Effectiveness Target Date"), (iii) the
Exchange Offer has not been Consummated within 30 business days after the
Effectiveness Target Date with respect to the Exchange Offer Registration
Statement or (iv) any Registration Statement required by this Agreement is filed
and declared effective but shall thereafter cease to be effective or fail to be
usable for its intended purpose without being succeeded immediately by a
post-effective amendment to such Registration Statement that cures such failure
and that is itself immediately declared effective (each such event referred to
in clauses (i) through (iv), a "Registration Default"), the Company hereby
agrees to pay liquidated damages to each Holder of Transfer Restricted
Securities with respect to the first 90-day period immediately following the
occurrence of such Registration Default, in an amount equal to $.05 per week per
$1,000 principal amount of Transfer Restricted Securities held by such Holder.
The amount of the liquidated damages shall increase by an additional $.05 per
week per $1,000 in principal amount of Transfer Restricted Securities with
respect to each subsequent 90-day period until all Registration Defaults have
been cured, up to a maximum amount of liquidated damages of $.30 per week per
$1,000 principal amount of Transfer Restricted Securities. All accrued
liquidated damages shall be paid to Record Holders by the Company by wire
transfer of immediately available funds or by federal funds check on each
Damages Payment Date, as provided in the Indenture. Following the cure of all
Registration Defaults relating to any particular Transfer Restricted Securities,
the accrual of liquidated damages with respect to such Transfer Restricted
Securities will cease.
-6-
<PAGE> 8
All obligations of the Company set forth in the preceding paragraph
that are outstanding with respect to any Transfer Restricted Security at the
time such security ceases to be a Transfer Restricted Security shall survive
until such time as all such obligations with respect to such security shall have
been satisfied in full.
SECTION 6. REGISTRATION PROCEDURES
(a) Exchange Offer Registration Statement. In connection with the
Exchange Offer, the Company shall comply with all of the provisions of Section
6(c) below, shall use commercially reasonable efforts to effect such exchange to
permit the sale of Transfer Restricted Securities being sold in accordance with
the intended method or methods of distribution thereof, and shall comply with
all of the following provisions:
(i) If in the reasonable opinion of counsel to the Company
there is a question as to whether the Exchange Offer is permitted by
applicable law, the Company hereby agrees to seek a no-action letter or
other favorable decision from the Commission allowing the Company to
Consummate an Exchange Offer for such Series A Notes. The Company
hereby agrees to pursue the issuance of such a decision to the
Commission staff level but shall not be required to take commercially
unreasonable action to effect a change of Commission policy. The
Company hereby agrees, however, to (A) participate in telephonic
conferences with the Commission, (B) deliver to the Commission staff an
analysis prepared by counsel to the Company setting forth the legal
bases, if any, upon which such counsel has concluded that such an
Exchange Offer should be permitted and (C) diligently pursue a
resolution (which need not be favorable) by the Commission staff of
such submission.
(ii) As a condition to its participation in the Exchange Offer
pursuant to the terms of this Agreement, each Holder of Transfer
Restricted Securities shall furnish, upon the request of the Company,
prior to the Consummation thereof, a written representation to the
Company (which may be contained in the letter of transmittal
contemplated by the Exchange Offer Registration Statement) to the
effect that (A) it is not an affiliate of the Company, (B) it is not
engaged in, and does not intend to engage in, and has no arrangement or
understanding with any person to participate in, a distribution of the
Series B Notes to be issued in the Exchange Offer and (C) it is
acquiring the Series B Notes in its ordinary course of business. In
addition, all such Holders of Transfer Restricted Securities shall
otherwise cooperate in the Company's preparations for the Exchange
Offer. Each Holder hereby acknowledges and agrees that any
Broker-Dealer and any such Holder using the Exchange Offer to
participate in a distribution of the securities to be acquired in the
Exchange Offer (1) could not under Commission policy as in effect on
the date of this Agreement rely on the position of the Commission
enunciated in Morgan Stanley and Co., Inc. (available June 5, 1991) and
Exxon Capital Holdings Corporation (available May 13, 1988), as
interpreted in the Commission's letter to Shearman & Sterling dated
July 2, 1993, and similar no-action letters (including any no-action
letter obtained pursuant to clause (i) above), and (2) must comply with
the registration and prospectus delivery requirements of the Act in
connection with a secondary resale transaction and that such a
secondary resale transaction should be covered by an effective
registration statement containing the selling security holder
information required by
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<PAGE> 9
Item 507 or 508, as applicable, of Regulation S-K if the resales are of
Series B Notes obtained by such Holder in exchange for Series A Notes
acquired by such Holder directly from the Company.
(iii) Prior to effectiveness of the Exchange Offer
Registration Statement, the Company shall provide a supplemental letter
to the Commission (A) stating that the Company is registering the
Exchange Offer in reliance on the position of the Commission enunciated
in Exxon Capital Holdings Corporation (available May 13, 1988), Morgan
Stanley and Co., Inc. (available June 5, 1991) and, if applicable, any
no-action letter obtained pursuant to clause (i) above and (B)
including a representation that the Company has not entered into any
arrangement or understanding with any Person to distribute the Series B
Notes to be received in the Exchange Offer and that, to the best of the
Company's information and belief, each Holder participating in the
Exchange Offer is acquiring the Series B Notes in its ordinary course
of business and has no arrangement or understanding with any Person to
participate in the distribution of the Series B Notes received in the
Exchange Offer.
(b) Shelf Registration Statement. In connection with the Shelf
Registration Statement, the Company shall comply with all the provisions of
Section 6(c) below and shall use commercially reasonable efforts to effect such
registration to permit the sale of the Transfer Restricted Securities being sold
in accordance with the intended method or methods of distribution thereof, and
pursuant thereto the Company will as expeditiously as possible prepare and file
with the Commission a Registration Statement relating to the registration on any
appropriate form under the Act, which form shall be available for the sale of
the Transfer Restricted Securities in accordance with the intended method or
methods of distribution thereof.
(c) General Provisions. In connection with any Registration
Statement and any Prospectus required by this Agreement to permit the sale or
resale of Transfer Restricted Securities (including, without limitation, any
Registration Statement and the related Prospectus required to permit resales of
Notes by Broker-Dealers), the Company shall:
(i) use commercially reasonable efforts to keep such
Registration Statement continuously effective for the period specified
in Section 3 or 4 of this Agreement, as applicable;
(ii) prepare and file with the Commission such amendments and
post-effective amendments to the Registration Statement as may be
necessary to keep the Registration Statement effective for the
applicable period set forth in Section 3 or 4 hereof, as applicable, or
such shorter period as will terminate when all Transfer Restricted
Securities covered by such Registration Statement have been sold; cause
the Prospectus to be supplemented by any required Prospectus
supplement, and as so supplemented to be filed pursuant to Rule 424
under the Act, and to comply fully with the applicable provisions of
Rules 424 and 430A under the Act in a timely manner; and comply with
the provisions of the Act with respect to the disposition of all
securities covered by such Registration Statement during the applicable
period in accordance with the intended method or methods of
distribution by the sellers thereof set forth in such Registration
Statement or supplement to the Prospectus;
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<PAGE> 10
(iii) advise the Underwriter(s), if any, and selling Holders
promptly and, if requested by such Persons, to confirm such advice in
writing, (A) with respect to any Shelf Registration Statement or any
related Prospectus, when the Prospectus or any Prospectus supplement or
post-effective amendment has been filed with the Commission, and, with
respect to any Shelf Registration Statement or any post-effective
amendment thereto, when the same has become effective, (B) with respect
to any Shelf Registration Statement or any related Prospectus, of any
request by the Commission for amendments to the Shelf Registration
Statement or amendments or supplements to the related Prospectus or for
additional information relating thereto, (C) of the issuance by the
Commission of any stop order suspending the effectiveness of the
Registration Statement under the Act or of the suspension by any state
securities commission of the qualification of the Transfer Restricted
Securities for offering or sale in any jurisdiction, or the initiation
of any proceeding for any of the preceding purposes, (D) of the
existence of any fact or the happening of any event that makes any
statement of a material fact made in the Registration Statement, the
Prospectus, any amendment or supplement thereto, or any document
incorporated by reference therein untrue, or that requires the making
of any additions to or changes in the Registration Statement or the
Prospectus with respect to any omission to state a material fact in
order to make the statements therein not misleading. If at any time the
Commission shall issue any stop order suspending the effectiveness of
the Registration Statement, or any state securities commission or other
regulatory authority shall issue an order suspending the qualification
or exemption from qualification of the Transfer Restricted Securities
under state securities or Blue Sky laws, the Company shall use
commercially reasonable efforts to obtain the withdrawal or lifting of
such order at the earliest possible time;
(iv) furnish to each of the selling Holders beneficially
owning 15% or more of the aggregate principal amount of the Notes and
each of the Underwriter(s), if any, before filing with the Commission,
copies of any Shelf Registration Statement or any related Prospectus
included therein or any amendments or supplements to any such Shelf
Registration Statement or related Prospectus (including all documents
incorporated by reference after the initial filing of such Shelf
Registration Statement), which documents will be subject to the review
of such Holders and Underwriter(s), if any, for a period of at least
three business days, and the Company will not file any such Shelf
Registration Statement or related Prospectus or any amendment or
supplement to any such Shelf Registration Statement or related
Prospectus (including all such documents incorporated by reference) to
which a selling Holder of Transfer Restricted Securities covered by
such Shelf Registration Statement or the Underwriter(s), if any, shall
reasonably object within three business days after the receipt thereof.
A selling Holder or underwriter, if any, shall be deemed to have
reasonably objected to such filing if such Registration Statement,
amendment, Prospectus or supplement, as applicable, as proposed to be
filed, contains a material misstatement or omission with respect to
information regarding such Holder or underwriter or fails to comply
with the applicable requirements of the Act;
(v) promptly prior to the filing of any document that is to be
incorporated by reference into a Shelf Registration Statement or
related Prospectus, provide copies of such document to the selling
Holders beneficially owning 15% or more of the aggregate principal
amount of the Notes and to the Underwriter(s), if any, make the
Company's representatives available for discussion of such document and
other customary due diligence matters, and
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<PAGE> 11
include such information in such document prior to the filing thereof
as such selling Holders or underwriter(s), if any, reasonably may
request;
(vi) make available at reasonable times for inspection by the
selling Holders, any Underwriter participating in any disposition
pursuant to such Shelf Registration Statement, and any attorney or
accountant retained by such selling Holders or any of the
Underwriter(s), all financial and other records, pertinent corporate
documents and properties of the Company and cause the Company's
officers, directors and employees to supply all information reasonably
requested by any such Holder, underwriter, attorney or accountant in
connection with such Shelf Registration Statement subsequent to the
filing thereof and prior to its effectiveness;
(vii) if requested by any selling Holders beneficially owning
15% or more of the aggregate principal amount of the Notes or the
Underwriter(s), if any, promptly incorporate in any Shelf Registration
Statement or related Prospectus, pursuant to a supplement or
post-effective amendment if necessary, such information as such selling
Holders and Underwriter(s), if any, may reasonably request to have
included therein, including, without limitation, information relating
to the "Plan of Distribution" of the Transfer Restricted Securities,
information with respect to the principal amount of Transfer Restricted
Securities being sold to such Underwriter(s), the purchase price being
paid therefor and any other terms of the offering of the Transfer
Restricted Securities to be sold in such offering; and make all
required filings of such Prospectus supplement or post-effective
amendment as soon as practicable after the Company is notified of the
matters to be incorporated in such Prospectus supplement or
post-effective amendment;
(viii) furnish to each selling Holder and each of the
Underwriter(s), if any, without charge, upon request therefrom, at
least one copy of the Shelf Registration Statement, as first filed with
the Commission, and of each amendment thereto, including all documents
incorporated by reference therein and all exhibits (including exhibits
incorporated therein by reference);
(ix) deliver to each selling Holder and each of the
Underwriter(s), if any, without charge, as many copies of the
Prospectus (including each preliminary prospectus) included in any
Shelf Registration Statement and any amendment or supplement thereto as
such Persons reasonably may request; the Company hereby consents to the
use of the Prospectus and any amendment or supplement thereto included
in any Shelf Registration Statement by each of the selling Holders and
each of the Underwriter(s), if any, in connection with the offering and
the sale of the Transfer Restricted Securities covered by the
Prospectus or any amendment or supplement thereto in the manner
described therein;
(x) enter into such agreements (including an underwriting
agreement), and make such representations and warranties, and take all
such other actions in connection therewith in order to expedite or
facilitate the disposition of the Transfer Restricted Securities
pursuant to any Shelf Registration Statement contemplated by this
Agreement, all to such extent as may be reasonably requested by the
Initial Purchaser or by any Holder of Transfer Restricted Securities or
Underwriter in connection with any sale or resale pursuant to any Shelf
Registration Statement contemplated by this Agreement; and whether or
not an underwriting
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<PAGE> 12
agreement is entered into and whether or not the registration is an
Underwritten Registration, the Company shall in connection with a Shelf
Registration Statement:
(A) furnish to each selling Holder and each Underwriter, if
any, in such substance and scope as they may reasonably request and
as are customarily made by issuers to underwriters in primary
underwritten offerings, upon the date of the effectiveness of the
Shelf Registration Statement:
(1) a certificate, dated the date of effectiveness of
the Shelf Registration Statement signed by (y) the President
or any Vice President and (z) a principal financial or
accounting officer of the Company confirming, as of the date
thereof, the matters set forth in paragraphs (c) and (d) of
Section 7 of the Purchase Agreement (or stating any exceptions
thereto) and such other matters as such parties may reasonably
request;
(2) an opinion, dated the date of effectiveness of the
Shelf Registration Statement of counsel for the Company,
covering the matters set forth in paragraph (g) of Section 7
of the Purchase Agreement and such other matters as such
parties may reasonably request, and in any event including a
statement to the effect that such counsel has participated in
conferences with officers and other representatives of the
Company and representatives of the independent public
accountants for the Company in connection with the preparation
of such Registration Statement and the related Prospectus and
have considered the matters required to be stated therein and
the statements contained therein, and although such counsel
has not independently verified the accuracy, completeness or
fairness of such statements, on the basis of the foregoing
(relying as to materiality to a large extent upon facts
provided to such counsel by officers and other representatives
of the Company and without independent check or verification),
no facts came to such counsel's attention that caused such
counsel to believe that the applicable Shelf Registration
Statement, at the time such Shelf Registration Statement
became effective, contained an untrue statement of a material
fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not
misleading, or that the Prospectus contained in such
Registration Statement as of its date contained an untrue
statement of a material fact or omitted to state a material
fact necessary in order to make the statements therein, in
light of the circumstances under which they were made, not
misleading. Without limiting the foregoing, such counsel may
state further that such counsel assumes no responsibility for,
and has not independently verified, the accuracy, completeness
or fairness of exhibits, the financial statements, notes and
schedules and other financial and statistical data included in
any Registration Statement contemplated by this Agreement or
the related Prospectus; and
(3) a customary comfort letter, dated as of the date of
effectiveness of the Shelf Registration Statement, from the
Company's independent accountants, in the customary form and
covering matters of the type customarily covered in comfort
letters by underwriters in connection with primary
underwritten
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<PAGE> 13
offerings, and affirming the matters set forth in the comfort
letters delivered pursuant to Section 7(l) of the Purchase
Agreement, subject to receipt of appropriate documentation,
and only if permitted by Statement of Auditing Standards No.
72;
(B) set forth in full or incorporate by reference in the
underwriting agreement, if any, the indemnification provisions and
procedures of Section 8 hereof with respect to all parties to be
indemnified pursuant to said Section; and
(C) deliver such other documents and certificates as may be
reasonably requested by such parties to evidence compliance with
clause (A) above and with any customary conditions contained in the
underwriting agreement or other agreement entered into by the
Company pursuant to this clause (xi), if any.
(xi) prior to any public offering of Transfer Restricted
Securities, cooperate with the selling Holders, the Underwriter(s), if
any, and their respective counsel in connection with the registration
and qualification of the Transfer Restricted Securities under the
securities or Blue Sky laws of such jurisdictions within the United
States as the selling Holders or Underwriter(s) may reasonably request
and do any and all other acts or things reasonably necessary or
advisable to enable the disposition in such jurisdictions within the
United States of the Transfer Restricted Securities covered by the
Shelf Registration Statement; provided, however, that the Company shall
not be required to register or qualify as a foreign corporation where
it is not now so qualified or to take any action that would subject it
to the service of process in suits or to taxation, other than as to
matters and transactions relating to the Registration Statement, in any
jurisdiction where it is not now so subject;
(xii) shall issue, upon the request of any Holder of Series A
Notes covered by the Shelf Registration Statement, Series B Notes,
having an aggregate principal amount equal to the aggregate principal
amount of Series A Notes surrendered to the Company by such Holder
being sold by such Holder; such Series B Notes to be registered in the
name of the purchaser(s) of such Notes; in return, the Series A Notes
held by such Holder shall be surrendered to the Company for
cancellation;
(xiii) in connection with a Shelf Registration Statement,
cooperate with the selling Holders and the Underwriter(s), if any, to
facilitate the timely preparation and delivery of certificates
representing Transfer Restricted Securities to be sold and not bearing
any restrictive legends; and enable such Transfer Restricted Securities
to be in such denominations and registered in such names as the Holders
or the Underwriter(s), if any, may request at least two business days
prior to any sale of Transfer Restricted Securities made by such
Underwriter(s);
(xiv) use commercially reasonable efforts to cause the
Transfer Restricted Securities covered by the Registration Statement to
be registered with or approved by such other governmental agencies or
authorities within the United States as may be necessary to enable the
seller or sellers thereof or the underwriter(s), if any, to consummate
the disposition of such Transfer Restricted Securities, subject to the
proviso contained in clause (xi) above;
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<PAGE> 14
(xv) if any fact or event contemplated by clause (c)(iii)(D)
above shall exist or have occurred, (A) prepare a supplement or
post-effective amendment to the Registration Statement or related
Prospectus or any document incorporated therein by reference or file
any other required document so that, as thereafter delivered to the
purchasers of Transfer Restricted Securities, the Prospectus will not
contain an untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein not misleading
and/or (B) use commercially reasonable efforts to cause such amendment
or supplement to be declared effective and such Registration Statement
and the related Prospectus to become usable for their intended
purpose(s) as soon as practicable thereafter;
(xvi) provide a CUSIP number for all Transfer Restricted
Securities not later than the effective date of the Registration
Statement and provide the Trustee under the Indenture with certificates
for the Transfer Restricted Securities which are in a form eligible for
deposit with the Depositary Trust Company;
(xvii) in connection with a Shelf Registration Statement,
cooperate and assist in any filings required to be made with the NASD
and in the performance of any due diligence investigation by any
Underwriter (including any "qualified independent underwriter") that is
required to be retained in accordance with the rules and regulations of
the NASD, and use commercially reasonable efforts to cause such
Registration Statement to become effective and approved by such
governmental agencies or authorities within the United States as may be
necessary to enable the Holders selling Transfer Restricted Securities
to consummate the disposition of such Transfer Restricted Securities;
(xviii) otherwise use commercially reasonable efforts to
comply with all applicable rules and regulations of the Commission, and
make generally available to its security holders, as soon as
practicable, a consolidated earnings statement meeting the requirements
of Rule 158 (which need not be audited) for the twelve-month period (A)
commencing at the end of any fiscal quarter in which Transfer
Restricted Securities are sold to Underwriters in a firm or best
efforts Underwritten Offering or (B) if not sold to Underwriters in
such an offering, beginning with the first month of the Company's first
fiscal quarter commencing after the effective date of the Registration
Statement;
(xix) cause the Indenture to be qualified under the TIA not
later than the effective date of the first Registration Statement
required by this Agreement, and, in connection therewith, cooperate
with the Trustee and the Holders of Notes to effect such changes to the
Indenture as may be required for such Indenture to be so qualified in
accordance with the terms of the TIA; and execute and use commercially
reasonable efforts to cause the Trustee to execute, all documents that
may be required to effect such changes and all other forms and
documents required to be filed with the Commission to enable such
Indenture to be so qualified in a timely manner;
(xx) provide promptly to each Holder upon request each
document filed with the Commission pursuant to the requirements of
Section 13(a) and Section 15(d) of the Exchange Act.
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<PAGE> 15
Each Holder agrees by acquisition of a Transfer Restricted Security
that, upon receipt of any notice from the Company of the existence of any fact
of the kind described in Section 6(c)(iii)(D) hereof, such Holder will forthwith
discontinue disposition of Transfer Restricted Securities pursuant to the
applicable Registration Statement until such Holder's receipt of the copies of
the supplemented or amended Prospectus contemplated by Section 6(c)(xv) hereof,
or until it is advised in writing (the "Advice") by the Company that the use of
the Prospectus may be resumed, and has received copies of any additional or
supplemental filings that are incorporated by reference in the Prospectus. If so
directed by the Company, each Holder will deliver to the Company (at the
Company's expense) all copies, other than permanent file copies then in such
Holder's possession, of the Prospectus covering such Transfer Restricted
Securities that was current at the time of receipt of such notice. In the event
the Company shall give any such notice, the time period regarding the
effectiveness of such Registration Statement set forth in Section 3 or 4 hereof,
as applicable, shall be extended by the number of days during the period from
and including the date of the giving of such notice pursuant to Section
6(c)(iii)(D) hereof to and including the date when each selling Holder covered
by such Registration Statement shall have received the copies of the
supplemented or amended Prospectus contemplated by Section 6(c)(xv) hereof or
shall have received the Advice.
SECTION 7. REGISTRATION EXPENSES
(a) All expenses incident to the Company's performance of or
compliance with this Agreement will be borne by the Company, regardless of
whether a Registration Statement becomes effective, including without
limitation: (i) all registration and filing fees and expenses (including filings
made by the Initial Purchaser or any Holder with the NASD (and, if applicable,
the fees and expenses of any "qualified independent underwriter" and its counsel
that may be required by the rules and regulations of the NASD)); (ii) all fees
and expenses of compliance with federal securities and state Blue Sky or
securities laws; (iii) all expenses of printing (including printing certificates
for the Series B Notes to be issued in the Exchange Offer and printing of
Prospectuses), messenger and delivery services and telephone; (iv) all fees and
disbursements of counsel for the Company and, subject to Section 7(b) below, the
Holders of Transfer Restricted Securities; (v) all application and filing fees
in connection with listing Notes on a national securities exchange or automated
quotation system pursuant to the requirements hereof; and (vi) all fees and
disbursements of independent certified public accountants of the Company
(including the expenses of any special audit and comfort letters required by or
incident to such performance).
The Company will bear their internal expenses (including, without
limitation, all salaries and expenses of its officers and employees performing
legal or accounting duties), the expenses of any annual audit and the fees and
expenses of any Person, including special experts, retained by any Company.
Notwithstanding the foregoing or anything in this Agreement to the
contrary, each Holder shall pay all underwriting discounts and commissions of
any Underwriters with respect to Notes sold by or on behalf of such Holder.
(b) In connection with any Registration Statement required by this
Agreement (including, without limitation, the Exchange Offer Registration
Statement and the Shelf Registration Statement), the Company will reimburse the
Initial Purchaser and the Holders of Transfer Restricted
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<PAGE> 16
Securities being tendered in the Exchange Offer and/or resold pursuant to the
"Plan of Distribution" contained in the Exchange Offer Registration Statement or
registered pursuant to the Shelf Registration Statement, as applicable, for the
reasonable fees and disbursements of not more than one counsel, who shall be
Latham & Watkins or such other counsel as may be chosen by the Holders of a
majority in aggregate principal amount of the Transfer Restricted Securities for
whose benefit such Registration Statement is being prepared.
SECTION 8. INDEMNIFICATION
(a) The Company agrees to indemnify and hold harmless (i) each
Holder and (ii) each person, if any, who controls (within the meaning of Section
15 of the Act or Section 20 of the Exchange Act) any Holder (any of the persons
referred to in this clause (ii) being hereinafter referred to as a "controlling
person") and (iii) the respective officers, directors, partners, employees,
representatives and agents of any Holder or any controlling person (any person
referred to in clause (i), (ii) or (iii) may hereinafter be referred to as a
"Company Indemnified Person"), to the fullest extent lawful, from and against
any and all losses, claims, damages, liabilities, judgments, actions and
expenses (including without limitation and as soon as reasonably practicable,
reimbursement of all reasonable costs of investigating, preparing, pursuing or
defending any claim or action, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, including the reasonable
fees and expenses of counsel to any Company Indemnified Person) directly or
indirectly caused by, related to, based upon, arising out of or in connection
with any untrue statement or alleged untrue statement of a material fact
contained in any Registration Statement or Prospectus (or any amendment or
supplement thereto), or any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, except insofar as such losses, claims, damages,
liabilities or expenses are caused by an untrue statement or omission or alleged
untrue statement or omission that is made in reliance upon and in conformity
with information relating to any of the Holders furnished in writing to the
Company by any of the Holders expressly for use therein; provided, however, that
the Company shall not be liable pursuant to this subsection (a) with respect to
any preliminary prospectus to the extent that any such loss, claim, damage,
liability, judgment, action or expense arises solely from the fact that a
Company Indemnified Person sold Notes to a person to whom there was not sent or
given, on or prior to the written confirmation of such sale, a copy of the final
Prospectus, as amended and supplemented, provided that the Company had
previously furnished copies thereof to such Company Indemnified Person in
accordance with this Agreement and the final Prospectus, as amended and
supplemented, would have corrected any such untrue statement or omission and
that the Company Indemnified Person failed to deliver such final Prospectus.
In case any action or proceeding (including any governmental or
regulatory investigation or proceeding) shall be brought or asserted against any
of the Company Indemnified Persons with respect to which indemnity may be sought
against the Company, such Company Indemnified Persons (or the Company
Indemnified Persons controlled by such controlling person) shall promptly notify
the Company in writing (provided, that the failure to give such notice (i) will
not relieve the Company from liability under paragraph (a) above unless and to
the extent it did not otherwise learn of such action and such failure materially
prejudices the substantial rights and defenses of the Company and (ii) will not,
in any event, relieve the indemnifying party from any obligations to any
indemnified party other than the indemnification obligation provided in
paragraph (a) above). The indemnifying party shall be entitled to appoint
counsel of the indemnifying party's choice at the
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<PAGE> 17
indemnifying party's expense to represent the Company Indemnified Persons in any
action for which indemnification is sought (in which case the indemnifying party
shall not thereafter be responsible for the fees and expenses of any separate
counsel retained by the Company Indemnified Persons or parties except as set
forth below); provided, however that such counsel shall be reasonably
satisfactory to the Company Indemnified Persons. Notwithstanding the
indemnifying party's election to appoint counsel to represent the Company
Indemnified Persons in an action, the Company Indemnified Persons shall have the
right to employ separate counsel (including local counsel), and the indemnifying
party shall bear the reasonable fees, costs and expenses of such separate
counsel if (i) the use of counsel chosen by the indemnifying party to represent
the Company Indemnified Persons would, in the opinion of legal counsel to the
Company Indemnified Persons, present such counsel with a conflict of interest,
(ii) the actual or potential defendants in, or targets of, any such action
include both the Company Indemnified Persons and the indemnifying party and the
Company Indemnified Persons shall have been informed in writing by legal counsel
that there may be legal defenses available to it and/or other Company
Indemnified Persons which are different from or additional to those available to
the indemnifying party, (iii) the indemnifying party shall not have employed
counsel reasonably satisfactory to the Company Indemnified Persons to represent
the Company Indemnified Persons within a reasonable time after notice of the
institution of such action or (iv) the indemnifying party shall authorize the
Company Indemnified Persons to employ separate counsel at the expense of the
indemnifying party. The Company shall not, in connection with any one such
action or proceeding or separate but substantially similar or related actions or
proceedings in the same jurisdiction arising out of the same general allegations
or circumstances, be liable for the reasonable fees and expenses of more than
one separate firm of attorneys (in addition to any local counsel) at any time
for such Company Indemnified Persons, which firm shall be designated by the
Holders. The indemnifying party shall not be liable for any settlement of any
proceeding effected without its written consent, but if settled with such
consent or if there be a final judgment for the plaintiff, the indemnifying
party agrees to indemnify the Company Indemnified Persons from and against any
loss or liability by reason of such settlement or judgment. The Company shall
not, without the prior written consent of each Company Indemnified Persons,
settle or compromise or consent to the entry of judgment in or otherwise seek to
terminate any pending or threatened action, claim, litigation or proceeding in
respect of which indemnification or contribution may be sought hereunder
(whether or not any Company Indemnified Persons is a party thereto), unless such
settlement, compromise, consent or termination includes an unconditional release
of each Company Indemnified Person from all liability arising out of such
action, claim, litigation or proceeding.
(b) Each Holder of Transfer Restricted Securities agrees,
severally and not jointly, to indemnify and hold harmless (i) the Company, (ii)
each controlling person, if any, with respect to the Company and (iii) their
respective directors, officers, and any controlling person with respect to the
foregoing persons (and persons referred to in clause (i), (ii) or (iii) may be
referred to as a"Holder Indemnified Person"), to the same extent as the
foregoing indemnity from the Company to each of the Company Indemnified Persons,
but only with respect to information relating to such Holder furnished in
writing by such Holder expressly for use in any Registration Statement. In case
any action or proceeding shall be brought against any Holder Indemnified Person
in respect of which indemnity may be sought against a Holder of Transfer
Restricted Securities, such Holder shall have the rights and duties given the
Company and the Holder Indemnified Person shall have the rights and duties given
to each Company Indemnified Person by the preceding paragraph. In no event shall
the liability of any selling Holder hereunder be greater in amount than the
dollar amount of the proceeds received by such
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<PAGE> 18
Holder upon the sale of the Transfer Restricted Securities giving rise to such
indemnification obligation.
(c) In order to provide for contribution in circumstances in which
the indemnification provided for in Sections 8(a) and 8(b) hereof is for any
reason held to be unavailable from the Company or is insufficient to hold
harmless a party indemnified hereunder, the Company, on the one hand, and each
Holder, on the other hand, shall contribute to the aggregate losses, claims,
damages, liabilities and expenses of the nature contemplated by such
indemnification provision (including any investigation, legal and other expenses
incurred in connection with, and any amount paid in settlement of, any action,
suit or proceeding or any claims asserted, but after deducting in the case of
losses, claims damages, liabilities and expenses suffered by the Company any
contribution received by the Company from persons, other than the Holders, who
may also be liable for contribution, including controlling persons with respect
to the Company) to which the Company and such Holder may be subject, in such
proportion as is appropriate to reflect the relative benefits received by the
Company, on one hand, and such Holder, on the other hand, or if such allocation
is not permitted by applicable law or indemnification is not available as a
result of the indemnifying party not having received notice as provided in this
Section 8, in such proportion as is appropriate to reflect not only the relative
benefits referred to above but also the relative fault of the Company, on the
one hand, and such Holder, on the other hand, in connection with the statements
or omissions which resulted in such losses, claims, damages, liabilities or
expenses, as well as any other relevant equitable considerations. The relative
benefits received by the Company, on one hand, and each Holder, on the other
hand, shall be deemed to be in the same proportion as (i) the total proceeds
from the offering of the Notes (net of discounts but before deducting expenses)
received by the Company and (ii) the total proceeds received by such Holder upon
the sale of the Notes giving rise to such indemnification obligation. The
relative fault of the Company, on the one hand, and of each Holder, on the other
hand, shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the Company
or such holder and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company and the Holders agree that it would not be just and
equitable if contribution pursuant to this Section 8(c) were determined by pro
rata allocation or by another method of allocation which does not take into
account the equitable considerations referred to above. Notwithstanding the
provisions of this Section 8(c), (i) in no case shall any Holder be required to
contribute any amount in excess of the dollar amount by which the proceeds
received by such Holder upon the sale of the Notes exceeds the amount of any
damages which such Holder has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission and (ii) no
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. For purposes of this Section 8(c),
(A) each controlling person, if any, with respect to any Holder and (B) the
respective officers, directors, partners, employees, representatives and agents
of each Holder or any controlling person shall have the same rights to
contribution as such Holder, and each controlling person, if any, with respect
to the Company and the respective officers, directors, partners, employees,
representatives and agents of the Company and any controlling person shall have
the same rights to contribution as the Company, subject in each case to clauses
(i) and (ii) of this Section 8(c). Any party entitled to contribution will,
promptly after receipt of notice of commencement of any action, suit or
proceeding against such party in respect of which a claim for
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<PAGE> 19
contribution may be made against another party or parties under this Section
8(c), notify such party or parties from whom contribution may be sought, but the
failure to so notify such party or parties shall not relieve the party or
parties from whom contribution may be sought from any obligation it or they may
have under this Section 8(c) or otherwise. No party shall be liable for
contribution with respect to any action or claim settled without its prior
written consent; provided, however, that such written consent was not
unreasonably withheld.
SECTION 9. RULE 144A
The Company hereby agrees with each Holder, for so long as any
Transfer Restricted Securities remain outstanding, to make available to any
Holder or beneficial owner of Transfer Restricted Securities in connection with
any sale thereof and any prospective purchaser of such Transfer Restricted
Securities from such Holder or beneficial owner, the information required by
Rule 144A(d)(4) under the Act in order to permit resales of such Transfer
Restricted Securities pursuant to Rule 144A.
SECTION 10. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS
No Holder may participate in any Underwritten Registration hereunder
unless such Holder (a) agrees to sell such Holder's Transfer Restricted
Securities on the basis provided in any underwriting arrangements approved by
the Persons entitled hereunder to approve such arrangements and (b) completes
and executes all reasonable questionnaires, powers of attorney, indemnities,
underwriting agreements, lock-up letters and other documents required under the
terms of such underwriting arrangements. The Company shall not be obligated to
engage in more than one Underwritten Registration hereunder.
SECTION 11. SELECTION OF UNDERWRITERS
The Holders of Transfer Restricted Securities covered by the Shelf
Registration Statement who desire to do so may sell such Transfer Restricted
Securities in an Underwritten Offering. In any such Underwritten Offering, the
investment banker or investment bankers and manager or managers that will
administer the offering will be selected by the Holders of a majority in
aggregate principal amount of the Transfer Restricted Securities included in
such offering; provided, that such investment bankers and managers must be
reasonably satisfactory to the Company.
SECTION 12. MISCELLANEOUS
(a) Remedies. The Company agrees that monetary damages (including
the liquidated damages contemplated hereby) would not be adequate compensation
for any loss incurred by reason of a breach by it of the provisions of this
Agreement and hereby agree to waive the defense in any action for specific
performance that a remedy at law would be adequate.
(b) No Inconsistent Agreements. The Company will not, on or after
the date of this Agreement, enter into any agreement with respect to its
securities that is inconsistent with the
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<PAGE> 20
rights granted to the Holders in this Agreement or otherwise conflicts with the
provisions hereof. The Company has not previously entered into any agreement
granting any registration rights with respect to the Notes to any Person. The
rights granted to the Holders hereunder do not in any way conflict with and are
not inconsistent with the rights granted to the holders of the Company's
securities under any agreement in effect on the date hereof other than the
Purchase Agreement and the Purchase Agreement Supplement with the Initial
Purchaser.
(c) Adjustments Affecting the Notes. The Company will not take any
action with respect to the Notes that would materially and adversely affect the
ability of the Holders to Consummate any Exchange Offer.
(d) Amendments and Waivers. The provisions of this Agreement may
not be amended, modified or supplemented, and waivers or consents to or
departures from the provisions hereof may not be given unless the Company has
obtained the written consent of Holders of a majority of the outstanding
principal amount of Transfer Restricted Securities. Notwithstanding the
foregoing, a waiver or consent to departure from the provisions hereof that
relates exclusively to the rights of Holders whose securities are being tendered
pursuant to the Exchange Offer and that does not affect directly or indirectly
the rights of other Holders whose securities are not being tendered pursuant to
such Exchange Offer may be given by the Holders of a majority of the outstanding
principal amount of Transfer Restricted Securities being tendered or registered.
(e) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), telecopier, or air courier
guaranteeing overnight delivery:
(i) if to a Holder, at the address set forth on the records of
the Registrar under the Indenture, with a copy to the Registrar under
the Indenture; and
(ii) if to the Company:
SAC Acquisition Corp.
c/o CGW Southeast Partners III, L.P.
Twelve Piedmont Center
Suite 210
Atlanta, GA 30305
Attention: William A. Davies
All such notices and communications shall be deemed to have been
duly given: at the time delivered by hand, if personally delivered; five
business days after being deposited in the mail, postage prepaid, if mailed;
when receipt acknowledged, if telecopied; and on the next business day, if
timely delivered to an air courier guaranteeing overnight delivery.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address specified in the Indenture.
(f) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the
parties, including without limitation and without
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<PAGE> 21
the need for an express assignment, subsequent Holders of Transfer Restricted
Securities; provided, however, that this Agreement shall not inure to the
benefit of or be binding upon a successor or assign of a Holder unless and to
the extent such successor or assign acquired Transfer Restricted Securities from
such Holder.
(g) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for convenience
of reference only and shall not limit or otherwise affect the meaning hereof.
(i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD
TO THE CONFLICT OF LAW RULES THEREOF.
(j) Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be affected or impaired thereby.
(k) Entire Agreement. This Agreement together with the other
Operative Documents (as defined in the Purchase Agreement) is intended by the
parties as a final expression of their agreement and intended to be a complete
and exclusive statement of the agreement and understanding of the parties hereto
in respect of the subject matter contained herein. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein with respect to the registration rights granted by the Company with
respect to the Transfer Restricted Securities. This Agreement supersedes all
prior agreements and understandings between the parties with respect to such
subject matter.
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<PAGE> 22
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first written above.
SAC ACQUISITION CORP.
By: /s/ William A. Davies
-----------------------------
Name: William A. Davies
Title: Chairman of the Board
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<PAGE> 23
The foregoing Registration Rights Agreement is hereby confirmed,
accepted and agreed as of the date first above written.
NATIONSBANC MONTGOMERY SECURITIES LLC
By: /s/ Mark Wilson
--------------------------------
Name: Mark Wilson
Title: Managing Director
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<PAGE> 1
EXHIBIT 4.4
REGISTRATION RIGHTS AGREEMENT SUPPLEMENT
THIS REGISTRATION RIGHTS AGREEMENT SUPPLEMENT is a supplement to
that certain Registration Rights Agreement, dated as of March 31, 1998 (the
"Registration Rights Agreement"), between SAC Acquisition Corp., a Georgia
corporation ("SAC"), and NationsBanc Montgomery Securities LLC (the "Initial
Purchaser"). Unless otherwise defined herein, defined terms are used herein as
defined in the Registration Rights Agreement.
As a result of the consummation of the Merger (as defined in the
Purchase Agreement, dated March 24, 1998, between SAC and the Initial
Purchaser), SAC was merged with and into SIMCALA, Inc., a Delaware corporation
(the "Company"), with the Company being the surviving corporation.
The Company and the Initial Purchaser agree as follows:
(a) the Company hereby (i) assumes the obligations, and makes the
agreements, of SAC under the Registration Rights Agreement and (ii) makes the
representations and warranties of SAC to the Initial Purchaser contained
therein;
(b) the Initial Purchaser hereby (i) reaffirms its obligations and
agreements under the Registration Rights Agreement and (ii) reaffirms to the
Company its representations and warranties contained therein; and
(c) the obligation of each Holder to SAC under the Registration
Rights Agreement shall be an obligation owing to the Company.
For purposes of Section 12(e) of the Registration Rights Agreement,
the address of the Company shall be the address of the Company set forth in the
Final Memorandum, Attention: C. Edward Boardwine, with copies to: (i) CGW
Southeast Partners III, L.P., Twelve Piedmont Center, Suite 210, Atlanta Georgia
30305, Attention: William A. Davies; and (ii) Alston & Bird LLP, 1201 West
Peachtree Street, Atlanta, Georgia 30309-3424, Attention: Terri McMahon, Esq.
This Registration Rights Agreement Supplement does not cancel or
extinguish any right or obligation of the parties to the Registration Rights
Agreement. The parties hereto agree that the Registration Rights Agreement shall
be supplemented only with respect to the matters referred to herein and the
provisions of the Registration Rights Agreement are otherwise in full force and
effect.
This Registration Rights Agreement Supplement may be executed in one
or more counterparts and, if executed in more than one counterpart, the executed
counterparts shall each be deemed to be an original and all such counterparts
shall together constitute one and the same instrument.
THIS REGISTRATION RIGHTS AGREEMENT SUPPLEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF NEW YORK, WITHOUT REGARD TO THE
CONFLICT OF LAW RULES THEREOF.
<PAGE> 2
IN WITNESS WHEREOF, the undersigned has executed this Registration
Rights Agreement Supplement as of March 31, 1998.
SIMCALA, INC.
BY: /s/ C. E. Boardwine
-------------------------------
NAME: C. EDWARD BOARDWINE
TITLE: CHIEF EXECUTIVE OFFICER
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<PAGE> 3
The foregoing Agreement is hereby
confirmed and accepted as of the
date first above written.
NATIONSBANC MONTGOMERY SECURITIES LLC
By: /s/ Mark Wilson
--------------------------------
Name: Mark Wilson
Title: Managing Director
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<PAGE> 1
EXHIBIT 10.1
AGREEMENT FOR INVESTMENT BANKING SERVICES
THIS AGREEMENT is entered into this March 31, 1998, by and between
SIMCALA, INC., a Delaware corporation (the "Corporation"), and CGW SOUTHEAST
MANAGEMENT III, L.L.C., a Delaware limited liability company ("CGW").
BACKGROUND
The Corporation desires to engage CGW to provide investment banking
services to the Company in connection with the transactions contemplated by that
certain Stock Purchase Agreement, dated February 10, 1998, among the
Corporation, SAC Acquisition Corp. and the shareholders of the Corporation (the
"Stock Purchase Agreement"), and in connection with structuring and negotiating
certain senior credit facilities and the terms of the issuance and sale by the
Corporation of senior subordinated notes and in arranging for contributions to
the equity capital of the Corporation (collectively, the "Financings").
AGREEMENT
For and in consideration of the above premises and the mutual covenants
and agreements hereinafter set forth, and other good and valuable consideration,
the receipt and sufficiency of which are acknowledged, the parties hereto agree
as follows:
1. SCOPE OF CONSULTING SERVICES. CGW has provided and agrees to
continue to provide to the Corporation investment banking and advisory services
in connection with the structuring and negotiation of the transactions
contemplated by the Stock Purchase Agreement and the Financings and the
consummation of such transactions.
2. COMPENSATION. For the services rendered by CGW as herein
described, upon consummation of the transactions provided for in the Stock
Purchase Agreement and the Financings the Corporation shall pay to CGW One
Million Three Hundred and Fifty Thousand Dollars ($1,350,000.00) (the "Fee").
The Fee shall be paid at the time of the consummation of such transactions by
wire transfer of immediately available funds.
3. EXPENSES. The Corporation shall reimburse CGW for all of CGW's
costs and expenses (other than ordinary overhead) reasonably incurred in
connection with providing the investment banking services hereunder. Such
reimbursements shall be paid to CGW upon submission by CGW of all documentation
ordinarily required by the Corporation's policy on reimbursement of expenses.
4. INDEPENDENT CONTRACTOR. CGW is and shall be an independent
contractor, and no employment or agency relationship between the Corporation and
CGW is intended to be created hereby.
<PAGE> 2
5. INDEMNIFICATION.
(a) The Corporation shall indemnify and hold harmless CGW and
its affiliates, their respective officers, directors,
controlling persons (within the meaning of Section 15 of
the Securities Act of 1933 or Section 20(a) of the
Securities Exchange Act of 1934), if any, employees and
agents of CGW or any of CGW's affiliates (each such person
being an "Indemnified Person") from and against any losses,
claims, damages or liabilities related to, arising out of
or in connection with CGW's engagement hereunder.
(b) The Corporation shall reimburse each Indemnified Person for
all reasonable expenses (including fees and expenses of
counsel) as they are incurred in connection with
investigating, preparing, pursuing or defending any action,
claim, suit, investigation or proceeding related to,
arising out of or in connection with CGW's engagement
hereunder, whether or not pending or threatened and whether
or not any Indemnified Person is a party; provided however,
that if a final judicial determination is made that any
losses, claims, damages or liabilities (or expenses related
thereto) have resulted from the bad faith or gross
negligence of any Indemnified Person, then each Indemnified
Person will remit to the Corporation any amounts reimbursed
under this subparagraph 5(b).
(c) The Corporation will not be responsible for any losses,
claims, damages or liabilities (or expenses related
thereto) that are finally judicially determined to have
resulted from the bad faith or gross negligence of any
Indemnified Person. The Corporation further agrees that no
Indemnified Person shall have any liability (whether direct
or indirect, in contract or tort or otherwise) to the
Corporation or to any person claiming through the
Corporation (including, without limitation, equity holders
and creditors of the Corporation) for or in connection with
CGW's engagement hereunder except for any such liability
for losses, claims, damages or liabilities incurred by the
Corporation that are finally judicially determined to have
resulted from the bad faith or gross negligence of such
Indemnified Person. If multiple claims are brought against
CGW in an arbitration, with respect to at least one of
which indemnification is permitted under applicable law and
provided for under this Agreement, the Corporation agrees
that any arbitration award shall be conclusively deemed to
be based on claims as to which indemnification is permitted
and provided for, except to the extent the arbitration
award expressly states that the award, or any portion
thereof, is based solely on a claim as to which
indemnification is not available.
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<PAGE> 3
(d) The Corporation agrees that each Indemnified Person is
entitled to retain separate counsel of its choice in
connection with any of the matters to which the
indemnification and reimbursement commitments set forth in
subparagraphs 5(a) and 5(b) above relate.
(e) No Indemnified Person seeking indemnification,
reimbursement or contribution under this Agreement will,
without the Corporation's prior written consent, settle,
compromise, consent to the entry of any judgment in or
otherwise seek to terminate any action, claim, suit,
investigation or proceeding referred to in this
subparagraph 5(a) above.
(f) The foregoing rights to indemnity and contribution shall be
in addition to any rights that CGW and/or any other
Indemnified Person may have at common law or otherwise and
shall remain in full force and effect following the
completion or any termination of CGW's engagement. The
Corporation hereby consents to personal jurisdiction and to
service and venue in any court in which any claim which is
subject to this Agreement is brought against CGW or any
other Indemnified Person.
(g) The Corporation and CGW agree that if any indemnification
or reimbursement sought pursuant to this Section 5 is
finally judicially determined to be unavailable (except by
reason of the gross negligence or bad faith of any
Indemnified Person), then, whether or not CGW is the person
entitled to indemnification or reimbursement, the
Corporation and CGW shall contribute to the losses, claims,
damages, liabilities and expenses for which such
indemnification or reimbursement is held unavailable in
such proportion as is appropriate to reflect the relative
benefits to the Corporation on the one hand, and CGW on the
other, in connection with the transaction to which such
indemnification or reimbursement relates, and other
equitable considerations; provided however, that in no
event shall the amount to be contributed by CGW exceed the
amount of the fee actually received by CGW hereunder.
6. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Georgia.
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<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date and year first above written.
SIMCALA, INC.
By: /s/ C. Edward Boardwine
--------------------------------
Name:
-------------------------------
Title:
------------------------------
CGW SOUTHEAST MANAGEMENT III, L.L.C.
By: /s/ William A. Davies
--------------------------------
Name:
-------------------------------
Managing Director
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<PAGE> 1
EXHIBIT 10.2
AGREEMENT FOR CONSULTING SERVICES
THIS AGREEMENT FOR CONSULTING SERVICES is entered into this March 31,
1998, by and between SIMCALA, INC., a Delaware corporation (the "Corporation"),
and CGW SOUTHEAST III, L.L.C., a Delaware limited liability company ("CGW").
BACKGROUND
A. The Corporation desires to engage CGW for the purpose of providing
financial and management consulting services to the Corporation.
B. CGW is willing to accept such engagement upon the terms and
conditions set forth herein.
AGREEMENT
For and in consideration of the above premises and the mutual covenants
and agreements hereinafter set forth, and other good and valuable consideration,
the receipt and sufficiency of which are acknowledged, the parties hereto agree
as follows:
1. SCOPE OF CONSULTING SERVICES. The Corporation retains CGW, and CGW
accepts engagement by the Corporation, to provide financial advisory and
management consulting services to the Corporation and its affiliates. In such
capacity, CGW will assist the Corporation and its affiliates in financial and
strategic planning and analysis. Such consulting services shall include having a
representative of CGW in attendance at all meetings of the Board of Directors of
the Corporation, evaluation of and negotiations with potential candidates for
acquisition by the Corporation, assisting the Corporation in relations with its
lenders, and providing advice to the Corporation on its capital needs and
structure, including general advice and assistance regarding refinancings or
public offerings or sale of the Corporation. CGW agrees to be available to the
Corporation as needed and to cause such services to be provided by persons
employed or retained by or affiliated with CGW or its general partner. Unless
required by reason of the nature of the particular consulting service, such
services may be performed at the offices of CGW.
2. TERM. The term (the "Term") of this Agreement shall commence on
the date hereof and end on the fifth anniversary of the date hereof. This
Agreement may be terminated prior to the expiration of the Term only (i) by
mutual agreement of CGW and the Corporation, (ii) as provided in Section 5
below, or (iii) by the Corporation upon the willful failure of CGW to provide
consulting services hereunder if such failure is not remedied within thirty (30)
days after receipt by CGW of written notice by the Corporation to CGW. Upon any
termination of this Agreement for any reason other than as provided in Section 5
below, CGW's right to receive compensation pursuant to Section 3 hereof shall
cease and terminate.
<PAGE> 2
3. COMPENSATION.
(a) For the services rendered by CGW hereunder, the Corporation
shall pay to CGW (i) a monthly fee of $15,000 on the first day of each calendar
month occurring during the Term, (ii) a fee with respect to each fiscal year of
the Corporation that ends during the Term in an amount equal to the bonus paid
to the Chief Executive Officer of the Corporation with respect to such fiscal
year, such additional fee to be paid at the same time as such bonus is paid to
the Chief Executive Officer, and (iii) a fee with respect to the portion of the
fiscal year of the Corporation in which this Agreement begins or ends and during
which this Agreement is in effect in an amount equal to the portion of the bonus
paid to the chief executive officer of the Corporation with respect to such
fiscal year pro rated based upon the number of days during such fiscal year this
Agreement is in effect. The amount payable under this Section 3(a) is herein
referred to as the "Retainer Fee."
(b) In addition to the Retainer Fee, the Corporation shall pay
to CGW fees in such amounts as shall be mutually agreed upon in advance for any
services provided by CGW with respect to services provided to the Corporation by
CGW at the request of the Corporation or any of its affiliates which fall
outside the scope of services generally contemplated by Section 1 of this
Agreement.
(c) Upon termination of this Agreement as provided in Section 5
below, the Corporation shall pay to CGW an amount equal to the aggregate
Retainer Fee that would have been paid over the remaining Term had such
termination not occurred. For purposes of determining such amount the bonus
deemed to be paid to the Chief Executive Officer of the Corporation for any
fiscal year of the Corporation ending after any such termination shall be the
average of the annual bonus paid to such officer for the full fiscal years of
the Corporation ended after the date hereof and prior to such termination, and
if no full fiscal years have ended during such period, then the bonus deemed to
be paid to the chief executive officer for each fiscal year of the Corporation
ending after such termination of this Agreement shall be $153,750.
4. EXPENSES. The Corporation shall reimburse CGW for all of CGW's
costs and expenses (other than ordinary overhead) reasonably incurred in
connection with (i) attendance at meetings with the Corporation or any
affiliate, and (ii) provision of its services hereunder. Such reimbursements
shall be paid to CGW in a timely manner in accordance with the regular expense
reimbursement policy of the Corporation and upon submission by CGW of all
documentation ordinarily required by the Corporation's policy on reimbursement
of expenses.
5. CHANGE OF CONTROL. This Agreement shall terminate upon the
occurrence of a Change in Control with respect to the Corporation. As used
herein, a "Change in Control" shall be deemed to have occurred with respect to
the Corporation upon (i) the consummation of any merger, share exchange or
consolidation (other than with an affiliate
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<PAGE> 3
of the Corporation) of the Corporation in which the shareholders of the
Corporation immediately prior to such merger, share exchange or consolidation
shall not following such merger, share exchange or consolidation, own, directly
or indirectly, at least fifty percent (50%) of the aggregate voting power of the
outstanding securities of the continuing or surviving entity, (ii) any issuance
or sale by the Corporation in a single transaction or series of related
transactions of shares of the Corporation's capital stock which constitute after
such issuance and sale fifty percent (50%) or more of the aggregate voting power
of the outstanding securities of the Corporation, other than the issuance and
sale of capital stock in a public offering of such securities or in connection
with the exercise of options to purchase such voting securities granted to its
employees or lenders, (iii) any other transaction or series of transactions in
which the current holders of the Corporation's common stock cease to own,
directly or indirectly, fifty percent (50%) or more of the aggregate voting
power of the outstanding securities of the Corporation, other than through a
public offering of the voting securities of the Corporation or other than in
connection with the exercise of options to purchase voting securities of the
Corporation granted to employees or lenders of the Corporation, or (iv) any sale
in a single transaction or a series of related transactions of all or
substantially all of the assets of the Corporation. The Corporation agrees to
notify CGW promptly of any Change in Control of the Corporation by mailing to
CGW written notice of such Change in Control, it being the intent of this
provision that CGW be informed at all times concerning the ownership of the
Corporation.
6. ENTIRE AGREEMENT. This Agreement embodies the entire agreement of
the parties hereto with respect to the services to be provided by CGW hereunder.
No amendment or modification of this Agreement shall be valid or binding upon
the Corporation or CGW unless made in writing and signed by the parties hereto.
7. INDEPENDENT CONTRACTOR. CGW is and shall be an independent
contractor, and no employment relationship between the Corporation and CGW is
intended to be created hereby.
8. INDEMNIFICATION.
(a) The Corporation shall indemnify and hold harmless CGW and
its affiliates, their respective officers, directors,
controlling persons (within the meaning of Section 15 of
the Securities Act of 1933 or Section 20(a) of the
Securities Exchange Act of 1934), if any, employees and
agents of CGW or any of CGW's affiliates (each such person
being an "Indemnified Person") from and against any losses,
claims, damages or liabilities related to, arising out of
or in connection with CGW's engagement hereunder.
(b) The Corporation shall reimburse each Indemnified Person for
all reasonable expenses (including fees and expenses of
counsel) as they are incurred in connection with
investigating, preparing, pursuing or defending any action,
claim, suit, investigation or proceeding related to,
arising out of or in
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<PAGE> 4
connection with CGW's engagement hereunder, whether or not
pending or threatened and whether or not any Indemnified
Person is a party; provided however, that if a final
judicial determination is made that any losses, claims,
damages or liabilities (or expenses related thereto) have
resulted from the bad faith or gross negligence of any
Indemnified Person, then each Indemnified Person will remit
to the Corporation any amounts reimbursed under this
subparagraph 8(b).
(c) The Corporation will not be responsible for any losses,
claims, damages or liabilities (or expenses related
thereto) that are finally judicially determined to have
resulted from the bad faith or gross negligence of any
Indemnified Person. The Corporation further agrees that no
Indemnified Person shall have any liability (whether direct
or indirect, in contract or tort or otherwise) to the
Corporation or to any person claiming through the
Corporation (including, without limitation, equity holders
and creditors of the Corporation) for or in connection with
CGW's engagement hereunder except for any such liability
for losses, claims, damages or liabilities incurred by the
Corporation that are finally judicially determined to have
resulted from the bad faith or gross negligence of such
Indemnified Person. If multiple claims are brought against
CGW in an arbitration, with respect to at least one of
which indemnification is permitted under applicable law and
provided for under this Agreement, the Corporation agrees
that any arbitration award shall be conclusively deemed to
be based on claims as to which indemnification is permitted
and provided for, except to the extent the arbitration
award expressly states that the award, or any portion
thereof, is based solely on a claim as to which
indemnification is not available.
(d) The Corporation agrees that each Indemnified Person is
entitled to retain separate counsel of its choice in
connection with any of the matters to which the
indemnification and reimbursement commitments set forth in
subparagraphs 8(a) and 8(b) above relate.
(e) No Indemnified Person seeking indemnification,
reimbursement or contribution under this Agreement will,
without the Corporation's prior written consent, settle,
compromise, consent to the entry of any judgment in or
otherwise seek to terminate any action, claim, suit,
investigation or proceeding referred to in this
subparagraph 8(a) above.
(f) The foregoing rights to indemnity and contribution shall be
in addition to any rights that CGW and/or any other
Indemnified Person may have at common law or otherwise and
shall remain in full force and effect following the
completion or any termination of CGW's engagement. The
Corporation hereby consents to personal jurisdiction and to
service and
-4-
<PAGE> 5
venue in any court in which any claim which is subject to
this Agreement is brought against CGW or any other
Indemnified Person.
(g) The Corporation and CGW agree that if any indemnification
or reimbursement sought pursuant to this Section 8 is
finally judicially determined to be unavailable (except by
reason of the gross negligence or bad faith of any
Indemnified Person), then, whether or not CGW is the person
entitled to indemnification or reimbursement, the
Corporation and CGW shall contribute to the losses, claims,
damages, liabilities and expenses for which such
indemnification or reimbursement is held unavailable in
such proportion as is appropriate to reflect the relative
benefits to the Corporation on the one hand, and CGW on the
other, in connection with the transaction to which such
indemnification or reimbursement relates, and other
equitable considerations; provided however, that in no
event shall the amount to be contributed by CGW exceed the
amount of the fee actually received by CGW hereunder.
9. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Georgia.
10. DELEGATION. CGW hereby delegates to CGW Southeast Management III,
L.L.C. ("Management") the performance of all duties of CGW hereunder, and
directs the Corporation to make payment of the Retainer Fee and all other
amounts due CGW hereunder to Management. The Corporation hereby consents to the
delegation of the performance of CGW's duties hereunder to Management, and
agrees to make payment of the Retainer Fee and such other amounts as so
directed. CGW may terminate the delegation of its duties hereunder to Management
by a written notice to the Corporation which shall be effective upon receipt by
the Corporation. From and after the receipt of such written notice, all amounts
payable hereunder to CGW shall be paid to CGW rather than to Management.
Management agrees to accept the delegation of the duties hereunder from CGW
until such delegation is terminated by CGW, and agrees to provide the consulting
services herein described in accordance with the terms hereof.
[Signatures on Next Page]
-5-
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date and year first above written.
SIMCALA, INC.
By: /s/ C. Edward Boardwine
-------------------------------
Name:
------------------------------
Title:
-----------------------------
CGW SOUTHEAST III, L.L.C.
By: CGW, Inc., its Manager
By: /s/ William A. Davies
-------------------------------
William A. Davies
Managing Director
CGW SOUTHEAST MANAGEMENT III, L.L.C.
By: /s/ William A. Davies
-------------------------------
William A. Davies
Managing Director
-6-
<PAGE> 1
EXHIBIT 10.3
CREDIT AGREEMENT
Dated as of March 31, 1998
among
SIMCALA, INC.,
as Borrower,
SIMCALA HOLDINGS, INC.,
AND
CERTAIN SUBSIDIARIES OF THE PARENT
FROM TIME TO TIME PARTY HERETO,
as Guarantors,
THE SEVERAL LENDERS
FROM TIME TO TIME PARTY HERETO
AND
NATIONSBANK, N. A.,
as Agent
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
SECTION 1 DEFINITIONS............................................................................................ 1
1.1 Definitions...................................................................................... 1
1.2 Computation of Time Periods......................................................................23
1.3 Accounting Terms.................................................................................23
SECTION 2 CREDIT FACILITIES......................................................................................24
2.1 Loans............................................................................................24
2.2 Letter of Credit Subfacility.....................................................................26
SECTION 3 OTHER PROVISIONS RELATING TO CREDIT FACILITIES.........................................................31
3.1 Default Rate.....................................................................................31
3.2 Extension and Conversion.........................................................................31
3.3 Prepayments......................................................................................32
3.4 Termination and Reduction of Committed Amount....................................................33
3.5 Fees.............................................................................................33
3.6 Capital Adequacy.................................................................................34
3.7 Limitation on Eurodollar Loans...................................................................35
3.8 Illegality.......................................................................................35
3.9 Requirements of Law..............................................................................36
3.10 Treatment of Affected Loans......................................................................37
3.11 Taxes............................................................................................37
3.12 Compensation.....................................................................................39
3.13 Pro Rata Treatment...............................................................................40
3.14 Sharing of Payments..............................................................................41
3.15 Payments, Computations, Etc......................................................................41
3.16 Evidence of Debt.................................................................................43
SECTION 4 GUARANTY...............................................................................................44
4.1 The Guaranty.....................................................................................44
4.2 Obligations Unconditional........................................................................44
4.3 Reinstatement....................................................................................45
4.4 Certain Additional Waivers.......................................................................45
4.5 Remedies.........................................................................................46
4.6 Rights of Contribution...........................................................................46
4.7 Guarantee of Payment; Continuing Guarantee.......................................................47
SECTION 5 CONDITIONS.............................................................................................47
5.1 Closing Conditions...............................................................................47
5.2 Conditions to all Extensions of Credit...........................................................53
SECTION 6 REPRESENTATIONS AND WARRANTIES.........................................................................54
6.1 Financial Condition..............................................................................54
6.2 No Material Change...............................................................................55
6.3 Organization and Good Standing...................................................................55
6.4 Power; Authorization; Enforceable Obligations....................................................55
6.5 No Conflicts.....................................................................................56
6.6 No Default.......................................................................................56
6.7 Ownership........................................................................................57
6.8 Indebtedness.....................................................................................57
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
6.9 Litigation.........................................................................................57
6.10 Taxes............................................................................................57
6.11 Compliance with Law..............................................................................57
6.12 ERISA............................................................................................57
6.13 Subsidiaries.....................................................................................59
6.14 Governmental Regulations, Etc....................................................................59
6.15 Purpose of Loans and Letters of Credit...........................................................60
6.16 Environmental Matters............................................................................60
6.17 Intellectual Property............................................................................61
6.18 Solvency.........................................................................................62
6.19 Investments......................................................................................62
6.20 Location of Collateral...........................................................................62
6.21 Disclosure.......................................................................................62
6.22 No Burdensome Restrictions.......................................................................62
6.23 Brokers' Fees....................................................................................62
6.24 Labor Matters....................................................................................62
6.25 Nature of Business...............................................................................63
6.26 Representations and Warranties from Purchase Agreement...........................................63
6.27 Year 2000 Compliance.............................................................................63
SECTION 7 AFFIRMATIVE COVENANTS..................................................................................63
7.1 Information Covenants..............................................................................63
7.2 Preservation of Existence and Franchises...........................................................67
7.3 Books and Records..................................................................................67
7.4 Compliance with Law................................................................................67
7.5 Payment of Taxes and Other Indebtedness............................................................67
7.6 Insurance..........................................................................................67
7.7 Maintenance of Property............................................................................68
7.8 Performance of Obligations.........................................................................68
7.9 Use of Proceeds....................................................................................68
7.10 Audits/Inspections.................................................................................69
7.11 Financial Covenants................................................................................69
7.12 Additional Credit Parties..........................................................................70
7.13 Pledged Assets.....................................................................................70
SECTION 8 NEGATIVE COVENANTS.....................................................................................71
8.1 Indebtedness.......................................................................................71
8.2 Liens..............................................................................................73
8.3 Nature of Business.................................................................................73
8.4 Consolidation, Merger, Dissolution, etc............................................................73
8.5 Asset Dispositions.................................................................................73
8.6 Investments........................................................................................74
8.7 Restricted Payments................................................................................74
8.8 Prepayments of Indebtedness, etc...................................................................75
8.9 Transactions with Affiliates.......................................................................75
8.10 Fiscal Year........................................................................................75
8.11 Limitation on Restricted Actions...................................................................76
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
8.12 Ownership of Subsidiaries; Limitations on Parent.................................................76
8.13 Sale Leasebacks..................................................................................77
8.14 Capital Expenditures.............................................................................77
8.15 No Further Negative Pledges......................................................................77
8.16 Operating Lease Obligations......................................................................77
8.17 No Foreign Subsidiaries..........................................................................77
SECTION 9EVENTS OF DEFAULT.......................................................................................78
9.1 Events of Default..................................................................................78
9.2 Acceleration; Remedies.............................................................................80
SECTION 10AGENCY PROVISIONS......................................................................................81
10.1 Appointment, Powers and Immunities...............................................................81
10.2 Reliance by Agent................................................................................82
10.3 Defaults.........................................................................................82
10.4 Rights as a Lender...............................................................................82
10.5 Indemnification..................................................................................83
10.6 Non-Reliance on Agent and Other Lenders..........................................................83
10.7 Successor Agent..................................................................................83
SECTION 11MISCELLANEOUS..........................................................................................84
11.1 Notices..........................................................................................84
11.2 Right of Set-Off; Adjustments....................................................................85
11.3 Benefit of Agreement.............................................................................85
11.4 No Waiver; Remedies Cumulative...................................................................87
11.5 Expenses; Indemnification........................................................................87
11.6 Amendments, Waivers and Consents.................................................................88
11.7 Counterparts.....................................................................................90
11.8 Headings.........................................................................................90
11.9 Survival.........................................................................................90
11.10 Governing Law; Submission to Jurisdiction; Venue.................................................90
11.11 Severability.....................................................................................91
11.12 Entirety.........................................................................................91
11.13 Binding Effect; Termination......................................................................91
11.14 Confidentiality..................................................................................92
11.15 Source of Funds..................................................................................92
11.16 Conflict.........................................................................................93
</TABLE>
iii
<PAGE> 5
SCHEDULES
=========
<TABLE>
<S> <C>
Schedule 1.1A Investments
Schedule 1.1B Liens
Schedule 2.1(a) Lenders
Schedule 5.1(c)(i) Form of Legal Opinion (General External Counsel)
Schedule 5.1(c)(ii) Form of Legal Opinion (Local Corporate Counsel)
Schedule 5.1(c)(iii) Form of Legal Opinion (Local Collateral Counsel)
Schedule 6.4 Required Consents, Authorizations, Notices
and Filings
Schedule 6.9 Litigation
Schedule 6.12 ERISA
Schedule 6.13 Subsidiaries
Schedule 6.16 Environmental Disclosures
Schedule 6.17 Intellectual Property
Schedule 6.20(a) Mortgaged Properties
Schedule 6.20(b) Collateral Locations
Schedule 6.20(c) Chief Executive Offices/Principal Places
of Business
Schedule 7.6 Insurance
Schedule 8.1 Indebtedness
<CAPTION>
EXHIBITS
========
<S> <C>
Exhibit 1.1A Form of Pledge Agreement
Exhibit 1.1B Form of Security Agreement
Exhibit 2.1(b)(i) Form of Notice of Borrowing
Exhibit 2.1(e) Form of Note
Exhibit 3.2 Form of Notice of Extension/Conversion
Exhibit 7.1(c) Form of Officer's Compliance Certificate
Exhibit 7.12 Form of Joinder Agreement
Exhibit 11.3(b) Form of Assignment and Acceptance
</TABLE>
iv
<PAGE> 6
CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of March 31, 1998 (as amended,
modified, restated or supplemented from time to time, the "Credit Agreement"),
is by and among SIMCALA, INC., a Delaware corporation (the "Borrower"), SIMCALA
HOLDINGS, INC., a Georgia corporation (the "Parent"), the Subsidiary Guarantors
(as defined herein), the Lenders (as defined herein) and NATIONSBANK, N. A., as
Agent for the Lenders (in such capacity, the "Agent").
W I T N E S S E T H
WHEREAS, the Borrower has requested that the Lenders provide a $15
million credit facility for the purposes hereinafter set forth; and
WHEREAS, the Lenders have agreed to make the requested credit facility
available to the Borrower on the terms and conditions hereinafter set forth;
NOW, THEREFORE, IN CONSIDERATION of the premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
SECTION 1
DEFINITIONS
-----------
1.1 DEFINITIONS.
As used in this Credit Agreement, the following terms shall have the
meanings specified below unless the context otherwise requires:
"Acquired Debt" means, with respect to any specified Person,
(i) Indebtedness of any other Person existing at the time such other
Person is merged with or into or became a Subsidiary of such specified
Person, including, without limitation, Indebtedness incurred in
connection with, or in contemplation of, such other Person merging with
or into or becoming a Subsidiary of such specified Person, and (ii)
Indebtedness secured by a Lien encumbering any asset acquired by such
specified Person.
"Acquisition" means the acquisition by the Parent of all of
the capital stock of the Borrower pursuant to the Purchase Agreement.
"Additional Credit Party" means each Person that becomes a
Subsidiary Guarantor after the Closing Date by execution of a Joinder
Agreement.
"Adjusted Base Rate" means the Base Rate plus the Applicable
Percentage.
1
<PAGE> 7
"Adjusted Eurodollar Rate" means the Eurodollar Rate plus the
Applicable Percentage.
"Affiliate" means, with respect to any Person, any other
Person (i) directly or indirectly controlling or controlled by or under
direct or indirect common control with such Person or (ii) directly or
indirectly owning or holding five percent (5%) or more of the Capital
Stock in such Person. For purposes of this definition, "control" when
used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether
through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative
to the foregoing.
"Agency Services Address" means NationsBank, N. A.,
NC1-001-15-03, 101 North Tryon Street, Charlotte, North Carolina 28255,
Attn: Agency Services, or such other address as may be identified by
written notice from the Agent to the Borrower.
"Agent" shall have the meaning assigned to such term in the
heading hereof, together with any successors or assigns.
"Agent's Fee Letter" means that certain letter agreement,
dated as of the Closing Date, between the Agent and the Borrower, as
amended, modified, restated or supplemented from time to time.
"Agent's Fees" shall have the meaning assigned to such term in
Section 3.5(d).
"Applicable Lending Office" means, for each Lender, the office
of such Lender (or of an Affiliate of such Lender) as such Lender may
from time to time specify to the Agent and the Borrower by written
notice as the office by which its Eurodollar Loans are made and
maintained.
"Applicable Percentage" means, for purposes of calculating the
applicable interest rate for any day for any Loan, the applicable rate
of the Unused Fee for any day for purposes of Section 3.5(b), the
applicable rate of the Standby Letter of Credit Fee for any day for
purposes of Section 3.5(c)(i) or the applicable rate of the Trade
Letter of Credit Fee for any day for purposes of Section 3.5(c)(ii),
the appropriate applicable percentage corresponding to the Total
Leverage Ratio in effect as of the most recent Calculation Date:
2
<PAGE> 8
<TABLE>
<CAPTION>
===================================================================================================
APPLICABLE
PERCENTAGE APPLICABLE PERCENTAGE PERCENTAGE APPLICABLE
FOR PERCENTAGE FOR FOR TRADE FOR
TOTAL EURODOLLAR FOR BASE STANDBY LETTER OF COMMITMENT
PRICING LEVERAGE RATIO RATE LETTER OF CREDIT FEE FEES
LEVEL RATIO LOANS LOANS CREDIT FEE
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
I > 3.75 to 2.25% 1.25% 2.25% .50% .50%
1.0
- ---------------------------------------------------------------------------------------------------
II < 3.75 to 2.00% 1.00% 2.00% .50% .50%
1.0 but >
2.50 to
1.0
- ---------------------------------------------------------------------------------------------------
III < 2.50 to 1.75% .75% 1.75% .50% .375%
1.0
===================================================================================================
</TABLE>
The Applicable Percentages shall be determined and adjusted quarterly
on the date (each a "Calculation Date") five Business Days after the
earlier of (x) the date by which the Borrower is required to provide
the officer's certificate in accordance with the provisions of Section
7.1(c) for the most recently ended fiscal quarter of the Credit Parties
or (y) the date such officer's certificate is actually delivered to the
Agent; provided, however, that (i) the initial Applicable Percentages
shall be based on Pricing Level I (as shown above) and shall remain at
Pricing Level I until the first Calculation Date subsequent to the
March 31, 1999, and, thereafter, the Pricing Level shall be determined
by the Total Leverage Ratio as of the last day of the most recently
ended fiscal quarter of the Credit Parties preceding the applicable
Calculation Date, and (ii) if the Borrower fails to provide the
officer's certificate to the Agency Services Address as required by
Section 7.1(c) for the last day of the most recently ended fiscal
quarter of the Credit Parties preceding the applicable Calculation
Date, the Applicable Percentage from such Calculation Date shall be
based on Pricing Level I until such time as an appropriate officer's
certificate is provided, whereupon the Pricing Level shall be
determined by the Total Leverage Ratio as of the last day of the most
recently ended fiscal quarter of the Credit Parties preceding such
Calculation Date. Except as provided above, each Applicable Percentage
shall be effective from one Calculation Date until the next Calculation
Date. Any adjustment in the Applicable Percentages shall be applicable
to all existing Loans and Letters of Credit as well as any new Loans
and Letters of Credit made or issued.
"Application Period", in respect of any Asset Disposition,
shall have the meaning assigned to such term in Section 8.5.
"Asset Disposition" means the disposition of any or all of the
assets (including without limitation the Capital Stock of a Subsidiary)
of any Credit Party whether by sale, lease, transfer or otherwise. The
term "Asset Disposition" (i) shall not include (a) the sale of
inventory in the ordinary course of business for fair consideration,
(b) the sale or
3
<PAGE> 9
disposition of machinery and equipment no longer used or useful in the
conduct of such Person's business, (c) any sale of assets having a net
book value of less $100,000 or (d) any Equity Issuance and (ii) shall
include a casualty loss or condemnation to the extent that the Net Cash
Proceeds received by the affected Credit Party from the insurer or
condemning authority, as applicable, are required by the terms of
Section 7.6 to be applied to the Credit Party Obligations.
"Asset Disposition Prepayment Event" means, with respect to
any Asset Disposition other than an Excluded Asset Disposition, the
failure of the Borrower to apply (or cause to be applied) the Net Cash
Proceeds of such Asset Disposition to the purchase, acquisition or
construction of Eligible Assets during the Application Period for such
Asset Disposition.
"Bankruptcy Code" means the Bankruptcy Code in Title 11 of the
United States Code, as amended, modified, succeeded or replaced from
time to time.
"Bankruptcy Event" means, with respect to any Person, the
occurrence of any of the following with respect to such Person: (i) a
court or governmental agency having jurisdiction in the premises shall
enter a decree or order for relief in respect of such Person in an
involuntary case under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect, or appointing a receiver,
liquidator, assignee, custodian, trustee, sequestrator (or similar
official) of such Person or for any substantial part of its Property or
ordering the winding up or liquidation of its affairs; or (ii) there
shall be commenced against such Person an involuntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter
in effect, or any case, proceeding or other action for the appointment
of a receiver, liquidator, assignee, custodian, trustee, sequestrator
(or similar official) of such Person or for any substantial part of its
Property or for the winding up or liquidation of its affairs, and such
involuntary case or other case, proceeding or other action shall remain
undismissed, undischarged or unbonded for a period of sixty (60)
consecutive days; or (iii) such Person shall commence a voluntary case
under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, or consent to the entry of an order for relief in
an involuntary case under any such law, or consent to the appointment
or taking possession by a receiver, liquidator, assignee, custodian,
trustee, sequestrator (or similar official) of such Person or for any
substantial part of its Property or make any general assignment for the
benefit of creditors; or (iv) such Person shall be unable to, or shall
admit in writing its inability to, pay its debts generally as they
become due.
"Base Rate" means, for any day, the rate per annum equal to
the higher of (a) the Federal Funds Rate for such day plus one-half of
one percent (0.5%) and (b) the Prime Rate for such day. Any change in
the Base Rate due to a change in the Prime Rate or the Federal Funds
Rate shall be effective on the effective date of such change in the
Prime Rate or Federal Funds Rate.
4
<PAGE> 10
"Base Rate Loan" means any Loan bearing interest at a rate
determined by reference to the Base Rate.
"Borrower" means the Person identified as such in the heading
hereof, together with any permitted successors and assigns.
"Business Day" means a day other than a Saturday, Sunday or
other day on which commercial banks in Charlotte, North Carolina or New
York, New York are authorized or required by law to close, except that,
when used in connection with a Eurodollar Loan, such day shall also be
a day on which dealings between banks are carried on in U.S. dollar
deposits in London, England.
"Calculation Date" has the meaning set forth in the definition
of "Applicable Percentage" set forth in this Section 1.1.
"Capital Lease" means, as applied to any Person, any lease of
any Property (whether real, personal or mixed) by that Person as lessee
which, in accordance with GAAP, is or should be accounted for as a
capital lease on the balance sheet of that Person.
"Capital Stock" means (i) in the case of a corporation,
capital stock, (ii) in the case of an association or business entity,
any and all shares, interests, participations, rights or other
equivalents (however designated) of capital stock, (iii) in the case of
a partnership, partnership interests (whether general or limited), (iv)
in the case of a limited liability company, membership interests and
(v) any other interest or participation that confers on a Person the
right to receive a share of the profits and losses of, or distributions
of assets of, the issuing Person.
"Cash Equivalents" means (a) securities issued or directly and
fully guaranteed or insured by the United States of America or any
agency or instrumentality thereof (provided that the full faith and
credit of the United States of America is pledged in support thereof)
having maturities of not more than twelve months from the date of
acquisition, (b) U.S. dollar denominated time deposits and certificates
of deposit of (i) any Lender, (ii) any domestic commercial bank of
recognized standing having capital and surplus in excess of
$500,000,000 or (iii) any bank whose short-term commercial paper rating
from S&P is at least A-1 or the equivalent thereof or from Moody's is
at least P-1 or the equivalent thereof (any such bank being an
"Approved Bank"), in each case with maturities of not more than 270
days from the date of acquisition, (c) commercial paper and variable or
fixed rate notes issued by any Approved Bank (or by the parent company
thereof) or any variable rate notes issued by, or guaranteed by, any
domestic corporation rated A-1 (or the equivalent thereof) or better by
S&P or P-1 (or the equivalent thereof) or better by Moody's and
maturing within six months of the date of acquisition, (d) repurchase
agreements entered into by any Person with a bank or trust company
(including any of the Lenders) or recognized securities dealer having
capital and surplus in excess of $500,000,000 for direct obligations
issued by or fully guaranteed by the United States of America in which
such Person shall have a perfected first priority security interest
(subject
5
<PAGE> 11
to no other Liens) and having, on the date of purchase thereof, a fair
market value of at least 100% of the amount of the repurchase
obligations and (e) Investments, classified in accordance with GAAP as
current assets, in money market investment programs registered under
the Investment Company Act of 1940, as amended, which are administered
by reputable financial institutions having capital of at least
$500,000,000 and the portfolios of which are limited to Investments of
the character described in the foregoing subdivisions (a) through (d).
"CGW" means CGW III, any Affiliates of CGW III, any limited
partners of CGW III and any Affiliates of such limited partners.
"CGW III" means CGW Southeast Partners III, L.P., a Delaware
limited partnership.
"Change of Control" means any of the following events: (a) the
failure of the Parent to own all of the Capital Stock of the Borrower,
(b) the failure of CGW to own at least 51% of the Capital Stock of the
Parent, (d) during any period of up to 24 consecutive months,
commencing after the Closing Date, individuals who at the beginning of
such 24 month period were directors of the Parent (together with any
new director whose election by the Parent's Board of Directors or whose
nomination for election by the Parent's shareholders was approved by a
vote of at least a majority of the directors then still in office who
either were directors at the beginning of such period or whose election
or nomination for election was previously so approved) cease for any
reason to constitute a majority of the directors of the Parent then in
office or (e) the occurrence of a "Change of Control" under and as
defined in either the Senior Note Agreement. As used herein,
"beneficial ownership" shall have the meaning provided in Rule 13d-3 of
the Securities and Exchange Commission under the Securities Exchange
Act of 1934.
"Closing Date" means the date hereof.
"Code" means the Internal Revenue Code of 1986, as amended,
and any successor statute thereto, as interpreted by the rules and
regulations issued thereunder, in each case as in effect from time to
time. References to sections of the Code shall be construed also to
refer to any successor sections.
"Collateral" means a collective reference to the collateral
which is identified in, and at any time will be covered by, the
Collateral Documents.
"Collateral Documents" means a collective reference to the
Security Agreement, the Pledge Agreement, the Mortgage Instruments and
such other documents executed and delivered in connection with the
attachment and perfection of the Agent's security interests and liens
arising thereunder, including without limitation, UCC financing
statements and patent and trademark filings.
6
<PAGE> 12
"Commitment" means (i) with respect to each Lender, the
Revolving Commitment of such Lender and (ii) with respect to the
Issuing Lender, the LOC Commitment.
"Commitment Percentage" means, for any Lender, the percentage
identified as its Commitment Percentage on Schedule 2.1(a), as such
percentage may be modified in connection with any assignment made in
accordance with the provisions of Section 11.3.
"Committed Amount" shall have the meaning assigned to such
term in Section 2.1(a).
"Consolidated Capital Expenditures" means, for any period, all
capital expenditures of the Credit Parties on a consolidated basis for
such period, as determined in accordance with GAAP.
"Consolidated EBITDA" means, for any period, the sum of (i)
Consolidated Net Income for such period, plus (ii) an amount which, in
the determination of Consolidated Net Income for such period, has been
deducted for (A) Consolidated Interest Expense, (B) total federal,
state, local and foreign income, value added and similar taxes, (C)
depreciation and amortization expense and (D) extraordinary or
non-recurring losses and (E) losses on the sale or other disposition of
assets, minus (iii) an amount which, in the determination of
Consolidated Net Income for such period, has been included for (A)
extraordinary or non-recurring gains and (E) gains on the sale or other
disposition of assets, all as determined in accordance with GAAP.
"Consolidated Interest Expense" means, for any period,
interest expense (including the amortization of debt discount and
premium, the interest component under Capital Leases and the implied
interest component under Synthetic Leases) of the Credit Parties on a
consolidated basis for such period, as determined in accordance with
GAAP.
"Consolidated Net Income" means, for any period, net income
(excluding extraordinary items) after taxes for such period of the
Credit Parties on a consolidated basis, as determined in accordance
with GAAP.
"Consolidated Net Worth" means, as of any date, shareholders'
equity or net worth of the Credit Parties on a consolidated basis, as
determined in accordance with GAAP.
"Consolidated Scheduled Funded Debt Payments" means, as of the
end of each fiscal quarter of the Credit Parties, for the Credit
Parties on a consolidated basis, the sum of all scheduled payments of
principal on Funded Indebtedness (other than Funded Indebtedness
retired in connection with the Acquisition) for the applicable period
ending on such date (including the principal component of payments due
on Capital Leases during the applicable period ending on such date); it
being understood that Scheduled Funded Debt Payments shall not include
voluntary prepayments or the mandatory prepayments required pursuant to
Section 3.3.
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"Consulting Agreement " means that certain Agreement for
Consulting Services dated March 31, 1998 by and between the Parent and
CGW III, as amended, modified, extended, renewed or replaced from time
to time.
"Continue", "Continuation", and "Continued" shall refer to the
continuation pursuant to Section 3.2 hereof of a Eurodollar Loan from
one Interest Period to the next Interest Period.
"Convert", "Conversion", and "Converted" shall refer to a
conversion pursuant to Section 3.2 or Sections 3.7 through 3.12,
inclusive, of a Base Rate Loan into a Eurodollar Loan.
"Credit Documents" means a collective reference to this Credit
Agreement, the Notes, the LOC Documents, each Joinder Agreement, the
Agent's Fee Letter, the Collateral Documents and all other related
agreements and documents issued or delivered hereunder or thereunder or
pursuant hereto or thereto (in each case as the same may be amended,
modified, restated, supplemented, extended, renewed or replaced from
time to time), and "Credit Document" means any one of them.
"Credit Parties" means a collective reference to the Borrower
and the Guarantors, and "Credit Party" means any one of them.
"Credit Party Obligations" means, without duplication, (i) all
of the obligations of the Credit Parties to the Lenders (including the
Issuing Lender) and the Agent, whenever arising, under this Credit
Agreement, the Notes, the Collateral Documents or any of the other
Credit Documents (including, but not limited to, any interest accruing
after the occurrence of a Bankruptcy Event with respect to any Credit
Party, regardless of whether such interest is an allowed claim under
the Bankruptcy Code) and (ii) all liabilities and obligations, whenever
arising, owing from the Borrower to any Lender, or any Affiliate of a
Lender, arising under any Hedging Agreement.
"Default" means any event, act or condition which with notice
or lapse of time, or both, would constitute an Event of Default.
"Defaulting Lender" means, at any time, any Lender that (a)
has failed to make a Loan or purchase a Participation Interest required
pursuant to the term of this Credit Agreement within one Business Day
of when due, (b) other than as set forth in (a) above, has failed to
pay to the Agent or any Lender an amount owed by such Lender pursuant
to the terms of this Credit Agreement within one Business Day of when
due, unless such amount is subject to a good faith dispute or (c) has
been deemed insolvent or has become subject to a bankruptcy or
insolvency proceeding or with respect to which (or with respect to any
of assets of which) a receiver, trustee or similar official has been
appointed.
"Dollars" and "$" means dollars in lawful currency of the
United States of America.
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<PAGE> 14
"Eligible Assets" means any long-term assets useful in the
same or a similar line of business as the Credit Parties were engaged
in on the Closing Date or any reasonable extensions or expansions
thereof.
"Eligible Assignee" means (i) a Lender; (ii) an Affiliate of a
Lender; and (iii) any other Person approved by the Agent and, unless an
Event of Default has occurred and is continuing at the time any
assignment is effected in accordance with Section 11.3, the Borrower
(such approval not to be unreasonably withheld or delayed by the
Borrower and such approval to be deemed given by the Borrower if no
objection is received by the assigning Lender and the Agent from the
Borrower within two Business Days after notice of such proposed
assignment has been provided by the assigning Lender to the Borrower);
provided, however, that neither the Borrower nor an Affiliate of the
Borrower shall qualify as an Eligible Assignee.
"Environmental Laws" means any and all lawful and applicable
Federal, state, local and foreign statutes, laws, regulations,
ordinances, rules, judgments, orders, decrees, permits, concessions,
grants, franchises, licenses, agreements or other governmental
restrictions relating to the environment or to emissions, discharges,
releases or threatened releases of pollutants, contaminants, chemicals,
or industrial, toxic or hazardous substances or wastes into the
environment including, without limitation, ambient air, surface water,
ground water, or land, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport,
or handling of pollutants, contaminants, chemicals, or industrial,
toxic or hazardous substances or wastes.
"Equity Issuance" means any issuance by any Credit Party to
any Person which is not a Credit Party of (a) shares of its Capital
Stock, (b) any shares of its Capital Stock pursuant to the exercise of
options or warrants or (c) any shares of its Capital Stock pursuant to
the conversion of any debt securities to equity.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and any successor statute thereto, as interpreted by
the rules and regulations thereunder, all as the same may be in effect
from time to time. References to sections of ERISA shall be construed
also to refer to any successor sections.
"ERISA Affiliate" means an entity which is under common
control with any Credit Party within the meaning of Section 4001(a)(14)
of ERISA, or is a member of a group which includes any Credit Party and
which is treated as a single employer under Sections 414(b) or (c) of
the Code.
"ERISA Event" means (i) with respect to any Plan, the
occurrence of a Reportable Event or the substantial cessation of
operations (within the meaning of Section 4062(e) of ERISA); (ii) the
withdrawal by any Credit Party or any ERISA Affiliate from a Multiple
Employer Plan during a plan year in which it was a substantial employer
(as such term is defined in Section 4001(a)(2) of ERISA), or the
termination of a Multiple Employer Plan;
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<PAGE> 15
(iii) the distribution of a notice of intent to terminate or the actual
termination of a Plan pursuant to Section 4041(a)(2) or 4041A of ERISA;
(iv) the institution of proceedings to terminate or the actual
termination of a Plan by the PBGC under Section 4042 of ERISA; (v) any
event or condition which could reasonably be expected to constitute
grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Plan; (vi) the complete or
partial withdrawal of any Credit Party or any ERISA Affiliate from a
Multiemployer Plan; (vii) the conditions for imposition of a lien under
Section 302(f) of ERISA exist with respect to any Plan; or (vii) the
adoption of an amendment to any Plan requiring the provision of
security to such Plan pursuant to Section 307 of ERISA.
"Eurodollar Loan" means any Loan that bears interest at a rate
based upon the Eurodollar Rate.
"Eurodollar Rate" means, for any Eurodollar Loan for any
Interest Period therefor, the rate per annum (rounded upwards, if
necessary, to the nearest 1/100 of 1%) determined by the Agent to be
equal to the quotient obtained by dividing (a) the Interbank Offered
Rate for such Eurodollar Loan for such Interest Period by (b) 1 minus
the Eurodollar Reserve Requirement for such Eurodollar Loan for such
Interest Period.
"Eurodollar Reserve Requirement" means, at any time, the
maximum rate at which reserves (including, without limitation, any
marginal, special, supplemental, or emergency reserves) are required to
be maintained under regulations issued from time to time by the Board
of Governors of the Federal Reserve System (or any successor) by member
banks of the Federal Reserve System against "Eurocurrency liabilities"
(as such term is used in Regulation D). Without limiting the effect of
the foregoing, the Eurodollar Reserve Requirement shall reflect any
other reserves required to be maintained by such member banks with
respect to (i) any category of liabilities which includes deposits by
reference to which the Adjusted Eurodollar Rate is to be determined, or
(ii) any category of extensions of credit or other assets which include
Eurodollar Loans. The Adjusted Eurodollar Rate shall be adjusted
automatically on and as of the effective date of any change in the
Eurodollar Reserve Requirement.
"Event of Default" shall have the meaning as defined in
Section 9.1.
"Excluded Asset Disposition" means any Asset Disposition by
any Credit Party to any Credit Party other than the Parent if (a) the
Credit Parties shall cause to be executed and delivered such documents,
instruments and certificates as the Agent may request so as to cause
the Credit Parties to be in compliance with the terms of Section 7.13
after giving effect to such Asset Disposition and (b) after giving
effect such Asset Disposition, no Default or Event of Default exists.
"Executive Officer" of any Person means any of the chief
executive officer, chief operating officer, president, vice president,
chief financial officer or treasurer of such Person.
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<PAGE> 16
"Exempt Affiliate Transactions" means (a) transactions between
or among the Borrower and/or its Wholly Owned Subsidiaries, (b)
advances to officers of any Credit Party in the ordinary course of
business to provide for the payment of reasonable expenses incurred by
such persons in the performance of their responsibilities to the
relevant Credit Party or in connection with any relocation, (c) fees
and compensation paid to and indemnity provided on behalf of directors,
officers or employees of any Credit Party in the ordinary course of
business, (d) any employment agreement that is in effect on the Closing
Date and any such agreement entered into by any Credit Party after the
Closing Date in the ordinary course of business of such Credit Party,
(e) any Restricted Payment that is not prohibited by Section 8.7, (f)
payments to the General Partner or its designee of management and
consulting fees in an amount in any fiscal year not to exceed $680,000
and (g) the delegation by the General Partner of its rights and
obligations under the Consulting Agreement to the Management Company
and (h) payment on the Closing Date to the the General Partner or its
designee of an investment banking fee in an amount not to exceed
$1,350,000.
"Fees" means all fees payable pursuant to Section 3.5.
"Federal Funds Rate" means, for any day, the rate per annum
(rounded upwards, if necessary, to the nearest 1/100 of 1%) 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 by the Federal Reserve
Bank of New York on the Business Day next succeeding such day; provided
that (a) if such day is not a Business Day, the Federal Funds Rate for
such day shall be such rate on such transactions on the next preceding
Business Day as so published on the next succeeding Business Day, and
(b) if no such rate is so published on such next succeeding Business
Day, the Federal Funds Rate for such day shall be the average rate
charged to the Agent (in its individual capacity) on such day on such
transactions as determined by the Agent.
"Foreign Subsidiary" means, with respect to any Person, any
Subsidiary of such Person which is not incorporated or organized under
the laws of any State of the United States or the District of Columbia.
"Funded Indebtedness" means, with respect to any Person,
without duplication, (a) all Indebtedness of such Person other than
Indebtedness of the types referred to in clause (e), (f), (g), (i),
(l), (k) (to the extent that the related preferred Capital Stock issued
by such Person, by the terms thereof, could not be (at the request of
the holders thereof or otherwise) subject to mandatory sinking fund
payments, redemption or other acceleration prior to the date 124 days
after the Maturity Date) and (m) of the definition of "Indebtedness"
set forth in this Section 1.1, (b) all Indebtedness of another Person
of the type referred to in clause (a) above secured by (or for which
the holder of such Funded Indebtedness has an existing right,
contingent or otherwise, to be secured by) any Lien on, or payable out
of the proceeds of production from, Property owned or acquired by such
Person, whether or not the obligations secured thereby have been
assumed, (c) all
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Guaranty Obligations of such Person with respect to Indebtedness of the
type referred to in clause (a) above of another Person and (d)
Indebtedness of the type referred to in clause (a) above of any
partnership or unincorporated joint venture in which such Person is a
general partner or is otherwise obligated thereunder.
"GAAP" means generally accepted accounting principles in the
United States applied on a consistent basis and subject to the terms of
Section 1.3.
"General Partner" means CGW Southeast III, L.L.C., a Delaware
limited liability company and general partner of CGW III.
"Governmental Authority" means any Federal, state, local or
foreign court or governmental agency, authority, instrumentality or
regulatory body.
"Guarantors" means a collective reference to the Parent and
each of the Subsidiary Guarantors, together with their successors and
permitted assigns, and "Guarantor " means any one of them.
"Guaranty Obligations" means, with respect to any Person,
without duplication, any obligations of such Person (other than
endorsements in the ordinary course of business of negotiable
instruments for deposit or collection) guaranteeing or intended to
guarantee any Indebtedness of any other Person in any manner, whether
direct or indirect, and including without limitation any obligation,
whether or not contingent, (i) to purchase any such Indebtedness or any
Property constituting security therefor, (ii) to advance or provide
funds or other support for the payment or purchase of any such
Indebtedness or to maintain working capital, solvency or other balance
sheet condition of such other Person (including without limitation keep
well agreements, maintenance agreements, comfort letters or similar
agreements or arrangements) for the benefit of any holder of
Indebtedness of such other Person, (iii) to lease or purchase Property,
securities or services primarily for the purpose of assuring the holder
of such Indebtedness (but excluding any obligations of such Person as
lessee under any Operating Lease), or (iv) to otherwise assure or hold
harmless the holder of such Indebtedness against loss in respect
thereof. The amount of any Guaranty Obligation hereunder shall (subject
to any limitations set forth therein) be deemed to be an amount equal
to the outstanding principal amount (or maximum principal amount, if
larger) of the Indebtedness in respect of which such Guaranty
Obligation is made.
"Hedging Agreements" means any interest rate protection
agreement or foreign currency exchange agreement between any Credit
Party and any Lender, or any Affiliate of a Lender.
"IDB Authority" means the Industrial Development Board of the
City of Montgomery, Alabama.
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<PAGE> 18
"Indebtedness" means, with respect to any Person, without
duplication, (a) all obligations of such Person for borrowed money, (b)
all obligations of such Person evidenced by bonds, debentures, notes or
similar instruments, or upon which interest payments are customarily
made, (c) all obligations of such Person under conditional sale or
other title retention agreements relating to Property purchased by such
Person (other than customary reservations or retentions of title under
agreements with suppliers entered into in the ordinary course of
business), (d) all obligations of such Person issued or assumed as the
deferred purchase price of Property or services purchased by such
Person (other than trade debt incurred in the ordinary course of
business and due within six months of the incurrence thereof) which
would appear as liabilities on a balance sheet of such Person, (e) all
obligations of such Person under take-or-pay or similar arrangements or
under commodities agreements, (f) all Indebtedness of others secured by
(or for which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any Lien on, or payable out
of the proceeds of production from, Property owned or acquired by such
Person, whether or not the obligations secured thereby have been
assumed, (g) all Guaranty Obligations of such Person, (h) the principal
portion of all obligations of such Person under Capital Leases, (i) all
obligations of such Person under Hedging Agreements, (j) the maximum
amount of all standby letters of credit issued or bankers' acceptances
facilities created for the account of such Person and, without
duplication, all drafts drawn thereunder (to the extent unreimbursed),
(k) all preferred Capital Stock issued by such Person and which by the
terms thereof could be (at the request of the holders thereof or
otherwise) subject to mandatory sinking fund payments, redemption or
other acceleration prior to the date 124 days after the Maturity Date,
(l) the principal portion of all obligations of such Person under
Synthetic Leases and (m) the Indebtedness of any partnership or
unincorporated joint venture in which such Person is a general partner
or is otherwise obligated thereunder.
"Interbank Offered Rate" means, for any Eurodollar Loan for
any Interest Period therefor, the rate per annum (rounded upwards, if
necessary, to the nearest 1/100 of 1%) appearing on Telerate Page 3750
(or any successor page) as the London interbank offered rate for
deposits in Dollars at approximately 11:00 A.M. (London time) two
Business Days prior to the first day of such Interest Period for a term
comparable to such Interest Period. If for any reason such rate is not
available, the term "Interbank Offered Rate" shall mean, for any
Eurodollar Loan for any Interest Period therefor, the rate per annum
(rounded upwards, if necessary, to the nearest 1/100 of 1%) appearing
on Reuters Screen LIBO Page as the London interbank offered rate for
deposits in Dollars at approximately 11:00 A.M. (London time) two
Business Days prior to the first day of such Interest Period for a term
comparable to such Interest Period; provided, however, if more than one
rate is specified on Reuters Screen LIBO Page, the applicable rate
shall be the arithmetic mean of all such rates (rounded upwards, if
necessary, to the nearest 1/100 of 1%).
"Interest Coverage Ratio" means, with respect to the Credit
Parties on a consolidated basis for the twelve month period ending on
the last day of any fiscal quarter of the Credit Parties, the ratio of
(a) Consolidated EBITDA for such period to (b) Consolidated Interest
Expense for such period.
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"Interest Payment Date" means (a) as to Base Rate Loans, the
last day of each fiscal quarter of the Borrower and the Maturity Date,
and (b) as to Eurodollar Loans, the last day of each applicable
Interest Period and the Maturity Date, and in addition where the
applicable Interest Period for a Eurodollar Loan is greater than three
months, then also the date three months from the beginning of the
Interest Period and each three months thereafter.
"Interest Period" means, as to Eurodollar Loans, a period of
one, two, three or six months' duration, as the Borrower may elect,
commencing, in each case, on the date of the borrowing (including
continuations and conversions thereof); provided, however, (a) if any
Interest Period would end on a day which is not a Business Day, such
Interest Period shall be extended to the next succeeding Business Day
(except that where the next succeeding Business Day falls in the next
succeeding calendar month, then on the next preceding Business Day),
(b) no Interest Period shall extend beyond the Maturity Date, and (c)
where an Interest Period begins on a day for which there is no
numerically corresponding day in the calendar month in which the
Interest Period is to end, such Interest Period shall end on the last
Business Day of such calendar month.
"Investment" in any Person means (a) the acquisition (whether
for cash, property, services, assumption of Indebtedness, securities or
otherwise, but exclusive of the acquisition of inventory, supplies,
equipment and other assets used or consumed in the ordinary course of
business and capital expenditures not otherwise prohibited hereunder)
of assets, Capital Stock, bonds, notes, debentures, partnership, joint
ventures or other ownership interests or other securities of such other
Person or (b) any deposit with, or advance, loan or other extension of
credit to, such Person (other than (i) deposits made in connection with
the purchase of equipment or other assets in the ordinary course of
business and (ii) deposits of the kinds referred to in clauses (iv) and
(xi) of the definition of "Permitted Liens" set forth in this Section
1.1) or (c) any other capital contribution to or investment in such
Person, including, without limitation, any Guaranty Obligations
(including any support for a letter of credit issued on behalf of such
Person) incurred for the benefit of such Person, but excluding any
Restricted Payment to such Person; provided that an acquisition of
assets, Capital Stock by the Borrower for consideration consisting of
common Capital Stock of the Borrower shall not be deemed to be an
Investment. The term "Investment" shall not include any transaction of
the type described in clause (ii) of the definition of "Restricted
Payment" set forth in this Section 1.1.
"Issuing Lender" means NationsBank.
"Issuing Lender Fees" shall have the meaning assigned to such
term in Section 3.5(c)(ii).
"Joinder Agreement" means a Joinder Agreement substantially in
the form of Exhibit 7.12 hereto, executed and delivered by an
Additional Credit Party in accordance with the provisions of Section
7.12.
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"Lender" means any of the Persons identified as a "Lender" on
the signature pages hereto, and any Person which may become a Lender by
way of assignment in accordance with the terms hereof, together with
their successors and permitted assigns.
"Letter of Credit" means any letter of credit issued by the
Issuing Lender for the account of the Borrower in accordance with the
terms of Section 2.2.
"Lien" means any mortgage, pledge, hypothecation, assignment,
deposit arrangement, security interest, encumbrance, lien (statutory or
otherwise), preference, priority or charge of any kind (including any
agreement to give any of the foregoing, any conditional sale or other
title retention agreement, any financing or similar statement or notice
filed under the Uniform Commercial Code as adopted and in effect in the
relevant jurisdiction or other similar recording or notice statute, and
any lease in the nature thereof).
"Loans" shall have the meaning assigned to such term in
Section 2.1(a). and shall include a portion of any Loan bearing
interest at the Adjusted Base Rate or the Adjusted Eurodollar Rate.
"LOC Commitment" means the commitment of the Issuing Lender to
issue Letters of Credit in an aggregate face amount at any time
outstanding (together with the amounts of any unreimbursed drawings
thereon) of up to the Committed Amount.
"LOC Documents" means, with respect to any Letter of Credit,
such Letter of Credit, any amendments thereto, any documents delivered
in connection therewith, any application therefor, and any agreements,
instruments, guarantees or other documents (whether general in
application or applicable only to such Letter of Credit) governing or
providing for (i) the rights and obligations of the parties concerned
or at risk or (ii) any collateral security for such obligations.
"LOC Obligations" means, at any time, the sum of (i) the
maximum amount which is, or at any time thereafter may become,
available to be drawn under Letters of Credit then outstanding,
assuming compliance with all requirements for drawings referred to in
such Letters of Credit plus (ii) the aggregate amount of all drawings
under Letters of Credit honored by the Issuing Lender but not
theretofore reimbursed by the Borrower.
"Management Company" means CGW Southeast Management III,
L.L.C., a Georgia limited liability company.
"Material Adverse Effect" means a material adverse effect on
(i) the condition (financial or otherwise), operations, business,
assets, liabilities or prospects of the Credit Parties taken as a
whole, (ii) the ability of any Credit Party to perform any material
obligation under the Credit Documents to which it is a party or (iii)
the material rights and remedies of the Lenders under the Credit
Documents.
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<PAGE> 21
"Materials of Environmental Concern" means any gasoline or
petroleum (including crude oil or any fraction thereof) or petroleum
products or any hazardous or toxic substances, materials or wastes,
defined or regulated as such in or under any Environmental Laws,
including, without limitation, asbestos, polychlorinated biphenyls and
urea-formaldehyde insulation.
"Maturity Date" means March 31, 2003.
"Moody's" means Moody's Investors Service, Inc., or any
successor or assignee of the business of such company in the business
of rating securities.
"Mortgage Instruments" shall have the meaning assigned such
term in Section 5.1(e).
"Mortgage Policies" shall have the meaning assigned such term
in Section 5.1(e).
"Mortgaged Properties" shall have the meaning assigned such
term in Section 5.1(e).
"Multiemployer Plan" means a Plan which is a multiemployer
plan as defined in Sections 3(37) or 4001(a)(3) of ERISA.
"Multiple Employer Plan" means a Plan which any Credit Party
or any ERISA Affiliate and at least one employer other than the Credit
Parties or any ERISA Affiliate are contributing sponsors.
"NationsBank" means NationsBank, N. A., in its individual
capacity, and its successors.
"Net Cash Proceeds" means the aggregate cash proceeds received
by the Credit Parties in respect of any Asset Disposition or Equity
Issuance, net of (a) direct costs (including, without limitation,
legal, accounting and investment banking fees, brokerage fees and sales
commissions), (b) taxes paid or payable as a result thereof and (c) in
the case of an Asset Disposition, any Indebtedness that is secured by
the asset disposed in such transaction and which is repaid in
connection with such Asset Disposition; it being understood that "Net
Cash Proceeds" shall include, without limitation, any cash received
upon the sale or other disposition of any non-cash consideration
received by the Credit Parties in any Asset Disposition or Equity
Issuance, as applicable.
"Net Leverage Ratio" means, with respect to the Credit Parties
on a consolidated basis for the twelve month period ending on the last
day of any fiscal quarter, the ratio of (a) Funded Indebtedness of the
Credit Parties on a consolidated basis on the last day of such period
minus cash and Cash Equivalents of the Credit Parties on a consolidated
basis on the last day of such period to (b) Consolidated EBITDA for
such period.
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<PAGE> 22
"Non-Recourse Debt" means Indebtedness (i) as to which neither
the Borrower nor any of its Subsidiaries (a) provides credit support of
any kind (including any undertaking, agreement or instrument that would
constitute Indebtedness), (b) is directly or indirectly liable (as a
guarantor or otherwise), or (c) constitutes the lender; and (ii) no
default with respect to which (including any rights that the holders
thereof may have to take enforcement action against a Subsidiary) would
permit (upon notice, lapse of time or both) any holder of any other
Indebtedness of the Borrower or any of its Subsidiaries to declare a
default on such other Indebtedness or cause the payment thereof to be
accelerated or payable prior to its stated maturity; and (iii) as to
which the lenders have been notified in writing that they will not have
any recourse to the stock or assets of the Borrower or any of its
Subsidiaries.
"Note" or "Notes" means the promissory notes of the Borrower
in favor of each of the Lenders evidencing the Loans provided pursuant
to Section 2.1(e), individually or collectively, as appropriate, as
such promissory notes may be amended, modified, restated, supplemented,
extended, renewed or replaced from time to time.
"Notice of Borrowing" means a written notice of borrowing in
substantially the form of Exhibit 2.1(b)(i), as required by Section
2.1(b)(i).
"Notice of Extension/Conversion" means the written notice of
extension or conversion in substantially the form of Exhibit 3.2, as
required by Section 3.2.
"Operating Lease" means, as applied to any Person, any lease
(including, without limitation, leases which may be terminated by the
lessee at any time) of any Property (whether real, personal or mixed)
which is not a Capital Lease other than any such lease in which that
Person is the lessor.
"Other Taxes" shall have the meaning assigned to such term in
Section 3.11.
"Parent" means the Person identified as such in the heading
hereof, together with any permitted successors and assigns.
"Participation Interest" means a purchase by a Lender of a
participation in Letters of Credit or LOC Obligations as provided in
Section 2.2 or in any Loans as provided in Section 3.14.
"PBGC" means the Pension Benefit Guaranty Corporation
established pursuant to Subtitle A of Title IV of ERISA and any
successor thereof.
"Permitted Business" means any business that manufactures
and/or sells silicon metal or microsilica, or any business that is
reasonably similar thereto or a reasonable extension, development or
expansion thereof or ancillary thereto.
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<PAGE> 23
"Permitted Investments" means Investments which are either (i)
cash and Cash Equivalents, (ii) accounts receivable created, acquired
or made by any Credit Party in the ordinary course of business and
payable or dischargeable in accordance with customary trade terms,
(iii) Investments consisting of Capital Stock, obligations, securities
or other property received by any Credit Party in settlement of
accounts receivable (created in the ordinary course of business) from
bankrupt obligors, (iv) Investments existing as of the Closing Date and
set forth in Schedule 1.1A, (v) Guaranty Obligations permitted by
Section 8.1, (vi) transactions permitted by Section 8.9, (vii) advances
or loans to directors, officers, employees, agents, customers or
suppliers that do not exceed $500,000 in the aggregate at any one time
outstanding for all of the Credit Parties, (viii) Investments in any
Credit Party other than the Parent, (ix) advances, loans or other
extensions of credit described in clause (b) of the definition of
"Exempt Affiliate Transactions" set forth in this Section 1.1, (x) any
Investment paid for solely with the Capital Stock of the Parent, (xi)
any other Investment by any Credit Party made solely with proceeds of
capital contributions in the Parent or with the Net Cash Proceeds of an
Equity Issuance by the Parent and (xii) other Investments having an
aggregate fair market value (measured on the date any such Investment
is made and without giving effect to subsequent changes in value) that,
when taken together with all other Investments made pursuant to this
clause (xii) that at the time outstanding, not to exceed $5,000,000.
"Permitted Liens" means:
(i) Liens in favor of the Agent to secure the Credit Party
Obligations;
(ii) Liens (other than Liens created or imposed under ERISA)
for taxes, assessments or governmental charges or levies not yet due or
Liens for taxes being contested in good faith by appropriate
proceedings for which adequate reserves determined in accordance with
GAAP have been established (and as to which the Property subject to any
such Lien is not yet subject to foreclosure, sale or loss on account
thereof);
(iii) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, materialmen and suppliers and other Liens
imposed by law or pursuant to customary reservations or retentions of
title arising in the ordinary course of business, provided that such
Liens secure only amounts not yet due and payable or, if due and
payable, are unfiled and no other action has been taken to enforce the
same or are being contested in good faith by appropriate proceedings
for which adequate reserves determined in accordance with GAAP have
been established (and as to which the Property subject to any such Lien
is not yet subject to foreclosure, sale or loss on account thereof);
(iv) Liens (other than Liens created or imposed under ERISA)
incurred or deposits made by any Credit Party in the ordinary course of
business in connection with workers' compensation, unemployment
insurance and other types of social security, or to secure the
performance of tenders, statutory obligations, bids, leases, government
contracts, performance and return-of-money bonds and other similar
obligations (exclusive of obligations for the payment of borrowed
money);
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(v) Liens in connection with attachments or judgments
(including judgment or appeal bonds) provided that the judgments
secured shall, within 30 days after the entry thereof, have been
discharged or execution thereof stayed pending appeal, or shall have
been discharged within 30 days after the expiration of any such stay;
(vi) easements, rights-of-way, restrictions (including zoning
restrictions), minor defects or irregularities in title and other
similar charges or encumbrances not, in any material respect, impairing
the use of the encumbered Property for its intended purposes;
(vii) Liens on Property securing purchase money Indebtedness
(including Capital Leases and Synthetic Leases) to the extent permitted
under Section 8.1(c), provided that any such Lien attaches to such
Property concurrently with or within 90 days after the acquisition
thereof;
(viii) leases or subleases granted to others not interfering
in any material respect with the business of any Credit Party;
(ix) any interest of title of a lessor under, and Liens
arising from UCC financing statements (or equivalent filings,
registrations or agreements in foreign jurisdictions) relating to,
leases permitted by this Credit Agreement;
(x) Liens deemed to exist in connection with Investments in
repurchase agreements permitted under Section 8.6;
(xi) normal and customary rights of setoff upon deposits of
cash in favor of banks or other depository institutions;
(xii) Liens securing Indebtedness not to exceed $1,000,000 in
an aggregate principal amount outstanding at any time; and
(xiii) Liens existing as of the Closing Date and set forth on
Schedule 1.1B; provided that (a) no such Lien shall at any time be
extended to or cover any Property other than the Property subject
thereto on the Closing Date and (b) the principal amount of the
Indebtedness secured by such Liens shall not be extended, renewed,
refunded or refinanced.
"Permitted Refinancing Indebtedness" means any Indebtedness of
the Borrower or any of its Subsidiaries issued in exchange for, or the
net proceeds of which are used to extend, refinance, renew, replace,
defease or refund other Indebtedness of the Borrower or any of its
Subsidiaries (other than intercompany Indebtedness); provided that: (i)
the principal amount (or accreted value, if applicable) of such
Permitted Refinancing Indebtedness does not exceed the principal amount
of (or accreted value, if applicable), plus accrued interest on, the
Indebtedness so extended, refinanced, renewed, replaced, defeased or
refunded (plus the amount of reasonable expenses incurred in connection
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therewith); (ii) such Permitted Refinancing Indebtedness has a final
maturity date later than the final maturity date of, and has a Weighted
Average Life to Maturity equal to or greater than the Weighted Average
Life to Maturity of, the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded; (iii) if the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded is
subordinated in right of payment to the Senior Notes, such Permitted
Refinancing Indebtedness has a final maturity date later than the final
maturity date of, and is subordinated in right of payment to, the
Credit Party Obligations on terms at least as favorable to the Lenders
as those contained in the documentation governing the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded;
and (iv) such Indebtedness is incurred either by the Borrower or by the
Subsidiary who is the obligor on the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded.
"Person" means any individual, partnership, joint venture,
firm, corporation, limited liability company, association, trust or
other enterprise (whether or not incorporated) or any Governmental
Authority.
"Plan" means any employee benefit plan (as defined in Section
3(3) of ERISA) which is covered by ERISA and with respect to which any
Credit Party or any ERISA Affiliate is (or, if such plan were
terminated at such time, would under Section 4069 of ERISA be deemed to
be) an "employer" within the meaning of Section 3(5) of ERISA.
