-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, L6uQr6WIlr7qykgvj64b7CpIFlVI3/CGpPHN5+iv576SaocYa6//z8gH+L669d4o YqtzL5LBTjvAmzserm+I+Q== 0000055604-02-000001.txt : 20020416 0000055604-02-000001.hdr.sgml : 20020416 ACCESSION NUMBER: 0000055604-02-000001 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 25 CONFORMED PERIOD OF REPORT: 20011231 FILED AS OF DATE: 20020415 FILER: COMPANY DATA: COMPANY CONFORMED NAME: KEYSTONE CONSOLIDATED INDUSTRIES INC CENTRAL INDEX KEY: 0000055604 STANDARD INDUSTRIAL CLASSIFICATION: STEEL WORKS, BLAST FURNACES ROLLING MILLS (COKE OVENS) [3312] IRS NUMBER: 370364250 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-03919 FILM NUMBER: 02610511 BUSINESS ADDRESS: STREET 1: 5430 LBJ FWY STE 1740 STREET 2: THREE LINCOLN CENTRE CITY: DALLAS STATE: TX ZIP: 75240 BUSINESS PHONE: 2144580028 MAIL ADDRESS: STREET 1: 5430 LBJ FWY STE 1740 STREET 2: THREE LINCOLN CENTRE CITY: DALLAS STATE: TX ZIP: 75240 FORMER COMPANY: FORMER CONFORMED NAME: KEYSTONE STEEL & WIRE CO DATE OF NAME CHANGE: 19710506 10-K 1 kci10k01.txt KEYSTONE CONSOLIDATED INDUSTRIES, INC. 12/31/01 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 - For the fiscal year ended December 31, 2001 Commission file number 1-3919 Keystone Consolidated Industries, Inc. (Exact name of registrant as specified in its charter) Delaware 37-0364250 - --------------------------------- --------------------------- (State or other jurisdiction of (IRS Employer incorporation or organization) identification No.) 5430 LBJ Freeway, Suite 1740 Three Lincoln Centre, Dallas, TX 75240-2697 - ---------------------------------------- ----------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (972) 458-0028 --------------------------- Securities registered pursuant to Section 12(b) of the Act: Name of each exchange Title of each class on which registered Common Stock, $1 par value None Securities registered pursuant to Section 12(g) of the Act: None. Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] As of April 8, 2002, 10,068,450 shares of common stock were outstanding. The aggregate market value of the 5,077,977 shares of voting stock held by nonaffiliates of the Registrant, as of such date, was approximately $5.8 million. Documents incorporated by reference The information required by Part III is incorporated by reference from the Registrant's definitive proxy statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A not later than 120 days after the end of the fiscal year covered by this report. PART I ITEM 1. BUSINESS. General Keystone Consolidated Industries, Inc. ("Keystone" or the "Company") believes it is a leading manufacturer of steel fabricated wire products, industrial wire and wire rod for the agricultural, industrial, construction, original equipment manufacturer and retail consumer markets, and believes it is the largest manufacturer of fabricated wire products in the United States based on tons shipped (281,000 tons in 2001). Keystone is vertically integrated, converting substantially all of its fabricated wire products and industrial wire from wire rod produced in its steel mini-mill. The Company's vertical integration has historically allowed it to benefit from the higher and more stable margins associated with fabricated wire products as compared to wire rod, as well as from lower production costs of wire rod as compared to wire fabricators which purchase wire rod in the open market. Moreover, management believes Keystone's downstream fabricated wire products and industrial wire businesses better insulate it from the effects of wire rod imports as compared to non-integrated wire rod producers. In 2001, Keystone had net sales of $309 million. Approximately 72% of the Company's net sales were generated from sales of fabricated wire products and industrial wire with the balance generated primarily from sales of wire rod not used in Keystone's downstream operations. The Company's fabricated wire products, which comprised 59% of its 2001 net sales, include fencing, barbed wire, welded and woven hardware cloth, welded and woven wire mesh and nails. These products are sold to agricultural, construction, industrial, consumer do-it-yourself and other end-user markets. Keystone serves these markets through distributors, agricultural retailers, building supply centers and consumer do-it-yourself chains such as Tractor Supply Co., Lowe's Companies, Inc., and Ace Hardware Corporation. A significant proportion of these products are sold to agricultural, consumer do-it-yourself and other end-user markets which in management's opinion are typically less cyclical than many steel consuming end-use markets such as the automotive, construction, appliance and machinery manufacturing industries. Management believes the Company's ability to service these customers with a wide range of fabricated wire products through multiple production and distribution locations provides it a competitive advantage in accessing these growing and less cyclical markets. Approximately 59% of Keystone's fabricated wire products net sales are generated by sales under the RED BRAND trademark, a widely recognized brand name in the agricultural and construction fencing marketplaces for more than 75 years. The Company also sells industrial wire, an intermediate product used in the manufacture of fabricated wire products, to third parties who are generally not competitors. Keystone's industrial wire customers include manufacturers of nails, coat hangers, barbecue grills, air conditioners, tools, containers, refrigerators and other appliances. In 2001, net sales of industrial wire accounted for 13% of Company net sales. In addition, Keystone also sells carbon steel rod into the open market which it is not able to consume in its downstream fabricated wire products and industrial wire operations. During 2001, open market sales of wire rod accounted for 25% of Company net sales. Keystone is also engaged in the distribution of wire, plastic and wood lawn and garden products to retailers through its 51% owned subsidiary Garden Zone LLC ("Garden Zone"). During 2001, sales by Garden Zone accounted for 3% of Company net sales. In addition, Keystone is engaged in scrap recycling through its unconsolidated 50% interest in Alter Recycling Company, L.L.C. ("ARC"). See Note 2 to the Consolidated Financial Statements. See "Business -- Products, Markets and Distributions" and Notes 2 and 11 to the Consolidated Financial Statements. The Company's operating strategy is to enhance profitability by: o Establishing a leading position as a supplier of choice among its fabricated wire products and industrial wire customers by offering a broad product line and by satisfying growing customer quality and service requirements; o Shifting its product mix towards higher margin, value-added fabricated wire products; o Achieving manufacturing cost savings and production efficiencies through capital improvements and investment in new and upgraded steel and wire production equipment; and o Increasing vertical integration through internal growth and selective acquisitions of fabricated wire products manufacturing facilities. During December 1998, the Company substantially completed a two-year $75 million capital improvements plan to upgrade certain of its plant and equipment and eliminate production capacity bottlenecks in order to reduce costs and improve production efficiency. The principal components of Keystone's capital improvements plan included reconfiguring its electric arc furnace, replacing its billet caster and upgrading its wire and rod mills. As a result of these capital improvements, beginning in 2001, the Company increased its annual billet production capacity to 1 million tons from 655,000 tons. Since Keystone's rod production is constrained by the 800,000 ton capacity of its rod mill, the Company anticipates any excess billet production will be sold externally. The Company is the successor to Keystone Steel & Wire Company, which was founded in 1889. Contran Corporation ("Contran") and other entities controlled by Mr. Harold C. Simmons beneficially own approximately 50% of the Company's voting stock. Substantially all of Contran's outstanding voting stock is held by trusts established for the benefit of certain children and grandchildren of Mr. Simmons, of which Mr. Simmons is sole trustee. Keystone may be deemed to be controlled by Contran and Mr. Simmons. As provided by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, the Company cautions that statements in this Annual Report on Form 10-K relating to matters that are not historical facts including, but not limited to, statements found in this Item 1 - "Business", Item 3 - "Legal Proceedings", Item 7 - "Management's Discussion And Analysis Of Financial Condition And Results Of Operations", and Item 7A - "Quantitative and Qualitative Disclosures About Market Risk", are forward-looking statements that represent management's beliefs and assumptions based on currently available information. Forward-looking statements can be identified by the use of words such as "believes", "intends", "may", "should", "could", "anticipates", "expected", or comparable terminology, or by discussions of strategies or trends. Although Keystone believes the expectations reflected in such forward-looking statements are reasonable, it cannot give any assurances that these expectations will prove to be correct. Such statements by their nature involve substantial risks and uncertainties that could significantly impact expected results, and actual future results could differ materially from those described in such forward-looking statements. While it is not possible to identify all factors, Keystone continues to face many risks and uncertainties. Among the factors that could cause actual future results to differ materially are the risks and uncertainties discussed in this Annual Report and those described from time to time in the Company's other filings with the Securities and Exchange Commission, including, but not limited to, future supply and demand for the Company's products (including cyclicality thereof), customer inventory levels, changes in raw material and other operating costs (such as scrap and energy), general economic conditions, competitive products and substitute products, customer and competitor strategies, the impact of pricing and production decisions, the possibility of labor disruptions, environmental matters (such as those requiring emission and discharge standards for existing and new facilities), government regulations and possible changes therein, any significant increases in the cost of providing medical coverage to employees and retirees, the ultimate resolution of pending litigation, international trade policies of the United States and certain foreign countries and any possible future litigation and other risks and uncertainties as discussed in this Annual Report, including, without limitation, the sections referenced above. Should one or more of these risks materialize (or the consequences of such a development worsen), or should the underlying assumptions prove incorrect, actual results could differ materially from those forecasted or expected. Keystone disclaims any intention or obligation to update or revise any forward-looking statement whether as a result of new information, future events or otherwise. Manufacturing The Company's manufacturing operations consist of an electric arc furnace mini-mill, a rod mill and five wire and wire product fabrication facilities. The manufacturing process commences in Peoria, Illinois with scrap steel being loaded into an electric arc furnace where it is converted into molten steel and then transferred to a ladle refining furnace where chemistries and temperatures are monitored and adjusted to specifications prior to casting. The molten steel is transferred from the ladle refining furnace into a six-strand continuous casting machine which produces five-inch square strands referred to as billets that are cut to predetermined lengths. These billets, along with any billets purchased from outside suppliers, are then transferred to the adjoining rod mill. Upon entering the rod mill, the billets are brought to rolling temperature in a reheat furnace and are fed to the rolling mill, where they are finished to a variety of diameters and specifications. After rolling, the wire rod is coiled and cooled. After cooling, the coiled wire rod passes through inspection stations for metallurgical, surface and diameter checks. Finished coils are compacted and tied, and either transferred to the Company's other facilities for processing into industrial wire, nails and other fabricated wire products or shipped to wire rod customers. While the Company does not maintain a significant "shelf" inventory of finished wire rod, it generally has on hand approximately a one-month supply of industrial wire and fabricated wire products inventory which enables Keystone to fill customer orders and respond to shifts in product demand. Products, Markets and Distribution The following table sets forth certain information with respect to the Company's steel and wire product mix in each of the last three years.
Year Ended December 31, 1999 2000 2001 ---------------- ---------------- ----------- Percent Percent Percent Percent Percent Percent of Tons Of of Tons of of Tons of Product Shipped Sales Shipped Sales Shipped Sales ----------------- ------- ----- ------- ----- ------- ----- Fabricated wire products 45.2% 62.5% 44.7% 61.9% 42.2% 60.9% Industrial wire 20.7 19.4 18.4 17.4 14.2 13.5 Wire rod 34.1 18.1 36.9 20.7 43.6 25.6 ----- ----- --------- --------- --------- --------- 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% ===== ===== ========= ========= ========= =========
Fabricated Wire Products. Keystone is one of the leading suppliers in the United States of agricultural fencing, barbed wire, stockade panels and a variety of welded and woven wire mesh, fabric and netting for agricultural, construction and industrial applications. The Company produces these products at its Peoria, Illinois; Sherman, Texas and Caldwell, Texas facilities. These products are distributed by Keystone through farm supply distributors, agricultural retailers, building supply centers, building and industrial materials distributors and consumer do-it-yourself chains such as Tractor Supply Co., Lowe's Companies, Inc., and Ace Hardware Corporation. Many of the Company's fencing and related wire products are marketed under the Company's RED BRAND label, a recognized trademark of Keystone for more than 75 years. As part of its marketing strategy, Keystone designs merchandise packaging, and supportive product literature for marketing many of these products to the retail consumer market. Keystone also manufactures products for residential and commercial construction, including bulk, packaged and collated nails, rebar ty wire, stucco netting, welded wire mesh, forms and reinforcing building fabric at its Peoria, Illinois; Sherman, Texas; Caldwell, Texas; Springdale, Arkansas; and Upper Sandusky, Ohio facilities. The primary customers for these products are construction contractors and building materials manufacturers and distributors. The Company sells approximately 63% of its nails through PrimeSource, Inc., one of the largest nail distributors in the United States, under PrimeSource's Grip-Rite(R) label. Keystone believes its fabricated wire products are less susceptible than industrial wire or wire rod to the cyclical nature of the steel business because the commodity-priced raw materials used in such products, such as scrap steel, represent a lower percentage of the total cost of such value-added products when compared to wire rod or other less value-added products. Industrial Wire. Keystone is one of the largest manufacturers of industrial wire in the United States. At its Peoria, Illinois; Sherman, Texas and Caldwell; Texas facilities, the Company produces custom-drawn industrial wire in a variety of gauges, finishes and packages for further consumption by Keystone's fabricated wire products operations or for sale to industrial fabrication and original equipment manufacturer customers. The Company's industrial wire is used by customers in the production of a broad range of finished goods, including nails, coat hangers, barbecue grills, air conditioners, tools, containers, refrigerators and other appliances. Management believes that with a few exceptions, its industrial wire customers do not generally compete with Keystone. Wire Rod. Keystone produces low carbon steel wire rod at its rod mill located in Peoria, Illinois. Low carbon steel wire rod, with carbon content of up to 0.38%, is more easily shaped and formed than higher carbon wire rod and is suitable for a variety of applications where ease of forming is a consideration. Although Keystone's five wire fabrication facilities on occasion buy wire rod from outside suppliers, during 2001, approximately 55% of the rod manufactured by the Company was used internally to produce wire and fabricated wire products. The remainder of Keystone's rod production was sold directly to producers of construction products, fabricated wire products and industrial wire, including products similar to those manufactured by the Company. In January 2001, Keystone's wholly-owned subsidiary, Fox Valley Steel & Wire ("Fox Valley") sold its sole business which was located in Hortonville, Wisconsin to a management group. The Company did not record any significant gain or loss as a result of the sale. Fox Valley manufactured industrial wire and fabricated wire products (primarily ladder rods and nails). Fox Valley's revenues in 1999 and 2000 amounted to $11.3 million and $10.3 million, respectively. During 1999 and 2000, approximately 30% and 32%, respectively of Fox Valley's sales were to a single customer. That customer is, subsequent to the sale, being serviced by Keystone's Peoria, Illinois facility. During 1999 and 2000, Fox Valley recorded operating losses of $67,000 and $686,000, respectively. Industry and Competition The fabricated wire products, industrial wire and wire rod businesses in the United States are highly competitive and are comprised primarily of several large mini-mill wire rod producers, many small independent wire companies and a few large diversified wire rod, and wire producers, such as the Company. Keystone's principal competitors in the fabricated wire products and industrial wire markets are Leggett and Platt, Deacero, Merchants Metals, Inc. and Davis Wire Corporation. Competition in the fabricated wire product and industrial wire markets is based on a variety of factors, including channels of distribution, price, delivery performance, product quality, service, and brand name preference. Since wire rod is a commodity steel product, management believes the domestic wire rod market is more competitive than the fabricated wire products and industrial wire markets, and price is the primary competitive factor. Among Keystone's principal domestic wire rod competitors are North Star Steel, Co-Steel Raritan, GS Industries and Rocky Mountain Steel. The Company also competes with many small independent wire companies who purchase rod from domestic and foreign sources. Due to the breadth of Keystone's fabricated wire products and industrial wire offerings, its ability to service diverse geographic and product markets, and the low relative cost of its internal supply of wire rod, the Company believes it is well positioned to compete effectively with non-diversified wire rod producers and wire companies. Foreign steel and industrial wire producers also compete with the Company and other domestic producers. The domestic steel wire rod industry continues to experience consolidation. During the last three years, eight of Keystone's nine major competitors have either filed for protection under federal bankruptcy laws and discontinued operations or reduced or completely shut-down their operations. The Company believes these shut-downs or production curtailments represent a decrease of approximately 3.5 million tons of annual capacity compared to an estimated domestic annual capacity of 3.8 million tons after the decline. However, worldwide overcapacity in the steel industry continues to exist and imports of wire rod and certain fabricated wire products in recent years have increased significantly. In an effort to stem increasing levels of imported wire rod, in December 1998, Keystone, joined by six other companies (representing more than 75% of the domestic market), and a labor union petitioned the U.S. International Trade Commission (the "ITC") seeking relief under Section 201 of the Trade Act of 1974. In February 2000, President Clinton announced the implementation of a Tariff-Rate Quota ("TRQ") for three years. The tariff is imposed on wire rod imports from countries subject to the TRQ once imports initially exceed 1.6 million net tons in 2000 and 2001 and 1.7 million net tons in 2002 and 2003. The tariff rate is 10% in 2000, 7.5% in 2001 and 5% in 2002. The Company does not believe the TRQ has had a major impact on the domestic wire rod market and high levels of imported rod continue. However, in April 2002, the United States Department of Commerce announced a preliminary determination that wire rod from seven countries is being sold in the United States below fair value and required importers to immediately begin posting bonds or cash deposits in the amount of the preliminary margins. The preliminary duties are subject to verification by the Department of Commerce. Final anti-dumping duties will go into effect later this year if the ITC concludes the United States wire rod industry is being injured by imports. The Company believes it is too early to determine the impact on the industry of the April 2002 actions by the Department of Commerce. Keystone believes its facilities are well located to serve markets throughout the continental United States, with principal markets located in the Midwestern, Southwestern and Southeastern regions. Close proximity to its customer base provides the Company with certain advantages over foreign and certain domestic competition including reduced shipping costs, improved customer service and shortened delivery times. Keystone believes higher transportation costs and the lack of local distribution centers tend to limit foreign producers' penetration of the Company's principal fabricated wire products and industrial wire markets, but there can be no assurance this will continue to be the case. Raw Materials and Energy The principal raw material used in Keystone's operations is scrap steel. The Company's steel mill is located close to numerous sources of high density automobile, industrial and railroad scrap, all of which are currently available from numerous sources. The purchase of scrap steel is highly competitive and its price volatility is influenced by periodic shortages, freight costs, weather, and other conditions beyond the control of the Company. The cost of scrap can fluctuate significantly and product selling prices cannot always be adjusted, especially in the short-term, to recover the costs of increases in scrap prices. The Company has not entered into any long-term contracts for the purchase or supply of scrap steel and it is, therefore, subject to the price fluctuation of scrap steel. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." Keystone's manufacturing processes consume large amounts of energy in the form of electricity and natural gas. The Company purchases electrical energy for its Peoria, Illinois facility from a utility under an interruptible service contract which provides for more economical electricity rates but allows the utility to refuse or interrupt power to Keystone's Peoria, Illinois manufacturing facilities. This utility has in the past, and may in the future, refuse or interrupt service to the Company resulting in decreased production and increased costs associated with the related downtime. In addition, in the past the utility has had the right to pass through certain of its costs to consumers through fuel adjustment charges. The Company's current agreement with the utility does not provide for such fuel adjustment charges. During the 1999 third quarter, Keystone received an unexpected $2.2 million fuel adjustment charge from the Peoria plant's electricity provider. The $2.2 million charge was paid during 2000, although during 2001, the Company received a $1.7 million credit on the 1999 fuel adjustment charge. Trademarks The Company has registered the trademark RED BRAND for field fence and related products. Adopted by Keystone in 1924, the RED BRAND trademark has been widely advertised and enjoys high levels of market recognition. The Company also maintains other trademarks for various products which have been promoted in their respective markets. Employment As of December 31, 2001, Keystone employed approximately 1,600 people, of whom approximately 990 are represented by the Independent Steel Workers' Alliance ("ISWA") at its Peoria, Illinois facilities, approximately 120 are represented by the International Association of Machinists and Aerospace Workers (Local 1570) ("IAMAW") at its Sherman, Texas facilities and approximately 30 are represented by Local Union #40, An Affiliate to the International Brotherhood of Teamsters' Chauffeurs Warehousemen And Helpers of America, AFL-CIO ("IBTCWHA") at its Upper Sandusky, Ohio facility. The current collective bargaining agreements with the ISWA, IAMAW and IBTCWHA expire in May 2006, March 2003 and November 2006, respectively. The Company believes its relationship with its employees are good. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." Customers The Company sells its products to customers in the agricultural, industrial, construction, commercial, original equipment manufacturer and retail markets primarily in the Midwestern, Southwestern and Southeastern regions of the United States. Customers vary considerably by product and management believes Keystone's ability to offer a broad range of product represents a competitive advantage in servicing the diverse needs of its customers. A listing of end-user markets by products follows: Product Principal Markets Served Fencing products Agricultural, construction, do-it-yourself retailers Wire mesh products Agricultural, construction Nails Construction, do-it-yourself retailers Industrial wire Producers of fabricated wire products Wire rod Producers of industrial wire and fabricated wire products Lawn and garden products Do-it-yourself retailers Keystone's industrial wire customers include manufacturers and producers of nails, coat hangers, barbecue grills, air conditioners, tools, containers, refrigerators and other appliances. With few exceptions, these customers are generally not in competition with the Company. Keystone's wire rod customers include other downstream industrial wire and fabricated wire products companies including manufacturers of products similar to those manufactured by the Company. The Company's ten largest customers represented approximately one-third of Keystone's net sales in each of the past three years. No single customer accounted for more than 9% of the Company's net sales during each of 1999, 2000 or 2001. Keystone's fabricated wire products, industrial wire and rod business is not dependent upon a single customer or a few customers, the loss of any one, or a few, of which would have a material adverse effect on its business. Backlog The Company's backlog of unfilled cancelable fabricated wire products, industrial wire and rod purchase orders, for delivery generally within three months, approximated $22 million at December 31, 2000 and $24 million at December 31, 2001. Keystone believes backlog is not a significant factor in its business, and all of the backlog at December 31, 2001 is expected to be shipped during 2002. Environmental Matters Keystone's production facilities are affected by a variety of environmental laws and regulations, including laws governing the discharge of water pollutants and air contaminants, the generation, transportation, storage, treatment and disposal of solid wastes and hazardous substances and the handling of toxic substances, including certain substances used in, or generated by, the Company's manufacturing operations. Many of these laws and regulations require permits to operate the facilities to which they pertain. Denial, revocation, suspension or expiration of such permits could impair the ability of the affected facility to continue operations. The Company records liabilities related to environmental issues at such time as information becomes available and is sufficient to support a reasonable estimate of a range of loss. If Keystone is unable to determine that a single amount in an estimated range is more likely, the minimum amount of the range is recorded. Costs of future expenditures for environmental remediation obligations are not discounted to their present value. Recoveries of environmental remediation costs from other parties are recorded as assets when their receipt is deemed probable. Keystone believes its current operating facilities are in material compliance with all presently applicable federal, state and local laws regulating the discharge of materials into the environment, or otherwise relating to the protection of the environment. Environmental legislation and regulations have changed rapidly in recent years and the Company may be subject to increasingly stringent environmental standards in the future. Information in Note 12 to the Consolidated Financial Statements is incorporated herein by reference. ITEM 2. PROPERTIES. The Company's principal executive offices are located in approximately 1,200 square feet of leased space at 5430 LBJ Freeway, Dallas, Texas 75240-2697. Keystone's fabricated wire products, industrial wire and wire rod production facilities utilize approximately 2.5 million square feet for manufacturing and office space, approximately 79% of which is located at the Company's Peoria, Illinois facility. The following table sets forth the location, size and general product types produced for each of the Company's steel and wire facilities, all of which are owned by the Company.
Approximate Size Facility Name Location (Square Feet) Products Produced Keystone Steel & Wire Peoria, IL 2,012,000 Fabricated wire products, industrial wire, wire rod Sherman Wire Sherman, TX 299,000 Fabricated wire products and industrial wire Engineered Wire Products Upper Sandusky, OH 83,000 Fabricated wire products Keystone Fasteners Springdale, AR 76,000 Fabricated wire products Sherman Wire of Caldwell Caldwell, TX 73,000 Fabricated wire products and industrial wire --------- 2,543,000 =========
The Company believes all of its facilities are well maintained and satisfactory for their intended purposes. ITEM 3. LEGAL PROCEEDINGS. Keystone is involved in various legal proceedings. Information required by this Item is included in Notes 12 and 14 to the Consolidated Financial Statements, which information is incorporated herein by reference. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. No matters were submitted to a vote of security holders during the quarter ended December 31, 2001. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. Prior to December 13, 2001, Keystone's common stock was listed and traded on the New York Stock Exchange (symbol: KES). Subsequent to December 12, 2001, Keystone's common stock is traded on the OTC Bulletin Board (Symbol: KESN). The number of holders of record of the Company's common stock as of April 8, 2002 was 2,232. The following table sets forth the high and low closing sales prices of the Company's common stock for the calendar years indicated, according to published sources.
High Low 2001 First quarter .............................. $ 2.50 $ 1.50 Second quarter ............................. $ 2.00 $ 1.20 Third quarter .............................. $ 1.70 $ .96 Fourth quarter ............................. $ 1.40 $ .48 2000 First quarter .............................. $ 7.50 $ 4.50 Second quarter ............................. $ 4.75 $ 3.75 Third quarter .............................. $ 3.88 $ 2.69 Fourth quarter ............................. $ 2.94 $ 1.25
The Company has not paid cash dividends on its common stock since 1977. Keystone is subject to certain covenants under its commercial revolving credit facilities that restrict its ability to pay dividends, including a prohibition against the payment of dividends on its common stock without lender consent. ITEM 6. SELECTED FINANCIAL DATA. The following selected consolidated financial data should be read in conjunction with the Consolidated Financial Statements and Item 7 -- "Management's Discussion And Analysis Of Financial Condition And Results Of Operations."
Years ended December 31, -------------------------------------------- 1997 1998 1999 2000 2001 ---- ---- ---- ---- ---- (In thousands, except per share and per ton amounts) Statement of Operations Data: Net sales $354,073 $370,022 $355,688 $338,321 $308,670 Cost of goods sold 316,599 339,625 332,644 331,167 295,339 -------- -------- -------- -------- -------- Gross profit $ 37,474 $ 30,397 $ 23,044 $ 7,154 $ 13,331 ======== ======== ======== ======== ======== Selling expenses $ 4,628 $ 6,042 $ 6,845 $ 6,737 $ 6,378 General and administrative Expenses 17,918 19,139 20,850 18,388 19,070 Operating income (loss) 23,292 14,021 2,578 (15,415) (4,463) Interest expense 7,612 10,460 14,058 15,346 14,575 Income (loss) before income taxes $ 16,909 $ 5,006 $(12,238) $(32,436) $(20,395) Minority interest in after-tax earnings - - - - 1 Provision (benefit) for income taxes 4,541 1,095 (4,754) (11,370) 5,998 -------- --------- --------- -------- -------- Net income (loss) $ 12,368 $ 3,911 $ (7,484) $(21,066) $(26,394) ======== ======== ======== ======== ======== Net income (loss) available for common Shares (1) $ 12,088 $ 3,754 $ (7,484) $(21,066) $(26,394) ======== ======== ======== ======== ======== Basic net income (loss) available for Common shares per share $ 1.30 $ .41 $ (.75) $ (2.10) $ (2.62) ======== ======== ======== ======== ======== Diluted net income (loss) available for common shares per share $ 1.28 $ .40 $ (.75) $ (2.10) $ (2.62) ======== ======== ======== ======== ======== Weighted average common and common equivalent shares outstanding : Basic 9,271 9,544 9,904 10,039 10,062 ======== ======== ======== ======== ======== Diluted 9,435 9,669 9,904 10,039 10,062 ======== ======== ======== ======== ======== Other Financial Data: Capital expenditures $ 26,294 $ 64,541 $ 16,873 $ 13,052 $ 3,889 Depreciation and amortization 12,815 20,140 21,051 17,224 16,992 Other Steel and Wire Products Operating Data: Shipments (000 tons): Fabricated wire products 225 327 315 310 281 Industrial wire 175 170 144 128 94 Wire rod 297 212 237 257 291 -------- -------- -------- -------- -------- Total 697 709 696 695 666 ======== ======== ======== ======== ======== Average selling prices (per ton): Fabricated wire products $ 710 $ 662 $ 683 $ 660 $ 649 Industrial wire 478 476 462 449 426 Wire rod 317 288 261 266 264 Steel and wire products in total 484 506 493 475 449 Average total production cost per ton $ 437 $ 464 $ 461 $ 470 $ 434 Average scrap purchase cost per ton 122 112 94 100 85
As of December 31, 1997 1998 1999 2000 2001 ---- ---- ---- ---- ---- (In thousands) Balance Sheet Data: Working capital (deficit) (2) $ 52,684 $ 555 $(13,920) $(39,243) $(30,982) Property, plant and equipment, net 112,754 156,100 150,156 144,696 129,600 Total assets 374,131 405,857 410,918 385,703 366,900 Total debt 106,844 131,764 146,857 146,008 146,455 Redeemable preferred stock 3,500 - - - - Stockholders' equity (deficit) 44,211 53,077 46,315 26,058 (336)
(1) Includes dividends on preferred stock of $280,000 and $157,000 in 1997 and 1998, respectively. (2) Working capital (deficit) represents current assets minus current liabilities. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. General The Company believes it is a leading manufacturer of fabricated wire products, industrial wire and wire rod for the agricultural, industrial, construction, original equipment manufacturer and retail consumer markets and believes it is the largest manufacturer of fabricated wire products in the United States based on tons shipped (281,000 in 2001). Keystone's operations benefit from vertical integration as the Company's mini-mill supplies wire rod produced from scrap steel to its downstream fabricated wire products and industrial wire operations. Sales of fabricated wire products and industrial wire by these downstream fabrication operations accounted for 72% of 2001 net sales. Keystone's fabricated wire products typically yield higher and less volatile gross margins compared to wire rod. Management believes Keystone's fabricated wire businesses help mitigate the adverse effect of wire rod imports on market prices compared to producers that rely primarily on wire rod sales. Moreover, historically over time, the Company's wire rod production costs have generally been below the market price for wire rod providing a significant cost advantage over wire producers who purchase wire rod as a raw material. During December 1998, the Company substantially completed a two-year $75 million capital improvements plan to upgrade certain of its plant and equipment and eliminate production capacity bottlenecks in order to reduce costs and improve production efficiency. The principal components of Keystone's capital improvements plan included reconfiguring its electric arc furnace, replacing its billet caster and upgrading its wire and rod mills. As a result of these capital improvements, beginning in 2001, the Company increased its annual billet production capacity to 1 million tons from 655,000 tons. However, despite the increase in billet production capacity, Keystone's wire rod production is constrained by the 800,000 ton capacity of its rod mill. The Company anticipates any excess billet production will be sold externally. The Company's steel making operations, together with billet purchases of 8,000 tons in 2000 (none in 2001) provided 686,000 tons and 682,000 tons of billets in 2001 and 2000, respectively. Despite marginally higher billet production and purchases in 2001, wire rod production decreased 4% from 678,000 tons (85% of estimated capacity) in 2000 to 651,000 tons (81% of estimated capacity) due primarily to lower sales demand. Keystone's estimated current fabricated wire products and industrial wire production capacity is 570,000 tons. The Company's fabricated wire products and industrial wire production facilities operated at about 84%, 78%, and 68% of their annual capacity during 1999, 2000 and 2001, respectively. In December 1997, Keystone purchased the remaining 80% of Engineered Wire Products, Inc. ("EWP") not already owned by Keystone. As a result of the acquisition of EWP, Keystone was able to convert additional volumes of lower-margin wire rod sales, into higher-margin fabricated wire product sales. This change in product mix between 1997 and 1998 resulted in a decline in overall fabricated wire product selling prices as EWP's fabricated wire products sell for lower prices than do Keystone's other fabricated wire products. The Company's profitability is dependent in large part on its ability to utilize effectively its production capacity, which is affected by the availability of raw material, plant efficiency and other production factors and to control its manufacturing costs, which are comprised primarily of raw materials, energy and labor costs. Keystone's primary raw material is scrap steel. The price of scrap steel is highly volatile and scrap steel prices are affected by periodic shortages, freight costs, weather and other conditions largely beyond the control of the Company. Scrap prices can vary widely from period to period. The average per-ton price paid for scrap by the Company was $94 in 1999, $100 in 2000 and $85 in 2001. Keystone's product selling prices cannot always be adjusted, especially in the short-term, to recover the costs of any increases in scrap prices. The domestic steel rod industry continues to experience consolidation. During the last three years, eight of Keystone's nine major competitors have either filed for protection under Federal bankruptcy laws and discontinued operations or reduced or completely shut-down their operations. The Company believes these shut-downs or production curtailments represent a decrease of approximately 3.5 million tons of annual capacity compared to an estimated domestic annual capacity of 3.8 million tons after the decline. However, worldwide over capacity in the steel industry continues to exist and imports of wire rod and certain fabricated wire products in recent years have increased significantly. In an effort to stem increasing levels of imported wire rod, in December 1998, Keystone, joined by six other companies (representing more than 75% of the domestic market), and a labor union petitioned the U.S. International Trade Commission (the "ITC") seeking relief under Section 201 of the Trade Act of 1974. In February 2000, President Clinton announced the implementation of a Tariff-Rate Quota ("TRQ") for three years. The tariff will be imposed on wire rod imports from countries subject to the TRQ once imports initially exceed 1.6 million net tons in 2000 and 2001 and 1.7 million net tons in 2002 and 2003. The tariff rate is 10% in 2000, 7.5% in 2001 and 5% in 2002. The Company does not believe the TRQ has had a major impact on the domestic wire rod market and high levels of imported rod continue. However, in April 2002, the United States Department of Commerce announced a preliminary determination that wire rod from seven countries is being sold in the United States below fair value and required importers to immediately begin posting bonds or cash deposits in the amount of the preliminary margins. The preliminary duties are subject to verification by the Department of Commerce. Final anti-dumping duties will go into effect later this year if the ITC concludes the United States wire rod industry is being injured by imports. The Company believes it is too early to determine the impact on the industry of the April 2002 actions by the Department of Commerce. Keystone consumes a significant amount of energy in its manufacturing operations and, accordingly, its profitability can also be adversely affected by the volatility in the price of coal, oil and natural gas resulting in increased energy, transportation, freight, scrap and supply costs. The Company purchases electrical energy for its Peoria, Illinois facility from a utility under an interruptible service contract which provides for more economical electricity rates but allows the utility to refuse or interrupt power to its manufacturing facilities. The utility has in the past, and may in the future, refuse or interrupt service to Keystone resulting in decreased production and increased costs associated with the related downtime. In addition, in the past the utility has had the right to pass through certain of its costs to consumers through fuel adjustment charges. The Company's current agreement with the utility does not provide for such fuel adjustment charges. During the 1999 third quarter, the Company received an unexpected $2.2 million fuel-adjustment charge from the Peoria plant's electricity provider. The $2.2 million charge, accrued in 1999, was paid during 2000, although during 2001 the Company received a $1.7 million credit with respect to the 1999 fuel-adjustment charge. In January 2001, Keystone's wholly-owned subsidiary, Fox Valley Steel & Wire ("Fox Valley") sold its sole business which was located in Hortonville, Wisconsin to a management group. The Company did not record any significant gain or loss as a result of the sale. Fox Valley manufactured industrial wire and fabricated wire products (primarily ladder rods and nails). Fox Valley's revenues in 1999 and 2000 amounted to $11.3 million and $10.3 million, respectively. During 1999 and 2000, approximately 30% and 32%, respectively of Fox Valley's sales were to a single customer. That customer is, subsequent to the sale, being serviced by Keystone's Peoria facility. During 1999 and 2000, Fox Valley recorded operating losses of $67,000 and $686,000, respectively. Keystone is also engaged in the marketing and distribution of wire, wood and plastic products to the consumer lawn and garden market, and the operation of a scrap recycling facility. These operations were insignificant when compared to the consolidated operations of the Company. As such, the results of their operations are not separately addressed in the discussion that follows. Results Of Operations The following table sets forth Keystone's steel and wire production, scrap costs, sales volume and pricing data, for the periods indicated.
Years Ended December 31, 1999 2000 2001 ---- ---- ---- (Tons in thousands) Production volume (tons): Billets: Produced .................................. 683 675 686 Purchased ................................. 45 8 -- Wire rod .................................... 687 678 651 Average per-ton scrap purchase cost ........... $ 94 $100 $ 85 Sales volume (tons): Fabricated wire products .................... 315 310 281 Industrial wire ............................. 144 128 94 Wire rod .................................... 237 257 291 ---- ---- ---- 696 695 666 ==== ==== ==== Per-ton selling prices: Fabricated wire products .................... $683 $660 $649 Industrial wire ............................. 462 449 426 Wire rod .................................... 261 266 264 All steel and wire products ................. 493 475 449
1 The following table sets forth the components of the Company's net sales for the periods indicated.
Years Ended December 31, 1999 2000 2001 ---- ---- ---- (In millions) Steel and wire products: Fabricated wire products .............. $214.7 $204.7 $182.4 Industrial wire ....................... 66.6 57.4 40.3 Wire rod .............................. 62.0 68.4 76.7 Other ................................. 1.4 1.5 1.3 ------ ------ ------ 344.7 332.0 300.7 Lawn and garden products ................ 11.0 6.3 8.0 ------ ------ ------ $355.7 $338.3 308.7 ====== ====== ======
The following table sets forth selected operating data of Keystone as a percentage of net sales for the periods indicated.
Years Ended December 31, 1999 2000 2001 ---- ---- ---- Net sales ..................................... 100.0% 100.0% 100.0% Cost of goods sold ............................ 93.5 97.9 95.7 ----- ----- ----- Gross profit .................................. 6.5% 2.1% 4.3% ===== ===== ===== Selling expenses .............................. 1.9% 2.0% 2.1% General and administrative expense ............ 5.9 5.4 6.2 Overfunded defined benefit pension credit ..... (1.6) (.1) (1.8) Loss before income taxes ...................... (3.4)% (9.6)% (6.6)% Provision for income taxes (benefit) .......... (1.3) (3.4) 1.9 ----- ----- ----- Net loss ...................................... (2.1)% (6.2)% (8.5)% ===== ===== =====
Year ended December 31, 2001 compared to year ended December 31, 2000 Net sales declined $29.7 million, or 8.8%, in 2001 from 2000 due primarily to a 4.2% decline in shipment volume of steel and wire products combined with a 5.5% decline in overall per-ton steel and wire product selling prices. In addition, the product mix in 2001 was less favorable than in 2000. Fabricated wire products and industrial wire sell for higher per-ton selling prices and at higher margins than wire rod. During 2001, fabricated wire products and industrial wire represented 59% and 13%, respectively of net sales as compared to 60% and 17% respectively, in 2000. This decline in the percentage of net sales represented by fabricated wire products and industrial wire sales resulted in wire rod sales increasing from 20% in 2000 to 25% of net sales in 2001. The 5.5% decline in overall per-ton steel and wire product selling prices ($26 per-ton) adversely impacted net sales by $17.3 million. Lower net sales of the Company's steel and wire products were offset in part by Garden Zone's net sales which increased by 26.2% during 2001 from $6.3 million to $8.0 million. Fabricated wire products per-ton selling prices declined 1.6% and shipments declined 9.4% in 2001 as compared to 2000. Industrial wire per-ton selling prices declined 5.0% in 2001 when compared to 2000 while shipments declined 26.1% Per-ton selling price of wire rod declined .9% during 2001 as compared to 2000, while shipments increased 13.2%. The decline in both volume and per-ton selling prices of fabricated wire products and industrial wire was due to lower demand. As the demand for these products declined, the Company increased the volume of rod sold to external customers. Gross profit of $13.3 million during 2001 increased by $6.1 million over the 2000 gross profit of $7.2 million as gross margin increased from 2.1% in 2000 to 4.3% in 2001. This increase in gross margin was due primarily to lower costs in 2001 related to a reduction in unplanned production outages, lower costs for scrap steel (the Company's primary raw material) and purchased billets, $1.8 million of business interruption insurance proceeds received in 2001 related to incidents in prior years (as compared to $300,000 in 2000) and a favorable $1.7 million utility settlement relative to a charge by the utility in a prior year, all partially offset by higher natural gas and OPEB costs as well as the lower overall steel and wire product per-ton selling prices. In addition, during the 2001 fourth quarter, Keystone recorded a $1.3 million benefit as a result of a favorable legal settlement with an electrode vendor related to alleged price fixing. During 2000, Keystone recorded a $2.7 million benefit as a result of similar settlements with electrode vendors. The estimated adverse impact on gross profit from production outages amounted to approximately $800,000 during 2001 as compared to $5.3 million in 2000. Keystone's per-ton scrap costs declined 15% during 2001 as compared to 2000. During 2001, the Company purchased 788,000 tons of scrap at an average price of $85 per-ton as compared to 2000 purchases of 658,000 tons at an average price of $100 per-ton. This decline in per-ton scrap costs favorably impacted gross profit during 2001 by approximately $11.8 million as compared to 2000. Keystone currently expects average scrap costs in 2002 will approximate 2001 costs. The Company did not purchase any billets in 2001 as compared to 8,000 tons purchased in 2000 at an average cost of $215 per-ton. Keystone does not anticipate purchasing any billets during 2002. Natural gas costs during 2001 were approximately $900,000 higher than 2000's cost. Selling expense decreased 5.6% to $6.4 million in 2001 from $6.7 million in 2000 but was relatively constant as a percentage of sales. General and administrative expense of $19.1 million in 2001 increased $700,000 from $18.4 million in 2000 as the effect of higher legal and professional and OPEB costs and environmental expenses during 2001 was only partially offset by the effect of reductions in salaried headcount resulting from certain salaried employees accepting Keystone's early retirement package during the last quarter of 2000 and a $650,000 reimbursement of legal fees received in 2001. During 2001, Keystone recorded a non-cash pension credit of $5.5 million as compared to $380,000 in 2000. The lower pension credit in 2000 was primarily the result of a $3.7 million charge as a result of the implementation of an early retirement program for certain salaried employees. During the fourth quarter of 2000, in connection with Keystone's cost reduction plans, the Company offered a group of salaried employees enhanced pension benefits if they would retire by December 31, 2000, resulting in the $3.7 million charge for termination benefits for early retirement window. The Company currently estimates, for financial reporting purposes, that it will recognize a non-cash pension credit of approximately $3 million in 2002 and does not anticipate cash contributions for defined benefit pension plan fundings will be required in 2002. However, future variances from assumed actuarial rates, including the rate of return on pension plan assets, may result in increases or decreases in pension expense or credit and future funding requirements. See Note 7 to the Consolidated Financial Statements. Interest expense during 2001 was lower than 2000 due principally to lower interest rates. Average borrowings by the Company under its revolving credit facilities, EWP term loan and Senior Secured Notes approximated $149.0 million during 2001 as compared to $150.9 million in 2000. During 2001, the average interest rate paid by the Company was 8.9% per annum as compared to 9.6% per annum in 2000. At December 31, 2001, the Company's financial statements reflected total accrued liabilities of $15.6 million to cover estimated remediation costs arising from environmental issues. Although Keystone has established an accrual for estimated future required environmental remediation costs, there is no assurance regarding the ultimate cost of remedial measures that might eventually be required by environmental authorities or that additional environmental hazards, requiring further remedial expenditures, might not be asserted by such authorities or private parties. Accordingly, the costs of remedial measures may exceed the amounts accrued. See Note 12 to the Consolidated Financial Statements. During 2001, the Company recorded a provision for income taxes of $6.0 million on a loss before income taxes of $20.4 million compared to an effective tax rate of 35% in 2000. During the fourth quarter of 2001, the Company determined a portion of its gross deferred tax assets did not currently meet the "more-likely-than-not" realizability test, and accordingly provided a deferred tax asset valuation allowance of approximately $14.5 million resulting in the $6.0 million provision for income taxes. The principal reasons for the difference between the U.S. Federal Statutory income tax rate and the Company's effective income tax rates are explained in Note 5 to the Consolidated Financial Statements. The Company's deferred tax position at December 31, 2001 is also explained in Note 5 to the Consolidated Financial Statements and in "Liquidity and Capital Resources". As a result of the items discussed above, Keystone incurred a net loss of $26.4 million during 2001 as compared to a net loss in 2000 of $21.1 million. Year ended December 31, 2000 compared to year ended December 31, 1999 Net sales declined 4.9% in 2000 from 1999 due primarily to a 3.6% decline in overall steel and wire product selling prices. During 1999 and 2000, fabricated wire products represented 60% of net sales while industrial wire declined to 17% of net sales in 2000 as compared to 19% in 1999. Carbon steel rod sales increased to 20% of net sales in 2000 from the 1999 level of 17%. The 3.6% decline in overall product selling prices ($18 per ton) adversely impacted net sales by $12.3 million. In addition, Garden Zone's sales during 2000 declined 42% to $6.3 million from $11.0 million in 1999 primarily due to lower shipments to a major customer. Fabricated wire products selling prices declined 3% while shipments declined 1% in 2000 as compared to 1999. Industrial wire selling prices also declined 3% in 2000 when compared to 1999 while shipments declined 11%. Carbon steel rod selling prices increased 2% while shipments increased 8% as compared to 1999. The decline in both volume and per-ton selling prices of fabricated wire products and industrial wire was due to lower demand. As the demand for these products declined, the Company increased the volume of rod sold to external customers. Gross profit declined approximately 69% to $7.2 million in 2000 from $23.0 million in 1999. Gross margin declined to 2.1% from 6.5% in 1999 due primarily to higher scrap costs, lower overall selling prices, and higher production costs during the second and fourth quarters of 2000. The higher production costs in the second quarter were due primarily to extended production outages caused by planned repairs and a furnace break-out. The higher production costs in the 2000 fourth quarter were primarily a result of a two-week production outage due to the failure of a furnace rocker arm and related repair costs of $1 million and slower production times due to high accumulations of snow and ice. In addition, during 1999, Keystone recorded a $2.7 million benefit as a result the favorable legal settlements with certain electrode vendors. Keystone's scrap costs increased 6% during 2000 as compared to 1999. During 2000, the Company purchased 658,000 tons of scrap at an average price of $100 per ton as compared to 1999 purchases of 768,000 tons at an average price of $94 per ton. This increase in per-ton scrap costs adversely impacted gross profit during 2000 by approximately $3.9 million as compared to 1999. The Company also purchased 8,000 tons of billets during 2000 at an average cost of $215 per ton as compared to 45,000 tons of billets in 1999 at an average cost of $195 per ton. Selling expenses decreased 2% to $6.7 million in 2000 from $6.8 million in 1999 but was relatively constant as a percentage of sales. General and administrative expenses decreased 12% to $18.4 million in 2000 from $20.9 million in 1999 primarily due to higher costs incurred in 1999 associated with the start-up of Garden Zone and unfavorable legal settlements during 1999. During 2000, Keystone recorded a non-cash pension credit of $380,000 as compared to $5.6 million in 1999. The lower pension credit in 2000 was primarily the result of increased pension benefits included in the Company's May 1999 labor contract with the Peoria facility's union and the $3.7 million charge as a result of the early retirement program for certain salaried employees. Interest expense during 2000 was higher than 1999 due principally to higher borrowing levels and higher interest rates. Average borrowings by the Company under its revolving credit facilities, EWP term loan and Senior Secured Notes approximated $150.9 million during 2000 as compared to $142.7 million in 1999. During 2000, the average interest rate paid by the Company was 9.6% per annum as compared to 9.3% per annum in 1999. The effective tax rates in 2000 and 1999 were 35% and 39%, respectively. The principal reasons for the difference between the U.S. federal statutory income tax rate and the Company's effective income tax rates are explained in Note 5 to the Consolidated Financial Statements. As a result of the items discussed above, Keystone incurred a net loss of $21.1 million during 2000 as compared to a net loss in 1999 of $7.5 million. Related party transactions As further discussed in Note 9 to the Consolidated Financial Statements, the Company is party to certain transactions with related parties. Outlook for 2002 Rod imports continue to cause disruption in the marketplace and market demand has weakened. However, management currently believes, despite the continued high level of rod imports, capacity utilization and shipment volumes in 2002 will approximate 2001 levels and per-ton selling prices will approximate those of the fourth quarter of 2001. In addition, management currently believes these volumes and per-ton selling prices combined with anticipated higher energy and OPEB costs, a lower pension credit and lower interest costs due to the events described in Note 15 to the Consolidated Financial Statements, will result in Keystone recording a loss before income taxes for calendar 2002. However, despite recording an anticipated operating loss and loss before income taxes in 2002, Keystone currently believes both operating loss and pre-tax loss (exclusive of non-recurring items discussed below) will decline in 2002 as compared to 2001 levels. As a result of the deferred tax asset valuation allowance recorded in 2001, the Company does not anticipate recognizing a tax benefit associated with its pre-tax losses during 2002 will be appropriate. Keystone will adopt Statement of Financial Accounting Standards ("SFAS") No. 142, Goodwill and Other Intangible Assets on January 1, 2002. As a result, negative goodwill at that date of approximately $20.0 million will be eliminated as a cumulative effect of change in accounting principle. In addition, as a result of the events described in Note 15 to the Consolidated Financial Statements Keystone will record a pre-tax extraordinary gain of approximately $54.7 million for financial reporting purposes during the first quarter of 2002. As a result of these items, the Company anticipates recording net income for calendar 2002. Critical accounting policies and estimates The accompanying "Management's Discussion and Analysis of Financial Condition and Results of Operations" are based upon the Company's consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"). The preparation of these financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amount of revenues and expenses during the reported period. On an on-going basis, the Company evaluates its estimates, including those related to bad debts, inventory reserves, the recoverability of other long-lived assets (including goodwill and other intangible assets), pension and other post-retirement benefit obligations and the underlying actuarial assumptions related thereto, the realization of deferred income tax assets and accruals for environmental remediation, litigation, income tax and other contingencies. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the reported amounts of assets, liabilities, revenues and expenses. Actual results may differ from previously-estimated amounts under different assumptions or conditions. Keystone believes the following critical accounting policies affect its more significant judgments and estimates used in the preparation of its consolidated financial statements: o The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments and other factors. The Company takes into consideration the current financial condition of the customers, the age of the outstanding balance and the current economic environment when assessing the adequacy of the allowance. If the financial condition of the Company's customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. o Keystone provides reserves for estimated obsolescence or unmarketable inventory equal to the difference between the cost of inventory and the estimated net realizable value using assumptions about future demand for its products and market conditions. If actual market conditions are less favorable than those projected by management, additional inventory reserves may be required. Keystone provides reserves for tools and supplies inventory based generally on both historical and expected future usage requirements. o The Company recognizes an impairment charge associated with its long-lived assets, primarily property and equipment, whenever it determines that recovery of such long-lived asset is not probable. Such determination is made in accordance with the applicable GAAP requirements associated with the long-lived asset, and is based upon, among other things, estimates of the amount of future net cash flows to be generated by the long-lived asset and estimates of the current fair value of the asset. Adverse changes in such estimates of future net cash flows or estimates of fair value could result in an inability to recover the carrying value of the long-lived asset, thereby possibly requiring an impairment charge to be recognized in the future. o Keystone records a valuation allowance to reduce its deferred income tax assets to the amount that is believed to be realized under the "more-likely-than-not" recognition criteria. While the Company has considered future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for a valuation allowance, it is possible that in the future the Company may change its estimate of the amount of the deferred income tax assets that would "more-likely-than-not" be realized in the future, resulting in an adjustment to the deferred income tax asset valuation allowance that would either increase or decrease, as applicable, reported net income in the period such change in estimate was made. o The Company records an accrual for environmental, legal, income tax and other contingencies when estimated future expenditures associated with such contingencies become probable, and the amounts can be reasonably estimated. However, new information may become available, or circumstances (such as applicable laws and regulations) may change, thereby resulting in an increase or decrease in the amount required to be accrued for such matters (and therefore a decrease or increase in reported net income in the period of such change). o Keystone sponsors a defined benefit pension plan covering substantially all employees who meet certain eligibility requirements. For financial reporting purposes, the pension plan is currently overfunded and as such, the Company's financial statements reflect prepaid pension cost on its balance sheets and an overfunded defined benefit pension credit in the statements of operations. In addition, the Company is not required to make cash contributions to the pension plan. The determination of the pension asset and pension credit is dependent on the selection of certain actuarial assumptions which attempt to anticipate future events. These pension actuarial assumptions, which are described in Note 7 to the Consolidated Financial Statements, include discount rate, expected return on plan assets, rate of future compensation increases, and mortality rates. Actual results that differ from the Company's pension actuarial assumptions are generally accumulated and amortized over future periods and therefore, generally affect the pension asset and pension credit in future periods. While the Company believes its pension actuarial assumptions are appropriate, future material differences between the Company's pension actuarial assumptions and actual results or significant changes in the Company's pension actuarial assumptions, could result in a material increase or decrease in the amount of the reported pension asset and credit, and therefore have a material impact on the Company's reported future results of operations. In addition, the plan could become underfunded under applicable federal regulations, which would require the Company to make cash contributions to the plan. o The determination of the Company's obligation and expense for OPEB benefits is dependent on the selection of certain actuarial assumptions which attempt to anticipate future events. These OPEB actuarial assumptions, which are also described in Note 7 to the Consolidated Financial Statements, include discount rate, rate of future increases in healthcare costs, and mortality rates. Actual results that differ from the Company's OPEB actuarial assumptions are, in accordance with GAAP, generally accumulated and amortized over future periods and therefore, generally affect OPEB obligations and expense in future periods. While the Company believes its OPEB actuarial assumptions are appropriate, future differences between the Company's OPEB actuarial assumptions and actual results or significant changes in the Company's OPEB actuarial assumptions could materially affect the reported amount of the Company's future OPEB obligation and expense, and therefore have a material impact on the Company's reported future results of operations. In addition, the amount the Company ultimately pays for future cash OPEB benefits could be materially different from the amounts inherent in the actuarial assumptions. Accounting Principles Not Yet Adopted See Note 16 to the Consolidated Financial Statements. Liquidity And Capital Resources At December 31, 2001, Keystone had negative working capital of $31.0 million, including $.5 million of notes payable and current maturities of long-term debt as well as outstanding borrowings under the Company's revolving credit facilities of $45.8 million. The amount of available borrowings under these revolving credit facilities is based on formula-determined amounts of trade receivables and inventories, less the amount of outstanding letters of credit. At December 31, 2001, unused credit available for borrowing under Keystone's $45 million revolving credit facility (the "Primary Revolver"), which expires March 31, 2005, EWP's $7 million revolving credit facility (the "EWP Revolver"), which expires June 30, 2002 and Garden Zone's $4 million revolving credit facility ("the Garden Zone Revolver"), which expires July 2, 2002 (as amended in April 2002) were $5.2 million, $3.6 million and $240,000, respectively. As a result of the events described in Note 15 to the Consolidated Financial Statements, as of April 9, 2002, unused credit availability under the Primarily Revolver had increased to $22.5 million. The Company's Primary Revolver requires daily cash receipts be used to reduce outstanding borrowings, which results in the Company maintaining zero cash balances when there are balances outstanding under this credit facility. Accordingly, any outstanding balances under the Primary Revolver are always classified as a current liability regardless of the maturity date of the facility. Keystone currently intends to review or replace both the EWP Revolver and the Garden Zone Revolver upon their respective maturities in June 2002 and July 2002. As previously reported, the Company did not make the scheduled interest payments due August 1, 2001 and February 1, 2002 on its $100 million of Senior Secured Notes (the "Senior Notes"), and accordingly the Senior Notes and Primary Revolver were in technical default as of December 31, 2001. As more fully described in Note 15 to the Consolidated Financial Statements, the liquidity of the Company was significantly improved during the first four months of 2002 as a result of the following transactions: o Holders of $93.9 million principal amount of the Company's Senior Notes agreed to exchange their Senior Notes for various combinations of cash and new debt and equity securities of the Company, all financial and other restrictive covenants included in the indenture covering the remaining $6.1 million principal amount of the Senior Notes were eliminated and the collateral was released (making the remaining Senior Notes unsecured), o The Company obtained a new $10 million interest-free loan from the County of Peoria, Illinois with no principal amortization required prior to its 2007 maturity date, o The Company obtained a new $5 million three-year term loan from the same lender that provides the Company with its Primary Revolver, o The maturity date of the Company's Primarily Revolver was extended to March 31, 2005, and the size of the facility was reduced from $55 million to $45 million, and o Two of the Company's major vendors agreed to a five-year non-interest bearing repayment of their past due balances which aggregate approximately $16.1 million. All past due interest amounts on the remaining $6.1 million principal amount of the Senior Notes (including approximately $24,000 of default interest) was paid in March 2002, and the remaining Senior Notes and Primary Revolver are no longer in technical default. In addition, a wholly-owned subsidiary of Contran has agreed to loan the Company up to an aggregate of $6 million under the terms of a revolving credit facility that matures on December 31, 2002. Through April 2002, the Company has not borrowed any amounts under such facility. During 2001, the Company's operating activities provided approximately $2.1 million of cash, compared to $13.9 million of cash provided by operating activities in 2000. Cash flow from operations decreased in 2001 compared to 2000 due primarily to a larger net loss and relative changes in the levels of assets and liabilities (primarily accounts receivable, inventories and accounts payable). During 2001, Keystone made capital expenditures of approximately $3.9 million primarily related to upgrades of production equipment at its facility in Peoria, Illinois, as compared to $13.1 million in 2000. During 2001, Keystone deferred capital expenditures, including maintenance items, due to liquidity constraints, although many of these items cannot be deferred indefinitely. Capital expenditures for 2002 are currently estimated to be approximately $11.4 million and are related primarily to upgrades of production equipment. Keystone currently anticipates these capital expenditures will be funded using cash flows from operations together with borrowing availability under Keystone's credit facilities. At December 31, 2001, the Company's financial statements reflected accrued liabilities of $15.6 million for estimated remediation costs for those environmental matters which Keystone believes are reasonably estimable. Although the Company has established an accrual for estimated future required environmental remediation costs, there is no assurance regarding the ultimate cost of remedial measures that might eventually be required by environmental authorities or that additional environmental hazards, requiring further remedial expenditures, might not be asserted by such authorities or private parties. Accordingly, the costs of remedial measures may exceed the amounts accrued. Keystone believes it is not possible to estimate the range of costs for certain sites. The upper end of range of reasonably possible costs to Keystone for sites for which the Company believes it is possible to estimate costs is approximately $22.0 million. Keystone does not expect to be required to make contributions to its pension plan during 2002. Future variances from assumed actuarial rates, including the rate of return on pension plan assets, may result in increases or decreases to pension expense or credit and funding requirements in future periods. See Note 7 to the Consolidated Financial Statements. The Company periodically reviews the recoverability of its deferred tax assets to determine whether such assets meet the "more-likely-than-not" recognition criteria. At December 31, 2001, the Company expects that its long-term profitability should ultimately be sufficient to enable it to realize full benefit of its future tax deductions. Although, considering all factors believed to be relevant, including the Company's recent operating results, its expected future near-term productivity rates; cost of raw materials, electricity, labor and employee benefits, environmental remediation, and retiree medical coverage; interest rates; product mix; sales volumes and selling prices; financial restructuring efforts and the fact that accrued OPEB expenses will become deductible over an extended period of time and require the Company to generate significant amounts of future taxable income, the Company believes a portion of the gross deferred tax assets may not currently meet the "more-likely-than-not" realizability test. As such, during the fourth quarter of 2001, the Company provided a deferred tax asset valuation allowance of approximately $14.5 million. The Company will continue to review the recoverability of its deferred tax assets, and based on such periodic reviews, the Company could change the valuation allowance related to its deferred tax assets in the future. At December 31, 2001, the Company has recognized a net deferred tax asset of $21.6 million, which approximates the tax expense for financial reporting purposes which will be recorded during the first quarter of 2002 related to the cancellation of indebtedness income resulting from the events described in Note 15 to the Consolidated Financial Statements. Keystone incurs significant ongoing costs for plant and equipment and substantial employee medical benefits for both current and retired employees. As such, Keystone is vulnerable to business downturns and increases in costs, and accordingly, routinely compares its liquidity requirements and capital needs against its estimated future operating cash flows. In addition to the financial restructuring related items discussed previously, planned reductions in fixed costs and announced increases in certain product selling prices, Keystone is taking additional action towards improving its liquidity. These actions include, but are not limited to, reducing inventory levels through more efficient production schedules and modifying coverages and participant contribution levels of medical plans for both employees and retirees. Keystone has also considered, and may in the future consider, the sale of certain divisions or subsidiaries that are not necessary to achieve the Company's long-term business objectives. However, there can be no assurance Keystone will be successful in any of these or other efforts, or that if successful, they will provide sufficient liquidity for the Company's operations during the next year. Management currently believes the cash flows from operations together with funds available under the Company's credit facilities will be sufficient to fund the anticipated needs of the Company's operations and capital improvements for the year ending December 31, 2002. This belief is based upon management's assessment of various financial and operational factors, including, but not limited to, assumptions relating to product shipments, product mix and selling prices, production schedules, productivity rates, raw materials, electricity, labor, employee benefits and other fixed and variable costs, interest rates, repayments of long-term debt, capital expenditures, and available borrowings under the Company's credit facilities. However, there are many factors that could cause actual future results to differ materially from management's current assessment. While it is not possible to identify all factors, Keystone continues to face many risks and uncertainties. Among the factors that could cause actual future results to differ materially are the risks and uncertainties discussed in this Annual Report and those described from time to time in the Company's other filings with the Securities and Exchange Commission, including, but not limited to, future supply and demand for the Company's products (including cyclicality thereof), customer inventory levels, changes in raw material and other operating costs (such as scrap and energy), general economic conditions, competitive products and substitute products, customer and competitor strategies, the impact of pricing and production decisions, the possibility of labor disruptions, environmental matters (such as those requiring emission and discharge standards for existing and new facilities), government regulations and possible changes therein, any significant increases in the cost of providing medical coverage to active and retired employees, the ultimate resolution of pending litigation, international trade policies of the United States and certain foreign countries and any possible future litigation and other risks and uncertainties as discussed in this Annual Report. Should one or more of these risks materialize (or the consequences of such a development worsen), or should the underlying assumptions prove incorrect, actual results could differ materially from those forecasted or expected and as a result, could have a material adverse effect on the future liquidity, financial condition and results of operations of the Company. Additionally, significant declines in the Company's end-user markets or market share, the inability to maintain satisfactory billet and wire rod production levels, or other unanticipated costs, if significant, could result in a need for funds greater than the Company currently has available. There can be no assurance the Company would be able to obtain an adequate amount of additional financing. See Notes 12 and 14 to the Consolidated Financial Statements. Summary of debt and other contractual commitments As more fully described in the notes to the Consolidated Financial Statements, the Company is a party to various debt, lease and other agreements which contractually and unconditionally commit the Company to pay certain amounts in the future. See Notes 4, 13 and 14 to the Consolidated Financial Statements. The following table summarizes such contractual commitments for the Company and its consolidated subsidiaries that are unconditional both in terms of timing and amount by the type and date of payment (as adjusted for the events described in Note 15 to the Consolidated Financial Statements):
Unconditional payment due date 2007 and Contractual commitment 2002 2003/2004 2005/2006 after Total - ---------------------- ---- --------- --------- ------- ----- (In thousands) Indebtedness ............... $36,111 $ 4,208 $ 3,146 $ 57,638 $101,103 Operating leases ........... 1,899 1,831 175 -- 3,905 Deferred vendor payment agreements ................ 2,421 6,454 6,454 807 16,136 Product supply agreement ... 1,200 2,400 2,400 5,100 11,100 ------- ------- ------- -------- -------- $41,631 $14,893 $12,175 $ 63,545 $132,244 ======= ======= ======= ======== ========
Payments under the deferred payment agreements in the above table reflect the minimum payments required under the agreements. Certain provisions of the agreements may require acceleration of the timing of the payments, but not an increase in the total amount to be paid. Payments under the product supply agreement in the above table reflect the minimum payments required under the agreement. However, it is probable the Company will make additional payments under the agreement based on actual consumption. In addition, the Company is party to an agreement that requires quarterly contributions of $75,000 to an environmental trust fund. Monies in the trust fund will be made available to the Company when the related environmental site is remediated or when the trust fund has a minimum excess of $2.0 million over the related site's estimated remaining remediation costs. At December 31, 2001, estimated remaining remediation costs exceeded the amount in the environmental trust fund. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Keystone's exposure to changes in interest rates relates primarily to long-term debt obligations. At December 31, 2001, substantially all of the Company's long-term debt was comprised of 9.6% average fixed rate instruments, which minimize earnings volatility related to interest expense. Keystone does not currently participate in interest rate-related derivative financial instruments. The table below presents principal amounts and related weighted-average interest rates by maturity date for Keystone's long-term debt obligations.
Estimated Contracted Maturity Date Fair Value -------------------- ------------------------------------------- 2002 2003 2004 2005 2006 Thereafter Total December 31, 2001 ---- ---- ---- ---- ---- ---------- ----- ----------------- ($ In thousands) Fixed-rate debt - Principal amount $ 73 $ 57 $ 66 $ - $ - $100,000 $100,196 $25,196 Weighted-average interest rate 7.8% 6.9% 9.0% - % - % 9.6% 9.6% Variable-rate debt- Principal amount $ 46,259 $ - $ - $ $ - $ - $ - $ 46,259 $46,259 Weighted-average interest rate 5.4% - % - % - % - % - % 5.4%
At December 31, 2000, long-term debt included fixed-rate debt of $100.7 million (fair value - $43.2 million) with a weighted average interest rate of 9.6% and $45.3 million variable-rate debt which approximated fair value, with a weighted-average interest rate of 9.8%. The table below presents principal amounts and related weighted-average interest rates by maturity date for Keystone's long-term debt obligations at December 31, 2001, as adjusted for the events described in Note 15 to the Consolidated Financial Statements.
Estimated Contracted Maturity Date Fair Value -------------------- ------------------------------------------- 2002 2003 2004 2005 2006 Thereafter Total December 31, 2001 ---- ---- ---- ---- ---- ---------- ----- ----------------- ($ In thousands) Fixed-rate debt - Principal amount $ 469 $ 849 $ 858 $ 792 $792 $57,638 $61,398 $61,398 Weighted-average interest rate 1.2% .5% .6% - % - % 2.1% 2.0% Variable-rate debt- Principal amount $35,642 $1,250 $1,250 $1,563 $ - $ - $39,705 $39,705 Weighted-average interest rate 5.4% 5.5% 5.5% 5.5% - % - % 5.4%
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. The information called for by this Item is contained in a separate section of this report. See Index of Financial Statements and Financial Statement Schedule on page F-1. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. The information required by this Item is incorporated by reference to disclosure provided under the captions "Election of Directors" and "Executive Officers" in Keystone's Proxy Statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A within 120 days after the end of the fiscal year covered by this report (the "Keystone Proxy Statement"). ITEM 11. EXECUTIVE COMPENSATION. The information required by this Item is incorporated by reference to disclosure provided under the caption "Executive Compensation" in the Keystone Proxy Statement. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. The information required by this Item is incorporated by reference to disclosure provided under the caption "Security Ownership" in the Keystone Proxy Statement. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. The information required by this Item is incorporated by reference to disclosure provided under the caption "Certain Business Relationships and Related Transactions" in the Keystone Proxy Statement. See also Note 9 to the Consolidated Financial Statements. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K. (a)(1), (2) The Index of Consolidated Financial Statements and Financial Statement Schedule is included on page F-1 of this report. (a)(3) Exhibits Included as exhibits are the items listed in the Exhibit Index. The Company will furnish a copy of any of the exhibits listed below upon payment of $4.00 per exhibit to cover the costs to the Company in furnishing the exhibits. The Company agrees to furnish to the Commission upon request copies of any instruments not included herein defining the rights of holders of long-term debt of the Company. Exhibit No. Exhibit 3.1 Certificate of Incorporation, as amended and filed with the Secretary of State of Delaware (Incorporated by reference to Exhibit 3.1 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1990). 3.2 Certificate of Designations, Rights and Preferences of the Series A 10% Cumulative Convertible Pay-In-Kind Preferred Stock of Registrant dated March 15, 2002. 3.3 Bylaws of the Company, as amended and restated December 30, 1994 (Incorporated by reference to Exhibit 3.2 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1994). 4.1 Indenture dated as of August 7, 1997 relating to the Registrant's 9 5/8% Senior Secured Notes due 2007 (Incorporated by reference to Exhibit 4.1 to the Registrant's Form 8-K filed September 4, 1997). 4.2 First Supplemental Indenture Dated as of March 15, 2002 to Indenture Dated as of August 7, 1997 Between Registrant as Issuer and the Bank of New York, as Trustee. 4.3 Second Supplemental Indenture Dated as of March 15, 2002 to Indenture Dated as of August 7, 1997 Between Registrant as Issuer and the Bank of New York, as Trustee. 4.4 Amended and Restated Revolving Loan And Security Agreement dated as of December 29, 1995 between the Company and Congress Financial Corporation (Central). (Incorporated by reference to Exhibit 4.1 to Registrant's Form 10-K for the year ended December 31, 1995). 4.5 First Amendment to Amended and Restated Revolving Loan And Security Agreement dated as of September 27, 1996 between Registrant and Congress Financial Corporation (Central). (Incorporated by reference to Exhibit 4.1 to Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 1996). 4.6 Second Amendment to Amended and Restated Revolving Loan And Security Agreement dated as of August 4, 1997 between Registrant and Congress Financial Corporation (Central). Exhibit No. Exhibit 4.7 Third Amendment to Amended and Restated Revolving Loan And Security Agreement dated as of May 14, 1999 between Registrant and Congress Financial Corporation (Central). 4.8 Fourth Amendment to Amended and Restated Revolving Loan and Security Agreement dated as of December 31, 1999 between Registrant and Congress Financial Corporation (Central) (Incorporated by reference to Exhibit 4.4 to the Registrant's Form 10-K for the year ended December 31, 1999). 4.9 Fifth Amendment to Amended and Restated Revolving Loan and Security Agreement dated as of February 3, 2000 between Registrant and Congress Financial Corporation (Central). (Incorporated by reference to Exhibit 4.6 to the Registrant's Form 10-K for the year ended December 31, 1999). 4.10 Sixth Amendment to Amended and Restated Revolving Loan and Security Agreement dated as of January 17, 2001 between Registrant and Congress Financial Corporation (Central). 4.11 Seventh Amendment to Amended and Restated Revolving Loan and Security Agreement dated as of November 1, 2001 between Registrant and Congress Financial Corporation (Central). 4.12 Eighth Amendment to Amended and Restated Revolving Loan and Security Agreement dated as of December 31, 2001 between Registrant and Congress Financial Corporation (Central). 4.13 Ninth Amendment to Amended and Restated Revolving Loan and Security Agreement dated as of January 31, 2002 between Registrant and Congress Financial Corporation (Central). 4.14 Tenth Amendment to Amended and Restated Revolving Loan and Security Agreement dated as of February 28, 2002 between Registrant and Congress Financial Corporation (Central). 4.15 Eleventh Amendment to Amended and Restated Revolving Loan and Security Agreement dated as of March 15, 2002 between Registrant and Congress Financial Corporation (Central). 4.16 Twelfth Amendment to Amended and Restated Revolving Loan and Security Agreement dated as of March 15, 2002 between Registrant and Congress Financial Corporation (Central). 4.17 Loan Agreement dated as of March 13, 2002 between Registrant and the County of Peoria, Illinois. 4.18 Subordinate Security Agreement dated as of March 13, 2002 made by Registrant in favor of the County of Peoria, Illinois. 4.19 Amended and Restated EWP Bridge Loan Agreement dated as of November 21, 2001, by and between Registrant and EWP Financial LLC. 4.20 First Amendment to Amended and Restated EWP Bridge Loan Agreement dated as of March 18, 2002, by and between Registrant and EWP Financial LLC. 4.21 Stock Pledge Agreement dated as of November 21, 2001, by and between Registrant and EWP Financial LLC. Exhibit No. Exhibit 4.22 Form of Registrant's 6% Subordinated Unsecured Note dated as of March 15, 2002. 4.23 Form of Registrant's 8% Subordinated Secured Note dated as of March 15, 2002. 4.24 Indenture Dated as of March 15, 2002, related to Registrant's 8% Subordinated Secured Notes Between Registrant as Issuer, and U.S. Bank National Association, as Trustee. 10.1 Intercorporate Services Agreement with Contran Corporation dated as of January 1, 2001. 10.2 The Combined Master Retirement Trust between Valhi, Inc. and Harold C. Simmons as restated effective July 1, 1995 (Incorporated by reference to Exhibit 10.2 to the Registrant's Registration Statement on Form S-4 (Registration No. 333-35955)). 10.3* Keystone Consolidated Industries, Inc. 1992 Incentive Compensation Plan. (Incorporated by reference to Exhibit 99.1 to Registrant's Registration Statement on Form S-8 (Registration No. 33-63086)). 10.4* Keystone Consolidated Industries, Inc. 1992 Non-Employee Director Stock Option Plan. (Incorporated by reference to Exhibit 99.2 to Registrant's Registration Statement on Form S-8 (Registration No. 33-63086)). 10.5* Keystone Consolidated Industries, Inc. 1997 Long-Term Incentive Plan. (Incorporated by reference to Appendix A to Registrant's Schedule 14A filed April 25, 1997). 10.6* Amendment to the Keystone Consolidated Industries, Inc. 1997 Long-Term Incentive Plan. (Incorporated by reference to Registrant's Schedule 14A filed April 24, 1998.) 10.7* Form of Deferred Compensation Agreement between the Registrant and certain executive officers. (Incorporated by reference to Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q (File No. 1-3919) for the quarter ended March 31, 1999). 10.8 Account Reconciliation Agreement dated as of March 12, 2002 between Registrant and Central Illinois Light Company. 10.9 Account Reconciliation Agreement dated as of March 11, 2002 between Registrant and PSC Metals, Inc. 21 Subsidiaries of the Company. 23.1 Consent of PricewaterhouseCoopers LLP 99 Annual report of the Keystone Consolidated Industries, Inc. Deferred Incentive Plan (Form 11-K) to be filed under Form 10-K/A to this Annual Report on Form 10-K within 180 days after December 31, 2001. (b) No reports on Form 8-K were filed during the quarter ended December 31, 2001. *Management contract, compensatory plan or agreement. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned and dated April 15, 2002, thereunto duly authorized. KEYSTONE CONSOLIDATED INDUSTRIES, INC. (Registrant) /s/ GLENN R. SIMMONS ----------------------------------- Glenn R. Simmons Chairman of the Board Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below and dated as of April 15, 2002 by the following persons on behalf of the registrant and in the capacities indicated: /s/ GLENN R. SIMMONS /s/ WILLIAM SPIER - ----------------------------------- ----------------------------------- Glenn R. Simmons William Spier Chairman of the Board Director /s/ J. WALTER TUCKER, JR. /s/ STEVEN L. WATSON - --------------------------- ----------------------------------- J. Walter Tucker, Jr. Steven L. Watson Vice Chairman of the Board Director /s/ THOMAS E. BARRY /s/ DAVID L. CHEEK - ------------------------------------ ----------------------------------- Thomas E. Barry David L. Cheek Director President and Chief Operating Officer /s/ PAUL M. BASS, JR. /s/ BERT E. DOWNING, JR. - ------------------------------------ -------------------------- Paul M. Bass, Jr. Bert E. Downing, Jr. Director Vice President and Corporate Controller and Principal Accounting and Financial Officer KEYSTONE CONSOLIDATED INDUSTRIES, INC. AND SUBSIDIARIES ANNUAL REPORT ON FORM 10-K Items 8, 14(a) and 14(d) Index of Consolidated Financial Statements and Financial Statement Schedule Page Financial Statements Report of Independent Accountants F-2 Consolidated Balance Sheets - December 31, 2000 and 2001 F-3 Consolidated Statements of Operations - Years ended December 31, 1999, 2000 and 2001 F-5 Consolidated Statements of Stockholders' Equity (Deficit) - Years ended December 31, 1999, 2000 and 2001 F-6 Consolidated Statements of Cash Flows - Years ended December 31, 1999, 2000 and 2001 F-7 Notes to Consolidated Financial Statements F-9 Financial Statement Schedule Schedule II - Valuation and Qualifying Accounts S-1 Schedules I, III and IV are omitted because they are not applicable. REPORT OF INDEPENDENT ACCOUNTANTS To the Stockholders and Board of Directors of Keystone Consolidated Industries, Inc. In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of Keystone Consolidated Industries, Inc. and Subsidiaries at December 31, 2000 and 2001, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2001, in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the accompanying index presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedule are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion. PricewaterhouseCoopers LLP Dallas, Texas March 29, 2002 KEYSTONE CONSOLIDATED INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS December 31, 2000 and 2001 (In thousands, except share data)
ASSETS 2000 2001 ------ ------ Current assets: Notes and accounts receivable, net of allowances of $1,681 and $2,858 ......................... $ 21,813 $ 29,411 Inventories .................................... 52,004 40,912 Deferred income taxes .......................... 16,828 9,778 Prepaid expenses and other ..................... 786 3,211 -------- -------- Total current assets ....................... 91,431 83,312 -------- -------- Property, plant and equipment: Land, buildings and improvements ............... 55,297 55,520 Machinery and equipment ........................ 311,063 311,336 Construction in progress ....................... 1,335 700 -------- -------- 367,695 367,556 Less accumulated depreciation .................. 222,999 237,956 -------- -------- Net property, plant and equipment .......... 144,696 129,600 -------- -------- Other assets: Restricted investments ......................... 5,969 5,675 Prepaid pension cost ........................... 126,506 131,985 Deferred income taxes .......................... 10,696 11,844 Deferred financing costs ....................... 2,685 2,295 Goodwill ....................................... 877 752 Other .......................................... 2,843 1,437 -------- -------- Total other assets ......................... 149,576 153,988 -------- -------- $385,703 $366,900 ======== ========
See accompanying notes to consolidated financial statements. KEYSTONE CONSOLIDATED INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (CONTINUED) December 31, 2000 and 2001 (In thousands, except share data)
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) 2000 2001 ------ ------ Current liabilities: Notes payable and current maturities of long-term debt ................................. $ 45,728 $ 46,332 Accounts payable ................................. 34,614 23,014 Payables to affiliates ........................... -- 633 Accrued OPEB cost ................................ 8,767 7,215 Other accrued liabilities ........................ 41,565 37,100 --------- --------- Total current liabilities .................... 130,674 114,294 --------- --------- Noncurrent liabilities: Long-term debt ................................... 100,280 100,123 Accrued OPEB cost ................................ 98,015 101,810 Negative goodwill ................................ 21,353 19,998 Other ............................................ 9,323 31,010 --------- --------- Total noncurrent liabilities ................. 228,971 252,941 --------- --------- Minority interest .................................. -- 1 --------- --------- Stockholders' equity (deficit): Common stock, $1 par value, 12,000,000 shares authorized; 10,063,103 shares issued at stated value ................................... 10,792 10,792 Additional paid-in capital ....................... 53,071 53,071 Accumulated deficit .............................. (37,793) (64,187) Treasury stock - 1,134 shares, at cost ........... (12) (12) --------- --------- Total stockholders' equity (deficit) ......... 26,058 (336) --------- --------- $ 385,703 $ 366,900 ========= =========
Commitments and contingencies (Notes 12, 13 and 14). KEYSTONE CONSOLIDATED INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS Years ended December 31, 1999, 2000 and 2001 (In thousands, except per share data)
1999 2000 2001 ------ -------- ------ Revenues and other income: Net sales ............................... $ 355,688 $ 338,321 $ 308,670 Interest ................................ 452 599 253 Other, net .............................. 463 183 565 --------- --------- --------- 356,603 339,103 309,488 --------- --------- --------- Costs and expenses: Cost of goods sold ...................... 332,644 331,167 295,339 Selling ................................. 6,845 6,737 6,378 General and administrative .............. 20,850 18,388 19,070 Overfunded defined benefit pension credit (5,610) (380) (5,479) Interest ................................ 14,058 15,346 14,575 --------- --------- --------- 368,787 371,258 329,883 --------- --------- --------- (12,184) (32,155) (20,395) Equity in losses of Alter Recycling Company L.L.C ....................... (54) (281) -- --------- --------- --------- Loss before income taxes ............ (12,238) (32,436) (20,395) Provision for income taxes (benefit) ...... (4,754) (11,370) 5,998 Minority interest in after-tax earnings ... -- -- 1 --------- --------- --------- Net loss ............................ $ (7,484) $ (21,066) $ (26,394) ========= ========= ========= Basic and diluted net loss per share ...... $ (.75) $ (2.10) $ (2.62) ========= ========= ========= Basic and diluted weighted average common and common equivalent shares outstanding . 9,904 10,039 10,062 ========= ========= =========
KEYSTONE CONSOLIDATED INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) Years ended December 31, 1999, 2000 and 2001 (In thousands)
Additional Common stock paid-in Accumulated Treasury Shares Amount capital (deficit) stock Total Balance - December 31, 1998 9,839 $10,569 $51,763 $ (9,243) $(12) $ 53,077 Net loss .................. -- -- -- (7,484) -- (7,484) Issuance of stock ......... 87 87 635 -- -- 722 ------ ------- ------- -------- ---- -------- Balance - December 31, 1999 9,926 10,656 52,398 (16,727) (12) 46,315 Net loss .................. -- -- -- (21,066) -- (21,066) Issuance of stock ......... 136 136 673 -- -- 809 ------ ------- ------- -------- ---- -------- Balance - December 31, 2000 10,062 10,792 53,071 (37,793) (12) 26,058 Net loss .................. -- -- -- (26,394) -- (26,394) ------ ------- ------- -------- ---- -------- Balance - December 31, 2001 10,062 $10,792 $53,071 $(64,187) $(12) $ (336) ====== ======= ======= ======== ==== ========
KEYSTONE CONSOLIDATED INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Years ended December 31, 1999, 2000 and 2001 (In thousands)
1999 2000 2001 ------- ------- ------ Cash flows from operating activities: Net loss ................................. $ (7,484) $(21,066) $(26,394) Depreciation and amortization ............ 21,051 17,224 16,992 Amortization of deferred financing costs . 519 479 540 Deferred income taxes .................... (3,363) (11,229) 5,902 Other, net ............................... (3,089) (1,883) 3,780 Change in assets and liabilities: Notes and accounts receivable .......... 4,323 11,605 (8,310) Inventories ............................ (14,685) 14,080 10,354 Prepaid pension cost ................... (5,610) (380) (5,479) Accounts payable ....................... (1,923) 3,855 (10,616) Other, net ............................. 11,312 1,236 15,329 -------- -------- -------- Net cash provided by operating activities ......................... 1,051 13,921 2,098 -------- -------- -------- Cash flows from investing activities: Capital expenditures ..................... (16,873) (13,052) (3,889) Proceeds from sale of business unit ...... -- -- 757 Other, net ............................... 729 (20) 587 -------- -------- -------- Net cash used by investing activities (16,144) (13,072) (2,545) -------- -------- -------- Cash flows from financing activities: Revolving credit facilities, net ......... $ 15,437 $ 777 $ 992 Other notes payable and long-term debt: Additions .............................. 1,125 26 56 Principal payments ..................... (1,469) (1,652) (601) -------- -------- -------- Net cash provided (used) by financing activities .......................... 15,093 (849) 447 -------- -------- --------
KEYSTONE CONSOLIDATED INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) Years ended December 31, 1999, 2000 and 2001 (In thousands)
1999 2000 2001 ------- ------- ------ Cash and cash equivalents: Net change from operations, investing and financing activities ................. -- -- -- Balance at beginning of year .............. -- -- -- -------- -------- ------- Balance at end of year .................... $ -- $ -- $ -- ======== ======== ======= Supplemental disclosures: Cash paid for: Interest, net of amounts capitalized .... $ 13,887 $ 14,867 $ 9,189 Income taxes paid (refund), net ......... (3,575) (807) (194) Common stock contributed to employee Benefit plan ............................ $ 722 $ 809 $ --
KEYSTONE CONSOLIDATED INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1 - Summary of significant accounting policies Keystone Consolidated Industries, Inc. ("Keystone" or the "Company") is 50% owned by Contran Corporation ("Contran") and other entities related to Mr. Harold C. Simmons. Substantially all of Contran's outstanding voting stock is held by trusts established for the benefit of certain children and grandchildren of Mr. Simmons, of which Mr. Simmons is sole trustee. The Company may be deemed to be controlled by Contran and Mr. Simmons. Principles of consolidation and management's estimates. The consolidated financial statements include the accounts of the Company and its majority-owned subsidiaries. All material intercompany accounts and balances have been eliminated. Certain prior year amounts have been reclassified to conform with the 2001 presentation. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amount of revenues and expenses during the reporting period. Actual results may differ from previously estimated amounts under different assumptions or conditions. Primarily as a result of a $54.7 million pre-tax extraordinary gain from cancellation of indebtedness (See Note 15), management expects to report net income for the year ending December 31, 2002. Keystone management also currently expects to report positive cash flow from operations during 2002. In addition, as a result of the events discussed in Note 15, Keystone's management believes the Company's liquidity in 2002 will be substantially improved over that experienced in 2001. As such, Keystone's management believes its available credit facilities and cash flows from operating activities will be sufficient to fund the anticipated needs of the Company's operations and capital expenditures for the year ending December 31, 2002. However, such expectation is based on various operating assumptions and goals. Failure to achieve these goals could have a material adverse effect on the Company's ability to achieve its intended business objectives and may result in cash flow needs in excess of its current borrowing availability under existing credit facilities. Fiscal year. The Company's fiscal year is 52 or 53 weeks and ends on the last Sunday in December. Each of fiscal 1999 and 2001 were 52-week years, and 2000 was a 53 week year. Net sales. Sales are recorded when products are shipped and title and other risks and rewards of ownership have passed to the customer. In general, sales from Keystone's steel and wire products segment include prepaid freight to the customer with the resulting freight cost absorbed by the Company. Keystone's reported sales in 1999, 2000 and 2001 are stated net of shipping and handling costs of $20.6 million, $19.9 million and $19.2 million, respectively. In general, sales from Keystone's lawn and garden products segment are also shipped freight prepaid to the customer with the resulting freight cost absorbed by the Company. Shipping and handling costs of the Company's lawn and garden products segment are included in cost of goods sold and were approximately $345,000, $169,000 and $208,000 in 1999, 2000 and 2001, respectively. The Company adopted Securities and Exchange Commission Staff Accounting Bulletin ("SAB") No. 101, as amended in 2000. SAB No. 101 provides guidance on the recognition, presentation and disclosure of revenue. The impact of adopting SAB No. 101 was not material. Inventories. Inventories are stated at the lower of cost or market. The last-in, first-out ("LIFO") method is used to determine the cost of approximately 75% and 74% of the inventories held at December 31, 2000 and 2001, respectively. The first-in, first-out or average cost methods are used to determine the cost of all other inventories. Property, plant, equipment and depreciation. Property, plant and equipment are stated at cost. Interest cost capitalized in 1999, 2000 and 2001 amounted to $50,000, $124,000 and $17,000 respectively. Expenditures for maintenance, repairs and minor renewals are expensed; expenditures for major improvements are capitalized. Keystone will perform certain planned major maintenance activities during the year (generally during the fourth quarter). Repair and maintenance costs estimated to be incurred in connection with such planned major maintenance activities are accrued in advance and are included in cost of goods sold. Depreciation for financial reporting purposes is computed using principally the straight-line method over the estimated useful lives of 10 to 30 years for buildings and improvements and three to 12 years for machinery and equipment. Accelerated depreciation methods are used for income tax purposes, as permitted. Depreciation expense amounted to $21,741,000, $18,252,000 and $18,184,000 during the years ended December 31, 1999, 2000 and 2001, respectively. Upon the sale or retirement of an asset, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is recognized in income currently. When events or changes in circumstances indicate assets may be impaired, an evaluation is performed to determine if an impairment exists. Such events or changes in circumstances include, among other things, (i) significant current and prior periods or current and projected periods with operating losses, (ii) a significant decrease in the market value of an asset or (iii) a significant change in the extent or manner in which an asset is used. All relevant factors are considered. The test for impairment is performed by comparing the estimated future undiscounted cash flows (exclusive of interest expense) associated with the asset to the asset's net carrying value to determine if a write-down to market value or discounted cash flow value is required. If the asset being tested for impairment was acquired in a business combination accounted for by the purchase method, any goodwill which arose out of that business combination may also be considered in the impairment test if the goodwill related specifically to the acquired asset and not to other aspects of the acquired business, such as the customer base or product lines. See Note 16. Investment in joint ventures. Investments in 20% but less than majority-owned companies are accounted for by the equity method. Differences between the cost of the investments and Keystone's pro rata share of separately-reported net assets if any, are not significant. Retirement plans and post-retirement benefits other than pensions. Accounting and funding policies for retirement plans and post retirement benefits other than pensions ("OPEB") are described in Note 7. Environmental liabilities. Keystone records liabilities related to environmental issues at such time as information becomes available and is sufficient to support a reasonable estimate of range of probable loss. If the Company is unable to determine that a single amount in an estimated range is more likely, the minimum amount of the range is recorded. Costs of future expenditures for environmental remediation obligations are not discounted to their present value. Recoveries of environmental remediation costs from other parties are recorded as assets when their receipt is deemed probable. At both December 31, 2000 and 2001 Keystone had such assets recorded of approximately $323,000. Income taxes. Deferred income tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the income tax and financial reporting carrying amounts of assets and liabilities. Keystone periodically evaluates its deferred tax assets and adjusts any related valuation allowance based on the estimate of the amount of such deferred tax assets which the Company believes does not meet the "more-likely-than-not" recognition criteria. Advertising costs. Advertising costs, expensed as incurred, were $.5 million in 1999, $.9 million in 2000 and $.6 million in 2001. Loss per share. Basic and diluted loss per share is based upon the weighted average number of common shares actually outstanding during each year. The impact of outstanding stock options was antidilutive. The weighted average number of shares of outstanding stock options which were excluded from the calculation of diluted earnings per share because their impact would have been antidilutive approximated 725,000, 795,000 and 651,000 in 1999, 2000 and 2001, respectively. Deferred financing costs. Deferred financing costs relate primarily to the issuance of Keystone's 9 5/8% Senior Secured Notes (the "Senior Notes") and are amortized by the interest method over 10 years (term of the Senior Notes). Deferred financing costs are stated net of accumulated amortization of $1,962,000 and $2,501,000 at December 31, 2000 and 2001, respectively. Goodwill. Goodwill, representing the excess of cost over the fair value of the net assets of Engineered Wire Products, Inc., ("EWP") acquired in a business combination accounted for by the purchase method, was amortized by the straight-line method over 10 years through December 31, 2001 and is stated net of accumulated amortization of approximately $352,000 at December 31, 2000 and $477,000 at December 31, 2001. Amortization of goodwill amounted to $113,000 in 1999, and $125,000 in each of 2000 and 2001. Upon adoption of SFAS No. 142, effective January 1, 2002, goodwill will no longer be subject to periodic amortization. See Note 16. Negative goodwill. Negative goodwill, representing the excess of fair value over cost of individual net assets acquired in business combinations accounted for by the purchase method, was amortized by the straight-line method over 20 years through December 31, 2001, and is stated net of accumulated amortization of approximately $5,762,000 and $7,118,000 at December 31, 2000 and 2001, respectively. Amortization of negative goodwill in each of 1999, 2000 and 2001 amounted to $1,356,000. Upon adoption of SFAS No. 142, effective January 1, 2002, negative goodwill will be eliminated as a cumulative effect of change in accounting principle. See Note 16. Employee stock options. Keystone accounts for stock-based compensation in accordance with Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, and its various interpretations. Under APBO No. 25, no compensation cost is generally recognized for fixed stock options in which the exercise price is not less than the market price on the grant date. Compensation cost recognized by the Company in accordance with APBO No. 25 has not been significant in each of the past three years. Business interruption insurance recoveries. Business interruption insurance recoveries related to production outages due primarily to equipment failures or malfunctions are recorded as a reduction of cost of good sold when the recovery is received. During 1999, 2000 and 2001 Keystone received such business interruption insurance recoveries of approximately $1.6 million, $300,000 and $1.8 million, respectively. Derivative activities. Effective January 1, 2001, the Company adopted SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended. Under SFAS No. 133, all derivatives are recognized as either assets or liabilities and measured at fair value. The accounting for changes in fair value of derivatives will depend upon the intended use of the derivative, and such changes are recognized either in net income or other comprehensive income. As permitted by the transition requirements of SFAS No. 133, as amended, Keystone has exempted from the scope of SFAS No. 133 all host contracts containing embedded derivatives which were acquired or issued prior to January 1, 1999. Keystone is not a party to any significant derivative or hedging instrument covered by SFAS No. 133 and therefore the Company's financial statements were not impacted by adopting SFAS No. 133. Business combinations. Effective July 1, 2001 the Company adopted SFAS No. 141, Business Combinations, for all business combinations initiated on or after July 1, 2001, and all purchase business combinations completed on or after July 1, 2001. Under SFAS No. 141, all business combinations initiated on or after July 1, 2001 will be accounted for by the purchase method, and the pooling-of-interests method is prohibited. Note 2 - Joint ventures In January 1999, Keystone and two unrelated parties formed Garden Zone LLC ("Garden Zone") to supply wire, wood and plastic products to the consumer lawn and garden market. Keystone owns 51% of Garden Zone and, as such, Keystone's consolidated financial statements include the accounts of Garden Zone. Neither Keystone nor the other owners contributed capital or assets to the Garden Zone joint venture, but Keystone did guarantee 51% of Garden Zone's $4 million revolving credit agreement. See Note 4. Garden Zone commenced operations in February 1999 and its earnings since that date, of which 51% accrue to Keystone for financial reporting purposes, have been insignificant. In July 1999, Keystone formed Alter Recycling Company, L.L.C. ("ARC"), a joint venture with Alter Peoria, Inc., to operate a scrap recycling operation at Keystone's facility in Peoria, Illinois. ARC sells scrap steel to Keystone and others. Upon formation, Keystone contributed the property and equipment of its Peoria scrap facility (net book value of approximately $335,000) to the joint venture in return for its 50% ownership interest. Keystone is not required to, nor does it currently anticipate it will, make any other contributions to fund or operate this joint venture. Keystone has not guaranteed any debt or other liability of the joint venture. Keystone recognized no gain or loss upon formation of ARC and the investment in ARC is accounted for by the equity method. In addition, Keystone sold its scrap facility's existing inventory to ARC upon commencement of ARC's operations. At December 31, 2000 and 2001, due to operating losses incurred by ARC, Keystone had reduced its investment in ARC to zero. ARC commenced operations in August 1999 and through December 31, 1999, Keystone purchased approximately $2.7 million of scrap from ARC. During 2000 and 2001, Keystone purchased approximately $7.2 million and $6.0 million, respectively of scrap from ARC. At December 31, 2000 and 2001, ARC owed Keystone approximately $818,000 and $1.0 million respectively, primarily for the scrap inventory purchased by ARC from Keystone at formation, and such amounts are included in notes and accounts receivable. However, during the fourth quarter of 2001, Keystone recorded a $1.0 million charge to provide an allowance for the full amount of the net receivable from ARC. Such allowance is included in allowance for notes and accounts receivable on the December 31, 2001 balance sheet. At December 31, 2000, Keystone owed ARC approximately $171,000 primarily for scrap purchases by Keystone from ARC. 2 Note 3 - Inventories
December 31, 2000 2001 ---- ---- (In thousands) Steel and wire products: Raw materials ...................................... $11,101 $ 9,818 Work in process .................................... 9,492 9,912 Finished products .................................. 23,954 16,132 Supplies ........................................... 15,520 13,446 ------- ------- 60,067 49,308 Less LIFO reserve .................................. 11,083 10,768 ------- ------- 48,984 38,540 Lawn and garden products - finished products ......... 3,020 2,372 ------- ------- $52,004 $40,912 ======= =======
Note 4 - Notes payable and long-term debt
December 31, 2000 2001 ---- ---- (In thousands) 9 5/8% Senior Secured Notes, due August 2007 ............................. $100,000 $100,000 Commercial credit agreements: Revolving credit facilities: Keystone ................................. 37,772 40,823 EWP ...................................... 4,203 3,225 Garden Zone .............................. 2,819 1,738 Term loan - EWP ............................ 164 -- Other ........................................ 1,050 669 -------- -------- 146,008 146,455 Less current maturities .................... 45,728 46,332 -------- -------- $100,280 $100,123
The Company did not make the scheduled interest payments due August 1, 2001 and February 1, 2002 on its Senior Notes, and accordingly the Senior Notes and the Company's primary revolving credit facility ("the Keystone Revolver") were in technical default as of December 31, 2001. During the first quarter of 2002, $93.9 million principal amount of the Senior Notes and the related accrued and unpaid interest were retired in exchange for various combinations of cash and new debt and equity securities of the Company, and all past due interest amounts on the remaining $6.1 million principal amount of the Senior Notes (including approximately $24,000 of default interest) were paid. See Note 15. After such exchanges and payment of accrued interest, the remaining Senior Notes and the Keystone Revolver are no longer in technical default. Accordingly, the Senior Notes and a portion of the related accrued interest as of December 31, 2001 have been classified as noncurrent liabilities. A portion of the accrued interest related to the Senior Notes as of December 31, 2001 has been classified as a current liability at such date to the extent that such accrued interest was subsequently paid or is expected to be paid during 2002, either under the terms of the existing Senior Notes (for those Senior Notes which remain outstanding), or as part of the consideration received by the Senior note holders (for those Senior Notes which were exchanged, in part, for cash). See Note 8. The Keystone Revolver, as amended in April 2002, provides for revolving borrowings of up to $45 million based upon formula-determined amounts of trade receivables and inventories. Borrowings bear interest, at the Company's option, at prime rate plus .5% or LIBOR plus 2.5%, mature no later than March, 2005 and are collateralized by certain of the Company's trade receivables and inventories. In addition, the Keystone Revolver is cross-collateralized with junior liens on certain of the Company's property, plant and equipment. The effective interest rate on outstanding borrowings under the Keystone Revolver was 10.0% and 5.5% at December 31, 2000 and 2001, respectively. At December 31, 2001, $1.2 million of letters of credit were outstanding, and $3.0 million was available for additional borrowings based upon April 2002 amended size of the facility. The Keystone Revolver requires the Company's daily net cash receipts to be used to reduce the outstanding borrowings, which results in the Company maintaining zero cash balances so long as there is an outstanding balance under the Keystone Revolver. Accordingly, any outstanding balances under the Keystone Revolver are always classified as a current liability, regardless of the maturity date of the facility. The Keystone Revolver contains restrictive covenants, including certain minimum working capital and net worth requirements, maintenance of financial ratios requirements and other customary provisions relative to payment of dividends on Keystone's common stock and on the Company's new 10% Pay-In-Kind Preferred Stock (See Note 15). EWP's $7 million revolving credit facility (the "EWP Revolver") expires in June 2002. Borrowings under the EWP Revolver bear interest at either the prime rate or LIBOR plus 2.25% (8.7% and 4.2% at December 31, 2000 and 2001, respectively). At December 31, 2001, $3.6 million was available for additional borrowings under the EWP revolver. EWP's accounts receivable, inventories and property, plant and equipment collateralize the EWP Revolver. The EWP Revolver Agreement contains covenants with respect to working capital, additional borrowings, payment of dividends and certain other matters. Keystone currently intends to renew or replace the EWP Revolver upon its maturity in June 2002. Garden Zone has a $4.0 million revolving credit facility (the "Garden Zone Revolver") which, as amended in April 2002, matures on July 2, 2002 and bears interest at the LIBOR rate plus 2.4%. During 2000 and 2001 the Garden Zone Revolver bore interest at the LIBOR rate plus 2% (8.7% and 4.6% at December 31, 2000 and 2001, respectively). Garden Zone's accounts receivable and inventories collateralize the Garden Zone Revolver. At December 31, 2001, approximately $240,000 was available for additional borrowings under the Garden Zone Revolver. Keystone has guaranteed 51% of the outstanding borrowings under the Garden Zone revolver. The Company currently intends to renew or replace the Garden Zone Revolver upon its maturity in July 2002. At December 31, 2000 and 2001, other notes payable and long-term debt included $474,000 advanced to Garden Zone by one of its other owners. The advance bears interest at the prime rate. Interest paid on this advance during 1999, 2000 and 2001 amounted to approximately $33,000, $64,000 and $34,000, respectively. Aggregate future maturities of other notes payable and long-term debt at December 31, 2001 amounted to $546,000, $57,000 and $66,000 in 2002, 2003 and 2004, respectively. Excluding the Senior Notes, substantially all of the Company's notes payable and long-term debt reprice with changes in interest rates. The aggregate fair value of the Senior Notes, based on quoted market prices at December 31, 2000 and management's estimate of fair value at December 31, 2001, approximated $42.5 million and $25.0 million, respectively. The book value of all other indebtedness is deemed to approximate market value. Note 5 - Income taxes At December 31, 2001, the Company expects that its long-term profitability should ultimately be sufficient to enable it to realize full benefit of its future tax attributes. However, considering all factors believed to be relevant, including the Company's recent operating results, its expected future near-term productivity rates; cost of raw materials, electricity, labor and employee benefits, environmental remediation, and retiree medical coverage; interest rates; product mix; sales volumes and selling prices; financial restructuring efforts and the fact that accrued OPEB expenses will become deductible over an extended period of time and require the Company to generate significant amounts of future taxable income, the Company believes a portion of the gross deferred tax assets may not currently meet the "more-likely-than-not" realizability test. As such, during the fourth quarter of 2001, the Company provided a deferred tax asset valuation allowance of approximately $14.5 million. The resulting net deferred tax asset of approximately $21.6 million at December 31, 2001 approximates the tax expense for financial reporting purposes which will be recorded during the first quarter of 2002 related to the cancellation of indebtedness income resulting from the events described in Note 15. Summarized below are (i) the differences between the provision (benefit) for income taxes and the amounts that would be expected using the U. S. federal statutory income tax rate of 35%, and (ii) the components of the comprehensive provision (benefit) for income taxes.