"Pledge Agreement" means the pledge agreement dated as of the
Closing Date in the form of Exhibit 1.1A to be executed in favor of the
Agent by each of the Credit Parties, as amended, modified, restated or
supplemented from time to time.
"Prime Rate" means the per annum rate of interest established
from time to time by NationsBank as its prime rate, which rate may not
be the lowest rate of interest charged by NationsBank to its customers.
"Principal Office" means the principal office of NationsBank,
presently located at Charlotte, North Carolina.
"Property" means any interest in any kind of property or
asset, whether real, personal or mixed, or tangible or intangible.
"Purchase Agreement" means (i) the Stock Purchase Agreement by
and among Simcala, Inc., a Delaware corporation, the individuals and
entities listed under the heading "Sellers" on the signature pages
thereto, as sellers, and SAC Acquisition Corp., a Georgia corporation,
as buyer, dated as of February 10, 1998, as it may be amended on or
prior to the Closing Date, and (ii) the Escrow Agreement by and among
SAC Acquisition Corp., a Georgia corporation, as buyer, the individuals
and entities listed under the heading "Sellers" on the signature pages
thereto, as sellers, and SunTrust Bank, Atlanta, a Georgia banking
corporation, dated as of March 31, 1998, as it may be amended on or
prior to the Closing Date.
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"Register" shall have the meaning given such term in Section
11.3(c).
"Regulation G, T, U, or X" means Regulation G, T, U or X,
respectively, of the Board of Governors of the Federal Reserve System
as from time to time in effect and any successor to all or a portion
thereof.
"Release" means any spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, dumping
or disposing into the environment (including the abandonment or
discarding of barrels, containers and other closed receptacles) of any
Materials of Environmental Concern.
"Reportable Event" means any of the events set forth in
Section 4043(c) of ERISA, other than those events as to which the
notice requirement has been waived by regulation.
"Required Financial Information" means, with respect to the
applicable Calculation Date, (i) the financial statements of the Credit
Parties required to be delivered pursuant to Section 7.1(a) or (b) for
the fiscal period or quarter ending as of such Calculation Date, and
(ii) the certificate of an Executive Officer of the Borrower required
by Section 7.1(c) to be delivered with the financial statements
described in clause (i) above.
"Required Lenders" means, at any time, Lenders (which are not
at such time Defaulting Lenders (as determined by the Agent)) and
holding in the aggregate at least 51% (if, at such time, there are more
than two Lenders hereunder) or 66 2/3% (if, at such time, there are two
Lenders only) of (i) the Commitments (and Participation Interests
therein) or (ii) if the Commitments have been terminated, the
outstanding Loans and Participation Interests (including the
Participation Interests of the Issuing Lender in any Letters of
Credit).
"Requirement of Law" means, as to any Person, the certificate
of incorporation and by-laws or other organizational or governing
documents of such Person, and any law, treaty, rule or regulation or
final, non-appealable determination of an arbitrator or a court or
other Governmental Authority, in each case applicable to or binding
upon such Person or to which any of its material property is subject.
"Restricted Payment" means (i) any dividend or other
distribution, direct or indirect, on account of any shares of any class
of Capital Stock of any Credit Party, now or hereafter outstanding,
(ii) any redemption, retirement, sinking fund or similar payment,
purchase or other acquisition for value, direct or indirect, of any
shares of any class of Capital Stock of any Credit Party, now or
hereafter outstanding, (iii) any payment made to retire, or to obtain
the surrender of, any outstanding warrants, options or other rights to
acquire shares of any class of Capital Stock of any Credit Party, now
or hereafter outstanding and (iv) any loan, advance or other
distribution to the Parent.
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"Revolving Commitment" means, with respect to each Lender, the
commitment of such Lender in an aggregate principal amount at any time
outstanding of up to such Lender's Commitment Percentage of the
Committed Amount, (i) to make Loans in accordance with the provisions
of Section 2.1(a) and (ii) to purchase Participation Interests in
Letters of Credit in accordance with the provisions of Section 2.2(c).
"S&P" means Standard & Poor's Ratings Group, a division of
McGraw Hill, Inc., or any successor or assignee of the business of such
division in the business of rating securities.
"Sale and Leaseback Transaction" means any direct or indirect
arrangement with any Person or to which any such Person is a party,
providing for the leasing to any Credit Party of any Property, whether
owned by such Credit Party as of the Closing Date or later acquired,
which has been or is to be sold or transferred by such Credit Party to
such Person or to any other Person from whom funds have been, or are to
be, advanced by such Person on the security of such Property.
"Security Agreement" means the security agreement dated as of
the Closing Date in the form of Exhibit 1.1B to be executed in favor of
the Agent by each of the Credit Parties, as amended, modified, restated
or supplemented from time to time.
"Senior Note" means any one of the __% Senior Notes due 2006,
issued by the Borrower pursuant to the Senior Note Agreement, as such
Senior Notes may be amended, modified, restated or supplemented and in
effect from time to time.
"Senior Note Agreement" means the Indenture, dated as of the
Closing Date, by and between the Borrower and IBJ Schroeder Bank &
Trust Company, as trustee for the Senior Noteholders, as the same may
be amended, modified, restated or supplemented and in effect from time
to time.
"Senior Noteholder" means any one of the holders from time to
time of the Senior Notes.
"Single Employer Plan" means any Plan which is covered by
Title IV of ERISA, but which is not a Multiemployer Plan or a Multiple
Employer Plan.
"Solvent" or "Solvency" means, with respect to any Person as
of a particular date, that on such date (i) such Person is able to
realize upon its assets and pay its debts and other liabilities,
contingent obligations and other commitments as they mature in the
normal course of business, (ii) such Person does not intend to, and
does not believe that it will, incur debts or liabilities beyond such
Person's ability to pay as such debts and liabilities mature in their
ordinary course, (iii) such Person is not engaged in a business or a
transaction, and is not about to engage in a business or a transaction,
for which such Person's Property would constitute unreasonably small
capital after giving due consideration to the prevailing practice in
the industry in which such Person is engaged or
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is to engage, (iv) the fair value of the Property of such Person is
greater than the total amount of liabilities, including, without
limitation, contingent liabilities, of such Person and (v) the present
fair salable value of the assets of such Person is not less than the
amount that will be required to pay the probable liability of such
Person on its debts as they become absolute and matured. In computing
the amount of contingent liabilities at any time, it is intended that
such liabilities will be computed at the amount which, in light of all
the facts and circumstances existing at such time, represents the
amount that can reasonably be expected to become an actual or matured
liability.
"Standby Letter of Credit Fee" shall have the meaning assigned
to such term in Section 3.5(c)(i).
"Subsidiary" means, as to any Person at any time, (a) any
corporation more than 50% of whose Capital Stock of any class or
classes having by the terms thereof ordinary voting power to elect a
majority of the directors of such corporation (irrespective of whether
or not at such time, any class or classes of such corporation shall
have or might have voting power by reason of the happening of any
contingency) is at such time owned by such Person directly or
indirectly through Subsidiaries, and (b) any partnership, association,
joint venture or other entity of which such Person directly or
indirectly through Subsidiaries owns at such time more than 50% of the
Capital Stock.
"Subsidiary Guarantor" means each of the Persons identified as
a "Subsidiary Guarantor" on the signature pages hereto and each
Additional Credit Party which may hereafter execute a Joinder
Agreement, together with their successors and permitted assigns, and
"Subsidiary Guarantor" means any one of them
"Synthetic Lease" means any synthetic lease, tax retention
operating lease, off-balance sheet loan or similar off-balance sheet
financing product where such transaction is considered borrowed money
indebtedness for tax purposes but is classified as an Operating Lease.
"Taxes" shall have the meaning assigned to such term in
Section 3.11.
"Total Leverage Ratio" means, with respect to the Credit
Parties on a consolidated basis for the twelve month period ending on
the last day of any fiscal quarter, the ratio of (a) Funded
Indebtedness of the Credit Parties on a consolidated basis on the last
day of such period to (b) Consolidated EBITDA for such period.
"Trade Letter of Credit Fee" shall have the meaning assigned
to such term in Section 3.5(c)(ii).
"Unused Fee" shall have the meaning assigned to such term in
Section 3.5(b).
"Unused Fee Calculation Period" shall have the meaning
assigned to such term in Section 3.5(b).
"Unused Committed Amount" means, for any period, the amount by
which (a) the then applicable Committed Amount exceeds (b) the daily
average sum for such period of (i) the outstanding aggregate principal
amount of all Loans plus (ii) the outstanding aggregate principal
amount of all LOC Obligations.
"Upfront Fee" shall have the meaning assigned to such term in
Section 3.5(a).
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"Voting Stock" means, with respect to any Person, Capital
Stock issued by such Person the holders of which are ordinarily, in the
absence of contingencies, entitled to vote for the election of
directors (or persons performing similar functions) of such Person,
even though the right so to vote has been suspended by the happening of
such a contingency.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (i)
the sum of the products obtained by multiplying (a) the amount of each
then remaining installment, sinking fund, serial maturity or other
required payments of principal, including payment at final maturity, in
respect thereof , by (b) the number of years (calculated to the nearest
one-twelfth) that will elapse between such date and the making of such
payment, by (ii) the then outstanding principal amount of such
Indebtedness.
"Wholly Owned Subsidiary" of any Person means any Subsidiary
100% of whose Voting Stock is at the time owned by such Person directly
or indirectly through other Wholly Owned Subsidiaries.
1.2 COMPUTATION OF TIME PERIODS.
For purposes of computation of periods of time hereunder, the word
"from" means "from and including" and the words "to" and "until" each mean "to
but excluding."
1.3 ACCOUNTING TERMS.
Except as otherwise expressly provided herein, all accounting terms
used herein shall be interpreted, and all financial statements and certificates
and reports as to financial matters required to be delivered to the Lenders
hereunder shall be prepared, in accordance with GAAP applied on a consistent
basis. All calculations made for the purposes of determining compliance with
this Credit Agreement shall (except as otherwise expressly provided herein) be
made by application of GAAP applied on a basis consistent with the most recent
annual or quarterly financial statements delivered pursuant to Section 7.1 (or,
prior to the delivery of the first financial statements pursuant to Section 7.1,
consistent with the financial statements as at December 31, 1997); provided,
however, if (a) the Borrower shall object to determining such compliance on such
basis at the time of delivery of such financial statements due to any change in
GAAP or the rules promulgated with respect thereto or (b) the Agent or the
Required Lenders shall so object in writing within 60 days after delivery of
such financial statements, then such calculations shall be
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made on a basis consistent with the most recent financial statements delivered
by the Borrower to the Lenders as to which no such objection shall have been
made.
Notwithstanding the above, the parties hereto acknowledge and agree that, for
purposes of all calculations made in determining compliance with the financial
covenants set forth in Section 7.11 (including without limitation for purposes
of the definition of "Applicable Percentage" set forth in Section 1.1), (i)(A)
income statement items (whether positive or negative) attributable to the
Property disposed of in any Asset Disposition as contemplated by Section 8.5, as
applicable, shall be excluded to the extent relating to any period occurring
prior to the date of such transaction and (B) Indebtedness which is retired in
connection with any such Asset Disposition shall be excluded and deemed to have
been retired as of the first day of the applicable period and (ii) income
statement items (whether positive or negative) attributable to any Property
acquired in any Investment transaction permitted by Section 8.6 shall be
included to the extent relating to any period applicable in such calculations
occurring after the date of such transaction (and, notwithstanding the
foregoing, during the first four fiscal quarters prior to the date of such
transaction, shall be included on a pro forma basis).
SECTION 2
CREDIT FACILITIES
2.1 LOANS.
(a) Revolving Commitment. Subject to the terms and conditions
hereof and in reliance upon the representations and warranties set
forth herein, each Lender severally agrees to make available to the
Borrower such Lender's Commitment Percentage of revolving credit loans
requested by the Borrower in Dollars ("Loans") from time to time from
the Closing Date until the Maturity Date, or such earlier date as the
Revolving Commitments shall have been terminated as provided herein for
the purposes hereinafter set forth; provided, however, that the sum of
the aggregate principal amount of outstanding Loans shall not exceed
FIFTEEN MILLION DOLLARS ($15,000,000) (as such aggregate maximum amount
may be reduced from time to time as provided in Section 3.4, the
"Committed Amount"); provided, further, (A) with regard to each Lender
individually, such Lender's outstanding Loans shall not exceed such
Lender's Commitment Percentage of the Committed Amount, and (B) the
aggregate principal amount of outstanding Loans plus LOC Obligations
outstanding shall not exceed the Committed Amount. Loans may consist of
Base Rate Loans or Eurodollar Loans, or a combination thereof, as the
Borrower may request; provided, however, that no more than 5 Eurodollar
Loans shall be outstanding hereunder at any time. For purposes hereof,
Eurodollar Loans with different Interest Periods shall be considered as
separate Eurodollar Loans, even if they begin on the same date,
although borrowings, extensions and conversions may, in accordance with
the provisions hereof, be combined at the end of existing Interest
Periods to constitute a new Eurodollar Loan with a single Interest
Period. Loans hereunder may be repaid and reborrowed in accordance with
the provisions hereof.
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(b) Loan Borrowings.
(i) Notice of Borrowing. The Borrower shall request a
Loan borrowing by written notice (or telephonic notice
promptly confirmed in writing) to the Agent not later than
1:00 P.M. (Charlotte, North Carolina time) on the Business Day
prior to the date of the requested borrowing in the case of
Base Rate Loans, and on the third Business Day prior to the
date of the requested borrowing in the case of Eurodollar
Loans. Each such request for borrowing shall be irrevocable
and shall specify (A) that a Loan is requested, (B) the date
of the requested borrowing (which shall be a Business Day),
(C) the aggregate principal amount to be borrowed, and (D)
whether the borrowing shall be comprised of Base Rate Loans,
Eurodollar Loans or a combination thereof, and if Eurodollar
Loans are requested, the Interest Period(s) therefor. If the
Borrower shall fail to specify in any such Notice of Borrowing
(I) an applicable Interest Period in the case of a Eurodollar
Loan, then such notice shall be deemed to be a request for an
Interest Period of one month, or (II) the type of Loan
requested, then such notice shall be deemed to be a request
for a Base Rate Loan hereunder. The Agent shall give notice to
each affected Lender promptly upon receipt of each Notice of
Borrowing pursuant to this Section 2.1(b)(i), the contents
thereof and each such Lender's share of any borrowing to be
made pursuant thereto.
(ii) Minimum Amounts. Each Eurodollar Loan or Base
Rate Loan that is a Loan shall be in a minimum aggregate
principal amount of $100,000 and integral multiples of $50,000
in excess thereof (or the remaining amount of the Committed
Amount, if less).
(iii) Advances. Each Lender will make its Commitment
Percentage of each Loan borrowing available to the Agent for
the account of the Borrower as specified in Section 3.15(a),
or in such other manner as the Agent may specify in writing,
by 2:00 P.M. (Charlotte, North Carolina time) on the date
specified in the applicable Notice of Borrowing in Dollars and
in funds immediately available to the Agent. Such borrowing
will then be made available to the Borrower by the Agent by
crediting the account of the Borrower on the books of such
office with the aggregate of the amounts made available to the
Agent by the Lenders and in like funds as received by the
Agent.
(c) Repayment. The principal amount of all Loans shall be due
and payable in full on the Maturity Date, unless accelerated sooner
pursuant to Section 9.2.
(d) Interest. Subject to the provisions of Section 3.1,
(i) Base Rate Loans. During such periods as Loans
shall be comprised in whole or in part of Base Rate Loans,
such Base Rate Loans shall bear interest at a per annum rate
equal to the Adjusted Base Rate.
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(ii) Eurodollar Loans. During such periods as Loans
shall be comprised in whole or in part of Eurodollar Loans,
such Eurodollar Loans shall bear interest at a per annum rate
equal to the Adjusted Eurodollar Rate.
Interest on Loans shall be payable in arrears on each applicable
Interest Payment Date (or at such other times as may be specified
herein).
(e) Notes. The Loans made by each Lender shall be evidenced by
a duly executed promissory note of the Borrower to such Lender in an
original principal amount equal to such Lender's Commitment Percentage
of the Committed Amount and in substantially the form of Exhibit
2.1(e).
2.2 LETTER OF CREDIT SUBFACILITY.
(a) Issuance. Subject to the terms and conditions hereof and
of the LOC Documents, if any, and any other terms and conditions which
the Issuing Lender may reasonably require and in reliance upon the
representations and warranties set forth herein, the Issuing Lender
agrees to issue, and each Lender severally agrees to participate in the
issuance by the Issuing Lender of, standby and trade Letters of Credit
in Dollars from time to time from the Closing Date until the date five
(5) Business Days prior to the Maturity Date as the Borrower may
request, in a form acceptable to the Issuing Lender; provided, however,
that (i) the LOC Obligations outstanding shall not at any time exceed
the Committed Amount and (ii) the sum of the aggregate principal amount
of outstanding Loans plus LOC Obligations outstanding shall not at any
time exceed the Committed Amount. No Letter of Credit shall (x) have an
original expiry date more than one year (or, in the case of any Letter
of Credit issued to support reimbursement obligations arising in
connection with industrial development bonds, thirteen months) from the
date of issuance or (y) as originally issued or as extended, have an
expiry date extending beyond the Maturity Date. Each Letter of Credit
shall comply with the related LOC Documents. The issuance and expiry
dates of each Letter of Credit shall be a Business Day.
(b) Notice and Reports. The request for the issuance of a
Letter of Credit shall be submitted by the Borrower to the Issuing
Lender at least three (3) Business Days prior to the requested date of
issuance. The Issuing Lender will, at least quarterly and more
frequently upon request, disseminate to each of the Lenders a detailed
report specifying the Letters of Credit which are then issued and
outstanding and any activity with respect thereto which may have
occurred since the date of the prior report, and including therein,
among other things, the beneficiary, the face amount and the expiry
date, as well as any payment or expirations which may have occurred.
(c) Participation. Each Lender, upon issuance of a Letter of
Credit, shall be deemed to have purchased without recourse a
Participation Interest from the Issuing Lender in such Letter of Credit
and the obligations arising thereunder and any collateral relating
thereto, in each case in an amount equal to its pro rata share of the
obligations
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under such Letter of Credit (based on the respective Commitment
Percentages of the Lenders) and shall absolutely, unconditionally and
irrevocably assume and be obligated to pay to the Issuing Lender and
discharge when due, its pro rata share of the obligations arising under
such Letter of Credit. Without limiting the scope and nature of each
Lender's Participation Interest in any Letter of Credit, to the extent
that the Issuing Lender has not been reimbursed as required hereunder
or under any such Letter of Credit, each such Lender shall pay to the
Issuing Lender its pro rata share of such unreimbursed drawing in same
day funds on the day of notification by the Issuing Lender of an
unreimbursed drawing pursuant to the provisions of subsection (d)
below. The obligation of each Lender to so reimburse the Issuing Lender
shall be absolute and unconditional and shall not be affected by the
occurrence of a Default, an Event of Default or any other occurrence or
event. Any such reimbursement shall not relieve or otherwise impair the
obligation of the Borrower to reimburse the Issuing Lender under any
Letter of Credit, together with interest as hereinafter provided.
(d) Reimbursement. In the event of any drawing under any
Letter of Credit, the Issuing Lender will promptly notify the Borrower.
Unless the Borrower shall immediately notify the Issuing Lender that
the Borrower intends to otherwise reimburse the Issuing Lender for such
drawing, the Borrower shall be deemed to have requested that the
Lenders make a Loan in the amount of the drawing as provided in
subsection (e) below on the related Letter of Credit, the proceeds of
which will be used to satisfy the related reimbursement obligations.
The Borrower promises to reimburse the Issuing Lender on the day of
drawing under any Letter of Credit (either with the proceeds of a Loan
obtained hereunder or otherwise) in same day funds. If the Borrower
shall fail to reimburse the Issuing Lender as provided hereinabove, the
unreimbursed amount of such drawing shall bear interest at a per annum
rate equal to the Adjusted Base Rate plus 2%. The Borrower's
reimbursement obligations hereunder shall, subject to gross negligence
or willful misconduct on the part of the Issuing Lender, be absolute
and unconditional under all circumstances irrespective of any rights of
setoff, counterclaim or defense to payment the Borrower may claim or
have against the Issuing Lender, the Agent, the Lenders, the
beneficiary of the Letter of Credit drawn upon or any other Person,
including without limitation any defense based on any failure of the
Borrower or any other Credit Party to receive consideration or the
legality, validity, regularity or unenforceability of the Letter of
Credit. The Issuing Lender will promptly notify the other Lenders of
the amount of any unreimbursed drawing and each Lender shall promptly
pay to the Agent for the account of the Issuing Lender in Dollars and
in immediately available funds, the amount of such Lender's pro rata
share of such unreimbursed drawing. Such payment shall be made on the
day such notice is received by such Lender from the Issuing Lender if
such notice is received at or before 2:00 P.M. (Charlotte, North
Carolina time) otherwise such payment shall be made at or before 12:00
Noon (Charlotte, North Carolina time) on the Business Day next
succeeding the day such notice is received. If such Lender does not pay
such amount to the Issuing Lender in full upon such request, such
Lender shall, on demand, pay to the Agent for the account of the
Issuing Lender interest on the unpaid amount during the period from the
date of such drawing until such Lender pays such amount to the Issuing
Lender in full at a rate per annum equal to, if paid within two (2)
Business Days of
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the date that such Lender is required to make payments of such amount
pursuant to the preceding sentence, the Federal Funds Rate and
thereafter at a rate equal to the Base Rate. Each Lender's obligation
to make such payment to the Issuing Lender, and the right of the
Issuing Lender to receive the same, shall be absolute and
unconditional, shall not be affected by any circumstance whatsoever and
without regard to the termination of this Credit Agreement or the
Commitments hereunder, the existence of a Default or Event of Default
or the acceleration of the obligations of the Borrower hereunder and
shall be made without any offset, abatement, withholding or reduction
whatsoever. Simultaneously with the making of each such payment by a
Lender to the Issuing Lender, such Lender shall, automatically and
without any further action on the part of the Issuing Lender or such
Lender, acquire a Participation Interest in an amount equal to such
payment (excluding the portion of such payment constituting interest
owing to the Issuing Lender) in the related unreimbursed drawing
portion of the LOC Obligation and in the interest thereon and in the
related LOC Documents, and shall have a claim against the Borrower with
respect thereto.
(e) Repayment with Loans. On any day on which the Borrower
shall have requested, or been deemed to have requested, a Loan advance
to reimburse a drawing under a Letter of Credit, the Agent shall give
notice to the Lenders that a Loan has been requested or deemed
requested by the Borrower to be made in connection with a drawing under
a Letter of Credit, in which case a Loan advance comprised of Base Rate
Loans (or Eurodollar Loans to the extent the Borrower has complied with
the procedures of Section 2.1(b)(i) with respect thereto) shall be
immediately made to the Borrower by all Lenders (notwithstanding any
termination of the Commitments pursuant to Section 9.2) pro rata based
on the respective Commitment Percentages of the Lenders (determined
before giving effect to any termination of the Commitments pursuant to
Section 9.2) and the proceeds thereof shall be paid directly to the
Issuing Lender for application to the respective LOC Obligations. Each
such Lender hereby irrevocably agrees to make its pro rata share of
each such Loan immediately upon any such request or deemed request in
the amount, in the manner and on the date specified in the preceding
sentence notwithstanding (i) the amount of such borrowing may not
comply with the minimum amount for advances of Loans otherwise required
hereunder, (ii) whether any conditions specified in Section 5.2 are
then satisfied, (iii) whether a Default or an Event of Default then
exists, (iv) failure for any such request or deemed request for Loan to
be made by the time otherwise required hereunder, (v) whether the date
of such borrowing is a date on which Loans are otherwise permitted to
be made hereunder or (vi) any termination of the Commitments relating
thereto immediately prior to or contemporaneously with such borrowing.
In the event that any Loan cannot for any reason be made on the date
otherwise required above (including, without limitation, as a result of
the commencement of a proceeding under the Bankruptcy Code with respect
to the Borrower or any Credit Party), then each such Lender hereby
agrees that it shall forthwith purchase (as of the date such borrowing
would otherwise have occurred, but adjusted for any payments received
from the Borrower on or after such date and prior to such purchase)
from the Issuing Lender such Participation Interests in the outstanding
LOC Obligations as shall be necessary to cause each such Lender to
share in such LOC Obligations ratably (based upon the respective
Commitment Percentages of the Lenders (determined before giving effect
to any termination of the
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Commitments pursuant to Section 9.2)), provided that at the time any
purchase of Participation Interests pursuant to this sentence is
actually made, the purchasing Lender shall be required to pay to the
Issuing Lender, to the extent not paid to the Issuer by the Borrower in
accordance with the terms of subsection (d) above, interest on the
principal amount of Participation Interests purchased for each day from
and including the day upon which such borrowing would otherwise have
occurred to but excluding the date of payment for such Participation
Interests, at the rate equal to, if paid within two (2) Business Days
of the date of the Loan advance, the Federal Funds Rate, and thereafter
at a rate equal to the Base Rate.
(f) Designation of Credit Parties as Account Parties.
Notwithstanding anything to the contrary set forth in this Credit
Agreement, including without limitation Section 2.2(a), a Letter of
Credit issued hereunder may contain a statement to the effect that such
Letter of Credit is issued for the account of a Credit Party other than
the Borrower or the Parent, provided that notwithstanding such
statement, the Borrower shall be the actual account party for all
purposes of this Credit Agreement for such Letter of Credit and such
statement shall not affect the Borrower's reimbursement obligations
hereunder with respect to such Letter of Credit.
(g) Renewal, Extension. The renewal or extension of any Letter
of Credit shall, for purposes hereof, be treated in all respects the
same as the issuance of a new Letter of Credit hereunder.
(h) Uniform Customs and Practices. The Issuing Lender may have
the Letters of Credit be subject to The Uniform Customs and Practice
for Documentary Credits, as published as of the date of issue by the
International Chamber of Commerce (the "UCP"), in which case the UCP
may be incorporated therein and deemed in all respects to be a part
thereof.
(i) Indemnification; Nature of Issuing Lender's Duties.
(i) In addition to its other obligations under this
Section 2.2, the Borrower hereby agrees to pay, and protect,
indemnify and save each Lender harmless from and against, any
and all claims, demands, liabilities, damages, losses, costs,
charges and expenses (including reasonable attorneys' fees)
that such Lender may actually incur or be subject to as a
consequence, direct or indirect, of (A) the issuance of any
Letter of Credit or (B) the failure of such Lender to honor a
drawing under a Letter of Credit as a result of any act or
omission, whether rightful or wrongful, of any present or
future de jure or de facto government or Governmental
Authority (all such acts or omissions, herein called
"Government Acts").
(ii) As between the Borrower and the Lenders
(including the Issuing
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Lender), the Borrower shall assume all risks of the acts,
omissions or misuse of any Letter of Credit by the beneficiary
thereof. No Lender (including the Issuing Lender) shall,
absent gross negligence or willful misconduct on the part of
such Lender, be responsible: (A) for the form, validity,
sufficiency, accuracy, genuineness or legal effect of any
document submitted by any party in connection with the
application for and issuance of any Letter of Credit, even if
it should in fact prove to be in any or all respects invalid,
insufficient, inaccurate, fraudulent or forged; (B) for the
validity or sufficiency of any instrument transferring or
assigning or purporting to transfer or assign any Letter of
Credit or the rights or benefits thereunder or proceeds
thereof, in whole or in part, that may prove to be invalid or
ineffective for any reason; (C) for errors, omissions,
interruptions or delays in transmission or delivery of any
messages, by mail, cable, telegraph, telex or otherwise,
whether or not they be in cipher; (D) for any loss or delay in
the transmission or otherwise of any document required in
order to make a drawing under a Letter of Credit or of the
proceeds thereof; and (E) for any consequences arising from
causes beyond the control of such Lender, including, without
limitation, any Government Acts. None of the above shall
affect, impair, or prevent the vesting of the Issuing Lender's
rights or powers hereunder.
(iii) In furtherance and extension and not in
limitation of the specific provisions hereinabove set forth,
any action taken or omitted by any Lender (including the
Issuing Lender), under or in connection with any Letter of
Credit or the related certificates, if taken or omitted in
good faith and absent gross negligence or willful misconduct
on the part of such Lender, shall not put such Lender under
any resulting liability to the Borrower or any other Credit
Party. It is the intention of the parties that this Credit
Agreement shall be construed and applied to protect and
indemnify each Lender (including the Issuing Lender) against
any and all risks involved in the issuance of the Letters of
Credit, all of which risks are hereby assumed by the Borrower
(on behalf of itself and each of the other Credit Parties),
including, without limitation, any and all Government Acts. No
Lender (including the Issuing Lender) shall, in any way, be
liable for any failure by such Lender or anyone else to pay
any drawing under any Letter of Credit as a result of any
Government Acts or any other cause beyond the control of such
Lender.
(iv) Nothing in this subsection (i) is intended to
limit the reimbursement obligations of the Borrower contained
in subsection (d) above. The obligations of the Borrower under
this subsection (i) shall survive the termination of this
Credit Agreement. No act or omission of any current or prior
beneficiary of a Letter of Credit shall in any way affect or
impair the rights of the Lenders (including the Issuing
Lender) to enforce any right, power or benefit under this
Credit Agreement.
(v) Notwithstanding anything to the contrary
contained in this subsection (i), the Borrower shall have no
obligation to indemnify any Lender (including the Issuing
Lender) in respect of any liability incurred by such Lender
(A) arising solely out of the gross negligence or willful
misconduct of such Lender,
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as determined by a court of competent jurisdiction, or (B)
caused by such Lender's failure to pay under any Letter of
Credit after presentation to it of a request strictly
complying with the terms and conditions of such Letter of
Credit, as determined by a court of competent jurisdiction,
unless such payment is prohibited by any law, regulation,
court order or decree.
(j) Responsibility of Issuing Lender. It is expressly
understood and agreed that the obligations of the Issuing Lender
hereunder to the Lenders are only those expressly set forth in this
Credit Agreement and that the Issuing Lender shall be entitled to
assume that the conditions precedent set forth in Section 5.2 have been
satisfied unless it shall have acquired actual knowledge that any such
condition precedent has not been satisfied; provided, however, that
nothing set forth in this Section 2.2 shall be deemed to prejudice the
right of any Lender to recover from the Issuing Lender any amounts made
available by such Lender to the Issuing Lender pursuant to this Section
2.2 in the event that it is determined by a court of competent
jurisdiction that the payment with respect to a Letter of Credit
constituted gross negligence or willful misconduct on the part of the
Issuing Lender.
(k) Conflict with LOC Documents. In the event of any conflict
between this Credit Agreement and any LOC Document (including any
letter of credit application), this Credit Agreement shall control.
SECTION 3
OTHER PROVISIONS RELATING TO CREDIT FACILITIES
3.1 DEFAULT RATE.
Upon the occurrence, and during the continuance, of an Event of
Default, the principal of and, to the extent permitted by law, interest on the
Loans and any other amounts owing hereunder or under the other Credit Documents
shall bear interest, payable on demand, at a per annum rate 2% greater than the
rate which would otherwise be applicable (or if no rate is applicable, whether
in respect of interest, fees or other amounts, then the Adjusted Base Rate plus
2%).
3.2 EXTENSION AND CONVERSION.
Subject to the terms of Section 5.2, the Borrower shall have the
option, on any Business Day, to extend existing Loans into a subsequent
permissible Interest Period or to convert Loans into Loans of another interest
rate type; provided, however, that (i) except as provided in Section 3.8,
Eurodollar Loans may be converted into Base Rate Loans only on the last day of
the Interest Period applicable thereto, (ii) Eurodollar Loans may be extended,
and Base Rate Loans may be converted into Eurodollar Loans, only if no Default
or Event of Default is in existence on the date of extension or conversion,
(iii) Loans extended as, or converted into, Eurodollar Loans shall be subject to
the terms of the definition of "Interest Period" set forth in Section 1.1 and
shall be in
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such minimum amounts as provided in Section 2.1(b)(ii), (iv) no more than 5
Eurodollar Loans shall be outstanding hereunder at any time (it being understood
that, for purposes hereof, Eurodollar Loans with different Interest Periods
shall be considered as separate Eurodollar Loans, even if they begin on the same
date, although borrowings, extensions and conversions may, in accordance with
the provisions hereof, be combined at the end of existing Interest Periods to
constitute a new Eurodollar Loan with a single Interest Period) and (v) any
request for extension or conversion of a Eurodollar Loan which shall fail to
specify an Interest Period shall be deemed to be a request for an Interest
Period of one month. Each such extension or conversion shall be effected by the
Borrower by giving a Notice of Extension/Conversion (or telephonic notice
promptly confirmed in writing) to the office of the Agent specified in Schedule
2.1(a), or at such other office as the Agent may designate in writing, prior to
1:00 P.M. (Charlotte, North Carolina time) on the Business Day of, in the case
of the conversion of a Eurodollar Loan into a Base Rate Loan, and on the third
Business Day prior to, in the case of the extension of a Eurodollar Loan as, or
conversion of a Base Rate Loan into, a Eurodollar Loan, the date of the proposed
extension or conversion, specifying the date of the proposed extension or
conversion, the Loans to be so extended or converted, the types of Loans into
which such Loans are to be converted and, if appropriate, the applicable
Interest Periods with respect thereto. Each request for extension or conversion
shall be irrevocable and shall constitute a representation and warranty by the
Borrower of the matters specified in subsections (b), (c), (d), (e) and (f) of
Section 5.2. In the event the Borrower fails to request extension or conversion
of any Eurodollar Loan in accordance with this Section, or any such conversion
or extension is not permitted or required by this Section, then such Eurodollar
Loan shall be automatically converted into a Base Rate Loan at the end of the
Interest Period applicable thereto. The Agent shall give each Lender notice as
promptly as practicable of any such proposed extension or conversion affecting
any Loan.
3.3 PREPAYMENTS.
(a) Voluntary Prepayments. The Borrower shall have the right
to prepay Loans in whole or in part from time to time; provided,
however, that each partial prepayment of Loans shall be in a minimum
principal amount of $100,000 and integral multiples of $50,000. Subject
to the foregoing terms, amounts prepaid under this Section 3.3(a) shall
be applied as the Borrower may elect; provided that if the Borrower
fails to specify otherwise in respect of any voluntary prepayment, then
such prepayment shall be applied first to Base Rate Loans and then to
Eurodollar Loans in direct order of Interest Period maturities. All
prepayments under this Section 3.3(a) shall be subject to Section 3.12,
but otherwise without premium or penalty, and be accompanied by
interest on the principal amount prepaid through the date of
prepayment.
(b) Mandatory Prepayments.
(i) Committed Amount. If at any time, the sum of the
aggregate principal amount of outstanding Loans plus LOC
Obligations outstanding shall exceed the Committed Amount, the
Borrower immediately shall prepay the Loans and (after all
Loans have been repaid) cash collateralize the LOC
Obligations, in an amount sufficient to eliminate such excess.
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(ii) Asset Dispositions. Immediately upon the
occurrence of any Asset Disposition Prepayment Event, the
Borrower shall prepay the Loans in an aggregate amount equal
to the Net Cash Proceeds of the related Asset Disposition not
applied (or caused to be applied) by the Credit Parties during
the related Application Period to the purchase, acquisition or
construction of Eligible Assets as contemplated by the terms
of Section 8.5(e) (such prepayment to be applied as set forth
in clause (iii) below).
(iii) Application of Mandatory Prepayments. All
amounts required to be paid pursuant to this Section 3.3(b)
shall be applied as follows: (A) with respect to all amounts
prepaid pursuant to Section 3.3(b)(i), to Loans and (after all
Loans have been repaid) to a cash collateral account in
respect of LOC Obligations, (B) with respect to all amounts
prepaid pursuant to Section 3.3(b)(ii), to the Loans and
(after all Loans have been repaid) to a cash collateral
account in respect of LOC Obligations (with a corresponding
reduction in the Committed Amount). Within the parameters of
the applications set forth above, prepayments shall be applied
first to Base Rate Loans and then to Eurodollar Loans in
direct order of Interest Period maturities. All prepayments
under this Section 3.3(b) shall be subject to Section 3.12 and
be accompanied by interest on the principal amount prepaid
through the date of prepayment.
3.4 TERMINATION AND REDUCTION OF COMMITTED AMOUNT.
(a) Voluntary Reductions. The Borrower may from time to time
permanently reduce or terminate the Committed Amount in whole or in
part (in minimum aggregate amounts of $500,000 or in integral multiples
of $100,000 in excess thereof (or, if less, the full remaining amount
of the then applicable Committed Amount)) upon five Business Days'
prior written notice to the Agent; provided, however, no such
termination or reduction shall be made which would cause the aggregate
principal amount of outstanding Loans plus LOC Obligations outstanding
to exceed the Committed Amount, unless, concurrently with such
termination or reduction, the Loans are repaid to the extent necessary
to eliminate such excess. The Agent shall promptly notify each affected
Lender of receipt by the Agent of any notice from the Borrower pursuant
to this Section 3.4(a).
(b) Mandatory Reductions. On any date that the Loans are
required to be prepaid pursuant to the terms of Section 3.3(b)(iii),
the Committed Amount automatically shall be permanently reduced by the
amount of such required prepayment and/or reduction.
(c) Maturity Date. The Revolving Commitments of the Lenders
and the LOC Commitment of the Issuing Lender shall automatically
terminate on the Maturity Date.
(d) General. The Borrower shall pay to the Agent for the
account of the Lenders in accordance with the terms of Section 3.5(b),
on the date of each termination or
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reduction of the Committed Amount, the Unused Fee accrued through the
date of such termination or reduction on the amount of the Committed
Amount so terminated or reduced.
3.5 FEES.
(a) Upfront Fees. The Borrower agrees to pay to the Agent for
the benefit of the Lenders in immediately available funds on or before
the Closing Date an upfront fee (the "Upfront Fee") in the amount
provided in the Agent's Fee Letter.
(b) Unused Fee. In consideration of the Revolving Commitments
of the Lenders hereunder, the Borrower agrees to pay to the Agent for
the account of each Lender a fee (the "Unused Fee") on the Unused
Committed Amount computed at a per annum rate for each day during the
applicable Unused Fee Calculation Period (hereinafter defined) at a
rate equal to the Applicable Percentage in effect from time to time.
The Unused Fee shall commence to accrue on the Closing Date and shall
be due and payable in arrears on the last business day of each March,
June, September and December (and any date that the Committed Amount is
reduced as provided in Section 3.4(a) and the Maturity Date) for the
immediately preceding quarter (or portion thereof) (each such quarter
or portion thereof for which the Unused Fee is payable hereunder being
herein referred to as an "Unused Fee Calculation Period"), beginning
with the first of such dates to occur after the Closing Date.
(c) Letter of Credit Fees.
(i) Standby Letter of Credit Issuance Fee. In
consideration of the issuance of standby Letters of Credit
hereunder, the Borrower promises to pay to the Agent for the
account of each Lender a fee (the "Standby Letter of Credit
Fee") on such Lender's Commitment Percentage of the average
daily maximum amount available to be drawn under each such
standby Letter of Credit computed at a per annum rate for each
day from the date of issuance to the date of expiration equal
to the Applicable Percentage. The Standby Letter of Credit Fee
will be payable quarterly in arrears on the last Business Day
of each March, June, September and December for the
immediately preceding quarter (or a portion thereof).
(ii) Trade Letter of Credit Drawing Fee. In
consideration of the issuance of trade Letters of Credit
hereunder, the Borrower promises to pay to the Agent for the
account of each Lender a fee (the "Trade Letter of Credit
Fee") equal to the Applicable Percentage on such Lender's
Commitment Percentage of the amount of each drawing under any
such trade Letter of Credit. The Trade Letter of Credit Fee
will be payable on each date of drawing under a trade Letter
of Credit.
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(iii) Issuing Lender Fees. In addition to the Standby
Letter of Credit Fee payable pursuant to clause (i) above and
the Trade Letter of Credit Fee payable pursuant to clause (ii)
above, the Borrower promises to pay to the Issuing Lender for
its own account without sharing by the other Lenders a letter
of credit fronting fee of one-fourth of one percent (1/4%) per
annum on the average daily maximum amount available to be
drawn under outstanding Letters of Credit payable quarterly in
arrears and such other negotiation fees agreed to by the
Borrower and the Issuing Lender from time to time and the
customary charges from time to time of the Issuing Lender with
respect to the issuance, amendment, transfer, administration,
cancellation and conversion of, and drawings under, such
Letters of Credit (collectively, the "Issuing Lender Fees").
(d) Administrative Fees. The Borrower agrees to pay to the
Agent, for its own account and NationsBanc Montgomery Securities LLC,
as applicable, the fees referred to in the Agent's Fee Letter
(collectively, the "Agent's Fees").
3.6 CAPITAL ADEQUACY.
If any Lender has reasonably determined, after the date hereof, that
the adoption or the becoming effective of, or any change in, or any change by
any Governmental Authority, central bank or comparable agency charged with the
interpretation or administration thereof in the interpretation or administration
of, any applicable law, rule or regulation regarding capital adequacy, or
compliance by such Lender with any request or directive regarding capital
adequacy (whether or not having the force of law) of any such authority, central
bank or comparable agency, has or would have the effect of reducing the rate of
return on such Lender's capital or assets as a consequence of its commitments or
obligations hereunder to a level below that which such Lender could have
achieved but for such adoption, effectiveness, change or compliance (taking into
consideration such Lender's policies with respect to capital adequacy), then,
upon notice from such Lender to the Borrower, the Borrower shall be obligated to
pay to such Lender such additional amount or amounts as will compensate such
Lender on an after-tax basis (after taking into account applicable deductions
and credits in respect of the amount indemnified) for such reduction.
Notwithstanding the foregoing, if any Lender fails to notify the Borrower of any
event that will entitle such Lender to compensation under this Section 3.6
within 90 days after such Lender becomes aware of such event, then such Lender
shall not be entitled to any compensation from the Borrower for any reduction in
rate of return on capital arising prior to the date that is 90 days before the
date on which such Lender notifies the Borrower of such event. Each
determination by any such Lender of amounts owing under this Section shall,
absent manifest error, be conclusive and binding on the parties hereto.
3.7 LIMITATION ON EURODOLLAR LOANS.
If on or prior to the first day of any Interest Period for any
Eurodollar Loan:
(a) the Agent determines in good faith (which determination
shall be conclusive) that by reason of circumstances affecting the
relevant market, adequate and
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reasonable means do not exist for ascertaining the Eurodollar Rate for
such Interest Period; or
(b) the Required Lenders determine in good faith (which
determination shall be conclusive) and notify the Agent that the
Eurodollar Rate will not adequately and fairly reflect the cost to the
Lenders of funding Eurodollar Loans for such Interest Period;
then the Agent shall give the Borrower prompt notice thereof (which notice shall
be withdrawn whenever such circumstances no longer exist), and so long as such
condition remains in effect, the Lenders shall be under no obligation to make
additional Eurodollar Loans, Continue Eurodollar Loans, or to Convert Base Rate
Loans into Eurodollar Loans and the Borrower shall, on the last day(s) of the
then current Interest Period(s) for the outstanding Eurodollar Loans, either
prepay such Eurodollar Loans or Convert such Eurodollar Loans into Base Rate
Loans in accordance with the terms of this Credit Agreement.
3.8 ILLEGALITY.
Notwithstanding any other provision of this Credit Agreement, in the
event that it becomes unlawful for any Lender or its Applicable Lending Office
to make, maintain, or fund Eurodollar Loans hereunder, then such Lender shall
promptly notify the Borrower thereof (which notice shall be withdrawn whenever
such circumstances no longer exist) and such Lender's obligation to make or
Continue Eurodollar Loans and to Convert Base Rate Loans into Eurodollar Loans
shall be suspended until such time as such Lender may again make, maintain, and
fund Eurodollar Loans (in which case the provisions of Section 3.10 shall be
applicable).
3.9 REQUIREMENTS OF LAW.
If, after the date hereof, the adoption of any applicable law, rule, or
regulation, or any change in any applicable law, rule, or regulation, or any
change in the interpretation or administration thereof by any Governmental
Authority, central bank, or comparable agency charged with the interpretation or
administration thereof, or compliance by any Lender (or its Applicable Lending
Office) with any request or directive (whether or not having the force of law)
of any such Governmental Authority, central bank, or comparable agency:
(i) shall subject such Lender (or its Applicable
Lending Office) to any tax, duty, or other charge with respect to any
Eurodollar Loans, its Notes, or its obligation to make Eurodollar
Loans, or change the basis of taxation of any amounts payable to such
Lender (or its Applicable Lending Office) under this Credit Agreement
or its Notes in respect of any Eurodollar Loans (other than taxes
imposed on the overall net income of such Lender by the jurisdiction in
which such Lender has its principal office or such Applicable Lending
Office);
(ii) shall impose, modify, or deem applicable any
reserve, special deposit, assessment, or similar requirement (other
than the Eurodollar Reserve Requirement utilized in the determination
of the Adjusted Eurodollar Rate) relating to any
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extensions of credit or other assets of, or any deposits with or other
liabilities or commitments of, such Lender (or its Applicable Lending
Office), including the Commitment of such Lender hereunder; or
(iii) shall impose on such Lender (or its Applicable
Lending Office) or on the United States market for certificates of
deposit or the London interbank market any other condition affecting
this Credit Agreement or its Notes or any of such extensions of credit
or liabilities or commitments (excluding any tax of any kind
whatsoever);
and the result of any of the foregoing is to increase the cost to such Lender
(or its Applicable Lending Office) of making, Converting into, Continuing, or
maintaining any Eurodollar Loans or to reduce any sum received or receivable by
such Lender (or its Applicable Lending Office) under this Credit Agreement or
its Notes with respect to any Eurodollar Loans, then the Borrower shall pay to
such Lender on demand such amount or amounts as will compensate such Lender on
an after-tax basis (after taking into account applicable deductions and credits
in respect of the amount indemnified) for such increased cost or reduction. If
any Lender requests compensation by the Borrower under this Section 3.9, the
Borrower may, by notice to such Lender (with a copy to the Agent), suspend the
obligation of such Lender to make or Continue Eurodollar Loans, or to Convert
Base Rate Loans into Eurodollar Loans, until the event or condition giving rise
to such request ceases to be in effect (in which case the provisions of Section
3.10 shall be applicable); provided that such suspension shall not affect the
right of such Lender to receive the compensation so requested. Each Lender shall
promptly notify the Borrower and the Agent of any event of which it has
knowledge, occurring after the date hereof, which will entitle such Lender to
compensation pursuant to this Section 3.9 and will designate a different
Applicable Lending Office if such designation will avoid the need for, or reduce
the amount of, such compensation and will not, in the judgment of such Lender,
be otherwise disadvantageous to it. Any Lender claiming compensation under this
Section 3.9 shall furnish to the Borrower and the Agent a statement setting
forth the additional amount or amounts to be paid to it hereunder which shall be
conclusive in the absence of manifest error. In determining such amount, such
Lender may use any reasonable averaging and attribution methods. Notwithstanding
the foregoing, if any Lender fails to notify the Borrower of any event that will
entitle such Lender to compensation under this Section 3.9(a) within 180 days
after such Lender becomes aware of such event, then such Lender shall not be
entitled to any compensation from the Borrower for any such amounts arising
prior to the date that is 180 days before the date on which such Lender notifies
the Borrower of such event. Such a certificate as to any additional amounts
payable pursuant to this Section 3.9(a) submitted by such Lender, through the
Agent, to the Borrower shall be conclusive and binding on the parties hereto in
the absence of manifest error.
3.10 TREATMENT OF AFFECTED LOANS.
If the obligation of any Lender to make any Eurodollar Loan or to
Continue, or to Convert Base Rate Loans into, Eurodollar Loans shall be
suspended pursuant to Section 3.8 or 3.9 hereof, such Lender's Eurodollar Loans
shall be automatically Converted into Base Rate Loans on the last day(s) of the
then current Interest Period(s) for such Eurodollar Loans (or, in the case of a
Conversion required by Section 3.8 hereof, on such earlier date as such Lender
may
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specify to the Borrower with a copy to the Agent) and, unless and until such
Lender gives notice as provided below that the circumstances specified in
Section 3.8 or 3.9 hereof that gave rise to such Conversion no longer exist:
(a) to the extent that such Lender's Eurodollar Loans have
been so Converted, all payments and prepayments of principal that would
otherwise be applied to such Lender's Eurodollar Loans shall be applied
instead to its Base Rate Loans; and
(b) all Loans that would otherwise be made or Continued by
such Lender as Eurodollar Loans shall be made or Continued instead as
Base Rate Loans, and all Base Rate Loans of such Lender that would
otherwise be Converted into Eurodollar Loans shall remain as Base Rate
Loans.
If such Lender gives notice to the Borrower (with a copy to the Agent) that the
circumstances specified in Section 3.8 or 3.9 hereof that gave rise to the
Conversion of such Lender's Eurodollar Loans pursuant to this Section 3.10 no
longer exist (which such Lender agrees to do promptly upon such circumstances
ceasing to exist) at a time when Eurodollar Loans made by other Lenders are
outstanding, such Lender's Base Rate Loans shall be automatically Converted, on
the first day(s) of the next succeeding Interest Period(s) for such outstanding
Eurodollar Loans, to the extent necessary so that, after giving effect thereto,
all Loans held by the Lenders holding Eurodollar Loans and by such Lender are
held pro rata (as to principal amounts, interest rate basis, and Interest
Periods) in accordance with their respective Commitments.
3.11 TAXES.
(a) Any and all payments by the Borrower to or for the account
of any Lender or the Agent hereunder or under any other Credit Document
shall be made free and clear of and without deduction for any and all
present or future taxes, duties, levies, imposts, deductions, charges
or withholdings, and all liabilities with respect thereto, excluding,
in the case of each Lender and the Agent, taxes imposed on its income,
and franchise taxes imposed on it, by the jurisdiction under the laws
of which such Lender (or its Applicable Lending Office) or the Agent
(as the case may be) is organized or any political subdivision thereof
(all such non-excluded taxes, duties, levies, imposts, deductions,
charges, withholdings, and liabilities being hereinafter referred to as
"Taxes"). If the Borrower shall be required by law to deduct any Taxes
from or in respect of any sum payable under this Credit Agreement or
any other Credit Document to any Lender or the Agent, (i) the sum
payable shall be increased as necessary so that after making all
required deductions (including deductions applicable to additional sums
payable under this Section 3.11) such Lender or the Agent receives an
amount equal to the sum it would have received had no such deductions
been made, (ii) the Borrower shall make such deductions, (iii) the
Borrower shall pay the full amount deducted to the relevant taxation
authority or other authority in accordance with applicable law, and
(iv) the Borrower shall furnish to the Agent, at its address referred
to in Section 11.1, the original or a certified copy of a receipt
evidencing payment thereof.
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(b) In addition, the Borrower agrees to pay any and all
present or future stamp or documentary taxes and any other excise or
property taxes or charges or similar levies which arise from any
payment made under this Credit Agreement or any other Credit Document
or from the execution or delivery of, or otherwise with respect to,
this Credit Agreement or any other Credit Document (hereinafter
referred to as "Other Taxes").
(c) The Borrower agrees to indemnify each Lender and the Agent
for the full amount of Taxes and Other Taxes (including, without
limitation, any Taxes or Other Taxes imposed or asserted by any
jurisdiction on amounts payable under this Section 3.11) paid by such
Lender or the Agent (as the case may be) and any liability (including
penalties, interest, and expenses) arising therefrom or with respect
thereto.
(d) Each Lender organized under the laws of a jurisdiction
outside the United States, on or prior to the date of its execution and
delivery of this Credit Agreement in the case of each Lender listed on
the signature pages hereof and on or prior to the date on which it
becomes a Lender in the case of each other Lender, and from time to
time thereafter if requested in writing by the Borrower or the Agent
(but only so long as such Lender remains lawfully able to do so), shall
provide the Borrower and the Agent with (i) Internal Revenue Service
Form 1001 or 4224, as appropriate, or any successor form prescribed by
the Internal Revenue Service, certifying that such Lender is entitled
to benefits under an income tax treaty to which the United States is a
party which reduces the rate of withholding tax on payments of interest
or certifying that the income receivable pursuant to this Credit
Agreement is effectively connected with the conduct of a trade or
business in the United States, (ii) Internal Revenue Service Form W-8
or W-9, as appropriate, or any successor form prescribed by the
Internal Revenue Service, and (iii) any other form or certificate
required by any taxing authority (including any certificate required by
Sections 871(h) and 881(c) of the Internal Revenue Code), certifying
that such Lender is entitled to an exemption from or a reduced rate of
tax on payments pursuant to this Credit Agreement or any of the other
Credit Documents.
(e) For any period with respect to which a Lender has failed
to provide the Borrower and the Agent with the appropriate form
pursuant to Section 3.11(d) (unless such failure is due to a change in
treaty, law, or regulation occurring subsequent to the date on which a
form originally was required to be provided), such Lender shall not be
entitled to indemnification under Section 3.11(a) or 3.11(b) with
respect to Taxes imposed by the United States; provided, however, that
should a Lender, which is otherwise exempt from or subject to a reduced
rate of withholding tax, become subject to Taxes because of its failure
to deliver a form required hereunder, the Borrower shall take such
steps as such Lender shall reasonably request to assist such Lender to
recover such Taxes.
(f) If the Borrower is required to pay additional amounts to
or for the account of any Lender pursuant to this Section 3.11, then
such Lender will agree to use reasonable efforts to change the
jurisdiction of its Applicable Lending Office so as to eliminate or
reduce any such additional payment which may thereafter accrue if such
change, in the judgment of such Lender, is not otherwise
disadvantageous to such Lender.
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(g) Within thirty (30) days after the date of any payment of
Taxes, the Borrower shall furnish to the Agent the original or a
certified copy of a receipt evidencing such payment.
(h) Without prejudice to the survival of any other agreement
of the Borrower hereunder, the agreements and obligations of the
Borrower contained in this Section 3.11 shall survive the repayment of
the Loans, LOC Obligations and other obligations under the Credit
Documents and the termination of the Commitments hereunder.
3.12 COMPENSATION.
Upon the request of any Lender, the Borrower shall pay to such Lender
such amount or amounts as shall be sufficient (in the reasonable opinion of such
Lender) to compensate it for any loss, cost, or expense (including loss of
anticipated profits) incurred by it as a result of:
(a) any payment, prepayment, or Conversion of a Eurodollar
Loan for any reason (including, without limitation, the acceleration of
the Loans pursuant to Section 9.2) on a date other than the last day of
the Interest Period for such Loan; or
(b) any failure by the Borrower for any reason (including,
without limitation, the failure of any condition precedent specified in
Section 5 to be satisfied) to borrow, Convert, Continue, or prepay a
Eurodollar Loan on the date for such borrowing, Conversion,
Continuation, or prepayment specified in the relevant notice of
borrowing, prepayment, Continuation, or Conversion under this Credit
Agreement.
With respect to Eurodollar Loans, such indemnification may include an amount
equal to the excess, if any, of (a) the amount of interest which would have
accrued on the amount so prepaid, or not so borrowed, converted or continued,
for the period from the date of such prepayment or of such failure to borrow,
convert or continue to the last day of the applicable Interest Period (or, in
the case of a failure to borrow, convert or continue, the Interest Period that
would have commenced on the date of such failure) in each case at the applicable
rate of interest for such Eurodollar Loans provided for herein (excluding,
however, the Applicable Percentage included therein, if any) over (b) the amount
of interest (as reasonably determined by such Lender) which would have accrued
to such Lender on such amount by placing such amount on deposit for a comparable
period with leading banks in the interbank Eurodollar market. The covenants of
the Borrower set forth in this Section 3.12 shall survive the repayment of the
Loans, LOC Obligations and other obligations under the Credit Documents and the
termination of the Commitments hereunder. Notwithstanding the foregoing, any
Lender shall be entitled to compensation under this Section 3.12 only for an
event occurring during the 180-day period ending on the date such Lender gives
notice of such event entitling such Lender to compensation under this Section
3.12.
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3.13 PRO RATA TREATMENT.
Except to the extent otherwise provided herein:
(a) Loans. Each Loan, each payment or (subject to the terms of
Section 3.3) prepayment of principal of any Loan or reimbursement
obligations arising from drawings under Letters of Credit, each payment
of interest on the Loans or reimbursement obligations arising from
drawings under Letters of Credit, each payment of Unused Fees, each
payment of the Standby Letter of Credit Fee, each payment of the Trade
Letter of Credit Fee, each reduction of the Committed Amount and each
conversion or extension of any Loan, shall be allocated pro rata among
the Lenders in accordance with the respective principal amounts of
their outstanding Loans and Participation Interests.
(b) Advances. No Lender shall be responsible for the failure
or delay by any other Lender in its obligation to make its ratable
share of a borrowing hereunder; provided, however, that the failure of
any Lender to fulfill its obligations hereunder shall not relieve any
other Lender of its obligations hereunder. Unless the Agent shall have
been notified by any Lender prior to the date of any requested
borrowing that such Lender does not intend to make available to the
Agent its ratable share of such borrowing to be made on such date, the
Agent may assume that such Lender has made such amount available to the
Agent on the date of such borrowing, and the Agent in reliance upon
such assumption, may (in its sole discretion but without any obligation
to do so) make available to the Borrower a corresponding amount. If
such corresponding amount is not in fact made available to the Agent,
the Agent shall be able to recover such corresponding amount from such
Lender. If such Lender does not pay such corresponding amount forthwith
upon the Agent's demand therefor, the Agent will promptly notify the
Borrower, and the Borrower shall immediately pay such corresponding
amount to the Agent. The Agent shall also be entitled to recover from
the Lender or the Borrower, as the case may be, interest on such
corresponding amount in respect of each day from the date such
corresponding amount was made available by the Agent to the Borrower to
the date such corresponding amount is recovered by the Agent at a per
annum rate equal to (i) from the Borrower at the applicable rate for
the applicable borrowing pursuant to the Notice of Borrowing and (ii)
from a Lender at the Federal Funds Rate.
3.14 SHARING OF PAYMENTS.
The Lenders agree among themselves that, in the event that any Lender
shall obtain payment in respect of any Loan, LOC Obligations or any other
obligation owing to such Lender under this Credit Agreement through the exercise
of a right of setoff, banker's lien or counterclaim, or pursuant to a secured
claim under Section 506 of Title 11 of the United States Code or other security
or interest arising from, or in lieu of, such secured claim, received by such
Lender under any applicable bankruptcy, insolvency or other similar law or
otherwise, or by any other means, in excess of its pro rata share of such
payment as provided for in this Credit Agreement, such Lender shall promptly
purchase from the other Lenders a Participation Interest in such Loans, LOC
Obligations and other obligations in such amounts, and make such other
adjustments from time to time, as shall be equitable to the end that all Lenders
share such payment in accordance with their respective ratable shares as
provided for in this Credit Agreement. The Lenders further agree among
themselves that if payment to a Lender obtained by such Lender
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through the exercise of a right of setoff, banker's lien, counterclaim or other
event as aforesaid shall be rescinded or must otherwise be restored, each Lender
which shall have shared the benefit of such payment shall, by repurchase of a
Participation Interest theretofore sold, return its share of that benefit
(together with its share of any accrued interest payable with respect thereto)
to each Lender whose payment shall have been rescinded or otherwise restored.
The Borrower agrees that any Lender so purchasing such a Participation Interest
may, to the fullest extent permitted by law, exercise all rights of payment,
including setoff, banker's lien or counterclaim, with respect to such
Participation Interest as fully as if such Lender were a holder of such Loan,
LOC Obligations or other obligation in the amount of such Participation
Interest. Except as otherwise expressly provided in this Credit Agreement, if
any Lender or the Agent shall fail to remit to the Agent or any other Lender an
amount payable by such Lender or the Agent to the Agent or such other Lender
pursuant to this Credit 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 Agent or such
other Lender at a rate per annum equal to the Federal Funds Rate. If under any
applicable bankruptcy, insolvency or other similar law, any Lender receives a
secured claim in lieu of a setoff to which this Section 3.14 applies, such
Lender shall, to the extent practicable, exercise its rights in respect of such
secured claim in a manner consistent with the rights of the Lenders under this
Section 3.14 to share in the benefits of any recovery on such secured claim.
3.15 PAYMENTS, COMPUTATIONS, ETC.
(a) Except as otherwise specifically provided herein, all
payments hereunder shall be made to the Agent in dollars in immediately
available funds, without setoff, deduction, counterclaim or withholding
of any kind, at the Agent's office specified in Schedule 2.1(a) not
later than 2:00 P.M. (Charlotte, North Carolina time) on the date when
due. Payments received after such time shall be deemed to have been
received on the next succeeding Business Day. The Agent may (but shall
not be obligated to) debit the amount of any such payment which is not
made by such time to any ordinary deposit account of the Borrower
maintained with the Agent (with notice to the Borrower). The Borrower
shall, at the time it makes any payment under this Credit Agreement,
specify to the Agent the Loans, LOC Obligations, Fees, interest or
other amounts payable by the Borrower hereunder to which such payment
is to be applied (and in the event that it fails so to specify, or if
such application would be inconsistent with the terms hereof, the Agent
shall distribute such payment to the Lenders in such manner as the
Agent may determine to be appropriate in respect of obligations owing
by the Borrower hereunder, subject to the terms of Section 3.13(a)).
The Agent will distribute such payments to such Lenders, if any such
payment is received prior to 12:00 Noon (Charlotte, North Carolina
time) on a Business Day in like funds as received prior to the end of
such Business Day and otherwise the Agent will distribute such payment
to such Lenders on the next succeeding Business Day. Whenever any
payment hereunder shall be stated to be due on a day which is not a
Business Day, the due date thereof shall be extended to the next
succeeding Business Day (subject to accrual of interest and Fees for
the period of such extension), except that in the case of Eurodollar
Loans, if the extension would cause the payment to be made in the next
following calendar month, then such payment shall instead be made on
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the next preceding Business Day. Except as expressly provided otherwise
herein, all computations of interest and fees shall be made on the
basis of actual number of days elapsed over a year of 360 days, except
with respect to computation of interest on Base Rate Loans shall be
calculated based on a year of 365 or 366 days, as appropriate. Interest
shall accrue from and include the date of borrowing, but exclude the
date of payment.
(b) Allocation of Payments After Event of Default.
Notwithstanding any other provisions of this Credit Agreement to the
contrary, after the occurrence and during the continuance of an Event
of Default, all amounts collected or received by the Agent or any
Lender on account of the Credit Party Obligations or any other amounts
outstanding under any of the Credit Documents or in respect of the
Collateral shall be paid over or delivered as follows:
FIRST, to the payment of all reasonable out-of-pocket costs
and expenses (including without limitation reasonable attorneys' fees)
of the Agent in connection with enforcing the rights of the Lenders
under the Credit Documents and any protective advances made by the
Agent with respect to the Collateral under or pursuant to the terms of
the Collateral Documents;
SECOND, to payment of any fees owed to the Agent;
THIRD, to the payment of all reasonable out-of-pocket costs
and expenses (including without limitation, reasonable attorneys' fees)
of each of the Lenders in connection with enforcing its rights under
the Credit Documents or otherwise with respect to the Credit Party
Obligations owing to such Lender;
FOURTH, to the payment of all of the Credit Party Obligations
consisting of accrued fees and interest;
FIFTH, to the payment of the outstanding principal amount of
the Credit Party Obligations (including the payment or cash
collateralization of the outstanding LOC Obligations);
SIXTH, to all other Credit Party Obligations and other
obligations which shall have become due and payable under the Credit
Documents or otherwise and not repaid pursuant to clauses "FIRST"
through "FIFTH" above; and
SEVENTH, to the payment of the surplus, if any, to whoever may
be lawfully entitled to receive such surplus.
In carrying out the foregoing, (i) amounts received shall be applied in
the numerical order provided until exhausted prior to application to
the next succeeding category; (ii) each of the Lenders shall receive an
amount equal to its pro rata share (based on the proportion that the
then outstanding Loans and LOC Obligations held by such Lender bears to
the
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aggregate then outstanding Loans and LOC Obligations) of amounts
available to be applied pursuant to clauses "THIRD", "FOURTH", "FIFTH"
and "SIXTH" above; and (iii) to the extent that any amounts available
for distribution pursuant to clause "FIFTH" above are attributable to
the issued but undrawn amount of outstanding Letters of Credit, such
amounts shall be held by the Agent in a cash collateral account and
applied (A) first, to reimburse the Issuing Lender from time to time
for any drawings under such Letters of Credit and (B) then, following
the expiration of all Letters of Credit, to all other obligations of
the types described in clauses "FIFTH" and "SIXTH" above in the manner
provided in this Section 3.15(b).
3.16 EVIDENCE OF DEBT.
(a) Each Lender shall maintain an account or accounts
evidencing each Loan made by such Lender to the Borrower from time to
time, including the amounts of principal and interest payable and paid
to such Lender from time to time under this Credit Agreement. Each
Lender will make reasonable efforts to maintain the accuracy of its
account or accounts and to promptly update its account or accounts from
time to time, as necessary.
(b) The Agent shall maintain the Register pursuant to Section
11.3(c), and a subaccount for each Lender, in which Register and
subaccounts (taken together) shall be recorded (i) the amount, type and
Interest Period of each such Loan hereunder, (ii) the amount of any
principal or interest due and payable or to become due and payable to
each Lender hereunder and (iii) the amount of any sum received by the
Agent hereunder from or for the account of the Borrower and each
Lender's share thereof. The Agent will make reasonable efforts to
maintain the accuracy of the subaccounts referred to in the preceding
sentence and to promptly update such subaccounts from time to time, as
necessary.
(c) The entries made in the accounts, Register and subaccounts
maintained pursuant to subsection (b) of this Section 3.16 (and, if
consistent with the entries of the Agent, subsection (a)) shall be
prima facie evidence of the existence and amounts of the obligations of
the Borrower therein recorded; provided, however, that the failure of
any Lender or the Agent to maintain any such account, such Register or
such subaccount, as applicable, or any error therein, shall not in any
manner affect the obligation of the Borrower to repay the Loans made by
such Lender in accordance with the terms hereof.
SECTION 4
GUARANTY
4.1 THE GUARANTY.
Each of the Guarantors hereby jointly and severally guarantees to each
Lender, each Affiliate of a Lender that enters into a Hedging Agreement, and the
Agent as hereinafter provided,
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as primary obligor and not as surety, the prompt payment of the Credit Party
Obligations in full when due (whether at stated maturity, as a mandatory
prepayment, by acceleration, as a mandatory cash collateralization or otherwise)
strictly in accordance with the terms thereof. The Guarantors hereby further
agree that if any of the Credit Party Obligations are not paid in full when due
(whether at stated maturity, as a mandatory prepayment, by acceleration, as a
mandatory cash collateralization or otherwise), the Guarantors will, jointly and
severally, promptly pay the same, without any demand or notice whatsoever, and
that in the case of any extension of time of payment or renewal of any of the
Credit Party Obligations, the same will be promptly paid in full when due
(whether at extended maturity, as a mandatory prepayment, by acceleration, as a
mandatory cash collateralization or otherwise) in accordance with the terms of
such extension or renewal.
Notwithstanding any provision to the contrary contained herein or in
any other of the Credit Documents or Hedging Agreements, the obligations of each
Guarantor hereunder shall be limited to an aggregate amount equal to the largest
amount that would not render its obligations hereunder subject to avoidance
under Section 548 of the Bankruptcy Code or any comparable provisions of any
applicable state law.
4.2 OBLIGATIONS UNCONDITIONAL.
The obligations of the Guarantors under Section 4.1 are joint and
several, absolute and unconditional, irrespective of the value, genuineness,
validity, regularity or enforceability of any of the Credit Documents or Hedging
Agreements, or any other agreement or instrument referred to therein, or any
substitution, release, impairment or exchange of any other guarantee of or
security for any of the Credit Party Obligations, and, to the fullest extent
permitted by applicable law, irrespective of any other circumstance whatsoever
which might otherwise constitute a legal or equitable discharge or defense of a
surety or guarantor, it being the intent of this Section 4.2 that the
obligations of the Guarantors hereunder shall be absolute and unconditional
under any and all circumstances. Each Guarantor agrees that such Guarantor shall
have no right of subrogation, indemnity, reimbursement or contribution against
the Borrower or any other Guarantor of the Credit Party Obligations for amounts
paid under this Section 4 until such time as the Lenders (and any Affiliates of
Lenders entering into Hedging Agreements) have been paid in full, all
Commitments under this Credit Agreement have been terminated and no Person or
Governmental Authority shall have any right to request any return or
reimbursement of funds from the Lenders in connection with monies received under
the Credit Documents or Hedging Agreements. Without limiting the generality of
the foregoing, it is agreed that, to the fullest extent permitted by law, the
occurrence of any one or more of the following shall not alter or impair the
liability of any Guarantor hereunder which shall remain absolute and
unconditional as described above:
(a) at any time or from time to time, without notice to any
Guarantor, the time for any performance of or compliance with any of
the Credit Party Obligations shall be extended, or such performance or
compliance shall be waived;
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(b) any of the acts mentioned in any of the provisions of any
of the Credit Documents, any Hedging Agreement or any other agreement
or instrument referred to in the Credit Documents or Hedging Agreements
shall be done or omitted;
(c) the maturity of any of the Credit Party Obligations shall
be accelerated, or any of the Credit Party Obligations shall be
modified, supplemented or amended in any respect, or any right under
any of the Credit Documents, any Hedging Agreement or any other
agreement or instrument referred to in the Credit Documents or Hedging
Agreements shall be waived or any other guarantee of any of the Credit
Party Obligations or any security therefor shall be released, impaired
or exchanged in whole or in part or otherwise dealt with;
(d) any Lien granted to, or in favor of, the Agent or any
Lender or Lenders as security for any of the Credit Party Obligations
shall fail to attach or be perfected; or
(e) any of the Credit Party Obligations shall be determined to
be void or voidable (including, without limitation, for the benefit of
any creditor of any Guarantor) or shall be subordinated to the claims
of any Person (including, without limitation, any creditor of any
Guarantor).
With respect to its obligations hereunder, each Guarantor hereby expressly
waives diligence, presentment, demand of payment, protest and all notices
whatsoever, and any requirement that the Agent or any Lender exhaust any right,
power or remedy or proceed against any Person under any of the Credit Documents,
any Hedging Agreement or any other agreement or instrument referred to in the
Credit Documents or Hedging Agreements, or against any other Person under any
other guarantee of, or security for, any of the Credit Party Obligations.
4.3 REINSTATEMENT.
The obligations of the Guarantors under this Section 4 shall be
automatically reinstated if and to the extent that for any reason any payment by
or on behalf of any Person in respect of the Credit Party Obligations is
rescinded or must be otherwise restored by any holder of any of the Credit Party
Obligations, whether as a result of any proceedings in bankruptcy or
reorganization or otherwise, and each Guarantor agrees that it will indemnify
the Agent and each Lender on demand for all reasonable costs and expenses
(including, without limitation, fees and expenses of counsel) incurred by the
Agent or such Lender in connection with such rescission or restoration,
including any such costs and expenses incurred in defending against any claim
alleging that such payment constituted a preference, fraudulent transfer or
similar payment under any bankruptcy, insolvency or similar law.
4.4 CERTAIN ADDITIONAL WAIVERS.
Without limiting the generality of the provisions of this Section 4,
each Guarantor hereby specifically waives the benefits of N.C. Gen. Stat. ss.ss.
26-7 through 26-9, inclusive, to the extent applicable. Each Guarantor further
agrees that such Guarantor shall have no right of recourse to
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security for the Credit Party Obligations, except through the exercise of rights
of subrogation pursuant to Section 4.2 and through the exercise of rights of
contribution pursuant to Section 4.6.
4.5 REMEDIES.
The Guarantors agree that, to the fullest extent permitted by law, as
between the Guarantors, on the one hand, and the Agent and the Lenders, on the
other hand, the Credit Party Obligations may be declared to be forthwith due and
payable as provided in Section 9.2 (and shall be deemed to have become
automatically due and payable in the circumstances provided in said Section 9.2)
for purposes of Section 4.1 notwithstanding any stay, injunction or other
prohibition preventing such declaration (or preventing the Credit Party
Obligations from becoming automatically due and payable) as against any other
Person and that, in the event of such declaration (or the Credit Party
Obligations being deemed to have become automatically due and payable), the
Credit Party Obligations (whether or not due and payable by any other Person)
shall forthwith become due and payable by the Guarantors for purposes of Section
4.1. The Guarantors acknowledge and agree that their obligations hereunder are
secured in accordance with the terms of the Security Agreements and the other
Collateral Documents and that the Lenders may exercise their remedies thereunder
in accordance with the terms thereof.
4.6 RIGHTS OF CONTRIBUTION.
The Guarantors hereby agree as among themselves that, if any Guarantor
shall make an Excess Payment (as defined below), such Guarantor shall have a
right of contribution from each other Guarantor in an amount equal to such other
Guarantor's Contribution Share (as defined below) of such Excess Payment. The
payment obligations of any Guarantor under this Section 4.6 shall be subordinate
and subject in right of payment to the prior payment in full to the Agent and
the Lenders of the Guaranteed Obligations, and none of the Guarantors shall
exercise any right or remedy under this Section 4.6 against any other Guarantor
until payment and satisfaction in full of all of such Guaranteed Obligations.
For purposes of this Section 4.6, (a) "Guaranteed Obligations" shall mean any
obligations arising under the other provisions of this Section 4; (b) "Excess
Payment" shall mean the amount paid by any Guarantor in excess of its Pro Rata
Share of any Guaranteed Obligations; (c) "Pro Rata Share" shall mean, for any
Guarantor in respect of any payment of Guaranteed Obligations, the ratio
(expressed as a percentage) as of the date of such payment of Guaranteed
Obligations of (i) the amount by which the aggregate present fair salable value
of all of its assets and properties exceeds the amount of all debts and
liabilities of such Guarantor (including contingent, subordinated, unmatured,
and unliquidated liabilities, but excluding the obligations of such Guarantor
hereunder) to (ii) the amount by which the aggregate present fair salable value
of all assets and other properties of the Borrower and all of the Guarantors
exceeds the amount of all of the debts and liabilities (including contingent,
subordinated, unmatured, and unliquidated liabilities, but excluding the
obligations of the Borrower and the Guarantors hereunder) of the Borrower and
all of the Guarantors; provided, however, that, for purposes of calculating the
Pro Rata Shares of the Guarantors in respect of any payment of Guaranteed
Obligations, any Guarantor that became a Guarantor subsequent to the date of any
such payment shall be deemed to have been a Guarantor on the date of such
payment and the financial information for such Guarantor as of the date such
Guarantor became a
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Guarantor shall be utilized for such Guarantor in connection with such payment;
and (d) "Contribution Share" shall mean, for any Guarantor in respect of any
Excess Payment made by any other Guarantor, the ratio (expressed as a
percentage) as of the date of such Excess Payment of (i) the amount by which the
aggregate present fair salable value of all of its assets and properties exceeds
the amount of all debts and liabilities of such Guarantor (including contingent,
subordinated, unmatured, and unliquidated liabilities, but excluding the
obligations of such Guarantor hereunder) to (ii) the amount by which the
aggregate present fair salable value of all assets and other properties of the
Borrower and all of the Guarantors other than the maker of such Excess Payment
exceeds the amount of all of the debts and liabilities (including contingent,
subordinated, unmatured, and unliquidated liabilities, but excluding the
obligations of the Borrower and the Guarantors hereunder) of the Borrower and
all of the Guarantors other than the maker of such Excess Payment; provided,
however, that, for purposes of calculating the Contribution Shares of the
Guarantors in respect of any Excess Payment, any Guarantor that became a
Guarantor subsequent to the date of any such Excess Payment shall be deemed to
have been a Guarantor on the date of such Excess Payment and the financial
information for such Guarantor as of the date such Guarantor became a Guarantor
shall be utilized for such Guarantor in connection with such Excess Payment.
This Section 4.6 shall not be deemed to affect any right of subrogation,
indemnity, reimbursement or contribution that any Guarantor may have under
applicable law against the Borrower in respect of any payment of Guaranteed
Obligations. Notwithstanding the foregoing, all rights of contribution against
any Guarantor shall terminate from and after such time, if ever, that such
Guarantor shall be relieved of its obligations pursuant to Section 8.4.
4.7 GUARANTEE OF PAYMENT; CONTINUING GUARANTEE.
The guarantee in this Section 4 is a guaranty of payment and not of
collection, is a continuing guarantee, and shall apply to all Credit Party
Obligations whenever arising.
SECTION 5
CONDITIONS
5.1 CLOSING CONDITIONS.
The obligation of the Lenders to enter into this Credit Agreement and
to make the initial Loans or the Issuing Lender to issue the initial Letter of
Credit, whichever shall occur first, shall be subject to satisfaction of the
following conditions (in form and substance acceptable to the Lenders):
(a) Executed Credit Documents. Receipt by the Agent of duly
executed copies of: (i) this Credit Agreement, (ii) the Notes, (iii)
the Collateral Documents and (iv) all other Credit Documents, each in
form and substance acceptable to the Agent in its sole discretion.
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(b) Corporate Documents. Receipt by the Agent of the
following:
(i) Charter Documents. Copies of the articles or
certificates of incorporation or other charter documents of
each Credit Party certified to be true and complete as of a
recent date by the appropriate Governmental Authority of the
state or other jurisdiction of its incorporation and certified
by a secretary or assistant secretary of such Credit Party to
be true and correct as of the Closing Date.
(ii) Bylaws. A copy of the bylaws of each Credit
Party certified by a secretary or assistant secretary of such
Credit Party to be true and correct as of the Closing Date.
(iii) Resolutions. Copies of resolutions of the Board
of Directors of each Credit Party approving and adopting the
Credit Documents to which it is a party, the transactions
contemplated therein and authorizing execution and delivery
thereof, certified by a secretary or assistant secretary of
such Credit Party to be true and correct and in force and
effect as of the Closing Date.
(iv) Good Standing. Copies of (A) certificates of
good standing, existence or its equivalent with respect to
each Credit Party certified as of a recent date by the
appropriate Governmental Authorities of the state or other
jurisdiction of incorporation and each other jurisdiction in
which the failure to so qualify and be in good standing could
have a Material Adverse Effect and (B) to the extent
available, a certificate indicating payment of all corporate
franchise taxes certified as of a recent date by the
appropriate governmental taxing authorities.
(v) Incumbency. An incumbency certificate of each
Credit Party certified by a secretary or assistant secretary
to be true and correct as of the Closing Date.
(c) Opinions of Counsel. The Agent shall have received, in
each case dated as of the Closing Date:
(i) a legal opinion of Alston & Bird, LLP, general
counsel for the Credit Parties, substantially in the form of
Schedule 5.1(c)(i);
(ii) a legal opinion of special local counsel for
each Credit Party not incorporated in the State of Georgia or
Delaware, substantially in the form of Schedule 5.1(c)(ii);
and
(iii) a legal opinion of special local counsel for
the Credit Parties for each State other than Georgia in which
any Collateral is located, substantially in the form of
Schedule 5.1(c)(iii);
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(d) Personal Property Collateral. The Agent shall have
received:
(i) searches of Uniform Commercial Code filings in the
jurisdiction of the chief executive office of each Credit
Party and each jurisdiction where any Collateral is located or
where a filing would need to be made in order to perfect the
Agent's security interest in the Collateral, copies of the
financing statements on file in such jurisdictions and
evidence that no Liens exist other than Permitted Liens;
(ii) duly executed UCC financing statements for each
appropriate jurisdiction as is necessary, in the Agent's sole
discretion, to perfect the Agent's security interest in the
Collateral;
(iii) searches of ownership of intellectual property in
the appropriate governmental offices and such
patent/trademark/copyright filings as requested by the Agent
in order to perfect the Agent's security interest in the
Collateral;
(iv) all stock certificates evidencing the Capital Stock
pledged to the Agent pursuant to the Pledge Agreement,
together with duly executed in blank, undated stock powers
attached thereto;
(v) such patent/trademark/copyright filings as
requested by the Agent in order to perfect the Agent's
security interest in the Collateral;
(vi) all instruments and chattel paper in the possession
of any of the Credit Parties, together with allonges or
assignments as may be necessary or appropriate to perfect the
Agent's security interest in the Collateral;
(vii) duly executed consents as are necessary, in the
Agent's sole discretion, to perfect the Lenders' security
interest in the Collateral; and
(viii) in the case of any personal property Collateral
located at a premises leased by a Credit Party, such estoppel
letters, consents and waivers from the landlords on such real
property as may be required by the Agent.
(e) Real Property Collateral. The Agent shall have received,
in form and substance reasonably satisfactory to the Agent:
(i) with respect to the real property described on
Schedule 6.20(a) (the "Mortgaged Property"), a fully executed
and notarized mortgage (each, as the same may be amended,
modified, restated or supplemented from time to time, a
"Mortgage Instrument" and collectively the "Mortgage
Instruments") encumbering (A) the fee interest of the IDB
Authority (which Mortgage Instrument shall include an
assignment of all leases, rents and profits in respect of the
Mortgaged Property
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and separate assignment of leases, rents and profits from the
IDB Authority to the Agent, in recordable form) and (B) the
leasehold interest of the Borrower;
(ii) a title report obtained by the Credit Parties in
respect of each of the Mortgaged Properties;
(iii) in the case of each real property leasehold
interest of any Credit Party constituting Mortgaged Property,
(a) such estoppel letters, consents and waivers from the
landlords on such real property as may be required by the
Agent, which estoppel letters shall be in the form and
substance reasonably satisfactory to the Agent and (b)
evidence that the applicable lease, a memorandum of lease with
respect thereto, or other evidence of such lease in form and
substance reasonably satisfactory to the Agent, has been or
will be recorded in all places to the extent necessary or
desirable, in the reasonable judgment of the Agent, so as to
enable the Mortgage Instrument encumbering such leasehold
interest to effectively create a valid and enforceable first
priority lien (subject to Permitted Liens) on such leasehold
interest in favor of the Agent (or such other Person as may be
required or desired under local law) for the benefit of
Lenders;
(iv) except as otherwise indicated on Schedule 6.20, the
Agent shall have received, and the title insurance company
issuing the policy referred to in Section 5.1(e)(v) (the
"Title Insurance Company") shall have received, maps or plats
of an as-built survey of the sites of the real property
covered by the Mortgage Instruments certified to the Agent and
the Title Insurance Company in a manner reasonably
satisfactory to each of the Agent and the Title Insurance
Company, dated a date reasonably satisfactory to each of the
Agent and the Title Insurance Company by an independent
professional licensed land surveyor, which maps or plats and
the surveys on which they are based shall be made in
accordance with standards that enable the Title Insurance
Company to issue the policies referred to in Section 5.1(e)(v)
below without exception for "Survey matters", except for
matters as are reasonably acceptable to the Agent;
(v) ALTA mortgagee title insurance policies issued by
Lawyers Title Insurance Corporation (the "Mortgage Policies"),
in amounts not less than the respective amounts designated in
Schedule 6.20(a) with respect to any particular Mortgaged
Property, assuring the Agent that each of the Mortgage
Instruments creates a valid and enforceable first priority
mortgage lien on the applicable Mortgaged Property, free and
clear of all defects and encumbrances except Permitted Liens,
which Mortgage Policies shall be in form and substance
reasonably satisfactory to the Agent and shall provide for
affirmative insurance and such reinsurance as the Agent may
reasonably request, all of the foregoing in form and substance
reasonably satisfactory to the Agent;
(vi) except as otherwise indicated on Schedule 6.20,
evidence, which may be in the form of a letter from an
insurance broker or a municipal engineer, as
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to whether (a) any Mortgaged Property (a "Flood Hazard
Property") is in an area designated by the Federal Emergency
Management Agency as having special flood or mud slide hazards
and (b) the community in which such Flood Hazard Property is
located is participating in the National Flood Insurance
Program;
(vii) if there are any Flood Hazard Properties, a Credit
Party's written acknowledgment of receipt of written
notification from the Agent (a) as to the existence of each
such Flood Hazard Property and (b) as to whether the community
in which each such Flood Hazard Property is located is
participating in the National Flood Insurance Program;
(viii) except as otherwise indicated on Schedule 6.20, if
there are maps or plats of an as-built survey of the sites of
the Mortgaged Properties certified to the Agent and the Title
Insurance Company in a manner reasonably satisfactory to them,
dated a date satisfactory to each of the Agent and the Title
Insurance Company by an independent professional licensed land
surveyor reasonably satisfactory to each of the Agent and the
Title Insurance Company, which maps or plats and the surveys
on which they are based shall be sufficient to delete any
standard printed survey exception contained in the applicable
title policy and be made in accordance with the Minimum
Standard Detail Requirements for Land Title Surveys jointly
established and adopted by the American Land Title Association
and the American Congress on Surveying and Mapping in 1992,
and, without limiting the generality of the foregoing, there
shall be surveyed and shown on such maps, plats or surveys the
following: (A) the locations on such sites of all the
buildings, structures and other improvements and the
established building setback lines; (B) the lines of streets
abutting the sites and width thereof; (C) all access and other
easements appurtenant to the sites necessary to use the sites;
(D) all roadways, paths, driveways, easements, encroachments
and overhanging projections and similar encumbrances affecting
the site, whether recorded, apparent from a physical
inspection of the sites or otherwise known to the surveyor;
(E) any encroachments on any adjoining property by the
building structures and improvements on the sites; and (F) if
the site is described as being on a filed map, a legend
relating the survey to said map; and
(ix) evidence satisfactory to the Agent that each of the
Mortgaged Properties, and the uses of the Mortgaged
Properties, are in compliance in all material respects with
all applicable laws, regulations and ordinances.
(f) Priority of Liens. The Agent shall have received
satisfactory evidence that (i) the Agent, on behalf of the Lenders,
holds a perfected, first priority Lien on all Collateral and (ii) none
of the Collateral is subject to any other Liens other than Permitted
Liens.
(g) Evidence of Insurance. Receipt by the Agent of copies of
insurance policies or certificates of insurance of the Credit Parties
evidencing liability and casualty
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insurance meeting the requirements set forth in the Credit Documents,
including, but not limited to, naming the Agent as loss payee on behalf
of the Lenders.
(h) Equity Investment. Receipt by the Agent of evidence that a
cash equity investment of at least $20 million shall have been made in
the Parent by CGW (and that immediately thereafter the Parent shall
have contributed such amount, net of reasonable expenses payable to
third parties, in the Borrower in exchange for common Capital Stock of
the Borrower) on terms that are satisfactory to the Agent.
(i) Senior Debt. (i) The Borrower shall have entered into the
Senior Note Agreement, (ii) the Borrower shall have issued the Senior
Notes, (iii) the Agent shall have received a copy, certified by an
Executive Officer of the Borrower as true and complete, of the Senior
Note Agreement as originally executed and delivered, and no amendment
or modification thereof shall have been entered into on or prior to the
Closing Date which shall not have been approved by each of the Lenders
and (iv) the Borrower shall have received gross proceeds from the sale
of Senior Notes in an aggregate principal amount of at least $75
million.
(j) Government Consent. Receipt by the Agent of evidence that
all governmental, shareholder and material third party consents
(including Hart-Scott-Rodino clearance) and approvals necessary or
desirable in connection with the Acquisition and the related financings
and other transactions contemplated hereby and expiration of all
applicable waiting periods without any action being taken by any
authority that could restrain, prevent or impose any material adverse
conditions on the Acquisition or such other transactions or that could
seek or threaten any of the foregoing, and no law or regulation shall
be applicable which in the judgment of the Agent could have such
effect.
(k) Litigation. There shall not exist (i) any order, decree,
judgment, ruling or injunction which restrains the consummation of the
Acquisition in the manner contemplated by the Purchase Agreement or
(ii) any pending or threatened action, suit, investigation or
proceeding against a Credit Party that could have a Material Adverse
Effect.
(l) Other Indebtedness. Receipt by the Agent of evidence that,
after giving effect to the Acquisition, the Credit Parties shall have
no Funded Indebtedness other than (i) the Indebtedness under the Credit
Documents, (ii) the Indebtedness arising under the Senior Note
Agreement and the Senior Notes and (iii) Indebtedness described on
Schedule 8.1.
(m) Purchase Agreement. There shall not have been any material
modification, amendment, supplement or waiver to the Purchase Agreement
without the prior written consent of the Agent, including, but not
limited to, any modification, amendment, supplement or waiver relating
to the amount or type of consideration to be paid in connection with
the Acquisition and the contents of all disclosure schedules and
exhibits, and the Acquisition shall have been consummated in accordance
with the terms of the
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Purchase Agreement (without waiver of any conditions precedent to the
obligations of the buyer thereunder) and the purchase price (including
assumed indebtedness and fees and expenses) payable by the buyer
pursuant thereto shall not exceed $87 million. The Agent shall have
received a final Purchase Agreement, together with all exhibits and
schedules thereto, certified by an Executive Officer of the Borrower.
(n) Officer's Certificates. The Agent shall have received a
certificate or certificates executed by an Executive Officer of the
Borrower as of the Closing Date stating that (A) each Credit Party is
in compliance with all existing financial obligations, (B) all
governmental, shareholder and third party consents and approvals, if
any, with respect to the Credit Documents and the transactions
contemplated thereby have been obtained, (C) no action, suit,
investigation or proceeding is pending or threatened in any court or
before any arbitrator or governmental instrumentality that purports to
affect any Credit Party or any transaction contemplated by the Credit
Documents, if such action, suit, investigation or proceeding could have
a Material Adverse Effect, (D) the transactions contemplated by the
Purchase Agreement have been consummated in accordance with the terms
thereof and (E) immediately after giving effect to this Credit
Agreement, the other Credit Documents and all the transactions
contemplated therein to occur on such date, (1) each of the Credit
Parties is Solvent, (2) no Default or Event of Default exists, (3) all
representations and warranties contained herein and in the other Credit
Documents are true and correct in all material respects, and (4) the
Credit Parties are in compliance with each of the financial covenants
set forth in Section 7.11.
(o) Fees and Expenses. Payment by the Credit Parties of all
fees and expenses owed by them to the Lenders and the Agent, including,
without limitation, payment to the Agent of the fees set forth in the
Fee Letter.
(p) Other. Receipt by the Lenders of such other documents,
instruments, agreements or information as reasonably requested by any
Lender, including, but not limited to, information regarding
litigation, tax, accounting, labor, insurance, pension liabilities
(actual or contingent), real estate leases, material contracts, debt
agreements, property ownership and contingent liabilities of the Credit
Parties.
5.2 CONDITIONS TO ALL EXTENSIONS OF CREDIT.
The obligations of each Lender to make, convert or extend any Loan and
of the Issuing Lender to issue or extend any Letter of Credit (including the
initial Loans and the initial Letter of Credit) are subject to satisfaction of
the following conditions in addition to satisfaction on the Closing Date of the
conditions set forth in Section 5.1:
(a) The Borrower shall have delivered (i) in the case of any
Loan, an appropriate Notice of Borrowing or Notice of
Extension/Conversion or (ii) in the case of any Letter of Credit, the
Issuing Lender shall have received an appropriate request for issuance
in accordance with the provisions of Section 2.2(b);
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(b) The representations and warranties set forth in Section 6
shall, subject to the limitations set forth therein, be true and
correct in all material respects as of such date (except for those
which expressly relate to an earlier date and except for changes in
facts or circumstances that make such representations and warranties
untrue but that, in and of themselves, do no constitute, and/or have
not resulted in the occurrence of, a Default or Event of Default);
(c) There shall not have been commenced against any Credit
Party an involuntary case under any applicable bankruptcy, insolvency
or other similar law now or hereafter in effect, or any case,
proceeding or other action for the appointment of a receiver,
liquidator, assignee, custodian, trustee, sequestrator (or similar
official) of such Person or for any substantial part of its Property or
for the winding up or liquidation of its affairs, and such involuntary
case or other case, proceeding or other action shall remain
undismissed, undischarged or unbonded;
(d) No Default or Event of Default shall exist and be
continuing either prior to or after giving effect thereto;
(e) No development or event which has had or could have a
Material Adverse Effect shall have occurred since the later of (i)
December 31, 1997 and (ii) the date of the most recent audited
financial statements delivered to the Agent and the Lenders in
accordance with the terms of Section 7.1(a); and
(f) Immediately after giving effect to the making of such Loan
(and the application of the proceeds thereof) or to the issuance of
such Letter of Credit, as the case may be, the sum of the aggregate
principal amount of outstanding Loans plus LOC Obligations outstanding
shall not exceed the Committed Amount.
The delivery of each Notice of Borrowing, each Notice of Extension/Conversion
and each request for a Letter of Credit pursuant to Section 2.2(b) shall
constitute a representation and warranty by the Borrower of the correctness of
the matters specified in subsections (b), (c), (d), (e) and (f) above.
SECTION 6
REPRESENTATIONS AND WARRANTIES
The Credit Parties hereby represent to the Agent and each Lender that:
6.1 FINANCIAL CONDITION.
(a) The audited consolidated and consolidating balance sheet
of the Credit Parties as of December 31, 1997 and the audited
consolidated and consolidating statements of earnings and statements of
cash flows for the years ended December 31, 1995, December 31,
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1996 and December 31, 1997, have heretofore been furnished to each
Lender. Such financial statements (including the notes thereto) (i)
have been audited by Crowe Chizek, (ii) have been prepared in
accordance with GAAP consistently, applied throughout the periods
covered thereby and (iii) present fairly (on the basis disclosed in the
footnotes to such b financial statements) the consolidated financial
condition, results of operations and cash flows of the Credit Parties
as of such date and for such periods. The unaudited interim balance
sheets of the Credit Parties as at the end of, and the related
unaudited interim statements of earnings and of cash flows for, the
2-month period ended February 28, 1998, have heretofore been furnished
to each Lender. Such interim financial statements for each such
quarterly period, (i) have been prepared in accordance with GAAP
consistently applied throughout the periods covered thereby and (ii)
present fairly (on the basis disclosed in the footnotes to such
financial statements) the consolidated and consolidating financial
condition, results of operations and cash flows of the Credit Parties
as of such date and for such periods. During the period from December
31, 1997 to and including the Closing Date, there has been no sale,
transfer or other disposition by any Credit Party of any material part
of the business or property of the Credit Parties, taken as a whole,
and no purchase or other acquisition by any of them of any business or
property (including any capital stock of any other person) material in
relation to the consolidated financial condition of the Credit Parties,
taken as a whole, in each case, which, is not reflected in the
foregoing financial statements or in the notes thereto and has not
otherwise been disclosed in writing to the Lenders on or prior to the
Closing Date.
(b) The pro forma consolidated balance sheet of the Credit
Parties as of the Closing Date giving effect to the Acquisition in
accordance with the terms of the Purchase Agreement and reflecting
estimated purchase price accounting adjustments, has heretofore been
furnished to each Lender. Such pro forma balance sheet is based upon
reasonable assumptions made known to the Lenders and upon information
not know to be incorrect or misleading in any material respect.
(c) The financial statements delivered to the Lenders pursuant
to Section 7.1(a) and (b), (i) have been prepared in accordance with
GAAP (except as may otherwise be permitted under Section 7.1(a) and
(b)) and (ii) present fairly (on the basis disclosed in the footnotes
to such financial statements) the consolidated and consolidating
financial condition, results of operations and cash flows of the Credit
Parties as of such date and for such periods.
6.2 NO MATERIAL CHANGE.
Since the later of (i) December 31, 1997 and (ii) the date of the most
recent audited financial statements delivered to the Agent and the Lenders in
accordance with the terms of Section 7.1(a), (a) there has been no development
or event relating to or affecting a Credit Party which has had or would be
reasonably likely to have a Material Adverse Effect and (b) except as otherwise
permitted under this Credit Agreement, no dividends or other distributions have
been declared, paid or made upon the Capital Stock in a Credit Party nor has any
of the Capital Stock in a Credit Party been redeemed, retired, purchased or
otherwise acquired for value.
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6.3 ORGANIZATION AND GOOD STANDING.
Each of the Credit Parties (a) is duly organized, validly existing and
is in good standing under the laws of the jurisdiction of its incorporation or
organization, (b) has the corporate or other necessary power and authority, and
the legal right, to own and operate its property, to lease the property it
operates as lessee and to conduct the business in which it is currently engaged
and (c) is duly qualified as a foreign entity and in good standing under the
laws of each jurisdiction where its ownership, lease or operation of property or
the conduct of its business requires such qualification, other than, in the case
of clauses (a) and (c) of this Section 6.3, in such jurisdictions where the
failure to be so qualified and in good standing would be reasonably likely to
have a Material Adverse Effect.
6.4 POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS.
Each of the Credit Parties has the corporate or other necessary power
and authority, and the legal right, to make, deliver and perform the Credit
Documents to which it is a party, and in the case of the Borrower, to obtain
extensions of credit hereunder, and has taken all necessary corporate action to
authorize the borrowings and other extensions of credit on the terms and
conditions of this Credit Agreement and to authorize the execution, delivery and
performance of the Credit Documents to which it is a party. No consent or
authorization of, filing with, notice to or other similar act by or in respect
of, any Governmental Authority or any other Person is required to be obtained or
made by or on behalf of any Credit Party in connection with the borrowings or
other extensions of credit hereunder or with the execution, delivery,
performance, validity or enforceability of the Credit Documents to which such
Credit Party is a party, except for (i) consents, authorizations, notices and
filings described in Schedule 6.4, all of which have been obtained or made or
have the status described in such Schedule 6.4 and (ii) filings to perfect the
Liens created by the Collateral Documents. This Credit Agreement has been, and
each other Credit Document to which any Credit Party is a party will be, duly
executed and delivered on behalf of the Credit Parties. This Credit Agreement
constitutes, and each other Credit Document to which any Credit Party is a party
when executed and delivered will constitute, a legal, valid and binding
obligation of such Credit Party enforceable against such party in accordance
with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally and by general equitable principles
(whether enforcement is sought by proceedings in equity or at law).
6.5 NO CONFLICTS.
Neither the execution and delivery of the Credit Documents, nor the
consummation of the transactions contemplated therein, nor performance of and
compliance with the terms and provisions thereof by such Credit Party will (a)
violate or conflict with any provision of its articles or certificate of
incorporation or bylaws or other organizational or governing documents of such
Person, (b) violate, contravene or materially conflict with any Requirement of
Law or any other law, regulation (including, without limitation, Regulation U or
Regulation X), order, writ,
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judgment, injunction, decree or permit applicable to it, (c) violate, contravene
or conflict with contractual provisions of, or cause an event of default under,
any material indenture, loan agreement, mortgage, deed of trust, contract or
other agreement or instrument to which it is a party or by which it may be
bound, the violation of which could have a Material Adverse Effect, or (d)
result in or require the creation of any Lien (other than those contemplated in
or created in connection with the Credit Documents) upon or with respect to its
properties.
6.6 NO DEFAULT.
No Credit Party is in default in any material respect under any
contract, lease, loan agreement, indenture, mortgage, security agreement or
other agreement or obligation to which it is a party or by which any of its
properties is bound which default could have a Material Adverse Effect. No
Default or Event of Default has occurred or exists except as previously
disclosed in writing to the Lenders.
6.7 OWNERSHIP.
Each Credit Party is the owner of, and has good and marketable title
to, all of its respective assets and none of such assets is subject to any Lien
other than Permitted Liens.
6.8 INDEBTEDNESS.
Except as otherwise permitted under Section 8.1, the Credit Parties
have no Indebtedness.
6.9 LITIGATION.
Except as disclosed in Schedule 6.9, there are no actions, suits or
legal, equitable, arbitration or administrative proceedings, pending or, to the
knowledge of any Credit Party, threatened against any Credit Party which would
be reasonably likely to have a Material Adverse Effect.
6.10 TAXES.
Each Credit Party has filed, or caused to be filed, all material tax
returns (federal, state, local and foreign) required to be filed and paid (a)
all amounts of taxes shown thereon to be due (including interest and penalties)
and (b) all other taxes, fees, assessments and other governmental charges
(including mortgage recording taxes, documentary stamp taxes and intangibles
taxes) owing by it, except for such taxes (i) which are not yet delinquent or
(ii) that are being contested in good faith and by proper proceedings, and
against which adequate reserves are being maintained in accordance with GAAP. No
Credit Party is aware as of the Closing Date of any proposed tax assessments
against it or any other Credit Party.
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6.11 COMPLIANCE WITH LAW.
Each Credit Party has complied in all material respects with all
applicable Requirements of Law and all other laws, rules, regulations, orders
and decrees (including without limitation Environmental Laws) applicable to it,
or to its properties, unless such failure to comply would not be reasonably
likely to have a Material Adverse Effect.
6.12 ERISA.
Except as would not be reasonably likely to have a Material Adverse
Effect:
(a) During the five-year period prior to the date on which
this representation is made or deemed made: (i) no ERISA Event has
occurred, and, to the best knowledge of the Credit Parties, no event or
condition has occurred or exists as a result of which any ERISA Event
could reasonably be expected to occur, with respect to any Plan; (ii)
no "accumulated funding deficiency," as such term is defined in Section
302 of ERISA and Section 412 of the Code, whether or not waived, has
occurred with respect to any Plan; (iii) each Plan has been maintained,
operated, and funded in compliance with its own terms and in material
compliance with the provisions of ERISA, the Code, and any other
applicable federal or state laws; and (iv) no lien in favor of the PBGC
or a Plan has arisen or is reasonably likely to arise on account of any
Plan.
(b) The actuarial present value of all "benefit liabilities"
(as defined in Section 4001(a)(16) of ERISA), whether or not vested,
under each Single Employer Plan, as of the last annual valuation date
prior to the date on which this representation is made or deemed made
(determined, in each case, in accordance with Financial Accounting
Standards Board Statement 87, utilizing the actuarial assumptions used
in such Plan's most recent actuarial valuation report), did not exceed
as of such valuation date the fair market value of the assets of such
Plan.
(c) Neither any Credit Party nor any ERISA Affiliate has
incurred, or, to the best knowledge of the Credit Parties, could be
reasonably expected to incur, any withdrawal liability under ERISA to
any Multiemployer Plan or Multiple Employer Plan. Neither any Credit
Party nor any ERISA Affiliate would become subject to any withdrawal
liability under ERISA if any Credit Party or any ERISA Affiliate were
to withdraw completely from all Multiemployer Plans and Multiple
Employer Plans as of the valuation date most closely preceding the date
on which this representation is made or deemed made. Neither any Credit
Party nor any ERISA Affiliate has received any notification that any
Multiemployer Plan is in reorganization (within the meaning of Section
4241 of ERISA), is insolvent (within the meaning of Section 4245 of
ERISA), or has been terminated (within the meaning of Title IV of
ERISA), and no Multiemployer Plan is, to the best knowledge of the
Credit Parties, reasonably expected to be in reorganization, insolvent,
or terminated.
(d) No prohibited transaction (within the meaning of Section
406 of ERISA or Section 4975 of the Code) or breach of fiduciary
responsibility has occurred with respect to a Plan which has subjected
or may subject any Credit Party or any ERISA Affiliate to
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any liability under Sections 406, 409, 502(i), or 502(l) of ERISA or
Section 4975 of the Code, or under any agreement or other instrument
pursuant to which any Credit Party or any ERISA Affiliate has agreed or
is required to indemnify any Person against any such liability.
(e) Neither any Credit Party nor any ERISA Affiliates has any
material liability with respect to "expected post-retirement benefit
obligations" within the meaning of the Financial Accounting Standards
Board Statement 106. Each Plan which is a welfare plan (as defined in
Section 3(1) of ERISA) to which Sections 601-609 of ERISA and Section
4980B of the Code apply has been administered in compliance in all
material respects of such sections.
(f) Neither the execution and delivery of this Credit
Agreement nor the consummation of the financing transactions
contemplated thereunder will involve any transaction which is subject
to the prohibitions of Sections 404, 406 or 407 of ERISA or in
connection with which a tax could be imposed pursuant to Section 4975
of the Code. The representation by the Credit Parties in the preceding
sentence is made in reliance upon and subject to the accuracy of the
Lenders' representation in Section 11.15 with respect to their source
of funds and is subject, in the event that the source of the funds used
by the Lenders in connection with this transaction is an insurance
company's general asset account, to the application of Prohibited
Transaction Class Exemption 95-60, 60 Fed. Reg. 35,925 (1995),
compliance with the regulations issued under Section 401(c)(1)(A) of
ERISA, or the issuance of any other prohibited transaction exemption or
similar relief, to the effect that assets in an insurance company's
general asset account do not constitute assets of an "employee benefit
plan" within the meaning of Section 3(3) of ERISA of a "plan" within
the meaning of Section 4975(e)(1) of the Code.
6.13 SUBSIDIARIES.
Set forth on Schedule 6.13 is a complete and accurate list of all
Subsidiaries of each Credit Party as of the Closing Date. Information on
Schedule 6.13 includes jurisdiction of incorporation, the number of shares of
each class of Capital Stock outstanding, the number and percentage of
outstanding shares of each class owned (directly or indirectly) by such Credit
Party; and the number and effect, if exercised, of all outstanding options,
warrants, rights of conversion or purchase and all other similar rights with
respect thereto. The outstanding Capital Stock of all such Subsidiaries is
validly issued, fully paid and non-assessable and is owned by each such Credit
Party, directly or indirectly, free and clear of all Liens (other than those
arising under or contemplated in connection with the Credit Documents). Other
than as set forth in Schedule 6.13, no Credit Party has outstanding any
securities convertible into or exchangeable for its Capital Stock nor does any
such Person have outstanding any rights to subscribe for or to purchase or any
options for the purchase of, or any agreements providing for the issuance
(contingent or otherwise) of, or any calls, commitments or claims of any
character relating to its Capital Stock. Schedule 6.13 may be updated from time
to time by the Borrower by giving written notice thereof to the Agent.
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6.14 GOVERNMENTAL REGULATIONS, ETC.
(a) No part of the Letters of Credit or proceeds of the Loans
will be used, directly or indirectly, for the purpose of purchasing or
carrying any "margin stock" within the meaning of Regulation G or
Regulation U, or for the purpose of purchasing or carrying or trading
in any securities. If requested by any Lender or the Agent, the
Borrower will furnish to the Agent and each Lender a statement to the
foregoing effect in conformity with the requirements of FR Form U-1
referred to in Regulation U. No indebtedness being reduced or retired
out of the proceeds of the Loans was or will be incurred for the
purpose of purchasing or carrying any margin stock within the meaning
of Regulation U or any "margin security" within the meaning of
Regulation T. "Margin stock" within the meaning of Regulation U does
not constitute more than 25% of the value of the consolidated assets of
the Credit Parties. None of the transactions contemplated by this
Credit Agreement (including, without limitation, the direct or indirect
use of the proceeds of the Loans) will violate or result in a violation
of the Securities Act of 1933, as amended, or the Securities Exchange
Act of 1934, as amended, or regulations issued pursuant thereto, or
Regulation G, T, U or X.
(b) No Credit Party is subject to regulation under the Public
Utility Holding Company Act of 1935, the Federal Power Act or the
Investment Company Act of 1940, each as amended. In addition, no Credit
Party is (i) an "investment company" registered or required to be
registered under the Investment Company Act of 1940, as amended, and is
not controlled by such a company, or (ii) a "holding company", or a
"subsidiary company" of a "holding company", or an "affiliate" of a
"holding company" or of a "subsidiary" of a "holding company", within
the meaning of the Public Utility Holding Company Act of 1935, as
amended.
(c) No director, executive officer or principal shareholder of
any Credit Party is a director, executive officer or principal
shareholder of any Lender. For the purposes hereof the terms
"director", "executive officer" and "principal shareholder" (when used
with reference to any Lender) have the respective meanings assigned
thereto in Regulation O issued by the Board of Governors of the Federal
Reserve System.
(d) Each Credit Party has obtained and holds in full force and
effect, all franchises, licenses, permits, certificates,
authorizations, qualifications, accreditations, easements, rights of
way and other rights, consents and approvals which are necessary for
the ownership of its respective Property and to the conduct of its
respective businesses as presently conducted, except where the failure
to hold the same would not be reasonably likely to have a Material
Adverse Effect.
(e) No Credit Party is in violation of any applicable statute,
regulation or ordinance of the United States of America, or of any
state, city, town, municipality, county or any other jurisdiction, or
of any agency thereof (including without limitation, environmental laws
and regulations), which violation could have a Material Adverse Effect.
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(f) Each Credit Party is current with all material reports and
documents, if any, required to be filed with any state or federal
securities commission or similar agency and is in full compliance in
all material respects with all applicable rules and regulations of such
commissions, except where the failure to comply would not be reasonably
likely to have a Material Adverse Effect.
6.15 PURPOSE OF LOANS AND LETTERS OF CREDIT.
The proceeds of the Loans hereunder shall be used solely by the
Borrower to provide for ongoing general corporate purposes of the Borrower and
its Subsidiaries. The Letters of Credit shall be used only for or in connection
with appeal bonds, reimbursement obligations arising in connection with surety,
reclamation and industrial development bonds, reinsurance, domestic or
international trade transactions and obligations not otherwise aforementioned
relating to transactions entered into by the applicable account party in the
ordinary course of business.
6.16 ENVIRONMENTAL MATTERS.
Except as disclosed and described in Schedule 6.16 attached hereto and
except as to matters which are not reasonably likely to have a Material Adverse
Effect:
(a) Each of the facilities and properties owned, leased or
operated by the Credit Parties (the "Properties") and all operations at
the Properties are in material compliance with all applicable
Environmental Laws, and there is no material violation of any
Environmental Law with respect to the Properties or the businesses
operated by the Credit Parties (the "Businesses"), and there are no
conditions relating to the Businesses or Properties that are reasonably
likely give rise to liability under any applicable Environmental Laws.
(b) None of the Properties contains, or, to best knowledge of
the Credit Parties, has contained prior to such time as a Credit Party
first became an owner, lessee or operator thereof, any Materials of
Environmental Concern at, on or under the Properties in amounts or
concentrations that constitute or constituted a material violation of,
or could give rise to material liability under, any applicable
Environmental Law.
(c) No Credit Party has received any written notice of or from
any Governmental Authority regarding, any material violation, alleged
violation, non-compliance, liability or potential liability regarding
environmental matters or compliance with applicable Environmental Laws
with regard to any of the Properties or the Businesses, nor does any
Credit Party have knowledge or reason to believe that any such notice
will be received or is being threatened.
(d) Materials of Environmental Concern have not been
transported or disposed of from the Properties, or generated, treated,
stored or disposed of at, on or under any of the Properties or any
other location, in each case by or on behalf of any Credit Party in
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violation of, or in a manner that is reasonably likely to give rise to
liability under, any applicable Environmental Law.
(e) No judicial proceeding or governmental or administrative
action is pending or, to the best knowledge of any Credit Party,
threatened, under any Environmental Law to which any Credit Party is or
will be named as a party, nor are there any consent decrees or other
decrees, consent orders, administrative orders or other orders, or
other administrative or judicial requirements outstanding under any
applicable Environmental Law with respect to the Credit Parties, the
Properties or the Businesses.
(f) There has been no release, or threat of release, of
Materials of Environmental Concern at or from the Properties, or
arising from or related to the operations (including, without
limitation, disposal) of any Credit Party in connection with the
Properties or otherwise in connection with the Businesses, in material
violation of or in amounts or in a manner that could give rise to
liability under Environmental Laws.
6.17 INTELLECTUAL PROPERTY.
Each Credit Party owns, or has the legal right to use, all trademarks,
tradenames, copyrights, technology, know-how and processes (the "Intellectual
Property") necessary for each of them to conduct its business as currently
conducted except for those the failure to own or have such legal right to use
could not have a Material Adverse Effect. Set forth on Schedule 6.17 is a list
of all Intellectual Property owned by each Credit Party or that any Credit Party
has the right to use. Except as provided on Schedule 6.17, no claim has been
asserted and is pending by any Person challenging or questioning the use of any
such Intellectual Property or the validity or effectiveness of any such
Intellectual Property, nor does any Credit Party know of any such claim, and to
the Credit Parties' knowledge the use of such Intellectual Property by any
Credit Party does not infringe on the rights of any Person, except for such
claims and infringements that, in the aggregate, could not have a Material
Adverse Effect.
6.18 SOLVENCY.
Each Credit Party is and, after consummation of the transactions
contemplated by this Credit Agreement (including without limitation the
Acquisition), will be Solvent.
6.19 INVESTMENTS.
All Investments of each Credit Party are Permitted Investments.
6.20 LOCATION OF COLLATERAL.
Set forth on Schedule 6.20(a) is a list of all Mortgaged Properties as
of the Closing Date with street address, county and state where located. Set
forth on Schedule 6.20(b) is a list of all locations as of the Closing Date
where any tangible personal property of a Credit Party is located, including
county and state where located. Set forth on Schedule 6.20(c) is a list of all
locations as
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of the Closing Date where any Credit Party maintains its chief executive office
and/or principal place of business.
6.21 DISCLOSURE.
Neither this Credit Agreement nor any financial statements delivered to
the Lenders nor any other document, certificate or statement furnished to the
Lenders by or on behalf of any Credit Party in connection with the transactions
contemplated hereby contained at the time furnished any untrue statement of a
material fact or omitted at the time furnished to state a material fact
necessary in order to make the statements contained therein or herein not
misleading.
6.22 NO BURDENSOME RESTRICTIONS.
No Credit Party is a party to any agreement or instrument or subject to
any other obligation or any charter or corporate restriction or any provision of
any applicable law, rule or regulation which, individually or in the aggregate,
could have a Material Adverse Effect.
6.23 BROKERS' FEES.
No Credit Party has any obligation to any Person in respect of any
finder's, broker's, investment banking or other similar fee in connection with
any of the transactions contemplated under the Credit Documents.
6.24 LABOR MATTERS.
Except for that Basic Labor Agreement dated as of August 8, 1995, there
are no collective bargaining agreements or Multiemployer Plans covering the
employees of a Credit Party as of the Closing Date and none of the Credit
Parties has suffered any strikes, walkouts, work stoppages or other material
labor difficulty within the last five years.
6.25 NATURE OF BUSINESS.
As of the Closing Date, the Credit Parties are engaged in the business
of manufacturing and sellng silicon metals products, microsilica, silicon dross
and silicon scrap.
6.26 REPRESENTATIONS AND WARRANTIES FROM PURCHASE AGREEMENT.
As of the Closing Date, each of the representations and warranties made
in the Purchase Agreement by each of the parties thereto is true and correct in
all material respects, except for matters that, in the aggregate, could not have
a Material Adverse Effect.
6.27 YEAR 2000 COMPLIANCE.
Each of the Credit Parties has conducted a review and assessment of its
computer applications with respect to the "year 2000 problem" (that is, the risk
that computer applications
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may not be able to properly perform date-sensitive functions after December 31,
1999) and, based on that review and inquiry, the Credit Parties believe that the
year 2000 problem will not result in a material adverse change in its business
condition (financial or otherwise), operations, business, assets, liabilities or
prospects of the Credit Parties taken as a whole, or on the ability of any
Credit Party to perform any material obligation under the Credit Documents to
which it is a party.
SECTION 7
AFFIRMATIVE COVENANTS
Each Credit Party hereby covenants and agrees that, so long as this
Credit Agreement is in effect or any amounts payable hereunder or under any
other Credit Document shall remain outstanding, and until all of the Commitments
hereunder shall have terminated:
7.1 INFORMATION COVENANTS.
The Borrower will furnish, or cause to be furnished, to the Agent and
each of the Lenders:
(a) Annual Financial Statements. As soon as available, and in
any event within 90 days after the close of each fiscal year of the
Credit Parties (other than the fourth fiscal quarter, in which case 90
days after the end thereof), a consolidated balance sheet and income
statement of the Credit Parties, as of the end of such fiscal year,
together with related consolidated statements of operations and
retained earnings and of cash flows for such fiscal year, setting forth
in comparative form consolidated figures for the preceding fiscal year,
all such financial information described above to be in a form
satisfying the Securities and Exchange Commission requirements for a
10-K filing or otherwise in reasonable form and detail and audited by
independent certified public accountants of recognized national
standing reasonably acceptable to the Agent and whose opinion shall be
to the effect that such financial statements have been prepared in
accordance with GAAP (except for changes with which such accountants
concur) and shall not be limited as to the scope of the audit or
qualified as to the status of the Credit Parties as a going concern.
(b) Quarterly Financial Statements. As soon as available, and
in any event within 45 days after the end of each fiscal quarter of the
Credit Parties, a consolidated balance sheet and income statement of
the Credit Parties as of the end of such fiscal quarter, together with
related consolidated statements of operations and retained earnings and
of cash flows for such fiscal quarter, in each case setting forth in
comparative form consolidated figures for the corresponding period of
the preceding fiscal year, all such financial information described
above to be in a form satisfying the Securities and Exchange Commission
requirements for a 10-Q filing or otherwise in reasonable form and
detail and reasonably acceptable to the Agent, and accompanied by a
certificate of an Executive Officer of the Borrower to the effect that
such quarterly financial statements fairly present in all material
respects the financial condition of the Credit Parties and have
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been prepared in accordance with GAAP, subject to changes resulting
from audit, normal year-end audit adjustments and the absence of notes.
(c) Officer's Certificate. At the time of delivery of the
financial statements provided for in Sections 7.1(a) and 7.1(b) above,
a certificate of an Executive Officer of the Borrower substantially in
the form of Exhibit 7.1(c), (i) demonstrating compliance with the
financial covenants contained in Section 7.11 by calculation thereof as
of the end of each such fiscal period and (ii) stating that, to his
knowledge, no Default or Event of Default exists, or if any Default or
Event of Default does exist, specifying the nature and extent thereof
and what action the Credit Parties propose to take with respect
thereto.
(d) Annual Business Plan and Budgets. At least 30 days prior
to the end of each fiscal year of the Borrower, beginning with the
fiscal year ending December 31, 1998, an annual business plan and
budget of the Credit Parties containing, among other things, pro forma
financial statements for the next fiscal year.
(e) Compliance With Certain Provisions of the Credit
Agreement. Within 90 days after the end of each fiscal year of the
Borrower, a certificate containing information regarding the amount of
all Asset Dispositions that were made during the prior fiscal year.
(f) Accountant's Certificate. Within the period for delivery
of the annual financial statements provided in Section 7.1(a), a
certificate of the accountants conducting the annual audit stating that
they have reviewed this Credit Agreement and stating further whether,
in the course of their audit, they have become aware of any Default or
Event of Default and, if any such Default or Event of Default exists,
specifying the nature and extent thereof.
(g) Auditor's Reports. Promptly upon receipt thereof, a copy
of any other report or "management letter" submitted by independent
accountants to any Credit Party in connection with any annual, interim
or special audit of the books of such Person.
(h) Reports. Promptly upon transmission or receipt thereof,
(i) copies of any filings and registrations with, and reports to or
from, the Securities and Exchange Commission, or any successor agency,
and copies of all financial statements, proxy statements, notices and
reports as any Credit Party shall send to its shareholders or to a
holder of any Indebtedness owed by any Credit Party in its capacity as
such a holder and (ii) upon the request of the Agent, all reports and
written information to and from the United States Environmental
Protection Agency, or any state or local agency responsible for
environmental matters, the United States Occupational Health and Safety
Administration, or any state or local agency responsible for health and
safety matters, or any successor agencies or authorities concerning a
violation which is reasonably likely to have a Material Adverse Effect.
(i) Notices. Upon obtaining knowledge thereof, the Borrower
will give written notice to the Agent immediately of (i) the occurrence
of an event or condition
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consisting of a Default or Event of Default, specifying the nature and
existence thereof and what action the Credit Parties propose to take
with respect thereto, and (ii) the occurrence of any of the following
with respect to any Credit Party (A) the pendency or commencement of
any litigation, arbitral or governmental proceeding against such Person
which if adversely determined is reasonably likely to have a Material
Adverse Effect, (B) the institution of any proceedings against such
Person with respect to, or the receipt of notice by such Person of
potential liability or responsibility for violation, or alleged
violation of any applicable federal, state or local law, rule or
regulation, including but not limited to, Environmental Laws, the
violation of which is reasonably likely to have a Material Adverse
Effect, or (C) any notice or determination concerning the imposition of
any withdrawal liability by a Multiemployer Plan against such Person or
any ERISA Affiliate, the determination that a Multiemployer Plan is, or
is expected to be, in reorganization within the meaning of Title IV of
ERISA or the termination of any Plan.
(j) ERISA. Upon obtaining knowledge thereof, the Borrower will
give written notice to the Agent promptly (and in any event within five
Business Days) of: (i) of any event or condition, including, but not
limited to, any Reportable Event, that constitutes, or might reasonably
lead to, an ERISA Event which ERISA Event would have or would be
reasonably expected to have a Material Adverse Effect; (ii) with
respect to any Multiemployer Plan, the receipt of notice as prescribed
in ERISA or otherwise of any withdrawal liability assessed against the
Borrower or any of its ERISA Affiliates, or of a determination that any
Multiemployer Plan is in reorganization or insolvent (both within the
meaning of Title IV of ERISA) which in either case would have or would
be reasonably expected to have a Material Adverse Effect; (iii) the
failure to make full payment on or before the due date (including
extensions) thereof of all amounts which any Credit Party or any ERISA
Affiliate is required to contribute to each Plan pursuant to its terms
and as required to meet the minimum funding standard set forth in ERISA
and the Code with respect thereto which would have or would be
reasonably expected to have a Material Adverse Effect; or (iv) any
event has occurred or failed to occur with respect to a Single Employer
Plan, Multiemployer Plan or Multiple Employer Plan sponsored,
maintained or contributed to by an ERISA Affiliate of any Credit Party
which would have or would be reasonably expected to have a Material
Adverse Effect; or (v) any change in the funding status of any Plan
that would have or would be reasonably expected to have a Material
Adverse Effect, together with a description of any such event or
condition or a copy of any such notice and a statement by an Executive
Officer of the Borrower briefly setting forth the details regarding
such event, condition, or notice, and the action, if any, which has
been or is being taken or is proposed to be taken by the Credit Parties
with respect thereto. Promptly upon request, the Credit Parties shall
furnish the Agent and the Lenders with such additional information
concerning any Plan as may be reasonably requested, including, but not
limited to, copies of each annual report/return (Form 5500 series), as
well as all schedules and attachments thereto required to be filed with
the Department of Labor and/or the Internal Revenue Service pursuant to
ERISA and the Code, respectively, for each "plan year" (within the
meaning of Section 3(39) of ERISA).
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(k) Environmental.
(i) Upon the reasonable written request of the Agent
from time to time whenever the Agent shall have reason to
believe that the nature or extent of the presence of any
Materials of Environmental Concern shall have materially and
adversely changed since the later of (i) the Closing Date or
(ii) the most recent report delivered pursuant to this Section
7.1(k) (in any event not to be given more frequently than once
during any single calendar year), the Credit Parties will
furnish or cause to be furnished to the Agent, at the
Borrower's expense, a report of an environmental assessment of
reasonable scope, form and depth, (including, where
appropriate, invasive soil or groundwater sampling) by a
consultant reasonably acceptable to the Agent and the Borrower
as to the nature and extent of the presence of any Materials
of Environmental Concern on any Properties (as defined in
Section 6.16) and as to the compliance by any Credit Party
with Environmental Laws at such Properties; provided, however,
that the Agent shall consult with the Borrower as to the
appropriated type of assessment prior to the request of the
Agent. If the Credit Parties fail to deliver such an
environmental report within seventy-five (75) days after
receipt of such written request then the Agent may arrange for
same, and the Credit Parties hereby grant to the Agent and
their representatives access to the Properties to reasonably
undertake such an assessment (including, where appropriate,
invasive soil or groundwater sampling). The reasonable cost of
any assessment arranged for by the Agent pursuant to this
provision will be payable by the Borrower on demand and added
to the obligations secured by the Collateral Documents.
(ii) The Credit Parties will conduct and complete in
all material respects all investigations, studies, sampling,
and testing and all remedial, removal, and other actions
necessary to address all Materials of Environmental Concern
on, from or affecting any of the Properties to the extent
necessary to be in compliance with all applicable
Environmental Laws and with the validly issued orders and
directives of all Governmental Authorities with jurisdiction
over such Properties to the extent any failure is reasonably
likely to have a Material Adverse Effect.
(l) Additional Patents and Trademarks. At the time of delivery
of the financial statements and reports provided for in Section 7.1(a),
a report signed by an Executive Officer or treasurer of the Borrower
setting forth (i) a list of registration numbers for all patents,
trademarks, service marks, tradenames and copyrights awarded to any
Credit Party since the last day of the immediately preceding fiscal
year and (ii) a list of all patent applications, trademark
applications, service mark applications, trade name applications and
copyright applications submitted by any Credit Party since the last day
of the immediately preceding fiscal year and the status of each such
application, all in such form as shall be reasonably satisfactory to
the Agent.
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(m) Other Information. With reasonable promptness upon any
such request, such other information regarding the business, properties
or financial condition of any Credit Party as the Agent or the Required
Lenders may reasonably request.
7.2 PRESERVATION OF EXISTENCE AND FRANCHISES.
Except as a result of or in connection with a dissolution, merger or
disposition of a Subsidiary permitted under Section 8.4 or Section 8.5, each
Credit Party will, and will cause each of its Subsidiaries to, do all things
necessary to preserve and keep in full force and effect its existence, rights,
franchises and authority.
7.3 BOOKS AND RECORDS.
Each Credit Party will, and will cause each of its Subsidiaries to,
keep complete and accurate books and records of its transactions in accordance
with good accounting practices on the basis of GAAP (including the establishment
and maintenance of appropriate reserves).
7.4 COMPLIANCE WITH LAW.
Each Credit Party will, and will cause each of its Subsidiaries to,
comply with all applicable laws, rules, regulations and orders, and all
applicable restrictions imposed by all Governmental Authorities, applicable to
it and its Property if noncompliance with any such law, rule, regulation, order
or restriction is reasonably likely to have a Material Adverse Effect.
7.5 PAYMENT OF TAXES AND OTHER INDEBTEDNESS.
Each Credit Party will, and will cause each of its Subsidiaries to, pay
and discharge (a) all taxes, assessments and governmental charges or levies
imposed upon it, or upon its income or profits, or upon any of its properties,
before they shall become delinquent, (b) all lawful claims (including claims for
labor, materials and supplies) which, if unpaid, might give rise to a Lien upon
any of its properties, and (c) except as prohibited hereunder, all of its other
Indebtedness as it shall become due; provided, however, that no Credit Party
shall be required to pay any such tax, assessment, charge, levy, claim or
Indebtedness which is being contested in good faith by appropriate proceedings
and as to which adequate reserves therefor have been established in accordance
with GAAP, unless the failure to make any such payment (i) could give rise to an
immediate right to foreclose on a Lien securing such amounts or (ii) could have
a Material Adverse Effect.
7.6 INSURANCE.
(a) Each Credit Party will, and will cause each of its
Subsidiaries to, at all times maintain in full force and effect
insurance (including worker's compensation insurance, liability
insurance, casualty insurance and business interruption insurance) in
such amounts, covering such risks and liabilities and with such
deductibles or self-insurance retentions as are in accordance with
normal industry practice (or as otherwise
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required by the Collateral Documents). The Agent shall be named as loss
payee or mortgagee, as its interest may appear, and/or additional
insured with respect to any such insurance providing coverage in
respect of any Collateral, and each provider of any such insurance
shall agree, by endorsement upon the policy or policies issued by it or
by independent instruments furnished to the Agent, that it will give
the Agent thirty (30) days prior written notice before any such policy
or policies shall be altered or canceled, and that no act or default of
any Credit Party or any other Person shall affect the rights of the
Agent or the Lenders under such policy or policies. The present
insurance coverage of the Credit Parties is outlined as to carrier,
policy number, expiration date, type and amount on Schedule 7.6, and
the Agent and the Lenders hereby acknowledge that, as of the Closing
Date, such insurance coverage is acceptable.
(b) In case of any loss, damage to or destruction of the
Collateral of any Credit Party or any part thereof in respect of which
a Credit Party shall receive any proceeds of such insurance in a net
amount in excess of $10,000,000, such Credit Party shall promptly give
written notice thereof to the Agent generally describing the nature and
extent of such damage or destruction. In case of any loss, damage to or
destruction of the Collateral of any Credit Party or any part thereof,
such Credit Party, at such Credit Party's cost and expense, will
promptly repair or replace the Collateral of such Credit Party so lost,
damaged or destroyed in a manner reasonably satisfactory to the Agent.
7.7 MAINTENANCE OF PROPERTY.
Each Credit Party will, and will cause each of its Subsidiaries to,
maintain and preserve its properties and equipment material to the conduct of
its business in good repair, working order and condition, normal wear and tear
and casualty and condemnation excepted, and will make, or cause to be made, in
such properties and equipment from time to time all repairs, renewals,
replacements, extensions, additions, betterments and improvements thereto as may
be needed or proper, to the extent and in the manner customary for companies in
similar businesses.
7.8 PERFORMANCE OF OBLIGATIONS.
Each Credit Party will, and will cause each of its Subsidiaries to,
perform in all material respects all of its obligations under the terms of all
material agreements, indentures, mortgages, security agreements or other debt
instruments to which it is a party or by which it is bound if the failure to so
perform would cause or be reasonably expected to cause a Material Adverse Effect
.
7.9 USE OF PROCEEDS.
The Borrower will use the proceeds of the Loans and will use the
Letters of Credit solely for the purposes set forth in Section 6.15.
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7.10 AUDITS/INSPECTIONS.
Upon reasonable written notice and during normal business hours, each
Credit Party will permit representatives appointed by the Agent, including,
without limitation, independent accountants, agents, attorneys, and appraisers
to visit and inspect its property, including its books and records, its accounts
receivable and inventory, its facilities and its other business assets, and to
make photocopies or photographs thereof and to write down and record any
information such representative obtains and shall permit the Agent or its
representatives to investigate and verify the accuracy of information provided
to the Lenders and to discuss all such matters with the officers, employees and
representatives of such Person. The Agent shall notify the Lenders prior to any
visit, inspection, investigation or discussion with accountants pursuant to this
Section 7.10, and the Credit Parties agree that any Lender shall be entitled to
accompany the Agent (or its duly appointed representative(s)) in connection with
any such visit, inspection, investigation or discussion with accountants. The
Credit Parties agree that the Agent, and its representatives, may conduct an
annual audit of the Collateral, at the expense of the Borrower.
7.11 FINANCIAL COVENANTS.
(a) Interest Coverage Ratio. The Interest Coverage Ratio, as
of the last day of each fiscal quarter of the Credit Parties, shall be
greater than or equal to:
(i) for the period from June 30, 1998 to and
including December 30, 2001, 1.50 to 1.00;
(ii) for the period from December 31, 2001 and at all
times thereafter, 2.25 to 1.00.
(b) Net Leverage Ratio. The Credit Parties shall cause the Net
Leverage Ratio, as of the last day of each fiscal quarter of the Credit
Parties, to be less than or equal to:
(i) for the period from June 30, 1998 to and
including December 30, 1998, 5.50 to 1.00;
(ii) for the period from December 31, 1998 to and
including December 30, 2001, 6.00 to 1.00;
(iii) for the period from December 31, 2001 to and
including December 30, 2002, 3.50 to 1.00; and
(iv) for the period from December 31, 2002 and at
all times thereafter, 3.00 to 1.00.
(c) Consolidated Net Worth. At all times the Consolidated Net
Worth of the Borrower shall be greater than or equal to the sum of
$18,000,000, increased on a cumulative basis as of the end of each
fiscal quarter of the Credit Parties, commencing
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with the fiscal quarter ending June 30, 1998 by an amount equal to 50%
of Consolidated Net Income (to the extent positive) for the fiscal
quarter then ended.
7.12 ADDITIONAL CREDIT PARTIES.
As soon as practicable and in any event within 30 days after any Person
becomes a Subsidiary of any Credit Party, the Borrower shall provide the Agent
with written notice thereof setting forth information in reasonable detail
describing all of the assets of such Person and shall (a) cause such Person to
execute a Joinder Agreement in substantially the same form as Exhibit 7.12, (b)
cause 100% of the Capital Stock of such Person to be delivered to the Agent
(together with undated stock powers signed in blank) and pledged to the Agent
pursuant to an appropriate pledge agreement(s) in substantially the form of the
Pledge Agreement and otherwise in form acceptable to the Agent and (c) cause
such Person to (i) if such Person owns or leases any real property located in
the United States of America or deemed to be material by the Agent or the
Required Lenders in its or their sole reasonable discretion, deliver to the
Agent with respect to such real property documents, instruments and other items
of the types required to be delivered pursuant to Section 5.1(e) all in form,
content and scope reasonably satisfactory to the Agent and (ii) deliver such
other documentation as the Agent may reasonably request in connection with the
foregoing, including, without limitation, appropriate UCC-1 financing
statements, real estate title insurance policies, environmental reports,
landlord's waivers, certified resolutions and other organizational and
authorizing documents of such Person, favorable opinions of counsel to such
Person (which shall cover, among other things, the legality, validity, binding
effect and enforceability of the documentation referred to above and the
perfection of the Agent's liens thereunder) and other items of the types
required to be delivered pursuant to Section 5.1(b), (c), (d) and (e), all in
form, content and scope reasonably satisfactory to the Agent.
7.13 PLEDGED ASSETS.
Each Credit Party will, and will cause each of its Subsidiaries to,
cause (i) all of its owned real and personal property located in the United
States, (ii) to the extent deemed to be material by the Agent or the Required
Lenders in its or their sole reasonable discretion, all of its other owned real
and personal property and (iii) all of its leased real property located in the
United States to be subject at all times to first priority, perfected and, in
the case of real property (whether leased or owned), title insured Liens in
favor of the Agent pursuant to the terms and conditions of the Collateral
Documents or, with respect to any such property acquired subsequent to the
Closing Date, such other additional security documents as the Agent shall
reasonably request. With respect to any real property (whether leased or owned)
located in the United States of America acquired by any direct or indirect
Subsidiary of the Borrower subsequent to the Closing Date, such Person will
cause to be delivered to the Agent with respect to such real property documents,
instruments and other items of the types required to be delivered pursuant to
Section 5.1(e) in form acceptable to the Agent. Without limiting the generality
of the above, the Credit Parties will cause 100% of the Capital Stock in the
Borrower and each of the other direct or indirect Subsidiaries of the Parent to
be subject at all times to a first priority, perfected Lien in favor of the
Agent pursuant to the terms and conditions of the Collateral Documents or such
other security documents as the Agent shall reasonably request.
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If, subsequent to the Closing Date, a Credit Party shall (a) acquire
any intellectual property, securities, instruments, chattel paper or other
personal property required to be delivered to the Agent as Collateral hereunder
or under any of the Collateral Documents or (b) acquire or lease any real
property, the Borrower shall promptly (and in any event within three (3)
Business Days) after any Executive Officer of a Credit Party acquires knowledge
of same notify the Agent of same. Each Credit Party shall, and shall cause each
of its Subsidiaries to, take such action (including but not limited to the
actions set forth in Sections 5.1(d) and (e)) at its own expense as requested by
the Agent to ensure that the Agent has a first priority perfected Lien to secure
the Credit Party Obligations in (i) all owned real property and personal
property of the Credit Parties located in the United States, (ii) to the extent
deemed to be material by the Agent or the Required Lenders in its or their sole
reasonable discretion, all other owned real and personal property of the Credit
Parties and (iii) all leased real property located in the United States, subject
in each case only to Permitted Liens. Each Credit Party shall, and shall cause
each of its Subsidiaries to, adhere to the covenants regarding the location of
personal property as set forth in the Security Agreements.
SECTION 8
NEGATIVE COVENANTS
Each Credit Party hereby covenants and agrees that, so long as this
Credit Agreement is in effect or any amounts payable hereunder or under any
other Credit Document shall remain outstanding, and until all of the Commitments
hereunder shall have terminated:
8.1 INDEBTEDNESS.
The Credit Parties will not permit any Credit Party to contract,
create, incur, assume or permit to exist any Indebtedness, except:
(a) Indebtedness arising under this Credit Agreement and the
other Credit Documents;
(b) Indebtedness of the Borrower set forth in Schedule 8.1,
Indebtedness arising under the Senior Note Agreement and the Senior
Notes (and renewals, refinancings and extensions thereof, provided that
the principal amount of such Indebtedness as so renewed, refinanced or
extended shall not exceed in principal amount the principal balance
outstanding thereon at the time of such renewal, refinancing or
extension);
(c) purchase money Indebtedness (including Capital Leases or
Synthetic Leases) hereafter incurred by the Borrower to finance the
purchase of fixed assets provided that (i) the total of all such
Indebtedness shall not exceed
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an aggregate principal amount of $5,000,000 at any one time outstanding
(including any such Indebtedness referred to in subsection (b) above);
(ii) such Indebtedness when incurred shall not exceed the purchase
price of the asset(s) financed; and (iii) no such Indebtedness shall be
refinanced for a principal amount in excess of the principal balance
outstanding thereon at the time of such refinancing;
(d) obligations of the Borrower in respect of Hedging
Agreements entered into in order to manage existing or anticipated
interest rate or exchange rate risks and not for speculative purposes;
(e) the incurrence by the Borrower or any of its Subsidiaries
of intercompany Indebtedness between or among the Borrower and any of
its Wholly Owned Subsidiaries; provided that (i) if the Borrower is the
obligor on such Indebtedness, such Indebtedness is expressly
subordinated to the prior payment in full in cash of all of the Credit
Party Obligations with respect to this Credit Agreement and (ii)(A) any
subsequent issuance or transfer of Capital Stock that results in any
such Indebtedness being held by a Person other than the Borrower or a
Subsidiary thereof and (B) any sale or other transfer of any such
Indebtedness to a Person that is not either the Borrower or a Wholly
Owned Subsidiary thereof shall be deemed, in each case, to constitute
an incurrence of such Indebtedness by the Borrower or such Subsidiary,
as the case may be, that was not permitted by this clause (e);
(f) the guarantee by the Borrower or a Subsidiary of the
Borrower of Indebtedness of the Borrower or a Subsidiary of the
Borrower that was permitted to be incurred by another provision of this
Section 8.1;
(g) Acquired Debt of a Subsidiary of the Borrower, which
Subsidiary was acquired after the Closing Date and which Acquired Debt
was in existence at the time of acquisition by the Borrower of such
Subsidiary, and not incurred in contemplation of such acquisition, if
such Acquired Debt is Non-Recourse Debt (except with respect to such
Subsidiary and its Subsidiaries) and such Acquired Debt for all such
Persons does not exceed an aggregate principal amount of $5,000,000 at
any one time outstanding;
(h) Indebtedness of the Borrower in the form of holdback notes
or deferred purchase price in connection with an in an amount not to
exceed an aggregate principal amount equal to the lesser of $5,000,000
or 20% of the purchase price paid by the Borrower and its Subsidiaries
for such acquisition;
(i) obligations in respect of performance bonds and completion
guarantees provided by the Borrower or any Subsidiary of the Borrower
in the ordinary course of business; and
(j) other Indebtedness in an aggregate principal amount (or
accreted value, as applicable) at any time outstanding, including all
Permitted Refinancing Indebtedness incurred to refund, refinance or
replace any Indebtedness incurred pursuant to this clause (j), not to
exceed an aggregate principal amount of $5,000,000 at any one time
outstanding.
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8.2 LIENS.
The Credit Parties will not permit any Credit Party to contract,
create, incur, assume or permit to exist any Lien with respect to any of its
Property, whether now owned or after acquired, except for Permitted Liens.
8.3 NATURE OF BUSINESS.
The Credit Parties will not permit any Credit Party to engage in any
business other a Permitted Business.
8.4 CONSOLIDATION, MERGER, DISSOLUTION, ETC.
Except in connection with an Asset Disposition permitted by the terms
of Section 8.5, the Credit Parties will not permit any Credit Party to enter
into any transaction of merger or consolidation or liquidate, wind up or
dissolve itself (or suffer any liquidation or dissolution); provided that,
notwithstanding the foregoing provisions of this Section 8.4, (a) the Borrower
may merge or consolidate with any of its Subsidiaries provided that the Borrower
shall be the continuing or surviving corporation, (b) any Credit Party other
than the Parent or the Borrower may merge or consolidate with any other Credit
Party other than the Parent or the Borrower and (c) any Wholly-Owned Subsidiary
of the Borrower may dissolve, liquidate or wind up its affairs at any time.
8.5 ASSET DISPOSITIONS.
The Credit Parties will not permit any Credit Party to make any Asset
Disposition (including, without limitation, any Sale and Leaseback Transaction)
other than Excluded Asset Dispositions unless (a) the consideration paid in
connection therewith is cash or Cash Equivalents, (b) if such transaction is a
Sale and Leaseback Transaction, such transaction is permitted by the terms of
Section 8.13, (c) such transaction does not involve the sale or other
disposition of a minority equity interest in any Credit Party, (d) the aggregate
net book value of all of the assets sold or otherwise disposed of by the Credit
Parties in all such transactions after the Closing Date shall not exceed
$10,000,000 and (e) no later than 5 days prior to such Asset Disposition, the
Agent and the Lenders shall have received a certificate of an Executive Officer
of the Borrower specifying the anticipated or actual date of such Asset
Disposition, briefly describing the assets to be sold or otherwise disposed of
and setting forth the net book value of such assets, the aggregate consideration
and the Net Cash Proceeds to be received for such assets in connection with such
Asset Disposition, and thereafter the Borrower shall, within the 6-month period
beginning 3 months prior to the consummation of such Asset Disposition (with
respect to any such Asset Disposition, the "Application Period"), apply (or
cause to be applied) an amount equal to the Net Cash Proceeds of such Asset
Disposition to (i) the purchase, acquisition or, in the case of improvements to
real property, construction of Eligible Assets or (ii) to the prepayment of the
Loans in accordance with the terms of Section 3.3(b)(iii).
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Upon a sale of assets or the sale of Capital Stock of a Credit Party
permitted by this Section 8.5, the Agent shall (to the extent applicable)
deliver to the Borrower, upon the Borrower's request and at the Borrower's
expense, such documentation as is reasonably necessary to evidence the release
of the Agent's security interest, if any, in such assets or Capital Stock,
including, without limitation, amendments or terminations of UCC financing
statements, if any, the return of stock certificates, if any, and the release of
such Credit Party from all of its obligations, if any, under the Credit
Documents.
8.6 INVESTMENTS.
The Credit Parties will not permit any Credit Party to make Investments
in or to any Person, except for Permitted Investments.
8.7 RESTRICTED PAYMENTS.
The Credit Parties will not permit any Credit Party to, directly or
indirectly, declare, order, make or set apart any sum for or pay any Restricted
Payment, except (i) to make dividends payable solely in the same class of
Capital Stock of such Person, (ii) to make dividends or other distributions
payable to any Credit Party other than the Parent, (iii) as permitted by Section
8.8 or Section 8.9, (iv) payments to the Parent pursuant to a tax sharing
agreement under which the Borrower is allocated its proportionate share of the
tax liability of the affiliated group of corporations that file consolidated
federal income tax returns (or that file state or local income tax returns on a
consolidated basis), (v) to make distributions by the Borrower to enable the
Parent to make any payment which would constitute an "Exempt Affiliate
Transaction" under clause (b), (c), (d), (f) or (h) of the definition of such
term set forth in Section 1.1 and (vi) provided that no Default or Event of
Default exists either before or after giving effect thereto, (A) the repurchase,
redemption or other acquisition or retirement for value of any Capital Stock of
the Borrower or any Subsidiary of the Borrower held by any member of the
Borrower's (or any of its Subsidiaries') management pursuant to any management
equity subscription agreement or stock option agreement in effect as of the date
of this Credit Agreement or entered into after the Closing Date with members of
the management of any Person acquired after the Closing Date in connection with
the acquisition of such Person or the repurchase of Capital Stock of the
Borrower or any Subsidiary of the Borrower held by employees, former employees,
directors or former directors pursuant to the terms of agreements (including
employment agreements) approved by the Parent's Board of Directors; provided
that the aggregate price paid for all such repurchased, redeemed, acquired or
retired Capital Stock shall not exceed $500,000 in any twelve-month period, (B)
payments to the Parent in an amount not to exceed the amount of the Borrower's
federal and state income tax liability that the Borrower would owe if it were
filing a separate income tax return as a stand alone company (or, if there are
any Subsidiaries of the Borrower, the amount of the federal and state income tax
liability for which the Borrower and such Subsidiaries would be liable if the
Borrower and such subsidiaries were filing a separate consolidated (or combined)
income tax return) plus $100,000; provided, that any such payment shall not
exceed the tax liability of the Parent that is actually then due and payable,
(C) loans, advances, dividends or distributions by the Borrower or any of its
Subsidiaries to the Parent to pay for corporate, administrative and operating
expenses in the ordinary course of business, including payment of directors' and
officers'
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liability insurance premiums, directors' fees, and fees, expenses and
indemnities in connection with the Transactions, in an aggregate amount not to
exceed $250,000 in any fiscal year and (D)(1) loans, advances, dividends or
distributions by the Borrower or any of its Subsidiaries to the Parent not to
exceed an amount necessary to permit the Parent to pay (I) its costs (including
all professional fees and expenses) incurred to comply with its reporting
obligations under federal or state laws or in connection with reporting or other
obligations hereunder or under the other Credit Documents, (II) its expenses
incurred in connection with any public offering of equity securities which has
been terminated by the Parent's Board of Directors, the net proceeds of which
were specifically intended to be received by or contributed or loaned to the
Borrower as evidenced by a resolution of the Parent's Board of Directors and (2)
loans or advances by the Borrower or any of its Subsidiaries to the Parent not
to exceed an amount necessary to permit the Parent to pay its interim expenses
incurred in connection with any public offering of equity securities the net
proceeds of which are specifically intended to be received by or contributed or
loaned to the Borrower, which, unless such offering shall have been terminated
by the Parent's Board of Directors shall be repaid to the Borrower promptly out
of the proceeds of such offering.
8.8 PREPAYMENTS OF INDEBTEDNESS, ETC.
The Credit Parties will not permit any Credit Party to (a) after the
issuance thereof, amend or modify (or permit the amendment or modification of)
any of the terms of any Indebtedness if such amendment or modification, taken
together with other amendments or modifications in respect of such Indebtedness
taken as a whole, would add or change any terms in a manner adverse to the
issuer of such Indebtedness, or shorten the final maturity or average life to
maturity or require any payment to be made sooner than originally scheduled or
increase the interest rate applicable thereto or change any subordination
provision thereof, or (b) if any Default or Event of Default has occurred and is
continuing or would be directly or indirectly caused as a result thereof, make
(or give any notice with respect thereto) any voluntary or optional payment or
prepayment or redemption or acquisition for value of (including without
limitation, by way of depositing money or securities with the trustee with
respect thereto before due for the purpose of paying when due), refund,
refinance or exchange of any other Indebtedness (including without limitation
any Indebtedness arising under the Senior Note Agreement and the Senior Notes).
8.9 TRANSACTIONS WITH AFFILIATES.
The Credit Parties will not permit any Credit Party to enter into or
permit to exist any transaction or series of transactions with any officer,
director, shareholder, Subsidiary or Affiliate of such Person other than (a)
Exempt Affiliate Transactions, (b) advances of working capital to any Credit
Party other than the Parent, (c) transfers of cash and assets to any Credit
Party other than the Parent, (d) transactions permitted by Section 8.4, Section
8.5, Section 8.6, Section 8.7 or Section 8.8, (e) normal compensation and
reimbursement of expenses of officers and directors and (f) except as otherwise
specifically limited in this Credit Agreement, other transactions which are
entered into in the ordinary course of such Person's business on terms and
conditions substantially as favorable to such Person as would be obtainable by
it in a comparable arms-length transaction with a Person other than an officer,
director, shareholder, Subsidiary or Affiliate.
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8.10 FISCAL YEAR.
The Credit Parties will not permit any Credit Party to change its
fiscal year without the prior written consent of the Required Lenders.
8.11 LIMITATION ON RESTRICTED ACTIONS.
The Credit Parties will not permit any Credit Party to, directly or
indirectly, create or otherwise cause or suffer to exist or become effective any
encumbrance or restriction on the ability of any such Person to (a) pay
dividends or make any other distributions to any Credit Party on its Capital
Stock or with respect to any other interest or participation in, or measured by,
its profits, (b) pay any Indebtedness or other obligation owed to any Credit
Party, (c) make loans or advances to any Credit Party, (d) sell, lease or
transfer any of its properties or assets to any Credit Party, or (e) act as a
Guarantor and pledge its assets pursuant to the Credit Documents or any
renewals, refinancings, exchanges, refundings or extension thereof, except (in
respect of any of the matters referred to in clauses (a)-(d) above) for such
encumbrances or restrictions existing under or by reason of (i) this Credit
Agreement and the other Credit Documents, (ii) the Senior Note Agreement, as in
effect as of the Closing Date (and any renewals, refinancings and extensions
thereof, that do not contain any such encumbrances or restrictions that are
materially more adverse to the Credit Parties than the corresponding provisions
of the Senior Note Agreement); (iii) applicable law, (iv) any document or
instrument governing Indebtedness incurred pursuant to Section 8.1(c), (g) or
(j), provided that, in the case of any Indebtedness incurred pursuant to Section
8.1(c), any such restriction shall relate only to the asset or assets
constructed or acquired in connection therewith or (v) any Permitted Lien or any
document or instrument governing any Permitted Lien, provided that any such
restriction contained therein relates only to the asset or assets subject to
such Permitted Lien.
8.12 OWNERSHIP OF SUBSIDIARIES; LIMITATIONS ON PARENT.
Notwithstanding any other provisions of this Credit Agreement to the
contrary:
(a) Except for Permitted Investments, the Credit Parties will
not permit any Credit Party to (i) permit any Person (other than the
Borrower or any Wholly-Owned Subsidiary of the Borrower) to own any
Capital Stock of any Subsidiary of the Borrower, (ii) permit any
Subsidiary of the Borrower to issue Capital Stock (except to the
Borrower or to a Wholly-Owned Subsidiary of the Borrower), (iii)
permit, create, incur, assume or suffer to exist any Lien thereon, in
each case except (A) as a result of or in connection with a
dissolution, merger or disposition of a Subsidiary permitted under
Section 8.4 or Section 8.5 or (B) for Permitted Liens and (iv)
notwithstanding anything to the contrary contained in clause (ii)
above, permit any Subsidiary of the Borrower to issue any shares of
preferred Capital Stock.
(b) The Parent shall not (i) hold any assets other than the
Capital Stock of the Borrower, (ii) have any liabilities other than (A)
the liabilities under the Credit Documents, (B) tax liabilities in the
ordinary course of business, (C) loans, advances and other
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obligations permitted under Section 8.9 and (D) corporate,
administrative and operating expenses in the ordinary course of
business and (iii) engage in any business other than (A) owning the
Capital Stock of the Borrower and activities incidental or related
thereto, (B) acting as a Guarantor hereunder and pledging its assets to
the Agent, for the benefit of the Lenders, pursuant to the Collateral
Documents to which it is a party and (C) acting as a guarantor in
respect of the Indebtedness arising under the Senior Notes.
8.13 SALE LEASEBACKS.
The Credit Parties will not permit any Credit Party to, directly or
indirectly, become or remain liable as lessee or as guarantor or other surety
with respect to any lease, whether an Operating Lease or a Capital Lease, of any
Property (whether real, personal or mixed), whether now owned or hereafter
acquired, (a) which such Credit Party has sold or transferred or is to sell or
transfer to a Person which is not a Credit Party or (b) which such Credit Party
intends to use for substantially the same purpose as any other Property which
has been sold or is to be sold or transferred by such Credit Party to another
Person which is not a Credit Party in connection with such lease.
8.14 CAPITAL EXPENDITURES.
The Credit Party will not permit Consolidated Capital Expenditures for
any fiscal year for to exceed (i) for fiscal year 1998, $12,500,000, (ii) for
fiscal year 1999, $17,500,000 plus the unused portion of permitted Consolidated
Capital Expenditures for fiscal year 1998, (iii) for fiscal year 2000,
$12,500,000 plus the unused portion of permitted Consolidated Capital
Expenditures for fiscal year 1999 (including any carry forward available in
fiscal year 1999 in respect of any unused portion of permitted Consolidated
Capital Expenditures for fiscal year 1998), (iv) for fiscal year 2001,
$5,000,000 plus the unused portion of permitted Consolidated Capital
Expenditures for fiscal year 2000 (including any carry forward available in
fiscal year 2000 in respect of any unused portion of permitted Consolidated
Capital Expenditures for fiscal years 1998 and 1999) or (iv) for any fiscal year
thereafter, $5,000,000 (without any carry forward from a prior fiscal year).
8.15 NO FURTHER NEGATIVE PLEDGES.
The Credit Parties will not permit any Credit Party to enter into,
assume or become subject to any agreement prohibiting or otherwise restricting
the creation or assumption of any Lien upon its properties or assets, whether
now owned or hereafter acquired, or requiring the grant of any security for such
obligation if security is given for some other obligation unless such agreement
expressly permits that the obligations of the Credit Parties hereunder may be
secured to the extent contemplated hereby and by the other Credit Documents.
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8.16 OPERATING LEASE OBLIGATIONS.
The Credit Parties will not permit any Credit Party to enter into,
assume or permit to exist any obligations for the payment of rental under
Operating Leases which in the aggregate for all such Persons would exceed
$5,000,000 in any fiscal year.
8.17 NO FOREIGN SUBSIDIARIES.
None of the Credit Parties will create, acquire or permit to exist any
direct or indirect Foreign Subsidiary.
SECTION 9
EVENTS OF DEFAULT
9.1 EVENTS OF DEFAULT.
An Event of Default shall exist upon the occurrence of any of the
following specified events (each an "Event of Default"):
(a) Payment. Any Credit Party shall
(i) default in the payment when due of any principal
of any of the Loans or of any reimbursement obligations
arising from drawings under Letters of Credit, or
(ii) default, and such default shall continue for
three (3) or more Business Days, in the payment when due of
any interest on the Loans or on any reimbursement obligations
arising from drawings under Letters of Credit, or of any Fees
or other amounts owing hereunder, under any of the other
Credit Documents or in connection herewith or therewith; or
(b) Representations. Any representation, warranty or statement
made or deemed to be made by any Credit Party herein, in any of the
other Credit Documents, or in any statement or certificate delivered or
required to be delivered pursuant hereto or thereto shall prove untrue
in any material respect on the date as of which it was deemed to have
been made; or
(c) Covenants. Any Credit Party shall
(i) default in the due performance or observance of
any term, covenant or agreement contained in Sections 7.2,
7.9, 7.11, 7.12, 7.13 or 8.1 through 8.17, inclusive;
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(ii) default in the due performance or observance of
any term, covenant or agreement contained in Sections 7.1(a),
(b) (c) or (d) and such default shall continue unremedied for
a period of at least 5 days after the earlier of an Executive
Officer of a Credit Party becoming aware of such default or
notice thereof by the Agent; or
(iii) default in the due performance or observance by
it of any term, covenant or agreement (other than those
referred to in subsections (a), (b), (c)(i) or (c)(ii) of this
Section 9.1) contained in this Credit Agreement and such
default shall continue unremedied for a period of at least 30
days after the earlier of an Executive Officer of a Credit
Party becoming aware of such default or notice thereof by the
Agent; or
(d) Other Credit Documents. (i) Any Credit Party shall default
in the due performance or observance of any term, covenant or agreement
in any of the other Credit Documents (subject to applicable grace or
cure periods, if any), or (ii) except as a result of or in connection
with a dissolution, merger or disposition of a Subsidiary permitted
under Section 8.4 or Section 8.5, any Credit Document shall fail to be
in full force and effect or to give the Agent and/or the Lenders the
Liens, rights, powers and privileges purported to be created thereby,
or any Credit Party shall so state in writing; or
(e) Guaranties. Except as the result of or in connection with
a dissolution, merger or disposition of a Subsidiary permitted under
Section 8.4 or Section 8.5, the guaranty given by any Guarantor
hereunder (including any Additional Credit Party) or any provision
thereof shall cease to be in full force and effect, or any Guarantor
(including any Additional Credit Party) hereunder or any Person acting
by or on behalf of such Guarantor shall deny or disaffirm such
Guarantor's obligations under such guaranty, or any Guarantor shall
default in the due performance or observance of any term, covenant or
agreement on its part to be performed or observed pursuant to any
guaranty; or
(f) Bankruptcy, etc. Any Bankruptcy Event shall occur with
respect to any Credit Party; or
(g) Defaults under Other Agreements.
(i) Any Credit Party shall default in the performance
or observance (beyond the applicable grace period with respect
thereto, if any) or any material obligation or condition of
any contract or lease material to the Credit Parties, taken as
a whole; or
(ii) With respect to any Indebtedness (other than
Indebtedness outstanding under this Credit Agreement) in
excess of $1,00,000 in the aggregate for the Credit Parties
taken as a whole, (A) any Credit Party shall (1) default in
any payment (beyond the applicable grace period with respect
thereto, if any) with respect to any such Indebtedness, or (2)
the occurrence and continuance of a
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default in the observance or performance relating to such
Indebtedness or contained in any instrument or agreement
evidencing, securing or relating thereto, or any other event
or condition shall occur or condition exist, the effect of
which default or other event or condition is to cause, or
permit, the holder or holders of such Indebtedness (or trustee
or agent on behalf of such holders) to cause (determined
without regard to whether any notice or lapse of time is
required), any such Indebtedness to become due prior to its
stated maturity; or (B) any such Indebtedness shall be
declared due and payable, or required to be prepaid other than
by a regularly scheduled required prepayment, prior to the
stated maturity thereof; or
(h) Judgments. One or more judgments or decrees shall be
entered against one or more of the Credit Parties involving a liability
of $1,00,000 or more in the aggregate (to the extent not paid or fully
covered by insurance provided by a carrier who has acknowledged
coverage and has the ability to perform) and any such judgments or
decrees shall not have been vacated, discharged or stayed or bonded
pending appeal within 30 days from the entry thereof; or
(i) ERISA. Any of the following events or conditions, if such
event or condition would cause or be reasonably expected to cause a
Material Adverse Effect: (i) any "accumulated funding deficiency," as
such term is defined in Section 302 of ERISA and Section 412 of the
Code, whether or not waived, shall exist with respect to any Plan, or
any lien shall arise on the assets of any Credit Party or any ERISA
Affiliate in favor of the PBGC or a Plan; (ii) an ERISA Event shall
occur with respect to a Single Employer Plan, which is, in the
reasonable opinion of the Agent, likely to result in the termination of
such Plan for purposes of Title IV of ERISA; (iii) an ERISA Event shall
occur with respect to a Multiemployer Plan or Multiple Employer Plan,
which is, in the reasonable opinion of the Agent, likely to result in
(A) the termination of such Plan for purposes of Title IV of ERISA, or
(B) any Credit Party or any ERISA Affiliate incurring any liability in
connection with a withdrawal from, reorganization of (within the
meaning of Section 4241 of ERISA), or insolvency or (within the meaning
of Section 4245 of ERISA) such Plan; or (iv) any prohibited transaction
(within the meaning of Section 406 of ERISA or Section 4975 of the
Code) or breach of fiduciary responsibility shall occur which may
subject any Credit Party or any ERISA Affiliate to any liability under
Sections 406, 409, 502(i), or 502(l) of ERISA or Section 4975 of the
Code, or under any agreement or other instrument pursuant to which any
Credit Party or any ERISA Affiliate has agreed or is required to
indemnify any person against any such liability; or
(j) Senior Note Agreement. There shall occur and be continuing
any Event of Default under and as defined in the Senior Note Agreement;
or
(k) Ownership. There shall occur a Change of Control.
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9.2 ACCELERATION; REMEDIES.
Upon the occurrence of an Event of Default, and at any time thereafter
unless and until such Event of Default has been waived by the requisite Lenders
(pursuant to the voting requirements of Section 11.6) or cured to the
satisfaction of the requisite Lenders (pursuant to the voting procedures in
Section 11.6), the Agent shall, upon the request and direction of the Required
Lenders, by written notice to the Credit Parties take any of the following
actions:
(a) Termination of Commitments. Declare the Commitments
terminated whereupon the Commitments shall be immediately terminated.
(b) Acceleration. Declare the unpaid principal of and any
accrued interest in respect of all Loans, any reimbursement obligations
arising from drawings under Letters of Credit and any and all other
indebtedness or obligations of any and every kind owing by the Borrower
to the Agent and/or any of the Lenders hereunder to be due whereupon
the same shall be immediately due and payable without presentment,
demand, protest or other notice of any kind, all of which are hereby
waived by the Borrower.
(c) Cash Collateral. Direct the Borrower to pay (and the
Borrower agrees that upon receipt of such notice, or upon the
occurrence of an Event of Default under Section 9.1(f), it will
immediately pay) to the Agent additional cash, to be held by the Agent,
for the benefit of the Lenders, in a cash collateral account as
additional security for the LOC Obligations in respect of subsequent
drawings under all then outstanding Letters of Credit in an amount
equal to the maximum aggregate amount which may be drawn under all
Letters of Credits then outstanding.
(d) Enforcement of Rights. Enforce any and all rights and
interests created and existing under the Credit Documents including,
without limitation, all rights and remedies existing under the
Collateral Documents, all rights and remedies against a Guarantor and
all rights of set-off.
Notwithstanding the foregoing, if an Event of Default specified in
Section 9.1(f) shall occur, then the Commitments shall automatically terminate
and all Loans, all reimbursement obligations arising from drawings under Letters
of Credit, all accrued interest in respect thereof, all accrued and unpaid Fees
and other indebtedness or obligations owing to the Agent and/or any of the
Lenders hereunder automatically shall immediately become due and payable without
the giving of any notice or other action by the Agent or the Lenders.
SECTION 10
AGENCY PROVISIONS
10.1 APPOINTMENT, POWERS AND IMMUNITIES.
Each Lender hereby irrevocably appoints and authorizes the Agent to act
as its agent under this Credit Agreement and the other Credit Documents with
such powers and discretion as
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are specifically delegated to the Agent by the terms of this Credit Agreement
and the other Credit Documents, together with such other powers as are
reasonably incidental thereto. The Agent (which term as used in this sentence
and in Section 10.5 and the first sentence of Section 10.6 hereof shall include
its Affiliates and its own and its Affiliates' officers, directors, employees,
and agents): (a) shall not have any duties or responsibilities except those
expressly set forth in this Credit Agreement and shall not be a trustee or
fiduciary for any Lender; (b) shall not be responsible to the Lenders for any
recital, statement, representation, or warranty (whether written or oral) made
in or in connection with any Credit Document or any certificate or other
document referred to or provided for in, or received by any of them under, any
Credit Document, or for the value, validity, effectiveness, genuineness,
enforceability, or sufficiency of any Credit Document, or any other document
referred to or provided for therein or for any failure by any Credit Party or
any other Person to perform any of its obligations thereunder; (c) shall not be
responsible for or have any duty to ascertain, inquire into, or verify the
performance or observance of any covenants or agreements by any Credit Party or
the satisfaction of any condition or to inspect the property (including the
books and records) of any Credit Party or any of its Subsidiaries or Affiliates;
(d) shall not be required to initiate or conduct any litigation or collection
proceedings under any Credit Document; and (e) shall not be responsible for any
action taken or omitted to be taken by it under or in connection with any Credit
Document, except for its own gross negligence or willful misconduct. The Agent
may employ agents and attorneys-in-fact and shall not be responsible for the
negligence or misconduct of any such agents or attorneys-in-fact selected by it
with reasonable care.
10.2 RELIANCE BY AGENT.
The Agent shall be entitled to rely upon any certification, notice,
instrument, writing, or other communication (including, without limitation, any
thereof by telephone or telecopy) believed by it to be genuine and correct and
to have been signed, sent or made by or on behalf of the proper Person or
Persons, and upon advice and statements of legal counsel (including counsel for
any Credit Party), independent accountants, and other experts selected by the
Agent. The Agent may deem and treat the payee of any Note as the holder thereof
for all purposes hereof unless and until the Agent receives and accepts an
Assignment and Acceptance executed in accordance with Section 11.3(b) hereof. As
to any matters not expressly provided for by this Credit Agreement, the Agent
shall not be required to exercise any discretion or take any action, but shall
be required to act or to refrain from acting (and shall be fully protected in so
acting or refraining from acting) upon the instructions of the Required Lenders,
and such instructions shall be binding on all of the Lenders; provided, however,
that the Agent shall not be required to take any action that exposes the Agent
to personal liability or that is contrary to any Credit Document or applicable
law or unless it shall first be indemnified to its satisfaction by the Lenders
against any and all liability and expense which may be incurred by it by reason
of taking any such action.
10.3 DEFAULTS.
The Agent shall not be deemed to have knowledge or notice of the
occurrence of a Default or Event of Default unless the Agent has received
written notice from a Lender or the Borrower specifying such Default or Event of
Default and stating that such notice is a "Notice of
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Default". In the event that the Agent receives such a notice of the occurrence
of a Default or Event of Default, the Agent shall give prompt notice thereof to
the Lenders. The Agent shall (subject to Section 10.2 hereof) take such action
with respect to such Default or Event of Default as shall reasonably be directed
by the Required Lenders, provided that, unless and until the Agent shall have
received such directions, the Agent may (but shall not be obligated to) take
such action, or refrain from taking such action, with respect to such Default or
Event of Default as it shall deem advisable in the best interest of the Lenders.
10.4 RIGHTS AS A LENDER.
With respect to its Commitment and the Loans made by it, NationsBank
(and any successor acting as Agent) in its capacity as a Lender hereunder shall
have the same rights and powers hereunder as any other Lender and may exercise
the same as though it were not acting as the Agent, and the term "Lender" or
"Lenders" shall, unless the context otherwise indicates, include the Agent in
its individual capacity. NationsBank (and any successor acting as Agent) and its
Affiliates may (without having to account therefor to any Lender) accept
deposits from, lend money to, make investments in, provide services to, and
generally engage in any kind of lending, trust, or other business with any
Credit Party or any of its Subsidiaries or Affiliates as if it were not acting
as Agent, and NationsBank (and any successor acting as Agent) and its Affiliates
may accept fees and other consideration from any Credit Party or any of its
Subsidiaries or Affiliates for services in connection with this Credit Agreement
or otherwise without having to account for the same to the Lenders.
10.5 INDEMNIFICATION.
The Lenders agree to indemnify the Agent (to the extent not reimbursed
under Section 11.5 hereof, but without limiting the obligations of the Borrower
under such Section) ratably in accordance with their respective Commitments, for
any and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses (including attorneys' fees), or disbursements
of any kind and nature whatsoever that may be imposed on, incurred by or
asserted against the Agent (including by any Lender) in any way relating to or
arising out of any Credit Document or the transactions contemplated thereby or
any action taken or omitted by the Agent under any Credit Document; provided
that no Lender shall be liable for any of the foregoing to the extent they arise
from the gross negligence or willful misconduct of the Person to be indemnified.
Without limitation of the foregoing, each Lender agrees to reimburse the Agent
promptly upon demand for its ratable share of any costs or expenses payable by
the Borrower under Section 11.5, to the extent that the Agent is not promptly
reimbursed for such costs and expenses by the Borrower. The agreements in this
Section 10.5 shall survive the repayment of the Loans, LOC Obligations and other
obligations under the Credit Documents and the termination of the Commitments
hereunder.
10.6 NON-RELIANCE ON AGENT AND OTHER LENDERS.
Each Lender agrees that it has, independently and without reliance on
the Agent or any other Lender, and based on such documents and information as it
has deemed appropriate, made
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its own credit analysis of the Credit Parties and their Subsidiaries and
decision to enter into this Credit Agreement and that it will, independently and
without reliance upon the Agent or any other Lender, and based on such documents
and information as it shall deem appropriate at the time, continue to make its
own analysis and decisions in taking or not taking action under the Credit
Documents. Except for notices, reports, and other documents and information
expressly required to be furnished to the Lenders by the Agent hereunder, the
Agent shall not have any duty or responsibility to provide any Lender with any
credit or other information concerning the affairs, financial condition, or
business of any Credit Party or any of its Subsidiaries or Affiliates that may
come into the possession of the Agent or any of its Affiliates.
10.7 SUCCESSOR AGENT.
The Agent may resign at any time by giving notice thereof to the
Lenders and the Borrower. Upon any such resignation, the Required Lenders shall
have the right to appoint a successor Agent. If no successor Agent shall have
been so appointed by the Required Lenders and shall have accepted such
appointment within thirty (30) days after the retiring Agent's giving of notice
of resignation, then the retiring Agent may, on behalf of the Lenders, appoint a
successor Agent which shall be a commercial bank organized under the laws of the
United States of America having combined capital and surplus of at least
$100,000,000. Notwithstanding the terms of the two immediately preceding
sentences, unless a Default or Event of Default has occurred and is continuing,
no successor Agent shall be appointed by the Required Lenders or the Agent
without the prior consent of the Borrower (which consent shall not be
unreasonably withheld). Upon the acceptance of any appointment as Agent
hereunder by a successor, such successor shall thereupon succeed to and become
vested with all the rights, powers, discretion, privileges, and duties of the
retiring Agent, and the retiring Agent shall be discharged from its duties and
obligations hereunder. After any retiring Agent's resignation hereunder as
Agent, the provisions of this Section 10 shall continue in effect for its
benefit in respect of any actions taken or omitted to be taken by it while it
was acting as Agent.
SECTION 11
MISCELLANEOUS
11.1 NOTICES.
Except as otherwise expressly provided herein, all notices and other
communications shall have been duly given and shall be effective (a) when
delivered, (b) when transmitted via telecopy (or other facsimile device) to the
number set out below, (c) the Business Day following the day on which the same
has been delivered prepaid to a reputable national overnight air courier
service, or (d) the third Business Day following the day on which the same is
sent by certified or registered mail, postage prepaid, in each case to the
respective parties at the address, in the case of the Borrower, Guarantors and
the Agent, set forth below, and, in the case of the Lenders, set forth on
Schedule 2.1(a), or at such other address as such party may specify by written
notice to the other parties hereto:
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if to the Borrower or the Guarantors:
Simcala, Inc.
P. O Box 68
Mt. Meigs, Alabama 36057-0068
Attn: Chief Financial Officer
Telephone: (334) 215-7560
Telecopy: (334) 215-8232
with a copy to:
CGW Southeast Partners III, L. P.
Suite 210
Twelve Piedmont Center
Atlanta, Georgia 30305
Attn: Bill Davies
Telephone: (404) 816-3255
Telecopy: (404) 816-3258
if to the Agent:
NationsBank, N. A.
Independence Center, 15th Floor
NC1-001-15-04
101 North Tryon Street
Charlotte, North Carolina 28255
Attn: Agency Services/Tim Pacitto
Telephone: (704) 388-1340
Telecopy: (704) 386-0456
with a copy to:
NationsBank, N. A.
NationsBank Corporate Center, 13th Floor
NC1-007-13-06
100 N. Tryon Street
Charlotte, NC 28255
Attn: Curt Lueker
Telephone: (704) 388-7353
Telecopy: (704) 386-9607
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11.2 RIGHT OF SET-OFF; ADJUSTMENTS.
Upon the occurrence and during the continuance of any Event of Default,
each Lender (and each of its Affiliates) is hereby authorized at any time and
from time to time, to the fullest extent permitted by law, to set off and apply
any and all deposits (general or special, time or demand, provisional or final)
at any time held and other indebtedness at any time owing by such Lender (or any
of its Affiliates) to or for the credit or the account of any Credit Party
against any and all of the obligations of such Person now or hereafter existing
under this Credit Agreement, under the Notes, under any other Credit Document or
otherwise, irrespective of whether such Lender shall have made any demand
hereunder or thereunder and although such obligations may be unmatured. Each
Lender agrees promptly to notify any affected Credit Party after any such
set-off and application made by such Lender; provided, however, that the failure
to give such notice shall not affect the validity of such set-off and
application. The rights of each Lender under this Section 11.2 are in addition
to other rights and remedies (including, without limitation, other rights of
set-off) that such Lender may have.
11.3 BENEFIT OF AGREEMENT.
(a) This Credit Agreement shall be binding upon and inure to
the benefit of and be enforceable by the respective successors and
assigns of the parties hereto; provided that none of the Credit Parties
may assign or transfer any of its interests and obligations without
prior written consent of the Lenders; provided further that the rights
of each Lender to transfer, assign or grant participations in its
rights and/or obligations hereunder shall be limited as set forth in
this Section 11.3.
(b) Each Lender may assign to one or more Eligible Assignees
all or a portion of its rights and obligations under this Credit
Agreement (including, without limitation, all or a portion of its
Loans, its Notes, and its Commitment); provided, however, that
(i) each such assignment shall be to an Eligible
Assignee;
(ii) except in the case of an assignment to another
Lender or an assignment of all of a Lender's rights and
obligations under this Credit Agreement, any such partial
assignment shall be in an amount at least equal to $5,000,000
(or, if less, the remaining amount of the Commitment being
assigned by such Lender) or an integral multiple of $1,000,000
in excess thereof;
(iii) each such assignment by a Lender shall be of a
constant, and not varying, percentage of all of its rights and
obligations under this Credit Agreement and the Notes; and
(iv) the parties to such assignment shall execute and
deliver to the Agent for its acceptance an Assignment and
Acceptance in the form of Exhibit 11.3(b) hereto, together
with any Note subject to such assignment and a processing fee
of $3,500.
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Upon execution, delivery, and acceptance of such Assignment and
Acceptance, the assignee thereunder shall be a party hereto and, to the
extent of such assignment, have the obligations, rights, and benefits
of a Lender hereunder and the assigning Lender shall, to the extent of
such assignment, relinquish its rights and be released from its
obligations under this Credit Agreement. Upon the consummation of any
assignment pursuant to this Section 11.3(b), the assignor, the Agent
and the Borrower shall make appropriate arrangements so that, if
required, new Notes are issued to the assignor and the assignee. If the
assignee is not incorporated under the laws of the United States of
America or a state thereof, it shall deliver to the Borrower and the
Agent certification as to exemption from deduction or withholding of
Taxes in accordance with Section 3.11.
(c) The Agent shall maintain at its address referred to in
Section 11.1 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 Lenders and the Commitment of, and principal amount of
the Loans owing to, each Lender from time to time (the "Register"). The
entries in the Register shall be conclusive and binding for all
purposes, absent manifest error, and the Borrower, the Agent and the
Lenders may treat each Person whose name is recorded in the Register as
a Lender hereunder for all purposes of this Credit Agreement. The
Register shall be available for inspection by the Borrower or any
Lender at any reasonable time and from time to time upon reasonable
prior notice.
(d) Upon its receipt of an Assignment and Acceptance executed
by the parties thereto, together with any Note subject to such
assignment and payment of the processing fee, the Agent shall, if such
Assignment and Acceptance has been completed and is in substantially
the form of Exhibit 11.3(b) hereto, (i) accept such Assignment and
Acceptance, (ii) record the information contained therein in the
Register and (iii) give prompt notice thereof to the parties thereto.
(e) Each Lender may sell participations to one or more Persons
in all or a portion of its rights, obligations or rights and
obligations under this Credit Agreement (including all or a portion of
its Commitment or its Loans); provided, however, that (i) such Lender's
obligations under this Credit Agreement shall remain unchanged, (ii)
such Lender shall remain solely responsible to the other parties hereto
for the performance of such obligations, (iii) the participant shall be
entitled to the benefit of the yield protection provisions contained in
Sections 3.7 through 3.12, inclusive, and the right of set-off
contained in Section 11.2, and (iv) the Borrower shall continue to deal
solely and directly with such Lender in connection with such Lender's
rights and obligations under this Credit Agreement, and such Lender
shall retain the sole right to enforce the obligations of the Borrower
relating to its Loans and its Notes and to approve any amendment,
modification, or waiver of any provision of this Credit Agreement
(other than amendments, modifications, or waivers decreasing the amount
of principal of or the rate at which interest is payable on such Loans
or Notes, extending any scheduled principal payment date or date fixed
for the payment of interest on such Loans or Notes, or extending its
Commitment).
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(f) Notwithstanding any other provision set forth in this
Credit Agreement, any Lender may at any time assign and pledge all or
any portion of its Loans and its Notes to any Federal Reserve Bank as
collateral security pursuant to Regulation A and any Operating Circular
issued by such Federal Reserve Bank. No such assignment shall release
the assigning Lender from its obligations hereunder.
(g) Any Lender may furnish any information concerning the
Borrower or any of its Subsidiaries in the possession of such Lender
from time to time to assignees and participants (including prospective
assignees and participants), subject, however, to the provisions of
Section 11.14 hereof.
11.4 NO WAIVER; REMEDIES CUMULATIVE.
No failure or delay on the part of the Agent or any Lender in
exercising any right, power or privilege hereunder or under any other Credit
Document and no course of dealing between the Agent or any Lender and any of the
Credit Parties shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, power or privilege hereunder or under any other
Credit Document preclude any other or further exercise thereof or the exercise
of any other right, power or privilege hereunder or thereunder. The rights and
remedies provided herein are cumulative and not exclusive of any rights or
remedies which the Agent or any Lender would otherwise have. No notice to or
demand on any Credit Party in any case shall entitle the Borrower or any other
Credit Party to any other or further notice or demand in similar or other
circumstances or constitute a waiver of the rights of the Agent or the Lenders
to any other or further action in any circumstances without notice or demand.
11.5 EXPENSES; INDEMNIFICATION.
(a) The Borrower agrees to pay on demand all costs and expenses of the
Agent in connection with the syndication, preparation, execution, delivery,
administration, modification, and amendment of this Credit Agreement, the other
Credit Documents, and the other documents to be delivered hereunder, including,
without limitation, the reasonable fees and expenses of counsel for the Agent
(including the cost of internal counsel) with respect thereto and with respect
to advising the Agent as to its rights and responsibilities under the Credit
Documents. The Borrower further agrees to pay on demand all costs and expenses
of the Agent and the Lenders, if any (including, without limitation, reasonable
attorneys' fees and expenses and the cost of internal counsel), in connection
with the enforcement (whether through negotiations, legal proceedings, or
otherwise) of the Credit Documents and the other documents to be delivered
hereunder.
(b) The Borrower agrees to indemnify and hold harmless the Agent and
each Lender and each of their Affiliates and their respective officers,
directors, employees, agents, and advisors (each, an "Indemnified Party") from
and against any and all claims, damages, losses, liabilities, costs, and
expenses (including, without limitation, reasonable attorneys' fees) that may be
incurred by or asserted or awarded against any Indemnified Party, in each case
arising out of or in connection with or by reason of (including, without
limitation, in connection with any
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investigation, litigation, or proceeding or preparation of defense in connection
therewith) the Credit Documents, any of the transactions contemplated herein or
the actual or proposed use of the proceeds of the Loans, except to the extent
such claim, damage, loss, liability, cost, or expense is found in a final,
non-appealable judgment by a court of competent jurisdiction to have resulted
from such Indemnified Party's gross negligence or willful misconduct. In the
case of an investigation, litigation or other proceeding to which the indemnity
in this Section 11.5 applies, such indemnity shall be effective whether or not
such investigation, litigation or proceeding is brought by the Borrower, its
directors, shareholders or creditors or an Indemnified Party or any other Person
or any Indemnified Party is otherwise a party thereto and whether or not the
transactions contemplated hereby are consummated. The Borrower agrees not to
assert any claim against the Agent, any Lender, any of their Affiliates, or any
of their respective directors, officers, employees, attorneys, agents, and
advisers, on any theory of liability, for special, indirect, consequential, or
punitive damages arising out of or otherwise relating to the Credit Documents,
any of the transactions contemplated herein or the actual or proposed use of the
proceeds of the Loans.
(c) Without prejudice to the survival of any other agreement of the
Borrower hereunder, the agreements and obligations of the Borrower contained in
this Section 11.5 shall survive the repayment of the Loans, LOC Obligations and
other obligations under the Credit Documents and the termination of the
Commitments hereunder.
11.6 AMENDMENTS, WAIVERS AND CONSENTS.
Neither this Credit Agreement nor any other Credit Document nor any of
the terms hereof or thereof may be amended, changed, waived, discharged or
terminated unless such amendment, change, waiver, discharge or termination is in
writing entered into by, or approved in writing by, the Required Lenders and the
Borrower, provided, however, that:
(i) without the consent of each Lender affected thereby,
neither this Credit Agreement nor any other Credit Document may be
amended to
(a) extend the final maturity of any Loan or of any
reimbursement obligation, or any portion thereof, arising from
drawings under Letters of Credit,
(b) reduce the rate or extend the time of payment of
interest (other than as a result of waiving the applicability
of any post-default increase in interest rates) thereon or
Fees hereunder,
(c) reduce or waive the principal amount of any Loan or
of any reimbursement obligation, or any portion thereof,
arising from drawings under Letters of Credit,
(d) increase the Commitment of a Lender over the amount
thereof in effect (it being understood and agreed that a
waiver of any Default or Event of
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Default or mandatory reduction in the Commitments shall not
constitute a change in the terms of any Commitment of any
Lender),
(e) except as the result of or in connection with an
Asset Disposition permitted by Section 8.5, release all or
substantially all of the Collateral,
(f) except as the result of or in connection with a
dissolution, merger or disposition of a Credit Party permitted
under Section 8.4, release the Borrower or substantially all
of the other Credit Parties from its or their obligations
under the Credit Documents,
(g) except amend, modify or waive any provision of this
Section 11.6 or Section 3.6, 3.7, 3.8, 3.9, 3.10, 3.11, 3.12,
3.13, 3.14, 3.15, 9.1(a), 11.2, 11.3, 11.5 or 11.9,
(h) reduce any percentage specified in, or otherwise
modify, the definition of Required Lenders, or
(i) consent to the assignment or transfer by the
Borrower or all or substantially all of the other Credit
Parties of any of its or their rights and obligations under
(or in respect of) the Credit Documents except as permitted
thereby;
(ii) without the consent of the Agent, no provision of Section
10 may be amended;
(iii) without the consent of the Issuing Lender, no provision
of Section 2.2 may be amended.
Notwithstanding the fact that the consent of all the Lenders is
required in certain circumstances as set forth above, (x) each Lender
is entitled to vote as such Lender sees fit on any bankruptcy
reorganization plan that affects the Loans, and each Lender
acknowledges that the provisions of Section 1126(c) of the Bankruptcy
Code supersedes the unanimous consent provisions set forth herein and
(y) the Required Lenders may consent to allow a Credit Party to use
cash collateral in the context of a bankruptcy or insolvency
proceeding.
11.7 COUNTERPARTS.
This Credit Agreement may be executed in any number of counterparts,
each of which when so executed and delivered shall be an original, but all of
which shall constitute one and the same instrument. It shall not be necessary in
making proof of this Credit Agreement to produce or account for more than one
such counterpart for each of the parties hereto. Delivery by facsimile by any of
the parties hereto of an executed counterpart of this Credit Agreement shall be
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as effective as an original executed counterpart hereof and shall be deemed a
representation that an original executed counterpart hereof will be delivered.
11.8 HEADINGS.
The headings of the sections and subsections hereof are provided for
convenience only and shall not in any way affect the meaning or construction of
any provision of this Credit Agreement.
11.9 SURVIVAL.
All indemnities set forth herein, including, without limitation, in
Section 2.2(i), 3.11, 3.12, 10.5 or 11.5 shall survive the execution and
delivery of this Credit Agreement, the making of the Loans, the issuance of the
Letters of Credit, the repayment of the Loans, LOC Obligations and other
obligations under the Credit Documents and the termination of the Commitments
hereunder, and all representations and warranties made by the Credit Parties
herein shall survive delivery of the Notes and the making of the Loans
hereunder.
11.10 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE.
(a) THIS CREDIT AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND
THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER
SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NORTH CAROLINA. Any legal action or proceeding
with respect to this Credit Agreement or any other Credit Document may
be brought in the courts of the State of North Carolina in Mecklenburg
County, or of the United States for the Western District of North
Carolina, and, by execution and delivery of this Credit Agreement, each
of the Credit Parties hereby irrevocably accepts for itself and in
respect of its property, generally and unconditionally, the
nonexclusive jurisdiction of such courts. Each of the Credit Parties
further irrevocably consents to the service of process out of any of
the aforementioned courts in any such action or proceeding by the
mailing of copies thereof by registered or certified mail, postage
prepaid, to it at the address set out for notices pursuant to Section
11.1, such service to become effective three (3) days after such
mailing. Nothing herein shall affect the right of the Agent or any
Lender to serve process in any other manner permitted by law or to
commence legal proceedings or to otherwise proceed against any Credit
Party in any other jurisdiction.
(b) Each of the Credit Parties hereby irrevocably waives any
objection which it may now or hereafter have to the laying of venue of
any of the aforesaid actions or proceedings arising out of or in
connection with this Credit Agreement or any other Credit Document
brought in the courts referred to in subsection (a) above and hereby
further irrevocably waives and agrees not to plead or claim in any such
court that any such action or proceeding brought in any such court has
been brought in an inconvenient forum.
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(c) TO THE EXTENT PERMITTED BY LAW, EACH OF THE AGENT, THE
LENDERS, THE BORROWER AND THE CREDIT PARTIES HEREBY IRREVOCABLY WAIVES
ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
ARISING OUT OF OR RELATING TO THIS CREDIT AGREEMENT, ANY OF THE OTHER
CREDIT DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY.
11.11 SEVERABILITY.
If any provision of any of the Credit Documents is determined to be
illegal, invalid or unenforceable, such provision shall be fully severable and
the remaining provisions shall remain in full force and effect and shall be
construed without giving effect to the illegal, invalid or unenforceable
provisions.
11.12 ENTIRETY.
This Credit Agreement together with the other Credit Documents
represent the entire agreement of the parties hereto and thereto, and supersede
all prior agreements and understandings, oral or written, if any, including any
commitment letters or correspondence relating to the Credit Documents or the
transactions contemplated herein and therein.
11.13 BINDING EFFECT; TERMINATION.
(a) This Credit Agreement shall become effective at such time
on or after the Closing Date when it shall have been executed by the
Borrower, the Guarantors and the Agent, and the Agent shall have
received copies hereof (telefaxed or otherwise) which, when taken
together, bear the signatures of each Lender, and thereafter this
Credit Agreement shall be binding upon and inure to the benefit of the
Borrower, the Guarantors, the Agent and each Lender and their
respective successors and assigns.
(b) The term of this Credit Agreement shall be until no Loans,
LOC Obligations or any other amounts payable hereunder or under any of
the other Credit Documents shall remain outstanding, no Letters of
Credit shall be outstanding, all of the Credit Party Obligations have
been irrevocably satisfied in full and all of the Commitments hereunder
shall have expired or been terminated.
11.14 CONFIDENTIALITY.
Each Lender agrees that it will use its reasonable best efforts to keep
confidential and to cause any representative designated under Section 7.10 to
keep confidential any non-public information from time to time supplied to it
under any Credit Document; provided, however, that nothing herein shall affect
the disclosure of any such information to (i) the extent such Lender in good
faith believes is required by statute, rule, regulation or judicial process,
(ii) counsel for such Lender or to its accountants, (iii) bank examiners or
auditors or comparable Persons, (iv) any affiliate of such Lender, (v) any other
Lender, or any assignee, transferee or participant, or any
95
<PAGE> 101
potential assignee, transferee or participant, of all or any portion of any
Lender's rights under this Credit Agreement who is notified of the confidential
nature of the information and agrees to be bound by this provision or provisions
reasonably comparable hereto, or (vi) any other Person in connection with any
litigation to which any one or more of the Lenders is a party; and provided
further that no Lender shall have any obligation under this Section 11.14 to the
extent any such information becomes available on a non-confidential basis from a
source other than a Credit Party or that any information becomes publicly
available other than by a breach of this Section 11.14. Each Lender agrees it
will use all confidential information exclusively for the purpose of evaluating,
monitoring, selling, protecting or enforcing its Loans and other rights under
the Credit Documents. Without affecting any other rights of the Borrower and the
Credit Parties, each Lender acknowledges that the Borrower shall be entitled to
seek the remedies of injunction, specific performance and other equitable relief
for any breach of the provisions of this Section 11.14.
11.15 SOURCE OF FUNDS.
Each of the Lenders hereby represents and warrants to the Borrower that
at least one of the following statements is an accurate representation as to the
source of funds to be used by such Lender in connection with the financing
hereunder:
(a) no part of such funds constitutes assets allocated to any
separate account maintained by such Lender in which any employee
benefit plan (or its related trust) has any interest;
(b) to the extent that any part of such funds constitutes
assets allocated to any separate account maintained by such Lender,
such Lender has disclosed to the Borrower the name of each employee
benefit plan whose assets in such account exceed 10% of the total
assets of such account as of the date of such purchase (and, for
purposes of this subsection (b), all employee benefit plans maintained
by the same employer or employee organization are deemed to be a single
plan);
(c) to the extent that any part of such funds constitutes
assets of an insurance company's general account, such insurance
company has complied with all of the requirements of the regulations
issued under Section 401(c)(1)(A) of ERISA; or
(d) such funds constitute assets of one or more specific
benefit plans which such Lender has identified in writing to the
Borrower.
As used in this Section 11.15, the terms "employee benefit plan" and "separate
account" shall have the respective meanings assigned to such terms in Section 3
of ERISA.
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11.16 CONFLICT.
To the extent that there is a conflict or inconsistency between any
provision hereof, on the one hand, and any provision of any Credit Document, on
the other hand, this Credit Agreement shall control.
[Signature Page to Follow]
<PAGE> 103
IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart
of this Credit Agreement to be duly executed and delivered as of the date first
above written.
BORROWER: SIMCALA, INC.,
- --------- a Delaware corporation
By: /s/ C. E. Boardwine
-------------------------------------
Name: C. E. Boardwine
Title: President and Chief Executive
Officer
PARENT: SIMCALA HOLDINGS, INC.,
- ------- a Georgia corporation
By: /s/ William A. Davies
-------------------------------------
Name: William A. Davies
Title: Secretary/Treasurer
<PAGE> 104
LENDERS: NATIONSBANK, N. A.,
- -------- individually in its capacity as a
Lender and in its capacity as Agent
By: /s/ Michael D. McKay
-------------------------------------
Name: Michael D. McKay
Title: Senior Vice President
2
<PAGE> 1
EXHIBIT 10.4
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT (this "Pledge Agreement") is entered into as of
March 31, 1998 among SIMCALA, INC., a Delaware corporation (the "Borrower"),
SIMCALA HOLDINGS, INC., a Georgia corporation, and certain Subsidiaries of the
Borrower (individually a "Guarantor", and collectively the "Guarantors";
together with the Borrower, individually a "Pledgor", and collectively the
"Pledgors") and NATIONSBANK, N.A., in its capacity as agent (in such capacity,
the "Agent") for the lenders from time to time party to the Credit Agreement
described below (the "Lenders").
RECITALS
WHEREAS, pursuant to that certain Credit Agreement dated as of the date
hereof (as amended, modified, extended, renewed or replaced from time to time,
the "Credit Agreement") among the Borrower, the Guarantors, the Lenders and the
Agent, the Lenders have agreed to make Loans and issue Letters of Credit upon
the terms and subject to the conditions set forth therein; and
WHEREAS, it is a condition precedent to the effectiveness of the Credit
Agreement and the obligations of the Lenders to make their respective Loans and
to issue Letters of Credit under the Credit Agreement that the Pledgors shall
have executed and delivered this Pledge Agreement to the Agent for the ratable
benefit of the Lenders.
NOW, THEREFORE, in consideration of these premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. Definitions. Unless otherwise defined herein, capitalized terms used
herein shall have the meanings ascribed to such terms in the Credit Agreement.
For purposes of this Pledge Agreement, the term "Lender" shall include any
Affiliate of any Lender which has entered into a Hedging Agreement with the
Borrower.
2. Pledge and Grant of Security Interest. To secure the prompt payment
and performance in full when due, whether by lapse of time or otherwise, of the
Pledgor Obligations (as defined in Section 3 hereof), each Pledgor hereby
pledges and assigns to the Agent, for the benefit of the Lenders, and grants to
the Agent, for the benefit of the Lenders, a continuing security interest in any
and all right, title and interest of such Pledgor in and to the following,
whether now owned or existing or owned, acquired, or arising hereafter
(collectively, the "Pledged Collateral"):
(a) Pledged Shares. 100% (or, if less, the full
amount owned by such Pledgor) of the issued and outstanding shares of
capital stock owned by such Pledgor of each Subsidiary of such Pledgor
set forth on Schedule 2(a) attached hereto, in each case together with
the certificates (or other agreements or instruments), if any,
representing
<PAGE> 2
such shares, and all options and other rights, contractual or
otherwise, with respect thereto (collectively, together with the shares
of capital stock described in Section 2(b) and 2(c) below, the "Pledged
Shares"), including, but not limited to, the following:
(y) all shares or securities representing a dividend
on any of the Pledged Shares, or representing a distribution
or return of capital upon or in respect of the Pledged Shares,
or resulting from a stock split, revision, reclassification or
other exchange therefor, and any subscriptions, warrants,
rights or options issued to the holder of, or otherwise in
respect of, the Pledged Shares; and
(z) without affecting the obligations of the Pledgors
under any provision prohibiting such action hereunder or under
the Credit Agreement, in the event of any consolidation or
merger involving the issuer of any Pledged Shares and in which
such issuer is not the surviving corporation, all shares of
each class of the capital stock of the successor corporation
formed by or resulting from such consolidation or merger.
(b) Additional Shares. 100% (or, if less, the full amount
owned by such Pledgor) of the issued and outstanding shares of capital
stock owned by such Pledgor of any Person which hereafter becomes a
Subsidiary of such Pledgor, including, without limitation, the
certificates representing such shares.
(c) Other Equity Interests. Any and all other Capital Stock in
each Pledgor in any Subsidiary of such Pledgor.
(d) Proceeds. All proceeds and products of the foregoing,
however and whenever acquired and in whatever form.
Without limiting the generality of the foregoing, it is hereby
specifically understood and agreed that a Pledgor may from time to time
hereafter deliver additional shares of stock to the Agent as collateral security
for the Pledgor Obligations. Upon delivery to the Agent, such additional shares
of stock shall be deemed to be part of the Pledged Collateral of such Pledgor
and shall be subject to the terms of this Pledge Agreement whether or not
Schedule 2(a) is amended to refer to such additional shares.
3. Security for Pledgor Obligations. The security interest created
hereby in the Pledged Collateral of each Pledgor constitutes continuing
collateral security for all of the following, whether now existing or hereafter
incurred (the "Pledgor Obligations"):
(a) In the case of the Borrower, the prompt performance and
observance by the Borrower of all obligations of the Borrower under the
Credit Agreement, the Notes, this Pledge Agreement and the other Credit
Documents to which the Borrower is a party;
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<PAGE> 3
(b) In the case of the Guarantors, the prompt performance and
observance by such Guarantor of all obligations of such Guarantor under
the Credit Agreement, this Pledge Agreement and the other Credit
Documents to which such Guarantor is a party, including, without
limitation, its guaranty obligations arising under Section 4 of the
Credit Agreement; and
(c) All other indebtedness, liabilities and obligations of any
kind or nature, now existing or hereafter arising, owing from any
Pledgor to any Lender or the Agent, howsoever evidenced, created,
incurred or acquired, whether primary, secondary, direct, contingent,
or joint and several, including, without limitation, all liabilities
arising under Hedging Agreements and all obligations and liabilities
incurred in connection with collecting and enforcing the Pledgor
Obligations.
4. Delivery of the Pledged Collateral. Each Pledgor hereby agrees that:
(a) Each Pledgor shall deliver to the Agent (i) simultaneously
with or prior to the execution and delivery of this Pledge Agreement,
all certificates representing the Pledged Shares of such Pledgor and
(ii) within a reasonable time upon the receipt thereof by or on behalf
of a Pledgor, all other certificates and instruments constituting
Pledged Collateral of a Pledgor. Prior to delivery to the Agent, all
such certificates and instruments constituting Pledged Collateral of a
Pledgor shall be held in trust by such Pledgor for the benefit of the
Agent pursuant hereto. All such certificates shall be delivered in
suitable form for transfer by delivery or shall be accompanied by duly
executed instruments of transfer or assignment in blank, substantially
in the form provided in Exhibit 4(a) attached hereto.
(b) Additional Securities. If such Pledgor shall receive by
virtue of its being or having been the owner of any Pledged Collateral,
any (i) stock certificate, including without limitation, any
certificate representing a stock dividend or distribution in connection
with any increase or reduction of capital, reclassification, merger,
consolidation, sale of assets, combination of shares, stock splits,
spin-off or split-off, promissory notes or other instrument; (ii)
option or right, whether as an addition to, substitution for, or an
exchange for, any Pledged Collateral or otherwise; (iii) dividends
payable in securities; or (iv) distributions of securities in
connection with a partial or total liquidation, dissolution or
reduction of capital, capital surplus or paid-in surplus, then such
Pledgor shall receive such stock certificate, instrument, option, right
or distribution in trust for the benefit of the Agent, shall segregate
it from such Pledgor's other property and shall deliver it forthwith to
the Agent in the exact form received together with any necessary
endorsement and/or appropriate stock power duly executed in blank,
substantially in the form provided in Exhibit 4(a), to be held by the
Agent as Pledged Collateral and as further collateral security for the
Pledgor Obligations.
(c) Financing Statements. Each Pledgor shall execute and
deliver to the Agent such UCC or other applicable financing statements
as may be reasonably requested by
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<PAGE> 4
the Agent in order to perfect and protect the security interest created
hereby in the Pledged Collateral of such Pledgor.
5. Representations and Warranties. Each Pledgor hereby represents and
warrants to the Agent, for the benefit of the Lenders, that so long as any of
the Pledgor Obligations remain outstanding or any Credit Document or Hedging
Agreement is in effect or any Letter of Credit shall remain outstanding, and
until all of the Commitments shall have been terminated:
(a) Authorization of Pledged Shares. The Pledged Shares are
duly authorized and validly issued, are fully paid and nonassessable
and are not subject to the preemptive rights of any Person. All other
shares of stock constituting Pledged Collateral will be duly authorized
and validly issued, fully paid and nonassessable and not subject to the
preemptive rights of any Person.
(b) Title. Each Pledgor has good and indefeasible title to the
Pledged Collateral of such Pledgor and will at all times be the legal
and beneficial owner of such Pledged Collateral free and clear of any
Lien, other than Permitted Liens. There exists no "adverse claim"
within the meaning of Section 8-302 of the Uniform Commercial Code as
in effect in the State of North Carolina (the "UCC") with respect to
the Pledged Shares of such Pledgor.
(c) Exercising of Rights. The exercise by the Agent of its
rights and remedies hereunder will not violate any law or governmental
regulation or any material contractual restriction binding on or
affecting a Pledgor or any of its property.
(d) Pledgor's Authority. No authorization, approval or action
by, and no notice or filing with any Governmental Authority or with the
issuer of any Pledged Stock is required either (i) for the pledge made
by a Pledgor or for the granting of the security interest by a Pledgor
pursuant to this Pledge Agreement or (ii) for the exercise by the Agent
or the Lenders of their rights and remedies hereunder (except as may be
required by laws affecting the offering and sale of securities).
(e) Security Interest/Priority. This Pledge Agreement creates
a valid security interest in favor of the Agent for the benefit of the
Lenders, in the Pledged Collateral. The taking possession by the Agent
of the certificates representing the Pledged Shares and all other
certificates and instruments constituting Pledged Collateral will
perfect and establish the first priority of the Agent's security
interest in the Pledged Shares and, when properly perfected by filing
or registration, in all other Pledged Collateral represented by such
Pledged Shares and instruments securing the Pledgor Obligations. Except
as set forth in this Section 5(e), no action is necessary to perfect or
otherwise protect such security interest.
(f) No Other Shares. No Pledgor owns any shares of stock other
than as set forth on Schedule 2(a) attached hereto.
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<PAGE> 5
6. Covenants. Each Pledgor hereby covenants, that so long as any of the
Pledgor Obligations remain outstanding or any Credit Document or Hedging
Agreement is in effect or any Letter of Credit shall remain outstanding, and
until all of the Commitments shall have been terminated, such Pledgor shall:
(a) Books and Records. Mark its books and records (and shall
cause the issuer of the Pledged Shares of such Pledgor to mark its
books and records) to reflect the security interest granted to the
Agent, for the benefit of the Lenders, pursuant to this Pledge
Agreement.
(b) Defense of Title. Warrant and defend title to and
ownership of the Pledged Collateral of such Pledgor at its own expense
against the claims and demands of all other parties claiming an
interest therein, keep the Pledged Collateral free from all Liens,
except for Permitted Liens, and not sell, exchange, transfer, assign,
lease or otherwise dispose of Pledged Collateral of such Pledgor or any
interest therein, except as permitted under the Credit Agreement and
the other Credit Documents.
(c) Further Assurances. Promptly execute and deliver at its
expense all further instruments and documents and take all further
action that may be necessary and desirable or that the Agent may
reasonably request in order to (i) perfect and protect the security
interest created hereby in the Pledged Collateral of such Pledgor
(including without limitation any and all action necessary to satisfy
the Agent that the Agent has obtained a first priority perfected
security interest in any capital stock); (ii) enable the Agent to
exercise and enforce its rights and remedies hereunder in respect of
the Pledged Collateral of such Pledgor; and (iii) otherwise effect the
purposes of this Pledge Agreement, including, without limitation and if
requested by the Agent, delivering to the Agent irrevocable proxies in
respect of the Pledged Collateral of such Pledgor.
(d) Amendments. Not allow to exist any restriction with
respect to any of the Pledged Collateral of such Pledgor other than
pursuant hereto or as may be permitted under the Credit Agreement.
(e) Compliance with Securities Laws. File all reports and
other information now or hereafter required to be filed by such Pledgor
with the United States Securities and Exchange Commission and any other
state, federal or foreign agency in connection with the ownership of
the Pledged Collateral of such Pledgor.
7. Advances by Lenders. On failure of any Pledgor to perform any of the
covenants and agreements contained herein, the Agent may, at its sole option and
in its sole discretion, perform the same and in so doing may expend such sums as
the Agent may reasonably deem advisable in the performance thereof, including,
without limitation, the payment of any insurance premiums, the payment of any
taxes, a payment to obtain a release of a Lien or potential Lien, expenditures
made in defending against any adverse claim and all other expenditures which the
Agent or the Lenders may make for the protection of the security hereof or which
may be compelled to make by operation of law. All such sums and amounts so
expended shall be
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repayable by the Pledgors on a joint and several basis promptly upon timely
notice thereof and demand therefor, shall constitute additional Pledgor
Obligations and shall bear interest from the date said amounts are expended at
the default rate specified in Section 3.1 of the Credit Agreement for Loans that
are Base Rate Loans. No such performance of any covenant or agreement by the
Agent or the Lenders on behalf of any Pledgor, and no such advance or
expenditure therefor, shall relieve the Pledgors of any default under the terms
of this Pledge Agreement, the other Credit Documents or any Hedging Agreement.
The Lenders may make any payment hereby authorized in accordance with any bill,
statement or estimate procured from the appropriate public office or holder of
the claim to be discharged without inquiry into the accuracy of such bill,
statement or estimate or into the validity of any tax assessment, sale,
forfeiture, tax lien, title or claim except to the extent such payment is being
contested in good faith by a Pledgor in appropriate proceedings and against
which adequate reserves are being maintained in accordance with GAAP.
8. Events of Default. The occurrence of an event which under the Credit
Agreement would constitute an Event of Default shall be an Event of Default
hereunder (an "Event of Default").
9. Remedies.
(a) General Remedies. Upon the occurrence of an Event of
Default and during the continuation thereof, the Agent and the Lenders
shall have, in respect of the Pledged Collateral of any Pledgor, in
addition to the rights and remedies provided herein, in the Credit
Documents, in the Hedging Agreements or by law, the rights and remedies
of a secured party under the UCC or any other applicable law.
(b) Sale of Pledged Collateral. Upon the occurrence of an
Event of Default and during the continuation thereof, without limiting
the generality of this Section and without notice, the Agent may, in
its sole discretion, sell or otherwise dispose of or realize upon the
Pledged Collateral, or any part thereof, in one or more parcels, at
public or private sale, at any exchange or broker's board or elsewhere,
at such price or prices and on such other terms as the Agent may deem
commercially reasonable, for cash, credit or for future delivery or
otherwise in accordance with applicable law. To the extent permitted by
law, any Lender may in such event, bid for the purchase of such
securities. Each Pledgor agrees that, to the extent notice of sale
shall be required by law and has not been waived by such Pledgor, any
requirement of reasonable notice shall be met if notice, specifying the
place of any public sale or the time after which any private sale is to
be made, is personally served on or mailed, postage prepaid, to such
Pledgor, in accordance with the notice provisions of Section 11.1 of
the Credit Agreement at least 10 days before the time of such sale. The
Agent shall not be obligated to make any sale of Pledged Collateral of
such Pledgor regardless of notice of sale having been given. The Agent
may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale may,
without further notice, be made at the time and place to which it was
so adjourned.
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(c) Private Sale. Upon the occurrence of an Event of Default
and during the continuation thereof, the Pledgors recognize that the
Agent may deem it impracticable to effect a public sale of all or any
part of the Pledged Shares or any of the securities constituting
Pledged Collateral and that the Agent may, therefore, determine to make
one or more private sales of any such securities to a restricted group
of purchasers who will be obligated to agree, among other things, to
acquire such securities for their own account, for investment and not
with a view to the distribution or resale thereof. Each Pledgor
acknowledges that any such private sale may be at prices and on terms
less favorable to the seller than the prices and other terms which
might have been obtained at a public sale and, notwithstanding the
foregoing, agrees that such private sale shall be deemed to have been
made in a commercially reasonable manner and that the Agent shall have
no obligation to delay sale of any such securities for the period of
time necessary to permit the issuer of such securities to register such
securities for public sale under the Securities Act of 1933. Each
Pledgor further acknowledges and agrees that any offer to sell such
securities which has been (i) publicly advertised on a bona fide basis
in a newspaper or other publication of general circulation in the
financial community of New York, New York (to the extent that such
offer may be advertised without prior registration under the Securities
Act of 1933), or (ii) made privately in the manner described above
shall be deemed to involve a "public sale" under the UCC,
notwithstanding that such sale may not constitute a "public offering"
under the Securities Act of 1933, and the Agent may, in such event, bid
for the purchase of such securities.
(d) Retention of Pledged Collateral. In addition to the rights
and remedies hereunder, upon the occurrence of an Event of Default, the
Agent may, after providing the notices required by Section 9-505(2) of
the UCC or otherwise complying with the requirements of applicable law
of the relevant jurisdiction, retain all or any portion of the Pledged
Collateral in satisfaction of the Pledgor Obligations. Unless and until
the Agent shall have provided such notices, however, the Agent shall
not be deemed to have retained any Pledged Collateral in satisfaction
of any Pledgor Obligations for any reason.
(e) Deficiency. In the event that the proceeds of any sale,
collection or realization are insufficient to pay all amounts to which
the Agent or the Lenders are legally entitled, the Pledgors shall be
jointly and severally liable for the deficiency, together with interest
thereon at the default rate specified in Section 3.1 of the Credit
Agreement for Loans that are Base Rate Loans, together with the costs
of collection and the reasonable fees of any attorneys employed by the
Agent to collect such deficiency. Any surplus remaining after the full
payment and satisfaction of the Pledgor Obligations shall be returned
to the Pledgors or to whomsoever a court of competent jurisdiction
shall determine to be entitled thereto.
10. Rights of the Agent.
(a) Power of Attorney. In addition to other powers of attorney
contained herein, each Pledgor hereby designates and appoints the
Agent, on behalf of the Lenders, and each of its designees or agents as
attorney-in-fact of such Pledgor, irrevocably and
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with power of substitution, with authority to take any or all of the
following actions upon the occurrence and during the continuance of an
Event of Default:
(i) to demand, collect, settle, compromise, adjust
and give discharges and releases concerning the Pledged
Collateral of such Pledgor, all as the Agent may reasonably
determine;
(ii) to commence and prosecute any actions at any
court for the purposes of collecting any of the Pledged
Collateral of such Pledgor and enforcing any other right in
respect thereof;
(iii) to defend, settle or compromise any action
brought and, in connection therewith, give such discharge or
release as the Agent may deem reasonably appropriate;
(iv) to pay or discharge taxes, liens, security
interests, or other encumbrances levied or placed on or
threatened against the Pledged Collateral of such Pledgor;
(v) to direct any parties liable for any payment
under any of the Pledged Collateral to make payment of any and
all monies due and to become due thereunder directly to the
Agent or as the Agent shall direct;
(vi) to receive payment of and receipt for any and
all monies, claims, and other amounts due and to become due at
any time in respect of or arising out of any Pledged
Collateral of such Pledgor;
(vii) to sign and endorse any drafts, assignments,
proxies, stock powers, verifications, notices and other
documents relating to the Pledged Collateral of such Pledgor;
(viii) to settle, compromise or adjust any suit,
action or proceeding described above and, in connection
therewith, to give such discharges or releases as the Agent
may deem reasonably appropriate;
(ix) execute and deliver all assignments,
conveyances, statements, financing statements, renewal
financing statements, pledge agreements, affidavits, notices
and other agreements, instruments and documents that the Agent
may determine necessary in order to perfect and maintain the
security interests and liens granted in this Pledge Agreement
and in order to fully consummate all of the transactions
contemplated therein;
(x) to exchange any of the Pledged Collateral of
such Pledgor or other property upon any merger, consolidation,
reorganization, recapitalization or other readjustment of the
issuer thereof and, in connection therewith, deposit
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any of the Pledged Collateral of such Pledgor with any
committee, depository, transfer agent, registrar or other
designated agency upon such terms as the Agent may determine;
(xi) to vote for a shareholder resolution, or to
sign an instrument in writing, sanctioning the transfer of any
or all of the Pledged Shares of such Pledgor into the name of
the Agent or one or more of the Lenders or into the name of
any transferee to whom the Pledged Shares of such Pledgor or
any part thereof may be sold pursuant to Section 10 hereof;
and
(xii) to do and perform all such other acts and
things as the Agent may reasonably deem to be necessary,
proper or convenient in connection with the Pledged Collateral
of such Pledgor.
This power of attorney is a power coupled with an interest and shall be
irrevocable (i) for so long as any of the Pledgor Obligations remain
outstanding, any Credit Document or any Hedging Agreement is in effect
or any Letter of Credit shall remain outstanding and (ii) until all of
the Commitments shall have been terminated. The Agent shall be under no
duty to exercise or withhold the exercise of any of the rights, powers,
privileges and options expressly or implicitly granted to the Agent in
this Pledge Agreement, and shall not be liable for any failure to do so
or any delay in doing so. The Agent shall not be liable for any act or
omission or for any error of judgment or any mistake of fact or law in
its individual capacity or its capacity as attorney-in-fact except acts
or omissions resulting from its gross negligence or willful misconduct.
This power of attorney is conferred on the Agent solely to protect,
preserve and realize upon its security interest in Pledged Collateral.
(b) Performance by the Agent of Pledgor's Obligations. If any
Pledgor fails to perform any agreement or obligation contained herein,
upon prior written notice to such Pledgor, the Agent itself may
reasonably perform, or cause performance of, such agreement or
obligation, and the reasonable expenses of the Agent incurred in
connection therewith shall be payable by the Pledgors on a joint and
several basis pursuant to Section 13 hereof.
(c) Assignment by the Agent. The Agent may from time to time
assign the Pledgor Obligations and any portion thereof and/or the
Pledged Collateral and any portion thereof, and the assignee shall be
entitled to all of the rights and remedies of the Agent under this
Pledge Agreement in relation thereto.
(d) The Agent's Duty of Care. Other than the exercise of
reasonable care to assure the safe custody of the Pledged Collateral
while being held by the Agent hereunder, the Agent shall have no duty
or liability to preserve rights pertaining thereto, it being understood
and agreed that Pledgors shall be responsible for preservation of all
rights in the Pledged Collateral of such Pledgor, and the Agent shall
be relieved of all responsibility for Pledged Collateral upon
surrendering it or tendering the surrender of it to the
- 9 -
<PAGE> 10
Pledgors. The Agent shall be deemed to have exercised reasonable care
in the custody and preservation of the Pledged Collateral in its
possession if such Pledged Collateral is accorded treatment
substantially equal to that which the Agent accords its own property,
which shall be no less than the treatment employed by a reasonable and
prudent agent in the industry, it being understood that the Agent shall
not have responsibility for (i) ascertaining or taking action with
respect to calls, conversions, exchanges, maturities, tenders or other
matters relating to any Pledged Collateral, whether or not the Agent
has or is deemed to have knowledge of such matters; or (ii) taking any
necessary steps to preserve rights against any parties with respect to
any Pledged Collateral.
(e) Voting Rights in Respect of the Pledged Collateral.
(i) So long as no Event of Default shall have
occurred and be continuing, to the extent permitted by law,
each Pledgor may exercise any and all voting and other
consensual rights pertaining to the Pledged Collateral of such
Pledgor or any part thereof for any purpose not inconsistent
with the terms of this Pledge Agreement or the Credit
Agreement; and
(ii) Upon the occurrence and during the continuance
of an Event of Default, all rights of a Pledgor to exercise
the voting and other consensual rights which it would
otherwise be entitled to exercise pursuant to paragraph (i) of
this Section shall cease and all such rights shall thereupon
become vested in the Agent which shall then have the sole
right to exercise such voting and other consensual rights.
(f) Dividend Rights in Respect of the Pledged Collateral.
(i) So long as no Event of Default shall have
occurred and be continuing and subject to Section 4(b) hereof,
each Pledgor may receive and retain any and all dividends
(other than stock dividends and other dividends constituting
Pledged Collateral which are addressed hereinabove) or
interest paid in respect of the Pledged Collateral to the
extent they are allowed under the Credit Agreement.
(ii) Upon the occurrence and during the continuance
of an Event of Default:
(A) all rights of a Pledgor to receive the
dividends and interest payments which it would
otherwise be authorized to receive and retain
pursuant to paragraph (i) of this Section shall cease
and all such rights shall thereupon be vested in the
Agent which shall then have the sole right to receive
and hold as Pledged Collateral such dividends and
interest payments; and
(B) all dividends and interest payments
which are received by a Pledgor contrary to the
provisions of paragraph (A) of this Section shall be
- 10 -
<PAGE> 11
received in trust for the benefit of the Agent, shall
be segregated from other property or funds of such
Pledgor, and shall be forthwith paid over to the
Agent as Pledged Collateral in the exact form
received, to be held by the Agent as Pledged
Collateral and as further collateral security for the
Pledgor Obligations.
(g) Release of Pledged Collateral. The Agent may release any
of the Pledged Collateral from this Pledge Agreement or may substitute
any of the Pledged Collateral for other Pledged Collateral without
altering, varying or diminishing in any way the force, effect, lien,
pledge or security interest of this Pledge Agreement as to any Pledged
Collateral not expressly released or substituted, and this Pledge
Agreement shall continue as a first priority lien on all Pledged
Collateral not expressly released or substituted.
11. Rights of Required Lenders. All rights of the Agent hereunder, if
not exercised by the Agent, may be exercised by the Required Lenders.
12. Application of Proceeds. Upon the occurrence and during the
continuance of an Event of Default, any payments in respect of the Pledgor
Obligations and any proceeds of any Pledged Collateral, when received by the
Agent or any of the Lenders in cash or its equivalent, will be applied in
reduction of the Pledgor Obligations in the order set forth in Section 3.15(b)
of the Credit Agreement, and each Pledgor irrevocably waives the right to direct
the application of such payments and proceeds and acknowledges and agrees that
the Agent shall have the continuing and exclusive right to apply and reapply any
and all such payments and proceeds in the Agent's sole discretion,
notwithstanding any entry to the contrary upon any of its books and records.
13. Costs of Counsel. At all times hereafter, the Pledgors agree to
promptly pay upon demand any and all reasonable costs and expenses of the Agent
or the Lenders, (a) as required under Section 11.5 of the Credit Agreement and
(b) as reasonably necessary to protect the Pledged Collateral or to reasonably
exercise any rights or remedies under this Pledge Agreement or with respect to
any Pledged Collateral. All of the foregoing costs and expenses shall constitute
Pledgor Obligations hereunder.
14. Continuing Agreement.
(a) This Pledge Agreement shall be a continuing agreement in
every respect and shall remain in full force and effect so long as any
of the Pledgor Obligations remain outstanding or any Credit Document or
Hedging Agreement is in effect or any Letter of Credit shall remain
outstanding, and until all of the Commitments thereunder shall have
terminated (other than any obligations with respect to the indemnities
and the representations and warranties set forth in the Credit
Documents). Upon such payment and termination, this Pledge Agreement
shall be automatically terminated and the Agent and the Lenders shall,
upon the request and at the expense of the Pledgors, forthwith release
all of its liens and security interests hereunder and shall executed
and deliver all UCC termination statements and/or other documents
reasonably requested by the Pledgors
- 11 -
<PAGE> 12
evidencing such termination. Notwithstanding the foregoing all releases
and indemnities provided hereunder shall survive termination of this
Pledge Agreement.
(b) This Pledge Agreement shall continue to be effective or be
automatically reinstated, as the case may be, if at any time payment,
in whole or in part, of any of the Pledgor Obligations is rescinded or
must otherwise be restored or returned by the Agent or any Lender as a
preference, fraudulent conveyance or otherwise under any bankruptcy,
insolvency or similar law, all as though such payment had not been
made; provided that in the event payment of all or any part of the
Pledgor Obligations is rescinded or must be restored or returned, all
reasonable costs and expenses (including without limitation any
reasonable legal fees and disbursements) incurred by the Agent or any
Lender in defending and enforcing such reinstatement shall be deemed to
be included as a part of the Pledgor Obligations.
15. Amendments; Waivers; Modifications. This Pledge Agreement and the
provisions hereof may not be amended, waived, modified, changed, discharged or
terminated except as set forth in Section 11.6 of the Credit Agreement.
16. Successors in Interest. This Pledge Agreement shall create a
continuing security interest in the Collateral and shall be binding upon each
Pledgor, its successors and assigns and shall inure, together with the rights
and remedies of the Agent and the Lenders hereunder, to the benefit of the Agent
and the Lenders and their successors and permitted assigns; provided, however,
that none of the Pledgors may assign its rights or delegate its duties hereunder
without the prior written consent of each Lender or the Required Lenders, as
required by the Credit Agreement. To the fullest extent permitted by law, each
Pledgor hereby releases the Agent and each Lender, and its successors and
assigns, from any liability for any act or omission relating to this Pledge
Agreement or the Collateral, except for any liability arising from the gross
negligence or willful misconduct of the Agent, or such Lender, or its officers,
employees or agents.
17. Notices. All notices required or permitted to be given under this
Pledge Agreement shall be in conformance with Section 11.1 of the Credit
Agreement.
18. Counterparts. This Pledge Agreement may be executed in any number
of counterparts, each of which where so executed and delivered shall be an
original, but all of which shall constitute one and the same instrument. It
shall not be necessary in making proof of this Pledge Agreement to produce or
account for more than one such counterpart.
19. Headings. The headings of the sections and subsections hereof are
provided for convenience only and shall not in any way affect the meaning or
construction of any provision of this Pledge Agreement.
- 12 -
<PAGE> 13
20. Governing Law; Submission to Jurisdiction; Venue.
(a) THIS PLEDGE AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF
THE PARTIES HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NORTH CAROLINA.
Any legal action or proceeding with respect to this Security Agreement
may be brought in the courts of the State of North Carolina, or of the
United States for the Western District of North Carolina, and, by
execution and delivery of this Security Agreement, each Pledgor hereby
irrevocably accepts for itself and in respect of its property,
generally and unconditionally, the jurisdiction of such courts. Each
Pledgor further irrevocably consents to the service of process out of
any of the aforementioned courts in any such action or proceeding by
the mailing of copies thereof by registered or certified mail, postage
prepaid, to it at the address for notices pursuant to Section 11.1 of
the Credit Agreement, such service to become effective 30 days after
such mailing. Nothing herein shall affect the right of the Agent to
serve process in any other manner permitted by law or to commence legal
proceedings or to otherwise proceed against any Pledgor in any other
jurisdiction.
(b) Each Pledgor hereby irrevocably waives any objection which
it may now or hereafter have to the laying of venue of any of the
aforesaid actions or proceedings arising out of or in connection with
this Pledge Agreement brought in the courts referred to in subsection
(a) hereof and hereby further irrevocably waives and agrees not to
plead or claim in any such court that any such action or proceeding
brought in any such court has been brought in an inconvenient forum.
21. Waiver of Jury Trial. TO THE EXTENT PERMITTED BY APPLICABLE LAW,
EACH OF THE PARTIES TO THIS PLEDGE AGREEMENT HEREBY IRREVOCABLY WAIVES ALL RIGHT
TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR
RELATING TO THIS PLEDGE AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
22. Severability. If any provision of any of the Pledge Agreement is
determined to be illegal, invalid or unenforceable, such provision shall be
fully severable and the remaining provisions shall remain in full force and
effect and shall be construed without giving effect to the illegal, invalid or
unenforceable provisions.
23. Entirety. This Pledge Agreement, the other Credit Documents and the
Hedging Agreements represent the entire agreement of the parties hereto and
thereto, and supersede all prior agreements and understandings, oral or written,
if any, including any commitment letters or correspondence relating to the
Credit Documents, the Hedging Agreements or the transactions contemplated herein
and therein.
24. Survival. All representations and warranties of the Pledgors
hereunder shall survive the execution and delivery of this Pledge Agreement, the
other Credit Documents and the
- 13 -
<PAGE> 14
Hedging Agreements, the delivery of the Notes and the making of the Loans and
the issuance of the Letters of Credit under the Credit Agreement.
25. Other Security. To the extent that any of the Pledgor Obligations
are now or hereafter secured by property other than the Pledged Collateral
(including, without limitation, real and other personal property owned by a
Pledgor), or by a guarantee, endorsement or property of any other Person, then
the Agent and the Lenders shall have the right to proceed against such other
property, guarantee or endorsement upon the occurrence of and during the
contiuation of any Event of Default, and the Agent and the Lenders have the
right, in their sole discretion, to determine which rights, security, liens,
security interests or remedies the Agent and the Lenders shall at any time
pursue, relinquish, subordinate, modify or take with respect thereto, without in
any way modifying or affecting any of them or any of the Agent's and the
Lenders' rights or the Pledgor Obligations under this Pledge Agreement, under
any other of the Credit Documents or under any Hedging Agreement.
26. Joint and Several Obligations of Pledgors.
(a) Each of the Pledgors is accepting joint and several
liability hereunder in consideration of the financial accommodation to
be provided by the Lenders under the Credit Agreement, for the mutual
benefit, directly and indirectly, of each of the Pledgors and in
consideration of the undertakings of each of the Pledgors to accept
joint and several liability for the obligations of each of them.
(b) Each of the Pledgors jointly and severally hereby
irrevocably and unconditionally accepts, not merely as a surety but
also as a co-debtor, joint and several liability with the other
Pledgors with respect to the payment and performance of all of the
Pledgor Obligations arising under this Pledge Agreement, the other
Credit Documents and the Hedging Agreements, it being the intention of
the parties hereto that all the Pledgor Obligations shall be the joint
and several obligations of each of the Pledgors without preferences or
distinction among them.
(c) Notwithstanding any provision to the contrary contained
herein or in any other of the Credit Documents, to the extent the
obligations of a Guarantor shall be adjudicated to be invalid or
unenforceable for any reason (including, without limitation, because of
any applicable state or federal law relating to fraudulent conveyances
or transfers) then the obligations of each Guarantor hereunder shall be
limited to the maximum amount that is permissible under applicable law
(whether federal or state and including, without limitation, the
Bankruptcy Code).
[remainder of page intentionally left blank]
- 14 -
<PAGE> 15
Each of the parties hereto has caused a counterpart of this Pledge
Agreement to be duly executed and delivered as of the date first above written.
BORROWER: SIMCALA, INC.,
a Delaware corporation
By: /s/ C.E. Boardwine
-----------------------------------------
Name: C. E. Boardwine
Title: President and Chief Executive Officer
GUARANTORS: SIMCALA HOLDINGS, INC.,
a Georgia corporation
By: /s/ William A. Davies
-----------------------------------------
Name: William A. Davies
Title: Secretary, Treasurer
Accepted and agreed to in Charlotte, North Carolina as of the date
first above written.
NATIONSBANK, N.A., as Agent
By: /s/ Michael D. McKay
-----------------------------------------
Name: Michael D. McKay
Title: Senior Vice President
<PAGE> 16
Schedule 2(a)
to
Pledge Agreement
dated as of March 31, 1998
in favor of NationsBank, N.A.
as Agent
PLEDGED STOCK
PLEDGOR: SIMCALA HOLDINGS, INC.
<TABLE>
<CAPTION>
Name of Subsidiary Number of Shares Certificate Number Percentage Ownership
- ------------------ ---------------- ------------------ --------------------
<S> <C> <C> <C>
Simcala, Inc. 10,889 100%
</TABLE>
PLEDGOR: SIMCALA, INC.
<TABLE>
<CAPTION>
Name of Subsidiary Number of Shares Certificate Number Percentage Ownership
- ------------------ ---------------- ------------------ --------------------
<S> <C> <C> <C>
none
</TABLE>
<PAGE> 17
Exhibit 4(a)
to
Pledge Agreement
dated as of March 31, 1998
in favor of NationsBank, N.A.
as Agent
Irrevocable Stock Power
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers to
the following shares of capital stock of _____________________, a ____________
corporation:
<TABLE>
<CAPTION>
No. of Shares Certificate No.
------------- ---------------
<S> <C>
</TABLE>
and irrevocably appoints __________________________________ its agent and
attorney-in-fact to transfer all or any part of such capital stock and to take
all necessary and appropriate action to effect any such transfer. The agent and
attorney-in-fact may substitute and appoint one or more persons to act for him.