Years ended December 31, 1999 2000 2001 ---- ---- ---- (In thousands) Expected tax benefit, at statutory rate ...... $ (4,283) $(11,353) $ (7,138) U.S. state income taxes (benefit), net ....... (157) 157 (399) Amortization of goodwill and negative goodwill (435) (431) (431) Deferred tax asset valuation allowance ....... -- -- 14,510 Other, net ................................... 121 257 (544) -------- -------- -------- Provision (benefit) for income taxes ......... $ (4,754) $(11,370) $ 5,998 ======== ======== ======== Provision (benefit) for income taxes: Currently payable (refundable): U.S. federal ............................. $ (930) $ (278) $ (37) U.S. state ............................... (461) 137 133 -------- -------- -------- Net currently payable (refundable) ..... (1,391) (141) 96 Deferred income taxes, net ................. (3,363) (11,229) 5,902 -------- -------- -------- $ (4,754) $(11,370) $ 5,998 ======== ======== ========
At December 31, 2001, Keystone had approximately $6.3 million of alternative minimum tax credit carryforwards which have no expiration date. At December 31, 2001, the Company had $24.7 million of net operating loss carryforwards expiring in 2003 through 2010 which may only be used to reduce future taxable income of an acquired subsidiary and which are limited in utilization to approximately $1.9 million per year. At December 31, 2001 Keystone has other net operating loss carryforwards of approximately $64.7 million which expire in 2019 through 2021, and which may be used to reduce future taxable income of the entire Company. The components of the net deferred tax asset are summarized below.
December 31, ---------------------- 2000 2001 --------------------------------------------- Assets Liabilities Assets Liabilities (In thousands) Tax effect of temporary differences relating to: Inventories ....................................... $ 2,639 $ -- $ 2,453 $ -- Property and equipment ............................ -- (5,738) -- (5,513) Prepaid pension ................................... -- (49,337) -- (51,474) Accrued OPEB cost ................................. 41,633 -- 42,507 Accrued liabilities and other deductible Differences ...................................... 14,811 -- 14,130 -- Other taxable differences ......................... -- (6,298) -- (6,260) Net operating loss carryforwards .................. 23,554 -- 34,029 -- Alternative minimum tax credit carryforwards ...... 6,260 -- 6,260 -- Deferred tax asset valuation allowance ............ -- -- (14,510) -- -------- -------- -------- -------- Gross deferred tax assets ....................... 88,897 (61,373) 84,869 (63,247) Reclassification, principally netting by tax jurisdiction ....................................... (61,373) 61,373 (63,247) 63,247 -------- -------- -------- -------- Net deferred tax asset .......................... 27,524 -- 21,622 -- Less current deferred tax asset, net of pro rata allocation of deferred tax asset valuation allowance 16,828 -- 9,778 -- -------- -------- -------- -------- Noncurrent net deferred tax asset ............... $ 10,696 $ -- $ 11,844 $ -- ======== ======== ======== ========
Note 6 - Stock options, warrants and stock appreciation rights plan In 1997, Keystone adopted its 1997 Long-Term Incentive Plan (the "1997 Plan"). Under the 1997 Plan, the Company may make awards that include, but need not be limited to, one or more of the following types: stock options, stock appreciation rights, restricted stock, performance grants and any other type of award deemed consistent with the purposes of the plan. Subject to certain adjustments, an aggregate of not more than 500,000 shares of Keystone's common stock may be issued under the 1997 Plan. Stock options granted under the 1997 Plan may include options that qualify as incentive stock options as well as options which are not so qualified. Incentive stock options are granted at a price not less than 100%, or in certain instances, 110% of a fair market value of such stock on the date of the grant. Stock options granted under the 1997 Plan may be exercised over a period of ten, or in certain instances, five years. The vesting period, exercise price, length of period during which awards can be exercised, and restriction periods of all awards are determined by the Incentive Compensation Committee of the Board of Directors. At December 31, 2001, there were 432,000 options outstanding under this plan. During 1997, the Company granted all remaining options available under Keystone's 1992 Option Plan. At December 31, 2001, there were 206,300 options outstanding under this plan. Also during 1997, the Company terminated its 1992 Non-Employee Director Stock Option Plan (the "Director Plan"). At December 31, 2001, there were 3,000 options outstanding under this plan. Changes in outstanding options, including options outstanding under the former 1992 Option Plan, the Director Plan and 15,000 options outstanding under another plan which was terminated in a prior year, all pursuant to which no further grants can be made are summarized in the table below.
Price per Amount payable Options share upon exercise Outstanding at December 31, 1998 402,066 $8.13 -$13.94 $3,653,724 Granted 342,000 7.63 - 9.19 3,124,938 Canceled (16,000) 8.38 - 13.94 (191,438) ------- ------------- ---------- Outstanding at December 31, 1999 728,066 7.63 - 13.94 6,587,224 Granted 146,000 4.25 - 5.50 765,500 Canceled (116,000) 5.13 - 13.38 (1,035,594) -------- ------------- ----------- Outstanding at December 31, 2000 758,066 4.25 - 13.94 6,317,130 Canceled (101,766) 5.13 - 13.94 (863,624) -------- ------------- ----------- Outstanding at December 31, 2001 656,300 $4.25 -$13.94 $ 5,453,506 ======== ============= ===========
The following table summarizes weighted average information about fixed stock options outstanding at December 31, 2001.
Outstanding Exercisable Weighted Average Weighted Average Range of Remaining Remaining Exercise Contractual Exercise Contractual Exercise Prices Options Life Price Options Life Price ---------- ------- ----------- -------- ------- ----------- ------- $ 4.25-$ 5.50 114,500 8.2 years $ 5.24 37,785 8.2 years $ 5.24 $ 7.63-$10.25 506,800 5.7 years $ 8.65 428,425 5.4 years $ 8.56 $12.86-$13.94 35,000 3.5 years $13.48 35,000 3.5 years $13.48 ------- ------- 656,300 6.0 years $ 8.31 501,210 5.5 years $ 8.65 ======= =======
At December 31, 2001, options to purchase 501,210 shares were exercisable (none at prices lower than the December 31, 2001 quoted market price of $.65 per share) and options to purchase an additional 117,305 shares will become exercisable in 2002. At December 31, 2001, an aggregate of 68,000 shares were available for future grants under the 1997 Plan. Pro forma information regarding net income and earnings per share is required by SFAS No. 123, and has been determined as if the Company had accounted for its stock options granted subsequent to 1994 in accordance with the fair value based accounting method of SFAS No. 123. The fair value of these options was estimated at the date of grant using a Black-Scholes option pricing model with the following weighted average assumptions for options granted in 1999 and 2000. There were no options granted in 2001.
Years ended December 31, 1999 2000 ---- ---- Risk-free interest rate ......................... 5.5% 6.66% Dividend yield .................................. -- -- Volatility factor ............................... 43% 45% Weighted average expected life .................. 10 years 10 years
The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the stock price volatility. Because Keystone's options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in the Company's opinion, the existing models do not necessarily provide a reliable single measure of the fair value of the granted options. For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the options' vesting period. The Company's pro forma net loss and basic and diluted net loss per common share were as follows:
Years ended December 31, 1999 2000 2001 ---- ---- ---- (In thousands except per share amounts) Net loss - as reported $(7,484) $(21,066) $(26,394) Net loss - pro forma $(8,228) $(21,639) $(26,892) Basic and diluted net loss per share - as reported $ (.75) $ (2.10) $ (2.62) Basic and diluted net loss per share - pro forma $ (.83) $ (2.16) $ (2.67) Weighted average fair value per share of options granted during the year $ 5.66 $ 3.52 $ -
Note 7 - Pensions and other post retirement benefits plans Keystone sponsors several pension plans and other post retirement benefit plans for its employees and certain retirees. Under plans currently in effect, most active employees would be entitled to receive OPEB upon retirement. The following tables provide a reconciliation of the changes in the plans' benefit obligations and fair value of assets for the years ended December 31, 2000 and 2001:
Pension Benefits Other Benefits ----------------- ----------------- 2000 2001 2000 2001 ---- ---- ---- ---- (In thousands) Change in benefit obligation: Benefit obligation at beginning of year $ 298,130 $ 308,494 $ 101,523 $ 106,703 Service cost ........................... 2,915 2,954 1,623 1,506 Interest cost .......................... 21,333 21,419 7,427 9,739 Plan participants' contributions ....... -- -- 587 933 Actuarial loss ......................... 4,765 6,702 6,357 44,146 Termination benefits for early retirement window ..................... 4,367 -- -- -- Benefits paid .......................... (23,016) (25,463) (10,814) (10,729) --------- --------- --------- --------- Benefit obligation at end of year ...... 308,494 314,106 106,703 152,298 --------- --------- --------- --------- Change in plan assets: Fair value of plan assets at beginning of year .............................. 336,673 343,501 -- -- Actual return on plan assets ........... 29,844 14,952 -- -- Company contributions .................. -- -- 10,227 9,796 Plan participants' contributions ....... -- -- 587 933 Benefits paid .......................... (23,016) (25,463) (10,814) (10,729) --------- --------- --------- --------- Fair value of plan assets at end of year 343,501 332,990 -- -- --------- --------- --------- --------- Funded status ............................ 35,007 18,884 (106,703) (152,298) Unrecognized net loss .................... 77,883 100,367 3,100 46,109 Unrecognized prior service cost (credit) . 13,616 12,734 (3,179) (2,836) --------- --------- --------- --------- Prepaid (accrued) benefit cost ........... 126,506 131,985 (106,782) (109,025) Less current portion ..................... -- -- (8,767) (7,215) --------- --------- --------- --------- Noncurrent portion ....................... $ 126,506 $ 131,985 $ (98,015) $(101,810) ========= ========= ========= =========
The assumptions used in the measurement of the Company's benefit obligations at December 31, are shown in the following table:
Pension Benefits Other Benefits --------------------- ------------------- 1999 2000 2001 1999 2000 2001 ---- ---- ---- ---- ---- ---- Discount rate ................... 7.5% 7.25% 7.0% 7.5% 7.25% 7.0% Expected return on plan assets .. 10.0% 10.0% 10.0% -- -- -- Rate of compensation increase ... 3.0% 3.0% 3.0% -- -- --
The following table provides the components of net periodic benefit cost for the plans for the years ended December 31,:
Pension Benefits Other Benefits --------------------------- --------------------------- 1999 2000 2001 1999 2000 2001 ---- ---- ---- ---- ---- ---- (In thousands) Service cost ..................... $ 3,074 $ 2,915 $ 2,954 $ 1,986 $ 1,623 $ 1,506 Interest cost .................... 21,008 21,333 21,419 7,030 7,427 9,739 Expected return on plan assets ... (34,219) (32,544) (33,142) -- -- -- Amortization of unrecognized: Net obligation as of January 1, 1987 .............. 1,810 1,199 -- -- -- Prior service cost ............. 511 882 882 (343) (343) (343) Net loss ....................... 2,206 2,112 2,408 -- -- 1,137 -------- -------- -------- ------- ------- -------- Net periodic benefit cost (credit) (5,610) (4,103) (5,479) $ 8,673 $ 8,707 $ 12,039 ======== ======== ======== ======= ======= ======== Termination benefits for early retirement window - 3,723 - -------- -------- ------- Total pension cost (credit) $ (5,610) $ (380) $ (5,479) ======== ======== ========
During the fourth quarter of 2000, in connection with Keystone's cost reduction plans, the Company offered a group of salaried employees enhanced pension benefits if they would retire by December 31, 2000, resulting in the $3.7 million charge for termination benefits for early retirement window. During the fourth quarter of 2001, based on an actuarial valuation, the Company recorded an increase in 2001 OPEB expense and liability of approximately $2.9 million resulting in OPEB expense for the year 2001 of approximately $12.0 million. The Company had previously estimated OPEB expense for 2001 would approximate $9.1 million. At December 31, 2001, substantially all of Keystone's defined benefit pension plan's (the "Plan") net assets were invested in a collective investment trust (the "Collective Trust") established by Valhi, Inc. ("Valhi"), a majority-owned subsidiary of Contran, to permit the collective investment by certain master trusts which fund certain employee benefit plans maintained by Contran, Valhi and related companies, including the Company. The remainder of the Plan's assets at December 31, 2001 were invested in investment partnerships, mortgages and other short-term investments. Harold C. Simmons is the sole trustee of the Collective Trust. Mr. Simmons and two members of Keystone's board of directors and Master Trust Investment Committee comprise the Trust Investment Committee for the Collective Trust. Neither Mr. Simmons nor the Keystone directors receive any compensation for serving in such capacities. With certain exceptions, the trustee of the Collective Trust has exclusive authority to manage and control the assets of the Collective Trust. Administrators of the employee benefit plans participating in the Collective Trust, however, have the authority to direct distributions and transfers of plan benefits under such participating plans. The Trust Investment Committee of the Collective Trust has the authority to direct the trustee to establish investment funds, transfer assets between investment funds and appoint investment managers and custodians. Except as otherwise provided by law, the trustee is not responsible for the investment of any assets of the Collective Trust that are subject to the management of an investment manager. The Company may withdraw all or part of the Plan's investment in the Collective Trust at the end of any calendar month without penalty. For measurement purposes, a 9% annual rate of increase in the per capita cost of covered health care benefits was assumed for 2001. The rate was assumed to decrease gradually to 5% in 2005 and remain at that level thereafter. Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plans. A one-percentage-point change in assumed health care cost trend rates would have the following effects: 3
Change in Health Care Cost Trend 1% Increase 1% Decrease (In thousands) Increase (decrease): Effect on total of service and interest cost components for the year ended December 31, 2001 ............................ $ 2,370 $ (1,949) Effect on postretirement benefit obligation at December 31, 2001 .............. $31,343 $(25,956)
The Company also maintains several defined contribution pension plans. Expense related to these plans was $2.9 million in 1999, $2.8 million in 2000 and $1.6 million in 2001. Note 8 - Other accrued liabilities
December 31, 2000 2001 ---- ---- Current: Employee benefits .............................. $12,137 $11,168 Self insurance ................................. 7,993 8,906 Environmental .................................. 8,398 8,068 Deferred vendor payments ....................... -- 2,488 Interest ....................................... 4,160 1,287 Legal and professional ......................... 836 887 Disposition of former facilities ............... 384 530 Unearned revenue ............................... 3,008 6 Other .......................................... 4,649 3,760 ------- ------- $41,565 $37,100 ======= ======= Noncurrent: Deferred vendor payments ....................... $ -- $13,648 Interest ....................................... -- 7,735 Environmental .................................. 8,395 7,508 Workers compensation payments .................. 593 1,762 Other .......................................... 335 357 ------- ------- $ 9,323 $31,010 ======= =======
Noncurrent accrued interest is discussed in Note 15. As further discussed in Note 15, during March 2002, the Company entered into agreements with certain vendors whereby the Company agreed that it would repay the vendors approximately $16.1 million owed to the vendors at December 31, 2001, over a five-year period with no interest. Accordingly, the Company reclassified this amount from accounts payable to current and noncurrent accrued liabilities. Note 9 - Related party transactions The Company may be deemed to be controlled by Harold C. Simmons. See Note 1. Corporations that may be deemed to be controlled by or affiliated with Mr. Simmons sometimes engage in (a) intercorporate transactions such as guarantees, management and expense sharing arrangements, shared fee arrangements, joint ventures, partnerships, loans, options, advances of funds on open account, and sales, leases and exchanges of assets, including securities issued by both related and unrelated parties, and (b) common investment and acquisition strategies, business combinations, reorganizations, recapitalizations, securities repurchases, and purchases and sales (and other acquisitions and dispositions) of subsidiaries, divisions or other business units, which transactions have involved both related and unrelated parties and have included transactions which resulted in the acquisition by one related party of a publicly-held minority equity interest in another related party. The Company continuously considers, reviews and evaluates, and understands that Contran and related entities consider, review and evaluate such transactions. Depending upon the business, tax and other objectives then relevant, it is possible that the Company might be a party to one or more such transactions in the future. It is the policy of the Company to engage in transactions with related parties on terms, in the opinion of the Company, no less favorable to the Company than could be obtained from unrelated parties. J. Walter Tucker, Jr., Vice Chairman of the Company, is a principal stockholder of Tucker & Branham, Inc., Orlando, Florida. Although the Company does not pay Mr. Tucker a salary, the Company has contracted with Tucker & Branham, Inc. for management consulting services by Mr. Tucker. Fees paid to Tucker & Branham, Inc. were $66,000 in 1999, $87,000 in 2000 and $52,000 in 2001. Under the terms of an intercorporate services agreement ("ISA") entered into between the Company and Contran, employees of Contran will provide certain management, tax planning, financial and administrative services to the Company on a fee basis. Such charges are based upon estimates of the time devoted by the employees of Contran to the affairs of the Company, and the compensation of such persons. Because of the large number of companies affiliated with Contran, the Company believes it benefits from cost savings and economies of scale gained by not having certain management, financial and administrative staffs duplicated at each entity, thus allowing certain individuals to provide services to multiple companies but only be compensated by one entity. The ISA agreement is reviewed and approved by the applicable independent directors of the Company. The ISA fees charged by Contran to the Company aggregated approximately $656,000 in 1999, $750,000 in 2000 and $1,005,000 in 2001. At December 31, 2001, the Company owed Contran approximately $633,000, primarily for ISA fees. Such amount is included in payables to affiliates on the Company's balance sheet. In addition, Keystone purchased certain aircraft services from Valhi in the amount of $175,000 in 1999, $111,000 in 2000 and $124,000 in 2001. Tall Pines Insurance Company ("Tall Pines"), Valmont Insurance Company ("Valmont") and EWI RE, Inc. ("EWI") provide for or broker certain of Keystone's insurance policies. Tall Pines is a wholly-owned captive insurance company of Tremont Corporation ("Tremont"), a company controlled by Contran. Valmont is a wholly-owned captive insurance company of Valhi. Parties related to Contran own all of the outstanding common stock of EWI. Through December 31, 2000, a son-in-law of Harold C. Simmons managed the operations of EWI. Subsequent to December 31, 2000, such son-in-law provides advisory services to EWI as requested by EWI. Consistent with insurance industry practices, Tall Pines, Valmont and EWI receive commissions from the insurance and reinsurance underwriters for the policies that they provide or broker. During 1999, 2000 and 2001, the Company and it subsidiaries paid approximately $2.7 million, $2.0 million and $2.2 million, respectively, for policies provided or brokered by Tall Pines, Valmont and/or EWI. These amounts principally include payments for reinsurance and insurance premiums paid to unrelated third parties, but also include commissions paid to Tall Pines, Valmont and EWI. In the Company's opinion, the amounts that Keystone and its subsidiaries paid for these insurance policies are reasonable and similar to those they could have obtained through unrelated insurance companies and/or brokers. The Company expects that these relationships with Tall Pines, Valmont and EWI will continue in 2002. Dallas Compressor Company, a wholly-owned subsidiary of Contran sells compressors and related services to Keystone. During 1999, 2000 and 2001 Keystone purchased products and services from Dallas Compressor Company in the amount of $170,000, $67,000 and $31,000, respectively. During 2001, Garden Zone paid approximately $60,000 to one of its other owners for accounting and financial services. EWP Financial, LLC, a wholly-owned subsidiary of Contran, has agreed to loan the Company up to an aggregate of $6 million through December 31, 2002. Borrowings bear interest at the prime rate plus 3%, and are collateralized by the stock of EWP. In addition, the Company pays a commitment fee of .375% on the unutilized portion of the facility. At December 31, 2001, no amounts were outstanding under the facility, and $6 million was available for borrowing by the Company. During 2001, the Company paid Contran an up-front facility fee of $120,000 related to this facility. The terms of this loan were approved by the independent directors of the Company. Note 10 - Quarterly financial data (unaudited)
March 31, June 30, September 30, December 31, --------- -------- --------- --------- (In thousands, except per share data) Year ended December 31, 2001: Net sales .......................... $ 77,763 $ 86,294 $ 82,329 $ 62,284 Gross profit (loss) ................ 1,406 5,833 6,636 (544) Net loss ........................... $ (3,706) $ (1,628) $ (1,250) $(19,810) ======== ======== ======== ======== Basic and diluted net loss per share $ (.37) $ (.16) $ (.12) $ (1.97) ======== ======== ======== ======== Year ended December 31, 2000: Net sales .......................... $ 96,422 $ 95,382 $ 82,787 $ 63,730 Gross profit ....................... 6,441 3,867 3,943 (7,097) Net loss ........................... $ (1,932) $ (3,395) $ (3,093) $(12,646) ======== ======== ======== ======== Basic and diluted net loss per share $ (.19) $ (.34) $ (.31) $ (1.26) ======== ======== ======== ========
During the fourth quarter of 2000, the Company offered a group of salaried employees enhanced pension benefits if they could retire by December 31, 2000, resulting in a $3.7 million charge for termination benefits for early retirement window. During the fourth quarter of 2001, the Company recorded a (i) $1.0 million charge to provide an allowance for the full amount of the net receivable from ARC, and (ii) a $14.5 million charge to provide a deferred tax asset valuation allowance for the portion of the Company's deferred tax asset that the Company believes does not currently meet the "more-likely-than-not" realizability test. During the fourth quarter of 2001, based on an actuarial valuation, the Company recorded an increase in 2001 OPEB expense and liability of approximately $2.9 million resulting in OPEB expense for the year 2001 of approximately $12.0 million. The Company had previously estimated OPEB expense for 2001 would approximate $9.1 million. During the fourth quarter of 2001, Keystone recorded a $1.3 million benefit as a result of a favorable legal settlement with an electrode vendor related to alleged price fixing. See Notes 2, 5 and 7. Note 11 - Operations Keystone's operations are comprised of two segments; the manufacture and sale of carbon steel rod, wire and wire products for agricultural, industrial, construction, commercial, original equipment manufacturers and retail consumer markets and the distribution of wire, wood and plastic products to the consumer lawn and garden markets through Garden Zone. Keystone owns 51% of Garden Zone. The Company's steel and wire products are distributed primarily in the Midwestern and Southwestern United States. Garden Zone's products are distributed primarily in the Southeastern United States. In January 2001, Keystone's wholly-owned subsidiary, Fox Valley Steel & Wire ("Fox Valley") sold its business which was located in Hortonville, Wisconsin. The Company did not record any significant gain or loss as a result of the sale. Fox Valley manufactured industrial wire and fabricated wire products (primarily ladder rods and nails). Fox Valley's revenues, in 1999 and 2000 amounted to $11.3 million and $10.3 million, respectively. During 1999 and 2000 Fox Valley recorded operating losses of $67,000 and $686,000, respectively. Business Segment Principal entities Location Steel and wire products Keystone Steel & Wire Peoria, Illinois Sherman Wire Sherman, Texas Sherman Wire of Caldwell, Inc. Caldwell, Texas Keystone Fasteners Springdale, Arkansas Engineered Wire Products Upper Sandusky, Ohio Lawn and garden products Garden Zone LLC (1) Charleston, South Carolina (1) 51.0% subsidiary. Keystone evaluates segment performance based on segment operating income, which is defined as income before income taxes and interest expense, exclusive of certain non-recurring items (such as gains or losses on disposition of business units) and certain general corporate income and expense items (including interest income) which are not attributable to the operations of the reportable operating segments. Keystone's operating segments are defined as components of consolidated operations about which separate financial information is available that is regularly evaluated by the chief operating decision maker in determining how to allocate resources and in assessing performance. The Company's chief operating decision maker is Mr. David L. Cheek. Each operating segment is separately managed, and each operating segment represents a strategic business unit offering different products. The accounting policies of the segments are the same as those described in the summary of significant accounting policies except that pension expense for each segment is recognized and measured on the basis of estimated current service cost of each segment. The remainder of the Company's net overfunded defined benefit pension credit is included in net general corporate expenses. In addition, amortization of goodwill and negative goodwill are included in general corporate expenses and are not allocated to each segment. General corporate expenses also includes OPEB and environmental expenses relative to facilities no longer owned by the Company. Segment assets are comprised of all assets attributable to each reportable operating segment. Corporate assets consist principally of pension related assets, restricted investments, deferred tax assets and corporate property, plant and equipment.
Steel and Lawn and Corporate Wire Garden Segment and Products Products Total Eliminations Total (In thousands) Year ended December 31, 2001: Net sales ...................... $ 300,659 $ 8,483 $ 309,142 $ (472) $ 308,670 Depreciation and amortization .. 18,215 -- 18,215 (1,223) 16,992 Operating profit (loss) ........ (4,673) 210 (4,463) -- (4,463) Identifiable segment assets .... 203,060 2,812 205,872 161,028 366,900 Capital expenditures ........... 3,888 -- 3,888 1 3,889 Year ended December 31, 2000: Net sales ...................... $ 331,975 $ 6,760 $ 338,735 $ (414) $ 338,321 Depreciation and amortization .. 18,446 -- 18,446 (1,222) 17,224 Equity in loss of unconsolidated affiliate ..................... (281) -- (281) -- (281) Operating profit (loss) ........ (15,760) 345 (15,415) -- (15,415) Identifiable segment assets .... 219,662 3,990 223,652 162,051 385,703 Capital expenditures ........... 13,045 -- 13,045 7 13,052 Year ended December 31, 1999: Net sales ...................... $ 344,738 $13,968 $ 358,706 $ (3,018) $ 355,688 Depreciation and amortization .. 22,282 -- 22,282 (1,231) 21,051 Equity in loss of unconsolidated affiliate ..................... (54) -- (54) -- (54) Operating profit ............... 2,311 267 2,578 -- 2,578 Identifiable segment assets .... 249,165 6,894 256,059 154,859 410,918 Capital expenditures ........... 16,857 -- 16,857 16 16,873
Years ended December 31, 1999 2000 2001 ---- ---- ---- (In thousands) Operating profit (loss) .................... $ 2,578 $(15,415) $ (4,463) Equity in loss of unconsolidated affiliate . (54) (281) -- General corporate items: Interest income .......................... 452 599 253 General income (expenses), net ........... (1,156) (1,993) (1,610) Interest expense ........................... (14,058) (15,346) (14,575) -------- -------- -------- Loss before income taxes ................. $(12,238) $(32,436) $(20,395) ======== ======== ========
All of the Company's assets are located in the United States. Information concerning geographic concentration of net sales based on location of customer is as follows:
Year ended December 31, 1999 2000 2001 ---- ---- ---- (In thousands) United States ............... $353,151 $336,288 $307,064 Canada ...................... 2,449 1,949 1,217 Mexico ...................... -- 7 189 Great Britain ............... 88 77 100 Japan ....................... -- -- 100 -------- -------- -------- $355,688 $338,321 $308,670 ======== ======== ========
Note 12 - Environmental matters At December 31, 2001, Keystone's financial statements reflected total accrued liabilities of $15.6 million to cover estimated remediation costs for those environmental matters which Keystone believes are reasonably estimable, including those discussed below. Although the Company has established an accrual for estimated future required environmental remediation costs, there is no assurance regarding the ultimate cost of remedial measures that might eventually be required by environmental authorities or that additional environmental hazards, requiring further remedial expenditures, might not be asserted by such authorities or private parties. Accordingly, the costs of remedial measures may exceed the amounts accrued. Keystone believes it is not possible to estimate the range of costs for certain sites. The upper end of range of reasonably possible costs to Keystone for sites for which the Company believes it is possible to estimate costs is approximately $22.0 million. The Company is currently involved in the closure of inactive waste disposal units at its Peoria facility pursuant to a closure plan approved by the Illinois Environmental Protection Agency ("IEPA") in September 1992. The original closure plan provides for the in-place treatment of seven hazardous waste surface impoundments and two waste piles to be disposed of as special wastes. The Company recorded an estimated liability for remediation of the impoundments and waste piles based on a six-phase remediation plan. The Company adjusts the recorded liability for each Phase as actual remediation costs become known. During 1995, the Company began remediation of Phases II and III and completed these Phases, as well as Phase IV during 1996. During 1998 and 1999 the Company did not have any significant remediation efforts relative to Phases V and VI. During 2000, Keystone began preliminary efforts relative to Phase V. Pursuant to agreements with the IEPA and Illinois Attorney General's office, the Company is depositing $75,000 per quarter into a trust fund. The Company must continue these quarterly deposits and cannot withdraw funds from the trust fund until the fund balance exceeds the sum of the estimated remaining remediation costs plus $2 million. At December 31, 2000 and 2001 the trust fund had balances of $4.4 million and $4.8 million, respectively, which amounts are included in other noncurrent assets because the Company does not expect to have access to any of these funds until after 2002. In February 2000, Keystone received a notice from the United States Environmental Protection Agency ("U.S. EPA") giving formal notice of the U.S. EPA's intent to issue a unilateral administrative order to Keystone pursuant to section 3008(h) of the Resource Conservation and Recovery Act ("RCRA"). The draft order enclosed with this notice would require Keystone to: (1) investigate the nature and extent of hazardous constituents present at and released from five alleged solid waste management units at the Peoria facility; (2) investigate hazardous constituent releases from "any other past or present locations at the Peoria facility where past waste treatment, storage or disposal may pose an unacceptable risk to human health and the environment"; (3) complete by June 30, 2001 an "environmental indicators report" demonstrating the containment of hazardous substances that could pose a risk to "human receptors" and further demonstrating that Keystone "has stabilized the migration of contaminated groundwater at or from the facility;" (4) submit by January 30, 2002 proposed "final corrective measures necessary to protect human health and the environment from all current and future unacceptable risks of releases of hazardous waste or hazardous constituents at or from the Peoria facility; and (5) complete by June 30, 2001 the closure of the sites discussed in the preceding paragraph now undergoing RCRA closure under the supervision of the IEPA. Keystone has complied with deadlines in the draft order. During the fourth quarter of 2000, Keystone entered into a modified Administrative Order on Consent, which may require the Company to conduct cleanup activities at certain solid waste management units at its Peoria facility depending on the results of soil and groundwater sampling and risk assessment to be conducted by Keystone during future periods pursuant to the order. In March 2000, the Illinois Attorney General (the "IAG") filed and served a seven-count complaint against Keystone for alleged violations of the Illinois Environmental Protection Act, 415 ILCS 5/31, and regulations implementing RCRA at Keystone's Peoria facility. The complaint alleges Keystone violated RCRA in failing to prevent spills of an alleged hazardous waste on four separate occasions during the period from June 1995 through January 1999. The complaint also alleges the Company illegally "stored", "disposed of" and manifested the same allegedly hazardous waste on some or all of those occasions. In addition, the complaint alleges these hazardous waste spills resulted in groundwater pollution in violation of the Illinois Environmental Protection Act. The complaint further alleges Keystone improperly disposed of hazardous waste on two occasions at a landfill not permitted to receive such wastes. The complaint seeks the maximum statutory penalties allowed which ranges up to $50,000 for each violation and additional amounts up to $25,000 for each day of violation. Keystone has answered the complaint and proceedings in the case have been stayed pending the outcome of settlement negotiations between Keystone and the IAG's office. In June 2000, the IAG filed a Complaint For Injunction And Civil Penalties against Keystone. The complaint alleges the Company's Peoria facility violated its National Pollutant Discharge Elimination System ("NPDES") permit limits for ammonia and zinc discharges from the facility's wastewater treatment facility into the Illinois River. The complaint alleges specific violations of the 30-day average ammonia limit in the NPDES permit for three months in 1996, 11 months in 1997, 12 months in 1998, 11 months in 1999 and the first two months of 2000. The complaint further alleges two violations of the daily maximum limit for zinc in October and December of 1999. Keystone has answered the complaint and proceedings in the case have been stayed pending the outcome of settlement negotiations between the Company and the IAG's office. "Superfund" sites The Company is subject to federal and state "Superfund" legislation that imposes cleanup and remediation responsibility upon present and former owners and operators of, and persons that generated hazardous substances deposited upon, sites determined by state or federal regulators to contain hazardous substances. Keystone has been notified by U.S. EPA that the Company is a potentially responsible party ("PRP") under the federal "Superfund" legislation for the alleged release or threat of release of hazardous substances into the environment at eight sites. These situations involve cleanup of landfills and disposal facilities which allegedly received hazardous substances generated by discontinued operations of the Company. Although Keystone believes its comprehensive general liability insurance policies provide indemnification for certain costs the Company incurs at the "Superfund" sites discussed below, it has only recorded receivables for the estimated insurance recoveries at three of those sites. During 1999, 2000 and 2001, the Company received approximately $725,000, $140,000 and $88,000, respectively, from certain of its insurers in exchange for releasing such insurers from coverage for certain years of environmental related liabilities. Such amounts are included in Keystone's self insurance accruals. In July 1991, the United States filed an action against a former division of the Company and four other PRPs in the United States District Court for the Northern District of Illinois (Civil Action No. 91C4482) seeking to recover investigation and remediation costs incurred by U.S. EPA at the Byron Salvage Yard, located in Byron, Illinois. In April 1992, Keystone filed a third-party complaint in this civil action against 15 additional parties seeking contribution in the event the Company is held liable for any response costs at the Byron site. Neither the Company nor the other designated PRPs are performing any investigation of the nature and extent of the contamination. In December 1996, Keystone, U.S. EPA and the Department of Justice entered into the Fifth Partial Consent Decree to settle Keystone's liability for EPA response costs incurred at the site through April 1994 for a payment of $690,000. Under the agreement Keystone is precluded from recovering any portion of the $690,000 settlement payment from other parties to the lawsuit. In January 1997, Keystone paid the $690,000 settlement. Keystone will remain potentially liable for EPA response costs incurred after April 30, 1994, and natural resource damage claims, if any, that may be asserted in the future. Keystone recovered a portion of the $690,000 payment from its insurer. In March 1997, U.S. EPA issued a Proposed Remedial Action Plan ("PRAP") recommending that a limited excavation of contaminated soils be performed at an estimated cost of $63,000, that a soil cover be placed over the site, an on-site groundwater pump and treat system be installed and operated for an estimated period of 15 years, and that both on-site and off-site groundwater monitoring be conducted for an indefinite period. U.S. EPA's cost estimate for the recommended plan is $5.1 million. U.S. EPA's estimate of the highest cost alternatives evaluated but not recommended in the PRAP is approximately $6 million. The Company filed public comments on May 1, 1997, objecting to the PRAP. In March 1999, Keystone and other PRP's received a Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA") special notice letter notifying them for the first time of a September 1998 Record of Decision ("ROD") and requesting a commitment on or before May 19, 1999 to perform soils work required by that ROD that was estimated to cost approximately $300,000. In addition, the special notice letter also requested the PRPs to reimburse U.S. EPA for costs incurred at the site since May 1994 in the amount of $1.1 million, as well as for all future costs the U.S. EPA will incur at the site in overseeing the implementation of the selected soils remedy and any future groundwater remedy. Keystone refused to agree to the U.S. EPA's past and future cost demand. In August 1999, U.S. EPA issued a groundwater PRAP with an estimated present value cost of $3 million. Keystone filed public comments opposing the PRAP in September 1999. Keystone and the other remaining PRPs are now in the final stages of negotiating another Consent Decree with the U.S. EPA, in order to resolve their liability for performance of the U.S. EPA's September 1998 ROD for a soils remedy at the site, for the performance of the U.S. EPA's December 1999 ROD for remedial action regarding the groundwater component of Operable Unit No. 4 at the site, for payment of U.S. EPA's site costs incurred since May 1994 as well as future U.S. EPA oversight costs, and for the transfer of certain funds that may be made available to the PRPs as a result of a consent decree reached between U.S. EPA and another site PRP. Under the proposed terms of that Consent Decree, and the draft PRP Agreement that would be executed to implement the PRPs' performance under that decree, Keystone would be required to pay approximately $700,000, and would remain liable for 18.57% of future U.S. EPA oversight costs as well as a similar share of any unanticipated cost increases in the soils remedial action work. (Under the proposed agreements, the City of Byron, Illinois, would assume responsibility for any cost overruns associated with the municipal water supply components of the groundwater contamination remedy.) Verbal agreement of all of the parties has been reached as to the terms of this agreement, subject to approval by the City Council of the City of Byron, the U.S. EPA Regional Administrator, and the Department of Justice. Until the proposed consent decree is signed by all of the responsible parties and approved by the court, it is possible that the negotiations could fail and that Keystone's ultimate liability could increase in a subsequent settlement agreement or as a result of litigation. In September 1991, the Company along with 53 other PRPs, executed a consent decree to undertake the immediate removal of hazardous wastes and initiate a Remedial Investigation/Feasibility Study ("RI/FS") of the Interstate Pollution Control site located in Rockford, Illinois. The Company's percentage allocation within the group of PRPs agreeing to fund this project is currently 2.14%. However, the Company's ultimate allocation, and the ultimate costs of the RI/FS and any remedial action, are subject to change depending, for example, upon: the number and financial condition of the other participating PRPs, field conditions and sampling results, results of the risk assessment and feasibility study, additional regulatory requirements, and the success of a contribution action seeking to compel additional parties to contribute to the costs of the RI/FS and any remedial action. The RI/FS began in 1993, was completed in 1997 and approved by IEPA in 1998. In the summer of 1999, IEPA selected a capping and soil vapor extraction remedy estimated by the PRP group to have a present value cost of approximately $2.5 million. IEPA is also demanding reimbursement of $460,000 in past costs for prior oversight costs and may also demand reimbursement of future oversight costs. In August 1987, Keystone was notified by U.S. EPA that it is a PRP responsible for the alleged hazardous substance contamination of a site previously owned by the Company in Cortland, New York. Four other PRPs participated in the RI/FS and a contribution action is pending against eleven additional viable companies which contributed wastes to the site. Following completion of the RI/FS, U.S. EPA published in November 1997, a PRAP for the site that recommends the excavation and disposal of contaminated soil, installation of an impervious cap over a portion of the site, placement of a surface cover over the remainder of the site and semi-annual groundwater monitoring until drinking water standards are met by natural attenuation. U.S. EPA estimates the costs of this recommended plan to be $3.1 million. The highest cost remedy evaluated by U.S. EPA but not recommended in the PRAP is estimated by U.S. EPA to have a cost of $19.8 million. In September 1998, Keystone and four other PRPs who had funded the prior remedial actions and RI/FS signed a proposed Consent Decree with U.S. EPA calling for them to be "nonperforming parties" for the implementation of a March 1998 Record of Decision. Under this proposed Consent Decree, Keystone is responsible for an unspecified share of U.S. EPA's past site costs of $686,000. Prior to its acquisition by Keystone, DeSoto, Inc. ("DeSoto") was notified by U.S. EPA that it is one of approximately 50 PRPs at the Chemical Recyclers, Inc. site in Wylie, Texas. In January 1999, DeSoto changed its name to Sherman Wire Company ("Sherman"). Under a consent order with the U.S. EPA, the PRP group has performed a removal action and an investigation of soil and groundwater contamination. Such investigation revealed certain environmental contamination. It is anticipated U.S. EPA will order further remedial action, the exact extent of which is not currently known. Sherman is paying on a non-binding interim basis, approximately 10% of the costs for this site. Remediation costs, at Sherman's present allocation level, are estimated at a range of from $1.5 million to $4 million. In 1984, U.S. EPA filed suit against DeSoto by amending a complaint against Midwest Solvent Recovery, Inc. et al ("Midco"). DeSoto was a defendant based upon alleged shipments to an industrial waste recycling storage and disposal operation site located in Gary, Indiana. The amended complaint sought relief under CERCLA to force the defendants to clean up the site, pay non-compliance penalties and reimburse the government for past clean up costs. In June 1992, DeSoto settled its portion of the case by entering into a partial consent decree, and all but one of the eight remaining primary defendants and 93 third party defendants entered into a main consent decree. Under the terms of the partial consent decree, DeSoto agreed to pay its pro rata share (13.47%) of all costs under the main consent decree. In addition to certain amounts included in the trust fund discussed below, Sherman also has certain funds available in other trust funds due it under the partial consent decree. These credits can be used by Sherman (with certain limitations) to fund its future liabilities under the partial consent decree. In 1995, DeSoto was notified by the Texas Natural Resource Conservation Commission ("TNRCC") that there were certain deficiencies in prior reports to TNRCC relative to one of its non-operating facilities located in Gainesville, Texas. During 1999, Sherman entered into TNRCC's Voluntary Cleanup Program. Remediation costs are presently estimated to be between $1.2 million and $2 million. Investigation activities are on-going including additional soil and groundwater sampling. In December 1991, DeSoto and approximately 600 other PRPs were named in a complaint alleging DeSoto and the PRPs generated wastes that were disposed of at a Pennsauken, New Jersey municipal landfill. The plaintiffs in the complaint were ordered by the court to show in what manner the defendants were connected to the site. The plaintiffs provided an alleged nexus indicating garbage and construction materials from DeSoto's former Pennsauken facility were disposed of at the site and such waste allegedly contained hazardous material to which DeSoto objected. The claim was dismissed without prejudice in August 1993. In 1996, DeSoto received an amended complaint containing the same allegations. This matter is in discovery stage at December 31, 2001. Sherman has denied any liability with regard to this matter and expects to vigorously defend the action. Sherman has received notification from the TNRCC stating that DeSoto is a PRP at the Material Recovery Enterprises Site near Ovalo, Texas, with approximately 3% of the total liability. The matter has been tendered to the Valspar Corporation ("Valspar") pursuant to a 1990 agreement whereby Valspar purchased certain assets of DeSoto. Valspar has been handling the matter under reservation of rights. At the request of Valspar, Sherman has signed a participation agreement which would require Sherman to pay no less than 3% of the remediation costs. Valspar continues to pay for legal fees in this matter and has reimbursed Sherman for all assessments. In addition to the sites discussed above, Sherman is allegedly involved at various other sites and in related toxic tort lawsuits which it does not currently expect to incur significant liability. Under the terms of a 1990 asset sale agreement, DeSoto established two trust funds totaling $6 million to fund potential clean-up liabilities relating to the assets sold. Sherman has access to the trust funds for any expenses or liabilities it incurs relative to environmental claims relating to the sites identified in the trust agreements. The trust funds are primarily invested in United States Treasury securities and are classified as restricted investments on the balance sheet. In October 2000, one of the trust's term expired and the $3.6 million trust balance was returned to Sherman. As of December 31, 2000 and 2001, the balance in the trust funds were approximately $1.5 million and $900,000, respectively. Note 13 - Lease commitments During years prior to its acquisition by Keystone, DeSoto sold four of its real properties to a real property trust created by DeSoto's pension plan. This trust entered into ten-year leases of the properties to DeSoto. The amount paid to DeSoto by the trust and DeSoto's annual rental obligation were based upon independent appraisals and approved by DeSoto's Board of Directors. During 1998, the Plan sold two of the locations and, as part of the terms of the sale of one of the locations, DeSoto leased back the property for a period of two years. The Plan sold the third and fourth locations during 1999 and 2000, respectively, and Sherman was released from the leases. Payments, net of subtenant rent payments, under these leases during 1999 and 2000 amounted to approximately $324,000, and $24,000, respectively. There were no payments under these leases in 2001 and there are no required payments under these leases in subsequent years. In addition, the Company is obligated under certain other operating leases through 2006. Future commitments under these leases are summarized below. Lease commitment (In thousands) 2002 $1,899 2003 1,371 2004 460 2005 137 2006 38 ------ $3,905 ====== Note 14 - Other commitments and contingencies Current litigation During 1996, DeSoto and more than 60 others were named as defendants in litigation in which the estates of four individuals who died of leukemia allege their deaths were a result of exposure to benzene during the individuals' maritime careers. Subsequently, the cases were dismissed although appeals are pending. DeSoto has denied any liability and will continue to vigorously defend these actions. In July 2001, Sherman received a letter from a law firm advising them that Sears Roebuck & Co. ("Sears") had been named as a defendant in a lead paint personal injury case. Sears claimed contractual indemnity against Sherman and demanded that Sherman defend and indemnify Sears with regard to any losses or damages Sears may sustain in the case. Sears was named as an additional insured on insurance policies, in which DeSoto, the manufacturer of the paint, was the named insured. DeSoto's insurance carriers were notified of the action and asked to indemnify Sherman with respect to the complaint. Sherman has not indemnified Sears and is unaware if the insurors have agreed to indemnify Sears. The Company is also engaged in various legal proceedings incidental to its normal business activities. In the opinion of the Company, none of such proceedings is material in relation to the Company's consolidated financial position, results of operations or liquidity. Product supply agreement In 1996, Keystone entered into a fifteen-year product supply agreement (the "Supply Agreement") with a vendor. The Supply Agreement provides, among other things, that the vendor will construct a plant at the Company's Peoria facility and, after completion of the plant, provide Keystone with all, subject to certain limitations, of its gaseous oxygen and nitrogen needs for a 15-year period ending in 2011. In addition to specifying rates to be paid by the Company, including a minimum facility fee of approximately $1.2 million per year, the Supply Agreement also specifies provisions for adjustments to the rates and term of the Supply Agreement. Purchases made pursuant to the Supply Agreement during 1999, 2000 and 2001 amounted to $2.1 million, $2.7 million and $2.2 million, respectively. Concentration of credit risk Steel and Wire Products. The Company sells its products to agricultural, industrial, construction, commercial, original equipment manufacturers and retail distributors primarily in the Midwestern and Southwestern regions of the United States. The Company performs ongoing credit evaluations of its customers' financial condition and, generally, requires no collateral from its customers. The Company's ten largest steel and wire customers accounted for approximately 34% of steel and wire product sales in 1999, 2000 and 2001. These customers accounted for approximately 20% of steel and wire products notes and accounts receivable at December 31, 2000 and 34% at December 31, 2001. Lawn and garden products. The Company sells its products primarily to retailers in the Southeastern United States. The Company performs ongoing credit evaluations of its customers' financial condition and, generally, requires no collateral from its customers. The Company's ten largest lawn and garden customers accounted for significantly all of lawn and garden product sales in 1999, 2000 and 2001 and lawn and garden products notes and accounts receivable at December 31, 2000 and 2001. Note 15 - Subsequent Events During March 2002, Keystone completed an exchange offer with respect to the Senior Notes pursuant to which, among other things, holders of $93.9 million principal amount of the Senior Notes agreed to exchange their Senior Notes (along with accrued interest of approximately $10.1 million through the date of exchange, including $2.1 million which accrued during the first quarter of 2002) for various forms of consideration, including newly-issued debt and equity securities of the Company, as described below, and such Senior Notes were retired: o $79.2 million principal amount of Senior Notes were exchanged for (i) $19.8 million principal amount of 8% Subordinated Secured Notes due 2009 and (ii) 59,399 shares of the Company's Series A 10% Convertible Pay-In-Kind Preferred Stock, o $14.5 million principal amount of Senior Notes were exchanged for $14.5 million principal amount of 6% Subordinated Unsecured Notes due 2011, and o $175,000 principal amount of Senior Notes were exchanged for $36,000 in cash and 6,481 shares of Keystone common stock. As a result of the exchange offer, the collateral previously securing the Senior Notes was released, and the Senior Note indenture was amended to eliminate substantially all covenants related to the Senior Notes, including all financial-related covenants. The 8% Subordinated Secured Notes bear simple interest at 8% per annum, one-half of which will be paid in cash on a semi-annual basis and one-half will be deferred and be paid together with the principal in three installments, one-third in each of March 2007, 2008 and 2009. The Subordinated Secured Notes are collateralized by a second-priority lien on substantially all of the existing fixed and intangible assets of the Company and its wholly-owned subsidiaries (excluding EWP and Garden Zone), other than the real property and other fixed assets comprising Keystone's steel mill in Peoria, Illinois, on which there will be a third-priority lien. Keystone may redeem the New Secured Notes, at its option, in whole or in part at any time with no prepayment penalty. The Subordinated Secured Notes are subordinated to all existing senior indebtedness of Keystone, including, without limitation, the Keystone, EWP and Garden Zone Revolvers, the new Term Loan (as defined below) and, to the extent of the Company's steel mill in Peoria, Illinois, the County Loan (as defined below). The Subordinated Secured Notes rank senior to any expressly subordinated indebtedness of Keystone, including the new 6% Subordinated Unsecured Notes. The 6% Subordinated Unsecured Notes bear simple interest at 6% per annum, of which one-fourth will be paid in cash on a semi-annual basis and three-fourths will accrue and be paid together with the principal in four installments, one-fourth in each of May 2008, 2009, 2010 and 2011. Keystone may redeem the Subordinated Unsecured Notes, at its option, in whole or in part at any time with no prepayment penalty. The Subordinated Unsecured Notes are subordinated to all existing and future senior or secured indebtedness of the Company, including, without limitation, the Keystone, EWP and Garden Zone Revolvers, the new Term Loan, the new County Loan, the Subordinated Secured Notes and any other future indebtedness of the Company which is expressly subordinated to the Subordinated Unsecured Notes. The Series A 10% Convertible Pay-In-Kind Preferred Stock has a stated value of $1,000 per share and has a liquidation preference of $1,000 per share plus accrued and unpaid dividends. The Series A preferred shares have an annual dividend of $100 per share, and such dividends may be paid in cash or, at the Company's option, in whole or in part in new Series A preferred shares based on their stated value. After March 2003, the Series A preferred shares may be converted into shares of Keystone common stock at the exchange rate of $4.00 per share, and holders of the Series A preferred shares will be entitled to vote on any matter brought before Keystone shareholders on an as-converted basis, voting together with Keystone common shareholders as a single class. The Company may redeem the Series A shares at any time, in whole or in part, at a redemption price of $1,000 per share plus accrued and unpaid dividends. In addition, in the event of certain sales of the Company's assets outside the ordinary course of business, the Company will be required to offer to purchase a specified portion of the Series A shares, at a purchase price of $1,000 per share plus accrued and unpaid dividends, based upon the proceeds to the Company from such asset sale. Otherwise, holders of the Series A shares have no mandatory redemption rights. Keystone will account for the Senior Notes retired in the exchange offer in accordance with SFAS No. 15, Accounting by Debtors and Creditors for Troubled Debt Restructurings. In accordance with SFAS No. 15: o The 6,481 shares of Keystone common stock will be recorded at their fair value at issuance of $7,000 based on the quoted market price for Keystone common stock on the date of exchange, o The 59,399 shares of Series A preferred stock will be recorded at their estimated fair value at issuance of $2.1 million, o The 8% Subordinated Secured Notes will initially be recorded at their aggregate undiscounted future cash flows (both principal and interest) of $29.3 million, and thereafter both principal and interest payments will be accounted for as a reduction of the carrying amount of the debt, and no interest expense will be recognized, and o The 6% Subordinated Unsecured Notes will initially be recorded at the $16.0 million carrying amount of the associated Senior Notes (both principal and interest), and future interest expense on such debt will be recognized on the effective interest method at a rate of 3.8%. As a result, for financial reporting purposes the Company expects to report a $54.7 million pre-tax extraordinary gain ($33.1 million net of income taxes) in the first quarter of 2002 related to the exchange of the Senior Notes. Because of differences between the income tax treatment and the financial reporting treatment of the exchange, the Company expects to report $65.8 million of income for federal income tax purposes resulting from the exchange. However, all of the taxable income generated from the exchange is expected to be offset by utilization of the Company's net operating loss carryforwards, and no significant cash income tax payments are expected to be required to be paid as a result of the exchange. As part of its efforts to restructure the Senior Notes, in April 2002 Keystone received a new $10 million term loan from the County of Peoria, Illinois (the "County Loan") and a new $5 million term loan (the "Term Loan") from the same lender providing the Keystone Revolver. The County Loan does not bear interest, requires no amortization of principal and is due in 2007. The Term Loan bears interest at prime plus .5% or LIBOR plus 2.5% at the Company's option, with principal payments amortized over a four-year period and due in March 2005. The County Loan is collateralized by a second primary lien on the real property and other fixed assets comprising Keystone's Steel mill in Peoria, Illinois. The Term Loan is collateralized by a first-priority lien on all of the fixed assets of the Company and its subsidiaries, other than EWP and Garden Zone. In addition, two of the Company's major vendors, representing approximately $16.1 million of trade payables, have agreed to be paid over a five-year period ending in March 2007 with no interest. The repayment of a portion of such deferred vendor payments could be accelerated if the Company achieves specified levels of future earnings. The following table sets forth the capitalization of the Company (i) on an actual basis as of December 31, 2001 and (ii) on an as adjusted basis after giving effect to the exchange of the Senior Notes and other transactions described above, as if such transactions had occurred on December 31, 2001 The aggregate $15 million proceeds from the new County and Term loans are assumed to (i) pay expenses associated with the exchange offer and related transactions of $3.1 million, (ii) pay $309,000 of accrued interest related to Senior Notes that remain outstanding and (iii) reduce the outstanding balance of the Keystone Revolver by $11.6 million. The actual carrying amounts of the Secured Subordinated Notes and Unsecured Subordinated Notes at their date of issuance will differ slightly from the amounts shown below because they will reflect the effect of accrued interest on the associated Senior Notes during the first quarter of 2002 up to the date of exchange.
December 31, 2001 Actual As Adjusted (Unaudited) (In thousands) Notes payable and long-term debt: 9 5/8% Senior Notes, due August 2007 ........... $ 100,000 $ 6,150 Commercial credit agreements: Revolving credit facilities: Keystone ................................... 40,823 29,269 EWP ........................................ 3,225 3,225 Garden Zone ................................ 1,738 1,738 Term loan .................................... -- 5,000 8% Subordinated Secured Notes .................. -- 29,304 6% Subordinated Unsecured Notes ................ -- 15,748 County Loan .................................... -- 10,000 Accrued interest on exchanged Senior Notes .................................. 8,255 -- Other indebtedness ............................. 669 669 --------- --------- Total ...................................... 154,710 101,103 --------- --------- Preferred stock .................................. -- 2,112 --------- --------- Stockholders' equity (deficit): Common stock ................................. 10,792 10,798 Additional paid-in-capital ................... 53,071 53,071 Accumulated deficit .......................... (64,187) (32,055) Treasury stock ............................... (12) (12) --------- --------- Total stockholders' equity (deficit) ....... (336) 31,802 --------- --------- Total capitalization ....................... $ 154,374 $ 135,017 ========= =========
The following table sets forth the aggregate maturities of notes payable and long-term debt of the Company as adjusted after giving effect to the Exchange Offer and related transactions as if such transactions had occurred on December 31, 2001. Year ending December 31, As Adjusted 2002 $ 36,111 2003 2,099 2004 2,108 2005 2,355 2006 792 Thereafter 57,638 -------- $101,103 ======== Note 16 - Accounting principles not yet adopted Goodwill. The Company will adopt SFAS No. 142, effective January 1, 2002. Under SFAS No. 142, goodwill, including goodwill arising from the difference between the cost of an investment accounted for by the equity method and the amount of the underlying equity in net assets of such equity method investee ("equity method goodwill"), will not be amortized on a periodic basis. Instead, goodwill (other than equity method goodwill) will be subject to an impairment test to be performed at least on an annual basis, and impairment reviews may result in future periodic write-downs charged to earnings. Equity method goodwill will not be tested for impairment in accordance with SFAS No. 142; rather, the overall carrying amount of an equity method investee will continue to be reviewed for impairment in accordance with existing GAAP. There is currently no equity method goodwill associated with any of the Company's equity method investees. Under the transition provisions of SFAS No. 142, all goodwill existing as of June 30, 2001 will cease to be periodically amortized as of January 1, 2002, but any goodwill arising in a purchase business combination (including step acquisitions) completed on or after July 1, 2001 would not be periodically amortized from the date of such combination. In addition, negative goodwill of approximately $20.0 million recorded at January 1, 2002 will be eliminated as a cumulative effect of change in accounting principle at that date. The Company would have reported a net loss of $8.7 million or $.88 per share; $22.3 million or $2.22 per share and $27.6 million or $2.75 per share in 1999, 2000 and 2001, respectively if the goodwill and negative goodwill amortization included in the Company's net loss, as reported, had not been recognized. As discussed in Note 1, the Company has assigned its goodwill to the reporting unit (as that term is defined in SFAS No. 142) consisting of EWP. Under SFAS No. 142, such goodwill will deemed to not be impaired if the estimated fair value of EWP exceeds the net carrying value of EWP, including the allocated goodwill. If the fair value of EWP is less than the carrying value, then a goodwill impairment loss would be recognized equal to the excess, if any, of the net carrying value of the reporting unit goodwill over its implied fair value (up to a maximum impairment equal to the carrying of goodwill). The implied fair value of EWP goodwill would be the amount equal to the excess of the estimated fair value of EWP over the amount that would be allocated to the tangible and intangible net assets of EWP (including unrecognized intangible assets) as if such reporting unit had been acquired in a purchase business combination accounted for in accordance with SFAS No. 141. The Company will use appropriate valuation techniques, such as discounted cash flows, to estimate the fair value of EWP. The Company has completed its initial, transitional goodwill impairment analysis under SFAS No. 142 as of January 1, 2002, and no goodwill impairment was deemed to exist. In accordance with requirements of SFAS No. 142, the Company will review goodwill for impairment during the third quarter of each year starting in 2002. Goodwill will also be reviewed for impairment at other times during each year when events or changes in circumstances indicate an impairment might be present. Impairment of long-lived assets. The Company will adopt SFAS No. 144, effective January 1, 2002. SFAS No. 144 retains the fundamental provisions of existing GAAP with respect to the recognition and measurement of long-lived asset impairment contained in SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Lived-Lived Assets to be Disposed Of. However, SFAS No. 144 provides new guidance intended to address certain implementation issues associated with SFAS No. 121, including expanded guidance with respect to appropriate cash flows to be used to determine whether recognition of any long-lived asset impairment is required, and if required how to measure the amount of the impairment. SFAS No. 144 also requires that any net assets to be disposed of by sale to be reported at the lower of carrying value or fair value less cost to sell, and expands the reporting of discontinued operations to include any component of an entity with operations and cash flows that can be clearly distinguished from the rest of the entity. Adoption of SFAS No. 144 will not have a significant effect on the Company as of January 1, 2002. Asset retirement obligations. The Company will adopt SFAS No. 143, Accounting for Asset Retirement Obligations, no later than January 1, 2003. Under SFAS No. 143, the fair value of a liability for an asset retirement obligation covered under the scope of SFAS No. 143 would be recognized in the period in which the liability is incurred, with an offsetting increase in the carrying amount of the related long-lived asset. Over time, the liability would be accreted to its present value, and the capitalized cost would be depreciated over the useful life of the related asset. Upon settlement of the liability, an entity would either settle the obligation for its recorded amount or incur a gain or loss upon settlement. The Company is still studying this standard to determine, among other things, whether it has any asset retirement obligations which are covered under the scope of SFAS No. 143, and the effect, if any, to the Company of adopting SFAS No. 143 has not yet been determined. KEYSTONE CONSOLIDATED INDUSTRIES, INC. AND SUBSIDIARIES SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS (In thousands)
Additions Balance at Charged to Deductions Balance at beginning costs and (net of end of Description of period expenses recoveries) period Year ended December 31, 1999: Allowance for doubtful accounts and notes receivable $4,915 $ 523 $3,141 $2,297 ====== ======= ====== ====== Year ended December 31, 2000: Allowance for doubtful accounts and Notes receivable $2,297 $ 200 $ 816 $1,681 ====== ====== ====== ====== Year ended December 31, 2001: Allowance for doubtful accounts and notes receivable $1,681 $1,589 $ 412 $2,858 ====== ====== ====== ====== Deferred tax asset valuation allowance $ - $14,510 $ - $14,510 ====== ======= ====== =======
EXHIBIT 21 KEYSTONE CONSOLIDATED INDUSTRIES, INC. AND SUBSIDIARIES SUBSIDIARIES OF THE REGISTRANT
Jurisdiction of Percent of Incorporation Voting Securities Name of Corporation or Organization Held (1) Sherman Wire of Caldwell, Inc. Nevada 100.0% FV Steel and Wire Company (3) Wisconsin 100.0% Sherman Wire Company (2) Delaware 100.0% J.L. Prescott Company New Jersey 100.0% DeSoto Environmental Management, Inc. Delaware 100.0% Engineered Wire Products, Inc. Ohio 100.0% Garden Zone LLC Delaware 51.0%
(1) Held by the Registrant or the indicated subsidiary of the Registrant. (2) Formerly DeSoto, Inc. (3) Formerly Fox Valley Steel and Wire Company. EX-3.2 3 exh32kci.txt CERTIFICATE OF DESIGNATIONS, RIGHTS AND PREFERENCES OF THE SERIES A 10% CUMULATIVE CONVERTIBLE PAY-IN-KIND PREFERRED STOCK of KEYSTONE CONSOLIDATED INDUSTRIES, INC. Pursuant to Section 151 of the General Corporation Law of the State of Delaware KEYSTONE CONSOLIDATED INDUSTRIES, INC., a corporation organized and existing under the General Corporation Law of the State of Delaware (the "Corporation"), hereby certifies that the following resolutions were adopted by the Board of Directors of the Corporation as required by Section 151 of the General Corporation Law of the State of Delaware by unanimous written consent dated as of March 15, 2002: "RESOLVED, that pursuant to the authority granted to and vested in the Board of Directors of the Corporation in accordance with the provisions of the Restated Certificate of Incorporation, as amended, the Board of Directors hereby creates a series of 10% Cumulative Convertible Pay-In-Kind Preferred Stock of the Corporation and hereby states the designation and number of shares, and fixes the relative rights, preferences, and limitations thereof as set forth below:" Series A 10% Cumulative Convertible Pay-In-Kind Preferred Stock 1. Designation. The Preferred Stock of Keystone Consolidated Industries, Inc. (the "Corporation"), created and authorized for issuance hereby, shall be designated as "Series A 10% Cumulative Convertible Pay-In-Kind Preferred Stock" (the "Series A Preferred Stock"), which will consist of 250,000 shares of such Series A Preferred Stock, each of which has a stated value of $1,000 per share (the "Stated Value") and no par value per share. 2. Priority. The Series A Preferred Stock shall, with respect to dividend rights and rights on liquidation, winding up or dissolution, whether voluntary or involuntary, whether now or hereafter issued, rank (i) senior to (A) any other class or series of Preferred Stock of the Corporation (the "Preferred Stock") established by the Board of Directors of the Corporation (the "Board of Directors"), other than any Equivalent Securities (hereinafter defined) or Senior Securities (hereinafter defined) issued in accordance with Section 5 hereof, (B) the Corporation's Common Stock, $1.00 par value per share (the "Common Stock"), and (C) any other equity securities of the Corporation (all of such equity securities of the Corporation to which the Series A Preferred Stock ranks senior, including the Common Stock, are at times collectively referred to herein as the "Junior Securities"). 3. Dividends. (a) Holders of shares of Series A Preferred Stock shall be entitled to receive out of funds legally available therefor cumulative dividends for each share of Series A Preferred Stock at an annual rate (the "Dividend Rate") of 10% of the Stated Value, payable annually on December 31 of each year commencing on December 31, 2002 (or at such additional times and for such interim periods, if any, as determined by the Board of Directors) (each of such dates being referred to herein as a "Dividend Payment Date"), except that if such date is a Saturday, Sunday or legal holiday, then such dividend shall be payable on the next date that is not a Saturday, Sunday or legal holiday on which banks in the State of New York are permitted or required to be closed (a "Business Day"). Each annual dividend shall be fully cumulative and shall accrue (whether or not declared), on a daily basis from the first day of the period in which such dividend may be accruable as provided herein; provided, however, that with respect to the first Dividend Payment Date following any issuance of shares of Series A Preferred Stock, the dividend with respect to such shares shall accrue from the date of issuance of such shares of Series A Preferred Stock. Dividends on shares of Series A Preferred Stock shall be payable in shares of Series A Preferred Stock (calculated with reference to the Stated Value of the Series A Preferred Stock), unless the Corporation shall, in its sole discretion, elect to pay such dividends, or any portion thereof, in cash. The Board of Directors shall declare and pay such accrued dividends at such time and to the extent permitted by law. No fractional shares shall be issued by the Corporation in respect of any payment of dividends in shares of Series A Preferred Stock on any Dividend Payment Date, so that in such event the number of shares of Series A Preferred Stock to be paid as a dividend pursuant to this Section 3(a) to a holder of Series A Preferred Stock shall be rounded down to the nearest whole number of shares; provided, however, that any such fractional shares to which a holder of Series A Preferred Stock would otherwise be entitled shall be aggregated with any fractional shares otherwise issuable in connection with any subsequent Dividend Payment Dates and each time such fractional shares shall equal one full share, such full share shall be issued to the holder entitled thereto on the next subsequent Dividend Payment Date with all attendant rights and preferences attaching thereto. Dividends shall be paid to the holders of record of shares of Series A Preferred Stock at the close of business on the date specified by the Board of Directors at the time such dividend is declared (the "Record Date"); provided, however, that such Record Date shall not be more than 60 days nor less than 10 days prior to the respective Dividend Payment Date. The Corporation shall deliver or cause to be delivered to the respective record holders of shares of Series A Preferred Stock certificates representing the shares of Series A Preferred Stock (if any) to which they are entitled pursuant to this Section 3(a) promptly following each Dividend Payment Date. (b) All dividends paid with respect to shares of Series A Preferred Stock pursuant to Section 3(a) hereof shall be paid pro rata to the holders entitled thereto, subject to the treatment of fractional shares described in Section 3(a) hereof. All shares of Series A Preferred Stock issued in respect of any Dividend Payment Date shall be deemed issued on the applicable Dividend Payment Date, and will thereupon be duly authorized, validly issued, fully paid and non-assessable and free and clear of all liens and charges. On and after a Dividend Payment Date, until certificates representing additional shares of Series A Preferred Stock shall have been issued pursuant to Section 3(a) hereof and unless the Corporation shall have elected to pay dividends with respect to such Divided Payment Date in cash, the certificates representing shares of Series A Preferred Stock held by a holder of Series A Preferred Stock on the Record Date shall represent not only such existing shares, but also the additional shares of Series A Preferred Stock issued to such holder pursuant to such dividend. (c) (i) Holders of shares of Series A Preferred Stock shall be entitled to receive the dividends provided for in Section 3(a) hereof in preference to and in priority over any dividends declared upon any of the Junior Securities. (ii) So long as any shares of Series A Preferred Stock are outstanding, the Corporation shall not, without first obtaining the consent or approval of the holders of a majority of the then outstanding shares of Series A Preferred Stock, declare, pay or set apart for payment any dividend on any of the Junior Securities or make any payment on account of, or set apart for payment money or establish a sinking or other similar fund for, the purchase, redemption, retirement or other acquisition of, or otherwise acquire for value, any of the Junior Securities or any warrants, rights, calls or options exercisable for any of the Junior Securities, or make any distribution in respect thereof, either directly or indirectly, whether in cash, obligations or shares of the Corporation or other property (other than distributions or dividends payable solely in the same Junior Securities to the holders of such Junior Securities), or permit any company or other entity directly or indirectly controlled by the Corporation to purchase or redeem any of the Junior Securities or any warrants, rights, calls or options exercisable for any of the Junior Securities, unless prior to or concurrently with such declaration, payment, setting apart for payment, purchase, redemption or distribution, as the case may be, all accrued and unpaid dividends, if any, on shares of Series A Preferred Stock not paid on the dates provided for in Section 3(a) hereof shall have been paid. (iii) Subject to the foregoing provisions of this Section 3 and the provisions of Section 9(f) hereof, the Board of Directors may declare and the Corporation may pay or set apart for payment dividends and other distributions on any of the Junior Securities, and may purchase or otherwise redeem any of the Junior Securities or any warrants, rights or options exercisable for any of the Junior Securities; provided, however, that the holders of the shares of Series A Preferred Stock shall be entitled to participate therein on as-if-converted to Common Stock basis (determined without regard to any limitation on the convertability of such shares as a result of the number of authorized and unissued shares of Common Stock) to the extent that the value of the dividends paid or set apart for payment with respect to the Junior Securities exceeds the value of the Dividend Rate. 4. Liquidation Preference. (a) In the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation, the holders of shares of Series A Preferred Stock then outstanding shall be entitled to be paid out of the assets of the Corporation available for distribution to its stockholders an amount in cash equal to the Stated Value for each share outstanding, plus (i) an amount in cash equal to all accrued but unpaid dividends thereon to the date fixed for liquidation and (ii) an amount equal to the pro rata portion of the assets of the Corporation remaining for distribution to the holders of the Common Stock determined on an as-if-converted into Common Stock basis (determined without regard to any limitation on the convertability of the Series A Preferred Stock as a result of the number of authorized and unissued shares of Common Stock), before any payment shall be made or any assets distributed to the holders of any of the Junior Securities (the "Liquidation Preference"). No full preferential payment on account of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, shall be made to the holders of any class of Equivalent Securities (as hereinafter defined in Section 5 below) unless there shall likewise be paid at the same time to holders of Series A Preferred Stock the full amounts to which such holders are entitled with respect to such distribution. If the assets of the Corporation are not sufficient to pay in full the liquidation payments payable to the holders of outstanding shares of Series A Preferred Stock and outstanding shares of Equivalent Securities, then the holders of all such shares shall share ratably in such distribution of assets in accordance with the full respective preferential amounts that would be payable on such shares of Series A Preferred Stock and such shares of Equivalent Securities if all amounts payable thereon were paid in full. (b) For the purposes of this Section 4, (i) the voluntary sale, conveyance, exchange or transfer (for cash, shares of stock, securities or other consideration) of all or substantially all of the property or assets of the Corporation (unless and until such sale, conveyance, exchange or transfer is followed by the dissolution of the Corporation pursuant to the General Corporation Law of the State of Delaware (the "DGCL")) or (ii) the consolidation or merger of the Corporation with one or more other companies or entities, shall not be deemed to be a liquidation, dissolution or winding up, voluntary or involuntary. 5. Certain Restrictions. Notwithstanding anything contained herein to the contrary, so long as any shares of the Series A Preferred Stock shall remain outstanding, the Corporation shall not, without first obtaining the consent or approval of the holders of a majority of the then outstanding shares of Series A Preferred Stock, establish, create, authorize or issue any shares of (i) any class or series of Preferred Stock the terms of which provide that such class or series shall rank on parity with the Series A Preferred Stock with respect to dividends or rights on liquidation, winding up or dissolution ("Equivalent Securities"), including (A) the reclassification of any class or series of stock of the Corporation into shares of Equivalent Securities and (B) the issuance of any security exchangeable for, convertible into or evidencing the right to purchase any shares of Equivalent Securities; or (ii) any other class or series of Preferred Stock, the terms of which provide that such class or series shall rank senior to the Series A Preferred Stock with respect to dividend rights or rights on liquidation, winding up or dissolution ("Senior Securities"), including (A) the reclassification of any class or series of stock of the Corporation into shares of Senior Securities and (B) the issuance of any security exchangeable for, convertible into or evidencing the right to purchase any shares of Senior Securities. 6. Optional Redemption by the Corporation. (a) The Corporation may, at its option, at any time on or after the first date on which shares of the Series A Preferred Stock are issued, redeem all or any portion of the shares of Series A Preferred Stock, upon notice as set forth in Section 6(c) hereof, at the redemption price set forth in Section 6(b) hereof out of funds legally available therefor. (b) The redemption price per share of the Series A Preferred Stock shall be an amount in cash equal to the Stated Value of such share of Series A Preferred Stock plus all accrued but unpaid dividends thereon to the Redemption Date (hereinafter defined); provided, however, that the holders of the Series A Preferred Stock will participate therein on an as-if-converted to Common Stock basis (determined without regard to any limitation on the convertability of such shares as a result of the number of authorized and unissued shares of Common Stock) in any redemption proceeds paid or available to holders of Junior Securities to the extent such amount exceeds the redemption price set forth in this Section 6(b). The Corporation shall take all actions required or permitted under the DGCL to permit such redemption of Series A Preferred Stock. (c) Notice of any redemption shall be sent by or on behalf of the Corporation not less than 30 nor more than 60 days prior to the date specified for redemption in such notice (the "Redemption Date"), by first-class mail, postage prepaid, to all holders of record of Series A Preferred Stock at their last addresses as they shall appear on the books of the Corporation (the date such notice is mailed by or on behalf of the Corporation is referred to herein as the "Redemption Notice Date"); provided, however, that no failure to give such notice or any defect therein or in the mailing thereof shall affect the validity of the proceedings for the redemption of any shares of Series A Preferred Stock except as to the holder to whom the Corporation has failed to give notice or except as to the holder to whom notice was defective. In addition to any information required by law, such notice shall state: (i) the Redemption Date; (ii) the redemption price; (iii) the place or places where certificates for such shares are to be surrendered for payment of the redemption price; (iv) that dividends on the shares to be redeemed will cease to accumulate as of the Redemption Date; and (v) the number of shares of Series A Preferred Stock to be so redeemed. Upon the mailing of any such notice of redemption, the Corporation shall become obligated to redeem at the time of redemption specified thereon all shares called for redemption. (d) If notice has been mailed in accordance with Section 6(c) hereof and provided that on or before the Redemption Date specified in such notice, all funds necessary for such redemption shall have been set aside by the Corporation, separate and apart from its other funds in trust and for the pro rata benefit of the holders of the shares so called for redemption, so as to be, and to continue to be available therefor, then, from and after the Redemption Date, dividends on the shares of Series A Preferred Stock so called for redemption shall cease to accumulate, and such shares shall no longer be deemed to be outstanding and shall not have the status of shares of Series A Preferred Stock, and all rights of the holders thereof as stockholders of the Corporation (except the right to receive from the Corporation the redemption price therefor) shall cease. Upon surrender, in accordance with such notice, of the certificates for any shares so redeemed (properly endorsed or assigned for transfer, if the Corporation shall so require and the notice shall so state), such shares shall be redeemed by the Corporation at the redemption price therefor on the Redemption Date. Upon surrender of a certificate representing shares of Series A Preferred Stock to be redeemed in part, the Corporation shall also issue to such holder a new certificate representing any unredeemed shares of Series A Preferred Stock represented by the certificate surrendered upon redemption. (e) Any deposit of funds with a bank or trust company for the purpose of redeeming shares of Series A Preferred Stock shall be irrevocable, except that (i) any balance of monies so deposited by the Corporation with respect to shares of Series A Preferred Stock converted by the holder pursuant to Section 9 hereof prior to the Redemption Date shall be repaid, together with interest or other earnings thereon, to the Corporation within 30 days after the Redemption Date and (ii) any balance of monies so deposited by the Corporation and unclaimed by the holders of shares of Series A Preferred Stock entitled thereto at the expiration of two years from the applicable Redemption Date shall be repaid, together with any interest or other earnings earned thereon, to the Corporation, and after any such repayment, the holders of the shares of Series A Preferred Stock entitled to the funds so repaid to the Corporation shall look only to the Corporation for payment without interest or other earnings. (f) In connection with any redemption of Series A Preferred Stock, holders of Series A Preferred Stock may exercise their right to convert in accordance with Section 9 hereof by notifying the Corporation on or before the Redemption Date. 7. Mandatory Offer of Repurchase by the Corporation. (a) Upon the consummation of an Asset Sale (hereinafter defined) by the Corporation, the Corporation shall make an offer to purchase from all holders of Series A Preferred Stock (the "Asset Sale Offer"), to the extent of the net proceeds of such Asset Sale to the Corporation (the "Available Amount"), shares of Series A Preferred Stock for a cash purchase price per share equal to the Stated Value of such share of Series A Preferred Stock plus all accrued but unpaid dividends thereon to the Purchase Date (hereinafter defined); provided, however, that to the extent the Company offers to purchase Junior Securities for an amount in excess of the purchase price set forth in this Section 7(a), the per share purchase price for the Series A Preferred Stock will be the same as the purchase price for the Junior Securities. In the event that the Corporation shall be required to commence an Asset Sale Offer, it shall follow the procedures specified below. (b) The Asset Sale Offer shall remain open for a period from the date of the mailing of the notice of the Asset Sale Offer described in Section 7(c) hereof until a date determined by the Corporation which is at least 30 but no more 60 days after the date of mailing of such notice, except to the extent that a longer period is required by applicable law (the "Asset Sale Offer Period"). On the last day of the Asset Sale Offer Period (the "Purchase Date"), the Corporation shall purchase all shares of Series A Preferred Stock properly tendered by the holders thereof in response to the Asset Sale Offer. (c) Notice of an Asset Sale Offer shall be sent by or on behalf of the Corporation within 30 days following the effective date of a transaction resulting in an Asset Sale, by first-class mail, postage prepaid, to all holders of record of Series A Preferred Stock at their last addresses as they shall appear on the books of the Corporation. In addition to any information required by law, such notice shall state: (i) that an Asset Sale Offer is being made pursuant to this Section 7; (ii) the Available Amount; (iii) the purchase price; (iv) the dates comprising the Asset Sale Offer Period; (v) the Purchase Date; (vi) that holders electing to have any of their shares of Series A Preferred Stock repurchased pursuant to such Asset Sale Offer shall be required to tender such shares to the Corporation at the address specified in such notice prior to the close of business on the third Business Day preceding the Purchase Date; (vii) that dividends on the shares tendered for repurchase by the Corporation will cease to accumulate as of the Purchase Date; (viii) that holders will be entitled to withdraw their election if the Corporation receives, not later than the close of business on the Business Day immediately preceding the Purchase Date, a telegram, facsimile transmission or letter setting forth the name of the holder, the shares of such holder delivered for repurchase and a statement that such holder is withdrawing his election to have such shares of Series A Preferred Stock repurchased in whole or in part; (ix) that, if the aggregate Stated Value of shares of Series A Preferred Stock tendered for repurchase plus all accrued but unpaid dividends thereon to the Purchase Date exceeds the Available Amount, the Corporation shall select the shares of Series A Preferred Stock to be purchased on a pro rata basis; and (x) that upon tender of a certificate representing shares of Series A Preferred Stock to be repurchased by the Corporation in part, the Corporation shall issue to such holder on the Purchase Date a new certificate representing any unpurchased shares of Series A Preferred Stock represented by the certificate surrendered for repurchase. (d) For purposes hereof, "Asset Sale" means any sale, transfer, assignment or disposition (directly or indirectly) for value of (i) all or a material part of the Corporation's fixed assets utilized in any of its respective operations, (ii) all or any portion of the intellectual property rights owned by the Corporation or (iii) all or any portion of the Corporation's ownership interest in any wholly-owned subsidiary of the Corporation. 8. Voting Rights. In addition to any voting rights provided elsewhere herein, and any voting rights provided by law, the holders of shares of Series A Preferred Stock shall have the following voting rights: (a) Commencing on the date that is one (1) year from the date upon which the first share of Series A Preferred Stock is issued (the "Initial Issue Date") and for so long as any shares of Series A Preferred Stock shall remain outstanding, each share of Series A Preferred Stock shall entitle the holder thereof to vote on all matters voted on by holders of the Common Stock, voting together as a single class with the Common Stock and all other shares entitled to vote, if any, at all meetings of the stockholders of the Corporation. With respect to any matter voted on by holders of the Common Stock and the Series A Preferred Stock voting together as a single class, each share of Series A Preferred Stock shall entitle the holder thereof to cast the number of votes equal to the number of votes which could be cast in such vote by a holder of the shares of Common Stock into which such share of Series A Preferred Stock are convertible (without regard to any limitation on the convertibility of such shares as a result of the number of authorized and unissued shares of Common Stock) on the record date for such vote. (b) Notwithstanding anything to the contrary contained herein, any action required or permitted to be taken by the holders of Series A Preferred Stock at any meeting of the holders of Series A Preferred Stock may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of not less than 66 2/3% of the issued and outstanding shares of Series A Preferred Stock, provided the non-consenting holders are given prompt notice of such action. If the holders of not less than twenty percent (20%) of the issued and outstanding shares of Series A Preferred Stock deliver to the Secretary of the Corporation a written request to hold a special meeting of the holders of the Series A Preferred Stock for the purpose of considering any matter or taking any action with respect to which the holders of Series A Preferred Stock are entitled to a vote pursuant to the terms hereof, the Corporation shall take such action as is required under the DGCL and the Bylaws of the Corporation to duly call and hold a special meeting of the holders of Series A Preferred Stock at a date, time and place determined by the Board of Directors. 9. Conversion Rights. (a) Commencing on the date that is one (1) year from the Initial Issue Date, each share of Series A Preferred Stock may be converted at the option of the holder, at any time (except that, with respect to any shares of Series A Preferred Stock which shall be called for redemption, such right shall terminate as provided in Section 6 hereof) into the number of fully paid, non-assessable shares of Common Stock obtained by dividing the Stated Value by the Conversion Price (as defined in Section 9(b) below) in effect on the date of conversion (the "Conversion Date"), in accordance with and subject to the terms and conditions of this Section 9, and the right to receive an additional number of fully paid and non-assessable shares of Common Stock equal to the Stated Value of the Series A Preferred Stock issuable pursuant to Section 3 hereof in respect of all accrued and unpaid dividends on the share of Series A Preferred Stock to be so converted (other than previously declared dividends payable to a holder of record on a prior Record Date, which dividends shall be paid by the Corporation to such holder on the next Dividend Payment Date) to the Conversion Date, whether or not declared, divided by the Conversion Price, such shares to be issued concurrently with the issuance of the shares of Common Stock pursuant to Section 9(c) hereof. Subject to Section 6(f) hereof and this Section 9, a holder of shares of Series A Preferred Stock shall have the right to convert all or any portion of such shares pursuant to this Section 9 at any time and from time to time. (b) The "Conversion Price" shall initially equal $4.00; provided, however, that such Conversion Price shall be adjusted and readjusted from time to time as provided in this Section 9 and, as so adjusted and readjusted, shall remain in effect until a further adjustment or readjustment thereof is required by this Section 9. (c) Upon surrender to the Corporation at the office of the transfer agent or such other place or places, if any, as the Board of Directors may determine, of certificates duly endorsed to the Corporation or in blank for shares of Series A Preferred Stock to be converted together with appropriate evidence of the payment of any transfer or similar tax, if required, and written instructions to the Corporation requesting conversion of such shares and specifying the name and address of the person, corporation, firm or other entity to whom shares of Common Stock are to be issued upon conversion thereof, the Corporation shall issue the number of shares of Common Stock issuable upon conversion thereof as of the time of such surrender and as promptly as practicable thereafter will deliver or cause to be delivered certificates for such shares of Common Stock. In addition, the Corporation shall issue a number of shares of Common Stock equal to the Stated Value of the Series A Preferred Stock issuable pursuant to Section 3 hereof in respect of all accrued and unpaid dividends on each share of Series A Preferred Stock so surrendered for conversion (other than previously declared dividends payable to a holder of record on a prior Record Date, which dividends shall be paid by the Corporation to such holder on the next Dividend Payment Date) divided by the Conversion Price. Upon surrender of a certificate representing shares of Series A Preferred Stock to be converted in part, in addition to the foregoing, the Corporation shall also issue to such holder a new certificate representing any unconverted shares of Series A Preferred Stock represented by the certificate surrendered for conversion. (d) No fractional shares of Common Stock shall be issued pursuant to this Section 9 and the number of shares of Common Stock shall be rounded down to the nearest whole number of shares; provided, however, that any such fractional shares to which a holder of Series A Preferred Stock would otherwise be entitled shall be aggregated with any fractional shares otherwise issuable in connection with any subsequent conversion by such holder of shares of Series A Preferred Stock and each time such fractional share shall equal one full share, such full share shall be issued to the holder entitled thereto. (e) The Corporation shall pay all documentary, stamp, or similar issue or transfer tax due upon conversion of Series A Preferred Stock. (f) The Conversion Price shall be subject to adjustment as follows: (i) In case the Corporation shall (i) pay or make a dividend or other distribution on the outstanding shares of Common Stock in shares of Common Stock, (ii) subdivide or reclassify the outstanding shares of Common Stock into a greater number of shares, or (iii) combine or reclassify the outstanding shares of Common Stock into a smaller number of shares, the Conversion Price in effect at the opening of business on the day following the date fixed for the determination of stockholders entitled to receive such dividend or other distribution or subject to such subdivision, combination or reclassification shall be adjusted by multiplying such Conversion Price by a fraction of which the numerator shall be the number of shares of Common Stock outstanding at the close of business on the date fixed for such determination and of which the denominator shall be the sum of such number of shares outstanding immediately after the event described in clause (i), (ii) or (iii) of this paragraph (i) of Section 9(f), such adjustment to the Conversion Price to become effective immediately after the opening of business on the day following the date fixed for such determination. (ii) In case the Corporation shall issue rights, options or warrants to all holders of Common Stock entitling them to subscribe for or purchase shares of Common Stock at a price per share less than the Conversion Price in effect immediately prior to the date fixed for the determination of stockholders entitled to receive such rights, options or warrants (the "Pre-Determination Conversion Price"), the Conversion Price in effect at the opening of business on the day following the date fixed for such determination shall be reduced by multiplying the Pre-Determination Conversion Price by a fraction of which the numerator shall be the number of shares of Common Stock outstanding at the close of business on the date fixed for such determination plus the number of shares of Common Stock which the aggregate offering price of the total number of shares of Common Stock so offered for subscription would purchase at the Pre-Determination Conversion Price, and of which the denominator shall be the number of shares of Common Stock outstanding at the close of business on the date fixed for such determination plus the number of shares of Common Stock so offered for subscription or purchase, such reduction of the Conversion Price to become effective immediately after the opening of business on the day following the date fixed for such determination. (iii) In case the Corporation shall, by dividend or otherwise, distribute to all holders of Common Stock (i) shares of capital stock of any class other than Common Stock, (ii) evidences of its indebtedness or (iii) assets (excluding any rights, options or warrants referred to in paragraph (ii) of this Section 9(f), any cash dividend or distribution lawfully paid under the laws of the state of incorporation of the Corporation, and any dividend or distribution referred to in paragraph (i) of this Section 9(f)), the Conversion Price shall be adjusted so that the same shall equal the price determined by multiplying the Conversion Price in effect immediately prior to the close of business on the date fixed for the determination of stockholders entitled to receive such distribution (the "Pre-Distribution Conversion Price") by a fraction of which the numerator shall be the Pre-Distribution Conversion Price less the fair market value (as determined by the Board of Directors of the Corporation) of the portion of the shares of capital stock or evidences of indebtedness or assets so distributed applicable to one share of Common Stock, and of which the denominator shall be the Pre-Distribution Conversion Price, such adjustment to become effective immediately prior to the opening of business on the day following the date fixed for the determination of stockholders entitled to receive such distribution. (iv) In case the Corporation shall issue any securities convertible into or exchangeable for Common Stock (other than securities issued in transactions described in paragraph (ii) or (iii) of this Section 9(f)), for a consideration per share of Common Stock less than the Conversion Price immediately prior to the date of issuance of such securities (the "Pre-Issuance Conversion Price"), the Conversion Price shall be adjusted immediately thereafter so that it shall equal the price determined by multiplying the Pre-Issuance Conversion Price by a fraction, of which the numerator shall be the number of shares of Common Stock outstanding immediately prior to the issuance of such securities plus the number of shares of Common Stock which the aggregate consideration received for such securities would purchase at the Pre-Issuance Conversion Price, and of which the denominator shall be the number of shares of Common Stock outstanding immediately prior to such issuance plus the maximum number of shares of Common Stock deliverable upon conversion of or in exchange for such securities at the initial conversion or exchange price or rate. Upon the termination of the right to convert or exchange such securities, the Conversion Price shall forthwith be readjusted to such Conversion Price as would have obtained had the adjustments made upon the issuance of such convertible or exchangeable securities been made upon the basis of the delivery of only the number of shares of Common Stock actually delivered upon conversion or exchange of such securities and upon the basis of the consideration actually received by the Corporation for such securities. (v) In case of any reclassification of the Common Stock (including any reclassification upon a consolidation or merger in which the Corporation is the continuing or surviving corporation) into securities other than Common Stock, the Series A Preferred Stock shall thereafter be convertible into the kind and amount of shares of such securities receivable upon such reclassification by a holder of the number of shares of Common Stock into which the Series A Preferred Stock would be convertible immediately prior to such reclassification. (vi) In case the Corporation shall issue shares of Common Stock for a consideration per share less than the Conversion Price immediately prior to the date on which the Corporation fixes the offering price of such additional shares (the "Pre-Offering Conversion Price"), the Conversion Price shall be adjusted immediately thereafter so that it shall equal the price determined by multiplying the Pre-Offering Conversion Price by a fraction, of which the numerator shall be the total number of shares of Common Stock outstanding immediately prior to the issuance of such additional shares plus the number of shares of Common Stock which the aggregate consideration received for the issuance of such additional shares would purchase at the Pre-Offering Conversion Price, and of which the denominator shall be the number of shares of Common Stock outstanding immediately after the issuance of such additional shares. There shall be no adjustment, however, pursuant to this paragraph (vi) with respect to any shares of Common Stock issued (i) in any of the transactions described in paragraph (ii) of this Section 9(f) where there has been an adjustment in respect thereto; (ii) upon conversion or exchange of securities convertible into or exchangeable for Common Stock where there has been an adjustment; (iii) upon the exercise or conversion of any stock option, warrant or other convertible security outstanding on the Initial Issue Date; or (iv) upon the exercise of any stock option granted by the Corporation (provided that, if applicable, any adjustment required pursuant to paragraph (iii) of this Section 9(f) upon the grant of such option has been made). (g) Anything herein to the contrary notwithstanding, no adjustment will be made to the Conversion Price by reason of the issuance of Common Stock upon the conversion of Series A Preferred Stock. (h) No adjustment in the Conversion Price need be made unless the adjustment pursuant to Section 9(f) hereof would require an increase or decrease of at least 1% in the Conversion Price; provided, however, that any adjustments which by reason of this paragraph are not required to be made shall be carried forward and taken into account in any subsequent adjustment required to be made hereunder, and, in any event, shall be made no later than the third anniversary of the date the adjustment pursuant to Section 9(f) hereof would have been made if it would have required an increase or decrease of at least 1% in the Conversion Price. All adjustments to the Conversion Price shall be made to the nearest one-one thousandth of a dollar. (i) No adjustment need be made for a change in the par value of the Common Stock. (j) Whenever the Conversion Price is adjusted, the Corporation shall promptly mail to holders of Series A Preferred Stock a notice of adjustment briefly stating the facts requiring the adjustment and the manner of computing such adjustment. (k) In case of any consolidation or merger of the Corporation with any other entity, or in case of any sale or transfer of all or substantially all of the assets of the Corporation, or in the case of any share exchange, in any such case pursuant to which all of the outstanding shares of Common Stock are converted into other securities or property, the Corporation shall make appropriate provision or cause appropriate provision to be made so that the holder of each share of Series A Preferred Stock then outstanding shall have the right thereafter, in lieu of the right to convert into Common Stock, to convert such share of Series A Preferred Stock into the kind and amount of shares of stock and other securities and property receivable upon such consolidation, merger, sale, transfer or share exchange by a holder of the number of shares of Common Stock into which such share of Series A Preferred Stock might have been converted immediately prior to the effective date of such consolidation, merger, sale, transfer or share exchange; provided, however, that if a purchase, tender or exchange offer shall have been made to and accepted by the holders of more than 50% of the outstanding shares of Common Stock, and if a holder of shares of Series A Preferred Stock so designates in a notice given to the Corporation on or before the date immediately preceding the date of the consummation of such transaction, the holder of such Series A Preferred Stock shall be entitled to receive the highest amount of securities, cash or other property to which such holder would actually have been entitled as a holder of Common Stock if the holder of Series A Preferred Stock had converted shares of Series A Preferred Stock into Common Stock prior to the expiration of such purchase, tender or exchange offer and accepted such offer, subject to adjustments (from and after the consummation of such purchase, tender or exchange offer) as nearly equivalent as possible to the adjustments provided for in this Section 9. If in connection with any such consolidation, merger, sale, transfer or share exchange, each holder of shares of Common Stock is entitled to elect to receive either securities, cash or other assets upon completion of such transaction, the Corporation shall provide or cause to be provided to each holder of Series A Preferred Stock the right to elect to receive the securities, cash or other assets into which Series A Preferred Stock held by such holder shall be convertible after completion of any such transaction on the same terms and subject to the same conditions applicable to holders of the Common Stock (including, without limitation, notice of the right to elect, limitations on the period in which such election shall be made and the effect of failing to exercise the election). The Corporation shall not effect any such transaction unless the provisions of this paragraph have been fulfilled. The above provisions shall similarly apply to successive consolidations, mergers, sales, transfers or share exchanges. (l) In case any other stock (other than Common Stock but including, without limitation, any class or series of Preferred Stock) or other securities of any other entity (corporate or otherwise) or the Corporation ("Other Securities") shall be issued or sold or shall become subject to issue or sale upon the conversion or exchange of any stock (or Other Securities) of the Corporation or to subscription, purchase or other acquisition for a consideration such as to dilute (on a basis consistent with the standards established in the other provisions of this Section 9) the conversion rights of the Series A Preferred Stock, then, and in each such case, the computations, adjustments and readjustments provided for in this Section 9 with respect to the Conversion Price shall be made as nearly as possible in the manner so provided and applied to determine the amount of Other Securities from time to time receivable upon the conversion of shares of Series A Preferred Stock, so as to protect the holders of Series A Preferred Stock against the effect of such dilution. (m) The Corporation shall use its best efforts to take all actions necessary (including, without limitation, amending the Corporation's Restated Certificate of Incorporation, as amended) to increase the number of its authorized but unissued shares of Common Stock by the date that is one (1) year from the Initial Issue Date to an amount sufficient to permit the conversion of all of the Series A Preferred Stock (together with the accrued dividends thereon), and the Corporation shall thereafter reserve and at all times keep available, free from preemptive rights, out of its authorized but unissued stock, for the purpose of effecting the conversion of Series A Preferred Stock, such number of its duly authorized Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding shares of Series A Preferred Stock. The Corporation covenants that all shares of Common Stock issued upon conversion of outstanding shares of Series A Preferred Stock shall, upon issuance, be duly authorized, validly issued, fully paid and non-assessable and free and clear of all liens and charges. 10. Shares to Be Retired. Any share of Series A Preferred Stock converted, redeemed, repurchased or otherwise acquired by the Corporation shall be retired and cancelled and shall upon cancellation and the filing of an appropriate certificate with the Delaware Secretary of State be restored to the status of authorized but unissued shares of preferred stock, subject to reissuance by the Board of Directors as Series A Preferred Stock or shares of Preferred Stock of one or more other series. 11. Record Holders. The Corporation and the Corporation's transfer agent may deem and treat the record holder of any shares of Series A Preferred Stock as the true and lawful owner thereof for all purposes, and neither the Corporation nor the Corporation's transfer agent shall be affected by any notice to the contrary. 12. Notice. Except as may otherwise be provided for herein, all notices referred to herein shall be in writing, and all notices hereunder shall be deemed to have been given upon, the earlier of receipt of such notice or three Business Days after the mailing of such notice if sent by registered mail (unless first-class mail shall be specifically permitted for such notice under the terms of this Certificate of Designations) with postage prepaid, addressed, if to the Corporation, to its offices at 5430 LBJ Freeway, Suite 1740, Dallas, Texas 75240-2697, (Attention: Ms. Sandy Myers, Corporate Secretary) or to an agent of the Corporation designated as permitted by the Certificate of Incorporation or, if to any holder of Series A Preferred Stock, to such holder at the address of such holder of Series A Preferred Stock as listed in the stock record books of the Corporation (which may include the records of the Corporation's transfer agent); or to such other address as the Corporation or holder, as the case may be, shall have designated by notice similarly given. [Signature page to follow.] IN WITNESS WHEREOF, the Corporation has caused this Certificate of Designations to be executed and acknowledged by its duly authorized officer this 15 day of March, 2002. KEYSTONE CONSOLIDATED INDUSTRIES, INC. ------------------------------- ----------------- Its ___________ EX-4.2 4 exh42kci.txt FIRST SUPPLEMENTAL INDENTURE Dated as of March 15, 2002 to INDENTURE Dated as of August 7, 1997 between Keystone Consolidated Industries, Inc. as Issuer, and The Bank of New York, as Trustee ---------------------------------- 9 5/8% Senior Secured Notes due 2007 ---------------------------------- FIRST SUPPLEMENTAL INDENTURE FIRST SUPPLEMENTAL INDENTURE, dated as of March 15, 2002 (this "Supplemental Indenture"), between Keystone Consolidated Industries, Inc., a Delaware corporation (the "Company"), and The Bank of New York, a New York banking corporation (the "Trustee"), to that certain Indenture, dated as of August 7, 1997 (the "Indenture"), between the Company and the Trustee. WHEREAS, the parties hereto have entered into the Indenture which provides for the issuance by the Company of up to $100,000,000 in aggregate principal amount of 9 5/8% Senior Secured Notes due 2007 (the "Notes"); WHEREAS, the Company wishes to amend or supplement the Indenture and the Notes as hereinafter provided; WHEREAS, all acts necessary to constitute this Supplemental Indenture as a valid, binding and legal obligation of the Company have been done and performed; and WHEREAS, capitalized terms used herein and not otherwise defined shall have the meanings given them in the Indenture. NOW, THEREFORE, this Supplemental Indenture witnesseth: In order to comply with the requirements of the Indenture, the Company covenants and agrees with the Trustee for the equal and proportionate benefit, security and protection of the respective holders from time to time of the Notes, as follows: ARTICLE I. RELEASE OF COLLATERAL The Company and the Trustee, in its capacity as Trustee under the Indenture and as Collateral Agent, hereby agree to do or cause to be done any and all things necessary or appropriate to cause the Collateral to be fully and completely released from the Lien of the Indenture and the Security Documents, or, at the option of the Company, to be transferred to a creditor designated by the Company, and the Company hereby certifies that it has obtained the written consent thereto of greater than 66-2/3% in aggregate principal amount of the Notes outstanding as of the date of this Supplemental Indenture, as required by Section 9.2 of the Indenture. ARTICLE II. MISCELLANEOUS AMENDMENTS Section 2.1. Deletions. (a) The Indenture shall be amended by deleting in their entirety the following provisions thereof: Section 2.9; Sections 3.8 and 3.9; Sections 4.2 and 4.3; Sections 4.7 through 4.11 (inclusive); Sections 4.13 and 4.14; Sections 4.16 through 4.22 (inclusive); Subsections 5.1(iv) through (vi) (inclusive); Subsections 6.1(e) and (g); Articles X and XI; and Section 12.15. (b) The Indenture shall be amended by deleting in their entirety the following definitions contained therein: "Acquired Debt"; "Affiliate Transaction"; "Appraiser"; "Asset Sale"; "Asset Sale Offer"; "Asset Sale Offer Period"; "Asset Sale Release Notice"; "Attributable Debt"; "Available Amount"; "Capital Expenditures"; "Cash Equivalents"; "Change of Control"; "Change of Control Offer"; "Change of Control Offer Period"; "Collateral"; "Collateral Account"; "Collateral Agent"; "Collateral Proceeds"; "Consolidated Cash Flow"; "Consolidated Cash Flow Ratio"; "Consolidated Interest Expense"; "Consolidated Net Income"; "Consolidated Net Worth"; "disposition" or "sale" or "transfer"; "Existing Indebtedness"; "Insurance Letters of Credit"; "Intercreditor Agreement"; "Investment"; "Liquidated Damages"; "Mortgages"; "Mortgaged Property"; "Net Award"; "Net Proceeds"; "Net Casualty Proceeds"; "Non-Collateral Proceeds"; "Obligations"; "Offer Amount"; "Permitted Holders"; "Permitted Indebtedness"; "Permitted Investments"; "Permitted Liens"; "Permitted Refinancing Debt"; "Permitted Secured Debt"; "Prior Liens"; "Purchase Date"; "Purchase Money Obligations"; "Purchase Price"; "Real Property"; "Related Business Investment"; "Released Interests"; "Registration Rights Agreement"; "Released Trust Moneys"; "Restricted Investment"; "Restricted Payments"; "Sale/leaseback"; "Security Agreements"; "Security Documents"; "Senior Secured Notes; "Survey"; "Taking"; "Trust Moneys"; "Valuation Date"; "Voting Stock"; and "Weighted Average Life to Maturity". (c) All references contained in the Indenture to the provisions and definitions deleted therefrom pursuant to the foregoing subsections (a) and (b) shall be deemed deleted for all purposes of the Indenture; provided, however, that all references contained in the Indenture to the term "Senior Secured Notes" shall be deemed to refer to "Subordinated Unsecured Notes," as set forth in Section 2.4 of this Supplemental Indenture. Section 2.2. Amendment of "Affiliate" Definition. The definition of the term "Affiliate" set forth in the Indenture shall be amended by deleting such definition in its entirety and replacing it with the following: "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 securities of a Person shall be presumed to be control, which presumption may be rebutted by evidence to the contrary. Section 2.3. Amendment of "Fair Market Value" Definition. The definition of the term "Fair Market Value" set forth in the Indenture shall be amended by deleting such definition in its entirety and replacing it with the following: "Fair Market Value" means, with respect to any asset, the price which could be negotiated in an arm's-length free market transaction, for cash, between a willing seller and a willing buyer, neither of whom is under undue pressure or compulsion to complete the transaction. Section 2.4. Addition of "Subordinated Unsecured Notes" Definition. The following definition shall be added to the Indenture: "Subordinated Unsecured Notes" means the Company's 9 5/8% Subordinated Unsecured Notes due 2007. Section 2.5. Amendment to Section 3.7(a). Section 3.7(a) of the Indenture shall be amended by deleting such section in its entirety and replacing it with the following: "(a) On and after the date hereof, the Notes will be subject to redemption 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 Price equal to 100% of principal amount, plus accrued and unpaid interest, if any, thereon to the applicable Redemption Date." ARTICLE III. MISCELLANEOUS PROVISIONS Section 3.1. Unless otherwise defined herein, or unless the context otherwise requires, the terms used herein shall have the respective meanings assigned to them in the Indenture. Section 3.2. The Trustee accepts the trusts in this Supplemental Indenture declared and provided upon the terms and conditions set forth in the Indenture. The Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Supplemental Indenture or the due execution hereof by the Company or for, or in respect of, the recitals and statements contained herein, all of which recitals and statements are made solely by the Company. Section 3.3. Upon the effectiveness of this Supplemental Indenture, all Notes outstanding immediately prior to such effectiveness shall be deemed amended as necessary or appropriate to reflect the terms and conditions set forth in the Indenture as modified by this Supplemental Indenture, and in the event of a conflict between any term or condition of such Notes and the Indenture as so modified, the Indenture as so modified shall control, notwithstanding any provision of such Notes or the Indenture to the contrary. Except as modified by this Supplemental Indenture, the Indenture and such Notes are in all respects ratified and confirmed and all of the terms, conditions and provisions thereof shall remain in full force and effect. Section 3.4. The recitals contained herein shall be taken as the statements of the Company, and the Trustee assumes no responsibility for their correctness. The Trustee makes no representations as to the validity or sufficiency of this Supplemental Indenture. Section 3.5. This Supplemental Indenture shall be effective as of the date first set forth above upon the execution hereof by both parties hereto. Section 3.6. The parties may sign multiple counterparts of this Supplemental Indenture, each of which may be delivered by facsimile transmission. Each signed counterpart shall be deemed an original, but all of them together represent the same agreement. Section 3.7. The laws of the State of New York shall govern this Supplemental Indenture without regard to principles of conflicts of laws. Section 3.8. If any provision or subprovision of this Supplemental Indenture or the application thereof to any person or circumstance shall be invalid, illegal or unenforceable to any extent, the remainder of this Supplemental Indenture and the application thereof shall not be affected and shall be enforceable to the fullest extent permitted by law. [Signatures on following page.] IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed, all as of the date first written above. KEYSTONE CONSOLIDATED INDUSTRIES, INC. By: ------------------------------------------ Name: ------------------------------------------ Title: ------------------------------------------ THE BANK OF NEW YORK, as Trustee By: ------------------------------------------ Name: ------------------------------------------ Title: ------------------------------------------ EX-4.3 5 exh43kci.txt SECOND SUPPLEMENTAL INDENTURE Dated as of March 15, 2002 to INDENTURE Dated as of August 7, 1997 between Keystone Consolidated Industries, Inc. as Issuer, and The Bank of New York, as Trustee ---------------------------------- 9 5/8% Senior Secured Notes due 2007 ---------------------------------- SECOND SUPPLEMENTAL INDENTURE SECOND SUPPLEMENTAL INDENTURE, dated as of March 15, 2002 (this "Supplemental Indenture"), between Keystone Consolidated Industries, Inc., a Delaware corporation (the "Company"), and The Bank of New York, a New York banking corporation (the "Trustee"), to that certain Indenture, dated as of August 7, 1997 (the "Indenture"), between the Company and the Trustee. WHEREAS, the parties hereto have entered into the Indenture which provides for the issuance by the Company of up to $100,000,000 in aggregate principal amount of 9 5/8% Senior Secured Notes due 2007 (the "Notes"); WHEREAS, concurrent herewith the Company and the Trustee are executing that certain First Supplemental Indenture dated as of the date hereof (the "First Supplemental Indenture") that provides for certain amendments to the Indenture and the Notes; WHEREAS, for administrative convenience, the Company wishes to further amend the Indenture and the Notes to provide additional rights or benefits to the Holders of the Notes with respect to the timely payment of defaulted interest as hereinafter provided; WHEREAS, all acts necessary to constitute this Supplemental Indenture as a valid, binding and legal obligation of the Company have been done and performed; and WHEREAS, capitalized terms used herein and not otherwise defined shall have the meanings given them in the Indenture. NOW, THEREFORE, this Supplemental Indenture witnesseth: In order to comply with the requirements of the Indenture, the Company covenants and agrees with the Trustee for the equal and proportionate benefit, security and protection of the respective holders from time to time of the Notes, as follows: ARTICLE I. AMENDMENT Section 1.1. Amendment of Section 2.12. Section 2.12 of the Indenture shall be amended by adding the following to the end of such section as set forth in the Indenture: "In the event that there shall be less than $10,000,000 in aggregate principal amount of Notes outstanding under this Indenture, then notwithstanding anything contained in this Indenture to the contrary, (i) the special record date relating to the payment of any defaulted interest may be the same as the payment date for any such interest; and (ii) neither the Company nor the Trustee shall be required to give any advance notice to any Holder of the fixing of the special record date, the special record date, the related payment date or the amount of such interest to be paid." ARTICLE II. MISCELLANEOUS PROVISIONS Section 2.1. Unless otherwise defined herein, or unless the context otherwise requires, the terms used herein shall have the respective meanings assigned to them in the Indenture. Section 2.2. The Trustee accepts the trusts in this Supplemental Indenture declared and provided upon the terms and conditions set forth in the Indenture. The Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Supplemental Indenture or the due execution hereof by the Company or for, or in respect of, the recitals and statements contained herein, all of which recitals and statements are made solely by the Company. Section 2.3. Upon the effectiveness of this Supplemental Indenture, all Notes outstanding immediately prior to such effectiveness shall be deemed amended as necessary or appropriate to reflect the terms and conditions set forth in the Indenture as modified by this Supplemental Indenture, and in the event of a conflict between any term or condition of such Notes and the Indenture as so modified, the Indenture as so modified shall control, notwithstanding any provision of such Notes or the Indenture to the contrary. Except as modified by this Supplemental Indenture and the First Supplemental Indenture, the Indenture and such Notes are in all respects ratified and confirmed and all of the terms, conditions and provisions thereof shall remain in full force and effect. Section 2.4. The recitals contained herein shall be taken as the statements of the Company, and the Trustee assumes no responsibility for their correctness. The Trustee makes no representations as to the validity or sufficiency of this Supplemental Indenture. Section 2.5. This Supplemental Indenture shall be effective as of the date first set forth above upon the execution hereof by both parties hereto. Section 2.6. The parties may sign multiple counterparts of this Supplemental Indenture, each of which may be delivered by facsimile transmission. Each signed counterpart shall be deemed an original, but all of them together represent the same agreement. Section 2.7. The laws of the State of New York shall govern this Supplemental Indenture without regard to principles of conflicts of laws. Section 2.8. If any provision or subprovision of this Supplemental Indenture or the application thereof to any person or circumstance shall be invalid, illegal or unenforceable to any extent, the remainder of this Supplemental Indenture and the application thereof shall not be affected and shall be enforceable to the fullest extent permitted by law. [Signatures on following page.] IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed, all as of the date first written above. KEYSTONE CONSOLIDATED INDUSTRIES, INC. By: ------------------------------------------------ Name: ------------------------------------------------ Title: ------------------------------------------------ THE BANK OF NEW YORK, as Trustee By: --------------------------------------------------- Name: --------------------------------------------------- Title: --------------------------------------------------- EX-4.6 6 exh46kci.txt SECOND AMENDMENT TO AMENDED AND RESTATED REVOLVING LOAN AND SECURITY AGREEMENT AND RELEASE OF TERM LOAN AND SECURITY AGREEMENT THIS SECOND AMENDMENT TO AMENDED AND RESTATED REVOLVING LOAN AND SECURITY AGREEMENT AND RELEASE OF TERM LOAN AND SECURITY AGREEMENT (the "Second Amendment") is entered into as of August 4, 1997 by and between KEYSTONE CONSOLIDATED INDUSTRIES, INC., a Delaware corporation ("Borrower"), and CONGRESS FINANCIAL CORPORATION (CENTRAL), an Illinois corporation ("Lender"). Except for terms which are expressly defined herein, all capitalized terms used herein shall have the meaning subscribed to them in the Loan Agreement (as defined below). RECITALS WHEREAS, Borrower and Lender are parties to (i) that certain Amended And Restated Revolving Loan And Security Agreement dated as of December 29, 1995, as amended by that certain First Amendment to Amended and Restated Revolving Loan and Security Agreement dated as of September 27, 1996 (the "Loan Agreement") and (ii) that certain Term Loan and Security Agreement dated as of December 30, 1993, as amended by that certain First Amendment to Term Loan and Security Agreement dated as of September 27, 1996 (the "Term Loan"). WHEREAS, Borrower desires to amend the terms of the Loan Agreement to permit Borrower to, among other things, issue $100,000,000 of Senior Secured Notes due 2007 ("Senior Notes") pursuant to the terms of that certain Indenture dated as of the date hereof (the "Indenture"). WHEREAS, Borrower desires to prepay the Term Loan from a portion of the proceeds raised from the issuance of the Senior Notes. WHEREAS, Lender is willing to amend the Loan Agreement and release the Term Loan and, in connection therewith, to release certain security interests held by Lender on the terms and conditions set forth herein. NOW, THEREFORE, in consideration of the mutual conditions and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: I. Amendments to the Loan Agreement. A. Definitions. 1. The second paragraph of Section 1 of the Loan Agreement is hereby amended by inserting the sentence "Terms that are defined under the Indenture shall be defined under the Indenture as in effect on August 7, 1997 without giving effect to any amendments, restatements, supplements or other modifications thereto." immediately after the period in the ninth line thereof. 2. The definition of "Maximum Credit" set forth in Section 1 of the Loan Agreement is hereby amended and restated in its entirety to read as follows: "Maximum Credit" shall mean the amount of $55,000,000 minus the aggregate amount of the "Revolving Loans" and the "Letter of Credit Accommodations" (as such terms are defined and used in the DeSoto Loan Agreement). 3. The following definitions are hereby added to Section 1 of the Loan Agreement in their appropriate alphabetical order: "Indenture" shall mean that certain Indenture dated August 7, 1997, between the Borrower and The Bank of New York, as trustee. "Indenture Trustee" shall mean the trustee under the Indenture. "Indenture Trustee-Lender Intercreditor Agreement" shall mean that certain Intercreditor Agreement dated August 7, 1997, between Lender and the Indenture Trustee. "Permitted Asset Sale" shall mean an Asset Sale (as defined in the Indenture without giving effect to any modifications, amendments or other supplements thereto) that (a) does not include a sale of the Collateral, (b) does not exceed, when aggregated with all other Permitted Asset Sales by all Affiliates during the prior twelve month period, $10,000,000, (c) does not include any real property which is used in Borrower's operations or on which Collateral is located, and (d) does not occur during or result in an Event of Default. "Senior Notes" shall mean those certain Senior Secured Notes due August 1, 2007 issued pursuant to the terms of the Indenture. B. Section 3.3 of the Loan Agreement is hereby amended to insert the following sentences immediately at the end thereof: "Notwithstanding the foregoing, at any time that there are no, and have not been for the most recent sixty (60) day period, Revolving Loans or Letter of Credit Accommodations hereunder or under and as defined in the DeSoto Loan Agreement outstanding, such $5,000 servicing fee shall be reduced to $2,500 ("Reduced Servicing Fee"). Such Reduced Servicing Fee shall be immediately increased to $5,000 upon Borrower incurring any Revolving Loans or Letter of Credit Accommodations hereunder or under and as defined in the DeSoto Loan Agreement." C. Section 5.2 of the Loan Agreement is hereby amended to (i) insert the word "and" between the words "licensee," and "choses" in the fourth line thereof and (ii) delete the phrase "and existing and future leasehold interests in equipment, real estate and fixtures" in the fourth and fifth lines thereof. D. Section 5.3 of the Loan Agreement is hereby amended to insert the phrase "except for the Trust Money (as defined in and pursuant to the Indenture) or other property deposited with the Indenture Trustee pursuant to Section 3.5 or Article VIII of the Indenture or delivered to or received by the Indenture Trustee for application in accordance with Section 6.11 of the Indenture," immediately before the word "all" in the first line thereof. E. Section 5.5 of the Loan Agreement is hereby deleted in its entirety and denoted as "[intentionally deleted]". F. Section 5.8 of the Loan Agreement is hereby deleted in its entirety and denoted as "[intentionally deleted]". G. Section 6.3 of the Loan Agreement is hereby amended to insert the following immediately at the end thereof: (d) Notwithstanding the foregoing, at Borrower's request, Borrower shall not be required to comply with subsections 6.3(a) and 6.3(c) so long as (i) there are no outstanding Obligations hereunder or under and as defined in the DeSoto Loan Agreement and (ii) Borrower does not anticipate requesting any Revolving Loans or Letter of Credit Accommodations hereunder or as defined in the DeSoto Loan Agreement within the next sixty (60) days; provided, however, that if Borrower at any time anticipates requesting such Revolving Loans or Letter of Credit Accommodations within the next sixty (60) days, Borrower shall immediately take all actions necessary to immediately come into compliance with subsections 6.3(a) and 6.3(c) hereof. H. Section 7.1 of the Loan Agreement is hereby amended to delete the phrase "and Equipment" immediately prior to the word "acquired" in the seventh line thereof. I. Section 7.4 of the Loan Agreement is hereby amended to delete subsections (a), (d), (e) and (f) thereof. J. Section 9.7(b) of the Loan Agreement is hereby amended to delete clauses (ii) and (iii) thereof and substitute the phrase "and (ii) Permitted Asset Sales, provided that Borrower immediately reports to Lender the terms and conditions of such Permitted Asset Sale and the amount and use of proceeds therefrom" in place thereof. K. Section 9.8 of the Loan Agreement is hereby amended to (i) delete the first reference to "and" in the last line thereof and (ii) insert the phrase "(f) the liens and security interests arising pursuant to the Indenture (as in effect as of August 7, 1997 without giving effect to any amendments, restatements, supplements or other modifications thereto); (g) liens and security interests on the Collateral (as defined in the Indenture), provided that any such lienholder or secured party shall be required to be bound by the same terms as the Indenture Trustee is bound by the Indenture Trustee-Lender Intercreditor Agreement; and (h) purchase money liens on and security interests in equipment, fixtures and real estate created pursuant to the three-year capital improvements plan described in the section entitled "Capital Improvements" of the Borrower's final Offering Memorandum filed with the Securities and Exchange Commission with respect to the Senior Notes, but only if the holder of each such lien or security interest shall have, prior to the creation thereof, entered into an agreement with Lender, in form and substance reasonably acceptable to Lender, to assure Lender access to the Collateral and the ability to utilize the property subject to such lien or security interest after an Event of Default on a basis consistent with the terms of the Indenture Trustee-Lender Intercreditor Agreement" immediately before the period in the last line thereof. L. Section 9.9 of the Loan Agreement is hereby amended and restated in its entirety to read as follows: Indebtedness and Certain Restrictions on Payments. Borrower shall not, nor permit Caldwell or Fox Valley to, incur, create, assume, become or be liable in any manner with respect to, or permit to exist, any obligations or indebtedness, except (a) the Obligations; (b) trade obligations and normal accruals in the ordinary course of business not yet due and payable, or with respect to which the Borrower, Caldwell or Fox Valley (as applicable) is contesting in good faith the amount or validity thereof by appropriate proceedings diligently pursued and available to Borrower, Caldwell or Fox Valley (as applicable), and with respect to which adequate reserves have been set aside on its books; (c) purchase money indebtedness (including capital leases) to the extent not incurred or secured by liens (including capital leases) in violation of any other provision of this Agreement; (d) obligations or indebtedness set forth in the Information Certificate; provided, that, (i) except for (A) mandatory redemptions of the Senior Notes as a result of a Permitted Asset Sale required under the Indenture (as in effect as of August 7, 1997 without giving effect to any amendments, restatements, supplements or other modifications thereto) and (B) optional redemptions and defeasance of the Senior Notes as permitted under the Indenture (as in effect as of August 7, 1997 without giving effect to any amendments, restatements, supplements or other modifications thereto) which are made at a time when no Event of Default has occurred and is continuing so long as there are no outstanding Revolving Loans or Letter of Credit Accommodations hereunder or under and as defined in the DeSoto Loan Agreement, Borrower, Caldwell or Fox Valley (as applicable) may only make regularly scheduled payments of principal and interest in respect of such indebtedness in accordance with the terms of the agreement or instrument evidencing or giving rise to such indebtedness as in effect on the date hereof, (ii) Borrower, Caldwell and Fox Valley shall not, directly or indirectly, (A) amend, modify, alter or change the terms of such indebtedness or any agreement, document or instrument related thereto as in effect on the date hereof, or (B) except for (i) mandatory redemptions of the Senior Notes as a result of a Permitted Asset Sale required under the Indenture (as in effect as of August 7, 1997 without giving effect to any amendments, restatements, supplements or other modifications thereto) and (ii) optional redemptions and defeasance of the Senior Notes as permitted under the Indenture (as in effect as of August 7, 1997 without giving effect to any amendments, restatements, supplements or other modifications thereto) which are made at a time when no Event of Default has occurred and is continuing so long as there are no outstanding Revolving Loans or Letter of Credit Accommodations hereunder or under and as defined in the DeSoto Loan Agreement, redeem, retire, defease, purchase or otherwise acquire such indebtedness, or set aside or otherwise deposit or invest any sums for such purpose, (iii) Borrower, Caldwell or Fox Valley (as applicable) shall furnish to Lender all notices or demands in connection with such indebtedness either received by Borrower, Caldwell or Fox Valley (as applicable) or on their behalf, promptly after the receipt thereof, or sent by Borrower, Caldwell or Fox Valley (as applicable) or on their behalf, concurrently with the sending thereof, as the case may be, and (iv) at no time shall any such obligations or indebtedness (A) of Caldwell (other than indebtedness owed to Borrower and permitted under Section 9.10 hereof) exceed $250,000 and (B) of Fox Valley (other than indebtedness owed to Borrower and permitted under Section 9.10 hereof) exceed $250,000; (e) indebtedness secured by liens and security interests on all or a part of the Collateral (as defined in the Indenture), provided that any such lender shall be required to be bound by the same terms as the Indenture Trustee is bound under the Indenture Trustee-Lender Intercreditor Agreement; and (f) purchase money indebtedness which is secured by liens and security interests as permitted under Section 9.8(h) hereof which is incurred in compliance with the Indenture and which does not cause Borrower to violate the terms of Section 9.13 hereof. Notwithstanding the foregoing, after an Event of Default, any payments made by Borrower to the Indenture Trustee for any purpose shall only be made from proceeds of either Permitted Asset Sales or other sales of assets which are not Collateral and which do not constitute Asset Sales (as defined in the Indenture without giving effect to any modifications, amendments or other supplements thereto) or refinancings, and none of the proceeds of the Revolving Loan or the Letter of Credit Accommodations hereunder or under and as defined in the DeSoto Loan Agreement shall be used for such payments. M. Section 9.11 of the Loan Agreement is hereby amended to insert the phrase "Except for (a) dividends on the Borrower's Series A Preferred Stock (the "Series A Preferred Stock") not to exceed $70,000 per quarter and (b) any redemption, in whole or in part, of the Series A Preferred Stock outstanding as of August 7, 1997 not to exceed $3,500,000, in either case so long as no Event of Default exists or would exist due to any such dividends on or any redemption of the Series A Preferred Stock," immediately before the word "Borrower" in the first line thereof. N. Section 9.10 of the Loan Agreement is hereby amended and restated in its entirety to read as follows: Revolving Loans, Investments. Guarantees. Etc. Borrower shall not, directly or indirectly, make any loans or advance money or property to any person, or invest in (by capital contribution, dividend or otherwise) or purchase or repurchase the stock or indebtedness or all or a substantial part of the assets or property of any person, or guarantee, assume, endorse, or otherwise become responsible for (directly or indirectly) the indebtedness, performance, obligations or dividends of any Person or agree to do any of the foregoing, except: (a) the endorsement of instruments for collection or deposit in the ordinary course of business; (b) loans or investments which result from the conversion of past due accounts receivable into notes or stock, which notes or stock are delivered and pledged to Lender; (c) investments in: (i) short-term direct obligations of the United States Government, (ii) negotiable certificates of deposit issued by any bank satisfactory to Lender, payable to the order of the Borrower or to bearer and delivered to Lender, (iii) commercial paper rated A1 or P l, (iv) the advances and investments as of December 31, 1995 in Engineered Wire Products, Inc., an Ohio corporation, and (v) loans or investments of no greater than (i) $3,000,000 to Fox Valley made available on a revolving credit basis and evidenced by a subordinated demand note, provided that Fox Valley is Solvent at the time of such loans or investments, (ii) $5,000,000 to Caldwell made available on a revolving credit basis and evidenced by a subordinated demand note, provided that Caldwell is Solvent at the time of such loans or investments, (iii)$10,000,000 to DeSoto, Inc. (excluding the initial investment of approximately $70,000,000 made to initially capitalize DSO Acquisition Corporation with the contribution of the Sherman Wire assets plus (X) the value of Borrower's stock issued in connection with the DeSoto Acquisition and (Y) all transaction costs related to the DeSoto Acquisition) made available on a revolving credit basis and evidenced by a subordinated demand note, provided that DeSoto, Inc. is Solvent at the time of such loans or investments, and (iv) $8,800,000 to DeSoto, Inc. made available as a term loan on or about August 7, 1997 to be evidenced by a subordinated demand note; provided, that, as to any of the foregoing, unless waived in writing by Lender, Borrower shall take such actions as are deemed necessary by Lender to perfect the security interest of Lender in such investments; and (d) the guarantee by Borrower of the obligations owing to Lender by Joint Venture and the guarantees set forth in the Information Certificate. O. The Information Certificate attached to the Loan Agreement is hereby amended to insert "Indenture - $100,000,000" under the section entitled "Indebtedness (Section 9.9)". II. Release of Term Loan. As of the Effective Date hereof, Lender and Borrower release each other from all obligations under the Term Loan and the Term Loan shall be of no further force and effect. III. Conditions to Effectiveness of Second Amendment. This Second Amendment shall become effective on the date (the "Effective Date") when Borrower shall satisfy all of the following conditions: A. Second Amendment. Borrower and Lender shall have duly executed and delivered this Second Amendment. B. Indenture and Senior Notes. Borrower shall have duly executed and delivered the Indenture and the Senior Notes shall have been duly issued thereunder. C. Payment of Obligations under Term Loan. Borrower shall prepay the entire principal balance and all accrued interest of, and pay all fees and other amounts outstanding under, the Term Loan. D. Execution of Indenture Trustee-Lender Intercreditor Agreement. The Indenture Trustee shall have duly authorized, executed and delivered the Indenture Trustee-Lender Intercreditor Agreement. E. Additional Matters. Lender shall have received such other certificates, opinions, documents and instruments relating to the obligations or the transactions contemplated hereby, by the Indenture and by the Financing Agreements as may have been reasonably requested by Lender, and all corporate and other proceedings and all other documents and all legal matters in connection with the transactions contemplated hereby, by the Indenture and by the Financing Agreements shall be reasonably satisfactory in form and substance to Lender. F. Term Loan Termination Fee. Borrower shall have paid Lender the early termination fee set forth in Section 12.1(c) of the Loan Agreement. IV. Release of Collateral. As of the Effective Date hereof, Lender shall release certain mortgages, security interests and other liens in accordance with this Second Amendment and Lender agrees to deposit documents evidencing the release thereof with Commonwealth Land Title Insurance Company (the "Title Company") promptly after the execution hereof by all parties, provided, however, that such release documentation shall not be so deposited unless and until Lender shall have received an executed escrow letter (the "Escrow Letter") by and between Lender and the Title Company, substantially in the form of Exhibit A attached hereto, providing for, among other things, (i) the execution and delivery by Lender into escrow with the Title Company, on or prior to the Effective Date, of all documents, UCC financing statements or other instruments required by the Escrow Letter and Exhibits A, B and C thereof and (ii) the recordation and filing in the appropriate jurisdictions by the Title Company of all such documents, UCC financing statements or other instruments, upon the terms and subject to the conditions set forth in the Escrow Letter. V. Representations and Warranties. In order to induce Lender to enter into this Second Amendment, Borrower represents and warrants to Lender, upon the effectiveness of this Second Amendment, which representations and warranties shall survive the execution and delivery of this Second Amendment, that: A. Borrower is a corporation duly organized, validly existing and in good standing under the laws of the state of its incorporation; B. The execution, delivery and performance of this Second Amendment by Borrower are within its corporate powers and have been duly authorized by all necessary corporate action; C. This Second Amendment constitutes a legal, valid and binding obligation of Borrower, enforceable against Borrower in accordance with its terms, except as enforcement 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 D. All of the representations and warranties contained in the Loan Agreement and in the other Financing Agreements (other than those which speak expressly only as of a different date) are true and correct as of the date of this Second Amendment after giving effect to this Second Amendment. VI. Miscellaneous. A. Effect: Ratification. The amendments set forth herein are effective solely for the purpose set forth herein and shall be limited precisely as written, and shall not be deemed to (i) be a consent to any amendment, waiver or modification of any other term or condition of the Loan Agreement or of any other Financing Agreements or (ii) prejudice any right or rights that Lender may now have or may have in the future under or in connection with the Loan Agreement or any other Financing Agreements. Each reference in the Loan Agreement to "this Agreement", "herein", "hereof" and words of like import and each reference in the other Financing Agreements to the Loan Agreement shall mean the Loan Agreement as amended hereby. This Second Amendment shall be construed in connection with and as part of the Loan Agreement and all terms, conditions, representations, warranties, covenants and agreements set forth in the Loan Agreement and each other Financing Agreement, except as herein amended or waived, are hereby ratified and confirmed and shall remain in full force and effect. B. Costs and Expenses. Borrower shall pay to Lender on demand all reasonable out-of-pocket costs, expenses, title fees, filing fees and taxes paid or payable in connection with the preparation, negotiation, execution, delivery, recording, administration, collection, liquidation, enforcement and defense of the Obligations, Lender's rights in the Collateral, this Second Amendment, the Indenture Trustee-Lender Intercreditor Agreement, the Loan Agreement, the other Financing Agreements and all other documents related hereto or thereto, including any amendments, supplements or consents which may hereafter be contemplated (whether or not executed) or entered into in respect hereof and thereof, including, but not limited to: (a) all costs and expenses of filing or recording (including Uniform Commercial Code financing statement filing taxes and fees, documentary taxes, intangibles taxes and mortgage recording and title insurance taxes and fees, if applicable); (b) costs and expenses and fees for title insurance and other insurance premiums, environmental audits, surveys, assessments, engineering reports and inspections, appraisal fees and search fees; (c) costs and expenses of remitting loan proceeds, collecting checks and other items of payment; (d) charges, fees or expenses charged by any bank or issuer in connection with the Letter of Credit Accommodations; (e) costs and expenses of preserving and protecting the Collateral; (f) costs and expenses paid or incurred in connection with obtaining payment of the Obligations, enforcing the security interests and liens of Lender, selling or otherwise realizing upon the Collateral, and otherwise enforcing the provisions of this Second Amendment, the Loan Agreement and the other Financing Agreements or defending any claims made or threatened against Lender arising out of the transactions contemplated hereby and thereby (including, without limitation, preparations for and consultations concerning any such matters); and (g) the fees and disbursements of counsel (including legal assistants) to Lender in connection with the foregoing. C, Certain Waivers: Release. Although Borrower does not believe that it has any claims against Lender, it is willing to provide Lender with a general and total release of all such claims in consideration of the benefits which Borrower will receive pursuant to this Second Amendment. Accordingly, Borrower for itself and any successor of Borrower hereby knowingly, voluntarily, intentionally and irrevocably releases and discharges Lender and its respective officers, directors, agents and counsel (each a "Releasee") from any and all actions, causes of action, suits, sums of money, accounts, reckonings, bonds, bills, specialties, covenants, contracts, controversies, agreements, promises, variances, trespasses, damages, judgments, extents, executions, losses, liabilities, costs, expenses, debts, dues, demands, obligations or other claims of any kind whatsoever, in law, admiralty or equity, which Borrower ever had, now have or hereafter can, shall or may have against any Releasee for, upon or by reason of any matter, cause or thing whatsoever from the beginning of the world to the date of this Second Amendment. D. Counterparts. This Second Amendment may be executed in any number of counterparts, each such counterpart constituting an original but all together constitute one and the same instrument. E. Severability. Any provision contained in this Second Amendment that is held to be inoperative, unenforceable or invalid in any jurisdiction shall, as to that jurisdiction, be inoperative, unenforceable or invalid without affecting the remaining provisions of this Second Amendment in that jurisdiction or the operation, enforceability or validity of that provision in any other jurisdiction. F. GOVERNING LAW. THIS SECOND AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS. G. Consent to Amendment to DeSoto Loan Agreement. Borrower hereby consents to DeSoto entering into that certain First Amendment to Revolving Loan and Security Agreement dated as of the date hereof under the terms and conditions set forth therein. H. Consent to Further Documentation. Borrower hereby consents to the preparation of a Second Amended and Restated Revolving Loan and Security Agreement promptly after the Effective Date to, among other things, incorporate into a single document the modifications to the Loan Agreement set forth in this Second Amendment. [remainder of page intentionally left blank] IN WITNESS WHEREOF, the parties hereto have executed this Second Amendment as of the date first above written. CONGRESS FINANCIAL CORPORATION (CENTRAL) By: Name: Title: KEYSTONE CONSOLIDATED INDUSTRIES, INC. By: Name: Title: Exhibit A Form of Escrow Letter August __, 1997 VIA FACSIMILE AND FEDERAL EXPRESS Mr. Mark Baillie Commonwealth Land Title Insurance Company 655 Third Avenue, 11th Floor New York, New York 10017 Re: Second Amendment to Amended and Restated Revolving Loan and Security Agreement and Release of Term Loan and Security Agreement by and between Congress Financial Corporation (Central) and Keystone Consolidated Industries, Inc. and the transactions contemplated thereby Dear Mr. Baillie: This letter constitutes the escrow instructions of Congress Financial Corporation (Central) ("Congress") in connection with the transactions contemplated by that certain Second Amendment to Amended and Restated Revolving Loan and Security Agreement and Release of Term Loan and Security Agreement (the "Second Amendment"), dated as of the date hereof, by and between Congress, as lender, and Keystone Consolidated Industries, Inc., as borrower ("Keystone"), and related documents, including the release of certain security interests in favor of Congress. In connection therewith, S. Jay Novatney of Latham & Watkins, counsel to Congress, will deliver the following executed original documents to you: 1. Releases of each of the mortgages set forth on Exhibit A hereto to be filed in and recorded with the appropriate office(s) in the jurisdictions listed on Exhibit A; 2. UCC-3 Partial Release Statements as set forth on Exhibit B hereto executed by Congress to be filed in and recorded with the appropriate office(s) in the jurisdictions listed on Exhibit B; and 3. UCC-3 Termination Statements as set forth on Exhibit C hereto executed by Congress to be filed in and recorded with the appropriate offices) in the jurisdictions listed on Exhibit C. The documents referred to above (collectively the "Closing Documents") have been or will be delivered to you in escrow and are to be held in and released from escrow for recordation solely in accordance with the terms and conditions of this letter. We anticipate being in a position to authorize recording on Thursday, August 7, 1997, or such other date as designated by Congress and Keystone as the date of the closing of the transactions referred to herein (the "Closing Date"). You will be irrevocably authorized to release the Closing Documents from escrow and record such Closing Documents in the appropriate jurisdictions only if and when the following conditions have been met: A. You receive executed originals of all of the Closing Documents; and B. You receive facsimile or other written confirmation from any of (i) Brett Mook, William Bloom, or George Kalesnik of Congress or (ii) Donald Schwartz, Bradley Kotler or Jay Novatney of Latham & Watkins on behalf of Congress, that you are instructed and authorized to release the Closing Documents from escrow and to record same. If you do not receive the foregoing written instructions by the close of business on ____________, 1997, you agree to return all of the Closing Documents to Latham & Watkins, 5800 Sears Tower, Chicago, Illinois 60606, Attention: _____________and to destroy any and all copies which you may have made thereof, by the close on business on ___________________, 1997. After the Closing Date, please send copies of the recorded Closing Documents, including file stamped copies of all UCC statements, recorded by you pursuant to this letter, to Latham & Watkins, 5800 Sears Tower, Chicago, Illinois 60606, Attention: _____________. Please also send copies of the recorded Closing Documents, including file stamped copies of all UCC statements, recorded by you pursuant to this letter to Keystone Consolidated Industries, Inc., Three Lincoln Centre, 5430 LBJ Freeway #1740, Dallas, Texas 75240, Attention: General Counsel. All title charges and costs or recording are to be paid by Keystone directly to you, and Congress is to be held at no expense for the transaction. EX-4.7 7 exh47kci.txt THIRD AMENDMENT TO AMENDED AND RESTATED REVOLVING LOAN AND SECURITY AGREEMENT THIS THIRD AMENDMENT TO AMENDED AND RESTATED REVOLVING LOAN AND SECURITY AGREEMENT (the "Third Amendment") is entered into as of May 14, 1999, by and between KEYSTONE CONSOLIDATED INDUSTRIES, INC., a Delaware corporation ("Borrower"), and CONGRESS FINANCIAL CORPORATION (CENTRAL), an Illinois corporation ("Lender"). Except for terms which are expressly defined herein, all capitalized terms used herein shall have the meaning subscribed to them in the Loan Agreement (as defined below). RECITALS WHEREAS, Borrower and Lender are parties to that certain Amended and Restated Revolving Loan and Security Agreement dated as of December 29, 1995, as amended by that certain First Amendment to Amended and Restated Revolving Loan and Security Agreement dated as of September 27, 1996 and that certain Second Amendment to Amended and Restated Revolving Loan and Security Agreement and Release of Term Loan and Security Agreement dated as of August 4, 1997 (collectively, the "Loan Agreement"). WHEREAS, Borrower desires to amend the terms of the Loan Agreement to reflect the disposition by Borrower of certain of DeSoto's laundry facility assets in Joliet, Illinois and to permit Borrower to, among other things, enter into a joint venture with Spartanburg Forest Products, Inc., a South Carolina corporation, and Gossling Consulting L.L.C., a Delaware limited liability company, and guarantee certain obligations of the joint venture. WHEREAS, Lender is willing to amend the Loan Agreement on the terms and conditions set forth herein. NOW, THEREFORE, in consideration of the mutual conditions and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: 1. Amendments to the Loan Agreement A. The definition of "Inventory Cap Adjustment" in Section 1 of the Loan Agreement is hereby amended and restated in its entirety to read as follows: "Inventory Cap Adjustment" shall mean, at any time, the amount, if any, by which the Inventory Utilization exceeds $25,000,000. B. Section 9.10 of the Loan Agreement is hereby amended and restated in its entirety to read as follows: Revolving Loans, Investments, Guarantees, Etc. Borrower shall not, directly or indirectly, make any loans or advance money or property to any person, or invest in (by capital contribution, dividend or otherwise) or purchase or repurchase the stock or indebtedness or all or a substantial part of the assets or property of any person, or guarantee, assume, endorse, or otherwise become responsible for (directly or indirectly) the indebtedness, performance, obligations or dividends of any Person or agree to do any of the foregoing, except: (a) the endorsement of instruments for collection or deposit in the ordinary course of business; (b) loans or investments which result from the conversion of past due accounts receivable into notes or stock, which notes or stock are delivered and pledged to Lender; (c) investments in: (i) short-term direct obligations of the United States Government, (ii) negotiable certificates of deposit issued by any bank satisfactory to Lender, payable to the order of the Borrower or to bearer and delivered to Lender, (iii) commercial paper rated A1 or P1, (iv) the advances and investments as of December 31, 1995 in Engineered Wire Products, Inc., an Ohio corporation, and (v) loans or investments of no greater than (A) $3,000,000 to Fox Valley made available on a revolving credit basis and evidenced by a subordinated demand note, provided that Fox Valley is Solvent at the time of such loans or investments, (B) $5,000,000 to Caldwell made available on a revolving credit basis and evidenced by a subordinated demand note, provided that Caldwell is Solvent at the time of such loans or investments, (C) $10,000,000 to DeSoto, Inc. (excluding the initial investment of approximately $70,000,000 made to initially capitalize DSO Acquisition Corporation with the contribution of the Sherman Wire assets plus (x) the value of Borrower's stock issued in connection with the DeSoto Acquisition and (y) all transaction costs related to DeSoto Acquisition) made available on a revolving credit basis and evidenced by a subordinated demand note, provided that DeSoto, Inc. is Solvent at the time of such loans or investments, (D) $8,800,000 to DeSoto, Inc. made available as a term loan on or about August 7, 1997 to be evidenced by a subordinated demand note, and (E) an investment of $102,000 made to initially capitalize Garden Zone, LLC, a Delaware limited liability company ("Garden Zone"); provided, that, as to any of the foregoing, unless waived in writing by Lender, Borrower shall take such actions as are deemed necessary by Lender to perfect the security interest of Lender in such investments; and (d) the guarantee(s) (i) by Borrower of the obligations owing to Lender by Joint Venture, (ii) by Borrower of up to $2,040,000 of the obligations owing to National Bank of South Carolina by Garden Zone and (iii) set forth in the Information Certificate. B. The Information Certificate attached as Exhibit A to the Loan Agreement is hereby amended to delete "DSO Acquisition Corporation" under the section entitled "Subsidiaries (Section 8.1)" and to insert "Garden Zone, LLC" in place thereof. II. Conditions to Effectiveness of Third Amendment. This Third Amendment shall become effective on the date (the "Effective Date") when Borrower shall satisfy all of the following conditions: A. Third Amendment. Borrower and Lender shall have duly executed and delivered this Third Amendment. B. Additional Matters. Lender shall have received such other certificates, opinions, UCC financing statements, documents and instruments relating to the obligations or the transactions contemplated hereby as may have been reasonably requested by Lender, and all corporate and other proceedings and all other documents and all legal matters in connection with the transactions contemplated hereby shall be reasonably satisfactory in form and substance to Lender. IV. Representations and Warranties. In order to induce Lender to enter into this Third Amendment, Borrower represents and warrants to Lender, upon the effectiveness of this Third Amendment, which representations and warranties shall survive the execution and delivery of this Third Amendment, that: A. Borrower is a corporation duly organized, validly existing and in good standing under the laws of the state of its incorporation; B. the execution, delivery and performance of this Third Amendment by Borrower are within its corporate powers and have been duly authorized by all necessary corporate action; C. this Third Amendment constitutes a legal, valid and binding obligation of Borrower, enforceable against Borrower in accordance with its terms, except as enforcement 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 D. all of the representations and warranties contained in the Loan Agreement and in the other Financing Agreements (other, than those which speak expressly only as of a different date) are true and correct as of the date of this Third Amendment after giving effect to this Third Amendment. V. Miscellaneous. A. Effect; Ratification. The amendments set forth herein are effective solely for the purpose set forth herein and shall be limited precisely as written, and shall not be deemed to (i) be a consent to any amendment, waiver or modification of any other term or condition of the Loan Agreement or of any other Financing Agreements or (ii) prejudice any right or rights that Lender may now have or may have in the future under or in connection with the Loan Agreement or any other Financing Agreements. Each reference in the Loan Agreement to "this Agreement", "herein", "hereof" and words of like import and each reference in the other Financing Agreements to the Loan Agreement shall mean the Loan Agreement as amended hereby. This Third Amendment shall be construed in connection with and as part of the Loan Agreement and all terms, conditions, representations, warranties, covenants and agreements set forth in the Loan Agreement and each other Financing Agreement, except as herein amended or waived, are hereby ratified and confirmed and shall remain in full force and effect. B. Costs and Expenses. Borrower shall pay to Lender on demand all reasonable out-of-pocket costs, expenses, title fees, filing fees and taxes paid or payable in connection with the preparation, negotiation, execution, delivery, recording, administration, collection, liquidation, enforcement and defense of the Obligations, Lender's rights in the Collateral, this Third Amendment, the Loan Agreement, the other Financing Agreements and all other documents related hereto or thereto, including any amendments, supplements or consents which may hereafter be contemplated (whether or not executed) or entered into in respect hereof and thereof, including, but not limited to: (a) all costs and expenses of filing or recording (including Uniform Commercial Code financing statement filing taxes and fees, documentary taxes, intangibles taxes and mortgage recording and title insurance taxes and fees, if applicable); (b) costs and expenses and fees for title insurance and other insurance premiums, environmental audits, surveys, assessments, engineering reports and inspections, appraisal fees and search fees; (c) costs and expenses of remitting loan proceeds, collecting checks and other items of payment; (d) charges, fees or expenses charged by any bank or issuer in connection with the Letter of Credit Accommodations; (e) costs and expenses of preserving and protecting the Collateral; (f) costs and expenses paid or incurred in connection with obtaining payment of the Obligations, enforcing the security interests and liens of Lender, selling or otherwise realizing upon the Collateral, and otherwise enforcing the provisions of this Third Amendment, the Loan Agreement and the other Financing Agreements or defending any claims made or threatened against Lender arising out of the transactions contemplated hereby and thereby (including, without limitation, preparations for and consultations concerning any such matters); and (g) the fees and disbursements of counsel (including legal assistants) to Lender in connection with the foregoing. C. Certain Waivers; Release. Although Borrower does not believe that it has any claims against Lender, it is willing to provide Lender with a general and total release of all such claims in consideration of the benefits which Borrower will receive pursuant to this Third Amendment. Accordingly, Borrower for itself and any successor of Borrower hereby knowingly, voluntarily, intentionally and irrevocably releases and discharges Lender and its respective officers, directors, agents and counsel (each a "Releasee") from any and all actions, causes of action, suits, sums of money, accounts, reckonings, bonds, bills, specialties, covenants, contracts, controversies, agreements, promises, variances, trespasses, damages, judgments, extents, executions, losses, liabilities, costs, expenses, debts, dues, demands, obligations or other claims of any kind whatsoever, in law, admiralty or equity, which Borrower ever had, now has or hereafter can, shall or may have against any Releasee for, upon or by reason of any matter, cause or thing whatsoever from the beginning of the world to the date of this Third Amendment. D. Counterparts. This Third Amendment may be executed in any number of counterparts, each such counterpart constituting an original but all together constituting one and the same instrument. E. Severability. Any provision contained in this Third Amendment that is held to be inoperative, unenforceable or invalid in any jurisdiction shall, as to that jurisdiction, be inoperative, unenforceable or invalid without affecting the remaining provisions of this Third Amendment in that jurisdiction or the operation, enforceability or validity of that provision in any other jurisdiction. F. GOVERNING LAW. THIS THIRD AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS. [remainder of page intentionally left blank] IN WITNESS WHEREOF, the parties hereto have executed this Third Amendment as of the date first above written. CONGRESS FINANCIAL CORPORATION (CENTRAL) By: Name: Title: KEYSTONE CONSOLIDATED INDUSTRIES, INC. By: Name: Title: EX-4.10 8 exh410kci.txt SIXTH AMENDMENT TO AMENDED AND RESTATED REVOLVING LOAN AND SECURITY AGREEMENT THIS SIXTH AMENDMENT TO AMENDED AND RESTATED REVOLVING LOAN AND SECURITY AGREEMENT (the "Sixth Amendment") is entered into as of January 17, 2001, by and between KEYSTONE CONSOLIDATED INDUSTRIES, INC., a Delaware corporation ("Borrower"), and CONGRESS FINANCIAL CORPORATION (CENTRAL), an Illinois corporation ("Lender"). Except for terms which are expressly defined herein, all capitalized terms used herein shall have the meaning subscribed to them in the Loan Agreement (as defined below). RECITALS WHEREAS, Borrower and Lender are parties to that certain Amended and Restated Revolving Loan and Security Agreement dated as of December 29, 1995 (as amended, supplemented or otherwise modified from time to time, the "Loan Agreement"). WHEREAS, Borrower desires to amend the terms of the Loan Agreement. WHEREAS, Lender is willing to amend the Loan Agreement on the terms and conditions set forth herein. NOW, THEREFORE, in consideration of the mutual conditions and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: I. Amendment to the Loan Agreement. A. Section 1 of the Loan Agreement is hereby amended by adding the following defined term in the appropriate alphabetical order: "Fox Valley Asset Sale" shall mean the sale of all or substantially all of the assets of Fox Valley pursuant to the terms of the Asset Purchase Agreement (the "Fox Valley Sale Agreement") dated as of January 12, 2001, by and between Fox Valley and Monroe Acquisition Corp. B. Section 9.7 of the Loan Agreement is hereby amended by inserting the following sentence immediately following the last sentence thereof: "Notwithstanding the foregoing, Lender hereby authorizes the Fox Valley Asset Sale in accordance with the Fox Valley Sale Agreement so long as the net proceeds of such sale related to the sale of Accounts and Inventory in an amount equal to or in excess of $1,294,000 are (a) sent via wire transfer in immediately available funds to the following account: Chase Manhattan Bank 4 New York Plaza New York, NY ABA 021000021 Congress Financial Corporation (Central) A/C # 322-020557 Re: Keystone Consolidated Industries, and (b) applied to the principal balance outstanding under the Revolving Loans pursuant to Section 6.4 hereof." C. Section 9.20 of the Loan Agreement is hereby amended by inserting the following sentence immediately following the last sentence thereof: "Notwithstanding the foregoing, Lender hereby authorizes the Fox Valley Asset Sale in accordance with the Fox Valley Sale Agreement so long as the net proceeds of such sale related to the sale of Accounts and Inventory in an amount equal to or in excess of $1,294,000 are (a) sent via wire transfer in immediately available funds to the account described in Section 9.7 hereof and (b) applied to the principal balance outstanding under the Revolving Loans pursuant to Section 6.4 hereof." D. Schedule 8.4 and the Information Certificate of the Loan Agreement are hereby amended and restated as Schedule 8.4 and the Information Certificate attached hereto. Lender acknowledges and accepts such revised Information Certificate and Schedule 8.4 as being effective as of the date hereof for all transactions with Lender after the date hereof. II. Conditions to Effectiveness of Sixth Amendment. This Sixth Amendment shall become effective on the date (the "Effective Date") when Borrower shall satisfy all of the following conditions: A. Sixth Amendment. Borrower and Lender shall have duly executed and delivered this Sixth Amendment. B. Fox Valley Asset Sale. The Fox Valley Asset Sale shall have been completed with the terms of the Fox Valley Sale Agreement in form and substance satisfactory to Lender, in its sole discretion, and Lender shall be satisfied, in its sole discretion, that the net proceeds of the Fox Valley Asset Sale related to the sale of Accounts and Inventory in an amount equal to or in excess of $1,294,000 (a) have been sent via wire transfer in immediately available funds to the account described in Section 9.7 hereof and (b) shall be applied to the principal balance outstanding under the Revolving Loans pursuant to Section 6.4 hereof. C. Additional Matters. Lender shall have received such other certificates, opinions, UCC financing statements, documents and instruments relating to the obligations or the transactions contemplated hereby as may have been reasonably requested by Lender, and all corporate and other proceedings and all other documents and all legal matters in connection with the transactions contemplated hereby shall be reasonably satisfactory in form and substance to Lender. IV. Representations and Warranties. In order to induce Lender to enter into this Sixth Amendment, Borrower represents and warrants to Lender, upon the effectiveness of this Sixth Amendment, which representations and warranties shall survive the execution and delivery of this Sixth Amendment, that: A. Borrower is a corporation duly organized, validly existing and in good standing under the laws of the state of its incorporation; B. the execution, delivery and performance of this Sixth Amendment by Borrower are within its corporate powers and have been duly authorized by all necessary corporate action; C. this Sixth Amendment constitutes a legal, valid and binding obligation of Borrower, enforceable against Borrower in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally, and by general principles of equity; D. all of the representations and warranties contained in the Loan Agreement and in the other Financing Agreements (other than those which speak expressly only as of a different date) are true and correct as of the date of this Sixth Amendment after giving effect to this Sixth Amendment; and E. as of the date hereof and following the consummation of the Fox Valley Asset Sale, Borrower is not and will not be in breach of any provision of the Indenture, including, without limitation, Section 4.16 thereof. V. Miscellaneous. A. Effect; Ratification. The amendments set forth herein are effective solely for the purpose set forth herein and shall be limited precisely as written, and shall not be deemed to (i) be a consent to any amendment, waiver or modification of any other term or condition of the Loan Agreement or of any other Financing Agreements or (ii) prejudice any right or rights that Lender may now have or may have in the future under or in connection with the Loan Agreement or any other Financing Agreements. Each reference in the Loan Agreement to "this Agreement", "herein", "hereof" and words of like import and each reference in the other Financing Agreements to the Loan Agreement shall mean the Loan Agreement as amended hereby. This Sixth Amendment shall be construed in connection with and as part of the Loan Agreement and all terms, conditions, representations, warranties, covenants and agreements set forth in the Loan Agreement and each other Financing Agreement, except as herein amended or waived, are hereby ratified and confirmed and shall remain in full force and effect. B. Costs and Expenses. Borrower shall pay to Lender on demand all reasonable out-of-pocket costs, expenses, title fees, filing fees and taxes paid or payable in connection with the preparation, negotiation, execution, delivery, recording, administration, collection, liquidation, enforcement and defense of the Obligations, Lender's rights in the Collateral, this Sixth Amendment, the Loan Agreement, the other Financing Agreements and all other documents related hereto or thereto, including any amendments, supplements or consents which may hereafter be contemplated (whether or not executed) or entered into in respect hereof and thereof, including, but not limited to: (a) all costs and expenses of filing or recording (including Uniform Commercial Code financing statement filing taxes and fees, documentary taxes, intangibles taxes and mortgage recording and title insurance taxes and fees, if applicable); (b) costs and expenses and fees for title insurance and other insurance premiums, environmental audits, surveys, assessments, engineering reports and inspections, appraisal fees and search fees; (c) costs and expenses of remitting loan proceeds, collecting checks and other items of payment; (d) charges, fees or expenses charged by any bank or issuer in connection with the Letter of Credit Accommodations; (e) costs and expenses of preserving and protecting the Collateral; (f) costs and expenses paid or incurred in connection with obtaining payment of the Obligations, enforcing the security interests and liens of Lender, selling or otherwise realizing upon the Collateral, and otherwise enforcing the provisions of this Sixth Amendment, the Loan Agreement and the other Financing Agreements or defending any claims made or threatened against Lender arising out of the transactions contemplated hereby and thereby (including, without limitation, preparations for and consultations concerning any such matters); and (g) the fees and disbursements of counsel (including legal assistants) to Lender in connection with the foregoing. C. Certain Waivers; Release. Although Borrower does not believe that it has any claims against Lender, it is willing to provide Lender with a general and total release of all such claims in consideration of the benefits which Borrower will receive pursuant to this Sixth Amendment. Accordingly, Borrower for itself and any successor of Borrower hereby knowingly, voluntarily, intentionally and irrevocably releases and discharges Lender and its respective officers, directors, agents and counsel (each a "Releasee") from any and all actions, causes of action, suits, sums of money, accounts, reckonings, bonds, bills, specialties, covenants, contracts, controversies, agreements, promises, variances, trespasses, damages, judgments, extents, executions, losses, liabilities, costs, expenses, debts, dues, demands, obligations or other claims of any kind whatsoever, in law, admiralty or equity, which Borrower ever had, now has or hereafter can, shall or may have against any Releasee for, upon or by reason of any matter, cause or thing whatsoever from the beginning of the world to the date of this Sixth Amendment. D. Counterparts. This Sixth Amendment may be executed in any number of counterparts, each such counterpart constituting an original but all together constituting one and the same instrument. E. Severability. Any provision contained in this Sixth Amendment that is held to be inoperative, unenforceable or invalid in any jurisdiction shall, as to that jurisdiction, be inoperative, unenforceable or invalid without affecting the remaining provisions of this Sixth Amendment in that jurisdiction or the operation, enforceability or validity of that provision in any other jurisdiction. F. GOVERNING LAW. THIS SIXTH AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS. [remainder of page intentionally left blank] IN WITNESS WHEREOF, the parties hereto have executed this Sixth Amendment as of the date first above written. CONGRESS FINANCIAL CORPORATION (CENTRAL) By ------------------------------------------ Name: ------------------------------------------ Title: ------------------------------------------ KEYSTONE CONSOLIDATED INDUSTRIES, INC. By ------------------------------------------- Name: ------------------------------------------- Title: ------------------------------------------- CONSENT By Guarantee dated September 27, 1996 (as amended, the "Guarantee"), the undersigned (the "Guarantor") guaranteed to Lender (as defined therein), subject to the terms, conditions and obligations set forth therein, the prompt payment and performance of all of the Guaranteed Obligations (as defined therein). The Guarantor consents to Borrower's execution of the foregoing Sixth Amendment to Loan Agreement (the "Amendment;" capitalized terms not otherwise defined herein shall have the meaning ascribed to them in the Amendment) and acknowledges the continued validity, enforceability and effectiveness of the Guarantee with respect to all loans, advances and extensions of credit to Borrower, whether heretofore or hereafter made, together with all interests thereon and all expenses in connection therewith. SHERMAN WIRE COMPANY By ---------------------------------------------- Name: ---------------------------------------------- Title: ---------------------------------------------- CONSENT By Confirmation Agreement dated September 27, 1996, relating to that Amendment, Ratification and Confirmation of Secured Guaranty Agreement dated December 29, 1995, relating to, among other things the Secured Guaranty Agreement dated October 16, 1987 (collectively, the "Guarantee"), the undersigned (the "Guarantor") guaranteed to Lender (as defined therein), subject to the terms, conditions and obligations set forth therein, the prompt payment and performance of all of the Obligations (as defined therein). The Guarantor consents to Borrower's execution of the foregoing Sixth Amendment to Loan Agreement (the "Amendment;" capitalized terms not otherwise defined herein shall have the meaning ascribed to them in the Amendment) and acknowledges the continued validity, enforceability and effectiveness of the Guarantee with respect to all loans, advances and extensions of credit to Borrower, whether heretofore or hereafter made, together with all interests thereon and all expenses in connection therewith. SHERMAN WIRE OF CALDWELL, INC. By ----------------------------------------- Name: ----------------------------------------- Title: ----------------------------------------- CONSENT By Confirmation Agreement dated September 27, 1996, relating to that Guarantee and Waiver and Rider No. 1 to Guarantee and Waiver, each dated December 30, 1993 (as amended, collectively, the "Guarantee"), the undersigned (the "Guarantor") guaranteed to Lender (as defined therein), subject to the terms, conditions and obligations set forth therein, the prompt payment and performance of all of the Obligations (as defined therein). The Guarantor consents to Borrower's execution of the foregoing Sixth Amendment to Loan Agreement (the "Amendment;" capitalized terms not otherwise defined herein shall have the meaning ascribed to them in the Amendment) and acknowledges the continued validity, enforceability and effectiveness of the Guarantee with respect to all loans, advances and extensions of credit to Borrower, whether heretofore or hereafter made, together with all interests thereon and all expenses in connection therewith. FOX VALLEY STEEL AND WIRE COMPANY By ------------------------------------------- Name: ------------------------------------------- Title: ------------------------------------------- EX-4.11 9 exh411kci.txt SEVENTH AMENDMENT TO AMENDED AND RESTATED REVOLVING LOAN AND SECURITY AGREEMENT THIS SEVENTH AMENDMENT TO AMENDED AND RESTATED REVOLVING LOAN AND SECURITY AGREEMENT (the "Seventh Amendment") is entered into as of November 1, 2001, by and between KEYSTONE CONSOLIDATED INDUSTRIES, INC., a Delaware corporation ("Borrower"), and CONGRESS FINANCIAL CORPORATION (CENTRAL), an Illinois corporation ("Lender"). Except for terms which are expressly defined herein, all capitalized terms used herein shall have the meaning subscribed to them in the Loan Agreement (as defined below). RECITALS WHEREAS, Borrower and Lender are parties to that certain Amended and Restated Revolving Loan and Security Agreement dated as of December 29, 1995 (as amended, supplemented or otherwise modified from time to time, the "Loan Agreement"). WHEREAS, Borrower desires to amend the terms of the Loan Agreement. WHEREAS, Lender is willing to amend the Loan Agreement on the terms and conditions set forth herein. NOW, THEREFORE, in consideration of the mutual conditions and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: I. Amendment to the Loan Agreement. A. The definition of "Maximum Credit" in Section 1 of the Loan Agreement is hereby amended and restated in its entirety to read as follows: "Maximum Credit" shall mean the amount of $55,000,000. II. Conditions to Effectiveness of Seventh Amendment. This Seventh Amendment shall become effective on the date (the "Effective Date") when Borrower shall satisfy all of the following conditions: A. Seventh Amendment. Borrower and Lender shall have duly executed and delivered this Seventh Amendment. B. Consent Letter. Borrower and Lender shall have duly executed and delivered that certain Consent Letter dated November 1, 2001, consenting to (i) the release of the security interest in the stock of Engineered Wire Products, Inc. and (ii) the incurrence of indebtedness by Borrower under that certain Loan Agreement dated as of November 1, 2001, by and between Borrower, the lenders party thereto and EWP Financial, LLC, as agent for the lenders. C. Additional Matters. Lender shall have received such other certificates, opinions, UCC financing statements, documents and instruments relating to the obligations or the transactions contemplated hereby as may have been reasonably requested by Lender, and all corporate and other proceedings and all other documents and all legal matters in connection with the transactions contemplated hereby shall be reasonably satisfactory in form and substance to Lender. IV. Representations and Warranties. In order to induce Lender to enter into this Seventh Amendment, Borrower represents and warrants to Lender, upon the effectiveness of this Seventh Amendment, which representations and warranties shall survive the execution and delivery of this Seventh Amendment, that: A. Borrower is a corporation duly organized, validly existing and in good standing under the laws of the state of its incorporation; B. the execution, delivery and performance of this Seventh Amendment by Borrower are within its corporate powers and have been duly authorized by all necessary corporate action; and C. this Seventh Amendment constitutes a legal, valid and binding obligation of Borrower, enforceable against Borrower in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally, and by general principles of equity. V. Miscellaneous. A. Effect; Ratification. The amendments set forth herein are effective solely for the purpose set forth herein and shall be limited precisely as written, and shall not be deemed to (i) be a consent to any amendment, waiver or modification of any other term or condition of the Loan Agreement or of any other Financing Agreements or (ii) prejudice any right or rights that Lender may now have or may have in the future under or in connection with the Loan Agreement or any other Financing Agreements. Each reference in the Loan Agreement to "this Agreement", "herein", "hereof" and words of like import and each reference in the other Financing Agreements to the Loan Agreement shall mean the Loan Agreement as amended hereby. This Seventh Amendment shall be construed in connection with and as part of the Loan Agreement and all terms, conditions, representations, warranties, covenants and agreements set forth in the Loan Agreement and each other Financing Agreement, except as herein amended or waived, are hereby ratified and confirmed and shall remain in full force and effect. B. Costs and Expenses. Borrower shall pay to Lender on demand all reasonable out-of-pocket costs, expenses, title fees, filing fees and taxes paid or payable in connection with the preparation, negotiation, execution, delivery, recording, administration, collection, liquidation, enforcement and defense of the Obligations, Lender's rights in the Collateral, this Seventh Amendment, the Loan Agreement, the other Financing Agreements and all other documents related hereto or thereto, including any amendments, supplements or consents which may hereafter be contemplated (whether or not executed) or entered into in respect hereof and thereof, including, but not limited to: (a) all costs and expenses of filing or recording (including Uniform Commercial Code financing statement filing taxes and fees, documentary taxes, intangibles taxes and mortgage recording and title insurance taxes and fees, if applicable); (b) costs and expenses and fees for title insurance and other insurance premiums, environmental audits, surveys, assessments, engineering reports and inspections, appraisal fees and search fees; (c) costs and expenses of remitting loan proceeds, collecting checks and other items of payment; (d) charges, fees or expenses charged by any bank or issuer in connection with the Letter of Credit Accommodations; (e) costs and expenses of preserving and protecting the Collateral; (f) costs and expenses paid or incurred in connection with obtaining payment of the Obligations, enforcing the security interests and liens of Lender, selling or otherwise realizing upon the Collateral, and otherwise enforcing the provisions of this Seventh Amendment, the Loan Agreement and the other Financing Agreements or defending any claims made or threatened against Lender arising out of the transactions contemplated hereby and thereby (including, without limitation, preparations for and consultations concerning any such matters); and (g) the fees and disbursements of counsel (including legal assistants) to Lender in connection with the foregoing. C. Certain Waivers; Release. Although Borrower does not believe that it has any claims against Lender, it is willing to provide Lender with a general and total release of all such claims in consideration of the benefits which Borrower will receive pursuant to this Seventh Amendment. Accordingly, Borrower for itself and any successor of Borrower hereby knowingly, voluntarily, intentionally and irrevocably releases and discharges Lender and its respective officers, directors, agents and counsel (each a "Released Party") from any and all actions, causes of action, suits, sums of money, accounts, reckonings, bonds, bills, specialties, covenants, contracts, controversies, agreements, promises, variances, trespasses, damages, judgments, extents, executions, losses, liabilities, costs, expenses, debts, dues, demands, obligations or other claims of any kind whatsoever, in law, admiralty or equity, which Borrower ever had, now has or hereafter can, shall or may have against any Released Party for, upon or by reason of any matter, cause or thing whatsoever from the beginning of the world to the date of this Seventh Amendment. D. Counterparts. This Seventh Amendment may be executed in any number of counterparts, each such counterpart constituting an original but all together constituting one and the same instrument. E. Severability. Any provision contained in this Seventh Amendment that is held to be inoperative, unenforceable or invalid in any jurisdiction shall, as to that jurisdiction, be inoperative, unenforceable or invalid without affecting the remaining provisions of this Seventh Amendment in that jurisdiction or the operation, enforceability or validity of that provision in any other jurisdiction. F. GOVERNING LAW. THIS SEVENTH AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS. [remainder of page intentionally left blank] IN WITNESS WHEREOF, the parties hereto have executed this Seventh Amendment as of the date first above written. CONGRESS FINANCIAL CORPORATION (CENTRAL) By ------------------------------------------------ Name: ------------------------------------------------ Title: ------------------------------------------------ KEYSTONE CONSOLIDATED INDUSTRIES, INC. By ------------------------------------------------ Name: ------------------------------------------------ Title: ------------------------------------------------ CONSENT By Guarantee dated September 27, 1996 (as amended, the "Guarantee"), the undersigned (the "Guarantor") guaranteed to Lender (as defined therein), subject to the terms, conditions and obligations set forth therein, the prompt payment and performance of all of the Guaranteed Obligations (as defined therein). The Guarantor consents to Borrower's execution of the foregoing Seventh Amendment to Loan Agreement (the "Amendment;" capitalized terms not otherwise defined herein shall have the meaning ascribed to them in the Amendment) and acknowledges the continued validity, enforceability and effectiveness of the Guarantee with respect to all loans, advances and extensions of credit to Borrower, whether heretofore or hereafter made, together with all interests thereon and all expenses in connection therewith. SHERMAN WIRE COMPANY By ------------------------------------------------- Name: ------------------------------------------------- Title: ------------------------------------------------- CONSENT By Confirmation Agreement dated September 27, 1996, relating to that Amendment, Ratification and Confirmation of Secured Guaranty Agreement dated December 29, 1995, relating to, among other things the Secured Guaranty Agreement dated October 16, 1987 (collectively, the "Guarantee"), the undersigned (the "Guarantor") guaranteed to Lender (as defined therein), subject to the terms, conditions and obligations set forth therein, the prompt payment and performance of all of the Obligations (as defined therein). The Guarantor consents to Borrower's execution of the foregoing Seventh Amendment to Loan Agreement (the "Amendment;" capitalized terms not otherwise defined herein shall have the meaning ascribed to them in the Amendment) and acknowledges the continued validity, enforceability and effectiveness of the Guarantee with respect to all loans, advances and extensions of credit to Borrower, whether heretofore or hereafter made, together with all interests thereon and all expenses in connection therewith. SHERMAN WIRE OF CALDWELL, INC. By ------------------------------------------------ Name: ------------------------------------------------ Title: ------------------------------------------------ CONSENT By Confirmation Agreement dated September 27, 1996, relating to that Guarantee and Waiver and Rider No. 1 to Guarantee and Waiver, each dated December 30, 1993 (as amended, collectively, the "Guarantee"), the undersigned (the "Guarantor") guaranteed to Lender (as defined therein), subject to the terms, conditions and obligations set forth therein, the prompt payment and performance of all of the Obligations (as defined therein). The Guarantor consents to Borrower's execution of the foregoing Seventh Amendment to Loan Agreement (the "Amendment;" capitalized terms not otherwise defined herein shall have the meaning ascribed to them in the Amendment) and acknowledges the continued validity, enforceability and effectiveness of the Guarantee with respect to all loans, advances and extensions of credit to Borrower, whether heretofore or hereafter made, together with all interests thereon and all expenses in connection therewith. FV STEEL AND WIRE COMPANY By ------------------------------------------------ Name: ------------------------------------------------ Title: ------------------------------------------------ EX-4.12 10 exh412kci.txt EIGHTH AMENDMENT TO AMENDED AND RESTATED REVOLVING LOAN AND SECURITY AGREEMENT THIS EIGHTH AMENDMENT TO AMENDED AND RESTATED REVOLVING LOAN AND SECURITY AGREEMENT (the "Amendment") is entered into as of December, 31, 2001, by and between KEYSTONE CONSOLIDATED INDUSTRIES, INC., a Delaware corporation ("Borrower"), and CONGRESS FINANCIAL CORPORATION (CENTRAL), an Illinois corporation ("Lender"). Except for terms which are expressly defined herein, all capitalized terms used herein shall have the meaning subscribed to them in the Loan Agreement (as defined below). RECITALS WHEREAS, Borrower and Lender are parties to that certain Amended and Restated Revolving Loan and Security Agreement dated as of December 29, 1995 (as amended, supplemented or otherwise modified from time to time, the "Loan Agreement"). WHEREAS, Borrower desires to amend the terms of the Loan Agreement. WHEREAS, Lender is willing to amend the Loan Agreement on the terms and conditions set forth herein. NOW, THEREFORE, in consideration of the mutual conditions and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: I. Amendment to the Loan Agreement. A. The Term of Agreement in Section 12.1 (a) of the Loan Agreement is hereby amended as follows: The first four sentences are deleted in their entirety and replaced by: "This agreement and the other Financing Agreements shall continue in full force and effect for a term ending on the date January 31, 2002 (the "Renewal Date")." II. Conditions to Effectiveness of Amendment. This Amendment shall become effective on the date (the "Effective Date") when Borrower shall satisfy all of the following conditions: A. Amendment. Borrower and Lender shall have duly executed and delivered this Amendment. B. Additional Matters. Lender shall have received such other certificates, opinions, UCC financing statements, documents and instruments relating to the obligations or the transactions contemplated hereby as may have been reasonably requested by Lender, and all corporate and other proceedings and all other documents and all legal matters in connection with the transactions contemplated hereby shall be reasonably satisfactory in form and substance to Lender. IV. Representations and Warranties. In order to induce Lender to enter into this Amendment, Borrower represents and warrants to Lender, upon the effectiveness of this Amendment, which representations and warranties shall survive the execution and delivery of this Amendment, that: A. Borrower is a corporation duly organized, validly existing and in good standing under the laws of the state of its incorporation; B. the execution, delivery and performance of this Amendment by Borrower are within its corporate powers and have been duly authorized by all necessary corporate action; and C. this Amendment constitutes a legal, valid and binding obligation of Borrower, enforceable against Borrower in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally, and by general principles of equity. V. Miscellaneous. A. Effect; Ratification. The amendments set forth herein are effective solely for the purpose set forth herein and shall be limited precisely as written, and shall not be deemed to (i) be a consent to any amendment, waiver or modification of any other term or condition of the Loan Agreement or of any other Financing Agreements or (ii) prejudice any right or rights that Lender may now have or may have in the future under or in connection with the Loan Agreement or any other Financing Agreements. Each reference in the Loan Agreement to "this Agreement", "herein", "hereof" and words of like import and each reference in the other Financing Agreements to the Loan Agreement shall mean the Loan Agreement as amended hereby. This Amendment shall be construed in connection with and as part of the Loan Agreement and all terms, conditions, representations, warranties, covenants and agreements set forth in the Loan Agreement and each other Financing Agreement, except as herein amended or waived, are hereby ratified and confirmed and shall remain in full force and effect. B. Costs and Expenses. Borrower shall pay to Lender on demand all reasonable out-of-pocket costs, expenses, title fees, filing fees and taxes paid or payable in connection with the preparation, negotiation, execution, delivery, recording, administration, collection, liquidation, enforcement and defense of the Obligations, Lender's rights in the Collateral, this Amendment, the Loan Agreement, the other Financing Agreements and all other documents related hereto or thereto, including any amendments, supplements or consents which may hereafter be contemplated (whether or not executed) or entered into in respect hereof and thereof, including, but not limited to: (a) all costs and expenses of filing or recording (including Uniform Commercial Code financing statement filing taxes and fees, documentary taxes, intangibles taxes and mortgage recording and title insurance taxes and fees, if applicable); (b) costs and expenses and fees for title insurance and other insurance premiums, environmental audits, surveys, assessments, engineering reports and inspections, appraisal fees and search fees; (c) costs and expenses of remitting loan proceeds, collecting checks and other items of payment; (d) charges, fees or expenses charged by any bank or issuer in connection with the Letter of Credit Accommodations; (e) costs and expenses of preserving and protecting the Collateral; (f) costs and expenses paid or incurred in connection with obtaining payment of the Obligations, enforcing the security interests and liens of Lender, selling or otherwise realizing upon the Collateral, and otherwise enforcing the provisions of this Amendment, the Loan Agreement and the other Financing Agreements or defending any claims made or threatened against Lender arising out of the transactions contemplated hereby and thereby (including, without limitation, preparations for and consultations concerning any such matters); and (g) the fees and disbursements of counsel (including legal assistants) to Lender in connection with the foregoing. C. Certain Waivers; Release. Although Borrower does not believe that it has any claims against Lender, it is willing to provide Lender with a general and total release of all such claims in consideration of the benefits which Borrower will receive pursuant to this Amendment. Accordingly, Borrower for itself and any successor of Borrower hereby knowingly, voluntarily, intentionally and irrevocably releases and discharges Lender and its respective officers, directors, agents and counsel (each a "Released Party") from any and all actions, causes of action, suits, sums of money, accounts, reckonings, bonds, bills, specialties, covenants, contracts, controversies, agreements, promises, variances, trespasses, damages, judgments, extents, executions, losses, liabilities, costs, expenses, debts, dues, demands, obligations or other claims of any kind whatsoever, in law, admiralty or equity, which Borrower ever had, now has or hereafter can, shall or may have against any Released Party for, upon or by reason of any matter, cause or thing whatsoever from the beginning of the world to the date of this Amendment. D. Counterparts. This Amendment may be executed in any number of counterparts, each such counterpart constituting an original but all together constituting one and the same instrument. E. Severability. Any provision contained in this Amendment that is held to be inoperative, unenforceable or invalid in any jurisdiction shall, as to that jurisdiction, be inoperative, unenforceable or invalid without affecting the remaining provisions of this Amendment in that jurisdiction or the operation, enforceability or validity of that provision in any other jurisdiction. F. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS. [remainder of page intentionally left blank] [Signature Page to Eighth Amendment To Amended And Restated Revolving Loan And Security Agreement] IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the date first above written. CONGRESS FINANCIAL CORPORATION (CENTRAL) By -------------------------------------------- Name: -------------------------------------------- Title: -------------------------------------------- KEYSTONE CONSOLIDATED INDUSTRIES, INC. By -------------------------------------------- Name: -------------------------------------------- Title: -------------------------------------------- CONSENT By Guarantee dated September 27, 1996 (as amended, the "Guarantee"), the undersigned (the "Guarantor") guaranteed to Lender (as defined therein), subject to the terms, conditions and obligations set forth therein, the prompt payment and performance of all of the Guaranteed Obligations (as defined therein). The Guarantor consents to Borrower's execution of the foregoing Eighth Amendment to Loan Agreement (the "Amendment;" capitalized terms not otherwise defined herein shall have the meaning ascribed to them in the Amendment) and acknowledges the continued validity, enforceability and effectiveness of the Guarantee with respect to all loans, advances and extensions of credit to Borrower, whether heretofore or hereafter made, together with all interests thereon and all expenses in connection therewith. SHERMAN WIRE COMPANY By ------------------------------------------------- Name: ------------------------------------------------- Title: ------------------------------------------------- CONSENT By Confirmation Agreement dated September 27, 1996, relating to that Amendment, Ratification and Confirmation of Secured Guaranty Agreement dated December 29, 1995, relating to, among other things the Secured Guaranty Agreement dated October 16, 1987 (collectively, the "Guarantee"), the undersigned (the "Guarantor") guaranteed to Lender (as defined therein), subject to the terms, conditions and obligations set forth therein, the prompt payment and performance of all of the Obligations (as defined therein). The Guarantor consents to Borrower's execution of the foregoing Eighth Amendment to Loan Agreement (the "Amendment;" capitalized terms not otherwise defined herein shall have the meaning ascribed to them in the Amendment) and acknowledges the continued validity, enforceability and effectiveness of the Guarantee with respect to all loans, advances and extensions of credit to Borrower, whether heretofore or hereafter made, together with all interests thereon and all expenses in connection therewith. SHERMAN WIRE OF CALDWELL, INC. By -------------------------------------------------- Name: -------------------------------------------------- Title: -------------------------------------------------- CONSENT By Confirmation Agreement dated September 27, 1996, relating to that Guarantee and Waiver and Rider No. 1 to Guarantee and Waiver, each dated December 30, 1993 (as amended, collectively, the "Guarantee"), the undersigned (the "Guarantor") guaranteed to Lender (as defined therein), subject to the terms, conditions and obligations set forth therein, the prompt payment and performance of all of the Obligations (as defined therein). The Guarantor consents to Borrower's execution of the foregoing Eighth Amendment to Loan Agreement (the "Amendment;" capitalized terms not otherwise defined herein shall have the meaning ascribed to them in the Amendment) and acknowledges the continued validity, enforceability and effectiveness of the Guarantee with respect to all loans, advances and extensions of credit to Borrower, whether heretofore or hereafter made, together with all interests thereon and all expenses in connection therewith. FV STEEL AND WIRE COMPANY By --------------------------------------------- Name: --------------------------------------------- Title: --------------------------------------------- EX-4.13 11 exh413kci.txt NINTH AMENDMENT TO AMENDED AND RESTATED REVOLVING LOAN AND SECURITY AGREEMENT THIS NINTH AMENDMENT TO AMENDED AND RESTATED REVOLVING LOAN AND SECURITY AGREEMENT (the "Amendment") is entered into as of January 31, 2002, by and between KEYSTONE CONSOLIDATED INDUSTRIES, INC., a Delaware corporation ("Borrower"), and CONGRESS FINANCIAL CORPORATION (CENTRAL), an Illinois corporation ("Lender"). Except for terms which are expressly defined herein, all capitalized terms used herein shall have the meaning subscribed to them in the Loan Agreement (as defined below). RECITALS WHEREAS, Borrower and Lender are parties to that certain Amended and Restated Revolving Loan and Security Agreement dated as of December 29, 1995 (as amended, supplemented or otherwise modified from time to time, the "Loan Agreement"). WHEREAS, Borrower desires to amend the terms of the Loan Agreement. WHEREAS, Lender is willing to amend the Loan Agreement on the terms and conditions set forth herein. NOW, THEREFORE, in consideration of the mutual conditions and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: I. Amendment to the Loan Agreement. A. The Term of Agreement in Section 12.1 (a) of the Loan Agreement is hereby amended as follows: The first sentence is deleted in its entirety and replaced by: "This agreement and the other Financing Agreements shall continue in full force and effect for a term ending on the date February 28, 2002 (the "Renewal Date")." II. Conditions to Effectiveness of Amendment. This Amendment shall become effective on the date (the "Effective Date") when Borrower shall satisfy all of the following conditions: A. Amendment. Borrower and Lender shall have duly executed and delivered this Amendment. B. Additional Matters. Lender shall have received such other certificates, opinions, UCC financing statements, documents and instruments relating to the obligations or the transactions contemplated hereby as may have been reasonably requested by Lender, and all corporate and other proceedings and all other documents and all legal matters in connection with the transactions contemplated hereby shall be reasonably satisfactory in form and substance to Lender. IV. Representations and Warranties. In order to induce Lender to enter into this Amendment, Borrower represents and warrants to Lender, upon the effectiveness of this Amendment, which representations and warranties shall survive the execution and delivery of this Amendment, that: A. Borrower is a corporation duly organized, validly existing and in good standing under the laws of the state of its incorporation; B. the execution, delivery and performance of this Amendment by Borrower are within its corporate powers and have been duly authorized by all necessary corporate action; and C. this Amendment constitutes a legal, valid and binding obligation of Borrower, enforceable against Borrower in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally, and by general principles of equity. V. Miscellaneous. A. Effect; Ratification. The amendments set forth herein are effective solely for the purpose set forth herein and shall be limited precisely as written, and shall not be deemed to (i) be a consent to any amendment, waiver or modification of any other term or condition of the Loan Agreement or of any other Financing Agreements or (ii) prejudice any right or rights that Lender may now have or may have in the future under or in connection with the Loan Agreement or any other Financing Agreements. Each reference in the Loan Agreement to "this Agreement", "herein", "hereof" and words of like import and each reference in the other Financing Agreements to the Loan Agreement shall mean the Loan Agreement as amended hereby. This Amendment shall be construed in connection with and as part of the Loan Agreement and all terms, conditions, representations, warranties, covenants and agreements set forth in the Loan Agreement and each other Financing Agreement, except as herein amended or waived, are hereby ratified and confirmed and shall remain in full force and effect. B. Costs and Expenses. Borrower shall pay to Lender on demand all reasonable out-of-pocket costs, expenses, title fees, filing fees and taxes paid or payable in connection with the preparation, negotiation, execution, delivery, recording, administration, collection, liquidation, enforcement and defense of the Obligations, Lender's rights in the Collateral, this Amendment, the Loan Agreement, the other Financing Agreements and all other documents related hereto or thereto, including any amendments, supplements or consents which may hereafter be contemplated (whether or not executed) or entered into in respect hereof and thereof, including, but not limited to: (a) all costs and expenses of filing or recording (including Uniform Commercial Code financing statement filing taxes and fees, documentary taxes, intangibles taxes and mortgage recording and title insurance taxes and fees, if applicable); (b) costs and expenses and fees for title insurance and other insurance premiums, environmental audits, surveys, assessments, engineering reports and inspections, appraisal fees and search fees; (c) costs and expenses of remitting loan proceeds, collecting checks and other items of payment; (d) charges, fees or expenses charged by any bank or issuer in connection with the Letter of Credit Accommodations; (e) costs and expenses of preserving and protecting the Collateral; (f) costs and expenses paid or incurred in connection with obtaining payment of the Obligations, enforcing the security interests and liens of Lender, selling or otherwise realizing upon the Collateral, and otherwise enforcing the provisions of this Amendment, the Loan Agreement and the other Financing Agreements or defending any claims made or threatened against Lender arising out of the transactions contemplated hereby and thereby (including, without limitation, preparations for and consultations concerning any such matters); and (g) the fees and disbursements of counsel (including legal assistants) to Lender in connection with the foregoing. C. Certain Waivers; Release. Although Borrower does not believe that it has any claims against Lender, it is willing to provide Lender with a general and total release of all such claims in consideration of the benefits which Borrower will receive pursuant to this Amendment. Accordingly, Borrower for itself and any successor of Borrower hereby knowingly, voluntarily, intentionally and irrevocably releases and discharges Lender and its respective officers, directors, agents and counsel (each a "Released Party") from any and all actions, causes of action, suits, sums of money, accounts, reckonings, bonds, bills, specialties, covenants, contracts, controversies, agreements, promises, variances, trespasses, damages, judgments, extents, executions, losses, liabilities, costs, expenses, debts, dues, demands, obligations or other claims of any kind whatsoever, in law, admiralty or equity, which Borrower ever had, now has or hereafter can, shall or may have against any Released Party for, upon or by reason of any matter, cause or thing whatsoever from the beginning of the world to the date of this Amendment. D. Counterparts. This Amendment may be executed in any number of counterparts, each such counterpart constituting an original but all together constituting one and the same instrument. E. Severability. Any provision contained in this Amendment that is held to be inoperative, unenforceable or invalid in any jurisdiction shall, as to that jurisdiction, be inoperative, unenforceable or invalid without affecting the remaining provisions of this Amendment in that jurisdiction or the operation, enforceability or validity of that provision in any other jurisdiction. F. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS. [remainder of page intentionally left blank] [Signature Page to Ninth Amendment To Amended And Restated Revolving Loan And Security Agreement] IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the date first above written. CONGRESS FINANCIAL CORPORATION (CENTRAL) By ----------------------------------------- Name: ----------------------------------------- Title: ----------------------------------------- KEYSTONE CONSOLIDATED INDUSTRIES, INC. By ------------------------------------------- Name: ------------------------------------------- Title: ------------------------------------------- CONSENT By Guarantee dated September 27, 1996 (as amended, the "Guarantee"), the undersigned (the "Guarantor") guaranteed to Lender (as defined therein), subject to the terms, conditions and obligations set forth therein, the prompt payment and performance of all of the Guaranteed Obligations (as defined therein). The Guarantor consents to Borrower's execution of the foregoing Ninth Amendment to Loan Agreement (the "Amendment;" capitalized terms not otherwise defined herein shall have the meaning ascribed to them in the Amendment) and acknowledges the continued validity, enforceability and effectiveness of the Guarantee with respect to all loans, advances and extensions of credit to Borrower, whether heretofore or hereafter made, together with all interests thereon and all expenses in connection therewith. SHERMAN WIRE COMPANY By ---------------------------------------------- Name: ---------------------------------------------- Title: ---------------------------------------------- CONSENT By Confirmation Agreement dated September 27, 1996, relating to that Amendment, Ratification and Confirmation of Secured Guaranty Agreement dated December 29, 1995, relating to, among other things the Secured Guaranty Agreement dated October 16, 1987 (collectively, the "Guarantee"), the undersigned (the "Guarantor") guaranteed to Lender (as defined therein), subject to the terms, conditions and obligations set forth therein, the prompt payment and performance of all of the Obligations (as defined therein). The Guarantor consents to Borrower's execution of the foregoing Ninth Amendment to Loan Agreement (the "Amendment;" capitalized terms not otherwise defined herein shall have the meaning ascribed to them in the Amendment) and acknowledges the continued validity, enforceability and effectiveness of the Guarantee with respect to all loans, advances and extensions of credit to Borrower, whether heretofore or hereafter made, together with all interests thereon and all expenses in connection therewith. SHERMAN WIRE OF CALDWELL, INC. By ----------------------------------------- Name: ----------------------------------------- Title: ----------------------------------------- CONSENT By Confirmation Agreement dated September 27, 1996, relating to that Guarantee and Waiver and Rider No. 1 to Guarantee and Waiver, each dated December 30, 1993 (as amended, collectively, the "Guarantee"), the undersigned (the "Guarantor") guaranteed to Lender (as defined therein), subject to the terms, conditions and obligations set forth therein, the prompt payment and performance of all of the Obligations (as defined therein). The Guarantor consents to Borrower's execution of the foregoing Ninth Amendment to Loan Agreement (the "Amendment;" capitalized terms not otherwise defined herein shall have the meaning ascribed to them in the Amendment) and acknowledges the continued validity, enforceability and effectiveness of the Guarantee with respect to all loans, advances and extensions of credit to Borrower, whether heretofore or hereafter made, together with all interests thereon and all expenses in connection therewith. FOX VALLEY STEEL AND WIRE COMPANY By --------------------------------------- Name: --------------------------------------- Title: --------------------------------------- EX-4.14 12 exh414kci.txt TENTH AMENDMENT TO AMENDED AND RESTATED REVOLVING LOAN AND SECURITY AGREEMENT THIS TENTH AMENDMENT TO AMENDED AND RESTATED REVOLVING LOAN AND SECURITY AGREEMENT (the "Amendment") is entered into as of February 28, 2002, by and between KEYSTONE CONSOLIDATED INDUSTRIES, INC., a Delaware corporation ("Borrower"), and CONGRESS FINANCIAL CORPORATION (CENTRAL), an Illinois corporation ("Lender"). Except for terms which are expressly defined herein, all capitalized terms used herein shall have the meaning subscribed to them in the Loan Agreement (as defined below). RECITALS WHEREAS, Borrower and Lender are parties to that certain Amended and Restated Revolving Loan and Security Agreement dated as of December 29, 1995 (as amended, supplemented or otherwise modified from time to time, the "Loan Agreement"). WHEREAS, Borrower desires to amend the terms of the Loan Agreement. WHEREAS, Lender is willing to amend the Loan Agreement on the terms and conditions set forth herein. NOW, THEREFORE, in consideration of the mutual conditions and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: I. Amendment to the Loan Agreement. A. The Term of Agreement in Section 12.1 (a) of the Loan Agreement is hereby amended as follows: The first sentence is deleted in its entirety and replaced by: "This agreement and the other Financing Agreements shall continue in full force and effect for a term ending on the date March 31, 2002 (the "Renewal Date")." II. Conditions to Effectiveness of Amendment. This Amendment shall become effective on the date (the "Effective Date") when Borrower shall satisfy all of the following conditions: A. Amendment. Borrower and Lender shall have duly executed and delivered this Amendment. B. Amendment fee. Borrower shall have paid to Lender a fee in the amount of $10,000. C. Additional Matters. Lender shall have received such other certificates, opinions, UCC financing statements, documents and instruments relating to the obligations or the transactions contemplated hereby as may have been reasonably requested by Lender, and all corporate and other proceedings and all other documents and all legal matters in connection with the transactions contemplated hereby shall be reasonably satisfactory in form and substance to Lender. IV. Representations and Warranties. In order to induce Lender to enter into this Amendment, Borrower represents and warrants to Lender, upon the effectiveness of this Amendment, which representations and warranties shall survive the execution and delivery of this Amendment, that: A. Borrower is a corporation duly organized, validly existing and in good standing under the laws of the state of its incorporation; B. the execution, delivery and performance of this Amendment by Borrower are within its corporate powers and have been duly authorized by all necessary corporate action; and C. this Amendment constitutes a legal, valid and binding obligation of Borrower, enforceable against Borrower in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally, and by general principles of equity. V. Miscellaneous. A. Effect; Ratification. The amendments set forth herein are effective solely for the purpose set forth herein and shall be limited precisely as written, and shall not be deemed to (i) be a consent to any amendment, waiver or modification of any other term or condition of the Loan Agreement or of any other Financing Agreements or (ii) prejudice any right or rights that Lender may now have or may have in the future under or in connection with the Loan Agreement or any other Financing Agreements. Each reference in the Loan Agreement to "this Agreement", "herein", "hereof" and words of like import and each reference in the other Financing Agreements to the Loan Agreement shall mean the Loan Agreement as amended hereby. This Amendment shall be construed in connection with and as part of the Loan Agreement and all terms, conditions, representations, warranties, covenants and agreements set forth in the Loan Agreement and each other Financing Agreement, except as herein amended or waived, are hereby ratified and confirmed and shall remain in full force and effect. B. Costs and Expenses. Borrower shall pay to Lender on demand all reasonable out-of-pocket costs, expenses, title fees, filing fees and taxes paid or payable in connection with the preparation, negotiation, execution, delivery, recording, administration, collection, liquidation, enforcement and defense of the Obligations, Lender's rights in the Collateral, this Amendment, the Loan Agreement, the other Financing Agreements and all other documents related hereto or thereto, including any amendments, supplements or consents which may hereafter be contemplated (whether or not executed) or entered into in respect hereof and thereof, including, but not limited to: (a) all costs and expenses of filing or recording (including Uniform Commercial Code financing statement filing taxes and fees, documentary taxes, intangibles taxes and mortgage recording and title insurance taxes and fees, if applicable); (b) costs and expenses and fees for title insurance and other insurance premiums, environmental audits, surveys, assessments, engineering reports and inspections, appraisal fees and search fees; (c) costs and expenses of remitting loan proceeds, collecting checks and other items of payment; (d) charges, fees or expenses charged by any bank or issuer in connection with the Letter of Credit Accommodations; (e) costs and expenses of preserving and protecting the Collateral; (f) costs and expenses paid or incurred in connection with obtaining payment of the Obligations, enforcing the security interests and liens of Lender, selling or otherwise realizing upon the Collateral, and otherwise enforcing the provisions of this Amendment, the Loan Agreement and the other Financing Agreements or defending any claims made or threatened against Lender arising out of the transactions contemplated hereby and thereby (including, without limitation, preparations for and consultations concerning any such matters); and (g) the fees and disbursements of counsel (including legal assistants) to Lender in connection with the foregoing. C. Certain Waivers; Release. Although Borrower does not believe that it has any claims against Lender, it is willing to provide Lender with a general and total release of all such claims in consideration of the benefits which Borrower will receive pursuant to this Amendment. Accordingly, Borrower for itself and any successor of Borrower hereby knowingly, voluntarily, intentionally and irrevocably releases and discharges Lender and its respective officers, directors, agents and counsel (each a "Released Party") from any and all actions, causes of action, suits, sums of money, accounts, reckonings, bonds, bills, specialties, covenants, contracts, controversies, agreements, promises, variances, trespasses, damages, judgments, extents, executions, losses, liabilities, costs, expenses, debts, dues, demands, obligations or other claims of any kind whatsoever, in law, admiralty or equity, which Borrower ever had, now has or hereafter can, shall or may have against any Released Party for, upon or by reason of any matter, cause or thing whatsoever from the beginning of the world to the date of this Amendment. D. Counterparts. This Amendment may be executed in any number of counterparts, each such counterpart constituting an original but all together constituting one and the same instrument. E. Severability. Any provision contained in this Amendment that is held to be inoperative, unenforceable or invalid in any jurisdiction shall, as to that jurisdiction, be inoperative, unenforceable or invalid without affecting the remaining provisions of this Amendment in that jurisdiction or the operation, enforceability or validity of that provision in any other jurisdiction. F. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS. [remainder of page intentionally left blank] [Signature Page to Tenth Amendment To Amended And Restated Revolving Loan And Security Agreement] IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the date first above written. CONGRESS FINANCIAL CORPORATION (CENTRAL) By --------------------------------------------------- Name: --------------------------------------------------- Title: --------------------------------------------------- KEYSTONE CONSOLIDATED INDUSTRIES, INC. By --------------------------------------------------- Name: Bert E. Downing, Jr. Title: Vice President and Corporate Controller CONSENT By Guarantee dated September 27, 1996 (as amended, the "Guarantee"), the undersigned (the "Guarantor") guaranteed to Lender (as defined therein), subject to the terms, conditions and obligations set forth therein, the prompt payment and performance of all of the Guaranteed Obligations (as defined therein). The Guarantor consents to Borrower's execution of the foregoing Tenth Amendment to Loan Agreement (the "Amendment;" capitalized terms not otherwise defined herein shall have the meaning ascribed to them in the Amendment) and acknowledges the continued validity, enforceability and effectiveness of the Guarantee with respect to all loans, advances and extensions of credit to Borrower, whether heretofore or hereafter made, together with all interests thereon and all expenses in connection therewith. SHERMAN WIRE COMPANY By ------------------------------------------------- Name: Bert E. Downing, Jr. Title: Vice President - Treasurer CONSENT By Confirmation Agreement dated September 27, 1996, relating to that Amendment, Ratification and Confirmation of Secured Guaranty Agreement dated December 29, 1995, relating to, among other things the Secured Guaranty Agreement dated October 16, 1987 (collectively, the "Guarantee"), the undersigned (the "Guarantor") guaranteed to Lender (as defined therein), subject to the terms, conditions and obligations set forth therein, the prompt payment and performance of all of the Obligations (as defined therein). The Guarantor consents to Borrower's execution of the foregoing Tenth Amendment to Loan Agreement (the "Amendment;" capitalized terms not otherwise defined herein shall have the meaning ascribed to them in the Amendment) and acknowledges the continued validity, enforceability and effectiveness of the Guarantee with respect to all loans, advances and extensions of credit to Borrower, whether heretofore or hereafter made, together with all interests thereon and all expenses in connection therewith. SHERMAN WIRE OF CALDWELL, INC. By ------------------------------------------------- Name: Bert E. Downing, Jr. Title: Corporate Controller CONSENT By Confirmation Agreement dated September 27, 1996, relating to that Guarantee and Waiver and Rider No. 1 to Guarantee and Waiver, each dated December 30, 1993 (as amended, collectively, the "Guarantee"), the undersigned (the "Guarantor") guaranteed to Lender (as defined therein), subject to the terms, conditions and obligations set forth therein, the prompt payment and performance of all of the Obligations (as defined therein). The Guarantor consents to Borrower's execution of the foregoing Tenth Amendment to Loan Agreement (the "Amendment;" capitalized terms not otherwise defined herein shall have the meaning ascribed to them in the Amendment) and acknowledges the continued validity, enforceability and effectiveness of the Guarantee with respect to all loans, advances and extensions of credit to Borrower, whether heretofore or hereafter made, together with all interests thereon and all expenses in connection therewith. FV STEEL AND WIRE COMPANY (fka Fox Valley Steel & Wire Company) By ------------------------------------------------- Name: Bert E. Downing, Jr. Title: Vice President - Treasurer EX-4.15 13 exh415kci.txt ELEVENTH AMENDMENT TO AMENDED AND RESTATED REVOLVING LOAN AND SECURITY AGREEMENT THIS ELEVENTH AMENDMENT TO AMENDED AND RESTATED REVOLVING LOAN AND SECURITY AGREEMENT (the "Amendment") is dated as of March 15, 2002, by and between KEYSTONE CONSOLIDATED INDUSTRIES, INC., a Delaware corporation ("Borrower"), and CONGRESS FINANCIAL CORPORATION (CENTRAL), an Illinois corporation ("Lender"). Except for terms which are expressly defined herein, all capitalized terms used herein shall have the meaning subscribed to them in the Loan Agreement (as defined below). RECITALS WHEREAS, Borrower and Lender are parties to that certain Amended and Restated Revolving Loan and Security Agreement dated December 29, 1995 (as amended, supplemented or otherwise modified from time to time, the "Loan Agreement"). WHEREAS, Borrower desires to amend the terms of the Loan Agreement. WHEREAS, Lender is willing to amend the Loan Agreement on the terms and conditions set forth herein. NOW, THEREFORE, in consideration of the mutual conditions and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: I. Amendments to the Loan Agreement. A. The definition of "Maximum Credit" in Section 1 of the Loan Agreement is hereby amended and restated in its entirety to read as follows: "Maximum Credit" shall mean the amount of $50,000,000. B. The first sentence in Section 12.1(a) of the Loan Agreement is hereby amended and restated to read as follows: This agreement and the other Financing Agreements shall continue in full force and effect for a term ending on the date April 30, 2002 (the "Renewal Date"). II. Conditions to Effectiveness of Amendment. This Amendment shall become effective on the date (the "Effective Date") when Borrower shall satisfy all of the following conditions: A. Amendment. Borrower and Lender shall have duly executed and delivered this Amendment. B. Additional Matters. Lender shall have received such other certificates, opinions, UCC financing statements, documents and instruments relating to the obligations or the transactions contemplated hereby as may have been reasonably requested by Lender, and all corporate and other proceedings and all other documents and all legal matters in connection with the transactions contemplated hereby shall be reasonably satisfactory in form and substance to Lender. IV. Representations and Warranties. In order to induce Lender to enter into this Amendment, Borrower represents and warrants to Lender, upon the effectiveness of this Amendment, which representations and warranties shall survive the execution and delivery of this Amendment, that: A. Borrower is a corporation duly organized, validly existing and in good standing under the laws of the state of its incorporation; B. the execution, delivery and performance of this Amendment by Borrower are within its corporate powers and have been duly authorized by all necessary corporate action; and C. this Amendment constitutes a legal, valid and binding obligation of Borrower, enforceable against Borrower in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally, and by general principles of equity. V. Miscellaneous. A. Effect; Ratification. The amendments set forth herein are effective solely for the purpose set forth herein and shall be limited precisely as written, and shall not be deemed to (i) be a consent to any amendment, waiver or modification of any other term or condition of the Loan Agreement or of any other Financing Agreements or (ii) prejudice any right or rights that Lender may now have or may have in the future under or in connection with the Loan Agreement or any other Financing Agreements. Each reference in the Loan Agreement to "this Agreement", "herein", "hereof" and words of like import and each reference in the other Financing Agreements to the Loan Agreement shall mean the Loan Agreement as amended hereby. This Amendment shall be construed in connection with and as part of the Loan Agreement. B. Costs and Expenses. Borrower shall pay to Lender on demand all reasonable out-of-pocket costs, expenses, title fees, filing fees and taxes paid or payable in connection with the preparation, negotiation, execution, delivery, recording, administration, collection, liquidation, enforcement and defense of the Obligations, Lender's rights in the Collateral, this Amendment, the Loan Agreement, the other Financing Agreements and all other documents related hereto or thereto, including any amendments, supplements or consents which may hereafter be contemplated (whether or not executed) or entered into in respect hereof and thereof, including, but not limited to: (a) all costs and expenses of filing or recording (including Uniform Commercial Code financing statement filing taxes and fees, documentary taxes, intangibles taxes and mortgage recording and title insurance taxes and fees, if applicable); (b) costs and expenses and fees for title insurance and other insurance premiums, environmental audits, surveys, assessments, engineering reports and inspections, appraisal fees and search fees; (c) costs and expenses of remitting loan proceeds, collecting checks and other items of payment; (d) charges, fees or expenses charged by any bank or issuer in connection with the Letter of Credit Accommodations; (e) costs and expenses of preserving and protecting the Collateral; (f) costs and expenses paid or incurred in connection with obtaining payment of the Obligations, enforcing the security interests and liens of Lender, selling or otherwise realizing upon the Collateral, and otherwise enforcing the provisions of this Amendment, the Loan Agreement and the other Financing Agreements or defending any claims made or threatened against Lender arising out of the transactions contemplated hereby and thereby (including, without limitation, preparations for and consultations concerning any such matters); and (g) the fees and disbursements of counsel (including legal assistants) to Lender in connection with the foregoing. C. Certain Waivers; Release. Although Borrower does not believe that it has any claims against Lender, it is willing to provide Lender with a general and total release of all such claims in consideration of the benefits which Borrower will receive pursuant to this Amendment. Accordingly, Borrower for itself and any successor of Borrower hereby knowingly, voluntarily, intentionally and irrevocably releases and discharges Lender and its respective officers, directors, agents and counsel (each a "Released Party") from any and all actions, causes of action, suits, sums of money, accounts, reckonings, bonds, bills, specialties, covenants, contracts, controversies, agreements, promises, variances, trespasses, damages, judgments, extents, executions, losses, liabilities, costs, expenses, debts, dues, demands, obligations or other claims of any kind whatsoever, in law, admiralty or equity, which Borrower ever had, now has or hereafter can, shall or may have against any Released Party for, upon or by reason of any matter, cause or thing whatsoever from the beginning of the world to the date of this Amendment. D. Counterparts. This Amendment may be executed in any number of counterparts, each such counterpart constituting an original but all together constituting one and the same instrument. E. Severability. Any provision contained in this Amendment that is held to be inoperative, unenforceable or invalid in any jurisdiction shall, as to that jurisdiction, be inoperative, unenforceable or invalid without affecting the remaining provisions of this Amendment in that jurisdiction or the operation, enforceability or validity of that provision in any other jurisdiction. F. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS. [remainder of page intentionally left blank] [Signature Page to Eleventh Amendment To Amended And Restated Revolving Loan And Security Agreement] IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the date first above written. CONGRESS FINANCIAL CORPORATION (CENTRAL) By: ---------------------------------------------- Name: ---------------------------------------------- Title: ---------------------------------------------- KEYSTONE CONSOLIDATED INDUSTRIES, INC. By: ---------------------------------------------- Name: ---------------------------------------------- Title: ---------------------------------------------- CONSENT By Guarantee dated September 27, 1996 (as amended, the "Guarantee"), the undersigned (the "Guarantor") guaranteed to Lender (as defined therein), subject to the terms, conditions and obligations set forth therein, the prompt payment and performance of all of the Guaranteed Obligations (as defined therein). The Guarantor consents to Borrower's execution of the foregoing Eleventh Amendment to Loan Agreement (the "Amendment;" capitalized terms not otherwise defined herein shall have the meaning ascribed to them in the Amendment) and acknowledges the continued validity, enforceability and effectiveness of the Guarantee with respect to all loans, advances and extensions of credit to Borrower, whether heretofore or hereafter made, together with all interests thereon and all expenses in connection therewith. SHERMAN WIRE COMPANY By: --------------------------------------------- Name: --------------------------------------------- Title: --------------------------------------------- CONSENT By Confirmation Agreement dated September 27, 1996, relating to that Amendment, Ratification and Confirmation of Secured Guaranty Agreement dated December 29, 1995, relating to, among other things the Secured Guaranty Agreement dated October 16, 1987 (collectively, the "Guarantee"), the undersigned (the "Guarantor") guaranteed to Lender (as defined therein), subject to the terms, conditions and obligations set forth therein, the prompt payment and performance of all of the Obligations (as defined therein). The Guarantor consents to Borrower's execution of the foregoing Eleventh Amendment to Loan Agreement (the "Amendment;" capitalized terms not otherwise defined herein shall have the meaning ascribed to them in the Amendment) and acknowledges the continued validity, enforceability and effectiveness of the Guarantee with respect to all loans, advances and extensions of credit to Borrower, whether heretofore or hereafter made, together with all interests thereon and all expenses in connection therewith. SHERMAN WIRE OF CALDWELL, INC. By: --------------------------------------------- Name: --------------------------------------------- Title: --------------------------------------------- CONSENT By Confirmation Agreement dated September 27, 1996, relating to that Guarantee and Waiver and Rider No. 1 to Guarantee and Waiver, each dated December 30, 1993 (as amended, collectively, the "Guarantee"), the undersigned (the "Guarantor") guaranteed to Lender (as defined therein), subject to the terms, conditions and obligations set forth therein, the prompt payment and performance of all of the Obligations (as defined therein). The Guarantor consents to Borrower's execution of the foregoing Eleventh Amendment to Loan Agreement (the "Amendment;" capitalized terms not otherwise defined herein shall have the meaning ascribed to them in the Amendment) and acknowledges the continued validity, enforceability and effectiveness of the Guarantee with respect to all loans, advances and extensions of credit to Borrower, whether heretofore or hereafter made, together with all interests thereon and all expenses in connection therewith. FV STEEL AND WIRE COMPANY By: --------------------------------------- Name: ---------------------------------------- Title: ---------------------------------------- EX-4.16 14 exh416kci.txt TWELFTH AMENDMENT TO AMENDED AND RESTATED REVOLVING LOAN AND SECURITY AGREEMENT THIS TWELFTH AMENDMENT TO AMENDED AND RESTATED REVOLVING LOAN AND SECURITY AGREEMENT (the "Twelfth Amendment") is dated as of March 15, 2002, by and between KEYSTONE CONSOLIDATED INDUSTRIES, INC., a Delaware corporation ("Borrower"), and CONGRESS FINANCIAL CORPORATION (CENTRAL), an Illinois corporation ("Lender"). Except for terms which are expressly defined herein, all capitalized terms used herein shall have the meaning subscribed to them in the Loan Agreement (as defined below). RECITALS WHEREAS, Borrower and Lender are parties to that certain Amended and Restated Revolving Loan and Security Agreement dated as of December 29, 1995 (as amended, supplemented or otherwise modified from time to time, the "Loan Agreement"). WHEREAS, Borrower desires to amend the terms of the Loan Agreement. WHEREAS, Lender is willing to amend the Loan Agreement on the terms and conditions set forth herein. NOW, THEREFORE, in consideration of the mutual conditions and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: I. Amendments to the Loan Agreement. A. Definitions. 1. The definition of "Accounts" in Section 1 of the Loan Agreement is hereby amended and restated in its entirety to read as follows: "Accounts" shall mean all present and future rights of Borrower to payment of a monetary obligation, whether or not earned by performance, which is not evidenced by chattel paper or an instrument, (a) for property that has been or is to be sold, leased, licensed, assigned, or otherwise disposed of, (b) for services rendered or to be rendered, (c) for a secondary obligation incurred or to be incurred, or (d) arising out of the use of a credit or charge card or information contained on or for use with the card. 2. The following new definition of "Amendment No. 12 Effective Date" is hereby added to Section 1 of the Loan Agreement in proper alphabetical order: "Amendment No. 12 Effective Date" shall mean March 15, 2002. 3. The following new definition of "Capital Expenditures" is hereby added to Section 1 of the Loan Agreement in proper alphabetical order: "Capital Expenditures" means, with respect to any Person, all expenditures (by the expenditure of cash or the incurrence of Indebtedness) by such Person during any measuring period for any fixed assets or improvements or for replacements, substitutions or additions thereto, that have a useful life of more than one year and that are required to be capitalized under GAAP. "Capital Expenditures" shall not include expenditures by EWP and Garden Zone. 4. The following new definition of "Capital Stock" is hereby added to Section 1 of the Loan Agreement in proper alphabetical order: "Capital Stock" shall mean, with respect to any Person, any and all shares, interests, participations or other equivalents (however designated) of such Person's capital stock or partnership, limited liability company or other equity interests at any time outstanding, and any and all rights, warrants or options exchangeable for or convertible into such capital stock or other interests (but excluding any debt security that is exchangeable for or convertible into such capital stock). 5. The following new definition of "Collateral Access Agreement" is hereby added to Section 1 of the Loan Agreement in proper alphabetical order: "Collateral Access Agreement" shall mean an agreement in writing, in form and substance satisfactory to Lender, from any lessor of premises to Borrower, or any other person to whom any Collateral (including Inventory, Equipment, bills of lading or other documents of title) is consigned or who has custody, control or possession of any such Collateral or is otherwise the owner or operator of any premises on which any of such Collateral is located, pursuant to which such lessor, consignee or other person, inter alia, acknowledges the first priority security interest of Lender in such Collateral, agrees to waive any and all claims such lessor, consignee or other person may, at any time, have against such Collateral, whether for processing, storage or otherwise, and agrees to permit Lender access to, and the right to remain on, the premises of such lessor, consignee or other person so as to exercise Lender's rights and remedies and otherwise deal with such Collateral and, in the case of any consignee or other person who at any time has custody, control or possession of any Collateral, acknowledges that it holds and will hold possession of the Collateral for the benefit of Lender and agrees to follow all instructions of Lender with respect thereto. 6. The following new definition of "Deposit Account Control Agreement" is hereby added to Section 1 of the Loan Agreement in proper alphabetical order: "Deposit Account Control Agreement" shall mean an agreement in writing, in form and substance satisfactory to Lender, by and among Lender, Borrower and any bank at which any deposit account of Borrower is at any time maintained which provides that such bank will comply with instructions originated by Lender directing disposition of the funds in the deposit account without further consent by Borrower and such other terms and conditions as Lender may require, including as to any such agreement with respect to any Blocked Account, providing that all items received or deposited in the Blocked Accounts are the property of Lender, that the bank has no lien upon, or right to setoff against, the Blocked Accounts, the items received for deposit therein, or the funds from time to time on deposit therein and that the bank will wire, or otherwise transfer, in immediately available funds, on a daily basis to the Lender Payment Account all funds received or deposited into the Blocked Accounts. 7. The following new definition of "EBITDA" is hereby added to Section 1 of the Loan Agreement in proper alphabetical order: "EBITDA" means with respect to any Person for any fiscal period, without duplication, an amount equal to (a) consolidated net income of such Person for such period determined in accordance with GAAP, minus (b) the sum of (i) income tax credits, (ii) interest income, (iii) gain from extraordinary items for such period, (iv) any aggregate net gain (but not any aggregate net loss) during such period arising from the sale, exchange or other disposition of capital assets by such Person (including any fixed assets, whether tangible or intangible, all Inventory sold in conjunction with the disposition of fixed assets and all securities), (v) any other non-cash gains that have been added in determining consolidated net income, and (vi) non-cash defined benefit pension income, in each case to the extent included in the calculation of consolidated net income of such Person for such period in accordance with GAAP, but without duplication, plus (c) the sum of (i) any provision for income taxes, (ii) Interest Expense, (iii) loss from extraordinary items for such period, (iv) depreciation and amortization for such period, (v) amortized debt discount for such period, (vi) the amount of any deduction to consolidated net income as the result of any grant to any members of the management of such Person of any Capital Stock, (vii) non-cash defined benefit pension expense and (viii) without duplication, non-cash post-retirement benefit expenses constituting retired employees' medical and life insurance benefit expenses, in each case to the extent included in the calculation of consolidated net income of such Person for such period in accordance with GAAP, but without duplication. For purposes of this definition, the following items shall be excluded in determining consolidated net income of a Person: (1) the income (or deficit) of any other Person accrued prior to the date it became a Subsidiary of, or was merged or consolidated into, such Person or any of such Person's Subsidiaries; (2) the income (or deficit) of any other Person (other than a Subsidiary) in which such Person has an ownership interest, except to the extent any such income has actually been received by such Person in the form of cash dividends or distributions; (3) the undistributed earnings of any Subsidiary of such Person to the extent that the declaration or payment of dividends or similar distributions by such Subsidiary is not at the time permitted by the terms of any contractual obligation or requirement of law applicable to such Subsidiary; (4) any restoration to income of any contingency reserve, except to the extent that provision for such reserve was made out of accrued income during such period; (5) any write-up of any asset; (6) any net gain from the collection of the proceeds of life insurance policies; (7) any net gain arising from the acquisition of any securities, or the extinguishment, under GAAP, of any Indebtedness, of such Person; (8) in the case of a successor to such Person by consolidation or merger or as a transferee of its assets, any earnings of such successor prior to such consolidation, merger or transfer of assets; (9) any deferred credit representing the excess of equity in any Subsidiary of such Person at the date of acquisition of such Subsidiary over the cost to such Person of the investment in such Subsidiary. 8. The following new definition of "ERISA" is hereby added to Section 1 of the Loan Agreement in proper alphabetical order: "ERISA" shall mean the United States Employee Retirement Income Security Act of 1974, together with all rules, regulations and interpretations thereunder or related thereto. 9. The following new definition of "ERISA Affiliate" is hereby added to Section 1 of the Loan Agreement in proper alphabetical order: "ERISA Affiliate" shall mean any person required to be aggregated with Borrower or any of its Subsidiaries under Sections 414(b), 414(c), 414(m) or 414(o) of the Code. 10. The following new definition of "EWP" is hereby added to Section 1 of the Loan Agreement in proper alphabetical order: "EWP" means Engineered Wire Products, Inc., an Ohio corporation. 11. The following new definition of "Fiscal Quarter" is hereby added to Section 1 of the Loan Agreement in proper alphabetical order: "Fiscal Quarter" means any of the quarterly accounting periods of Borrower, ending consistent with Borrower's Securities and Exchange Commission reporting periods. 12. The following new definition of "Fixed Charges" is hereby added to Section 1 of the Loan Agreement in proper alphabetical order: "Fixed Charges" means, with respect to any Person for any fiscal period, (a) the aggregate of all Interest Expense paid or accrued (except with respect to the deferred interest expense of (i) the 6% Notes and (ii) the 8% Notes) during such period, plus (b) scheduled payments of principal with respect to Indebtedness during such period, plus (c) Capital Expenditures during such period, plus (d) corporate income taxes paid in cash during such period. 13. The following new definition of "Fixed Charge Coverage Ratio" is hereby added to Section 1 of the Loan Agreement in proper alphabetical order: "Fixed Charge Coverage Ratio" means, with respect to any Person for any fiscal period, the ratio of EBITDA to Fixed Charges. 14. The following new definition of "Governmental Authority" is hereby added to Section 1 of the Loan Agreement in proper alphabetical order: "Governmental Authority" shall mean any nation or government, any state, province, or other political subdivision thereof, any central bank (or similar monetary or regulatory authority) thereof, any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, and any corporation or other entity owned or controlled, through stock or capital ownership or otherwise, by any of the foregoing. 15. The following new definition of "Indebtedness" is hereby added to Section 1 of the Loan Agreement in proper alphabetical order: "Indebtedness" shall mean, with respect to any Person, any liability, whether or not contingent, (a) in respect of borrowed money (whether or not the recourse of the lender is to the whole of the assets of such Person or only to a portion thereof) or evidenced by bonds, notes, debentures or similar instruments; (b) representing the balance deferred and unpaid of the purchase price of any property or services (except any such balance that constitutes an account payable to a trade creditor (whether or not an Affiliate) created, incurred, assumed or guaranteed by such Person in the ordinary course of business of such Person in connection with obtaining goods, materials or services that is not overdue by more than ninety (90) days, unless the trade payable is being contested in good faith); (c) all obligations as lessee under leases which have been, or should be, in accordance with GAAP recorded as capital leases; (d) any contractual obligation, contingent or otherwise, of such Person to pay or be liable for the payment of any indebtedness of another Person, including, without limitation, any such indebtedness, directly or indirectly guaranteed, or any agreement to purchase, repurchase, or otherwise acquire such indebtedness, obligation or liability or any security therefor, or to provide funds for the payment or discharge thereof, or to maintain solvency, assets, level of income, or other financial condition; (e) all obligations with respect to mandatory redeemable stock and mandatory redemption or repurchase obligations under any Capital Stock or other equity securities issued by such Person; (f) all reimbursement obligations and other liabilities of such Person with respect to surety bonds (whether bid, performance or otherwise), letters of credit, banker's acceptances, drafts or similar documents or instruments issued for such Person's account; (g) all indebtedness of such Person in respect of indebtedness of another Person for borrowed money or indebtedness of another Person otherwise described in this definition which is secured by any consensual lien, security interest, collateral assignment, conditional sale, mortgage, deed of trust, or other encumbrance on any asset of such Person, whether or not such obligations, liabilities or indebtedness are assumed by or are a personal liability of such Person, all as of such time; (h) all obligations, liabilities and indebtedness of such Person (marked to market) arising under swap agreements, cap agreements and collar agreements and other agreements or arrangements designed to protect such person against fluctuations in interest rates or currency or commodity values and (i) all obligations owed by such Person under license agreements with respect to non-refundable, advance or minimum guarantee royalty payments. 16. The following new definition of "Intellectual Property" is hereby added to Section 1 of the Loan Agreement in proper alphabetical order: "Intellectual Property" shall mean Borrower's now owned and hereafter arising or acquired: patents, patent rights, patent applications, copyrights, works which are the subject matter of copyrights, copyright registrations, trademarks, trade names, trade styles, trademark and service mark applications, and licenses and rights to use any of the foregoing; all extensions, renewals, reissues, divisions, continuations, and continuations-in-part of any of the foregoing; all rights to sue for past, present and future infringement of any of the foregoing; inventions, trade secrets, formulae, processes, compounds, drawings, designs, blueprints, surveys, reports, manuals, and operating standards; goodwill (including any goodwill associated with any trademark or the license of any trademark); customer and other lists in whatever form maintained; and trade secret rights, copyright rights, rights in works of authorship, domain names and domain name registrations; software and contract rights relating to software, in whatever form created or maintained. 17. The following new definition of "Interest Expense" is hereby added to Section 1 of the Loan Agreement in proper alphabetical order: "Interest Expense" means, with respect to any Person for any fiscal period, cash and non-cash interest expense of such Person determined in accordance with GAAP for the relevant period ended on such date, including interest expense with respect to any Indebtedness of such Person and interest expense for the relevant period that has been capitalized on the balance sheet of such Person. 18. The following new definition of "Lender Payment Account" is hereby added to Section 1 of the Loan Agreement in proper alphabetical order: "Lender Payment Account" shall mean account no. 322-020557 of Lender at Chase Manhattan Bank or such other account of Lender as Lender may from time to time designate to Borrower as the Lender Payment Account for purposes of this Agreement. 19. The following new definition of "Loans" is hereby added to Section 1 of the Loan Agreement in proper alphabetical order: "Loans" shall mean the Revolving Loans and the Term Loan. 20. The definition of "Maximum Credit" in Section 1 of the Loan Agreement is hereby amended and restated in its entirety to read as follows: "Maximum Credit" shall mean the amount of $50,000,000. 21. The following new definition of "Mortgages" is hereby added to Section 1 of the Loan Agreement in proper alphabetical order: "Mortgages" shall mean, individually and collectively, each of the following: (a) the Mortgage, Security Agreement, Assignment of Leases and Rents, Financing Statement and Fixture Filing, dated of even date herewith, by Borrower in favor of Lender with respect to the Real Property and related assets of Borrower located in Peoria County, Illinois, (b) the Deed of Trust, Assignment, Security Agreement and Financing Statement, dated of even date herewith, by Sherman Wire Company f/k/a DeSoto, Inc. ("Sherman") in favor of Lender with respect to the Real Property and related assets of Sherman located in Grayson County, Texas, (c) the Deed of Trust, Assignment, Security Agreement and Financing Statement, dated of even date herewith, by Sherman Wire of Caldwell, Inc. ("Sherman Caldwell") in favor of Lender with respect to the Real Property and related assets of Sherman Caldwell located in Burleson County, Texas, and (d) the Mortgage, Security Agreement, Assignment of Leases and Rents, Financing Statement and Fixture Filing, dated of even date herewith, by Borrower in favor of Lender with respect to the Real Property and related assets of Borrower located in Washington County, Arkansas. 22. The following new definition of "Multiemployer Plan" is hereby added to Section 1 of the Loan Agreement in proper alphabetical order: "Multiemployer Plan" shall mean a "multi-employer plan" as defined in Section 4001(a)(3) of ERISA which is or was at any time during the current year or the immediately preceding six (6) years contributed to by Borrower or any ERISA Affiliate. 23. The definition of "Obligations" in Section 1 of the Loan Agreement is hereby amended to add the phrase "the Term Loan," after the phrase "Revolving Loans," in the first line thereof. 24. The following new definition of "Plan" is hereby added to Section 1 of the Loan Agreement in proper alphabetical order: "Plan" means an employee benefit plan (as defined in Section 3(3) of ERISA) which Borrower sponsors, maintains, or to which it makes, is making, or is obligated to make contributions, or in the case of a Multiemployer Plan has made contributions at any time during the immediately preceding six (6) plan years. 25. The following new definition of "Real Property" is hereby added to Section 1 of the Loan Agreement in proper alphabetical order: "Real Property" shall mean all now owned and hereafter acquired real property of Borrower, including leasehold interests, together with all buildings, structures, and other improvements located thereon and all licenses, easements and appurtenances relating thereto, wherever located, including the real property and related assets more particularly described in the Mortgages. 26. The following new definition of "Receivables" is hereby added to Section 1 of the Loan Agreement in proper alphabetical order: "Receivables" shall mean all of the following now owned or hereafter arising or acquired property of Borrower: (a) all Accounts; (b) all interest, fees, late charges, penalties, collection fees and other amounts due or to become due or otherwise payable in connection with any Account; (c) all payment intangibles of Borrower and other contract rights, chattel paper, instruments, notes, and other forms of obligations owing to Borrower, whether from the sale and lease of goods or other property, licensing of any property (including Intellectual Property or other general intangibles), rendition of services or from loans or advances by Borrower or to or for the benefit of any third person (including loans or advances to any affiliates or Subsidiaries of Borrower) or otherwise associated with any Accounts, Inventory or general intangibles of Borrower (including, without limitation, choses in action, causes of action, tax refunds, tax refund claims, any funds which may become payable to Borrower in connection with the termination of any Plan or other employee benefit plan and any other amounts payable to Borrower from any Plan or other employee benefit plan, rights and claims against carriers and shippers, rights to indemnification, business interruption insurance and proceeds thereof, casualty or any similar types of insurance and any proceeds thereof and proceeds of insurance covering the lives of employees on which Borrower is a beneficiary). 27. The following new definition of "Revolving Loan Limit" is hereby added to Section 1 of the Loan Agreement in proper alphabetical order: "Revolving Loan Limit" shall mean $45,000,000. 28. The following new definition of "Subordinated Indebtedness" is hereby added to Section 1 of the Loan Agreement in proper alphabetical order: "Subordinated Indebtedness" shall mean (i) Borrower's obligations under that certain Loan Agreement dated as of March 13, 2002, by and between Borrower and the County of Peoria, Illinois, (ii) Borrower's obligations under that certain $19,800,000 Indenture dated as of March 15, 2002, between the Borrower, as issuer, and U.S. Bank National Association, a national banking association, as trustee, and those certain 8% Subordinated Secured Notes due 2009 (the "8% Notes")executed in connection therewith, and (iii) those certain 6% Subordinated Unsecured Notes due 2011 (the "6% Notes"); in each case together with all collateral documents and all other agreements executed in connection therewith. 29. The following new definition of "Subsidiaries" is hereby added to Section 1 of the Loan Agreement in proper alphabetical order: "Subsidiary" or "subsidiary" shall mean, with respect to any Person, any corporation, limited liability company, limited liability partnership or other limited or general partnership, trust, association or other business entity of which an aggregate of at least a majority of the outstanding Capital Stock or other interests entitled to vote in the election of the board of directors of such corporation (irrespective of whether, at the time, Capital Stock of any other class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency), managers, trustees or other controlling persons, or an equivalent controlling interest therein, of such Person is, at the time, directly or indirectly, owned by such Person and/or one or more Subsidiaries of such Person. 30. The following new definition of "Term Loan" is hereby added to Section 1 of the Loan Agreement in proper alphabetical order: "Term Loan" shall mean the term loan made by Lender to Borrower as provided for in Section 2.4 hereof. 31. The following new definition of "UCC" is hereby added to Section 1 of the Loan Agreement in proper alphabetical order: "UCC" shall mean the Uniform Commercial Code as in effect in the State of Illinois, and any successor statute, as in effect from time to time (except that terms used herein which are defined in the Uniform Commercial Code as in effect in the State of Illinois on the date of the Twelfth Amendment shall continue to have the same meaning notwithstanding any replacement or amendment of such statute except as Lender may otherwise determine). 32. The following new definition of "Vendor Settlements" is hereby added to Section 1 of the Loan Agreement in proper alphabetical order: "Vendor Settlements" shall mean Borrower's obligations under (i) that certain Account Reconciliation Agreement dated as of March 12, 2002, by and between Borrower and Central Illinois Light Company, an Illinois corporation, and (ii) that certain Account Reconciliation Agreement dated as of March 11, 2002, by and between Borrower and PSC Metals, Inc., an Ohio corporation. B. Subsection (c) of Section 2.1 of the Loan Agreement is hereby amended and restated in its entirety to read as follows: Except in Lender's discretion, (i) the aggregate amount of Revolving Loans outstanding at any time shall not exceed the Revolving Loan Limit and (ii) the aggregate amount of the Loans and the Letter of Credit Accommodations outstanding at any time shall not exceed the Maximum Credit. In the event that the outstanding amount of any component of the Loans, or the aggregate amount of the outstanding Loans and Letter of Credit Accommodations, exceed the amounts available under the lending formulas, the Revolving Loan Limit, the sublimits for the Letter of Credit Accommodations set forth in Section 2.2(c) or the Maximum Credit, as applicable, such event shall not limit, waive or otherwise affect any rights of Lender in that circumstance or on any future occasions and Borrower shall, upon demand by Lender, which may be made at any time or from time to time, immediately repay to Lender the entire amount of any such excess(es) for which payment is demanded. C. The following new Section 2.4 is hereby added to the Loan Agreement in proper numerical order: 2.4 Term Loan. (a) Lender is making a Term Loan to Borrower in the original principal amount of $5,000,000. The Term Loan is (a) evidenced by a Term Loan promissory note in such original principal amount to be duly executed and delivered by Borrower to Lender on the date of such borrowing; (b) to be repaid, together with interest and other amounts, in accordance with this Agreement, the Term Loan promissory note, and the other Financing Agreements and (c) secured by all of the Collateral. The principal amount of the Term Loan shall be repaid in thirty-six (36) consecutive monthly installments (or earlier as provided herein) payable on the first day of each month commencing May 1, 2002, of which the first thirty-five (35) installments shall each be in the amount of $104,167 and the last installment shall be in the amount of the entire unpaid balance of the Term Loan and shall be payable on the Renewal Date. (b) Notwithstanding subsection 2.4(a) above, the aggregate outstanding principal balance of the Term Loan shall be due and payable in full in immediately available funds upon the Renewal Date or other termination of or prepayment in full of the Revolving Loans. No payment with respect to the Term Loan may be reborrowed. D. Section 3.1(a) of the Loan Agreement is hereby amended by replacing each reference to the phrase "Revolving Loans" with the word "Loans". E. Clause (vi) of Subsection 3.1(b) of the Loan Agreement is hereby amended and restated in its entirety to read as follows: (vi) the maximum amount of the Eurodollar Rate Loans at any time requested by Borrower shall not exceed the amount equal to (A) the principal amount of the Term Loan which it is anticipated will be outstanding as of the last day of the applicable Interest Period plus (B) eighty (80%) percent of the lowest principal amount of the Revolving Loans which it is anticipated will be outstanding during the applicable Interest Period, in each case as determined by Lender (but with no obligation of Lender to make such Loans), F. Section 4.2 of the Loan Agreement is hereby amended by replacing the phrase "Revolving Loans" with the word "Loans" wherever it appears therein. G. Section 5 of the Loan Agreement is hereby amended and restated in its entirety to read as follows: Section 5. GRANT OF SECURITY INTEREST 5.1 Grant of Security Interest. To secure payment and performance of all Obligations, Borrower hereby grants to Lender a continuing security interest in, a lien upon, and a right of set off against, and hereby assigns to Lender as security, all personal and real property and fixtures and interests in property and fixtures of Borrower, whether now owned or hereafter acquired or existing, and wherever located (together with all other collateral security for the Obligations at any time granted to or held by or acquired by Lender, collectively, the Collateral"), including: (a) all Accounts; (b) all general intangibles, including, without limitation, all Intellectual Property; (c) all goods, including, without limitation, Inventory and Equipment; (d) all Real Property and fixtures; (e) all chattel paper (including all tangible and electronic chattel paper); (f) all instruments (including all promissory notes); (g) all documents; (h) all deposit accounts; (i) all letters of credit, banker's acceptances and similar instruments and including all letter-of-credit rights; (j) all supporting obligations and all present and future liens, security interests, rights, remedies, title and interest in, to and in respect of Receivables and other Collateral, including (i) rights and remedies under or relating to guaranties, contracts of suretyship, letters of credit and credit and other insurance related to the Collateral, (ii) rights of stoppage in transit, replevin, repossession, reclamation and other rights and remedies of an unpaid vendor, lienor or secured party, (iii) goods described in invoices, documents, contracts or instruments with respect to, or otherwise representing or evidencing, Receivables or other Collateral, including returned, repossessed and reclaimed goods, and (iv) deposits by and property of account debtors or other persons securing the obligations of account debtors; (k) all (i) investment property (including securities, whether certificated or uncertificated, securities accounts, security entitlements, commodity contracts or commodity accounts), excluding Borrower's investments in EWP and Garden Zone, and (ii) monies, credit balances, deposits and other property of Borrower now or hereafter held or received by or in transit to Lender or its affiliates or at any other depository or other institution from or for the account of Borrower, whether for safekeeping, pledge, custody, transmission, collection or otherwise, excluding funds held in trust with respect to environmental liabilities and other property deposited with the Indenture Trustee pursuant to Section 3.5 or Article VIII of the Indenture or delivered to or received by the Indenture Trustee for application in accordance with Section 6.11 of the Indenture; (l) all commercial tort claims, including, without limitation, those identified in the Information Certificate; (m) to the extent not otherwise described above, all Receivables; (n) all Records; and (o) all products and proceeds of the foregoing, in any form, including insurance proceeds and all claims against third parties for loss or damage to or destruction of or other involuntary conversion of any kind or nature of any or all of the other Collateral. Lender acknowledges that the definition of Collateral shall not include the assets of Garden Zone and EWP. 5.2 Perfection of Security Interests. (a) Borrower irrevocably and unconditionally authorizes Lender (or its agent) to file at any time and from time to time such financing statements with respect to the Collateral naming Lender or its designee as the secured party and Borrower as debtor, as Lender may require, and including any other information with respect to Borrower or otherwise required by part 5 of Article 9 of the Uniform Commercial Code of such jurisdiction as Lender may determine, together with any amendment and continuations with respect thereto, which authorization shall apply to all financing statements filed on, prior to or after the date hereof. Borrower hereby ratifies and approves all financing statements naming Lender or its designee as secured party and Borrower as debtor with respect to the Collateral (and any amendments with respect to such financing statements) filed by or on behalf of Lender prior to the date hereof and ratifies and confirms the authorization of Lender to file such financing statements (and amendments, if any). Borrower hereby authorizes Lender to adopt on behalf of Borrower any symbol required for authenticating any electronic filing. In the event that the description of the collateral in any financing statement naming Lender or its designee as the secured party and Borrower as debtor includes assets and properties of Borrower that do not at any time constitute Collateral, whether hereunder, under any of the other Financing Agreements or otherwise, the filing of such financing statement shall nonetheless be deemed authorized by Borrower to the extent of the Collateral included in such description and it shall not render the financing statement ineffective as to any of the Collateral or otherwise affect the financing statement as it applies to any of the Collateral. In no event shall Borrower at any time file, or permit or cause to be filed, any correction statement or termination statement with respect to any financing statement (or amendment or continuation with respect thereto) naming Lender or its designee as secured party and Borrower as debtor. (b) Borrower does not have any chattel paper (whether tangible or electronic) or instruments as of the date hereof, except as set forth in the Information Certificate. In the event that Borrower shall be entitled to or shall receive any chattel paper or instrument after the date hereof, Borrower shall promptly notify Lender thereof in writing. Promptly upon the receipt thereof by or on behalf of Borrower (including by any agent or representative), Borrower shall deliver, or cause to be delivered to Lender, all tangible chattel paper and instruments that Borrower has or may at any time acquire, accompanied by such instruments of transfer or assignment duly executed in blank as Lender may from time to time specify, in each case except as Lender may otherwise agree. At Lender's option, Borrower shall, or Lender may at any time on behalf of Borrower, cause the original of any such instrument or chattel paper to be conspicuously marked in a form and manner acceptable to Lender with the following legend referring to chattel paper or instruments as applicable: "This [chattel paper][instrument] is subject to the security interest of Congress Financial Corporation (Central) and any sale, transfer, assignment or encumbrance of this [chattel paper][instrument] violates the rights of such secured party." (c) In the event that Borrower shall at any time hold or acquire an interest in any electronic chattel paper or any "transferable record" (as such term is defined in Section 201 of the Federal Electronic Signatures in Global and National Commerce Act or in Section 16 of the Uniform Electronic Transactions Act as in effect in any relevant jurisdiction), Borrower shall promptly notify Lender thereof in writing. Promptly upon Lender's request, Borrower shall take, or cause to be taken, such actions as Lender may reasonably request to give Lender control of such electronic chattel paper under Section 9-105 of the UCC and control of such transferable record under Section 201 of the Federal Electronic Signatures in Global and National Commerce Act or, as the case may be, Section 16 of the Uniform Electronic Transactions Act, as in effect in such jurisdiction. (d) Borrower does not have any lockbox or other deposit accounts (where payments on Receivables or other proceeds of Inventory or other Collateral are deposited) as of the date hereof, except as set forth in the Information Certificate. Borrower shall not, directly or indirectly, after the date hereof open, establish or maintain any lockbox or other deposit account (where payments on Receivables or other proceeds of Inventory or other Collateral are deposited) unless each of the following conditions is satisfied: (i) Lender shall have received not less than five (5) Business Days prior written notice of the intention of Borrower to open or establish such account which notice shall specify in reasonable detail and specificity acceptable to Lender the name of the account, the owner of the account, the name and address of the bank at which such account is to be opened or established, the individual at such bank with whom Borrower is dealing and the purpose of the account, (ii) the bank where such account is opened or maintained shall be acceptable to Lender, and (iii) on or before the opening of such deposit account, Borrower shall as Lender may specify either (A) deliver to Lender a Deposit Account Control Agreement with respect to such deposit account duly authorized, executed and delivered by Borrower and the bank at which such deposit account is opened and maintained or (B) arrange for Lender to become the customer of the bank with respect to the deposit account on terms and conditions acceptable to Lender. The terms of this subsection (d) shall not apply to deposit accounts specifically and exclusively used for payroll, payroll taxes and other employee wage and benefit payments to or for the benefit of Borrower's salaried or hourly wage employees. (e) Borrower does not own or hold, directly or indirectly, beneficially or as record owner or both, any investment property, as of the date hereof, or have any investment account, securities account, commodity account or other similar account with any bank or other financial institution or other securities intermediary or commodity intermediary as of the date hereof, in each case except as set forth in the Information Certificate. (i) In the event that Borrower shall be entitled to or shall at any time after the date hereof hold or acquire any certificated securities, Borrower shall promptly endorse, assign and deliver the same to Lender, accompanied by such instruments of transfer or assignment duly executed in blank as Lender may from time to time specify. If any securities, now or hereafter acquired by Borrower are uncertificated and are issued to Borrower or its nominee directly by the issuer thereof, Borrower shall immediately notify Lender thereof and shall as Lender may specify, either (A) cause the issuer to agree to comply with instructions from Lender as to such securities, without further consent of Borrower or such nominee, or (B) arrange for Lender to become the registered owner of the securities. (ii) Borrower shall not, directly or indirectly, after the date hereof open, establish or maintain any investment account, securities account, commodity account or any other similar account (other than a deposit account) with any securities intermediary or commodity intermediary unless each of the following conditions is satisfied: (A) Lender shall have received not less than five (5) Business Days prior written notice of the intention of Borrower to open or establish such account which notice shall specify in reasonable detail and specificity acceptable to Lender the name of the account, the owner of the account, the name and address of the securities intermediary or commodity intermediary at which such account is to be opened or established, the individual at such intermediary with whom Borrower is dealing and the purpose of the account, (B) the securities intermediary or commodity intermediary (as the case may be) where such account is opened or maintained shall be acceptable to Lender, and (C) on or before the opening of such investment account, securities account or other similar account with a securities intermediary or commodity intermediary, Borrower shall as Lender may specify either (1) execute and deliver, and cause to be executed and delivered to Lender, an Investment Property Control Agreement with respect thereto duly authorized, executed and delivered by Borrower and such securities intermediary or commodity intermediary or (2) arrange for Lender to become the entitlement holder with respect to such investment property on terms and conditions acceptable to Lender. (f) Borrower is not the beneficiary or otherwise entitled to any right to payment under any letter of credit, banker's acceptance or similar instrument as of the date hereof, except as set forth in the Information Certificate. In the event that Borrower shall be entitled to or shall receive any right to payment under any letter of credit, banker's acceptance or any similar instrument, whether as beneficiary thereof or otherwise after the date hereof, Borrower shall promptly notify Lender thereof in writing. Borrower shall immediately, as Lender may specify, either (i) deliver, or cause to be delivered to Lender, with respect to any such letter of credit, banker's acceptance or similar instrument, the written agreement of the issuer and any other nominated person obligated to make any payment in respect thereof (including any confirming or negotiating bank), in form and substance satisfactory to Lender, consenting to the assignment of the proceeds of the letter of credit to Lender by Borrower and agreeing to make all payments thereon directly to Lender or as Lender may otherwise direct or (ii) cause Lender to become, at Borrower's expense, the transferee beneficiary of the letter of credit, banker's acceptance or similar instrument (as the case may be). (g) Borrower has no commercial tort claims as of the date hereof, except as set forth in the Information Certificate. In the event that Borrower shall at any time after the date hereof have any commercial tort claims, Borrower shall promptly notify Lender thereof in writing, which notice shall (i) set forth in reasonable detail the basis for and nature of such commercial tort claim and (ii) include the express grant by Borrower to Lender of a security interest in such commercial tort claim (and the proceeds thereof). In the event that such notice does not include such grant of a security interest, the sending thereof by Borrower to Lender shall be deemed to constitute such grant to Lender. Upon the sending of such notice, any commercial tort claim described therein shall constitute part of the Collateral and shall be deemed included therein. Without limiting the authorization of Lender provided in Section 5.2(a) hereof or otherwise arising by the execution by Borrower of this Agreement or any of the other Financing Agreements, Lender is hereby irrevocably authorized from time to time and at any time to file such financing statements naming Lender or its designee as secured party and Borrower as debtor, or any amendments to any financing statements, covering any such commercial tort claim as Collateral. In addition, Borrower shall promptly upon Lender's request, execute and deliver, or cause to be executed and delivered, to Lender such other agreements, documents and instruments as Lender may require in connection with such commercial tort claim. (h) Borrower does not have any goods, documents of title or other Collateral in the custody, control or possession of a third party as of the date hereof, except as set forth in the Information Certificate and except for goods located in the United States in transit to a location of Borrower permitted herein in the ordinary course of business of Borrower in the possession of the carrier transporting such goods. In the event that any goods, documents of the title or other Collateral are at any time after the date hereof in the custody, control or possession of any other person not referred to in the Information Certificate or such carriers, Borrower shall promptly notify Lender thereof in writing. Promptly upon Lender's request with respect to any material amount of Collateral located in the custody, control or possession of any third party, Borrower shall deliver to Lender a Collateral Access Agreement duly authorized, executed and delivered by such person and Borrower. (i) Borrower shall take any other actions reasonably requested by Lender from time to time to cause the attachment, perfection and first priority of, and the ability of Lender to enforce, the security interest of Lender in any and all