The effectiveness of a transfer pursuant to this stock power shall be subject to
any and all transfer restrictions referenced on the face of the certificates
evidencing such interest or in the certificate of incorporation or bylaws of the
subject corporation, to the extent they may from time to time exist.
---------------,
a ______________ corporation
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
<PAGE> 1
EXHIBIT 10.5
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "Security Agreement") is entered into as
of March 31, 1998 among SIMCALA, INC. , a Delaware corporation (the "Borrower"),
SIMCALA HOLDINGS, INC., a Georgia corporation, and certain Subsidiaries of the
Borrower (individually a "Guarantor" and collectively the "Guarantors"; together
with the Borrower, individually an "Obligor", and collectively the "Obligors")
and NATIONSBANK, N.A., in its capacity as agent (in such capacity, the "Agent")
for the lenders from time to time party to the Credit Agreement described below
(the "Lenders").
RECITALS
WHEREAS, pursuant to that certain Credit Agreement, dated as of the
date hereof (as amended, modified, extended, renewed or replaced from time to
time, the "Credit Agreement"), among the Borrower, the Guarantors, the Lenders
and the Agent, the Lenders have agreed to make Loans and issue Letters of Credit
upon the terms and subject to the conditions set forth therein; and
WHEREAS, it is a condition precedent to the effectiveness of the Credit
Agreement and the obligations of the Lenders to make their respective Loans and
to issue Letters of Credit under the Credit Agreement that the Obligors shall
have executed and delivered this Security Agreement to the Agent for the ratable
benefit of the Lenders.
NOW, THEREFORE, in consideration of these premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. Definitions.
(a) Unless otherwise defined herein, capitalized terms used
herein shall have the meanings ascribed to such terms in the Credit
Agreement, and the following terms which are defined in the Uniform
Commercial Code in effect in the State of North Carolina on the date
hereof are used herein as so defined: Accounts, Chattel Paper, Deposit
Accounts, Documents, Equipment, Farm Products, Fixtures, General
Intangibles, Instruments, Inventory and Proceeds. For purposes of this
Security Agreement, the term "Lender" shall include any Affiliate of
any Lender which has entered into a Hedging Agreement with the
Borrower.
(b) In addition, the following terms shall have the following
meanings:
"Copyright Licenses": any written agreement, naming any
Obligor as licensor, granting any right under any Copyright including,
without limitation, any thereof referred to in Schedule 1(b) hereto.
<PAGE> 2
"Copyrights": (a) all registered United States copyrights in
all Works, now existing or hereafter created or acquired, all
registrations and recordings thereof, and all applications in
connection therewith, including, without limitation, registrations,
recordings and applications in the United States Copyright office
including, without limitation, any thereof referred to in Schedule 1(b)
hereto, and (b) all renewals thereof including, without limitation, any
thereof referred to in Schedule 1(b) hereto.
"Patent License": all agreements, whether written or oral,
providing for the grant by or to an Obligor of any right to
manufacture, use or sell any invention covered by a Patent, including,
without limitation, any thereof referred to in Schedule 1(b) hereto.
"Patents": (a) all letters patent of the United States or any
other country and all reissues and extensions thereof, including,
without limitation, any thereof referred to in Schedule 1(b) hereto,
and (b) all applications for letters patent of the United States or any
other country and all divisions, continuations and
continuations-in-part thereof, including, without limitation, any
thereof referred to in Schedule 1(b) hereto.
"Secured Obligations": the collective reference to the
following:
(a) In the case of the Borrower, the prompt
performance and observance by the Borrower of all obligations
of the Borrower under the Credit Agreement, the Notes, this
Security Agreement and the other Credit Documents to which the
Borrower is a party;
(b) In the case of the Guarantors, the
prompt performance and observance by such Guarantor of all
obligations of such Guarantor under the Credit Agreement, this
Security Agreement and the other Credit Documents to which
such Guarantor is a party, including, without limitation, its
guaranty obligations arising under Section 4 of the Credit
Agreement; and
(c) All other indebtedness, liabilities and
obligations of any kind or nature, now existing or hereafter
arising, owing from any Obligor to any Lender or the Agent,
howsoever evidenced, created, incurred or acquired, whether
primary, secondary, direct, contingent, or joint and several,
including, without limitation, all liabilities arising under
Hedging Agreements and all obligations and liabilities
incurred in connection with collecting and enforcing the
Secured Obligations.
"Trademark License": means any agreement, written or oral,
providing for the grant by or to an Obligor of any right to use any
Trademark, including, without limitation, any thereof referred to in
Schedule 1(b) hereto.
"Trademarks": (a) all trademarks, trade names, corporate
names, company names, business names, fictitious business names, trade
styles, service marks, logos and other source or business identifiers,
and the goodwill associated therewith, now existing or
- 2 -
<PAGE> 3
hereafter adopted or acquired, all registrations and recordings
thereof, and all applications in connection therewith, whether in the
United States Patent and Trademark Office or in any similar office or
agency of the United States, any State thereof or any other country or
any political subdivision thereof, or otherwise, including, without
limitation, any thereof referred to in Schedule 1(b) hereto, and (b)
all renewals thereof.
"Work": any work which is subject to copyright protection
pursuant to Title 17 of the United States Code.
2. Grant of Security Interest in the Collateral. To secure the prompt
payment and performance in full when due, whether by lapse of time, acceleration
or otherwise, of the Secured Obligations, each Obligor hereby grants to the
Agent, for the benefit of the Lenders, a continuing security interest in, and a
right to set off against, any and all right, title and interest of such Obligor
in and to the following, whether now owned or existing or owned, acquired, or
arising hereafter (collectively, the "Collateral"):
(a) all Accounts;
(b) all Chattel Paper;
(c) all Copyrights;
(d) all Copyright Licenses;
(e) all Deposit Accounts;
(f) all Documents;
(g) all Equipment;
(h) all Fixtures;
(i) all General Intangibles;
(j) all Instruments;
(k) all Inventory;
(l) all Patents;
(m) all Patent Licenses;
(n) all Trademarks;
(o) all Trademark Licenses;
- 3 -
<PAGE> 4
(p) all books, records, ledger cards, files,
correspondence, computer programs, tapes, disks, and
related data processing software (owned by such
Obligor or in which it has an interest) that at any
time evidence or contain information relating to any
Collateral or are otherwise necessary or helpful in
the collection thereof or realization thereupon; and
(q) to the extent not otherwise included,
all Proceeds and products of any and all of the
foregoing.
The Obligors and the Agent, on behalf of the Lenders, hereby
acknowledge and agree that the security interest created hereby in the
Collateral (i) constitutes continuing collateral security for all of the Secured
Obligations, whether now existing or hereafter arising and (ii) is not to be
construed as an assignment of any Copyrights, Copyright Licenses, Patents,
Patent Licenses, Trademarks or Trademark Licenses.
3. Provisions Relating to Accounts.
(a) Anything herein to the contrary notwithstanding, each of
the Obligors shall remain liable under each of the Accounts to observe
and perform all the conditions and obligations to be observed and
performed by it thereunder, all in accordance with the terms of any
agreement giving rise to each such Account. Neither the Agent nor any
Lender shall have any obligation or liability under any Account (or any
agreement giving rise thereto) by reason of or arising out of this
Security Agreement or the receipt by the Agent or any Lender of any
payment relating to such Account pursuant hereto, nor shall the Agent
or any Lender be obligated in any manner to perform any of the
obligations of an Obligor under or pursuant to any Account (or any
agreement giving rise thereto), to make any payment, to make any
inquiry as to the nature or the sufficiency of any payment received by
it or as to the sufficiency of any performance by any party under any
Account (or any agreement giving rise thereto), to present or file any
claim, to take any action to enforce any performance or to collect the
payment of any amounts which may have been assigned to it or to which
it may be entitled at any time or times.
(b) Once during each calendar year or at any time after the
occurrence and during the continuation of an Event of Default, the
Agent shall have the right, but not the obligation, upon prior written
notice to the Obligors, to make test verifications of the Accounts in
any manner and through any medium that it reasonably considers
advisable, and the Obligors shall furnish all such assistance and
information as the Agent may require in connection with such test
verifications. After the occurrence and during the continuance of an
Event of Default, upon the Agent's request and at the expense of the
Agent, the Obligors shall cause independent public accountants or
others satisfactory to the Agent to furnish to the Agent reports
showing reconciliations, aging and test verifications of, and trial
balances for, the Accounts. After the occurrence and during the
continuance of an Event of Default, the Agent in its own name or in the
name of others
- 4 -
<PAGE> 5
may communicate with account debtors on the Accounts to verify with
them to the Agent's satisfaction the existence, amount and terms of any
Accounts.
4. Representations and Warranties. Each Obligor hereby represents and
warrants to the Agent, for the benefit of the Lenders, that so long as any of
the Secured Obligations remain outstanding or any Credit Document or Hedging
Agreement is in effect or any Letter of Credit shall remain outstanding, and
until all of the Commitments shall have been terminated:
(a) Chief Executive Office; Books & Records. Each Obligor's
chief executive office and chief place of business is (and for the
prior four months have been) located at the locations set forth on
Schedule 4(a) hereto, and each Obligor keeps its books and records at
such locations.
(b) Location of Collateral. The location of all Collateral
owned by each Obligor is as shown on Schedule 4(b) hereto.
(c) Ownership. Each Obligor is the legal and beneficial owner
of its Collateral and has the right to pledge, sell, assign or transfer
the same. Each Obligor's legal name is as shown in this Security
Agreement and no Obligor has in the past four months changed its name,
been party to a merger, consolidation or other change in structure or
used any tradename except as set forth in Schedule 4(c) attached
hereto.
(d) Security Interest/Priority. This Security Agreement
creates a valid security interest in favor of the Agent, for the
benefit of the Lenders, in the Collateral of such Obligor and, when
properly perfected by filing, shall constitute a valid perfected
security interest in such Collateral, to the extent such security can
be perfected by filing under the UCC, free and clear of all Liens
except for Permitted Liens.
(e) Farm Products. None of the Collateral constitutes, or is
the Proceeds of, Farm Products.
(f) Accounts. (i) Each Account of the Obligors and the papers
and documents relating thereto are genuine and in all material respects
what they purport to be, (ii) each Account arises out of (A) a bona
fide sale of goods sold and delivered by such Obligor (or is in the
process of being delivered) or (B) services theretofore actually
rendered by such Obligor to, the account debtor named therein, (iii) no
Account of an Obligor is evidenced by any Instrument or Chattel Paper
unless such Instrument or Chattel Paper has been theretofore endorsed
over and delivered to the Agent and (iv) no surety bond was required or
given in connection with any Account of an Obligor or the contracts or
purchase orders out of which they arose.
(g) Inventory. No Inventory is held by an Obligor pursuant to
consignment, sale or return, sale on approval or similar arrangement.
(h) Copyrights, Patents and Trademarks.
- 5 -
<PAGE> 6
(i) Schedule 1(b) hereto includes all Copyrights,
Copyright Licenses, Patents, Patent Licenses, Trademarks and
Trademark Licenses owned by the Obligors in their own names as
of the date hereof.
(ii) To the best of each Obligor's knowledge, each
Copyright, Patent and Trademark of such Obligor is valid,
subsisting, unexpired, enforceable and has not been abandoned.
(iii) Except as set forth in Schedule 1(b) hereto,
none of such Copyrights, Patents and Trademarks is the subject
of any licensing or franchise agreement.
(iv) No holding, decision or judgment has been
rendered by any Governmental Authority which would limit,
cancel or question the validity of any Copyright, Patent or
Trademark.
(v) No action or proceeding is pending seeking to
limit, cancel or question the validity of any Copyright,
Patent or Trademark, or which, if adversely determined, would
have a material adverse effect on the value of any Copyright,
Patent or Trademark.
(vi) All applications pertaining to the Copyrights,
Patents and Trademarks of each Obligor have been duly and
properly filed, and all registrations or letters pertaining to
such Copyrights, Patents and Trademarks have been duly and
properly filed and issued, and all of such Copyrights, Patents
and Trademarks are valid and enforceable.
(vii) No Obligor has made any assignment or agreement
in conflict with the security interest in the Copyrights,
Patents or Trademarks of each Obligor hereunder.
5. Covenants. Each Obligor covenants that, so long as any of the
Secured Obligations remain outstanding or any Credit Document or Hedging
Agreement is in effect or any Letter of Credit shall remain outstanding, and
until all of the Commitments shall have been terminated, such Obligor shall:
(a) Other Liens. Defend the Collateral against the claims and
demands of all other parties claiming an interest therein, keep the
Collateral free from all Liens, except for Permitted Liens, and not
sell, exchange, transfer, assign, lease or otherwise dispose of the
Collateral or any interest therein, except as permitted under the
Credit Agreement.
(b) Preservation of Collateral. Keep the Collateral in good
order, condition and repair and not use the Collateral in violation of
the provisions of this Security
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<PAGE> 7
Agreement or any other agreement relating to the Collateral or any
policy insuring the Collateral or any applicable statute, law, bylaw,
rule, regulation or ordinance.
(c) Instruments/Chattel Paper. If any amount payable under or
in connection with any of the Collateral shall be or become evidenced
by any Instrument or Chattel Paper, immediately deliver such Instrument
or Chattel Paper to the Agent, duly indorsed in a manner satisfactory
to the Agent, to be held as Collateral pursuant to this Security
Agreement.
(d) Change in Location. Not, without providing 30 days prior
written notice to the Agent and without filing such amendments to any
previously filed financing statements as the Agent may require, (a)
change the location of its chief executive office and chief place of
business (as well as its books and records) from the locations set
forth on Schedule 4(a) hereto, (b) change the location of its
Collateral from the locations set forth for such Obligor on Schedule
4(b) hereto, or (c) change its name, be party to a merger,
consolidation or other change in structure or use any tradename other
than as set forth on Schedule 4(c) attached hereto.
(e) Inspection. Upon reasonable notice, and during reasonable
hours, at all times allow the Agent or its representatives to visit and
inspect the Collateral as set forth in Section 7.10 of the Credit
Agreement.
(f) Perfection of Security Interest. Execute and deliver to
the Agent such agreements, assignments or instruments (including
affidavits, notices, reaffirmations and amendments and restatements of
existing documents, as the Agent may reasonably request) and do all
such other things as the Agent may reasonably deem necessary or
appropriate (i) to assure to the Agent its security interests
hereunder, including (A) such financing statements (including renewal
statements) or amendments thereof or supplements thereto or other
instruments as the Agent may from time to time reasonably request in
order to perfect and maintain the security interests granted hereunder
in accordance with the UCC, (B) with regard to Copyrights, a Notice of
Grant of Security Interest in Copyrights in the form of Schedule
5(f)(i), (C) with regard to Patents, a Notice of Grant of Security
Interest in Patents for filing with the United States Patent and
Trademark Office in the form of Schedule 5(f)(ii) attached hereto and
(D) with regard to Trademarks, a Notice of Grant of Security Interest
in Trademarks for filing with the United States Patent and Trademark
Office in the form of Schedule 5(f)(iii) attached hereto, (ii) to
consummate the transactions contemplated hereby and (iii) to otherwise
protect and assure the Agent of its rights and interests hereunder. To
that end, each Obligor agrees that the Agent may file one or more
financing statements disclosing the Agent's security interest in any or
all of the Collateral of such Obligor without, to the extent permitted
by law, such Obligor's signature thereon, and further each Obligor also
hereby irrevocably makes, constitutes and appoints the Agent, its
nominee or any other person whom the Agent may designate, as such
Obligor's attorney in fact with full power and for the limited purpose
to sign in the name of such Obligor any such financing statements, or
amendments and supplements to financing statements, renewal financing
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<PAGE> 8
statements, notices or any similar documents which in the Agent's
reasonable discretion would be necessary, appropriate or convenient in
order to perfect and maintain perfection of the security interests
granted hereunder, such power, being coupled with an interest, being
and remaining irrevocable so long as the Credit Agreement is in effect
or any amounts payable thereunder or under any other Credit Document,
any Letter of Credit or any Hedging Agreement shall remain outstanding,
and until all of the Commitments thereunder shall have terminated. Each
Obligor hereby agrees that a carbon, photographic or other reproduction
of this Security Agreement or any such financing statement is
sufficient for filing as a financing statement by the Agent without
notice thereof to such Obligor wherever the Agent may in its sole
discretion desire to file the same. In the event for any reason the law
of any jurisdiction other than North Carolina becomes or is applicable
to the Collateral of any Obligor or any part thereof, or to any of the
Secured Obligations, such Obligor agrees to execute and deliver all
such instruments and to do all such other things as the Agent in its
sole discretion reasonably deems necessary or appropriate to preserve,
protect and enforce the security interests of the Agent under the law
of such other jurisdiction (and, if an Obligor shall fail to do so
promptly upon the request of the Agent, then the Agent may execute any
and all such requested documents on behalf of such Obligor pursuant to
the power of attorney granted hereinabove). If any Collateral is in the
possession or control of an Obligor's agents and the Agent so requests,
such Obligor agrees to notify such agents in writing of the Agent's
security interest therein and, upon the occurrence of and during the
continuation of and Event of Default, upon the Agent's request,
instruct them to hold all such Collateral for the Lenders' account and
subject to the Agent's instructions. Each Obligor agrees to mark its
books and records to reflect the security interest of the Agent in the
Collateral.
(g) Treatment of Accounts. Not grant or extend the time for
payment of any Account, or compromise or settle any Account for less
than the full amount thereof, or release any person or property, in
whole or in part, from payment thereof, or allow any credit or discount
thereon, other than as normal and customary in the ordinary course of
an Obligor's business.
(h) Covenants Relating to Copyrights.
(i) Employ the Copyright for each Work with such
notice of copyright as may be required by law to secure
copyright protection.
(ii) Not do any act or knowingly omit to do any act
whereby any material Copyright may become invalidated and (A)
not do any act, or knowingly omit to do any act, whereby any
material Copyright may become injected into the public domain;
(B) notify the Agent immediately if it knows, or has reason to
know, that any material Copyright may become injected into the
public domain or of any adverse determination or development
(including, without limitation, the institution of, or any
such determination or development in, any court or tribunal in
the United States or any other country) regarding an Obligor's
ownership of any such Copyright or its validity; (C) take all
necessary steps as it
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<PAGE> 9
shall deem appropriate under the circumstances, to maintain
and pursue each application (and to obtain the relevant
registration) and to maintain each registration of each
material Copyright owned by an Obligor including, without
limitation, filing of applications for renewal where
necessary; and (D) promptly notify the Agent of any material
infringement of any material Copyright of an Obligor of which
it becomes aware and take such actions as it shall reasonably
deem appropriate under the circumstances to protect such
Copyright, including, where appropriate, the bringing of suit
for infringement, seeking injunctive relief and seeking to
recover any and all damages for such infringement.
(iii) Not make any assignment or agreement in
conflict with the security interest in the Copyrights of each
Obligor hereunder.
(i) Covenants Relating to Patents and Trademarks.
(i) (A) Continue to use each Trademark on each and
every trademark class of goods applicable to its current line
as reflected in its current catalogs, brochures and price
lists in order to maintain such Trademark in full force free
from any claim of abandonment for non-use, (B) maintain as in
the past the quality of products and services offered under
such Trademark, (C) employ such Trademark with the appropriate
notice of registration, (D) not adopt or use any mark which is
confusingly similar or a colorable imitation of such Trademark
unless the Agent, for the ratable benefit of the Lenders,
shall obtain a perfected security interest in such mark
pursuant to this Security Agreement, and (E) not (and not
permit any licensee or sublicensee thereof to) do any act or
knowingly omit to do any act whereby any Trademark may become
invalidated.
(ii) Not do any act, or omit to do any act, whereby
any Patent may become abandoned or dedicated.
(iii) Notify the Agent and the Lenders within a
reasonable time if it knows, or has reason to know, that any
application or registration relating to any Patent or
Trademark may become abandoned or dedicated, or of any adverse
determination or development (including, without limitation,
the institution of, or any such determination or development
in, any proceeding in the United States Patent and Trademark
Office or any court or tribunal in any country) regarding an
Obligor's ownership of any Patent or Trademark or its right to
register the same or to keep and maintain the same.
(iv) Whenever an Obligor, either by itself or
through an agent, employee, licensee or designee, shall file
an application for the registration of any Patent or Trademark
with the United States Patent and Trademark Office or any
similar office or agency in any other country or any political
subdivision thereof, an Obligor shall report such filing to
the Agent and the Lenders within fifteen Business Days after
the last day of the fiscal quarter in which such filing
occurs.
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<PAGE> 10
Upon request of the Agent, an Obligor shall execute and
deliver any and all agreements, instruments, documents and
papers as the Agent may request to evidence the Agent's and
the Lenders' security interest in any Patent or Trademark and
the goodwill and general intangibles of an Obligor relating
thereto or represented thereby.
(v) Take all reasonable and necessary steps,
including, without limitation, in any proceeding before the
United States Patent and Trademark Office, or any similar
office or agency in any other country or any political
subdivision thereof, to maintain and pursue each application
(and to obtain the relevant registration) and to maintain each
registration of the Patents and Trademarks, including, without
limitation, filing of applications for renewal, affidavits of
use and affidavits of incontestability.
(vi) Promptly notify the Agent and the Lenders after
it learns that any Patent or Trademark included in the
Collateral is infringed, misappropriated or diluted by a third
party and promptly sue for infringement, misappropriation or
dilution, to seek injunctive relief where appropriate and to
recover any and all damages for such infringement,
misappropriation or dilution, or take such other actions as it
shall reasonably deem appropriate under the circumstances to
protect such Patent or Trademark.
(vii) Not make any assignment or agreement in
conflict with the security interest in the Patents or
Trademarks of each Obligor hereunder.
(j) New Patents, Copyrights and Trademarks. Promptly provide
the Agent with (i) a listing of all applications, if any, for new
Copyrights, Patents or Trademarks (together with a listing of the
issuance of registrations or letters on present applications), which
new applications and issued registrations or letters shall be subject
to the terms and conditions hereunder, and (ii) (A) with respect to
Copyrights, a duly executed Notice of Security Interest in Copyrights,
(B) with respect to Patents, a duly executed Notice of Security
Interest in Patents, (C) with respect to Trademarks, a duly executed
Notice of Security Interest in Trademarks or (D) such other duly
executed documents as the Agent may request in a form acceptable to
counsel for the Agent and suitable for recording to evidence the
security interest in the Copyright, Patent or Trademark which is the
subject of such new application.
(k) Insurance. Insure, repair and replace the Collateral of
such Obligor as set forth in the Credit Agreement. All insurance
proceeds shall be subject to the security interest of the Agent
hereunder.
6. Advances by Lenders. On failure of any Obligor to perform any of the
covenants and agreements contained herein, the Agent may, at its sole option and
in its sole discretion, perform the same and in so doing may expend such sums as
the Agent may reasonably deem advisable in the performance thereof, including,
without limitation, the payment of any insurance
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<PAGE> 11
premiums, the payment of any taxes, a payment to obtain a release of a Lien or
potential Lien, expenditures made in defending against any adverse claim and all
other expenditures which the Agent or the Lenders may make for the protection of
the security hereof or which may be compelled to make by operation of law. All
such sums and amounts so expended shall be repayable by the Obligors on a joint
and several basis promptly upon timely notice thereof and demand therefor, shall
constitute additional Secured Obligations and shall bear interest from the date
said amounts are expended at the default rate specified in Section 3.1 of the
Credit Agreement for Loans that are Base Rate Loans. No such performance of any
covenant or agreement by the Agent or the Lenders on behalf of any Obligor, and
no such advance or expenditure therefor, shall relieve the Obligors of any
default under the terms of this Security Agreement, the other Credit Documents
or any Hedging Agreement. The Lenders may make any payment hereby authorized in
accordance with any bill, statement or estimate procured from the appropriate
public office or holder of the claim to be discharged without inquiry into the
accuracy of such bill, statement or estimate or into the validity of any tax
assessment, sale, forfeiture, tax lien, title or claim except to the extent such
payment is being contested in good faith by an Obligor in appropriate
proceedings and against which adequate reserves are being maintained in
accordance with GAAP.
7. Events of Default.
The occurrence of an event which under the Credit Agreement would
constitute an Event of Default shall be an Event of Default hereunder (an "Event
of Default").
8. Remedies.
(a) General Remedies. Upon the occurrence of an Event of
Default and during continuation thereof, the Lenders shall have, in
addition to the rights and remedies provided herein, in the Credit
Documents, in the Hedging Agreements or by law (including, but not
limited to, the rights and remedies set forth in the Uniform Commercial
Code of the jurisdiction applicable to the affected Collateral), the
rights and remedies of a secured party under the UCC (regardless of
whether the UCC is the law of the jurisdiction where the rights and
remedies are asserted and regardless of whether the UCC applies to the
affected Collateral), and further, the Agent may, with or without
judicial process or the aid and assistance of others, (i) enter on any
premises on which any of the Collateral may be located and, without
resistance or interference by the Obligors, take possession of the
Collateral, (ii) dispose of any Collateral on any such premises, (iii)
require the Obligors to assemble and make available to the Agent at the
expense of the Obligors any Collateral at any place and time designated
by the Agent which is reasonably convenient to both parties, (iv)
remove any Collateral from any such premises for the purpose of
effecting sale or other disposition thereof, and/or (v) without demand
and without advertisement, notice, hearing or process of law, all of
which each of the Obligors hereby waives to the fullest extent
permitted by law, at any place and time or times, sell and deliver any
or all Collateral held by or for it at public or private sale, by one
or more contracts, in one or more parcels, for cash, upon credit or
otherwise, at such prices and upon such terms as the Agent deems
advisable, in its sole discretion (subject to any and all mandatory
legal
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<PAGE> 12
requirements). In addition to all other sums due the Agent and the
Lenders with respect to the Secured Obligations, the Obligors shall pay
the Agent and each of the Lenders all reasonable documented costs and
expenses incurred by the Agent or any such Lender, including, but not
limited to, reasonable attorneys' fees and court costs, in obtaining or
liquidating the Collateral, in enforcing payment of the Secured
Obligations, or in the prosecution or defense of any action or
proceeding by or against the Agent or the Lenders or the Obligors
concerning any matter arising out of or connected with this Security
Agreement, any Collateral or the Secured Obligations, including,
without limitation, any of the foregoing arising in, arising under or
related to a case under the Bankruptcy Code. To the extent the rights
of notice cannot be legally waived hereunder, each Obligor agrees that
any requirement of reasonable notice shall be met if such notice is
personally served on or mailed, postage prepaid, to the Borrower in
accordance with the notice provisions of Section 11.1 of the Credit
Agreement at least 10 days before the time of sale or other event
giving rise to the requirement of such notice. The Agent and the
Lenders shall not be obligated to make any sale or other disposition of
the Collateral regardless of notice having been given. To the extent
permitted by law, any Lender may be a purchaser at any such sale. To
the extent permitted by applicable law, each of the Obligors hereby
waives all of its rights of redemption with respect to any such sale.
Subject to the provisions of applicable law, the Agent and the Lenders
may postpone or cause the postponement of the sale of all or any
portion of the Collateral by announcement at the time and place of such
sale, and such sale may, without further notice, to the extent
permitted by law, be made at the time and place to which the sale was
postponed, or the Agent and the Lenders may further postpone such sale
by announcement made at such time and place.
(b) Remedies relating to Accounts. Upon the occurrence of an
Event of Default and during the continuation thereof, whether or not
the Agent has exercised any or all of its rights and remedies
hereunder, each Obligor will promptly upon request of the Agent
instruct all account debtors to remit all payments in respect of
Accounts to a mailing location selected by the Agent. In addition, the
Agent or its designee may notify any Obligor's customers and account
debtors that the Accounts of such Obligor have been assigned to the
Agent or of the Agent's security interest therein, and may (either in
its own name or in the name of an Obligor or both) demand, collect
(including without limitation by way of a lockbox arrangement),
receive, take receipt for, sell, sue for, compound, settle, compromise
and give acquittance for any and all amounts due or to become due on
any Account, and, in the Agent's discretion, file any claim or take any
other action or proceeding to protect and realize upon the security
interest of the Lenders in the Accounts. Each Obligor acknowledges and
agrees that the Proceeds of its Accounts remitted to or on behalf of
the Agent in accordance with the provisions hereof shall be solely for
the Agent's own convenience and that such Obligor shall not have any
right, title or interest in such Accounts or in any such other amounts
except as expressly provided herein. The Agent and the Lenders shall
have no liability or responsibility to any Obligor for acceptance of a
check, draft or other order for payment of money bearing the legend
"payment in full" or words of similar import or any other restrictive
legend or endorsement or be responsible for determining the correctness
of any remittance unless such acceptance was willful or with gross
negligence. Each Obligor hereby agrees to indemnify the Agent
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<PAGE> 13
and the Lenders from and against all liabilities, damages, losses,
actions, claims, judgments, costs, expenses, charges and reasonable
attorneys' fees suffered or incurred by the Agent or the Lenders (each,
an "Indemnified Party") because of the maintenance of the foregoing
arrangements except as relating to or arising out of the gross
negligence or willful misconduct of an Indemnified Party or its
officers, employees or agents. In the case of any investigation,
litigation or other proceeding, the foregoing indemnity shall be
effective whether or not such investigation, litigation or proceeding
is brought by an Obligor, its directors, shareholders or creditors or
an Indemnified Party or any other Person or any other Indemnified Party
is otherwise a party thereto.
(c) Access. In addition to the rights and remedies hereunder,
upon the occurrence of an Event of Default and during the continuance
thereof, the Agent shall have the right to enter and remain upon the
various premises of the Obligors without cost or charge to the Agent,
and use the same, together with materials, supplies, books and records
of the Obligors for the purpose of collecting and liquidating the
Collateral, or for preparing for sale and conducting the sale of the
Collateral, whether by foreclosure, auction or otherwise. In addition,
the Agent may remove Collateral, or any part thereof, from such
premises and/or any records with respect thereto, in order to
effectively collect or liquidate such Collateral.
(d) Nonexclusive Nature of Remedies. Failure by the Agent or
the Lenders to exercise any right, remedy or option under this Security
Agreement, any other Credit Document, any Hedging Agreement or as
provided by law, or any delay by the Agent or the Lenders in exercising
the same, shall not operate as a waiver of any such right, remedy or
option. No waiver hereunder shall be effective unless it is in writing,
signed by the party against whom such waiver is sought to be enforced
and then only to the extent specifically stated, which in the case of
the Agent or the Lenders shall only be granted as provided herein. To
the extent permitted by law, neither the Agent, the Lenders, nor any
party acting as attorney for the Agent or the Lenders, shall be liable
hereunder for any acts or omissions or for any error of judgment or
mistake of fact or law other than their gross negligence or willful
misconduct hereunder. The rights and remedies of the Agents and the
Lenders under this Security Agreement shall be cumulative and not
exclusive of any other right or remedy which the Agent or the Lenders
may have.
(e) Retention of Collateral. The Agent may, after providing
the notices required by Section 9-505(2) of the UCC or otherwise
complying with the requirements of applicable law of the relevant
jurisdiction, to the extent the Agent is in possession of any of the
Collateral, retain the Collateral in satisfaction of the Secured
Obligations. Unless and until the Agent shall have provided such
notices, however, the Agent shall not be deemed to have retained any
Collateral in satisfaction of any Secured Obligations for any reason.
(f) Deficiency. In the event that the proceeds of any sale,
collection or realization are insufficient to pay all amounts to which
the Agent or the Lenders are legally entitled, the Obligors shall be
jointly and severally liable for the deficiency, together with
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<PAGE> 14
interest thereon at the default rate specified in Section 3.1 of the
Credit Agreement for Loans that are Base Rate Loans, together with the
costs of collection and the reasonable fees of any attorneys employed
by the Agent to collect such deficiency. Any surplus remaining after
the full payment and satisfaction of the Secured Obligations shall be
returned to the Obligors or to whomsoever a court of competent
jurisdiction shall determine to be entitled thereto.
9. Rights of the Agent.
(a) Power of Attorney. In addition to other powers of attorney
contained herein, each Obligor hereby designates and appoints the
Agent, on behalf of the Lenders, and each of its designees or agents,
as attorney-in-fact of such Obligor, irrevocably and with power of
substitution, with authority to take any or all of the following
actions upon the occurrence and during the continuance of an Event of
Default:
(i) to demand, collect, settle, compromise, adjust,
give discharges and releases, all as the Agent may reasonably
determine;
(ii) to commence and prosecute any actions at any
court for the purposes of collecting any Collateral and
enforcing any other right in respect thereof;
(iii) to defend, settle or compromise any action
brought and, in connection therewith, give such discharge or
release as the Agent may deem reasonably appropriate;
(iv) receive, open and dispose of mail addressed to
an Obligor and endorse checks, notes, drafts, acceptances,
money orders, bills of lading, warehouse receipts or other
instruments or documents evidencing payment, shipment or
storage of the goods giving rise to the Collateral of such
Obligor on behalf of and in the name of such Obligor, or
securing, or relating to such Collateral;
(v) sell, assign, transfer, make any agreement in
respect of, or otherwise deal with or exercise rights in
respect of, any Collateral or the goods or services which have
given rise thereto, as fully and completely as though the
Agent were the absolute owner thereof for all purposes;
(vi) adjust and settle claims under any insurance
policy relating thereto;
(vii) execute and deliver all assignments,
conveyances, statements, financing statements, renewal
financing statements, security agreements, affidavits, notices
and other agreements, instruments and documents that the Agent
may determine necessary in order to perfect and
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<PAGE> 15
maintain the security interests and liens granted in this
Security Agreement and in order to fully consummate all of the
transactions contemplated therein;
(viii) institute any foreclosure proceedings that the
Agent may deem appropriate; and
(ix) do and perform all such other acts and things
as the Agent may reasonably deem to be necessary, proper or
convenient in connection with the Collateral.
This power of attorney is a power coupled with an interest and shall be
irrevocable (i) for so long as any of the Secured Obligations remain
outstanding, any Credit Document or any Hedging Agreement is in effect
or any Letter of Credit shall remain outstanding and (ii) until all of
the Commitments shall have been terminated. The Agent shall be under no
duty to exercise or withhold the exercise of any of the rights, powers,
privileges and options expressly or implicitly granted to the Agent in
this Security Agreement, and shall not be liable for any failure to do
so or any delay in doing so. The Agent shall not be liable for any act
or omission or for any error of judgment or any mistake of fact or law
in its individual capacity or its capacity as attorney-in-fact except
acts or omissions resulting from its gross negligence or willful
misconduct. This power of attorney is conferred on the Agent solely to
protect, preserve and realize upon its security interest in the
Collateral.
(b) Performance by the Agent of Obligations. If any Obligor
fails to perform any agreement or obligation contained herein, the
Agent itself may perform, or cause performance of, such agreement or
obligation, and the expenses of the Agent incurred in connection
therewith shall be payable by the Obligors on a joint and several basis
pursuant to Section 11 hereof.
(c) Assignment by the Agent. The Agent may from time to time
assign the Secured Obligations and any portion thereof and/or the
Collateral and any portion thereof, and the assignee shall be entitled
to all of the rights and remedies of the Agent under this Security
Agreement in relation thereto.
(d) The Agent's Duty of Care. Other than the exercise of
reasonable care to assure the safe custody of the Collateral while
being held by the Agent hereunder, the Agent shall have no duty or
liability to preserve rights pertaining thereto, it being understood
and agreed that the Obligors shall be responsible for preservation of
all rights in the Collateral, and the Agent shall be relieved of all
responsibility for the Collateral upon surrendering it or tendering the
surrender of it to the Obligors. The Agent shall be deemed to have
exercised reasonable care in the custody and preservation of the
Collateral in its possession if the Collateral is accorded treatment
substantially equal to that which the Agent accords its own property,
which shall be no less than the treatment employed by a reasonable and
prudent agent in the industry, it being understood that the Agent shall
not
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<PAGE> 16
have responsibility for taking any necessary steps to preserve rights
against any parties with respect to any of the Collateral.
10. Application of Proceeds. Upon the occurrence and during the
continuance of an Event of Default, any payments in respect of the Secured
Obligations and any proceeds of the Collateral, when received by the Agent or
any of the Lenders in cash or its equivalent, will be applied in reduction of
the Secured Obligations in the order set forth in Section 3.15(b) of the Credit
Agreement, and each Obligor irrevocably waives the right to direct the
application of such payments and proceeds and acknowledges and agrees that the
Agent shall have the continuing and exclusive right to apply and reapply any and
all such payments and proceeds in the Agent's sole discretion, notwithstanding
any entry to the contrary upon any of its books and records.
11. Costs of Counsel. If at any time hereafter, whether upon the
occurrence of an Event of Default or not, the Agent employs counsel to prepare
or consider amendments, waivers or consents with respect to this Security
Agreement, or to take action or make a response in or with respect to any legal
or arbitral proceeding relating to this Security Agreement or relating to the
Collateral, or to reasonably protect the Collateral or reasonably exercise any
rights or remedies under this Security Agreement or with respect to the
Collateral, then the Obligors agree to promptly pay upon demand any and all such
reasonable documented costs and expenses of the Agent or the Lenders, all of
which costs and expenses shall constitute Secured Obligations hereunder.
12. Continuing Agreement.
(a) This Security Agreement shall be a continuing agreement in
every respect and shall remain in full force and effect so long as any
of the Secured Obligations remain outstanding or any Credit Document or
Hedging Agreement is in effect or any Letter of Credit shall remain
outstanding, and until all of the Commitments thereunder shall have
terminated (other than any obligations with respect to the indemnities
and the representations and warranties set forth in the Credit
Documents). Upon such payment and termination, this Security Agreement
shall be automatically terminated and the Agent and the Lenders shall,
upon the request and at the expense of the Obligors, forthwith release
all of its liens and security interests hereunder and shall execute and
deliver all UCC termination statements and/or other documents
reasonably requested by the Obligors evidencing such termination.
Notwithstanding the foregoing all releases and indemnities provided
hereunder shall survive termination of this Security Agreement.
(b) This Security Agreement shall continue to be effective or
be automatically reinstated, as the case may be, if at any time
payment, in whole or in part, of any of the Secured Obligations is
rescinded or must otherwise be restored or returned by the Agent or any
Lender as a preference, fraudulent conveyance or otherwise under any
bankruptcy, insolvency or similar law, all as though such payment had
not been made; provided that in the event payment of all or any part of
the Secured Obligations is rescinded or must be restored or returned,
all reasonable costs and expenses (including without limitation any
reasonable legal fees and disbursements) incurred by the Agent or any
Lender in defending
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<PAGE> 17
and enforcing such reinstatement shall be deemed to be included as a
part of the Secured Obligations.
13. Amendments; Waivers; Modifications. This Security Agreement and the
provisions hereof may not be amended, waived, modified, changed, discharged or
terminated except as set forth in Section 11.6 of the Credit Agreement.
14. Successors in Interest. This Security Agreement shall create a
continuing security interest in the Collateral and shall be binding upon each
Obligor, its successors and assigns and shall inure, together with the rights
and remedies of the Agent and the Lenders hereunder, to the benefit of the Agent
and the Lenders and their successors and permitted assigns; provided, however,
that none of the Obligors may assign its rights or delegate its duties hereunder
without the prior written consent of each Lender or the Required Lenders, as
required by the Credit Agreement. To the fullest extent permitted by law, each
Obligor hereby releases the Agent and each Lender, and its successors and
assigns, from any liability for any act or omission relating to this Security
Agreement or the Collateral, except for any liability arising from the gross
negligence or willful misconduct of the Agent, or such Lender, or its officers,
employees or agents.
15. Notices. All notices required or permitted to be given under this
Security Agreement shall be in conformance with Section 11.1 of the Credit
Agreement.
16. Counterparts. This Security Agreement may be executed in any number
of counterparts, each of which where so executed and delivered shall be an
original, but all of which shall constitute one and the same instrument. It
shall not be necessary in making proof of this Security Agreement to produce or
account for more than one such counterpart.
17. Headings. The headings of the sections and subsections hereof are
provided for convenience only and shall not in any way affect the meaning or
construction of any provision of this Security Agreement.
18. Governing Law; Submission to Jurisdiction; Venue.
(a) THIS SECURITY AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF
THE PARTIES HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NORTH CAROLINA.
Any legal action or proceeding with respect to this Security Agreement
may be brought in the courts of the State of North Carolina, or of the
United States for the Western District of North Carolina, and, by
execution and delivery of this Security Agreement, each Obligor hereby
irrevocably accepts for itself and in respect of its property,
generally and unconditionally, the jurisdiction of such courts. Each
Obligor further irrevocably consents to the service of process out of
any of the aforementioned courts in any such action or proceeding by
the mailing of copies thereof by registered or certified mail, postage
prepaid, to it at the address for notices pursuant to Section 11.1 of
the Credit Agreement, such service to become
- 17 -
<PAGE> 18
effective 30 days after such mailing. Nothing herein shall affect the
right of the Agent to serve process in any other manner permitted by
law or to commence legal proceedings or to otherwise proceed against
any Obligor in any other jurisdiction.
(b) Each Obligor hereby irrevocably waives any objection which
it may now or hereafter have to the laying of venue of any of the
aforesaid actions or proceedings arising out of or in connection with
this Security Agreement brought in the courts referred to in subsection
(a) hereof and hereby further irrevocably waives and agrees not to
plead or claim in any such court that any such action or proceeding
brought in any such court has been brought in an inconvenient forum.
19. Waiver of Jury Trial. TO THE EXTENT PERMITTED BY APPLICABLE LAW,
EACH OF THE PARTIES TO THIS SECURITY AGREEMENT HEREBY IRREVOCABLY WAIVES ALL
RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF
OR RELATING TO THIS SECURITY AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
20. Severability. If any provision of any of the Security Agreement is
determined to be illegal, invalid or unenforceable, such provision shall be
fully severable and the remaining provisions shall remain in full force and
effect and shall be construed without giving effect to the illegal, invalid or
unenforceable provisions.
21. Entirety. This Security Agreement, the other Credit Documents and
the Hedging Agreements represent the entire agreement of the parties hereto and
thereto, and supersede all prior agreements and understandings, oral or written,
if any, including any commitment letters or correspondence relating to the
Credit Documents, the Hedging Agreements or the transactions contemplated herein
and therein.
22. Survival. All representations and warranties of the Obligors
hereunder shall survive the execution and delivery of this Security Agreement,
the other Credit Documents and the Hedging Agreements, the delivery of the Notes
and the making of the Loans and the issuance of the Letters of Credit under the
Credit Agreement.
23. Other Security. To the extent that any of the Secured Obligations
are now or hereafter secured by property other than the Collateral (including,
without limitation, real property and securities owned by an Obligor), or by a
guarantee, endorsement or property of any other Person, then the Agent and the
Lenders shall have the right to proceed against such other property, guarantee
or endorsement upon the occurrence and during the continuance of any Event of
Default, and the Agent and the Lenders have the right, in their sole discretion,
to determine which rights, security, liens, security interests or remedies the
Agent and the Lenders shall at any time pursue, relinquish, subordinate, modify
or take with respect thereto, without in any way modifying or affecting any of
them or any of the Agent's and the Lenders' rights or the Secured Obligations
under this Security Agreement, under any other of the Credit Documents or under
any Hedging Agreement.
- 18 -
<PAGE> 19
24. Joint and Several Obligations of Obligors.
(a) Each of the Obligors is accepting joint and several
liability hereunder in consideration of the financial accommodation to
be provided by the Lenders under the Credit Agreement, for the mutual
benefit, directly and indirectly, of each of the Obligors and in
consideration of the undertakings of each of the Obligors to accept
joint and several liability for the obligations of each of them.
(b) Each of the Obligors jointly and severally hereby
irrevocably and unconditionally accepts, not merely as a surety but
also as a co-debtor, joint and several liability with the other
Obligors with respect to the payment and performance of all of the
Secured Obligations arising under this Security Agreement, the other
Credit Documents and the Hedging Agreements, it being the intention of
the parties hereto that all the Obligations shall be the joint and
several obligations of each of the Obligors without preferences or
distinction among them.
(c) Notwithstanding any provision to the contrary contained
herein or in any other of the Credit Documents, to the extent the
obligations of a Guarantor shall be adjudicated to be invalid or
unenforceable for any reason (including, without limitation, because of
any applicable state or federal law relating to fraudulent conveyances
or transfers) then the obligations of each Guarantor hereunder shall be
limited to the maximum amount that is permissible under applicable law
(whether federal or state and including, without limitation, the
Bankruptcy Code).
25. Rights of Required Lenders. All rights of the Agent hereunder, if
not exercised by the Agent, may be exercised by the Required Lenders.
- 19 -
<PAGE> 20
Each of the parties hereto has caused a counterpart of this Security
Agreement to be duly executed and delivered as of the date first above written.
BORROWER: SIMCALA, INC. ,
a Delaware corporation
By: /s/ C. E. Boardwine
-----------------------------------------
Name: C. E. Boardwine
Title: President and Chief Executive Officer
GUARANTORS: SIMCALA HOLDINGS, INC.,
a Georgia corporation
By: /s/ William D. Davies
-----------------------------------------
Name: William A. Davies
Title: Secretary-Treasurer
Accepted and agreed to in Charlotte, North Carolina as of the date
first above written.
NATIONSBANK, N.A., as Agent
By: /s/ Michael D. McKay
-----------------------------------------
Name: Michael D. McKay
Title: Senior Vice President
<PAGE> 21
SCHEDULE 1(b)
INTELLECTUAL PROPERTY
None.
<PAGE> 22
SCHEDULE 4(a)
CHIEF EXECUTIVE OFFICE
Simcala, Inc.
Ohio Ferro-Alloys Road
Mt. Meigs, Alabama 36057
Simcala, Holdings, Inc.
c/o CGW Southeast Partners III, L.P.
Twelve Piedmont Center, Suite 210
Atlanta, Georgia 30305
<PAGE> 23
SCHEDULE 4(b)
LOCATIONS OF COLLATERAL
Simcala, Inc.
Ohio Ferro-Alloys Road
Mt. Meigs, Alabama 36057
Marietta Industrial Enterprises
Alloys Division
Route 7 South
Marietta, OH 45750
<PAGE> 24
SCHEDULE 4(c)
MERGERS, CONSOLIDATIONS, CHANGE IN STRUCTURE OR USE OF TRADENAMES
Merger between Simcala, Inc. and SAC Acquisition Corp. with Simcala, Inc. as the
survivor
<PAGE> 25
SCHEDULE 5(f)(i)
NOTICE
OF
GRANT OF SECURITY INTEREST
IN
COPYRIGHTS
United States Copyright Office
Gentlemen:
Please be advised that pursuant to the Security Agreement dated as of
March 31, 1998 (as the same may be amended, modified, extended or restated from
time to time, the "Security Agreement") by and among the Obligors party thereto
(each an "Obligor" and collectively, the "Obligors") and NationsBank, N.A., as
Agent (the "Agent") for the lenders referenced therein (the "Lenders"), the
undersigned Obligor has granted a continuing security interest in and continuing
lien upon, the copyrights and copyright applications shown below to the Agent
for the ratable benefit of the Lenders:
COPYRIGHTS
<TABLE>
<CAPTION>
Date of
Copyright No. Description of Copyright Copyright
------------- ------------------------ ---------
<S> <C> <C>
</TABLE>
Copyright Applications
<TABLE>
<CAPTION>
Copyright Description of Copyright Date of Copyright
Applications No. Applied For Applications
---------------- ------------------------ -----------------
<S> <C> <C>
</TABLE>
<PAGE> 26
The Obligors and the Agent, on behalf of the Lenders, hereby
acknowledge and agree that the security interest in the foregoing copyrights and
copyright applications (i) may only be terminated in accordance with the terms
of the Security Agreement and (ii) is not to be construed as an assignment of
any copyright or copyright application.
Very truly yours,
----------------------------------
[Obligor]
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
Acknowledged and Accepted:
NATIONSBANK, N.A., as Agent
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
- 26 -
<PAGE> 27
SCHEDULE 5(f)(ii)
NOTICE
OF
GRANT OF SECURITY INTEREST
IN
PATENTS
United States Patent and Trademark Office
Gentlemen:
Please be advised that pursuant to the Security Agreement dated as of
March 31, 1998 (the "Security Agreement") by and among the Obligors party
thereto (each an "Obligor" and collectively, the "Obligors") and NationsBank,
N.A., as Agent (the "Agent") for the lenders referenced therein (the "Lenders"),
the undersigned Obligor has granted a continuing security interest in and
continuing lien upon, the patents and patent applications shown below to the
Agent for the ratable benefit of the Lenders:
PATENTS
<TABLE>
<CAPTION>
Description of Patent Date of
Patent No. Item Patent
---------- --------------------- -------
<S> <C> <C>
</TABLE>
Patent Applications
<TABLE>
<CAPTION>
Patent Description of Patent Date of Patent
Applications No. Applied For Applications
---------------- --------------------- --------------
<S> <C> <C>
</TABLE>
<PAGE> 28
The Obligors and the Agent, on behalf of the Lenders, hereby
acknowledge and agree that the security interest in the foregoing patents and
patent applications (i) may only be terminated in accordance with the terms of
the Security Agreement and (ii) is not to be construed as an assignment of any
patent or patent application.
Very truly yours,
----------------------------------
[Obligor]
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
Acknowledged and Accepted:
NATIONSBANK, N.A., as Agent
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
- 28 -
<PAGE> 29
SCHEDULE 5(f)(iii)
NOTICE
OF
GRANT OF SECURITY INTEREST
IN
TRADEMARKS
United States Patent and Trademark Office
Gentlemen:
Please be advised that pursuant to the Security Agreement dated as of
March 31, 1998 (the "Security Agreement") by and among the Obligors party
thereto (each an "Obligor" and collectively, the "Obligors") and NationsBank,
N.A., as Agent (the "Agent") for the lenders referenced therein (the "Lenders"),
the undersigned Obligor has granted a continuing security interest in and
continuing lien upon, the trademarks and trademark applications shown below to
the Agent for the ratable benefit of the Lenders:
TRADEMARKS
<TABLE>
<CAPTION>
Description of Trademark Date of
Trademark No. Item Trademark
------------- ------------------------ ---------
<S> <C> <C>
</TABLE>
Trademark Applications
<TABLE>
<CAPTION>
Trademark Description of Trademark Date of Trademark
Applications No. Applied For Applications
---------------- ------------------------ -----------------
<S> <C> <C>
</TABLE>
<PAGE> 30
The Obligors and the Agent, on behalf of the Lenders, hereby
acknowledge and agree that the security interest in the foregoing trademarks and
trademark applications (i) may only be terminated in accordance with the terms
of the Security Agreement and (ii) is not to be construed as an assignment of
any trademark or trademark application.
Very truly yours,
----------------------------------
[Obligor]
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
Acknowledged and Accepted:
NATIONSBANK, N.A., as Agent
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
- 30 -
<PAGE> 1
EXHIBIT 10.6
================================================================================
MORTGAGE, SECURITY AGREEMENT, ASSIGNMENT OF LEASES AND RENTS AND
FIXTURE FINANCING STATEMENT
by
SIMCALA, INC.
and
THE INDUSTRIAL DEVELOPMENT BOARD OF THE CITY OF MONTGOMERY
and
to
NATIONSBANK, N.A.,
as Agent for the Lenders party to
the Credit Agreement (herein defined)
- --------------------------------------------------------------------------------
Dated
March 31, 1998
================================================================================
<PAGE> 2
THIS INSTRUMENT WAS PREPARED BY,
AND WHEN RECORDED SHOULD BE
RETURNED TO:
Moore & Van Allen PLLC
100 North Tryon Street, Floor 47
Charlotte, North Carolina 28202
MORTGAGE, SECURITY AGREEMENT,
ASSIGNMENT OF LEASES AND RENTS
AND FIXTURE FINANCING STATEMENT
THIS MORTGAGE, SECURITY AGREEMENT, ASSIGNMENT OF LEASES AND RENTS AND
FIXTURE FINANCING STATEMENT (this "Mortgage") is given as of March 31, 1998, by
SIMCALA, INC., a Delaware corporation (the "Borrower"), having its principal
offices at Ohio Ferro Alloys Road, Mt. Meigs, Alabama 36057, and THE INDUSTRIAL
DEVELOPMENT BOARD OF THE CITY OF MONTGOMERY (the "IDB"), a public corporation
organized and existing under the laws of the State of Alabama, and in particular
Article 4, Chapter 54, Title 11 of the Code of Alabama of 1975, as amended, in
favor of NATIONSBANK, N.A., a national banking association, as agent for the
lenders party to the Credit Agreement hereinafter defined (in such capacity, the
"Agent"), having its principal offices at 101 North Tryon Street, 15th Floor,
Charlotte, North Carolina 28255.
RECITALS
A. The IDB is the owner of the real property situated in Montgomery
County, Alabama, legally described on Exhibit A attached hereto and made a part
hereof (the "Real Property");
B. Pursuant to that certain Consolidated, Amended and Restated Lease
Agreement dated as of January 1, 1995, by and between the IDB and the Borrower
and recorded in Book 1542 at Page 870 in the Montgomery County Public Registry
(as amended, modified, supplemented, extended or renewed from time to time, the
"IDB Lease"), entered into in connection with those certain $6,000,000 Taxable
Industrial Revenue Bonds (SIMCALA, Inc. Project), Series 1995, issued by the
State Industrial Development Authority, an Alabama public corporation (the
"Bonds"), the Borrower leased from the IDB the Real Property and the
improvements, fixtures and equipment located thereon;
C. The Agent, as agent for the Lenders, and the Lenders have agreed to
establish a $15,000,000 credit facility in favor of the Borrower pursuant to the
terms of that certain Credit Agreement dated as of the date hereof among the
Borrower, the guarantors party thereto, the lenders party thereto (the
"Lenders") and the Agent (as amended, modified, supplemented, extended, renewed
or replaced from time to time, the "Credit Agreement"; terms used but not
- 1 -
<PAGE> 3
otherwise defined herein shall have the meanings provided in the Credit
Agreement) and as evidenced by (i) the revolving credit promissory notes of the
Borrower (as amended, modified, supplemented, extended, renewed or replaced from
time to time, the "Notes"); and (ii) those letters of credit for the account of
the Borrower or any other Credit Party (as referenced in the Credit Agreement,
as amended, modified, supplemented, extended, renewed or replaced from time to
time, the "Letters of Credit"). Hereinafter, the loans and extensions of credit
under the Credit Agreement may be called the "Loan".
D. It is a condition precedent to the obligation of the Lenders to make
the Loan pursuant to the terms of the Credit Agreement that this Mortgage be
executed and delivered by the Borrower and the IDB.
E. In order to secure the payment and performance of the Obligations
(as hereinafter defined), the Borrower and the IDB have agreed to execute and
deliver this Mortgage.
F. The obligations secured by this Mortgage (the "Obligations") are as
follows:
(i) the prompt performance and observance by the Borrower of
all obligations of the Borrower under the Credit Agreement, the Notes
(as defined in the Credit Agreement), this Mortgage and the other
Credit Documents; and
(ii) all other indebtedness, liabilities and obligations of
any kind or nature, now existing or hereafter arising pursuant to the
Credit Documents, owing from the Borrower to any Lender or the Agent,
howsoever evidenced, created, incurred or acquired, whether primary,
secondary, direct, contingent, or joint and several, including, without
limitation, all liabilities arising under Hedging Agreements (as
defined in the Credit Agreement) and all obligations and liabilities
incurred in connection with collecting and enforcing the Obligations.
G. The maximum principal indebtedness secured hereby is $15,000,000,
plus amounts which may be advanced by the Agent or the Lenders in protection of
the Mortgaged Property (as hereinafter defined) or this Mortgage.
H. The Obligations shall mature on or before December 1, 2019 (the
"Maturity Date").
NOW, THEREFORE, in consideration of the Lenders making the Loan and of
the Issuing Lender issuing the Letters of Credit, and to secure the Loan and
payment and performance of the Obligations, including without limitation all
advances and readvances of principal under the Notes and all draws under the
Letters of Credit, together with all interest and other charges due thereon, and
also to secure the performance of all terms, conditions and agreements of the
Credit Agreement, the Notes, this Mortgage and the other Credit Documents, the
Borrower and the IDB do hereby grant, bargain, sell and convey to the Agent its
successors and assigns, forever, with power of sale, and grant to the Agent, its
successors and assigns, a security interest in, the following, all of which is
called the "Mortgaged Property":
- 2 -
<PAGE> 4
A. LAND AND IMPROVEMENTS
All of the IDB's and the Borrower's rights, title and interests in the
Real Property and all mineral rights, hereditaments, easements and appurtenances
thereto (collectively the "Land"), and all improvements and structures thereon
(the "Improvements"), and all of the Borrower's rights, title and interest in
the Mortgaged Property arising from and out of the IDB Lease; and
B. FIXTURES AND PERSONAL PROPERTY
All fixtures (the "Fixtures"), and all machinery, equipment and
personal property (collectively, the "Personal Property") now or hereafter
located on, in or under the Land and the Improvements, or usable in connection
with the Land or the Improvements, and which are owned by the IDB or the
Borrower or in which the IDB or the Borrower has an interest, including any
construction and building materials stored on and to be included in the
Improvements, plus any repairs, replacements and betterments to any of the
foregoing and the proceeds and products thereof; and
C. LEASES AND RENTS
All rights of the Borrower and the IDB with respect to the IDB Lease,
and all rights of the Borrower with respect to tenants or occupants now or
hereafter occupying any part of the Land or the Improvements, if any, including
all subleases and licenses and rights in connection therewith, whether oral or
written (collectively the "Subleases"), and all rents, income, both from
services and occupation, royalties, revenues and payments, including prepayments
and security deposits (collectively the "Rents"), which are now or hereafter due
or to be paid in connection with the Land, the Improvements, the Fixtures or the
Personal Property; and
D. INSURANCE AND CONDEMNATION PROCEEDS
All proceeds of insurance and condemnation or other conveyance of the
Land and the Improvements; and
E. AFTER-ACQUIRED PROPERTY AND PROCEEDS
All after-acquired property similar to the property herein described
and conveyed which may be subsequently acquired by the IDB or the Borrower and
used in connection with the Land, the Improvements, the Fixtures, the Personal
Property and other property; and all cash and non-cash proceeds and products of
all of the foregoing property (provided, however, that the inclusion of proceeds
and products shall not be deemed to permit any sale or other disposition of the
Mortgaged Property or any part thereof in violation of the terms and provisions
of this Mortgage).
- 3 -
<PAGE> 5
TO HAVE AND TO HOLD the same, and all estate therein, together with all
the rights, privileges and appurtenances thereunto belonging, to the use and
benefit of the Agent, its successors and assigns, forever.
BUT, THIS CONVEYANCE IS MADE UPON THE FOLLOWING CONDITIONS
NEVERTHELESS, that is to say: (a) the Borrower shall well and truly pay when and
as due the aggregate of all of the Obligations, including without limitation all
advances and re-advances of principal under the Notes and all draws under the
Letters of Credit, together with all interest and other charges due therein, (b)
the Borrower and the IDB shall have fulfilled and performed all of the terms,
conditions and agreements contained in the Credit Agreement, the Notes, this
Mortgage and the other Credit Documents, (c) the Notes shall have been satisfied
and terminated in accordance with their terms and the Lenders shall have no
obligation to extend any further credit under the Credit Agreement or the Notes,
and (d) an appropriate instrument in satisfaction of this Mortgage, executed by
a duly authorized officer of the Agent, shall have been duly recorded in the
Probate Office in which this Mortgage is originally recorded, then this
conveyance shall become void; otherwise, the same shall remain in full force and
effect.
This Mortgage constitutes (a) a real estate mortgage under the laws of
the State of Alabama, (b) a security agreement within the meaning of the Uniform
Commercial Code as in effect in the State of Alabama (the "UCC"), with respect
to all property described herein as to which a security interest may be granted
and/or perfected pursuant to the UCC (and is intended to afford the Agent, to
the fullest extend allowed by law, the rights and remedies of a secured party
under the UCC), and (c) a financing statement filed as a fixture filing for
purposes of Article 9 of the UCC.
The Notes evidence and this Mortgage secures an open-end revolving line
of credit under which the Borrower may borrow and repay, and reborrow and repay,
amounts from the Lenders from time to time up to a maximum principal amount to
any one time outstanding not exceeding $15,000,000. Advances under the Notes are
obligatory. The Notes do not require that the Borrower maintain any minimum
balance under the revolving line of credit and, therefore, at times there may be
no outstanding debt under the Notes. This Mortgage shall not be deemed satisfied
nor shall title to the Mortgaged Property be divested from the Agent by the
payment in full of all the debt at any one time evidenced by the Notes, since in
each case further borrowings can thereafter be made from time to time by the
Borrower under the terms of the Notes and all such borrowings are to be included
in the Obligations. The Borrower agrees to pay or reimburse the Agent and the
Lenders for any and all recording and mortgage taxes and fees which at any time
and from time to time may be paid or incurred by the Agent or the Lenders by
virtue of the recordation of this Mortgage or any advances or readvances of
principal under the Notes.
- 4 -
<PAGE> 6
BORROWER FURTHER agrees as follows:
ARTICLE I
AGREEMENTS
Section 1.1 Performance of Obligations; Incorporation by Reference. The
Borrower shall pay and perform the Obligations as provided in the Credit
Agreement and the other Credit Documents. Time is of the essence hereof. All of
the covenants, obligations, agreements, warranties and representations of the
Borrower contained in the Credit Agreement and the other Credit Documents and
all of the terms and provisions thereof, are hereby incorporated herein and made
a part hereof by reference as if fully set forth herein. If there is a conflict
or inconsistency between the Credit Agreement and this Mortgage, the provisions
of the Credit Agreement shall control and govern.
Section 1.2 Further Assurance. If the Agent requests, the Borrower and
the IDB shall sign and deliver and cause to be recorded as the Agent shall
direct any further mortgages, instruments of further assurances, certificates
and other documents as the Agent reasonably may consider necessary or desirable
in order to perfect, continue and preserve the Obligations and the Agent's
rights, title, estate, liens and interests under the Credit Documents. The
Borrower further agrees to pay to the Agent, upon demand, all costs and expenses
incurred by the Agent or the Lenders in connection with the preparation,
execution, recording, filing and refiling of any such documents, including
reasonable attorneys' fees and title insurance costs.
Section 1.3 Sale, Transfer, Encumbrances. If the Borrower or the IDB
sells, conveys, transfers or otherwise disposes of, or encumbers, all or any
part of its interest in the Mortgaged Property, whether voluntarily,
involuntarily or by operation of law, without the prior written consent of the
Agent, the Agent shall have the option to declare the Obligations immediately
due and payable without notice, except as to Liens that are permitted by the
Credit Agreement. In addition, during the term of this Mortgage there shall not
be any change in the ownership, membership or control of the Borrower unless the
Agent in its sole discretion has given its approval, which approval shall not be
unreasonably withheld or delayed. Notwithstanding anything to the contrary
contained herein, Agent hereby consents to the sale of the Mortgaged Property
from the IDB to the Borrower pursuant to the purchase option contained in the
IDB Lease.
Section 1.4 Insurance.
(A) Types Required. The Borrower shall maintain insurance for
the Mortgaged Property as set forth in Section 7.6 of the Credit Agreement. In
addition to the requirements set forth in Section 7.6 of the Credit Agreement,
if any part of the Improvements is located in an area having "special flood
hazards" as defined in the Federal Flood Disaster Protection Act of 1973, a
flood insurance policy as may be required by law naming the Agent as insured
mortgagee must be submitted to the Agent. The policy must be in such amount,
covering such risks and liabilities and
- 5 -
<PAGE> 7
with such deductibles or self-insurance retentions as are in accordance with
normal industry practice.
(B) Use of Proceeds: All insurance proceeds received by the
Borrower shall be applied as set forth in Section 7.6 of the Credit Agreement.
Section 1.5 Taxes and Fees. The Borrower will pay all taxes, including,
but not limited to, all ad valorem taxes, mortgage taxes, privilege taxes,
recording taxes and other taxes, general and special assessments, insurance
premiums, permit fees, inspection fees, license fees, water and sewer charges,
franchise fees and equipment rents and any other charges or fees against it or
the Mortgaged Property (and the Borrower, upon request of the Agent, will submit
to the Agent receipts evidencing said payments) in accordance with Section 7.5
of the Credit Agreement. The Borrower shall keep the Mortgaged Property free and
clear of all liens, encumbrances, easements, covenants, conditions, restrictions
and reservations except Permitted Liens.
Section 1.6 Escrow Payments. If requested by the Agent, which request
shall only be made after an Event of Default hereunder, the Borrower shall, for
so long as such Event of Default continues, deposit with the Agent on the same
date as payments are due under the Credit Agreement the amount reasonably
estimated by the Agent to be necessary to enable the Agent to pay, at least five
(5) days before they become due, all taxes, assessments and governmental charges
and levies of every kind or nature whatsoever ( collectively, the "Impositions")
against the Mortgaged Property and the premiums upon all insurance required
hereby to be maintained with respect to the Mortgaged Property. All funds so
deposited shall secure the Obligations. Such deposits shall be held by the
Agent, or its nominee, in a non-interest bearing account and may be commingled
with other funds. Such deposits shall be used to pay such Impositions and
insurance premiums when due. Any excess sums so deposited shall be retained by
the Agent and shall be applied to pay said items in the future, unless the
Obligations have been paid and performed in full, in which case all excess sums
so paid shall be refunded to the Borrower. Upon the occurrence and during the
continuation of an Event of Default, the Agent may apply any funds in said
account against the Obligations in such order as the Agent may determine.
Section 1.7 Maintenance and Repair; Compliance with Laws. Except as
provided otherwise in the Credit Agreement, the Borrower will abstain from and
will not permit the commission of waste in or about the Mortgaged Property and
will maintain the Mortgaged Property in good condition and repair, ordinary wear
and tear excepted. The Borrower will do, or cause to be done, all such things as
may be required by law in order fully to protect the security and all rights of
the Agent under this Mortgage. The Borrower shall not cause or permit the lien
of this Mortgage to be impaired in any way.
Section 1.8 Subleases.
(A) The Borrower represents that there is no existing
Sublease. The Borrower shall not enter into or amend any Sublease
without the Agent's prior written consent, and shall furnish to the
Agent, upon execution, a complete and fully executed copy of each
Sublease. The Borrower shall provide the Agent with a copy of each
proposed Sublease
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requiring the consent of the Agent and with any information requested
by the Agent regarding the proposed Tenant (as hereinafter defined)
thereunder. The Agent may declare each Sublease to be prior or
subordinate to this Mortgage, at the Agent's option.
(B) The Borrower shall, at its cost and expense, perform each
obligation to be performed by the landlord under each Sublease; not
borrow against, pledge or further assign any rents or other payments
due thereunder; not permit the prepayment of any rents or other
payments due for more than thirty (30) days in advance; and not permit
any Tenant to assign its Sublease or sublet the Mortgaged Property
covered by its Sublease, unless required to do so by the terms thereof
and then only if such assignment does not work to relieve the Tenant of
any liability for performance of its obligations thereunder.
(C) If any Tenant shall default under its Sublease, the
Borrower shall, in the ordinary course of business, exercise sound
business judgment with respect to such default, but may discount,
compromise, forgive or waive claims or discharge the Tenant from its
obligations under the Sublease or terminate or accept a surrender of
the Sublease.
(D) If the Borrower fails to perform any obligations of
landlord under any Sublease or if the Agent becomes aware of or is
notified by any Tenant of a failure on the part of the Borrower to so
perform, the Agent may, but shall not be obligated to, without waiving
or releasing the Borrower from any obligation in this Agreement or any
of the other Credit Documents, remedy such failure, and the Borrower
agrees to repay upon demand all sums incurred by the Agent or the
Lenders in remedying any such failure, together with interest thereon
from the date incurred at the rate of interest set forth in Section 3.1
of the Credit Agreement.
(E) For purposes of this Mortgage, the following terms shall
have the following meanings:
(I) "Sublease": Any lease or other document or
agreement, written or oral, permitting any Person to use or
occupy any part of the Mortgaged Property.
(II) "Person": Person shall have the meaning
assigned thereto in the Credit Agreement.
(III) "Tenant": Any person or party using or
occupying any part of the Mortgaged Property pursuant to a
Sublease.
Section 1.9 Indemnity. The Borrower shall indemnify the Agent, the
Lenders, the IDB and their directors, officers, agents and employees
(collectively the "Indemnified Parties") against, and hold the Indemnified
Parties harmless from, all losses, damages, suits, claims, judgments, penalties,
fines, liabilities, costs and expenses by reason of, or on account of, or in
connection with the construction, reconstruction or alteration of the Mortgaged
Property, or any accident, injury, death or damage to any person or property
occurring in, on or about the Mortgaged Property or any street, drive, sidewalk,
curb or passageway adjacent thereto, except to the extent
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that such losses, damages, suits, claims, judgments, penalties, fines,
liabilities, costs and expenses are directly caused by the Indemnified Party's
negligence, wanton or willful misconduct. The indemnity contained in this
Section shall include costs of defense of any such claim asserted against an
Indemnified Party, including reasonably attorneys' fees. The indemnity contained
in this Section shall survive payment and performance of the Obligations and
satisfaction and release of this Mortgage and any foreclosure thereof or
acquisition of title by deed in lieu of foreclosure.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Section 2.1 Ownership. The IDB covenants with the Agent, its successors
and assigns, that the IDB is lawfully seized in fee simple of the Real Property
and the IDB and the Borrower covenant with the Agent that they are the lawful
owners of the Improvements, Fixtures and Personal Property, and have good right
to sell and convey the Mortgaged Property as aforesaid; that the Mortgaged
Property is free of all encumbrances except for Permitted Liens, and that the
IDB and the Borrower will forever warrant and forever defend their respective
titles to the Mortgaged Property unto the Agent, its successors and assigns,
against the lawful claims and demands of all persons.
Section 2.2 Liens, Compliance with Laws. The Borrower makes the
following representations and warranties: that the Mortgaged Property is free
from any and all liens and encumbrances, except for Permitted Liens; and that if
the Borrower shall, at any time prior to payment in full of the Obligations,
acquire the fee title or any greater estate in any of the Mortgaged Property,
the lien of this Mortgage shall attach, extend to cover and be a lien upon such
fee simple title or other estate. All applicable zoning, environmental, land
use, subdivision, building, fire, safety and health laws, statutes, ordinances,
codes, rules, regulations and requirements affecting the Mortgaged Property
permit the current use and occupancy thereof, and the Borrower has obtained all
consents, permits and licenses required for such use. The Borrower has examined
and is familiar with all applicable laws, statutes, ordinances, codes and
governmental rules, regulations and requirements affecting the Mortgaged
Property, and the Mortgaged Property complies with all of the foregoing.
Section 2.3 Use. The Mortgaged Property is not homestead property nor
is it agricultural property or in agricultural use.
Section 2.4 Utilities; Services. The Mortgaged Property is serviced by
all necessary public utilities, and all such utilities are operational and have
sufficient capacity for current uses. There is no contract or agreement
providing for services to or maintenance of the Mortgaged Property which cannot
be canceled upon thirty (30) days' or less notice, except as approved by the
Agent, which approval shall not be reasonably withheld.
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Section 2.5 Compliance with IDB Lease.
(A) The Borrower covenants and agrees that it will at all
times fully perform and comply with all agreements, covenants, terms
and conditions imposed upon or assumed by it as tenant under the IDB
Lease, that it will not surrender its leasehold estate and interests,
nor exercise any right to terminate or cancel the IDB Lease (except in
the exercise of the Borrower's purchase option in the IDB Lease), and
that it will not, without the express written consent of the Agent,
modify, change, supplement, alter or amend the IDB Lease, and as
further security for the repayment of the Obligations and for the
performance of the covenants contained herein and in the IDB Lease, the
Borrower hereby assigns to the Agent all of its rights, privileges and
prerogatives as tenant under the IDB Lease to terminate, cancel,
modify, change, supplement, alter or amend the IDB Lease, and any such
termination, cancellation, modification, change, supplement,
alteration, or amendment of the IDB Lease without the prior written
consent thereto by the Agent, shall be void and of no force and effect;
provided that so long as no Event of Default exists, the Agent shall
have no right to terminate, cancel, modify, change, supplement, alter
or amend the IDB Lease.
(B) The Borrower covenants and agrees that no release or
forbearance of any of the Borrower's obligations under the IDB Lease,
pursuant to the IDB Lease or otherwise, shall release the Borrower from
any of its obligations under this Mortgage, including its obligations
with respect to the payment of rent as provided for in the IDB Lease
and the performance of all of the terms, provisions, covenants,
conditions and agreements contained in the IDB Lease to be kept,
performed and complied with by the Borrower.
(C) The Borrower shall not borrower against, pledge or further
assign its rights under the IDB Lease.
(D) The Borrower shall not waive or fail to exercise its
rights to renew and extend the term of the IDB Lease without the
Agent's prior written consent.
(E) If the Borrower fails to perform any covenants or
obligations of the Borrower under the IDB Lease, the Agent may (but
shall not be obligated to) take any action the Agent deems necessary or
desirable to prevent or to cure any such failure by the Borrower. Upon
receipt by the Agent from the IDB of any notice of default by the
Borrower under the IDB Lease, the Agent may rely thereon and take any
action as aforesaid to cure such default even though the existence of
such default or the nature thereof is questioned or denied by the
Borrower or by any party on behalf of the Borrower, unless such default
is being contested in a manner permitted by the Credit Agreement and
for which reserves or security has been provided. The Borrower hereby
expressly grants to the Agent, and agrees that the Agent shall have,
the absolute and immediate right to enter in and upon the Mortgaged
Property or any part thereof to such extent and as often as the Agent,
in its sole discretion, deems necessary or desirable in order to
prevent or to cure any such default by the Borrower. So long as no
Event of
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Default exists, the Agent shall give at least one Business Day's prior
notice of any such entry, but no prior notice shall be required with
respect to any entry during the continuance of an Event of Default. The
Agent may pay and expend such sums of money as the Agent in its sole
discretion deems necessary for any such purpose, and the Borrower
hereby agrees to pay to the Agent, immediately and without demand, all
such sums so paid and expended by the Agent or the Lenders, together
with interest thereon at the rate of interest set forth in Section 3.1
of the Credit Agreement. All sums so paid and expended by the Agent or
the Lenders, together with interest thereon, shall be added to and be
secured by the lien of this Mortgage.
(f) The IDB agrees that: (i) the Agent's lien upon or security
interest in the Personal Property owned by the Borrower is prior and
superior to any interest, lien or claim of any nature the IDB may now
have or hereafter obtain in such Personal Property whether by operation
of law, contract or otherwise; (ii) either the Borrower or the Agent
may remove such Personal Property from the Land at any time without
hindrance on the part of the IDB, and, upon request, the IDB will grant
the Agent (or its representatives) access to the Land so that the Agent
(or its representatives) may remove such Personal Property; and (iii)
such Personal Property shall remain personal property (to the extent
such Personal Property is not already a fixture as of the date hereof)
and shall not become fixtures, notwithstanding the manner or mode of
the attachment of the Personal Property to the Land. The IDB hereby
waives any rights it may now or hereafter have in such Personal
Property, including without limitation, any lien rights available under
applicable law. Agent will repair, at its expense, any material damage
to the Mortgaged Property resulting from Agent's removal of such
Personal Property.
ARTICLE III
EMINENT DOMAIN
Section 3.1 Eminent Domain. The Borrower assigns to the Agent any
proceeds or awards which may become due by reason of any condemnation or other
taking for public use of the whole or any part of the Mortgaged Property or any
rights appurtenant thereto to which the Borrower is entitled, and such proceeds
or awards shall be applied in the same manner the insurance proceeds are applied
pursuant to Section 7.6 of the Credit Agreement. The Borrower agrees to execute
such further assignments and agreements as may be reasonably required by the
Agent to assure the effectiveness of this Section. In the event any Governmental
Authority shall require or commence any proceedings for the demolition of any
buildings or structures comprising a part of the Mortgaged Property, or shall
commence any proceedings to condemn or otherwise take pursuant to the power of
eminent domain a material portion of the Mortgaged Property, the Borrower shall
promptly notify the Agent of such requirement or commencement of proceeding (for
demolition, condemnation or other taking).
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ARTICLE IV
DEFAULTS AND REMEDIES
Section 4.1 Events of Default. An Event of Default, as defined in the
Credit Agreement, shall constitute an Event of Default hereunder, as shall
failure of the Borrower to comply with any term, covenant or condition of the
IDB Lease, if such failure is not cured within the grace period provided for in
the IDB Lease, if any.
Section 4.2 Remedies. Upon the occurrence of an Event of Default, all
of the Obligations shall, at the option of the Agent, be accelerated and become
immediately due and payable without notice or declaration to the Borrower. The
Obligations shall be due and payable without presentment, demand or further
notice of any kind. The Agent shall have the right to proceed to protect and
enforce its rights by one or more of the following remedies:
(A) Bring a court action at law or in equity to foreclose this
Mortgage or to enforce its provisions or any of the obligations secured
by this Mortgage, either or both, concurrently or otherwise, and one
action or suit shall not abate or be a bar to or waiver of the Agent's
right to institute or maintain the other, provided that the Agent shall
have only one payment and satisfaction of the Obligations;
(B) Cause any or all of the Mortgaged Property to be sold
under the power of sale granted hereby in any manner permitted by
applicable law;
(c) Take physical possession of the Mortgaged Property;
(d) Exercise its right to collect the Rents;
(e) Enter into contracts for the completion, repair and
maintenance of the Improvements thereon;
(f) Expend Loan funds and any rents, income and profits
derived from the Mortgaged Property for payment of any taxes, insurance
premiums, assessments and charges for completion, repair and
maintenance of the Improvements, preservation of the lien of this
Mortgage and satisfaction and fulfillment of any liabilities or
obligations of the Borrower arising out of or in any way connected with
the construction of Improvements on the Mortgaged Property whether or
not such liabilities and obligations in any way affect, or may affect,
the lien of this Mortgage;
(g) Enter into leases demising the Mortgaged Property or any
part thereof;
(h) Take such steps to protect and enforce the specific
performance of any covenant, condition or agreement in the Notes, this
Mortgage, the Credit Agreement, or the other Credit Documents, or to
aid the execution of any power herein granted;
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(i) Generally, supervise, manage, and contract with reference
to the Mortgaged Property as if the Agent were equitable owner of the
Mortgaged Property. The Borrower also agrees that any of the foregoing
rights and remedies of the Agent may be exercised at any time
independently of the exercise of any other such rights and remedies,
and the Agent may continue to exercise any or all such rights and
remedies until the Event(s) of Default are cured or waived with the
consent of the Required Lenders or the Lenders (as required by the
Credit Agreement) or until foreclosure and the conveyance of the
Mortgaged Property or until the Loans and Letters of Credit and other
indebtedness secured hereby are otherwise satisfied or paid in full and
the Commitments are terminated;
(j) Sell the Mortgaged Property at public outcry to the
highest bidder for cash in front of the front or main door of the court
house of the county where said Mortgaged Property, or a substantial and
material part thereof, if located, either in person or by auctioneer,
after having first given notice of the time, place and terms of sale,
together with a description of the Mortgaged Property, by publication
once a week for three (3) successive weeks prior to said sale in some
newspaper published in the county (or all counties, if more than one)
in which the Mortgaged Property is located (but if no newspaper is
published in any such county, the notice shall be published in a
newspaper published in an adjoining county for three successive weeks),
and upon payment of the purchase money, the Agent or any person
conducting the sale for the Agent is authorized to execute to the
purchaser at said sale a deed to the Mortgaged Property so purchased.
Any such sale shall be held between the hours of 11:00 a.m.. and 4:00
p.m. on the day designated for the exercise of the power of sale
hereunder. The Agent may bid at said sale and purchase said Mortgaged
Property, or any part thereof, if the highest bidder therefor. The
purchaser at any such sale shall be under no obligation to see to the
proper allocation of the purchase money. At the foreclosure sale, the
Mortgaged Property may be offered for sale and sold as a whole without
first offering it in any other manner or may be offered for sale and
sold in any other manner the Agent may elect in its sole discretion.
Any such sale shall operate as a foreclosure of this Mortgage only as
to the Mortgaged Property sold, and if the Obligations and all other
sums secured hereby are not thereby satisfied in full, the other
Mortgaged Property shall continue as security therefor and there may be
a further foreclosure of this Mortgage, either by sale under power of
sale or by judicial foreclosure;
(k) Exercise any other right or remedy available under law or
in equity or under the Credit Documents
Section 4.3 Appointment of Receiver. If upon the maturity of any of the
Loan or any other amounts or obligations under the Credit Documents, the same
remain unpaid, or upon the occurrence and continuance of an Event of Default,
the Agent as a matter of right shall be entitled to the appointment of a
receiver or receivers for all or any part of the Mortgaged Property, to take
possession of and to operate the Mortgaged Property, and to collect the rents,
issues, profits, and income thereof, all expenses of which shall be added to the
indebtedness secured hereby, whether such receivership be incident to a proposed
sale (or sales) of such property or otherwise, and without regard to the value
of the Mortgaged Property or the solvency of any Person or
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Persons liable for the payment of the indebtedness secured hereby, and the
Borrower does hereby irrevocably consent to the appointment of such receiver or
receivers, waives any and all defenses to such appointment, and agrees not to
oppose any application therefor by Agent. Nothing herein is to be construed to
deprive the Agent of any other right, remedy or privilege it may have under the
law to have a receiver appointed. Any money advanced by the Agent in connection
with any such receivership shall be a demand obligation (which obligation the
Borrower hereby promises to pay) owing by the Borrower to the Agent pursuant to
this Mortgage.
Section 4.4 Proceeds. The proceeds of any sale under this Mortgage will
be applied in accordance with Section 3.15(b) of the Credit Agreement.
Section 4.5 The Agent's Option on Foreclosure. At the option of the
Agent, this Mortgage may be foreclosed as provided by law or in equity, in which
event the Agent's attorneys' fees shall, among other costs and expenses, be
allowed and paid out the proceeds of the sale. In the event the Agent exercises
its option to foreclose the Mortgage in equity, the Agent may, at its option,
foreclose this Mortgage subject to the rights of any tenants of the Mortgaged
Property, and the failure to make any such tenants parties defendants to any
such foreclosure proceeding and to foreclose their rights will not be, nor be
asserted by the Borrower to be a defense to any proceedings instituted by the
Agent to collect the sums secured hereby, or any deficiency remaining unpaid
after the foreclosure sale of the Mortgaged Property.
Section 4.6 Expenses of Exercising Rights Powers and Remedies. The
reasonable expenses (including any receiver's fees, attorneys' fees, appraisers'
fees, environmental engineers' and/or consultant's fees, costs incurred for
documentary and expert evidence, stenographers' charges, publication costs,
costs (which may be estimated as to items to be expended after entry of the
decree of foreclosure) of procuring all abstracts of title, continuations of
abstracts of title, title searches and examinations, title insurance policies
and commitments and extensions therefor, UCC and chattel lien searches, and
similar data and assurances with respect to title as the Agent may deem
reasonably necessary either to prosecute any foreclosure action or to evidence
to bidders at any sale which may be had pursuant to any foreclosure decree the
true condition of the title to or the value of the Mortgaged Property, and
agent's compensation) incurred by the Agent or the Lenders after the occurrence
of any Event of Default and/or in pursuing the rights, powers and remedies
contained in this Mortgage shall be immediately due and payable by the Borrower,
with interest thereon from the date incurred at the rate of interest set forth
in Section 3.1 of the Credit Agreement, and shall be added to the indebtedness
secured by this Mortgage.
Section 4.7 Restoration of Position. In case the Agent shall have
proceeded to enforce any right under this Mortgage by foreclosure, sale, entry
or otherwise, and such proceedings shall have been discontinued or abandoned for
any reason or shall have been determined adversely, then, and in every such
case, the Borrower and the Agent shall be restored to their former positions and
rights hereunder with respect to the Mortgaged Property subject to the lien
hereof.
Section 4.8 Waivers. The Borrower and the IDB waive all rights to
direct the order or manner in which any of the Mortgaged Property will be sold
in the event of any sale under this Mortgage, and also any right to have any of
the Mortgaged Property marshalled upon any sale.
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The Agent may in its discretion sell all the personal and real property together
or in parts, in one or more sales, and in any sequence the Agent selects. No
waiver of any provision hereof shall be implied from the conduct of the parties.
Any such waiver much be in writing and must be signed by the party against which
such waiver is sought to be enforced. The waiver or release of any breach of the
provisions set forth herein to be kept and performed shall not be a waiver or
release of any preceding or subsequent breach of the same or any other
provision. No receipt of partial payment after acceleration of any of the
Obligations shall waive the acceleration. No payment by the Borrower or receipt
by the Agent of a lesser amount than the full amount secured hereby shall be
deemed to be other than on account of the sums due and payable hereunder, nor
shall any endorsement or statement on any check or any letter accompanying any
check or payment be deemed an accord and satisfaction, and the Agent may accept
any check or payment without prejudice to the Agent's right to recover the
balance of such sums or to pursue any other remedy provided in this Mortgage.
The consent by the Agent to any matter or event requiring such consent shall not
constitute a waiver of the necessity for such consent to any subsequent matter
or event. No waiver of any Event of Default shall at any time thereafter be held
to be a waiver of any rights of the Agent stated anywhere in the Credit
Agreement, the Notes, this Mortgage or any of the other Credit Documents, nor
shall any waiver of a prior Event of Default operate to waive any subsequent
Event(s) of Default. All remedies provided in the Credit Agreement, the Notes,
this Mortgage or any of the other Credit Documents are cumulative and may, at
the election of the Agent, be exercised alternatively, successively, or in any
manner and are in addition to any other rights provided by law.
Section 4.9 The Agent's Right to Cure Defaults. If the Borrower shall
fail to comply with any of the terms of the Credit Documents with respect to the
procuring of insurance, the payment of taxes, assessments and other charges, the
keeping of the Mortgaged Property in repair, or any other term contained herein
or in any of the other Credit Documents, the Agent may make advances to perform
the same without releasing the Borrower from any of the Obligations. The
Borrower agrees to repay upon demand all sums so advanced and all sums expended
by the Agent or the Lenders in connection with such performance, including
without limitation attorneys' fees, with interest at the rate of interest set
forth in Section 3.1 of the Credit Agreement from the dates such advances are
made, and all sums so advanced and/or expenses incurred, with interest, shall be
secured hereby, but no such advance and/or incurring of expense by the Agent or
the Lenders, shall be deemed to relieve the Borrower from any default hereunder
or under any of the other Loan Documents, or to release the Borrower from any of
the Obligations.
Section 4.10 Suits and Proceedings. The Agent shall have the power and
authority, upon prior notice to the Borrower, to institute and maintain any
suits and proceedings as the Agent may deem advisable to (i) prevent any
impairment of the Mortgaged Property by any act which may be unlawful or by any
violation of this Mortgage, (ii) preserve or protect its interest in the
Mortgaged Property, or (iii) restrain the enforcement of or compliance with any
legislation or other governmental enactment, rule or order that may be
unconstitutional or otherwise invalid, if, in the sole opinion of the Agent, the
enforcement of or compliance with such enactment, rule or order might impair the
security hereunder or be prejudicial to the Agent's interest.
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Section 4.11 Delivery of Possession After Foreclosure. In the event
there is a foreclosure sale hereunder and at the time of such sale, the Borrower
or the Borrower's heirs, devises, representatives, successors or assigns are
occupying or using the Mortgaged Property, or any part thereof, each and all
immediately shall become the tenant of the purchaser at such sale, which tenancy
shall be a tenancy from day to day, terminable at the will of either landlord or
tenant, at a reasonable rental per day based upon the value of the property
occupied, such rental to be due daily to the purchaser; and to the extent
permitted by applicable law, the purchaser at such sale, notwithstanding any
language herein apparently to the contrary, shall have the sole option to demand
possession immediately following the sale or to permit the occupants to remain
as tenants at will. In the event the tenant fails to surrender possession of
said property upon demand, the purchaser shall be entitled to institute and
maintain a summary action for possession of the property (such as an action for
forcible detainer) in any court having jurisdiction.
ARTICLE V
MISCELLANEOUS
Section 5.1 Binding Effect; Survival; Number; Gender. This Mortgage
shall be binding on and inure to the benefit of the parties hereto, and their
respective heirs, legal representatives, successors and assigns. All agreements,
representations and warranties contained herein or otherwise heretofore made by
the IDB or the Borrower to the Agent shall survive the execution, delivery and
foreclosure hereof. The singular of all terms used herein shall include the
plural, the plural shall include the singular, and the use of any gender herein
shall include all other genders, where the context so requires or permits.
Section 5.2 Severability. The unenforceability or invalidity of any
provision of this Mortgage as to any person or circumstance shall not render
that provision unenforceable or invalid as to any other person or circumstance.
Section 5.3 Notices. Any notice or other communication to any party in
connection with this Mortgage shall be in writing and shall be sent by manual
delivery, telegram, telex, facsimile transmission, overnight courier or United
States mail (postage prepaid) addressed to such party at the address specified
below, or at such other address as such party shall have specified to the other
party hereto in writing. All periods of notice shall be measured from the date
of delivery thereof if manually delivered, from the date of sending thereof if
sent by telegram, telex or facsimile transmission, from the first Business Day
after the date of sending if sent by overnight courier, or from three Business
Days after the date of mailing if mailed. Notices shall be given to or made upon
the respective parties hereto at their respective addresses set forth below:
If to the Borrower: Simcala, Inc.
Ohio Ferro Alloys Road
Mt. Meigs, Alabama 36057
Attention: Chief Financial Officer
Telecopy No. (334)215-7560
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If to the IDB: The Industrial Development Board of
The City of Montgomery
P.O. Box 79
Montgomery, Alabama 36101
If to the Agent: NationsBank, N.A.
101 North Tryon Street, Floor 15
Charlotte, NC 28255
Attn: Agency Services
Telecopy No. (704) 388-3916
Either party may change its address for notices by a notice given not less than
five (5) Business Days prior to the effective date of the change.
Section 5.4 Applicable Law. This Mortgage shall be governed by and
construed in accordance with the internal law of the State of North Carolina as
provided in Section 11.10 of the Credit Agreement; provided, however, that the
provisions of this Mortgage relating to the creation, perfection and enforcement
of the lien and security interest created by this Mortgage in respect of the
Mortgaged Property and the exercise of each remedy provided hereby, including
the power of foreclosure or power of sale procedures set forth in this Mortgage,
shall be governed by and construed in accordance with the internal law of the
state where the Mortgaged Property is located. In the event of a conflict
between the laws of the State of North Carolina and the internal law of the
state in which the Mortgaged Property is located with respect to creation,
perfection and enforcement of the lien and security interest created by this
Mortgage, the laws of the state in which the Mortgaged Property is located shall
govern.
Section 5.5 Effect. This Mortgage is in addition and not in
substitution for any other guarantees, covenants, obligations or other rights
now or hereafter held by the Agent from any other person or entity in connection
with the Obligations.
Section 5.6 Assignability. The Agent shall have the right to assign
this Mortgage, in whole or in part, or sell participation interests herein, to
any person obtaining an interest in the Obligations.
Section 5.7 Headings. Headings of the Sections of this Mortgage are
inserted for convenience only and shall not be deemed to constitute a part
hereof.
Section 5.8 Fixture Filing. This instrument shall be deemed to be a
Fixture Filing within the meaning of the Alabama Uniform Commercial Codes, and
for such purpose, the following information is given:
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(A) Name and address of Debtors: Simcala, Inc.
Ohio Ferro Alloys Road
Mt Meigs, Alabama 36057
Attention: Chief Financial Officer
Federal Tax I.D. No.: 34-0438210
The Industrial Development Board of
The City of Montgomery
P. 0. Box 79
Montgomery, Alabama 36101
Federal Tax I.D. No.: 63-6083264
(B) Name and address of NationsBank, N.A.
Secured Party: 101 North Tryon Street, 15th Floor
Charlotte, NC 28255
(C) Description of the types (or
items) of property covered
by this Fixture Filing: See granting clause on pages 2 and
3 hereof.
(D) Description of real estate
to which the collateral is
attached or upon which it
is or will be located: See Exhibit A hereto.
Some of the above-described collateral is or is to become Fixtures upon the
above described real estate, and shall be deemed part of said real estate and
this Fixture Filing is to be filed for record and indexed in the public real
estate records. IDB is the record owner of said real estate.
Section 5.9 The IDB. It is expressly understood and agreed that the
IDB's liability hereunder is limited solely to its interest in the Mortgaged
Property and the revenues and receipts derived from the leasing of the Mortgage
Property under the IDB Lease (except for Unassigned Rights as therein defined)
or under any other Leases or Subleases of all or any part or parts of the
Mortgaged Property. No agreement, covenant or representation herein contained
shall ever constitute or give rise to any pecuniary liability or charge,
including environmental obligations, against the general credit of the IDB or
against the servants, agents or employees of the IDB. Further, none of the
directors, officers, employees or agents of the IDB shall have any personal
liability hereunder whatsoever for the breach by the IDB of any of the
representations, covenants or agreements on its part herein contained.
Section 5.10 Remedies Cumulative. All remedies contained in this
Mortgage are cumulative and not exclusive, and the Agent shall also have all
other remedies provided by law or equity or in any other agreement between the
Borrower and the Agent. No delay or failure by the Agent to exercise any right
or remedy under this Mortgage will be construed to be a waiver of that right or
remedy or of a default or Event of Default by the Borrower or the IDB. The Agent
- 17 -
<PAGE> 19
may exercise any one or more of its rights and remedies at its option without
regard to the adequacy of its security, and all of the Agent's rights and
remedies with respect to all collateral shall be cumulative and may be exercised
concurrently by the Agent.
Section 5.11 Releases and Waivers. The Borrower and the IDB agree that
no release by the Agent of any of the Borrower's or the IDB's successors in
title from liability on the Obligations, no release by the Agent of any portion
of the Mortgaged Property, the Rents or the Fixtures or Personal Property, no
subordination of lien, no forbearance on the part of the Agent or the Lenders to
collect on the Obligations, or any part thereof, no waiver of any right granted
or remedy available to the Agent or the Lenders and no action taken or not taken
by the Agent or the Lenders shall in any way diminish the Borrower's or the
IDB's obligations to the Agent or the Lenders or have the effect of releasing
the Borrower or the IDB, or any successor, from full responsibility to the Agent
or the Lenders for the complete discharge of each and every of the Borrower's or
the IDB's obligations hereunder or the Borrower's obligations pursuant to any
Credit Document.
[The remainder of this page is intentionally left blank.]
- 18 -
<PAGE> 20
IN WITNESS HEREOF, the Borrower and the IDB have executed this Mortgage
as of the date first written above.
SIMCALA, INC.
By: /s/ C. Edward Boardwine
----------------------------
Name: C. Edward Boardwine
Title: President
THE STATE OF ALABAMA )
) ss.
MONTGOMERY COUNTY )
I, Linda L. Kelley, a Notary Public in and for said County, in
said State, hereby certify that C. Edward Boardwine whose name as President of
SIMCALA, INC., a Delaware corporation, is signed to the foregoing Mortgage and
who is known to me, acknowledged before me on this day that, being informed of
the contents of the Mortgage, he, as such officer and with full authority,
executed the same voluntarily for and as the act of said corporation.
Given under my hand this the 26th day of March, 1998.
/s/
-----------------------------------
Notary Public
<PAGE> 21
THE INDUSTRIAL DEVELOPMENT BOARD OF THE CITY OF MONTGOMERY
By: /s/
----------------------------
Name: R.E. Thornton, Jr.
Title: Chairman
THE STATE OF ALABAMA )
)ss
MONTGOMERY COUNTY )
I, Samantha Anne Wood, a Notary in and for said County, in
said State, hereby certify that R.E. Thornton, Jr., whose name as Chairman of
THE INDUSTRIAL DEVELOPMENT BOARD OF THE CITY OF MONTGOMERY is signed to the
foregoing Mortgage and who is known to me, acknowledged before me on this day,
that being informed of the contents of said Mortgage, he, as such officer, and
with full authority, executed the same voluntarily for and as the act of said
corporation, acting in its capacity as Chairman as aforesaid.
Given under my hand this the 27th day of March, 1998
/s/
-----------------------------------
Notary Public
<PAGE> 22
EXHIBIT A
Legal Description (Granting Clause A)
PARCEL 1:
Begin at the Southeast Corner of Section 5, T-16-N, R-20-E, Montgomery County,
Alabama; thence run along the South Line of said Section 5, S 87(0) 05' 57" W,
1818.81 feet to a point; thence run N 01(0) 53" 50" W, 1623.33 feet to an iron
pin; thence run N 03(0) 50' 08" E, 1038.55 feet to a concrete monument lying on
the North Line of the Southeast Quarter of said Section; thence run N 87(0) 34'
04" E, 1990.78 feet to a point at the Northeast Corner of the Southeast Quarter
of said Section 5; thence run along the East Line of said Section, S 04(0) 03'
41" W, 2657.77 feet to the point of beginning.
Said described property lying and being situated in the Southeast Quarter of
Section 5, T-16-N, R-20-E, Montgomery County, Alabama.
PARCEL 2:
Begin at the Northeast Corner of the Southeast Quarter of Section, 5, T-16-N,
R-20-E, Montgomery County, Alabama; thence run along the North Line of the
Southeast Quarter of said Section, S 87(0) 34; 04" W, 1990.78 feet to a concrete
monument; thence continue, S 87(0) 34' 04" W, 663.34 feet to a concrete monument
lying at the Northwest Corner of the Southeast Quarter of said Section 5; thence
run N 04(0) 03' 41" E, 90.10 feet to a point lying on the South right of way of
CSX Railroad (100' ROW); thence run along said South right of way, N 87(0) 00'
00" E, 2657.34 feet to a point lying on the East Line of said Section 5; thence
run along said East Line, S 04(0) 03' 41" W, 117.34 feet to the point of
beginning.
Said described property lying and being situated in the Northeast Quarter of
Section 5, T-16-N, R-20-E, Montgomery County, Alabama.
PARCEL 3:
Begin at a concrete monument at the Northwest Corner of the Southeast Quarter of
Section 5, T-16-N, R-20-E, Montgomery County, Alabama; thence run S 87(0) 33'
07" W, 661.96 feet to an iron pin; thence run S 87(0) 33' 21" W, 671.78 feet to
an iron pin; thence run N 04(0) 03' 41" E 76.74 feet to a point lying on the
South right of way of CSX Railroad; thence run along said South right of way, N
87(0) 00' 00" E, 1335.32 feet to a point; thence run S 04(0) 03' 41" W, 90.10
feet to the point of beginning.
Said described parcel lying and being situated in the Northwest Quarter of
Section 5, T-16-N, R-20-E, Montgomery County, Alabama.
<PAGE> 23
TOGETHER WITH all of the Borrower's right, title and interest in and to the
lease agreement between the Borrower and the Department of Youth Services, dated
January 3, 1986, as amended by letter agreements dated August 7, 1995 and
September 14, 1995(as amended, the "Slurry Pond Lease") and the easements,
rights, interests and privileges granted to the Borrower under the provisions of
the Slurry Pond Lease.
<PAGE> 1
EXHIBIT 10.7
================================================================================
CONSOLIDATED, AMENDED AND RESTATED
LEASE AGREEMENT
between
THE INDUSTRIAL DEVELOPMENT BOARD OF THE CITY OF MONTGOMERY
and
SIMCALA, INC.
-----------------------------------
Dated
as of
January 1, 1995
================================================================================
THIS INSTRUMENT CONSOLIDATES AND AMENDS THREE LEASES, ALL BETWEEN THE INDUSTRIAL
DEVELOPMENT BOARD OF THE CITY OF MONTGOMERY AS LESSOR AND SIMETCO, INC.
(FORMERLY KNOWN AS OHIO FERRO-ALLOYS CORPORATION) AS LESSEE, DATED AS OF JUNE 1,
1975, AND RECORDED IN THE OFFICE OF THE JUDGE OF PROBATE OF MONTGOMERY COUNTY,
ALABAMA, IN RLPY BOOK 271 AT PAGE 715 (AS AMENDED BY INSTRUMENT SO RECORDED IN
RLPY BOOK 720 AT PAGE 90), IN RLPY BOOK 271 AT PAGE 860, AND IN RLPY BOOK 272 AT
PAGE 4, RESPECTIVELY. ALL THREE AFORESAID LEASES HAVE BEEN ASSIGNED BY SIMETCO,
INC. TO SIMCALA, INC. PURSUANT TO AN ASSIGNMENT AND ASSUMPTION OF LEASES DATED
AS OF JANUARY 1, 1995 AND RECORDED IN SAID PROBATE OFFICE IN RLPY BOOK 1542 AT
PAGE 848.
<PAGE> 2
CONSOLIDATED, AMENDED AND RESTATED
LEASE AGREEMENT
BETWEEN
THE INDUSTRIAL DEVELOPMENT BOARD OF THE CITY OF
MONTGOMERY
AND
SIMCALA, INC.
INDEX
-----
<TABLE>
<CAPTION>
Page
----
ARTICLE I
DEFINITIONS
<S> <C> <C>
Section 1.1 Definitions ................................................................... 2
Section 1.2 Interpretation ................................................................ 7
Section 1.3 Captions and Headings.......................................................... 8
ARTICLE II
REPRESENTATIONS AND COVENANTS
Section 2.1 Representations and Findings by the IDB........................................ 9
Section 2.2 Representations and Covenants by the Lessee - General.......................... 9
ARTICLE III
LEASE PROVISIONS
Section 3.1 Demising Provision; Assignment of Redemption Rights ........................... 12
Section 3.2 Exercise of Renewal Option; Lease Term; Possession and
Quiet Enjoyment ............................................................... 12
Section 3.3 Rentals ....................................................................... 13
Section 3.4 Obligations of Lessee Unconditional ........................................... 13
Section 3.5 Sublease or Grant of Use by Lessee ............................................ 14
Section 3.6 Execution and Delivery of Mortgages, SIDA Documents ........................... 15
Section 3.7 Restrictions on Mortgage or Sale of Project ................................... 15
Section 3.8 Option to Terminate Lease Agreement and Purchase Project ...................... 15
Section 3.9 Conveyance on Exercise of Option to Purchase................................... 16
Section 3.10 Use of Party Walls ............................................................ 16
ARTICLE IV
PROVISIONS RESPECTING THE PROJECT
Section 4.1 1995 Project................................................................... 18
Section 4.2 Construction Fund; Disbursements; Pledge ...................................... 18
Section 4.3 No Warranty of Suitability by IDB ............................................. 19
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
Section 4.4 IDB to Pursue Remedies Against Contractors, Subcontractors
Suppliers and Sureties ........................................................ 19
Section 4.5 Completion of the 1995 Project ................................................ 20
Section 4.6 Maintenance, Additions and Improvements ....................................... 20
Section 4.7 Taxes, Other Governmental Charges and Utility Charges ......................... 21
Section 4.8 Insurance ..................................................................... 22
Section 4.9 Advances by IDB................................................................ 23
Section 4.10 Damage or Destruction ......................................................... 23
Section 4.11 Condemnation .................................................................. 24
Section 4.12 Removal and Disposition of Equipment .......................................... 25
Section 4.13 Cooperation with the County ................................................... 25
ARTICLE V
ADDITIONAL AGREEMENTS AND COVENANTS
Section 5.1 General Covenants ............................................................. 26
Section 5.2 Inspection of Project ......................................................... 26
Section 5.3 Indemnification ............................................................... 26
Section 5.4 Covenants Under Other Lessee Documents ........................................ 27
ARTICLE VI
EVENTS OF DEFAULT AND REMEDIES
Section 6.1 Events of Default ............................................................. 28
Section 6.2 Remedies on Default ........................................................... 28
Section 6.3 No Remedy Exclusive ........................................................... 29
Section 6.4 Agreement to Pay Attorneys' Fees and Expenses ................................. 29
Section 6.5 No Additional Waiver Implied by One Waiver .................................... 30
ARTICLE VII
MISCELLANEOUS
Section 7.1 Prior Agreements Cancelled .................................................... 31
Section 7.2 IDB's Liabilities Limited ..................................................... 31
Section 7.3 Execution Counterparts ........................................................ 31
Section 7.4 Binding Effect; Assignability ................................................. 31
Section 7.5 Amendments .................................................................... 32
Section 7.6 Severability .................................................................. 32
Section 7.7 Notices ....................................................................... 32
Section 7.8 Governing Law ................................................................. 32
Section 7.9 References to Mortgagees....................................................... 32
SIGNATURES ...................................................................................... 33
ACKNOWLEDGMENTS ................................................................................. 34
EXHIBIT A - Description of Realty
</TABLE>
-3-
<PAGE> 4
STATE OF ALABAMA )
:
MONTGOMERY COUNTY )
THIS CONSOLIDATED, AMENDED AND RESTATED LEASE AGREEMENT made and
entered into as of January 1, 1995 (as the same may hereafter be further amended
or supplemented, this "Lease Agreement"), between THE INDUSTRIAL DEVELOPMENT
BOARD OF THE CITY OF MONTGOMERY (the "IDB"), a public corporation organized
under the laws of the State of Alabama (the "State"), and SIMCALA, INC., a
Delaware corporation (the "Lessee"), their respective successors and assigns,
under the circumstances summarized in the following Recitals (with capitalized
terms used but not defined therein having the meanings given to them in Article
I hereof):
A. The IDB has been heretofore organized under and is authorized by
the Act to acquire, enlarge, improve, replace, own, lease and dispose of
properties to the end that the IDB may be able to promote industry, develop
trade and further the use of the agricultural products and natural and human
resources of the State and the development and preservation of said resources.
B. Pursuant to and in furtherance of the public purposes expressed in
the Act, the IDB has heretofore issued its $1,000,000 Industrial Development
First Mortgage Revenue Bonds (Ohio Ferro-Alloys Corporation Project) Series A,
its $5,000,000 Pollution Control First Mortgage Revenue Bonds (Ohio Ferro-Alloys
Corporation Project) Series A and its $14,000,000 Subordinated Industrial
Development Revenue Bond (Ohio Ferro-Alloys Corporation Project) Series A
(collectively, the "Prior Bonds"), and applied the proceeds thereof to acquire,
construct and equip certain "projects" within the meaning of the Act
(collectively, the "Existing Project") which the IDB leased to SiMETCO, Inc.,
formerly known as Ohio Ferro-Alloys Corporation ("SiMETCO"), pursuant to three
separate Leases referenced on the cover page hereof (collectively, the "Original
Leases").
C. SiMETCO and Lessee have heretofore entered into an Agreement of
Purchase and Sale of Assets dated as of September 14, 1994 (the "SiMETCO
Agreement") whereby SiMETCO agreed to transfer, sell, assign, deliver and convey
to Lessee, and Lessee agreed to purchase and acquire from SiMETCO, the assets
therein described. Such assets include without limitation SiMETCO's rights and
incidents of interest in and to the Leased Premises under and as defined in each
of the Original Leases and consisting of (i) the Leased Real Property, as
defined and described in each of the Original Leases, and (ii) the Existing
Project. The closing of the SiMETCO Agreement and the consummation of the
transactions contemplated therein have been reviewed and approved by the United
States Bankruptcy Court for the Northern District of Ohio in the SiMETCO, Inc.,
Case No. 93-61772.
D. The transfer of the property described in the second sentence of
the preceding Recital has simultaneously herewith been accomplished pursuant to
the
<PAGE> 5
Assignment and Assumption of Leases referenced on the cover page hereof (the
"Lease Assignment"), among the IDB, SiMETCO and the Lessee. In consideration
therefor, the Lessee has, among other things, simultaneously herewith caused the
Prior Bonds (which have heretofore been in default) to be paid in full and the
indentures pursuant to which the same were issued, to be discharged.
E. Lessee has proposed to acquire, construct and equip an expansion to
the Existing Project (the "l995 Project") and to pay costs of the 1995 Project
from proceeds of the SIDA Bonds, part of the proceeds of which have also been
used to pay part of the consideration for acquiring the Existing Project.
F. SIDA has adopted the Preliminary Resolution and entered into the
Preliminary Agreement with the Lessee in respect of the Project, all pursuant to
the SIDA Act.
G. Lessee is desirous of consolidating the three Original Leases,
because of the virtual identity of the provisions thereof and the
interrelatedness of the premises demised thereby, amending the provisions
thereof, in order to accommodate the issuance of the SIDA Bonds and the
undertaking of the 1995 Project, and by virtue of such consolidation and
amendment, restating the three Original Leases in this Lease Agreement, as a
document which can facilitate the expansion and continuing operation of the
Project, in fulfillment of the purposes of the Act. The IDB, in consideration of
the retirement by the Lessee of the Prior Bonds and of the Lessee's commitment
to the continuing operation of the Existing Project and to the undertaking of
the 1995 Project, has consented to and joined in the Lease Assignment, will
execute and deliver the IDB Documents and will cooperate with the Lessee in
obtaining such other economic development incentives, including without
limitation a Site Prep Grant, the CDBG Loan, enterprise zone benefits,
linked-deposit loans and the like (collectively, the "Incentives"), as may be
available to the Lessee from the State, the County, the City and their
respective various agencies or departments.
W I T N E S S E T H:
In consideration of the mutual covenants and agreements hereinafter
contained, the parties to this Lease Agreement hereby formally covenant, agree
and bind themselves as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. In addition to the words and terms elsewhere
defined in this Lease Agreement (including in the Recitals hereto) or by
reference to another document, unless the context or use clearly indicates
another or different meaning or intent:
-2-
<PAGE> 6
"Act" means Article 4, Chapter 54, Title 11 of the Code of Alabama of
1975, as amended.
"ADECA" means the Alabama Department of Economic and Community Affairs,
its successors and assigns.
"Affiliate" means a Person that directly, or indirectly, through one or
more intermediaries, controls or is controlled by, or is under common control
with, the Lessee.
"Basic Rent" means that portion of the Rentals payable hereunder in the
amounts and at the times sufficient to pay Debt Service.
"Building" means, collectively, all structures and improvements now
existing or hereafter expanded, constructed, reconstructed or made on the
Realty, as they may at any time exist.
"CDBG" means the Community Development Block Grant in the amount of
$520,000 to be made by ADECA to the County, $500,000 of the proceeds of which
are to be applied by the County to make the CDBG Loan.
"CDBG Documents" means all documents evidencing or securing the CDBG
Loan, including without limitation the CDBG Grant Agreement, the CDBG Loan
Commitment Agreement, the CDBG Note and the CDBG Security Agreement.
"CDBG Grant Agreement" means the Agreement to be entered into between
ADECA and the County relating to the CDBG and the CDBG Loan.
"CDBG Loan" means the ten-year Economic Development Fund loan in the
principal amount of $500,000 to be made by the County to the IDB with moneys
furnished to the County by ADECA pursuant to the CDBG Grant Agreement, the
proceeds of which are to be applied by the IDB to pay or reimburse costs of
acquiring and installing assets comprising part of the 1995 Project.
"CDBG Loan Commitment Agreement" means the Loan Commitment Agreement
dated the date of closing of the CDBG Loan among the Lessee, the County, the IDB
and ADECA.
"CDBG Note means the Promissory Note from the IDB to the County, and
assigned by the County to ADECA, in the principal amount of $500,000 dated the
date of closing of the CDBG Loan and evidencing the CDBG Loan.
"CDBG Security Agreement" means the Security Agreement dated the date
of closing of the CDBG Loan from the IDB, joined in by the Lessee, to the County
and assigned by the County to ADECA, pursuant to which a security interest is
granted in
-3-
<PAGE> 7
those assets comprising part of the 1995 Project, costs of which have been paid
or reimbursed with proceeds of the CDBG Loan.
"City" means the City of Montgomery, Alabama.
"County" means Montgomery County, Alabama.
"Debt Service" means, for any period or payable at any time, the
aggregate principal, interest and other charges (if any) due on the outstanding
Notes for that period or payable at that time, including for purposes of this
Lease Agreement the Purchase Price (as defined in the Loan Agreement) that may
become due from time to time in respect of the SIDA Bonds.
"Equipment" means any items of equipment, fixtures and tangible
personal property located in or on the Building or the Realty and any item of
equipment, fixtures or tangible personal property acquired in substitution
therefor or as a renewal or replacement thereof pursuant to the provisions
hereof and of the Mortgages.
"Event of Default' means an Event of Default specified and defined in
Section 6.1 hereof.
"First Mortgage" means the Real Estate Mortgage, Assignment of Lease
and Security Agreement of even date herewith, as the same may hereafter be
amended or supplemented, from the Lessee and the IDB to the guarantor of
Lessee's reimbursement obligations to the bank issuing a letter of credit
securing the SIDA Bonds.
"Governmental Authority" means the United States, any state or
political subdivision thereof and any court, agency, department, commission,
board, bureau or instrumentality of any of the foregoing.
"IDB Documents" means, individually or collectively, as the context may
require, each or all of the Loan Agreement, the Notes to which the IDB is a
party, the Mortgages, this Lease Agreement, those of the CDBG Documents to which
the IDB is a party and such other documents or instruments as the IDB may enter
into in order to consummate the transactions contemplated hereby and thereby.