of the Collateral, including, without limitation, (i) executing, delivering and, where appropriate, filing financing statements and amendments relating thereto under the UCC or other applicable law, to the extent, if any, that Borrower's signature thereon is required therefor, (ii) causing Lender's name to be noted as secured party on any certificate of title for a titled good if such notation is a condition to attachment, perfection or priority of, or ability of Lender to enforce, the security interest of Lender in such Collateral, (iii) complying with any provision of any statute, regulation or treaty of the United States as to any Collateral if compliance with such provision is a condition to attachment, perfection or priority of, or ability of Lender to enforce, the security interest of Lender in such Collateral, (iv) obtaining the consents and approvals of any Governmental Authority or third party, including, without limitation, any consent of any licensor, lessor or other person obligated on Collateral, and taking all actions required by any earlier versions of the UCC or by other law, as applicable in any relevant jurisdiction. H. Section 6.1 of the Loan Agreement is hereby amended by replacing the phrase "Revolving Loans" with the word "Loans" wherever it appears therein. I. Subsections 6.3(a) and (b) of the Loan Agreement are hereby amended and restated in their entirety to read as follows: (a) Borrower shall establish and maintain, at its expense, blocked accounts or lockboxes and related blocked accounts (in either case, "Blocked Accounts"), as Lender may specify, with such banks as are acceptable to Lender into which Borrower shall promptly deposit and direct its account debtors to directly remit all payments on Receivables and all payments constituting proceeds of Inventory or other Collateral in the identical form in which such payments are made, whether by cash, check or other manner. Borrower shall deliver, or cause to be delivered to Lender, a Depository Account Control Agreement duly authorized, executed and delivered by each bank where a Blocked Account is maintained as provided in Section 5.2 hereof or at any time and from time to time Lender may become bank's customer with respect to the Blocked Accounts and promptly upon Lender's request, Borrower shall execute and deliver such agreements or documents as Lender may require in connection therewith. Borrower agrees that all payments made to such Blocked Accounts or other funds received and collected by Lender, whether in respect of the Receivables, as proceeds of Inventory or other Collateral or otherwise shall be treated as payments to Lender in respect of the Obligations and therefore shall constitute the property of Lender to the extent of the then outstanding Obligations. (b) For purposes of calculating the amount of the Loans available to Borrower, such payments will be applied (conditional upon final collection) to the Obligations on the Business Day of receipt by Lender of immediately available funds in the Lender Payment Account provided such payments and notice thereof are received in accordance with Lender's usual and customary practices as in effect from time to time and within sufficient time to credit Borrower's loan account on such day, and if not, then on the next Business Day. For the purposes of calculating interest on the Obligations, such payments or other funds received will be applied (conditional upon final collection) to the Obligations one (1) Business Day following the date of receipt of immediately available funds by Lender in the Lender Payment Account provided such payments or other funds and notice thereof are received in accordance with Lender's usual and customary practices as in effect from time to time and within sufficient time to credit Borrower's loan account on such day, and if not, then on the next Business Day. J. Section 6.5 of the Loan Agreement is hereby amended by replacing the phrase "Revolving Loans" with the word "Loans" wherever it appears therein. K. Section 6.6 of the Loan Agreement is hereby amended by replacing the phrase "Revolving Loans" with the word "Loans" wherever it appears therein. L. Section 7.1 of the Loan Agreement is hereby amended to insert the phrase "and Equipment" after the word "Inventory" in clause (c)(iii) thereof. M. Section 7.4 of the Loan Agreement is hereby amended and restated in its entirety to read as follows: 7.4 Equipment and Real Property Covenants. With respect to the Equipment and Real Property: (a) upon Lender's request, Borrower shall, at its expense, on or after an Event of Default, deliver or cause to be delivered to Lender written appraisals as to the Equipment and/or the Real Property in form, scope and methodology acceptable to Lender and by an appraiser acceptable to Lender, addressed to Lender and upon which Lender is expressly permitted to rely; (b) Borrower shall keep the Equipment in good order, repair, running and marketable condition (ordinary wear and tear excepted); (c) Borrower shall use the Equipment and Real Property with all reasonable care and caution and in accordance with applicable standards of any insurance and in conformity with all applicable laws; (d) the Equipment is and shall be used in Borrower's business and not for personal, family, household or farming use; (e) Borrower shall not remove any Equipment from the locations set forth or permitted herein, except in connection with the sale of obsolete Equipment or to the extent necessary to have any Equipment repaired or maintained in the ordinary course of the business of Borrower or to move Equipment directly from one location set forth or permitted herein to another such location and except for the movement of motor vehicles used by or for the benefit of Borrower in the ordinary course of business; (f) the Equipment is now and shall remain personal property and Borrower shall not permit any of the Equipment to be or become a part of or affixed to real property; and (g) Borrower assumes all responsibility and liability arising from the use of the Equipment and Real Property. N. Section 8.1 of the Loan Agreement is hereby amended and restated in its entirety to read as follows: 8.1 Corporate Existence. Power and Authority; Subsidiaries. (a) Borrower is a corporation duly organized and in good standing under the laws its state of incorporation and is duly qualified as a foreign corporation and in good standing in all states and jurisdictions where the nature and extent of the business transacted by it or the ownership of assets makes such qualification necessary. The execution, delivery and performance of this Agreement, the other Financing Agreements and the transactions contemplated hereunder and thereunder are all within Borrower's corporate powers, have been duly authorized and are not in contravention of law or the terms of Borrower's certificate of incorporation, by-laws, or other organizational documentation, or any indenture, agreement or undertaking to which Borrower is a party or by which Borrower or its property are bound. The performance of Borrower's obligations do not, as of the execution hereof, require any governmental consent, registration or approval, do not contravene any contractual or governmental restriction binding upon Borrowers and will not, except as contemplated herein, result in the imposition of any lien, charge, security interest or encumbrance upon any property of the Borrower under any existing indenture, mortgage, deed of trust, loan or credit agreement or other material agreement or instrument to which the Borrower is a party or by which it or any of its property may be bound or affected. The execution and delivery by Borrower of the Agreement and all other documents and instruments executed and delivered in connection herewith and the performance of Borrower's obligations hereunder and thereunder are not in contravention of any law or laws. This Agreement and the other Financing Agreements constitute legal, valid and binding obligations of Borrower enforceable in accordance with their respective terms. Borrower does not have any Subsidiaries except as set forth on the Information Certificate. Except as disclosed on the Information Certificate, Borrower has not used and has no current plans to use, any corporate or fictitious name other than the corporate name shown on the Borrower's Articles of Incorporation. (b) Borrower does not have any direct or indirect Subsidiaries or Affiliates and is not engaged in any joint venture or partnership except as set forth in Schedule 8.1 to the Information Certificate. (c) Borrower is the record and beneficial owner of all of the issued and outstanding shares of Capital Stock of each of the Subsidiaries listed on Schedule 8.1 to the Information Certificate as being owned by Borrower and there are no proxies, irrevocable or otherwise, with respect to such shares and no equity securities of any of the Subsidiaries are or may become required to be issued by reason of any options, warrants, rights to subscribe to, calls or commitments of any kind or nature and there are no contracts, commitments, understandings or arrangements by which any Subsidiary is or may become bound to issue additional shares of it Capital Stock or securities convertible into or exchangeable for such shares. O. Section 8.3 of the Loan Agreement is hereby amended and restated in its entirety to read as follows: 8.3 Name; State of Organization; Chief Executive Office; Collateral Locations. (a) The exact legal name of Borrower is as set forth on the signature page of this Agreement and in the Information Certificate. Borrower has not, during the past five years, been known by or used any other corporate or fictitious name or been a party to any merger or consolidation, or acquired all or substantially all of the assets of any Person, or acquired any of its property or assets out of the ordinary course of business, except as set forth in the Information Certificate. (b) Borrower is an organization of the type and organized in the jurisdiction set forth in the Information Certificate. The Information Certificate accurately sets forth the organizational identification number of Borrower or accurately states that Borrower has none and accurately sets forth the federal employer identification number of Borrower. (c) The chief executive office and mailing address of Borrower and Borrower's Records concerning Accounts are located only at the address set forth below and its only other places of business and the only other locations of Collateral, if any, are the addresses set forth in the Information Certificate, subject to the right of Borrower to establish new locations in accordance with Section 9.2 below. The Information Certificate correctly identifies any of such locations which are not owned by Borrower and sets forth the owners and/or operators thereof and, to the best of Borrower's knowledge, the holders of any mortgages on such locations. P. The following new Section 8.14 is hereby added to the Loan Agreement in proper numerical order: 8.14 Bank Accounts. All of the deposit accounts, investment accounts or other accounts in the name of or used by Borrower maintained at any bank or other financial institution are set forth in Schedule 8.14 to the Information Certificate, subject to the right of Borrower to establish new accounts in accordance with Section 5.2 hereof. Q. Section 9.4 of the Loan Agreement is hereby amended by replacing the phrase "Revolving Loans" with the word "Loans" wherever it appears therein. R. Section 9.6 of the Loan Agreement is hereby amended by adding the following new subsection (e) at the end thereof: (e) Borrower shall, within sixty (60) days after the end of each of its first three Fiscal Quarters and within 90 days after its last Fiscal Quarter of each year, furnish or cause to be furnished to Lender a compliance certificate in the form of Exhibit B hereto, along with a schedule in form reasonably satisfactory to Lender of the calculations used in determining, as of the end of the immediately preceding Fiscal Quarter, whether Borrower was in compliance with the covenants set forth in Sections 9.21 and 9.22 of this Agreement for such Fiscal Quarter. S. Subsections 9.8(f) and (g) of the Loan Agreement are hereby amended and restated in their entirety, and new subsections 9.8(i) and (j) are added, to read as follows: (f) subordinate liens on the Real Property and fixtures at Borrower's Peoria, Illinois facility that are granted to the County of Peoria, Illinois to secure a $10,000,000 loan to the Borrower, provided that such secured party shall be subject to a subordination agreement in form and substance acceptable to Lender in its sole discretion; (g) subordinate liens on the Borrower's property that are granted to the holders of the 8% Subordinated Secured Notes due 2009, provided such Notes shall be subordinate to the Loans, in form and substance acceptable to Lender in its sole discretion; (i) the pledge of stock of EWP to EWP Financial, LLC to secure a $6,000,000 revolving credit facility to Keystone (the "EWP Financial Loan"); and (j) purchase money liens (including capital leases) on equipment of Borrower in an amount not to exceed $375,000; and (k) liens permitted under other Financing Agreements. T. Section 9.9 is amended to insert the following subsection (g) at the end thereof: and (g) the Subordinated Indebtedness, EWP Financial Loan and the Vendor Settlements, in each case as in effect on the date hereof. U. Section 9.11 is amended and restated in its entirety to read "Intentionally Deleted." V. The following new Section 9.21 is hereby added to the Loan Agreement in proper numerical order: 9.21 Minimum Fixed Charge Coverage Ratio. Borrower and its Subsidiaries shall have on a consolidated basis at the end of each Fiscal Quarter set forth below, a Fixed Charge Coverage Ratio for the 12-month period then ended of not less than the following: For the Fiscal Quarter ending Minimum Fixed Charge Ratio June 30, 2002 0.5 to 1.00 September 30, 2002 0.5 to 1.00 December 31, 2002 0.56 to 1.00 March 31, 2003 0.62 to 1.00 June 30, 2003 0.68 to 1.00 September 30, 2003 0.74 to 1.00 December 31, 2003 0.80 to 1.00 March 31, 2004 0.86 to 1.00 June 30, 2004 0.92 to 1.00 September 30, 2004 0.98 to 1.00 December 31, 2004 and for each Fiscal Quarter end thereafter 1.01 to 1.00 W. The following new Section 9.22 is hereby added to the Loan Agreement in proper numerical order: 9.22 Minimum EBITDA. Borrower and its Subsidiaries on a consolidated basis shall have, at the end of each Fiscal Quarter set forth below, EBITDA for the 12-month period then ended of not less than the following: Period EBITDA June 30, 2002 $7,500,000 September 30, 2002 $6,000,000 December 31, 2002 $5,000,000 March 31, 2003 $5,250,000 June 30, 2003 $5,500,000 September 30, 2003 $5,750,000 December 31, 2003 $6,000,000 March 31, 2004 $6,250,000 June 30, 2004 $6,500,000 September 30, 2004 $6,750,000 December 31, 2004 $7,000,000 X. The following new Section 9.23 is hereby added to the Loan Agreement in proper numerical order: 9.23 Restricted Payments. The Borrower shall not, and shall not suffer or permit any of its Subsidiaries to, (i) declare or make any dividend payment or other distribution of assets, properties, cash, rights, obligations or securities on account of any shares of any class of its Capital Stock, (ii) purchase, redeem or otherwise acquire for value any shares of its Capital Stock or any warrants, rights or options to acquire such shares, interests or securities now or hereafter outstanding or (iii) make any payment or prepayment of principal of, premium, if any, interest, redemption, exchange, purchase, retirement, defeasance, sinking fund or similar payment with respect to, the Senior Notes or the Subordinated Indebtedness; provided that: (a) the Borrower may make regularly scheduled interest payments on the Senior Notes and the Subordinated Indebtedness provided that no Event of Default or an event which with notice or passage of time or both would constitute an Event of Default is occurring or would result from such payment; (b) Borrower may declare and make dividend payments and other distributions payable solely in its common stock; (c) Borrower may make dividends in respect of Borrower's Series A 10% Cumulative Convertible Pay-In-Kind Preferred Stock provided that (x) no Event of Default or an event which with notice or passage of time or both would constitute an Event of Default is occurring or would result from such payment and (y) after giving effect to (A) such payment, (B) the Revolving Loan Limit and (C) the availability of Borrower to obtain a Revolving Loan after giving effect to the lending formulas set forth in Section 2.1(a) hereof, Borrower would be permitted to borrow Revolving Loans in an amount not less than $1,250,000; (d) the Borrower may redeem the Senior Notes in an aggregate amount not to exceed $6,150,000. Y. The following new Section 9.24 is hereby added to the Loan Agreement in proper numerical order: 9.24 Vendor Settlements. Borrower shall not, and shall cause its Subsidiaries not to, make any payment under the Vendor Settlements unless (i) no Event of Default or an event which with notice or passage of time or both would constitute an Event of Default is occurring or would result from such payment and (ii) after giving effect to (a) such payment, (b) the Revolving Loan Limit and (c) the availability of Borrower to obtain a Revolving Loan after giving effect to the lending formulas set forth in Section 2.1(a) hereof, Borrower would be permitted to borrow Revolving Loans in an amount not less than $1,250,000. Z. Section 10.1 is hereby amended to add the following new subsections 10.1(q) and (r) at the end thereof: (q) there shall occur an "Asset Sale" as defined in the Certificate of Designations, Rights and Preferences of the Series A Cumulative Convertible Pay-in-Kind Preferred Stock; and (r) the Pension Benefit Guaranty Corporation shall place a lien on any assets of the Borrower, or any of Borrower's Subsidiaries, or on any assets of Garden Zone. AA. Section 10.2. 1. The following new subsections 10.2(e) and (f) are hereby added at the end of Section 10.2: (e) Lender may, at any time or times that an Event of Default exists or has occurred and is continuing, enforce Borrower's rights against any account debtor, secondary obligor or other obligor in respect of any of the Accounts or other Receivables. Without limiting the generality of the foregoing, Lender may at such time or times (i) notify any or all account debtors, secondary obligors or other obligors in respect thereof that the Receivables have been assigned to Lender and that Lender has a security interest therein and Lender may direct any or all accounts debtors, secondary obligors and other obligors to make payment of Receivables directly to Lender, (ii) extend the time of payment of, compromise, settle or adjust for cash, credit, return of merchandise or otherwise, and upon any terms or conditions, any and all Receivables or other obligations included in the Collateral and thereby discharge or release the account debtor or any secondary obligors or other obligors in respect thereof without affecting any of the Obligations, (iii) demand, collect or enforce payment of any Receivables or such other obligations, but without any duty to do so, and Lender shall not be liable for its failure to collect or enforce the payment thereof nor for the negligence of its agents or attorneys with respect thereto and (iv) take whatever other action Lender may deem necessary or desirable for the protection of its interests. At any time that an Event of Default exists or has occurred and is continuing, at Lender's request, all invoices and statements sent to any account debtor shall state that the Accounts and such other obligations have been assigned to Lender and are payable directly and only to Lender and Borrower shall deliver to Lender such originals of documents evidencing the sale and delivery of goods or the performance of services giving rise to any Accounts as Lender may require. In the event any account debtor returns Inventory when an Event of Default exists or has occurred and is continuing, Borrower shall, upon Lender's request, hold the returned Inventory in trust for Lender, segregate all returned Inventory from all of its other property, dispose of the returned Inventory solely according to Lender's instructions, and not issue any credits, discounts or allowances with respect thereto without Lender's prior written consent. (f) For the purpose of enabling Lender to exercise the rights and remedies hereunder, Borrower hereby grants to Lender, to the extent assignable, an irrevocable, non-exclusive license (exercisable without payment of royalty or other compensation to Borrower) to use, assign, license or sublicense any of the trademarks, service-marks, trade names, business names, trade styles, designs, logos and other source of business identifiers and other Intellectual Property and general intangibles now owned or hereafter acquired by Borrower, wherever the same may be located, including in such license reasonable access to all media in which any of the licensed items may be recorded or stored and to all computer programs used for the compilation or printout thereof. BB. Section 12.1. 1. Section 12.1(a) of the Loan Agreement is hereby amended and restated in its entirety to read as follows: This Agreement and the other Financing Agreements shall continue in full force and effect for a term ending on the date March 31, 2005 (the "Renewal Date"). Upon the Renewal Date or earlier termination of the Financing Agreements, Borrower shall pay to Lender, in full, all outstanding and unpaid Obligations and shall furnish cash collateral to Lender in such amounts as Lender determines are reasonably necessary to secure Lender from loss, cost, damage or expense, including attorneys' fees and legal expenses, in connection with any contingent Obligations, including issued and outstanding Letter of Credit Accommodations and checks or other payments provisionally credited to the Obligations and/or as to which Lender has not yet received final and indefeasible payment. Such cash collateral shall be remitted by wire transfer in Federal funds to such bank account of Lender, as Lender may, in its discretion, designate in writing to Borrower for such purpose. Interest shall be due until and including the next business day, if the amounts so paid by Borrower to the bank account designated by Lender are received in such bank account later than 12:00 noon, Chicago time. 2. Section 12.1(c) of the Loan Agreement is hereby amended and restated in its entirety to read as follows: If for any reason this Agreement is terminated prior to the end of the then current term or renewal term of this Agreement, in view of the impracticality and extreme difficulty of ascertaining actual damages and by mutual agreement of the parties as to a reasonable calculation of Lender's lost profits as a result thereof, Borrower agrees to pay to Lender, upon the effective date of such termination, an early termination fee equal to one percent (1%) of the Maximum Credit; provided that if such termination occurs after the second anniversary following the Amendment No. 12 Effective Date, such termination fee shall be reduced to one-half of one percent (1/2%) of the Maximum Credit. Such early termination fee shall be presumed to be the amount of damages sustained by Lender as a result of such early termination and Borrower agrees that it is reasonable under the circumstances currently existing. In addition, Lender shall be entitled to such early termination fee upon the occurrence of any Event of Default described in Sections 10.1(g) and 10.1(h) hereof, even if Lender does not exercise its right to terminate this Agreement, but elects, at its option, to provide financing to Borrower or permit the use of cash collateral under the United States Bankruptcy Code. The early termination fee provided for in this Section 12.1 shall be deemed included in the Obligations. CC. A new Exhibit B is hereby added to the Loan Agreement in the form of Exhibit A attached hereto. II. Renewal Fee. The Borrower shall pay to Lender a $500,000 renewal fee ("Renewal Fee"), which is due on the Amendment No. 12 Effective Date and payable in three (3) installments of $166,667 on each of April 8, 2002 and March 15, 2003 and $166,666 on March 15, 2004; provided that at such time (if at all) that the Revolving Loan Limit is to be increased, the entire unpaid Renewal Fee shall be immediately payable to Lender. III. Conditions to Effectiveness of Twelfth Amendment. This Twelfth Amendment shall become effective on the date when Borrower shall satisfy all of the following conditions: A. Twelfth Amendment. Borrower and Lender shall have duly executed and delivered this Twelfth Amendment. B. The County of Peoria, Illinois Subordination and Intercreditor Agreement. Lender shall have received a duly executed copy of that certain Subordination and Intercreditor Agreement, dated as of March 15, 2002, by and among Borrower, Lender and The County of Peoria, Illinois. C. Legal Opinion. Lender shall have received a legal opinion of Mark Hollingsworth, the Borrower's in-house counsel, addressed to Lender and in form and substance satisfactory to Lender. D. Renewal Fee. The Borrower shall have paid to the Lender $166,667 which constitutes the first installment of the $500,000 renewal fee. E. Subordinated Indebtedness. Lender shall have received satisfactory evidence that the documentation evidencing the Subordinated Indebtedness has been fully executed and delivered and the Subordinated Indebtedness has been issued, including, without limitation, evidence that the Borrower has received $10,000,000 from the County of Peoria, Illinois and that the 8% Notes and the 6% Notes have been issued. F. Vendor Settlements. Lender shall have received satisfactory evidence that the documentation evidencing the Vendor Settlements have been executed and delivered to Borrower. G. Additional Matters. Lender shall have received such other certificates, opinions, UCC financing statements, documents and instruments relating to the obligations or the transactions contemplated hereby as may have been reasonably requested by Lender, and all corporate and other proceedings and all other documents and all legal matters in connection with the transactions contemplated hereby shall be reasonably satisfactory in form and substance to Lender. IV. Representations and Warranties. In order to induce Lender to enter into this Twelfth Amendment, Borrower represents and warrants to Lender, upon the effectiveness of this Twelfth Amendment, which representations and warranties shall survive the execution and delivery of this Twelfth Amendment, that: A. Borrower is a corporation duly organized, validly existing and in good standing under the laws of the state of its incorporation; B. the execution, delivery and performance of this Twelfth Amendment by Borrower are within its corporate powers and have been duly authorized by all necessary corporate action; and C. this Twelfth Amendment constitutes a legal, valid and binding obligation of Borrower, enforceable against Borrower in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally, and by general principles of equity. V. Information Certificate. Borrower shall deliver to Lender, within thirty (30) days following the date hereof, an Information Certificate and updates of applicable Schedules. Such Information Certificate shall be in form and substance satisfactory to Lender in its sole discretion. Failure to satisfy this Article IV hereof shall constitute an immediate Event of Default under the Loan Agreement. VI. Miscellaneous. A. Effect; Ratification. The amendments set forth herein are effective solely for the purpose set forth herein and shall be limited precisely as written, and shall not be deemed to (i) be a consent to any amendment, waiver or modification of any other term or condition of the Loan Agreement or of any other Financing Agreements or (ii) prejudice any right or rights that Lender may now have or may have in the future under or in connection with the Loan Agreement or any other Financing Agreements. Each reference in the Loan Agreement to "this Agreement", "herein", "hereof" and words of like import and each reference in the other Financing Agreements to the Loan Agreement shall mean the Loan Agreement as amended hereby. This Twelfth Amendment shall be construed in connection with and as part of the Loan Agreement and all terms, conditions, representations, warranties, covenants and agreements set forth in the Loan Agreement and each other Financing Agreement, except as herein amended or waived, are hereby ratified and confirmed and shall remain in full force and effect. B. Costs and Expenses. Borrower shall pay to Lender on demand all reasonable out-of-pocket costs, expenses, title fees, filing fees and taxes paid or payable in connection with the preparation, negotiation, execution, delivery, recording, administration, collection, liquidation, enforcement and defense of the Obligations, Lender's rights in the Collateral, this Twelfth Amendment, the Loan Agreement, the other Financing Agreements and all other documents related hereto or thereto, including any amendments, supplements or consents which may hereafter be contemplated (whether or not executed) or entered into in respect hereof and thereof, including, but not limited to: (a) all costs and expenses of filing or recording (including Uniform Commercial Code financing statement filing taxes and fees, documentary taxes, intangibles taxes and mortgage recording and title insurance taxes and fees, if applicable); (b) costs and expenses and fees for title insurance and other insurance premiums, environmental audits, surveys, assessments, engineering reports and inspections, appraisal fees and search fees; (c) costs and expenses of remitting loan proceeds, collecting checks and other items of payment; (d) charges, fees or expenses charged by any bank or issuer in connection with the Letter of Credit Accommodations; (e) costs and expenses of preserving and protecting the Collateral; (f) costs and expenses paid or incurred in connection with obtaining payment of the Obligations, enforcing the security interests and liens of Lender, selling or otherwise realizing upon the Collateral, and otherwise enforcing the provisions of this Twelfth Amendment, the Loan Agreement and the other Financing Agreements or defending any claims made or threatened against Lender arising out of the transactions contemplated hereby and thereby (including, without limitation, preparations for and consultations concerning any such matters); and (g) the fees and disbursements of counsel (including legal assistants) to Lender in connection with the foregoing. C. Certain Waivers; Release. Although Borrower does not believe that it has any claims against Lender, it is willing to provide Lender with a general and total release of all such claims in consideration of the benefits which Borrower will receive pursuant to this Twelfth Amendment. Accordingly, Borrower for itself and any successor of Borrower hereby knowingly, voluntarily, intentionally and irrevocably releases and discharges Lender and its respective officers, directors, agents and counsel (each a "Released Party") from any and all actions, causes of action, suits, sums of money, accounts, reckonings, bonds, bills, specialties, covenants, contracts, controversies, agreements, promises, variances, trespasses, damages, judgments, extents, executions, losses, liabilities, costs, expenses, debts, dues, demands, obligations or other claims of any kind whatsoever, in law, admiralty or equity, which Borrower ever had, now has or hereafter can, shall or may have against any Released Party for, upon or by reason of any matter, cause or thing whatsoever from the beginning of the world to the date of this Twelfth Amendment. D. Counterparts. This Twelfth Amendment may be executed in any number of counterparts, each such counterpart constituting an original but all together constituting one and the same instrument. E. Severability. Any provision contained in this Twelfth Amendment that is held to be inoperative, unenforceable or invalid in any jurisdiction shall, as to that jurisdiction, be inoperative, unenforceable or invalid without affecting the remaining provisions of this Twelfth Amendment in that jurisdiction or the operation, enforceability or validity of that provision in any other jurisdiction. F. GOVERNING LAW. THIS TWELFTH AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS. [remainder of page intentionally left blank] [Signature Page to Twelfth Amendment To Amended And Restated Revolving Loan And Security Agreement] IN WITNESS WHEREOF, the parties hereto have executed this Twelfth Amendment as of the date first above written. CONGRESS FINANCIAL CORPORATION (CENTRAL) By: ------------------------------------------------- Name: ------------------------------------------------- Title: ------------------------------------------------- KEYSTONE CONSOLIDATED INDUSTRIES, INC. By: ------------------------------------------------- Name: ------------------------------------------------- Title: ------------------------------------------------- CONSENT By Guarantee dated September 27, 1996 (as amended, the "Guarantee"), the undersigned (the "Guarantor") guaranteed to Lender (as defined therein), subject to the terms, conditions and obligations set forth therein, the prompt payment and performance of all of the Guaranteed Obligations (as defined therein). The Guarantor consents to Borrower's execution of the foregoing Twelfth Amendment to Loan Agreement (the "Amendment;" capitalized terms not otherwise defined herein shall have the meaning ascribed to them in the Amendment) and acknowledges the continued validity, enforceability and effectiveness of the Guarantee with respect to all loans, advances and extensions of credit to Borrower, whether heretofore or hereafter made, together with all interests thereon and all expenses in connection therewith. SHERMAN WIRE COMPANY By: ------------------------------------------------- Name: ------------------------------------------------- Title: ------------------------------------------------- CONSENT By Confirmation Agreement dated September 27, 1996, relating to that Amendment, Ratification and Confirmation of Secured Guaranty Agreement dated December 29, 1995, relating to, among other things the Secured Guaranty Agreement dated October 16, 1987 (collectively, the "Guarantee"), the undersigned (the "Guarantor") guaranteed to Lender (as defined therein), subject to the terms, conditions and obligations set forth therein, the prompt payment and performance of all of the Obligations (as defined therein). The Guarantor consents to Borrower's execution of the foregoing Twelfth Amendment to Loan Agreement (the "Amendment;" capitalized terms not otherwise defined herein shall have the meaning ascribed to them in the Amendment) and acknowledges the continued validity, enforceability and effectiveness of the Guarantee with respect to all loans, advances and extensions of credit to Borrower, whether heretofore or hereafter made, together with all interests thereon and all expenses in connection therewith. SHERMAN WIRE OF CALDWELL, INC. By: ---------------------------------------------- Name: ---------------------------------------------- Title: ---------------------------------------------- CONSENT By Confirmation Agreement dated September 27, 1996, relating to that Guarantee and Waiver and Rider No. 1 to Guarantee and Waiver, each dated December 30, 1993 (as amended, collectively, the "Guarantee"), the undersigned (the "Guarantor") guaranteed to Lender (as defined therein), subject to the terms, conditions and obligations set forth therein, the prompt payment and performance of all of the Obligations (as defined therein). The Guarantor consents to Borrower's execution of the foregoing Twelfth Amendment to Loan Agreement (the "Amendment;" capitalized terms not otherwise defined herein shall have the meaning ascribed to them in the Amendment) and acknowledges the continued validity, enforceability and effectiveness of the Guarantee with respect to all loans, advances and extensions of credit to Borrower, whether heretofore or hereafter made, together with all interests thereon and all expenses in connection therewith. FV Steel & Wire Company acknowledges and agrees that (i) all references in the Finance Agreements to the name "Fox Valley Steel & Wire Company" or to "Fox Valley Steel and Wire Company" shall be deemed to be references to "FV Steel & Wire Company" (including, without limitation, all signature blocks executed by "Fox Valley Steel & Wire Company" or "Fox Valley Steel and Wire Company"), (ii) notwithstanding the fact that FV Steel & Wire Company has executed all Finance Agreements as Fox Valley Steel & Wire Company or Fox Valley Steel and Wire Company after such entity has changed its name, any such executed Finance Agreement shall be valid and binding on FV Steel & Wire Company and (iii) FV Steel & Wire Company, as of the date of execution by Fox Valley Steel & Wire Company or Fox Valley Steel and Wire Company of any Finance Agreements, is bound by the terms of any such Finance Agreements. FV STEEL & WIRE COMPANY By: -------------------------------------------------- Name: -------------------------------------------------- Title: -------------------------------------------------- EXHIBIT A FORM OF COMPLIANCE CERTIFICATE KEYSTONE CONSOLIDATED INDUSTRIES, INC. Date: ____________, 200__ This certificate is given by Keystone Consolidated Industries, Inc., a Delaware corporation ("Borrower"), pursuant to subsection 9.6(e) of that certain Amended and Restated Revolving Loan Agreement dated as of December 29, 1995, between Borrower and Congress Financial Corporation (Central), an Illinois corporation ("Lender"), as such agreement may have been amended, restated, supplemented or otherwise modified from time to time, including, without limitation, all refinancings and refundings (the "Loan Agreement"). Capitalized terms used herein without definition shall have the meanings set forth in the Loan Agreement. The officer executing this certificate is duly authorized to execute and deliver this certificate on behalf of Borrower. By executing this certificate such officer hereby certifies to Lender that Exhibit A attached hereto is a correct calculation of each of the financial covenants contained in Sections 9.21 and 9.22 of the Loan Agreement. IN WITNESS WHEREOF, Borrower has caused this Certificate to be executed by one of its officers this _____ day of _______________, _____. KEYSTONE CONSOLIDATED INDUSTRIES, INC. By ___________________________________ Its ____________________________________ EXHIBIT A TO EXHIBIT 4.2(b) COMPLIANCE CERTIFICATE Covenant 6.3 Fixed Charge Coverage EXHIBIT A TO COMPLIANCE CERTIFICATE Covenant 9.21 FIXED CHARGE COVERAGE RATIO Fixed Charge Coverage is defined as follows1: EBITDA $____________ Fixed Charges: Interest Expense paid or accrued (except with respect to the deferred interest expense of the 6% Notes and the 8% Notes) $____________ Plus: Scheduled principal payments of Indebtedness during such period $___________ Corporate income taxes paid in cash during such period $___________ Capital Expenditures during such period $___________ Fixed Charges $___________ Fixed Charge Coverage (EBITDA divided by Fixed Charges) ____________ Required Fixed Charge Coverage ____________ In Compliance Yes/No EXHIBIT A TO EXHIBIT 4.2(b) COMPLIANCE CERTIFICATE Covenant 6.2 Leverage Ratio EXHIBIT A TO COMPLIANCE CERTIFICATE Covenant 9.22 MINIMUM EBITDA EBITDA is defined as follows: Net income (or loss) for the applicable period of measurement of Borrower and its Subsidiaries on a consolidated basis determined in accordance with GAAP, but excluding: (i) income tax credits, (ii) interest income, (iii) gain from extraordinary items for such period, (iv) any aggregate net gain (but not any aggregate net loss) during such period arising from the sale, exchange or other disposition of capital assets by such Person (including any fixed assets, whether tangible or intangible, all Inventory sold in conjunction with the disposition of fixed assets and all securities), (v) any other non-cash gains that have been added in determining consolidated net income and (vi) non-cash defined benefit pension income, in each case to the extent included in the calculation of consolidated net income of such Person for such period in accordance with GAAP, but without duplication $___________ Plus: $____________ Any provision for income taxes Interest Expense $____________ Loss from extraordinary items for such period $____________ Depreciation and amortization for such period $____________ Amortized debt discount for such period $____________ The amount of any deduction to consolidated net income as the result of any grant to any members of the management of such Person of any Capital Stock, in each case to the extent included in the calculation of consolidated net income of such Person for such period in accordance with GAAP, but without duplication $____________ Non-cash defined benefit pension expense $____________ without duplication, non-cash post-retirement benefits constituting retired employees'medical$____________ and life insurance benefits EBITDA for the applicable period of measurement $____________ Applicable Minimum Amount $____________ In Compliance Yes/No 1 The Fixed Charge Coverage shall be calculated on a rolling twelve (12) month basis. EX-4.17 15 exh417kci.txt LOAN AGREEMENT THIS LOAN AGREEMENT (this "Agreement") is made and entered into as of this 13th day of March, 2002 by and between KEYSTONE CONSOLIDATED INDUSTRIES, INC., a Delaware corporation (the "Company"), and THE COUNTY OF PEORIA, ILLINOIS (the "Lender"). Recitals: WHEREAS, the Company has requested that the Lender make a loan to the Company in the amount of TEN MILLION DOLLARS ($10,000,000.00); and WHEREAS, the Lender is willing to make such loan to the Company on the terms and subject to the conditions hereinafter set forth. NOW, THEREFORE, the parties promise and agree as follows: ARTICLE I Definitions In addition to terms defined elsewhere in this Agreement, the following definitions shall apply for purposes of this Agreement: "Bankruptcy Law" means Title 11 of the U.S. Code or any similar federal or state law for the relief of debtors as now and hereafter in effect, or any successor statutes. "Business Day" means a day other than a Saturday, a Sunday or a day on which banking institutions in Peoria, Illinois are authorized by law, regulation or executive order to remain closed. If a payment date called for herein or in the Note is not a Business Day, payment may be made on the next succeeding day that is a Business Day. "Contract" means any contract, agreement, undertaking or commitment (written or oral, formal or informal, firm or contingent) to which the Company or any of its Subsidiaries is a party or by which the Company, any of its Subsidiaries, or any of their respective assets are bound, and which has current operative or executory effect. "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. "Exchange Offer" means that certain Offer to Exchange Cash and Common Stock, New Unsecured Instruments or New Securities for Outstanding 9 5/8% Senior Secured Notes Due 2007 of Keystone Consolidated Industries, Inc. "GAAP" means generally accepted accounting principles set forth from time to time in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board (or agencies with similar functions of comparable stature and authority within the U.S. accounting profession), which are applicable to the circumstances as of the date of determination. "Governmental Authority" means the United States, any state or municipality, the government of any foreign country, any subdivision of any of the foregoing, or any authority, department, commission, board, bureau, agency, court, or instrumentality of any of the foregoing. "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 obligations in respect of a lease that would at such time be required to be capitalized on a balance sheet in accordance with GAAP or the balance deferred and unpaid of the purchase price of any property (other than contingent or "earnout" payment obligations), except any such balance that constitutes an accrued expense or trade payable, if and to the extent any of the foregoing indebtedness (other than letters of credit) 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, whether or not conditional, by such Person of any indebtedness of any other Person. "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). "Mortgage" means that certain Subordinate Mortgage, Security Agreement, Assignment of Rent and Fixture Filing to be executed and delivered by the Company to Lender securing the Loan with certain steel making assets of the Company's located in Peoria Township and Limestone Township, Illinois, and being a portion of property located at and commonly known as 7000 S.W. Adams Street, Peoria, Illinois, as more particularly described therein, and granting Lender a second priority subordinate lien on those assets subject only to the prior first lien of Congress Financial Corporation (Central). "Person" means any individual, corporation, general or limited partnership, limited liability company, joint venture, association, joint-stock company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity. "Restructuring" shall mean the restructuring of the Company as described in the Offering Circular dated February 11, 2002 for the Exchange Offer. "Security Agreement" means that certain Subordinate Security Agreement to be executed and delivered by Company to Lender securing the Loan with certain steel making assets of Company's located in Peoria, Illinois, as more particularly described therein, and granting Lender a second priority subordinate lien on those assets subject only to the prior first lien of Congress Financial Corporation (Central). "Subsidiary" means any corporation, general or limited partnership, limited liability company, association or other business entity of which securities or other ownership interests representing more than fifty percent (50%) of the ordinary voting power are, at the time as of which any determination is being made, owned or controlled by the Company or one or more Subsidiaries of the Company. "SEC" means the Securities and Exchange Commission. "1933 Act" means the Securities Act of 1933, as amended. "1934 Act" means the Securities Exchange Act of 1934, as amended. ARTICLE II Loan; Note; Closing and Closing Date 2.1. Loan; Note. Subject to the terms and conditions set forth in this Agreement, and relying upon the representations and warranties of the Company herein set forth, the Lender agrees, to make a loan to the Company in the principal amount of Ten Million Dollars ($10,000,000.00) (the "Loan"). The Loan shall be evidenced by the Company's term note in the form of Exhibit "A" hereto, payable to the order of the Lender and dated the Closing Date, for the principal sum of the Loan (the "Note"). The Note and this Agreement shall be secured by the Mortgage and the Security Agreement, which shall be executed, delivered and filed of record in the appropriate recording offices to perfect Lender's interest. 2.2. Closing; Closing Date. The closing of the Loan to be made by the Lender hereunder (the "Closing") shall occur at 10:00 a.m. at the offices of the Lender on or before June 1, 2002, or such other time and place as the parties may agree in writing (the "Closing Date"), upon satisfaction of the terms and conditions to the Lender's obligations as set forth in Section 4.1 hereof. 2.3 Escrow of Loan Proceeds. Upon execution of this Agreement , Lender agrees to place Ten Million and No/100 Dollars ($10,000,000.00) in escrow pursuant to the Escrow Agreement attached as Exhibit "B" hereto. ARTICLE III Terms of Loan and Note 3.1. Interest Rate; Payment; Usury. (a) Provided that no Event of Default has occurred and is continuing and subject to the other provisions of this Agreement, the Loan shall not bear interest. During any period that an Event of Default shall have occurred and be continuing, interest on the Loan shall accrue at a rate equal to the rate published in the Wall Street Journal from time to time as the prime rate (the "Default Interest Rate"). Notwithstanding anything contained herein to the contrary, in no event shall the interest rate on the Loan, including the Default Interest Rate, exceed the highest rate permitted by applicable law. Interest on the Loan at the Default Interest Rate, shall be based on a 360-day year, and shall accrue and be payable for the actual number of calendar days elapsed. Interest shall be payable in arrears commencing on the first day after the Maturity Date (as hereinafter defined) and continuing thereafter on the same day of each subsequent month until the Loan and all accrued interest have been paid in full. (b) It is the intention of the Company and the Lender to conform strictly to applicable usury laws now or hereafter in force, and any interest payable under this Agreement or the Note shall be subject to reduction to an amount not to exceed the maximum non-usurious amount for commercial loans allowed under such applicable usury laws as now or hereafter construed by the courts having jurisdiction over such matters. 3.2. Maturity Date. Unless the same shall become due earlier as a result of acceleration of the maturity, the Loan shall mature on the fifth year anniversary of the Closing Date (the "Maturity Date"), at which time the outstanding principal balance and all accrued interest, if any, of the Loan shall become due and payable. 3.3. Prepayments. The Company may from time to time and at any time prepay the Loan, in whole or in part, without penalty or premium. The Company shall not be required to make any installment payments during the term of the Loan. 3.4. Manner of Payment. The Company shall make payments in respect of the Loan in immediately available funds at Lender's office or by wire transfer to an account specified by Lender. 3.5. Events of Default. Each of the following constitutes an "Event of Default": (a) default in payment when due of the principal on the Note; (b) failure by the Company for thirty (30) days after notice from the Lender to comply with any of its covenants or agreements in this Agreement or the Note including, but not limited to, the provisions of (g), (h) and (i) of this Section 3.5; (c) any of the representations or warranties of the Company set forth in this Agreement or incorporated herein by reference or set forth in any statement or schedule delivered pursuant to this Agreement was untrue or inaccurate in any material respect as of the date of execution of this Agreement or as of the Closing Date and such untruth or inaccuracy substantially impairs Lender's security interest; (d) the Company or any of its Subsidiaries 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; (iii) consents to the appointment of a custodian of it or for all or substantially all of its property or assets; or (iv) makes a general assignment for the benefit of its creditors; (e) a court of competent jurisdiction enters an order or decree in an involuntary case or proceeding under any Bankruptcy Law that: (i) is for relief against the Company or any of its Subsidiaries; (ii) appoints a custodian of the Company or any of its Subsidiaries or for all or substantially all of the property of the Company or any of its Subsidiaries; or (iii) orders the liquidation of the Company or any of its Subsidiaries, and in any such case, the order or decree remains unstayed and in effect for 60 consecutive days; (f) the Mortgage or Security Agreement shall cease to be in full force and effect, or the Company (or any person by, through or on behalf of the Company) shall contest in any manner the validity, binding nature or enforceability of the Mortgage or Security Agreement; (g) if prior to April 30, 2002, Lender shall not have received an original policy of title insurance from Lawyer's Title Insurance Company, or other national title company (the "Title Policy") in the full amount of the Loan naming Lender as the insured party and the Company as the owner and holder of fee simple title to the Property (as defined in the Mortgage) and insuring the lien of the Mortgage as a second and prior lien upon the Property, subject to no material exceptions other than standard exceptions, and exceptions expressly permitted by the Mortgage. The Title Policy shall include a location endorsement to the extent such can be issued for the Property; (h) if prior to April 30, 2002, Lender shall not have received a copy of the most recent existing survey of the parent tract for the Property together with an engineer's sketch showing the location of the Property within the larger parent tract; and (i) if prior to May 15, 2002, Lender shall not have received sufficient evidence that the security interest granted pursuant to the Security Agreement are superior and prior to the rights of all Persons other than (x) the Lien granted to Congress Financial Corporation (Central), or other financial institution designated by Company, simultaneously with the closing of this Loan, and (y) such other Liens as are identified on Schedule 6(b) of the Security Agreement. 3.6. Acceleration. (a) Declaration of Acceleration. If any Event of Default occurs and is continuing, the Lender may, at its option and upon notice to the Company, declare the Note to be due and payable immediately; and upon any such declaration all principal and interest on the Loan and the Note shall become immediately due and payable; provided, however, that in the case of an Event of Default arising from any event described in clauses (d) or (e) of Section 3.5 hereof, the Loan and the Note shall ipso facto become automatically due and payable without further action or notice on the part of the Lender. (b) Rescission. At any time after a declaration of acceleration with respect to the Note, the Lender may, in its sole discretion, rescind and cancel such declaration and its consequences. No such rescission shall affect any subsequent Event of Default or impair any right with respect thereto. 3.7. Other Remedies. If an Event of Default occurs and is continuing, the Lender may pursue any available remedy to collect the payment of principal (and interest at the Default Interest Rate) on the Note or to enforce the performance of any provision of the Note, this Agreement, the Mortgage or the Security Agreement. A delay or omission by the Lender 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. 3.8. Waiver Of Past Defaults. Lender may waive any existing Default or Event of Default and its consequences under this Agreement. Upon any such waiver, such Default or Event of Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured for every purpose of this Agreement; but no such waiver shall extend to any subsequent or other Event of Default or impair any right consequent thereon. 3.9. Priorities. If an Event of Default occurs and is continuing, any sums collected by the Lender hereunder or under the Note shall be applied first to all costs and expenses of collection, including reasonable attorneys' fees, then to accrued and unpaid interest (at the Default Interest Rate to the extent applicable) and then to principal due on the Note. ARTICLE IV Conditions to Lender's Obligations; Lender's Covenants 4.1. Conditions at Closing Date. The Lender's obligation to make the Loan on the Closing Date shall be subject to Lender's satisfaction that the following conditions have been satisfied on or before the Closing Date, except to the extent waived in writing as provided in Section 4.2: (a) The Company shall have reimbursed the Lender for the fees and expenses for which the Company is liable pursuant to the terms of Section 7.6, below, to the extent documented to the Company as of the Closing; (b) All conditions to the closing and consummation of the Exchange Offer shall have occurred or been waived in accordance with the terms thereof; (c) Each of the representations and warranties of the Company set forth in this Agreement or incorporated herein by reference or set forth in any statement or schedule delivered pursuant to this Agreement are true and correct in all material respects as of the date of execution of this Agreement and as of the date of the Closing Date as if made on such date; (d) The Company shall not be in default with respect to any of its covenants and agreements set forth in Article VI of this Agreement or set forth elsewhere in this Agreement; (e) No Default or Event of Default shall have occurred and be continuing; (f) The Company shall have delivered to the Lender a certificate, executed by an officer of the Company acceptable to the Lender and dated as of the Closing Date, certifying to the Company's fulfillment of the conditions specified in subsections (a) through (e) of this Section 4.1; (g) The Company shall provide Lender a second priority security interest and lien on the real property and fixtures referred to in the Mortgage; (h) The Company shall provide Lender a second priority security interest and lien on certain assets referred to in the Security Agreement; and (i) All of the conditions precedent specified in Part III, Section 2.1 of the DCCA Grants (as defined hereafter) have occurred. 4.2. Waiver; Termination. The Lender may waive in writing any of the conditions to its obligations set forth in Sections 4.1 hereof in its sole discretion. If the conditions to the Lender's obligations set forth in Section 4.1 hereof shall not have been satisfied or waived on or before April 1, 2002, the parties may terminate the obligations and benefits under to this Agreement without any liability on the part of the Lender or Company to each other or to any other Person. 4.3 Lender's Covenants. If, and to the extent, requested by the holder of the first lien on the assets secured by the Mortgage and Security Agreement (the "First Lienholder"), the Lender hereby agrees to enter into a subordination and inter-creditor agreement with such First Lienholder and shall reasonably cooperate with the First Lienholder in the negotiation, preparation and execution of any such agreement. ARTICLE V Representations and Warranties 5.1. Representations and Warranties of the Company. In order to induce the Lender to enter into this Agreement, the Company represents and warrants to the Lender on the date hereof and on and as of the date of the Loan, as if made on and as of such date, which representations and warranties shall survive such date and be independent of any investigation or lack of investigation of the Company made by or on behalf of the Lender, as follows: (a) Organization and Standing. The Company is duly incorporated and validly existing under the laws of the State of Delaware, and has all requisite corporate power and authority to own or lease its properties and assets and to conduct its business as it has been and is proposed to be conducted. The Company is qualified to do business and in good standing in each jurisdiction in which the failure to so qualify could be reasonably expected to have a material adverse effect upon its assets, properties, liabilities, financial condition, results of operations or business. (b) Capacity of the Company; Consents; Execution of Agreements. The Company has the requisite power, authority, and capacity to enter into this Agreement, the Note, the Mortgage and the Security Agreement and to perform the transactions and obligations to be performed by the Company hereunder and thereunder. Except as described on Schedule 5.1(b) hereto, no consent, authorization, approval, license, permit or order of, or filing with, any Person or Governmental Authority is required in connection with the execution and delivery of this Agreement, the Note, the Mortgage and Security Agreement or the performance by the Company of the transactions and obligations to be performed by it hereunder and thereunder, except as contemplated by said agreements. The failure to obtain any of the consents described on Schedule 5.1(b) prior to the Closing Date will not have a material adverse effect upon the Company's assets, properties, liabilities, financial condition, results of operations or business. The execution and delivery of this Agreement, the Note, the Mortgage and the Security Agreement by the Company, and the performance of the transactions and obligations contemplated hereby and thereby by the Company, have been duly authorized by all requisite action of the Company. This Agreement has been, and the Note, the Mortgage and the Security Agreement will be, duly executed and delivered by a duly authorized officer of the Company and constitutes, or when executed and delivered will constitute, a valid and legally binding agreement of the Company, enforceable in accordance with its terms, except as enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws, both state and federal, affecting the enforcement of creditors' rights or remedies in general from time to time in effect and the exercise by courts of equity powers or their application of principles of public policy. (c) Valid Issuance. The Note to be issued hereunder, when issued by the Company to the Lender pursuant to the terms of this Agreement, will be duly authorized and validly issued. (d) Conflicts; Defaults. The execution and delivery of this Agreement, the Note, the Mortgage and the Security Agreement by the Company, and the performance by the Company of the transactions and obligations contemplated hereby and thereby to be performed, will not: (i) violate, conflict with, or constitute a default under any of the terms or provisions of its certificate of incorporation or bylaws, or any provisions of, or result in the acceleration of any obligation under, any Contract, note, debt instrument, security agreement, or other instrument to which the Company, or any Subsidiary is a party or by which the Company, or any Subsidiary or any of their respective assets is bound; (ii) result in the creation or imposition of any Liens or claims upon the assets of the Company or any Subsidiary; (iii) constitute a violation of any law, statute, judgment, decree, order, rule, or regulation of a Governmental Authority applicable to the Company, or any Subsidiary; or (iv) constitute an event which, after notice or lapse of time or both, would result in any of the foregoing. The Company is not presently in violation of any provision of its certificate of incorporation or bylaws. Neither the Company nor any Subsidiary is presently in default in any material respect under any of the terms or provisions of any of its material Contracts, notes, debt instruments, security agreements, or other instruments, or any order, judgment, or decree relating to it or its business or by which it or any of its assets is bound, except with respect to the matters set forth on Schedule 5.1 (d). (e) Compliance with Laws. Except with respect to the matters set forth on Schedule 5.1(e), neither the Company nor any Subsidiary is in violation of, nor do any of their respective operations violate in any respect, any statute, law, or regulation of any Governmental Authority applicable to the Company or a Subsidiary, as the case may be, any of their respective assets, or the conduct of their respective businesses ("Applicable Laws"), the violation of which reasonably could be anticipated to have a material adverse effect upon the Company's or a Subsidiary's respective assets, properties, liabilities, financial condition, results of operations or business, and no material expenditures are or, based on present requirements, will be required of the Company or its Subsidiaries in order for them to comply or remain in compliance with any Applicable Laws. (f) Litigation. Neither the Company nor any Subsidiary is a party to any material legal action, suit, claim, investigation or proceeding which is not adequately described in a periodic report heretofore filed by the Company with the SEC, and, to the best of the Company's knowledge and belief after due inquiry, there exist no facts or circumstances which reasonably could be anticipated to result in any such action, suit, claim, investigation, or proceeding. (g) Taxes. The Company has prepared and duly and timely filed with each appropriate Governmental Authority, all material federal, state, municipal, local and foreign tax returns, information returns and other reports required to be filed on or before the date of this Agreement or the making of any Loan and has paid all material taxes required to be paid by the Company prior to the date of this Agreement or the making of any Loan in respect of the periods covered by such returns and reports, except such taxes as are being contested in good faith. (h) Environmental Compliance. Except as disclosed in the Mortgage or described in a periodic report under the 1934 Act filed by the Company with the SEC, the Company and its Subsidiaries are in compliance with all applicable federal, state and local laws and requirements (including permit requirements) relating to the protection of health or the environment in connection with the ownership, operation and condition of its properties and business, except where failure to comply would not have a material adverse effect on the business or operations of the Company or any Subsidiary. (i) Securities Laws. No consent, authorization, approval, permit, or order of or filing with any Governmental Authority is required in order for the Company to execute and deliver this Agreement or to offer, issue, sell or deliver the Note. Based in part on the representations of the Lender and under the circumstances contemplated hereby and under current laws and regulations, the offer, issuance, sale and delivery of the Note to the Lender are exempt from the prospectus delivery and registration requirements of the 1933 Act. Any disclosure or representation made in any section or schedule of this Agreement, the Mortgage or the Security Agreement shall be incorporated into any other applicable section or schedule to the extent appropriate. 5.2. Representations and Warranties of the Lender. The Lender represents and warrants to the Company that: (a) Investment Intent. The Note to be issued to the Lender is being acquired for its own account and not with the view to, or for resale in connection with, any distribution or public offering thereof within the meaning of the 1933 Act. The Lender understands that such Note has not been registered under the 1933 Act by reason of its issuance in a transaction exempt from the registration and prospectus delivery requirements of the 1933 Act pursuant to Section 4(2) thereof. It further understands that the Note will bear the following legend and agrees that it will hold the Note subject thereto: THIS NOTE HAS NOT BEEN REGISTERED PURSUANT TO THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAW. NEITHER THIS NOTE NOR ANY PORTION HEREOF OR INTEREST HEREIN MAY BE SOLD, ASSIGNED, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF UNLESS THE SAME IS REGISTERED UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAW, OR UNLESS AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE AND THE COMPANY SHALL HAVE RECEIVED, AT THE EXPENSE OF THE LENDER, EVIDENCE OF SUCH EXEMPTION REASONABLY SATISFACTORY TO THE COMPANY (WHICH MAY INCLUDE, AMONG OTHER THINGS, AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY). (b) Capacity of the Lender; Execution of Agreement. The Lender has all requisite power, authority, and capacity to enter into this Agreement, and to perform the transactions and obligations to be performed by it hereunder. This Agreement has been duly authorized, executed and delivered by it and constitutes its valid and legally binding obligation, enforceable in accordance with its terms, except as enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws, both state and federal, affecting the enforcement of creditors' rights or remedies in general from time to time in effect and the exercise by courts of equity powers or their application of principles of public policy. ARTICLE VI Covenants and Agreements 6.1. Affirmative Covenants. So long as any Indebtedness remains outstanding under this Agreement and the Note, the Company covenants and agrees that it will: (a) Capital Expenditures. Invest an aggregate total of Ten Million Dollars ($10,000,000) over the five year term of the Loan in Durable Movable Equipment for the Company's facilities in Peoria, Illinois in accordance with the provisions of Part III, Section 2.2 of the DCCA Grants (as defined hereafter) (the "Capital Expenditure Requirement"). In complying with the Capital Expenditure Requirement, the Company shall use generally accepted sound business practices, arms length bargaining and the other principles set forth in Part IV, Section 4.8 of the DCCA Grants. (b) Reporting Requirements. In connection with the Grant Agreements Numbered 02-120803, 02-120804, 02-120805 and 02-120806 between the Lender and the State of Illinois Department of Commerce and Community Affairs ("DCCA"), which are attached hereto as Exhibit "C" (the "DCCA Grants"), the Company agrees to: 1. provide Lender all information in Company's possession and control which is reasonably needed for Lender to comply with the "Audit Requirements" found in Part II-A2, Section 2.1 and Part V, Section 5.4 C of the DCCA Grants; 2. prepare for Lender's execution and submission the "Quarterly Expense Reports" required under Part II-A2, Section 2.5(a) of the DCCA Grants; 3. provide Lender all information in Company's possession and control which is reasonably needed for Lender to submit the "Close-out Package" required in Part II-A2, Section 2.5(b) and Part V, Section 5.4 B of the DCCA Grants; 4. (i) keep adequate and sufficient written records and documentation of all purchases applied to the Capital Expenditure Requirement, (ii) retain such records in accordance with Part V, Section 5.4 A of the DCCA Grants for a minimum of three (3) years after this Agreement terminates, and (iii) provide Lender and DCCA reasonable access to such records in accordance with Part V, Section 5.4 A of the DCCA Grants; and 5. provide, upon request by Lender, any additional information in Company's possession and control which is reasonably requested by DCCA; (all such items are hereinafter referred to as the "DCCA Reporting Requirements"). (c) Taxes. Pay and discharge all taxes and other governmental charges before the same shall become overdue, unless and to the extent only that such payment is being contested in good faith. (d) Insurance. Maintain insurance coverage on its physical assets and against other business risks in such amounts and of such types as are customarily carried by companies similar in size and nature, and in the event of acquisition of additional property, real or personal, or of incurrence of additional risks of any nature, increase such insurance coverage in such manner and to such extent as prudent business judgment and present practice would dictate. (e) Examination of Books. Permit the Lender, through its authorized attorneys, accountants and representatives, to examine the Company's books, accounts, records, ledgers and assets of every kind and description at all reasonable times upon oral or written request of the Lender, at the Company's cost and expense (provided that so long as an Event of Default has not occurred, the Company shall be obligated to pay for no more than one (1) such examination per year). (f) Notification of Events of Default, Acceleration or Material Adverse Effect. Promptly notify the Lender of any condition or event which constitutes, or with the passage of time and/or the giving of notice would constitute, an Event of Default under this Agreement or of payment defaults aggregating more than $5,000,000 on any Indebtedness of the Company or of any acceleration of the maturity of any Indebtedness of the Company aggregating more than $5,000,000, and promptly inform the Lender of the existence or occurrence of any condition or event (other than conditions having an effect on the economy in general) which could reasonably be anticipated to have a material adverse effect upon the Company's financial condition. (g) Maintenance of Licenses. Maintain in good standing all licenses required by any Governmental Authority that may be necessary or required for the Company and its Subsidiaries to carry on its businesses, where the failure to maintain such licenses would have a material adverse effect on the Company taken as a whole. (h) ERISA Compliance. Comply with all material requirements imposed by the Employee Retirement Income Security Act of 1974 as presently in effect or hereafter promulgated, including but not limited to, the minimum funding requirements of any defined contribution employee benefit plan. (i) Compliance with Law. Comply in all material respects with all applicable laws, rules, regulations and orders of any Governmental Authority, such compliance to include, without limitation, paying before the same become delinquent all taxes, assessments, and governmental charges imposed upon it or upon its property, except to the extent that compliance with any of the foregoing is then being contested in good faith by appropriate legal proceedings and with respect to which adequate financial reserves have been established on the books and records of the Company and except where the failure to comply would not have a material adverse effect on the Company and its Subsidiaries, taken as a whole. ARTICLE VII Miscellaneous 7.1. Indemnification. The Company agrees to indemnify, defend and hold harmless Lender, its officers, agents or employees ("Lender Indemnitees") from any and all claims and actions, including, but not limited to, reasonable attorneys' fees, costs and expenses, arising out of or based upon, the acts or omissions of the Company, its officers, employees, agents independent contractors, subcontractors, volunteers or other associates ("Company Agents") under this Agreement and the transactions contemplated hereunder, expressly excluding any claims or actions arising out of or based upon Lender Indemnitees' gross negligence or willful misconduct, and arising out of or based upon any termination of the DCCA Grants which is the direct result of the Lender Indemnitee's actions or omissions. The Company further agrees to indemnify and hold the Lender Indemnitees harmless from and against any and all liabilities, demands, claims, damages, suits, costs, reasonable fees and expenses for injuries or death to persons and the loss, damage to or destruction of property due to the negligence, intentional acts or omissions of the Company Agents arising out of or related to this Agreement or the performances hereunder, expressly excluding any such liabilities, demands, claims, damages, suits, costs, reasonable fees and expenses arising out of or based upon Lender Indemnitees' gross negligence or willful misconduct and arising out of or based upon any termination of the DCCA Grants which is the direct result of the Lender Indemnitee's actions or omissions. 7.2 Termination of DCCA Grants. If DCCA terminates the DCCA Grants due to Company's failure to comply with the DCCA Reporting Requirements, and such termination is not the direct result of the Lender's actions or omissions, then Lender shall have the right, after written notice to Company and a ninety (90) day opportunity to cure, to accelerate the Note in accordance with Section 3.6 of this Agreement, and declare the entire Note due and payable. 7.3 Waiver and Amendments. No failure or delay on the part of the Lender in the exercise of any power or right, and no course of dealing between the Company and the Lender, shall operate as a waiver of such power or right, nor shall any single or partial exercise of any power or right preclude other or further exercise thereof or the exercise of any other power or right. Remedies provided for herein are cumulative and not exclusive of any remedies which may be available to the Lender at law or in equity. No notice to or demand on the Company required hereunder or under the Note shall in any event entitle the Company to any other or further notice or demand in similar or other circumstances or constitute a waiver of the right of the Lender to any other or further action and any circumstances without notice or demand. Except as may otherwise be specifically provided in this Agreement, no amendment, modification or waiver of, or consent with respect to, any provision of this Agreement or the Note shall in any event be effective with respect to the Lender unless the same shall be in writing and signed and delivered by the Lender. Any waiver of any provision of this Agreement or the Note, and any consent to any departure by the Company from the terms of any provision of this Agreement or the Note, shall be effective only in the specific instance and for the specific purpose for which given. 7.4. Notices. All notices and other communications required or permitted under this Agreement shall be in writing and, if mailed by prepaid registered or certified mail, return receipt requested, shall be deemed to have been received on the earlier of the date shown on the receipt or three (3) Business Days after the post-mark date thereof. Except as otherwise provided herein, notices may also be given by recognized overnight courier services or delivered by hand or facsimile transmission. In the event of delivery by overnight courier service, such notice shall be deemed to have been received as of the regularly scheduled time for delivery established by such courier service. In the event of delivery by hand, such notice shall be deemed effective when delivered. In the event of delivery by facsimile transmission, such notice shall be deemed effective upon confirmation of transmission. All notices and other communications under this Agreement shall be given to the parties hereto at the following addresses: If to the Company: Keystone Consolidated Industries, Inc. Three Lincoln Centre 5430 LBJ Freeway, Suite 1740 Dallas, Texas 75240-2697 Attention: President Fax: (972) 448-1408 With a copy to: J. Mark Hollingsworth, Esq. General Counsel Three Lincoln Centre 5430 LBJ Freeway, Suite 1700 Dallas, Texas 75240-2697 Fax: (972) 450-4278 If to the Lender: County of Peoria, Illinois 324 Main Street Peoria, Illinois 61602 Attention: F. Patrick Urich, County Administrator Fax: (309) 672-6029 With a copy to: Schwartz, Cooper, Greenberger & Krauss, Chtd. 180 N. LaSalle Street, Suite 2700 Chicago, Illinois 60601 Attention: Martin W. Salzman Fax: (312) 782-8416 Any party hereto may change the address to which notices shall be directed under this Section 7.4 by giving written notice of such change to the other parties. 7.5. Restriction on Transfer. The Lender acknowledges that the Note has not been registered under the 1933 Act or the securities laws of any state. Accordingly, the Note may not be sold or otherwise disposed of or transferred, unless such sale, disposition or transfer is registered under the 1933 Act and applicable state securities laws or unless the Company has received an opinion of counsel reasonably acceptable to the Company that such sale, disposition or transfer is exempt from such registration. The Note shall bear a restrictive legend to the foregoing effect. 7.6. Expenses. The Company shall reimburse the Lender for all of its reasonable out-of-pocket expenses incurred in the negotiation, preparation, execution and delivery of this Agreement, the Note, the Mortgage and the Security Agreement and related matters, and all related due diligence, including, without limitation, the expenses of legal counsel and accountants. The Company shall also reimburse the Lender for all of its out-of-pocket expenses incurred in the administration, waiver, modification and enforcement of any of its rights under this Agreement, the Note, the Mortgage and the Security Agreement, including, without limitation, the reasonable expenses of legal counsel and accountants. In addition, the Company shall be responsible for any documentary taxes incurred in connection with the transactions contemplated by this Agreement, and the Note, the Mortgage and the Security Agreement. 7.7. Severability. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction, shall as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or affecting the validity or enforceability of such provision in any other jurisdiction. 7.8. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Illinois without giving effect to any choice or conflict of law provision or rule (whether of the State of Illinois or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Illinois. 7.9. Successors and Assigns. This Agreement shall be binding upon the Company and the Lender and their respective successors and assigns, and shall inure to the benefit of the Company and the Lender and their successors and assigns. 7.10. Headings. Headings used in this Agreement are for convenience only and shall not be used in connection with the interpretation of any provision hereof. 7.11. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all such separate counterparts shall together constitute one and the same instrument. 7.12. Forum Selection and Consent to Jurisdiction. ANY LITIGATION BASED HEREIN, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS AGREEMENT, THE NOTE, MORTGAGE, SECURITY AGREEMENT OR ANY OTHER LOAN DOCUMENT, SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE COURTS OF THE STATE OF ILLINOIS OR IN THE UNITED STATES DISTRICT COURT FOR THE CENTRAL DISTRICT OF ILLINOIS; PROVIDED THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT LENDER'S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND. THE COMPANY HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE COURTS OF THE STATE OF ILLINOIS AND OF THE UNITED STATES DISTRICT COURT FOR THE CENTRAL DISTRICT OF ILLINOIS FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE. THE COMPANY FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF ILLINOIS. THE COMPANY HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. 7.13. Waiver of Jury Trial. THE COMPANY AND LENDER HEREBY WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT, ANY NOTE, ANY OTHER LOAN DOCUMENT AND ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR THEREWITH OR ARISING FROM ANY RELATIONSHIP EXISTING IN CONNECTION WITH ANY OF THE FOREGOING, AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY. [remainder of page intentionally blank; signature page follows] IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by the undersigned thereunto duly authorized as of the date first written above. THE COMPANY: KEYSTONE CONSOLIDATED INDUSTRIES, INC. By: ------------------------------------------ Name: ------------------------------------------ Title: ------------------------------------------ THE LENDER: COUNTY OF PEORIA, ILLINOIS By: ------------------------------------------ Name: ------------------------------------------ Title: ------------------------------------------ SCHEDULE 5.1(b) CONSENTS SCHEDULE 5.1(d) Defaults under material debt instruments - - The Company is in default under the Indenture governing its $100 million Senior Secured Notes due 2007 as a result of failure to pay interest payments due August 1, 2001 and February 1, 2002 - - The Company is in default under the $55 million Revolving Credit Agreement with Congress Financial Corporation as a result of failure to pay interest payments due August 1, 2001 and February 1, 2002 on the Company's $100 million Senior Secured Notes due 2007 SCHEDULE 5.1(e) Compliance with Laws - - The Company is engaged in a lawsuit with the Illinois Industrial Commission (the "Illinois Commission") regarding the Company's self-insurance of its workers compensation obligations in Illinois. The Illinois Commission has requested that the Company post a total of $5,475,000 as security. The Company has filed a petition for rehearing with the Illinois Commission challenging the Illinois Commission's security calculation. Exhibit "A" Form of Promissory Note Exhibit "B" Form of Escrow Agreement Exhibit "C" DCCA Grants EX-4.18 16 exh418kci.txt SUBORDINATE SECURITY AGREEMENT THIS SUBORDINATE SECURITY AGREEMENT, dated as of March 13, 2002, is made by Keystone Consolidated Industries, Inc., a corporation duly organized and validly existing under the laws of the State of Delaware ("Debtor"), in favor of The County of Peoria, Illinois ("Lender"), pursuant to the Loan Agreement (as hereinafter defined). W I T N E S S E T H: WHEREAS, Debtor and Lender have, in connection with the execution and delivery of this Agreement, entered into that certain Loan Agreement (as amended, restated, supplemented or otherwise modified from time to time, the "Loan Agreement"), dated as of March 13, 2002, pursuant to which Lender agreed to loan to Debtor and Debtor agreed to execute and deliver to Lender a term note in the principal amount of $10,000,000.00 (the "Note"); WHEREAS, Debtor is the owner of the Pledged Collateral (as hereinafter defined); and WHEREAS, this Agreement is given by Debtor in favor of Lender for its benefit to secure the payment and performance of the Secured Obligations (as hereinafter defined); NOW, THEREFORE, in consideration of the foregoing premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Debtor and Lender hereby agree as follows: Section 1. Definitions. Capitalized terms used herein but not otherwise defined shall have the meanings assigned to such terms in the Loan Agreement. The following terms shall have the following meanings: "Agreement" shall mean this Security Agreement, as the same may be amended, restate, modified or otherwise supplemented from time to time. "Equipment" shall mean, collectively, all "equipment", as such term is defined in the UCC, located at or used solely in connection with the operation of Debtor's steel-making business conducted at the Real Estate, whether or not affixed to the Real Estate, and shall specifically include, without limitation, (i) goods which would be considered a "fixture" under Section 9-334 of the UCC or otherwise would be considered a "fixture" or a part of the Real Estate under applicable law (including under the assembled economic unit or industrial plant doctrines which might otherwise be applicable under the law of the applicable jurisdiction), except for Real Estate Fixtures, (ii) all machinery, facilities, installations, apparatus, equipment, office machinery, electronic data processing equipment, computers and computer hardware and software (whether owned or licensed), all indoor or outdoor furniture, tools, materials, automotive equipment, motor vehicles, manufacturing, storage and handling equipment, overhead cranes, cutting and bending machines and other equipment for the fabrication of steel rods and wire products, furnaces, electric arc furnaces, ladle refining furnaces, billet casters, reheat furnaces, conveyors, coilers, cooling beds, and all other equipment and machinery of any kind or nature and owned by Debtor or in which Debtor may have any interest (but only to the extent of such interest) and used in connection with the operation of Debtor's steel-making business conducted at the Real Estate, (iii) all modifications, renewals, improvements, alterations, repairs, substitutions, attachments, additions, accessions and other property now or hereafter affixed thereto or used in connection therewith and (iv) all replacements and all parts therefor. "Permitted Lien" shall mean: (i) the first priority lien of Congress Financial Corporation (Central) on the Pledged Collateral; (ii) the third priority lien of the holders of the Debtor's 8% Subordinated Secured Notes due 2009 on the Pledged Collateral; (iii) Liens to secure refinancing, in whole or in part, of any Indebtedness secured by the Lien referred to in (i) or (ii); (iv) Liens on assets existing at the time of acquisition thereof by the Debtor provided that such Liens were in existence prior to such acquisition and were not incurred in contemplation thereof and do not extend to any assets other than those so acquired by the Debtor; (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 (or to secure reimbursement obligations in respect of letters of credit issued in connection with any of the foregoing obligations); (vi) Liens to secure Indebtedness (including purchase money obligations and capital lease obligations) covering only the assets acquired with such Indebtedness; (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 pursued, provided that any reserve or other appropriate provision as shall be required in conformity with GAAP shall have been made therefor; and (viii) Liens with respect to judgments which have been stayed or for which a bond having a value equal to the judgment amount has been posted, but only for so long as such judgment has been stayed or such bond remains posted and outstanding; (ix) Liens incurred in the ordinary course of the Debtor's business with respect to obligations that do not exceed One Million Dollars at any one time outstanding and that (a) are not incurred in connection with the borrowing of money or the obtaining of advances or credit (other than trade credit in the ordinary course of business) and (b) do not in the aggregate materially detract from the value of the property or materially impair the use thereof in the operation of Debtor's business; and (x) Liens on assets or property (including any real property upon which such assets or property are or will be located) securing Indebtedness incurred to purchase or construct such assets or property. "Pledged Collateral" shall have the meaning ascribed thereto in Section 2 hereof. "Proceeds" shall have the meaning assigned to the term "proceeds" under the UCC and, in any event, shall include, without limitation, any and all (i) proceeds of any insurance (except payments made to a Person that is not a party to this Agreement), indemnity, warranty, guarantee or claim payable to Lender or to Debtor from time to time with respect to any of the Pledged Collateral, (ii) payments (in any form whatsoever) made or due and payable to Debtor from time to time in connection with any requisition, confiscation, condemnation, seizure or forfeiture of all or any part of the Pledged Collateral by any governmental authority (or any person acting under color of a governmental authority), and (iii) other amounts from time to time paid or payable under or in connection with any of the Pledged Collateral. "Real Estate" shall mean, collectively, all estates, rights and interests of Debtor in (i) the real property located in Peoria, Illinois which is more particularly described on the attached Exhibit A, and all appurtenances relating or appertaining thereto, (ii) all existing buildings, structures and other improvements located or erected thereon, (iii) all Real Estate Fixtures, (iv) all permits, licenses, franchises, certificates, consents, approvals and authorizations furnished in respect of the real property and improvements located thereon, including, without limitation, building permits, certificates-of occupancy and environmental certificates, (v) all leases, licenses and occupancy and concession agreements in respect of the real property and improvements located thereon and all rents, receipts, fees and other amounts payable thereunder, (vi) all documents relating to any of the foregoing and (vii) all Proceeds of any of the foregoing; provided, however, that Real Estate shall in no event include (A) any item of property described in clauses (i) through (v) of this definition which is integral to the manufacturing or other business operations conducted by Debtor at the real property as opposed to the occupancy (or customarily used by occupants in connection with the occupancy) of the land or the operation of the buildings, structures and improvements located thereon as such and (B) any documents or proceeds relating to any property excluded from this definition by clause (A) of this proviso. As used in this definition, "documents" and "proceeds" shall have the meanings assigned to such terms under the UCC. "Real Estate Fixtures" shall mean only such "equipment" as defined in the UCC which is (i) affixed to the Real Estate, (ii) considered a fixture or a part of the Real Estate under applicable law (other than under the assembled economic unit or industrial plant doctrines which might otherwise be applicable under the law of the applicable state) and (iii) integral to the occupancy or customarily used by occupants in connection with the occupancy of the land or the operation of the buildings, structures and improvements thereon as such, as opposed to manufacturing or other business operations conducted therein or therefrom, together with any and all modifications, renewals, improvements, alterations, repairs, substitutions, attachments, additions, accessions and other property now or hereafter affixed thereto or used in connection therewith, all replacements and all parts therefor, and together with all substitutes for any of the foregoing. "Secured Obligations" shall have the meaning assigned to such term pursuant to Section 3 of this Agreement. "UCC" shall mean the Uniform Commercial Code as in effect from time to time in the applicable jurisdiction. Section 2. Pledge. (a) As collateral security for the payment and performance when due of all the Secured Obligations, Debtor hereby pledges, assigns, transfers and grants to Lender for its benefit, a lien and security interest in and to all of the right, title and interest of Debtor in, to and under the following property, whether now existing or hereafter arising or acquired (collectively, the "Pledged Collateral"): (a) all Equipment and Real Estate Fixtures; and (b) all Proceeds of any of the foregoing. Section 3. Secured Obligations. This Agreement secures, and the Pledged Collateral is collateral security for, the payment and performance in full when due, whether at stated maturity, by acceleration or otherwise [including, without limitation, the payment of interest and other amounts which would accrue and become due but for the filing of a petition in bankruptcy or the operation of the automatic stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. ss. 362(a)], of (i) all obligations of Debtor now or hereafter existing under or in respect of the Loan Agreement and the Note (including, without limitation, the obligations of Debtor to pay principal of, and interest, if any, on the Note when due and payable) and all other charges, fees, expenses, commissions, reimbursements, premiums, indemnities and all other amounts due or to become due under or in connection with the Loan Agreement and the Note and (ii) without duplication of the amounts described in clause (i), all obligations, indebtedness and liabilities of Debtor now existing or hereafter arising under or in respect of this Agreement, including, without limitation, with respect to all charges, fees, expenses, commissions, reimbursements, premiums, indemnities and other payments related to or in respect of the obligations contained in this Agreement (the obligations described in clauses (i) and (ii) of this Section 3, collectively, the "Secured Obligations"). Section 4. No Release. Nothing set forth in this Agreement shall relieve Debtor from the performance of any term, covenant condition or agreement on Debtor's part to be performed or observed under or in respect of any of the Pledged Collateral or from any liability to any Person under or in respect of any Pledged Collateral or shall impose any obligation on Lender to perform or observe any such term, covenant, condition or agreement on Debtor's part to be so performed or observed or shall impose any liability on Lender for any act or omission on the part of Debtor relating thereto or for any breach of any representation or warranty on the part of Debtor contained in this Agreement, or under or in respect of the Pledged Collateral or made in connection herewith or therewith. The obligations of Debtor contained in this Section 4 shall survive the termination of this Agreement and the discharge of Debtor's other obligations under this Agreement. Section 5. Supplements: Further Assurances. Debtor agrees that, at any time and from time to time, it shall execute and file and refile such financing statements, continuation statements, amendments thereto and other documents (including, without limitation, this Agreement) in such offices required or permitted by law in order to perfect, protect and preserve the rights and interests granted to Lender hereunder. Without limiting Debtor's obligation to make such filings, Debtor hereby authorizes Lender and appoints Lender as its attorney-in-fact to file such financing statements, continuation statements, amendments thereto and other documents without the signature of Debtor to the fullest extent permitted by applicable law, and Debtor agrees to do such further acts and things, and to execute and deliver to Lender such additional assignments, agreements, powers and instruments, as Lender may require to carry into effect the purposes of this Agreement or to assure and confirm unto Lender its rights, powers and remedies hereunder. All of the foregoing shall be at the sole cost and expense of Debtor. Section 6. Representations, Warranties and Covenants. Debtor represents, warrants and covenants as follows: (a) Perfection. The filings, registrations and recordings described in Schedule 6(a) constitute the only filings, registrations and recordings necessary or appropriate to create, preserve, protect and perfect the security interest granted by Debtor to Lender pursuant to this Agreement in respect of the Pledged Collateral. All such filings, registrations and recordings shall be made as soon as possible after the execution hereof. Upon such filings, registrations and recordings, the Lien granted to Lender for the benefit of Lender pursuant to this Agreement will constitute a valid, perfected lien and security interest in and to all of the Pledged Collateral, superior and prior to the rights of all other Persons therein other than the holders of (i) the Lien on the Pledged Collateral granted to Congress Financial Corporation (Central) on the date hereof (the "Congress Lien") and (ii) such other Liens as are identified on Schedule 6(b) hereof. (b) No Liens. Debtor is as of the date hereof the owner of all the Pledged Collateral free from any Lien or other right, title or interest of any Person other than (i) the Congress Lien, (ii) those Liens identified on Schedule 6(b) hereof and (iii) the Lien granted to Lender pursuant to this Agreement. Debtor shall defend the Pledged Collateral against all claims and demands of all Persons at any time claiming any interest therein adverse to Lender. (c) Other Financing Statements and Liens. There is no filed financing statement (or similar statement or instrument of registration under the law of any jurisdiction) covering any interest of any kind in Pledged Collateral other than the financing statements or similar statements or instruments filed in respect of (i) the Congress Lien (ii) those Liens identified on Schedule 6(b), (iii) those Liens to be released on or prior to the Closing Date, and (iv) this Agreement. So long as the Secured Obligations remain unpaid, Debtor shall not execute or authorize to be filed in any public office any financing statement (or similar statement or instrument of registration under the law of any jurisdiction) or statements relating to the Pledged Collateral, except financing statements filed or to be filed in respect of (A) the Congress Lien, (B) those Liens identified on Schedule 6(b), (C) this Agreement and (D) the other Liens permitted pursuant to Section 8 of this Agreement. (d) Chief Executive Office: Change of Name. The chief executive office of Debtor is located at Three Lincoln Centre, 5430 LBJ Freeway, Suite 1740, Dallas, Texas 75240-2697. Debtor shall not move its chief executive office, except to such new location as Debtor may establish in accordance with the last sentence of this subsection 6(d). Debtor shall not establish a new location for its chief executive office nor shall it change its name until (i) it shall have given Lender not less than thirty (30) days' prior written notice of its intention so to do, clearly describing such new location or name and providing such other information in connection therewith as Lender may reasonably request and (ii) with respect to such new location or name, Debtor shall have taken all action reasonably satisfactory to Lender to maintain the perfection and priority of the security interest of Lender in the Pledged Collateral intended to be granted hereby, including, without limitation, obtaining waivers of landlord's or warehouseman's liens with respect to such new location. (e) Location of Equipment. All Equipment held on the date hereof by Debtor is located at the Real Estate. All Equipment now held or subsequently acquired shall be kept at the Real Estate, or such new location as Debtor may establish if (i) it shall have given to Lender at least thirty (30) days' prior written notice of its intention so to do, clearly describing such new location and providing such other information in connection therewith as Lender may reasonably request, and (ii) with respect to such new location, Debtor shall have taken all action reasonably satisfactory to Lender to maintain the perfection and priority of the security interest of Lender for the benefit of Lender in the Pledged Collateral intended to be granted hereby, including, without limitation, obtaining waivers of landlord's or warehouseman's liens with respect to such new location. (f) Authorization; Enforceability. Debtor has full corporate power, authority and legal right to pledge and grant a security interest in all the Pledged Collateral pursuant to this Agreement, and this Agreement constitutes the legal, valid and binding obligation of Debtor, enforceable against Debtor in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally or by general equitable principles (regardless of whether such enforceability is considered in a proceeding in equity or at law). (g) No Consents. Except for (i) the filings, registrations and recordings contemplated in subsection 6(a) and (ii) those consents, authorizations, approvals or other actions, notices or filings which have been previously taken, obtained or made, no consent of any party (including, without limitation, stockholders or creditors of Debtor) and no consent, authorization, approval, or other action by, and no notice to or filing with, any governmental authority or regulatory body or other Person is required either (A) for the pledge by Debtor of the Pledged Collateral pursuant to this Agreement or for the execution, delivery or performance of this Agreement by Debtor, (B) except as may be provided in the Loan Agreement, for the exercise by Lender of the rights provided for in this Agreement or (C) except as may be provided in the Loan Agreement, for the exercise by Lender of the remedies in respect of the Pledged Collateral pursuant to this Agreement. (h) Organization Identification Number. The organization identification number of Debtor with the Delaware Secretary of State is 488210. Debtor shall not change its state of incorporation or become a party to any merger, consolidation or re-incorporation until (i) it shall have given Lender not less than thirty (30) days' prior written notice of its intention so to do, clearly describing such change, merger, consolidation or re-incorporation and providing such other information in connection therewith as Lender may reasonably request and (ii) with respect to such change in its state of incorporation, merger, consolidation or re-incorporation, Debtor shall have taken all action reasonably satisfactory to Lender to maintain the perfection and priority of the security interest of Lender in the Pledged Collateral intended to be granted hereby. (i) Maintenance of Existence, etc. Debtor will maintain and preserve, (a) its existence and good standing in the jurisdiction of its organization and (b) its qualification to do business and good standing in each jurisdiction where the nature of its business makes such qualification necessary (except in those instances in which the failure to be qualified or in good standing does not have a material adverse effect). (j) Good Repair; Sales. Debtor will take such actions as are reasonably necessary to keep the Equipment (other than Equipment no longer used by such Debtor) in good repair and condition and in good working order, ordinary wear and tear excepted; and will promptly pay when due all license fees, registration fees, taxes, assessments and other charges which may be levied upon or assessed against the ownership, operation, possession, maintenance or use of the Equipment. Except for sales of Equipment which is no longer useful in its business or which is being replaced by similar Equipment, Debtor will not sell, lease, assign or create or permit to exist any Lien on any Equipment other than Permitted Liens (k) Pledged Collateral. All information set forth herein (including, without limitation, the information set forth in the Schedules annexed hereto) relating to the Pledged Collateral is accurate and complete in all material respects. Section 7. Provisions Concerning All Pledged Collateral. (a) Insurance. Debtor shall at all times keep the Equipment insured in favor of Lender, at Debtor's own expense, against fire, theft and all other risks to which the Pledged Collateral may be subject, in such amounts and with such deductibles as from time to time would be maintained by a prudent operator of businesses similar to the business of Debtor (including self-insurance). Each policy or certificates with respect to such insurance shall be endorsed to Lender's reasonable satisfaction for the benefit of Lender (including, without limitation, by naming Lender as an additional named insured or loss payee as its interest may appear) and such policy or certificate shall be delivered to Lender. Each such policy shall state that it cannot be canceled without thirty (30) days' prior written notice to Lender. At least thirty (30) days prior to the expiration of any such policy of insurance, Debtor shall deliver to Lender an extension or renewal policy or an insurance certificate evidencing renewal or extension of such policy. If Debtor shall fail to insure such Pledged Collateral to Lender's reasonable satisfaction or if Debtor shall fail to so endorse and deposit, or to extend or renew, all such insurance policies or certificates with respect thereto, Lender shall have the right (but shall be under no obligation), to advance funds to procure or renew or extend such insurance and Debtor agrees to reimburse Lender for any and all costs and expenses thereof, with interest on all such funds from the date advanced at the Default Interest Rate (as defined in the Loan Agreement). Within five (5) Business Days after making any such advance, Lender shall endeavor to give Debtor written notice of the amount and purpose of such advance; provided, however, that failure to give such notice will not relieve Debtor of its obligations to make such reimbursement to Lender. Any proceeds of insurance in respect of the Pledged Collateral are hereby assigned to Lender. In case of any loss or damage to any of the Pledged Collateral, all proceeds of insurance maintained by Debtor shall be paid to Lender and shall be subject to retention and disbursement by Lender in accordance with the terms of the Loan Agreement. (b) Further Actions. Debtor shall, at its sole cost and expense, make, execute, endorse, acknowledge, file and/or deliver to Lender from time to time such lists, descriptions and designations of the Pledged Collateral, copies of warehouse receipts, receipts in the nature of warehouse receipts, bills of lading, documents of title, vouchers, invoices and schedules relating to the Pledged Collateral as Lender may reasonably request. (c) Notation on Books and Records. Debtor shall place on its books and records with respect to the Pledged Collateral a notation stating that Lender has a security interest therein. Section 8. Transfers and Other Liens. Except as permitted by the Loan Agreement, Debtor shall not sell, convey, assign or otherwise dispose of, or grant any option with respect to, any of the Pledged Collateral. Debtor shall not create or permit to exist any Lien upon or with respect to any of the Pledged Collateral other than (i) the Congress Lien, (ii) those Liens identified on Schedule 6(b) of this Agreement, (iii) the Lien granted to Lender pursuant to this Agreement, and (iv) Permitted Liens. Section 9. Reasonable Care. Lender shall be deemed to have exercised reasonable care in the custody and preservation of the Pledged Collateral in its possession if such Pledged Collateral is accorded treatment substantially equivalent to that which Lender, in its individual capacity, accords its own property, it being understood that Lender shall not have responsibility for taking any necessary steps to preserve rights against any Person with respect to any Pledged Collateral. Section 10. Default; Remedies. If any one or more of the following events (individually, an "Event of Default") shall occur: (x) failure by Debtor to pay, when due, the principal on the Note; (y) failure by Debtor to observe or perform any term, covenant or condition of this Agreement, and such failure is not cured by Debtor within a period of thirty (30) days after receipt of notice thereof from Lender; or (z) if an Event of Default exists under the Loan Agreement; then Debtor shall be entitled to exercise any one or combination of remedies described in this Section 10 hereof in addition to and not in lieu of or substitution for, all other rights and remedies provided by law: (a) Obtaining Possession of the Pledged Collateral. If an Event of Default shall have occurred and be continuing, then and in every such case, Lender may, but shall not be obligated to, in addition to any other action permitted by law (and not limited in any manner to the remedies contained in the Note and the Loan Agreement) take one or more of the following actions, in accordance with the terms of, and at the times, if any, specified in the Loan Agreement: (i) personally, or by agents or attorneys, immediately take possession of the Pledged Collateral or any part thereof, from Debtor or any other Person who then has possession of any part thereof with or without notice or process of law (to the fullest extent permitted by law), and for that purpose may enter upon Debtor's premises where any of the Pledged Collateral is located and remove such Pledged Collateral and use in connection with such removal any and all services, supplies, aids and other facilities of Debtor; (ii) sell, assign or otherwise liquidate, or direct Debtor to sell, assign or otherwise liquidate, any or all investments made in whole or in part with the Pledged Collateral or any part thereof, and take possession of the proceeds of any such sale, assignment or liquidation; and (iii) take possession of the Pledged Collateral or any part thereof, by directing Debtor in writing to deliver the same to Lender at any place or places designated by Lender, in which event Debtor shall at its own expense: (x) forthwith cause the same to be moved to the place or places so designated by Lender and there delivered to Lender; (y) store and keep any Pledged Collateral so delivered to Lender at such place or places pending further action by Lender, and (z) while the Pledged Collateral shall be so stored and kept, provide such guards and maintenance services as shall be necessary to protect the same and to preserve and maintain them in good condition. Debtor's obligation to deliver the Pledged Collateral is of the essence of this Agreement. Upon application to a court of equity having jurisdiction, Lender shall be entitled to a decree requiring specific performance by Debtor of such obligation. (b) Disposition of the Pledged Collateral. Upon the occurrence and during the continuance of an Event of Default, Lender may, in accordance with the terms of, and at the times, if any, specified in the Loan Agreement, exercise in respect of the Pledged Collateral, in addition to the other rights and remedies provided for herein or otherwise available to it, without notice except as specified below or as otherwise required by law, sell the Pledged Collateral or any part thereof in one or more parcels at public or private sale, at any exchange, broker's board or at any of Lender's offices or elsewhere, for cash, on credit or for future delivery, and at such price or prices and upon such other terms as Lender may deem commercially reasonable. Lender may bid for and be the purchaser of any or all of the Pledged Collateral at any such sale and shall be entitled, for the purpose of bidding and making settlement or payment of the purchase price for all or any portion of the Pledged Collateral sold at such sale, to deliver any outstanding Note or claims for interest thereon in lieu of cash, which Note or claims for interest thereon shall be applied to the payment of such purchase price. In the event that the amount payable in respect of the purchase price of the Pledged Collateral purchased at any such sale shall be less than the amount due on the Note, the Note shall be returned to the Holder after being appropriately stamped to show partial payment. Each purchaser at any such sale shall acquire the property sold absolutely free from any claim or right on the part of Debtor, and Debtor hereby waives, to the fullest extent permitted by law, all rights of redemption, stay or appraisal hereafter enacted. Lender shall not be obligated to make any sale of Pledged Collateral regardless of notice of sale having been given. Lender 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. Debtor hereby waives, to the fullest extent permitted by law, any claims against Lender arising by reason of the fact that the price at which any Pledged Collateral may have been sold at such a private sale was less than the price which might have been obtained at a public sale, even if Lender accepts the first offer received and does not offer such Pledged Collateral to more than one offeree. Debtor agrees that, to the extent notice of sale shall be required by law, five (5) days' notice from Lender of the time and place of any public sale or of the time after which a private sale or other intended disposition is to take place shall be commercially reasonable notification of such matters. No notification need be given to Debtor if it has signed, after the occurrence of an Event of Default, a statement renouncing or modifying any right to notification of sale or other intended disposition. (c) Remedies Under UCC. In addition to the rights and remedies provided in this Agreement or otherwise available to it, Lender shall have all the rights and remedies of a secured party under the UCC. (d) Waiver of Claims. Except as otherwise provided herein, Debtor hereby waives to the fullest extent permitted by applicable law, notice or judicial hearing in connection with Lender's taking possession or Lender's disposition of any of the Pledged Collateral, including, without limitation, any and all prior notice and hearing for any prejudgment remedy or remedies and any such right which Debtor would otherwise have under law, and Debtor hereby further waives, to the fullest extent permitted by applicable law: (i) all damages occasioned by such taking of possession; (ii) all other requirements as to the time, place and terms of sale or other requirements with respect to the enforcement of Lender's rights hereunder; and (iii) all rights of redemption, appraisal, valuation, stay, extension or moratorium now or hereafter in force under any applicable law. Any sale of, or the grant of options to purchase, or any other realization upon, any Pledged Collateral shall operate to divest all right, title, interest, claim and demand, either at law or in equity, of Debtor therein and thereto, and shall be a perpetual bar both at law and in equity against Debtor and against any and all Persons claiming or attempting to claim the Pledged Collateral so sold, optioned or realized upon, or any part thereof, from, through or under Debtor. (e) Certain Sales of Pledged Collateral. Debtor recognizes that, by reason of certain prohibitions contained in law, rules, regulations or orders of any foreign governmental authority, Lender may be compelled, with respect to any sale of all or any part of the Pledged Collateral, to limit purchasers to those who meet the requirements of such foreign governmental authority. Debtor acknowledges that any such sales may be at prices and on terms less favorable to Lender than those obtainable through a public sale without such restrictions, and, notwithstanding such circumstances, agrees that any such restricted sale shall be deemed to have been made in a commercially reasonable manner. Section 11. Application of Proceeds. The proceeds received by Lender in respect of any sale of, collection from or other realization upon all or any part of the Pledged Collateral pursuant to the exercise by Lender of its remedies as a secured creditor as provided in Section 11 hereof shall be applied, together with any other sums then held by Lender pursuant to this Agreement, promptly by Lender in the manner set forth in the Loan Agreement. Section 12. Expenses. Debtor will upon demand pay to Lender the amount of any and all expenses, including the reasonable fees and expenses of its counsel (including, without limitation, any local counsel) and the fees and expenses of any experts and agents which Lender may incur in connection with (i) the collection of the Secured Obligations, (ii) the enforcement and administration of this Agreement, (iii) the custody or preservation of, or the sale of, collection from, or other realization upon, any of the Pledged Collateral, (iv) the exercise or enforcement of any of the rights of Lender or (v) the failure by Debtor to perform or observe any of the provisions hereof. All amounts payable by Debtor under this Section 12 shall be due upon demand and shall be part of the Secured Obligations. Debtor's obligations under this Section 12 shall survive the termination of this Agreement and the discharge of Debtor's other obligations hereunder. Section 13. No Waiver; Cumulative Remedies. (a) No failure on the part of Lender to exercise, no course of dealing with respect to, and no delay on the part of Lender in exercising, any right, power or remedy hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any such right, power or remedy hereunder preclude any other or further exercise thereof or the exercise of any other right, power or remedy. The remedies herein provided are cumulative and are not exclusive of any remedies provided by law. (b) In the event Lender shall have instituted any proceeding to enforce any right, power or remedy under this Agreement by foreclosure, sale, entry or otherwise, and such proceeding shall have been discontinued or abandoned for any reason or shall have been determined adversely to Lender, then and in every such case, Debtor and Lender and shall be restored to their respective former positions and rights hereunder with respect to the Pledged Collateral, and all rights, remedies and powers of Lender and shall continue as if no such proceeding had been instituted. Section 14. Lender May Perform; Lender Appointed Attorney-in-Fact. If Debtor shall fail to do any act or thing that it has covenanted to do hereunder or if any warranty on the part of Debtor contained herein shall be breached and if such failure or breach shall constitute an Event of Default, Lender may (but shall not be obligated to) do the same or cause it to be done or remedy any such breach, and may expend funds for such purpose. Any and all amounts so expended by Lender shall be paid by Debtor within five Business Days after demand therefor, with interest at the Default Rate during the period from and including the date on which such funds were so expended to the date of repayment. Debtor's obligations under this Section 14 shall survive the termination of this Agreement and the discharge of Debtor's other obligations under this Agreement. Debtor hereby appoints Lender its attorney-in-fact with an interest, with full authority in the place and stead of Debtor and in the name of Debtor, or otherwise, from time to time in Lender's discretion, to take any action and to execute any instrument consistent with the terms of this Agreement and the Loan Agreement which Lender may deem necessary or advisable to accomplish the purposes of this Agreement. The foregoing grant of authority is a power of attorney coupled with an interest and such appointment shall be irrevocable for the term of this Agreement. Debtor hereby ratifies all that such attorney shall lawfully do or cause to be done by virtue and in accordance with the terms hereof. Section 15. Notices. Unless otherwise provided herein any notice or other communication herein required or permitted to be given shall be given in the manner and at the address set forth in the Loan Agreement, or as to any party at such other address as shall be designated by such party in a written notice to the other party complying as to delivery with the terms of this Section 16. All such notices and other communications shall be deemed to have been given when delivered in person, or received by telecopy; or one (1) Business Day after delivery to the office of such overnight courier service; or five (5) Business Days after deposit in the United States mail, registered or certified, with postage prepaid and properly addressed; provided, however, that notices to Lender shall not be effective until received by Lender. Section 16. Continuing Security Interest; Assignment. This Agreement shall create a continuing security interest in the Pledged Collateral and shall (i) be binding upon Debtor, its successors and assigns, and (ii) inure, together with the rights and remedies of Lender hereunder, to the benefit of Lender and its successors, transferees and assigns; no other Persons (including, without limitation, any other creditor of Debtor) shall have any interest herein or any right or benefit with respect hereto. Without limiting the generality of the foregoing clause (ii), Lender may assign or otherwise transfer any Note held by it secured by this Agreement to any other Person, and such other Person shall thereupon become vested with all the benefits in respect thereof granted to Lender, herein or otherwise, subject however, to the provisions of the Loan Agreement. Section 17. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Illinois without giving effect to any choice or conflict of law provision or rule (whether of the State of Illinois or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Illinois. Section 18. Forum Selection and Consent to Jurisdiction. ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS AGREEMENT, SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE COURTS OF THE STATE OF ILLINOIS OR IN THE UNITED STATES DISTRICT COURT FOR THE CENTRAL DISTRICT OF ILLINOIS; PROVIDED THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT LENDER'S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND. DEBTOR HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE COURTS OF THE STATE OF ILLINOIS AND OF THE UNITED STATES DISTRICT COURT FOR THE CENTRAL DISTRICT OF ILLINOIS FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE. DEBTOR FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF ILLINOIS. THE COMPANY HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. Section 19. Waiver of Jury Trial. DEBTOR AND LENDER HEREBY WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT AND ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR THEREWITH OR ARISING FROM ANY RELATIONSHIP EXISTING IN CONNECTION WITH ANY OF THE FOREGOING, AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY. Section 20. Severability of Provisions. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or affecting the validity or enforceability of such provision in any other jurisdiction. Section 21. Execution in Counterparts. This Agreement and any amendments, waivers, consents or supplements hereto may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original, but all such counterparts together shall constitute one and the same Agreement. Section 22. Entire Agreement. This Agreement, together with the Loan Agreement, the Note and the other documents evidencing or securing the Secured Obligations (collectively, the "Loan Agreement Documents"), constitutes the entire agreement of the parties hereto with respect to the subject matter thereof and supersedes all other prior written and oral agreements and understandings with respect thereto. Section 23. Conflicts; Construction. In the case of a conflict between any provision of this Agreement and any provision of the other Loan Agreement Documents, the provision selected by the Lender in its sole subjective discretion shall prevail and be controlling. Section 24. Headings. The Section headings used in this Agreement are for convenience of reference only and shall not affect the construction of this Agreement. Section 25. Limitation on Interest Payable. It is the intention of the parties to conform strictly to the usury laws, whether state or federal, that are applicable to the transaction of which this Agreement is a part. All agreements between Debtor and Lender, whether now existing or hereafter arising and whether oral or written, are hereby expressly limited so that in no contingency or event whatsoever shall the amount paid or agreed to be paid by Debtor for the use, forbearance or detention of the money to be loaned or advanced under the Loan Agreement or any related document, or for the payment or performance of any covenant or obligation contained herein or in the Loan Agreement, exceeds the maximum amount permissible under applicable federal or state usury laws. If under any circumstances whatsoever fulfillment of any such provision, at the time performance of such provision shall be due, shall involve exceeding the limit of validity prescribed by law, then the obligation to be fulfilled shall be reduced to the limit of such validity. If under any circumstances Debtor shall have paid an amount deemed interest by applicable law, which would exceed the highest lawful rate, such amount that would be excessive interest under applicable usury laws shall be applied to the reduction of the principal amount owing in respect of the Secured Obligations and not to the payment of interest, or if such excessive interest exceeds the unpaid balance of principal and any other amounts due hereunder, the excess shall be refunded to Debtor. All sums paid or agreed to be paid for the use, forbearance or detention of the principal under any extension of credit or advancement of funds by Lender, shall, to the extent permitted by applicable law, and to the extent necessary to preclude exceeding the limit of validity prescribed by law, be amortized, prorated, allocated and spread from the date of this Agreement until payment in full of the Secured Obligations so that the actual rate of interest on account of such principal amounts is uniform throughout the term hereof. [Signature Page Follows] IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written. KEYSTONE CONSOLIDATED INDUSTRIES, INC. By:____________________________________ Name: _________________________________ Title: __________________________________ COUNTY OF PEORIA, ILLINOIS By:____________________________________ Name: _________________________________ Title: __________________________________ EXHIBIT A Legal Description of Steel Making Land in Peoria, IL North 580' of the northwest quarter of section 31, township 8 north, range 8 east of the fourth principal meridian. Also north 580' of the northeast quarter of section 36, township 8 north, range 7 east of the fourth principal meridian lying east of the east right of way line of the Chicago & Northwestern Railroad. Also all of the southeast quarter of section 25, township 8 north, range 7 east of the fourth principal meridian lying east of the east right of way line of the Chicago & Northwestern Railroad. Also all of the west half of section 30, township 8 north, range 8 east of the fourth principal meridian lying southwest of the southwest right of way line of I-474 Excepting the north 1600'. Except the coal and other minerals underlying the surface of said land and all rights and easements in favor of the estate of said coal and other minerals. Together with a non-exclusive easement for ingress, egress and access on, over, across and through that certain improved road known as "Steel Works Road" located on the adjacent real property owned by Mortgagor and contained within Section 25, Township 8 North, Range 7 East, which road connects the Property to the publicly dedicated street known as "Washington Street". SCHEDULE 6(a) REQUIRED FILINGS, REGISTRATIONS AND RECORDINGS Secretary of State of Delaware Peoria County Recorder 324 Main Street Peoria, Illinois 61602 SCHEDULE 6(B) EXISTING LIENS [DEBTOR NEEDS TO PROVIDE COPIES TO LENDER] Recorded with Secretary of State of Illinois Debtor: Keystone Consolidated Industries, Inc. File Date File No. Secured Party 08-03-92 3015663 Caterpillar Financial Services Corp. 12-06-88 2507503 Keystone Master Retirement Trust 12-21-92 3064746 Hyster Credit Company 12-21-92 3064745 Hyster Credit Company 01-21-93 3075196 Caterpillar Financial Services 01-06-93 3069697 Hyster Credit Company 03-15-93 3096120 Caterpillar Financial Services 02-26-93 3098917 Caterpillar Financial Services 10-13-93 3177244 Hyster Credit Company 03-15-93 3096121 Caterpillar Financial Services 01-04-94 3206267 Hyster Credit Company 01-03-94 3205370 Hyster Credit Company 02-24-94 3225979 AT&T Credit Corporation 02-10-94 3221203 Hyster Credit Company 08-03-94 3289883 Hyster Credit Company 06-29-94 3276358 Hyster Credit Company 06-26-95 3417015 Hyster Credit Company 10-18-94 3317289 MH Equipment Corporation 07-21-95 3425454 Hyster Credit Company 07-19-95 3424628 Caterpillar Financial Services 08-28-95 3440139 Textron Financial Corp. 08-02-95 3430844 Hyster Credit Company 12-05-95 3477054 Hyster Credit Company 12-04-95 3476431 Caterpillar Financial Services 01-04-96 3488585 Hyster Credit Company 01-04-96 3488299 Hyster Credit Company 12-02-96 3618019 MH Equipment Corporation 08-01-96 3573211 Caterpillar Financial Services 05-13-97 3688537 MH Equipment Corporation SCHEDULE 6(B) EXISTING LIENS [Update] Recorded with Secretary of State of Illinois Debtor: Keystone Consolidated Industries, Inc. File Date File No. Secured Party - --------- -------- ------------- 09-14-92 3029676 Common Equipment Company 05-20-93 3124177 Nations Bank of Texas, N. A. 07-04-97 3720307 Nations Bank of Texas, N.A. 04-25-94 3250212 Lease Consultants 04-15-94 3246312 Common Equipment Co. 08-28-93 3150810 Common Equipment Co. 06-06-94 3266280 Lease Consultants 04-15-94 3246313 Common Equipment Co. 04-15-94 3246311 Common Equipment Co. 12-08-94 3338005 Lease Consultants 06-19-97 3706360 Common Equipment Co. 03-24-97 3667202 EMC Corp. 10-31-96 3606126 Common Equipment Co. 04-16-96 3530252 Signode Packaging Systems 06-19-97 3706361 Common Equipment Co. 06-19-97 3706359 Common Equipment Co. 01-30-97 3645420 Lease Consulting Corp. 06-03-96 3547159 Excel Machinery Co., Inc. SCHEDULE 6(B) EXISTING LIENS [Update] Recorded with Peoria County Recorder (Illinois) Debtor: Keystone Consolidated Industries, Inc. File Date File No. Secured Party - --------- ------ ------------- 04-21-88 129553 First Republic Bank 12-20-96 012201 NationsBank of Texas 05-10-93 006752 NationsBank of Texas EX-4.19 17 exh419kci.txt AMENDED AND RESTATED EWP BRIDGE LOAN AGREEMENT THIS AMENDED AND RESTATED LOAN AGREEMENT (this "Agreement") is made and entered into as of this 21st day of November, 2001 by and between KEYSTONE CONSOLIDATED INDUSTRIES, INC., a Delaware corporation (the "Company"); the lenders listed in Annex I hereto (individually a "Lender" and collectively, the "Lenders"); and EWP FINANCIAL LLC, a Delaware limited liability company, as agent for the Lenders (the "Agent"). Recitals: WHEREAS, the Company, the Lenders and the Agent entered into that certain EWP Bridge Loan Agreement dated as of November 1, 2001 (the "Original Loan Agreement"); and WHEREAS, the Loans to be made under the Original Loan Agreement were intended fully by the parties to be secured by the Company's investment in Engineered Wire Products, Inc. ("EWP"), a subsidiary of the Company; WHEREAS, the Company's investment in EWP is comprised of and evidenced by certificates representing in the aggregate all of the outstanding capital stock of EWP issued in the name of the Company and an account maintained on the Company's books and records, which account is styled as "Loan Account - EWP, Account Number 480.20" but which account, in fact, represents the Company's net investment in EWP (the "EWP Investment"); WHEREAS, the initial balance of the EWP Investment, which arose in connection with the transaction whereby the Company acquired all of the equity interest in EWP not already owned by the Company, was approximately $12,000,000.00, and as of September 30, 2001 the balance of the EWP Investment was approximately $8,400,000.00; WHEREAS, the Original Loan Agreement inadvertently failed to include a provision relating to the assignment of the EWP Investment to the Agent as security for the Loans (as that term is used in the Original Loan Agreement and this Agreement) as the parties had fully intended; WHEREAS, the Company, the Lenders and the Agent fully intended to include such a provision in the Original Loan Agreement and desire to amend and restate the Original Loan Agreement as herein provided; WHEREAS, no Loans have been made against the Commitment as of the date hereof; WHEREAS, the Company has requested that the Lenders make loans to the Company in the aggregate amount of up to $6,000,000.00; and WHEREAS, the Lenders are willing to make such loans to the Company on the terms and subject to the conditions hereinafter set forth. NOW, THEREFORE, the parties promise and agree as follows: ARTICLE I Definitions In addition to terms defined elsewhere in this Agreement, the following definitions shall apply for purposes of this Agreement: "Bankruptcy Law" means Title 11, U.S. Code or any similar federal or state law for the relief of debtors. "Business Day" means a day other than a Saturday, a Sunday or a day on which banking institutions in the City of Dallas, Texas are authorized by law, regulation or executive order to remain closed. If a payment date called for herein or in the Note is not a Business Day, payment may be made on the next succeeding day that is a Business Day. "Commitment" means, with respect to each Lender, the amount set forth opposite such Lender's name in Annex I, as the same may be adjusted from time to time as a result of assignments to or from such Lender pursuant to Section 7.8 hereof. "Contract" means any contract, agreement, undertaking or commitment (written or oral, formal or informal, firm or contingent) to which the Company or any of its Subsidiaries is a party or by which the Company, any of its Subsidiaries, or any of their respective assets are bound, and which has current operative or executory effect. "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. "GAAP" means generally accepted accounting principles set forth from time to time in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board (or agencies with similar functions of comparable stature and authority within the U.S. accounting profession), which are applicable to the circumstances as of the date of determination. "Governmental Authority" means the United States, any state or municipality, the government of any foreign country, any subdivision of any of the foregoing, or any authority, department, commission, board, bureau, agency, court, or instrumentality of any of the foregoing. "Holder" means a Lender and any subsequent holder of a Note. "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 obligations in respect of a lease that would at such time be required to be capitalized on a balance sheet in accordance with GAAP or the balance deferred and unpaid of the purchase price of any property (other than contingent or "earnout" payment obligations), except any such balance that constitutes an accrued expense or trade payable, if and to the extent any of the foregoing indebtedness (other than letters of credit) 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, whether or not conditional, by such Person of any indebtedness of any other Person. "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). "Person" means any individual, corporation, general or limited partnership, limited liability company, joint venture, association, joint-stock company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity. "Required Holders" means Holders holding not less than fifty-one percent (51%) of the aggregate principal amount of the Loans then outstanding (or fifty-one percent (51%) of the Commitments if no Loans are then outstanding). "Restructuring" means the consummation of any restructuring, reorganization (whether or not pursuant to Bankruptcy Law) and/or recapitalization of the Company and its Subsidiaries, as well as its successors, affecting, in each case, existing and potential debt obligations and other claims of or against the Company and/or such Subsidiaries or successors. "Subsidiary" means any corporation, general or limited partnership, limited liability company, association or other business entity of which securities or other ownership interests representing more than fifty percent (50%) of the ordinary voting power are, at the time as of which any determination is being made, owned or controlled by the Company or one or more Subsidiaries of the Company. "SEC" means the Securities and Exchange Commission. "1933 Act" means the Securities Act of 1933, as amended. ARTICLE II Loans; Notes; Closing and Closing Date 2.1. Commitment; Revolving Loans; Notes. Subject to the terms and conditions set forth in this Agreement, and relying upon the representations and warranties of the Company herein set forth, each Lender severally agrees, from time to time during the period from and including the Closing Date to but not including the Maturity Date, to make a loan or loans to the Company in aggregate principal amount at any time outstanding not to exceed the Commitment of such Lender. The Commitment of each Lender is revolving in nature, and the Company may borrow, repay and reborrow an aggregate principal amount up to the applicable Commitment at any time and from time to time without premium or penalty, subject to the terms and conditions of this Agreement. The amounts borrowed by the Company pursuant to each Commitment (each such borrowing a "Loan" and, collectively, the "Loans", and the aggregate amount of all such Loans outstanding from time to time, the "Loan Amount") shall be evidenced by notes of like tenor except as to principal amount in the form of Exhibit A hereto (each a "Note" and, collectively, the "Notes"), the terms and conditions of which are incorporated in and made a part of this Agreement. Each Note shall be dated the Closing Date and be made payable to the order of the respective Lender for the principal sum of each such Lender's Commitment. 2.2. Closing; Closing Date. The closing hereunder (the "Closing") shall occur at 10:00 a.m. at the offices of the Company on or before November 21, 2001, or such other time and place as the parties may agree in writing (the "Closing Date"), upon satisfaction of the terms and conditions to the Lender's obligations as set forth in Section 4.1 hereof. 2.3. Notice of Borrowing. In the event that the Company shall elect to borrow from the Lenders pursuant hereto, the Company shall give written notice thereof to each Lender not later than three (3) Business Days prior to the proposed date of such Loans. Each such notice shall be by facsimile transmission, promptly confirmed by letter, and shall specify therein: (i) the date of such proposed Loans, which shall be a Business Day; (ii) the aggregate amount of such proposed Loans, which Loans shall be in increments of $100,000; (iii) each Lender's pro rata portion of the aggregate amount of such proposed Loans (i.e., such Lender's respective Loan) (determined on the basis of the ratio of such Lender's Commitment to the aggregate amount of all Commitments), which when aggregated together with the amount of all Loans of such Lender then outstanding shall not exceed the Commitment of such Lender; (iv) the bank account or accounts to which the proceeds of such Loans should be paid by the Lenders; and (v) the intended use of the proceeds of such Loans. Upon such notice properly given, and subject to the determination by the Required Holders that (i) the Company has satisfied the terms and conditions to the Lenders' obligations as set forth in Section 4.2 hereof, including, without limitation, compliance satisfactory to the Required Holders in their sole discretion with the terms of Section 6.2(a) for use of proceeds, and (ii) there is no additional borrowing availability under that certain Amended and Restated Revolving Loan and Security Agreement dated December 29, 1995 between the Company and Congress Financial Corporation, as amended (the "Congress Facility"), the Lenders shall each fund their respective Loans at the time and to the account(s) specified in the Company's notice. ARTICLE III Terms of Loans and Note 3.1. Interest Rate; Payment; Usury. (a) Provided that no Event of Default has occurred and is continuing and subject to the other provisions of this Agreement, the Loan Amount shall bear interest at a rate per annum equal to three percent (3%) plus the rate from time to time published in the Wall Street Journal as the prime rate, whether or not such announced rate is the best rate available at any bank or other financial institution (the "Interest Rate"). During any period that an Event of Default shall have occurred and be continuing, interest on the Loan Amount shall accrue at a rate equal to the Interest Rate plus two percent (2%) (the "Default Interest Rate"). Notwithstanding anything contained herein to the contrary, in no event shall the interest rate on the Loans, including the Default Interest Rate, exceed the highest rate permitted by applicable law. Interest on the Loans, including interest at the Default Interest Rate, shall be based on a 360-day year, and interest shall accrue and be payable for the actual number of calendar days elapsed. Interest shall be payable in arrears commencing on the 30th day of November, 2001 and continuing thereafter on the last day of each subsequent month until the Loan Amount and all accrued interest have been paid in full. (b) It is the intention of the Company and the Lenders to conform strictly to applicable usury laws now or hereafter in force, and any interest payable under this Agreement or the Notes shall be subject to reduction to an amount not to exceed the maximum non-usurious amount for commercial loans allowed under such applicable usury laws as now or hereafter construed by the courts having jurisdiction over such matters. In the event such interest (whether designated as interest, service charges, points, origination fees, or otherwise) does exceed the maximum legal rate, it shall be (i) canceled automatically to the extent that such interest exceeds the maximum legal rate; (ii) if already paid, at the option of each Holder, either be rebated to the Company or credited on the principal amount of the Loans evidenced by the Note held by such Holder; or (iii) if the Loans have been prepaid in full, then such excess shall be rebated to the Company. It is further agreed, without limitation of the foregoing, that all calculations of the rate of interest contracted for, charged, or received under this Agreement and the Notes that are made for the purpose of determining whether such rate exceeds the maximum legal rate, shall be made, to the extent permitted by applicable law, by amortizing, prorating, allocating, and spreading throughout the full stated term of the Loans (and any extensions of the term thereof that may be hereafter granted) all such interest at any time contracted for, charged, or received from the Company or otherwise by the Holders so that the rate of interest on account of the Loans, as so calculated, is uniform throughout the term thereof. If the Company is exempt or hereafter becomes exempt from applicable usury statutes or for any other reason the rate of interest to be charged on the Loans is not limited by law, none of the provisions of this paragraph shall be construed so as to limit or reduce the interest or other consideration payable under this Agreement or the Notes or under any instrument securing payment thereof. The terms and provisions of this paragraph shall control and supersede every other provision of all agreements between the parties hereto. 3.2 Unused Commitment Fee. Up to and including the Maturity Date or date of earlier acceleration of the Loans, the Company shall pay each Lender a fee on the unused portion of its Commitment, payable at maturity and quarterly on the last Business Day of each March, June, September and December, in an amount equal to 37.5 basis points per annum multiplied by the difference between such Lender's Commitment and the average Loan Amount owed to such Lender during such quarter or portion thereof. 3.3. Maturity Date. Unless the same shall become due earlier as a result of acceleration of the maturity, the Loans shall mature on the earlier of: (i) the date of consummation of the Restructuring or (ii) the six (6) month anniversary of the Closing Date (the earlier of such dates being referred to herein as the "Maturity Date"), at which time the outstanding principal balance of the Loans and all accrued and unpaid interest and commitment fees shall become due and payable. 3.4. Prepayments. The Company may from time to time and at any time prepay the Loans, in whole or in part and without premium or penalty, provided that after giving effect to any such prepayment there is a minimum of $1,000,000 of borrowing availability under the Congress Facility. Any partial prepayment shall be applied first to interest which is accrued and unpaid and then to principal. 3.5. Manner of Payment. The Company shall make payments in respect of the Loans (including principal and interest) by wire transfer of immediately available funds to the accounts specified by the Holders. Notwithstanding any other provision in this Agreement or the Notes, the Company covenants and agrees and the Lenders among themselves agree that all payments made by the Company of interest and principal, including any prepayments, shall be made to and for the benefit of the Holders pro rata according to the outstanding principal balance of their respective Notes. 3.6. Events of Default. Each of the following constitutes an "Event of Default": (a) default for five (5) days in the payment when due of interest on any of the Notes; (b) default in payment when due of the principal on any of the Notes; (c) failure of the Company to make payments to the Holders of interest or principal due on the Notes or of any prepayments other than pro rata according to the outstanding principal balance of their respective Notes; (d) the occurrence and continuation of an "Event of Default" under that certain Term Loan and Credit Agreement dated as of March 10, 1995 by and among EWP, NBD Bank, The Huntington National Bank, BankOne and NBD Bank, as agent, as amended, extended, modified, or renewed from time to time or under any agreement evidencing the refinancing of indebtedness thereunder; (e) the occurrence and continuation of an "Event of Default" under the Congress Facility; (f) the occurrence and continuation of an "Event of Default" under the Stock Pledge Agreement or the Collateral Assignment (each as defined in Article IV hereof); (g) the acceleration for any reason of any of the obligations of the Company, prior to the express maturity of such obligations, under its $100 million 9 5/8% Senior Secured Notes due 2007; (h) failure by the Company for fifteen (15) days after notice from the Agent (at the direction of the Required Holders) to comply with the provisions described under Article VI hereof; (i) failure by the Company for thirty (30) days after notice from the Agent (at the direction of the Required Holders) to comply with any of its covenants or agreements in this Agreement or the Notes other than covenants and agreements which are subject to subsections (a) through (h) of this Section 3.6; (j) any of the representations or warranties of the Company set forth in this Agreement or incorporated herein by reference or set forth in any statement or schedule delivered pursuant to this Agreement was untrue or incorrect in any material respect as of the date of execution of this Agreement or as of the Closing Date or the date subsequent thereto of the making of any additional Loan, in either case as if made on such date; (k) the Company or any of its Subsidiaries 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; (iii) consents to the appointment of a custodian of it or for all or substantially all of its property or assets; or (iv) makes a general assignment for the benefit of its creditors; or (l) a court of competent jurisdiction enters an order or decree in an involuntary case or proceeding under any Bankruptcy Law that: (i) is for relief against the Company or any of its Subsidiaries; (ii) appoints a custodian of the Company or any of its Subsidiaries or for all or substantially all of the property of the Company or any of its Subsidiaries; or (iii) orders the liquidation of the Company or any of its Subsidiaries; and in any such case, the order or decree remains unstayed and in effect for 60 consecutive days. 3.7. Acceleration. (a) Declaration of Acceleration. If any Event of Default occurs and is continuing, the Agent shall, at the direction of the Required Holders (given in the sole discretion of such Holders) and upon notice to the Company (i) terminate the Commitments or (ii) declare the outstanding principal of, and accrued and unpaid interest on, the Notes and all other amounts owing under this Agreement and the Notes to be immediately due and payable, or either one or both of the foregoing, whereupon the Commitments shall terminate forthwith and all such amounts shall become immediately due and payable, as the case may be; provided, however, that in the case of an Event of Default arising from any event described in clauses (k) or (l) of Section 3.6 hereof, the Loans and the Notes shall ipso facto become due and payable without further action or notice on the part of the Agent or any Holder. (b) Rescission. At any time after a declaration of acceleration with respect to the Notes, the Agent shall, at the direction of the Required Holders (given in the sole discretion of such Holders), rescind and cancel such declaration and its consequences. No such rescission shall affect any subsequent Default or impair any right with respect thereto. 3.8. Other Remedies. If an Event of Default occurs and is continuing, the Agent shall, at the direction of the Required Holders (given in the sole discretion of such Holders), pursue any available remedy to collect the payment of principal and interest (including interest at the Default Interest Rate) on the Notes or to enforce the performance of any provision of such Notes, this Agreement, the Stock Pledge Agreement or the Collateral Agreement. A delay or omission by the Agent 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. 3.9. Waiver Of Past Defaults. The Agent, at the direction of the Required Holders (given in the sole discretion of such Holders) shall waive in writing any existing Default or Event of Default and its consequences under this Agreement. 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 Agreement; but no such waiver shall extend to any subsequent or other Default or impair any right consequent thereon. 3.10. Priorities. Any sums collected by a Holder hereunder or under a Note held by it shall be applied first to all costs and expenses of collection, including reasonable attorneys' fees, then to accrued and unpaid interest (including at the Default Interest Rate to the extent applicable) and then to principal due on such Holder's Note. ARTICLE IV Conditions to Lender's Obligations 4.1. Conditions at Closing Date. Each Lender's obligation to make the initial Loan on the Closing Date shall be subject to the satisfaction of the following conditions on or before the Closing Date, except to the extent waived by the Required Holders in writing: (a) The Company shall have reimbursed the Lenders for the fees and expenses for which the Company is liable pursuant to the terms of Section 7.5, below, to the extent documented to the Company as of the Closing; (b) The Company shall have paid to each Lender an origination fee in the amount of two percent (2%) of its Commitment; (c) (i) The Bridge Loan Stock Pledge Agreement attached hereto as Exhibit B (the "Stock Pledge Agreement"), pertaining to the Company's shares of the common stock of EWP, a wholly owned subsidiary of the Company, shall have been executed and delivered, together with the blank stock powers and certificates pertaining thereto, by or on behalf of the Company to and in favor of the Agent for the benefit of the Holders, and such agreement shall be in full force and effect and (ii) the Collateral Assignment attached hereto as Exhibit C (the "Collateral Assignment"), pertaining to the Company's investment in EWP, shall have been executed and delivered by or on behalf of the Company to and in favor of the Agent for the benefit of the Holders, and such Collateral Assignment shall be in full force and effect; (d) Each of the representations and warranties of the Company set forth in this Agreement or incorporated herein by reference or set forth in any statement or schedule delivered pursuant to this Agreement are true and correct in all material respects as of the date of execution of this Agreement and as of the date of the Closing Date as if made on such date; (e) The Company shall not be in default with respect to any of its covenants and agreements set forth in Article VI of this Agreement or set forth elsewhere in this Agreement; (f) No Default or Event of Default shall have occurred and be continuing; (g) The Company shall have delivered to the Lenders a certificate, executed by an officer of the Company acceptable to the Required Holders and dated as of the Closing Date, certifying to the Company's fulfillment of the conditions specified in subsections (a) through (f) of this Section 4.1, and expressly detailing, and certifying the compliance with Section 6.2(a) hereof with regard to, the intended use of the proceeds of such Loan; and (h) No other Lender shall have defaulted on its obligation to make its respective Loan hereunder. 4.2. Conditions at Subsequent Date. Each Lender's obligation to make a Loan on any date subsequent to the Closing Date shall be subject to the satisfaction of the following conditions on or before the proposed date of such Loan, except to the extent waived by the Required Holders in writing: (a) The Company shall have reimbursed the Lenders for the fees and expenses for which the Company is liable pursuant to the terms of Section 7.5, below, to the extent documented to the Company as of the closing of such Loan; (b) Each of the representations and warranties of the Company set forth in this Agreement or incorporated herein by reference or set forth in any statement or schedule delivered pursuant to this Agreement are true and correct in all material respects as of the date of the closing of such Loan as if made on such date; (c) The Company shall not be in default with respect to any of its covenants and agreements set forth in Article VI of this Agreement or set forth elsewhere in this Agreement; (d) No Default or Event of Default shall have occurred and be continuing; (e) The Company shall have delivered to the Lenders a certificate, executed by an officer of the Company, acceptable to the Required Holders and dated as of the date of the closing of such Loan, certifying to the Company's fulfillment of the conditions specified in subsections (a) through (d) of this Section 4.2, and expressly detailing, and certifying the compliance with Section 6.2(a) hereof with regard to, the intended use of the proceeds of such Loan; and (f) No other Lender shall have defaulted on its obligation to make its respective Loan hereunder. 4.3. Waiver; Termination. The Required Holders may in their sole discretion waive in writing any of the conditions set forth in Sections 4.1 or 4.2 hereof. If the conditions to the Lenders' obligations set forth in Section 4.1 hereof shall not have been satisfied by the Company or waived by the Required Holders on or before November 30, 2001, the Required Holders may in their sole discretion terminate the obligations and benefits of the Lenders pursuant to this Agreement without any liability on the part of the Agent or the Lenders to any other Person. ARTICLE V Representations and Warranties 5.1. Representations and Warranties of the Company. In order to induce the Lenders to enter into this Agreement, the Company represents and warrants to the Lenders on the date hereof and on and as of the date of each Loan, as if made on and as of such date, which representations and warranties shall survive such date and be independent of any investigation or lack of investigation of the Company made by or on behalf of the Agent or the Lenders, as follows: (a) Organization and Standing. The Company is duly incorporated and validly existing under the laws of the State of Delaware, and has all requisite corporate power and authority to own or lease its properties and assets and to conduct its business as it has been and is proposed to be conducted. The Company is qualified to do business and in good standing in each jurisdiction in which the failure to so qualify could have a material adverse effect upon its assets, properties, liabilities, financial condition, results of operations or business. (b) Capacity of the Company; Consents; Execution of Agreements. The Company has the requisite corporate power, authority, and capacity to enter into this Agreement, the Note, the Stock Pledge Agreement and the Collateral Assignment and to perform the transactions and obligations to be performed by the Company hereunder and thereunder. Except as described on Schedule 5.1(b) hereto, no consent, authorization, approval, license, permit or order of, or filing with, any Person or Governmental Authority is required in connection with the execution and delivery of this Agreement, the Notes, the Stock Pledge Agreement and the Collateral Assignment or the performance by the Company of the transactions and obligations to be performed by it hereunder and thereunder, except as contemplated by said agreements. The failure to obtain any of the consents described on Schedule 5.1(b) prior to the Closing Date will not have a material adverse effect upon the Company's assets, properties, liabilities, financial condition, results of operations or business. The execution and delivery of this Agreement, the Notes, the Stock Pledge Agreement and the Collateral Assignment by the Company, and the performance of the transactions and obligations contemplated hereby and thereby by the Company, have been duly authorized by all requisite action of the Company. This Agreement has been, and the Notes, the Stock Pledge Agreement and the Collateral Assignment will be, duly executed and delivered by a duly authorized officer of the Company and constitutes, or when executed and delivered will constitute, a valid and legally binding agreement of the Company, enforceable in accordance with their terms, except as enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws, both state and federal, affecting the enforcement of creditors' rights or remedies in general from time to time in effect and the exercise by courts of equity powers or their application of principles of public policy. (c) Valid Issuance. The Notes to be issued hereunder, when issued by the Company to the Lenders pursuant to the terms of this Agreement, will be duly authorized and validly issued. (d) Conflicts; Defaults. The execution and delivery of this Agreement, the Notes and the Stock Pledge Agreement by the Company, and the performance by the Company of the transactions and obligations contemplated hereby and thereby to be performed, will not: (i) violate, conflict with, or constitute a default under any of the terms or provisions of its certificate of incorporation or bylaws, or any provisions of, or result in the acceleration of any obligation under, any Contract, note, debt instrument, security agreement, or other instrument to which the Company, or any Subsidiary is a party or by which the Company, or any Subsidiary or any of their respective assets is bound; (ii) result in the creation or imposition of any Liens or claims upon the assets of the Company or any Subsidiary or their issued and outstanding capital stock, except with respect to the stock of EWP to be pledged under the Stock Pledge Agreement or as otherwise contemplated by the Collateral Assignment; (iii) constitute a violation of any law, statute, judgment, decree, order, rule, or regulation of a Governmental Authority applicable to the Company, or any Subsidiary; or (iv) constitute an event which, after notice or lapse of time or both, would result in any of the foregoing. The Company is not presently in violation of any provision of its certificate of incorporation or bylaws. (e) Compliance with Laws. Neither the Company nor any Subsidiary is in violation of, nor do any of their respective operations violate in any respect, any statute, law, or regulation of any Governmental Authority applicable to the Company or a Subsidiary, as the case may be, any of their respective assets, or the conduct of their respective businesses ("Applicable Laws"), the violation of which reasonably could be anticipated to have a material adverse effect upon the Company's or a Subsidiary's respective assets, properties, liabilities, financial condition, results of operations or business, and no material expenditures are or, based on present requirements, will be required of the Company or its Subsidiaries in order for them to comply or remain in compliance with any Applicable Laws. (f) Litigation. Neither the Company nor any Subsidiary is a party to any material legal action, suit, claim, investigation or proceeding which is not adequately described in a periodic report heretofore filed by the Company with the SEC, and, to the best of the Company's knowledge and belief after due inquiry, there exist no facts or circumstances which reasonably could be anticipated to result in any such action, suit, claim, investigation, or proceeding. (g) Taxes. The Company has prepared and duly and timely filed with each appropriate Governmental Authority, all material federal, state, municipal, local and foreign tax returns, information returns and other reports required to be filed on or before the date of this Agreement or the making of any Loan and has paid all material taxes required to be paid by the Company prior to the date of this Agreement or the making of any Loan in respect of the periods covered by such returns and reports, except such taxes as are being contested in good faith. (h) Environmental Compliance. The Company and its Subsidiaries are in compliance with all applicable federal, state and local laws and requirements (including permit requirements) relating to the protection of health or the environment in connection with the ownership, operation and condition of its properties and business, except as described in a periodic report heretofore filed by the Company with the SEC or where failure to comply would not have a material adverse effect on the business or operations of the Company or any Subsidiary. (i) Securities Laws. No consent, authorization, approval, permit, or order of or filing with any Governmental Authority is required in order for the Company to execute and deliver this Agreement, the Stock Pledge Agreement or the Collateral Assignment or to offer, issue, sell or deliver the Notes. Based in part on the representations of the Lenders and under the circumstances contemplated hereby and under current laws and regulations, the offer, issuance, sale and delivery of the Notes to the Lenders are exempt from the prospectus delivery and registration requirements of the 1933 Act. (j) Disclosure. The Company has fully responded to all written requests for information and has accurately answered, to the best of the Company's knowledge and belief after due inquiry, all written questions from the Lenders concerning the assets, properties, liabilities, financial condition, results of operations, business and prospects of the Company and its Subsidiaries, and has not knowingly withheld any facts relating thereto which it reasonably believed to be material with respect to the assets, properties, liabilities, financial condition, results of operations, business or prospects of the Company or any Subsidiary. No information in this Agreement, or in any Schedule or Exhibit attached to this Agreement or delivered to the Lenders in connection herewith, contains any untrue statement of a material fact or when considered together with all such information delivered to the Lenders omits to state any material fact necessary in order to make the statements made in the light of the circumstances under which they were made, when taken as a whole, not misleading. The disclosures made in writing by the Company in connection with this Agreement do not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made therein not misleading. There is no fact or circumstance relating to the Company or any Subsidiary which materially and adversely affects or in the future may, in the reasonable business judgment of the Company, be expected materially and adversely to affect the same which has not been set forth in this Agreement or the Schedules hereto. 5.2. Representations and Warranties of the Lenders. Each Lender (solely as to itself and not as to any other Lender) represents and warrants to the Company that: (a) Investment Intent. The Note to be issued to such Lender is being acquired for its own account and not with the view to, or for resale in connection with, any distribution or public offering thereof within the meaning of the 1933 Act. Such Lender understands that such Note has not been registered under the 1933 Act by reason of its issuance in a transaction exempt from the registration and prospectus delivery requirements of the 1933 Act pursuant to Section 4(2) thereof. It further understands that such Note will bear the following legend and agrees that it will hold such Note subject thereto: THIS NOTE HAS NOT BEEN REGISTERED PURSUANT TO THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAW. NEITHER THIS NOTE NOR ANY PORTION HEREOF OR INTEREST HEREIN MAY BE SOLD, ASSIGNED, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF UNLESS THE SAME IS REGISTERED UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAW, OR UNLESS AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE AND THE COMPANY SHALL HAVE RECEIVED, AT THE EXPENSE OF THE HOLDER HEREOF, EVIDENCE OF SUCH EXEMPTION REASONABLY SATISFACTORY TO THE COMPANY (WHICH MAY INCLUDE, AMONG OTHER THINGS, AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY). (b) Capacity of the Lender; Execution of Agreement. Such Lender has all requisite power, authority, and capacity to enter into this Agreement, and to perform the transactions and obligations to be performed by it hereunder. This Agreement has been duly authorized, executed and delivered by it and constitutes its valid and legally binding obligation, enforceable in accordance with its terms, except as enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws, both state and federal, affecting the enforcement of creditors' rights or remedies in general from time to time in effect and the exercise by courts of equity powers or their application of principles of public policy. (c) Accredited Investor. Such Lender and, if such Lender is a limited partnership or limited liability company, each partner or member of such Lender, is an "accredited investor" as defined in Rule 501 (a) of Regulation D promulgated under the 1933 Act. ARTICLE VI Covenants and Agreements 6.1. Affirmative Covenants. So long as any Indebtedness remains outstanding under this Agreement and the Notes, the Company covenants and agrees that it will and will cause each Subsidiary to: (a) Certain Information and SEC Reports. Furnish to each Lender in form and substance satisfactory to the Required Holders: (i) within five (5) days after the Company learns of the commencement or overtly threatened commencement of any material claim or suit, legal or equitable, or of any administrative, arbitration, or other similar proceeding against the Company or any of its Subsidiaries, or any of their respective businesses, assets, or properties which claim or proceeding, if determined adversely to the Company or such Subsidiary, would be likely to have a material adverse effect on the Company and its Subsidiaries, taken as a whole, written notice of the nature and extent of such suit or proceeding; (ii) within five (5) days after the Company learns of any circumstance or event which reasonably can be expected to have a material adverse effect on the assets, properties, liabilities, financial condition, results of operations, business, or prospects of the Company or any Subsidiary, written notice of the nature and extent of such circumstance or event; (iii) simultaneous with the transmission thereof to the Company's shareholders, copies of (or notice from an EDGAR watch service of) all financial statements, proxy statements, reports and any other general written communications which the Company sends to its shareholders and copies (or notice from an EDGAR watch service of) of all registration statements and all regular, special or periodic reports which it files with the SEC or with any securities exchange on which any of its securities are then listed, and copies of all press releases and other statements made available generally by the Company to the public concerning material developments in the Company's businesses; and (iv) within ten (10) days after a Holder makes a reasonable request therefor, such other data relating to the business, affairs and financial condition of the Company or any of its Subsidiaries. (b) Taxes. Pay and discharge all taxes and other governmental charges before the same shall become overdue, unless and to the extent only that such payment is being contested in good faith. (c) Insurance. Maintain insurance coverage on its physical assets and against other business risks in such amounts and of such types as are customarily carried by companies similar in size and nature, and in the event of acquisition of additional property, real or personal, or of incurrence of additional risks of any nature, increase such insurance coverage in such manner and to such extent as prudent business judgment and present practice would dictate. (d) Examination of Books. Permit each Lender, through its authorized attorneys, accountants and representatives, to examine the Company's books, accounts, records, ledgers and assets of every kind and description at all reasonable times upon oral or written request of such Lender, at the Company's cost and expense (provided that so long as the Company shall not be in default, the Company shall be obligated to pay for no more than one (1) such examination per year). (e) Notification of Events of Default, Acceleration or Material Adverse Effect. Promptly notify each Lender of any condition or event which constitutes, or with the passage of time and/or the giving of notice would constitute, an Event of Default under this Agreement or of payment defaults aggregating more than $500,000 on any Indebtedness of the Company and its Subsidiaries or of any acceleration of the maturity of any Indebtedness of the Company and its Subsidiaries aggregating more than $500,000, and promptly inform each Lender of the existence or occurrence of any condition or event (other than conditions having an effect on the economy in general) which could reasonably be anticipated to have a material adverse effect upon the Company's financial condition. (f) Maintenance of Licenses. Maintain in good standing all licenses required by any Governmental Authority that may be necessary or required for the Company and its Subsidiaries to carry on their respective businesses, where the failure to maintain such licenses would have a material adverse effect on the Company and its Subsidiaries taken as a whole. (g) ERISA Compliance. Comply with all material requirements imposed by the Employee Retirement Income Security Act of 1974 as presently in effect or hereafter promulgated, including but not limited to, the minimum funding requirements of any defined contribution employee benefit plan. (h) Compliance with Law. Comply in all material respects with all applicable laws, rules, regulations and orders of any Governmental Authority, such compliance to include, without limitation, paying before the same become delinquent all taxes, assessments, and governmental charges imposed upon it or upon its property, except to the extent that compliance with any of the foregoing is then being contested in good faith by appropriate legal proceedings and with respect to which adequate financial reserves have been established on the books and records of the Company and except where the failure to comply would not have a material adverse effect on the Company and its Subsidiaries, taken as a whole. 6.2. Negative Covenants. The Company covenants and agrees that so long as any Indebtedness remains outstanding under this Agreement and the Notes, without the prior written consent of the Required Holders, the Company will not: (a) Use of Proceeds. Use all or any portion of the proceeds of any Loan for any purpose other than the funding and payment of ongoing operating expenses of the Company arising or becoming due on or subsequent to the Closing Date or, with respect to any Loan made thereafter, the date of the making of such Loan. The Company expressly covenants and agrees that, without limiting the generality of the foregoing, the Company will not apply any portion of the proceeds of any Loan to the payment of any past due indebtedness of the Company to any vendor or supplier or to the satisfaction of any other past due trade payables of the Company. (b) No Mergers, Etc. Enter into any merger or consolidation or sell, lease, transfer or dispose of all, substantially all, or any material part of its assets, except (i) in the ordinary course of its business, or (ii) upon the consent of the Required Holders at the time to any such transaction, and subject in either such case to the approval of the Board of Directors of the Company in accordance with the provisions of the Company's bylaws. (c) Limitations on Indebtedness. Become or remain obligated, or suffer or permit any Subsidiary to become or remain obligated, for any Indebtedness, except: (i) Existing Indebtedness as set forth on Schedule 6.2(c) hereto; and (ii) Indebtedness arising pursuant to this Agreement. ARTICLE VII Miscellaneous 7.1. Waiver and Amendments. No failure or delay on the part of the Agent or the Lenders in the exercise of any power or right, and no course of dealing between the Company and the Agent or the Lenders, shall operate as a waiver of such power or right, nor shall any single or partial exercise of any power or right preclude other or further exercise thereof or the exercise of any other power or right. Remedies provided for herein are cumulative and not exclusive of any remedies which may be available to the Agent or the Lenders at law or in equity. No notice to or demand on the Company required hereunder or under the Notes shall in any event entitle the Company to any other or further notice or demand in similar or other circumstances or constitute a waiver of the right of the Agent or the Lenders to any other or further action and any circumstances without notice or demand. No amendment, modification or waiver of, or consent with respect to, any provision of this Agreement or the Notes shall in any event be effective with respect to any Lender unless the same shall be in writing and signed and delivered by the Required Holders; provided, however, that no such amendment, modification, termination or waiver shall, without the consent of all of the Lenders: (i) authorize or permit the extension of time for, or any reduction of the amount of, any payment of the principal of, or interest on, the Notes, any rate of interest applicable thereto, or any fees or other amounts payable thereunder; (ii) amend or terminate the respective Commitment of any Lender or modify the provisions of this Section 7.1 or the definition of Required Holders; or (iii) provide for the release of any collateral subject to the Stock Pledge Agreement or the Collateral Assignment. Any waiver of any provision of this Agreement or the Notes, and any consent to any departure by the Company from the terms of any provision of this Agreement or the Notes, shall be effective only in the specific instance and for the specific purpose for which it is given. 7.2. The Agent. Each Lender hereby irrevocably designates and appoints the Agent to act as specified herein and in the Stock Pledge Agreement and the Collateral Assignment or as directed by the Required Holders, and each such Lender hereby irrevocably authorizes the Agent to take such action on its behalf under the provisions of this Agreement, the Stock Pledge Agreement and the Collateral Assignment or as directed by the Required Holders, and to exercise such powers and perform such duties as are expressly delegated to the Agent by the terms of this Agreement, the Stock Pledge Agreement and the Collateral Assignment or as directed by the Required Holders, together with such other powers as are reasonably incidental thereto. The Agent agrees to act as such upon the express conditions contained in this Section 7.2. Notwithstanding any provision to the contrary elsewhere in this Agreement, the Agent shall not have any duties or responsibilities, except those expressly set forth herein, in the Stock Pledge Agreement or in the Collateral Assignment or as directed by the Required Holders, nor any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or otherwise exist against the Agent. The provisions of this Section 7.2 are solely for the benefit of the Agent, and the Lenders and the Company shall not have any rights as a third party beneficiary of any of the provisions hereof. In performing its functions and duties under this Agreement, the Agent shall act solely as agent of the Lenders and does not assume and shall not be deemed to have assumed any obligation or relationship of agency or trust with or for the Company. Neither the Agent nor any of its respective officers, directors, employees, agents, attorneys-in-fact or affiliates shall be (i) liable for any action lawfully taken or omitted to be taken by it or such person under or in connection with this Agreement (except for its or such person's own gross negligence or willful misconduct) or (ii) responsible in any manner to any of the Lenders for any recitals, statements, representations or warranties made by the Company or any of its officers contained in this Agreement, the Stock Pledge Agreement, the Collateral Assignment or in any certificate, report, statement or other document referred to or provided for in, or received by the Agent under or in connection with, this Agreement or for any failure of the Company to perform its obligations hereunder. The Agent shall not be under any obligation to any Lender to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement, or to inspect the properties, books or records of the Company. The Agent shall not be responsible to any Lender for the effectiveness, genuineness, validity, enforceability, collectibility or sufficiency of this Agreement, the Stock Pledge Agreement or the Collateral Assignment or for any representations, warranties, recitals or statements made herein or therein or made in any written or oral statement or in any financial or other statements, instruments, reports certificates or any other documents in connection herewith or therewith furnished or made by the Agent to the Lenders or by or on behalf of the Company to the Agent or any Lender or be required to ascertain or inquire as to the performance or observance of any of the terms, conditions, provisions, covenants or agreements contained herein or therein or as to the use of the proceeds of the Loans or of the existence or possible existence of any Default or Event of Default. Each Lender expressly acknowledges that neither the Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or affiliates have made any representations or warranties to it and that no act by the Agent hereinafter taken, including any review of the affairs of the Company shall be deemed to constitute any representation or warranty by the Agent to any Lender. Each Lender represents to the Agent that it has, independently and without reliance upon the Agent, or any other Lender, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, assets, operations, property, financial and other conditions, prospects and creditworthiness of the Company and made its own decision to make its Loans hereunder and enter into this Agreement. The Lenders agree to indemnify the Agent in its capacity as such ratably according to their respective Commitments, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, reasonable expenses or disbursements of any kind whatsoever which may at any time (including, without limitation, at any time following the payment of the Loans) be imposed on, incurred by or asserted against the Agent in its capacity as such in any way relating to or arising out of this Agreement, the Stock Pledge Agreement or the Collateral Assignment, or any documents contemplated by or referred to herein or the transactions contemplated hereby or any action taken or omitted to be taken by the Agent under or in connection with any of the foregoing, but only to the extent that any of the foregoing is not paid by the Company, provided that no Lender shall be liable to the Agent for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements to the extent resulting solely from the Agent's gross negligence or willful misconduct. The agreements in this Section 7.2 shall survive the payment of all Loans. 7.3. Notices. All notices and other communications required or permitted under this Agreement shall be in writing and, if mailed by prepaid registered or certified mail, return receipt requested, shall be deemed to have been received on the earlier of the date shown on the receipt or three (3) Business Days after the post-mark date thereof. Except as otherwise provided herein, notices may also be given by recognized overnight courier services or delivered by hand or facsimile transmission. In the event of delivery by overnight courier service, such notice shall be deemed to have been received as of the regularly scheduled time for delivery established by such courier service. In the event of delivery by hand, such notice shall be deemed effective when delivered. In the event of delivery by facsimile transmission, such notice shall be deemed effective upon confirmation of transmission. All notices and other communications under this Agreement shall be given to the parties hereto at the following addresses: If to the Company: Keystone Consolidated Industries, Inc. Three Lincoln Centre 5430 LBJ Freeway, Suite 1740 Dallas, Texas 75240 Attention: Chief Financial Officer Fax: (972) 448-1408 With a copy to: Richards, Layton & Finger, P.A. One Rodney Square Post Office Box 551 Wilmington, Delaware 19899 Attention: Mark D. Collins, Esq. Fax: (302) 651-7701 If to the Agent: EWP Financial LLC Three Lincoln Centre 5430 LBJ Freeway, Suite 1740 Dallas, Texas 75240 Attention: Bobby D. O'Brien Fax: (972) 448-1445 With a copy to: Rogers & Hardin LLP 2700 International Tower 229 Peachtree Street, N.E. Atlanta, Georgia 30303 Attention: Edward J. Hardin, Esq. Fax: (404) 525-2224 If to the Lenders: To the address for each Lender set forth on Annex I hereto. Any party hereto may change the address to which notices shall be directed under this Section 7.2 by giving written notice of such change to the other parties. 7.4. Restriction on Transfer. The Lenders acknowledge that the Notes have not been registered under the 1933 Act, as amended, or the securities laws of any state. Accordingly, the Notes may not be sold or otherwise disposed of or transferred, unless such sale, disposition or transfer is registered under the 1933 Act and applicable state securities laws or unless the Company has received an opinion of counsel reasonably acceptable to the Company that such sale, disposition or transfer is exempt from such registration. The Notes shall bear a restrictive legend to the foregoing effect. 7.5. Expenses. The Company shall reimburse the Lenders for all of their reasonable out-of-pocket expenses incurred in the negotiation, preparation, execution and delivery of this Agreement, the Notes, the Stock Pledge Agreement, the Collateral Assignment and related matters, and all related due diligence, including, without limitation, the expenses of legal counsel and accountants. The Company shall also reimburse each Holder for all of its out-of-pocket expenses incurred in the administration, waiver, modification and enforcement of any of its rights under this Agreement, the Note held by it, the Stock Pledge Agreement and the Collateral Assignment, including, without limitation, the reasonable expenses of legal counsel and accountants. In addition, the Company shall be responsible for any documentary taxes incurred in connection with the transactions contemplated by this Agreement and the Notes. 7.6. Severability. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction, shall as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or affecting the validity or enforceability of such provision in any other jurisdiction. 7.7. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Texas without giving effect to any choice or conflict of law provision or rule (whether of the State of Texas or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Texas. 7.8. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns; provided, however, that the Company may not, without the prior written consent of all of the Lenders, assign its rights or obligations hereunder or under the Notes, the Stock Pledge Agreement or the Collateral Assignment, and the Lenders shall not be obligated to make any Loan to any entity other than the Company. No Lender may assign, or sell a participation in, all or any portion of its rights or obligations under this Agreement, the Notes, the Stock Pledge Agreement or the Collateral Assignment, without the prior written consent of the Required Holders. With the prior written consent of the Required Holders, any Lender may assign all or a portion of its Loans and Commitment hereunder to one or more Persons, each of which assignees shall become a party to and be bound by, and shall make the representations and warranties of a Lender under, this Agreement by execution of an assignment agreement in the form of Exhibit D hereto (an "Assignment Agreement"). In connection with any such assignment, the Company shall, upon request by the assignor and assignee and return of the original Note in favor of the assignor, issue replacement Note(s) to the assignee and, if applicable, the assignor in the amount of their respective Commitments set forth in the applicable Assignment Agreement. 7.9. Headings. Headings used in this Agreement are for convenience only and shall not be used in connection with the interpretation of any provision hereof. 7.10. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all such separate counterparts shall together constitute one and the same instrument. 7.11. Withholding Tax. The Lenders acknowledge that the Company will be required to comply with the requirements of the Internal Revenue Service relative to backup withholding and the Lenders may be subject to backup withholding depending on their individual status and compliance with applicable filing requirements of the Internal Revenue Service. 7.12 Entire Agreement. This Agreement, together with the exhibits and schedules hereto, constitutes the entire agreement between the parties hereto relating to the subject matter hereof and supersedes all prior negotiations, discussions, writings and agreements between them, including, without limitation, the Original Loan Agreement. [Remainder of page intentionally left blank. Signature page follows.] IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by the undersigned thereunto duly authorized as of the date first written above. THE COMPANY: KEYSTONE CONSOLIDATED INDUSTRIES, INC. By: --------------------------------------------- Name: --------------------------------------------- Title: --------------------------------------------- THE AGENT: EWP FINANCIAL LLC By: --------------------------------------------- Name: --------------------------------------------- Title: --------------------------------------------- THE LENDERS: EWP FINANCIAL LLC By: --------------------------------------------- Name: --------------------------------------------- Title: --------------------------------------------- --------------------------------------------- By: --------------------------------------------- Name: --------------------------------------------- Title: --------------------------------------------- ANNEX I
% of Total Name of Lender Address of Lender Commitment Commitment -------------- ----------------- ---------- ---------- EWP Financial LLC Three Lincoln Centre $6,000,000 100% 5430 LBJ Freeway Suite 1740 Dallas, Texas 75240 Total Commitment Amount: $6,000,000
Exhibit A THIS NOTE HAS NOT BEEN REGISTERED PURSUANT TO THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAW. NEITHER THIS NOTE NOR ANY PORTION HEREOF OR INTEREST HEREIN MAY BE SOLD, ASSIGNED, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF UNLESS THE SAME IS REGISTERED UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAW, OR UNLESS AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE AND THE COMPANY SHALL HAVE RECEIVED, AT THE EXPENSE OF THE HOLDER HEREOF, EVIDENCE OF SUCH EXEMPTION REASONABLY SATISFACTORY TO THE COMPANY (WHICH MAY INCLUDE, AMONG OTHER THINGS, AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY). PROMISSORY NOTE $6,000,000.00 Dallas, Texas November 21, 2001 FOR VALUE RECEIVED, KEYSTONE CONSOLIDATED INDUSTRIES, INC., a Delaware corporation (the "Company"), promises to pay to the order of EWP Financial LLC (the "Holder"), at 5430 LBJ Freeway, Suite 1740, Dallas, Texas 75240, or such other place as designated in writing by the Holder, the principal sum of SIX MILLION DOLLARS ($6,000,000.00) or, if less, the then unpaid principal amount of Loans made by the Holder to the Company pursuant to that certain EWP Bridge Loan Agreement dated as of November 1, 2001 by and between the Company, EWP Financial LLC, as Agent, the Holder, and the other Lenders party thereto (the "Loan Agreement"), together with interest on the principal balance outstanding from time to time in accordance with the provisions of this Note. This Note is executed and delivered by the Company pursuant to the Loan Agreement, the terms and conditions of which are incorporated herein by reference. Unless otherwise indicated herein, capitalized terms used in this Note have the same meanings set forth in the Loan Agreement. 1. Interest Rate; Payment; Usury. (a) Provided that no Event of Default has occurred and is continuing and subject to the other provisions of this Note, the outstanding principal of this Note shall bear interest at a rate per annum equal to three percent (3%) plus the rate from time to time published in the Wall Street Journal as the prime rate, whether or not such announced rate is the best rate available at any bank or other financial institution (the "Interest Rate"). During any period that an Event of Default shall have occurred and be continuing, interest on the outstanding principal of this Note shall accrue at a rate equal to the Interest Rate plus two percent (2%) (the "Default Interest Rate"). Notwithstanding anything contained herein to the contrary, in no event shall the interest rate on this Note, including the Default Interest Rate, exceed the highest rate permitted by applicable law. Interest on this Note, including interest at the Default Interest Rate, shall be based on a 360-day year, and interest shall accrue and be payable for the actual number of calendar days elapsed. Interest shall be payable in arrears commencing on the 30th day of November, 2001 and continuing thereafter on the last day of each subsequent month until the principal and all accrued interest have been paid in full. (b) It is the intention of the Company and the Holder to conform strictly to applicable usury laws now or hereafter in force, and any interest payable under this Note or the Loan Agreement shall be subject to reduction to an amount not to exceed the maximum non-usurious amount for commercial loans allowed under such applicable usury laws as now or hereafter construed by the courts having jurisdiction over such matters. In the event such interest (whether designated as interest, service charges, points, origination fees or otherwise) does exceed the maximum legal rate, it shall be (i) canceled automatically to the extent that such interest exceeds the maximum legal rate; (ii) if already paid, at the option of the Holder, either be rebated to the Company or credited on the principal amount of this Note; or (iii) if this Note has been prepaid in full, then such excess shall be rebated to the Company. It is further agreed, without limitation of the foregoing, that all calculations of the rate of interest contracted for, charged, or received under this Note and the Loan Agreement that are made for the purpose of determining whether such rate exceeds the maximum legal rate, shall be made, to the extent permitted by applicable law, by amortizing, prorating, allocating, and spreading throughout the full stated term of this Note (and any extensions of the term thereof that may be hereafter granted) all such interest at any time contracted for, charged, or received from the Company or otherwise by the Holder so that the rate of interest on account of this Note, as so calculated, is uniform throughout the term thereof. If the Company is exempt or hereafter becomes exempt from applicable usury statutes or for any other reason the rate of interest to be charged on this Note is not limited by law, none of the provisions of this paragraph shall be construed so as to limit or reduce the interest or other consideration payable under this Note or the Loan Agreement or under any instrument securing payment thereof. The terms and provisions of this paragraph shall control and supersede every other provision of all agreements between the Company and the Holder. 2. Maturity. Unless the same shall become due earlier as a result of acceleration of the maturity, this Note shall mature on the earlier of: (i) the date of consummation of the Restructuring or (ii) the six (6) month anniversary of the Closing Date, at which time the outstanding principal balance of this Note and all accrued and unpaid interest shall become due and payable. 3. Revolving Loans; Prepayments. Subject to the terms and conditions of the Loan Agreement, the Company may from time to time and at any time prior to the Maturity Date borrow, repay and reborrow under this Note or prepay this Note, in whole or in part and without premium or penalty. Any payment shall be applied first to interest which is accrued and unpaid and then to principal. 4. Manner of Payment. The Company shall make payments in respect of this Note (including principal and interest) by wire transfer of immediately available funds to the account specified by the Holder. 5. Events of Default; Acceleration. The maturity of this Note is subject to acceleration pursuant to Section 3.7 of the Loan Agreement if an Event of Default occurs and is continuing pursuant to Section 3.6 of the Loan Agreement. 6. Collection Expenses. In the event the Company fails to pay any installment of interest or principal when due, the Company shall pay to the Holder, in addition to the amounts due, all costs of collection, including reasonable attorneys' fees. 7. Company Waivers. The Company, for itself and its successors and assigns, hereby waives demand, presentment, protest, diligence, notice of dishonor and any other formality in connection with this Note and expressly agrees that this Note, or any payment hereunder, may be extended from time to time and that the Holder may accept security for this Note or release security for this Note, all without in any way affecting the liability of the Company hereunder. 8. Governing Law. All questions concerning the construction, validity and interpretation of this Note shall be governed by and construed in accordance with the laws of the State of Texas, without giving effect to any choice or conflict of law provision or rule (whether of the State of Texas or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Texas. 9. Collateral. The Company's obligations under this Note are secured by collateral pledged pursuant to the Stock Pledge Agreement. 10. Amendment and Waiver. Subject to the Loan Agreement, the provisions of this Note may be amended and waived only with the prior written consent of the Company and the Holder of this Note. 11. Amendment, Restatement and Replacement of Prior Note. This Note amends, supplements, restates, replaces and supercedes in its entirety that certain promissory note dated November 1, 2001 in the original principal amount of $6.0 million payable to the order of EWP Financial LLC and executed by the Company. [Remainder of page intentionally left blank. Signature page follows.] IN WITNESS WHEREOF, the Company has executed this Note on the date first written above. KEYSTONE CONSOLIDATED INDUSTRIES, INC. By: --------------------------------------------- Name: --------------------------------------------- Title: --------------------------------------------- EXHIBIT B STOCK PLEDGE AGREEMENT THIS STOCK PLEDGE AGREEMENT (the "Agreement") is dated as of November 21, 2001 by and between KEYSTONE CONSOLIDATED INDUSTRIES, INC., a Delaware corporation (the "Pledgor"), and EWP FINANCIAL LLC, a Delaware limited liability company, as agent for the lenders under the hereinafter described Loan Agreement (the "Pledgee"). Recitals: WHEREAS, pursuant to that certain Amended and Restated Loan Agreement dated as of November 21, 2001 (the "Loan Agreement") by and between the Pledgor, the Pledgee, and the Lenders party thereto (individually a "Lender" and, collectively, the "Lenders"), the Pledgor has made promissory notes of even date herewith aggregating up to an original principal amount of $6,000,000.00, each payable to a Lender (individually, the "Note" and, collectively, the "Notes"); WHEREAS, the Pledgor has agreed to enter into this Agreement and to pledge all of the outstanding shares of common stock of Engineered Wire Products, Inc., an Ohio corporation and a wholly-owned subsidiary of the Pledgor ("EWP"), registered in the name of the Pledgor (the "Stock") as security for performance of its obligations under the Loan Agreement and the Notes; and WHEREAS, capitalized terms used but not otherwise defined herein shall have the same meanings given to such terms in the Loan Agreement. NOW, THEREFORE, in consideration of the premises and of the mutual covenants herein contained, and to secure the payment and performance of the Pledgor's obligations under the Loan Agreement and the Notes, the parties hereto agree as follows: SECTION 1. Pledge. As collateral security for the due and punctual payment of the indebtedness and obligations referred to in Section 2 hereof, the Pledgor hereby pledges, hypothecates, transfers, sets over, delivers and assigns unto the Pledgee, and hereby grants the Pledgee a first security interest in the following: (a) the Stock and the certificates representing the Stock, and all cash, securities and other property at any time and from time to time received, receivable or otherwise distributed in respect of or in exchange for all or any portion of the Stock; and (b) all securities hereafter delivered to the Pledgee by the Pledgor in substitution for any of the foregoing, all certificates and instruments representing or evidencing such securities, together with all interest, cash, securities and other property at any time and from time to time received, receivable or otherwise distributed in respect of, in exchange for or on conversion of any or all thereof (all such Stock, indebtedness, shares, certificates, interest, cash, securities and other property received, receivable or otherwise distributed in respect of any or all thereof being included within the definition of "Collateral" for purposes of this Agreement). TO HAVE AND TO HOLD the Collateral, together with all rights, titles, interests, privileges and preferences appertaining or incidental thereto, unto the Pledgee, its successors and assigns, forever, subject, however, to the terms, covenants and conditions hereinafter set forth. SECTION 2. Indebtedness and Obligations Secured. This Agreement and the Collateral secure repayment of the indebtedness and the obligations of the Pledgor indicated below (collectively, the "Obligations"), equally and ratably as to all such indebtedness and obligations and without preference or priority as to any class of such indebtedness or obligations or any component thereof: (a) the indebtedness evidenced by the Loan Agreement and the Notes (and any promissory note of the Pledgor issued in exchange for, or replacement of, or substitution for, any of the Notes, which shall be included in the term "Notes" as used herein), with interest and premiums thereon as therein provided; (b) all other amounts payable by the Pledgor under the Loan Agreement and the Notes, including without limitation, all fees, costs, expenses and indemnities payable by the Pledgor thereunder; (c) all indebtedness of the Pledgor arising under this Agreement and all costs and expenses of the Pledgee in enforcing this Agreement, the Loan Agreement and the Notes; and (d) all renewals and extensions, in whole or in part, of the Notes or of any other indebtedness or obligation described above. SECTION 3. Representations and Warranties. The Pledgor hereby represents and warrants that as of the date hereof: (i) the Pledgor is the holder of record of all of the Stock; (ii) the Stock pledged hereunder constitutes all of the issued and outstanding capital stock of EWP; (iii) the Pledgor has good, right and lawful authority to enter into this Agreement and to pledge the Collateral in the manner hereby done or contemplated and will defend its title thereto against the claims of all persons whomsoever; (iv) there are no liens, claims, pledges, security interests, encumbrances or rights of third parties whatsoever with respect to the Collateral; (v) this Agreement has been duly authorized, executed and delivered and constitutes the legal, valid and binding obligation of the Pledgor, enforceable in accordance with its terms; and (vi) no consent or approval of any court, governmental body or regulatory authority (federal, state or local) is or was necessary to the validity of the pledge granted hereby. SECTION 4. Appointment of Agents; Registration in Nominee Name. The Pledgee shall have the right to appoint one or more agents for the purpose of retaining physical possession of the certificates or instruments representing or evidencing the Collateral, which certificates or instruments may be held (in the discretion of the Pledgee) in the name of the Pledgor, endorsed or assigned in blank or in favor of the Pledgee, or in the name of the Pledgee or any agent appointed by the Pledgee to retain physical possession of such certificates or instruments, or in the name of any nominee of the Pledgee or any such agent. In addition, the Pledgee shall at all times have the right to exchange certificates or instruments representing or evidencing the Collateral for certificates or instruments of smaller or larger denominations. The Pledgor hereby agrees that any registrar or transfer agent for any securities included in the Collateral shall be entitled to rely on the provisions of this Section 4 as conclusive evidence of the authority of the Pledgee to effect re-registration of any such securities in the name of the Pledgee or that of its agents or its or their nominees or to exchange certificates or instruments representing or evidencing such Collateral for certificates or instruments of smaller or larger denominations, notwithstanding any notice or direction to such registrar or transfer agent from the Pledgor to the contrary. SECTION 5. Voting Rights; Dividends; Etc. (a) Until there shall occur an Event of Default (as set forth in Section 6 hereof), the Pledgor shall be entitled to exercise any and all voting or consensual rights and powers relating or pertaining to the Collateral or any part thereof for the term of this Agreement, and upon the occurrence of an Event of Default, the Pledgee shall be entitled to exercise such rights and powers; and (b) The Pledgor shall not be entitled to receive and retain any and all cash dividends and interest payable on the Collateral, and any and all stock or liquidating dividends, distributions and property, returns of capital or other distributions made on or in respect of the Collateral, whether resulting from a subdivision, combination or reclassification of the outstanding capital stock of the Pledgee or received in exchange for or on conversion of the Collateral or any part thereof or as a result of any merger, consolidation, acquisition or other exchange of assets to which the Pledgee may be a party or otherwise, and any and all cash and other property received in payment of the principal or in redemption of or in exchange for or on conversion of any Collateral (either at maturity, upon call for redemption, upon forced conversion or otherwise), shall be and become part of the Collateral pledged hereunder and, if received by the Pledgor, shall forthwith be delivered to the Pledgee or its designated agent (accompanied by proper instruments of assignment or stock or bond powers executed by the Pledgor in accordance with the Pledgee's instructions) to be held subject to the terms of this Agreement. SECTION 6. Events of Default. The occurrence and continuation of any of the following events shall constitute an Event of Default under this Agreement: (a) Any Event of Default as defined in the Loan Agreement or the Notes; and (b) Any default in the due observance or performance of any term, covenant, warranty, agreement or condition contained in this Agreement, which default continues for five (5) calendar days after the Pledgee, at the direction of the Required Holders, gives notice of such failure to the Pledgor. SECTION 7. Remedies Upon Default. Upon the occurrence and during the continuation of an Event of Default hereunder, the Pledgee may, at the direction of the Required Holders, in addition to the exercise by the Pledgee of its rights and remedies under any other Section of this Agreement or under the Loan Agreement or the Notes, or otherwise available to it at law or in equity: (a) apply the cash (if any) then held by it as collateral hereunder to the payment of any Obligations, whether or not then due and in any order selected by the Pledgee; and (b) if there shall be no such cash or the cash so applied shall be insufficient to pay all such Obligations in full, exercise all the rights and remedies of a secured party under the Uniform Commercial Code in effect in the State of Texas at that time and sell (in compliance with applicable securities laws) the Collateral, or any part thereof, at public or private sale, at any broker's board, upon any securities exchange, at the Pledgee's offices or elsewhere, for cash, upon credit or for future delivery, as the Pledgee may deem appropriate in the circumstances and commercially reasonable, irrespective of the impact of any such sales on the market price of the Collateral. In that connection, the Pledgee shall have the right to impose such limitations and restrictions on the sale of the Collateral as the Pledgee may deem to be necessary or appropriate to comply with any law, rule or regulation (federal, state or local) having applicability to the sale, including, without limitation, restrictions on the number and qualifications of the offerees and requirements for any necessary governmental approvals, and the Pledgee shall be authorized at any such sale (if it deems it advisable to do so) to restrict the prospective offerees or purchasers to persons who will represent and agree that they are purchasing securities included in the Collateral for their own account and not with a view to the distribution or sale thereof in violation of applicable securities laws. Upon consummation of any such sale, the Pledgee shall have the right to assign, transfer and deliver to the purchaser or purchasers thereof the Collateral so sold. Each such purchaser at any such sale shall hold the property sold absolutely, free from any claim or right on the part of the Pledgor, and the Pledgor hereby waives (to the extent permitted by law) all rights of redemption, stay or appraisal that it now has or may at any time in the future have under any rule of law or statute now existing or hereafter enacted. The Pledgee shall give the Pledgor at least ten (10) calendar days' prior written notice of the Pledgee's intention to make any public or private sale of such Collateral. Such notice shall state the time and place fixed for sale, and the Collateral, or portion thereof, to be offered for sale. Any such sale shall be held at such time or times within ordinary business hours and at such place or places as the Pledgee may fix in the notice of such sale. At any such sale, the Collateral, or portion thereof, to be sold may be sold in one lot as an entirety or in separate parcels, as the Pledgee may (in its sole and absolute discretion) determine; and the Pledgee may itself bid (which bid may be in whole or in part in the form of cancellation of Obligations) for and purchase the whole or any part of the Collateral and shall be entitled, for purposes of bidding and making settlement or payment of the purchase price for all or any portion of the Collateral sold at such sale, to use and apply any of the Obligations owed to the Pledgee as a credit on account of the purchase of any Collateral payable by the Pledgee at such sale. The Pledgee shall not be obligated to make any sale of Collateral if it shall determine not to do so, regardless of the fact that notice of sale of Collateral may have been given. The Pledgee may, without notice or publication, adjourn any public or private sale or cause the same to be adjourned from time to time by announcement at the time and place fixed for sale, and such sale may, without further notice, be made at the time and place to which the same was so adjourned. In the event the sale of all or any part of the Collateral is made on credit or for future delivery, the Collateral so sold may be retained by the Pledgee until the sale price is paid by the purchaser or purchasers thereof, but the Pledgee shall not incur any liability in the event any such purchaser or purchasers shall fail to take up and pay for the Collateral so sold and, in the event of any such failure, such Collateral may be sold again upon like notice. As an alternative to exercising the power of sale herein conferred upon it, the Pledgee may proceed by a suit or suits at law or in equity to foreclose this Agreement and sell the Collateral, or any portion thereof, pursuant to a judgment or decree of a court or courts of competent jurisdiction. SECTION 8. Application of Proceeds of Sale; Deficiency; Acknowledgement. (a) The proceeds of any sale of the Collateral sold pursuant to Section 7 hereof shall be applied by the Pledgee as follows: First: to the payment of the costs and expenses of such sale, including the out-of-pocket expenses of the Pledgee and the reasonable fees and out-of-pocket expenses of counsel employed in connection therewith, and the payment of all costs and expenses incurred by the Pledgee in connection with the administration and enforcement of this Agreement, to the extent that such costs and expenses shall not have been previously reimbursed or paid to the Pledgee; Second: to the payment or prepayment in full of all other Obligations, whether or not then due and in any order selected by the Pledgee as directed by the Required Holders; and Third: the balance (if any) of such proceeds shall be paid to the Pledgor or as a court of competent jurisdiction may direct. (b) The Pledgor recognizes that, by reason of certain prohibitions contained in the Securities Act of 1933, as amended (the "Securities Act"), and applicable state securities laws, the Pledgee may be compelled, with respect to any sale of all or any part of the Collateral, to limit purchasers to those who will agree, among other things, to acquire the Collateral for their own account, for investment and not with a view to the distribution or resale thereof. The Pledgor acknowledges that any such private sales may be at prices and on terms less favorable to the Pledgee than those obtainable through a public sale without such restrictions (including, without limitation, a public offering made pursuant to a registration statement under the Securities Act), and, notwithstanding such circumstances, agrees that any such private sale shall be deemed to have been made in a commercially reasonable manner and that the Pledgee shall have no obligation to delay the sale of any Collateral for the period of time necessary to permit the issuer thereof to register it for a form of public sale requiring registration under the Securities Act or under applicable state securities laws, even if such issuer would agree to do so. SECTION 9. Pledgee Appointed Attorney-In-Fact. The Pledgor hereby appoints the Pledgee the Pledgor's attorney-in-fact, with full power of substitution, for the purpose of carrying out the provisions of this Agreement and taking any action and executing any agreement or instrument on behalf of the Pledgor that the Pledgee may deem necessary or advisable to accomplish the purposes hereof, which appointment is coupled with an interest and is irrevocable. Without limiting the generality of the foregoing, the Pledgor agrees and understands that the Pledgee shall have the right and power to receive, endorse and collect all checks and other orders for the payment of money made payable to the Pledgor representing any dividend, principal or interest payment or other distribution payable or distributable in respect of the Collateral or any part thereof and to give full discharge for the same. SECTION 10. Responsibility of the Pledgee; Care of Collateral. Neither the Pledgee, nor any director, officer, employee or agent of the Pledgee, shall be liable for any action taken or omitted to be taken by it or them relative to this Agreement or any of the Collateral except for its or their gross negligence or willful misconduct, and the Pledgee shall not be liable for any action or omission to act on the part of any agent appointed by the Pledgee to act hereunder or with respect to the Collateral (or any part thereof), selected by the Pledgee with reasonable care. Notwithstanding the provisions of Section 5 hereof, the Pledgee shall have no duty to exercise any voting or any other consensual rights and powers becoming vested in the Pledgee with respect to the Collateral or any part thereof, to exercise any right to redeem, convert or exchange any securities included in the Collateral, to enforce or see to the payment of any dividend, principal or interest or any other distribution payable or distributable on or with respect to the Collateral or any part thereof or otherwise to preserve any rights in respect of the Collateral against any third parties, and the Pledgee shall not be liable or accountable to the Pledgor in respect of any of the foregoing. The Pledgee shall be deemed to have exercised reasonable care in the custody and preservation of the Collateral if the Pledgee shall take such action for such purpose as the Pledgor may request in writing, but the failure of the Pledgee to take any action requested by the Pledgor shall not, in and of itself, be deemed to constitute a failure on the part of the Pledgee to exercise reasonable care in respect of the custody and preservation of the Collateral or any part thereof. SECTION 11. Expenses. The Pledgor agrees to pay the Pledgee, upon its demand, all of the Pledgee's out-of-pocket expenses (including its reasonable attorneys' fees) incurred in connection with the administration or enforcement of this Agreement, the care and custody of the Collateral (or any part thereof), the registration, re-registration or transfer of the Collateral (or any part thereof) and the sale or collection of the Collateral (or any part thereof). Should the Pledgor fail to do any act or thing that the Pledgor has covenanted to do hereunder, or should any representation or warranty on the part of the Pledgor contained herein be breached, the Pledgee may (but shall not be obligated to) do the same or cause it to be done, or remedy any such breach, and there shall be added to the liabilities of the Pledgor hereunder, the cost or expense to the Pledgee in so doing, and any and all amounts expended by the Pledgee in taking any such action shall be repayable to it by the Pledgor upon the Pledgee's demand. SECTION 12. No Waiver; Cumulative Remedies. No failure on the part of the Pledgee to exercise, and no delay in exercising, any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or remedy by the Pledgee preclude any other or further exercise thereof or the exercise of any other right, power or remedy. All remedies of the Pledgee hereunder are cumulative and are not exclusive of any other remedies available to the Pledgee at law or in equity. SECTION 13. Termination and Release of Collateral. This Agreement shall terminate when all Obligations secured hereby have been fully paid and performed, at which time the Pledgee shall reassign and redeliver (or cause to be reassigned or redelivered) to the Pledgor, or to such person or persons as the Pledgor shall designate, against receipt, such of the Collateral (if any) as shall not have been sold or otherwise applied by the Pledgee pursuant to the terms hereof and as shall still be held by it hereunder, together with appropriate instruments of assignment and release. SECTION 14. Notices. All notices and other communications required or permitted under this Agreement shall be in writing and, if mailed by prepaid registered or certified mail, return receipt requested, shall be deemed to have been received on the earlier of the date shown on the receipt or five (5) calendar days after the post-mark date thereof. Notices may be given by recognized overnight courier services and shall be deemed to have been received as of the regularly scheduled time for delivery established by such courier service. In addition, notices hereunder may be delivered by hand, in which case the notice shall be deemed effective when delivered, or by facsimile transmission, in which case it shall be deemed effective upon confirmation of transmission. All notices and other communications under this Agreement shall be given to the parties hereto at the following addresses: If to the Pledgor: Keystone Consolidated Industries, Inc. Three Lincoln Centre 5430 LBJ Freeway, Suite 1740 Dallas, Texas 75240 Attn: Chief Financial Officer Fax: (972) 448-1408 With a copy to: Richards, Layton & Finger, P.A. One Rodney Square Post Office Box 551 Wilmington, Delaware 19899 Attn: Mark D. Collins, Esq. Fax: (302) 651-7701 If to the Pledgee: EWP Financial LLC Three Lincoln Centre 5430 LBJ Freeway, Suite 1740 Dallas, Texas 75240 Attn: Bobby D. O'Brien Fax: (972) 448-1445 With a copy to: Rogers & Hardin LLP 2700 International Tower 229 Peachtree Street, N.E. Atlanta, Georgia 30303 Attn: Edward J. Hardin, Esq. Fax: (404) 525-2224 Any party hereto may change the address to which notices shall be directed under this Section 14 by giving written notice of such change to the other parties. SECTION 15. Further Assurances. The Pledgor agrees to do such further acts and things, and to execute and deliver such agreements and instruments, including without limitation stock and bond powers, as the Pledgee may at any time request in connection with the administration or enforcement of this Agreement or related to the Collateral or any part thereof or in order better to assure and confirm unto the Pledgee its rights, powers and remedies hereunder. SECTION 16. Binding Agreement; Assignment. This Agreement, and the terms, covenants and conditions hereof, shall be binding upon and inure to the benefit of the parties hereto, and their respective successors and assigns, except that the Pledgor shall not be permitted to assign this Agreement or any interest in the Collateral, or any part thereof, or otherwise pledge, encumber or grant any option with respect to the Collateral, or any part thereof, or any cash or property held by the Pledgee as collateral under this Agreement, without the prior written consent of the Pledgee. SECTION 17. Miscellaneous. Neither this Agreement nor any provisions hereof may be amended, modified, waived, discharged or terminated, nor may any of the Collateral be released or the pledge or the security interest created hereby extended, except by an instrument in writing signed on behalf of the party to be charged. The Section headings used herein are for convenience of reference only and shall not define or limit the provisions of this Agreement. This Agreement may be executed in counterparts, each of which shall be deemed to be an original and both of which together shall constitute the Agreement. This Agreement replaces and supercedes in its entirety that certain Stock Pledge Agreement dated as of November 1, 2001 by and between Pledgee and Pledgor that was delivered pursuant to the Original Loan Agreement (as defined in the Loan Agreement). SECTION 18. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Texas without giving effect to any choice or conflict of law provision or rule (whether of the State of Texas or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Texas. [Remainder of page intentionally left blank. Signature page follows.] IN WITNESS WHEREOF, the parties hereto have caused this Pledge Agreement to be duly executed and delivered as of the date first above written. THE PLEDGOR: KEYSTONE CONSOLIDATED INDUSTRIES, INC. By: ---------------------------------------------- Name: ---------------------------------------------- Title: ---------------------------------------------- THE PLEDGEE: EWP FINANCIAL LLC, as Agent By: ---------------------------------------------- Name: ---------------------------------------------- Title: ---------------------------------------------- EXHIBIT C COLLATERAL ASSIGNMENT THIS COLLATERAL ASSIGNMENT (this "Collateral Assignment") is made as of November 21, 2001 by KEYSTONE CONSOLIDATED INDUSTRIES, INC., a Delaware corporation (the "Assignor"), for the benefit of EWP FINANCIAL LLC, a Delaware limited liability company, acting as agent (the "Agent") for itself and for all additional Lenders (collectively with the Agent, the "Lenders") pursuant to the terms and conditions of the Loan Agreement (as hereinafter defined). Recitals: WHEREAS, pursuant to that certain Amended and Restated Loan Agreement dated as of November 21, 2001 (the "Loan Agreement") by and between the Assignor, the Agent, and the Lenders, the Assignor has made promissory notes of even date herewith aggregating up to an original principal amount of $6,000,000.00, each payable to a Lender (individually, the "Note" and, collectively, the "Notes"); WHEREAS, the Assignor has made an investment in Engineered Wire Products, Inc., an Ohio corporation and a wholly-owned subsidiary of Assignor ("EWP"), which investment, in part, is comprised of and evidenced by an account maintained on the Assignor's books and records, which account is styled as "Loan Account - EWP, Account Number 480.20" but which account, in fact, represents the Assignor's net investment in EWP (together with any and all modifications thereto, extension thereof and substitution therefor, the "EWP Investment"); WHEREAS, the initial balance of the EWP Investment, which arose in connection with the transaction whereby the Assignor acquired all of the equity interest in EWP not already owned by the Assignor, was approximately $12,000,000.00, and as of September 30, 2001 the balance of the EWP Investment was approximately $8,400,000.00; WHEREAS, the Lenders have agreed to make the Loans (as defined in the Loan Agreement) available to the Assignor with the condition precedent that the Assignor collaterally assign and grant to the Agent, for itself and as agent for the Lenders, a security interest in, and lien on, all right, title and interest of the Assignor in, to, and under EWP Investment as collateral and security for the Obligations (as hereinafter defined); and WHEREAS, all capitalized terms used in this Collateral Assignment and not defined herein shall have the meaning given to such terms in the Loan Agreement. NOW, THEREFORE, in consideration of the premises and of the mutual covenants herein contained, and to secure the payment and performance of the Assignor's obligations under the Loan Agreement and the Notes, the parties hereto agree as follows: ARTICLE I DEFINITIONS AND CONSTRUCTION Section 1.1 Recitals. The Recitals set forth hereinabove are incorporated herein by reference. Section 1.2 Rules of Construction. (a) The words "hereof", "herein", "hereunder" "hereto", and other words of similar import refer to this Collateral Assignment in its entirety. (b) The terms "agree" and "agreements" contained herein are intended to include and mean "covenant" and "covenants". (c) References to Articles, Sections, and other subdivisions of this Collateral Assignment are to the designated Articles, Sections, and other subdivisions of this Collateral Assignment as originally executed. (d) The headings of this Collateral Assignment are for convenience only and shall not define or limit the provisions hereof. (e) All references made (i) in the neuter, masculine or feminine gender shall be deemed to have been made in all such genders, and (ii) in the singular or plural number shall be deemed to have been made, respectively, in the plural or singular number as well. ARTICLE II REPRESENTATIONS AND WARRANTIES Section 2.1 EWP Investment. The Assignor represents and warrants to the Lenders that (a) the EWP Investment is not evidenced by any promissory note or other instrument, (b) the Assignor has not made any previous collateral assignment of the EWP Investment except for collateral assignments which have been terminated prior to or as of the date hereof, and (c) no financing statement covering EWP Investment is on file in any public office except financing statements in favor of the Lenders and except those which have been terminated prior to or as of the date hereof. ARTICLE III COLLATERAL ASSIGNMENT Section 3.1 Collateral Assignment. As security and collateral for the payment and performance of, and compliance with, all of the Obligations, the Assignor hereby collaterally assigns to the Agent, for itself and as agent for the Lenders, and grants to the Agent, for itself and as agent for the Lenders, a lien on, and security interest in, all right, title and interest of the Assignor in, to, and under the EWP Investment, together with all cash and non-cash proceeds, distributions or payments in respect thereof; provided, however, that nothing contained herein shall impose upon the Lenders any obligations or liabilities of the Assignor under EWP Investment, and provided further that the Lenders shall not exercise any rights under EWP Investment unless and until (a) an Event of Default (except with respect to this Collateral Assignment) has occurred and continues beyond the expiration of any applicable grace and/or notice and cure periods, under the Loan Agreement or (b) Assignor fails to duly observe and perform any term, covenant or agreement set forth in this Collateral Assignment, which failure shall remain uncured for more than thirty (30) days after written notice thereof to the Assignor by the Agent unless the nature of the failure is such that (a) it cannot be cured within the thirty (30) day period, and Assignor institutes corrective action within the thirty (30) day period and (b) Assignor diligently pursues such action and completes the cure within ninety (90) days (an "Event of Default"). As used in this Agreement, the term "Obligations" shall mean all: (a) the indebtedness evidenced by the Loan Agreement and the Notes (and any promissory note of the Assignor issued in exchange for, or replacement of, or substitution for, any of the Notes, which shall be included in the term "Notes" as used herein), with interest and premiums thereon as therein provided; (b) all other amounts payable by the Assignor under the Loan Agreement and the Notes, including without limitation, all fees, costs, expenses and indemnities payable by the Assignor thereunder; (c) all indebtedness of the Assignor arising under this Agreement and all costs and expenses of the Agent in enforcing this Collateral Assignment, the Loan Agreement and the Notes; and (d) all renewals and extensions, in whole or in part, of the Notes or of any other indebtedness or obligation described above. ARTICLE IV COVENANTS Until payment and performance in full of all of the Obligations, the Assignor hereby covenants and agrees as follows: Section 4.1 Further Assurances. The Assignor shall promptly upon request execute, acknowledge and deliver any financing statement, renewal, affidavit, deed, collateral assignment, continuation statement, security agreement, certificate or other document as the Agent may reasonably require in order to perfect, preserve, maintain, protect, continue and/or extend the collateral assignment, lien or security interest of the Lenders under this Collateral Assignment and its priority. The Assignor shall pay to the Agent on demand all taxes, costs and expenses incurred by the Lenders in connection with the preparation, execution, recording and filing of any such document or instrument mentioned aforesaid. Such taxes, costs and expenses shall constitute and become a part of the Obligations. Section 4.2 Performance under the EWP Investment. The Assignor shall fully, promptly and faithfully comply with and perform all of its obligations and duties under the EWP Investment in accordance with the terms thereof, will make no changes or amendments to the EWP Investment without the prior written consent of the Agent, and will deliver to the Agent to hold as collateral hereunder any amounts received by the Assignor in respect of the EWP Investment. ARTICLE V DEFAULTS AND REMEDIES Section 5.1 Remedies upon Default. Subject to the provisions and understandings of Section 3.1 of this Collateral Assignment, upon or at any time after the occurrence and during the continuance of an Event of Default, the Agent may, without notice, without regard to the adequacy of security for the Obligations and in addition to any other remedy which the Lenders may have at law or in equity under the Loan Agreement or the Stock Pledge Agreement, either in person or by agent, with or without bringing any action or proceeding, or by a receiver to be appointed by a court, enforce any and all rights and remedies of the Assignor under and in connection with the EWP Investment, and subject to the provisions of the Loan Agreement and Section 3.1 of this Collateral Assignment, enforce or modify the EWP Investment and do any acts which the Agent deems proper to protect the security hereof. The Assignor agrees that the failure of the Assignor to comply with any of the covenants contained herein for a period of thirty (30) days after the date the Agent notifies the Assignor in writing shall constitute an immediate Event of Default under the Loan Agreement. ARTICLE VI MISCELLANEOUS Section 6.1 Continuation of Collateral Assignment. Upon the payment and performance in full of all of the Obligations, this Collateral Assignment shall become and be void and of no effect, but the affidavit of any officer of the Agent showing any part of the Obligations to remain unpaid or unperformed, shall be and constitute conclusive evidence of the validity, effectiveness and continuing force of this Collateral Assignment, and any Person may and is hereby authorized to rely thereon. Section 6.2 Successors and Assigns. The rights, powers, privileges and discretions (hereinafter collectively called the "rights") specifically granted to the Lenders are not in limitation of, but in addition to, those to which the Lenders are entitled under any general or local law relating to such collateral assignments. The rights to which the Lenders may be entitled shall inure to the benefit of their successors and assigns. All the rights of the Lenders are cumulative and not alternative and may be enforced successfully or concurrently. Failure of the Lenders to exercise any of their rights shall not impair any of their rights nor be deemed a waiver thereof and no waiver of any of their rights shall be deemed to apply to any other such rights nor shall it be effective unless in writing and signed by the Agent. The terms and conditions agreed to by the Assignor and the covenants of the Assignor shall be binding upon its successors and assigns, but this provision does not waive any prohibition of assignment or any requirement of consent to an assignment. Section 6.3 Waiver of Acceptance by Assignor. The Assignor hereby waives acceptance of this Collateral Assignment by the Lenders. Section 6.4 Illegality; Severability. If fulfillment of any provision hereof or any transaction related hereto, at the time transcending the limit of validity prescribed by law, then ipso facto, the obligation to be fulfilled shall be reduced to the limit of such validity; and if any clause or provision herein contained operates or would prospectively operate to invalidate this Collateral Assignment in whole or part, then such clause or provision only shall be void as though not herein contained, and the remainder of this Collateral Assignment shall remain operative and in full force and effect. Section 6.5 Amendments. Neither this Collateral Assignment nor any term, condition, representation, warranty, covenant or agreement hereof may be changed, waived, discharged or terminated orally, but, rather, only by an instrument in writing by the party against whom such change, waiver, discharge or termination is sought. Section 6.6 Governing Law. This Collateral Assignment shall be governed and construed in accordance with the laws of the State of Texas without giving effect to any choice of law provision or rule (whether of the State of Texas or any other jurisdiction) that would cause the application of any jurisdiction other than the State of Texas. Section 6.7 Duplicate Originals. This Collateral Assignment may be executed in any number of duplicate originals, each of which shall be an original but all of which together shall constitute one and the same instrument. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] IN WITNESS WHEREOF, Assignor has executed this Collateral Assignment by its duly authorized partner or officer, under seal, as of the day and year first above written. ASSIGNOR: KEYSTONE CONSOLIDATED INDUSTRIES, INC. By: ----------------------------------------------- Name: ----------------------------------------------- Title: ----------------------------------------------- EXHIBIT D ASSIGNMENT AGREEMENT Dated ________________ Reference is made to the Amended and Restated EWP Bridge Loan Agreement dated as of November 21, 2001 among Keystone Consolidated Industries, Inc., EWP Financial LLC, as Agent, and the Lenders party thereto (as such Loan Agreement may hereafter be amended, modified or supplemented from time to time, the "Loan Agreement"). Terms defined in the Loan Agreement are used herein as therein defined. ________________ (the "Assignor") and ________________ (the "Assignee") hereby agree as follows: 1. The Assignor hereby sells and assigns to the Assignee without recourse and without representation or warranty (other than as expressly provided herein), and the Assignee hereby purchases and assumes from the Assignor, that interest in and to all of the Assignor's rights and obligations under the Loan Agreement as of the date hereof which represents the percentage interest specified in Annex I (the "Assigned Share") of all of Assignor's outstanding rights and obligations under the Loan Agreement, including, without limitation, all rights and obligations with respect to the Assigned Share of the Assignor's Commitment and of the Loans and the Notes held by the Assignor. After giving effect to such sale and assignment, the Assignee's Commitment will be as set forth in Annex I. 2. The Assignor (i) represents and warrants that it is duly authorized to enter into and perform the terms of this Assignment Agreement, that it is the legal and beneficial owner of the interest being assigned by it hereunder and that such interest is free and clear of any liens or security interests; (ii) makes no other representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Loan Agreement or the Stock Pledge Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Loan Agreement or the Stock Pledge Agreement or any other instrument or document furnished pursuant thereto; and (iii) makes no other representation or warranty and assumes no responsibility with respect to the financial condition of the Company or the performance or observance by the Company of any of its obligations under the Loan Agreement or the Stock Pledge Agreement or any other instrument or document furnished pursuant thereto. 3. The Assignee (i) represents and warrants that it is duly authorized to enter into and perform the terms of this Assignment Agreement; (ii) confirms that it has received a copy of the Loan Agreement, the Stock Pledge Agreement and the Collateral Agreement, together with copies of the financial statements referred to therein and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment Agreement; (iii) agrees that it will, independently and without reliance upon the Agent, the Assignor or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Loan Agreement; (iv) appoints and authorizes the Agent to take such action as agent on its behalf to exercise such powers under the Loan Agreement, the Stock Pledge Agreement and the Collateral Agreement as are delegated to the Agent by the terms thereof, together with such powers as are reasonably incidental thereto; (v) agrees that it will perform in accordance with their terms all of the obligations which by the terms of the Loan Agreement are required to be performed by it as a Lender; and (vi) makes the representations and warranties to the Company set forth in Section 5.2 of the Loan Agreement. 4. Following the execution of this Assignment Agreement by the Assignor and the Assignee, an executed original hereof (together with all attachments) will be delivered to the Agent. The effective date of this Assignment Agreement shall be the date of execution hereof by the Assignor and the Assignee (the "Settlement Date"). 5. As of the Settlement Date, (i) the Assignee shall be a party to the Loan Agreement and, to the extent provided in this Assignment Agreement, have the rights and obligations of a Lender thereunder and under the Stock Pledge Agreement and the Collateral Agreement; and (ii) the Assignor shall, to the extent provided in this Assignment Agreement, relinquish its rights and be released from its obligations under the Loan Agreement, the Stock Pledge Agreement and the Collateral Agreement. 6. It is agreed that upon the effectiveness hereof, the Assignee shall be entitled to all interest on the Assigned Share of the Loans which accrue on and after the Settlement Date. It is further agreed that all payments of principal made by the Company on the Assigned Share of the Loans which occur on and after the Settlement Date will be paid directly to the Assignee. Upon the Settlement Date, the Assignee shall pay to the Assignor an amount specified by the Assignor in writing which represents the Assigned Share of the principal amount of the respective Loans made by the Assignor pursuant to the Loan Agreement which are outstanding on the Settlement Date, net of any closing costs, and which are being assigned hereunder. The Assignor and the Assignee shall make all appropriate adjustments in payments under the Loan Agreement for periods prior to the Settlement Date directly between themselves on the Settlement Date. 7. THIS ASSIGNMENT AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS. 8. This Assignment Agreement may be executed in counterparts, and by different parties on separate counterparts, each of which shall be an original and all of which collectively shall constitute one and the same agreement. IN WITNESS WHEREOF, the parties hereto have caused this Assignment Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. as Assignor as Assignee By: By: ----------------------- -------------------------------------- Its: Its: ----------------------- -------------------------------------- ANNEX I to ASSIGNMENT AGREEMENT 1. Amounts:
Commitment Loans Aggregate Amount $_____________ $_______________ for all Lenders Assigned Share ____________% ____________% Amount of $______________ $______________ Assigned Share Amount retained by $______________ $______________ Assignor
2. Notices: ASSIGNOR: ASSIGNEE: Attn: Attn: -------------------------- -------------------------- Telephone: Telephone: ------------------------- -------------------------- Fax: Fax: ------------------------- -------------------------- 3. Payment Instructions: ASSIGNOR: ASSIGNEE: ABA No.: ABA No.: --------------------- ---------------------------- Account No.: Account No.: --------------------- ---------------------------- Reference: Reference: --------------------- ---------------------------- Attn: Attn: --------------------- ---------------------------- EX-4.20 18 exh420kci.txt FIRST AMENDMENT TO AMENDED AND RESTATED EWP BRIDGE LOAN AGREEMENT THIS FIRST AMENDMENT TO AMENDED AND RESTATED LOAN AGREEMENT (the "Amendment") is made and entered into as of the 18 day of March, 2002 by and between KEYSTONE CONSOLIDATED INDUSTRIES, INC., a Delaware corporation (the "Company"), and the lenders listed in Annex I hereto (individually a "Lender" and collectively, the "Lenders"). Recitals: WHEREAS, the Company and the Lenders, among others, have entered into that certain Amended and Restated EWP Bridge Loan Agreement dated as of November 21, 2001 (the "Loan Agreement"); WHEREAS, the Company and the Lenders wish to amend the Loan Agreement as provided herein; and WHEREAS, capitalized terms used but not otherwise defined herein shall have the same meanings given to such terms in the Loan Agreement. NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements herein, the parties hereto do hereby agree as follows: SECTION 1. Amendments to Loan Agreement. The Loan Agreement is hereby amended as follows: (a) Section 3.3 of the Loan Agreement shall be amended by deleting such section in its entirety and replacing it with the following: "3.3. Maturity Date. Unless the same shall become due earlier as a result of acceleration of the maturity, the Loans shall mature on December 31, 2002 (the "Maturity Date"), at which time the outstanding principal balance of the Loans and all accrued and unpaid interest and commitment fees shall become due and payable." (b) Section 6.2(c) of the Loan Agreement shall be amended by deleting such section in its entirety and replacing it with the following: "(c) Limitations on Indebtedness. Become or remain obligated, or suffer or permit any Subsidiary to become or remain obligated, for any Indebtedness, except: (i) Existing Indebtedness as set forth on Schedule 6.2(c) hereto; (ii) Indebtedness arising pursuant to this Agreement; and (iii) Indebtedness arising in connection with, and as a part of, the Restructuring." SECTION 2. Effect on Loan Agreement and Notes. Upon the effectiveness of this Amendment, all Notes outstanding immediately prior to such effectiveness shall be deemed amended as necessary or appropriate to reflect the terms and conditions set forth in the Loan Agreement as modified by this Amendment, and in the event of a conflict between any term or condition of such Notes and the Loan Agreement as so modified, the Loan Agreement as so modified shall control, notwithstanding any provision of such Notes or the Loan Agreement to the contrary. Except as modified by this Amendment, the Loan Agreement and such Notes are in all respects ratified and confirmed and all of the terms, conditions and provisions thereof shall remain in full force and effect. SECTION 3. Governing Law. This Amendment shall be governed by and construed in accordance with the laws of the State of Texas without giving effect to any choice or conflict of law provision or rule (whether of the State of Texas or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Texas. SECTION 4. Headings. The section headings contained in this Amendment are for reference purposes only and will not affect in any way the meaning or interpretation of this Amendment. SECTION 5. Counterparts; Facsimile. This Amendment may be separately executed in counterparts and by the different parties hereto in separate counterparts, each of which when so executed shall be deemed to constitute one and the same Amendment. This Amendment when executed may be validly delivered by facsimile or other electronic transmission. SECTION 6. Severability. Any provision of this Amendment which is prohibited or unenforceable in any jurisdiction, shall as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or affecting the validity or enforceability of such provision in any other jurisdiction. [Remainder of page intentionally left blank. Signature page follows.] IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by the undersigned thereunto duly authorized as of the date first written above. THE COMPANY: KEYSTONE CONSOLIDATED INDUSTRIES, INC. By: ------------------------------------------- Name: ------------------------------------------- Title: ------------------------------------------- THE LENDERS: EWP FINANCIAL LLC By: ------------------------------------------- Name: ------------------------------------------- Title: -------------------------------------------
ANNEX I % of Total Name of Lender Address of Lender Commitment Commitment - -------------- ----------------- ---------- ---------- EWP Financial LLC Three Lincoln Centre $6,000,000 100% 5430 LBJ Freeway Suite 1740 Dallas, Texas 75240 Total Commitment Amount: $6,000,000
EX-4.21 19 exh421kci.txt STOCK PLEDGE AGREEMENT THIS STOCK PLEDGE AGREEMENT (the "Agreement") is dated as of November 21, 2001 by and between KEYSTONE CONSOLIDATED INDUSTRIES, INC., a Delaware corporation (the "Pledgor"), and EWP FINANCIAL LLC, a Delaware limited liability company, as agent for the lenders under the hereinafter described Loan Agreement (the "Pledgee"). Recitals: WHEREAS, pursuant to that certain Amended and Restated Loan Agreement dated as of November 21, 2001 (the "Loan Agreement") by and between the Pledgor, the Pledgee, and the Lenders party thereto (individually a "Lender" and, collectively, the "Lenders"), the Pledgor has made promissory notes of even date herewith aggregating up to an original principal amount of $6,000,000.00, each payable to a Lender (individually, the "Note" and, collectively, the "Notes"); WHEREAS, the Pledgor has agreed to enter into this Agreement and to pledge all of the outstanding shares of common stock of Engineered Wire Products, Inc., an Ohio corporation and a wholly-owned subsidiary of the Pledgor ("EWP"), registered in the name of the Pledgor (the "Stock") as security for performance of its obligations under the Loan Agreement and the Notes; and WHEREAS, capitalized terms used but not otherwise defined herein shall have the same meanings given to such terms in the Loan Agreement. NOW, THEREFORE, in consideration of the premises and of the mutual covenants herein contained, and to secure the payment and performance of the Pledgor's obligations under the Loan Agreement and the Notes, the parties hereto agree as follows: SECTION 1. Pledge. As collateral security for the due and punctual payment of the indebtedness and obligations referred to in Section 2 hereof, the Pledgor hereby pledges, hypothecates, transfers, sets over, delivers and assigns unto the Pledgee, and hereby grants the Pledgee a first security interest in the following: (a) the Stock and the certificates representing the Stock, and all cash, securities and other property at any time and from time to time received, receivable or otherwise distributed in respect of or in exchange for all or any portion of the Stock; and (b) all securities hereafter delivered to the Pledgee by the Pledgor in substitution for any of the foregoing, all certificates and instruments representing or evidencing such securities, together with all interest, cash, securities and other property at any time and from time to time received, receivable or otherwise distributed in respect of, in exchange for or on conversion of any or all thereof (all such Stock, indebtedness, shares, certificates, interest, cash, securities and other property received, receivable or otherwise distributed in respect of any or all thereof being included within the definition of "Collateral" for purposes of this Agreement). TO HAVE AND TO HOLD the Collateral, together with all rights, titles, interests, privileges and preferences appertaining or incidental thereto, unto the Pledgee, its successors and assigns, forever, subject, however, to the terms, covenants and conditions hereinafter set forth. SECTION 2. Indebtedness and Obligations Secured. This Agreement and the Collateral secure repayment of the indebtedness and the obligations of the Pledgor indicated below (collectively, the "Obligations"), equally and ratably as to all such indebtedness and obligations and without preference or priority as to any class of such indebtedness or obligations or any component thereof: (a) the indebtedness evidenced by the Loan Agreement and the Notes (and any promissory note of the Pledgor issued in exchange for, or replacement of, or substitution for, any of the Notes, which shall be included in the term "Notes" as used herein), with interest and premiums thereon as therein provided; (b) all other amounts payable by the Pledgor under the Loan Agreement and the Notes, including without limitation, all fees, costs, expenses and indemnities payable by the Pledgor thereunder; (c) all indebtedness of the Pledgor arising under this Agreement and all costs and expenses of the Pledgee in enforcing this Agreement, the Loan Agreement and the Notes; and (d) all renewals and extensions, in whole or in part, of the Notes or of any other indebtedness or obligation described above. SECTION 3. Representations and Warranties. The Pledgor hereby represents and warrants that as of the date hereof: (i) the Pledgor is the holder of record of all of the Stock; (ii) the Stock pledged hereunder constitutes all of the issued and outstanding capital stock of EWP; (iii) the Pledgor has good, right and lawful authority to enter into this Agreement and to pledge the Collateral in the manner hereby done or contemplated and will defend its title thereto against the claims of all persons whomsoever; (iv) there are no liens, claims, pledges, security interests, encumbrances or rights of third parties whatsoever with respect to the Collateral; (v) this Agreement has been duly authorized, executed and delivered and constitutes the legal, valid and binding obligation of the Pledgor, enforceable in accordance with its terms; and (vi) no consent or approval of any court, governmental body or regulatory authority (federal, state or local) is or was necessary to the validity of the pledge granted hereby. SECTION 4. Appointment of Agents; Registration in Nominee Name. The Pledgee shall have the right to appoint one or more agents for the purpose of retaining physical possession of the certificates or instruments representing or evidencing the Collateral, which certificates or instruments may be held (in the discretion of the Pledgee) in the name of the Pledgor, endorsed or assigned in blank or in favor of the Pledgee, or in the name of the Pledgee or any agent appointed by the Pledgee to retain physical possession of such certificates or instruments, or in the name of any nominee of the Pledgee or any such agent. In addition, the Pledgee shall at all times have the right to exchange certificates or instruments representing or evidencing the Collateral for certificates or instruments of smaller or larger denominations. The Pledgor hereby agrees that any registrar or transfer agent for any securities included in the Collateral shall be entitled to rely on the provisions of this Section 4 as conclusive evidence of the authority of the Pledgee to effect re-registration of any such securities in the name of the Pledgee or that of its agents or its or their nominees or to exchange certificates or instruments representing or evidencing such Collateral for certificates or instruments of smaller or larger denominations, notwithstanding any notice or direction to such registrar or transfer agent from the Pledgor to the contrary. SECTION 5. Voting Rights; Dividends; Etc. (a) Until there shall occur an Event of Default (as set forth in Section 6 hereof), the Pledgor shall be entitled to exercise any and all voting or consensual rights and powers relating or pertaining to the Collateral or any part thereof for the term of this Agreement, and upon the occurrence of an Event of Default, the Pledgee shall be entitled to exercise such rights and powers; and (b) The Pledgor shall not be entitled to receive and retain any and all cash dividends and interest payable on the Collateral, and any and all stock or liquidating dividends, distributions and property, returns of capital or other distributions made on or in respect of the Collateral, whether resulting from a subdivision, combination or reclassification of the outstanding capital stock of the Pledgee or received in exchange for or on conversion of the Collateral or any part thereof or as a result of any merger, consolidation, acquisition or other exchange of assets to which the Pledgee may be a party or otherwise, and any and all cash and other property received in payment of the principal or in redemption of or in exchange for or on conversion of any Collateral (either at maturity, upon call for redemption, upon forced conversion or otherwise), shall be and become part of the Collateral pledged hereunder and, if received by the Pledgor, shall forthwith be delivered to the Pledgee or its designated agent (accompanied by proper instruments of assignment or stock or bond powers executed by the Pledgor in accordance with the Pledgee's instructions) to be held subject to the terms of this Agreement. SECTION 6. Events of Default. The occurrence and continuation of any of the following events shall constitute an Event of Default under this Agreement: (a) Any Event of Default as defined in the Loan Agreement or the Notes; and (b) Any default in the due observance or performance of any term, covenant, warranty, agreement or condition contained in this Agreement, which default continues for five (5) calendar days after the Pledgee, at the direction of the Required Holders, gives notice of such failure to the Pledgor. SECTION 7. Remedies Upon Default. Upon the occurrence and during the continuation of an Event of Default hereunder, the Pledgee may, at the direction of the Required Holders, in addition to the exercise by the Pledgee of its rights and remedies under any other Section of this Agreement or under the Loan Agreement or the Notes, or otherwise available to it at law or in equity: (a) apply the cash (if any) then held by it as collateral hereunder to the payment of any Obligations, whether or not then due and in any order selected by the Pledgee; and (b) if there shall be no such cash or the cash so applied shall be insufficient to pay all such Obligations in full, exercise all the rights and remedies of a secured party under the Uniform Commercial Code in effect in the State of Texas at that time and sell (in compliance with applicable securities laws) the Collateral, or any part thereof, at public or private sale, at any broker's board, upon any securities exchange, at the Pledgee's offices or elsewhere, for cash, upon credit or for future delivery, as the Pledgee may deem appropriate in the circumstances and commercially reasonable, irrespective of the impact of any such sales on the market price of the Collateral. In that connection, the Pledgee shall have the right to impose such limitations and restrictions on the sale of the Collateral as the Pledgee may deem to be necessary or appropriate to comply with any law, rule or regulation (federal, state or local) having applicability to the sale, including, without limitation, restrictions on the number and qualifications of the offerees and requirements for any necessary governmental approvals, and the Pledgee shall be authorized at any such sale (if it deems it advisable to do so) to restrict the prospective offerees or purchasers to persons who will represent and agree that they are purchasing securities included in the Collateral for their own account and not with a view to the distribution or sale thereof in violation of applicable securities laws. Upon consummation of any such sale, the Pledgee shall have the right to assign, transfer and deliver to the purchaser or purchasers thereof the Collateral so sold. Each such purchaser at any such sale shall hold the property sold absolutely, free from any claim or right on the part of the Pledgor, and the Pledgor hereby waives (to the extent permitted by law) all rights of redemption, stay or appraisal that it now has or may at any time in the future have under any rule of law or statute now existing or hereafter enacted. The Pledgee shall give the Pledgor at least ten (10) calendar days' prior written notice of the Pledgee's intention to make any public or private sale of such Collateral. Such notice shall state the time and place fixed for sale, and the Collateral, or portion thereof, to be offered for sale. Any such sale shall be held at such time or times within ordinary business hours and at such place or places as the Pledgee may fix in the notice of such sale. At any such sale, the Collateral, or portion thereof, to be sold may be sold in one lot as an entirety or in separate parcels, as the Pledgee may (in its sole and absolute discretion) determine; and the Pledgee may itself bid (which bid may be in whole or in part in the form of cancellation of Obligations) for and purchase the whole or any part of the Collateral and shall be entitled, for purposes of bidding and making settlement or payment of the purchase price for all or any portion of the Collateral sold at such sale, to use and apply any of the Obligations owed to the Pledgee as a credit on account of the purchase of any Collateral payable by the Pledgee at such sale. The Pledgee shall not be obligated to make any sale of Collateral if it shall determine not to do so, regardless of the fact that notice of sale of Collateral may have been given. The Pledgee may, without notice or publication, adjourn any public or private sale or cause the same to be adjourned from time to time by announcement at the time and place fixed for sale, and such sale may, without further notice, be made at the time and place to which the same was so adjourned. In the event the sale of all or any part of the Collateral is made on credit or for future delivery, the Collateral so sold may be retained by the Pledgee until the sale price is paid by the purchaser or purchasers thereof, but the Pledgee shall not incur any liability in the event any such purchaser or purchasers shall fail to take up and pay for the Collateral so sold and, in the event of any such failure, such Collateral may be sold again upon like notice. As an alternative to exercising the power of sale herein conferred upon it, the Pledgee may proceed by a suit or suits at law or in equity to foreclose this Agreement and sell the Collateral, or any portion thereof, pursuant to a judgment or decree of a court or courts of competent jurisdiction. SECTION 8. Application of Proceeds of Sale; Deficiency; Acknowledgement. (a) The proceeds of any sale of the Collateral sold pursuant to Section 7 hereof shall be applied by the Pledgee as follows: First: to the payment of the costs and expenses of such sale, including the out-of-pocket expenses of the Pledgee and the reasonable fees and out-of-pocket expenses of counsel employed in connection therewith, and the payment of all costs and expenses incurred by the Pledgee in connection with the administration and enforcement of this Agreement, to the extent that such costs and expenses shall not have been previously reimbursed or paid to the Pledgee; Second: to the payment or prepayment in full of all other Obligations, whether or not then due and in any order selected by the Pledgee as directed by the Required Holders; and Third: the balance (if any) of such proceeds shall be paid to the Pledgor or as a court of competent jurisdiction may direct. (b) The Pledgor recognizes that, by reason of certain prohibitions contained in the Securities Act of 1933, as amended (the "Securities Act"), and applicable state securities laws, the Pledgee may be compelled, with respect to any sale of all or any part of the Collateral, to limit purchasers to those who will agree, among other things, to acquire the Collateral for their own account, for investment and not with a view to the distribution or resale thereof. The Pledgor acknowledges that any such private sales may be at prices and on terms less favorable to the Pledgee than those obtainable through a public sale without such restrictions (including, without limitation, a public offering made pursuant to a registration statement under the Securities Act), and, notwithstanding such circumstances, agrees that any such private sale shall be deemed to have been made in a commercially reasonable manner and that the Pledgee shall have no obligation to delay the sale of any Collateral for the period of time necessary to permit the issuer thereof to register it for a form of public sale requiring registration under the Securities Act or under applicable state securities laws, even if such issuer would agree to do so. SECTION 9. Pledgee Appointed Attorney-In-Fact. The Pledgor hereby appoints the Pledgee the Pledgor's attorney-in-fact, with full power of substitution, for the purpose of carrying out the provisions of this Agreement and taking any action and executing any agreement or instrument on behalf of the Pledgor that the Pledgee may deem necessary or advisable to accomplish the purposes hereof, which appointment is coupled with an interest and is irrevocable. Without limiting the generality of the foregoing, the Pledgor agrees and understands that the Pledgee shall have the right and power to receive, endorse and collect all checks and other orders for the payment of money made payable to the Pledgor representing any dividend, principal or interest payment or other distribution payable or distributable in respect of the Collateral or any part thereof and to give full discharge for the same. SECTION 10. Responsibility of the Pledgee; Care of Collateral. Neither the Pledgee, nor any director, officer, employee or agent of the Pledgee, shall be liable for any action taken or omitted to be taken by it or them relative to this Agreement or any of the Collateral except for its or their gross negligence or willful misconduct, and the Pledgee shall not be liable for any action or omission to act on the part of any agent appointed by the Pledgee to act hereunder or with respect to the Collateral (or any part thereof), selected by the Pledgee with reasonable care. Notwithstanding the provisions of Section 5 hereof, the Pledgee shall have no duty to exercise any voting or any other consensual rights and powers becoming vested in the Pledgee with respect to the Collateral or any part thereof, to exercise any right to redeem, convert or exchange any securities included in the Collateral, to enforce or see to the payment of any dividend, principal or interest or any other distribution payable or distributable on or with respect to the Collateral or any part thereof or otherwise to preserve any rights in respect of the Collateral against any third parties, and the Pledgee shall not be liable or accountable to the Pledgor in respect of any of the foregoing. The Pledgee shall be deemed to have exercised reasonable care in the custody and preservation of the Collateral if the Pledgee shall take such action for such purpose as the Pledgor may request in writing, but the failure of the Pledgee to take any action requested by the Pledgor shall not, in and of itself, be deemed to constitute a failure on the part of the Pledgee to exercise reasonable care in respect of the custody and preservation of the Collateral or any part thereof. SECTION 11. Expenses. The Pledgor agrees to pay the Pledgee, upon its demand, all of the Pledgee's out-of-pocket expenses (including its reasonable attorneys' fees) incurred in connection with the administration or enforcement of this Agreement, the care and custody of the Collateral (or any part thereof), the registration, re-registration or transfer of the Collateral (or any part thereof) and the sale or collection of the Collateral (or any part thereof). Should the Pledgor fail to do any act or thing that the Pledgor has covenanted to do hereunder, or should any representation or warranty on the part of the Pledgor contained herein be breached, the Pledgee may (but shall not be obligated to) do the same or cause it to be done, or remedy any such breach, and there shall be added to the liabilities of the Pledgor hereunder, the cost or expense to the Pledgee in so doing, and any and all amounts expended by the Pledgee in taking any such action shall be repayable to it by the Pledgor upon the Pledgee's demand. SECTION 12. No Waiver; Cumulative Remedies. No failure on the part of the Pledgee to exercise, and no delay in exercising, any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or remedy by the Pledgee preclude any other or further exercise thereof or the exercise of any other right, power or remedy. All remedies of the Pledgee hereunder are cumulative and are not exclusive of any other remedies available to the Pledgee at law or in equity. SECTION 13. Termination and Release of Collateral. This Agreement shall terminate when all Obligations secured hereby have been fully paid and performed, at which time the Pledgee shall reassign and redeliver (or cause to be reassigned or redelivered) to the Pledgor, or to such person or persons as the Pledgor shall designate, against receipt, such of the Collateral (if any) as shall not have been sold or otherwise applied by the Pledgee pursuant to the terms hereof and as shall still be held by it hereunder, together with appropriate instruments of assignment and release. SECTION 14. Notices. All notices and other communications required or permitted under this Agreement shall be in writing and, if mailed by prepaid registered or certified mail, return receipt requested, shall be deemed to have been received on the earlier of the date shown on the receipt or five (5) calendar days after the post-mark date thereof. Notices may be given by recognized overnight courier services and shall be deemed to have been received as of the regularly scheduled time for delivery established by such courier service. In addition, notices hereunder may be delivered by hand, in which case the notice shall be deemed effective when delivered, or by facsimile transmission, in which case it shall be deemed effective upon confirmation of transmission. All notices and other communications under this Agreement shall be given to the parties hereto at the following addresses: If to the Pledgor: Keystone Consolidated Industries, Inc. Three Lincoln Centre 5430 LBJ Freeway, Suite 1740 Dallas, Texas 75240 Attn: Chief Financial Officer Fax: (972) 448-1408 With a copy to: Richards, Layton & Finger, P.A. One Rodney Square Post Office Box 551 Wilmington, Delaware 19899 Attn: Mark D. Collins, Esq. Fax: (302) 651-7701 If to the Pledgee: EWP Financial LLC Three Lincoln Centre 5430 LBJ Freeway, Suite 1740 Dallas, Texas 75240 Attn: Bobby D. O'Brien Fax: (972) 448-1445 With a copy to: Rogers & Hardin LLP 2700 International Tower 229 Peachtree Street, N.E. Atlanta, Georgia 30303 Attn: Edward J. Hardin, Esq. Fax: (404) 525-2224 Any party hereto may change the address to which notices shall be directed under this Section 14 by giving written notice of such change to the other parties. SECTION 15. Further Assurances. The Pledgor agrees to do such further acts and things, and to execute and deliver such agreements and instruments, including without limitation stock and bond powers, as the Pledgee may at any time request in connection with the administration or enforcement of this Agreement or related to the Collateral or any part thereof or in order better to assure and confirm unto the Pledgee its rights, powers and remedies hereunder. SECTION 16. Binding Agreement; Assignment. This Agreement, and the terms, covenants and conditions hereof, shall be binding upon and inure to the benefit of the parties hereto, and their respective successors and assigns, except that the Pledgor shall not be permitted to assign this Agreement or any interest in the Collateral, or any part thereof, or otherwise pledge, encumber or grant any option with respect to the Collateral, or any part thereof, or any cash or property held by the Pledgee as collateral under this Agreement, without the prior written consent of the Pledgee. SECTION 17. Miscellaneous. Neither this Agreement nor any provisions hereof may be amended, modified, waived, discharged or terminated, nor may any of the Collateral be released or the pledge or the security interest created hereby extended, except by an instrument in writing signed on behalf of the party to be charged. The Section headings used herein are for convenience of reference only and shall not define or limit the provisions of this Agreement. This Agreement may be executed in counterparts, each of which shall be deemed to be an original and both of which together shall constitute the Agreement. This Agreement replaces and supercedes in its entirety that certain Stock Pledge Agreement dated as of November 1, 2001 by and between Pledgee and Pledgor that was delivered pursuant to the Original Loan Agreement (as defined in the Loan Agreement). SECTION 18. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Texas without giving effect to any choice or conflict of law provision or rule (whether of the State of Texas or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Texas. [Remainder of page intentionally left blank. Signature page follows.] IN WITNESS WHEREOF, the parties hereto have caused this Pledge Agreement to be duly executed and delivered as of the date first above written. THE PLEDGOR: KEYSTONE CONSOLIDATED INDUSTRIES, INC. By: ------------------------------------------ Name: ------------------------------------------ Title: ------------------------------------------ THE PLEDGEE: EWP FINANCIAL LLC, as Agent By: ------------------------------------------ Name: ------------------------------------------ Title: ------------------------------------------ EX-4.22 20 exh422kci.txt FORM OF SUBORDINATED UNSECURED NOTE THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). NO TRANSFER OF THIS NOTE OR ANY INTEREST HEREIN MAY BE MADE EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR UNLESS SUCH TRANSFER IS EXEMPT FROM REGISTRATION UNDER THE ACT. KEYSTONE CONSOLIDATED INDUSTRIES, INC. 6% SUBORDINATED UNSECURED NOTE DUE 2011 No. __________ $ ----------------- Interest Payment Dates: March 15 and Maturity Date: May 31, 2011 September 15, commencing September 15, 2002, with a final payment on May 31, 2011 KEYSTONE CONSOLIDATED INDUSTRIES, INC., a Delaware corporation (the "Company"), for value received promises to pay to ____________________________________ or registered assigns, the principal sum of ____________________ Dollars in installments of __________ Dollars on March 15, 2009, __________ Dollars on March 15, 2010, ___________ Dollars on March 15, 2011 and __________ Dollars on May 31, 2011. Capitalized terms used herein shall have the meanings assigned to them in Section 7 below unless otherwise indicated. 1. Interest. The Company promises to pay interest on the outstanding principal amount of this Note at the rate of 6% per annum from the date of original issuance until maturity, as follows: (i) the Company will make payments of interest at a rate of 1.5% per annum on the outstanding principal amount of this Note semi-annually on March 15 and September 15 of each year until maturity commencing September 15, 2002, and (ii) the remaining interest of 4.5% per annum provided for herein shall accrue (the "Deferred Interest") and be paid by the Company in an amount equal to 25% of such accrued and unpaid Deferred Interest on each of March 15, 2009, March 15, 2010 and March 15, 2011 and all remaining accrued and unpaid Deferred Interest will be paid by the Company on May 31, 2011. The Company shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue payments of the principal from time to time on demand at a rate that is 1% per annum in excess of the rate then in effect; the Company shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest (without regard to any applicable grace periods) hereon 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. Payment of principal and interest will be made by wire transfer of immediately available funds pursuant to wire transfer instructions provided to the Company by the Holder of this Note. 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. Optional Prepayment. This Note may be prepaid in whole or in part at the option of the Company at any time and from time to time without penalty. Accrued and unpaid interest to the date of any such prepayment shall be paid in full with respect to the principal amount prepaid at the time of such prepayment. 4. Defaults and Remedies. Events of Default include the following: (a) the Company defaults in the payment when due of interest on the Note and such default continues for a period of 30 days; (b) the Company defaults in the payment when due of principal of the Note, whether at maturity or otherwise; (c) the Company or any Subsidiary: (i) commences a voluntary case under any Bankruptcy Law, (ii) consents to the entry of an order for relief against it in an involuntary case, (iii) consents to the appointment of a custodian or receiver of it or for all or substantially all of its property, or (iv) makes a general assignment for the benefit of its creditors; or (d) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (i) is for relief in an involuntary case against the Company or any Subsidiary; (ii) appoints a custodian or receiver of the Company or any Subsidiary or for all or substantially all of the property of any of the foregoing; (iii) orders the liquidation of the Company or any Subsidiary; and (iv) the order or decree remains unstayed and in effect for 60 consecutive days. If any Event of Default occurs and is continuing, the Holder of this Note shall notify the Company in writing of such Event of Default and, if such Event of Default shall not be cured within 5 days of such written notice, may declare all of this Note to be due and payable immediately. Upon any such declaration, the entire principal amount of, and accrued and unpaid interest on, this Note shall become immediately due and payable, unless all Events of Default specified in such acceleration notice (other than any Event of Default in respect of non-payment of principal or interest, if any, which has become due solely by reason of such declaration of acceleration) shall have been cured. Notwithstanding the foregoing, if an Event of Default specified in subsection 4(c) or 4(d) hereof occurs with respect to the Company or any Subsidiary, this Note will become due and payable without further action or notice. In addition to the foregoing, if an Event of Default occurs and is continuing , the Holder of this Note may pursue any available remedy to collect the payment of principal of, or interest on, this Note or to enforce the performance of any provision of this Note. A delay or omission by the Holder 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. 5. Rank and Subordination. This Note shall rank (i) senior to the Company's Subordinated Indebtedness and (ii) subordinate to the Company's Senior Indebtedness to the extent and in the manner provided in this Section 5. (a) The Company agrees, and the Holder of this Note by his acceptance hereof likewise agrees, that the payment of the principal of, and interest and any other amounts on, this Note (all of the foregoing, a "Payment" or "Distribution") is subordinated and junior in right of payment, to the extent and in the manner provided in this Section 5, to the prior irrevocable payment in full in cash of all Senior Indebtedness whether outstanding on the date hereof or hereafter created, incurred, assumed or guaranteed. A Payment or Distribution shall include any asset of any kind or character, and may consist of cash, securities or other property, by set-off or otherwise. (b) The Senior Indebtedness of the Company shall continue to be Senior Indebtedness and entitled to the benefit of these subordination provisions irrespective of any amendment, modification, refunding, refinancing or waiver of any term of any instrument relating to refinancing of the Senior Indebtedness. Any amendment or modification of this Section 5 shall not be effective against any holder of Senior Indebtedness unless the holder of such Senior Indebtedness so consents. (c) All the provisions of this Note shall be subject to the provisions of this Section 5 so far as they may be applicable thereto. (d) No right of any holder of any Senior Indebtedness to enforce subordination as herein provided shall at any time or in any way be affected or impaired by any failure to act on the part of the Company, the Holder of this Note, or the holders of the Senior Indebtedness, or by any noncompliance by the Company or the Holder of this Note with any of the terms, provisions and covenants of this Note, regardless of any knowledge thereof that any such holder of Senior Indebtedness may have or be otherwise charged with. (e) No Payment or Distribution shall be made by the Company on account of principal of, or interest or any other amount on, this Note, whether upon stated maturity or acceleration, or otherwise, or on account of the purchase or other acquisition of this Note, whether upon stated maturity or acceleration, or otherwise, and the Holder of this Note shall not accept any such payment if there shall have occurred and be continuing a default with respect to any Senior Indebtedness permitting the acceleration thereof or with respect to the payment of any Senior Indebtedness, unless and until such default or event of default shall have been cured or waived or shall have ceased to exist. Until the Senior Indebtedness is paid in full in cash, the Holder of this Note shall not take any action to collect, enforce payment or accelerate the obligations under this Note, exercise any of the remedies with respect to this Note or that otherwise may be available to such Holder, either at law or in equity by judicial proceedings or otherwise. Upon any acceleration of the principal of this Note or any payment by the Company or distribution of assets of the Company of any kind or character, whether in cash, property or securities, to creditors upon any dissolution or winding up or liquidation or reorganization of the Company, whether voluntary or involuntary, or in bankruptcy, insolvency, receivership or other proceedings, all amounts due or to become due upon all Senior Indebtedness shall first be paid in full in cash, or payment thereof provided for to the satisfaction of the holders thereof, before any Payment or Distribution is made on account of the principal of, or interest or any other amount on, this Note; and upon any such dissolution or winding up or liquidation or reorganization, any Payment or Distribution by the Company or distribution of assets of the Company of any kind or character, whether in cash, property or securities (other than securities of the Company as reorganized or readjusted or securities of the Company or any other company, trust or corporation provided for by a plan of reorganization or readjustment, the payment of which is junior or otherwise subordinate, at least to the extent provided in this Section 5 with respect to this Note to the payment of all Senior Indebtedness at the time outstanding and to the payment of all securities issued in exchange therefor to the holders of the Senior Indebtedness at the time outstanding, and the rights of the holders of Senior Indebtedness of the Company are not altered by such plan of reorganization or readjustment), to which the Holder of this Note would be entitled except for the provisions of this Section 5, shall be paid by the Company or by any receiver, trustee in bankruptcy, liquidating trustee, agent or other Person making such Payment or Distribution directly to the holders of Senior Indebtedness of the Company or their representative or representatives, or to the trustee or trustees under any indenture pursuant to which any instruments evidencing any Senior Indebtedness may have been issued, as their respective interests may appear, to the extent necessary to pay all Senior Indebtedness in full in cash, after giving effect to any concurrent payment or distribution to or for the holders of Senior Indebtedness, before any Payment or Distribution is made to the Holder of this Note. In the event that, notwithstanding the foregoing, any Payment or Distribution by the Company of any kind or character, (whether such payment shall be in cash, property or securities) which is prohibited by the foregoing, shall have been made to the Holder of this Note before all Senior Indebtedness is irrevocably paid in full in cash, or provision is made for such payment to the satisfaction of the holders thereof, and if such fact shall then have been or thereafter be made known to the Holder of this Note, then and in such event such Payment or Distribution shall be paid over by the Holder of this Note or delivered to the holders of Senior Indebtedness or their representative or representatives, or to the trustee or trustees under any indenture pursuant to which any instruments evidencing any Senior Indebtedness may have been issued, as their respective interests may appear, for application to the payment of all Senior Indebtedness remaining unpaid to the extent necessary to pay all Senior Indebtedness in full in cash, after giving effect to any concurrent Payment or Distribution to or for the holders of such Senior Indebtedness, and, until so delivered, the same shall be held in trust by the Holder of this Note as the property of the holders of Senior Indebtedness. The consolidation of the Company with, or the merger of the Company into, another Person or the liquidation or dissolution of the Company following the conveyance or transfer of its property as an entirety, or substantially as an entirety, to another corporation shall not be deemed a dissolution, winding up, liquidation or reorganization for the purposes of this subsection 5(e) if, as a part of such consolidation, merger, conveyance or transfer, the following conditions are complied with: (i) the Company shall be 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 (the "Surviving Entity"), is a corporation organized and existing under the laws of the United States, any state thereof, or the District of Columbia; (ii) the Surviving Entity, if any, assumes all of the obligations of the Company under this Note; (iii) immediately after giving effect to such transaction, no Default or Event of Default shall have occurred and be continuing; and (iv) in the case of a transfer of assets, the Surviving Entity has acquired all or substantially all of the assets of the Company as an entirety. The holders of Senior Indebtedness may, at any time and from time to time, without the consent of or notice to the Holder of this Note, without incurring responsibility to the Holder of this Note and without impairing or releasing the obligations of the Holder of this Note hereunder to the holders of Senior Indebtedness: (i) change the manner, place or terms of payment or change or extend the time of payment of, or renew or alter, Senior Indebtedness, or otherwise amend in any manner Senior Indebtedness or any instrument evidencing the same or any agreement under which Senior Indebtedness is outstanding; (ii) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing Senior Indebtedness; (iii) release any Person liable in any manner for the collection of Senior Indebtedness; (iv) apply any amounts received to any liability of the Company owing to holders of Senior Indebtedness; and/or (v) exercise or refrain from exercising any rights against the Company and any other Person. (f) Subject to the prior irrevocable payment in full in cash of all amounts then due (whether by acceleration of the maturity thereof or otherwise) on account of all Senior Indebtedness at the time outstanding, the Holder of this Note shall be subrogated to the rights of the holders of Senior Indebtedness to receive Payments or Distributions of cash, property or securities of the Company applicable to the Senior Indebtedness until the principal of, or interest on, this Note shall be paid in full; and, for the purposes of such subrogation, no Payments or Distributions to the holders of Senior Indebtedness to which the Holder of this Note would be entitled except for the provisions of this Section 5, and no payments pursuant to the provisions of this Section 5 to the holders of Senior Indebtedness by the Holder of this Note, shall, as between the Company, the Company's creditors other than holders of Senior Indebtedness, and the Holder of this Note, be deemed to be a payment by the Company to or on account of the Senior Indebtedness. It is understood that the provisions of this Section 5 are and are intended solely for the purpose of defining the relative rights of the Holder of this Note, on the one hand, and the holders of Senior Indebtedness, on the other hand. Nothing contained in this Section 5 or elsewhere in this Note is intended to or shall impair, as among the Company, its creditors other than the holders of Senior Indebtedness, and the Holder of this Note, the obligation of the Company, which is absolute and unconditional, to pay to the Holder of this Note the principal of, and interest on, this Note as and when the same shall become due and payable in accordance with the terms hereof, or is intended to or shall affect the relative rights of the Holder of this Note and creditors of the Company other than the holders of Senior Indebtedness, nor shall anything herein or therein prevent the Holder of this Note from exercising all remedies otherwise permitted by applicable law upon default hereunder, subject to the rights, if any, under this Section 5 of the holders of Senior Indebtedness in respect of cash, property or securities of the Company received upon the exercise of any such remedy. Upon any payment or distribution of assets of the Company referred to in this Section 5, the Holder of this Note shall be entitled to rely upon any order or decree made by any court of competent jurisdiction in which any dissolution, winding up, liquidation or reorganization proceedings are pending, or certificate of the receiver, trustee in bankruptcy, liquidating trustee, agent or other Person making such payment or distribution, delivered to the Holder of this Note, for the purpose of ascertaining the Persons entitled to participate in such distribution, the holders of Senior Indebtedness and other indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Section 5. (g) The Company shall give prompt written notice to the Holder of this Note of any fact known to the Company which would prohibit the making of any payment to the Holder in respect of this Note pursuant to the provisions of this Section 5. Notwithstanding the provisions of this Section 5 or any other provision of this Note, the Holder shall not be charged with knowledge of the existence of any facts which would prohibit the making of any payment to the Holder in respect of this Note pursuant to the provisions of this Section 5 unless and until the Holder shall have received written notice thereof from the Company or a holder or holders of Senior Indebtedness or from any trustee or agent therefor; and, prior to the receipt of any such written notice, the Holder of this Notice shall be entitled in all respects to assume that no such facts exist. (h) No right of any present or future holder of any Senior Indebtedness to enforce subordination as herein provided shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of the Company or the Holder of this Note or by any act, or failure to act, in good faith, by any such holder of Senior Indebtedness, or by any noncompliance by the Company or the Holder of this Note with the terms, provisions and covenants of this Note, regardless of any knowledge thereof which any such holder may have or otherwise be charged with. (i) The failure to make a payment on account of principal of, or interest on, this Note by reason of any provision in this Section 5 shall not be construed as preventing the occurrence of an Event of Default with respect to this Note hereunder. (j) The indebtedness represented by this Note will be senior and prior in right of payment to all Subordinated Indebtedness to the extent and in the manner provided in such Subordinated Indebtedness. 6. No Recourse Against Others. No past, present or future director, officer, employee, incorporator or stockholder of the Company, as such, shall have any liability for any obligations of the Company under this Note or for any claim based on, in respect of, or by reason of, such obligations or their creation. The Holder by accepting this Note waives and releases all such liability. The waiver and release are part of the consideration for the issuance of this Note. 7. Definitions. For the purposes of this Note, the following terms shall have the meanings set forth below: "Bankruptcy Law" means Title 11 of the U.S. Code or any similar Federal or state law for the relief of debtors. "Capital Stock" means (i) in the case of a corporation, corporate stock, (ii) in the case of an association or any other business entity, any and all shares, interests, participations, rights or other equivalents (however designated) in the equity of such association or entity, (iii) in the case of a partnership, partnership 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. "Guarantee" means, as applied to any Indebtedness of another Person, (i) a guarantee (other than by endorsement of negotiable instruments for collection in the ordinary course of business), direct or indirect, in any manner, of all or any part of such Indebtedness, (ii) any direct or indirect obligation, contingent or otherwise, of a Person guaranteeing or having the effect of guaranteeing the Indebtedness of any other Person in any manner and (iii) an agreement of a Person, direct or indirect, contingent or otherwise, the practical effect of which is to assure in any way the payment or performance (or payment of damages in the event of non-performance) of all or any part of such Indebtedness of another Person. "Hedging Obligations" means, with respect to any Person, the obligations of such Person under (i) interest rate swap agreements, interest rate cap agreements, 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 this Note is registered. "Indebtedness" means, with respect to any Person, without duplication, whether recourse is to all or a portion of the assets of such Person and whether or not contingent: (i) any liability of such Person (a) for borrowed money, or under any reimbursement obligation relating to a letter of credit, bankers' acceptance or note purchase facility; (b) evidenced by a bond, note, debenture or similar instrument; (c) for the balance deferred and unpaid of the purchase price for any property or service or any obligation upon which interest charges are customarily paid (except for accrued expenses or trade payables arising in the ordinary course of business); (d) for the payment of money relating to a lease that is required to be classified as a capital lease obligation in accordance with United States generally accepted accounting principles; (e) secured by a Lien; (ii) any obligation of others secured by a Lien on any asset of such Person, whether or not any obligation secured thereby has been assumed by such Person; (ii) any obligations of such Person under any Hedging Obligation; and (iv) any Guarantee of such Person or any obligation of such Person which in economic effect is a guarantee with respect to any Indebtedness of another Person. "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). "Person" means any individual, corporation, limited or general partnership, limited liability company, joint venture, association, joint stock company, trust, entity, unincorporated organization or government or any agency or political subdivision thereof. "Senior Indebtedness" means the principal, premium, if any, and unpaid interest (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to the Company whether or not a claim for post-filing interest is allowed in such proceeding, including interest that would have accrued but for the filing), fees, charges, expenses, reimbursement and indemnification obligations, and all other amounts payable under or in respect of Indebtedness of the Company, whether any such Indebtedness exists as of the date of this Indenture or shall hereafter be created, incurred, assumed or guaranteed, as may be amended from time to time and any renewals, extensions, refundings, refinancings, amendments and modifications of any such indebtedness or obligations or of the instruments creating or evidencing such indebtedness or obligations or guarantees; provided, however, that Senior Indebtedness shall not include (i) Indebtedness owed to a Subsidiary, (ii) Indebtedness of the Company which is expressly pari passu to this Note or (iii) Subordinated Indebtedness. "Subordinated Indebtedness" means any Indebtedness of the Company now or hereafter outstanding which by its terms is expressly subordinated in right of payment to this Note. "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 in a combination thereof) and (ii) any partnership or limited liability company (a) the sole general partner or member or the managing general partner or member of which is such Person or a Subsidiary of such Person or (b) the only general partners or members of which are such Person or of one or more Subsidiaries of such Person (or any combination thereof). 8. 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). 9. Governing Law. This Note shall be governed by and construed in accordance with the laws of the State of New York, including Section 5-1401 of the General Obligation Law, but otherwise without regard to conflict of law rules. The Company hereby irrevocably submits to the jurisdiction of any New York state court sitting in the Borough of Manhattan in the City of New York or any Federal court sitting in the Borough of Manhattan in the City of New York in respect of any suit, action or proceeding arising out of or relating to this Note, and irrevocably accepts for itself and in respect of its property, generally and unconditionally, jurisdiction of the aforesaid courts. The Company irrevocably waives, to the fullest extent that it may effectively do so under applicable law, trial by jury and any objection which it may now or hereafter have to the laying of the venue of any such suit, action or proceeding brought in any such court and any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum. Nothing herein shall affect the right of the Holder of this Note to serve process in any other manner permitted by law or to commence legal proceedings or otherwise proceed against the Company in any other jurisdiction. IN WITNESS WHEREOF, the Company has caused this Note to be duly executed under its corporate seal. [SEAL] KEYSTONE CONSOLIDATED INDUSTRIES, INC. By: ----------------------------------------- Name: ----------------------------------------- Title: ----------------------------------------- By: ----------------------------------------- Name: ----------------------------------------- Title: ----------------------------------------- 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 agent 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:_______________________________________________________ (Signatures must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.) EX-4.23 21 exh423kci.txt Exhibit A FORM OF SUBORDINATED SECURED NOTE (Face of Subordinated Secured Note) KEYSTONE CONSOLIDATED INDUSTRIES, INC. 8% SUBORDINATED SECURED NOTE DUE 2009 [THISNOTE IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A NOMINEE OF A DEPOSITARY OR A SUCCESSOR DEPOSITARY. THIS NOTE IS NOT EXCHANGEABLE FOR NOTES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITARY OR ITS NOMINEE EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER OF THIS SECURITY (OTHER THAN A TRANSFER OF THIS SECURITY AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY) MAY BE REGISTERED EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO KEYSTONE CONSOLIDATED INDUSTRIES, INC. (THE "COMPANY") OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.] 1 THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY STATE SECURITIES LAWS, BUT HAS BEEN ISSUED IN RELIANCE UPON EXEMPTIONS THEREFROM. NO TRANSFER OF THIS NOTE OR ANY INTEREST THEREIN MAY BE MADE EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND UNDER APPLICABLE STATE SECURITIES LAWS, UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL OR OTHER EVIDENCE, SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED. This instrument and the rights and obligations evidenced hereby are subordinate in the manner and to the extent set forth in Article III of that certain Indenture, entered into as of March 15, 2002 by and between THE COMPANY, and U.S. Bank National Association, as trustee, to the senior indebtedness (as defined in such indenture) OF the Company, including, without limitation, the Peoria County Loan and Indebtedness under the Senior Credit Facility Documents, each as defined in the indenture; and each holder of this instrument, by its acceptance hereof, irrevocably agrees to be bound by the provisions of the Indenture. KEYSTONE CONSOLIDATED INDUSTRIES, INC. 8% SUBORDINATED SECURED NOTE DUE 2009 No. __________ $ ----------------- Record Dates: February 28 and August 31 CUSIP No. ------------- Interest Payment Dates: March 15 and Maturity Date: March 15, 2009 September 15, commencing September 15, 2002 KEYSTONE CONSOLIDATED INDUSTRIES, INC., a Delaware corporation (the "Company," which term includes any successor corporation under the Indenture hereinafter referred to), for value received promises to pay to ____________________________________ or registered assigns, the principal sum of ____________________ Dollars in installments of __________ Dollars on March 15, 2007, __________ Dollars on March 15, 2008, and __________ Dollars on March 15, 2009. Reference is hereby made to the further provisions of this Note set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as set forth at this place. Unless the certificate of authentication hereon has been executed by the Trustee referred to on the reverse hereof by manual signature, this Note shall not be entitled to any benefits under the Indenture referred to on the reverse hereof or be valid or obligatory for any purpose. IN WITNESS WHEREOF, the Company has caused this Note to be duly executed under its corporate seal. [SEAL] KEYSTONE CONSOLIDATED INDUSTRIES, INC. By: ------------------------------------------ Name: ------------------------------------------ Title: ------------------------------------------ By: ------------------------------------------ Name: ------------------------------------------ Title: ------------------------------------------ This is one of the Notes referred to in the within-mentioned Indenture: U.S. BANK NATIONAL ASSOCIATION, as Trustee By: Dated: __________ -------------------------------------------------- Name: ------------------------------------------------ Title: ----------------------------------------------- (Back of Subordinated Secured Note) 8% SUBORDINATED SECURED NOTE DUE 2009 Capitalized terms used herein shall have the meanings assigned to them in the Indenture referred to below unless otherwise indicated. 1. Interest. The Company promises to pay interest on the outstanding principal amount of this Note at the rate of 8% per annum from the date of original issuance until maturity. The Company will make payments of interest semi-annually on March 15 and September 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"), as follows: (i) commencing on the first Interest Payment Date next succeeding the date of original issuance of this Note, the Company shall pay one-half of such interest accrued since the date of original issuance on such Interest Payment Date and thereafter until maturity the Company shall pay one-half of such interest accrued since the immediately preceding Interest Payment Date on each successive Interest Payment Date; and (ii) the remaining interest accrued and unpaid shall be paid one-third on each of March 15, 2007 and March 15, 2008, and all remaining accrued and unpaid interest shall be paid in full on March 15, 2009; provided, however, that each of the payments of such remaining accrued and unpaid interest shall not be made until such time as the Company has paid in full all Senior Indebtedness (including, without limitation, the Peoria County Loan and Indebtedness under the Senior Credit Facility Documents), as provided in the Indenture. The Company shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue payments of the principal and Redemption Price of this Note from time to time on demand at a rate that is 1% per annum in excess of the rate then in effect; the Company shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest (without regard to any applicable grace periods) hereon 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) to the Persons who are registered Holders of Notes at the close of business on February 28 or August 31 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 2.11 of the Indenture with respect to defaulted interest. Any such installment of interest not punctually paid or duly provided for shall forthwith cease to be payable to the registered Holders on such Interest Payment Date, and may be paid to the registered Holders at the close of business on a special Interest Payment Date to be fixed by the Trustee for the payment of such defaulted interest, notice whereof shall be given to the registered Holders not less than 10 days prior to such special Interest Payment Date, or may be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Notes may be listed, and upon such notice as may be required by such exchange, all as more fully provided in the Indenture. The Notes will be payable as to principal, Redemption Price and interest at the office of the Paying Agent, or, at the option of the Company, payment of interest may be made by check mailed to the Holders at their addresses set forth in the register of Holders; provided, however, that payment by wire transfer of immediately available funds will be required with respect to principal and Redemption Price of, and interest on, all Global Notes and all other Notes the Holders of which shall have provided wire transfer instructions to the Trustee 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. Indenture. The Company issued the Notes under an Indenture dated as of March 15, 2002 (the "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), to the extent incorporated therein. The Notes are subject to all such terms, and Holders are referred to the Indenture and the TIA for a statement of such terms. The Notes are general secured obligations of the Company to the extent of their aggregate principal amount and any accrued and unpaid interest thereon. 4. Paying Agent and Registrar. Initially, U.S. Bank National Association, 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 may act in any such capacity. 5. Optional Redemption. The Company may redeem any or all of the Notes at any time, upon not less than 30 nor more than 60 days' prior notice in amounts of $500 or an integral multiple thereof at the Redemption Price together with accrued and unpaid interest to the Redemption Date. If less than all the outstanding Notes are to be redeemed, the Trustee will select the particular Notes or portions thereof to be redeemed by lot, pro rata or by any other method the Trustee shall deem fair and reasonable; provided, however, that no Notes of $500 or less shall be redeemed in part. 6. Mandatory Redemption. The Company shall not be required to make mandatory redemption payments with respect to the Notes. 7. Notice of Redemption. Subject to the provisions of the Indenture, a 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 $500 may be redeemed in part but only in whole multiples of $500, 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. 8. Security Documents. In order to secure the due and punctual payment of the principal of and interest on the Notes and all other amounts payable by the Company under the Indenture and the Notes when and as the same will be due and payable, whether at maturity, by acceleration or otherwise, according to the terms of the Notes and the Indenture, the Company has granted security interests in and liens on the Collateral owned by it to the Trustee for the benefit of the Holders of Notes pursuant to the Indenture and the Security Documents. The Notes will be secured by Liens on and security interests in the Collateral with the priority contemplated in Section 11.1(a) of the Indenture and are subject to the terms and conditions of the Intercreditor Agreement. Each Holder, by accepting a Note, agrees to all of the terms and provisions of the Security Documents, as the same may be amended from time to time pursuant to the respective provisions thereof and the Indenture. The Trustee and each Holder acknowledge that a release of any of the Collateral or any Lien strictly in accordance with the terms and provisions of the Security Documents and the terms and provisions of the Indenture will not be deemed for any purpose to be an impairment of the security under the Indenture. 9. Denominations, Transfer and Exchange. The Notes are in registered form without coupons in denominations of $500 and integral multiples of $500. 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, it 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. With respect to Global Notes, the Depositary may grant proxies and otherwise authorize Holders of Notes represented by such Global Notes to give or take any request, demand, authorization, direction, notice, consent, waiver or other action which a Holder of a Note is entitled to give or take under this Indenture. 11. Amendment, Supplement and Waiver. Subject to certain exceptions, the Indenture and 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, 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. Without the consent of any Holder of a Note, the Indenture and the Notes may be amended or supplemented to cure any ambiguity, defect or inconsistency, 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 any applicable requirements of the Commission or the TIA, or to evidence and provide for the acceptance of appointment under the Indenture by a successor Trustee with respect to the Notes. 12. Defaults and Remedies. Events of Default include the following: (i) default for 30 days in the payment when due of interest on the Notes; (ii) default in payment when due of principal or Redemption Price of the Notes when the same becomes due and payable at maturity, upon redemption, or otherwise; (iii) failure by the Company for 30 days after notice to the Company to comply with any other covenant, representation, warranty or agreement in the Indenture or the Notes by the Trustee or the Holders of at least 30% of the aggregate principal amount of the Notes outstanding; (iv) default under certain other agreements relating to Indebtedness of the Company which default results in the acceleration of any Indebtedness prior to its express maturity and, in each case, the principal amount of such Indebtedness, together with the principal amount of any other such Indebtedness the maturity of which has been so accelerated, aggregates $10 million or more; (v) certain final judgments for the payment of money that remain undischarged for a period of 60 days, provided that the aggregate of all such undischarged judgments exceeds $10 million; (vi) any of the Security Documents ceases to be in full force and effect or any of the Security Documents ceases to give the Trustee the Liens, rights, powers and privileges purported to be created thereby in any material respect; and (vii) certain events of bankruptcy or insolvency with respect to the Company or any Subsidiary. If any Event of Default occurs and is continuing, the Trustee or the Holders of at least 30% 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, 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 payment on any Note) if it determines in good faith that withholding notice is in their interest. The Holders of not less than 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 the principal and Redemption Price of, or interest on, the Notes (which may be waived only by Holders of all of the Notes then outstanding). 13. Trustee Dealings with Company. Subject to certain limitations, the Trustee under the Indenture, in its individual or any other capacity, may become owner or pledgee of Notes and may otherwise deal with the Company or its Affiliates, as if it were not Trustee. 14. No Recourse Against Others. No past, present or future director, officer, employee, incorporator or stockholder of the Company, as such, shall 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. 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. Governing Law. The Indenture, any supplemental indenture and this Note shall be governed by and construed in accordance with the laws of the State of New York, including Section 5-1401 of the General Obligation Law, but otherwise without regard to conflict of law rules. The Company hereby irrevocably submits to the jurisdiction of any New York state court sitting in the Borough of Manhattan in the City of New York or any Federal court sitting in the Borough of Manhattan in the City of New York in respect of any suit, action or proceeding arising out of or relating to the Indenture and the Notes, and irrevocably accept for itself and in respect of its property, generally and unconditionally, jurisdiction of the aforesaid courts. The Company irrevocably waives, to the fullest extent that it may effectively do so under applicable law, trial by jury and any objection which it may now or hereafter have to the laying of the venue of any such suit, action or proceeding brought in any such court and any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum. Nothing herein shall affect the right of the Trustee or any Holder of the Notes to serve process in any other manner permitted by law or to commence legal proceedings or otherwise proceed against the Company in any other jurisdiction. 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 correctness or 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. Request may be made to: Keystone Consolidated Industries, Inc. Three Lincoln Centre 5430 LBJ Freeway Suite 1740 Dallas, Texas 75240-2697 Attention: Secretary 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 agent 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:_________________________________ (Signatures must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.) SCHEDULE OF EXCHANGES FOR CERTIFICATED NOTE OR ANOTHER GLOBAL NOTE2 The following exchanges of a part of this Global Note for Certificated Notes or another Global Note have been made:
Amount of Amount of Principal Amount --------------------- ---------------------- --------------------- Signature of decrease in increase in of this Global --------------------- Principal Amount Principal Amount Note following authorized officer of this Global of this Global such decrease (or of Trustee or Note Date of Exchange Note Note increase) Custodian
- -------- 1 To be included only if the Note is issued in global form. 2 To be included only if the Note is issued in global form. EX-4.24 22 exh424kci.txt $19,800,000 8% Subordinated Secured Notes due 2009 ------------------------------ INDENTURE Dated as of March 15, 2002 ------------------------------ Between Keystone Consolidated Industries, Inc., as Issuer, and U.S. Bank National Association, as Trustee CROSS REFERENCE TABLE Trust Indenture Act Section Indenture Section 310(a)(1)......................................................8.10 (a)(2)......................................................8.10 (a)(3)......................................................N.A. (a)(4)......................................................N.A. (a)(5)......................................................8.10 (b).........................................................8.3; 8.8; 8.10 (c).........................................................N.A. 311(a)......................................................8.11 (b).........................................................8.11 (c).........................................................N.A. 312(a)......................................................2.5 (b).........................................................12.3 (c).........................................................12.3 313(a)......................................................8.6 (b)(1)......................................................N.A. (b)(2)......................................................8.6 (c).........................................................8.6; 12.2 314(a)......................................................5.2; 12.2 (b).........................................................11.2 (c)(1)......................................................12.4 (c)(2)......................................................12.4 (c)(3)......................................................12.4 (d).........................................................11.3 (e).........................................................12.5 (f).........................................................N.A. 315(a)......................................................8.1(b) (b).........................................................8.5; 12.2 (c).........................................................8.1 (d).........................................................8.1 (e).........................................................7.11 316(a)(1)(A)................................................7.5 (a)(1)(B)...................................................7.4 (a)(2)......................................................N.A. (b).........................................................7.7 (c).........................................................N.A. 317(a)(1)...................................................7.8 (a)(2)......................................................7.10 (b).........................................................2.4 318(a)......................................................12.1 318(b)......................................................N.A. 318(c)......................................................12.1 "N.A." means not applicable. TABLE OF CONTENTS* * Page ARTICLE I. DEFINITIONS AND INCORPORATION BY REFERENCE.....................1 SECTION 1.1. DEFINITIONS.........................................1 SECTION 1.2. OTHER DEFINITIONS...................................8 SECTION 1.3. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT...8 SECTION 1.4. RULES OF CONSTRUCTION...............................8 SECTION 1.5. ACTS OF HOLDERS.....................................9 ARTICLE II. THE NOTES.....................................................10 SECTION 2.1. FORM AND DATING.....................................10 SECTION 2.2. EXECUTION AND AUTHENTICATION........................11 SECTION 2.3. REGISTRAR AND PAYING AGENT; DEPOSITARY..............11 SECTION 2.4. PAYING AGENTS TO HOLD MONEY IN TRUST................12 SECTION 2.5. HOLDER LISTS........................................12 SECTION 2.6. TRANSFER AND EXCHANGE...............................12 SECTION 2.7. REPLACEMENT NOTES...................................14 SECTION 2.8. OUTSTANDING NOTES...................................15 SECTION 2.9. TEMPORARY NOTES.....................................15 SECTION 2.10. CANCELLATION.......................................15 SECTION 2.11. DEFAULTED INTEREST.................................15 SECTION 2.12. PERSONS DEEMED OWNERS..............................16 SECTION 2.13. CUSIP NUMBERS......................................16 ARTICLE III. RANKING 16 SECTION 3.1. RANKING OF NOTES....................................16 SECTION 3.2. NOTES SUBORDINATED TO SENIOR INDEBTEDNESS...........16 SECTION 3.3. COMPANY NOT TO MAKE PAYMENTS WITH RESPECT TO NOTES IN CERTAIN CIRCUMSTANCES... .............18 SECTION 3.4. SUBROGATION OF NOTES................................20 SECTION 3.5. AUTHORIZATION BY HOLDERS OF NOTES...................21 SECTION 3.6. NOTICES TO TRUSTEE..................................21 SECTION 3.7. TRUSTEE'S RELATION TO SENIOR INDEBTEDNESS...........22 SECTION 3.8. NO IMPAIRMENT OF SUBORDINATION......................22 SECTION 3.9. ARTICLE III NOT TO PREVENT EVENTS OF DEFAULT........22 SECTION 3.10. PAYING AGENTS OTHER THAN TRUSTEE...................22 SECTION 3.11. NOTES SENIOR TO SUBORDINATED INDEBTEDNESS..........23 SECTION 3.12. SUBORDINATION OF LIENS AND SECURITY INTERESTS......23 SECTION 3.13. LEGEND. 23 SECTION 3.14. MODIFICATION OF INDENTURE..........................23 SECTION 3.15. ASSIGNMENT OF SENIOR INDEBTEDNESS..................24 SECTION 3.16. RELEASE OF LIENS...................................24 SECTION 3.17. AMENDMENT OF ARTICLE III...........................25 ARTICLE IV. REDEMPTION....................................................25 SECTION 4.1. NOTICES TO TRUSTEE..................................25 SECTION 4.2. SELECTION OF NOTES..................................25 SECTION 4.3. NOTICE OF OPTIONAL REDEMPTION.......................26 SECTION 4.4. EFFECT OF NOTICE OF REDEMPTION......................26 SECTION 4.5. DEPOSIT OF REDEMPTION PRICE.........................27 SECTION 4.6. NOTES REDEEMED IN PART..............................27 SECTION 4.7. OPTIONAL REDEMPTION.................................27 ARTICLE V. COVENANTS 27 SECTION 5.1. PAYMENT OF PRINCIPAL AND INTEREST...................27 SECTION 5.2. COMPLIANCE CERTIFICATE..............................28 SECTION 5.3. TAXES. 28 SECTION 5.4. STAY, EXTENSION AND USURY LAWS......................28 SECTION 5.5. CONTINUED EXISTENCE.................................28 SECTION 5.6. IMPAIRMENT OF SECURITY INTEREST.....................29 SECTION 5.7. AMENDMENT TO SECURITY DOCUMENTS.....................29 SECTION 5.8. INSPECTION AND CONFIDENTIALITY......................29 ARTICLE VI. SUCCESSORS....................................................29 SECTION 6.1. MERGER, CONSOLIDATION, OR SALE OF ASSETS............29 SECTION 6.2. SUCCESSOR CORPORATION SUBSTITUTED...................30 ARTICLE VII. DEFAULTS AND REMEDIES........................................30 SECTION 7.1. EVENTS OF DEFAULT...................................30 SECTION 7.2. ACCELERATION........................................31 SECTION 7.3. OTHER REMEDIES......................................32 SECTION 7.4. WAIVER OF PAST DEFAULTS; RECISSION OF ACCELERATION..32 SECTION 7.5. CONTROL BY MAJORITY.................................33 SECTION 7.6. LIMITATION ON SUITS.................................33 SECTION 7.7. RIGHTS OF HOLDERS OF NOTES TO RECEIVE PAYMENT.......33 SECTION 7.8. COLLECTION SUIT BY TRUSTEE..........................33 SECTION 7.9. TRUSTEE MAY FILE PROOFS OF CLAIM....................34 SECTION 7.10. PRIORITIES.........................................34 SECTION 7.11. UNDERTAKING FOR COSTS..............................34 ARTICLE VIII. TRUSTEE.....................................................35 SECTION 8.1. DUTIES OF TRUSTEE...................................35 SECTION 8.2. RIGHTS OF TRUSTEE...................................36 SECTION 8.3. INDIVIDUAL RIGHTS OF TRUSTEE........................36 SECTION 8.4. TRUSTEE'S DISCLAIMER................................36 SECTION 8.5. NOTICE OF DEFAULTS..................................37 SECTION 8.6. REPORTS BY TRUSTEE TO HOLDERS OF THE NOTES..........37 SECTION 8.7. COMPENSATION, REIMBURSEMENT AND INDEMNITY...........37 SECTION 8.8. REPLACEMENT OF TRUSTEE..............................38 SECTION 8.9. SUCCESSOR TRUSTEE BY MERGER, ETC....................39 SECTION 8.10. ELIGIBILITY; DISQUALIFICATION......................39 SECTION 8.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY..39 SECTION 8.12. MONIES TO BE HELD IN TRUST.........................40 ARTICLE IX. SATISFACTION AND DISCHARGE OF INDENTURE.......................40 SECTION 9.1. DISCHARGE OF INDENTURE..............................40 SECTION 9.2. DEPOSITED MONEYS TO BE HELD IN TRUST BY TRUSTEE.....40 SECTION 9.3. PAYING AGENT TO REPAY MONIES HELD...................41 SECTION 9.4. RETURN OF UNCLAIMED MONIES..........................41 SECTION 9.5. REINSTATEMENT.......................................41 ARTICLE X. AMENDMENT, SUPPLEMENT AND WAIVER...............................41 SECTION 10.1. WITHOUT CONSENT OF HOLDERS OF NOTES................41 SECTION 10.2. WITH CONSENT OF HOLDERS OF NOTES...................42 SECTION 10.3. COMPLIANCE WITH TRUST INDENTURE ACT................43 SECTION 10.4. REVOCATION AND EFFECT OF CONSENTS..................43 SECTION 10.5. NOTATION ON OR EXCHANGE OF NOTES...................43 SECTION 10.6. TRUSTEE TO SIGN AMENDMENTS, ETC....................43 ARTICLE XI. SECURITY DOCUMENTS............................................44 SECTION 11.1. COLLATERAL AND SECURITY DOCUMENTS..................44 SECTION 11.2. RECORDING; PRIORITY; OPINIONS, ETC.................44 SECTION 11.3. RELEASE OF COLLATERAL..............................45 SECTION 11.4. DISPOSITION OF COLLATERAL WITHOUT RELEASE..........46 SECTION 11.5. EMINENT DOMAIN AND OTHER GOVERNMENT TAKINGS........46 SECTION 11.6. TRUST INDENTURE ACT REQUIREMENTS...................47 SECTION 11.7. SUITS TO PROTECT COLLATERAL........................48 SECTION 11.8. PURCHASER PROTECTED................................48 SECTION 11.9. POWERS EXERCISABLE BY RECEIVER OR TRUSTEE..........48 SECTION 11.10. DETERMINATIONS RELATING TO COLLATERAL.............48 SECTION 11.11. FORM AND SUFFICIENCY OF RELEASE...................49 SECTION 11.12. POSSESSION AND USE OF COLLATERAL..................49 SECTION 11.13. DISPOSITION OF OBLIGATIONS RECEIVED...............49 SECTION 11.14. RELEASE UPON TERMINATION OF THE COMPANY'S OBLIGATIONS.......................................49 ARTICLE XII. MISCELLANEOUS................................................50 SECTION 12.1. TRUST INDENTURE ACT CONTROL........................50 SECTION 12.2. NOTICES............................................50 SECTION 12.3. COMMUNICATION BY HOLDERS OF NOTES WITH OTHER HOLDERS OF NOTES...................................51 SECTION 12.4. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.51 SECTION 12.5. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION......52 SECTION 12.6. RULES BY TRUSTEE AND AGENTS........................52 SECTION 12.7. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS.........................52 SECTION 12.8. GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL......................................52 SECTION 12.9. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS......53 SECTION 12.10. SUCCESSORS........................................53 SECTION 12.11. SEVERABILITY......................................53 SECTION 12.12. COUNTERPART ORIGINALS.............................53 SECTION 12.13. TABLE OF CONTENTS, HEADINGS, ETC..................53 EXHIBITS Exhibit A Form of Subordinated Secured Note INDENTURE INDENTURE, dated as of March 15, 2002, between Keystone Consolidated Industries, Inc., a Delaware corporation (the "Company"), and U.S. Bank National Association, a national banking association, as trustee (the "Trustee"). Each party agrees as follows for the benefit of the other party and for the equal and ratable benefit of the Holders (as defined below) of the Company's 8% Subordinated Secured Notes due 2009: ARTICLE I DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.1.......DEFINITIONS. "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 securities of a Person shall be presumed to be control, which presumption may be rebutted by evidence to the contrary. "Agent" means any Registrar, Paying Agent or co-registrar. "Agent Member" means a member of, or a participant in, the Depositary. "Amended Credit Facility" means the Amended and Restated Revolving Loan and Security Agreement, dated as of December 29, 1995, by and between Congress Financial Corporation (Central) and the Company, as amended, including any related collateral documents, instruments and agreements executed in connection therewith, and in each case as amended, modified, renewed, refunded, replaced or refinanced from time to time (provided that such amendment, modification, renewal, refunding, replacement or refinancing does not result in an increase in (i) the $55 million in the maximum principal amount of revolving borrowings available under the Amended Credit Facility or (ii) the principal amount of any term loan outstanding under the Amended Credit Facility to an amount in excess of $15 million). "Applicable Procedures" means, with respect to any transfer or exchange of beneficial interests in a Global Note, the rules and procedures of the Depositary that are applicable to such transfer or exchange. "Bankruptcy Law" means Title 11 of the U.S. Code or any similar Federal or state law for the relief of debtors. "Board" means the Board of Directors of the Company or any duly authorized committee of the Board of Directors. "Business Day" means any day other than 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 not a Business Day at a place of payment, payment may be made at that place on the next succeeding day that is a Business Day, and no interest shall accrue for the intervening period. "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 any other business entity, any and all shares, interests, participations, rights or other equivalents (however designated) in the equity of such association or entity, (iii) in the case of a partnership, partnership 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) securities issued or directly and fully guaranteed or insured by the United States government or any agency or instrumentality thereof having maturities of not more than six months from the date of acquisition; (ii) demand and time deposits, 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 Amended Credit Facility or with any domestic commercial bank having capital and surplus in excess of $500.0 million and a Thompson Bank Watch Rating of "B" or better; (iii) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clauses (i) and (ii) above entered into with any financial institution meeting the qualifications specified in clause (ii) above; (iv) commercial paper rated at least P-1 by Moody's Investors Service, Inc. or at least A-1 by Standard & Poor's Rating Group and in each case maturing within six months after the date of acquisition; and (v) money market funds rated at least Aaa by Moody's Investors Service, Inc. "Certificated Note" means a Note that is in the form of the Note attached hereto as Exhibit A, but which does not include the information called for by footnotes 1 and 2 thereof. "Collateral" means, collectively, all of the property and assets that are from time to time subject to, or purported to be subject to, the Lien of this Indenture or the Security Documents. "Collateral Agent" shall mean U.S. Bank National Association, in its capacity as collateral agent under the Security Documents, and any successor thereto in such capacity. "Commission" means the United States Securities and Exchange Commission. "Company" means Keystone Consolidated Industries, Inc., a Delaware corporation, until a successor Person shall have become such pursuant to the applicable provisions of this Indenture, and thereafter means such successor Person. "Default" means any event, occurrence or condition that, with the passage of time, the giving of notice or both, would constitute an Event of Default. "Depositary" means, with respect to the Notes issuable in whole or in part in global form, the Person specified in Section 2.3 hereof as the Depositary with respect to the Notes, until a successor shall have been appointed and become such pursuant to the applicable provisions of this Indenture, and, thereafter, "Depositary" shall mean or include such successor. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Fair Market Value" means, with respect to any asset, the price which could be negotiated in an arm's-length free market transaction, for cash, between a willing seller and a willing buyer, neither of whom is under undue pressure or compulsion to complete the transaction. "GAAP" means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as may be approved by a significant segment of the accounting profession of the United States, which are in effect from time to time. "Global Note" means a Note that is in the form of the Note attached hereto as Exhibit A, including the information called for by footnotes 1 and 2 thereof, that is deposited with and registered in the name of the Depositary. "Guarantee" means, as applied to any Indebtedness of another Person, (i) a guarantee (other than by endorsement of negotiable instruments for collection in the ordinary course of business), direct or indirect, in any manner, of all or any part of such Indebtedness, (ii) any direct or indirect obligation, contingent or otherwise, of a Person guaranteeing or having the effect of guaranteeing the Indebtedness of any other Person in any manner and (iii) an agreement of a Person, direct or indirect, contingent or otherwise, the practical effect of which is to assure in any way the payment or performance (or payment of damages in the event of non-performance) of all or any part of such Indebtedness of another Person. "Hedging Obligations" means, with respect to any Person, the obligations of such Person under (i) interest rate swap agreements, interest rate cap agreements, 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. "Incur" or "incur" means, with respect to any Indebtedness or other obligation of any Person, to create, issue (by conversion, exchange or otherwise), assume, Guarantee or otherwise become liable in respect of such Indebtedness or other obligation or the recording, as required pursuant to GAAP or otherwise, of any such Indebtedness or other obligation on the unconsolidated balance sheet of such Person (and "incurrence," "incurred," "incurrable" and "incurring" shall have meanings correlative to the foregoing); provided, however, that a change in GAAP that results in an obligation of such Person that exists at such time becoming Indebtedness shall not be deemed an incurrence of such Indebtedness. "Indebtedness" means, with respect to any Person, without duplication, whether recourse is to all or a portion of the assets of such Person and whether or not contingent: (i) any liability of such Person (a) for borrowed money, or under any reimbursement obligation relating to a letter of credit, bankers' acceptance or note purchase facility; (b) evidenced by a bond, note, debenture or similar instrument; (c) for the balance deferred and unpaid of the purchase price for any property or service or any obligation upon which interest charges are customarily paid (except for accrued expenses or trade payables arising in the ordinary course of business); (d) for the payment of money relating to a lease that is required to be classified as a Capital Lease Obligation in accordance with GAAP; (e) secured by a Lien; (ii) any obligation of others secured by a Lien on any asset of such Person, whether or not any obligation secured thereby has been assumed, by such Person; (iii) any obligations of such Person under any Hedging Obligation; and (iv) any Guarantee of such Person or any obligation of such Person which in economic effect is a guarantee with respect to any Indebtedness of another Person. "Indenture" means this Indenture, as amended or supplemented from time to time. "Intercreditor Agreement" means the Letter Agreement, dated as of March 15, 2002, between the Company, Congress Financial Corporation (Central), The County of Peoria, Illinois, and the Trustee, as the same may be amended from time to time. "Interest Payment Date" means the stated maturity of an installment of interest on the Notes. "Issue Date" means the date on which the Notes are first authenticated and delivered under this Indenture. "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). "Mortgages" means, collectively, any mortgages dated on or about the date hereof between the Company and the Collateral Agent, as the same may be amended, amended and restated, supplemented or otherwise modified from time to time. "Mortgaged Property" has the meaning assigned to such term in the Mortgages. "Net Award" shall have the meaning assigned to such term in the Mortgages and shall include any amounts received in respect of personal property pursuant to the Security Documents or otherwise. "Note Custodian" means the Trustee, as custodian with respect to the Notes in global form, or any successor entity thereto. "Notes" means the Subordinated Secured Notes that are issued under this Indenture, as amended or supplemented from time to time. "Officer" means, (a) with respect to any Person that is a corporation, the Chairman of the Board, the Chief Executive Officer, the President, the Chief Operating Officer, the Chief Financial Officer, the Treasurer, the Controller, the Secretary or any Vice- President or Assistant Secretary of such Person and (b) with respect to any other Person, the individuals selected by such Person to perform functions similar to those of the officers listed in clause (a). "Officers' Certificate" means a certificate signed on behalf of any Person by two Officers of such Person, one of whom must be the Chief Executive Officer, the Chief Financial Officer, the Treasurer or the principal accounting officer of such Person, that meets the requirements of Sections 12.4 and 12.5 hereof. "Opinion of Counsel" means an opinion from legal counsel who is reasonably acceptable to the Trustee, that meets the requirements of Sections 12.4 and 12.5 hereof. The counsel may be an employee of or counsel to the Company, any Subsidiary of the Company or the Trustee. "Peoria County Loan" means the Loan Agreement, dated as of March 13, 2002, between the Company and The County of Peoria, Illinois, including any related collateral documents, instruments and agreements executed in connection therewith, and in each case as amended, modified, renewed, refunded, replaced or refinanced from time to time. "Person" means any individual, corporation, limited or general partnership, limited liability company, joint venture, association, joint stock company, trust, entity, unincorporated organization or government or any agency or political subdivision thereof. "Permitted Liens" means (i) Liens on property existing as of the date of this Indenture and as modified or amended from time to time; (ii) 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; (iii) 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, however, that any reserve or other appropriate provision as shall be required in conformity with GAAP shall have been made therefor; (iv) Liens incurred or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security; (v) easements, rights-of-way, restrictions, minor defects or irregularities in title and other similar charges or encumbrances not interfering in any material respect with the business of the Company; (vi) Liens securing reimbursement obligations with respect to letters of credit which encumber only documents and other property relating to such letters of credit and the products and proceeds thereof; (vii) Liens encumbering deposits made to secure obligations arising from statutory, regulatory, contractual or warranty requirements; (viii) any interest or title of a lessor in property subject to any Capital Lease Obligation or operating lease; (ix) Liens evidenced by Uniform Commercial Code financing statements regarding leases; (x) Liens in respect of property or assets imposed by law which were incurred in the ordinary course of business, such as carrier's, warehousemen's, materialmen's and mechanic's liens, which do not in the aggregate materially detract from the value of such property or assets or materially impair the use thereof; (xi) Liens to secure Senior Indebtedness; or (xii) any other Liens not exceeding $1,000,000 in aggregate amount at any time outstanding. "Proceeding" shall mean any voluntary or involuntary insolvency, bankruptcy, receivership, custodianship, liquidation, dissolution, reorganization, assignment for the benefit of creditors, appointment of a custodian, receiver, trustee or other officer with similar powers or any other proceeding for the liquidation, dissolution or other winding up of a Person. "Prior Liens" has the meaning assigned to such term in the Mortgages. "Real Property" means any interest in any real property or any portion thereof whether owned in fee or leased or otherwise owned. "Redemption Date" means, with respect to any Note to be redeemed, the date fixed for such redemption by or pursuant this Indenture. "Redemption Price" means the amount payable for the redemption of any Note on a Redemption Date, which amount shall equal the principal amount of such Note exclusive of accrued and unpaid interest thereon to the Redemption Date, unless otherwise specifically provided. "Refinanced Senior Credit Facility Documents" shall mean any financing documentation which replaces the Amended Credit Facility and pursuant to which the Senior Indebtedness under the Amended Credit Facility is refinanced (in whole or in part), as such financing documentation may be amended, restated, supplemented or otherwise modified from time to time. "Responsible Officer" means, when used with respect to the Trustee, any officer of the Trustee assigned by the Trustee to administer this Indenture 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. "Securities Act" means the Securities Act of 1933, as amended. "Security Agreement" means the security agreement dated as of the date hereof between the Company and the Collateral Agent, as the same may be amended, amended and restated, supplemented or otherwise modified from time to time. "Security Documents" means, collectively, the Security Agreement, the Mortgages, the Intercreditor Agreement and all other instruments or documents entered into or delivered in connection with any of the foregoing, as such agreements, instruments or documents may be amended, amended and restated, supplemented or otherwise modified from time to time. "Senior Credit Facility Documents" means the Amended Credit Facility and, after the consummation of any refinancing, the Refinanced Senior Credit Facility Documents. "Senior Indebtedness" means the principal, premium, if any, and unpaid interest (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to the Company and/or its Subsidiaries whether or not a claim for post-filing interest is allowed in such proceeding, including interest that would have accrued but for such filing), fees, charges, expenses, reimbursement and indemnification obligations, and all other amounts payable under or in respect of Indebtedness of the Company and/or its Subsidiaries (including, without limitation, the Peoria County Loan and Indebtedness arising and owing under the Senior Credit Facility Documents) existing as of the date of this Indenture, as may be amended from time to time, and any renewals, restatements, extensions, refinancings, refundings, amendments and modifications of any such indebtedness or obligations or of the instruments creating or evidencing such indebtedness or obligations or guarantees, and with respect to the Senior Credit Facility Documents, including, without limitation, all Indebtedness and amounts and obligations of every nature whether existing as of the date of this Indenture or as shall thereafter be created, incurred, assumed or guaranteed that arise and are payable under the Senior Credit Facility Documents; provided, however, that Senior Indebtedness shall not include (i) Indebtedness owed to a Subsidiary; (ii) Indebtedness of the Company which is expressly pari passu to the Notes; or (iii) Subordinated Indebtedness. Senior Indebtedness shall be considered to be outstanding whenever any loan commitment under the Senior Indebtedness Document is outstanding. "Subordinated Indebtedness" means any Indebtedness of the Company now or hereafter outstanding which by its terms is expressly subordinated in right of payment to the Notes and all Indebtedness hereafter created, incurred, assumed or guaranteed by the Company (except to the extent such Indebtedness constitutes Senior Indebtedness). "Subordinated Indebtedness Documents" means any Guarantee with respect to the Subordinated Indebtedness and all other documents, agreements and instruments evidencing or pertaining to all or any portion of the Subordinated Indebtedness (including, without limitation, all collateral documentation securing such Subordinated Indebtedness) now existing or hereinafter executed in connection therewith, as the same may be, solely to the extent permitted hereunder, amended, modified, renewed or extended and, solely to the extent permitted hereunder, any refinancing or refunding of the Subordinated Indebtedness. "Subordinated Secured Notes" means the Company's 8% Subordinated Secured Notes due 2009 issued pursuant to this Indenture. "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 in a combination thereof) and (ii) any partnership or limited liability company (a) the sole general partner or member or the managing general partner or member of which is such Person or a Subsidiary of such Person or (b) the only general partners or members of which are such Person or of one or more Subsidiaries of such Person (or any combination thereof). "Taking" shall have the meaning assigned to such term in the Mortgages. "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. "TIA" means the Trust Indenture Act of 1939 (15 U.S.C. ss.ss. 77aaa-77bbbb) as in effect on the date of this Indenture; provided that in the event the Trust Indenture Act of 1939 is amended after such date, "TIA" means, to the extent required by any such amendment, the Trust Indenture Act of 1939 as so amended. SECTION 1.2. OTHER DEFINITIONS.