"IDB Resolution" means the resolution adopted by the Board of Directors
of the IDB on January 23, 1995 authorizing the execution and delivery of the IDB
Documents and the IDB's cooperation in obtaining the Incentives.
"Indenture" means the Trust Indenture of even date herewith between the
SIDA and the Trustee, as the same may hereafter be amended or supplemented.
-4-
<PAGE> 8
"Independent Counsel" means an attorney or firm of attorneys duly
admitted to practice law in the State and not in the full-time employment of
either the IDB or the Lessee.
"Interest Rate for Advances" means the rate per annum which is one
percent in excess of that rate announced from time to time by the Trustee as its
"prime" or "base" rate.
"Issue Date" means the date of initial authentication and delivery of
the SIDA Bonds.
"Loan Agreement" means the Loan Agreement of even date herewith between
the SIDA as lender and the Lessee and the IDB as borrowers, as the same may
hereafter be amended or supplemented.
"Lease Term" means the duration of the leasehold estate created in the
Original Leases, as hereby renewed, all as more fully described in Section 3.2
hereof.
"Lessee Documents" means, individually or collectively, as the context
may require, each or all of this Lease Agreement, the Loan Agreement, the Notes
to which the Lessee is a party, the Mortgages, the Bond Purchase Agreement and
the Reimbursement Agreement (both as defined in the Loan Agreement), those of
the CDBG Documents to which the Lessee is a party and such other documents or
instruments as the Lessee may enter into in order to consummate the transactions
contemplated hereby and thereby.
"Mortgages" means any instrument conveying a mortgage on and/or
security interest in the Project or any part thereof or any rents, income and
profits therefrom in order to secure one or more Notes. As used herein,
"Mortgages" would include the First Mortgage, the Subordinated Mortgages and the
CDBG Security Agreement.
"Necessary Authorizations" means, with respect to any given action or
effect, all authorizations, consents, approvals, permits, licenses and
exemptions of, filings and registrations with, and reports to, all Governmental
Authorities which are necessary or required to accomplish such action or achieve
such effect.
"Net Proceeds," when. used with respect to any insurance or
condemnation award, means the gross proceeds from the insurance or condemnation
award with respect to which that term is used remaining after payment of all
reasonable expenses (including reasonable attorneys' fees) incurred in the
collection of such gross proceeds.
"Notes" means any and all bonds, promissory notes or other evidences of
indebtedness incurred by the Lessee and/or by another Person on the Lessees
behalf, the proceeds of which borrowing are used in whole or in part to pay or
reimburse Project Costs or costs or expenses relating to the Project. As used
herein, "Notes" would include
-5-
<PAGE> 9
the SIDA Bonds (and the SIDA Note related thereto, which together represent but
one indebtedness), the CDBG Note and any bonds hereafter issued by the IDB.
"Person" includes natural persons, firms, associations, partnerships,
trusts, corporations, limited liability companies, and public bodies.
"Preliminary Agreement" means the Preliminary Agreement dated September
12, 1994 between SIDA and the Lessee.
"Preliminary Resolution" means the resolution adopted by SIDA on
September 12, 1994, as amended by a further resolution adopted December 8, 1994,
preliminarily approving the Project and the issuance of the SIDA Bonds.
"Project" means, collectively, the Existing Project and the 1995
Project, together consisting of the Realty, the Building and the Equipment, to
be leased to the Lessee pursuant hereto for use as silicon metal manufacturing
facilities, as such Realty, Building and Equipment may at any time exist.
"Project Costs" means costs of acquiring, preserving, constructing,
modifying, expanding, equipping and financing the Project, including any fees
and charges in connection therewith and any architectural and engineering costs
incidental to, and any interest during the construction phase of, the 1995
Project.
"Project Supervisor" means any employee or agent of the Lessee
hereafter authorized in writing, by the President or any Vice President of the
Lessee, to act in connection with matters pertaining to the Project pursuant to
the provisions hereof.
"Realty" means the Leased Real Property (as defined and described in
each of the Original Leases) and any additional real property and interests
therein subjected to the demise of this Lease Agreement, all as described in
Exhibit A hereto, and together constituting the site of the Building.
"Rentals" means the amounts required to be paid by the Lessee pursuant
to Section 3.3 hereof.
"SIDA" means the State Industrial Development Authority, a public
corporation of the State organized pursuant to and existing under the provisions
of Articles 2 and 2A, Chapter 10, Title 41 of the Code of Alabama of 1975, as
amended.
"SIDA Act" means Act No. 93-851 enacted at the 1993 First Special
Session of the Alabama Legislature, as amended.
"SIDA Bonds" means the $6,000,000 Taxable Industrial Revenue Bonds
(SIMCALA, Inc. Project) Series 1995 of SIDA issued and delivered under the
Indenture.
-6-
<PAGE> 10
"SIDA Note" means the promissory note of the Lessee and the IDB, dated
the Issue Date, in the form attached as Exhibit B to the Loan Agreement and in
principal amount equal to the aggregate principal amount of the SIDA Bonds.
"Site Prep Grant" means a grant from SIDA for the grading, drainage and
other preparation of a site.
"Subordinated Mortgages" means three separate subordinated Real Estate
Mortgages, Assignments of Lease and Security Agreements from the Lessee and the
IDB to subordinated creditors of the Lessee.
"Trustee" means the institution serving as such under the Indenture,
initially, First Alabama Bank, Montgomery, Alabama.
"Unassigned Rights" means all of the rights of the IDB to receive
payments or reimbursement pursuant to Section 3.3(b) and (c) hereof, to be held
harmless and indemnified pursuant to Section 5.3 hereof, to be reimbursed for
attorney's fees and expenses pursuant to Section 6.4 hereof, to receive notices
hereunder and to give or withhold consent to amendments, supplements,
modifications or termination of this Lease Agreement.
Section 1.2 Interpretation. Any reference herein to the IDB or to any
member of the Board of Directors or officer thereof includes servants, agents or
employees or entities or officials succeeding to their respective functions,
duties or responsibilities pursuant to or by operation of law or lawfully
performing their functions.
Any reference to a section or provision of the Constitution of the
State or the Act, or to a section, provision or chapter of the Code of Alabama
of 1975, or to any statute of the United States of America, includes that
section, provision or chapter as amended, modified, revised, supplemented or
superseded from time to time; provided, however, that no amendment,
modification, revision, supplement or superseding section, provision or chapter
shall be applicable solely by reason of this provision, if it constitutes in any
way an impairment of the rights or obligations of the IDB, SIDA or the Lessee
under this Lease Agreement, the Notes, the Mortgages or any other instrument or
document entered into in connection with any of the foregoing, including without
limitation, any alteration of the obligation to pay Debt Service in the amount
and manner, at the times, and from the sources provided therein.
Unless the context indicates otherwise, words importing the singular
number include the plural number, and vice versa; the terms "hereof", "hereby",
"herein", "hereto", "hereunder" and similar terms refer to this Lease Agreement;
and the term "hereafter" means after, and the term "heretofore" means before,
the effective date of this Lease Agreement. Words of any gender include the
correlative words of the other genders, unless the sense indicates otherwise.
-7-
<PAGE> 11
Section 1.3 Captions and Headings. The captions and headings in this
Lease Agreement are solely for convenience of reference and in no way define,
limit or describe the scope or intent of any Articles, Sections, subsections,
paragraphs, subparagraphs or clauses hereof.
[END OF ARTICLE I]
-8-
<PAGE> 12
ARTICLE 11
REPRESENTATIONS AND COVENANTS
Section 2.1 Representations and Findings by the IDS. The IDB makes the
following representations and findings as the basis for the undertakings on its
part herein contained:
(a) The IDB finds and determines that (i) the Existing Project
constituted and continues to constitute, and the 1995 Project will
constitute, a "project", within the meaning of the Act; (ii) the
Project has been and will continue to be consistent with and in
furtherance of the purposes of the Act in promoting the development of
trade and furthering the use of natural and human resources of the
State and the development and preservation of said resources; and (iii)
the utilization of the Project has benefited and will continue to
benefit the people of the City, the County and the State by preserving
and creating jobs and employment opportunities, thereby promoting the
economic welfare of the City, the County and the State.
(b) The IDB is duly incorporated under the provisions of the
Act. Under the provisions of the Act, the IDB had the power to
undertake the Existing Project and to enter into the Original Leases
and has the power to enter into the IDB Documents and to carry out its
obligations thereunder. The IDB is not in default under any of the
provisions contained in its Certificate of Incorporation or By-Laws or
of the laws of the State. The IDB by proper corporate action has duly
authorized the execution, delivery and performance of the IDB
Documents.
(c) The Project has been and will continue to be located
within 25 miles of the corporate limits of the City and therefore
within the jurisdiction of the IDB.
(d) The execution, delivery and performance by the IDB of the
IDB Documents are within the IDB's corporate powers, and each such
document, when executed and delivered, will constitute a legal, valid
and binding obligation of the IDB enforceable against the IDB in
accordance with its terms, except as enforcement may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors' rights generally and by the
application of general principles of equity.
Section 2.2 Representations and Covenants by the Lessee - General. The
Lessee represents and covenants that:
(a) It is a corporation duly organized and validly existing
under the laws of the State of Delaware and qualified to transact
business under the laws of the State.
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(b) The execution, delivery and performance by the Lessee of
the Lessee Documents and the carrying out of the transactions
contemplated thereby are within the Lessee's powers as a corporation,
have been duly authorized by all necessary action on the part of the
shareholders and members of the Board of Directors of Lessee, and do
not violate any provision of law, any order of any court or other
governmental agency, the Articles of Incorporation or By-laws of the
Lessee, or any indenture, agreement or other instrument to which the
Lessee or any Affiliate is a party or by which the Lessee or any
Affiliate or any of its or their properties or assets is bound, or
conflict with, result in a breach of or constitute (with due notice or
lapse of time or both) a default under, any such indenture, agreement
or other instrument, or result in the creation or imposition of any
lien, charge or encumbrance of any nature whatsoever upon any of the
properties or assets of the Lessee or any Affiliate (other than the
liens of the Mortgages).
(c) The Lessee intends to continue to operate the Project as
silicon metal manufacturing facilities throughout the Lease Term and
knows of no reason why the Project will not be so operated. If, in the
future, there is a cessation of that operation, it. will use its
reasonable efforts to resume that operation or accomplish an alternate
use by the Lessee or others which will be consistent with the Act and
the SIDA Act.
(d) To the best of its knowledge, the Lessee has obtained and
will use its reasonable efforts to maintain all Necessary
Authorizations for the acquisition of the Existing Project and the
acquisition, construction and equipping of the 1995 Project, and has
obtained or will obtain and will use its reasonable efforts to maintain
all Necessary Authorizations for the operation of the Project and for
the due execution, delivery and performance by the Lessee of each of
the Lessee Documents. In particular, all building permits required for
the construction or renovation of the Building have been or will when
and as necessary be obtained and, once obtained, will be maintained in
full force and effect, and all utility services (including water
supply, storm and sanitary sewerage, electric and telephone facilities)
necessary for the construction or renovation and operation of the
Building for the intended purposes are or will be available.
(e) Each of the Lessee Documents, when executed and delivered,
will constitute a legal, valid and binding obligation of the Lessee
enforceable against the Lessee in accordance with its terms, except as
enforcement may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights
generally and by the application of general principles of equity.
(f) There is no pending or, to the best of its knowledge,
threatened action, investigation or proceeding before any court,
governmental agency or arbitrator against or affecting the Lessee or
any Affiliate (i) in any way contesting
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or affecting the validity of the Original Leases, the Lease Assignment,
this Lease Agreement or any of the other Lessee Documents, or (ii) in
any way contesting the existence or powers of the Lessee as a
corporation.
[END OF ARTICLE II]
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ARTICLE III
LEASE PROVISIONS
Section 3.1 Demising Provision: Assignment of Redemption Rights.
(a) The IDB has heretofore demised and leased to the Lessee,
as assignee of SiMETCO, the Existing Project and that portion of the
Realty on which the same is situated, being described as Parcel 1 of
Exhibit A hereto; and the IDB does hereby demise and lease to the
Lessee, and the Lessee leases from the IDB, that portion of the Realty
acquired in connection with the 1995 Project, being described as
Parcels 2 and 3 of Exhibit A hereto, together with the additions and
improvements to the Existing Project which constitute part of the 1995
Project; all in accordance with the provisions of this Lease Agreement
and upon and subject to the terms, conditions and provisions of this
Lease Agreement, to each of which the IDB and the Lessee and each of
them do hereby separately and severally covenant and agree.
(b) The IDB hereby conveys and assigns to the Lessee, subject
to the Mortgages, the IDB's equity of redemption in respect of the
Project, entitling the Lessee to redeem the Project from impending
foreclosure under any one or more of the Mortgages. The IDB furthermore
assigns to the Lessee, without reservation, the IDB's statutory right
of redemption under Section 6-5-248 of the Code of Alabama of 1975, as
amended. Additionally, the IDB will, upon request of the Lessee,
transfer and assign the IDB's statutory right of redemption to the
Lessee for the sum of $1.00 at any time after foreclosure of any
mortgage on the Project. The foregoing assignments are made in further
consideration of the Lessee's agreement to acquire the Existing Project
and to acquire, construct and equip the 1995 Project on behalf of the
IDB and to use and operate the same in furtherance of the public
purposes of the Act.
Section 3.2 Exercise of Renewal Option; Lease Term; Possession and
Quiet Enjoyment. Section 12.3 of each of the Original Leases grants to the
Lessee, as assignee of SiMETCO, the option to renew the terms of the Original
Leases provided (i) such options exercised in writing not fewer than 90 days
prior to June 1, 1995 and (ii) Lessee is not in default under the Original
Leases at the time such options are exercised. Having cured any previous
defaults under the Original Leases by virtue of the retirement of the Prior
Bonds, the Lessee, by its execution hereof, hereby exercises its options to
renew the term of each of the Original Leases (as hereby consolidated) for the
Renewal Term as defined and specified therein. The IDB, by its execution and
delivery hereof, acknowledges that the foregoing constitutes due and proper
notice of the exercise by Lessee of its options to renew under the Original
Leases. By reason of the exercise of such options, the Lease Term shall, subject
to the provisions of this Lease Agreement permitting earlier termination,
continue until midnight on June 1, 2010.
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So long as the Lessee performs and observes all the covenants and
agreements on its part herein contained, it shall peaceably and quietly have,
hold and enjoy the Project during the Lease Term subject to all the terms and
provisions hereof.
Section 3.3 Rentals.
(a) In consideration of the lease of the Project, the Lessee
does hereby covenant and agree to pay Basic Rent, directly to the
Persons who or which hold the Notes or to any fiduciary for such Person
or Persons, in such respective amounts and at such respective times as
shall be sufficient and timely to pay all Debt Service as the same
shall be or become due and payable, whether at maturity, upon
acceleration or otherwise. All such payments of Basic Rent, albeit not
to the IDB, shall be and constitute adequate consideration to the IDB
for the leasing of the Project to the Lessee, inasmuch as the Notes
shall finance the payment of the costs of acquiring, preserving,
constructing, expanding, equipping and financing the Project,
accomplishment of which is the paramount objective and public purpose
of the IDB.
The Lessee recognizes and acknowledges that it is the
intention of the parties hereto that this Lease Agreement be a net
lease.
(b) In further consideration of the lease of the Project, and
in accordance with Section 3.1 of each of the Original Leases, the
Lessee shall pay to the IDB, as additional Rentals hereunder, the
amount of $2,000 per year, being the sum of the rents specified in the
three Original Leases during the Renewal Term (as therein defined),
payable annually in advance on each June 1 of the Lease Term,
commencing on June 1, 1995 and ending (subject to earlier termination
of the Lease Term) on June 1, 2009.
(c) In further consideration of the lease of the Project, the
Lessee covenants and agrees to pay as additional Rentals hereunder any
and all costs and expenses incurred or to be paid by the IDB related to
actions taken by the IDB under this Lease Agreement, including any
advances made pursuant to Section 4.6 hereof, provided that the Lessee
may, without creating a default hereunder, contest in good faith the
reasonableness of any such fees, charges or expenses. Following the
payment or incurring of any such costs, expenses or liability, such
additional Rentals are payable upon written demand therefor, and if not
paid upon such demand shall bear interest from the date paid or
incurred at the Interest Rate for Advances.
Section 3.4 Obligations of Lessee Unconditional. The obligation of the
Lessee to pay the Rentals, to make all other payments provided for herein and to
perform and observe the other agreements and covenants on its part herein
contained shall be absolute and unconditional, irrespective of any rights of
setoff, recoupment or counterclaim it might otherwise have against the IDB or
any other Person. The Lessee will not suspend or
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discontinue any such payment or fail to perform and observe any of its other
agreements and covenants contained herein or terminate this Lease Agreement for
any cause whatsoever, including, without limiting the generality of the
foregoing, any acts or circumstances that may constitute an eviction or
constructive eviction, failure of consideration or commercial frustration of
purpose, any damage to or destruction of the Project, the invalidity of any
provision of this Lease Agreement, the taking by eminent domain of title to or
the right to temporary use of all or any of the Project, any change in the tax
or other laws of the United States of America, the State or any political
subdivision of either thereof, or any failure of the IDB to perform and observe
any agreement or covenant, whether express or implied, or any duty, liability or
obligation arising out of or connected with this Lease Agreement.
Notwithstanding the foregoing, the Lessee may, at its own cost and expense and
in its own name or in the name of the IDB, prosecute or defend any action or
proceeding, or take any other action involving third persons which the Lessee
deems reasonably necessary, in order to secure or protect its rights of use and
occupancy and its other rights hereunder. Nothing contained herein shall be
construed to be a waiver of any rights which the Lessee may have against the IDB
under this Lease Agreement or under any provision of law.
Section 3.5 Sublease or Grant of Use by Lessee. The Lessee may, without
the necessity of the IDB's consent, assign this Lease Agreement or sublease or
grant the right to occupy and use the Project, in whole or in part, to others,
provided:
(a) No such assignment, grant or sublease shall relieve the
Lessee from primary liability for any of its obligations under this
Lease Agreement;
(b) In connection with any such assignment, grant or sublease
the Lessee shall retain such rights and interests as will permit it to
comply with its obligations under this Lease Agreement;
(c) No such assignment, grant or sublease shall permit any use
other than one consistent with the intended use of the Project or the
purposes of the Act and (so long as the SIDA Bonds are outstanding) the
SIDA Act; and
(d) All such assignments, subleases or grants of use as may be
entered into shall be subject to the terms and conditions of this Lease
Agreement and the Mortgages, including, without limitation, the
provisions with respect to the maintenance and operation of the
Project.
The IDB hereby agrees, if requested by the Lessee, to join in the execution and
delivery of each and every assignment, sublease or grant of use made pursuant to
the provisions of this Section 3.5, but solely for the purposes of indicating
its consent thereto and approval thereof, provided, however, that any such
assignment, sublease or grant of use entered into pursuant to this Section will
be effective even if the IDB refuses to execute it.
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Section 3.6 Execution and Delivery of Mortgages, SIDA Documents.
(a) In furtherance of the public purposes that will be
accomplished by the establishment and operation by the Lessee of the
Project and in consideration thereof, the IDB hereby agrees that it
shall, whenever requested by the Lessee, execute and deliver any one or
more of the Mortgages, pursuant to which it is anticipated that the IDB
will assign all its right, title and interest (except for Unassigned
Rights) in and to and pledge Basic Rent payable under this Lease
Agreement and join in conveying a mortgage on and security interest in
the Project or any part thereof to each mortgagee under a Mortgage as
security for payment of the amount of Debt Service due to such
mortgagee or (if such mortgagee serves in a fiduciary capacity) to its
beneficiaries. Each such mortgagee shall have all rights and remedies
herein accorded to the IDB (except for Unassigned Rights) and any
reference herein to the IDB shall be deemed, with the necessary changes
in detail, to include each such mortgagee, and each such mortgagee is
deemed to be a third party beneficiary of the covenants and agreements
of the Lessee herein contained.
(b) The parties acknowledge that the transaction involving the
SIDA Bonds is structured as a loan of the proceeds of sale thereof by
SIDA to the Lessee and the IDB, repayment of which is evidenced by the
Loan Agreement and the SIDA Note. Any liability of the IDB under the
Loan Agreement and the SIDA Note shall be limited solely to the
revenues and receipts derived from the leasing of the Project
hereunder.
Section 3.7 Restrictions on Mortgage or Sale of Project. Except for
the Mortgages, the IDB will not mortgage, sell, assign, transfer or convey the
Project during the Lease Term without the prior written consent of the Lessee.
If the laws of the State at the time shall permit it, nothing contained in this
Section shall prevent the consolidation of the IDB with, or merger of the IDB
into, or transfer of the Project as an entirety to, the City, the County or any
public corporation whose property and income are not subject to State taxation
and which has corporate authority to carry on the business of owning and leasing
the Project; provided, that upon any such consolidation, merger, or transfer,
the due and punctual performance and observance of all the agreements and
conditions of this Lease Agreement to be kept and performed by the IDB shall be
expressly assumed in writing by the corporation resulting from such
consolidation or surviving such merger or to which the Project shall be
transferred as an entirety.
Section 3.8 Option to Terminate Lease Agreement and Purchase Project.
(a) Prior to the expiration of the Lease Term, and
notwithstanding any provision herein to the contrary, the Lessee shall
have the option to terminate this Lease Agreement and purchase the
Project from the IDB upon:
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(i) written notice to the IDB of the exercise of
such option, to be given at least 30 days in advance of the
date specified by the Lessee for conveyance of the Project;
(ii) payment of a purchase price for the Project of
Two Thousand Dollars ($2,000.00), being the sum of the
purchase prices specified in Section 12.4 of each of the
Original Leases, together with payment of any amounts due
under Section 3.3(c) hereof, and
(iii) if any of the Notes consist of bonds issued by
the IDB, payment or redemption in whole of all such bonds in
accordance with their terms.
When the foregoing conditions shall have been met, the IDB will
promptly convey the Project to the Lessee (or, if applicable, to any
nominee of the Lessee designated in writing to the IDB) in accordance
with Section 3.9 hereof.
(b) In the event said option shall not have been exercised
prior to the end of the Lease Term, it shall be deemed exercised on and
as of the last day of the Lease Term, whereupon the IDB and the Lessee
shall proceed to closing.
(c) The IDB finds and determines that the price payable upon
exercise of the option to purchase granted hereby, together with the
amounts of Basic Rent to be paid to retire the long-term debt incurred
to finance the Project and the other Rentals payable hereunder,
constitutes fair market value for the property for purposes of State
law, including without limitation within the interpretation of Act No.
91-635, Legislature of Alabama, and any predecessor statute thereto.
Section 3.9 Conveyance on Exercise of Option to Purchase. At the
closing of the purchase pursuant to the exercise of the option to purchase
granted herein, the IDB will upon receipt of the purchase price deliver to the
Lessee or its nominee a statutory warranty deed and such other documents as may
be necessary to convey to the Lessee or its nominee the Realty together with all
improvements thereon, as such property then exists, subject only to the
following: (a) those liens and encumbrances, if any, to which title to said
property was subject when conveyed to the IDB; (b) those liens and encumbrances
created by the Lessee or to the creation or suffering of which the Lessee
consented, including without limitation any of the Mortgages to the extent then
still in effect; and (c) those liens and encumbrances resulting from the failure
of the Lessee to perform or observe any of the agreements on its part contained
in this Lease Agreement.
Section 3.10 Use of Party Walls. If the Lessee owns, acquires or leases
other real property adjacent to the Realty, all walls presently standing or
hereafter erected on or contiguous to the boundary line of such other property
shall be party walls; and each party hereto grants the other a ten-foot easement
adjacent to any such party wall for the purpose of inspection, maintenance,
repair and replacement thereof and the tying-in of new
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construction. If the Lessee utilizes any party wall for the purpose of tying in
new construction that will be utilized under common control with the Project,
Lessee may also tie in the utility facilities on the Realty for the purpose of
serving the new construction and may remove any non-loadbearing wall panels in
the party wall; provided, however, that if the property so owned, acquired or
leased by the Lessee ceases to be operated under common control with the
Project, Lessee covenants that it will install non-loadbearing wall panels
similar in quality to those that have been removed and will provide separate
utility services for the new construction. The foregoing provisions shall also
be required to be observed by any third party in the event such third party
acquires, as Lessee's designee, any portion of the Realty.
[END OF ARTICLE III]
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ARTICLE IV
PROVISIONS RESPECTING THE PROJECT
Section 4.1 1995 Project.
(a) Section 6.1 of each of the Original Leases permits
"additions, modifications and improvements" to be made to the Existing
Project. The IDB and Lessee agree that the 1995 Project (and any and
all future additions, modifications and improvements permitted under
the provisions of Section 4.6 hereof and of the Mortgages) constitutes
such an addition, modification and improvement to the Existing Project
and that the IDB will undertake the 1995 Project in accordance with the
provisions hereof and of the Act.
(b) The IDB hereby authorizes the Lessee, in the name and on
behalf of the IDB, to commence the planning, design, acquisition,
construction, improvement and equipping of the 1995 Project. The Lessee
hereby accepts such authorization and covenants that it shall, pursuant
to such authorization, complete the acquisition, construction and
equipping of the 1995 Project as promptly as is practicable.
Notwithstanding the foregoing, it remains the intention of the parties
to this Lease Agreement that the IDB purchase all building materials
and supplies and Equipment to be acquired as part of the 1995 Project
and that title to such building materials and supplies and Equipment
will pass from the respective supplier or vendor thereof directly to
the IDB. The IDB will enter into, or accept the assignment of, such
contracts as the Lessee may request in order to effectuate the purposes
of this Section -- but it will not execute any contract or give any
order for such construction or for the purchase of materials, supplies
or equipment unless and until the Lessee shall have approved the same
in writing.
(c) The IDB has agreed to cooperate with the Lessee in
applying for and obtaining any Incentives for which the Lessee and the
Project may be eligible. The IDB hereby reaffirms such commitment and
in particular agrees to apply for a Site Prep Grant from SIDA in
accordance with Article 2, Chapter 10, Title 41 of the Code of Alabama
of 1975, as amended. All proceeds of the Site Prep Grant and of the
CDBG Loan for the 1995 Project (if and when received) shall be
deposited in the Construction Fund and shall be applied to pay or to
reimburse the Lessee for paying such Project Costs of the 1995 Project
as the Lessee shall requisition in accordance with the provisions
hereof and of the Indenture.
Section 4.2 Construction Fund: Disbursements; Pledge. There is hereby
created and established with the Trustee a trust fund (the "Construction Fund")
in the name of the IDB to be designated "The Industrial Development Board of the
City of Montgomery - SIMCALA Construction Fund". In accordance with the
Indenture, the proceeds of the sale of the SIDA Bonds shall be deposited by the
Trustee, on behalf of SIDA, in the Construction Fund.
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The moneys in the Construction Fund shall be paid out by the Trustee
from time to time solely for the purposes of (a) reimbursing to the Company all
funds advanced to pay Project Costs subsequent to the date of the Preliminary
Agreement and (b) paying the Project Costs. The provisions of Section 405 of the
Indenture shall govern the manner of requisitioning and disbursing moneys in the
Construction Fund.
Until expended, the IDB hereby pledges and assigns to the Trustee all
moneys and investments in the Construction Fund as security for the payment of
the Loan Payments due under and as defined in the Loan Agreement and the SIDA
Note; and such moneys shall be held and invested by the Trustee, at the
direction of the Lessee, all as provided in the Indenture.
Section 4.3 No Warranty of Suitability by IDB. The Lessee recognizes
that since the plans and specifications for constructing and equipping the 1995
Project have been prepared to its order, and that since the Equipment intended
to constitute part of the 1995 Project has been and is to be selected by it, the
IDB can make no warranty, either express or implied, or offer any assurances,
that the 1995 Project or said Equipment is or will be suitable for the Lessee's
purposes or needs, or that the proceeds derived from the sale of the SIDA Bonds
will be sufficient to pay in full all of the Project Costs related thereto.
Section 4.4 IDB to Pursue Remedies Against Contractors, Subcontractors,
Suppliers and Sureties. In the event of default of any contractor, subcontractor
or supplier under any contract made by it in connection with the Project, the
IDB at the request of the Lessee will promptly proceed (at the Lessee's sole
cost and expense), either separately or in conjunction with others, to exhaust
the remedies of the IDB against the contractor, subcontractor or supplier so in
default and against his surety, if any, for the performance of such contract.
The IDB will advise the Lessee of the steps it intends to take in connection
with any such default. If the Lessee shall so notify the IDB, the Lessee may, in
its own name or in the name of the IDB, prosecute or defend any action or
proceeding or take any other action involving any such contractor,
subcontractor, supplier or surety which the Lessee deems reasonably necessary,
and in such event the IDB will cooperate fully with the Lessee and will take all
action necessary to effect the substitution of the Lessee for the IDB in any
such action or proceeding. Any amounts recovered by way of damages, refunds,
adjustments or otherwise in connection with the foregoing prior to the
completion of the 1995 Project shall, after payment of all costs and expenses
including reasonable attorney's fees incurred in connection with the foregoing,
be paid into the Construction Fund.
Upon completion of the 1995 Project or at any time prior thereto upon
the request of the Lessee, the IDB will assign to the Lessee all warranties and
guaranties of all contractors, subcontractors, suppliers, architects and
engineers for the furnishing of labor, materials or equipment or for supervision
or design in connection with the 1995 Project and any rights or causes of action
against any of the foregoing.
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Section 4.5 Completion of the 1995 Project. If moneys in the
Construction Fund shall be insufficient to pay fully all sums required to
complete the 1995 Project, the Lessee shall be obligated to complete the
acquisition, construction and equipping of the 1995 Project at its own expense.
The Lessee shall pay any such deficiency either by making payments directly to
the contractor or contractors or the suppliers of materials and equipment or by
paying into the Construction Fund the moneys necessary to complete the 1995
Project, in which case the IDB will proceed to complete the Project and the cost
thereof will be paid from the Construction Fund. The Lessee shall save the IDB
whole and harmless from any obligation to pay any amount in excess of the moneys
available therefor in the Construction Fund. The Lessee shall not by reason of
the payment of such excess costs from its own funds (whether by direct payment
thereof or payment into the Construction Fund) be entitled to any diminution in
the payment of Rentals hereunder.
Section 4.6 Maintenance, Additions and Improvements.
(a) The Lessee will, at its own expense, (1) keep the Project
in as reasonably safe condition as its operations permit, and (2) keep
the Project in good order and repair, and from time to time make all
needful and proper repairs, renewals and replacements thereto,
including external and structural repairs, renewals and replacements.
In lieu of making such repairs, renewals and replacements directly, the
Lessee may, if it so desires, furnish to the IDB the funds necessary
therefor, in which case the 1013 will proceed to make such repairs,
renewals and replacements.
(b) The Lessee may, also at its own expense, make any
additions, modifications and improvements to the Project that it may
deem desirable for its business purposes, provided that such additions,
modifications and improvements do not in the opinion of Independent
Counsel change the character of the Project to such an extent that it
ceases to be a "project" under the Act or (so long as the SIDA Bonds
shall be outstanding) under the SIDA Act. In lieu of making such
additions, improvements or alterations directly, the Lessee may, if it
so desires, furnish to the IDB the funds necessary therefor, in which
case the IDB will proceed to make such additions, improvements or
alterations.
(c) All such additions, modifications and improvements as are
made by the Lessee shall become a part of the Project and shall be
subject to the demise of this Lease Agreement and (except as limited in
the CDBG Security Agreement) the liens of the Mortgages; provided,
however, that any personal property used at or in connection with the
Project by the Lessee which was not acquired with proceeds of a Note
and is not a replacement or renewal of Equipment constituting a part of
the Project may, subject to the provisions of the Mortgages, be removed
by the Lessee at any time and from time to time while it is not in
default under the terms of this Lease Agreement; and provided further,
that any damage to the Project occasioned by such removal shall be
repaired by the Lessee at its own expense.
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The same provisions will apply with respect to personal property of a
sublessee or other user of the Project pursuant to Section 3.5 hereof.
(d) The Lessee will not permit any mechanic's or other liens
to stand against the Project for labor or material furnished in
connection with the original acquisition, construction or equipping of
the Project or any additions, modifications, improvements or repairs to
the Project so made by it. The Lessee may, however, in good faith
contest any such mechanic's or other liens and in such event may permit
any such liens to remain unsatisfied and undischarged during the period
of such contest and any appeal therefrom unless by such action the
Project or any part thereof shall be subject to loss or forfeiture, in
which event such mechanics or other liens shall be promptly satisfied
or bonded for.
(e) The Lessee may, also at its own expense, connect or
"tie-in" walls and utility and other facilities located on the Realty
to other facilities on real property adjacent to the Realty or partly
on such adjacent real property and partly on the Realty, but only if
the Lessee certifies to the IDB and the mortgagees under the Mortgages
that such connection and "tie-in" of walls and facilities will not
unreasonably interfere with the operation of the Project.
(f) The IDB will, upon request of the Lessee, grant such
utility, right-of-way and other similar easements over, across or under
the Realty as shall be necessary or convenient for the furnishing of
utility, transportation and other similar services to real property
adjacent to or near the Realty, provided that such easements shall not
adversely affect the operations of any facilities forming a part of the
Project.
Section 4.7 Taxes, Other Governmental Charges and Utility Charges.
(a) The IDB and the Lessee acknowledge that (i) under the law
in existence as of the Issue Date, by reason of the entry by the IDB
and Lessee's assignor into the Original Leases prior to May 21, 1992
(the effective date of Act No. 92-599, Legislature of Alabama), and by
reason of the renewal provisions contained in the Original Leases, no
part of the Project owned by the IDB will be subject, throughout the
Lease Term, to ad valorem taxation by the State or by any political or
taxing subdivision thereof; (ii) under the law in existence as of the
Issue Date, the income and profits (if any) of the IDB from the Project
are not subject to either federal or State taxation; and (iii) these
factors, among others, induced the Lessee to enter into this Lease
Agreement. In the event such exemptions are terminated or deemed
inapplicable to the Project or any part thereof, the Lessee may at its
option terminate this Lease Agreement and may purchase the Project in
accordance with the terms hereof. However, the Lessee will pay, as the
same respectively become due, all taxes and governmental charges of any
kind whatsoever that may at any time be lawfully assessed or levied
against or with respect to the Project or any machinery, equipment or
other property installed or
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brought by the Lessee onto the Realty (including, without limiting the
generality of the foregoing, (i) any taxes levied on or with respect to
the income or profits of the IDB from the Project which, if not paid,
will become a lien on the Project or a charge on the revenues and
receipts from the Project prior to or on a parity with the lien of any
of the Mortgages thereon and (ii) any ad valorem taxes levied or
assessed upon Lessee's interest in the Project), and all assessments
and charges lawfully made by any governmental body for public
improvements that may be secured by a lien on the Project; provided,
however, that with respect to special assessments or other governmental
charges that may lawfully be paid in installments over a period of
years, the Lessee shall be obligated to pay only such installments as
are required to be paid during the Lease Term.
(b) The Lessee agrees to pay all gas, electric, light and
power, water, sewer and all other charges for the operation,
maintenance, use and upkeep of the Project.
(c) The Lessee may, subject to the provisions of the
Mortgages, at its own expense and in its own name and behalf or in the
name and behalf of the IDB, in good faith contest any such taxes,
assessments and other charges and, in the event of any such contest,
may permit the taxes, assessments or other charges so contested to
remain unpaid during the period of such contest and any appeal
therefrom, unless by such action the title of the IDB to any part of
the Project shall be materially endangered or the Project or any
part-thereof shall become subject to loss or forfeiture, in which event
such taxes, assessments or charges shall be paid forthwith by the
Lessee. The IDB will cooperate fully with the Lessee in any such
contest.
Section 4.8 Insurance.
(a) The Lessee will cause the Project to be insured and at all
times keep the Project insured against loss and/or damage to the
Project by fire and other perils (including vandalism and malicious
mischief) customarily covered by the extended coverage clause of fire
insurance policies in an amount equal to the full replacement cost of
the Project. The Lessee will pay all premiums on such insurance. All
such policies shall be for the benefit of the Lessee and the mortgagees
under the Mortgages, as their respective interests may appear. Any such
insurance policy or policies may, at the Lessee's option, contain a
deductible clause in a commercially reasonable amount. All such
insurance policies shall be taken out and maintained with generally
recognized, responsible insurance companies, each of which shall be
qualified and authorized to assume the respective risks undertaken.
(b) The Lessee shall also take out and at all times maintain
and pay the premium on policies of general liability insurance with
generally recognized, responsible insurance companies, each of which
shall be qualified to assume the
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<PAGE> 26
risks undertaken, for the benefit of the IDB and the Lessee, as their
interests may appear. Such general public liability insurance shall
insure against liability for injuries to persons and property or death
or accidental injuries arising out of the occupancy, use or operation
of the Project, in the minimum amount of $2,000,000 combined single
limit coverage, and also in such amount with respect to any vehicle
used in connection with the Project.
All such insurance shall be provided during the entire Lease Term.
Notwithstanding the foregoing, during the construction phase of the 1995 Project
such insurance as may be applicable to the 1995 Project may be provided by way
of builders' risk insurance which shall be for the benefit of the parties
specified above, as their respective interests may appear. Each policy shall
provide that the policy may not be cancelled or expire without 30 days' prior
written notice of such cancellation or expiration by the insurer to the Lessee
and, as applicable, to the IDB and each of the mortgagees under the Mortgages.
Such insurance may also be provided under a blanket insurance policy or
policies.
Section 4.9 Advances by IDB. In the event that the Lessee fails to
take out or maintain the full insurance coverage required by this Lease
Agreement, fails to pay the taxes and other charges required to be paid by the
Lessee at the times they are required to be paid, or fails to keep the Project
in as reasonably safe condition as its operating conditions permit and in good
order and repair, the IDB, after first notifying the Lessee of any such failure
on its part, may (but shall not be obligated to) take out the required policies
of insurance and pay the premiums on the same, pay such taxes or other charges,
or make such repairs, renewals and replacements as may be necessary to maintain
the Project in as reasonably safe condition as the Lessee's operations permit
and in good order and repair, respectively; and all amounts so advanced therefor
by the IDB shall become an additional obligation of the Lessee to the IDB, which
amounts, together with interest thereon at the Interest Rate for Advances, the
Lessee agrees to pay. Any remedy herein vested in the IDB for the collection of
the Rentals shall also be available to the IDB for the collection of all such
amounts so advanced.
Section 4.10 Damage or Destruction. If prior to full payment of the
Notes the Project is destroyed (in whole or in part) or is damaged by fire or
other casualty, the Lessee shall be obligated to continue to pay Rentals, to
perform its other obligations and covenants hereunder and to repair, rebuild or
restore the property damaged or destroyed to substantially the same condition as
existed prior to the event causing such damage or destruction, with such
changes, alterations and modifications (including the substitution and addition
of other property) as may be desired by the Lessee and as will not, in the
opinion of Independent Counsel, change the character of the Project to such an
extent that it ceases to be a "project" under the Act or (so long as the SIDA
Bonds shall be outstanding) the SIDA Act.
The Lessee may apply for such purpose so much as may be necessary of
any Net Proceeds of insurance resulting from claims for such losses. In the
event said Net
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<PAGE> 27
Proceeds are not sufficient to pay in full the costs of such repair, rebuilding
or restoration, the Lessee will nonetheless complete the work thereof and will
pay that portion of the costs thereof in excess of the amount of said proceeds.
The Lessee shall not, by reason of the payment of such excess costs, be entitled
to any reimbursement from the IDB or any abatement or diminution of the Rentals
payable hereunder. Any balance of insurance proceeds remaining after payment of
all the costs of such repair, rebuilding or restoration shall be paid to the
Lessee.
Notwithstanding the foregoing, if the Lessee shall determine that such
repair, restoration or rebuilding is not, in whole or in part, economically
viable, then the Lessee may elect to prepay one or more of the Notes in
accordance with their terms, in which case the Net Proceeds (or such portion
thereof as is allocable to the portion of the Project not being repaired,
restored or rebuilt) shall be applied to such prepayment; provided, however,
that if the SIDA Bonds shall at the time bear interest at a Yearly Fixed Rate or
the Permanent Fixed Rate (both as therein defined), then such prepayment may
occur only if the preconditions set forth therein for extraordinary optional
redemption thereof shall have been met.
The IDB shall cooperate fully with the Lessee in the handling of any
prospective or pending insurance claim with respect to the Project or any part
thereof. In no event will the IDB voluntarily settle, or consent to the
settlement of, any prospective or pending insurance claim with respect to the
Project or any part thereof without the written consent of the Lessee, in its
sole discretion.
Section 4.11 Condemnation. In the event that title to, or the temporary
use of, the Project or any part thereof or interest therein shall be taken under
the exercise of the power of eminent domain by any Governmental Authority or by
any Person acting under governmental authorization, the Lessee shall be
obligated to continue to pay Rentals and to perform its other obligations and
covenants hereunder. If the Lessee so elects, the IDB and the Lessee will cause
the Net Proceeds received by them or by any of the mortgagees under the
Mortgages from any award made in such eminent domain proceedings to be applied,
as shall be directed in writing by the Lessee within 120 days from entry of a
final order in such eminent domain proceedings, to:
(a) the restoration of the remaining improvements located on
the Realty to substantially the same condition as existed prior to the
exercise of the power of eminent domain, and/or
(b) the acquisition, by construction or otherwise, of other
lands or improvements suitable for the Lessee's operations at the
Project (which land or improvements shall be deemed a part of the
Project and available for use and occupancy by the Lessee without the
payment of any rent other than herein provided for, to the same extent
as if such land or other improvements were specifically described
herein and demised hereby).
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<PAGE> 28
In the event that the Lessee elects either of the foregoing options and
the Net Proceeds are not sufficient to pay in full the costs of such restoration
or acquisition, the Lessee will nonetheless pay that portion of the costs
thereof in excess of the amount of the proceeds. The Lessee shall not, by reason
of the payment of such excess costs, be entitled to any reimbursement from the
IDB or any abatement or diminution of the Rentals payable hereunder.
Notwithstanding the foregoing, if the Lessee shall determine that such
restoration or acquisition is not, in whole or in part, economically viable,
then the Lessee may elect to prepay one or more of the Notes in accordance with
their terms, in which case the Net Proceeds (or such portion thereof as is
allocable to the portion of the Project not being restored) shall be applied to
such prepayment; provided, however, that if the SIDA Bonds shall at the time
bear interest at a Yearly Fixed Rate or the Permanent Fixed Rate (both as
therein defined), then such prepayment may occur only if the preconditions set
forth therein for extraordinary optional redemption thereof shall have been met.
Any balance of Net Proceeds of an award in such eminent domain
proceedings remaining after the application thereof as hereinabove provided
shall be paid to the Lessee.
The IDB shall cooperate fully with the Lessee in the handling and
conduct of any prospective or pending condemnation proceeding with respect to
the Project or any part thereof and will, to the extent it may lawfully do so,
permit the Lessee to litigate in any such proceeding in the name and behalf of
the IDB, through counsel of Lessee's own choice; provided, however, if the IDB
is legally required to participate through its own counsel in any such defense,
the Lessee shall be responsible for the reasonable fees and charges of such
counsel. In no event will the IDB voluntarily settle, or consent to the
settlement of, any prospective or pending condemnation proceeding with respect
to the Project or any part thereof without the written consent of the Lessee, in
its sole discretion.
Section 4.12 Removal and Disposition of Equipment. Subject to the
provisions of the Mortgages, the Lessee may, if no Event of Default shall have
occurred and be continuing, remove or sever any item of the Equipment from the
Project and use such item in its other operations or sell or otherwise dispose
of such item in any way the Lessee may see fit, free of the demise of this Lease
Agreement and without the Lessee having any responsibility or accountability to
the IDB therefor.
Section 4.13 Cooperation with the County. The IDB and the Lessee
covenant to give reasonable cooperation to the County in the performance of the
County's obligations under the CDBG Grant Agreement relative to the CDBG Loan;
provided the foregoing shall not obligate the Lessee to furnish proprietary or
confidential information or otherwise adversely affect trade secrets, processes
or contractual relationships.
[END OF ARTICLE IV]
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<PAGE> 29
ARTICLE V
ADDITIONAL AGREEMENTS AND COVENANTS
Section 5.1 General Covenants. The Lessee will not do or permit
anything to be done on or about the Project that will affect, impair or
contravene any policies of insurance that may be carried on the Project or any
part thereof against loss or damage by fire, casualty or otherwise. The Lessee
will, in the use of the Project and the public ways abutting the same, comply
with all lawful requirements of all governmental bodies; provided, however, the
Lessee may, at its own expense in good faith contest the validity or
applicability of any such requirement.
Section 5.2 Inspection of Project. The Lessee will permit the IDB and
its duly authorized agents at reasonable times during normal business hours and
on reasonable advance notice to enter upon, examine and inspect the Project and,
provided the same shall not unduly infringe on professional or trade secrets,
privileges or processes of the Lessee, to have access to, inspect, examine and
make copies of the books and records, accounts and data of the Lessee pertaining
to the Project.
Section 5.3 Indemnification. The Lessee releases the IDB from, agrees
that the IDB shall not be liable for, and indemnifies the IDB against, all
liabilities, claims, costs and expenses (including reasonable attorneys' fees)
sustained or incurred in the absence of negligence or willful misconduct on the
part of the IDB and arising out of or in connection with: (a) any loss or damage
to property or injury to or death of or loss by any person that may be
occasioned by any cause whatsoever pertaining to the maintenance, operation and
use of the Project; (b) any breach or default on the part of the Lessee in the
performance of any covenant or agreement of the Lessee under any of the Lessee
Documents, or arising from any act or failure to act by the Lessee or any of its
agents, contractors, servants, employees or licensees; (c) any action taken in
connection with obtaining any of the Incentives; and (d) any claim, action or
proceeding brought with respect to the matters set forth in (a), (b) or (c)
above.
The indemnification set forth above is intended to and shall include
the indemnification of all affected officials, directors, officers and servants,
agents and employees of the IDB. That indemnification is intended to and shall
be enforceable by the IDB to the full extent permitted by law.
In case any action or proceeding is brought against the IDB in respect
of which indemnity may be sought hereunder, the party seeking indemnity shall
promptly give notice of that action or proceeding to the Lessee, and thereafter
shall forward to the Lessee a copy of every summons, complaint, pleading, motion
or other process received with respect to such action or proceeding. The Lessee
upon receipt of that notice shall have the obligation and the right to assume at
its expense the defense of the action or proceeding; provided that failure or
untimeliness of a party to give that notice shall not relieve the Lessee from
any of its obligations under this Section unless that failure or
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<PAGE> 30
untimeliness materially prejudices the defense of the action or proceeding by
the Lessee. At its own expense, an indemnified party may employ separate counsel
and participate in the defense. No indemnified party shall take any actions,
including an admission of liability, which would bar the Lessee from enforcing
any applicable coverage under policies of insurance held by the Lessee or would
prejudice any defense of Lessee in any appropriate legal proceedings pertaining
to any such matter or otherwise prevent Lessee from defending itself with
respect to any such matter. The Lessee shall not be liable for any settlement
without its consent, unless it shall have failed after due notice to participate
in such proceedings.
Section 5.4 Covenants Under Other Lessee Documents. The Lessee shall
observe and perform all covenants and agreements to be observed or performed by
the Lessee under the other Lessee Documents.
[END OF ARTICLE V]
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<PAGE> 31
ARTICLE VI
EVENTS OF DEFAULT AND REMEDIES
Section 6.1 Events of Default. Each of the following shall be an Event
of Default under this Lease Agreement:
(a) Failure by the Lessee to make when due any payment of
Rentals that has become due and payable by the terms of this Lease
Agreement and continuation of the same for a period of five days after
notice thereof from the IDB or the holder of any Note to the Lessee.
(b) Failure by the Lessee to observe and perform any other
covenant, condition or agreement on its part to be observed or
performed hereunder and continuation of such failure for a period of 30
days after written notice, specifying such failure and requesting that
it be remedied, shall have been given to the Lessee by the IDB or the
mortgagee under the First Mortgage, unless the IDB and said mortgagee
shall agree in writing to an extension of such time prior to its
expiration; provided, however, if the failure stated in the notice can
be corrected but not within the applicable period, it shall not
constitute an Event of Default if corrective action is instituted by
the Lessee within the applicable period and diligently pursued until
the failure is corrected.
(c) Any representation or warranty made by the Lessee herein
or any statement in any report, certificate, financial statement or
other instrument furnished in connection with this Lease Agreement
shall at any time prove to have been false or misleading in any
material respect when made or given.
(d) The filing of a petition in bankruptcy (or other
commencement of a bankruptcy or similar proceeding) by or against the
Lessee, as debtor, under any applicable bankruptcy, reorganization,
insolvency or other similar law now or hereafter in effect; provided,
however, that if any such petition or proceeding is filed, such filing
shall not constitute an Event of Default hereunder unless such petition
shall remain undismissed for a period of 120 days after filing;
provided further, however, that the occurrence of an Event of Default
under this subsection and the exercise of remedies upon any such
occurrence shall be subject to any applicable limitations of federal or
state law affecting or precluding such occurrence or exercise during
the pendency of or immediately following any liquidation or
reorganization proceedings.
Section 6.2 Remedies on Default. Whenever any such Event of Default
shall have happened and be continuing, the mortgagee under the First Mortgage,
as assignee of the IDB, or the IDB (but only as to Unassigned Rights), may:
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<PAGE> 32
(a) Declare all installments of Basic Rent allocable to the
Notes and payable under this Lease Agreement for the remainder of the
Lease Term to be immediately due and payable;
(b) Re-enter and take possession of the Project, without
terminating this Lease Agreement, exclude the Lessee from possession
thereof and sublease the Project or any part thereof, for the account
of the Lessee, holding the Lessee liable for the difference in the rent
and other amounts payable by such sublessee in such subleasing and the
Rentals and other amounts payable by the Lessee hereunder;
(c) Terminate this Lease Agreement, exclude the Lessee from
possession of the Project and lease the same for the account of the
IDB, holding the Lessee liable for all Rentals due up to the date such
lease is made for the account of the IDB;
(d) Take whatever action at law or in equity may appear
necessary or desirable to collect the Rentals then due, whether by
declaration or otherwise, or to enforce any obligation, covenant or
agreement of the Lessee under this Lease Agreement or by law.
The IDB may, without consent of the mortgagee under the First Mortgage, waive
any Event of Default hereunder with respect to Unassigned Rights, and said
mortgagee may, without the written consent of the IDB, waive any Event of
Default hereunder with respect to Unassigned Rights.
Section 6.3 No Remedy Exclusive. No remedy herein conferred upon or
reserved to the IDB or the mortgagee under the First Mortgage is intended to be
exclusive of any other available remedy or remedies, but each and every such
remedy shall be cumulative and shall be in addition to every other remedy given
under this Lease Agreement or now or hereafter existing at law or in equity or
by statute. No delay or omission to exercise any right or power accruing upon
any default shall impair any such right or power or shall be construed to be a
waiver thereof but any such right or power may be exercised from time to time
and as often as may be deemed expedient.
Section 6.4 Agreement to Pay Attorneys' Fees and Expenses. In the
event the Lessee should default under any of the provisions of this Lease
Agreement and the IDB or the mortgagee under the First Mortgage (in its own name
or in the name and on behalf of the IDB) should employ attorneys or incur other
expenses for the collection of Rentals or the enforcement of performance or
observance of any obligation or agreement on the part of the Lessee herein
contained, the Lessee will on demand therefor pay to the IDB and/or said
mortgagee the reasonable fees of such attorneys and such other expenses so
incurred; and such amounts shall bear interest at the Interest Rate for Advances
from the date of demand to the date of payment.
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<PAGE> 33
Section 6.5 No Additional Waiver Implied by One Waiver. In the event
any agreement contained in this Lease Agreement should be breached by either
party and thereafter waived by the other party, such waiver shall be limited to
the particular breach so waived and shall not be deemed to waive any other
breach hereunder.
[END OF ARTICLE VI]
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<PAGE> 34
ARTICLE VII
MISCELLANEOUS
Section 7.1 Prior Agreements Cancelled. This Lease Agreement shall
completely and fully supersede all other prior agreements (including without
limitation the Original Leases, which are restated hereby), both written and
oral, between the IDB and the Lessee or the Lessee's assignor relating to the
acquisition, preservation, construction, expansion or equipping or the leasing
or operation of the Project. No party to any such prior agreement shall
hereafter have any rights thereunder but shall look solely to this Lease
Agreement for definition and determination of all of its rights, liabilities and
responsibilities relating to the Project.
Section 7.2 IDB's Liabilities Limited.
(a) The covenants and agreements contained in this Lease
Agreement shall never constitute or give rise to a personal or
pecuniary liability or charge against the general credit of the IDB,
and in the event of a breach of any such covenant or agreement. no
personal or pecuniary liability or charge payable directly or
indirectly from the general assets or revenues of the IDB shall arise
therefrom. Nothing contained in this Section, however, shall relieve
the IDB from the observance and performance of the covenants and
agreements on its part contained herein.
(b) Other than for willful or wanton acts, no recourse under
or upon any covenant or agreement of this Lease Agreement shall be had
against any past, present or future incorporator, officer or member of
the Board of Directors of the IDB, or any of its servants, agents or
employees, or of any successor corporation, either directly or through
the IDB, whether by virtue of any constitution, statute or rule of law,
or by the enforcement of any assessment or penalty or otherwise; it
being expressly understood that this Lease Agreement is solely a
corporate obligation, and that no personal liability whatever shall
attach to, or is or shall be incurred by, any incorporator, officer or
member of the Board of Directors of the IDB or any of its servants,
agents or employees, or any successor corporation, or any of them,
under or by reason of the covenants or agreements contained in this
Lease Agreement.
Section 7.3 Execution Counterparts. This Lease Agreement may be
simultaneously executed in several counterparts, each of which shall be an
original and all of which shall constitute but one and the same instrument.
Section 7.4 Binding Effect; Assignability. This Lease Agreement shall
inure to the benefit of, and shall be binding upon, the IDB, the Lessee and
their respective successors and assigns, provided, however, that the Lessee may
not assign this Lease Agreement in
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<PAGE> 35
whole or in part without the prior written consent of the mortgagee under the
First Mortgage.
Section 7.5 Amendments. So long as any of the SIDA Bonds are
outstanding, this Lease Agreement may be amended only by a written instrument
between the IDB and the Lessee with the written consent of the mortgagee under
the First Mortgage.
Section 7.6 Severability. In the event any provision of this Lease
Agreement shall be held invalid or unenforceable by any court of competent
jurisdiction, such holding shall not invalidate or render unenforceable any
other provision hereof.
Section 7.7 Notices. Unless otherwise provided herein, all notices,
certificates or other communications hereunder shall be sufficiently given and
shall be deemed given when delivered or mailed by registered or certified mail,
postage prepaid, or sent by overnight courier service, telegram, telex or other
instantaneous transmission device, addressed as follows:
(a) If to the IDB, at The Industrial Development Board of the
City of Montgomery, Post Office Box 79, Montgomery, Alabama 36101,
Attention: Chairman of the Board of Directors; and
(b) If to the Lessee, (i) by mail or telegram, at SIMCALA,
Inc., c/o Capital One Partners, 1111 Chester Avenue, Cleveland, Ohio
44114, Attention: JimPetras, Partner; and (ii) by telefax, at (216)
781-0158.
Either of the foregoing parties may, by notice given hereunder, designate any
further or different addresses to which subsequent notices, certificates or
other communications shall be sent.
Section 7.8 Governing Law. This Lease Agreement shall be deemed to be a
contract made under the laws of the State and for all purposes shall be governed
by and construed in accordance with the laws of the State.
Section 7.9 References to Mortgagees. Provisions of this Lease
Agreement pertaining to required notices to or consents from the mortgagees
under the Mortgages and like provisions shall be understood to apply, as to any
given mortgagee, only so long as the Note underlying the Mortgage of said
mortgagee is outstanding and shall not have been paid in full.
[END OF ARTICLE VII]
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<PAGE> 36
IN WITNESS WHEREOF, the IDB and the Lessee have caused this
Consolidated, Amended and Restated Lease Agreement to be executed, sealed and
attested, as applicable, in their respective names, all by their respective duly
authorized officers, as of the date first hereinabove stated.
THE INDUSTRIAL DEVELOPMENT
BOARD OF THE CITY OF MONTGOMERY
(SEAL)
By:/s/
--------------------------------------
Chairman of the Board of Directors
ATTEST:
/s/
- ---------------------------------
Its [Assistant] Secretary
SIMCALA, INC., a Delaware corporation
(SEAL)
By:/s/
--------------------------------------
President
ATTEST:
/s/
- ---------------------------------
Its Secretary
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<PAGE> 37
ACKNOWLEDGMENT OF IDB
STATE OF ALABAMA )
:
COUNTY OF MONTGOMERY )
I, the undersigned Notary Public in and for said County in said State,
hereby certify that R.E. Thornton, Jr., whose signature as the Chairman of the
Board of Directors of The Industrial Development Board of the City of Montgomery
is signed to the foregoing instrument and who is known to me and known to be
such officer, acknowledged before me on this day that, being informed of the
contents of said instrument, he, as such officer and with full authority,
executed the same voluntarily for and as the act of said Board.
Given under my hand and seal of office this 8th day of February, 1995.
/s/
--------------------------------------
NOTARY PUBLIC, State at Large
My Commission Expires: October 8, 1995
(SEAL)
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<PAGE> 38
ACKNOWLEDGMENT OF LESSEE
STATE OF ALABAMA )
:
COUNTY OF MONTGOMERY )
I, the undersigned authority, a Notary Public in and for said County in
said State, hereby certify that James M. Petras, whose signature as President of
SIMCALA, Inc., a Delaware corporation, is signed to the foregoing instrument,
and who is known to me and known to be such officer, acknowledged before me on
this day that, being informed of the contents of said instrument, he, as such
officer and with full authority, executed the same voluntarily for and as the
act of said corporation
Given under my hand and seal of office this 9th day of February, 1995.
/s/
----------------------------------------
NOTARY PUBLIC, State at Large
My Commission Expires: November 30, 1996
(SEAL)
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<PAGE> 39
EXHIBIT A
DESCRIPTION OF REALTY
PARCEL 1
Begin at the Southeast Corner of Section 5, T-16-N, R-20-E, Montgomery County.
Alabama; thence run along the South Line of said Section 5, S 87(degree) 05' 57"
W, 1818.81 feet to a point; thence run N 01(degree) 53' 50" W, 1623.33 feet to
an iron pin; thence run N 03(degree) 50' 08" E, 1038.55 feet to a concrete
monument lying on the North Line of the Southeast Quarter of said Section;
thence run N 87(degree) 34' 04" E, 1990.78 feet to a point at the Northeast
Corner of the Southeast Quarter of said Section 5; thence run along the East
Line of said Section, S 04(degree) 03' 41" W, 2657.77 feet to the point of
beginning.
Said described property lying and being situated in the Southeast Quarter of
Section 5, T-16-N, R-20-E, Montgomery County, Alabama, and contains 117.693
acres, more or less.
PARCEL 2
Begin at the Northeast Corner of the Southeast Quarter of Section 5, T-16-N,
R-20-E. Montgomery County, Alabama; thence run along the North Line of the
Southeast Quarter of Said Section, S 87(degree) 34' 04" W, 1990.78 feet to a
concrete monument; thence continue, S 87(degree) 34' 04" W, 663.34 feet to a
concrete monument lying at the Northwest Corner of the Southeast Quarter of said
Section 5; thence run N 04(degree) 03' 41" E, 90.10 feet to a point lying on the
South right of way of CSX Railroad (100' ROW); thence run along said South right
of way, N 87(degree) 00' 00" E, 2657.34 feet to a point lying on the East Line
of said Section 5; thence run along said East Line, S 04(degree) 03' 41" W,
117.34 feet to the point of beginning.
Said described property lying and being situated in the Northeast Quarter of
Section 5, T-16-N, R-20-E, Montgomery County, Alabama, and contains 6.279 acres,
more or less.
PARCEL 3
Begin at a concrete monument at the Northwest Corner of the Southeast Quarter of
Section 5. T-16-N, R-20-E, Montgomery County, Alabama, thence run S 87(degree)
33' 07" W, 661.96 feet to an iron pin; thence run S 87(degree) 33' 21" W, 671.78
feet to an iron pin; thence run N 04(degree) 03' 41" E, 76.74 feet to a point
lying on the South right of way of CSX Railroad; thence run along said South
right of way, N 87(degree) 00' 00" E, 1335.32 feet to a point, thence run S
04(degree) O3' 41" W, 90.10 feet to the point of beginning.
Said described parcel lying and being situated in the Northwest Quarter of
Section 5, T-16-N, R-20-E, Montgomery County, Alabama, and contains 2.487 acres,
more or less.
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<PAGE> 1
EXHIBIT 10.8
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
LOAN AGREEMENT
BETWEEN
STATE INDUSTRIAL DEVELOPMENT AUTHORITY,
AS LENDER,
AND
SIMCALA, INC.
AND
THE INDUSTRIAL DEVELOPMENT BOARD OF
THE CITY OF MONTGOMERY,
AS BORROWERS
----------------------
RELATING TO
$6,000,000
STATE INDUSTRIAL DEVELOPMENT AUTHORITY
TAXABLE INDUSTRIAL REVENUE BONDS
(SIMCALA, INC. PROJECT)
SERIES 1995
----------------------
DATED
AS OF
JANUARY 1, 1995
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
KAUFMAN & ROTHFEDER, P.C.
MONTGOMERY, ALABAMA
BOND COUNSEL
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LOAN AGREEMENT
BETWEEN
STATE INDUSTRIAL DEVELOPMENT AUTHORITY
AND
SIMCALA, INC.
AND
THE INDUSTRIAL DEVELOPMENT BOARD OF
THE CITY OF MONTGOMERY
I N D E X
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ARTICLE I DEFINITIONS.................................................................... 2
Section 1.1 Definitions............................................................. 2
Section 1.2 Interpretation.......................................................... 8
Section 1.3 Captions and Headings................................................... 9
ARTICLE II REPRESENTATIONS AND COVENANTS.................................................. 10
Section 2.1 Representations by the Issuer........................................... 10
Section 2.2 Representations and Covenants by the Company - General.................. 10
Section 2.3 Representations and Covenants by the Company - SIDA Act................. 11
ARTICLE III LOAN PROVISIONS................................................................ 13
Section 3.1 Loan; Loan Payments..................................................... 13
Section 3.2 Additional Payments..................................................... 13
Section 3.3 Obligations of Company Unconditional.................................... 14
Section 3.4 Assignment of Loan Agreement............................................ 14
ARTICLE IV PROVISIONS RESPECTING THE PROJECT.............................................. 16
Section 4.1 Agreement to Complete Project........................................... 16
Section 4.2 No Warranty of Suitability by Issuer.................................... 16
Section 4.3 Completion of the Project............................................... 16
ARTICLE V ADDITIONAL AGREEMENTS AND COVENANTS............................................ 17
Section 5.1 General Covenants....................................................... 17
Section 5.2 Indemnification......................................................... 17
Section 5.3 Compliance with Other Documents......................................... 17
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Section 5.4 Letter of Credit; Alternate Credit Facility............................. 17
ARTICLE VI EVENTS OF DEFAULT AND REMEDIES................................................. 21
Section 6.1 Events of Default....................................................... 21
Section 6.2 Remedies on Default..................................................... 21
Section 6.3 No Remedy Exclusive..................................................... 22
Section 6.4 Agreement to Pay Attorneys' Fees and Expenses........................... 22
Section 6.5 No Additional Waiver Implied by One Waiver.............................. 22
ARTICLE VII MISCELLANEOUS.................................................................. 23
Section 7.1 Limitation of Issuer's Liability........................................ 23
Section 7.2 Limitation of IDB's Liability........................................... 23
Section 7.3 Execution Counterparts.................................................. 24
Section 7.4 Binding Effect; Assignability........................................... 24
Section 7.5 Amendments.............................................................. 24
Section 7.6 Severability............................................................ 24
Section 7.7 Notices................................................................. 24
Section 7.8 Governing Law........................................................... 25
Section 7.9 Term of Loan Agreement.................................................. 25
SIGNATURES ...................................................................................... 26
ACKNOWLEDGMENTS ................................................................................. 27
Exhibit A Description of Realty
Exhibit B Form of Note
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LOAN AGREEMENT
This LOAN AGREEMENT made and entered into as of January 1, 1995 (as the
same may hereafter be amended or supplemented, this "Loan Agreement"), between
the STATE INDUSTRIAL DEVELOPMENT AUTHORITY (the "Issuer"), a public corporation
organized under the laws of the State of Alabama (the "State"), as lender, and
SIMCALA, INC., a Delaware corporation qualified to transact business in and
pursuant to the laws of the State (the "Company") and THE INDUSTRIAL DEVELOPMENT
BOARD OF THE CITY OF MONTGOMERY, a public corporation organized under the laws
of the State (the "IDB"), as borrowers, their respective successors and assigns,
under the circumstances summarized in the following recitals (with capitalized
terms used but not defined therein having the meanings given to them in Article
1 hereof):
A. The Issuer will issue the Bonds pursuant to the Bond Resolution in
order to finance part of the costs of acquiring, constructing and equipping the
Project.
B. Pursuant to this Loan Agreement, the Issuer will make the Loan to
the Company and the Company will agree to make Loan Payments to or for the
account of the Issuer, as herein and in the Note provided, at such times and in
such amounts as shall be sufficient to pay when due Debt Service on or Purchase
Price of the Bonds.
C. Title to the Project is nominally vested in the IDB, but is leased
by the IDB to and used by the Company in accordance with the provisions of the
Lease Agreement. Pursuant to the Lease Agreement, and in furtherance of the
public purposes for which it was created under the IDB Act, the IDB shall join
in the execution and delivery of this Loan Agreement, the Note and the
Mortgages, essentially as an accommodation to the Company.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter contained, the parties to this Loan Agreement hereby formally
covenant, agree and bind themselves as follows:
<PAGE> 5
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. In addition to the words and terms
elsewhere defined in this Loan Agreement or by reference to another document,
unless the context or use clearly indicates another or different meaning or
intent:
"Act of Bankruptcy" means the filing of a petition in bankruptcy (or
other commencement of a bankruptcy or similar proceeding) by or against the
Company or by the Issuer, as debtor, under any applicable bankruptcy,
reorganization, insolvency or other similar law now or hereinafter in effect.
"Additional Payments" means the amounts required to be paid by the
Company pursuant to the provisions of Section 3.2 hereof.
"Affiliate" means, as to any specified Person, another Person that
directly, or indirectly, through one or more intermediaries, controls or is
controlled by, or is under common control with the specified Person.
"Alternate Credit Facility" means an irrevocable letter of credit, a
surety bond, an insurance policy or other credit facility delivered to the
Trustee pursuant to Section 5.4 of this Loan Agreement.
"Available Moneys" shall mean (a) original proceeds of the Bonds held
in any fund or account under the Indenture, together with investment earnings on
such proceeds, provided such proceeds are not furnished by, and do not come into
the possession of, the Company; (b) moneys paid by the Company to the Trustee
pursuant to this Loan Agreement, together with investment earnings on such
moneys, provided that, at the time of such payment and for a period of at least
123 days thereafter, there shall not have occurred any Act of Bankruptcy, as
evidenced by a certificate of the Company and the Issuer delivered to the
Trustee to that effect; provided such moneys need not have been on deposit for
123 days if the Company shall furnish to the Trustee, the Tender Agent and any
Rating Agency by which the Bonds shall then be rated an unqualified opinion of
counsel of national recognition experienced in bankruptcy matters, which opinion
shall be certified in writing by Moody's to be acceptable in form and content,
that payment of such moneys to the Holders would not constitute an avoidable
preference under Section 547 of the Federal Bankruptcy Code in the event of the
filing of a petition thereunder by or against the Company or by the Issuer; and
(c) moneys received by the Trustee from a draw under the Letter of Credit or
Alternate Credit Facility (provided such moneys are the Bank's own funds and are
not funds furnished by the Company), together with investment earnings on such
moneys.
"Bank" means Chemical Bank, New York, New York, and its successors and
assigns, as issuer of the Initial Letter of Credit, until such time, if any, as
a Substitute
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Letter of Credit or Alternate Credit Facility shall become effective pursuant to
Section 5.4 hereof, and thereafter "Bank" shall mean the issuer or provider of
such Substitute Letter of Credit or Alternate Credit Facility.
"Basic Rent" means that portion of the rentals payable under the Lease
Agreement in respect of Debt Service on or Purchase Price of the Bonds.
"Bond" or "Bonds" means the $6,000,000 Taxable Industrial Revenue Bonds
(SIMCALA, Inc. Project) Series 1995 of the Issuer issued and delivered under the
Bond Resolution and the Indenture.
"Bond Purchase Agreement" means the Bond Purchase Agreement, dated the
date of final pricing of the Bonds by the Original Purchaser, among the Issuer,
the Company and the Original Purchaser.
"Bond Resolution" means the resolution of the Issuer adopted January
11, 1995 authorizing the issuance of the Bonds and the execution and delivery of
the Issuer Documents, among other matters.
"Building" means, collectively, all structures and improvements now
existing or hereafter expanded, constructed, reconstructed or made on the
Realty, as they may at any time exist.
"Business Day" means any day other than (A) a Saturday or Sunday or (B)
a day on which commercial banks are required or authorized by law to close in
any of the following locations: (i) the city in which the Trustee's Office (as
defined in the Indenture) is located, (ii) the city in which the principal
office of the Remarketing Agent is located, (iii) the city in which the office
of the Bank at which drawings under the Letter of Credit are to be made is
located, or (iv) the City of New York, New York.
"Company Documents" means, individually or collectively, as the context
may require, each or all of this Loan Agreement, the Note, the Mortgages, the
Bond Purchase Agreement, the Reimbursement Agreement, the Lease Agreement and
such other documents or instruments as the Company may enter into in order to
consummate the transactions contemplated hereby and thereby.
"Completion Date" means the date of completion of the Project to be
established by the Company in accordance with Section 4.3 hereof.
"Construction Fund" means the fund created pursuant to the Lease
Agreement and described in Section 3.1 hereof.
"Debt Service" means, for any period or payable at any time, the
principal, interest and any premium due on the Bonds for that period or payable
at that time.
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"Department" means the Department of Revenue of the State.
"Equipment" means any items of equipment, fixtures and tangible
personal property located in or on the Building or the Realty and any item of
equipment, fixtures or tangible personal property acquired in substitution
therefor or as a renewal or replacement thereof pursuant to the provisions of
the Lease Agreement and the Mortgages.
"Event of Default" means an Event of Default specified and defined in
Section 6.1 hereof.
"Existing Letter of Credit" means, as of any particular time, the
Letter of Credit or Alternate Credit Facility held by the Trustee at that time.
"Extension Letter of Credit" means a Substitute Letter of Credit from
the same Bank which issued the Existing Letter of Credit, substantially
identical to the Existing Letter of Credit except that it has a Stated
Termination Date at least one year later than that of the Existing Letter of
Credit.
"First Mortgage" means the Real Estate Mortgage, Assignment of Lease
and Security Agreement of even date herewith from the Company and the IDB to the
guarantor of the Company's obligations to the Bank under the Reimbursement
Agreement, as the same may hereafter be amended or supplemented.
"Governmental Authority" means the United States, any state or
political subdivision thereof and any court, agency, department, commission,
board, bureau or instrumentality of any of the foregoing.
"Holder" means the Person in whose name a Bond is registered on the
books kept and maintained by the Registrar for the registration and transfer of
Bonds.
"IDB Act" means Article 4, Chapter 54, Title 11 of the Code of Alabama
of 1975, as amended.
"IDB Documents" means, individually or collectively, as the context may
require, each or all of this Loan Agreement, the Note, the Mortgages, the Lease
Agreement and such other documents or instruments as the IDB may enter into in
order to consummate the transactions contemplated hereby and thereby.
"Indenture" means the Trust Indenture of even date herewith between the
issuer and the Trustee, as the same may hereafter be amended or supplemented.
"Initial Letter of Credit" means the initial Letter of Credit in the
form attached to the Reimbursement Agreement as Schedule I and delivered to the
Trustee on or prior to the Issue Date.
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"Interest Payment Date," when used with respect to any installment of
interest on a Bond, means the date specified in such Bond as the fixed date on
which such installment of interest is due and payable, as more particularly
described in the Indenture.
"Interest Rate for Advances" means the rate per annum which is one
percent per annum in excess of that rate announced from time to time by the
Trustee as its "prime" or "base" rate.
"Issue Date" means the date of initial authentication and delivery of
the Bonds.
"Issuer Documents" means, individually or collectively, as the context
may require, each or all of this Loan Agreement, the Indenture, the Bond
Purchase Agreement and such other documents or instruments as the Issuer may
issue into in order to consummate the transactions contemplated hereby, thereby
and by the Bond Resolution.
"Lease Agreement" means the Consolidated, Amended and Restated Lease
Agreement of even date herewith between the IDB, as lessor, and the Company, as
lessee, as the same may hereafter be amended and supplemented.
"Letter of Credit" means the Initial Letter of Credit and, unless the
context or use indicates another or different meaning or intent, any Substitute
Letter of Credit.
"Loan" means the loan by the Issuer to the Company and the IDB of the
proceeds received from the sale of the Bonds to the Original Purchaser.
"Loan Payment Date" means the Business Day preceding (a) any date on
which any Debt Service on the Bonds shall be due and payable, whether at
maturity, upon acceleration, call for redemption or otherwise, or (b) any Tender
Date on which the Purchase Price of Bonds shall be due and payable.
"Loan Payments" means the amounts required to be paid by the Company in
repayment of the Loan pursuant to Section 3.1 hereof and the Note.
"Mandatory Tender" means a tender of Bonds required to be made by the
provisions of the Indenture.
"Mortgages" means any instrument conveying a mortgage on and/or
security interest in the Project or any part thereof or any rents, income and
profits therefrom, including without limitation the First Mortgage and the
Subordinated Mortgages.
"Necessary Authorizations" means, with respect to any given action or
effect, all authorizations, consents, approvals, permits, licenses and
exemptions of, filings and registrations with, and reports to, all Governmental
Authorities which are necessary or required to accomplish such action or achieve
such effect.
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"Note" means the promissory note of the Company and the IDB, dated the
Issue Date, in the form attached as Exhibit B to this Loan Agreement and in
principal amount equal to the aggregate principal amount of the Bonds,
evidencing the obligation of the Company to make Loan Payments.
"Optional Tender" means a tender of Bonds at the option of the Holder
thereof pursuant to the provisions of the Indenture.
"Original Purchaser" means, as to the Bonds, Merchant Capital, L.L.C.,
Montgomery, Alabama.
"Person" includes natural persons, firms, associations, partnerships,
trusts, corporations and public bodies.
"Preliminary Agreement" means the Preliminary Agreement dated September
12, 1994 between the Issuer and the Company.
"Project" means the Realty, the Building and the Equipment, to be
acquired, constructed, equipped, owned and operated by the Company pursuant to
the Lease Agreement and this Loan Agreement for use as silicon metal
manufacturing facilities or other purposes consistent with the provisions of the
IDB Act and the SIDA Act, as such Realty, Building and Equipment may at any time
exist.
"Project Costs" means costs of or relating to the Project which may be
paid (or the prior payment of which may be reimbursed) with proceeds of the
Bonds, including without limitation the following: (a) all costs related to the
acquisition of real and personal properties or any interest therein; (b) the
cost of labor, materials and supplies furnished or used in the construction,
installation, renovation or rehabilitation of buildings and structures; (c)
acquisition, transportation and installation costs for personal property and
fixtures; (d) fees for architectural, engineering, legal and supervisory
services, including any legal, accounting, underwriting and fiduciary fees and
expenses incurred by the Issuer or the Company in connection with the issuance
of the Bonds; (e) expenses incurred in the enforcement of any remedy against any
contractor, subcontractor, materialmen, vendor, supplier or surety; (f) interest
accruing on indebtedness incurred by the Issuer or the Company (including the
Bonds) in connection with the acquisition and construction of, or other work on,
the Project for the period ending 24 months after the date the Project is placed
in service; (g) fees for an appraisal of the Project; (h) costs of obtaining or
maintaining credit enhancement and/or liquidity facilities in respect of the
Bonds; and (i) insurance premiums and taxes incurred until the Project is (or
was) placed in service.
"Project Supervisor" means any employee or agent of the Company now or
hereafter authorized in writing, by the President or any Vice President of the
Company, to act in connection with matters pertaining to the Project pursuant to
the provisions hereof.
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"Purchase Price" means, with respect to any Bond tendered for purchase
by Optional Tender or Mandatory Tender, 100% of the principal amount thereof
plus accrued interest thereon, if any, from the last preceding Interest Payment
Date to the Tender Date.
"Rating Agency" means Moody's Investors Service, Inc. ("Moody's") or
Standard & Poor's Corporation ("S&P"), both of New York, New York, their
respective successors and assigns and any other nationally recognized securities
rating agency.
"Realty" means the real estate and interests therein constituting the
site of the Building, as described in Exhibit A hereto, less any such real
estate, interests in real estate and other rights as may be released from the
Lease Agreement and the Mortgages pursuant to the respective provisions thereof
or taken by the exercise of the power of eminent domain.
"Registrar" means the Trustee in its capacity as Registrar for the
Bonds under the Indenture.
"Reimbursement Agreement" means the Reimbursement Agreement of even
date herewith between the Company and the Bank, as issuer of the Initial Letter
of Credit, as the same may hereafter be amended or supplemented, or any
comparable agreement relating to a Substitute Letter of Credit or Alternate
Credit Facility.
"Related Documentation" means the documentation required to accompany a
Substitute Letter of Credit or Alternate Credit Facility in accordance with the
provisions of Section 5.4 of this Loan Agreement.
"Remarketing Agent" means the Remarketing Agent appointed in accordance
with Section 518 of the Indenture.
"Reserved Rights" means all of the rights of the Issuer to receive
Additional Payments or reimbursement pursuant to Section 3.2(a) hereof, to be
held harmless and indemnified pursuant to Section 5.2 hereof, to be reimbursed
for attorney's fees and expenses pursuant to Section 6.4 hereof, to receive
notices hereunder and to give or withhold consent to amendments, supplements,
modifications or termination of this Loan Agreement.
"SIDA Act" means Act No. 93-851 enacted at the 1993 First Special
Session of the Alabama Legislature, as amended.
"State" means the State of Alabama.
"Stated Termination Date" means the date on which the Letter of Credit
is stated to expire, which shall in each case be the 15th day of a calendar
month.
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"Subordinated Mortgages" means three separate subordinated Real Estate
Mortgages, Assignments of Lease and Security Agreements from the Company and the
IDB to subordinated creditors of the Company.
"Substitute Letter of Credit" means an irrevocable letter of credit
delivered to the Trustee in substitution for the Existing Letter of Credit, in
compliance with the requirements of Section 5.4 of this Loan Agreement and
accompanied by the Related Documentation.
"Tender Date" means any date on which Bonds are to be purchased
pursuant to an Optional Tender or a Mandatory Tender, as the case may be.
"Trustee" means the institution serving as such under the Indenture,
initially, First Alabama Bank, Montgomery, Alabama.
Section 1.2 Interpretation. Any reference herein to the Issuer or
to any member of the Board of Directors or officer thereof includes entities or
officials succeeding to their respective functions, duties or responsibilities
pursuant to or by operation of law or lawfully performing their functions.
Any reference to a section or provision of the Constitution of the
State or the SIDA Act, or to a section, provision or chapter of the Code of
Alabama of 1975 or to any statute of the United States of America, includes that
section, provision or chapter as amended, modified, revised, supplemented or
superseded from time to time, provided that no amendment, modification,
revision, supplement or superseding section, provision or chapter shall be
applicable solely by reason of this provision, if it constitutes in any way an
impairment of the rights or obligations of the Issuer, the Holders, the Trustee,
the Bank, the IDB or the Company under this Loan Agreement, the Note, the Bonds,
the Indenture, the Mortgages or any other instrument or document entered into in
connection with any of the foregoing, including without limitation, any
alteration of the obligation to pay Debt Service on or Purchase price of the
Bonds in the amount and manner, at the times, and from the sources provided in
the Bonds, except as permitted therein.
Unless the context indicates otherwise, words importing the singular
number include the plural number, and vice versa; the terms "hereof," "hereby,"
"herein," "hereto," "hereunder" and similar terms refer to this Loan Agreement,
and the term "hereafter" means after, and the term "heretofore" means before,
the effective date of this Loan Agreement, which shall be the Issue Date. Words
of any gender include the correlative words of the other genders, unless the
sense indicates otherwise.
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Section 1.3 Captions and Headings. The captions and headings in
this Loan Agreement are solely for convenience of reference and in no way
define, limit or describe the scope or intent of any Articles, Sections,
subsections, paragraphs, subparagraphs or clauses hereof.
[END OF ARTICLE I]
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ARTICLE II
REPRESENTATIONS AND COVENANTS
Section 2.1 Representations by the Issuer. The Issuer makes the
following representations as the basis for the undertakings on its part herein
contained:
(a) The Issuer is a public corporation organized under the
laws of the State. Under the provisions of the SIDA Act the Issuer has
the power to enter into and consummate the transactions contemplated by
the Issuer Documents and to carry out its obligations thereunder. By
proper action the Issuer has duly authorized the execution, delivery
and performance of the Issuer Documents and the Issuance of the Bonds.
(b) The execution, delivery and performance by the Issuer of
the Issuer Documents and the issuance of the Bonds are within the
Issuer's powers, and each such document, when executed and delivered,
will constitute a legal, valid and binding obligation of the issuer
enforceable against the Issuer in accordance with its terms, except as
enforcement thereof may be limited by applicable bankruptcy,
insolvency, moratorium, reorganization or similar laws affecting
creditors' rights generally and by the application of general
principles of equity.
(c) It will do all things in its power in order to maintain
its existence or assure the assumption of its obligations under the
Issuer Documents by any successor public body, as provided in the
Indenture.
Section 2.2 Representations and Covenants by the Company - General.
The Company represents and covenants that:
(a) It is a corporation duly organized and validly existing
under the laws of the State of Delaware and qualified to transact
business under the laws of the State.
(b) The execution, delivery and performance by the Company of
the Company Documents and the carrying out of the transactions
contemplated thereby are within the Company's corporate powers, have
been duly authorized by all necessary corporate action on the part of
the Company, and do not violate any provision of law, any order of any
court or other governmental agency, the Articles of Incorporation or
Bylaws of the Company, or any indenture, agreement or other instrument
to which the Company or any Affiliate of the Company is a party or by
which the Company or any Affiliate of the Company or any of its or
their properties or assets is bound, or conflict with, result in a
breach of or constitute (with due notice or lapse of time or both) a
default under, any such indenture, agreement or other instrument, or
result in the creation or imposition of any lien, charge or encumbrance
of any nature whatsoever upon any of the
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<PAGE> 14
properties or assets of the Company or any Affiliate of the Company
(other than the liens of the Mortgages).
(c) The Company has, to the best of its knowledge, obtained
and will use its reasonable efforts to maintain all Necessary
Authorizations for the acquisition, construction and equipping of the
Project, and has, to the best of its knowledge, obtained or will
promptly obtain and will use its reasonable efforts to maintain all
Necessary Authorizations for the operation of the Project and for the
due execution, delivery and performance by the Company of each of the
Company Documents. In particular, all building permits required for the
construction or renovation of the Building have been or will when and
as necessary be obtained and, once obtained, will be maintained in full
force and effect, and all utility services (including water supply,
storm and sanitary sewerage, electric and telephone facilities)
necessary for the construction or renovation and operation of the
Building for the intended purposes are or will be available.
(d) Each of the Company Documents, when executed and
delivered, will constitute a legal, valid and binding obligation of the
Company enforceable against the Company in accordance with its terms,
except as enforcement may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting
creditors' rights generally and by the application of general
principles of equity.
(e) There is no pending or, to the best of its knowledge,
threatened action, investigation or proceeding before any court,
governmental agency or arbitrator against or affecting the Company or
any Affiliate of the Company (i) in any way contesting or affecting the
Project, the validity of this Loan Agreement or any of the other
Company Documents, (ii) in any way contesting the existence or powers
of the Company as a limited liability company, or (iii) in any material
way affecting the ability of the Company to discharge its obligations
under any of the Company Documents.
Section 2.3 Representations and Covenants by the Company - SIDA Act.
(a) The Company expects that the Project will be used in a
trade or business described in SIC Code No. 3339 throughout the term of
the Bonds. If, in the future, there is a cessation of that operation,
the Company may in its discretion resume that operation or accomplish
an alternate use by the Company or others which will be consistent with
the SIDA Act and the IDB Act.
(b) Either (i) the average hourly wage for full-time hourly
wage paid employees at the Project will be at least $8.00 per hour or
(ii) average total compensation (including benefits) for full time paid
employees at the Project will be at least equivalent to $10.00 per
hour.
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(c) The Company expects and agrees to invest not less than
$6,000,000 on Project Costs on or before March 1, 1998.
(d) The Company expects to employ at least 130 full time new
employees at the Project within 18 months after the date that the
Project is placed in service by the Company. The Company has not laid
off any employees in the State during the two years preceding the Issue
Date. This term "new employees" includes only those individuals (i) who
have not previously been employed by the Company in the State; (ii)
will be employed at the Project; and (iii) will be subject to the
personal income tax imposed by Section 40-18-2 of the Code of Alabama
of 1975, as amended, upon commencement of employment by the Company at
the Project.
(e) The Company did not commence the acquisition or
construction of the Project prior to the date of the Preliminary
Agreement. For purposes of this paragraph, preliminary expenditures not
exceeding 10% of the total cost of the Project for items such as
architectural, engineering, surveying, soil testing, feasibility and
similar costs shall not be considered as the commencement of
acquisition or construction.
(f) The amount of Job Development Fees (as defined in the SIDA
Act) assessed by the Company and withheld from the gross wages of its
new employees at the Project shall not exceed the amount permitted by
the SIDA Act and the rules and regulations of the Issuer and the
Department in existence on the Issue Date.
(g) The Company has complied and will comply with all of the
provisions of the SIDA Act and the Issuer's rules and regulations
applicable to it.
Failure to comply with the representations and warranties contained in this
Section 2.3 shall not constitute an Event of Default under Section 6.1 hereof
but may constitute grounds for the reduction, suspension or denial by the
Department of the right to collect Job Development Fees and the credits against
corporate income taxes granted by the SIDA Act.
[END OF ARTICLE II]
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ARTICLE III
LOAN PROVISIONS
Section 3.1 Loan; Loan Payments.
(a) Simultaneously with the execution and delivery hereof, the
Issuer will issue the Bonds and will make the Loan by causing the
proceeds from the sale of the Bonds to be deposited with the Trustee
into the Construction Fund in the name of the IDB for the benefit of
the Company, in accordance with the provisions of the Lease Agreement
and the Indenture, in order (i) to reimburse the Company for any
amounts advanced by the Company to pay Project Costs subsequent to the
date of the Preliminary Agreement and (ii) to pay Project Costs. In
consideration of the Loan, the Company and the IDB shall, concurrently
with the issuance of the Bonds, execute and deliver the Note
(evidencing the obligation to make Loan Payments in respect of Debt
Service on or Purchase Price of the Bonds) to the Trustee, the First
Mortgage to the guarantor of the Company's obligations to the Bank
under the Reimbursement Agreement and the Subordinated Mortgages to
certain other creditors of the Company in respect of the Project.
(b) The Company shall make Loan Payments in repayment of the
Loan by 12:00 p.m. Montgomery, Alabama time on each Loan Payment Date,
in the amount necessary to pay the Debt Service on or Purchase Price of
the Bonds which is due and payable on that date. The IDB's obligations
under this Loan Agreement and the Note shall be limited solely to the
Basic Rent and any other revenues and receipts derived from the leasing
of the Project to the Company under the Lease Agreement (excluding,
however, any such revenues and receipts payable to the IDB as part of
its Unassigned Rights as therein defined).
(c) All Loan Payments shall be paid directly to the Trustee
for the account of the Issuer for application to the payment of Debt
Service on or Purchase Price of the Bonds or the reimbursement to the
Bank of amounts drawn under the Letter of Credit.
(d) Upon payment in full of the Debt Service on the Bonds,
whether at maturity or upon redemption or otherwise, the Note shall be
deemed fully paid, the obligations of the Company and the IDB
thereunder shall be terminated and the Note shall be surrendered by the
Trustee to the Company for cancellation.
Section 3.2 Additional Payments. (a) In further consideration of
the Loan by the Issuer, the Company covenants and agrees to pay as Additional
Payments hereunder the reasonable expenses of the Issuer Incurred at the request
of the Company, or in the performance of its duties under this Loan Agreement,
or in connection with any litigation which may at any time be instituted
involving the Project, this Loan Agreement or the Indenture, or in the pursuit
of any remedies under this Loan Agreement or the Indenture.
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<PAGE> 17
The Issuer reserves the right to adopt and impose an administrative fee to be
paid annually by the Company to the Issuer during the term of the Bonds (such
fee not to exceed 1/10th of 1% of the principal amount of such Bonds
outstanding) and the Company agrees to pay such administrative fee to the Issuer
if, as and when requested. The Company shall make such Additional Payments
within ten days after receipt of an invoice therefor.
(b) The Company covenants and agrees to pay as further
Additional Payments hereunder the fees, charges and expenses of the
Trustee and the other Fiduciaries (as defined in the Indenture) for
acting as such under the Indenture, as and when the same become due,
provided that the Company may, without creating a default hereunder,
contest in good faith the necessity for any extraordinary services or
extraordinary expenses and the reasonableness of any such fees, charges
or expenses. Following the payment or incurring of any such costs,
expenses or liabilities, such Additional Payments are payable by the
Company upon written demand therefor, and if not paid upon such demand
shall bear interest from the date of demand at the Interest Rate for
Advances.
Section 3.3 Obligations of Company Unconditional. The obligation
of the Company to pay the Loan Payments and to perform and observe the other
agreements and covenants on its part herein contained shall be absolute and
unconditional, irrespective of any rights of setoff, recoupment or counterclaim
it might otherwise have against the Issuer, the Trustee, the Bank or any other
Person. The Company will not suspend or discontinue such Loan Payments or fail
to perform and observe any of its other agreements and covenants contained
herein or terminate this Loan Agreement for any cause whatsoever, including,
without limiting the generality of the foregoing, failure to complete the
Project, any acts or circumstances that may constitute an eviction or
constructive eviction, failure of consideration or commercial frustration of
purpose, any damage to or destruction of the Project, the Invalidity of any
provision of this Loan Agreement, the taking by eminent domain of title to or
the right to temporary use of all or any of the Project, any change in the tax
or other laws of the United States of America or of the State or any political
subdivision thereof, or any failure of the Issuer to perform and observe any
agreement or covenant, whether express or implied, or any duty, liability or
obligation arising out of or connected with this Loan Agreement. Notwithstanding
the foregoing, the Company may, at its own cost and expense and in its own name
or in the name of the Issuer, prosecute or defend any action or proceeding, or
take any other action involving third persons which the Company deems reasonably
necessary, in order to secure or protect its rights of use and occupancy of the
Project and its other rights hereunder. Nothing contained herein shall be
construed to be a waiver of any rights which the Company may have against the
Issuer under this Loan Agreement or under any provision of law.
Section 3.4 Assignment of Loan Agreement. Except for Reserved
Rights, the Issuer has in the Indenture assigned all its right title and
interest in and to this Loan Agreement and the Loan Payments to the Trustee as
security for payment of the Debt Service and Purchase Price of the Bonds. The
Trustee shall have all rights and remedies
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<PAGE> 18
herein accorded to the Issuer (except for Reserved Rights), and any reference
herein to the Issuer shall be deemed, with the necessary changes in detail, to
include the Trustee, and the Trustee and any Holders are deemed to be third
party beneficiaries of the covenants and agreements of the Company herein
contained. The Company hereby agrees and consents to the Indenture.
[END OF ARTICLE III]
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<PAGE> 19
ARTICLE IV
PROVISIONS RESPECTING THE PROJECT
Section 4.1 Agreement to Complete Project. The Company will use
its reasonable efforts to cause the acquisition, construction and equipping of
the Project to be completed as soon as practicable in accordance with such plans
and specifications for the Project as the Company has caused to be prepared. The
Company may cause changes or amendments to be made in such plans and
specifications for the Project, provided no such change or amendment will alter
the character of the Project to such an extent that it ceases to be a "project"
under the SIDA Act or the IDB Act. The Issuer hereby authorizes and directs the
Company to requisition disbursements of amounts in the Construction Fund to pay
or reimburse the prior payment of Project Costs, all as more fully described in
Section 405 of the Indenture.
Section 4.2 No Warranty of Suitability by Issuer. The Company
recognizes that since any plans and specifications for the Project have been
prepared to its order, and that since the Equipment has been and is to be
selected by it, the Issuer can make no warranty, either express or implied, or
offer any assurances, that the Project will be suitable for the Company's
purposes or needs.
Section 4.3 Completion of the Project The Company shall notify
the Trustee and the Issuer of the Completion Date of the Project by a
certificate signed by a Project Supervisor stating, as appropriate: (1) the date
on which the acquisition, construction and equipping of the Project were
substantially completed (the "Completion Date"); (ii) that all other facilities
necessary in connection with the Project have been acquired, constructed,
improved and equipped; (iii) that the acquisition, construction, improvement and
equipping of the Project and those other facilities have been accomplished in
such a manner as to conform with all applicable zoning, planning, buildings,
environmental and other similar governmental regulations; (iv) that all costs of
that acquisition, construction, improvement and equipping then or theretofore
due and payable have been paid; and (v) the amounts (if any) of Project Costs
not yet due or of liabilities which the Company is contesting. Such certificate
may state that it is given without prejudice to any rights against third parties
which exist at the date of such certificate or which may subsequently come into
being.
[END OF ARTICLE IV]
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<PAGE> 20
ARTICLE V
ADDITIONAL AGREEMENTS AND COVENANTS
Section 5.1 General Covenants. The Company will not do or permit
anything to be done on or about the Project that will affect, impair or
contravene any policies of Insurance that may be carried on the Project or any
part thereof against loss or damage by fire, casualty or otherwise. The Company
will, in the use of the Project and the public ways abutting the same, comply
with all lawful requirements of all Governmental Authorities; provided, however,
the Company may, at its own expense and in good faith, contest the validity or
applicability of any such requirement
Section 5.2 Indemnification. To the extent permitted by law, the
Company agrees to indemnify the Issuer for, and hold it harmless against any
loss, liability or expense (including reasonable attorneys' fees) incurred
without negligence, bad faith or willful misconduct on its part, arising out of
or in connection with the issuance of the Bonds, the acceptance of its duties
and responsibilities under the Issuer Documents, or its performance or
observance of any agreement or covenant on its part to be observed or performed
under the Indenture or this Loan Agreement, including without limitation (i) the
offer and sale of the Bonds or a subsequent sale or distribution of any of the
Bonds and (ii) the exercise, or failure to exercise, any right, privilege or
power of the Issuer under the Issuer Documents. The covenant of indemnity by the
Company contained in this Section shall survive the termination of this Loan
Agreement.
Section 5.3 Compliance with Other Documents. The Company shall comply
and shall cause any lessee, licensee or invitee of the Project to comply with
the terms and provisions of the Lease Agreement, this Loan Agreement and the
Mortgages respecting the Project.
Section 5.4 Letter of Credit; Alternate Credit Facility.
(a) On or before the Issue Date, the Company shall cause to be
delivered to the Trustee the Initial Letter of Credit. The Company may
at any time and from time to time, but shall not be required to,
deliver a Substitute Letter of Credit to the Trustee in substitution
for the Existing Letter of Credit
(b) The Company shall give the Trustee at least 30 days' prior
written notice of its intention to deliver a Substitute Letter of
Credit not fewer than 21 days prior to the date on which such
Substitute Letter of Credit is proposed to be delivered, which date
shall be a Business Day, the Company shall deliver to the Trustee a
binding commitment for the issuance of such Substitute Letter of Credit
and the Related Documentation described in subsection (d)(i) of this
Section.
(c) Each Substitute Letter of Credit delivered to the Trustee
pursuant to this Section must meet the following criteria:
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<PAGE> 21
(i) if such Substitute Letter of Credit will be
effective during a Seven Day Rate Period (as defined in the
Indenture), such Substitute Letter of Credit shall be
substantially in the same form and of the same tenor as the
Initial Letter of Credit, including provision for the payment
of interest on the Bonds (or the interest portion of the
purchase price of Bonds tendered, or deemed tendered, for
purchase) for a period of 60 days at the maximum rate per
annum, specified in such Substitute Letter of Credit, at which
there has been calculated the amount available to be drawn
thereunder with respect to interest on the Bonds;
(ii) If such Substitute Letter of Credit will be
effective during a Yearly Fixed Rate Period or the Permanent
Fixed Rate Period (both as defined In the Indenture), such
Substitute Letter of Credit shall be substantially in the same
form and of the same tenor as the Initial Letter of Credit
except this such Substitute Letter of Credit must provide for
the payment of (A) interest on the Bonds (or the interest
portion of the purchase price of Bonds tendered, or deemed
tendered, for purchase) for a period of 210 days at the rate
per annum to be borne by the Bonds during such Yearly Fixed
Rate Period or Permanent Fixed Rate Period, plus (B) an amount
equal to 2% of the then principal amount of the Bonds, to
enable the Trustee to pay the redemption premium on the Bonds
in the event of the optional redemption thereof,
(iii) if such Substitute Letter of Credit is being
delivered in connection with a Letter of Credit Substitution
Date or with a conversion of the Interest rate borne by the
Bonds on a Conversion Date or Seven-Day Rate Recommencement
Date (all as defined in the Indenture), then the effective
date of such Substitute Letter of Credit shall be such Letter
of Credit Substitution Date, Conversion Date or Seven-Day Rate
Recommencement Date, as the case may be; and if such
Substitute Letter of Credit is being delivered in connection
with the Stated Termination Date of the Existing Letter of
Credit, then the effective date of such Substitute Letter of
Credit shall be the first Business Day of the calendar month
in which such Stated Termination Date is to occur, and
(iv) such Substitute Letter of Credit must have a
Stated Termination Date that is (A) the 15th day of a calendar
month and (B) not sooner than one year after its effective
date.
(d) Each Substitute Letter of Credit (other than any
Extension Letter of Credit) delivered to the Trustee must be
accompanied by the following Related Documentation, to the extent
applicable:
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<PAGE> 22
(i) written evidence from each Rating Agency that
maintains a rating with respect to the Bonds of (A) the fact
that such Rating Agency has reviewed the proposed Substitute
Letter of Credit (B) the rating or ratings, if any, assigned
or to be assigned by such Rating Agency to the Issuer of the
proposed Substitute Letter of Credit and (C) the rating or
ratings, if any, that such Rating Agency has assigned or would
assign to the Bonds by reason of the substitution;
(ii) an opinion of Bond Counsel to the effect that
such Substitute Letter of Credit is authorized by this Loan
Agreement and the Indenture; and
(iii) an opinion of counsel for the issuer of such
Substitute Letter of Credit to the effect that (A) such
Substitute Letter of Credit is a valid, binding and
enforceable obligation of the issuer thereof (B) use of the
proceeds of a drawing on such Substitute Letter of Credit to
pay Debt Service on the Bonds would not be avoidable as a
preferential payment under Section 547 of the Bankruptcy Code
recoverable under Section 550 thereof should the Company or
the Issuer become a debtor in a proceeding commenced
thereunder, and (C) the Substitute Letter of Credit and the
Bonds are not required to be registered under the Securities
Act of 1933, as amended, and the Indenture is not required to
be qualified under the Trust Indenture Act of 1939, as
amended.
(e) At the close of business on the effective date of any
Substitute Letter of Credit, the Trustee shall return the Existing
Letter or Credit to the issuer thereof, provided that any draws on such
Existing Letter of Credit made on or prior to such date have been
honored. Any draws that under the terms of the Indenture, are to be
made on the Letter of Credit on or prior to the effective date of a
Substitute Letter of Credit shall be made under the Existing Letter of
Credit not later than the close of business on the effective date of a
Substitute Letter of Credit, the Bank shall deliver to the Trustee
written evidence that all obligations of the Company to the issuer of
the Existing Letter of Credit for reimbursement of amounts drawn
thereunder shall have been satisfied, and upon receipt of such evidence
any Bank Bonds held by the Tender Agent (as both said terms are defined
in the Indenture) under the Indenture for the benefit of the issuer of
the Existing Letter of Credit shall be delivered to, or upon the order
of, the Company.
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<PAGE> 23
(f) The Company may, at its option, provide for the delivery
to the Trustee of an Alternate Credit Facility to supplement the Letter
of Credit or to provide credit enhancement In place of a Letter of
Credit. Any such Alternate Credit Facility shall be payable to the
Trustee for the benefit of the Holders of the Bonds and shall have
administrative provisions satisfactory to the Trustee. The
preconditions for delivery of an Alternate Credit Facility shall be
identical in substance to those detailed in this Section for delivery
of a Substitute Letter of Credit with such modifications, however, as
shall be appropriate to comport with the form and character of the
Alternate Credit Facility.
[END OF ARTICLE V]
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<PAGE> 24
ARTICLE VI
EVENTS OF DEFAULT AND REMEDIES
Section 6.1 Events of Default. Any one or more of the following
shall be an Event of Default under this Loan Agreement:
(a) Failure by the Company to pay when due any Loan Payment
or portion thereof.
(b) Failure by the Company to observe or perform any other
covenant, condition or agreement on its part to be observed or
performed and continuation of such failure for a period of 30 days
after receipt of notice thereof from the Trustee or the Issuer, or such
longer period as may be reasonably necessary to cure such default so
long as the Company is diligently pursuing such cure.
(c) The occurrence and continuation of an "Event of Default"
under and as defined in the Indenture or Reimbursement Agreement.
(d) Any representation or warranty made by the Company herein
(other than in Section 2.3 hereof) or in any document, certificate, or
other instrument furnished in connection with this Loan Agreement or
with the issuance and sale of the Bonds shall at any time prove to have
been false or misleading in any material respect as of the time made.
Section 6.2 Remedies on Default. Whenever any such Event of Default
shall have happened and be continuing, the Trustee, as assignee of the Issuer
and on its behalf, or (but only as to any Reserved Rights) the Issuer, may:
(a) declare all Loan Payments payable under this Loan
Agreement for the remainder of the term hereof to be immediately due
and payable;
(b) exercise any or all or any combination of the remedies
specified in the Indenture; or
(c) take whatever action at law or in equity may appear
necessary or desirable to collect the Loan Payments, Additional
Payments or other amounts then due hereunder, whether by declaration or
otherwise, or to enforce any obligation, covenant or agreement of the
Company under this Loan Agreement or arising by law.
The Issuer may, without consent of the Trustee, waive any Event of
Default hereunder with respect to Reserved Rights, and the Trustee may not,
without the written consent of the Issuer, waive any Event of Default hereunder
with respect to Reserved Rights.
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<PAGE> 25
The provisions of this Section are subject to the limitation that any
rescission by the Trustee, pursuant to Section 602 of the Indenture, of its
declaration that all of the Bonds are immediately due and payable also shall
constitute an annulment of any corresponding declaration made pursuant to
paragraph (a) of this Section and a waiver and rescission of the consequences of
that declaration and of the Event of Default with respect to which that
declaration had been made; provided that no such waiver or rescission shall
extend to or affect any subsequent or other default or impair any right
consequent thereon.
Section 6.3 No Remedy Exclusive. No remedy herein conferred upon
or reserved to the Issuer or the Trustee is intended to be exclusive of any
other available remedy or remedies, but each and every such remedy shall be
cumulative and shall be in addition to every other remedy given under this Loan
Agreement or any related document or now or hereafter existing at law or in
equity or by statute. No delay or omission to exercise any right or power
accruing upon any default shall impair any such right or power or shall be
construed to be a waiver thereof but any such right or power may be exercised
from time to time and as often as may be deemed expedient.
Section 6.4 Agreement to Pay Attorneys' Fees and Expenses. In the
event the Company should default under any of the provisions of this Loan
Agreement and the Issuer or the Trustee should employ attorneys or incur other
expenses for the collection of Loan Payments or other sums due under this Loan
Agreement or the enforcement of performance or observance of any obligation or
agreement on the part of the Company herein contained, the Company will on
demand therefor pay to the Issuer and the Trustee the reasonable fees of such
attorneys and such other expenses so incurred; and such amounts shall bear
interest at the Interest Rate for Advances from the date of demand to the date
of payment
Section 6.5 No Additional Waiver Implied by One Waiver. In the
event any agreement contained in this Loan Agreement should be breached by
either party and thereafter waived by the other party, such waiver shall be
limited to the particular breach so waived and shall not be deemed to waive any
other breach hereunder.
[END OF ARTICLE VI]
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<PAGE> 26
ARTICLE VII
MISCELLANEOUS
Section 7.1 Limitation of Issuer's Liability.
(a) The covenants and agreements contained in this Loan
Agreement shall never constitute or give rise to a personal or
pecuniary liability or charge against the general credit of the Issuer,
and in the event of a breach of any such covenant or agreement no
personal or pecuniary liability or charge payable directly or
indirectly from the general assets or revenues of the Issuer shall
arise therefrom. Nothing contained in this Section, however, shall
relieve the Issuer from the observance and performance of the covenants
and agreements on its part contained herein.
(b) Other than for willful or wanton acts: no recourse under
or upon any covenant or agreement of this Loan Agreement shall be had
against any past, present or future incorporator, officer or member of
the Board of Directors of the Issuer, or any of its servants, agents or
employees, or of any successor corporation, either directly or through
the Issuer, whether by virtue of any constitution, statute or rule of
law, or by the enforcement of any assessment or penalty or otherwise;
it being expressly understood that this Loan Agreement Is solely a
corporate obligation, and that no personal liability whatever shall
attach to, or is or shall be incurred by, any Incorporator, officer or
member of the Board of Directors of the Issuer or any successor
corporation, or any of them, under or by reason of the covenants or
agreements contained in this Loan Agreement
Section 7.2 Limitation of IDB's Liability.
(a) The covenants and agreements contained in this Loan
Agreement shall never constitute or give rise to a personal or
pecuniary liability or charge against the general credit of the IDB,
and in the event of a breach of any such covenant or agreement, no
personal or pecuniary liability or charge payable directly or
indirectly from the general assets or revenues of the IDB shall arise
therefrom. Nothing contained in this Section, however, shall relieve
the IDB from the observance and performance of the covenants and
agreements on its part contained herein.
(b) Other than for willful or wanton acts, no recourse under
or upon any covenant or agreement of this Loan Agreement shall be had
against any past, present or future incorporator, officer or member of
the Board of Directors of the IDB, or any of its servants, agents or
employees, or of any successor corporation, either directly or through
the IDB, whether by virtue of any constitution, statute or rule of law,
or by the enforcement of any assessment or penalty or otherwise; it
being expressly understood that this Loan Agreement is solely a
corporate
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<PAGE> 27
obligation, and that no personal liability whatever shall attach to, or
is or shall be incurred by, any incorporator, officer or member of the
Board of Directors of the IDB or any of its servants, agents or
employees, or any successor corporation, or any of them, under or by
reason of the covenants or agreements contained in this Loan Agreement.
Section 7.3 Execution Counterparts. This Loan Agreement may be
simultaneously executed in several counterparts, each of which shall be an
original and all of which shall constitute but one and the same instrument
Section 7.4 Binding Effect; Assignability. This Loan Agreement shall
inure to the benefit of, and shall be binding upon, the Issuer, the Company, the
IDB and their respective successors and assigns. This Loan Agreement is
assignable by the Company provided the Company remains primarily liable
hereunder and under the Note, but may not be assigned by the Issuer except to
the Trustee pursuant to the Indenture or as may otherwise be necessary to
enforce or secure payment of Debt Service on and Purchase Price of the Bonds.
Section 7.5 Amendments. So long as any of the Bonds are outstanding,
this Loan Agreement may be amended only in writing signed by the parties hereto
with the written consent of the Trustee and the Bank.
Section 7.6 Severability. In the event any provision of this Loan
Agreement shall be held invalid or unenforceable by any court of competent
jurisdiction, such provision shall be deemed severed herefrom and such holding
shall not invalidate or render unenforceable any other provision hereof.
Section 7.7 Notices. Unless otherwise provided herein, all notices,
certificates or other communications hereunder shall be sufficiently given and
shall be deemed given when delivered or mailed by first class mail, postage
prepaid, or overnight courier service, or sent by telegram, telex, telefax or
other instantaneous transmission device (with hard copy via first class mail or
overnight courier service), addressed as follows:
(a) If to the Issuer, at State Industrial Development
Authority, Alabama Center for Commerce, 401 Adams Avenue, Montgomery,
Alabama 36130, Attention: President, Telefax No. (334) 242-2414;
(b) If to the Trustee, at First Alabama Bank, Post Office Box
511 (zip 36101-0511), 8 Commerce Street (zip 36104), Montgomery,
Alabama, Attention: Bruce Rinehart, Telefax No. (334) 832-8560;
(c) If to the Company, (1) by mail or telegram, at c/o Capital
One Partners, 1111 Chester Avenue, Cleveland, Ohio 44114, Attention:
James M. Petras, Partner, and (ii) by Telefax, at (216) 781-0158; and
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<PAGE> 28
(d) If to the IDB, at The Industrial Development Board of the
City of Montgomery, Post Office Box 79, Montgomery, Alabama 36101,
Attention: Chairman of the Board of Directors, Telefax No.
(334) 265-4745.
Any of the foregoing parties may, by notice given hereunder, designate any
further or different addresses to which subsequent notices, certificates or
other communications shall be sent.
Section 7.8 Governing Law. This Loan Agreement shall be deemed to
be a contract made under the laws of the State and for all purposes shall be
governed by and construed in accordance with the laws of the State.
Section 7.9 Term of Loan Agreement. Unless sooner terminated in
accordance with the provisions hereof, this Loan Agreement will terminate on the
date of payment in full of the Debt Service on the Bonds, whether at maturity or
upon redemption or otherwise, provided (a) certain expenses (including
Additional Payments then due) shall have been paid or provided for and (b) the
covenant of the Company set forth in Section 5.2 hereof shall survive such
termination.
[END OF ARTICLE VII]
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<PAGE> 29
IN WITNESS WHEREOF, the Issuer, the Company and the IDS applicable,
caused this Loan Agreement to be executed in their respective names have caused
their respective seals to be hereunto affixed, and have caused this Loan
Agreement to be attested, all by their respective duly authorized officers, as
of the date first hereinabove stated.
STATE INDUSTRIAL DEVELOPMENT
AUTHORITY
(SEAL)
ATTEST: By: /s/
--------------------------------------
Its [Vice] President
/s/
- ---------------------------
Secretary
(SEAL) SIMCALA, INC.
ATTEST:
By: /s/
--------------------------------------
Name:
-------------------------------
/s/ Title:
- --------------------------- ------------------------------
Secretary
(SEAL) THE INDUSTRIAL DEVELOPMENT
BOARD OF THE CITY OF
MONTGOMERY
ATTEST:
/s/ By: /s/
- --------------------------- --------------------------------------
Its [Assistant] Secretary Chairman of the Board of Directors
-26-
<PAGE> 30
ACKNOWLEDGMENT OF ISSUER
STATE OF ALABAMA )
:
MONTGOMERY COUNTY )
I, the undersigned Notary Public in and for said County in said State,
hereby certify that Charles S. Snider, Jr., whose name as President of the State
Industrial Development Authority is signed to the foregoing Loan Agreement and
who is known to me and known to be such officer, acknowledged before me on this
day that, being informed of the contents of said Loan Agreement, he, as such
officer and with full authority, executed the same voluntarily for and as the
act of the Authority.
Given under my hand and official seal of office this 8th day of
February, 1995.
/s/
------------------------------------
Notary Public
My Commission Expires: 12-28/98
--------------
(SEAL)
-27-
<PAGE> 31
ACKNOWLEDGMENT OF COMPANY
STATE OF ALABAMA )
:
MONTGOMERY COUNTY )
I, the undersigned authority, a Notary Public in and for said County in
said State, hereby certify that James M. Petras, whose name as President of
SIMCALA, Inc., a Delaware corporation, is signed to the foregoing Loan Agreement
and who is known to me, acknowledged before me on this day that, being informed
of the contents of the Loan Agreement, he, as said officer and with full
authority, executed the same on behalf of said corporation on the day same bears
date.
Given under my hand and official seal of office this 9th day of
February, 1995.
/s/
------------------------------------
Notary Public
My Commission Expires: 11-30-96
(SEAL)
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<PAGE> 32
ACKNOWLEDGMENT OF IDB
STATE OF ALABAMA )
:
MONTGOMERY COUNTY )
I, the undersigned Notary Public in and for said County in said State,
hereby certify that R. E. Thornton, Jr., whose signature as the Chairman of the
Board of Directors of The Industrial Development Board of the City of Montgomery
is signed to the foregoing Loan Agreement and who is known to me and known to be
such officer, acknowledged before me on this day that being informed of the
contents of said Loan Agreement, he, as such officer and with full authority,
executed the same voluntarily for and as the act of said Board.
Given under my hand and seal of office this 8th day of February, 1995.
/s/
------------------------------------
Notary Public
My Commission Expires: Oct. 8, 1995
THIS INSTRUMENT WAS PREPARED BY:
Roy S. Goldfinger, Esq.
Kaufman & Rothfeder, P.C.
2740 Zelda Road, 3rd Floor
Post Office Drawer 4540
Montgomery, Alabama 36103-4540
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<PAGE> 33
EXHIBIT A
DESCRIPTION OF REALTY
PARCEL 1
Begin at the Southeast Comer of Section 5, T-16-N, R-20-E, Montgomery
County, Alabama; thence run along the South Line of said Section 5, S 87(degree)
05' 57' W, 1818.81 feet to a point, thence run N 01(degree) 53' 50" W, 1623.33
feet to an iron pin; thence run N 03(degree) 50' 08" E, 1038.55 feet to a
concrete monument lying on the North Line of the Southeast Quarter of said
Section; thence run N 87(degree) 34' 04" E, 1990.78 feet to a point at the
Northeast Corner of the Southeast Quarter of said Section 5; thence run along
the East Line of said Section, S 04(degree) 03' 41" W, 2657.77 feet to the point
of beginning.
Said described property lying and being situated in the Southeast
Quarter of Section 5, T-16-N, R-20-E, Montgomery County, Alabama, and contains
117.693 acres, more or less.
PARCEL 2
Begin at the Northeast Comer of the Southeast Quarter of Section 5,
T-16-N, R-20-E, Montgomery County, Alabama; thence run along the North Line of
the Southeast Quarter of Said Section, S 87(degree) 34' 04" W, 1990.78 feet to a
concrete monument;, thence continue, S 87(degree) 34' 04" W, 663.34 feet to a
concrete monument lying at the Northwest Comer of the Southeast Quarter of said
Section 5; thence run N 04(degree) 03' 41" E, 90.10 feet to a point lying on the
South right of way of CSX Railroad (100' ROW); thence run along said South right
of way, N 87(degree) 00' 00" E, 2657.34 feet to a point lying on the East Line
of said Section 5; thence run along said East Line, S 04(degree) 03' 41" W,
117.34 feet to the point of beginning.
Said described property lying and being situated in the Northeast Quarter of
Section 5, T-16-N, R-20-E, Montgomery County, Alabama, and contains 6.279 acres,
more or less.
PARCEL 3
Begin at a concrete monument at the Northwest Comer of the Southeast Quarter of
Section 5. T-16-N, R-20-E, Montgomery County, Alabama, thence run S 87(degree)
33' 07" W, 661.96 feet to an iron pin; thence run S 87(degree) 33' 21" W, 671.78
feet to an iron pin; thence run N 04(degree) 03' 41" E 76.74 feet to a point
lying on the South right of way of CSX Railroad; thence run along said South
right of way, N 87(degree) 00' 00" E, 1335.32 feet to a point, thence run S
04(degree) 03' 41" W, 90.10 feet to the point of beginning.
Said described parcel lying and being situated In the Northwest Quarter of
Section 5, T-16-N, R-20-E, Montgomery County, Alabama, and contains 2.487 acres,
more or less.
-30-
<PAGE> 34
EXHIBIT B
FORM OF NOTE
SIMCALA, Inc., a corporation duly organized and validly existing under
the laws of the State of Delaware and qualified to transact business under the
laws of the State of Alabama (the "Company"), and The Industrial Development
Board of the City of Montgomery, a public corporation organized under the laws
of the State of Alabama (the "IDB"), for value received, promise to pay (but in
the case of the IDB, solely from the sources hereinafter provided) to First
Alabama Bank, Montgomery, Alabama (the "Trustee") the principal sum of
SIX MILLION AND NO/100 DOLLARS ($6,000,000)
and to pay interest on the unpaid balance of such principal sum from and after
the date of execution and delivery hereof at the rate per annum from time to
time borne by the Bonds hereinafter defined until the payment of such principal
sum has been made or provided for.
This Note has been executed and delivered by the Company and the IDB to
the Trustee pursuant to, a certain Loan Agreement dated as of January 1, 1995
(the "Agreement") between the State Industrial Development Authority (the
"Issuer" and the Company and the IDB. Terms used but not defined herein shall
have the meanings given to them in the Agreement. Under the Agreement, the
Issuer has loaned the Company the principal proceeds received from the sale of
the Issuers $6,000,000 aggregate principal amount of Taxable Industrial Revenue
Bonds (SIMCALA, Inc. Project) Series 1995 (the "Bonds"') to assist in the
financing of the Project, and the Company has agreed to repay such loan by
making payments ("Loan Payments") at such times and in such amounts as shall be
sufficient to pay when due (whether at maturity or upon redemption or
acceleration) the principal of and interest on ("Debt Service") the Bonds and
the Purchase Price of Bonds due on any Tender Date. Pursuant to the Indenture,
the Issuer has assigned to the Trustee all its rights under the Agreement other
than the Reserved Rights.
All Loan Payments shall be payable in lawful money of the United States
of America and shall be made to the Trustee, for the account of the Issuer, and
applied by the Trustee to pay the Debt Service on or Purchase Price of the Bonds
as and when due or to reimburse the Bank for amounts drawn under the Letter of
Credit to pay such Debt Service or Purchase Price.
The obligation of the Company to make the Loan Payments shall be
absolute and unconditional and the Company shall make such payments without
abatement, diminution or deduction, regardless of any cause or circumstances
whatsoever, including without limitation any defense, set-off, recoupment or
counterclaim which the Company may have or assert against the Issuer, the Bank,
the Trustee, to IDS or any other person. The obligation of the IDS to make Loan
Payments under the Agreement and this Note is
-31-
<PAGE> 35
limited solely to the Basic Rent payable by the Company to the IDS under the
Lease Agreement and any other revenues and receipts derived from the leasing of
the Project under the Lease Agreement (excluding, however, any such revenues and
receipts payable to the IDS as part of its Unassigned Rights, as defined in the
Lease Agreement).
This Note shall be subject to prepayment prior to maturity at times and
in amounts corresponding to the redemption provisions of the Bonds. Any notice
or redemption of the Bonds shall be deemed to be a notice of prepayment of the
Note.
If an Event of Default occurs and is continuing under the terms of the
Agreement the principal of this Note and the interest accrued hereon may be
declared due and payable in the manner and with the effect provided in the
Agreement.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK]
-32-
<PAGE> 36
IN WITNESS WHEREOF, each of the Company and the IDB has caused this
Note to be executed in its name by its duly authorized officer, as of this ____
day of February, 1995.
SIMCALA, INC.
(SEAL) By:
-------------------------------------------
President
ATTEST:
- ---------------------------
Assistant Secretary
THE INDUSTRIAL DEVELOPMENT
BOARD OF THE CITY OF MONTGOMERY
(SEAL)
By:
-------------------------------------------
Chairman of the Board of Directors
ATTEST:
- ---------------------------
Its [Assistant] Secretary
-33-
<PAGE> 1
EXHIBIT 10.9
Certain portions of this exhibit have been deleted and
confidentially filed with the Securities and Exchange Commission pursuant to a
confidential treatment request under Rule 406 under the Securities Act of
1933, as amended. The confidential portions of the exhibit that have been
deleted are indicated by "[*****]" inserted in place of such confidential
information.
Contract for Electric Power
Rate HLF, Transmission Delivery
AGREEMENT made this ______ day of February, 1995, by and between
ALABAMA POWER COMPANY, hereinafter called the Company, and SIMCALA, INC., a
Delaware corporation, hereinafter called the Consumer.
IN CONSIDERATION of the mutual agreements hereinafter contained, IT IS AGREED:
FIRST: That during the term of five (5) years from the beginning of
service (not later than the 8th day of February, 1995), and thereafter until the
expiration of at least one (1) year written notice by either party to the other
party of its intention to terminate this agreement. The Company shall maintain
sufficient line and transformer capacity to enable it to sell and deliver
electric power to the Consumer at a delivery point in Montgomery County, Alabama
described a follows: The point of connection between the Company's 115,000 volt
conductors and the Consumer's 115,000 volt conductors at the Consumer's silicon
metal plant premises near Mt. Meigs.
Service provided shall be for a capacity of [****] kilowatts in the
form of three-phase alternating current at approximately sixty hertz, from the
Company's 110,000 volt Transmission line.
SECOND: The Consumer's capacity (KVA or KW) and energy (KWH) used by
the Consumer shall be measured by meters and instruments installed and owned by
the Company. The Consumer shall pay a charge based on capacity established and
energy used each month in accordance with the rate schedule attached hereto and
made a part hereof or the lawful rate schedule which may replace the same
pursuant to regulation by the Alabama Public Service Commission or its successor
in function. Unless otherwise expressly provided, the words "month" and
"monthly" as used herein and in the applicable rate schedule shall not mean or
refer to a calendar month, but shall mean and refer to the period between
consecutive meter readings. Meters will be read by the Company at appropriate
intervals to determine the Consumer's capacity and the amount of energy used for
billing in accordance with the applicable rate schedule.
[*] Confidential treatment requested
<PAGE> 2
THIRD: A bill for the service supplied hereunder shall be rendered by
the Company for each month, and, if not paid at the Company's office within ten
(10) days next succeeding the due date of such bill, the Company may, at any
time thereafter, upon five days' written notice, suspend service, and, if not
paid within another period of fifteen (15) days, the Company may, at its option,
treat this agreement as terminated, and at an end, whereupon all rights of the
Consumer hereunder shall cease. The Consumer shall make weekly advance payments
of an estimated one (1) week power bill, until such time as Consumer's credit is
approved by the Company. The Company may, at its discretion, allow the Consumer
to make advance payments on other terms, such as bimonthly, during the period
prior to approval of the Consumer's credit by the Company.
The Company may however, extend the time for paying any one or more
bills, or any part thereof, and its action in so doing, whether by taking note
of the Consumer or anyone else with or without security or merely extending the
time for paying such bill or bills, shall be without prejudice, and by so doing
the Company shall not be held or considered as waiving any of its rights
hereunder, including its right at its option, thereafter to suspend service
and/or to treat this agreement as terminated and at an end.
FOURTH: All transformers, lines, wiring, switches, apparatus,
appliances, materials and equipment essential to render service (hereinafter
"equipment") up to the delivery point described in Article FIRST hereof, and all
the Company's metering equipment wherever placed, shall be owned, maintained and
operated by the Company, and shall at all times be subject to its inspection,
repair, replacement or alteration, and removable at its option. The Consumer
shall supply and prepare without charge to the Company a suitable site or sites
for such transformer substation as may be needed and shall also supply, without
charge to the Company, suitable accommodations for the Company's metering
equipment. All equipment on the Consumer's side of said delivery point shall be
supplied, owned, maintained and operated by and at the expense of the Consumer
with a view of securing a power factor as near 90% lagging as may be deemed
satisfactory for the Company. The Consumer shall be responsible for the
maintenance, repair and replacement of all equipment located an the Consumer's
side of said delivery point, and the Consumer agrees to keep Company's equipment
safe and in good operating condition and the Company shall not be held liable
for accidents or injuries or damages of any kind due to the condition of the
Consumer's equipment and the operation, maintenance and repair and replacement
thereof.
The Company shall not be in any way responsible for the transmission or
control of said electric energy on the Consumer's side of said delivery point
and the Company shall not be liable on account of injuries to persons or damages
to property resulting in any manner from the receipt, use or application by the
Consumer of such electric energy. The Company may, however, refuse to render
service or may discontinue service at any time and from time to time if the
Consumer's equipment is hazardous, or if the operation of such equipment
adversely affects the safe and economical operation of the Company's system, or
if the operation of such equipment adversely affects service to other Consumers.
- 2 -
<PAGE> 3
Each party hereto shall use reasonable diligence not to damage the
electrical equipment of the other and each party hereto shall reimburse the
other party for any injury to employees of the other party or damage to the
electrical equipment of the other party resulting from defects in the operation
and maintenance of its own electrical equipment or resulting from its negligence
or that of its agents or employees, and each party hereto shall indemnify the
other party against liability for injury or damage suffered by third parties
from any such defects and/or negligence.
The Consumer shall allow the Company free access and entry to the
Consumer's properties and premises and the Consumer hereby agrees to convey to
the Company such rights of way for transmission lines and easements for such
transformer substations on, over, and across the Consumer's property and
premises as may be required for the purpose of rendering service to the Consumer
and to others who may be economically served from such transmission lines and
substations.
FIFTH: If at any time the Consumer desires to increase the capacity
required to be maintained by the Company pursuant to the provisions of Article
FIRST hereof, ninety days' written notice thereof shall be given to the Company,
and the Company shall then make the required increase subject to the
availability of equipment and to the rules, regulations and conditions under
which the Company may then be operating. Should the capacity herein required to
be maintained exceed the Consumer's maximum integrated fifteen-minute capacity
by 25% or more for a period of six consecutive months, the Company may upon
thirty (30) days' written notice, decrease the said required capacity to
approximately the amount of such maximum integrated fifteen-minute capacity,
subject to increase again only as above provided.
In the event the Consumer's maximum integrated fifteen-minute capacity
exceeds the capacity required to be maintained hereunder, the supplying of such
capacity by the Company shall not be deemed to constitute a waiver of the
aforesaid notice and the Consumer will reduce such maximum capacity to the
capacity stated in Article FIRST at any time upon written notice from the
Company and will thereafter keep within said capacity until increased as herein
provided. The Consumer shall be liable for all damages resulting to the Company
by reason of any such excess or excesses. The Company may interrupt the service
without notice at any time a momentary overload shall exceed said capacity by
more than 50%, but shall be under no duty to do so.
SIXTH: Electric energy furnished hereunder may be used by the Consumer
for lighting and other purposes incidental and necessary to the primary
operations of the Consumer. The Company, however, shall be under no duty or
obligation hereunder to render a reduced or regulated voltage suitable for such
lighting service or critical leads sensitive to voltage fluctuations. In the
event the voltage or the regulation of the energy furnished hereunder is found
by the Consumer to be unsatisfactory for such purposes, suitable voltage
regulating and transforming apparatus may be installed at the expense of the
Consumer.
- 3 -
<PAGE> 4
The Consumer agrees not to use any electric power at the premises
served hereby other than that furnished hereunder without the written consent of
the Company, and the Consumer further agrees not to sell or dispose of any power
furnished hereunder, or which may be generated directly or indirectly therefrom,
without the written consent of the Company.
SEVENTH: The obligations of the Company hereunder are dependent upon
its securing and retaining the necessary rights, easements, privileges,
franchises, permits and equipment and the Company shall not be liable to the
Consumer in the event it is delayed in the delivery of power or is prevented
from delivering the power herein provided for by its inability to secure and
retain such rights, easements, privileges, franchises, permits and equipment. In
the event the Company is delayed in delivering power from any of the above
causes, the time fixed for the commencement of the term of this Agreement shall
be extended for a period equal to such delay. If the delivery of electric power
is interrupted due to an act of God or nature, such as but not limited to, wind,
lightning, storms or flood, or from injunction or strike, or from riot or
invasion, or from fire or accident, or from breakdown or failure of its system
or from maintenance or repairs of its system, or temporarily from connecting new
customers or from interruption in an emergency threatening the integrity of its
system, or from any other cause reasonably beyond the Company's control, the
Company shall not be liable to the Consumer for such interruption but shall use
its best efforts to restore the service promptly. During such interruptions, the
Consumer shall have the right to use such other power as may be available,
provided that Company-owned facilities are not energized from another power
source.
The obligations of the Company under this agreement are subject to all
laws, rules and regulations under which the Company may from time to time be
operating and are further dependent upon and subject to the demands or
priorities of the United States Government and the State of Alabama, and the
Company shall not be obligated hereunder to continue the delivery of any
quantity of electric power in the event it is required to supply such power to
the United States Government or to the State of Alabama or to any person, firm,
corporation or governmental entity designated by the United States Government or
the State or Alabama.
In the event the Consumer shall make an assignment for the benefit of
the Consumer's creditors, or voluntary or involuntary proceedings in bankruptcy
are initiated seeking to adjudge the Consumer a bankrupt, or if the Consumer be
adjudged a bankrupt, or if the Consumer's affairs be placed in the hands of any
court for administration or if the Consumer shall fail to comply with the terms
hereof, this agreement shall, at the Company's Option, thereupon terminate and
be at an end.
EIGHTH: A waiver of one or more defaults by either party hereto shall
not be considered a waiver of any other or subsequent default by such party.
- 4 -
<PAGE> 5
NINTH: Before this agreement shall be binding upon the Company it must
be approved in writing and endorsed below by an authorized official of the
Company. All previous communications between the parties hereto, whether verbal
or written, with reference to the subject matter of this agreement are hereby
abrogated, and no modification hereof shall be binding unless it shall be in
writing duly accepted by the Consumer and approved by an authorized official of
the Company.
This agreement shall not be assigned by the Consumer without the
written consent of the Company.
TENTH: Article TENTH consisting of two (2) pages is attached to and
made a part of this contract. The information contained in this Article TENTH is
customer confidential and proprietary information.
ELEVENTH: This contract shall not become effective until it has been
filed with and approved by the Alabama Public Service Commission, whereupon it
will cancel and supersede the contract between the Company and Ohio Ferro-Alloys
Corporation dated February 3, 1987.
ALABAMA POWER COMPANY
SIMCALA, INC. By: /s/
- ------------------------------------ -------------------------------
Consumer Manager-Power Contracts
By: /s/
--------------------------------- Approved:
President ALABAMA POWER COMPANY
- ------------------------------------
Official Capacity
By: /s/
-------------------------------
Its: Vice President - Marketing
- 5 -
<PAGE> 6
CUSTOMER
CONFIDENTIAL
ARTICLE TENTH
INCREMENTAL ENERGY
Attached to and made a part of the Contract for Electric Power between Alabama
Power Company (hereinafter called "the Company") and Simcala, Inc. (hereinafter
called "the Consumer") dated ______________________________ . WHEREAS, by reason
of the Consumer's unusual operations and particularly since the Consumer can,
upon notice from the Company, reduce its electric load to a predetermined level
and is willing to do so, the Company agrees to supply Incremental Energy in lieu
of the HLF Capacity required to be maintained in Article FIRST of this Contract,
in accordance with the provisions set forth below.
(A) DEFINITIONS
(1) "Incremental Energy" or "IE" means that energy consumed by
the submerged arc furnaces. These loads are defined as electrothermal loads and
may be exempt by the State of Alabama Department of Revenue from certain state
utility taxes.
(2) "IE Capacity" means the capacity associated with
Incremental Energy (IE) and shall be the maximum Integrated fifteen (15) minute
capacity during each billing period measured in kilowatts (KW) by an appropriate
capacity meter, but not less than [****] KW.
(B) CHARGES: The charges for IE effective January 31, 1995 are as
follows: BILLING MONTHS OF JUNE THROUGH OCTOBER
10:00 A.M. - 9:00 P.M., Monday through Friday [****] cents/KWH
All other hours [****] cents/KWH
[*] Confidential treatment requested
<PAGE> 7
BILLING MONTHS OF NOVEMBER THROUGH MAY
7:00 A.M. - 9:00 P.M., Monday through Friday [****] cents/KWH
All other hours [****] cents/KWH
Charges for IE are subject to the provisions of the Company's Rate ECR (Energy
Cost Recovery), Rate RSE (Rate Stabilization and Equalization), Rate CNP
(Adjustment for Commercial Operation of Certified New Plant), Rate T (Tax
Adjustment) or its successor(s) in function.
(C) INTERRUPTION OF INCREMENTAL ENERGY SERVICE
The delivery of the IE Capacity shall be subject to suspension at the
Company's discretion, as set forth below. No credits are associated with the
suspension of the delivery of IE Capacity. Upon four (4) hour's advance notice
from the Company to the Consumer (except, however, in the event of an emergency
on the Company's system, the time specified in the notice shall be for such
shorter time period, as little as fifteen (15) minutes, as the emergency
circumstances may, in the Company's judgment, require), the delivery of IE shall
be subject to suspension for any period or periods of time, except as limited
hereinafter. Such notice may be either oral or written, but if given orally
shall be promptly confirmed in writing to the Consumer's representative
designated to receive such notices. Any continuous period during which the
deliver of IE is suspended is hereinafter referred to as a "Suspension Period."
The total time of Suspension Periods associated with IE shall not exceed eight
(8) hours per day nor six hundred (600) hours per calendar year. There shall be
only one (1) such Suspension Period per day, and no more than five (5) such
Suspension Periods during any week (Sunday through Saturday).
(D) The Consumer agrees that whenever the Company suspends delivery of
IE Capacity, it will reduce its load to 2,000 KW or to such lesser amount as the
Consumer, at its option, may desire.
[*] Confidential treatment requested
- 2 -
<PAGE> 8
(E) The Consumer shall pay a compliance incentive of [***] for each KW
of IE Capacity above 2,000 KW taken by the Consumer during each such Suspension
Period imposed during the term of this Contract.
(F) The MINIMUM BILL provisions of Rate HLF will apply to the IE
Capacity as defined in paragraph (A)(2) above.
[*] Confidential treatment requested.
- 3 -
<PAGE> 9
AMENDMENT NO. 1
TO THE
CONTRACT FOR ELECTRIC POWER
THIS AMENDMENT is entered into as of July 8, 1997, by and between
SIMCALA, INC., a Delaware corporation ("Customer"), and ALABAMA POWER COMPANY
("Company").
WHEREAS, the Company and the Customer have entered into a Contract for
Electric Power dated February 8, 1995 for electric service to the Customer's
silicon metal plant located near Mt. Meigs; and
WHEREAS, the Customer desires to change the Contract capacity
requirements of the plant to incorporate an additional furnace at the plant; and
WHEREAS, the Company is willing to make such changes under the terms
and conditions set forth below:
NOW THEREFORE, in consideration of the premises and the mutual
covenants of the parties, the parties agree as follows:
1. As of the effective date set forth above, the Capacity
references in Article FIRST and TENTH of the Contract shall be
revised by deleting the reference to [****] KW and
substituting [****] KW.
Except as modified by this Amendment No. 1, all terms and conditions of the
Contract shall remain in full force and effect.
WHEREFORE, each of the parties has executed this Amendment as of the
effective date hereof by its duly authorized representatives.
SIMCALA, INC. ALABAMA POWER COMPANY
By: /s/ By: /s/
-------------------------------- ------------------------------
Its: Pres/CEO Its: VP - Marketing
-------------------------------- -------------------------------
[*] Confidential treatment requested
<PAGE> 1
EXHIBIT 10.10
Certain portions of this exhibit have been deleted and confidentially
filed with the Securities and Exchange Commission pursuant to a confidential
treatment request under Rule 406 under the Securities Act of 1933, as amended.
The confidential portions of the exhibit that have been deleted are indicted by
"[*****]" inserted in place of such confidential information.
SUPPLY AGREEMENT
1. CONTRACT DURATION: This Agreement shall be effective January 1, 1997
and continue for a period of three years through December 31, 1999 and
year to year thereafter unless canceled by either party upon 180 days
written notice prior to the expiry of the initial term or any renewal
thereof.
2. Simcala, Inc. agrees to sell and Alcan agrees to buy effective January
1, 1997 [********************************************] of silicon metal
per year. This tonnage [**********************************************]
for Alcan Sebree. Shipments will be in approximately equal monthly
increments. One month prior to the start of each quarter, the Alcan and
Simcala representatives [**********************************************
***********************************************************************
**********************************************************************]
one month prior to the start of each quarter.
3. Shipping terms: [*********************]
4. Pricing:
The first quarter 1997 price will be [****]/pound of [*******] silicon
metal. [**************************************************************
********************************************]. Simcala and Alcan will
exchange non-confidential market information to facilitate the pricing
process.
5. Quality: [****************************************************]
Specification:
[**
** ****
** ****
** ****
** ****
** ****
** ****]
[**********************************************************************
*********************************************]
[*********************************************************]
Shipments in bulk truckload quantities.
[*] Confidential treatment requested
<PAGE> 2
Reference the attached Alcan General Purchasing Specification for
silicon metal - GP-S-3 Rev. #2, effective 4/30/96.
6. Terms: [***************************************************]
7. Above pricing will cover shipments [**********************************
**************************************************************].
8. Asset Disposal: Should Alcan dispose of any of their plants with their
demands for silicon covered by this Supply Agreement both Alcan and
Simcala agrees to meet to discuss the affected volume. Once an
agreement is reached on the volume, an amendment to the Supply
Agreement will be issued in writing. If no agreement is reached within
90 days of such asset disposal, an automatic adjustment of the volume
equivalent to the average of the last 9 month releases to the Company,
the assets of which have been disposed of by Alcan, will be applied to
the monthly releases under this Agreement, for the remaining term of
it.
9. All and any silicon metal purchased through this contract will be for
Alcan's consumption within the United States or any other Alcan
location outside the United States, this latter case however only after
mutual agreement confirmed in writing by Simcala.
10. Any resale of silicon metal out of this contract is not permitted.
11. Warranties and Claims: Seller warrants that (a) the Product sold
hereunder will conform to the description herein set forth, within the
tolerances of Buyer's specification as described herein; (b) such
Product will not be defective in material or workmanship; (c) the title
to such Product which Seller will convey to Buyer will be good and
marketable; (d) the transfer of such Product by Seller to Buyer will be
rightful and (e) such Product will be delivered free from any security
interest or other lien or encumbrance created by, or otherwise arising
out of acts or omissions of Seller. In the event of a breach of any
warranty by Seller given hereby as to the Product herein. Seller will
be notified thereof by Buyer promptly after discovery thereof and in
any event within 90 days after receipt of such Product by Buyer or in
case of any breach which cannot reasonably be detected by Buyer within
10 days after such detection, and in any event within one year after
receipt of such Product by Buyer. If such breach has occurred, and such
timely notice has been given, Seller will, at Buyer's option, repair or
replace such Product or refund or appropriately adjust the purchase
price thereof, or, in the case of a
[*] Confidential treatment requested
- 2 -
<PAGE> 3
breach in warranties (c), (d), or (e) above, take other appropriate
action to remedy such breach; disposition of such Product to be
repaired or replaced or as to which a refund is to be made shall be
pursuant to Buyer's directions and at Seller's expense, Seller will be
given a reasonable opportunity to investigate all claims and Buyer will
cooperate in any such investigation.
12. Fairness Clause: If for any reason beyond the control of the parties,
economic circumstances, including the introduction of any future sales
and/or added value taxes in the United States, change in such a way the
execution of this Agreement or any part thereof would cause undue
hardship to either one or both of the parties, or unduly favor one to
the detriment of the other, the parties shall consult with each other
to find a mutually acceptable and equitable solution with respect
thereto.
In the event within ninety days of a claim of hardship of either party,
no solution will be agreed to, this agreement can be canceled within a
term of further 180 days.
13. Severability of Terms: This Agreement and every provision hereof shall
be deemed to be severable, and in the event that any Article,
Paragraph, or Provision hereby is invalid or illegal, or in the event
any Article, Paragraph or Provision hereof shall be construed as
preventing the formation of a valid binding contract between the
parties to this Agreement, any such Article, Paragraph or Provision
shall be deemed to be stricken from this Agreement, and the remainder
of this Agreement shall continue to be in full force and effect as
though such Article, Paragraph or Provision was not contained in this
Agreement.
14. Assignment: This Agreement shall not be assignable, as to assignment of
rights and/or delegation of duties, in whole or in part by either party
or by operation of law in any matter whatsoever (including but not
limited to voluntary or involuntary bankruptcy, receivership,
dissolution, liquidation or death) without the other party's prior
written consent which shall not be unreasonably withheld, but otherwise
shall be binding upon and shall inure to the benefit of the parties,
their representatives, successors and assigns.
15. Force Majure: Neither Alcan nor Simcala shall be liable for any delay
or failure in fulfilling their obligations under this Agreement in case
such delay or failure is caused by strike or other labor dispute, acts
or laws of federal, state, or local governments, war, civil
insurrection, Acts of God, or any other reason not subject to Alcan's
or Simcala's reasonable control which cannot be prevented or overcome
by the reasonable diligence or action of Alcan or Simcala.
16. Additional Terms: This Agreement together with Alcan's "Conditions of
Order", a copy of which is on the reverse side of Alcan's Purchase
Order, constitute the entire agreement between the parties for the
Product.
- 3 -
<PAGE> 4
All and any of the conditions of this Agreement supersede Alcan's
"Conditions of Order" where conflicts exist.
No other terms shall be valid unless in writing and signed by the
parties hereto.
17. Applicable Law: This Agreement shall be governed as to all matters
affecting its validity, construction or performance by the laws of
Ohio.
Executed as of August 3, 1997.
SIMCALA, INC. BY: /s/
---------------------------------
ALCAN ALUMINUM LTD. BY: /s/
---------------------------------
- 4 -
<PAGE> 1
EXHIBIT 10.11
Certain portions of this exhibit have been deleted and confidentially
filed with the Securities and Exchange Commission pursuant to a confidential
treatment request under Rule 406 under the Securities Act of 1933, as amended.
The confidential portions of the exhibit that have been deleted are indicated
by "[*****]" inserted in place of such confidential information.
SILICON METAL PURCHASE AGREEMENT
ITEM: [********************] Silicon Metal
[*************************]
[***************]
Size: [*****************************]
Shipped in bulk truckload quantities
DURATION: Jan. 1, 1997-Dec. 31, 1998
QUANTITY: A) [*****] tons/month [***********] distributed as:
[***] tons [************]
[*****] tons [***********************]
B) As less [**********] is generated, tonnage lost is
converted to additional [*********] tons
TERMS: [********************************************
***************************************************]
Review [********************************] (if needed)
PRICE: [*****************] is [**] cents/pound.
Price [***************************************************
********************************************************
********************************************************
********************************************************]
end of the contract. The Wabash price [**********************
*************].
[******************] is [***] cents/pound for 1997.
Price for 1998 [*********].
CANCEL: Must be written with six (6) month's advance notice.
/s/ 12/10/96
- --------------------------------- ---------------------------------
Wabash Alloys Date
/s/ 12/15/96
- --------------------------------- ---------------------------------
SIMCALA Date
[*] Confidential treatment requested
<PAGE> 1
EXHIBIT 10.12
Certain portions of this exhibit have been deleted and confidentially
filed with the Securities and Exchange Commission pursuant to a confidential
treatment request under Rule 406 under the Securities Act of 1933, as amended.
The confidential portions of the exhibit that have been deleted are indicated
by "[*****]" inserted in place of such confidential information.
SILICON METAL PURCHASE AGREEMENT
ITEM: [******] Silicon Metal
Size: [*************************************]
Shipped in bulk truckload quantities
DURATION: Jan. 1, 1997-Dec. 31, 1998
QUANTITY: A) [*******] silicon available as generated
[*****************************]
Delivery schedule to match [***] as generated
B) As less [******] is generated, tonnage lost is
converted to additional [*********] tons
TERMS: [******************************************
*******************************************]
Review [******************************] (if needed)
PRICE: [******] silicon having a content of up to [**********]
priced at [***************************] silicon
[*******************************************]
on the shipment invoice
The Wabash price [*****************************]
CANCEL: Must be written with six (6) month's advance notice
/s/ 12/10/96
- --------------------------------- ---------------------------------
Wabash Alloys Date
/s/ 12/15/96
- --------------------------------- ---------------------------------
SIMCALA Date
[*] Confidential treatment requested
<PAGE> 1
EXHIBIT 10.13
EMPLOYMENT AND
CONFIDENTIALITY AGREEMENT
THIS EMPLOYMENT AND CONFIDENTIALITY AGREEMENT (this "Agreement") is
made February 10, 1998, between SAC ACQUISITION CORP., a Georgia corporation
(the "Company"), and DWIGHT L. GOFF, a resident of the State of Alabama
("Executive").
BACKGROUND
On the date of this Agreement and pursuant to that certain Stock
Purchase Agreement (the "Stock Purchase Agreement") dated February 10, 1998 by
and among the Company, the Executive, Simcala, Inc., a Delaware corporation (the
"Target"), Charter Oak Partners, Capital One Investors, Carl Edward Boardwine,
R. Myles Cowan, and George W. Rapp, Jr., the Company has agreed to acquire all
of the capital stock of the Target. Executive is an employee of the Target, and,
subject to the consummation of the transactions contemplated under the Stock
Purchase Agreement, the Company desires to cause Target to employ the Executive
in the capacities and on the terms and conditions set forth below. Executive
desires to accept employment on the terms and conditions set forth below.
AGREEMENT
NOW, THEREFORE, for and in consideration of the employment and
continued employment of Executive by Target, the premises, and the mutual
agreements hereinafter set forth, the parties agree as follows:
1. Definitions. The following terms used herein shall have the
definitions set forth below:
(a) "Affiliate" means any person or entity directly or
indirectly controlling, controlled by, or under common control with another
person.
(b) "Area" means the territorial United States.
(c) "Business" or "Business of the Company" means the business
of the manufacture, production, development, sale, and distribution of silicon
metals.
(d) "Cause" means (i) conduct amounting to fraud or dishonesty
against the Target or any subsidiary or Affiliate of the Target; (ii)
Executive's intentional misconduct or repeated refusal to follow the reasonable
directions of the Board of Directors of the Target, provided an officer of the
Target, upon the direction of the Board of Directors, notifies Executive of the
acts deemed to constitute such intentional misconduct or repeated refusal in
writing and Executive fails to correct such acts (or
<PAGE> 2
begins such action as may be necessary to correct such acts and thereafter
diligently pursues the completion thereof) within five (5) business days after
written notice has been given; (iii) repeated absences from work without a
reasonable excuse, (iv) repeated intoxication with alcohol or drugs while on
Target business during regular business hours; (v) a conviction or plea of
guilty or nolo contendere to a felony (other than one arising from the operation
of a motor vehicle or resulting from actions taken (or not taken) by Executive
in good faith in his capacity as an employee or officer of the Target; or (vi) a
breach or violation by the Executive of any material terms of this Agreement or
any other agreement to which Executive and the Target are a party.
(e) "Competing Enterprise" means any person or any business
organization of whatever form, engaged directly or indirectly within the Area in
the Business of the Company.
(f) "Disability" means (i) the inability of Executive to
perform the duties of Executive's employment due to physical or emotional
incapacity or illness, where such inability is expected to be of long-continued
and indefinite duration, or (ii) Executive shall be entitled to (x) disability
retirement benefits under the federal Social Security Act or (y) recover
benefits under any long-term disability plan or policy maintained by the
Company. In the event of a dispute, the determination of Disability shall be
made reasonably by the Board of Directors of the Target and shall be supported
by advice of a physician competent in the area to which such Disability relates.
(g) "Effective Date of Termination" means the later of the
last day on which Executive performs any duties of his employment as a full-time
employee of the Target hereunder or the effective date of the termination of
Executive's employment hereunder specified in any notice of termination of such
employment given by the Target as permitted herein.
(h) "Excluded Information" means any data or information that
is a Trade Secret hereunder (i) that has been voluntarily disclosed to the
public by the Target or any Affiliate thereof or has become generally known to
the public (except where such public disclosure has been made by or through
Executive or by a third person or entity with the knowledge of Executive without
authorization by the Target); (ii) that has been independently developed and
disclosed by parties other than Executive or the Target or any Affiliate thereof
to Executive or to the public generally without a breach of any obligation of
confidentiality by any such person running directly or indirectly to the Target
or any Affiliate thereof; or (iii) that otherwise enters the public domain
through lawful means.
(i) "Subsidiary" means any subsidiary of the Company.
(j) "Trade Secrets" means information which derives economic
value, actual or potential, from not being generally known and not being readily
ascertainable to other persons who can obtain economic value from its disclosure
or use and which is the
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<PAGE> 3
subject of efforts that are reasonable under the circumstances to maintain its
secrecy or confidentiality. Trade Secrets may include either technical or
non-technical data, including without limitation, (i) any useful process,
machine, chemical formula, composition of matter, or other device which (A) is
new or which Executive has a reasonable basis to believe may be new, (B) is
being used or studied by the Target or any Affiliate thereof and is not
described in a printed patent or in any literature already published and
distributed externally by the Target or any Affiliate thereof, and (C) is not
readily ascertainable from inspection of a product of the Target or any
Affiliate thereof; (ii) any engineering, technical, or product specifications
including those features used in any current product of the Target or any
Affiliate thereof or to be used, or the use of which is contemplated, in a
future product of the Target or any Affiliate thereof; (iii) any application,
operating system, communication system, or other computer software (whether in
source or object code) and all flow charts, algorithms, coding sheets, routines,
subroutines, compilers, assemblers, design concepts, test data, documentation,
or manuals related thereto, whether or not copyrighted, patented or patentable,
related to or used in the Business of the Target or any Affiliate thereof; or
(iv) information concerning the customers, suppliers, products, pricing
strategies of the Target or any Affiliate thereof, personnel assignments and
policies of the Target, or matters concerning the financial affairs and
management of the Target or any Affiliate thereof; provided however, that Trade
Secrets shall not include any Excluded Information.
2. Terms of Engagement; Duties
(a) Effective as of the date of the closing of the
transactions contemplated by the Agreement (the "Closing Date"), Target employs
Executive as Executive Vice President of Target. In such capacity Executive
shall report to the President of Target, and shall perform such duties and
responsibilities relating to the Business of Target as may be assigned or
delegated to him from time to time by the Board of Directors of Target or its
designee.
(b) Executive accepts such employment and agrees to:
(i) devote substantially all of Executive's
effort, time, energy, and skill (reasonable
vacations and reasonable absences due to
illness excepted) during regular business
hours to the duties of his employment
hereunder;
(ii) faithfully, loyally, and industriously
perform such duties, subject to the
supervision of the Board of Directors of
Target; and
(iii) diligently follow and implement all lawful
management policies and decisions of Target
that are communicated to Executive.
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<PAGE> 4
(c) During the Term of this Agreement, Executive shall not
engage (whether or not during normal business hours) in any other business or
professional activity, whether or not such activity is pursued for gain, profit
or other pecuniary advantage; but this shall not be construed as preventing
Executive from (i) investing his personal assets in businesses which do not
compete with the Business of the Company or any Affiliate thereof in such form
or manner as will not require any services on the part of Executive in the
operation or the affairs of the entities in which such investments are made and
in which his participation is solely that of an investor, or (ii) purchasing
securities in any corporation whose securities are regularly traded on a
national securities exchange, provided that such purchase does not result in
Executive collectively owning beneficially at any time five (5%) percent or more
of the voting securities of any Competing Enterprise or any Affiliate thereof.
3. Compensation.
(a) In consideration of the services rendered by Executive
pursuant to this Agreement, Target shall pay to Executive a base salary of One
Hundred Thousand Dollars ($100,000) per annum (the "Base Salary"), which Base
Salary will be reviewed periodically and may be increased by Target from time to
time. The Base Salary shall be paid in accordance with Target's standard payroll
practices in effect from time to time. All amounts payable to Executive
hereunder shall be subject to such deductions and withholdings as are required
by law or by policies of Target.
(b) Executive shall be eligible to receive an annual bonus in
the amount of up to 65% of the Base Salary then being paid to Executive,
pursuant to an executive incentive plan to be established by Target's Board of
Directors. The award and payment of any such bonus, and the amount thereof if
awarded and paid, shall be calculated as follows: fifty (50%) percent of the
award shall be based upon EBITDA of the Target. During the first three years of
the Term, and in the event EBITDA of the Target is equal to or greater than Ten
Million Dollars, such fifty percent amount of the award shall be pro-rated on an
increasing sliding scale from 0% to 100% of this portion between an EBITDA of at
least $9,999,999.00 (whereupon none of the 50% bonus shall be awarded) and a
maximum of $13,000,000.00 (whereupon all of the 50% bonus shall be awarded). In
subsequent years of the Term, the Target's Board of Directors shall determine in
its sole discretion the targeted EBITDA for such fifty (50%) percent portion of
the Bonus. The remaining 50% of the bonus shall be awarded and paid in the sole
discretion of the Board of Directors of Target.
(c) Executive shall also have the right to participate in any
medical, hospitalization, dental, disability income, life or other similar
insurance plans maintained by Target from time to time to the extent that
Executive's position, tenure, salary, age, health and other qualifications make
him eligible to participate, and such other fringe benefits as are provided to
the other senior management employees of Target, provided that Target shall not
be required to adopt or continue any insurance plans or fringe benefit plans.
- 4 -
<PAGE> 5
(d) Target shall reimburse Executive for all reasonable
business expenses incurred by Executive in connection with the business of the
Company subject to compliance with the expense reimbursement policies
established by Target and in sufficient detail to comply with Internal Revenue
Service Regulations.
(e) Except for stock incentive awards which may be granted
from time to time to Executive, the remuneration and benefits set forth in this
Section 3 shall be the only compensation payable to Executive with respect to
his employment hereunder, and Executive shall not be entitled to receive any
compensation in addition to that set forth in this Section 3 or under such stock
incentive awards for any services rendered by him in any capacity to Target, the
Company or any Affiliate thereof unless agreed to in writing by the Company,
Target, or such Affiliate thereof.
4. Term and Termination of this Agreement. The term of employment of
Executive (the "Term") pursuant to this Agreement shall commence on the Closing
Date and shall continue for a term of five (5) years from the Closing Date.
(a) Executive's employment hereunder shall be terminated
during the Term upon the death or Disability of Executive.
(b) Executive's employment hereunder may be terminated during
the Term by Target (i) with Cause at any time, and (ii) without Cause upon
thirty (30) days written notice to Executive, provided that Executive shall
immediately cease the performance of his duties hereunder if Target shall so
request following the date of such notice. In the event Executive's employment
is terminated without Cause, whether pursuant to this Agreement or following the
termination or expiration of the Term of this Agreement, Target shall pay to
Executive, as severance pay hereunder, an amount equal to the annual Base Salary
paid to Executive at the Effective Date of Termination, which amount shall be
paid in twelve (12) substantially equal monthly installments (less such
deductions and withholdings as are required by law or the policies of Target)
commencing with the first day of the calendar month next following.
(c) Upon termination of Executive's employment hereunder
pursuant to subsection 4(a) or for Cause pursuant to subsection 4(b), or upon
voluntary termination by Executive of Executive's employment hereunder, Target
shall have no further obligation to Executive or his personal representative
with respect to remuneration due under this Agreement, except for Base Salary
earned but unpaid at the Effective Date of Termination and, in the case of
termination of employment under subsection 4(a), a pro rata portion (based on
the number of days of the fiscal year of Target in which such termination
occurred during which this Agreement was in effect) of the bonus, if any,
payable under Section 3(b) with respect to such fiscal year. Payment of such
bonus, if any, shall be made at such time as similar bonuses are paid to other
executives of Target with respect to such fiscal year.
- 5 -
<PAGE> 6
(d) If Executive's employment hereunder is terminated during
the Term by Target without Cause pursuant to subsection 4(b), Target shall have
no obligation to Employee with respect to renumeration due under this Agreement
or such termination other than (i) Base Salary earned but unpaid at the
Effective Date of Termination, and (ii) a pro rata portion (based on the number
of days of the fiscal year of Target in which the Effective Date of Termination
occurred during which this Agreement was in effect) of the bonus, if any,
payable under Section 3(b) with respect to such fiscal year, and (iii) the
severance pay described in subsection 4(b). Payment pursuant to clause (ii) of
the preceding sentence shall be made when such bonuses are paid to other
executive officers receiving bonus payments with respect to such fiscal year.
(e) Notwithstanding anything to the contrary expressed or
implied herein, the covenants and agreements of Executive in Sections 5 and 6 of
this Agreement shall survive the termination of Executive's employment
hereunder.
5. Ownership, Non-Disclosure, and Non-Use of Trade Secrets.
(a) Executive acknowledges and agrees that all Trade Secrets,
and all physical embodiments thereof, are confidential to and shall be and
remain the sole and exclusive property of the Company and any Affiliate thereof
and that any Trade Secrets produced by Executive during the period of
Executive's employment by the Company shall be considered "work for hire" as
such term is defined in 17 U.S.C. Section 101, the ownership and copyright of
which shall be vested solely in Target. Executive agrees (i) immediately to
disclose to Target all Trade Secrets developed in whole or part by Executive
during the Term of Executive's employment by Target, and (ii) at the request and
expense of Target, to do all things and sign all documents or instruments
reasonably necessary in the opinion of Target to eliminate any ambiguity as to
the rights of Target in such Trade Secrets including, without limitation,
providing to Target Executive's full cooperation in any litigation or other
proceeding to establish, protect, or obtain such rights. Upon request by Target,
and in any event upon termination of Executive's employment by Target for any
reason, Executive shall promptly deliver to Target all property belonging to
Target or any of its Affiliates, including, without limitation, all Trade
Secrets (and all embodiments thereof) then in Executive's custody, control, or
possession.
(b) Executive agrees that all Trade Secrets of Target or any
Affiliate thereof received or developed by Executive as a result of Executive's
employment with Target will be held in trust and strictest confidence, that
Executive will protect such Trade Secrets from disclosure, and that Executive
will make no use of such Trade Secrets, except in connection with Executive's
employment hereunder, without Target's prior written consent. The obligations of
confidentiality contained in this Agreement will apply during Executive's
employment by Target and (i) with respect to all Trade Secrets consisting of
scientific or technical data, at any and all times after expiration or
termination (for whatever reason) of such employment; and (ii) with respect to
all other Trade Secrets,
- 6 -
<PAGE> 7
for a period of five (5) years after such expiration or termination, unless a
longer period of protection is provided by law.
6. Non-Compete: Non-Solicitation Covenants.
(a) In consideration of the amounts to be paid to Executive
hereunder, Executive covenants that Executive shall, during the Term of this
Agreement, and (i) for one (1) year following the termination or expiration of
the Term of this Agreement or Executive's employment hereunder, or (ii) for one
(1) year following the termination of Executive's employment with the Target
without Cause (whether such employment is under this Agreement or not), observe
the following separate and independent covenants:
(i) Neither Executive nor any Affiliate will,
without the prior written consent of the
Company, within the Area, either directly or
indirectly, (A) become financially
interested in a Competing Enterprise (other
than as a holder of less than five percent
(5%) of the outstanding voting securities of
any entity whose voting securities are
listed on a national securities exchange or
quoted by the National Association of
Securities Dealers, Inc. National Market
System), or, (B) engage in or be employed by
any Competing Enterprise as an executive or
managerial employee.
(ii) Neither Executive nor any Affiliate will,
without the prior written consent of Target,
either directly or indirectly, on
Executive's own behalf or in the service or
on behalf of others, solicit, divert, or
appropriate, or attempt to solicit, divert,
or appropriate, to any Competing Enterprise
within the Area, any person or entity that
was a customer of Target during the Term of
this Agreement who was solicited or serviced
as such by or under the supervision of
Executive.
(iii) Neither Executive nor any Affiliate will,
without Target's prior written consent,
either directly or indirectly, on
Executive's own behalf or in the service or
on behalf of others, solicit, divert, or
hire away, or attempt to solicit, divert, or
hire away, to any Competing Enterprise, any
person employed by Target or one of its
Affiliates, whether or not such employee is
a full-time or a temporary employee of
Target or such Affiliate and whether or not
such employment is pursuant to written
agreement and whether or not such employment
is at will.
7. Remedies. Executive acknowledges and agrees that Target is engaged
in the Business of Target in and throughout the Area, that by virtue of the
training, duties,
- 7 -
<PAGE> 8
and responsibilities attendant with Executive's employment by Target and the
special knowledge of the Business and operations of Target that Executive will
have as a consequence of Executive's employment by Target, great loss and
irreparable damage would be suffered by Target if Executive should breach or
violate any of the terms or provisions of the covenants and agreements set forth
herein, and that by virtue of Executive's senior management position with Target
Executive has been and will be throughout the Term of this Agreement directly
and indirectly involved in servicing the accounts of Target's customer.
Executive further acknowledges and agrees that each such covenant and agreement
is reasonably necessary to protect and preserve the interest of Target.
Therefore, in addition to all the remedies provided at law or in equity,
Executive agrees and consents that Target shall be entitled to a temporary
restraining order and a permanent injunction to prevent a breach or threatened
breach of any of the covenants or agreements of Executive contained herein. The
existence of any claim, demand, action or cause of action of Executive against
Target shall not constitute a defense to the enforcement by Target of any of the
covenants or agreements herein whether predicated upon this Agreement or
otherwise, and shall not constitute a defense to the enforcement by Target of
any of its rights hereunder.
8. General Provisions.
(a) In the event that any one or more of the provisions, or
parts of any provisions, contained in the Agreement shall for any reason be held
to be invalid, illegal, or unenforceable in any respect by a court of competent
jurisdiction, the same shall not invalidate or otherwise affect any other
provision hereof, and this Agreement shall be construed as if such invalid,
illegal, or unenforceable provision had never been contained herein.
Specifically, but without limiting the foregoing in any way, each of the
covenants of the parties to this Agreement contained herein shall be deemed and
shall be construed as a separate and independent covenant and should any part or
provision of any of such covenants be held or declared invalid by any court of
competent jurisdiction, such invalidity shall in no way render invalid or
unenforceable any other part or provision thereof or any other covenant of the
parties not held or declared invalid.
(b) This Agreement and the rights and obligations of Target
hereunder may be assigned by the Company to any Subsidiary or to any successor
to Target, and shall inure to the benefit of, shall be binding upon, and shall
be enforceable by any such assignee, provided that any such assignee shall agree
to assume and be bound by this Agreement. This Agreement and the rights and
obligations of Executive hereunder may not be assigned by Executive.
(c) The waiver by Target of any breach of this Agreement by
Executive shall not be effective unless in writing, and no such waiver shall
operate or be construed as a waiver of the same or another breach on a
subsequent occasion.
(d) This Agreement and the rights of the parties hereunder
shall be governed by and construed in accordance with the laws of the State of
Georgia.
- 8 -
<PAGE> 9
(e) This Agreement shall automatically terminate upon the
termination of the Stock Purchase Agreement pursuant to Article 11 thereof. Upon
the termination of this Agreement pursuant to the preceding sentence, this
Agreement shall forthwith become null and void, and no party hereto shall have
any rights, liabilities or obligations hereunder or with respect hereto. This
Agreement embodies the entire agreement of the parties relating to the
employment of Executive by Target. No amendment or modification of this
Agreement shall be valid or binding upon Target or Executive unless made in
writing and signed by the parties. All prior understandings and agreements
relating to the employment of Executive by Target are hereby expressly
terminated, including, without limitation, that certain Employment Agreement
with Executive dated February 9, 1995.
(f) Any notice, request, demand, or other communication
required to be given hereunder shall be made in writing and shall be deemed to
have been fully given if personally delivered or if mailed by overnight delivery
(the date on which such notice, request, demand, or other communication is
received shall be the date of delivery) to the parties at the following
addresses (or at such other addresses as shall be given in writing by any party
to the other party hereto):
If to Executive:
Dwight L. Goff
1665 Minnie Knight Road
Titus, Alabama 36080
If to Company:
SAC Acquisition Corp.
c/o CGW Southeast Partners III, L.P.
Suite 210
Twelve Piedmont Center
Atlanta, Georgia 30305
Telephone: (404) 816-3255
Telecopy: (404) 816-3258
- 9 -
<PAGE> 10
with a copy (which shall not constitute notice) to:
Alston & Bird
One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309-3424
Attention: Teri L. McMahon, Esq.
Telephone: (404) 881-7266
Telecopy: (404) 881-7777
(g) This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, and it shall not
be necessary for the same counterpart of this agreement to be signed by all of
the undersigned in order for the agreements set forth herein to be binding upon
all of the undersigned in accordance with the terms hereof.
IN WITNESS WHEREOF, the Company and Executive have each executed and
delivered this Agreement as of the date first above written.
COMPANY:
SAC ACQUISITION CORP.
By:/s/ William A. Davies
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
EXECUTIVE:
/s/ Dwight L. Goff (SEAL)
--------------------------------------
Dwight L. Goff
- 10 -
<PAGE> 1
EXHIBIT 10.14
EMPLOYMENT AND
CONFIDENTIALITY AGREEMENT
THIS EMPLOYMENT AND CONFIDENTIALITY AGREEMENT (this "Agreement") is
made February 10, 1998, between SAC ACQUISITION CORP., a Georgia corporation
(the "Company"), and R. MYLES COWAN, a resident of the State of Alabama
("Executive").
BACKGROUND
On the date of this Agreement and pursuant to that certain Stock
Purchase Agreement (the "Stock Purchase Agreement") dated February 10, 1998 by
and among the Company, the Executive, Simcala, Inc., a Delaware corporation (the
"Target"), Charter Oak Partners, Capital One Investors, Carl Edward Boardwine,
Dwight L. Goff, and George W. Rapp, Jr., the Company has agreed to acquire all
of the capital stock of the Target. Executive is an employee of the Target, and,
subject to the consummation of the transactions contemplated under the Stock
Purchase Agreement, the Company desires to cause Target to employ the Executive
in the capacities and on the terms and conditions set forth below. Executive
desires to accept employment on the terms and conditions set forth below.
AGREEMENT
NOW, THEREFORE, for and in consideration of the employment and
continued employment of Executive by Target, the premises, and the mutual
agreements hereinafter set forth, the parties agree as follows:
1. Definitions. The following terms used herein shall have the
definitions set forth below:
(a) "Affiliate" means any person or entity directly or
indirectly controlling, controlled by, or under common control with another
person.
(b) "Area" means the territorial United States.
(c) "Business" or "Business of the Company" means the business
of the manufacture, production, development, sale, and distribution of silicon
metals.
(d) "Cause" means (i) conduct amounting to fraud or dishonesty
against the Target or any subsidiary or Affiliate of the Target; (ii)
Executive's intentional misconduct or repeated refusal to follow the reasonable
directions of the Board of Directors of the Target, provided an officer of the
Target, upon the direction of the Board of Directors, notifies Executive of the
acts deemed to constitute such intentional misconduct or repeated refusal in
writing and Executive fails to correct such acts (or
<PAGE> 2
begins such action as may be necessary to correct such acts and thereafter
diligently pursues the completion thereof) within five (5) business days after
written notice has been given; (iii) repeated absences from work without a
reasonable excuse, (iv) repeated intoxication with alcohol or drugs while on
Target business during regular business hours; (v) a conviction or plea of
guilty or nolo contendere to a felony (other than one arising from the operation
of a motor vehicle or resulting from actions taken (or not taken) by Executive
in good faith in his capacity as an employee or officer of the Target; or (vi) a
breach or violation by the Executive of any material terms of this Agreement or
any other agreement to which Executive and the Target are a party.
(e) "Competing Enterprise" means any person or any business
organization of whatever form, engaged directly or indirectly within the Area in
the Business of the Company.
(f) "Disability" means (i) the inability of Executive to
perform the duties of Executive's employment due to physical or emotional
incapacity or illness, where such inability is expected to be of long-continued
and indefinite duration, or (ii) Executive shall be entitled to (x) disability
retirement benefits under the federal Social Security Act or (y) recover
benefits under any long-term disability plan or policy maintained by the
Company. In the event of a dispute, the determination of Disability shall be
made reasonably by the Board of Directors of the Target and shall be supported
by advice of a physician competent in the area to which such Disability relates.
(g) "Effective Date of Termination" means the later of the
last day on which Executive performs any duties of his employment as a full-time
employee of the Target hereunder or the effective date of the termination of
Executive's employment hereunder specified in any notice of termination of such
employment given by the Target as permitted herein.
(h) "Excluded Information" means any data or information that
is a Trade Secret hereunder (i) that has been voluntarily disclosed to the
public by the Target or any Affiliate thereof or has become generally known to
the public (except where such public disclosure has been made by or through
Executive or by a third person or entity with the knowledge of Executive without
authorization by the Target); (ii) that has been independently developed and
disclosed by parties other than Executive or the Target or any Affiliate thereof
to Executive or to the public generally without a breach of any obligation of
confidentiality by any such person running directly or indirectly to the Target
or any Affiliate thereof; or (iii) that otherwise enters the public domain
through lawful means.
(i) "Subsidiary" means any subsidiary of the Company.
(j) "Trade Secrets" means information which derives economic
value, actual or potential, from not being generally known and not being readily
ascertainable to other persons who can obtain economic value from its disclosure
or use and which is the
- 2 -
<PAGE> 3
subject of efforts that are reasonable under the circumstances to maintain its
secrecy or confidentiality. Trade Secrets may include either technical or
non-technical data, including without limitation, (i) any useful process,
machine, chemical formula, composition of matter, or other device which (A) is
new or which Executive has a reasonable basis to believe may be new, (B) is
being used or studied by the Target or any Affiliate thereof and is not
described in a printed patent or in any literature already published and
distributed externally by the Target or any Affiliate thereof, and (C) is not
readily ascertainable from inspection of a product of the Target or any
Affiliate thereof; (ii) any engineering, technical, or product specifications
including those features used in any current product of the Target or any
Affiliate thereof or to be used, or the use of which is contemplated, in a
future product of the Target or any Affiliate thereof; (iii) any application,
operating system, communication system, or other computer software (whether in
source or object code) and all flow charts, algorithms, coding sheets, routines,
subroutines, compilers, assemblers, design concepts, test data, documentation,
or manuals related thereto, whether or not copyrighted, patented or patentable,
related to or used in the Business of the Target or any Affiliate thereof; or
(iv) information concerning the customers, suppliers, products, pricing
strategies of the Target or any Affiliate thereof, personnel assignments and
policies of the Target, or matters concerning the financial affairs and
management of the Target or any Affiliate thereof; provided however, that Trade
Secrets shall not include any Excluded Information.
2. Terms of Engagement; Duties
(a) Effective as of the date of the closing of the
transactions contemplated by the Agreement (the "Closing Date"), Target employs
Executive as Chief Financial Officer of Target. In such capacity Executive shall
report to the President of Target, and shall perform such duties and
responsibilities relating to the Business of Target as may be assigned or
delegated to him from time to time by the Board of Directors of Target or its
designee.
(b) Executive accepts such employment and agrees to:
(i) devote substantially all of Executive's
effort, time, energy, and skill (reasonable
vacations and reasonable absences due to
illness excepted) during regular business
hours to the duties of his employment
hereunder;
(ii) faithfully, loyally, and industriously
perform such duties, subject to the
supervision of the Board of Directors of
Target; and
(iii) diligently follow and implement all lawful
management policies and decisions of Target
that are communicated to Executive.
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<PAGE> 4
(c) During the Term of this Agreement, Executive shall not
engage (whether or not during normal business hours) in any other business or
professional activity, whether or not such activity is pursued for gain, profit
or other pecuniary advantage; but this shall not be construed as preventing
Executive from (i) investing his personal assets in businesses which do not
compete with the Business of the Company or any Affiliate thereof in such form
or manner as will not require any services on the part of Executive in the
operation or the affairs of the entities in which such investments are made and
in which his participation is solely that of an investor, or (ii) purchasing
securities in any corporation whose securities are regularly traded on a
national securities exchange, provided that such purchase does not result in
Executive collectively owning beneficially at any time five (5%) percent or more
of the voting securities of any Competing Enterprise or any Affiliate thereof.
3. Compensation.
(a) In consideration of the services rendered by Executive
pursuant to this Agreement, Target shall pay to Executive a base salary of
Ninety Thousand Dollars ($90,000) per annum (the "Base Salary"), which Base
Salary will be reviewed periodically and may be increased by Target from time to
time. The Base Salary shall be paid in accordance with Target's standard payroll
practices in effect from time to time. All amounts payable to Executive
hereunder shall be subject to such deductions and withholdings as are required
by law or by policies of Target.
(b) Executive shall be eligible to receive an annual bonus in
the amount of up to 65% of the Base Salary then being paid to Executive,
pursuant to an executive incentive plan to be established by Target's Board of
Directors. The award and payment of any such bonus, and the amount thereof if
awarded and paid, shall be calculated as follows: fifty (50%) percent of the
award shall be based upon EBITDA of the Target. During the first three years of
the Term, and in the event EBITDA of the Target is equal to or greater than Ten
Million Dollars, such fifty percent amount of the award shall be pro-rated on an
increasing sliding scale from 0% to 100% of this portion between an EBITDA of at
least $9,999,999.00 (whereupon none of the 50% bonus shall be awarded) and a
maximum of $13,000,000.00 (whereupon all of the 50% bonus shall be awarded). In
subsequent years of the Term, the Target's Board of Directors shall determine in
its sole discretion the targeted EBITDA for such fifty (50%) percent portion of
the Bonus. The remaining 50% of the bonus shall be awarded and paid in the sole
discretion of the Board of Directors of Target.
(c) Executive shall also have the right to participate in any
medical, hospitalization, dental, disability income, life or other similar
insurance plans maintained by Target from time to time to the extent that
Executive's position, tenure, salary, age, health and other qualifications make
him eligible to participate, and such other fringe benefits as are provided to
the other senior management employees of Target, provided that Target shall not
be required to adopt or continue any insurance plans or fringe benefit plans.
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<PAGE> 5
(d) Target shall reimburse Executive for all reasonable
business expenses incurred by Executive in connection with the business of the
Company subject to compliance with the expense reimbursement policies
established by Target and in sufficient detail to comply with Internal Revenue
Service Regulations.
(e) Except for stock incentive awards which may be granted
from time to time to Executive, the remuneration and benefits set forth in this
Section 3 shall be the only compensation payable to Executive with respect to
his employment hereunder, and Executive shall not be entitled to receive any
compensation in addition to that set forth in this Section 3 or under such stock
incentive awards for any services rendered by him in any capacity to Target, the
Company or any Affiliate thereof unless agreed to in writing by the Company,
Target, or such Affiliate thereof.
4. Term and Termination of this Agreement. The term of employment of
Executive (the "Term") pursuant to this Agreement shall commence on the Closing
Date and shall continue for a term of five (5) years from the Closing Date.
(a) Executive's employment hereunder shall be terminated
during the Term upon the death or Disability of Executive.
(b) Executive's employment hereunder may be terminated during
the Term by Target (i) with Cause at any time, and (ii) without Cause upon
thirty (30) days written notice to Executive, provided that Executive shall
immediately cease the performance of his duties hereunder if Target shall so
request following the date of such notice. In the event Executive's employment
is terminated without Cause, whether pursuant to this Agreement or following the
termination or expiration of the Term of this Agreement, Target shall pay to
Executive, as severance pay hereunder, an amount equal to the annual Base Salary
paid to Executive at the Effective Date of Termination, which amount shall be
paid in twelve (12) substantially equal monthly installments (less such
deductions and withholdings as are required by law or the policies of Target)
commencing with the first day of the calendar month next following.
(c) Upon termination of Executive's employment hereunder
pursuant to subsection 4(a) or for Cause pursuant to subsection 4(b), or upon
voluntary termination by Executive of Executive's employment hereunder, Target
shall have no further obligation to Executive or his personal representative
with respect to remuneration due under this Agreement, except for Base Salary
earned but unpaid at the Effective Date of Termination and, in the case of
termination of employment under subsection 4(a), a pro rata portion (based on
the number of days of the fiscal year of Target in which such termination
occurred during which this Agreement was in effect) of the bonus, if any,
payable under Section 3(b) with respect to such fiscal year. Payment of such
bonus, if any, shall be made at such time as similar bonuses are paid to other
executives of Target with respect to such fiscal year.
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<PAGE> 6
(d) If Executive's employment hereunder is terminated during
the Term by Target without Cause pursuant to subsection 4(b), Target shall have
no obligation to Employee with respect to renumeration due under this Agreement
or such termination other than (i) Base Salary earned but unpaid at the
Effective Date of Termination, and (ii) a pro rata portion (based on the number
of days of the fiscal year of Target in which the Effective Date of Termination
occurred during which this Agreement was in effect) of the bonus, if any,
payable under Section 3(b) with respect to such fiscal year, and (iii) the
severance pay described in subsection 4(b). Payment pursuant to clause (ii) of
the preceding sentence shall be made when such bonuses are paid to other
executive officers receiving bonus payments with respect to such fiscal year.
(e) Notwithstanding anything to the contrary expressed or
implied herein, the covenants and agreements of Executive in Sections 5 and 6 of
this Agreement shall survive the termination of Executive's employment
hereunder.
5. Ownership, Non-Disclosure, and Non-Use of Trade Secrets.
(a) Executive acknowledges and agrees that all Trade Secrets,
and all physical embodiments thereof, are confidential to and shall be and
remain the sole and exclusive property of the Company and any Affiliate thereof
and that any Trade Secrets produced by Executive during the period of
Executive's employment by the Company shall be considered "work for hire" as
such term is defined in 17 U.S.C. Section 101, the ownership and copyright of
which shall be vested solely in Target. Executive agrees (i) immediately to
disclose to Target all Trade Secrets developed in whole or part by Executive
during the Term of Executive's employment by Target, and (ii) at the request and
expense of Target, to do all things and sign all documents or instruments
reasonably necessary in the opinion of Target to eliminate any ambiguity as to
the rights of Target in such Trade Secrets including, without limitation,
providing to Target Executive's full cooperation in any litigation or other
proceeding to establish, protect, or obtain such rights. Upon request by Target,
and in any event upon termination of Executive's employment by Target for any
reason, Executive shall promptly deliver to Target all property belonging to
Target or any of its Affiliates, including, without limitation, all Trade
Secrets (and all embodiments thereof) then in Executive's custody, control, or
possession.
(b) Executive agrees that all Trade Secrets of Target or any
Affiliate thereof received or developed by Executive as a result of Executive's
employment with Target will be held in trust and strictest confidence, that
Executive will protect such Trade Secrets from disclosure, and that Executive
will make no use of such Trade Secrets, except in connection with Executive's
employment hereunder, without Target's prior written consent. The obligations of
confidentiality contained in this Agreement will apply during Executive's
employment by Target and (i) with respect to all Trade Secrets consisting of
scientific or technical data, at any and all times after expiration or
termination (for whatever reason) of such employment; and (ii) with respect to
all other Trade Secrets,
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<PAGE> 7
for a period of five (5) years after such expiration or termination, unless a
longer period of protection is provided by law.
6. Non-Compete: Non-Solicitation Covenants.
(a) In consideration of the amounts to be paid to Executive
hereunder, Executive covenants that Executive shall, during the Term of this
Agreement, and (i) for one (1) year following the termination or expiration of
the Term of this Agreement or Executive's employment hereunder, or (ii) for one
(1) year following the termination of Executive's employment with the Target
without Cause (whether such employment is under this Agreement or not), observe
the following separate and independent covenants:
(i) Neither Executive nor any Affiliate will,
without the prior written consent of the
Company, within the Area, either directly or
indirectly, (A) become financially
interested in a Competing Enterprise (other
than as a holder of less than five percent
(5%) of the outstanding voting securities of
any entity whose voting securities are
listed on a national securities exchange or
quoted by the National Association of
Securities Dealers, Inc. National Market
System), or, (B) engage in or be employed by
any Competing Enterprise as an executive or
managerial employee.
(ii) Neither Executive nor any Affiliate will,
without the prior written consent of Target,
either directly or indirectly, on
Executive's own behalf or in the service or
on behalf of others, solicit, divert, or
appropriate, or attempt to solicit, divert,
or appropriate, to any Competing Enterprise
within the Area, any person or entity that
was a customer of Target during the Term of
this Agreement who was solicited or serviced
as such by or under the supervision of
Executive.
(iii) Neither Executive nor any Affiliate will,
without Target's prior written consent,
either directly or indirectly, on
Executive's own behalf or in the service or
on behalf of others, solicit, divert, or
hire away, or attempt to solicit, divert, or
hire away, to any Competing Enterprise, any
person employed by Target or one of its
Affiliates, whether or not such employee is
a full-time or a temporary employee of
Target or such Affiliate and whether or not
such employment is pursuant to written
agreement and whether or not such employment
is at will.
7. Remedies. Executive acknowledges and agrees that Target is engaged
in the Business of Target in and throughout the Area, that by virtue of the
training, duties,
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<PAGE> 8
and responsibilities attendant with Executive's employment by Target and the
special knowledge of the Business and operations of Target that Executive will
have as a consequence of Executive's employment by Target, great loss and
irreparable damage would be suffered by Target if Executive should breach or
violate any of the terms or provisions of the covenants and agreements set forth
herein, and that by virtue of Executive's senior management position with Target
Executive has been and will be throughout the Term of this Agreement directly
and indirectly involved in servicing the accounts of Target's customer.
Executive further acknowledges and agrees that each such covenant and agreement
is reasonably necessary to protect and preserve the interest of Target.
Therefore, in addition to all the remedies provided at law or in equity,
Executive agrees and consents that Target shall be entitled to a temporary
restraining order and a permanent injunction to prevent a breach or threatened
breach of any of the covenants or agreements of Executive contained herein. The
existence of any claim, demand, action or cause of action of Executive against
Target shall not constitute a defense to the enforcement by Target of any of the
covenants or agreements herein whether predicated upon this Agreement or
otherwise, and shall not constitute a defense to the enforcement by Target of
any of its rights hereunder.
8. General Provisions.
(a) In the event that any one or more of the provisions, or
parts of any provisions, contained in the Agreement shall for any reason be held
to be invalid, illegal, or unenforceable in any respect by a court of competent
jurisdiction, the same shall not invalidate or otherwise affect any other
provision hereof, and this Agreement shall be construed as if such invalid,
illegal, or unenforceable provision had never been contained herein.
Specifically, but without limiting the foregoing in any way, each of the
covenants of the parties to this Agreement contained herein shall be deemed and
shall be construed as a separate and independent covenant and should any part or
provision of any of such covenants be held or declared invalid by any court of
competent jurisdiction, such invalidity shall in no way render invalid or
unenforceable any other part or provision thereof or any other covenant of the
parties not held or declared invalid.
(b) This Agreement and the rights and obligations of Target
hereunder may be assigned by the Company to any Subsidiary or to any successor
to Target, and shall inure to the benefit of, shall be binding upon, and shall
be enforceable by any such assignee, provided that any such assignee shall agree
to assume and be bound by this Agreement. This Agreement and the rights and
obligations of Executive hereunder may not be assigned by Executive.
(c) The waiver by Target of any breach of this Agreement by
Executive shall not be effective unless in writing, and no such waiver shall
operate or be construed as a waiver of the same or another breach on a
subsequent occasion.
(d) This Agreement and the rights of the parties hereunder
shall be governed by and construed in accordance with the laws of the State of
Georgia.
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<PAGE> 9
(e) This Agreement shall automatically terminate upon the
termination of the Stock Purchase Agreement pursuant to Article 11 thereof. Upon
the termination of this Agreement pursuant to the preceding sentence, this
Agreement shall forthwith become null and void, and no party hereto shall have
any rights, liabilities or obligations hereunder or with respect hereto. This
Agreement embodies the entire agreement of the parties relating to the
employment of Executive by Target. No amendment or modification of this
Agreement shall be valid or binding upon Target or Executive unless made in
writing and signed by the parties. All prior understandings and agreements
relating to the employment of Executive by Target are hereby expressly
terminated.
(f) Any notice, request, demand, or other communication
required to be given hereunder shall be made in writing and shall be deemed to
have been fully given if personally delivered or if mailed by overnight delivery
(the date on which such notice, request, demand, or other communication is
received shall be the date of delivery) to the parties at the following
addresses (or at such other addresses as shall be given in writing by any party
to the other party hereto):
If to Executive:
R. Myles Cowan
3640 Narrow Lane Road
Montgomery, Alabama 36111
If to Company:
SAC Acquisition Corp.
c/o CGW Southeast Partners III, L.P.
Suite 210
Twelve Piedmont Center
Atlanta, Georgia 30305
Telephone: (404) 816-3255
Telecopy: (404) 816-3258
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<PAGE> 10
with a copy (which shall not constitute notice) to:
Alston & Bird
One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309-3424
Attention: Teri L. McMahon, Esq.
Telephone: (404) 881-7266
Telecopy: (404) 881-7777
(g) This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, and it shall not
be necessary for the same counterpart of this agreement to be signed by all of
the undersigned in order for the agreements set forth herein to be binding upon
all of the undersigned in accordance with the terms hereof.
IN WITNESS WHEREOF, the Company and Executive have each executed and
delivered this Agreement as of the date first above written.
COMPANY:
SAC ACQUISITION CORP.
By: /s/ William A. Davies
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
EXECUTIVE:
/s/ R. Myles Cowan (SEAL)
--------------------------------------
R. Myles Cowan
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<PAGE> 1
EXHIBIT 10.15
EMPLOYMENT AND
CONFIDENTIALITY AGREEMENT
THIS EMPLOYMENT AND CONFIDENTIALITY AGREEMENT (this "Agreement") is
made February 10, 1998, between SAC ACQUISITION CORP., a Georgia corporation
(the "Company"), and CARL EDWARD BOARDWINE, a resident of the State of Alabama
("Executive").
BACKGROUND
On the date of this Agreement and pursuant to that certain Stock
Purchase Agreement (the "Stock Purchase Agreement") dated February 10, 1998 by
and among the Company, the Executive, Simcala, Inc., a Delaware corporation (the
"Target"), Charter Oak Partners, Capital One Investors, Dwight L. Goff, R. Myles
Cowan, and George W. Rapp, Jr., the Company has agreed to acquire all of the
capital stock of the Target. Executive is an employee of the Target, and,
subject to the consummation of the transactions contemplated under the Stock
Purchase Agreement, the Company desires to cause Target to employ the Executive
in the capacities and on the terms and conditions set forth below. Executive
desires to accept employment on the terms and conditions set forth below.
AGREEMENT
NOW, THEREFORE, for and in consideration of the employment and
continued employment of Executive by Target, the premises, and the mutual
agreements hereinafter set forth, the parties agree as follows:
1. Definitions. The following terms used herein shall have the
definitions set forth below:
(a) "Affiliate" means any person or entity directly or
indirectly controlling, controlled by, or under common control with another
person.
(b) "Area" means the territorial United States.
(c) "Business" or "Business of the Company" means the business
of the manufacture, production, development, sale, and distribution of silicon
metals.
(d) "Cause" means (i) conduct amounting to fraud or dishonesty
against the Target or any subsidiary or Affiliate of the Target; (ii)
Executive's intentional misconduct or repeated refusal to follow the reasonable
directions of the Board of Directors of the Target, provided an officer of the
Target, upon the direction of the Board of Directors, notifies Executive of the
acts deemed to constitute such intentional misconduct or repeated refusal in
writing and Executive fails to correct such acts (or
<PAGE> 2
begins such action as may be necessary to correct such acts and thereafter
diligently pursues the completion thereof) within five (5) business days after
written notice has been given; (iii) repeated absences from work without a
reasonable excuse, (iv) repeated intoxication with alcohol or drugs while on
Target business during regular business hours; (v) a conviction or plea of
guilty or nolo contendere to a felony (other than one arising from the operation
of a motor vehicle or resulting from actions taken (or not taken) by Executive
in good faith in his capacity as an employee or officer of the Target; or (vi) a
breach or violation by the Executive of any material terms of this Agreement or
any other agreement to which Executive and the Target are a party.
(e) "Competing Enterprise" means any person or any business
organization of whatever form, engaged directly or indirectly within the Area in
the Business of the Company.
(f) "Disability" means (i) the inability of Executive to
perform the duties of Executive's employment due to physical or emotional
incapacity or illness, where such inability is expected to be of long-continued
and indefinite duration, or (ii) Executive shall be entitled to (x) disability
retirement benefits under the federal Social Security Act or (y) recover
benefits under any long-term disability plan or policy maintained by the
Company. In the event of a dispute, the determination of Disability shall be
made reasonably by the Board of Directors of the Target and shall be supported
by advice of a physician competent in the area to which such Disability relates.
(g) "Effective Date of Termination" means the later of the
last day on which Executive performs any duties of his employment as a full-time
employee of the Target hereunder or the effective date of the termination of
Executive's employment hereunder specified in any notice of termination of such
employment given by the Target as permitted herein.
(h) "Excluded Information" means any data or information that
is a Trade Secret hereunder (i) that has been voluntarily disclosed to the
public by the Target or any Affiliate thereof or has become generally known to
the public (except where such public disclosure has been made by or through
Executive or by a third person or entity with the knowledge of Executive without
authorization by the Target); (ii) that has been independently developed and
disclosed by parties other than Executive or the Target or any Affiliate thereof
to Executive or to the public generally without a breach of any obligation of
confidentiality by any such person running directly or indirectly to the Target
or any Affiliate thereof; or (iii) that otherwise enters the public domain
through lawful means.
(i) "Subsidiary" means any subsidiary of the Company.
(j) "Trade Secrets" means information which derives economic
value, actual or potential, from not being generally known and not being readily
ascertainable to other persons who can obtain economic value from its disclosure
or use and which is the
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subject of efforts that are reasonable under the circumstances to maintain its
secrecy or confidentiality. Trade Secrets may include either technical or
non-technical data, including without limitation, (i) any useful process,
machine, chemical formula, composition of matter, or other device which (A) is
new or which Executive has a reasonable basis to believe may be new, (B) is
being used or studied by the Target or any Affiliate thereof and is not
described in a printed patent or in any literature already published and
distributed externally by the Target or any Affiliate thereof, and (C) is not
readily ascertainable from inspection of a product of the Target or any
Affiliate thereof; (ii) any engineering, technical, or product specifications
including those features used in any current product of the Target or any
Affiliate thereof or to be used, or the use of which is contemplated, in a
future product of the Target or any Affiliate thereof; (iii) any application,
operating system, communication system, or other computer software (whether in
source or object code) and all flow charts, algorithms, coding sheets, routines,
subroutines, compilers, assemblers, design concepts, test data, documentation,
or manuals related thereto, whether or not copyrighted, patented or patentable,
related to or used in the Business of the Target or any Affiliate thereof; or
(iv) information concerning the customers, suppliers, products, pricing
strategies of the Target or any Affiliate thereof, personnel assignments and
policies of the Target, or matters concerning the financial affairs and
management of the Target or any Affiliate thereof; provided however, that Trade
Secrets shall not include any Excluded Information.
2. Terms of Engagement; Duties
(a) Effective as of the date of the closing of the
transactions contemplated by the Agreement (the "Closing Date"), Target employs
Executive as President and Chief Executive Officer of Target. In such capacity
Executive shall report to the Board of Directors of Target, and shall perform
such duties and responsibilities relating to the Business of Target as may be
assigned or delegated to him from time to time by the Board of Directors of
Target or its designee.
(b) Executive accepts such employment and agrees to:
(i) devote substantially all of Executive's
effort, time, energy, and skill (reasonable
vacations and reasonable absences due to
illness excepted) during regular business
hours to the duties of his employment
hereunder;
(ii) faithfully, loyally, and industriously
perform such duties, subject to the
supervision of the Board of Directors of
Target; and
(iii) diligently follow and implement all lawful
management policies and decisions of Target
that are communicated to Executive.
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<PAGE> 4
(c) During the Term of this Agreement, Executive shall not
engage (whether or not during normal business hours) in any other business or
professional activity, whether or not such activity is pursued for gain, profit
or other pecuniary advantage; but this shall not be construed as preventing
Executive from (i) investing his personal assets in businesses which do not
compete with the Business of the Company or any Affiliate thereof in such form
or manner as will not require any services on the part of Executive in the
operation or the affairs of the entities in which such investments are made and
in which his participation is solely that of an investor, or (ii) purchasing
securities in any corporation whose securities are regularly traded on a
national securities exchange, provided that such purchase does not result in
Executive collectively owning beneficially at any time five (5%) percent or more
of the voting securities of any Competing Enterprise or any Affiliate thereof.
3. Compensation.
(a) In consideration of the services rendered by Executive
pursuant to this Agreement, Target shall pay to Executive a base salary of Two
Hundred Five Thousand Dollars ($205,000) per annum (the "Base Salary"), which
Base Salary will be reviewed periodically and may be increased by Target from
time to time. The Base Salary shall be paid in accordance with Target's standard
payroll practices in effect from time to time. All amounts payable to Executive
hereunder shall be subject to such deductions and withholdings as are required
by law or by policies of Target.
(b) Executive shall be eligible to receive an annual bonus in
the amount of up to 75% of the Base Salary then being paid to Executive,
pursuant to an executive incentive plan to be established by Target's Board of
Directors. The award and payment of any such bonus, and the amount thereof if
awarded and paid, shall be calculated as follows: fifty (50%) percent of the
award shall be based upon EBITDA of the Target. During the first three years of
the Term, and in the event EBITDA of the Target is equal to or greater than Ten
Million Dollars, such fifty percent amount of the award shall be pro-rated on an
increasing sliding scale from 0% to 100% of this portion between an EBITDA of at
least $9,999,999.00 (whereupon none of the 50% bonus shall be awarded) and a
maximum of $13,000,000.00 (whereupon all of the 50% bonus shall be awarded). In
subsequent years of the Term, the Target's Board of Directors shall determine in
its sole discretion the targeted EBITDA for such fifty (50%) percent portion of
the Bonus. The remaining 50% of the bonus shall be awarded and paid in the sole
discretion of the Board of Directors of Target.
(c) Executive shall also have the right to participate in any
medical, hospitalization, dental, disability income, life or other similar
insurance plans maintained by Target from time to time to the extent that
Executive's position, tenure, salary, age, health and other qualifications make
him eligible to participate, and such other fringe benefits as are currently
provided to Executive under his existing contract with Target.
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<PAGE> 5
(d) Target shall reimburse Executive for all reasonable
business expenses incurred by Executive in connection with the business of the
Company subject to compliance with the expense reimbursement policies
established by Target and in sufficient detail to comply with Internal Revenue
Service Regulations.
(e) Except for stock incentive awards which may be granted
from time to time to Executive, the remuneration and benefits set forth in this
Section 3 shall be the only compensation payable to Executive with respect to
his employment hereunder, and Executive shall not be entitled to receive any
compensation in addition to that set forth in this Section 3 or under such stock
incentive awards for any services rendered by him in any capacity to Target, the
Company or any Affiliate thereof unless agreed to in writing by the Company,
Target, or such Affiliate thereof.
4. Term and Termination of this Agreement. The term of employment of
Executive (the "Term") pursuant to this Agreement shall commence on the Closing
Date and shall continue for a term of five (5) years from the Closing Date.
(a) Executive's employment hereunder shall be terminated
during the Term upon the death or Disability of Executive.
(b) Executive's employment hereunder may be terminated during
the Term by Target (i) with Cause at any time, and (ii) without Cause upon
thirty (30) days written notice to Executive, provided that Executive shall
immediately cease the performance of his duties hereunder if Target shall so
request following the date of such notice. In the event Executive's employment
is terminated without Cause, whether pursuant to this Agreement or following the
termination or expiration of the Term of this Agreement, Target shall pay to
Executive, as severance pay hereunder, an amount equal to the annual Base Salary
paid to Executive at the Effective Date of Termination, which amount shall be
paid in twelve (12) substantially equal monthly installments (less such
deductions and withholdings as are required by law or the policies of Target)
commencing with the first day of the calendar month next following.
(c) Upon termination of Executive's employment hereunder
pursuant to subsection 4(a) or for Cause pursuant to subsection 4(b), or upon
voluntary termination by Executive of Executive's employment hereunder, Target
shall have no further obligation to Executive or his personal representative
with respect to remuneration due under this Agreement, except for Base Salary
earned but unpaid at the Effective Date of Termination and, in the case of
termination of employment under subsection 4(a), a pro rata portion (based on
the number of days of the fiscal year of Target in which such termination
occurred during which this Agreement was in effect) of the bonus, if any,
payable under Section 3(b) with respect to such fiscal year. Payment of such
bonus, if any, shall be made at such time as similar bonuses are paid to other
executives of Target with respect to such fiscal year.
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<PAGE> 6
(d) If Executive's employment hereunder is terminated during
the Term by Target without Cause pursuant to subsection 4(b), Target shall have
no obligation to Employee with respect to renumeration due under this Agreement
or such termination other than (i) Base Salary earned but unpaid at the
Effective Date of Termination, and (ii) a pro rata portion (based on the number
of days of the fiscal year of Target in which the Effective Date of Termination
occurred during which this Agreement was in effect) of the bonus, if any,
payable under Section 3(b) with respect to such fiscal year, and (iii) the
severance pay described in subsection 4(b). Payment pursuant to clause (ii) of
the preceding sentence shall be made when such bonuses are paid to other
executive officers receiving bonus payments with respect to such fiscal year.
(e) Notwithstanding anything to the contrary expressed or
implied herein, the covenants and agreements of Executive in Sections 5 and 6 of
this Agreement shall survive the termination of Executive's employment
hereunder.
5. Ownership, Non-Disclosure, and Non-Use of Trade Secrets.
(a) Executive acknowledges and agrees that all Trade Secrets,
and all physical embodiments thereof, are confidential to and shall be and
remain the sole and exclusive property of the Company and any Affiliate thereof
and that any Trade Secrets produced by Executive during the period of
Executive's employment by the Company shall be considered "work for hire" as
such term is defined in 17 U.S.C. Section 101, the ownership and copyright of
which shall be vested solely in Target. Executive agrees (i) immediately to
disclose to Target all Trade Secrets developed in whole or part by Executive
during the Term of Executive's employment by Target, and (ii) at the request and
expense of Target, to do all things and sign all documents or instruments
reasonably necessary in the opinion of Target to eliminate any ambiguity as to
the rights of Target in such Trade Secrets including, without limitation,
providing to Target Executive's full cooperation in any litigation or other
proceeding to establish, protect, or obtain such rights. Upon request by Target,
and in any event upon termination of Executive's employment by Target for any
reason, Executive shall promptly deliver to Target all property belonging to
Target or any of its Affiliates, including, without limitation, all Trade
Secrets (and all embodiments thereof) then in Executive's custody, control, or
possession.
(b) Executive agrees that all Trade Secrets of Target or any
Affiliate thereof received or developed by Executive as a result of Executive's
employment with Target will be held in trust and strictest confidence, that
Executive will protect such Trade Secrets from disclosure, and that Executive
will make no use of such Trade Secrets,
- 6 -
<PAGE> 7
except in connection with Executive's employment hereunder, without Target's
prior written consent. The obligations of confidentiality contained in this
Agreement will apply during Executive's employment by Target and (i) with
respect to all Trade Secrets consisting of scientific or technical data, at any
and all times after expiration or termination (for whatever reason) of such
employment; and (ii) with respect to all other Trade Secrets, for a period of
five (5) years after such expiration or termination, unless a longer period of
protection is provided by law.
6. Non-Compete: Non-Solicitation Covenants.
(a) In consideration of the amounts to be paid to Executive
hereunder, Executive covenants that Executive shall, during the Term of this
Agreement, and (i) for one (1) year following the termination or expiration of
the Term of this Agreement or Executive's employment hereunder, or (ii) for one
(1) year following the termination of Executive's employment with the Target
without Cause (whether such employment is under this Agreement or not), observe
the following separate and independent covenants:
(i) Neither Executive nor any Affiliate will,
without the prior written consent of the
Company, within the Area, either directly or
indirectly, (A) become financially
interested in a Competing Enterprise (other
than as a holder of less than five percent
(5%) of the outstanding voting securities of
any entity whose voting securities are
listed on a national securities exchange or
quoted by the National Association of
Securities Dealers, Inc. National Market
System), or, (B) engage in or be employed by
any Competing Enterprise as an executive or
managerial employee.
(ii) Neither Executive nor any Affiliate will,
without the prior written consent of Target,
either directly or indirectly, on
Executive's own behalf or in the service or
on behalf of others, solicit, divert, or
appropriate, or attempt to solicit, divert,
or appropriate, to any Competing Enterprise
within the Area, any person or entity that
was a customer of Target during the Term of
this Agreement who was solicited or serviced
as such by or under the supervision of
Executive.
(iii) Neither Executive nor any Affiliate will,
without Target's prior written consent,
either directly or indirectly, on
Executive's own behalf or in the service or
on behalf of others, solicit, divert, or
hire away, or attempt to solicit, divert, or
hire away, to any Competing Enterprise, any
person employed by Target or one of its
Affiliates, whether or not such employee is
a full-time or a temporary employee of
Target or such Affiliate and whether or not
such employment is pursuant to written
agreement and whether or not such employment
is at will.
7. Remedies. Executive acknowledges and agrees that Target is engaged
in the Business of Target in and throughout the Area, that by virtue of the
training, duties,
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<PAGE> 8
and responsibilities attendant with Executive's employment by Target and the
special knowledge of the Business and operations of Target that Executive will
have as a consequence of Executive's employment by Target, great loss and
irreparable damage would be suffered by Target if Executive should breach or
violate any of the terms or provisions of the covenants and agreements set forth
herein, and that by virtue of Executive's senior management position with Target
Executive has been and will be throughout the Term of this Agreement directly
and indirectly involved in servicing the accounts of Target's customer.
Executive further acknowledges and agrees that each such covenant and agreement
is reasonably necessary to protect and preserve the interest of Target.
Therefore, in addition to all the remedies provided at law or in equity,
Executive agrees and consents that Target shall be entitled to a temporary
restraining order and a permanent injunction to prevent a breach or threatened
breach of any of the covenants or agreements of Executive contained herein. The
existence of any claim, demand, action or cause of action of Executive against
Target shall not constitute a defense to the enforcement by Target of any of the
covenants or agreements herein whether predicated upon this Agreement or
otherwise, and shall not constitute a defense to the enforcement by Target of
any of its rights hereunder.
8. General Provisions.
(a) In the event that any one or more of the provisions, or
parts of any provisions, contained in the Agreement shall for any reason be held
to be invalid, illegal, or unenforceable in any respect by a court of competent
jurisdiction, the same shall not invalidate or otherwise affect any other
provision hereof, and this Agreement shall be construed as if such invalid,
illegal, or unenforceable provision had never been contained herein.
Specifically, but without limiting the foregoing in any way, each of the
covenants of the parties to this Agreement contained herein shall be deemed and
shall be construed as a separate and independent covenant and should any part or
provision of any of such covenants be held or declared invalid by any court of
competent jurisdiction, such invalidity shall in no way render invalid or
unenforceable any other part or provision thereof or any other covenant of the
parties not held or declared invalid.
(b) This Agreement and the rights and obligations of Target
hereunder may be assigned by the Company to any Subsidiary or to any successor
to Target, and shall inure to the benefit of, shall be binding upon, and shall
be enforceable by any such assignee, provided that any such assignee shall agree
to assume and be bound by this Agreement. This Agreement and the rights and
obligations of Executive hereunder may not be assigned by Executive.
(c) The waiver by Target of any breach of this Agreement by
Executive shall not be effective unless in writing, and no such waiver shall
operate or be construed as a waiver of the same or another breach on a
subsequent occasion.
(d) This Agreement and the rights of the parties hereunder
shall be governed by and construed in accordance with the laws of the State of
Georgia.
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<PAGE> 9
(e) This Agreement shall automatically terminate upon the
termination of the Stock Purchase Agreement pursuant to Article 11 thereof. Upon
the termination of this Agreement pursuant to the preceding sentence, this
Agreement shall forthwith become null and void, and no party hereto shall have
any rights, liabilities or obligations hereunder or with respect hereto. This
Agreement embodies the entire agreement of the parties relating to the
employment of Executive by Target. No amendment or modification of this
Agreement shall be valid or binding upon Target or Executive unless made in
writing and signed by the parties. All prior understandings and agreements
relating to the employment of Executive by Target are hereby expressly
terminated, including, without limitation, that certain Employment Agreement
with Executive dated February 9, 1995.
(f) Any notice, request, demand, or other communication
required to be given hereunder shall be made in writing and shall be deemed to
have been fully given if personally delivered or if mailed by overnight delivery
(the date on which such notice, request, demand, or other communication is
received shall be the date of delivery) to the parties at the following
addresses (or at such other addresses as shall be given in writing by any party
to the other party hereto):
If to Executive:
Carl Edward Boardwine
125 Bald Cyprus E.
Eclectic Alabama 36024
If to Company:
SAC Acquisition Corp.
c/o CGW Southeast Partners III, L.P.
Suite 210
Twelve Piedmont Center
Atlanta, Georgia 30305
Telephone: (404) 816-3255
Telecopy: (404) 816-3258
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<PAGE> 10
with a copy (which shall not constitute notice) to:
Alston & Bird
One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309-3424
Attention: Teri L. McMahon, Esq.
Telephone: (404) 881-7266
Telecopy: (404) 881-7777
(g) This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, and it shall not
be necessary for the same counterpart of this agreement to be signed by all of
the undersigned in order for the agreements set forth herein to be binding upon
all of the undersigned in accordance with the terms hereof.
IN WITNESS WHEREOF, the Company and Executive have each executed and
delivered this Agreement as of the date first above written.
COMPANY:
SAC ACQUISITION CORP.
By: /s/ William A. Davies
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
EXECUTIVE:
/s/ Carl Edward Boardwine (SEAL)
--------------------------------------
Carl Edward Boardwine
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<PAGE> 1
EXHIBIT 10.16
1995 - 2000
BASIC LABOR AGREEMENT
AND
SENIORITY RULES AND REGULATIONS
between
SIMCALA, INC.
and
UNITED STEELWORKERS OF AMERICA
(AFL-CIO)
August 8, 1995
<PAGE> 2
1995-2000
LABOR AGREEMENT INDEX
<TABLE>
<CAPTION>
ARTICLE SUBJECT PAGE
<S> <C> <C>
PREAMBLE........................................................................................ 1
I RECOGNITION..................................................................................... 1
II PURPOSE AND SCOPE............................................................................... 1
2.1 Purpose................................................................................ 1
2.2 Employees Defined...................................................................... 1
2.3 Unit Change............................................................................ 1
2.4 Excluded Personnel..................................................................... 1
2.5 Contracting Work....................................................................... 2
III
CHECKOFF........................................................................................ 2
3.1 Monthly Reports........................................................................ 2
3.2 Initiation Fees and Dues............................................................... 2
3.3 Remittance............................................................................. 2
3.4 Preference............................................................................. 2
3.5 Indemnity Clause....................................................................... 2
3.6 Report to Union........................................................................ 2
3.7 Dues Exemption......................................................................... 2
IV MANAGEMENT...................................................................................... 3
V STRIKES AND LOCKOUTS............................................................................ 3
VI RATES OF PAY.................................................................................... 3
6.1 The Standard Hourly Wage Scale......................................................... 3
6.2 New or Changed Job..................................................................... 3
6.3 Inequity Grievances Prohibited......................................................... 4
6.4 Shift Premium.......................................................................... 4
6.5 Sunday Premium Pay..................................................................... 5
6.6 Funeral Pay............................................................................ 5
VII HOURS OF WORK................................................................................... 5
7.1 Definitions............................................................................ 5
7.2 Normal Hours........................................................................... 6
7.3 Scheduling............................................................................. 6
7.4 Allowance for Jury Service............................................................. 7
7.5 Overtime Hours and Pay................................................................. 7
7.6 Attendance and Absenteeism............................................................. 8
VIII VACATIONS....................................................................................... 10
8.1 Intent................................................................................. 10
8.2 Qualifying Services.................................................................... 10
</TABLE>
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<PAGE> 3
<TABLE>
<S> <C> <C>
8.3 Eligibility Requirements for Vacation with Pay......................................... 11
8.4 Allowance.............................................................................. 12
8.5 Pay.................................................................................... 12
8.6 Forfeit................................................................................ 13
IX HOLIDAYS........................................................................................ 13
9.1 Production Optional With Company....................................................... 13
9.2 Holidays............................................................................... 13
9.3 Employees Not Working.................................................................. 13
9.4 Employees Scheduled.................................................................... 14
9.5 Holiday Pay............................................................................ 14
9.6 Maximum Pay............................................................................ 14
X INJURY PAY...................................................................................... 14
10.1 Allowed Time for Injury.............................................................. 14
XI ADJUSTMENT OF GRIEVANCES........................................................................ 15
11.1 Step 1............................................................................... 15
Step 2...................................................................................... 15
Step 3...................................................................................... 16
Step 4...................................................................................... 16
11.2 Statement of Facts................................................................... 17
11.3 Rules of Appeal and Answer........................................................... 17
11.4 Witnesses............................................................................ 18
11.5 Grievance Committee.................................................................. 18
11.6 List of Union Representatives........................................................ 18
XII SUSPENSION AND DISCHARGE........................................................................ 18
12.1 Procedure............................................................................ 18
12.2 Reinstatement Pay.................................................................... 19
XIII SAFETY.......................................................................................... 20
13.1 Company Provisions................................................................... 20
13.2 Joint Safety Committee............................................................... 20
13.3 Safety Rules......................................................................... 20
13.4 Unsafe Conditions-Practices.......................................................... 20
13.5 Life Endangered...................................................................... 20
13.6 Annual Physical...................................................................... 21
XIV LEAVE OF ABSENCE................................................................................ 21
14.1 Personal, Medical or Family Leave.................................................... 21
14.2 Union Absence........................................................................ 21
14.3 Military............................................................................. 21
14.4 Personal Leave....................................................................... 22
XV SENIORITY....................................................................................... 22
15.1 Acquisition of Seniority............................................................. 22
15.2 Excluded Personnel................................................................... 22
15.3 Loss of Seniority.................................................................... 23
15.4 Seniority Factors.................................................................... 24
</TABLE>
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<PAGE> 4
<TABLE>
<S> <C> <C>
15.5 Seniority Units...................................................................... 25
15.6 Permanent Vacancies.................................................................. 25
15.7 Filling Temporary Vacancies.......................................................... 27
15.8 Promotions, Reductions in Forces..................................................... 28
15.9 Transfers and Retaining Seniority Rights............................................. 29
15.10 Temporary Transfer at Management's Direction......................................... 29
15.11 Loss of Work Arising from Work Stoppages or Strikes.................................. 30
15.12 Manning New Facilities............................................................... 30
XVI TERMINATION.................................................................................... 30
XVII TRAINING....................................................................................... 30
XVIII ENTIRE AGREEMENT............................................................................... 32
SCHEDULE 'A' -- Standard Hourly Wage Scale.................................................. 34
Simcala Inc. 401-K Plan..................................................................... 35
Simcala Inc. Profit-Sharing Agreement....................................................... 36
Local Agreements............................................................................ 39
Exhibit 'A' -- Line of Progression.......................................................... 40
</TABLE>
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<PAGE> 5
AGREEMENT
This Basic Agreement dated as of August 5, 1995 is between SIMCALA, INC. or its
successors and assigns (hereinafter referred to as the "Company") and the UNITED
STEELWORKERS OF AMERICA, AFL/CIO or its successors and assigns (hereinafter
referred to as the "Union") on behalf of its members employed by the Company at
its Montgomery, Alabama Plant.
ARTICLE 1 - RECOGNITION
1.1 In accordance with and subject to the provisions of the Labor
Management Relations Act, 1947, as amended, the Company recognizes the
Union as the sole exclusive bargaining agency of the production and
maintenance employees of the Company at the above-named plant of the
Company for the purpose of collective bargaining in respect to rates of
pay, hours of work, and conditions of employment.
1.2 The Union agrees to keep the Company advised at all times of the names
of its duly elected officers and committeemen with whom the Company
will deal to carry out the provisions of this Agreement.
ARTICLE 2 - PURPOSE AND SCOPE
2.1 Purpose - It is the intent and purpose of the parties hereto that this
Agreement will set forth herein the basic understanding covering rates
of pay, hours of work, and conditions of employment to be observed by
the parties hereto so as to maintain uninterrupted operations in the
plant and to achieve the highest level of employee performance and
efficiency through ongoing training and consistent with safety, good
health, and sustained effort.
2.2 Employees Defined - Whenever the terms "employee" or "employees" are
used in this Basic Agreement, they shall be regarded as including all
employees of the plant named above, and shall not include office
clerical employees, professional employees, guards, foremen, or any
supervisory positions, salaried employees, lab technicians and
analysts, chemists, research employees, and certain other technical
employees.
2.3 Unit Change - Any change in the bargaining unit shall be by mutual
agreement.
2.4 Excluded Personnel
A. Supervisors are not within the definition of "employee," but
may perform bargaining unit work from time-to-time, however,
B. A grievance if granted under this section will provide four
(4) pay to an employee or employees off injured or sick as
designated by the Grievance Committee and Plant Manager.
<PAGE> 6
2.5 Contracting Work
A. Contracting out of work will not be done to replace or
displace a bargaining unit employee.
B. The Company agrees to notify the Union of its intent to
contract out work.
ARTICLE 3 - CHECKOFF
3.1 Monthly Reports - On or before the fifteenth day of each calendar month
the Company shall submit to the Union a list showing the name, address
and employee number of each new employee hired during the preceding
month.
3.2 Initiation Fees and Dues - The Company agrees to deduct from each
employee's first pay of the succeeding calendar month next following
the receipt of a voluntary union dues checkoff authorization card
executed by that employee, the monthly union dues for the preceding
month and shall also deduct any assessments against the employee which
are general and uniform among all employees who at the time are members
of the union, and also if owed an initiation fee in the amount
designated by the union.
3.3 Remittance - The Company shall promptly remit any and all amounts so
deducted as a result of receipt of aforesaid assignments to the
International Treasurer, United Steelworkers of America, 6200 E.J.
Oliver Blvd., Suite 44, Fairfield, AL 35064, or to wherever designated
by the Treasurer.
3.4 Preference - It is understood and agreed that deductions for Old Age
Benefits, Withholding Tax, Insurance, Company Property, and Court
Assignments shall have preference over the aforesaid deductions.
3.5 Indemnity Clause - In consideration of the Company's deducting dues
under the foregoing arrangement, the Union agrees that it shall
indemnify and hold the Company harmless against any and all claims,
demands, civil suits or other forms of liability that may arise out of
or by reason of any action taken or not taken by the Company for the
purposes of complying with any of the provisions of this Article 3 or
any information furnished to the Company by the Union or any of its
duly authorized representatives.
3.6 Report to Union - A list of employees names from whom dues, initiation
fees and assessments have been deducted shall be furnished to the
Financial Secretary of the Local Union each month. Included in the list
of names of employees from whom dues were deducted shall be the names
of those from whom it was impossible to deduct dues and a statement of
the reason.
3.7 Dues Exemption - The constitution of the Union provides that members
who have not received forty (40) hours pay in any one month, through no
fault of their own, shall be exonerated from the payment of dues. It is
agreed that in cases where employees do not
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<PAGE> 7
have earnings in the pay period from which dues are customarily
deducted, but did have forty (40) hours pay or more in the month, the
Company will deduct the dues for the particular month from the next pay
period in which the employee has earnings. It is understood that the
above exemption does not apply when the time lost is due to earned
vacation. The provisions of this paragraph will be changed only as a
result of official notice from the International Treasurer of the
Union.
ARTICLE 4 - MANAGEMENT
4.1 Subject to the provisions of the Agreement, the Union recognizes that
the Management of the works and the direction of the working forces
including, but not limited to, introduction of new technologies,
equipment and processes, the assigning of work schedules and job
duties, and transfer, the right to hire, suspend, or discharge for
proper cause including lack of qualification or inability to achieve
minimum levels of competence during the initial probationary period of
employment, and thereafter, and proper attendance, and successful
completion of training programs, and the right to relieve employees
from duty because of lack of work or for other legitimate reasons, is
vested exclusively in the Company.
ARTICLE 5 - STRIKES AND LOCKOUTS
5.1 There shall be no lockouts on the part of the Company, no suspension of
work on the part of the employees. It is agreed between the parties
hereto that the procedure provided in the Agreement is adequate, if
followed in good faith by both parties, for a fair and expeditious
settlement of grievances arising between the parties. It is further
agreed that if this procedure is not followed or is disregarded and a
strike occurs, all members who are proven to have advocated,
instigated, or caused such strike, in violation of this Agreement shall
be subject to disciplinary action. The Union officers and committeemen
shall work with Company representatives to first, prevent any violation
of this Agreement and second, to immediately correct any violation.
ARTICLE 6 - RATES OF PAY
6.1 THE STANDARD HOURLY WAGE SCALE
It is understood and agreed that the Standard Hourly Wage Scale as
shown in Schedule A, attached hereto and made a part of this Agreement, shall be
the rates of pay, except as changed under the terms of this Agreement.
6.2 DESCRIPTION AND CLASSIFICATION OF NEW OR CHANGED JOB
6.2.1 To establish a description and classification for a new job at some
subsequent date, the Company shall within sixty (60) operating days of
the installation of the new job, describe said new job in accordance
with the Current Manual and shall submit two copies of such description
to the Union; the sixty (60) days may be extended by written agreement.
- 3 -
<PAGE> 8
6.2.2 After the Company and the Union have agreed upon and signed the job
description, the Company shall classify such job and shall submit two
copies of such classification to the Union.
6.2.3 If Management and the Union are unable to agree upon the description
and/or classification, Management shall install the proposed
description and/or classification and the employee or employees
affected may, within thirty (30) days after such disagreement, file a
grievance alleging that the job description and/or classification is
improper under the procedure established in the Procedural Agreement.
Such grievance shall be processed under the Grievance Procedure of the
Basic Agreement, beginning at the second step.
6.2.4 An existing job shall not be reclassified unless accumulative changes
occurring shall alter the requirements of such job. Introduction of new
technologies or processes will not be grounds for reclassification.
6.2.5 Jobs will not be combined without mutual agreement of the parties.
6.3 The Company and the Union agree that "inequity" grievances over
relative rates of pay among the various job classifications are
prohibited.
6.3.1 No basis shall exist for an employee to allege that a wage rate
inequity exists and no grievance on behalf of an employee alleging a
wage rate inequity shall be filed or processed during the term of the
Agreement.
6.4 SHIFT PREMIUM
6.4.1 Effective for the term of this Agreement, shift premiums shall be paid
as follows:
A. For hours worked which would fall in the prevailing night
shift, which includes all shifts regularly scheduled to
commence between 10:00 p.m. and 12:00 midnight, there shall be
paid a shift premium of thirty (30) cents per hour.
B. For hours worked which would fall in the prevailing day shift,
which includes all shifts regularly scheduled to commence
between 6:00 a.m. and 8:00 a.m., no shift premium will be
paid.
C. For hours worked which would fall in the prevailing afternoon
shift, which includes all shifts regularly scheduled to
commence between 2:00 p.m. and 4:00 p.m., there shall be paid
a shift premium rate of twenty (20) cents per hour.
D. For shifts commencing at times other than covered in A, B, and
C above, the afternoon shift premium will be paid for all
hours worked between 4:00 p.m. and midnight and the night
shift premium will be paid for all hours worked between
midnight and 8:00 a.m.
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<PAGE> 9
6.4.2 Shift premiums shall be included in the calculation of overtime
compensation.
6.4.3 Shift premiums shall be paid for allowed time or reporting time when
the hours for which payment is made would have called for a premium, if
worked.
6.5 SUNDAY PREMIUM PAY
6.5.1 For all time worked on Sunday, which is not paid for on an overtime
basis, a premium on the regular rate for the job as defined in the
Standard Hourly Wage Scale as shown in Schedule A, attached to and made
a part of this Agreement, shall be paid as follows:
TWENTY-FIVE (25) PERCENT
6.5.2 For the purpose of this provision, Sunday will be deemed to be the
twenty four (24) hours beginning with the turn change time nearest to
12:01 a.m. Sunday.
6.6 FUNERAL PAY
6.6.1 Any employee losing work because of the death of the employee's father,
mother, brother, sister, father-in-law, mother-in-law, husband, wife,
child, grandfather, grandmother, grandchild or step parents and step
children (when they have lived with the employee in an immediate family
relationship) shall be entitled to maximum of three (3) days' pay, or
the day of the funeral in the event of the death of the employee's
immediate brother-in-law or sister-in-law or son-in-law or
daughter-in-law, if the employee was scheduled to work on any of those
days.
6.6.2 In the event of the death of a spouse or child during the employee's
vacation, three (3) days of the vacation will be rescheduled at a later
date, four (4) days if the funeral is over 100 miles away.
6.6.3 The above days shall not extend beyond the date of the funeral and will
require attendance at the funeral, except, that one of the four days
may be applied to the first day after the funeral, if the funeral is
held at a distance of 100 miles or more from the employee's home, and
such day is required for travel.
6.6.4 Proof of relationship, such as an obituary notice, must be attached to
the claim for pay. The rate of such "Funeral Pay" shall be the standard
hourly wage rate shown in Schedule A, attached hereto, for the job said
employee worked on his last day of actual work and shall not include
any premium pay for whatever cause.
ARTICLE 7 -- HOURS OF WORK
7.1 DEFINITIONS
- 5 -
<PAGE> 10
7.1.1 A day is the twenty-four (24) hour period from the time an employee
commences work.
7.1.2 A week is a calendar week.
7.2 NORMAL HOURS
7.2.1 The normal hours as shown below shall not be construed as a guarantee
of hours of work per day or per week, or for days of work per week.
7.2.2 The normal hours per day shall be eight (8) hours of work and sixteen
(16) consecutive hours of rest.
A. The employee shall not have an established lunch period, shall
eat at the convenience of the operation, but shall not be
required to eat sooner than three (3) hours nor later than
five (5) hours after he commences work, and shall not take
time to exceed a total of thirty (30) minutes during any work
shift.
B. It shall not be considered normal hours and the overtime
provisions of Section 7.6 shall not apply when either a local
ordinance or State or Federal legislation changes the time and
such action forces a short return.
7.2.3 The normal hours per week shall be forty (40) hours of work consisting
of five (5) work days and two (2) scheduled rest days.
7.2.4 All hours worked beyond the normal hours as set forth in this Section
shall be paid at the overtime rate, as provided in Section 7.5 below.
7.2.5 Where possible, employees will be scheduled to work so they will work
five (5) consecutive days in a week and have two (2) consecutive
scheduled rest days per week.
7.3 SCHEDULING
7.3.1 Determination of the daily and weekly work schedules shall be made by
the Company and such schedules may be changed by the Company from time
to time to suit varying conditions of the business or conditions beyond
the Company's control; provided, however, that the plant work week
shall not be reduced below forty (40) hours without mutual agreement.
The Company further agrees that it will return to a forty (40) hour
week before hiring any additional employees.
7.3.2 An employee shall not be laid off a day to make up for working his
scheduled day off in order to avoid payment of sixth or seventh day
overtime.
7.3.3 Schedules of the employees' regular workdays whenever possible shall be
posted or otherwise made known to employees by 3:00 P.M. CST Friday.
- 6 -
<PAGE> 11
7.4 ALLOWANCE FOR JURY SERVICE
7.4.1 An employee who is called for jury service shall be excused from work
for the days on which he serves and shall receive for each day of
service on which he otherwise would have worked his normal wages and
benefits.
7.4.2 The employee will be required to present proof of service.
7.4.3 This allowance shall not apply in the case of a witness when he is
being paid for such service as a deputy or peace officer.
7.5 OVERTIME HOURS AND PAY
7.5.1 It is understood and agreed that some overtime is expected. Therefore,
it shall be at Management's discretion to assign overtime work,
provided:
No employee shall work more than sixteen (16) consecutive hours from
the time he commences work nor return to work within 8 hours after
working 16 consecutive hours nor more than twenty-four (24) overtime
hours within one calendar week unless extended by mutual agreement
between the affected employee and the Company.
7.5.2 When management determines that overtime is necessary, the following
procedure will be used:
Offer overtime to personnel on the shift present, in the classification
where the vacancy exists first, in seniority order unless the line of
progression is fully utilized.
1. Offer overtime to personnel on the shift present, in
the classification where the vacancy exists first, in
seniority order.
2. If no one accepts, offer the overtime to the
personnel in the same classification from the
on-coming crew in seniority order.
3. Call all other personnel scheduled in the
classification in seniority order.
4. If no one accepts, go directly to the qualified
voluntary overtime list for that classification.
These lists will be changed quarterly.
5. If no one volunteers from that list, employees at
work will be forced to work.
A. Should problems arise in the administration of this procedure,
the parties agree to discuss them at that time.
B. Grievances that arise from the administration of this
procedure will be settled by allowing the aggrieved employee
or employees to work the same amount of time as missed and
paid at the same rate.
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7.5.3 OVERTIME PAY
A. The overtime rate to be paid employees for overtime hours
shall be one and one-half (1-1/2) times the regular rate of
pay for the occupation on which the overtime hours are worked,
except as excluded under 7.5.4 and 7.5.5 below.
7.5.4 OVERTIME RATES SHALL BE PAID FOR:
A. Hours worked in excess of eight (8) hours within the
twenty-four (24) hour period commencing with the time an
employee begins work, except that this shall not apply in
instances excluded by local agreements.
B. Hours worked in excess of forty (40) hours in any calendar
week.
C. Hours worked by an employee on the sixth or seventh work day
in a payroll week (Sunday through Saturday), during which work
was performed on employee's scheduled five (5) workdays,
except that if laid off by Company on scheduled workday, lost
time will be counted.
D. Any employee who must bump to a shift involving a short return
in order to stay in his classification or preserve his
employment.
E. Lost time for Union business will be counted as time worked
for overtime purposes for officers and grievance committeemen.
7.5.5 NONDUPLICATION
A. Payment of overtime rates shall not be duplicated for the same
hours worked, but the higher of the applicable rates shall be
used. Hours compensated for at overtime rates shall not be
counted further for any purpose in determining overtime
liability under the same or any other provisions, provided,
however, that a holiday, whether worked or not, shall be
counted for purposes of computing overtime liability under the
provisions of subsection 7.5.4C above and hours worked on a
holiday shall be counted for purposes of computing overtime
liability under the provisions of subsection 7.5.4A above.
B. Except as above provided, hours paid for but not worked shall
not be counted in determining overtime liability.
7.6 ATTENDANCE AND ABSENTEEISM
7.6.1 DETERMINATION OF ABSENTEEISM
A. An Absentee Rate will be computed for each employee and that
rate will be compared to a fixed percentage rate which the
Company will tolerate. Any
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employee with a rate higher than the fixed rate will receive
the next higher degree of discipline.
B. The Absentee Rate will be computed over a time period of a
minimum of six weeks since previous discipline (if any) or a
minimum of six weeks from the present offense backwards toward
the last discipline (if any). If the employee has had no
previous discipline, the last six week period (or longer) can
be considered. For purposes of the calculation, the six week
period shall represent 30 days. The points referred to below
shall represent the absentee demerits. Thus, if an employee
has three unexcused absences (with proper two hour
notification of the absence) during said six week period, his
absentee percentage would be 10% (3130) and he would be
subject to disciplinary actions as noted below.
C. In computing the Absentee Rate, each unexcused absence,
unexcused tardy or unexcused "out early" will count as one
point towards absence. An unexcused absence with a late call
in (less than two hours notice preceding shift) will count as
one and one half absences. The sum of the above will be
divided by the total number of working days in the period
under consideration in B. above.
D. Management determines what will be an excused or unexcused
absence as follows:
EXCUSED ABSENCES:
1. Death in the family (those covered in article 6.6 of
the Basic Labor Agreement).
2. Industrial Injury
3. Union Business
4. Jury Duty
5. Extended Illness (for physically incapacitated days
accompanied by a doctors certificate).
6. Sickness (when accompanied by a doctor's excuse).
Unexcused absences consist of all absences not covered as excused.
Tardiness and leaving early, unless for one of the above excused
reasons will be considered unexcused. Failure to report off will result
in an advancement to the next step, regardless of percentage rate.
E. The fixed absentee rate for the Mt. Meigs plant will be 4%.
Any employee with a higher rate as prescribed in B, C. and D
above will receive the next higher step in the discipline
procedure.
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F. The Steps of Discipline are as follows:
1. Written Reprimand
2. 1 Day Suspension
3. 3 Day Suspension
4. 5 Day Suspension pending discharge.
G. Any employee who maintains a percentage of less than 4% as
computed in B, C, and D above for six months since his last
reprimand will back up one step in the procedure. Any employee
who maintains a perfect attendance record for six months will
completely clear his absenteeism record.
7.6.2 REPORTING ABSENCE OR LATENESS
A. In reporting off from a scheduled shift, calls must be made 2
hours prior to the start of that shift, except 1 hour on "B"
shift. Failure to meet this time requirement will result in
one-half point against the attendance record and one point for
one hour or less notice.
B. Employees missing their scheduled turn will have one point
assessed against attendance record.
C. Failure to call in by the start of the shift and then missing
scheduled shift will result in advancement to the next step of
disciplinary procedure.
D. A late report for work without calling to advise of expected
lateness will result in an additional one-half point and said
employee may be reassigned or sent home.
ARTICLE 8 - VACATIONS
8.1 VACATIONS INTENT
Vacations are granted as a reward for service, as indicated by the
qualifying requirements of this vacation plan. It is the intent of this section
to grant vacations, with pay, to those employees who are consistently employed
and who have given faithful attendance to their employment.
8.2 QUALIFYING SERVICES
A. In determining length of continuous service for the purpose of
deciding vacation eligibility of an employee, his total number
of years of continuous service shall be calculated from his
last date of hire (calendar year).
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<PAGE> 15
B. Continuous service credit will be given an employee who has
"Lay- Off Standing," "Leave of Absence Standing" or "Military
Standing" on any vacation eligibility date, who returns to the
payroll of the Company during the calendar year, who completes
one (1) year or more of continuous service during that
calendar year, and who otherwise meets the eligibility
requirements of this Article 8.
8.3 ELIGIBILITY REQUIREMENTS FOR VACATION WITH PAY
To be eligible for a regular vacation in any calendar year during the
term of this Agreement, the employee must:
A. Have one (1) year or more of continuous service.
B. Have received earnings in at least fifty percent (50%) of the
pay periods in the preceding calendar year, except that in
case of an employee who completes his first year of continuous
service in such calendar year, he shall have received earnings
in at least fifty percent (50%) of the pay periods during the
twelve (12) months following the date of his original
employment and still be on the payroll on his first
anniversary date.
C. No more than one (1) vacation shall be paid during any one (1)
calendar year.
D. In cases where an employee has been absent from work due to a
disability arising out of his employment at the Company's
plant, hours worked credit will be granted for vacation
purposes for all hours lost due to the disability during the
twelve (12) months following the date the injury occurred, but
not to exceed eight (8) hours a day or forty (40) hours a
week.
E. An employee entering the Military Service for his first
enrollment, who has completed at least one (1) year of
continuous service shall receive, for such year of enrollment,
not less than fifty percent (50%) of his vacation allowance,
notwithstanding the number of pay periods worked in.
F. If an employee does not qualify under the above provisions and
has two (2) years of continuous service and has worked at
least two hundred sixty (260) hours during the last preceding
calendar year, he shall be eligible for a prorated vacation.
based on the ratio of his actual hours worked to one thousand
forty (1,040) hours.
G. All active SiMETCO employees employed on the closing date of
the SIMCALA acquisition who are hired by SIMCALA shall be
recognized for prior continuous service for purposes of this
Section 8 only.
H. It is agreed that the purpose of this Article 8, Vacations, is
to provide actual time off to all employees; therefore, all
vacations shall be taken with the exception that
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the Company may, with the consent of the employee, pay him
vacation allowance, in lieu of time off for vacation.
8.4 VACATION ALLOWANCE
A. In line with the above eligibility requirements, continuous
service shall earn vacation pay allowance as follows provided,
however, that no employee shall be entitled to more than two
weeks of vacation during the first two years of this
Agreement:
<TABLE>
<CAPTION>
Years of Service Weeks of Vacation
---------------- -----------------
<S> <C>
1 but less than 3........................1
3 but less than 15.......................2
15 or more...............................3
</TABLE>
B. All vacations shall be taken in full week periods; a one
week's vacation shall consist of seven (7) consecutive days, a
two weeks' vacation of fourteen (14) consecutive days, a three
weeks vacation of twenty-one (21) consecutive days. Each
vacation week shall include five (5) regularly scheduled
working days. When vacations are split, they shall be paid
accordingly.
C. Vacations will, as far as possible, be granted at times most
desired by employees, but vacations must necessarily be
governed by business conditions and the final right to
allotment of individual vacation period is exclusively
reserved to the Company in order to insure the orderly
operation of the plant.
8.5 VACATION PAY
A. Each employee requesting vacation time and pay shall fill in
and sign a regular Vacation Request Form furnished by
Management, and submit to his supervisor for approval. This
form will also require approval of the Plant Superintendent or
his designated representative, and will then be forwarded to
the Payroll Department for execution. In each case, the
employee must file such Vacation Request Form at least thirty
(30) days ahead of the desired vacation time in order to
exercise his seniority for preference on vacation time
approval. The Vacation Request Form provides that an employee
may list jobs he would be interested in bidding upon should
they be posted during his vacation period.
B. Each employee granted a vacation under this Section 8 will be
paid at his current hourly rate times forty.
C. Vacations shall commence after January 1st each calendar year
and as near as possible, shall be scheduled on a planned basis
of an approximate equal number of employees each month.
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<PAGE> 17
8.6 FORFEIT OF VACATION
A. An employee who voluntarily quits will forfeit all rights to
eligibility and pay unless he gives two (2) weeks' written
notice to Management and continues to work through the notice
period, and has met the eligibility requirements of Section
8.3 above.
B. An employee who is discharged for cause prior to an
eligibility date will forfeit all rights to eligibility and
pay.
C. Any employee with three years' service who quits after working
50 percent of any pay periods and thereby earning a vacation
for the next year shall receive said vacation pay after
January 1 subject to the provisions of 8.6A above.
ARTICLE 9 - HOLIDAYS
9.1 PRODUCTION OPTIONAL WITH COMPANY
Regular production on days defined as holidays shall be optional with
the Company. When the plant is scheduled to work on any of these days, those
employees scheduled to work shall report on their regular shifts.
9.2 HOLIDAYS
For the purpose of this Agreement, the following days shall be
considered holidays, and when such holiday falls on Sunday, it shall be observed
on Monday, and such Monday shall be construed as the holiday:
New Year's Day, Martin Luther King Jr's. Birthday, Good
Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day, Day before Christmas and Christmas Day.
9.3 EMPLOYEES NOT WORKING
A. All employees not required to work on a day on which any of
the above holidays occur shall be paid the rate of the job he
last worked or his bid rate, whichever is higher, for eight
(8) hours, if they worked their last scheduled day prior to
the holiday and their first scheduled day after the holiday,
except that Management shall waive the work requirement for
personal illness (when validated by a doctor's certificate
stating the employee's physical inability to work) or death in
the immediate family.
B. Paragraph A above shall not apply to employees laid off, on
leave of absence, or off due to an illness or injury except an
employee absent due to such causes who
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<PAGE> 18
works during the pay period in which the holiday occurs. An
employee who is on vacation during the week in which a holiday
occurs shall be paid as computed in Paragraph A above.
9.4 EMPLOYEES SCHEDULED
A. Any employee who is normally scheduled to work on a day on
which any of the above holidays occur and who does not report
for work for any reason, may not be paid except that this work
requirement shall be waived for personal sickness or death in
the immediate family.
9.5 HOLIDAY PAY
For all hours worked by an employee on any of the holidays specified in
Section 9.2 above, Holiday Pay shall be as follows:
A. The employee shall receive two (2) times his regular rate of
pay.
B. If an employee has been scheduled off but then is called to
work on his normal schedule on a holiday but works less than
eight (8) hours, he shall be entitled to the benefits of
Subsection 9.3A of this Article 9 to the extent that the
number of hours worked by him on the holiday are less than
eight (8).
C. An employee scheduled off on a holiday and then called out
shall receive the holiday premium pay for hours worked plus
the holiday pay as outlined in 9.3A above.
D. An employee working his normal scheduled shift on the holiday
who is required to work in excess of his normal eight (8) hour
shift shall receive no more than the rates outlined in 9.5A
above.
9.6 MAXIMUM PAY
However, no employee shall receive more than the above specified rates
for hours worked on any holiday.
ARTICLE 10 - INJURY PAY
10.1 ALLOWED TIME FOR INJURY
A. Any employee suffering an injury on the job, requiring the
attention of a doctor which in the opinion of the attending
doctor or nurse renders him unable to continue work, shall be
paid for the balance of that work shift at the rate of the job
he was working at the time of said injury. On the date of the
employee's injury, if
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<PAGE> 19
such employee returns to work and finds he is unable to work,
and such employee then goes home, he shall be paid for the
balance of that shift.
B. All hours paid for above will count as hours worked for the
purpose of overtime calculation under the provision of Article
7.
C. When additional visits are required due to injury, and
supported by written proof of appointment, such employee will
be compensated for lost time for a maximum of two (2)
additional visits. Whenever possible doctors visits will be
scheduled on the employee's off time.
ARTICLE 11 - ADJUSTMENT OF GRIEVANCES
11.1 Should differences arise between the Company and the Union as to the
meaning and application of the provisions of this Agreement or should any
trouble of any kind arise in the plant, there shall be no suspension of work or
refusal to perform the duties assigned, on account of such differences, but an
earnest effort shall be made to settle such differences immediately in the
following manner.
Step 1
A. Grievances or complaints must be reported within five (5) days
from the date of occurrence. Grievances or complaints not
adjusted within fifteen (15) days of occurrence or within
fifteen (15) days (excluding Saturdays, Sundays and Holidays)
of the date the employee or employees or Committee become
aware of the occurrence, or last occurrence, on which the
grievance is based, shall be reduced to writing by the
aggrieved employee or employees or the grievance committeeman
on suitable forms furnished for this purpose in triplicate,
and presented to the immediate supervisor before they will be
considered further.
B. These written grievances shall be signed and dated by the
aggrieved employee and the committeeman. In such grievance,
should it be decided by the Personnel Department that it is
necessary to consider the merits and demerits of the
grievance, the department may do so, but in all cases it shall
enter a written disposition of the same within five (5)
working days of the date of the presentation of the written
grievance. The Personnel Department shall date and sign all
three copies of the written grievance and will return two
copies to the Chairman of the Grievance Committee.
Step 2
A. Grievances not settled in Step 1 above, may be appealed by the
Grievance Committee to the Personnel Department, which appeal
must be in writing, addressed to the Personnel Department and
must be presented to it not later than five (5) days after
receipt of the written disposition by the Personnel
Department.
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<PAGE> 20
B. Within five (5) days from the date of the presentation of such
written grievance, a representative of the Personnel
Department shall meet with the General Grievance Committee for
a discussion of said appeal and attempt to settle such
grievance.
C. It is understood, by the above paragraph, that the Grievance
Committee will investigate all alleged grievances before
processing them to Step 2 of this Grievance Procedure and any
alleged grievance found not to be based on fact will not be
affirmed by the Committee and will be withdrawn.
D. If no agreement is reached during the discussion of such
appeal, the Personnel Department will submit its written
disposition of such grievance within five (5) days from the
date of the hearing. Grievances not appealed in writing from
the decision in Step 1 within five (5) days from the date of
such decision shall be considered settled on the basis of the
decision last made and shall not be eligible for further
appeal.
Step 3
A. Grievances not settled in Step 2 may be appealed to the
representatives of the International Union and representatives
of the Company, which appeal shall be in writing and shall be
made within five (5) days from the date of the last decision.
B. Within another fifteen (15) days from such appeal, the
representatives of the International Union of his designees
shall contact representatives of the Company, in writing, to
request a meeting on the grievance, or advise that he has not
affirmed the grievance, and same has been withdrawn. After
such written appeal, a Management representative shall make
verbal or written contact, within ten (10) days, to arrange a
date for a meeting.
C. Management must answer in ten (10) days (excluding Saturdays,
Sundays, and Holidays) from the date of the meeting or from
the date of the last meeting if several meetings are held.
Step 4
A. If the Union wishes to appeal the disposition made in Step 3
of any grievance, a representative of the Union shall mail to
the Company a written notice of appeal of such grievance to
arbitration, within ten (10) days from such disposition.
B. When he deems it advisable, and prior to proceeding into
arbitration, even though appealed, the Union Staff
Representative may appeal a case in this Step 4, in writing,
to an Executive of the Company and the District Director of
the Union for the District involved, for review and an attempt
to solve. The Executive of the Company and the District
Director, or their respective designees, shall arrange to
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meet at their convenience to review the case and develop all
facts in an effort to find a solution.
Either party may call in witnesses who can contribute to a better
understanding or development of facts. The stipulated officials of the parties
will then proceed in their own method toward reaching a solution.
If, after a thorough examination of the facts, no agreement can be
reached in this case, it may be withdrawn or may be referred back to the Union
Staff Representative to process on into arbitration. In either instance, the
Company shall be notified in writing within fifteen (15) days after the final
meeting of the officials referred to above.
C. 1. The Union upon the filing of an appeal to arbitration
will simultaneously request from the Federal
Mediation and Conciliation Service (FMCS) a panel of
not more than five impartial arbitrators. The Union
and the Company within 14 days of receipt of the FMCS
panel will select an arbitrator by alternating
strikes. The Union and the Company may agree to
request a second FMCS panel if the first panel is
deemed for any reason unacceptable to both.
2. No new evidence shall be submitted in Step 4;
however, should any new facts develop after the Third
Step, said case shall be referred back to the Third
Step.
3. Post hearing briefs will only be filed by mutual
agreement.
D. The said umpire shall not have the power to add to, subtract
from or modify the terms of this Labor Agreement or any
Agreement supplemental thereto. The decision of the umpire
shall be final and binding on both parties. The fees and
expenses (including the cost of the original copy of any
stenographic record) shall be paid equally and jointly if
jointly requested by the Company and the Union. It shall be
the duty of the umpire to make his decision within thirty (30)
days after final submission of the case to him, which includes
receipt of the transcript and post hearing briefs.
11.2 The employee or the committeeman in reducing any grievances to writing
shall state clearly and concisely in writing all fads known to him
which are the basis of his grievance and, if he claims that any Article
or Articles of this Agreement are involved, he shall specify such
Article or Articles on such grievance form.
11.3 Unless an extension of time has been mutually agreed upon by and
between the parties:
11.3.1 The parties shall not be under any obligation to discuss any difference
unless such difference is submitted within the time limits specified in
Article 11.
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<PAGE> 22
11.3.2 If a grievance is not appealed from one stage of negotiation to the
next higher stage of negotiation within the specified time limits, or
if a written notice of intention to appeal a grievance has not been
given within such time limits, such grievance shall be considered
settled on the basis of the last answer which has been made; provided,
however, that such settlement shall not constitute a precedent in any
other case.
11.3.3 If a grievance is not answered within the specified time limits, the
grievance shall be considered by the parties to have been granted;
provided, however, that the disposition of such grievance shall not
constitute a precedent in any case.
11.4 In all grievance hearings it shall be permissible for either party to
bring in employees of the Corporation, who are involved in the
grievance or other witnesses who may present direct evidence to the
grievance.
11.5 The General Grievance Committee shall consist of three (3) employees
designated by the Local Union. The lost time involved for a maximum of
one Third Step meeting per month, if held, will be paid by the Company.
Additional time off will be afforded without pay as may be required: To
attend regularly scheduled or special committee meetings with
Management; and to attend meetings pertaining to discharges or other
matters which cannot be reasonably postponed until the time of the next
regular meeting with Management.
11.5.1 Any officer or Grievance Committeeman of the Union required to attend
meetings outside the plant property shall notify in writing the
Personnel Department two (2) days in advance of such meetings so that
necessary arrangements can be made for his replacement.
11.6 The Union, from time to time, shall furnish the Company with a list
showing the names of the Officers of the Local Union, General Grievance
Committee and Shop Stewards, and the Company shall recognize as
Officers, Committeemen and Shop Stewards only such persons as are named
on the most recent list certified.
ARTICLE 12 - SUSPENSION AND DISCHARGE
12.1. PROCEDURE
A. In the exercise of its right as set forth in Article 4,
Management, of this Agreement, the Company agrees that no
employee shall be peremptorily discharged from and after the
date thereof, but that in all instances in which the Company
may conclude that an employee's conduct may justify discharge,
he must be first suspended. Such suspension shall be for not
more then five (5) calendar days excluding Saturdays, Sundays,
and Holidays). In all cases of suspension, a Union
representative and the employee's Foreman will be present at
the time of such action.
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<PAGE> 23
B. The employee will be advised of his rights for a hearing
during this period of suspension, and the employee or the
Grievance Committee may, if he believes that he has been
unjustly dealt with, request a hearing and a statement of the
offense before the Personnel Department with or without the
member or members of the Grievance committee present as he may
choose. Such hearing shall be held within five (5) calendar
days (excluding Saturdays, Sundays, and Holidays) after the
date of such request. If any such employee shall not request a
hearing within the five (5) day provisional discharge period,
his discharge shall become final. Reprimands, docking,
suspensions or anything detrimental (excluding absenteeism) to
the employee's work record will be removed from the employee's
record after twenty-four (24) months and shall not be used
against him or cited in arbitration.
C. At any such hearings all of the known facts concerning the
case shall be made available to both parties. After such
hearing, the Company shall conclude within five (5) calendar
days (excluding Saturdays, Sundays, and Holidays) whether the
discharge shall become final or, dependent upon the facts of
the case, that such discharge shall be revoked. If the
discharge is revoked, the employee shall be returned to
employment and shall receive such compensation, if any, as
provided in Section 12. 2 below.
D. If the discharge of the employee is affirmed, the employee may
within five (5 calendar days (excluding Saturdays, Sundays,
and Holidays); after such disposition, file a grievance under
the procedure for the adjustment of grievances set forth in
Article 11 of this Agreement, and such grievance shall be
filed at Step 3. If any such employee shall not file a
grievance within such five (5) day period, his discharge shall
become final. No new evidence shall be used after the Third
Step. However, should any new facts develop after the Third
Step, said case shall be referred back to the Third Step.
E. The Grievance Committee shall be notified of all such
suspensions and reason for same and shall, following a
requested hearing, receive a copy of the decision of the local
Management of the Company. However, Management shall be
relieved of all requirements if a strike, work stoppage, or
other impeding of production in violation of this Agreement is
in progress.
12.2 REINSTATEMENT PAY
A. If it is agreed by the parties or determined in arbitration,
as provided in Article 11 of this Agreement, that an employee
was unjustly discharged, such employee shall be reinstated to
his job, with no loss of seniority, and shall be paid such
amount, if any, as may be agreed upon by the parties or
determined in arbitration, to be fair and just.
B. Said employee shall be paid the amount of what would have been
his normal earnings including overtime shift premium, holiday
pay and all other earnings and
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<PAGE> 24
benefits for his normally scheduled work during the period
from his discharge to his reinstatement, less any unemployment
compensation received during said period.
C. In the event a grievance concerning suspension or discharge
goes to arbitration, the arbitrator shall have the authority
to modify the penalty. The arbitrator may substitute his
judgment for that of the Company on appropriate discipline.
ARTICLE 13 -SAFETY
13.1 The Company shall continue to make reasonable provisions for the safety
and health of its employees at the plant during the hours of their
employment. Protective devices, special wearing apparel and other
equipment necessary to properly protect employees from injury shall be
provided by the Company, and such equipment shall be used by the
employees. The wearing of appropriate safety apparel is mandatory.
13.2 A joint Management and Union Safety Committee shall be established for
the plant. The committee shall be composed of one Management
Representative and one Union Representative for each 150 employees;
however, the minimum shall be four members, two being appointed by
Management and two being appointed by the Union. Time spent on
committee work by the members shall be compensated by the Company for
time lost. The Committee shall hold regular monthly meetings, at times
determined by the Committee, and shall be compensated for lost time.
The duties of the Committee shall be:
A. To advise plant Management concerning safety and health
matters.
B. To make requested inspections of safety and health conditions
and participate in the investigation of all accidents.
C. To maintain a safety standard and a safety program for the
plant.
13.3 The purpose of the plant safety rules shall be for the protection of
our employees, and flagrant or intentional violation of such rules
shall subject an employee to immediate discharge.
13.4 Any unsafe condition or practice, alleged to be existing in the plant,
shall be brought to the attention of the Supervisor immediately by the
employee noticing said condition or practice. The Company will take
appropriate action necessary to correct the condition within a
reasonable time.
13.5 In case any employee alleges a condition to be dangerous over and
beyond the inherent hazards of the job, to the extent of endangering
the life or limb of an employee, the employee will immediately report
the matter to the employee's Supervisor.
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13.6 The company shall retain the right to require all employees to take
annual physical examinations and bi-annual vision and hearing tests
with the costs of such tests to be borne by the company.
ARTICLE 14 - LEAVE OF ABSENCE
14.1 The Company agrees to conform to the terms and conditions of the Family
and Medical Leave Act.
14.2 UNION ABSENCE
14.2.1 An employee who has two (2) years or more of continuous service with
the Company and who is duly elected or selected by the Union to an
office of the Union which is the bargaining unit shall be granted a
leave of absence for a period not to exceed two (2) years.
14.3 MILITARY AND NAVAL SERVICE
14.3.1 The parties agree to follow the Universal Military Training and Service
Act, as amended, in connection with the reinstatement and employment of
former employees of the Company, who have been honorably discharged
from military and naval service of the United States, who have
seniority rights under this Agreement.
14.3.2 An employee who meets the requirements of 14.4.1 above shall be granted
time and military allowance or military allowance in lieu of time for
the year of his reinstatement and employment, following such service,
notwithstanding any eligibility requirements of Article 8, Vacations,
of the Agreement.
14.3.3 An employee required to lose work in order to report for pre-induction
physical shall be paid a maximum of eight (8) hours, provided he
resumes work on his next scheduled workday.
14.3.4 An employee with one or more years of continuous service who is
required to attend an encampment of the Reserve Armed Forces, shall be
paid, for a period not to exceed two (2) weeks in any calendar year,
the difference between the amount paid by the Government (not including
travel, subsistence and quarters allowance) and the amount calculated
by the Company in accordance with the following formula. Such pay shall
be based on the number of days such employee would have worked had he
not been attending such encampment during such two weeks (plus any
holiday in such two weeks which he would not have worked) and the pay
for each such day shall be eight (8) times his average straight-time
hourly rate of earnings (excluding shift differentials and Sunday and
overtime premiums) during the last payroll period worked prior to the
encampment. If the period of such encampment exceeds two weeks in any
calendar year, the period on which such pay shall be based shall be the
first two weeks he would have worked during such period. Riot and
National Guard duty are excluded from this allowance.
- 21 -
<PAGE> 26
14.4 PERSONAL LEAVE
A. An employee who desires to pursue a course of study at an accredited
school of learning shall be granted such leave, not to exceed four (4)
years, provided:
1. The employee advises the Company in writing at least thirty
(30) days prior to the start of such course of his desire for
a leave.
2. The employee must notify the Company and the Union in writing
at least once a year of his continued interest to resume
active employment with the Company upon completion or
terminating such course of study.
3. The employee must report for reemployment within thirty (30)
days after completion or termination of such course of study.
B. Such personal leave of absence, outlined in A above, shall not
constitute a break in the record of continuous service of such employee
if he meets the requirements outlined therein. No more than two (2)
such leaves shall be granted at one time except as may be mutually
agreed to.
ARTICLE 15 -- SENIORITY RULES AND REGULATIONS
15.1 PREAMBLE
A. The Seniority Rules hereafter set forth, which implement the
seniority provisions of the Production and Maintenance Labor
Agreement, shall be used to govern the application of
seniority from and after August 8, 1995, as it relates to
hourly-paid production and maintenance employees represented
by the United Steelworkers of America.
B. These rules shall remain in effect unless and until modified
by written agreement signed by Management representatives and
appropriate representatives of the United Steelworkers,
including the Chairman and Secretary of the Grievance
Committee.
C. The intent and spirit of these Seniority Rules and Regulations
is to insure the placement and retention of the most qualified
employees with the longest continuous service.
15.2 PROBATION
A. Any person having one hundred-eighty (180) calendar days or
less of continuous service shall be deemed to be a
probationary employee. During such probationary period, the
Company may separate said probationary employee at its
discretion.
- 22 -
<PAGE> 27
B. Any employee retained after sold one hundred-eighty (180)
calendar days shall become a regular employee.
C. Should a new hire be laid off prior to the end of his
probationary period and then recalled at a later date (not to
exceed one hundred eighty (180) days), previous probationary
time will be used in determining the completion of the
probationary period only.
D. Should the layoff continue past the one hundred-eighty (180)
day period, the employee shall be considered as a new hire and
a new probationary period shall be served.
E. Those former employees of SiMETCO who were rehired by SIMCALA,
INC. shall not suffer a break in continuous service.
15.3 LOSS OF SENIORITY
A. Voluntary quit.
B. Discharge for proper cause.
C. Failure to report for work or failure to report reason for
absence for four (4) consecutive days.
D. Failure to report for work or report intent following a
layoff:
(a) if notified of recall to work, either in person or by a
person-to--person telephone call, he will report intent to
return and, if he refuses, he will be sent a notice by
registered or certified mail, and failing to report within
twenty-four (24) hours after receiving notice, he will be
terminated.
(b) Should the Company be unable to reach you by telephone,
you will have four (4) calendar days to report to work after
receipt of notice by registered or certified mail.
E. Absence in excess of any leave of absence granted under
Article 14.
F. If an employee shall be absent because of layoff or physical
disability, he shall continue to accumulate continuous service
during such absence for two (2) years, and shall be eligible
for recall for an additional period equal to (a) two (2)
years, or (b) the excess, if any, of his length of continuous
service at commencement of such absence over two (2) years,
whichever is less. Any accumulation in excess of two (2) years
during such absence shall be counted, however, only for the
purposes of this Article 15, including local agreements
thereunder, and shall not be counted for any other purpose
under this or any other agreement between the Company and
- 23 -
<PAGE> 28
the Union. In order to avoid a break in service after an
absence of two (2) years, the employee must give the Company
annual written notice that he intends to return to employment
when called, if the Company at least thirty (30) days prior
thereto has mailed him a notice at the most recent address
furnished by him to the Company that he must file such written
notices.
G. Absence due to a compensable disability incurred during the
course of employment shall not break continuous service,
provided such individual is returned to work within thirty
(30) days after final payment of statutory compensation for
such disability or after the end of the period used in
calculating a lump sum payment.
15.4 SENIORITY FACTORS
A. The parties recognize that promotional opportunity and job
security in event of promotions, decrease of forces, and
recalls after layoffs should increase in proportion to length
of continuous service, and that in the administration of this
section the intent will be that wherever practicable full
consideration shall be given continuous service in such cases.
In recognition of the responsibility of Management for the
efficient operation of the works, it is understood and agreed
that in all cases of promotion, layoff and recall the
following factors will apply:
(a) Ability to perform the work.
(b) Training, experience and education.
(c) Prior job performance.
(d) Continuous Service (Plant Service).
Where (a), (b) and (c) are relatively equal, (d) will be the
determining factor.
B. Nothing in this Subsection "B" shall prevent Plant Management
and the Grievance Committee from mutually agreeing to fill an
equal or lower job in a promotional sequence with a senior
employee, nor shall anything in this Subsection "B" prevent
Plant Management and the Grievance Committee from executing an
agreement in writing to provide an opportunity to any employee
displaced in the course of a reduction of forces to exercise
his seniority to the extent appropriate to obtain a job paying
higher earnings; provided, such employee is otherwise
qualified with respect to relative ability to perform the work
and relative physical fitness as provided above. Plant
Management and the Grievance Committee may mutually agree to
provide training for employees disabled in the plant and to
assign them to vacancies for which they are qualified on the
basis of such seniority arrangements as they may determine.
- 24 -
<PAGE> 29
C. Wherever used in these rules (unless expressly defined
otherwise) "continuous service" shall mean an employee's
length of continuous service within the plant, calculated from
the first day worked on any occupation in the plant or his
first day worked upon re-employment following a break in
continuous service in the plant, whichever is later.
D. If the plant continuous service dates for two (2) or more
employees are the same, then the employee with the lowest dock
number will be accorded benefits to be derived from having the
greater plant continuous service date.
15.5 SENIORITY UNITS
A. The units to which the seniority factors, as set forth above,
shall be applied are the lines of promotion, also referred to
as "seniority units" which are attached as an Appendix hereto.
These units may be changed or now units established from time
to time by written agreement, on chart form, signed by Local
Plant Management and by the Chairman of the Grievance
Committee of the Local Union.
B. The seniority unit in which an employee has status on a
permanent basis is referred to hereinafter as the employee's
"home seniority unit."
15.6 PERMANENT VACANCIES
A. Appointments to fill permanent vacancy in a line of promotion
(including a permanent vacancy in a regular relief assignment)
created by an employee promotion, demotion, death, discharge,
quit, retirement or transfer out of the seniority unit shall
be made in the following order of priority:
1. Employee(s) with the greatest seniority occupying the
immediately preceding occupation to the vacant
occupation in the line of promotion, or occupying an
occupation of equal rank in the line of promotion
where lateral movement is provided for by connecting
lines on the chart will be offered the promotion.
2. In the event that the candidate above refuses a
promotion, then employees on successively lower
ranking occupations in the line of promotion will be
similarly considered for promotion.
3. Each successive lower ranking job in the line of
promotion is filled in the same manner with the
employees present, then employees who have recall
rights to the line of promotion shall be recalled in
order of their plant continuous service to fill the
remaining vacancies.
4. After all employees with seniority rights in the line
of promotion have been recalled, then the vacancy
will be filled by the following bid procedure:
- 25 -
<PAGE> 30
a. When it becomes necessary to fill a job
vacancy through the posting of a bid the
senior employee(s) within the classification
will be permitted the option of moving to
the vacancy before the bid is posted. The
vacancy remaining will then be subject to
the bid award.
b. Notice of the permanent vacancy shall be
posted in the clock room. Such notice shall
show the department, job title, job class,
estimated number of employees required, date
of posting, designed location where bid is
to be filed, and shall remain posted for
seven (7) calendar days.
c. Any employee holding plant continuous
service in the plant may bid for the job in
writing on forms furnished by the Company,
and bids shall be received by Management
during the seven (7) calendar day period
provided above. When the employee presents
his bid at the designated location in the
plant, his bid shall be recorded as received
and the employee shall be given a copy as
evidence of receipt of his bid.
d. Management shall have seven (7) days (longer
periods than seven (7) days may be required
if there is a large volume of bids received)
following the seven (7) day posting period
in which to make an evaluation of all
bidders, the selection will be made on the
basis of:
(a) Ability to perform the
work.
(b) Training, experience and
education.
(c) Prior job performance.
(d) Continuous Service (Plant
Service).
Where (a), (b) and (c) are relatively equal, (d) will
be the deciding factor.
B. Promptly upon selection management, notice of the employee
selected by Management to fill a permanent vacancy shall be
posted for ten (10) days on the same bulletin boards, as the
notice of vacancy was posted. The notice shall show the name,
badge number, plant continuous service date of the employee
appointed, department, occupation title, the effective day of
the appointment, and the day of posting. In the event
Management determines not to fill a vacancy that has been
posted for bidding, a cancellation notice will be posted in
the same manner.
- 26 -
<PAGE> 31
1. Any complaint or grievance contesting Management's
selection must be filed in writing with the
department Superintendent or his designated
representative during the ten (10) day period that
the notice of appointment is posted. If no grievance
is filed within the ten (10) day period as above
provided, no grievance will thereafter be entertained
either by the Union or the Company unless an employee
was temporarily absent during the entire ten (10) day
period that the notice of appointment was posted
because of vacation, illness, injury, and in such
event in order to be considered, such employee must
file a grievance within the ten (10) day period after
the date he returns to work.
2. If a grievance protesting the appointment to fill a
permanent vacancy is settled in favor of the
aggrieved employee, he shall displace the employee
assigned to the occupation in question; and all other
affected employees shall be returned to their former
positions. If additional employees are needed, the
job will again be posted for bids.
C. New jobs may be filled directly by the bid procedure or may be
inserted into an existing line of promotion and then filled by
candidates occupying the immediately preceding occupation to
the new job after it is inserted in the line of promotion. In
the event that the Union and the Company fail to agree on the
appropriate position in the line of promotion, Management may
insert the job in the position they deem appropriate subject
to challenge in the Grievance Procedure, including
Arbitration.
D. Should an employee in the seniority unit eligible for
promotion be unable to accept such assignment because of
temporary absence due to vacation, illness, injury or leave of
absence, another employee may be temporarily assigned to the
vacant occupation, pending return to work of the employee
initially eligible for promotion. The Company may fill an
occupation on a temporary basis during the time required to
determine the successful candidate by the bid procedure.
E. An employee who refuses a permanent promotion shall be
required to sign a waiver form. Such waiver shall be binding
on the employee until revoked by the employee in writing, when
he will again be considered for such promotion.
15.7 FILLING TEMPORARY VACANCIES
A. VACANCIES OF THREE WEEKS (21 DAYS OR LESS).
In filling a temporary vacancy in an occupation within a line
of promotion for a period of three (3) weeks or less, the employee on the same
turn occupying the occupation immediately preceding the vacant occupation with
the greatest length of plant continuous service shall be offered the temporary
promotion. In other words, in filling all temporary vacancies in a line of
promotion, each turn shall stand on its own.
- 27 -
<PAGE> 32
B. VACANCIES OVER THREE WEEKS (21) DAYS
In filling a temporary vacancy within a line of promotion,
other than one caused by an employee vacation that continues beyond the initial
three week period, the vacancy will be filled as though it was permanent (A.1.).
The employee with the greatest length of plant continuous service occupying the
occupation immediately preceding the temporarily vacant occupation regardless of
the shift he is working. Such assignments shall be posted.
C. STATUS OF EMPLOYEES AT THE END OF A TEMPORARY VACANCY
1. When an absent employee gives notice at least two (2)
hours in advance of his intention to return to work
at the end of a temporary vacancy (that was filled on
the turn), he will on reporting displace the employee
promoted in his place and, in turn, the temporary
incumbents will be returned to the occupations from
which they came in the line of promotion if their
plant continuous service still entitles them to be
retained in such jobs; otherwise they will exercise
their plant continuous service on successively lower
ranking jobs.
2. When an absent employee is to return to work
following an extended period wherein the temporary
vacancies were filled by crossing turns, then
displacement of all temporary incumbents and their
returning to the occupations from which they came
will take place for the next payroll week covered by
the posting of the weekly work schedule if their
plant continuous service still entitles them to be
retained in such jobs; otherwise, they will exercise
their plant continuous service on successively lower
ranking jobs. In the interim, employees returning
from extended periods of absence will be offered
whatever jobs are available without displacement in
their home line of promotion.
D. When it is necessary to supplement the regular scheduled crews
by doubling over employees for a period estimated at less than
a full turn, the employees doubled over will be assigned
independently of the regular scheduled crews. This does not
affect the filling of temporary vacancies created by absences
of any member of the regular scheduled crews.
15.8 PROMOTIONS, REDUCTION IN FORCES AND RECALLS AFTER LAYOFFS
A. A qualified employee may exercise his plant continuous service
to displace a junior employee on lower ranking occupations or
occupations of equal rank where lateral movement is provided
for by connecting lines on the he line of promotion charts
only under the conditions listed below, provided he will move
laterally or downward in the line of promotion only until he
reaches the highest occupation where his qualifications and
his plant continuous service is sufficient for him to
- 28 -
<PAGE> 33
hold. Employees displaced by more senior employees in a
reduction in force will move likewise.
1. In a reduction in forces.
2. If the occupation to which he is assigned is
eliminated.
3. If he is demoted because of inability to meet
satisfactorily the requirements of the occupation to
which he is assigned.
When an employee's position is filled following a reduction in force,
he will be required to return to that position (unless the employee has since
bid into another line of promotion).
B. If an employee would otherwise be laid off due to a reduction
in force, or the elimination of the occupation to which he is
assigned, he may be retained in the line of promotion if he
has sufficient plant continuous service to displace a junior
employee on the occupation that is next above the occupation
to which he was last permanently assigned; provided, however,
the employee with the greatest seniority similarly located
will get the benefits of the promotion provided he is
qualified.
C. Employees who are the successful bidders for a job in a line
of promotion will enter the line of promotion with their
entire plant continuous service date for promotional purposes.
D. Employees may be promoted on increases in forces to an
occupation of higher rank in the line of promotion or an
occupation of equal rank in the line of promotion where
lateral movement is provided by connecting lines on the chart,
only when a vacancy is to be filled in such occupation.
15.9 TRANSFERS AND RETAINING SENIORITY RIGHTS
A. When an employee temporarily transferred is recalled for
regular assignment to a job in his home line of promotion, he
shall return to his home line of promotion on the next weekly
schedule.
15.10 TEMPORARY TRANSFER AT MANAGEMENT'S DIRECTION
A. An employee, who is temporarily transferred at Management's
direction will be considered in filling permanent vacancies in
higher ranking jobs in his home line of promotion the same as
if he were still actively employed in that line of promotion
on the job from which temporarily transferred.
B. If at any time during the term of a temporary transfer, the
services of an employee are no longer required by Management,
his temporary transfer will be terminated.
- 29 -
<PAGE> 34
C. Senior employees, on rotating or frozen shift jobs, will be
given preference once every year for changing shifts on
January 1.
15.11 TEMPORARY LOSS OF WORK ARISING OUT OF STRIKES OR WORK STOPPAGES
A. Because of the difficulties of reopening the plants, no claims
for violation of seniority provisions shall be made or
processed in the grievance procedure with respect to the first
two (2) weeks after the ending of a strike or work stoppage.
15.12 MANNING NEW FACILITIES
A. Prior to the manning of a new or expanded department at the
Mt. Meigs Plant, Management and Plant Grievance Committee
shall meet to seek agreement in accordance with the Labor
Agreement to facilitate efficient manning and preserve job
security for longer service employees.
ARTICLE 16 - TERMINATION
16.1 This Agreement shall terminate at the expiration of sixty (60) days
after either party shall give written notice of termination to the
other party but in any event shall not terminate earlier than August 8,
2000. The company agrees to sit down with the union and discuss wages
after thirty (30) months.
16.2 It is understood and agreed herewith that with the signing of this
Agreement, both parties waive or withdraw all other questions raised
and/or discussed during negotiations but which have not been written
into this Agreement specified parts hereof or agreed to by other
action.
16.3 Any notice given under this Article 16, shall be given by registered or
certified mail, and, if given by the Company, shall be addressed to the
United Steelworkers of America, 6200 E. J. Oliver Blvd., Suite 44,
Fairfield, AL 35054, and, if given by the Union, shall be addressed to
SIMCALA, Inc., P.O. Box 68, Mt. Meigs, Alabama 36057. Either party
shall, by like written notice, advise the other of any change in
address.
16.4 It is the continuing policy of the Company and the Union that the
provisions of this Agreement shall be applied to all employees without
regard to race, color, religious creed, national origin, age, sex,
handicap or veteran status.
ARTICLE 17 - TRAINING
It is the intent of the Company to provide all of its employees with the
training required to evaluate, control and continuously improve all production
and support service processes and to maintain and upgrade the Plant to ensure
efficient production. This will enable the Company to provide its customers with
products and services which meet or exceed the customers' requirements and
expectations.
- 30 -
<PAGE> 35
The following types of training will be required for all hourly employees:
Basics of Statistical Process Control
-- Training approach is to include:
-- Use of SIMCALA historical data in training programs.
-- Specific applications data used for special
functional areas:
-- Shipping data used to train Shipping
employees.
-- Production data to train Production
employees.
-- Raw material data to train Maintenance
employees.
-- Training in Statistical Process Control techniques
-- Gathering data, averaging numbers, SPC chart
production.
-- Determination of SPC control limits.
-- Recognition of out--of--control conditions and
appropriate actions.
Problem--Solving Skills
-- Training is to include:
-- Trend, Gap, Pareto and Ishikawa (Fishbone)
Minimum Competency Training (for employees below high--school
competency)
-- Training approach is to include:
-- Needs analysis for each employee.
-- Specific training as needed.
ESTIMATED TRAINING HOURS
Basics of Statistical Process Control: 6 Hours per Employee
Problem Solving Skills: 2 Hours per Employee
Minimum Competency Training: Structured to Individual's Needs
Other training for electricians shall be developed by the Company to
ensure adequate levels of competency when considering the electrical
complexity of the Plant.
- 31 -
<PAGE> 36
TRAINING DELIVERY APPROACH
- All training is to be delivered by qualified trainers at either the
SIMCALA conference room or off-site. Employees will be compensated at
the bid hourly rate for all training hours.
ARTICLE 18 - ENTIRE AGREEMENT
Section 1. This Agreement contains the sole and entire agreement and
understanding of the Company and the Union with respect to the
entire subject matter hereof, all prior discussions,
negotiations, commitments, and undertakings being merged
herein. During the negotiations which resulted in this
Agreement, both the Company and the Union had the unlimited
right and opportunity to make demands and proposals with
respect to any subject matter not removed by law from the area
of collective bargaining, and the understandings and
agreements arrived at by the parties hereto after the exercise
of that right and opportunity are set forth in this Agreement.
The Company and the Union, for the life of this Agreement,
each voluntarily and unqualifiedly waives the right, and each
agrees that the other shall not be obligated, to bargain
collectively with respect to any subject or matter whether or
not such subject or matter is specifically referred to or
covered in this Agreement.
Section 2. No Local Agreements, Bargaining History of Assumption of
Liability.
It is understood and agreed that no "local" agreements, letter
agreements, or understandings, bargaining, history, arbitral
or grievance precedent, plant practices or "traditions," which
were or may have been observed prior to the date of this
Agreement shall have any force or effect on the parties
hereto. The Union understands and agrees that the Company by
this Agreement is not assuming liability for any wages,
benefits, vacations or other rights which may have accrued
prior to the date of acquisition of the Plant by SIMCALA.
Section 3. This Agreement may not be modified of terminated orally, and
no modification, termination, or waiver shall be valid in
writing and signed by the party against whom the same is
sought to be enforced.
- 32 -
<PAGE> 37
IN WITNESS of the foregoing, the Company and the Union have caused this
Agreement to be executed by their duly authorized representatives, all on the
8th day of August, 1995.
SIMCALA, INC. UNITED STEELWORKERS OF AMERICA
AFL--CIO--CLC
BY: BY:
/s/ C.E. Boardwine /s/ George Becker
- -------------------------------- ------------------------------------
C.E. Boardwine, President/C.E.O. George Becker, Intl. President
/s/ Donald J. Williams /s/ Leo W. Gerard
- -------------------------------- ------------------------------------
Donald J. Williams, Corp. Dir. Leo W. Gerard, Intl. Sec.-Treasurer
Human Resources
/s/ Arthur M. Danison /s/ Richard H. Davis
- -------------------------------- ------------------------------------
Arthur M. Danison, Plant Mgr. Richard H. Davis, Intl. V.P. Adm.
/s/ Leon Lynch
------------------------------------
Leon Lynch, Intl. V.P. Human Affairs
/s/ Joe L. Kiker
------------------------------------
Joe L. Kiker, Director, District 9
/s/ David L. Newell
------------------------------------
David L. Newell, Staff Rep.
LOCAL 8538 NEGOTIATING COMMITTEE
/s/ Clarence W. Hellums, Jr.
------------------------------------
Clarence W. Hellums, Jr., Pres.
/s/ Johnny L. Ross
------------------------------------
Johnny L. Ross, Vice Pres.
/s/ T. H. Hatfield
------------------------------------
T. H. Hatfield, Chairman
/s/ Kyle King
------------------------------------
Kyle King, Committeeman
- 33 -
<PAGE> 38
SCHEDULE 'A'
STANDARD HOURLY WAGE SCALE
<TABLE>
<CAPTION>
Job Class '95 Effective
-----------------------------------------------------------------
<S> <C>
1-2 $11.485
3 $11.602
4 $11.719
5 $11.836
6 $11.953
7 $12.070
8 $12.187
9 $12.304
10 $12.421
11 $12.538
12 $12.655
13 $12.772
14 $12.889
15 $13.006
16 $13.123
17 $13.240
18 $13.357
</TABLE>
- 34 -
<PAGE> 39
SIMCALA INC.
401-K PLAN
SIMCALA, Inc. and United Steelworkers of America have agreed upon the following
provisions in regard to establishing a 401 (k) plan for the benefit of hourly
employees at the Montgomery, Alabama plant:
a. The 401 (k) plan will be established no later than March 1, 1995.
b. Each hourly employee has the option of participating in the plan by
contributing, from each pay, a percentage of their compensation.
c. The Company has agreed to match 100% of the first 2% of employee
contributions.
d. Employee contributions are not now subject to Federal and/or State
income tax.
e. A choice of investment options will be offered for each participant.
f. Employee contributions are 100% vested.
g. Employer contributions are 100% vested after five years of service,
including plant service prior to enrolling in the plan.
h. SIMCALA, Inc. will pay the administration charges necessary to maintain
the plan.
i. SIMCALA agrees to fund any employee contributions which were deducted
from an employee's payroll check but not paid by SiMETCO, Inc. (under
its old plan date: __/10/90), as of September 17, 1993. Such amounts
shall be funded plus 5% interest from the date signed below over the
first twenty (20) days after the establishment of the plan.
SIMCALA, INC. UNITED STEELWORKERS OF AMERICA
Local 8538
/s/ /s/
- -------------------------------- -----------------------------------
/s/ /s/
- -------------------------------- -----------------------------------
/s/ /s/
- -------------------------------- -----------------------------------
/s/
- -------------------------------- -----------------------------------
- 35 -
<PAGE> 40
SIMCALA, INC.
PROFIT SHARING AGREEMENT
Section 1. Effective August 8, 1995, the operating profit of the Mt.
Meigs plant will be considered in the derivation of a Profit
Sharing Bonus for all employees of the plant. The term
"operating profit" is defined as the Mt. Meigs Plant profit
before interest expenses and taxes ("Profit").
Section 2. A Profit Sharing Pool is established and will include the
total amount of funds that will be distributed to the hourly
employees of the plant at various levels of operating profit.
All active plant hourly employees who satisfy the eligibility
requirements of Section 5 of this Appendix will share equally
in the funds provided at the appropriate level of the
Distribution Pool (the "Pool") for the amount of the operating
profit earned. The Pool will remain a fixed amount for the
life of the 1994-199_ Agreement. As necessary, the monthly
bonus will be calculated through interpolation within the
Pool.
Section 3. The Profit Sharing Bonus, if earned, will be distributed on a
quarterly basis. The first quarter of the Plan will be the
three month period beginning fiscal January. 1995 and
concluding at the end of fiscal September, 1999. The last
quarter of the Plan will be the quarter ending fiscal
December, 1999.
Section 4. The Company will provide to the Union on a timely basis at the
end of each quarter information, including P&L statements and
pertinent data from outside audits regarding the Mt. Meigs
Plant operating profit and the derivation and calculation of
the quarterly Profit Sharing Bonus. Checks for the Bonus will
be issued promptly upon calculation of the Bonus.
Section 5. To be eligible to receive a Profit Sharing Bonus for a
particular quarter, an employee must meet the following
requirements:
(a) The employee must have satisfied his probationary
period by the beginning of the quarter being
considered.
(b) The employee must have worked at least two hundred
forty (240) hours within the quarter, or have been
off work due to an on-the-job-injury. Hours will be
considered as worked for all paid time away from the
job. Union leave and S&A.
- 36 -
<PAGE> 41
Section 6. A cap of $150,000 is provided on the Profit Sharing Pool.
<TABLE>
<CAPTION>
QUARTERLY PROFIT DISTRIBUTION POOL
---------------- -----------------
<S> <C>
$3,000,000 $150,000
$2,500,000 $120,000
$2,000,000 $ 90,000
$1,500,000 $ 65,000
$1,000,000 $ 40,000
$ 500,000 $ 20,000
</TABLE>
- 37 -
<PAGE> 42
SIGNATURE SHEET
PROFIT SHARING AGREEMENT
SIMCALA, INC. UNITED STEELWORKERS OF AMERICA
Local 8538
/s/
- -------------------------------- -----------------------------------
/s/
- -------------------------------- -----------------------------------
/s/
- -------------------------------- -----------------------------------
/s/
-----------------------------------
/s/
-----------------------------------
/s/
-----------------------------------
/s/
-----------------------------------
/s/
-----------------------------------
Dated:
------------------------
- 38 -
<PAGE> 43
SIMCALA, INC.
LOCAL AGREEMENTS - MONTGOMERY PLANT
AUGUST 8, 1995
1. Safety shoe allowance will be $50.00 per calendar year. Allowance not
used during the year of entitlement may be carried over into the next
year with the total accumulation not to exceed two allowances during
any calendar year.
2. Overtime meal allowance will be set at $2.00 and $5.00.
SIMCALA, INC. UNITED STEELWORKERS OF AMERICA
Local 8538
/s/
- -------------------------------- -----------------------------------
/s/
- -------------------------------- -----------------------------------
/s/
- -------------------------------- -----------------------------------
/s/
- -------------------------------- -----------------------------------
/s/
-----------------------------------
/s/
-----------------------------------
/s/
-----------------------------------
/s/
-----------------------------------
- 39 -
<PAGE> 44
Exhibit 'A'
1. Maintenance Department Progression:
Certified Electrician
|
Shift Maintenance Man
|
Welder / Maintenance
|
Blacksmith
|
Oilier / Helper
2. V.S. Department Progression:
Raw Material Handler
|
Stores Attendant
|
V.S. Attendant
|
V.S. Bagger
3. Shipping Department Progression:
Finished Material Handler
|
Shipping Labor
4. Furnace Department Progression:
Head Furnaceman
|
Furnaceman
|
Head Tapper
|
Tapper
|
Furnace Crane
|
Ladle Repairman
|
Metal Breaker
|
Furnace Labor
|
Electrode Installer
- 40 -
<PAGE> 1
EXHIBIT 10.17
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (this "Agreement") is made as of March 31, 1998
by and among Simcala, Inc., a Delaware corporation (the "Company") and successor
by merger with SAC ACQUISITION CORP., a Georgia corporation ("Buyer"), each of
the individuals and entities listed on SCHEDULE B hereto (each being a "Seller,"
and all of them together being the "Sellers"), and SunTrust Bank, Atlanta, a
Georgia banking corporation ("Escrow Agent").
BACKGROUND
A. Immediately prior to the execution and delivery hereof, Buyer
became the owner of 100% of the issued and outstanding shares of capital stock
of (the Company), pursuant to the terms of that certain Stock Purchase
Agreement, dated as of February 10, 1998 (the "Purchase Agreement") among Buyer,
the Company, and the Sellers and Buyer merged with and into the Company, with
the Company being the surviving corporation.
B. The Purchase Agreement contemplates the establishment of an escrow
fund for the purposes stated therein.
C. Escrow Agent is willing to accept the escrow fund and to hold and
distribute the escrow fund in accordance with the terms and conditions set forth
herein.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual promises contained
herein, and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties agree as follows:
1. Appointment of Escrow Agent. The Company and each of the Sellers
hereby designate and appoint Escrow Agent to serve as escrow agent hereunder,
and Escrow Agent hereby confirms its agreement to act as escrow agent upon the
terms, conditions, and provisions of this Agreement.
2. Creation of Escrow Fund.
(a) Concurrently with the execution and delivery of this Agreement, the
Buyer has deposited with Escrow Agent the sum of Four Million Dollars
($4,000,000) (the "Escrow Deposit").
(b) Escrow Agent agrees to hold, administer, invest and dispose of the
Escrow Deposit and any interest, dividends, distributions or other income or
capital appreciation earned and realized from the Escrow Deposit and the
realized earnings thereof (hereinafter collectively referred to as the
"Earnings"; the sum of the Escrow Deposit plus the Earnings less any
distributions pursuant to Section 5 is hereinafter referred to as the "Escrow
Fund") in accordance with the terms and conditions of this Escrow Agreement and
not permit any withdrawal thereof except pursuant to the terms hereof.
<PAGE> 2
(c) Escrow Agent shall invest and reinvest any or all of the Escrow
Fund in any of the following:
(i) obligations issued or guaranteed by the United States of
America or any agency or instrumentality thereof with a remaining term of one
year or less;
(ii) certificates of deposit of, or accounts with, national
banks or corporations endowed with trust powers having capital and surplus in
excess of $100,000,000;
(iii) commercial paper at the time of investment rated A-1 by
Standard & Poor's Corporation or Prime-1 by Moody's Investor's Service, Inc.; or
(iv) obligations issued by any state or municipality of the
United States with a remaining term of one year or less.
The parties agree that the Sellers will include any Earnings in respect of the
Escrow Fund in their respective incomes.
(d) Escrow Agent shall maintain a ledger (the "Escrow Ledger") setting
forth (i) the name and address of each Seller, (ii) investments and
reinvestments of the Escrow Fund, (iii) the amount of the Escrow Fund
attributable to the remainder of the Escrow Deposit, (iv) the amount of the
remainder of the Escrow Deposit attributable to each Seller, determined
initially based on his or its Proportionate Share, (v) the amount of the Escrow
Fund attributable to the Earnings, and (vi) each Seller's share of the Earnings
based on such Seller's respective percentage interest in the Escrow Fund on the
date the Earnings are realized, and (vii) the amount of the Escrow Fund
attributable to each Seller, and (viii) such other information as may be
required from time to time in writing by the Company or the Sellers for the
administration of this Agreement. Copies of each updated version of the Escrow
Ledger shall be sent to the Company and all Sellers as soon as practicable
following each such update and each March 31, June 30, September 30 and December
31 during the term of this Agreement.
3. Disposition of Claims Amount. At any time prior to the close of
business on September 15, 2002, the Company may deliver to Escrow Agent an
Indemnification Claim, with a copy being contemporaneously delivered to the
Seller(s) named therein (the "Seller Indemnitor(s)"). Each Seller Indemnitor
shall have thirty (30) days following receipt of such Indemnification Claim to
deliver to Escrow Agent a written objection thereto specifying in reasonable
detail the basis for such objection (the "Objection"), with a copy being
contemporaneously delivered to the Company. If an Objection is not timely filed
with Escrow Agent by a Seller Indemnitor, the Indemnification Claim against such
Seller Indemnitor is an
2
<PAGE> 3
"Uncontested Claim." If an Objection is timely filed with Escrow Agent by a
Seller Indemnitor, the Indemnification Claim against such Seller Indemnitor is a
"Contested Claim."
4. Tentatively Impounded Funds. With respect to each Indemnification
Claim received by Escrow Agent, Escrow Agent shall make a notation on the Escrow
Ledger setting aside from the Escrow Fund (and each Seller Indemnitor's share of
the Escrow Fund) the amount asserted by the Company as a Loss (the "Tentatively
Impounded Funds"). In connection with any asserted Loss in respect of a Company
Related Claim, such notation shall be made against each Seller Indemnitor's
share of the Escrow Fund pro rata based on his or its respective Proportionate
Shares, and any payment with respect thereto shall also be made from each Seller
Indemnitor's share of the Escrow Fund based on his or its Proportionate Share.
Upon notification of determination of the exact amount of the Loss with respect
to each Indemnification Claim (whether by Notice of Release or by Award Notice),
the Tentatively Impounded Funds shall be decreased or increased by Escrow Agent
as necessary to reflect the difference (if any) between the amount of the Loss
asserted in the Indemnification Claim and the amount of the Loss actually
payable to the Company pursuant to Section 5 hereof. Upon payment by Escrow
Agent to the Company of any amount in respect of any such Loss or upon receipt
of a Withdrawal Notice from the Company, any remaining Tentatively Impounded
Funds with respect to such Loss or Withdrawal Notice shall be reduced by the
amount of such payments or the amount stated in such Withdrawal Notice.
5. Distributions from Escrow Fund. Escrow Agent shall pay and disburse
from the Escrow Fund:
(a) To the Company the amount specified as an "Adjustment Amount" in
a written declaration executed by the Company and each of the Sellers;
(b) All accrued Earnings (net of amounts paid as the Sellers'
share of the expenses of Escrow Agent) on the Escrow Deposit will be
distributed by Escrow Agent beginning June 30, 1998 and, thereafter,
quarterly to the Sellers based on each of their respective shares of
the Earnings as reflected in the Escrow Ledger on the date of
distribution of the Earnings;
(c) To the Company the amount of Loss asserted if the
Indemnification Claim is an Uncontested Claim;
(d) To the Company the amount of Loss asserted if the
Indemnification Claim is a Contested Claim and the Seller Indemnitor
shall have delivered a Withdrawal Notice to Escrow Agent with respect
to such Contested Claim;
(e) To the Company the amount specified in any Notice of Release
with respect to an Indemnification Claim;
(f) To the Company the amount specified in any Award Notice
with respect to an Indemnification Claim;
-3-
<PAGE> 4
(g) Pursuant to written notice received from the Sellers, to
each of the Sellers in Proportionate Shares, on the next business day
following September 30, 1998 an amount equal to Five Hundred Thousand
Dollars ($500,000); provided, however, that the amount distributed to
each Seller shall be reduced by the sum of (i) the amount of
Tentatively Impounded Funds attributable to such Seller on such date,
(ii) the amount of such Seller's Proportionate Share of any Adjustment
Amount paid from the Escrow Fund, and (iii) the amount of any and all
Losses attributable to such Seller paid from the Escrow Fund.
(h) Pursuant to written notice received from the Sellers, to
each of the Sellers in Proportionate Shares, on the next business day
following March 31, 1999 an amount equal to One Million Dollars
($1,000,000); provided, however, that the amount distributed to each
Seller shall be reduced by the sum of (i) the amount of Tentatively
Impounded Funds attributable to such Seller on such date, (ii) the
amount of such Seller's Proportionate Share of any Adjustment Amount
paid from the Escrow Fund (but only to the extent that such amount was
not withheld from the funds released pursuant to subparagraph (g)
above), and (iii) the amount of any and all Losses attributable to such
Seller paid from the Escrow Fund (but, in each case, only to the extent
that such amount was not withheld from the funds released pursuant to
subparagraph (g) above).
(i) Pursuant to written notice received from the Sellers, to
each of the Sellers in Proportionate Shares, on the next business day
following September 30, 1999 an amount equal to One Million Dollars
($1,000,000); provided, however, that the amount distributed to each
Seller shall be reduced by the sum of (i) the amount of Tentatively
Impounded Funds attributable to such Seller on such date, (ii) the
amount of such Seller's Proportionate Share of any Adjustment Amount
paid from the Escrow Fund (but only to the extent that such amount was
not withheld from the funds released pursuant to subparagraphs (g) and
(h) above), and (iii) the amount of any and all Losses attributable to
such Seller paid from the Escrow Fund (but, in each case, only to the
extent that such amount was not withheld from the funds released
pursuant to subparagraphs (g) and (h) above).
(j) If there are Tentatively Impounded Funds with respect to a
particular asserted Loss on any of the dates specified in (g), (h) or
(i) above, and the amount of the asserted Loss exceeds the amount of
the Loss actually paid to the Company pursuant to this Section 5, to
each Seller in an amount equal to his or its share of such excess (or,
if less, such Seller's remaining interest in the Escrow Fund).
(k) Pursuant to written notice received from the Sellers, to
each of the Sellers, on the next business day following September 15,
2002, the amounts equal to the amounts by which the then remaining
balance of each Seller's interest in the Escrow Fund exceeds the amount
of Tentatively Impounded Funds attributable to such Seller on such
date; and
-4-
<PAGE> 5
(l) If there are Tentatively Impounded Funds with respect to a
particular asserted Loss on September 15, 2002, to the Seller to whom
or which the Tentatively Impounded Funds were attributable on September
15, 2002, on the next business day following the first day when the
Tentatively Impounded Funds attributable to such Seller with respect to
such Loss are equal to zero, an amount equal to the excess of the
remaining balance of such Seller's interest in the Escrow Deposit over
any remaining Tentatively Impounded Funds with respect to such Seller.
With respect to a disbursement made pursuant to subparagraph (f) above,
not less than 20 days before such disbursement, Escrow Agent shall give notice
of such pending disbursement to each of the Company and the relevant Seller(s).
All other disbursements described hereunder shall be made by Escrow Agent within
three (3) business days following the events described above by wire transfer to
an account designated in writing by the recipient(s) of the disbursement. A
Seller's share of the Escrow Fund shall be reduced by (and such reduction shall
be reflected on the Escrow Ledger) (i) the amount of all distributions to such
Seller, (ii) such Seller's Proportionate Share of any Adjustment Amount
distributed to the Company, and (iii) in accordance with Section 4 of this
Agreement, by the amount of payments made to the Company under subparagraphs
(c), (d), (e) and (f) of this Section 5 for Indemnification Claims for which
such Seller was the Seller Indemnitor. If at any time the amount of any payment
required to be made by Escrow Agent to the Company in respect of a particular
Seller exceeds such Seller's remaining share of the Escrow Fund, Escrow Agent
shall pay to the Company the entire Escrow Fund with respect to such Seller.
6. Escrow Agent's Duties. Escrow Agent shall be obligated to perform
only such duties as expressly set forth in this Agreement and the Schedules
hereto, and shall not be required, in carrying out its duties under this
Agreement, to refer to the Purchase Agreement or any other agreement between the
parties or any of them or among the parties or any of them and any other person
or entity.
7. Remedies of Escrow Agent. In the event of any disagreement or
controversy hereunder, or if conflicting demands or notices are made upon Escrow
Agent, or in the event Escrow Agent in good faith is in doubt as to what action
it should take hereunder, the parties expressly agree and consent that Escrow
Agent shall have the absolute right, at its option, to file a suit in
interpleader and obtain an order from a court of competent jurisdiction
requiring all persons involved to interplead their several claims and rights
among themselves and with Escrow Agent.
8. Reliance on Counsel. The Escrow Agent may from time to time consult
with legal counsel of its own choosing in the event of any disagreement, or
controversy, or question or doubt as to the construction of any of the
provisions hereof or its duties hereunder, and it shall incur no liability and
shall be fully protected in acting in good faith in accordance with the opinion
or instructions of such counsel, unless such opinion or instructions constitute
gross negligence or willful misconduct. Any such fees and expenses of such legal
counsel shall be considered part of the fees and expenses of the Escrow Agent
described within this Escrow Agreement.
-5-
<PAGE> 6
9. Escrow Agent's Fees and Expenses. The Company hereby remits to
Escrow Agent the sum of $2,500, and the Sellers hereby remit to Escrow Agent the
sum of $2,500 based on their Proportionate Shares, in partial consideration for
carrying out the Escrow Agent's duties hereunder. All additional reasonable
compensation of Escrow Agent as set forth in SCHEDULE A hereto and all expenses,
disbursements and advances (including reasonable attorneys' fees and expenses)
incurred in carrying out Escrow Agent's duties hereunder shall be paid one-half
by the Company and one-half from the Escrow Fund (first from Earnings, then, if
necessary, from the Escrow Deposit) pro rata according to the Sellers'
Proportionate Shares. If Escrow Agent resigns or is terminated pursuant to
Section 11 of this Agreement, Escrow Agent shall be entitled to its compensation
earned prior to such resignation or termination.
10. Indemnification. The Company and each of the Sellers severally
shall indemnify, protect and save and hold Escrow Agent and its successors and
permitted assigns harmless from all liabilities, obligations, losses, damages,
penalties, claims, actions, suits, costs and expenses (including reasonable
attorneys' fees and expenses) of whatsoever kind or nature imposed on, incurred
by or asserted against Escrow Agent which in any way relate to or arise out of
the execution and delivery of this Agreement or any action taken hereunder;
provided, however, that the Company and the Sellers shall have no obligation to
indemnify and save and hold Escrow Agent harmless from any liability incurred
by, imposed upon or asserted against Escrow Agent resulting from the gross
negligence or willful misconduct of Escrow Agent The Company shall indemnify
Escrow Agent for up to one-half of the amount of any indemnification obligations
owing by the Company under this Section 10, and all of the Sellers shall
indemnify Escrow Agent for up to one-half of the amount of any indemnification
obligations owing under this Section 10, with each Seller being jointly and
severally liable for the Sellers' aggregate one-half share of any such
indemnification obligations. The provisions of this Section 10 shall survive the
term of this Agreement.
11. Resignation by or Termination of Escrow Agent. Escrow Agent may
resign as such by delivering written notice to such effect at least thirty (30)
days prior to the effective date of such resignation to each of the Sellers and
the Company. The Company and the Sellers, acting jointly, may terminate Escrow
Agent from its position as such by delivering written notice to Escrow Agent to
such effect executed by the Company and the Sellers at least thirty (30) days
prior to the effective date of such termination (unless such termination is as a
result of Escrow Agent's breach of its obligations hereunder, in which case the
effective date of such termination shall be any date specified in such notice by
the Company and the Sellers). In the event of such resignation by or termination
of Escrow Agent, a successor Escrow Agent shall be appointed by mutual written
agreement between the Company and the Sellers. Escrow Agent which has been so
terminated or has so resigned shall promptly deliver to the successor Escrow
Agent the entire balance of the Escrow Fund (together with copies of all records
pertaining thereto) upon presentation of evidence reasonably satisfactory to it
of the appointment and authorization of such successor Escrow Agent by the
Company and the Sellers. Upon receipt of the amounts in the Escrow Fund, such
successor Escrow Agent shall thereupon be bound by all of the provisions hereof.
From and after the appointment of a successor Escrow Agent pursuant to this
Section 11, all references herein to Escrow Agent shall be deemed to be to such
successor Escrow Agent. Should the Company and the Sellers fail to appoint a
successor Escrow Agent within thirty (30)
-6-
<PAGE> 7
days of the effective date of any resignation or termination pursuant to this
Section 11, then Escrow Agent may institute suit in a court of competent
jurisdiction to have a successor Escrow Agent appointed and tender into the
custody of that court all of the remaining portion of the Escrow Fund.
12. Definitions. As used herein:
(a) "AWARD NOTICE" means a true copy of the final unappealable
order (or an order for which the time to appeal has expired without an
appeal having been made) of a court of competent jurisdiction.
(b) "COMPANY RELATED CLAIM" means an asserted Loss in respect
of an alleged breach of a representation, warranty, covenant or
agreement of the Company in the Purchase Agreement or certain other
documents referenced in Section 12.2(a) of the Purchase Agreement or a
claim under Section 8.7 of the Purchase Agreement.
(c) "INDEMNIFICATION CLAIM" means a written declaration by the
Company as successor in interest to the Buyer, stating (i) that the
Company as successor in interest to the Buyer has suffered a Loss, (ii)
the identity of the Seller Indemnitor(s) to whom or which the Loss is
attributable which, in the case of a Company Related Claim, shall be
all Sellers, (iii) the facts, circumstances and events giving rise to
such Loss, each specified in reasonable detail, (iv) the amount of the
asserted Loss, (v) that the amount of such Loss or portion thereof is a
reasonable estimate, and (vi) whether the Indemnification Claim is a
Company Related Claim. If the asserted Loss is a Company Related Claim,
the Company as successor in interest to the Buyer must name all Sellers
as Seller Indemnitors and allocate the Loss to each Seller Indemnitor
according to his or its Proportionate Share.
(d) "LOSS" means any and all demands, claims, actions or
causes of action, assessments, losses, fines, judgments, costs, damages
(including special and consequential damages), liabilities, costs,
removal and remediation requirements and expenses, including without
limitation, interest, penalties, cost of investigation and defense, and
reasonable attorneys' and other professional fees and expenses asserted
against, paid, suffered or incurred by the Company as successor in
interest to the Buyer.
(e) "NOTICE OF RELEASE" means a written declaration, executed
by the Company and the appropriate Seller Indemnitee, (which, in the
case of a Company Related Claim, must be executed by all Sellers),
specifying the resolution of an Indemnification Claim and the
disposition to be made of the Escrow Fund or any portion thereof that
was the subject of such Indemnification Claim.
(f) "OBJECTION" means a written objection by the appropriate
Seller Indemnitee to an Indemnification Claim stating in reasonable
detail the basis for such objection.
-7-
<PAGE> 8
(g) "PROPORTIONATE SHARE" means the respective percentage
interest of each Seller in the Escrow Deposit and in certain amounts
disbursed to the Sellers hereunder, which percentage interest is set
forth on SCHEDULE B hereto.
(h) "WITHDRAWAL NOTICE" means an irrevocable written
declaration (x) withdrawing an Indemnification Claim executed by the
Company as successor in interest to the Buyer (which, in the case of a
Company Related Claim, must be a complete withdrawal against all
Sellers), or (y) executed by the appropriate Seller Indemnitee
withdrawing an Objection (which, in the case of a Company Related
Claim, must be executed by all Sellers).
13. General Provisions.
(a) Assignment. This Agreement shall be binding upon the successors and
permitted assigns of the parties. Neither this Agreement nor any right or
benefit of any party hereunder may be assigned or transferred by such party
without the prior written consent of all other parties hereto, which consent
shall not be unreasonably withheld or delayed; provided, however, that the
Company may assign its rights, together with its obligations, hereunder (i) to
any of its affiliates, (ii) to any lender or lenders providing financing to
Buyer, the Company or its affiliates or (iii) in connection with any sale,
transfer or other disposition (by operation of law or otherwise) of all or
substantially all of its assets or business or stock of the Company, without
prior written consent.
(b) Amendment. This Agreement may not be amended or modified without
the prior written consent of all parties.
(c) Waiver. Failure to insist upon strict compliance with any of the
terms or conditions of this Agreement at any one time shall not be deemed a
waiver of such term or condition at any other time; nor shall any waiver or
relinquishment of any right or power granted herein at any time be deemed a
waiver or relinquishment of the same or any other right or power at any other
time.
(d) Governing Law. Notwithstanding the place where this Agreement may
be executed by any of the parties, the parties expressly agree that this
Agreement shall in all respects be governed by, and construed in accordance
with, the laws of the State of Georgia, without regard for its conflict of laws
doctrine.
(e) Notices. Any notice or other communication to be given hereunder
shall be in writing, shall be sent to all parties, and shall be deemed
sufficient when (i) mailed by United States certified mail, return receipt
requested, (ii) mailed by overnight express mail, or (iii) delivered in person,
at the address set forth below, or such other address as a party may provide to
the other in accordance with the procedure for notices set forth in this
Section:
-8-
<PAGE> 9
(i) If to the Company:
SIMCALA, Inc.
c/o CGW Southeast Partners III, L.P.
Suite 210
Twelve Piedmont Center
Atlanta, Georgia 30305
Attn: Mr. William A. Davies
Telephone: (404) 816-3255
Telecopier: (404) 816-3258
Taxpayer Identification Number: 34-1780941
with a copy (which shall not constitute notice) to:
Alston & Bird
1201 West Peachtree Street
Atlanta, GA 30309-3424
Attn: Teri L. McMahon, Esq.
Telephone: 404-881-7266
Telecopier: 404-881-4777
(ii) If to a Seller:
(A) If to Charter Oak Partners:
10 Wright Street, Building B
Westport, Connecticut 06880
Attn: Anthony J. Dowd
Telephone: (203) 221-4752
Telecopier: (203) 222-2720
Taxpayer Identification Number: 13-2869339
(B) If to Capital One Investors:
1111 Chester Avenue, Suite 815
Cleveland, Ohio 44114
Attn: James M. Petras
Telephone: (216) 781-5134
Telecopier: (216) 781-0158
Taxpayer Identification Number: 34-17497-09
-9-
<PAGE> 10
(C) If to Carl Edward Boardwine:
c/o SIMCALA, Inc.
Ohio Ferro Alloys Road
Mt. Meigs, Alabama 36057
Telephone: (334) 215-7560
Telecopier: (334) 215-8969
Taxpayer Identification Number: ###-##-####
(D) If to Dwight L. Goff:
c/o SIMCALA, Inc.
Ohio Ferro Alloys Road
Mt. Meigs, Alabama 36057
Telephone: (334) 215-7560
Telecopier: (334) 215-8969
Taxpayer Identification Number: ###-##-####
(E) If to R. Myles Cowan:
c/o SIMCALA, Inc.
Ohio Ferro Alloys Road
Mt. Meigs, Alabama 36057
Telephone: (334) 215-7560
Telecopier: (334) 215-8969
Taxpayer Identification Number: ###-##-####
(F) If to George W. Rapp, Jr.:
97 Warrior Road
Louisville Kentucky 40207
Telephone: (502) 897-3019
Telecopier: (502) 897-3019
Taxpayer Identification Number: ###-##-####
with a copy (which shall not constitute notice) to:
Schulte Roth & Zabel LLP
900 Third Avenue
New York, New York 10022
Attn: Andre Weiss, Esq.
Telephone: (212) 756-2431
Telecopier: (212) 593-5955
-10-
<PAGE> 11
(iii) If to Escrow Agent:
SunTrust Bank, Atlanta
Corporate Trust Department
Room 400 - Annex
58 Edgewood Avenue
Atlanta, Georgia 30303
Attn: Ronald C. Painter
Telephone: (404) 588-7191
Telecopier: (404) 332-3966
(f) Invalid Provision. If any provision of this Agreement shall be
determined to be invalid or unenforceable, this Agreement shall be deemed
amended to delete such provision and the remainder of this Agreement shall be
enforceable by its terms.
(g) Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective permitted successors and
assigns.
(h) Further Assurances. Each party agrees to execute and deliver all
such further instruments and do all such further acts as may be reasonably
necessary or appropriate to effectuate this Agreement.
(i) Headings. Headings and captions contained in this Agreement are
inserted only as a matter of convenience and for reference and in no way define,
limit, extend or prescribe the scope of this Agreement or the intent of any
provision.
(j) Person and Gender. The masculine gender shall include the feminine
and neuter genders and the singular shall include the plural.
(k) Entire Agreement. This Agreement constitutes the entire agreement
of the parties with respect to matters set forth in this Agreement, and
supersedes any prior understanding or agreement, oral or written, with respect
to such matters.
(l) Interpretations. Neither this Agreement nor any uncertainty or
ambiguity herein shall be construed or resolved against any party hereto,
whether under any rule of construction or otherwise. No party shall be
considered the draftsman. On the contrary, this Agreement has been reviewed,
negotiated and accepted by all parties and shall be construed and interpreted
according to the ordinary meaning of the words used so as to fairly accomplish
the purposes and intentions of all parties hereto.
(m) Execution in Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be an original, and all such
counterparts shall constitute one and the same Agreement, binding on all the
parties notwithstanding that all the parties are not signatories to the same
counterpart.
-11-
<PAGE> 12
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
SIMCALA, Inc. as successor in interest to SAC
Acquisition Corp.
By: /s/ William A. Davies
-------------------------------------------
William A. Davies
Chairman of the Board
SUNTRUST BANK, ATLANTA,
as Escrow Agent
By: /s/ Ronald C. Painter
-------------------------------------------
Name:
-----------------------------------------
Title:
----------------------------------------
SELLERS:
Charter Oak Partners
By Fine Partners L.P., the Managing
Partner of Charter Oak Partners
By: /s/ Anthony J. Dowd
-------------------------------------------
Anthony J. Dowd
Authorized Signatory
[Signatures Continued on Following Page]
-12-
<PAGE> 13
Capital One Investors
By: MCK Corporation, General Partner
By: /s/ James M. Petras
-----------------------------------------
James M. Petras, President of
MCK Corporation
By: Briseis Capital Corporation, General Partner
By: /s/ James D. Ireland III
-----------------------------------------
James D. Ireland III, President of
Briseis Capital Corporation
Carl Edward Boardwine
/s/ Carl Edward Boardwine
--------------------------------------------------
Dwight L. Goff
/s/ Dwight L. Goff
--------------------------------------------------
R. Myles Cowan
/s/ R. Myles Cowan
--------------------------------------------------
George W. Rapp, Jr.
/s/ George W. Rapp, Jr.
--------------------------------------------------
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<PAGE> 14
SCHEDULE A
ESCROW AGENT'S FEES
The annual fee of $3,500 for administering this Escrow Agreement is due at the
time of closing. Each year on the anniversary of the date of this Escrow
Agreement, half of the annual fee will be invoiced to the Company and the other
half of the annual fee will be paid from the Escrow Fund (as provided in Section
9 of the Escrow Agreement).
Out of pocket expenses such as, but not limited to postage, courier, overnight
mail, insurance, money wire transfer, long distance telephone charges,
facsimile, stationery, travel, legal or accounting, etc., will be billed or
deducted from the Escrow Fund, as appropriate, at cost.
These fees do not include extraordinary services which will be priced according
to time and scope of duties.
It is acknowledged that the schedule of fees shown above are acceptable for the
services mutually agreed upon and the parties authorize SunTrust Bank, Atlanta
to perform said services.
<PAGE> 15
SCHEDULE B
PROPORTIONATE SHARES
<TABLE>
<CAPTION>
PROPORTIONATE SHARE
<S> <C>
Charter Oak Partners 53.1%
P.O. Box 5147
10 Wright Street, Building B
Westport, Connecticut 06880
Taxpayer Identification Number: 13-2869339
Capital One Investors 36.0%
111 Chester Avenue, Ste. 815
Cleveland, Ohio 44144
Taxpayer Identification Number: 34-1749709
Carl Edward Boardwine 8.0%
125 Bald Cypress East
Electic, Alabama 36080
Social Security Number: ###-##-####
Dwight L. Goff 1.0%
1665 Minnie Knight Road
Titus, Alabama 36080
Social Security Number: ###-##-####
R. Myles Cowan 1.0%
3640 Narrow Lane Road
Montgomery, Alabama 36111
Social Security Number: ###-##-####
George W. Rapp, Jr. 0.9%
97 Warrior Road
Louisville, Kentucky 40207
Social Security Number: ###-##-####
</TABLE>
<PAGE> 1
EXHIBIT 10.18
SIMCALA HOLDINGS, INC.
SHAREHOLDERS AGREEMENT
THIS SHAREHOLDERS AGREEMENT (this "Agreement") is made and entered into
as of March 31, 1998, by and among SIMCALA HOLDINGS, INC., a Georgia
corporation (the "Company"), CGW SOUTHEAST PARTNERS III, L.P., a Delaware
limited partnership ("CGW"), and Carl Edward Boardwine, Dwight L. Goff and R.
Myles Cowan (may be referred to individually as a "Shareholder" and collectively
as the "Shareholders").
RECITALS
WHEREAS, the shares of capital stock of the Company now or hereafter
owned by the Shareholders, or any of them, are hereinafter called the "Shares";
and
WHEREAS, CGW, the Shareholders and the Company deem it to be in their
best interests to provide certain agreements with respect to the Shares,
including, without limitation, the transfer or other disposition of the Shares;
AGREEMENT
NOW, THEREFORE, for and in consideration of the premises, the mutual
covenants contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree:
ARTICLE 1
RESTRICTIONS ON SHARES
1.1 Restrictions on Transfer of Shares. The Shares shall be subject to
the following restrictions:
(a) Except for transfers made in compliance with Section
1.1(b) below, none of the Shares owned by a Shareholder may be
conveyed, pledged, assigned, transferred, hypothecated, encumbered or
otherwise disposed of by a Shareholder.
(b) A Shareholder (or any Transferee as defined in Section
9.12(h) hereof) may transfer the Shares owned by such Shareholder or
such Transferee only:
(i) to a Transferee, provided that all such Shares
shall remain subject to the restrictions set forth in this
Section 1.1 and all applicable rights in favor of the Company
set forth elsewhere herein in the hands of the Transferee and
any subsequent Transferee;
<PAGE> 2
(ii) in connection with one of the following
transactions: (A) dissolution or liquidation of the Company,
(B) merger of the Company into another company, or any
consolidation, share exchange, combination, reorganization or
like transaction the consummation of which is subject to prior
approval by the shareholders of the Company, (C) sale or
transfer (other than as security for the Company's credit
obligations) of substantially all of the assets of the
Company, or (D) in a transfer pursuant to Articles 3 or 7
hereof; or
(iii) in strict compliance with the right of first
refusal described in Article 2 below.
(c) Any Transferee shall, as a condition to the transfer of any
Shares to the Transferee, become a party to this Agreement and shall
thereupon be deemed a "Shareholder" hereunder.
ARTICLE 2
RIGHT OF FIRST REFUSAL
2.1 Right of First Offer. If a Shareholder shall receive a bona fide
offer from a third party for such third party to purchase any Shares owned by
such Shareholder, which offer such Shareholder intends to accept, such
Shareholder, before accepting such third party offer or consummating the sale to
such third party, shall notify the Company in writing of such offer, which
notice shall state the number of Shares subject to such offer and the price and
terms of payment offered by such third party. The Company shall have thirty (30)
days after receipt by it of such notice within which to notify the Shareholder,
in writing, of its election to purchase all (but not less than all) of the
Shares that are the subject of such third party offer at the same price and upon
the same terms and conditions as are contained in such third party offer.
Failure by the Company to give such written notice within such thirty (30) day
period shall constitute a rejection of such offer by the Company. If the Company
rejects such offer or fails timely to accept such offer, or if after timely
accepting such offer the Company fails timely to consummate the purchase of the
Shares that are the subject of that offer, then such Shareholder shall be free
to sell the Shares that are the subject of such third party offer to the third
party at the price and upon the same terms and conditions as are set forth in
the third party offer; provided, however, if such Shareholder does not
consummate such sale to the third party within ninety (90) days after rejection
by the Company of the offer, or, if such offer is timely accepted by the
Company, after failure of the Company timely to consummate such purchase, the
Shares that were the subject of such third party offer shall once again become
subject to the provisions of this Section 2.1, and any subsequent disposition of
such Shares shall be made only after compliance with the terms of this Section
2.1. If the Company timely accepts such offer, the consummation by the Company
of the purchase of Shares that are the subject of the offer shall be held at the
offices of the Company not later than sixty (60) days following the date the
Company gives written notice of its acceptance of such offer.
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<PAGE> 3
ARTICLE 3
COMPANY'S REPURCHASE RIGHT
3.1 Right to Sell and Purchase Shares. Upon the occurrence of a
Repurchase Event (as defined in Section 9.12(f) hereof) with respect to a
Shareholder:
(a) The Shareholder (or his personal representative, executor or
administrator, as the case may be) and/or a Transferee of such Shareholder shall
have the right to sell to the Company all or any portion of the Shares owned by
the Shareholder and/or such Transferee at a price per share equal to the
Purchase Price (as defined in Section 3.2) upon the terms and conditions set
forth herein. A Shareholder and/or a Transferee may exercise his right to sell
the Shares owned by such Shareholder and/or such Transferee by giving written
notice to the Company within one month following the occurrence of the
Repurchase Event giving rise to such right, provided, however, if the Repurchase
Event is the death or disability of a Shareholder, notice may be given within
six months following the Repurchase Event.
(b) During the respective periods described in Section 3.1(a) and for
the period of ninety (90) days following the expiration of the applicable period
described in that Section, the Company shall have the right to purchase all or
any portion of the Shares owned by such Shareholder (or his personal
representative, executor or administrator, as the case may be) and/or a
Transferee of such Shareholder at a price per share equal to the Purchase Price
upon the terms and conditions set forth herein. The Company may exercise its
right to purchase the Shares owned by such Shareholder and/or such Transferee by
giving written notice to such Shareholder and/or Transferee within the
applicable period following the occurrence of the Repurchase Event giving rise
to such right or within the ninety (90) day period following the expiration of
such applicable period.
3.2 Purchase Price. The Purchase Price shall be (a) upon the occurrence
of a Repurchase Event, (i) the greater of Fair Value Per Share (as defined in
Section 9.12(d) hereof) or Cost (as defined in Section 9.12(c) hereof) due to
the termination of such Shareholder's employment for any reason other than by
the Company for Cause, and (ii) the lesser of Fair Value Per Share or Cost due
to the termination of Shareholder's employment by the Company for Cause, and (b)
for any other purpose, Fair Value Per Share.
3.3 Closing of Repurchase. The closing of any purchase of the Shares
owned by such Shareholder and/or such Transferee pursuant to this Article 3
shall take place at the principal office of the Company not earlier than thirty
(30) nor later than forty-five (45) days after the date of the written notice by
a Shareholder and/or a Transferee of the exercise of his right to sell, and the
date of the Company's written notice of the exercise of its right to purchase
such Shares pursuant to this Article 3. At the closing of any purchase of Shares
pursuant to this Article 3, such Shareholder (or his personal representative,
executor or administrator, or such Transferee, as the case may be) shall deliver
all stock certificates representing the Shares to be purchased, properly
endorsed for transfer, and the Company shall pay the transferor at such time and
against delivery of the Shares (a) the aggregate purchase price for the Shares
being purchased; provided,
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<PAGE> 4
however, if the Board of Directors of the Company shall determine in good faith
that payment of the entire aggregate purchase price for the Shares is not
permitted by the Company's loan agreements or would constitute an unlawful
distribution by the Company, then the Company shall have the right, if the
Company's loan agreements permit the Company to incur the indebtedness created
by such deferred payment, to pay for such Shares by executing and delivering to
such Shareholder (or his personal representative, executor or administrator or
such Transferee, as the case may be), the Company's unsecured promissory note
for the aggregate purchase price. Such note shall be payable to the order of the
transferor and shall bear interest at the annual rate of interest equal to the
annual rate of interest the Company is paying on the date of the closing of such
repurchase on borrowings from its senior lenders, with accrued and unpaid
interest being due on each principal installment payment date. To the extent
that the loan agreements to which the Company is a party permit the payment
annually of an amount greater than the aggregate amount then payable annually
under any note or notes issued as above provided, the Company shall use its best
efforts to obtain the consent (if required) of the lenders who are parties to
such loan agreements to permit such additional amounts to be applied in
prepayment of any such note or notes, and if such consent is obtained (or if no
such consent is required) the Company shall pay such additional amounts in
prepayment of such note or notes (with such prepayment being made pro rata based
upon the outstanding principal amount of all such notes in the event more than
one such note shall be outstanding), with any such prepayment being applied in
inverse order of maturity.
3.4 Death of Shareholder During Payout. In the event of the death of
such Shareholder after payment has commenced under Section 3.3, the terms and
amounts of payment due to such Shareholder shall continue unchanged, and
payments shall be made to such Shareholder's estate or personal representative.
ARTICLE 4
ASSIGNMENT OF COMPANY'S RIGHT TO PURCHASE
If the Company shall at any time during the term of this Agreement have
the right to purchase from a Shareholder and/or a Transferee of a Shareholder,
as the case may be, any shares of the capital stock of the Company then owned by
such Shareholder or such transferee, and the Company at such time is either
unable, or elects not, to exercise such right with respect to all or any part of
such shares of capital stock, the Company may, but shall not be obligated to,
assign its rights and delegate its obligations hereunder to CGW which may then
exercise all of the rights of the Company with respect to the purchase of such
shares of capital stock as to which such rights are assigned.
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<PAGE> 5
ARTICLE 5
FAILURE TO DELIVER SHARES
If a Shareholder or a Transferee, as the case may be, becomes obligated
to sell all or any portion of the Shares to the Company and/or to CGW under of
this Agreement but fails to present the certificate(s) for such Shares at the
closing of such purchase, then the Company and/or CGW, as the case may be, shall
transfer the purchase price for such Shares to a trustee (which shall be a bank
or trust company located in the State of Georgia), for the benefit of such
Shareholder and/or such Transferee, as the case may be, and thereupon such
portion of the Shares shall (a) in the case of a purchase by the Company be
deemed as of the date of such transfer of the purchase price to have been
redeemed and canceled and no longer outstanding, and (b) in the case of a
purchase by CGW be deemed transferred and conveyed to CGW, and the Company may
cancel certificates for such shares and may issue new certificates for such
shares in the name of CGW. The Company or CGW, as the case may be, shall
promptly inform such Shareholder and/or such Transferee, as the case may be, of
the name and address of the trustee. The Shareholder and/or such Transferee
shall have the right to obtain the purchase price from the trustee (or from the
Company and/or CGW, as the case may be, following a return of the purchase price
by the trustee as hereinafter provided) upon surrender to the trustee of the
certificates evidencing such portion of the Shares or, in the event such
certificates are missing or have been stolen, an affidavit of such Shareholder
and/or such Transferee, as the case may be, to that effect together with the
agreement of such Shareholder and/or such Transferee, as the case may be, to
indemnify the Company and/or CGW, as the case may be, against any loss incurred
as a result of such missing or stolen certificates. Any portion of the purchase
price remaining in the hands of the trustee following the lapse of a two (2)
year period commencing with the date of transfer of such purchase price to the
trustee may be returned to the Company and/or CGW, as the case may be, but such
return shall not vitiate the cancellation of such portion of the Shares to which
the returned portion of the purchase price relates, and the Shareholder and/or
such Transferee shall thereafter have the right to receive such purchase price
from the Company and/or CGW, as the case may be.
ARTICLE 6
PREEMPTIVE RIGHTS
6.1 Preemptive Rights. Except as provided in Section 6.2 below, if
after the date hereof the Company authorizes the issuance and sale of any shares
of its equity securities or any securities containing options or rights to
acquire any shares of capital stock or any other equity securities of the
Company, the Company will first offer in writing to sell to each Shareholder a
portion of such equity securities, options or rights equal to the percentage
determined by dividing (i) the number of shares of capital stock then held by
such Shareholder by (ii) the number of shares of capital stock outstanding (on a
fully diluted basis), at the most favorable price and on the most favorable
terms as such equity securities, options or rights are to be offered to any
other person. For purposes of this Section 6.1, capital stock acquirable upon
exercise or conversion of options or rights to acquire any shares of capital
stock or any other equity securities of the Company shall be deemed outstanding
only if the applicable conversion price, exercise price or
-5-
<PAGE> 6
other acquisition price per share is equal to or less than the then current Fair
Value Per Share. In the event any Shareholder shall not, within ten (10)
business days after receipt of such written offer, timely exercise his rights
under this Section 6.1 to purchase a portion of such equity securities, options
or rights, or if after timely exercising such right shall fail timely to
consummate such purchase (a "Non-Purchasing Shareholder"), each other
Shareholder that has fully exercised its right under this Section 6.1 to
purchase such Shareholder's portion of such equity securities, options or rights
and who has timely consummated such purchase (a "Purchasing Shareholder") shall
have the right to purchase such Purchasing Shareholder's pro rata share
(determined among all Purchasing Shareholders on the basis of their respective
ownership of capital stock of the Company) of the portion of such equity
securities, options or rights which the Non-Purchasing Shareholder had the right
to purchase under this Article 6. Any computation of the number of shares of
equity securities, options or rights that a Shareholder has the right to
purchase under this Article 6 shall be rounded to the nearest whole share. Each
Shareholder must exercise its purchase rights within thirty (30) days after
receipt of written notice from Company describing in reasonable detail the
equity securities, options or rights being offered, the purchase price thereof,
the payment terms and such Shareholder's percentage allotment or in the case of
the purchase by a Purchasing Shareholder of a portion of the equity securities,
options or rights that a Non-Purchasing Shareholder had the right to, but did
not purchase, within forty-five (45) days after receipt of such written notice.
The provisions of this Section 6.1 shall terminate upon the
consummation of a Public Offering (as defined in Section 9.12(e) hereof).
6.2 Exceptions for Stock Options. Section 6.1 above and the rights of
Shareholders thereunder shall not apply to capital stock or any securities of
the Company which are convertible into or exchangeable or exerciseable for
capital stock that are issued to employees of the Company or any direct or
indirect subsidiary, either directly or upon exercise of options, rights,
warrants, grants or awards, pursuant to the terms of any stock option or stock
incentive plan adopted by the Board of Directors of the Company primarily for
the benefit of employees of the Company and its subsidiaries.
ARTICLE 7
CO-SALE RIGHTS AND OBLIGATIONS
7.1 Co-Sale Rights of Shareholders. In the event that CGW receives a
bona fide offer from a third party including the Company or any Affiliate
thereof (a "Proposed Purchaser") to purchase all or any portion of the shares of
capital stock of the Company owned by CGW (a "Proposed Transfer"), then each
Shareholder shall have the right, as a precondition to such Proposed Transfer,
to cause CGW to require the Proposed Purchaser to purchase such percentage of
the Shares owned by such Shareholder as such Shareholder elects, up to and
including the percentage of CGW's shares being purchased by the Proposed
Purchaser. Any Shares purchased from such Shareholder pursuant to this Section
7.1 shall be paid and contracted for at the same price per share, with the same
form of consideration and otherwise upon the same terms and conditions as the
sale by CGW.
-6-
<PAGE> 7
7.2 Co-Sale Obligations of Shareholders. In the event of a proposed
Sale of the Company (as defined in Section 9.12(g)) that is effected through a
sale of the capital stock of the Company, CGW shall have the right to require
such Shareholder to sell to the Proposed Purchaser in such Sale of the Company
all of its respective Shares. Any Shares purchased from a Shareholder pursuant
to this Section 7.2 shall be paid and contracted for at the same price per
share, with the same form of consideration and otherwise upon the same terms and
conditions as the sale by CGW of its shares to the Proposed Purchaser in such
Sale of the Company. If the Proposed Purchaser in any Sale of the Company is an
Affiliate of CGW, such sale may only be made at a price per each Share to each
Shareholder equal to or greater than the Fair Value Per Share determined as
provided in Section 9.12(d).
7.3 Participation Notice. CGW shall, not less than fifteen (15) nor
more than forty-five (45) days prior to any Proposed Transfer or Sale of the
Company, notify each Shareholder in writing of any such Proposed Transfer or
Sale of the Company (the "Participation Notice"). Such Participation Notice
shall set forth: (i) the number and type of securities proposed to be
transferred (the "Transferred Securities"); (ii) the name(s) and address(es) of
the Proposed Purchaser(s); (iii) the proposed amount and all forms of
consideration and terms and conditions of payment offered by such Proposed
Purchaser; (iv) the date, time and place at which the Proposed Transfer or Sale
of the Company is to be consummated (the "Scheduled Closing"); and (v) that the
Proposed Purchaser has been informed of the co-sale rights of the Shareholders
provided for in Section 7.1 hereof and has agreed to purchase the Transferred
Securities in accordance with the terms of that Section.
7.4 Exercise of Co-Sale Rights or Obligations. The co-sale rights
described in Section 7.1 shall be deemed to have been exercised by a Shareholder
with respect to the maximum number of Shares that can be sold by such
Stockholder unless written notice of the Non-Exercise (the "Non-Exercise
Notice") of any of such rights is delivered to CGW at least five (5) days prior
to the Scheduled Closing. The co-sale obligations described in Section 7.2 may
be exercised by delivery of a written notice (the "Exercise Notice"), at least
five (5) days prior to the Scheduled Closing, to a Shareholder.
7.5 Miscellaneous. In the event that a Shareholder exercises his
co-sale rights pursuant to Section 7.1 hereof and the Proposed Purchaser is not
willing to purchase Shares from such Shareholder on the same terms and
conditions as specified in the Participation Notice, then CGW shall not be
permitted to transfer or otherwise dispose of any of its shares to the Proposed
Purchaser pursuant to the Proposed Transfer unless the Proposed Purchaser agrees
to purchase (i) a lesser amount of CGW's shares and (ii) a pro rata amount of
the shares of such Shareholder on the same terms and conditions as CGW's shares
are purchased. Upon exercising his respective co-sale rights pursuant to this
Article 7, a Shareholder shall be obligated until the date of the Scheduled
Closing, to transfer such number and type of securities with respect to which
such exercise has been made, to the Proposed Purchaser on the terms and
conditions stated in the Participation Notice and in accordance with the
provisions of this Article 7.
-7-
<PAGE> 8
7.6 Inapplicability of Article. Notwithstanding anything to the
contrary set forth in this Article 7, the rights and obligations arising under
this Article 7 shall not apply to: (i) the sale by CGW of shares of capital
stock of the Company pursuant to a Public Offering in which the Shareholders are
permitted to sell Shares unless the inability of the Shareholders to sell Shares
in such Public Offering is due to advice to the Company from the managing
underwriter of such offering to the effect that the inclusion in such offering
of Shares of the Shareholders would adversely affect the marketing of the
securities of the Company proposed to be sold in such offering, or (ii) any
distribution by CGW of all or any portion of the shares owned by it to its
partners.
ARTICLE 8
TERM AND TERMINATION
8.1 Term and Termination. Articles 1, 2 and 6 of this Agreement shall
terminate and be of no force and effect, unless extended as provided herein,
upon the sooner of (a) the passage of fifteen (15) years from the date of this
Agreement, (b) the effective date of a written agreement signed by all of the
parties hereto providing for the termination of this Agreement, or (c) upon the
effective date of a registration statement filed by the Company with the
Securities and Exchange Commission that will, upon issuance and sale of the
shares of Common Stock covered by that registration statement, result in a
Public Offering (as defined in Section 9.12(e)).
8.2 Extension of Term. This Agreement may be extended for additional
ten (10) year periods if the Company, CGW, and Shareholders who own in the
aggregate more than fifty-one percent (51%) of Shares subject to this Agreement
at the time of the extension so agree in writing.
ARTICLE 9
GENERAL PROVISIONS
9.1 Legends. Each certificate representing the Shares shall be endorsed
with the following legend:
TRANSFER IS RESTRICTED
THE SECURITIES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO A RIGHT OF
FIRST REFUSAL AND OTHER RESTRICTIONS ON TRANSFER SET FORTH IN A SHAREHOLDERS
AGREEMENT, DATED AS OF MARCH ____, 1998, A COPY OF WHICH IS AVAILABLE FROM THE
COMPANY.
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") AND ANY
APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, OR
HYPOTHECATED UNLESS (1) THERE IS AN EFFECTIVE REGISTRATION UNDER THE SECURITIES
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<PAGE> 9
ACT AND ANY APPLICABLE STATE SECURITIES LAWS COVERING SUCH SECURITIES OR (2) THE
COMPANY RECEIVES AN OPINION OF COUNSEL, REASONABLY SATISFACTORY TO THE COMPANY,
STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND ANY APPLICABLE STATE
SECURITIES LAWS.
Each Shareholder agrees that the Company may also endorse any other
legends required by applicable federal or state securities laws and securities
laws of applicable foreign jurisdictions.
The Company shall not be required (a) to transfer on its books any
Shares that have been sold or transferred in violation of the provisions of this
Agreement (including the foregoing legends), or (b) to treat as the owner of the
Shares, or otherwise to accord voting or dividend rights to, any transferee to
whom the Shares have been transferred in contravention of this Agreement (or
such legends).
9.2 Additional Shares or Substituted Securities. If any stock
dividend, stock split, recapitalization or other change affecting the Company's
outstanding stock is effected without receipt of consideration, then any new,
substituted or additional securities or other property (including money paid
other than as a regular cash dividend) which is by reason of any such
transaction distributed with respect to the Shares shall be immediately subject
to the restrictions on Shares set forth herein, and the requirement of a legend
set forth in Section 9.1, of this Agreement, but only to the extent that the
Shares are at the time subject to such restrictions and requirement.
9.3 Removal of Legend and Transfer Restrictions.
(a) Any legend or portion of a legend endorsed on a
certificate pursuant to Section 9.1 hereof and the stop transfer
instructions with respect to the Shares shall be removed and the
Company shall issue a certificate without such legend or portion
thereof to the holder thereof if such Shares are registered under the
Securities Act and a prospectus meeting the requirements of Section 10
of the Securities Act is available or at such other time as such legend
is no longer applicable.
(b) The restrictions described in the second sentence of the
legend set forth in Section 9.1 hereof may be removed at such time as
permitted by Rule 144 promulgated under the Securities Act.
9.4 Governing Laws. This Agreement shall be construed,
administered and enforced according to the laws of the State of Georgia.
9.5 Assignment; Successors. This Agreement and the rights of a
party hereunder may be transferred to a Transferee of such party, but may not be
transferred or assigned to any other person or entity without the prior written
consent of the parties hereto; provided, however, CGW may assign this Agreement
and its rights hereunder to any Affiliate of CGW, provided CGW
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<PAGE> 10
remains liable with respect to its obligations under this Agreement. This
Agreement shall be binding upon and inure to the benefit of the parties and
their respective permitted Transferees.
9.6 Notice. Except as otherwise specified herein, all notices and other
communications under this Agreement shall be in writing and shall be deemed to
have been given if personally delivered or if sent by overnight delivery
addressed to the proposed recipient at the last known address of the recipient
as reflected on the books and records of the Company. The date on which such
notice or other communication is received shall be the date of delivery. Any
party may designate any other address to which notices shall be sent by giving
notice of the address to the other parties in the same manner as provided
herein.
9.7 Severability. In the event that any one or more of the provisions
or portion thereof contained in this Agreement shall for any reason be held to
be invalid, illegal, or unenforceable in any respect, the same shall not
invalidate or otherwise affect any other provisions of this Agreement, and this
Agreement shall be construed as if the invalid, illegal or unenforceable
provision or portion thereof had never been contained herein.
9.8 Entire Agreement. This Agreement expresses the entire understanding
and agreement of the parties with respect to the subject matter hereof. This
Agreement may be executed in two or more counterparts, each of which shall be
deemed an original but all of which shall constitute one and the same
instrument.
9.9 Violation. Any attempted transfer, pledge, sale, assignment, or
hypothecation of the Shares or any portion thereof in violation of the terms of
this Agreement shall be void and without effect.
9.10 Headings. Paragraph headings used herein are for convenience of
reference only and shall not be considered in construing this Agreement.
9.11 Specific Enforcement. Each of the Company, CGW and the
Shareholders expressly agrees that others will be irreparably damaged if this
Agreement is not specifically performed. Upon a breach of the terms, covenants
and/or conditions of this Agreement by any party, the other parties shall, in
addition to any and all other rights and remedies at law or in equity, be
entitled to a temporary or permanent injunction, without showing any actual
damage, and/or a decree for specific performance, in accordance with the
provisions hereof. All such rights and remedies shall be cumulative.
9.12 Certain Definitions. The capitalized terms listed below are used
herein with the meaning thereafter ascribed:
(a) "AFFILIATE" of any party shall mean any natural person,
corporation, general or limited partnership, joint venture, trust,
association, or unincorporated entity of any kind (each a "Person")
that controls or is controlled by or under common control with such
other party. For the purpose of this definition, "control" of a Person
shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of its
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<PAGE> 11
management and policies, whether through the ownership of voting
capital stock, by contract or otherwise, and the terms "controlled" and
"common control" shall have correlative meanings.
(b) "CAUSE" shall mean as to a Shareholder (i) conduct
amounting to fraud or dishonesty against the Company; (ii) such
Shareholder's willful misconduct intended to injure or having the
effect of injuring the reputation, business or business relationship of
the Company, repeated refusal to follow the reasonable directions of
the Board of Directors of the Company, or knowing violation of law in
the course of performance of the duties of such Shareholder's
employment with the Company, (iii) repeated absences from work without
a reasonable excuse without being corrected upon fifteen (15) days
prior written notice, (iv) a conviction or plea of guilty or nolo
contendere to a felony or a crime involving dishonesty against the
Company; or (v) a breach or violation by such Shareholder of the terms
of this Agreement or any other agreement to which such Shareholder and
the Company are a party without being corrected upon fifteen (15) days
prior written notice.
(c) "COST" shall mean the consideration per Share paid by the
Shareholder for such Share.
(d) "FAIR VALUE PER SHARE" shall mean the value of a share of
capital stock of the Company (on a fully-diluted basis) assuming the
sale of the Company and all its subsidiaries as a whole and as a going
concern to a willing buyer on the date with respect to which such
determination is made (whether such sale takes the form of a sale of
stock, a sale of assets, a merger or a consolidation). The Company
will, within fifteen (15) days after the date with respect to which
such determination is made, deliver to the Shareholder with respect to
whose Shares the determination is being made a written notice setting
forth a proposed Fair Value Per Share. If, within fifteen (15) days
after receipt of such notice, such Shareholder does not object to the
determination of the Fair Value Per Share set forth therein, then the
Fair Value Per Share will be as set forth in such notice. If within
such fifteen (15) day period such Shareholder objects to the Company's
determination of Fair Value Per Share, the Company and such Shareholder
will attempt to agree within fifteen (15) days following the expiration
of such period on an appraiser to determine the Fair Value Per Share.
If the Company and such Shareholder fail to agree on a mutually
acceptable appraiser during such fifteen (15) day period, then the
Company and such Shareholder will each appoint an investment banking
firm of national reputation and such two investment banking firms will
select a third investment banking firm of national or regional
reputation experienced in the appraisal of businesses similar to that
of the Company and its subsidiaries to serve as the appraiser and shall
direct such appraiser to independently determine the Fair Value Per
Share and to submit its determination in writing at the earliest
practicable date, but in any event within ninety (90) days following
the date of such appraiser's selection. The Company and the Shareholder
shall each bear the costs of their respective investment banking firms
for purposes of appointing an appraiser, and the costs of the third
appraiser shall be shared equally by the Company and such Shareholder;
provided, however, that to the extent the Fair Value Per Share
-11-
<PAGE> 12
determined by the appraisers ("Appraisers' Value") shall exceed the
Fair Value Per Share proposed by the Company ("Company's Value") to the
Shareholder pursuant to this subsection (c), the Company shall pay an
amount of the appraisal costs of the Shareholder equal to the amount
per share the Appraiser's Value exceeds the Company's Value, multiplied
by the number of Shares which are the subject of the appraisal. If
either the Company or the Shareholder fails to appoint an investment
banking firm of national reputation within fifteen (15) days after the
expiration of such fifteen (15) day period, then the investment banking
firm appointed by the other party will act as the appraiser and
determine the Fair Value Per Share. All appraisal reports will be in
writing, will be signed by the appraiser and will be delivered to the
Company with copies to the Shareholder. If the appraiser expresses its
opinion as to Fair Value Per Share in terms of a range of values, the
mean of such range shall be deemed to be the Fair Value Per Share for
purposes of this Agreement or if such opinion expresses Fair Value Per
Share as an absolute number, such number shall be deemed to be the Fair
Value Per Share. The Fair Value Per Share determined as herein provided
will be final and binding upon Company and the Shareholder.
(e) "PUBLIC OFFERING" shall mean one or a series of firmly
underwritten public offerings for sale by the Company of an aggregate
number of shares of its Common Stock for all such offerings as will,
immediately following the completion of such offerings, constitute not
less than twenty percent (20%) of the total shares of the Common Stock
of the Company then issued and outstanding, which public offerings
shall be managed by one or more underwriters that the Company, in its
discretion, reasonably believes to have appropriate experience in
public offerings of similar size and type, and where the aggregate
gross proceeds to the Company from such public offerings shall be not
less than $20,000,000.
(f) "REPURCHASE EVENT" means, as to a Shareholder, the
termination of such Shareholder's employment with the Company or any
Affiliate of the Company for any reason, other than (i) in the case of
a "put" by such Shareholder pursuant to Section 3.1(a) above,
termination of such employment by the Shareholder or by the Company for
Cause, and (ii) in the case of a "call" by the Company pursuant to
Section 3.1(b) above, termination of such employment by the Company
without Cause.
(g) "SALE OF THE COMPANY" shall mean the sale of the Company
and all of its Subsidiaries (whether by merger, share exchange,
consolidation, sale of all of the outstanding capital stock or sale of
substantially all of their respective assets) to any person or entity.
(h) "TRANSFEREE" shall mean a spouse or any child, grandchild,
parent or spouse of any child, grandchild or parent, or any trust
created for the benefit of any of the foregoing.
-12-
<PAGE> 13
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year first set forth above.
SIMCALA HOLDINGS, INC..
By: /s/ William A. Davies
--------------------------------------
William A. Davies
Chairman of the Board
CGW SOUTHEAST PARTNERS III, L.P.
By: CGW Southeast III, L.L.C., its
General Partner
By: CGW, Inc., its Manager
By: /s/ William A. Davies
--------------------------------------
William A. Davies
Managing Director
SHAREHOLDERS:
/s/ Carl Edward Boardwine
-----------------------------------------------
Carl Edward Boardwine
/s/ Dwight L. Goff
-----------------------------------------------
Dwight L. Goff
/s/ R. Myles Cowan
-----------------------------------------------
R. Myles Cowan
-13-
<PAGE> 1
EXHIBIT 12.1
SIMCALA, INC.
STATEMENT SETTING FORTH COMPUTATION OF
RATIO TO EARNINGS OF FIXED CHARGES
FOR THE YEARS ENDED DECEMBER 31, 1993 AND 1994 AND FOR THE
PERIOD FROM JANUARY 1, 1995 TO FEBRUARY 10, 1995 (SIMETCO, INC.) AND
FOR THE PERIOD FROM FEBRUARY 10, 1995 TO DECEMBER 31, 1995, FOR THE
YEARS ENDED DECEMBER 31, 1996 AND 1997, FOR THE
THREE MONTHS ENDED MARCH 31, 1997 AND 1998 (PREDECESSOR),
FOR THE PRO FORMA AS ADJUSTED YEAR ENDING DECEMBER 31, 1997 AND
FOR THE PRO FORMA AS ADJUSTED THREE MONTHS ENDING MARCH 31, 1998 (COMPANY)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIMETCO, INC. PREDECESSOR
------------------------------- -------------------------------------
PERIOD FROM
PERIOD FROM FEBRUARY 10,
JANUARY 1, 1995 (DATE OF
YEAR ENDED 1995 TO INCEPTION) TO YEAR ENDED
DECEMBER 31, FEBRUARY 10, DECEMBER 31, DECEMBER 31,
----------------- -------------------
1993 1994 1995 1995 1996 1997
-------- ------- ------------ ------------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Earnings available for Fixed Charges:
Earnings (loss) before provision for income taxes $ (2,728) $(1,943) $ 290 $ (3,219) $ 6,619 $ 9,885
Fixed charges - see below 776 800 72 1,250 1,713 2,001
Less capitalized interest (102) (66)
------- ------- ------------ ------------- ------- --------
Total $(1,952) $(1,143) $ 362 $ (2,071) $ 8,266 $ 11,886
======= ======= ============ ============= ======= ========
Fixed Charges:
Interest expense $ 776 $ 800 $ 72 $ 1,111 $ 1,511 $ 1,710
Capitalized interest 102 66
Amortization of debt issuance costs 60 218
Rental expense 37 76 73
------- ------- ------------ ------------- ------- --------
Total $ 776 $ 800 $ 72 $ 1,250 $ 1,713 $ 2,001
======= ======= ============ ============= ======= ========
Ratio of Earnings to Fixed Charges (2.5) (1.4) 5.0 (1.7) 4.8 5.9
======= ======= ============ ============= ======= ========
Deficiency $(2,728) $(1,943) $ (3,321)
======= ======= =============
PREDECESSOR COMPANY
---------------------------- ----------------------------
PRO FORMA
(UNAUDITED) PRO FORMA AS ADJUSTED
THREE MONTHS THREE MONTHS AS ADJUSTED THREE MONTHS
ENDED ENDED YEAR ENDING ENDING
MARCH 31, MARCH 31, DECEMBER 31, MARCH 31,
1997 1998 1997 1998
---------------------------- ----------------------------
<S> <C> <C> <C> <C>
Earnings available for Fixed Charges:
Earnings (loss) before provision for income taxes $ 2,363 $ (681) $ (522) (3,395)
Fixed charges - see below 434 339 8,366 2,099
Less capitalized interest (20) (20)
---------------------------- ----------------------------
Total $ 2,797 $ (362) $ 7,844 $ (1,316)
============================ ============================
Fixed Charges:
Interest expense $ 361 $ 300 7,699 1,925
Capitalized interest 20 20
Amortization of debt issuance costs 55 14 594 149
Rental expense 18 5 73 5
---------------------------- ----------------------------
Total $ 434 $ 339 $ 8,366 $ 2,099
============================ ============================
Ratio of Earnings to Fixed Charges 6.46 (1.07) 0.94 (0.63)
============================ ============================
Deficiency $ (701) $ (522) $ (3,415)
============ ============================
</TABLE>
<PAGE> 2
SIMCALA, INC.
STATEMENT SETTING FORTH COMPUTATION OF
RATIO OF EBITDA TO CASH INTEREST EXPENSE
FOR THE YEARS ENDED DECEMBER 31, 1993 AND 1994 AND FOR THE
PERIOD FROM JANUARY 1, 1995 TO FEBRUARY 10, 1995 (SIMETCO, INC.) AND
FOR THE PERIOD FROM FEBRUARY 10, 1995 TO DECEMBER 31, 1995, FOR THE
YEARS ENDED DECEMBER 31, 1996 AND 1997, FOR THE
THREE MONTHS ENDED MARCH 31, 1997 AND 1998 (PREDECESSOR),
FOR THE PRO FORMA AS ADJUSTED YEAR ENDING DECEMBER 31, 1997 AND
FOR THE PRO FORMA AS ADJUSTED THREE MONTHS ENDING MARCH 31, 1998 (COMPANY)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIMETCO, INC. PREDECESSOR
-------------------------------- --------------------------------------
PERIOD FROM
PERIOD FROM FEBRUARY 10,
JANUARY 1, 1995 (DATE OF
YEAR ENDED 1995 TO INCEPTION) TO YEAR ENDED
DECEMBER 31, FEBRUARY 10, DECEMBER 31, DECEMBER 31,
----------------- ------------------
1993 1994 1995 1995 1996 1997
-------- ------- ------------ ------------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
EBITDA:
Earnings (loss) from continued operations
before cumulative effect of change in
accounting principle $(2,728) $(1,943) $ 290 $ (3,219) $ 5,450 $ 6,371
Interest expense 776 800 72 1,111 1,511 1,710
Income taxes - - - - 1,169 3,514
Depreciation and amortization 1,282 1,140 95 1,070 1,593 2,167
======= ======= ============ ============= ======= =======
Total $ (670) $ (3) $ 457 $ (1,038) $ 9,723 $13,762
======= ======= ============ ============= ======= =======
Cash interest expense $ 607 $ 800 $ 72 $ 929 $ 1,238 $ 1,560
Ratio of EBITDA to cash interest expense (1.1) (0.0) 6.3 (1.1) 7.9 8.8
======= ======= ============ ============= ======= =======
Deficiency $(1,277) $ (803) $ (1,967)
======= ======= =============
<CAPTION>
PREDECESSOR COMPANY
---------------------------- ----------------------------
PRO FORMA
(UNAUDITED) PRO FORMA AS ADJUSTED
THREE MONTHS THREE MONTHS AS ADJUSTED THREE MONTHS
ENDED ENDED YEAR ENDING ENDING
MARCH 31, MARCH 31, DECEMBER 31, MARCH 31,
1997 1998 1997 1998
---------------------------- ----------------------------
<S> <C> <C> <C> <C>
EBITDA:
Earnings (loss) from continued operations
before cumulative effect of change in
accounting principle $ 1,570 $ (581) $ (891) $ (2,377)
Interest expense 415 314 8,293 2,073
Income taxes 793 (100) 369 (1,018)
Depreciation and amortization 424 471 5,991 1,427
============ ============ ============================
Total $ 3,202 $ 104 $ 13,762 $ 105
============ ============ ============================
Cash interest expense $ 421 $ 161 $ 8,143 $ 1,920
Ratio of EBITDA to cash interest expense 7.6 0.6 1.7 0.1
============ ============ ============================
Deficiency $ (57) $ (1,815)
============ ============
</TABLE>
<PAGE> 3
SIMCALA, INC.
STATEMENT SETTING FORTH COMPUTATION OF
RATIO OF EBITDA MARGIN
FOR THE YEARS ENDED DECEMBER 31, 1993 AND 1994 AND FOR THE
PERIOD FROM JANUARY 1, 1995 TO FEBRUARY 10, 1995 (SIMETCO, INC.) AND
FOR THE PERIOD FROM FEBRUARY 10, 1995 TO DECEMBER 31, 1995, FOR THE
YEARS ENDED DECEMBER 31, 1996 AND 1997, FOR THE
THREE MONTHS ENDED MARCH 31, 1997 AND 1998 (PREDECESSOR)
FOR THE PRO FORMA AS ADJUSTED YEAR ENDING DECEMBER 31, 1997 AND
FOR THE PRO FORMA AS ADJUSTED THREE MONTHS ENDING MARCH 31, 1998 (COMPANY)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIMETCO, INC. PREDECESSOR
--------------------------------- --------------------------------------
PERIOD FROM
PERIOD FROM FEBRUARY 10,
JANUARY 1, 1995 (DATE OF
YEAR ENDED 1995 TO INCEPTION) TO YEAR ENDED
DECEMBER 31, FEBRUARY 10, DECEMBER 31, DECEMBER 31,
------------------ ------------------
1993 1994 1995 1995 1996 1997
-------- ------- ------------ ------------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
EBITDA:
Earnings (loss) from continued operations
before cumulative effect of change in
accounting principle $ (2,728) $(1,943) $ 290 $ (3,219) $ 5,450 $ 6,371
Interest expense 776 800 72 1,111 1,511 1,710
Income taxes 0 0 0 0 1,169 3,514
Depreciation and amortization 1,282 1,140 95 1,070 1,593 2,167
---------------------------------- --------------------------------------
Total $ (670) $ (3) $ 457 $ (1,038) $ 9,723 $13,762
================================== ======================================
Net Sales $ 31,014 $31,127 $ 3,742 $ 31,523 $52,407 $62,184
Ratio (2.2%) (0.0%) 12.2% (3.3%) 18.6% 22.1%
================================== ======================================
PREDECESSOR COMPANY
---------------------------- ----------------------------
PRO FORMA
(UNAUDITED) PRO FORMA AS ADJUSTED
THREE MONTHS THREE MONTHS AS ADJUSTED THREE MONTHS
ENDED ENDED YEAR ENDING ENDING
MARCH 31, MARCH 31, DECEMBER 31, MARCH 31,
1997 1998 1997 1998
---------------------------- ----------------------------
<S> <C> <C> <C> <C>
EBITDA:
Earnings (loss) from continued operations
before cumulative effect of change in
accounting principle $ 1,570 $ (581) $ (891) $ (2,377)
Interest expense 415 314 8,293 2,073
Income taxes 793 (100) 369 (1,018)
Depreciation and amortization 424 471 5,991 1,427
------------ ------------- ----------------------------
Total $ 3,202 $ 104 $ 13,762 $ 105
============ ============ ============================
Net Sales $ 15,655 $ 14,854 $ 62,184 14,854
Ratio 20.5% 0.7% 22.1% 0.7%
============================ ============================
</TABLE>
<PAGE> 4
SIMCALA, INC.
STATEMENT SETTING FORTH COMPUTATION OF
RATIO OF NET DEBT TO PRO FORMA EBITDA
FOR THE PRO FORMA AS ADJUSTED YEAR ENDING DECEMBER 31, 1997 AND
FOR THE PRO FORMA AS ADJUSTED THREE MONTHS ENDING MARCH 31, 1998
(COMPANY)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Company
-------------------------------
Pro Forma
Pro Forma As Adjusted
As Adjusted Three Months
Year Ending Ending
December 31, March 31,
1997 1998
-------------------------------
<S> <C> <C>
Net Debt:
Long-term debt at March 31, 1998 $ 81,083 $ 81,083
Current portion - debt at March 31, 1998 90 90
Less: cash and cash equivalents at March 31, 1998 (15,796) (15,796)
-------------------------------
65,377 65,377
Pro Forma EBITDA $ 13,762 $ 105
Ratio 4.75 622.6
===============================
</TABLE>
<PAGE> 1
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT AND REPORT ON SCHEDULE
Board of Directors
SIMCALA, Inc.
We consent to the use in this Registration Statement of SIMCALA, Inc. (the
"Company") on Form S-1 of our report dated February 27, 1998, appearing in the
Prospectus, which is part of the Registration Statement, and to the references
to us under the headings "Summary Historical and Pro Forma Financial
Information," "Selected Historical Financial Information" and "Experts" in such
Prospectus.
Our audit of the financial statements referred to in our aforementioned report
also included the financial statement schedule of the Company as of and for the
year ended December 31, 1997, listed in Item 16. This financial statement
schedule is the responsibility of the Company's management. Our responsibility
is to express an opinion based on our audit. In our opinion, such financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
/s/ Deloitte & Touche LLP
Atlanta, Georgia
May 28, 1998
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the inclusion in this Registration Statement on Form S-1
and the related Prospectus of our report dated January 17, 1997 except as to
Note 4 for which the date is January 22, 1997 on the financial statements of
SIMCALA, Inc. and to the reference to our firm under the heading "Experts"
included in this Registration Statement and the related Prospectus.
Our audit of the financial statements referred to in our aforementioned report
also included the financial statement schedule of the Company as of and for the
year ended December 31, 1996, listed in Item 16. This financial statement
schedule is the responsibility of the Company's management. Our responsibility
is to express an opinion based on our audit. In our opinion, such financial
statement schedule, when considered in relation to the basis financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
Crowe, Chizek and Company LLP
Oak Brook, Illinois
May 28, 1998
<PAGE> 1
EXHIBIT 23.4
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated March 8, 1996, in the Registration Statement (Form S-1)
and related Prospectus of SIMCALA, Inc. for the registration of $75,000,000 of 9
5/8% Series B Senior Notes due 2006.
Our audit also included the financial statement schedule of SIMCALA, Inc. listed
in Item 16 for the period from February 10, 1995 (date of inception) to December
31, 1995. This schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion based on our audits. 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 set forth therein.
/s/ Ernst & Young LLP
Cleveland, Ohio
May 28, 1998
<PAGE> 1
EXHIBIT 25.1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(B)(2)
IBJ SCHRODER BANK & TRUST COMPANY
(Exact name of trustee as specified in its charter)
New York 13-5375195
(Jurisdiction of incorporation or (I.R.S. Employer
organization if not a U.S. national bank) Identification No.)
One State Street, New York, New York 10004
(Address of principal executive offices) (Zip code)
IBJ SCHRODER BANK & TRUST COMPANY
One State Street
New York, New York 10004
(212) 858-2000
(Name, address and telephone number of agent for service)
SIMCALA, INC.
(Exact name of obligor as specified in its charter)
Delaware 34-1780941
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Ohio Ferro Alloys Road
Mt. Meigs, Alabama 36057
(Address of principal executive offices) (Zip Code)
9 5/8% SERIES B SENIOR NOTES DUE 2006
(Title of indenture securities)
<PAGE> 2
Item 1. General information
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to
which it is subject.
New York State Banking Department
Two Rector Street, New York, New York
Federal Deposit Insurance Corporation
Washington, D.C.
Federal Reserve Bank of New York Second District
33 Liberty Street
New York, New York
(b) Whether it is authorized to exercise corporate trust powers.
Yes
Item 2. Affiliations with the Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
The obligor is not an affiliate of the trustee.
Item 4. Trusteeships under other indentures.
If the trustee is a trustee under another indenture under which any
other securities, or certificates of interest or participation in any
other securities of the obligor are outstanding, furnish the
following information:
(a) Title of the securities outstanding under each such other
indenture.
None
(b) A brief statement of the facts relied upon as a basis for the
claim that no conflicting interest within the meaning of
Section (310)(b)(1) of the Act arises as a result of the
trusteeship under any such other indenture, including a
statement as to how the indenture securities will rank as
compared with the securities issued under such other
indentures.
Not applicable
<PAGE> 3
Item 13. Defaults by the Obligor.
(a) State whether there is or has been a default with respect to
the securities under this indenture. Explain the nature of any
such default.
None
(b) If the trustee is a trustee under another indenture under
which any other securities, or certificates of interest or
participation in any other securities, of the obligor are
outstanding, or is trustee for more than one outstanding
series of securities under the indenture, state whether there
has been a default under any such indenture or series,
identify the indenture or series affected, and explain the
nature of any such default.
Not applicable
Item 16. List of exhibits.
List below all exhibits filed as part of this statement of
eligibility.
*1. A copy of the Charter of IBJ Schroder Bank & Trust Company as
amended to date. (See Exhibit 1A to Form T-1, Securities and
Exchange Commission File No. 22-18460).
*2. A copy of the Certificate of Authority of the trustee to
Commence Business (Included in Exhibit 1 above).
*3. A copy of the Authorization of the trustee to exercise
corporate trust powers, as amended to date (See Exhibit 4 to
Form T-1, Securities and Exchange Commission File No.
22-19146).
*4. A copy of the existing By-Laws of the trustee, as amended to
date (See Exhibit 4 to Form T-1, Securities and Exchange
Commission File No. 22-19146).
5. Not Applicable
6. The consent of United States institutional trustee required by
Section 321(b) of the Act.
7. A copy of the latest report of condition of the trustee
published pursuant to law or the requirements of its
supervising or examining authority.
*The Exhibits thus designated are incorporated herein by reference as exhibits
hereto. Following the description of such Exhibits is a reference to the copy of
the Exhibit heretofore filed with the Securities and Exchange Commission, to
which there have been no amendments or changes.
-2-
<PAGE> 4
NOTE
In answering any item in this Statement of Eligibility which relates to matters
peculiarly within the knowledge of the obligor and its directors or officers,
the trustee has relied upon information furnished to it by the obligor.
Inasmuch as this Form T-1 is filed prior to the ascertainment by the trustee of
all facts on which to base responsive answers to Item 2, the answer to said Item
are based on incomplete information.
Item 2, may, however, be considered as correct unless amended by an amendment to
this Form T-1.
<PAGE> 5
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the trustee,
IBJ Schroder Bank & Trust Company, a corporation organized and existing under
the laws of the State of New York, has duly caused this statement of eligibility
to be signed on its behalf by the undersigned, thereunto duly authorized, all in
the City of New York, and State of New York, on the 19th day of May, 1998.
IBJ SCHRODER BANK & TRUST COMPANY
By: /s/ Stephen J. Giurlando
-----------------------------
Stephen J. Giurlando
Assistant Vice President
-4-
<PAGE> 6
EXHIBIT 6
CONSENT OF TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture Act of
1939, as amended, in connection with the issuance by Simcala, Inc. of its 9 5/8%
Series B Senior Notes due 2006, we hereby consent that reports of examinations
by Federal, State, Territorial, or District authorities may be furnished by such
authorities to the Securities and Exchange Commission upon request therefor.
IBJ SCHRODER BANK & TRUST COMPANY
By: /s/ Stephen J. Giurlando
--------------------------------
Stephen J. Giurlando
Assistant Vice President
Dated: May 19, 1998
<PAGE> 7
EXHIBIT 7
CONSOLIDATED REPORT OF CONDITION OF
IBJ SCHRODER BANK & TRUST COMPANY
OF NEW YORK, NEW YORK
AND FOREIGN AND DOMESTIC SUBSIDIARIES
REPORT AS OF DECEMBER 31, 1997
<PAGE> 8
<TABLE>
<CAPTION>
DOLLAR AMOUNTS
IN THOUSANDS
ASSETS
<S> <C>
1. Cash and balance due from depository institutions:
a. Noninterest-bearing balances and currency and coin $ 45,276
b. Interest-bearing balances $ 121,534
2. Securities:
a. Held-to-maturity securities $ 184,821
b. Available-for-sale securities $ 74,043
3. Federal funds sold and securities purchased under agreements to resell in
domestic offices of the bank and of its Edge and Agreement subsidiaries
and in IBFs:
Federal Funds sold and Securities purchased under agreements to resell $ 202,104
4. Loans and lease financing receivables:
a. Loans and leases, net of unearned income $ 1,797,414
b. LESS: Allowance for loan and lease losses $ 61,962
c. LESS: Allocated transfer risk reserve $ -0-
d. Loans and leases, net of unearned income, allowance, and reserve $ 1,735,452
5. Trading assets held in trading accounts $ 479
6. Premises and fixed assets (including capitalized leases) $ 2,952
7. Other real estate owned $ -0-
8. Investments in unconsolidated subsidiaries and associated companies $ -0-
9. Customers' liability to this bank on acceptances outstanding $ 1,447
10. Intangible assets $ -0-
11. Other assets $ 67,256
12. TOTAL ASSETS $ 2,435,364
</TABLE>
-2-
<PAGE> 9
LIABILITIES
<TABLE>
<S> <C>
13. Deposits:
a. In domestic offices $ 791,520
(1) Noninterest-bearing $ 247,397
(2) Interest-bearing................................$ 544,123
b. In foreign offices, Edge and Agreement subsidiaries, and IBFs $ 1,229,810
(1) Noninterest-bearing.............................$ 14,607
(2) Interest-bearing................................$ 1,215,203
14. Federal funds purchased and securities sold under agreements to repurchase
in domestic offices of the bank and of its Edge and Agreement
subsidiaries, and in IBFs:
Federal Funds purchased and Securities sold under
agreements to repurchase $ 10,000
15. a. Demand notes issued to the U.S. Treasury $ 5,000
b. Trading Liabilities $ 108
16. Other borrowed money:
a. With a remaining maturity of one year or less $ 83,453
b. With a remaining maturity of more than one year $ 1,763
c. With a remaining maturity of more than three years $ 2,242
17. Not applicable.
18. Bank's liability on acceptances executed and outstanding $ 1,447
19. Subordinated notes and debentures $ -0-
20. Other liabilities $ 70,284
21. TOTAL LIABILITIES $ 2,195,627
22. Limited-life preferred stock and related surplus $ -0-
EQUITY CAPITAL
23. Perpetual preferred stock and related surplus $ -0-
24. Common stock $ 29,649
25. Surplus (exclude all surplus related to preferred stock) $ 217,008
</TABLE>
-3-
<PAGE> 10
<TABLE>
<S> <C> <C>
26. a. Undivided profits and capital reserves $ (7,130)
b. Net unrealized gains (losses) on available-for-sale securities $ 210
27. Cumulative foreign currency translation adjustments $ -0-
28. TOTAL EQUITY CAPITAL $ 239,737
29. TOTAL LIABILITIES AND EQUITY CAPITAL $ 2,435,364
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SIMCALA INC.
(PREDECESSOR) INCOME STATEMENT FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND
SIMACALA, INC. (COMPANY) AS OF MARCH 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FORM S-1 FINANCIAL STATEMENT.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 20,546,000
<SECURITIES> 0
<RECEIVABLES> 5,809,000
<ALLOWANCES> 0
<INVENTORY> 2,871,000
<CURRENT-ASSETS> 32,844,000
<PP&E> 53,075,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 122,667,000
<CURRENT-LIABILITIES> 9,438,000
<BONDS> 0
0
0
<COMMON> 109
<OTHER-SE> 18,807,891
<TOTAL-LIABILITY-AND-EQUITY> 122,667,000
<SALES> 14,854,000
<TOTAL-REVENUES> 14,854,000
<CGS> 11,679,000
<TOTAL-COSTS> 11,679,000
<OTHER-EXPENSES> (282,000)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 314,000
<INCOME-PRETAX> (681,000)
<INCOME-TAX> (100,000)
<INCOME-CONTINUING> (581,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (581,000)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SIMCALA INC.
FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1997 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FORM S-1 REGISTRATION STATEMENT.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 634,877
<SECURITIES> 0
<RECEIVABLES> 5,907,822
<ALLOWANCES> (77,436)
<INVENTORY> 2,663,941
<CURRENT-ASSETS> 10,544,832
<PP&E> 26,493,428
<DEPRECIATION> (4,045,499)
<TOTAL-ASSETS> 33,662,539
<CURRENT-LIABILITIES> 9,659,697
<BONDS> 0
0
0
<COMMON> 100
<OTHER-SE> 8,275,572
<TOTAL-LIABILITY-AND-EQUITY> 33,662,539
<SALES> 62,184,345
<TOTAL-REVENUES> 62,184,345
<CGS> 47,972,065
<TOTAL-COSTS> 47,972,065
<OTHER-EXPENSES> (228,461)
<LOSS-PROVISION> (8,846)
<INTEREST-EXPENSE> 1,709,586
<INCOME-PRETAX> 9,885,313
<INCOME-TAX> 3,514,000
<INCOME-CONTINUING> 6,371,313
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,371,313
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<PAGE> 1
EXHIBIT 99.1
FORM OF NON-QUALIFIED STOCK OPTION AGREEMENT
THIS AGREEMENT is made and entered into as of __________, (the "Grant
Date") by and between SIMCALA Holdings, Inc. (the "Corporation"), a Georgia
corporation, and _____________ ("Optionee").
BACKGROUND
A. The Corporation has adopted the 1998 Stock Incentive Plan (the
"Plan"). Pursuant to the Plan, the Committee has authorized the grant to
Optionee of a non-qualified stock option to purchase shares of the common stock
of the Corporation. Capitalized terms used herein and not defined in context are
defined in Section 4.11 hereof or in the Plan.
B. The Corporation and Optionee wish to confirm herein the terms,
conditions, and restrictions of the option.
C. For and in consideration of the premises, the mutual covenants
contained herein, and other good and valuable consideration, the parties hereto
agree:
ARTICLE 1
GRANT AND EXERCISE OF OPTION
1.1 Grant of Option. Subject to the terms, restrictions, limitations,
and conditions stated herein, the Corporation hereby grants to Optionee a
non-qualified option (the "Option") to purchase all or any part of ____ shares
of Common Stock of the Corporation (the "Option Shares"). This Option is
intended to be a non-qualified stock option.
1.2 Exercise of Option.
(a) The Option may be exercised during the Option Period (as
defined in Section 1.4) only to the extent of the number of Option
Shares that are then vested ("Vested Shares") as determined pursuant to
the vesting schedule attached hereto as Schedule I.
(b) The Option may be exercised with respect to all or any
portion of the Vested Shares at any time during the Option Period by
the delivery to the Corporation, at its principal place of business, of
(i) a written notice of exercise, in substantially the form attached
hereto as Exhibit A (or as otherwise permitted by the Committee), which
shall be delivered to the Corporation no earlier than thirty (30) days
and no later than ten (10) days (or such lesser number of days as
permitted by the Committee) prior to the date upon which Optionee
desires to exercise all or any portion of the Option (the "Exercise
Date"); (ii) a certified
<PAGE> 2
check payable to the Corporation in the amount of the Exercise Price
multiplied by the number of Option Shares being purchased (the
"Purchase Price") or, at the discretion of the Committee, by delivery
of a number of shares of Stock having a Fair Market Value as of the
Exercise Date at least equal to the Purchase Price; and (iii) a
certified check payable to the Corporation in the amount of all
withholding tax obligations (whether federal, state or local), imposed
on the Corporation by reason of the exercise of the Option, or the
Withholding Election described in Section 1.2(c). Upon acceptance of
such notice, receipt of payment in full, and receipt of payment of all
withholding tax obligations, the Corporation shall cause a certificate
representing the shares of Stock purchased to be issued and delivered
to Optionee.
(c) In lieu of paying the withholding tax obligation in cash,
as described in Section 1.2(b)(iii), Optionee may elect to have the
actual number of shares issuable upon exercise of the Option reduced by
the smallest number of whole shares of Stock which, when multiplied by
the Fair Market Value per share of the Stock as of the Exercise Date,
is sufficient to satisfy the amount of the withholding tax obligations
imposed on the Corporation by reason of the exercise hereof (the
"Withholding Election"). The Withholding Election must be made by
executing and delivering to the Corporation a properly completed Notice
of Withholding Election, in substantially the form of Exhibit B
attached hereto (or as otherwise permitted by the Committee).
1.3 Exercise Price. The price for each share of Stock for which the
Option is exercised is US $________.
1.4 Term and Termination of Option. Except as otherwise provided
herein, the period in which the Option may be exercised as to any Vested Shares
(the "Option Period") shall commence on the date such shares become Vested
Shares and terminate at 5:00 p.m. Eastern Time on the date of the first to occur
of the following events:
(a) the 10th anniversary of the Grant Date;
(b) If the employment of Optionee by the Corporation
terminates for any reason other than as provided in paragraph (c) or
(d) below, the Option shall lapse, unless it is previously exercised,
one year after Optionee's Termination of Employment; provided, however,
that if Optionee's employment is terminated by the Corporation for
Cause or by Optionee without the consent of the Corporation, the Option
shall (to the extent not previously exercised) lapse immediately.
(c) If the employment of Optionee by the Corporation
terminates by reason of his Disability, the Option shall lapse, unless
it is previously exercised, within one year after Optionee's
Termination of Employment.
-2-
<PAGE> 3
(d) If Optionee dies while employed by the Corporation, or
during the one year period described in paragraph (b) or during the
one-year period described in paragraph (c) and before the Option
otherwise lapses, the Option shall lapse one year after Optionee's
death. Upon Optionee's death, any exercisable Options may be exercised
by Optionee's beneficiary.
Unless the exercisability of the Option is accelerated as provided in
Article 13 of the Plan, if Optionee exercises the Option after Termination of
Employment, the Option may be exercised only with respect to the shares that
were otherwise vested on Optionee's Termination of Employment. Upon the
expiration of any Option Period, this Option, and all unexercised rights granted
to Optionee hereunder shall terminate as to all Vested Shares to which such
Option Period relates, and thereafter be null and void.
1.5 Rights as Stockholder. Optionee, or, if applicable, the Transferee
(as defined in Section 4.11), shall have no rights as a stockholder with respect
to any Option Shares until Optionee has exercised this Option as to such Option
Shares and has tendered to the Corporation the Purchase Price due in respect of
such exercise. No adjustment to the number of Option Shares covered by this
Option or the Exercise Price shall be made for dividends paid or declared on or
with respect to Stock in cash, securities or other property, for which the
record date is prior to the date of exercise hereof.
1.6 Changes in Capitalization. The Committee may proportionately adjust
the number of Option Shares and the Exercise Price for any increase or decrease
in the number of issued shares of Stock (without any change in the aggregate
price to be paid upon exercise of all of the Option Shares) resulting from an
event described in Article 14 of the Plan. Any adjustment pursuant to this
Section 1.6 may provide, in the Committee's discretion, for the elimination of
any fractional shares that might otherwise become subject to the Option without
payment therefor.
1.7 Accelerated Vesting.
(a) Change in Control. If a Change in Control occurs, the
Option shall become fully exercisable.
(b) Other Events. As provided in Section 13.9 and Section
13.10 of the Plan, the Committee may accelerate the vesting of the
Option in other events.
(c) Effect of Acceleration. If the vesting of the Option
accelerates due to a Change in Control or is accelerated by the
Committee pursuant to Section 13.9 of the Plan (i.e., events that could
lead to a Change in Control), the Committee shall determine (i) whether
the fully exercisable Option will expire after a designated period of
time to the extent not then exercised, (ii) whether the difference
between the Exercise Price and the Fair Market Value of the Option
Shares as of a date designated by the Committee will be settled in
cash, (iii) whether the Option will be assumed by another party to the
transaction giving
-3-
<PAGE> 4
rise to the acceleration or otherwise be equitably converted in
connection with such transaction, or (iv) any combination of the
foregoing.
1.8 Rights of Optionee Subject to Plan. This Option is granted pursuant
to the Plan and is, in all respects, subject to the terms and provisions of the
Plan, a copy of which is available at the offices of the Corporation. In the
event of any conflict between any part or provision of this Agreement and any
part or provision of the Plan, the part or provision of the Plan shall control.
1.9 Shareholders Agreement. Upon exercise of this Option pursuant to
Section 1.2, Optionee shall enter into and be bound by that certain Shareholders
Agreement, dated _____________, 1998, among SIMCALA, Inc., and its shareholders,
or any other stockholder, voting, or similar agreement if all other employee
shareholders of the Corporation have either executed or been asked to execute
such an agreement.
ARTICLE 2
RESTRICTION ON TRANSFER OF OPTION
2.1 Restrictions on Transfer of Option. The Option evidenced hereby is
nontransferable other than by will or the laws of descent and distribution.
ARTICLE 3
LEGENDS
3.1 Legends. Each certificate representing the Option Shares purchased
upon exercise of this Option shall be endorsed with the following legend and
Optionee shall not make any transfer of the Option Shares without first
complying with the restrictions on transfer described in such legend:
TRANSFER IS RESTRICTED
THE SECURITIES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON
TRANSFER SET FORTH IN A NON-QUALIFIED STOCK OPTION AGREEMENT DATED
______________, 1998, A COPY OF WHICH IS AVAILABLE FROM THE CORPORATION.
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED,
OR HYPOTHECATED UNLESS (1) THERE IS AN EFFECTIVE REGISTRATION UNDER SUCH ACT
COVERING SUCH SECURITIES, (2) THE TRANSFER IS MADE IN COMPLIANCE WITH RULE 144
PROMULGATED UNDER SUCH ACT, OR (3) THE ISSUER RECEIVES AN OPINION OF COUNSEL,
REASONABLY SATISFACTORY TO THE CORPORATION, STATING THAT SUCH SALE, TRANSFER,
ASSIGNMENT OR
-4-
<PAGE> 5
HYPOTHECATION IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT.
Optionee agrees that the Corporation may also endorse any other legends
required by applicable federal or state securities laws.
The Corporation shall not be required (a) to transfer on its books any
Option Shares that have been sold or transferred in violation of the provisions
of this Agreement (including the foregoing legends), or (b) to treat the owner
of the Option Shares, or otherwise to accord voting or dividend rights to, any
transferee to whom the Option Shares have been transferred in contravention of
this Agreement (or such legends).
3.2 Removal of Legend and Transfer Restrictions.
(a) Any legend endorsed on a certificate pursuant to Section
3.1 hereof and the stop transfer instructions with respect to the
Option Shares shall be removed and the Corporation shall issue a
certificate without such legend to the holder thereof if such Option
Shares are registered under the Securities Act of 1933 and a prospectus
meeting the requirements of Section 10 of the Securities Act of 1933 is
available.
(b) The restrictions described in the second sentence of the
legend set forth in Section 3.1 hereof may be removed at such time as
permitted by Rule 144 promulgated under the Securities Act of 1933.
ARTICLE 4
GENERAL PROVISIONS
4.1 Governing Laws. This Agreement shall be construed, administered and
enforced according to the laws of the State of Georgia; provided, however, this
Option may not be exercised except, in the reasonable judgment of the Committee,
in compliance with exemptions under applicable state securities laws of the
state in which Optionee resides, and/or any other applicable securities laws.
4.2 Successors. This Agreement shall be binding upon and inure to the
benefit of the heirs, legal representatives, successors, and permitted assigns
of the parties.
4.3 Notice. Except as otherwise specified herein, all notices and other
communications under this Agreement shall be in writing and shall be deemed to
have been given if personally delivered, if mailed by overnight delivery or if
sent by registered or certified United States mail, return receipt requested,
postage prepaid, addressed to the proposed recipient at the last known address
of the recipient. In each case, each notice or other communication shall be
deemed to have been received on the earlier of the date of actual receipt or the
date that is three (3) days after the date on which such notice or other
communication was mailed or sent. Any party may designate any other address to
which
-5-
<PAGE> 6
notices shall be sent by giving notice of the address to the other parties in
the same manner as provided herein.
4.4 Severability. In the event that any one or more of the provisions
or portion thereof contained in this Agreement shall for any reason be held to
be invalid, illegal, or unenforceable in any respect, the same shall not
invalidate or otherwise affect any other provisions of this Agreement, and this
Agreement shall be construed as if the invalid, illegal or unenforceable
provision or portion thereof had never been contained herein.
4.5 Entire Agreement. Except as set forth in Section 1.9, this
Agreement expresses the entire understanding and agreement of the parties with
respect to the subject matter hereof. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original but all of which
shall constitute one and the same instrument.
4.6 Violation. Except as provided herein, any transfer, pledge, sale,
assignment, or hypothecation of the Option or any portion thereof or of any
Option Shares issued upon exercise hereof shall be a violation of the terms of
this Agreement and shall be void and without effect.
4.7 Headings. Paragraph headings used herein are for convenience of
reference only and shall not be considered in construing this Agreement.
4.8 Specific Performance. In the event of any actual or threatened
default in, or breach of, any of the terms, conditions and provisions of this
Agreement, the party or parties who are thereby aggrieved shall have the right
to specific performance and injunction in addition to any and all other rights
and remedies at law or in equity, and all such rights and remedies shall be
cumulative.
4.9 No Employment Rights Created. The grant of the Option hereunder
shall not be construed as giving Optionee the right to continued employment with
the Corporation.
4.10 Special Limitation on Exercise. Notwithstanding anything contained
herein to the contrary, no purported exercise of the Option shall be effective
without the written approval of the Corporation, which approval may be withheld
if the exercise of this Option, together with the exercise of other previously
exercised stock options and/or offers and sales pursuant to any prior or
contemplated offering of securities, would, in the sole and absolute judgment of
the Corporation, require the filing of a registration statement with the United
States Securities and Exchange Commission, or with the securities commission of
any state. The Corporation shall avail itself of any exemptions from
registration contained in applicable federal and state securities laws which are
reasonably available to the Corporation on terms which, in its sole and absolute
discretion, it deems reasonable and not unduly burdensome or costly. If the
Option cannot be exercised at the time it would otherwise expire due to the
restrictions contained in this
-6-
<PAGE> 7
Section 4.10, the Exercise Period may, upon request of Optionee, be extended for
successive one-year periods until it can be exercised in accordance with this
Section 4.10. Any attempt by Optionee to exercise the Option that is not
effective due to the restrictions contained in this Section 4.10 shall be deemed
to be a request for a one-year extension period under the preceding sentence.
Optionee shall deliver to the Corporation, prior to the exercise of the Option,
such information representations, and warranties as the Corporation may
reasonably request in order for the Corporation to be able to satisfy itself
that the Option Shares to be acquired pursuant to the exercise of the Option is
being acquired in accordance with the terms of an applicable exemption from the
securities registration requirements of applicable federal and state securities
laws.
4.11 Certain Definitions. The capitalized terms listed below are used
herein with the meaning thereafter ascribed:
(a) "Cause" shall have the meaning assigned such term in any
employment agreement that exists between the Corporation and the
Optionee provided, however, if no definition exists, it shall mean as
follows: (i) conduct amounting to fraud or dishonesty against the
Corporation or any subsidiary or affiliate of the Corporation; (ii)
Optionee's intentional misconduct or repeated refusal to follow the
reasonable directions of the Board of Directors of the Corporation,
provided an officer of the Corporation, upon the direction of the Board
of Directors, notifies Optionee of the acts deemed to constitute such
intentional misconduct or repeated refusal in writing and Optionee
fails to correct such acts (or begins such action as may be necessary
to correct such acts and thereafter diligently pursues the completion
thereof) within five (5) business days after written notice has been
given; (iii) repeated absences from work without a reasonable excuse,
(iv) repeated intoxication with alcohol or drugs while on Corporation
business during regular business hours; (v) a conviction or plea of
guilty or nolo contendere to a felony (other than one arising from the
operation of a motor vehicle or resulting from actions taken (or not
taken) by Optionee in good faith in his capacity as an employee or
officer of the Corporation; or (vi) a breach or violation by the
Optionee of any material terms of this Agreement or any other agreement
to which Optionee and the Corporation are a party.
(b) "Disability" shall have the meaning assigned such term in
any employment agreement that exists between the Corporation and the
Optionee provided, however, if no definition exists, it shall mean as
follows: (i) the inability of Optionee to perform the duties of
Optionee's employment due to physical or emotional incapacity or
illness, where such inability is expected to be of long-continued and
indefinite duration, or (ii) Optionee shall be entitled to (x)
disability retirement benefits under the federal Social Security Act or
(y) recover benefits under any long-term disability plan or policy
maintained by the Corporation. In the event of a dispute, the
determination of Disability shall be made reasonably by the Board of
Directors of the Corporation and shall be supported by advice of a
physician competent in the area to which such Disability relates.
-7-
<PAGE> 8
(c) "Fair Market Value" shall mean the value of the share of
Stock of the Corporation determined as follows:
(i) If the Stock is, at the time of the determination of Fair Market
Value, listed or traded on any national securities exchange or quoted
on a national securities or central market system, the Fair Market
Value of a share of Stock shall be the average of the daily closing
prices for the thirty (30) consecutive trading days before such date of
determination, excluding any trades which are not bona fide arms-length
transactions. The closing price for each day shall be (A) if such
securities are listed are admitted for trading on any national
securities exchange, the last sale price for such security, regular
way, or the mean of the closing bid and asked prices therefor if no
such sale occurred, in each case as officially reported on the
principal securities exchange on which such Stock is listed; or (B) if
quoted on a national securities exchange or market system, the mean
between the closing high bid and low asked quotations for such Stock
for each day during such thirty (30) day period.
(ii) If, at time of such determination, the Stock of the Corporation is
not listed or quoted on any national securities exchange or market
system, the Fair Market Value of a share of Stock shall be determined
in good faith by the Directors of the Corporation.
(d) "Termination of Employment" means the termination of the
employee-employer relationship between Optionee and the Corporation
(and its Parents and Subsidiaries), regardless of the fact that
severance or similar payments are made to Optionee, for any reason,
including, but not by way of limitation, a termination by resignation,
discharge, death, Disability, or retirement. The Committee shall, in
its absolute discretion, determine the effect of all matters and
questions relating to Termination of Employment.
Other capitalized terms used herein without definition shall have the
meanings assigned to such terms in the Plan.
-8-
<PAGE> 9
IN WITNESS WHEREOF, the parties have executed and sealed this Agreement
on the day and year first set forth above.
SIMCALA HOLDINGS, INC.
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
OPTIONEE:
(SEAL)
--------------------------------
-9-
<PAGE> 10
EXHIBIT A
TO
SIMCALA HOLDINGS, INC.
NON-QUALIFIED STOCK OPTION AGREEMENT
Notice of Exercise
Name
---------------------------------
Address
-----------------------------
---------------------------------
Date
---------------------------------
SIMCALA Holdings, Inc.
- -------------------------
- -------------------------
Re: Exercise of Stock Option
Gentlemen:
I hereby give notice of my election to exercise options granted to me
to purchase ________ shares of no par value Common Stock (the "Stock") of
SIMCALA Holdings, Inc. (the "Corporation") under SIMCALA Holdings, Inc.
Non-Qualified Stock Option Agreement dated ___________ (the "Agreement"). The
purchase shall take place as of ___________ (the "Exercise Date").
On or before the Exercise Date, I will present you with a certified
check (or bank cashier's check) for $__________ for the full purchase price
payable to the order of __________________________.
I hereby represent, warrant, covenant, and agree with the Corporation
as follows:
The shares of the Stock being acquired by me will be acquired
for my own account without the participation of any other person, with
the intent of holding the Stock for investment and without the intent
of participating, directly or indirectly, in a distribution of the
Stock and not with a view to, or for resale in connection with, any
distribution of the Stock, nor am I aware of the existence of any
distribution of the Stock;
I am not acquiring the Stock based upon any representation,
oral or written, by any person with respect to the future value of, or
income from, the Stock but rather upon an independent examination and
judgment as to the prospects of the Corporation;
Exhibit A to Non-Qualified Stock Option Agreement - Page 1
<PAGE> 11
The Stock was not offered to me by means of publicly
disseminated advertisements or sales literature, nor am I aware of any
offers made to other persons by such means;
I am able to bear the economic risks of the investment in the
Stock including the risk of a complete loss of my investment therein;
I understand and agree that the Stock will be issued and sold
to me without registration under any state law relating to the
registration of securities for sale, and will be issued and sold in
reliance on the exemptions from registration under the Securities Act
of 1933 (the "1933 Act"), provided by Sections 3(b) and/or 4(2) thereof
and the rules and regulations promulgated thereunder;
The Stock cannot be offered for sale, sold or transferred by
me other than pursuant to: (A) an effective registration under the 1933
Act or in a transaction, otherwise in compliance with the 1933 Act; and
(B) evidence satisfactory to the Corporation of compliance with the
applicable securities laws of other jurisdictions. The Corporation
shall be entitled to rely upon an opinion of counsel satisfactory to it
with respect to compliance with the above laws;
The Corporation will be under no obligation to register the
Stock or comply with any exemption available for sale of the Stock
without registration or filing, and the information or conditions
necessary to permit routine sale of securities of the Corporation under
Rule 144 of the 1933 Act are not now available and no assurance has
been given that it or they will become available. The Corporation is
under no obligation to act in any manner so as to make Rule 144
available with respect to the Stock;
I have and have had complete access to and the opportunity to
review and make copies of all material documents related to the
business of the Corporation, including, but not limited to, contracts,
financial statements, tax returns, leases, deeds and other books and
records. I have examined such of these documents as I wished and am
familiar with the business and affairs of the Corporation. I realize
that purchase of the Stock is a speculative investment and that any
possible profit therefrom is uncertain;
Exhibit A to Non-Qualified Stock Option Agreement - Page 2
<PAGE> 12
I have had the opportunity to ask questions of and receive
answers from the Corporation and any person acting on its behalf and to
obtain all material informal reasonably available with respect to the
Corporation and its affairs. I have received all information and data
with respect to the Corporation which I have requested and which I have
deemed relevant in connection with the evaluation of the merits and
risks of investment in the Corporation;
I have such knowledge and experience in financial and business
matters that I am capable of evaluating the merits and risks of the
purchase of the Stock hereunder and I am able to bear the economic risk
of such purchase; and
The agreements, representations, warranties, and covenants
made by me herein extend to and apply to all of the Stock of the
Corporation issued to me pursuant to this Option. Acceptance by me of
the certificate representing such Stock shall constitute a confirmation
by me that all such agreements, representations, warranties, and
covenants made herein shall be true and correct at that time.
I understand that the certificates representing the shares being
purchased by me in accordance with this notice shall bear a legend referring to
the foregoing covenants, representations and warranties and restrictions on
transfer, and I agree that a legend to that effect may be placed on any
certificate which may be issued to me as a substitute for the certificates being
acquired by me in accordance with this notice.
Very truly yours,
---------------------------------------
AGREED TO AND ACCEPTED:
SIMCALA HOLDINGS, INC.
By:
-------------------------------
Title:
----------------------------
Number of Shares
Exercised:
------------------------
Number of Shares
Remaining: Date:
------------------------ --------------------
Exhibit A to Non-Qualified Stock Option Agreement - Page 3
<PAGE> 13
EXHIBIT B
TO
SIMCALA HOLDINGS, INC.
NON-QUALIFIED STOCK OPTION AGREEMENT
Notice of Withholding Election
TO: SIMCALA HOLDINGS, INC.
FROM: Name
--------------------
RE: Withholding Election
- -------------------------------------------------------------------------------
This election relates to the Option identified in Paragraph 3 below. I
hereby certify that:
(1) My correct name and social security number and my current
address are set forth at the end of this document.
(2) I am (check one, whichever is applicable).
[ ] the original recipient of the Option.
[ ] the legal representative of the estate of the original
recipient of the Option.
[ ] a legatee of the original recipient of the Option.
[ ] the legal guardian of the original recipient of the
Option.
(3) The Option pursuant to which this election is made is dated
and was issued in the name of ___________ for ___________
shares of SIMCALA Holdings, Inc. (the "Corporation") no par
value Common Stock (the "Stock"). This election relates to
_____________ shares of the Stock issuable upon whole or
partial exercise(s) of the Option (the "Option Shares").
(4) In connection with any exercise of the Option with respect to
the Option Shares, I hereby elect to have certain of the
shares issuable pursuant to the exercise withheld by the
Corporation for the purpose of having the value of the shares
applied to pay federal, state, and local, if any, taxes
arising from exercise. The shares to be withheld shall have,
as of the date on which the amount of the tax required to be
withheld is determined, a fair market value
Exhibit B to Non-Qualified Stock Option Agreement - Page 1
<PAGE> 14
equal to the minimum statutory tax withholding requirement
under federal, state, and local law in connection with the
exercise.
(5) I understand that this Withholding Election is subject to the
disapproval of the Board of Directors.
(6) I further understand that, if this Withholding Election is not
disapproved by the Board of Directors, the Corporation shall
withhold from the Option Shares a number of shares of the
Stock having the value specified in Paragraph 4 above.
Dated:
---------------------------- ----------------------------------------
Legal Signature
- ---------------------------------- ----------------------------------------
Social Security Number Name (Printed)
- ---------------------------------- ----------------------------------------
Street Address
- ---------------------------------- ----------------------------------------
City, State, Zip Code
Exhibit B to Non-Qualified Stock Option Agreement - Page 2
<PAGE> 15
SCHEDULE I
TO
SIMCALA HOLDINGS, INC.
NON-QUALIFIED STOCK OPTION AGREEMENT
Vesting Schedule
The Option Shares shall vest as follows:
<TABLE>
<CAPTION>
Anniversary of % of Option
Grant Date Shares Vested
-------------- --------------
<S> <C>
1 20%
2 40%
3 60%
4 80%
5 100%
</TABLE>
Construction.
Unless the vesting shall be accelerated, the right of Optionee to vest
in Option Shares shall cease upon the termination of Optionee's employment by
the Company, and thereafter, no further shares shall become Vested Shares.
<PAGE> 1
EXHIBIT 99.2
SIMCALA HOLDINGS, INC.
1998 STOCK INCENTIVE PLAN
ARTICLE 1
PURPOSE
1.1. GENERAL. The purpose of the SIMCALA Holdings, Inc. 1998 Stock
Incentive Plan (the "Plan") is to promote the success, and enhance the value, of
SIMCALA Holdings, Inc. (the "Company"), by linking the personal interests of its
employees and officers to those of Company stockholders and by providing such
persons with an incentive for outstanding performance. The Plan is further
intended to provide flexibility to the Company in its ability to motivate,
attract, and retain the services of employees and officers upon whose judgment,
interest, and special effort the successful conduct of the Company's operation
is largely dependent. Accordingly, the Plan permits the grant of incentive
awards from time to time to selected employees and officers.
ARTICLE 2
EFFECTIVE DATE
2.1. EFFECTIVE DATE. The Plan shall be effective as of the date upon
which it shall be approved by the Board. However, the Plan shall be submitted to
the stockholders of the Company for approval within 12 months of the Board's
approval thereof. No Incentive Stock Options granted under the Plan may be
exercised prior to approval of the Plan by the stockholders and if the
stockholders fail to approve the Plan within 12 months of the Board's approval
thereof, any Incentive Stock Options previously granted hereunder shall be
automatically converted to Non-Qualified Stock Options without any further act.
Unless the Committee specifies otherwise at the time of grant, no Awards granted
under the Plan shall be contingent upon the stockholders having approved the
Plan. In the discretion of the Committee, Awards may be made to Covered
Employees which are intended to satisfy the conditions for deductibility under
Code Section 162(m).
ARTICLE 3
DEFINITIONS
3.1. DEFINITIONS. When a word or phrase appears in this Plan with the
initial letter capitalized, and the word or phrase does not commence a sentence,
the word or phrase shall generally be given the meaning ascribed to it in this
Section or in Section 1.1 unless a clearly different meaning is required by the
context. The following words and phrases shall have the following meanings:
(a) "Award" means any Option, Stock Appreciation Right,
Restricted Stock Award, Performance Share Award, Dividend Equivalent
Award, or Other Stock-Based
<PAGE> 2
Award, or any other right or interest relating to Stock or cash,
granted to a Participant under the Plan.
(b) "Award Agreement" means any written agreement, contract,
or other instrument or document evidencing an Award.
(c) "Board" means the Board of Directors of the Company.
(d) "CGW" means Cravey, Green & Wahlen, Inc.
(e) "CGW Affiliate" means any corporation, limited liability
company, partnership, joint venture or other entity in which CGW owns
or controls, directly or indirectly through one or more intermediaries,
20% or more of the combined voting power of the outstanding voting
securities of such entity.
(f) "Cause" has the same meaning as provided in any employment
agreement between the Participant in question and the Company on the
date of the Participant's termination of employment, or if no such
definition or employment agreement exists, "Cause" means (i) conduct by
the Participant amounting to fraud or dishonesty against the Company,
(ii) the Participant's intentional misconduct, repeated refusal to
follow the reasonable directions of the Board, or knowing violation of
law in the course of performance his duties of employment with the
Company, (iii) the Participant's repeated absences from work without a
reasonable excuse, (iv) the Participant's repeated intoxication with
alcohol or drugs while on the Company's premises during regular
business hours, (v) the Participant's conviction or plea of guilty or
nolo contendere to a felony or a crime involving dishonesty, or (vi) a
breach or violation by the Participant of the terms of any employment
or other agreement to which the Participant and the Company are
parties.
(g) "Change in Control" means consummation of a merger or
consolidation of the Company with, or sale or other disposition of all
or substantially all of the assets or stock of the Company to, any
individual, entity or group other than CGW or a CGW Affiliate.
(h) "Code" means the Internal Revenue Code of 1986, as amended
from time to time.
(i) "Committee" means the committee of the Board described in
Article 4.
(j) "Company" means SIMCALA Holdings, Inc. , a Georgia
corporation.
(k) "Covered Employees" is defined in Code Section 162(m).
(l) "Disability" has the same meaning as provided in any
employment agreement or shareholder agreement between the Participant
in question and the
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<PAGE> 3
Company on the date the Participant ceases active work due to a
disability, or if no such definition or agreement exists, "Disability"
means (1) the inability of the Participant to perform the duties of his
employment due to physical or emotional incapacity or illness, where
such inability is expected to be of long-continued and indefinite
duration, or (2) the Participant shall be entitled to (i) disability
retirement benefits under the federal Special Security Act or (ii)
recover benefits under any long-term disability plan or policy
maintained by the Company. In the event of a dispute, the determination
of Disability shall be made by the Committee and shall be supported by
advice of a physician competent in the area to which such Disability
relates.
(m) "Dividend Equivalent" means a right granted to a
Participant under Article 11.
(n) "Effective Date" has the meaning assigned such term in
Section 2.1.
(o) "Fair Market Value" means with respect to Stock or any
other property, the fair market value of such Stock or other property
determined by such methods or procedures as may be established from
time to time by the Committee. Unless otherwise determined by the
Committee, (i) if at any time the Stock is traded on an
over-the-counter market, Fair Market Value of Stock as of any date
shall mean the average bid and ask price of a share of Stock on the
over-the-counter market on such date, or, if no bid and ask prices are
available with respect to such day, on the next preceding day on which
such bid and ask prices were available, and (ii) if at any time the
Stock is listed on a securities exchange or is traded over the Nasdaq
National Market, Fair Market Value of Stock as of any date shall mean
the closing sales price on such exchange or over such system on such
date or, in the absence of reported sales on such date, the closing
sales price on the immediately preceding date on which sales were
reported.
(p) "Incentive Stock Option" means an Option that is intended
to meet the requirements of Section 422 of the Code or any successor
provision thereto.
(q) "Non-Qualified Stock Option" means an Option that is not
an Incentive Stock Option.
(r) "Option" means a right granted to a Participant under
Article 7 of the Plan to purchase Stock at a specified price during
specified time periods. An Option may be either an Incentive Stock
Option or a Non-Qualified Stock Option.
(s) "Other Stock-Based Award" means a right, granted to a
Participant under Article 12, that relates to or is valued by reference
to Stock or other Awards relating to Stock.
(t) "Parent" means a corporation which owns or beneficially
owns a majority of the outstanding voting stock or voting power of the
Company. For
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<PAGE> 4
Incentive Stock Options, the term shall have the same meaning as set
forth in Code Section 424(e).
(u) "Participant" means a person who, as an officer or
employee of the Company or any Parent or Subsidiary, has been granted
an Award under the Plan.
(v) "Performance Share" means a right granted to a Participant
under Article 9, to receive cash, Stock, or other Awards, the payment
of which is contingent upon achieving certain performance goals
established by the Committee.
(w) "Plan" means SIMCALA Holdings, Inc. 1998 Stock Incentive
Plan, as amended from time to time.
(x) "Restricted Stock Award" means Stock granted to a
Participant under Article 10 that is subject to certain restrictions
and to risk of forfeiture.
(y) "Stock" means the no par value common stock of the Company
and such other securities of the Company as may be substituted for
Stock pursuant to Article 14.
(z) "Stock Appreciation Right" or "SAR" means a right granted
to a Participant under Article 8 to receive a payment equal to the
difference between the Fair Market Value of a share of Stock as of the
date of exercise of the SAR over the grant price of the SAR, all as
determined pursuant to Article 8.
(aa) "Subsidiary" means any corporation of which a majority of
the outstanding voting stock or voting power is beneficially owned
directly or indirectly by the Company. For Incentive Stock Options, the
term shall have the meaning set forth in Code Section 424(f).
(bb) "1933 Act" means the Securities Act of 1933, as amended
from time to time.
(cc) "1934 Act" means the Securities Exchange Act of 1934, as
amended from time to time.
ARTICLE 4
ADMINISTRATION
4.1. COMMITTEE. The Plan shall be administered by the Compensation
Committee of the Board or, at the discretion of the Board from time to time, by
the Board. From and after the time, if any, at which the Company shall have a
class of securities registered under Section 12 of the 1934 Act, it is intended
that the directors appointed to serve on the Committee shall be "non-employee
directors" (within the meaning of Rule 16b-3 promulgated under the 1934 Act) and
"outside directors" (within the meaning of Code Section 162(m) and
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<PAGE> 5
the regulations thereunder). However, the mere fact that a Committee member
shall fail to qualify under either of the foregoing requirements shall not
invalidate any Award made by the Committee which Award is otherwise validly made
under the Plan. The members of the Committee shall be appointed by, and may be
changed at any time and from time to time in the discretion of, the Board.
During any time that the Board is acting as administrator of the Plan, it shall
have all the powers of the Committee hereunder, and any reference herein to the
Committee (other than in this Section 4.1) shall include the Board.
4.2. ACTION BY THE COMMITTEE. For purposes of administering the Plan,
the following rules of procedure shall govern the Committee. A majority of the
Committee shall constitute a quorum. The acts of a majority of the members
present at any meeting at which a quorum is present, and acts approved
unanimously in writing by the members of the Committee in lieu of a meeting,
shall be deemed the acts of the Committee. Each member of the Committee is
entitled to, in good faith, rely or act upon any report or other information
furnished to that member by any officer or other employee of the Company or any
Parent or Subsidiary, the Company's independent certified public accountants, or
any executive compensation consultant or other professional retained by the
Company to assist in the administration of the Plan.
4.3. AUTHORITY OF COMMITTEE. The Committee has the exclusive power,
authority and discretion to:
(a) Designate Participants;
(b) Determine the type or types of Awards to be granted to
each Participant;
(c) Determine the number of Awards to be granted and the
number of shares of Stock to which an Award will relate;
(d) Determine the terms and conditions of any Award granted
under the Plan, including but not limited to, the exercise price, grant
price, or purchase price, any restrictions or limitations on the Award,
any schedule for lapse of forfeiture restrictions or restrictions on
the exercisability of an Award, and accelerations or waivers thereof,
based in each case on such considerations as the Committee in its sole
discretion determines;
(e) Accelerate the vesting or lapse of restrictions of any
outstanding Award, based in each case on such considerations as the
Committee in its sole discretion determines;
(f) Determine whether, to what extent, and under what
circumstances an Award may be settled in, or the exercise price of an
Award may be paid in, cash, Stock, other Awards, or other property, or
an Award may be canceled, forfeited, or surrendered;
-5-
<PAGE> 6
(g) Prescribe the form of each Award Agreement, which need not
be identical for each Participant;
(h) Decide all other matters that must be determined in
connection with an Award;
(i) Establish, adopt or revise any rules and regulations as it
may deem necessary or advisable to administer the Plan;
(j) Make all other decisions and determinations that may be
required under the Plan or as the Committee deems necessary or
advisable to administer the Plan; and
(k) Amend the Plan or any Award Agreement as provided in
Article 15.
4.4. DECISIONS BINDING. The Committee's interpretation of the Plan, any
Awards granted under the Plan, any Award Agreement and all decisions and
determinations by the Committee with respect to the Plan are final, binding, and
conclusive on all parties.
ARTICLE 5
SHARES SUBJECT TO THE PLAN
5.1. NUMBER OF SHARES. Subject to adjustment as provided in Section
14.1, the aggregate number of shares of Stock reserved and available for Awards
or which may be used to provide a basis of measurement for or to determine the
value of an Award (such as with a Stock Appreciation Right or Performance Share
Award) shall be eight thousand (8,000), of which not more than 10% may be
granted as Awards of Restricted Stock or unrestricted Stock Awards.
5.2. LAPSED AWARDS. To the extent that an Award is canceled,
terminates, expires or lapses for any reason, any shares of Stock subject to the
Award will again be available for the grant of an Award under the Plan and
shares subject to SARs or other Awards settled in cash will be available for the
grant of an Award under the Plan.
5.3. STOCK DISTRIBUTED. Any Stock distributed pursuant to an Award may
consist, in whole or in part, of authorized and unissued Stock, treasury Stock
or Stock purchased on the open market.
5.4. LIMITATION ON AWARDS. Notwithstanding any provision in the Plan to
the contrary, the maximum number of shares of Stock with respect to one or more
Options and/or SARs that may be granted during any one calendar year under the
Plan to any one Participant shall be 8000. The maximum fair market value
(measured as of the date of grant) of any Awards other than Options and SARs
that may be received by any one Participant (less any consideration paid by the
Participant for such Award) during any one calendar year under the Plan shall be
$1,000,000.
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<PAGE> 7
ARTICLE 6
ELIGIBILITY
6.1. GENERAL. Awards may be granted only to individuals who are
employees or officers of the Company, Parent or a Subsidiary, as determined by
the Committee.
ARTICLE 7
STOCK OPTIONS
7.1. GENERAL. The Committee is authorized to grant Options to
Participants on the following terms and conditions:
(a) EXERCISE PRICE. The exercise price per share of Stock
under an Option shall be determined by the Committee.
(b) TIME AND CONDITIONS OF EXERCISE. The Committee shall
determine the time or times at which an Option may be exercised in
whole or in part. The Committee also shall determine the performance or
other conditions, if any, that must be satisfied before all or part of
an Option may be exercised. The Committee may waive any exercise
provisions at any time in whole or in part based on factors as the
Committee may determine in its sole discretion so that the Option
becomes exercisable at an earlier date.
(c) PAYMENT. The Committee shall determine the methods by
which the exercise price of an Option may be paid, the form of payment,
including, without limitation, cash, shares of Stock, or other property
(including "cashless exercise" arrangements), and the methods by which
shares of Stock shall be delivered or deemed to be delivered to
Participants; provided, however, that if shares of Stock are used to
pay the exercise price of an Option, such shares must have been held by
the Participant for at least six months.
(d) EVIDENCE OF GRANT. All Options shall be evidenced by a
written Award Agreement between the Company and the Participant. The
Award Agreement shall include such provisions as may be specified by
the Committee.
7.2. INCENTIVE STOCK OPTIONS. The terms of any Incentive Stock Options
granted under the Plan must comply with the following additional rules:
(a) EXERCISE PRICE. The exercise price per share of Stock
shall be set by the Committee, provided that the exercise price for any
Incentive Stock Option shall not be less than the Fair Market Value as
of the date of the grant.
(b) EXERCISE. In no event may any Incentive Stock Option be
exercisable for more than ten years from the date of its grant.
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<PAGE> 8
(c) LAPSE OF OPTION. An Incentive Stock Option shall lapse
under the earliest of the following circumstances; provided, however,
that the Committee may, prior to the lapse of the Incentive Stock
Option under the circumstances described in paragraphs (3), (4) and (5)
below, provide in writing that the Option will extend until a later
date, but if the Option is exercised after the dates specified in
paragraphs (3) or (4) and (5) below, it will automatically become a
Non-Qualified Stock Option:
(1) The Incentive Stock Option shall lapse as of the
option expiration date set forth in the Award Agreement.
(2) The Incentive Stock Option shall lapse ten years
after it is granted, unless an earlier time is set in the
Award Agreement.
(3) If the Participant terminates employment for any
reason other than as provided in paragraph (4) or (5) below,
the Incentive Stock Option shall lapse, unless it is
previously exercised, three months after the Participant's
termination of employment; provided, however, that if the
Participant's employment is terminated by the Company for
Cause or by the Participant without the consent of the
Company, the Incentive Stock Option shall (to the extent not
previously exercised) lapse immediately.
(4) If the Participant terminates employment by
reason of his Disability, the Incentive Stock Option shall
lapse, unless it is previously exercised, one year after the
Participant's termination of employment.
(5) If the Participant dies while employed, or during
the three-month period described in paragraph (3) or during
the one-year period described in paragraph (4) and before the
Option otherwise lapses, the Option shall lapse one year after
the Participant's death. Upon the Participant's death, any
exercisable Incentive Stock Options may be exercised by the
Participant's beneficiary, determined in accordance with
Section 13.6.
Unless the exercisability of the Incentive Stock Option is
accelerated as provided in Article 13, if a Participant exercises an
Option after termination of employment, the Option may be exercised
only with respect to the shares that were otherwise vested on the
Participant's termination of employment.
(d) INDIVIDUAL DOLLAR LIMITATION. The aggregate Fair Market
Value (determined as of the time an Award is made) of all shares of
Stock with respect to which Incentive Stock Options are first
exercisable by a Participant in any calendar year may not exceed
$100,000.00.
(e) TEN PERCENT OWNERS. No Incentive Stock Option shall be
granted to any individual who, at the date of grant, owns stock
possessing more than
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<PAGE> 9
ten percent of the total combined voting power of all classes of stock
of the Company or any Parent or Subsidiary unless the exercise price
per share of such Option is at least 110% of the Fair Market Value per
share of Stock at the date of grant and the Option expires no later
than five years after the date of grant.
(f) EXPIRATION OF INCENTIVE STOCK OPTIONS. No Award of an
Incentive Stock Option may be made pursuant to the Plan after the day
immediately prior to the tenth anniversary of the Effective Date.
(g) RIGHT TO EXERCISE. During a Participant's lifetime, an
Incentive Stock Option may be exercised only by the Participant or, in
the case of the Participant's Disability, by the Participant's guardian
or legal representative.
ARTICLE 8
STOCK APPRECIATION RIGHTS
8.1. GRANT OF SARs. The Committee is authorized to grant SARs to
Participants on the following terms and conditions:
(a) RIGHT TO PAYMENT. Upon the exercise of a Stock
Appreciation Right, the Participant to whom it is granted has the right
to receive the excess, if any, of:
(1) The Fair Market Value of one share of Stock on the
date of exercise; over
(2) The grant price of the Stock Appreciation Right as
determined by the Committee, which shall not be less than the
Fair Market Value of one share of Stock on the date of grant in
the case of any SAR related to an Incentive Stock Option.
(b) OTHER TERMS. All awards of Stock Appreciation Rights shall
be evidenced by an Award Agreement. The terms, methods of exercise,
methods of settlement, form of consideration payable in settlement, and
any other terms and conditions of any Stock Appreciation Right shall be
determined by the Committee at the time of the grant of the Award and
shall be reflected in the Award Agreement.
ARTICLE 9
PERFORMANCE SHARES
9.1. GRANT OF PERFORMANCE SHARES. The Committee is authorized to grant
Performance Shares to Participants on such terms and conditions as may be
selected by the Committee. The Committee shall have the complete discretion to
determine the number of
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<PAGE> 10
Performance Shares granted to each Participant. All Awards of Performance Shares
shall be evidenced by an Award Agreement.
9.2. RIGHT TO PAYMENT. A grant of Performance Shares gives the
Participant rights, valued as determined by the Committee, and payable to, or
exercisable by, the Participant to whom the Performance Shares are granted, in
whole or in part, as the Committee shall establish at grant or thereafter. The
Committee shall set performance goals and other terms or conditions to payment
of the Performance Shares in its discretion which, depending on the extent to
which they are met, will determine the number and value of Performance Shares
that will be paid to the Participant.
9.3. OTHER TERMS. Performance Shares may be payable in cash, Stock, or
other property, and have such other terms and conditions as determined by the
Committee and reflected in the Award Agreement.
ARTICLE 10
RESTRICTED STOCK AWARDS
10.1. GRANT OF RESTRICTED STOCK. The Committee is authorized to make
Awards of Restricted Stock to Participants in such amounts and subject to such
terms and conditions as may be selected by the Committee. All Awards of
Restricted Stock shall be evidenced by a Restricted Stock Award Agreement.
10.2. ISSUANCE AND RESTRICTIONS. Restricted Stock shall be subject to
such restrictions on transferability and other restrictions as the Committee may
impose (including, without limitation, limitations on the right to vote
Restricted Stock or the right to receive dividends on the Restricted Stock).
These restrictions may lapse separately or in combination at such times, under
such circumstances, in such installments, upon the satisfaction of performance
goals or otherwise, as the Committee determines at the time of the grant of the
Award or thereafter.
10.3. FORFEITURE. Except as otherwise determined by the Committee at
the time of the grant of the Award or thereafter, upon termination of employment
during the applicable restriction period or upon failure to satisfy a
performance goal during the applicable restriction period, Restricted Stock that
is at that time subject to restrictions shall be forfeited and reacquired by the
Company; provided, however, that the Committee may provide in any Award
Agreement that restrictions or forfeiture conditions relating to Restricted
Stock will be waived in whole or in part in the event of terminations resulting
from specified causes, and the Committee may in other cases waive in whole or in
part restrictions or forfeiture conditions relating to Restricted Stock.
10.4. CERTIFICATES FOR RESTRICTED STOCK. Restricted Stock granted under
the Plan may be evidenced in such manner as the Committee shall determine. If
certificates representing shares of Restricted Stock are registered in the name
of the
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<PAGE> 11
Participant, certificates must bear an appropriate legend referring to the
terms, conditions, and restrictions applicable to such Restricted Stock.
ARTICLE 11
DIVIDEND EQUIVALENTS
11.1. GRANT OF DIVIDEND EQUIVALENTS. The Committee is authorized to
grant Dividend Equivalents to Participants subject to such terms and conditions
as may be selected by the Committee. Dividend Equivalents shall entitle the
Participant to receive payments equal to dividends with respect to all or a
portion of the number of shares of Stock subject to an Option Award or SAR
Award, as determined by the Committee. The Committee may provide that Dividend
Equivalents be paid or distributed when accrued or be deemed to have been
reinvested in additional shares of Stock, or otherwise reinvested.
ARTICLE 12
OTHER STOCK-BASED AWARDS
12.1. GRANT OF OTHER STOCK-BASED AWARDS. The Committee is authorized,
subject to limitations under applicable law, to grant to Participants such other
Awards that are payable in, valued in whole or in part by reference to, or
otherwise based on or related to shares of Stock, as deemed by the Committee to
be consistent with the purposes of the Plan, including without limitation shares
of Stock awarded purely as a "bonus" and not subject to any restrictions or
conditions, convertible or exchangeable debt securities, other rights
convertible or exchangeable into shares of Stock, and Awards valued by reference
to book value of shares of Stock or the value of securities of or the
performance of specified Parents or Subsidiaries. The Committee shall determine
the terms and conditions of such Awards.
ARTICLE 13
PROVISIONS APPLICABLE TO AWARDS
13.1. STAND-ALONE, TANDEM, AND SUBSTITUTE AWARDS. Awards granted under
the Plan may, in the discretion of the Committee, be granted either alone or in
addition to, in tandem with, or in substitution for, any other Award granted
under the Plan. If an Award is granted in substitution for another Award, the
Committee may require the surrender of such other Award in consideration of the
grant of the new Award. Awards granted in addition to or in tandem with other
Awards may be granted either at the same time as or at a different time from the
grant of such other Awards.
13.2. EXCHANGE PROVISIONS. The Committee may at any time offer to
exchange or buy out any previously granted Award for a payment in cash, Stock,
or another Award (subject to Section 14.1), based on the terms and conditions
the Committee determines and communicates to the Participant at the time the
offer is made.
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<PAGE> 12
13.3. TERM OF AWARD. The term of each Award shall be for the period as
determined by the Committee, provided that in no event shall the term of any
Incentive Stock Option or a Stock Appreciation Right granted in tandem with the
Incentive Stock Option exceed a period of ten years from the date of its grant
(or, if Section 7.2(e) applies, five years from the date of its grant).
13.4. FORM OF PAYMENT FOR AWARDS. Subject to the terms of the Plan and
any applicable law or Award Agreement, payments or transfers to be made by the
Company or a Parent or Subsidiary on the grant or exercise of an Award may be
made in such form as the Committee determines at or after the time of grant,
including without limitation, cash, Stock, other Awards, or other property, or
any combination, and may be made in a single payment or transfer, in
installments, or on a deferred basis, in each case determined in accordance with
rules adopted by, and at the discretion of, the Committee.
13.5. LIMITS ON TRANSFER. No right or interest of a Participant in any
unexercised or restricted Award may be pledged, encumbered, or hypothecated to
or in favor of any party other than the Company or a Parent or Subsidiary, or
shall be subject to any lien, obligation, or liability of such Participant to
any other party other than the Company or a Parent or Subsidiary. No Award shall
be assignable or transferable by a Participant other than by will or the laws of
descent and distribution or, except in the case of an Incentive Stock Option,
pursuant to a domestic relations order that would satisfy Section 414(p)(1)(A)
of the Code if such Section applied to an Award under the Plan; provided
however, that the Committee may (but need not) permit other transfers where the
Committee concludes that such transferability (i) does not result in accelerated
taxation, (ii) does not cause any Option intended to be an incentive stock
option to fail to be described in Code Section 422(b), and (iii) is otherwise
appropriate and desirable, taking into account factors deemed relevant,
including without limitation, any state or federal tax or securities laws
applicable to transferable Awards.
13.6. BENEFICIARIES. Notwithstanding Section 13.5, a Participant may,
in the manner determined by the Committee, designate a beneficiary to exercise
the rights of the Participant and to receive any distribution with respect to
any Award upon the Participant's death. A beneficiary, legal guardian, legal
representative, or other person claiming any rights under the Plan is subject to
all terms and conditions of the Plan and any Award Agreement applicable to the
Participant, except to the extent the Plan and Award Agreement otherwise
provide, and to any additional restrictions deemed necessary or appropriate by
the Committee. If no beneficiary has been designated or survives the
Participant, payment shall be made to the Participant's estate. Subject to the
foregoing, a beneficiary designation may be changed or revoked by a Participant
at any time provided the change or revocation is filed with the Committee.
13.7. STOCK CERTIFICATES. All Stock certificates delivered under the
Plan are subject to any stop-transfer orders and other restrictions as the
Committee deems necessary or advisable to comply with federal or state
securities laws, rules and regulations and the rules of any national securities
exchange or automated quotation system on which the Stock is listed, quoted, or
traded. The Committee may place legends on any Stock certificate to reference
-12-
<PAGE> 13
restrictions applicable to the Stock. The Committee may, as a condition
precedent to the issuance of any certificate evidencing Stock, require the
Participant to execute a shareholder voting, or similar agreement if all other
shareholders of the Company have at that time either executed or been asked to
execute such an agreement.
13.8. ACCELERATION UPON A CHANGE IN CONTROL. If a Change in Control
occurs, all outstanding Options, Stock Appreciation Rights, and other Awards in
the nature of rights that may be exercised shall become fully exercisable and
all restrictions on outstanding Awards shall lapse; provided however, that such
acceleration will not occur if, in the opinion of the Company's accountants,
such acceleration would preclude the use of "pooling of interest" accounting
treatment for a Change in Control transaction that (a) would otherwise qualify
for such accounting treatment, and (b) is contingent upon qualifying for such
accounting treatment. To the extent that this provision causes Incentive Stock
Options to exceed the dollar limitation set forth in Section 7.2(d), the excess
Options shall be deemed to be Non-Qualified Stock Options.
13.9. ACCELERATION UPON CERTAIN EVENTS NOT CONSTITUTING A CHANGE IN
CONTROL. In the event of the occurrence of any circumstance, transaction or
event not constituting a Change in Control (as defined in Section 3.1) but which
the Board of Directors deems to be, or to be reasonably likely to lead to, an
effective change in control of the Company of a nature that would be required to
be reported in response to Item 6(e) of Schedule 14A of the 1934 Act, the
Committee may in its sole discretion declare all outstanding Options, Stock
Appreciation Rights, and other Awards in the nature of rights that may be
exercised to be fully exercisable, and/or all restrictions on all outstanding
Awards to have lapsed, in each case as of such date as the Committee may, in its
sole discretion, declare, which may be on or before the consummation of such
transaction or event. To the extent that this provision causes Incentive Stock
Options to exceed the dollar limitation set forth in Section 7.2(d), the excess
Options shall be deemed to be Non-Qualified Stock Options.
13.10. ACCELERATION FOR ANY OTHER REASON. Regardless of whether an
event has occurred as described in Section 13.8 or 13.9 above, the Committee may
in its sole discretion at any time determine that all or a portion of a
Participant's Options, Stock Appreciation Rights, and other Awards in the nature
of rights that may be exercised shall become fully or partially exercisable,
and/or that all or a part of the restrictions on all or a portion of the
outstanding Awards shall lapse, in each case as of such date as the Committee
may, in its sole discretion, declare. The Committee may discriminate among
Participants and among Awards granted to a Participant in exercising its
discretion pursuant to this Section 13.10.
13.11. EFFECT OF ACCELERATION. If an Award is accelerated under Section
13.8 or 13.9, the Committee may, in its sole discretion, provide (i) that the
Award will expire after a designated period of time after such acceleration to
the extent not then exercised, (ii) that the Award will be settled in cash
rather than Stock, (iii) that the Award will be assumed by another party to the
transaction giving rise to the acceleration or otherwise be equitably converted
in connection with such transaction, or (iv) any combination of the foregoing.
The
-13-
<PAGE> 14
Committee's determination need not be uniform and may be different for different
Participants whether or not such Participants are similarly situated.
13.12. PERFORMANCE GOALS. The Committee may determine that any Award
granted pursuant to this Plan to a Participant (including, but not limited to,
Participants who are Covered Employees) shall be determined solely on the basis
of (a) the achievement by the Company or a Parent or Subsidiary of a specified
target return, or target growth in return, on equity or assets, (b) the
Company's or Parent's or Subsidiary's stock price, (c) the achievement by a
business unit of the Company or a Parent or Subsidiary of a specified target, or
target growth in, net income or earnings per share, or (d) any combination of
the goals set forth in (a) through (c) above. Furthermore, the Committee
reserves the right for any reason to reduce (but not increase) any Award,
notwithstanding the achievement of a specified goal. If an Award is made on such
basis, the Committee shall establish goals prior to the beginning of the period
for which such performance goal relates (or such later date as may be permitted
under Code Section 162(m) or the regulations thereunder). Any payment of an
Award granted with performance goals shall be conditioned on the written
certification of the Committee in each case that the performance goals and any
other material conditions were satisfied.
13.13. TERMINATION OF EMPLOYMENT. Whether military, government or other
service or other leave of absence shall constitute a termination of employment
shall be determined in each case by the Committee at its discretion, and any
determination by the Committee shall be final and conclusive. A termination of
employment shall not occur in a circumstance in which a Participant transfers
from the Company to one of its Subsidiaries, transfers from a Parent or
Subsidiary to the Company, or transfers from one Parent or Subsidiary to another
Parent or Subsidiary.
ARTICLE 14
CHANGES IN CAPITAL STRUCTURE
14.1. GENERAL. In the event a stock dividend is declared upon the
Stock, the shares of Stock then subject to each Award shall be increased
proportionately without any change in the aggregate purchase price therefor. In
the event the Stock shall be changed into or exchanged for a different number or
class of shares of stock or securities of the Company or of another corporation,
whether through reorganization, recapitalization, reclassification, stock
split-up, combination of shares, merger or consolidation, there shall be
substituted for each such share of Stock then subject to each Award the number
and class of shares into which each outstanding share of Stock shall be so
exchanged, all without any change in the aggregate purchase price for the shares
then subject to each Award.
ARTICLE 15
AMENDMENT, MODIFICATION AND TERMINATION
15.1. AMENDMENT, MODIFICATION AND TERMINATION OF THE PLAN. The Board or
the Committee may, at any time and from time to time, amend, modify or
-14-
<PAGE> 15
terminate the Plan without stockholder approval; provided, however, that the
Board or Committee may condition any amendment or modification on the approval
of stockholders of the Company if such approval is necessary or deemed advisable
with respect to tax, securities or other applicable laws, policies or
regulations.
15.2. AWARDS PREVIOUSLY GRANTED. At any time and from time to time, the
Committee may amend, modify or terminate any outstanding Award without approval
of the Participant; provided, however, that, subject to the terms of the
applicable Award Agreement, such amendment, modification or termination shall
not, without the Participant's consent, reduce or diminish the value of such
Award determined as if the Award had been exercised, vested, cashed in or
otherwise settled on the date of such amendment or termination.
ARTICLE 16
GENERAL PROVISIONS
16.1. NO RIGHTS TO AWARDS. No Participant or any employee or officer
shall have any claim to be granted any Award under the Plan, and neither the
Company nor the Committee is obligated to treat Participants or employees and
officers uniformly.
16.2. NO STOCKHOLDER RIGHTS. No Award gives the Participant any of the
rights of a stockholder of the Company unless and until shares of Stock are in
fact issued to such person in connection with such Award.
16.3. WITHHOLDING. The Company or any Parent or Subsidiary shall have
the authority and the right to deduct or withhold, or require a Participant to
remit to the Company, an amount sufficient to satisfy federal, state, and local
taxes (including the Participant's FICA obligation) required by law to be
withheld with respect to any taxable event arising as a result of the Plan. With
respect to withholding required upon any taxable event under the Plan, the
Committee may, at the time the Award is granted or thereafter, require that any
such withholding requirement be satisfied, in whole or in part, by withholding
shares of Stock having a Fair Market Value on the date of withholding equal to
the amount to be withheld for tax purposes, all in accordance with such
procedures as the Committee establishes.
16.4. NO RIGHT TO EMPLOYMENT. Nothing in the Plan or any Award
Agreement shall interfere with or limit in any way the right of the Company or
any Parent or Subsidiary to terminate any Participant's employment at any time,
nor confer upon any Participant any right to continue in the employ of the
Company or any Parent or Subsidiary.
16.5. UNFUNDED STATUS OF AWARDS. The Plan is intended to be an
"unfunded" plan for incentive and deferred compensation. With respect to any
payments not yet made to a Participant pursuant to an Award, nothing contained
in the Plan or any Award Agreement shall give the Participant any rights that
are greater than those of a general creditor of the Company or any Parent or
Subsidiary.
-15-
<PAGE> 16
16.6. INDEMNIFICATION. To the extent allowable under applicable law,
each member of the Committee shall be indemnified and held harmless by the
Company from any loss, cost, liability, or expense that may be imposed upon or
reasonably incurred by such member in connection with or resulting from any
claim, action, suit, or proceeding to which such member may be a party or in
which he may be involved by reason of any action or failure to act under the
Plan and against and from any and all amounts paid by such member in
satisfaction of judgment in such action, suit, or proceeding against him
provided he gives the Company an opportunity, at its own expense, to handle and
defend the same before he undertakes to handle and defend it on his own behalf.
The foregoing right of indemnification shall not be exclusive of any other
rights of indemnification to which such persons may be entitled under the
Company's Articles of Incorporation or Bylaws, as a matter of law, or otherwise,
or any power that the Company may have to indemnify them or hold them harmless.
16.7. RELATIONSHIP TO OTHER BENEFITS. No payment under the Plan shall
be taken into account in determining any benefits under any pension, retirement,
savings, profit sharing, group insurance, welfare or benefit plan of the Company
or any Parent or Subsidiary unless provided otherwise in such other plan.
16.8. EXPENSES. The expenses of administering the Plan shall be borne
by the Company and its Parents or Subsidiaries.
16.9. TITLES AND HEADINGS. The titles and headings of the Sections in
the Plan are for convenience of reference only, and in the event of any
conflict, the text of the Plan, rather than such titles or headings, shall
control.
16.10. GENDER AND NUMBER. Except where otherwise indicated by the
context, any masculine term used herein also shall include the feminine; the
plural shall include the singular and the singular shall include the plural.
16.11. FRACTIONAL SHARES. No fractional shares of Stock shall be issued
and the Committee shall determine, in its discretion, whether cash shall be
given in lieu of fractional shares or whether such fractional shares shall be
eliminated by rounding up.
16.12. GOVERNMENT AND OTHER REGULATIONS. The obligation of the Company
to make payment of awards in Stock or otherwise shall be subject to all
applicable laws, rules, and regulations, and to such approvals by government
agencies as may be required. The Company shall be under no obligation to
register under the 1933 Act, or any state securities act, any of the shares of
Stock paid under the Plan. The shares paid under the Plan may in certain
circumstances be exempt from registration under the 1933 Act, and the Company
may restrict the transfer of such shares in such manner as it deems advisable to
ensure the availability of any such exemption.
16.13. GOVERNING LAW. To the extent not governed by federal law, the
Plan and all Award Agreements shall be construed in accordance with and governed
by the laws of the State of Georgia.
-16-
<PAGE> 17
16.14. ADDITIONAL PROVISIONS. Each Award Agreement may contain such
other terms and conditions as the Committee may determine; provided that such
other terms and conditions are not inconsistent with the provisions of this
Plan.
16.15 CODE SECTION 162(m). The deduction limits of Code Section 162(m)
and the regulation thereunder do not apply to the Company until such time, if
any, as any class of the Company's common equity securities is registered under
Section 12 of the 1934 Act or the Corporation otherwise meets the definition of
a "publicly held corporation" under Treasury Regulation 1.162-27(c) or any
successor provision. Upon becoming a publicly held corporation, the deduction
limits of Code Section 162(m) and the regulations thereunder shall not apply to
compensation payable under this Plan until the expiration of the reliance period
described in Treasury Regulation 1.162-27(f) or any successor regulation.
The foregoing is hereby acknowledged as being the SIMCALA Holdings,
Inc. 1998 Stock Incentive Plan as adopted by the Board of Directors of the
Company on March 31, 1998.
SIMCALA Holdings, Inc.
By: /s/ William A. Davies
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
-17-
<PAGE> 1
EXHIBIT 99.3
SIMCALA, INC.
LETTER OF TRANSMITTAL
TO TENDER FOR EXCHANGE
9 5/8% SENIOR NOTES DUE 2006, SERIES B WHICH
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
FOR ANY AND ALL OUTSTANDING
9 5/8% SENIOR NOTES DUE 2006, SERIES A
PURSUANT TO THE PROSPECTUS DATED _________, 1998
- -------------------------------------------------------------------------------
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M.,
EASTERN TIME, ,1998, UNLESS EXTENDED (THE "EXPIRATION DATE").
- -------------------------------------------------------------------------------
PLEASE READ CAREFULLY THE ATTACHED INSTRUCTIONS
If you desire to accept the Exchange Offer, this Letter of Transmittal should be
completed, signed, and submitted timely to the Exchange Agent:
TO: IBJ SCHRODER BANK & TRUST COMPANY, EXCHANGE AGENT
By Hand or Overnight Delivery:
------------------------------
IBJ Schroder Bank & Trust Company
One State Street
New York, New York 10004
Attn: Securities Processing Window,
Subcellar One (SC-1)
By Registered or Certified Mail:
--------------------------------
IBJ Schroder Bank & Trust Company
P.O. Box 84
Bowling Green Station
New York, New York 10274-0084
Attn: Reorganization Operations Department
By Facsimile Transmission
(Eligible Institutions Only):
-----------------------------
(212) 858-2611
To Confirm by Telephone
or for Information, Call:
-------------------------
(212) 858-2103
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
FOR ANY QUESTIONS REGARDING THIS LETTER OF TRANSMITTAL OR FOR ANY
ADDITIONAL INFORMATION, YOU MAY CONTACT THE EXCHANGE AGENT BY TELEPHONE AT (212)
858-2103.
<PAGE> 2
The undersigned hereby acknowledges receipt of the Prospectus dated
___________, 1998 (the "Prospectus") of SIMCALA, Inc., a Delaware corporation
(the "Company"), and this Letter of Transmittal (the "Letter of Transmittal"),
that together constitute the Company's offer (the "Exchange Offer") to exchange
$1,000 in principal amount of its 9 5/8% Senior Notes due 2006, Series B (the
"Exchange Notes"), which have been registered under the Securities Act of 1933,
as amended (the "Securities Act"), pursuant to an effective Registration
Statement filed with the Securities and Exchange Commission ("SEC"), for each
$1,000 in principal amount of its outstanding 9 5/8% Senior Notes due 2006,
Series A (the "Series A Notes," and together with the Exchange Notes, the
"Notes"), of which $75,000,000 aggregate principal amount is outstanding.
Capitalized terms used but not defined herein have the meanings ascribed to them
in the Prospectus.
The undersigned hereby tenders the Series A Notes described in Box 1
below (the "Tendered Notes") upon the terms, and subject to the conditions,
described in the Prospectus and this Letter of Transmittal. The undersigned is
the registered owner of all the Tendered Notes, and the undersigned represents
that it has received from each beneficial owner of the Tendered Notes
("Beneficial Owners") a duly completed and executed form of "Instruction to
Registered Holder and/or Book-Entry Transfer Facility Participant from Owner"
accompanying this Letter of Transmittal, instructing the undersigned to take the
action described in this Letter of Transmittal.
This Letter of Transmittal is to be completed either if (a)
certificates are to be forwarded herewith or (b) tenders are to be made pursuant
to the procedures for tender by book-entry transfer set forth under "The
Exchange Offer - Procedures for Tendering" in the Prospectus and an Agent's
Message (as defined below) is not delivered. Certificates, or book-entry
confirmation of a book-entry transfer of such Series A Notes into the Exchange
Agent's Account at The Depository Trust Company ("DTC"), as well as this Letter
of Transmittal (or a facsimile thereof), properly completed and duly executed,
with any required signature guarantees, and any other documents required by this
Letter of Transmittal, must be received by the Exchange Agent at its address set
forth herein on or prior to the Expiration Date. Tenders by book-entry transfer
may also be made by delivering an Agent's Message in lieu of this Letter of
Transmittal. The term "Agent's Message" means a message, transmitted by DTC to
and received by the Exchange Agent and forming a part of a book-entry
confirmation, which states that DTC has received an express acknowledgment from
the tendering participant, which acknowledgment states that such participant has
received and agrees to be bound by this Letter of Transmittal and that the
Company may enforce this Letter of Transmittal against such participant.
Holders (as defined below) of Series A Notes whose certificates (the
"Certificates") for such Series A Notes are not immediately available or who
cannot deliver their Certificates and all other required documents to the
Exchange Agent on or prior to the Expiration Date (as defined in the Prospectus)
or who cannot complete the procedures for book-entry transfer on a timely basis,
must tender their Series A Notes according to the guaranteed delivery procedures
set forth in "The Exchange Offer Procedures for Tendering" in the Prospectus.
Delivery of the documents to the book-entry transfer facility does not
constitute delivery to the Exchange Agent.
Subject to, and effective upon, the acceptance for exchange by the
Company of the Tendered Notes, the undersigned hereby exchanges, assigns,
transfers and conveys to, or upon the order of, the Company, all right, title,
and interest in, to and under the Tendered Notes.
-2-
<PAGE> 3
Please issue the Exchange Notes in exchange for Tendered Notes in the
name(s) of the undersigned. Similarly, unless otherwise indicated under "Special
Delivery Instructions" below (Box 3), please send or cause to be sent the
Certificate(s) for the Exchange Notes (and accompanying documents, as
appropriate) to the undersigned at the address shown below in Box 1.
The undersigned hereby irrevocably constitutes and appoints the
Exchange Agent as the true and lawful agent and attorney in fact of the
undersigned with respect to the Tendered Notes, with full power of substitution
(such power of attorney being an irrevocable power coupled with an interest), to
(i) deliver the Tendered Notes to the Company or cause ownership of the Tendered
Notes to be transferred to, or upon the order of, the Company, on the books of
the transfer agent and registrar for the Series A Notes and deliver all
accompanying evidences of transfer and authenticity to, or upon the order of,
the Company upon receipt by the Exchange Agent, as the undersigned's agent, of
the Exchange Notes to which the undersigned is entitled upon acceptance by the
Company of the Tendered Notes pursuant to the Exchange Offer, and (ii) receive
as agent of the Company all benefits and otherwise exercise all rights of
beneficial ownership of the Tendered Notes, all in accordance with the terms of
the Exchange Offer.
The undersigned understands that tenders of Series A Notes pursuant to
the procedures described under the caption "The Exchange Offer" in the
Prospectus and in the instructions hereto will constitute a binding agreement
between the undersigned and the Company upon the terms and subject to the
conditions of the Exchange Offer, subject only to withdrawal of such tenders on
the terms set forth in the Prospectus under the caption "The Exchange Offer -
Withdrawals of Tenders." All authority herein conferred or agreed to be
conferred shall survive the death or incapacity of the undersigned and any
Beneficial Owner(s), and every representation, warranty, covenant and obligation
of the undersigned or any Beneficial Owner(s) hereunder shall be binding upon
the heirs, representatives, successors and assigns of the undersigned and such
Beneficial Owner(s).
The undersigned hereby represents and warrants that the undersigned has
full power, authority and capacity to tender, exchange, assign and transfer the
Tendered Notes and that the Company will acquire good and unencumbered title to
the Tendered Notes free and clear of all liens, pledges, restrictions, charges,
encumbrances, and adverse claims of any kind whatsoever. The undersigned and
each Beneficial Owner will, upon receipt, execute and deliver any additional
documents or instruments reasonably requested by the Company or the Exchange
Agent as necessary or desirable to complete and give effect to the transactions
contemplated hereby.
The undersigned hereby represents and warrants that the information set
forth in Box 2 is true and correct. By accepting the Exchange Offer, the
undersigned hereby further represents and warrants that (i) the Exchange Notes
to be acquired by the undersigned and any Beneficial Owner(s) in connection with
the Exchange Offer are being acquired by the undersigned and any Beneficial
Owner(s) in the ordinary course of business of the undersigned and any
Beneficial Owner(s), (ii) neither the undersigned nor any Beneficial Owner on
behalf of which the undersigned is acting has any arrangement or understanding
with any person to participate in the distribution of such Exchange Notes,
and/or any intention to participate in any distribution of the Exchange Notes,
(iii) neither the undersigned nor any Beneficial Owner is an "affiliate" (as
defined in Rule 405 under the Securities Act) of the Company, and (iv) the
undersigned and each such Beneficial Owner acknowledge and agree that (x) any
person with the intention of distributing the Exchange Notes is not eligible to
participate in the Exchange Offer and, in the event any such person holds
-3-
<PAGE> 4
Exchange Notes, such person must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with a secondary
resale of the Exchange Notes acquired by such person and cannot rely on the
position of the Staff of the SEC set forth in the no-action letters that are
discussed in the section of the Prospectus entitled "The Exchange Offer," and
(y) any such secondary resale transaction should be covered by an effective
registration statement containing the information with respect to the selling
security holders required by Item 507 of Regulation S-K under the Securities
Act.
In addition, by accepting the Exchange Offer, the undersigned hereby
(i) represents and warrants that, if the undersigned or any Beneficial Owner of
the Series A Notes is a broker-dealer, such broker-dealer holds the Series A
Notes for its own account as a result of market-making activities or other
trading activities and (ii) acknowledges that, by receiving Exchange Notes for
its own account in exchange for Series A Notes, where such Series A Notes were
acquired as a result of market-making activities or other trading activities,
such broker-dealer may be a statutory underwriter and will deliver a prospectus
meeting the requirements of the Securities Act in connection with any resale of
such Exchange Notes. By so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act.
ANY HOLDER WHO IS PROHIBITED BY APPLICABLE LAW OR SEC POLICY FROM
PARTICIPATING IN THE EXCHANGE OFFER, INCLUDING ANY HOLDER WHO IS AN AFFILIATE OF
THE COMPANY OR A BROKER-DEALER WHO HOLDS SERIES A NOTES ACQUIRED DIRECTLY FROM
THE COMPANY OR ONE OF ITS AFFILIATES, AND ANY PERSON WHO INTENDS TO, OR IS
PARTICIPATING IN, OR HAS ANY ARRANGEMENT OR UNDERSTANDING TO PARTICIPATE IN, A
DISTRIBUTION OF THE EXCHANGE NOTES, SHOULD CONTACT THE COMPANY WITHIN 20
BUSINESS DAYS OF THE EXCHANGE OFFER IN ORDER TO PRESERVE ITS REGISTRATION RIGHTS
THAT ARE DISCUSSED IN THE SECTION OF THE PROSPECTUS ENTITLED "THE EXCHANGE OFFER
- - REGISTRATION RIGHTS AND EFFECT OF EXCHANGE OFFER."
[ ] CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED HEREWITH.
[ ] CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED PURSUANT TO
A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY DELIVERED TO THE
EXCHANGE AGENT AND COMPLETE "USE OF GUARANTEED DELIVERY" BELOW
(Box 4).
[ ] CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH
THE BOOK-ENTRY TRANSFER FACILITY AND COMPLETE "USE OF BOOK-ENTRY
TRANSFER" BELOW (Box 5).
-4-
<PAGE> 5
<TABLE>
- -------------------------------------------------------------------------------
PAYOR'S NAME: SIMCALA, INC.*
- -------------------------------------------------------------------------------
<S> <C>
Name (if joint names, list first and circle the name of
the person or entity whose number you enter in Part I
below. See instructions if your name has changed.)
--------------------------------------------------------
Address
--------------------------------------------------------
SUBSTITUTE City, State and ZIP Code
--------------------------------------------------------
Form W-9 List account number(s) here (optional)
--------------------------------------------------------
Department of the PART 1-PLEASE PROVIDE YOUR Social Security Number
Treasury TAXPAYER IDENTIFICATION or TIN
Internal Revenue NUMBER ("TIN") IN THE BOX AT
Service RIGHT AND CERTIFY BY SIGNING
AND DATING BELOW
--------------------------------------------------------
PART 2-Check the box if you are NOT subject to backup
withholding under the provisions of section 3406(a)(I)(C)
of the Internal Revenue Code because (1) you have not
been notified that you are subject to backup withholding
as a result of failure to report all interest or
dividends or (2) the Internal Revenue Service has
notified you that you are no longer subject to backup
withholding. [ ]
- -------------------------------------------------------------------------------
CERTIFICATION-UNDER THE PENALTIES OF PERJURY,
I CERTIFY THAT THE INFORMATION PROVIDED ON THIS
FORM IS TRUE, CORRECT AND COMPLETE. Awaiting TIN [ ]
SIGNATURE DATE , 1998
------------------------------- -------------------------
- -------------------------------------------------------------------------------
*See Instruction 8.
</TABLE>
- -------------------------------------------------------------------------------
Note: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE EXCHANGE
OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF
TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL
DETAILS.
-5-
<PAGE> 6
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL
CAREFULLY BEFORE COMPLETING THE BOXES
- -------------------------------------------------------------------------------
BOX 1*
DESCRIPTION OF NOTES TENDERED**
(Attach additional signed pages, if necessary)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Aggregate
Principal
Name(s) and Address(es) of Registered Note Amount Aggregate
Holder(s), exactly as name(s) appear(s) on Note Certificate Represented Principal
Certificate(s) Number(s) by Amount
(Please fill in, if blank) of Notes Certificate(s) Tendered
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
Total
- ------------------------------------------------------------------------------------------------
</TABLE>
* Need not be completed by persons tendering by book-entry transfer.
** The minimum permitted tender is $1,000 in principal amount of Series A
Notes. All other tenders must be in integral multiples of $1,000 of
principal amount. Unless otherwise indicated in this column, the
principal amount of all Note Certificates identified in this Box 1 or
delivered to the Exchange Agent herewith shall be deemed tendered. See
Instruction 4.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
BOX 2
BENEFICIAL OWNER(S)
- -------------------------------------------------------------------------------
<TABLE>
<S> <C>
State of Principal Residence of Each Principal Amount of Tendered Notes
Beneficial Owner of Tendered Notes Held for Account of Beneficial Owner
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
</TABLE>
-6-
<PAGE> 7
- -------------------------------------------------------------------------------
BOX 3
SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 5, 6 and 7)
TO BE COMPLETED ONLY IF EXCHANGE NOTES ARE TO BE EXCHANGED FOR SERIES A NOTES
AND UNTENDERED SERIES A NOTES ARE TO BE SENT TO SOMEONE OTHER THAN THE
UNDERSIGNED, OR TO THE UNDERSIGNED AT AN ADDRESS OTHER THAN THAT SHOWN ABOVE.
Mail Exchange Note(s) and any untendered Series A Notes to:
Name(s):
- -------------------------------------------------------------------------------
(please print)
Address:
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(Include Zip Code)
Tax Identification or
Social Security No.:
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
BOX 4
USE OF GUARANTEED DELIVERY
(See Instruction 2)
TO BE COMPLETED ONLY IF SERIES A NOTES ARE BEING TENDERED BY MEANS OF A NOTICE
OF GUARANTEED DELIVERY.
Name(s) of Registered Holder(s):
- -------------------------------------------------------------------------------
Date of Execution of Notice of Guaranteed Delivery:
----------------------------
Name of Institution which Guaranteed Delivery:
---------------------------------
- -------------------------------------------------------------------------------
-7-
<PAGE> 8
- -------------------------------------------------------------------------------
BOX 5
USE OF BOOK-ENTRY TRANSFER
(See Instruction 1)
TO BE COMPLETED ONLY IF DELIVERY OF TENDERED NOTES IS TO BE MADE BY BOOK-ENTRY
TRANSFER.
Name of Tendering Institution:
-------------------------------------------------
Account Number:
----------------------------------------------------------------
Transaction Code Number:
-------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
BOX 6
TENDERING HOLDER SIGNATURE
(See Instructions 1 and 5)
IN ADDITION, SUBSTITUTE FORM W-9 MUST BE COMPLETED AND SIGNED
- -------------------------------------------------------------------------------
<TABLE>
<S> <C>
X Signature Guarantee
-------------------------
X (If required by Instruction 5)
--------------------------
(Signature of Registered Holder(s) or Authorized Signatory) Authorized Signature
Note: The above lines must be signed by the
registered holder(s) of Series A Notes or by X
person(s) authorized to become registered holder(s) ---------------------------------
(evidence of such authorization must be transmitted Name:
with this Letter of Transmittal). If signature is -----------------------------
by a trustee, executor, administrator, guardian, (please print)
attorney-in-fact, officer, or other person acting
in a fiduciary or representative capacity, such
person must set forth his or her full title below.
See Instruction 5. Title:
----------------------------
Name of Firm:
---------------------
Name(s): (Must be an Eligible Institution as
-------------------------------------------- defined in Instruction 2)
- ----------------------------------------------------
Capacity: Address:
------------------------------------------- --------------------------
--------------------------
Street Address:
-------------------------------------- --------------------------
-------------------------------------- Area Code and Telephone Number:
(include ZIP code)
Area Code and Telephone Number:
--------------------------------------------
Tax Identification or Social Security Number: Dated:
--------------------------------------------- --------------------------
</TABLE>
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<PAGE> 9
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BOX 7
BROKER-DEALER STATUS
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[ ] Check this box if the Beneficial Owner of the Series A Notes is a
broker-dealer and such broker-dealer acquired the Series A Notes for
its own account as a result of market-making activities or other
trading activities.
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<PAGE> 10
SIMCALA, INC.
INSTRUCTIONS TO LETTER OF TRANSMITTAL
FORMING PART OF THE TERMS AND CONDITIONS
OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND SERIES A NOTES. A
properly completed and duly executed copy of this Letter of Transmittal,
including Substitute Form W-9, and any other documents required by this Letter
of Transmittal must be received by the Exchange Agent at its address set forth
herein, and either Certificates for Tendered Notes must be received by the
Exchange Agent at its address set forth herein or such Tendered Notes must be
transferred pursuant to the procedures for book-entry transfer described in the
Prospectus under the caption "Exchange Offer - Procedures for Tendering" (and a
confirmation of such transfer received by the Exchange Agent), in each case
prior to 5:00 P.M., Eastern Time, on the Expiration Date. The method of delivery
of Certificates for Tendered Notes, this Letter of Transmittal and all other
required documents to the Exchange Agent is at the election and risk of the
tendering holder, and the delivery will be deemed made only when actually
received by the Exchange Agent. If delivery is by mail, registered mail with
return receipt requested, properly insured, is recommended. Instead of delivery
by mail, it is recommended that the holder use an overnight or hand delivery
service. In all cases, sufficient time should be allowed to assure timely
delivery. No Letter of Transmittal or Series A Notes should be sent to the
Company. Neither the Company nor the registrar or transfer agent is under any
obligation to notify any tendering holder of the Company's acceptance of
Tendered Notes prior to the closing of the Exchange Offer.
2. GUARANTEED DELIVERY PROCEDURES. Holders who wish to tender their
Series A Notes but whose Series A Notes are not immediately available, and who
cannot deliver their Series A Notes, this Letter of Transmittal or any other
documents required hereby to the Exchange Agent prior to the Expiration Date
must tender their Series A Notes according to the guaranteed delivery procedures
set forth below, including completion of Box 4. Pursuant to such procedures: (i)
such tender must be made by an "eligible guarantor institution" within the
meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended,
and which is a member of a recognized signature guarantee program (i.e.,
Securities Transfer Agents Medallion Program, Stock Exchange Medallion Program
or New York Stock Exchange Medallion Signature Program) (an "Eligible
Institution") and the Notice of Guaranteed Delivery must be signed by the
holder; (ii) prior to the Expiration Date, the Exchange Agent must have received
from the holder and the Eligible Institution a properly completed and duly
executed Notice of Guaranteed Delivery (by mail, hand delivery or facsimile
transmission) setting forth the name and address of the holder, the Certificate
number(s) of the Tendered Notes and the principal amount of Tendered Notes,
stating that the tender is being made thereby and guaranteeing that, within five
trading days after the Expiration Date, this Letter of Transmittal together with
the Certificate(s) representing the Series A Notes and any other required
documents will be deposited by the Eligible Institution with the Exchange Agent;
and (iii) such properly completed and executed Letter of Transmittal, as well as
all other documents required by this Letter of Transmittal and the
Certificate(s) representing all Tendered Notes in proper form for transfer, must
be received by the Exchange Agent within three trading days after the Expiration
Date. Any holder who wishes to tender Series A Notes pursuant to the guaranteed
delivery procedures described above must ensure that the Exchange Agent receives
the Notice of Guaranteed Delivery relating to such Series A Notes prior to 5:00
P.M., Eastern Time, on the Expiration Date.
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<PAGE> 11
3. BENEFICIAL OWNER INSTRUCTIONS TO REGISTERED HOLDERS. Only a holder
in whose name Tendered Notes are registered on the books of the registrar (or
the legal representative or attorney-in-fact of such registered holder) may
execute and deliver this Letter of Transmittal. Any Beneficial Owner of Tendered
Notes who is not the registered holder must arrange promptly with the registered
holder to execute and deliver this Letter of Transmittal on his or her behalf
through the execution and delivery to the registered holder of the "Instructions
to Registered Holder and/or Book-Entry Transfer Facility Participant from Owner"
form accompanying this Letter of Transmittal. The Company, the Exchange Agent,
and the transfer agent and registrar for Series A Notes shall be entitled to
rely upon all representations, warranties, covenants and instructions given by
such registered holder as have been duly authorized and true with respect to,
and binding upon, the Beneficial Owner.
4. PARTIAL TENDERS. Tenders of Series A Notes will be accepted only in
integral multiples of $1,000 in principal amount. If less than the entire
principal amount of Series A Notes held by the holder is tendered, the tendering
holder should fill in the principal amount tendered in the column labeled
"Aggregate Principal Amount Tendered" of the box entitled "Description of Notes
Tendered" (Box 1) above. The entire principal amount of Series A Notes delivered
to the Exchange Agent will be deemed to have been tendered unless otherwise
indicated. If the entire principal amount of all Series A Notes held by the
holder is not tendered, then Series A Notes for the principal amount of Series A
Notes not tendered and Exchange Notes issued in exchange for any Series A Notes
tendered and accepted will be sent to the registered holder at his or her
registered address, unless a different address is provided in the appropriate
box on this Letter of Transmittal, as soon as practicable following the
Expiration Date.
5. SIGNATURES ON THE LETTER OF TRANSMITTAL; BOND POWERS AND
ENDORSEMENTS; GUARANTEE OF SIGNATURES. If this Letter of Transmittal is signed
by the registered holder(s) of the Tendered Notes, the signature must correspond
with the name(s) as written on the face of the Tendered Notes without
alteration, enlargement or any change whatsoever.
If any of the Tendered Notes are owned of record by two or more joint
owners, all such owners must sign this Letter of Transmittal. If any Tendered
Notes are held in different names, it will be necessary to complete, sign and
submit as many separate copies of the Letter of Transmittal as there are
different names in which Tendered Notes are held.
If this Letter of Transmittal is signed by the registered holder(s) of
Tendered Notes, and Exchange Notes issued in exchange therefor are to be issued
(and any untendered principal amount of Series A Notes is to be reissued) in the
name of the registered holder(s), then such registered holder(s) need not and
should not endorse any Tendered Notes, nor provide a separate bond power. In any
other case, such registered holder(s) must either properly endorse the Tendered
Notes or transmit a properly completed separate bond power with this Letter of
Transmittal, with the signature(s) on the endorsement or bond power guaranteed
by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of any Tendered Notes, such Tendered Notes must be endorsed
or accompanied by appropriate bond powers, in each case, signed as the name(s)
of the registered holder(s) appear(s) on the Tendered Notes, with the
signature(s) on the endorsement or bond power guaranteed by an Eligible
Institution.
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<PAGE> 12
If this Letter of Transmittal or any Tendered Notes or bond powers are
signed by a trustee, executors, administrators, guardians, attorneys-in-fact,
officers of corporations, or others acting in a fiduciary or representative
capacity, such person should so indicate when signing and, unless waived by the
Company, evidence satisfactory to the Company of their authority to so act must
be submitted with this Letter of Transmittal.
Endorsements on Tendered Notes or signatures on bond powers required by
this Instruction 5 must be guaranteed by an Eligible Institution.
Signatures on this Letter of Transmittal must be guaranteed by an
Eligible Institution unless the Tendered Notes are tendered (i) by a registered
holder who has not completed the box set forth herein entitled "Special Delivery
Instructions" (Box 3) or (ii) by an Eligible Institution.
6. SPECIAL DELIVERY INSTRUCTIONS. Tendering holders should indicate, in
the applicable box (Box 3), the name and address to which the Exchange Notes
and/or substitute Series A Notes for principal amounts are tendered or not
accepted for exchange, respectively are to be sent, if different from the name
and address of the person signing this Letter of Transmittal. In the case of
issuance in a different name, the taxpayer identification or social security
number of the person named must also be indicated.
7. TRANSFER TAXES. The Company will pay all transfer taxes, if any,
applicable to the exchange of Tendered Notes pursuant to the Exchange Offer. If,
however, a transfer tax is imposed for any reason other than the transfer and
exchange of Tendered Notes pursuant to the Exchange Offer, then the amount of
any such transfer taxes (whether imposed on the registered holder or on any
other person) will be payable by the tendering holder. If satisfactory evidence
of payment of such taxes or exemption therefrom is not submitted with this
Letter of Transmittal, the amount of such transfer taxes will be billed directly
to such tendering holder.
Except as provided in this Instruction 7, it will not be necessary for
transfer tax stamps to be affixed to the Tendered Notes listed in this Letter of
Transmittal.
8. TAX IDENTIFICATION NUMBER. Federal income tax law requires that the
holder(s) of any Tendered Notes which are accepted for exchange must provide the
Company (as payor) with its correct taxpayer identification number ("TIN"),
which, in the case of a holder who is an individual, is his or her social
security number. If the Company is not provided with the correct TIN, the holder
may be subject to backup withholding and a $50 penalty imposed by the Internal
Revenue Service. (If withholding results in an over-payment of taxes, a refund
may be obtained.) Certain holders (including, among others, all corporations and
certain foreign individuals) are not subject to these backup withholding and
reporting requirements. See the enclosed "Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9" for additional
instructions.
To prevent backup withholding, each holder of Tendered Notes must
provide such holder's correct TIN by completing the Substitute Form W-9 set
forth herein, certifying that the TIN provided is correct (or that such holder
is awaiting a TIN), and that (i) the holder has not been notified by the
Internal Revenue Service that such holder is subject to backup withholding as a
result of failure to report all interest or dividends or (ii) the Internal
Revenue Service has notified the holder that such holder is no longer subject to
backup withholding. If the Tendered Notes are registered in more than one name
or are not in the name of the actual owner, consult the
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<PAGE> 13
"Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9" for information on which TIN to report.
The Company reserves the right in its sole discretion to take whatever
steps are necessary to comply with the Company's obligations regarding backup
withholding.
9. VALIDITY OF TENDERS. All questions as to the validity, form,
eligibility (including time of receipt), acceptance and withdrawal of Tendered
Notes will be determined by the Company in its sole discretion, and whose
determination will be final and binding. The Company reserves the right to
reject any and all Series A Notes not validly tendered or any Series A Notes the
Company's acceptance of which would, in the opinion of the Company or its
counsel, be unlawful. The Company also reserves the right to waive any
conditions of the Exchange Offer or defects or irregularities in tenders of
Series A Notes as to any ineligibility of any holder who seeks to tender Series
A Notes in the Exchange Offer. The interpretation of the terms and conditions of
the Exchange Offer (including this Letter of Transmittal and the instructions
hereto) by the Company shall be final and binding on all parties. Unless waived,
any defects or irregularities in connection with tenders of Series A Notes must
be cured within such time as the Company shall determine. Neither the Company,
the Exchange Agent nor any other person shall be under any duty to give
notification of defects or irregularities with respect to tenders of Series A
Notes, nor shall any of them incur any liability for failure to give such
notification. Tenders of Series A Notes will not be deemed to have been made
until such defects or irregularities have been cured or waived. Any Series A
Notes received by the Exchange Agent that are not properly tendered and as to
which the defects or irregularities have not been cured or waived will be
returned by the Exchange Agent to the tendering holder, unless otherwise
provided in this Letter of Transmittal, as soon as practicable following the
Expiration Date.
10. WAIVER OF CONDITIONS. The Company reserves the absolute right to
amend, waive or modify any of the conditions in the Exchange Offer in the case
of any Tendered Notes.
11. NO CONDITIONAL TENDER. No alternative, conditional, irregular, or
contingent tender of Series A Notes or transmittal of this Letter of Transmittal
will be accepted.
12. MUTILATED, LOST, STOLEN OR DESTROYED NOTES. Any tendering holder
whose Series A Notes have been mutilated, lost, stolen or destroyed should
contact the Exchange Agent at the address indicated herein for further
instructions.
13. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and
requests for assistance and requests for additional copies of the Prospectus or
this Letter of Transmittal may be directed to the Exchange Agent at the address
indicated herein. Holders may also contact their broker, dealer, commercial
bank, trust company or other nominee for assistance concerning the Exchange
Offer.
14. ACCEPTANCE OF TENDERED NOTES AND ISSUANCE OF NOTES; RETURN OF
NOTES. Subject to the terms and conditions of the Exchange Offer, the Company
will accept for exchange all validly tendered Series A Notes as soon as
practicable after the Expiration Date and will issue Exchange Notes therefor as
soon as practicable thereafter. For purposes of the Exchange Offer, the Company
shall be deemed to have accepted tendered Series A Notes when, as and if the
Company has given written or oral notice (immediately followed in writing)
thereof to the Exchange Agent. If any Tendered Notes are not exchanged pursuant
to the Exchange Offer for any reason, such
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<PAGE> 14
unexchanged Series A Notes will be returned, without expense, to the undersigned
at the address shown in Box 1 or at a different address as may be indicated
herein under "Special Delivery Instructions" (Box 3).
15. WITHDRAWAL. Tenders may be withdrawn only pursuant to the
procedures set forth in the Prospectus under the caption "The Exchange Offer."
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<PAGE> 15
IBJ SCHRODER BANK & TRUST COMPANY, EXCHANGE AGENT
ONE STATE STREET
NEW YORK, NEW YORK 10004
(212) 858-2103