Term Defined in Section "Act" 1.4 "Event of Default" 7.1 "Paying Agent" 2.3 "Payment Default" 7.1 "Payment or Distribution" 3.2 "Registrar" 2.3 "Surviving Entity" 6.1
SECTION 1.3. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT. Whenever this Indenture refers to a provision of the TIA, the provision is incorporated by reference in and made a part of this Indenture to the extent that either this Indenture has been qualified under the TIA or such provision is otherwise made applicable to this Indenture by the TIA notwithstanding the qualification of this Indenture under the TIA. In accordance with the foregoing, the following TIA terms used in this Indenture shall have the following meanings: "indenture securities" means the Notes; "indenture security holder" means a Holder; "indenture to be qualified" means this Indenture; "indenture trustee" or "institutional trustee" means the Trustee; "obligor" on the Notes means the Company and any successor obligor upon the Notes. All other terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by Commission rule under the TIA have the meanings so assigned to them to the extent that either this Indenture has been qualified under the TIA or such definition is otherwise made applicable to this Indenture by the TIA notwithstanding the qualification of this Indenture under the TIA. SECTION 1.4. RULES OF CONSTRUCTION. Unless the context otherwise requires: (a) a term has the meaning assigned to it; (b) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP; (c) "or" is not exclusive; (d) words in the singular include the plural, and in the plural include the singular; (e) provisions apply to successive events and transactions; (f) "herein," "hereof" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision; and (g) references to sections of or rules under the Securities Act, the Exchange Act and the TIA shall be deemed to include substitute, replacement and successor sections or rules adopted by the Commission from time to time. SECTION 1.5. ACTS OF HOLDERS. (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by an agent duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee and, where it is hereby expressly required, to the Company. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of Holders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to Section 8.1) conclusive in favor of the Trustee and the Company, if made in the manner provided in this Section 1.5. (b) The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by the certificate of any notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him or her the execution thereof. Where such execution is by an officer of a corporation or a member of a partnership or a limited liability company, on behalf of such corporation, partnership or limited liability company, such certificate or affidavit shall also constitute sufficient proof of his or her authority. (c) The ownership of Notes shall be proved by the register maintained by the Registrar. (d) Any request, demand, authorization, direction, notice, consent, waiver or other Act of the Holder of any Note shall bind every future Holder of the same Note and the holder of every Note issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done or suffered to be done by the Trustee or the Company in reliance thereon, whether or not notation of such action is made upon such Note. ARTICLE II. THE NOTES SECTION 2.1. FORM AND DATING. The Notes and the Trustee's certificate of authentication shall be substantially in the form of Exhibit A hereto. The Notes may have notations, legends or endorsements required by law, stock exchange rule or usage in addition to any set forth in Exhibit A hereto. Each Note shall be dated the date of its authentication. The Notes shall be in denominations of $500 or even 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. (a) Global Notes. 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 amount of outstanding Notes from time to time endorsed thereon and that the aggregate 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 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 2.6 hereof. Except as set forth in Section 2.6 hereof, the Global Notes may be transferred, in whole and not in part, only to another nominee of the Depositary or to a successor of the Depositary or its nominee. (b) Book-Entry Provisions. This Section 2.1(b) shall apply only to the Global Notes deposited with or on behalf of the Depositary. The Company shall execute and the Trustee shall, in accordance with Section 2.2, authenticate and deliver the Global Notes that (i) shall be registered in the name of the Depositary or the nominee of the Depositary and (ii) shall be delivered by the Trustee to the Depositary or pursuant to the Depositary's instructions or held by the Trustee as custodian for the Depositary. Agent Members shall have no rights either under this Indenture with respect to any Global Note held on their behalf by the Depositary or by the Trustee as custodian for the Depositary or under such Global Note, and the Depositary may be treated by the Company, the Trustee and any agent of the Company or the Trustee as the absolute owner of such Global Note for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Trustee or any agent of the Company or the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depositary or impair, as between the Depositary and its Agent Members, the operation of customary practices of such Depositary governing the exercise of the rights of an owner of a beneficial interest in any Global Note. (c) Certificated Notes. Notes issued in certificated form shall be substantially in the form of Exhibit A attached hereto, but without including the text referred to in footnotes 1 and 2 thereto. SECTION 2.2. EXECUTION AND AUTHENTICATION. Two Officers of the Company shall sign the Notes for the Company by manual or facsimile signature. The seal of the Company shall 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, upon a written order of the Company signed by two Officers of the Company, shall authenticate Notes for original issue up to the aggregate principal amount of $19,800,000. Such written order of the Company shall specify the amount of Notes to be authenticated and the date on which the original issue of Notes is to be authenticated. The aggregate principal amount of Notes outstanding at any time may not exceed such amount except as provided in Section 2.7 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 the Company or an Affiliate of the Company. SECTION 2.3. REGISTRAR AND PAYING AGENT; DEPOSITARY. 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. At the option of the Company, payment of interest may be made by check mailed to the Holders at their addresses set forth in the register of Holders, provided that payment by wire transfer of immediately available funds will be required with respect to principal and Redemption Price of, and interest on, all Global Notes and all other Notes the Holders of which shall have provided wire transfer instructions to the Trustee or the Paying Agent. 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 Paying 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 may act as Paying Agent or Registrar. The Depositary shall, by acceptance of a Global Note, agree that transfers of beneficial interests in such Global Note may be effected only through a book-entry system maintained by the Depositary (or its agent), and that ownership of a beneficial interest in the Note shall be required to be reflected in a book entry. 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. The Company does not initially appoint a Depositary with respect to the Global Notes, electing instead to appoint a Depositary only at such time as a Global Note(s) is issued. SECTION 2.4. PAYING AGENTS 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 Paying Agent for the payment of principal and Redemption Price of, and 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) shall have no further liability for the money. If the Company 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 2.5. 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) to the extent such provision is otherwise applicable hereto. 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) to the extent such provision is otherwise applicable hereto. SECTION 2.6. TRANSFER AND EXCHANGE. (a) Transfer and Exchange of Global Notes. The transfer and exchange of Global Notes or beneficial interests therein shall be effected through the Depositary, in accordance with this Indenture and the procedures of the Depositary therefor, which shall include restrictions on transfer to the extent required by the Securities Act. (b) Transfer and Exchange of Certificated Notes. When Certificated Notes are presented by a Holder to the Registrar with a request: (i) to register the transfer of the Certificated Notes; or (ii) to exchange such Certificated Notes for an equal principal amount of Certificated Notes of other authorized denominations, the Registrar shall register the transfer or make the exchange as requested; provided, however, that the Certificated Notes presented or surrendered for register of transfer or exchange shall be 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. (c) Exchange of a Beneficial Interest in a Global Note for a Certificated Note. (i) Any Person having a beneficial interest in a Global Note may upon request, subject to the Applicable Procedures, exchange such beneficial interest for a Certificated Note. Upon receipt by the Trustee of written instructions, or such other form of instructions as is customary for the Depositary, from the Depositary or its nominee on behalf of any Person having a beneficial interest in a Global Note, and a certification (which may be submitted by facsimile) to the effect that such beneficial interest is being transferred to the same Person designated by the Depositary as having the beneficial interest in the portion of the Global Note being exchanged; in which case the Trustee or the Note Custodian, at the direction of the Trustee, shall, in accordance with the standing instructions and procedures existing between the Depositary and the Note Custodian, cause the aggregate principal amount of Global Notes to be reduced accordingly and, following such reduction, the Company shall execute and the Trustee shall authenticate and deliver to the Person requesting such exchange a Certificated Note in the appropriate principal amount. (ii) Certificated Notes issued in exchange for a beneficial interest in a Global Note pursuant to this Section 2.6(c) shall be registered in such names and in such authorized denominations as the Depositary, pursuant to instructions from its direct or indirect participants or otherwise, shall instruct the Trustee. The Trustee shall deliver such Certificated Notes to the Persons in whose names such Notes are so registered. (d) Restrictions on Transfer and Exchange of Global Notes. Notwithstanding any other provision of this Indenture (other than the provisions set forth in this Section 2.6(d)), a Global Note may not be transferred as a whole except 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. (e) Authentication of Certificated Notes in Absence of Depositary. If at any time: (i) the Depositary for the Notes notifies the Company that the Depositary is unwilling or unable to continue as Depositary for the Global Notes and a successor Depositary for the Global Notes is not appointed by the Company within 90 days after delivery of such notice; or (ii) the Company, at its sole discretion, notifies the Trustee in writing that it elects to cause the issuance of Certificated Notes under this Indenture, then the Company shall execute, and the Trustee shall, upon receipt of an authentication order in accordance with Section 2.2 hereof, authenticate and deliver, Certificated Notes registered in such names and principal amounts as specified by the Depositary in an aggregate principal amount equal to the principal amount of the Global Notes in exchange for such Global Notes. (f) Cancellation or Adjustment of Global Notes. At such time as all beneficial interests in Global Notes have been exchanged for Certificated Notes, redeemed, repurchased or canceled, all Global Notes shall be returned to or retained and canceled by the Trustee in accordance with Section 2.10 hereof. At any time prior to such cancellation, if any beneficial interest in a Global Note is exchanged for Certificated Notes, redeemed, repurchased or canceled, the principal amount of Notes represented by such Global Notes shall be reduced accordingly and an endorsement shall be made on such Global Note by the Trustee or the Note Custodian, at the direction of the Trustee, to reflect such reduction. (g) General Provisions Relating to Transfers and Exchanges. (i) To permit registrations of transfers and exchanges, the Company shall execute and the Trustee shall authenticate Certificated Notes and Global Notes at the Registrar's request. (ii) No service charge shall be made to a Holder for any registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any transfer tax or similar governmental charge payable in connection therewith. (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 Certificated Notes and Global Notes issued upon any registration of transfer or exchange of Certificated Notes or Global Notes shall be the valid obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Certificated Notes or Global 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 Notes during a period beginning at the opening of business 15 days before the day of any selection of Notes for redemption under Section 4.2 hereof and ending at the close of business on the day of selection; or (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) The Trustee shall authenticate Certificated Notes and Global Notes in accordance with the provisions of Section 2.2 hereof. SECTION 2.7. REPLACEMENT NOTES. If any mutilated Note is surrendered to the Trustee or either the Company or 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 in accordance with Section 2.2 hereof, shall authenticate a replacement Note if the Trustee's requirements for replacement of Notes are met; provided, however, that in lieu of the foregoing, the Trustee may pay or cause the payment of the principal of and accrued and unpaid interest on any such mutilated, destroyed, lost or stolen Note in the event such Note has matured. 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 and any authenticating agent from any loss that any of them may suffer if a Note is replaced. The Trustee and the Company may charge the Holder for their expenses in replacing a Note. Every replacement Note is an additional obligation of the Company and shall be entitled to all of the benefits of this Indenture equally and proportionately with all other Notes duly issued hereunder. SECTION 2.8. 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 or the Note Custodian in accordance with the provisions hereof, and those described in this Section as not outstanding. A Note does not cease to be outstanding because the Company or an Affiliate of the Company holds the Note. If a Note is replaced pursuant to Section 2.7 hereof, it shall cease to be outstanding unless the Trustee receives proof satisfactory to it that the replaced Note is held by a bona fide purchaser for value. If the principal amount of any Note is considered paid under Section 5.1 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 2.9. TEMPORARY NOTES. Until Certificated Notes are ready for delivery, the Company may prepare and the Trustee, upon receipt of an authentication order in accordance with Section 2.2 hereof, shall authenticate temporary Notes. Temporary Notes shall be substantially in the form of Certificated Notes, but may have such variations as 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 Certificated Notes in exchange for temporary Notes. Holders of temporary Notes shall be entitled to all of the benefits of this Indenture. SECTION 2.10. 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 promptly destroy all such canceled Notes and deliver to the Company a certificate of the destruction of such Notes. The Company may not issue new Notes to replace Notes that have been paid or that have been delivered to the Trustee for cancellation. SECTION 2.11. DEFAULTED INTEREST. If the Company defaults in a payment of interest on the Notes, the Company 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 5.1 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. SECTION 2.12. PERSONS DEEMED OWNERS. Prior to due presentment of a Note for registration of transfer and subject to Section 2.11 hereof, the Company, the Trustee, any Paying Agent, any co- registrar and any Registrar may deem and treat the person in whose name any Note shall be registered upon the register of Notes kept by the Registrar as the absolute owner of such Note (whether or not such Note shall be overdue and notwithstanding any notation of the ownership or other writing thereon made by anyone other than the Company, any co-registrar or any Registrar) for the purpose of receiving all payments with respect to such Note and for all other purposes, and none of the Company, the Trustee, any Paying Agent, any co- registrar or any Registrar shall be affected by any notice to the contrary. SECTION 2.13. CUSIP NUMBERS. The Company in issuing the Notes may use a "CUSIP" number, and if so, the Trustee shall use the CUSIP number in notices of redemption or exchange as a convenience to Holders; provided, however, that any such notice may state that no representation is made as to the correctness or accuracy of the CUSIP number printed in the notice or on the Notes, and that reliance may be placed only on the other identification numbers printed on the Notes. ARTICLE III. RANKING SECTION 3.1. RANKING OF NOTES. The Notes shall rank (i) senior to the Company's Subordinated Indebtedness and (ii) subordinate to the Company's Senior Indebtedness to the extent and in the manner provided in this Article III. SECTION 3.2. NOTES SUBORDINATED TO SENIOR INDEBTEDNESS. (a) The Company agrees, and each Holder of the Notes by his acceptance thereof likewise agrees, that the payment of the principal of, and interest on and any other amounts under, the Notes (all of the foregoing, a "Payment" or "Distribution") is subordinated and junior in right and time of payment, to the extent and in the manner provided in this Article III, to the prior irrevocable payment in full in cash of all Senior Indebtedness outstanding on the date hereof and shall be senior in right of payment to all Indebtedness (except the Senior Indebtedness) hereafter created, incurred, assumed or guaranteed by the Company. A Payment or Distribution shall include any asset of any kind or character, and may consist of cash, securities or other property, by set-off or otherwise, and shall include, without limitation, any purchase, redemption or other acquisition of Notes or the making of any deposit of funds pursuant to this Indenture. (b) The Senior Indebtedness of the Company shall continue to be Senior Indebtedness and entitled to the benefit of these subordination provisions irrespective of any amendment, modification, refunding, refinancing or waiver of any term of any instrument relating to refinancing of the Senior Indebtedness. (c) All the provisions of this Indenture and the Notes shall be subject to the provisions of this Article III so far as they may be applicable thereto, except that nothing in this Article III shall apply to claims for, or payments to, the Trustee under or pursuant to Section 8.7. (d) No right of any holder of any Senior Indebtedness to enforce subordination as herein provided shall at any time or in any way be affected or impaired by any failure to act on the part of the Company, any Paying Agent, the Holders of the Notes, the Trustee or the holders of the Senior Indebtedness, or by any noncompliance by the Company, any Paying Agent, the Holders of the Notes or the Trustee with any of the terms, provisions and covenants of the Notes or this Indenture, regardless of any knowledge thereof that any such holder of Senior Indebtedness may have or be otherwise charged with. (e) Except for such Payments or Distributions permitted to be made to the Holders of the Notes pursuant to Section 3.3, any Payment or Distribution, whether in cash, securities or other property which would otherwise, but for the terms hereof, be payable or deliverable in respect of the Subordinated Indebtedness shall be paid or delivered directly to the holders of the Senior Indebtedness until all Senior Indebtedness is irrevocably paid in full in cash and all commitments to lend under the Senior Credit Facility Documents shall have been terminated. Each of the Trustee and the Holders of the Notes irrevocably authorizes, empowers and directs any debtor, debtor in possession, receiver, trustee, liquidator, custodian, conservator or other person having authority, to pay or otherwise deliver all such Payments and Distributions to the holders of the Senior Indebtedness. Each of the Trustee and the Holders of the Notes also irrevocably authorizes and empowers the holders of the Senior Indebtedness, in the name of such Trustee and the Holders of the Notes, to demand, sue for, collect and receive any and all such Payments and Distributions. (f) Each of the Trustee and the Holders of the Notes agrees not to initiate, prosecute or participate in any claim, action or other proceeding challenging the enforceability, validity, perfection or priority of the Senior Indebtedness, any liens and security interests securing the Senior Indebtedness, any claim or adequate protection rights granted or allowed by a bankruptcy court in favor of the Senior Indebtedness or the holders of the Senior Indebtedness, the terms of any proposed orders authorizing the use of cash collateral to which a majority of the holders of the Senior Indebtedness consents, or the terms of any proposed debtor-in-possession financing to be provided by the holders of the Senior Indebtedness or otherwise supported by a majority of the holders of the Senior Indebtedness in such Proceeding, including, without limitation, any claim or objection based on lack of adequate protection with respect to the Subordinated Indebtedness. (g) Each of the Trustee and the Holders of the Notes agrees to execute, verify, deliver and file any proofs of claim in respect of the Subordinated Indebtedness requested by the holders of the Senior Indebtedness in connection with any such Proceeding and hereby irrevocably authorizes, empowers and appoints the holders of the Senior Indebtedness, its agent and attorney-in-fact to (i) execute, verify, deliver and file such proofs of claim upon the failure of the Trustee or the Holders of the Notes promptly to do so prior to 15 days before the expiration of the time to file any such proof of claim and (ii) vote such claim in any such Proceeding upon the failure of the Trustee and the Holders of the Notes to do so prior to 10 days before the expiration of the time to vote any such claim; provided that the holders of the Senior Indebtedness shall have no obligation to execute, verify, deliver, file and/or vote any such proof of claim. In the event that the holders of the Senior Indebtedness vote any claim in accordance with the authority granted hereby, the Trustee and the Holders of the Notes shall not be entitled to change or withdraw such vote. (h) The Senior Indebtedness shall continue to be treated as Senior Indebtedness and the provisions of this Article III shall continue to govern the relative rights and priorities of the holders of the Senior Indebtedness and the Trustee and the Holders of the Notes even if all or part of the Senior Indebtedness or the security interests securing the Senior Indebtedness are subordinated, set aside, avoided, invalidated or disallowed in connection with any such Proceeding, and the provisions of this Article III shall be reinstated if at any time any payment of any of the Senior Indebtedness is rescinded or must otherwise be returned by any holder of Senior Indebtedness or any representative of such holder. SECTION 3.3. COMPANY NOT TO MAKE PAYMENTS WITH RESPECT TO NOTES IN CERTAIN CIRCUMSTANCES. No Payment or Distribution shall be made by the Company, the Trustee or any Paying Agent on account of principal of, interest on or any other amounts under the Notes, whether upon stated maturity, redemption or acceleration, or otherwise, or on account of the purchase or other acquisition of Notes, whether upon stated maturity, redemption or acceleration, or otherwise, until the Senior Indebtedness is irrevocably paid in full in cash and all commitments to lend under the Senior Credit Facility Documents shall be terminated. Notwithstanding the foregoing, so long as no default under the Senior Credit Facility Documents has occurred and is continuing, the Company may make and the Trustee, Paying Agent and Holders may receive, accept and retain regularly scheduled interest payments that are due under the Notes. Until the Senior Indebtedness is irrevocably paid in full in cash and all commitments to lend under the Senior Credit Facility Documents shall be terminated, the Trustee, Paying Agent, Collateral Agent and Holders of the Notes shall not, without the prior written consent of the holders of the Senior Indebtedness, take any Enforcement Action with respect to the Subordinated Indebtedness. For purposes of this Indenture, "Enforcement Action" shall mean (a) to take any enforcement action or otherwise commence the exercise of remedies against the Company or any guarantor of the Subordinated Indebtedness to collect all or any part of the Subordinated Indebtedness, including by way of set-off, (b) to sue for payment of, or to initiate or participate with others in any suit, action or proceeding against the Company or any such guarantor to (i) enforce payment of or to collect the whole or any part of the Subordinated Indebtedness or (ii) commence judicial enforcement of any of the rights and remedies under the Subordinated Indebtedness Documents or applicable law with respect to the Subordinated Indebtedness, (c) to accelerate the Subordinated Indebtedness, (d) to exercise any put option or to cause the Company or any such guarantor to honor any redemption or mandatory prepayment obligation under any Subordinated Indebtedness Document or (e) take any action under the provisions of any state or federal law, including, without limitation, the Uniform Commercial Code, or under any contract or agreement, to enforce, foreclose upon, take possession of or sell any property or assets of the Company or any such guarantor. Upon any acceleration of the principal of the Notes or any payment by the Company or distribution of assets of the Company of any kind or character, whether in cash, property or securities, to creditors upon any dissolution or winding up or liquidation or reorganization of the Company, whether voluntary or involuntary, or in bankruptcy, insolvency, receivership or other proceedings, all amounts due or to become due upon all Senior Indebtedness shall first be paid in full in cash, or payment thereof provided for to the satisfaction of the holders thereof, before any Payment or Distribution is made on account of the principal of, interest on or any other amount under the Notes; and upon any such dissolution or winding up or liquidation or reorganization, any Payment or Distribution by the Company or distribution of assets of the Company of any kind or character, whether in cash, property or securities (other than securities of the Company as reorganized or readjusted or securities of the Company or any other company, trust or corporation provided for by a plan of reorganization or readjustment, the payment of which is junior or otherwise subordinate, at least to the extent provided in this Article III with respect to the Notes to the payment of all Senior Indebtedness and to the payment of all securities issued in exchange therefor to the holders of the Senior Indebtedness, and the rights of the holders of Senior Indebtedness of the Company are not altered by such plan of reorganization or readjustment), to which the Holders of the Notes or the Trustee would be entitled except for the provisions of this Article III, shall be paid by the Company or by any receiver, trustee in bankruptcy, liquidating trustee, agent or other Person making such Payment or Distribution directly to the holders of Senior Indebtedness of the Company or their representative or representatives, or to the trustee or trustees under any indenture pursuant to which any instruments evidencing any Senior Indebtedness may have been issued, as their respective interests may appear, to the extent necessary to pay all Senior Indebtedness in full in cash, after giving effect to any concurrent payment or distribution to or for the holders of Senior Indebtedness, before any Payment or Distribution is made to the Holders of the Notes or to the Trustee, except that the Trustee will have a lien for the payment of its fees and expenses. In the event that, notwithstanding the foregoing, any Payment or Distribution by the Company of any kind or character, (whether such payment shall be in cash, property or securities) which is prohibited by the foregoing, shall have been made to the Trustee, Paying Agent or the Holders of the Notes before all Senior Indebtedness is irrevocably paid in full in cash, or provision is made for such payment to the satisfaction of the holders thereof, and if such fact shall then have been or thereafter be made known to the Trustee, Paying Agent or, as the case may be, such Holder, then and in such event such Payment or Distribution shall be paid over by the Trustee, Paying Agent or such Holder or delivered to the holders of Senior Indebtedness or their representative or representatives, or to the trustee or trustees under any indenture pursuant to which any instruments evidencing any Senior Indebtedness may have been issued, as their respective interests may appear, for application to the payment of all Senior Indebtedness remaining unpaid to the extent necessary to pay all Senior Indebtedness in full in cash, after giving effect to any concurrent Payment or Distribution to or for the holders of such Senior Indebtedness, and, until so delivered, the same shall be held in trust by any Holder of a Note as the property of the holders of Senior Indebtedness. The consolidation of the Company with, or the merger of the Company into, another Person or the liquidation or dissolution of the Company following the conveyance or transfer of its property as an entirety, or substantially as an entirety, to another corporation upon the terms and conditions provided in Article VI shall not be deemed a dissolution, winding up, liquidation or reorganization for the purposes of this Section 3.3 if such other Person shall, as a part of such consolidation, merger, conveyance or transfer, comply with the conditions stated in Article VI. Nothing in this Section shall apply to claims of, or payments to, the Trustee under or pursuant to Section 8.7. The holders of Senior Indebtedness may, at any time and from time to time, without the consent of or notice to the Holders of the Notes, without incurring responsibility to the Holders of the Notes and without impairing or releasing (or impacting the subordination provisions hereunder) the obligations of the Holders of the Notes hereunder to the holders of Senior Indebtedness: (i) change the manner, place or terms of payment or change or extend the time of payment of, or renew or alter, Senior Indebtedness, or otherwise amend in any manner Senior Indebtedness or any instrument evidencing the same or any agreement under which Senior Indebtedness is outstanding; (ii) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing Senior Indebtedness; (iii) release any Person liable in any manner for the collection of Senior Indebtedness; (iv) apply any amounts received to any liability of the Company owing to holders of Senior Indebtedness; and/or (v) exercise or refrain from exercising any rights against the Company and any other Person. SECTION 3.4. SUBROGATION OF NOTES. Subject to the prior irrevocable payment in full in cash of all amounts then due (whether by acceleration of the maturity thereof or otherwise) on account of all Senior Indebtedness at the time outstanding, the Holders of the Notes shall be subrogated to the rights of the holders of Senior Indebtedness to receive Payments or Distributions of cash, property or securities of the Company applicable to the Senior Indebtedness until the principal of, or interest on, the Notes shall be paid in full; and, for the purposes of such subrogation, no Payments or Distributions to the holders of Senior Indebtedness to which the Holders of the Notes or the Trustee would be entitled except for the provisions of this Article III, and no payments pursuant to the provisions of this Article III to the holders of Senior Indebtedness by Holders of the Notes or the Trustee, shall, as between the Company, the Company's creditors other than holders of Senior Indebtedness, and the Holders of the Notes, be deemed to be a payment by the Company to or on account of the Senior Indebtedness. It is understood that the provisions of this Article III are and are intended solely for the purpose of defining the relative rights of the Holders of the Notes, on the one hand, and the holders of Senior Indebtedness, on the other hand. Nothing contained in this Article III or elsewhere in this Indenture or in the Notes is intended to or shall impair, as among the Company, its creditors other than the holders of Senior Indebtedness, and the Holders of the Notes, the obligation of the Company, which is absolute and unconditional, to pay to the Holders of the Notes the principal of, and interest on, the Notes as and when the same shall become due and payable in accordance with their terms, or is intended to or shall affect the relative rights of the Holders of the Notes and creditors of the Company other than the holders of Senior Indebtedness, nor shall anything herein or therein prevent the Trustee or the Holder of any Note from exercising all remedies otherwise permitted by applicable law upon default under this Indenture, subject to the rights, if any, under this Article III of the holders of Senior Indebtedness in respect of cash, property or securities of the Company received upon the exercise of any such remedy. Upon any payment or distribution of assets of the Company referred to in this Article III, the Trustee, subject to the provisions of Sections 8.1 and 8.2, and the Holders of the Notes shall be entitled to rely upon any order or decree made by any court of competent jurisdiction in which any dissolution, winding up, liquidation or reorganization proceedings are pending, or certificate of the receiver, trustee in bankruptcy, liquidating trustee, agent or other Person making such payment or distribution, delivered to the Trustee or to the Holders of the Notes, for the purpose of ascertaining the Persons entitled to participate in such distribution, the holders of Senior Indebtedness and other indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article III. SECTION 3.5. AUTHORIZATION BY HOLDERS OF NOTES. Each holder of a Note by his acceptance thereof authorizes and directs the Trustee on his behalf to take such action as may be necessary or appropriate to effectuate, as between the Holder of the Note and the holders of Senior Indebtedness, the subordination provided for in this Article III and appoints the Trustee his attorney-in-fact for any and all such purposes including, without limitation, to execute, verify, deliver and file any proofs of claim which any holder of Senior Indebtedness may at any time require in order to prove and realize upon any rights or claims pertaining to the Notes and to effectuate the full benefit of the subordination contained herein. If the Trustee shall fail to do so prior to 30 days prior to the expiration of the period for filing such claims, any such holder of Senior Indebtedness shall be deemed to be irrevocably appointed the agent and attorney-in-fact of the Holder to execute, verify, deliver and file any such proofs of claim; provided that no holder of Senior Indebtedness shall incur any liability for any failure to exercise its right to file any such proofs of claim. SECTION 3.6. NOTICES TO TRUSTEE. The Company shall give prompt written notice to the Trustee of any fact known to it which would prohibit the making of any payment of moneys to or by the Trustee in respect of the Notes pursuant to the provisions of this Article III. Notwithstanding the provisions of this Article III or any other provision of this Indenture, the Trustee shall not be charged with knowledge of the existence of any facts which would prohibit the making of any payment of moneys to or by the Trustee in respect of the Notes pursuant to the provisions of this Article III unless and until the Trustee shall have received written notice thereof from the Company or a holder or holders of Senior Indebtedness or from any trustee or agent therefor; and, prior to the receipt of any such written notice, the Trustee, subject to the provisions of Sections 8.1 and 8.2, shall be entitled in all respects to assume that no such facts exist; provided, however, that if the Trustee shall not have received at least three Business Days prior to the date upon which by the terms hereof any such moneys may become payable for any purpose (including, without limitation, the payment of the principal of, or interest on, any Note) with respect to such moneys the notice provided for in this Section 3.6, then, anything herein contained to the contrary notwithstanding, the Trustee shall have the full power and authority to receive such moneys and to apply the same to the purpose for which they were received and shall not be affected by any notice to the contrary which may be received by it within three Business Days prior to such date or at any time thereafter. The Trustee shall be entitled to rely conclusively on the delivery to it of a written notice by a Person representing himself to be a holder of Senior Indebtedness (or a trustee on behalf of such holder) to establish that such notice has been given by a holder of Senior Indebtedness or a trustee or agent on behalf of any such holder. In the event that the Trustee determines in good faith that further evidence is required with respect to the right of any Person as a holder of Senior Indebtedness to participate in any payment or distribution pursuant to this Article III, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and any other facts pertinent to the rights of such Person under this Article III, and if such evidence is not furnished, the Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment. SECTION 3.7. TRUSTEE'S RELATION TO SENIOR INDEBTEDNESS. The Trustee in its individual capacity shall be entitled to all the rights set forth in this Article III in respect of any Senior Indebtedness at any time held by it, to the same extent as any other holder of Senior Indebtedness, and nothing in this Section 3.7 or elsewhere in this Indenture shall deprive the Trustee of any of its rights as such holder. With respect to the holders of Senior Indebtedness, the Trustee undertakes to perform or to observe only such of its covenants and obligations as are specifically set forth in this Article III, and no implied covenants or obligations with respect to the holders of Senior Indebtedness shall be read into this Indenture against the Trustee. The Trustee shall not owe any fiduciary duty to the holders of Senior Indebtedness and shall not be liable, in the absence of the Trustee's gross negligence or willful misconduct, to any such holder if the Trustee shall mistakenly pay over or distribute to Holders of the Notes or the Company or any other Person money or assets to which any holder of Senior Indebtedness shall be entitled by virtue of this Article III or otherwise. SECTION 3.8. NO IMPAIRMENT OF SUBORDINATION. No right of any present or future holder of any Senior Indebtedness to enforce subordination as herein provided shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of the Company, the Trustee or the Holder of any of the Notes or by any act, or failure to act, in good faith, by any such holder of Senior Indebtedness, or by any noncompliance by the Company, the Trustee or the Holder of any of the Notes with the terms, provisions and covenants of this Indenture, regardless of any knowledge thereof which any such holder may have or otherwise be charged with. SECTION 3.9. ARTICLE III NOT TO PREVENT EVENTS OF DEFAULT. The failure to make a payment on account of principal of, or interest on, the Notes by reason of any provision in this Article III shall not be construed as preventing the occurrence of an Event of Default with respect to such Notes under Section 7.1. SECTION 3.10. PAYING AGENTS OTHER THAN TRUSTEE. In any case at any time any Paying Agent other than the Trustee shall have been appointed by the Company and be then acting hereunder, the term "Trustee" as used in this Article III shall in such case (unless the context shall otherwise require) be construed as extending to and including such Paying Agent within its meaning as fully for all intents and purposes as if such Paying Agent were named in this Article III in addition to or in place of the Trustee. SECTION 3.11. NOTES SENIOR TO SUBORDINATED INDEBTEDNESS. The indebtedness represented by the Notes will be senior and prior in right of payment to all Subordinated Indebtedness, to the extent and in the manner provided in such Subordinated Indebtedness, and shall be senior and prior in right of payment to all Indebtedness hereafter created, incurred, assumed or guaranteed by the Company (except to the extent such Indebtedness constitutes Senior Indebtedness). SECTION 3.12. SUBORDINATION OF LIENS AND SECURITY INTERESTS. Subject to the terms of the Intercreditor Agreement, until the Senior Indebtedness has been irrevocably paid in full in cash and all lending commitments under the Senior Credit Facility Documents have terminated, any Liens and security interests of the Collateral Agent, Trustee or any Holder of the Notes in the Collateral which may exist shall be and hereby are subordinated for all purposes and in all respects to the Liens and security interests of the holders of the Senior Indebtedness in the Collateral, regardless of the time, manner or order of perfection of any such Liens and security interests. Each of the Trustee, Collateral Agent and the Holders of the Subordinated Indebtedness agrees that it will not at any time contest the validity, perfection, priority or enforceability of the Senior Indebtedness, the Senior Credit Facility Documents, or the Liens and security interests of the holders of the Senior Indebtedness in the Collateral securing the Senior Indebtedness. SECTION 3.13. LEGEND. Until the Senior Indebtedness has been irrevocably paid in full in cash and all lending commitments under the Senior Credit Facility Documents have terminated, the Trustee and each Holder of Subordinated Indebtedness will cause to be clearly, conspicuously and prominently inserted on the face of the Notes, as well as any renewals or replacements thereof, the following legend: This instrument and the rights and obligations evidenced hereby are subordinate in the manner and to the extent set forth in Article III of that certain Indenture, entered into as of March 15, 2002 by and between THE COMPANY, and U.S. Bank National Association, as trustee, to the senior indebtedness (as defined in such indenture) OF the Company, including, without limitation, the Peoria County Loan and Indebtedness under the Senior Credit Facility Documents, each as defined in the indenture; and each holder of this instrument, by its acceptance hereof, irrevocably agrees to be bound by the provisions of the Indenture. SECTION 3.14. MODIFICATION OF INDENTURE. Until the Senior Indebtedness has been irrevocably paid in full in cash and all lending commitments under the Senior Credit Facility Documents have terminated, and notwithstanding anything to the contrary contained in this Indenture, the Trustee and the Holders of the Notes shall not, without the prior written consent of the holders of the Senior Indebtedness, agree to any amendment, restatement, modification, refinancing, refunding or supplement to this Indenture or the Notes. SECTION 3.15. ASSIGNMENT OF SENIOR INDEBTEDNESS. Any holder of the Senior Indebtedness may, from time to time, without notice to the Trustee or any Holder of the Notes, assign or transfer any or all of the Senior Indebtedness or any interest therein to any Person and, notwithstanding any such assignment or transfer, or any subsequent assignment or transfer, the Senior Indebtedness shall, subject to the terms hereof, be and remain Senior Indebtedness for purposes of this Indenture, and every assignee or transferee of any of the Senior Indebtedness or of any interest therein shall, to the extent of the interest of such assignee or transferee in the Senior Indebtedness, be entitled to rely upon and be the third party beneficiary of the subordination provided under this Indenture and shall be entitled to enforce the terms and provisions hereof. The holders of the Senior Indebtedness shall be third party beneficiaries under this Article III hereof. SECTION 3.16. RELEASE OF LIENS. Subject to the Intercreditor Agreement, the holders of the Senior Indebtedness' rights with respect to the Collateral include the right to release any or all of the Collateral from any or all liens or encumbrances in favor of the holders of the Senior Indebtedness, the Trustee, the Collateral Agent and the Holders of the Notes in connection with any sale of all or any portion of the Collateral. The Trustee, the Collateral Agent and the Holders of the Notes are hereby deemed to have consented to all such sales. Upon the request of the holders of the Senior Indebtedness, the Collateral Agent shall deliver to the holders of the Senior Indebtedness such duly executed and undated UCC and, as applicable, intellectual property terminations, satisfactions and discharges of mortgages (the term "mortgage" being deemed to include mortgage deeds, deeds of trust and other similar instruments creating a lien on real property), termination statements and partial release statements (in blank as to the assets being released), as the holders of the Senior Indebtedness may request with respect to the Collateral Agent's and Holders of the Notes' liens on any or all of the Company's assets. If the holders of the Senior Indebtedness shall determine, in connection with any sale of Collateral, that the termination, satisfaction, discharge or partial release of the lien on all or any portion of the Collateral in connection with such sale is necessary or advisable, the holders of the Senior Indebtedness may deliver to the applicable purchaser at such sale (or, upon the request of such purchaser, file) such previously delivered termination, satisfaction, discharge or partial release documents, which partial release documents the holders of the Senior Indebtedness are hereby authorized to complete (whether one or more and from time to time)) by inserting the description of the assets to be released. The Collateral Agent shall execute such other release, satisfaction, discharge and termination documents and instruments and shall take such further actions as the holders of the Senior Indebtedness shall request. The Trustee, Collateral Agent and Holders of the Notes each hereby irrevocably constitute and appoint the holders of the Senior Indebtedness, with full power of substitution, as its true and lawful attorney-in-fact with full irrevocable power and authority in the place and stead of such Trustee, Collateral Agent and Holders of the Notes and in their name or in the holders of the Senior Indebtedness' own name, from time to time in the holders of the Senior Indebtedness' discretion, for the purpose of carrying out the terms of this Section 3.16, to take any and all appropriate action and to execute any and all documents and instruments which may be necessary or desirable to accomplish the purposes of this Section 3.16, including, without limitation, any terminations of financing statements, partial lien releases, mortgage satisfactions and discharges, endorsements, assignments or other instruments of transfer, termination or release, and, in addition, to take any and all other appropriate and commercially reasonably action for the purpose of carrying out the terms of this Section 3.16. The Trustee, Collateral Agent and Holders of the Notes hereby ratify all that said attorneys shall lawfully do or cause to be done pursuant to the power of attorney granted in this Section 3.16. No person to whom this power of attorney is presented, as authority for holders of the Senior Indebtedness to take any action or actions contemplated hereby, shall be required to inquire into or seek confirmation from the Trustee, Collateral Agent or Holders of the Notes as to the authority of the holders of the Senior Indebtedness to take any action described herein, or as to the existence of or fulfillment of any condition to this power of attorney, which is intended to grant to the holders of the Senior Indebtedness unconditionally the authority to take and perform the actions contemplated herein. Each of the Trustee, Collateral Agent and the Holders of the Notes irrevocably waives any right to commence any suit or action, in law or equity, against any person or entity which acts in reliance upon or acknowledges the authority granted under this power of attorney. SECTION 3.17. AMENDMENT OF ARTICLE III. Notwithstanding any provision hereof to the contrary, no amendment or modification of this Article III shall be effective against any holder of Senior Indebtedness, the Trustee, the Collateral Agent, the Paying Agent or any Holder of the Notes unless the holders of the Senior Indebtedness so consent. ARTICLE IV. REDEMPTION SECTION 4.1. NOTICES TO TRUSTEE. If the Company elects to redeem Notes pursuant to the provisions of Section 4.7 hereof, it shall furnish to the Trustee, at least 45 days but not more than 60 days before the Redemption Date, an Officers' Certificate of the Company setting forth the Redemption Date, the principal amount of Notes to be redeemed and the Redemption Price. If the Registrar is not the Trustee, the Company shall, concurrently with each notice of redemption, cause the Registrar to deliver to the Trustee a certificate (upon which the Trustee may rely) setting forth the principal amounts of Notes held by each Holder. SECTION 4.2. SELECTION OF NOTES. If less than all of the Notes are to be redeemed, the Trustee shall select the Notes or portions thereof to be redeemed by lot, pro rata or by such other method as the Trustee shall deem fair and appropriate. In the event of partial redemption by lot, the particular Notes or portions thereof 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 or portions thereof selected for redemption and, in the case of any Note selected for partial redemption, the principal amount thereof to be redeemed. Notes and portions thereof selected shall be in amounts of $500 or even multiples thereof; 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 $500, shall be redeemed. SECTION 4.3. NOTICE OF OPTIONAL REDEMPTION. In the event Notes are to be redeemed pursuant to Section 4.7 hereof, at least 30 days but not more than 60 days before the Redemption Date, the Company shall mail a notice of redemption to each Holder whose Notes are to be redeemed in whole or in part at its registered address, with a copy to the Trustee. The notice shall identify the Notes or portions thereof to be redeemed, including CUSIP numbers, 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 will be issued; (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 and accrued interest thereon to the Redemption Date; (f) that, unless the Company defaults in making the redemption payment, interest on Notes called for redemption will cease to accrue on and after the Redemption Date, and the only remaining right of the Holders of such Notes is to receive payment of the Redemption Price and accrued interest thereon to the Redemption Date upon surrender to the Paying Agent of the Notes redeemed; and (g) if fewer than all the Notes are to be redeemed, the identification of the particular Notes (or portions thereof) to be redeemed, as well as the aggregate principal amount of the Notes to be redeemed and the aggregate principal amount of Notes to be outstanding after such partial redemption. If the Redemption Date is on or after an interest record date and on or before the related Interest Payment Date, any accrued and unpaid interest to the Redemption Date 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 pursuant to the redemption. At the Company's request, the Trustee shall give the notice of redemption in the Company's name and at its expense; provided that the Company shall deliver to the Trustee, at least 40 days prior to the Redemption Date, an Officers' Certificate of the Company 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 4.4. EFFECT OF NOTICE OF REDEMPTION. Once notice of redemption is mailed, Notes or portions thereof called for redemption become due and payable on the Redemption Date at the Redemption Price. Upon surrender to any Paying Agent, such Notes or portions thereof shall be paid at the Redemption Price, plus accrued interest to the Redemption Date; provided, however, that installments of interest which are due and payable on or prior to the Redemption Date shall be payable to the Holders of such Notes, registered as such, at the close of business on the relevant record date for the payment of such installment of interest. SECTION 4.5. DEPOSIT OF REDEMPTION PRICE. On or before each Redemption Date, the Company shall irrevocably deposit with the Trustee or with the Paying Agent money sufficient to pay the aggregate amount due on all Notes to be redeemed on that date, including without limitation any accrued and unpaid interest to the Redemption Date. Upon written request by the Company, the Trustee or the Paying Agent shall promptly return to the Company any money not required for that purpose. Unless the Company defaults in making such payment, interest on the Notes to be redeemed will cease to accrue on the applicable Redemption Date, whether or not such Notes are presented for payment. If any Note called for redemption shall not be so paid upon surrender because of the failure of the Company to comply with the preceding paragraph, interest will be paid on the unpaid Redemption Price from the applicable Redemption Date until such amount is paid, and on any interest not paid on such amount, in each case at the rate provided in the Notes and in Section 5.1 hereof. SECTION 4.6. NOTES REDEEMED IN PART. Upon surrender of a Note that is redeemed in part, the Company shall issue and the Trustee shall authenticate for the Holder at the expense of the Company a new Note equal in principal amount to portion of the Note surrendered that is not to be redeemed. SECTION 4.7. OPTIONAL REDEMPTION. (a) At any time, and from time to time, after the Issue Date, the Notes will be subject to redemption 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 Price plus accrued and unpaid interest thereon to the applicable Redemption Date. (b) Any redemption pursuant to this Section 4.7 shall be made pursuant to the provisions of Sections 4.1 through 4.6 hereof. ARTICLE V. COVENANTS SECTION 5.1. PAYMENT OF PRINCIPAL AND INTEREST. The Company shall pay or cause to be paid the principal and Redemption Price of, and interest on, the Notes on the dates, in the amounts and in the manner provided herein and in the Notes. Principal, Redemption Price and interest shall be considered paid on the date due if the Paying Agent, if other than the Company, holds as of 5:00 p.m. Eastern Time on the Business Day immediately preceding such due date money deposited by the Company in immediately available funds and designated for and sufficient to pay the aggregate amount then due. The Company shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal and Redemption Price 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 at the same rate to the extent lawful. SECTION 5.2. COMPLIANCE CERTIFICATE. (a) The Company shall deliver to the Trustee, within 60 days after the end of each of the first three fiscal quarters of each fiscal year, and within 90 days after the end of each fiscal year, an Officers' Certificate of the Company stating that a review of the activities of the Company and its Subsidiaries during the preceding fiscal period 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 in all material respects, 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 this Indenture in all material respects and is not in Default in the performance or observance of any of the terms, provisions and conditions of this Indenture (and, if a Default or Event of Default shall have occurred, describing each such Default or Event of Default and its status with particularity) of which he or she may have knowledge, 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. The Officers' Certificate shall also notify the Trustee should the Company elect to change the manner in which it fixes its fiscal year end. (b) The Company shall, so long as any of the Notes are outstanding, deliver to the Trustee, forthwith (and in any event within five days) upon any of its Officers becoming aware of any Default or Event of Default an Officers' Certificate of the Company specifying such Default or Event of Default. SECTION 5.3. TAXES. The Company shall pay or discharge, and shall cause each of its Subsidiaries to pay or discharge, 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 5.4. 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 such law had not been enacted. SECTION 5.5. CONTINUED EXISTENCE. Subject to Article VI 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 in accordance with the organizational documents (as the same may be amended from time to time) of the Company and (ii) the material rights (charter and statutory), licenses and franchises of the Company, except to the extent that the Board determines in good faith that the preservation of such right, license or franchise is no longer necessary or desirable in the conduct of the business of the Company and its Subsidiaries taken as a whole and that the loss thereof is not disadvantageous in any material respect to the Holders. SECTION 5.6. IMPAIRMENT OF SECURITY INTEREST. The Company shall not, and shall not permit any of its Subsidiaries to, take or omit to take any action, which action or omission might or would have the result of affecting or impairing the security interest in favor of the Collateral Agent, on behalf of the Trustee and the Holders, with respect to the Collateral, and the Company shall not grant to any Person (other than the Collateral Agent on behalf of the Trustee and the Holders) any interest whatsoever in the Collateral, except, in either case, as expressly permitted by this Indenture and the Security Documents. SECTION 5.7. AMENDMENT TO SECURITY DOCUMENTS. The Company will not amend, modify or supplement, or permit or consent to any amendment, modification or supplement of, the Security Documents in any way which would be adverse to the Holders without the consent of the holders of at least 66 2/3% in aggregate principal amount of the then outstanding Notes. SECTION 5.8. INSPECTION AND CONFIDENTIALITY. (a) The Company shall, and shall cause each of its Subsidiaries to, permit authorized representatives of the Trustee and the Collateral Agent to visit and inspect the properties of the Company or its Subsidiaries, and any or all books, records and documents in the possession of the Company relating to the Collateral, and to make copies and take extracts therefrom and to visit and inspect the Collateral, all upon reasonable prior notice and at such reasonable times during normal business hours and as often as may be reasonably requested. (b) The Trustee and the Collateral Agent and their respective authorized representatives referred to in Section 5.8(a) agree not to use any information obtained pursuant to this Section 5.8 for any unlawful purpose and to keep confidential and not to disclose any such information to any person except that (i) the recipient of the information may disclose any information that becomes publicly available other than as a result of disclosure by such recipient, (ii) the recipient of the information may disclose any information that its counsel reasonably concludes is necessary to be disclosed by law, pursuant to any court or administrative order or ruling or in any pending legal or administrative proceeding or investigation after prior written notice, reasonable under the circumstances, to the Company, and (iii) the recipient of the information may disclose any information necessary to be disclosed pursuant to any provision of the TIA or pursuant to this Indenture. ARTICLE VI. SUCCESSORS SECTION 6.1. MERGER, CONSOLIDATION, OR SALE OF ASSETS. The Company shall not consolidate or merge with or into any other Person (whether or not the Company is the surviving corporation), or permit any other Person to consolidate or merge with or into the Company, nor will the Company sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its assets in one or more related transactions to another corporation, Person or entity unless: (i) the Company shall be 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 (the "Surviving Entity"), is a corporation organized and existing under the laws of the United States, any state thereof, or the District of Columbia; (ii) the Surviving Entity, if any, assumes by supplemental indenture in a form reasonably satisfactory to the Trustee all of the obligations of the Company under the Notes and this Indenture; (iii) immediately after giving effect to such transaction, no Default or Event of Default shall have occurred and be continuing; and (iv) in the case of a transfer of assets, the Surviving Entity has acquired all or substantially all of the assets of the Company as an entirety. The Company shall deliver to the Trustee prior to the consummation of the proposed transaction an Officers' Certificate of the Company to the foregoing effect and an Opinion of Counsel stating that the proposed transaction and such supplemental indenture comply with this Indenture. SECTION 6.2. SUCCESSOR CORPORATION SUBSTITUTED. Upon any consolidation or merger, or any sale, lease, conveyance or other disposition of all or substantially all of the assets of the Company in accordance with Section 6.1 hereof, the Surviving Entity shall succeed to and be substituted for, and may exercise every right and power of, the Company under this Indenture with the same effect as if such Surviving Entity had been named as the Company herein; provided, however, that the predecessor Company shall not be relieved from the obligation to pay the principal or Redemption Price of, or interest on, the Notes except in the case of a sale of all of the Company's assets that meets the requirements of Section 6.1 hereof. ARTICLE VII. DEFAULTS AND REMEDIES SECTION 7.1. EVENTS OF DEFAULT. An "Event of Default" occurs if: (a) the Company defaults in the payment when due of interest on the Notes and such default continues for a period of 30 days; (b) the Company defaults in the payment when due of principal or Redemption Price of the Notes, whether at maturity, upon redemption or otherwise; (c) the Company fails to comply with any other covenant, representation, warranty or other agreement in this Indenture or the Notes and such failure to comply continues for a period of 30 days after notice thereof from the Trustee or the Holders of at least 30% in aggregate principal amount of the then outstanding Notes; (d) 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 such Subsidiaries, whether such Indebtedness or Guarantee now exists, or is created after the date of this Indenture, which default results in the acceleration of any such Indebtedness prior to its express maturity and, in each case, the principal amount of such Indebtedness, together with the principal amount of any other such Indebtedness the maturity of which has been so accelerated, aggregates $10 million or more; (e) 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 Subsidiaries and such judgment or judgments are not paid, stayed or discharged (by operation of appeal or otherwise) for a period of 60 days, provided that the aggregate of all such judgments exceeds $10 million (excluding judgments to the extent covered by insurance in respect of which coverage has not been disclaimed or denied); (f) any of the Security Documents ceases to be in full force and effect or any of the Security Documents ceases to give the Trustee the Liens, rights, powers and privileges purported to be created thereby in any material respect; (g) the Company or any Subsidiary: (i) commences a voluntary case under any Bankruptcy Law, (ii) consents to the entry of an order for relief against it in an involuntary case, (iii) consents to the appointment of a custodian or receiver 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 in an involuntary case against the Company or any Subsidiary; (ii) appoints a custodian or receiver of the Company or any Subsidiary or for all or substantially all of the property of any of the foregoing; (iii) orders the liquidation of the Company or any Subsidiary; and (iv) the order or decree remains unstayed and in effect for 60 consecutive days. SECTION 7.2. ACCELERATION. If any Event of Default occurs and is continuing, the Trustee or the Holders of at least 30% in principal amount of the then outstanding Notes by written notice to the Company (and the Trustee, if such notice is given by such Holders) may declare all the Notes to be due and payable immediately. Upon any such declaration, the entire principal amount of, and accrued and unpaid interest on the Notes shall become immediately due and payable, unless all Events of Default specified in such acceleration notice (other than any Event of Default in respect of non-payment of principal, Redemption Price or interest, if any, which has become due solely by reason of such declaration of acceleration) shall have been cured. Notwithstanding the foregoing, if an Event of Default specified in clause (g) or (h) of Section 7.1 hereof occurs with respect to the Company or any Subsidiary, all outstanding Notes shall be due and payable immediately without further action or notice. 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, Redemption Price or interest) if it determines in good faith that withholding notice is in their interest. SECTION 7.3. OTHER REMEDIES. If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy to collect the payment of principal or Redemption Price of, or interest on, the Notes or to enforce the performance of any provision of the Notes or this Indenture. Subject to Article III hereof, if an Event of Default occurs under this Indenture and a declaration of acceleration of the Notes occurs as a result thereof, the Trustee, on behalf of the Holders of the Notes, in addition to any rights or remedies available to it hereunder, may take such action as it deems advisable to protect and enforce its rights in the Collateral, including the institution of foreclosure proceedings. Subject to Article III hereof, 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, and any recovery or judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, be for the ratable benefit of the Holders of the Notes. A delay or omission by the Trustee or any Holder 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 7.4. WAIVER OF PAST DEFAULTS; RECISSION OF ACCELERATION. Holders of at least 66 2/3% of the 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 with regard to a continuing Default or Event of Default in the payment of the principal or Redemption Price of, or interest on, the Notes. Except as provided in the immediately preceding sentence, 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 for all Defaults or Events of Default arising from provisions of this Indenture. 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. After a declaration of acceleration has been made, but before a judgment or decree for payment of the money due has been obtained by the Trustee, the Holders of not less than a majority in aggregate principal amount of Notes outstanding, by written notice to the Company and the Trustee, may annul such declaration if (i) the Company has paid or deposited with the Trustee a sum sufficient to pay (a) all sums paid or advanced by the Trustee under this Indenture and the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, (b) all overdue interest on all Notes, and (c) to the extent that payment of such interest is lawful, interest upon overdue interest at the rate borne by the Notes; and (ii) all Events of Default, other than the non-payment of principal of the Notes which has become due solely by such declaration of acceleration, have been cured or waived. SECTION 7.5. 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 applicable law or this Indenture that the Trustee reasonably determines may be unduly prejudicial to the rights of other Holders of Notes or that may subject the Trustee to personal liability and shall be entitled to the benefit of Section 8.1(c)(iii) and (e) hereof. SECTION 7.6. LIMITATION ON SUITS. A Holder of a Note may pursue a remedy with respect to this Indenture or the Notes only if: (a) the Holder of a Note gives to the Trustee written notice of a continuing Event of Default; (b) the Holders of at least 30% in principal amount of the then outstanding Notes make a written request to the Trustee to pursue the remedy; (c) such Holder 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 7.7. 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 or Redemption Price of, or interest on, the Note, on or after the respective due dates therefor, 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 written consent of the holders of at least 66 2/3% in aggregate principal amount of the then outstanding Notes, except to the extent that the institution or prosecution of such suit or the entry of judgment therein would, under applicable law, result in the surrender, impairment, waiver or loss of the Lien of this Indenture and the Security Documents upon the Collateral. SECTION 7.8. COLLECTION SUIT BY TRUSTEE. If an Event of Default specified in Section 7.1(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, Redemption Price and interest remaining unpaid on the Notes and interest on overdue principal and Redemption Price and, to the extent lawful, interest, and such further amounts as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expense, disbursements and advances of the Trustee, its agents and counsel. SECTION 7.9. 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 (including accountants, experts or such other professionals as the Trustee deems necessary, advisable or appropriate) 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 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 8.7 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 8.7 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 7.10. PRIORITIES. Subject to Article III hereof, if the Trustee collects any money pursuant to this Article, it shall pay out the money in the following order: First: to the Trustee for amounts due under Section 8.7, and then to the Collateral Agent for amounts due under the Security Documents; Second: to Holders of Notes for amounts due and unpaid on the Notes for principal, Redemption Price and interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for principal, Redemption Price 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 special record date and payment date for any payment to Holders of Notes pursuant to this Section 7.10. SECTION 7.11. 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 pursuant to Section 7.6 hereof, or a suit by Holders of more than 10% in principal amount of the then outstanding Notes. ARTICLE VIII. TRUSTEE SECTION 8.1. 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 thereof, as a prudent person would exercise or use under the circumstances in the conduct of his own affairs. (b) Except during the continuance of an Event of Default: (i) the duties of the Trustee shall be determined solely by the express provisions of this Indenture and the TIA (to the extent the TIA is otherwise applicable hereto) 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 or the TIA against the Trustee; and (ii) in the absence of bad faith on its part, the Trustee may conclusively rely, without investigation, as to the truth of the statements and the correctness of the opinions expressed therein, upon any statements, 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 on their face 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 7.5 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 this Section 8.1. (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, pursuant to the provisions of this Indenture, including, without limitation, Section 7.5 hereof, unless such Holder shall have offered to the Trustee security and indemnity satisfactory to it against any loss, liability or expense which might be incurred by it in compliance with such request or direction. SECTION 8.2. RIGHTS OF TRUSTEE. (a) The Trustee may conclusively rely and shall be protected in acting or refraining from acting upon any document believed by it to be genuine and to have been signed or presented by the proper Person. The Trustee 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 of the Company 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 of the Company or Opinion of Counsel. The Trustee may consult with counsel and the written advice of such counsel and Opinions 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. (c) The Trustee may act through its attorneys, accountants, experts and such other professionals as the Trustee deems necessary, advisable or appropriate and shall not be responsible for the misconduct or negligence of any attorney, accountant, expert or other such professional 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 sufficiently evidenced by a written order signed by two Officers of the Company. (f) The Trustee shall not be charged with knowledge of any Default or Event of Default under Section 7.1 hereof (other than under Section 7.1(a) or Section 7.1(b) hereof) unless either (i) a Responsible Officer shall have actual knowledge thereof, or (ii) the Trustee shall have received notice thereof in accordance with Section 12.2 hereof from the Company or any Holder of the Notes. SECTION 8.3. 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 within the meaning of the TIA it must eliminate such conflict within 90 days, apply (subject to the consent of the Company and only if Notes are registered under the Securities Act at such time) to the Commission 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 8.10 and 8.11 hereof. SECTION 8.4. 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 in the Notes or any information, statement or recital in any other document, including, without limitation, any offering memorandum or other disclosure material, prepared or distributed in connection with the sale of the Notes or pursuant to this Indenture other than its certificate of authentication. SECTION 8.5. NOTICE OF DEFAULTS. If a Default or Event of Default occurs and is continuing, 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 in payment 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 8.6. 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, for so long as Notes remain outstanding and to the extent the TIA is applicable hereto, 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), and the Trustee shall also comply with TIA ss. 313(b). In each such case, the Trustee shall transmit by mail all reports in the manner required by TIA ss. 313(c) and 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 Commission and each stock exchange on which the Notes are then 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 8.7. COMPENSATION, REIMBURSEMENT AND INDEMNITY. The Company shall pay to the Trustee from time to time such compensation as the Company may negotiate with the Trustee in accordance with industry standards for its acceptance of this Indenture and the rendering by it of the services required 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 or on behalf of it in addition to the compensation for its services. Such expenses shall include the reasonable compensation, disbursements and expenses of the Trustee's attorneys, accountants, experts and such other professionals as the Trustee deems necessary, advisable or appropriate. 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 its duties under Section 10.6 hereof), including the costs and expenses of enforcing this Indenture (including this Section 8.7) or any Security Document against the Company or the applicable Subsidiary (including, without limitation, expenses of any foreclosure sale pursuant to the Mortgages and any advances, fees and expenses, including, without limitation, reasonable fees and expenses of the Trustee's legal counsel, and of any judicial proceedings wherein such foreclosure sale may be made, and all expenses, liabilities and advances reasonably made or incurred by the Trustee under the Mortgages, together with interest on all such advances made by the Trustee at the rate set forth in the Mortgages, and including the payments of any Impositions (as defined in the Mortgages), except any taxes, assessments or other charges subject to which the Mortgaged Property shall have been sold) and defending itself against or investigating any claim (whether asserted by the Company, any Subsidiary, 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 willful misconduct. 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 shall defend any claim or threatened claim asserted against the Trustee, and the Trustee shall cooperate in the defense. 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 8.7 shall survive the resignation or removal of the Trustee, the satisfaction and discharge of this Indenture and the termination of this Indenture. To secure the Company's payment obligations in this Section 8.7, 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 or Redemption Price of, or interest on, particular Notes. Such Lien shall survive the resignation or removal of the Trustee, the satisfaction and discharge of this Indenture and the termination of this Indenture. When the Trustee incurs expenses or renders services after an Event of Default specified in Section 7.1(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. SECTION 8.8. 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. The Company may remove the Trustee if: (a) the Trustee fails to comply with Section 8.10 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, receiver or public officer takes charge of the Trustee or its property for the purpose of rehabilitation, conversation or liquidation; 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 date on which 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. If a successor Trustee does not take office within 30 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 bona fide holder of a Note or Notes for at least six months, fails to comply with Section 8.10, 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 Company shall mail a notice of the Trustee's succession to each Holder 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 8.7 hereof. Notwithstanding replacement of the Trustee pursuant to this Section 8.8, the Company's obligations under Section 8.7 hereof shall continue for the benefit of the retiring Trustee. SECTION 8.9. 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 that is eligible under Section 8.10 hereof, the successor corporation without any further act shall be the successor Trustee. SECTION 8.10. 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 (including the District of Columbia) that is authorized under such laws to exercise corporate trust power, that is subject to supervision or examination by federal or state authorities and that has a combined capital and surplus of at least $100.0 million as set forth in its most recent published annual report of condition. In the event this Indenture shall become qualified under the TIA, this Indenture shall at all times thereafter have a Trustee who satisfies the requirements of TIA ss. 310(a)(1), (2) and (5) and such Trustee shall be subject to TIA ss. 310(b). SECTION 8.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY. In the event this Indenture shall become qualified under the TIA, the Trustee shall be subject to TIA ss. 311(a), excluding any creditor relationship listed in TIA ss. 311(b), and any Trustee who thereafter resigns or is removed shall be subject to TIA ss. 311(a) to the extent indicated therein. SECTION 8.12. MONIES TO BE HELD IN TRUST. Subject to the provisions of Section 8.4, all monies received by the Trustee shall, until used or applied as herein provided, be held in trust for the purposes for which they were received. Money held by the Trustee in trust thereunder need not be segregated from other funds except to the extent required by law. The Trustee shall be under no liability for interest on any money received by it hereunder except as may be agreed from time to time by the Company and the Trustee. ARTICLE IX. SATISFACTION AND DISCHARGE OF INDENTURE SECTION 9.1. DISCHARGE OF INDENTURE. When (a) the Company shall deliver to the Trustee for cancellation all Notes theretofore authenticated (other than any Notes which have been mutilated, destroyed, lost or stolen and in lieu of or in substitution for which other Notes shall have been authenticated and delivered) and not theretofore canceled, or (b) all the Notes not theretofore canceled or delivered to the Trustee for cancellation shall have become due and payable, or are by their terms to become due and payable within one year or are to be canceled for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption, and the Company shall deposit with the Trustee, in trust, monies sufficient to pay at maturity or upon redemption of all of the Notes (other than any Notes which shall have been mutilated, destroyed, lost or stolen and in lieu of or in substitution for which other Notes shall have been authenticated and delivered) not theretofore canceled or delivered to the Trustee for cancellation, including principal and interest due or to become due to such date of maturity or Redemption Date, as the case may be, and if in either case the Company shall also pay or cause to be paid all other sums payable hereunder by the Company, then this Indenture shall cease to be of further effect (except as to (i) remaining rights of registration of transfer, substitution and exchange of Notes, (ii) rights hereunder of Holders to receive payments of principal of and interest on, the Notes and the other rights, duties and obligations of Holders, as beneficiaries hereof with respect to the amounts, if any, so deposited with the Trustee and (iii) the rights, obligations and immunities of the Trustee hereunder), and the Trustee, on demand of the Company accompanied by an Officers' Certificate and an Opinion of Counsel as required by Sections 12.4 and 12.5, respectively, and at the cost and use of the Company, shall execute proper instruments acknowledging satisfaction of and discharging this Indenture, with the Company, however, hereby agreeing to reimburse the Trustee for any costs or expenses thereafter reasonably and properly incurred by the Trustee and to compensate the Trustee for any services thereafter reasonably and properly rendered by the Trustee in connection with this Indenture or the Notes. SECTION 9.2. DEPOSITED MONEYS TO BE HELD IN TRUST BY TRUSTEE. Subject to Section 9.4, all monies deposited with the Trustee pursuant to Section 9.1 shall be held uninvested and in trust for the sole benefit of the Holders, and such monies shall be applied by the Trustee to the payment, either directly or through any Paying Agent (including the Company if acting as its own Paying Agent), to the Holders of the particular Notes for the payment or redemption of which such monies have been deposited with the Trustee, of all sums due and to become due thereon for principal and interest. SECTION 9.3. PAYING AGENT TO REPAY MONIES HELD. Upon the satisfaction and discharge of this Indenture, all monies then held by any Paying Agent for the Notes (other than the Trustee) shall, upon written request of the Company, be repaid to the Company or paid to the Trustee, and thereupon such Paying Agent shall be released from all further liability with respect to such monies. SECTION 9.4. RETURN OF UNCLAIMED MONIES.(a) Subject to the requirements of applicable law, any monies deposited with or paid to the Trustee for payment of the principal of or interest on Notes and not applied but remaining unclaimed by the Holders of Notes for two years after the date upon which the principal of or interest on such Notes, as the case may be, shall have become due and payable, shall be repaid to the Company by the Trustee on demand and all liability of the Trustee shall thereupon cease with respect to such monies, and the Holder of any of the Notes shall thereafter look only to the Company for any payment which such Holder may be entitled to collect except if an applicable abandoned property law does not so permit. SECTION 9.5. REINSTATEMENT. If the Trustee or the Paying Agent is unable to apply any money in accordance with Section 9.2 by reason of any order or judgment of any court of governmental authority enjoining, restraining or otherwise prohibiting such application, the Company's obligations under this Indenture and the Notes shall be revived and reinstated as though no deposit had occurred pursuant to Section 9.1 until such time as the Trustee or the Paying Agent is permitted to apply all such money in accordance with Section 9.2; provided, however, that if the Company makes any payment of interest on or principal of 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 X. AMENDMENT, SUPPLEMENT AND WAIVER SECTION 10.1. WITHOUT CONSENT OF HOLDERS OF NOTES. Notwithstanding Section 10.2 of this Indenture, the Company and the Trustee may amend or supplement this Indenture or the Notes without the consent of any Holder of a Note: (a) to cure any ambiguity, defect or inconsistency; (b) to provide for the assumption of the Company's obligations to the Holders of the Notes in the case of a merger or consolidation pursuant to Article VI hereof; (c) 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 Notes; (d) to comply with any applicable requirements of the Commission or the TIA as applicable; or (e) to evidence and provide for the acceptance of appointment hereunder by a successor Trustee with respect to the Notes. Upon the request of the Company, accompanied by a resolution of the Board (evidenced by an Officers' Certificate of the Company) authorizing the execution of any such amended or supplemental indenture, and upon receipt by the Trustee of the documents described in Section 8.2 hereof, the Trustee shall join with the Company 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. SECTION 10.2. WITH CONSENT OF HOLDERS OF NOTES. Except as provided below in this Section 10.2, the Company and the Trustee may amend or supplement this Indenture (including Article XI hereof, and including the defined terms used therein) 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 (including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for the Notes), and, subject to Sections 7.2, 7.4 and 7.7 hereof, any existing Default or Event of Default or compliance with any provision of this 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 consents obtained in connection with a tender offer or exchange offer for the 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): (a) reduce the principal amount of Notes whose Holders must consent to an amendment, supplement or waiver; (b) reduce the principal or Redemption Price 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; (c) reduce the rate of or change the time for payment of interest on any Note; (d) waive a Default or Event of Default in the payment of principal or Redemption Price of, 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 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; or (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 or Redemption Price of, or interest on, the Notes. In addition to the foregoing, except as expressly permitted by this Indenture (including, without limitation, in Sections 11.3, 11.4 and 11.5), no portion of the Collateral may be released without the consent of the Holders of at least 66 2/3% in aggregate principal amount of the then outstanding Notes. Upon the written request of the Company accompanied by a resolution of the Board (evidenced by an Officers' Certificate of the Company) 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 8.2 hereof, the Trustee shall join with the Company in the execution of such amended or supplemental indenture unless such amended or supplemental Indenture 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 10.2 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 10.2 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. SECTION 10.3. COMPLIANCE WITH TRUST INDENTURE ACT. Every amendment or supplement to this Indenture or the Notes shall be set forth in an amended or supplemental indenture that complies with the TIA as then in effect to the extent that the TIA is otherwise applicable to this Indenture. SECTION 10.4. 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 10.5. 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 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 10.6. TRUSTEE TO SIGN AMENDMENTS, ETC. The Trustee shall sign any amended or supplemental indenture authorized pursuant to this Article X if the amendment or supplement does not adversely affect the rights, duties, liabilities or immunities of the Trustee. In executing any amended or supplemental indenture, the Trustee shall be entitled to receive, in addition to the documents required by Sections 12.4 and 12.5 hereof, and, subject to Section 8.1, shall be fully protected in relying upon, an Officers' Certificate of the Company and an Opinion of Counsel stating that (i) the execution of such amended or supplemental indenture is authorized or permitted by this Indenture, (ii) no Event of Default shall occur as a result of the execution of such Officers' Certificate of the Company or the delivery of such Opinion of Counsel and (iii) the amended or supplemental indenture complies with the terms of this Indenture. ARTICLE XI. SECURITY DOCUMENTS SECTION 11.1. COLLATERAL AND SECURITY DOCUMENTS. (a) In order to secure the due and punctual payment of principal of and interest on the Notes when and as the same shall be due and payable, whether on an Interest Payment Date, at maturity, by acceleration, repurchase, redemption or otherwise, and interest on the overdue principal of, and interest (to the extent permitted by law), if any, on, the Notes and performance of all other obligations of the Company to the Holders or the Trustee under this Indenture and the Notes, the Company and the Collateral Agent have simultaneously with the execution of this Indenture entered into the Security Documents, pursuant to which the Company has granted to the Collateral Agent for the benefit of the Trustee and the Holders a second priority Lien on and security interest in certain of the Collateral (such Lien, subject to the terms of the Intercreditor Agreement, ranking junior in priority only to the Peoria County Loan and the Indebtedness under the Senior Credit Facility Documents). The Collateral Agent and the Company hereby agree that the Collateral Agent holds the Collateral as a secured party or mortgagee, as the case may be, in trust for the benefit of the Trustee, in its capacity as trustee, and for the ratable benefit of the Holders pursuant to the terms of the Security Documents. The Collateral Agent is authorized and directed to enter into the Intercreditor Agreement. (b) Each Holder, by accepting a Note, consents and agrees to all of the terms and provisions of the Security Documents, as the same may be in effect from time to time or may be amended from time to time in accordance with the provisions of the Security Documents and this Indenture, and authorizes and directs the Collateral Agent to act as mortgagee or secured party with respect thereto. (c) As set forth in and governed by the Security Documents, as among the Holders of Notes, the Collateral as now or hereafter constituted shall be held for the equal and ratable benefit of the Holders of the Notes without preference, priority or distinction of any thereof over any other by reason of difference in time of issuance, sale or otherwise, as security for the Notes. SECTION 11.2. RECORDING; PRIORITY; OPINIONS, ETC. (a) The Company shall at its sole cost and expense perform any and all acts and execute any and all documents (including, without limitation, the execution, amendment or supplementation of any financing statement and continuation statement or other statement) for filing under the provisions of the UCC and the rules and regulations thereunder, or any other statute, rule or regulation of any applicable federal, state or local jurisdiction, including any filings in local real estate land record offices, which are necessary or advisable and shall do such other acts and execute such other documents as may be required under any of the Security Documents, from time to time, in order to grant, perfect and maintain in favor of the Collateral Agent for the benefit of the Trustee and the Holders a valid and perfected Lien on the Collateral with the priority set forth in Section 11.1(a), subject only to the Liens permitted by the Security Documents and Permitted Liens and to preserve fully and protect the rights of the Trustee and the Holders under this Indenture. The Company shall from time to time promptly pay and satisfy all mortgage and financing and continuation statement recording and/or filing fees, charges and taxes relating to this Indenture and the Security Documents, any amendments thereto and any other instruments of further assurance. Without limiting the generality of the foregoing covenant, in the event at any time the Collateral Agent or the Trustee shall determine that additional mortgage recording, transfer or similar taxes are required to be paid to perfect or continue any Lien on any Collateral, the Company shall pay such taxes promptly upon demand by the Collateral Agent or the Trustee. (b) The Company shall, with respect to (i) below, promptly after the initial issuance of the Notes, and with respect to (ii) below, in the event of the qualification of this Indenture under the TIA, furnish to the Trustee: (i) Opinion(s) of Counsel either (a) to the effect that, in the opinion of such counsel, this Indenture and the grant of a security interest in the Collateral intended to be made by the Security Documents and all other instruments of further assurance, including, without limitation, financing statements, have been properly recorded and filed to the extent necessary to perfect the Lien on the Collateral created by the Security Documents and reciting the details of such action, and stating that as to the Liens created pursuant to the Security Documents, such recordings and filings are the only recordings and filings necessary to give notice thereof and that no re-recordings or refilings are necessary to maintain such notice (other than as stated in such opinion), or (b) to the effect that, in the opinion of such counsel, no such action is necessary to perfect such Lien; (ii) on March 15 in each year, an Opinion of Counsel, dated as of such date, either (a) to the effect that, in the opinion of such counsel, such action has been taken with respect to the recordings, registerings, filings, re-recordings, re-registerings and refilings of all financing statements, continuation statements or other instruments of further assurance as is necessary to maintain the Lien of each of the Security Documents and reciting with respect to such Liens the details of such action or referencing prior Opinions of Counsel in which such details are given, and stating that all financing statements and continuation statements have been executed and filed that are necessary fully to preserve and protect the rights of the Holders and the Trustee hereunder and under each of the Security Documents with respect to the Liens, or (b) to the effect that, in the opinion of such counsel, no such action is necessary to maintain such Liens. SECTION 11.3. RELEASE OF COLLATERAL. Except as otherwise permitted by Sections 11.4 and 11.5, the Collateral Agent shall not release Collateral from the Lien of the Security Documents unless such release is in accordance with the provisions of this Section 11.3 and of the Security Documents. The Company shall cause TIA ss.ss. 314(d) relating to the release of property or Liens to be complied with to the extent the such provision is otherwise applicable hereto. The Company shall be entitled to obtain a full release of all of the Collateral from the Lien of this Indenture and the Security Documents upon compliance with all of the conditions precedent for satisfaction and discharge of this Indenture set forth in Section 9.1 or consent of the holders of at least 66 2/3% in aggregate principal amount of the then outstanding Notes. Upon delivery by the Company to the Trustee and to the Collateral Agent of an Officers' Certificate and an Opinion of Counsel, each to the effect that all of the conditions precedent have been complied with (which may be the same Officers' Certificate and Opinion of Counsel required by Article IV), the Trustee shall take all necessary action, at the request and expense of the Company, to release and reconvey to the Company all of the Collateral, and shall deliver such Collateral in its possession to the Company including, without limitation, the execution and delivery of releases or waivers whenever necessary. SECTION 11.4. DISPOSITION OF COLLATERAL WITHOUT RELEASE. (a) So long as no Default or Event of Default shall have occurred and be continuing, the Company may, without any release or consent by the Collateral Agent or the Trustee, sell or otherwise dispose of any machinery, equipment, furniture, apparatus, tools or implements or other similar property which at such time is subject to the Lien of the Security Documents, which may have become worn out or obsolete, and, solely with respect to equipment, not exceeding individually, in Fair Market Value, $250,000, subject in all cases to any applicable requirements of and restrictions contained in the TIA. (b) In the event that that the Company has sold, exchanged, or otherwise disposed of or proposes to sell, exchange or otherwise dispose of any portion of the Collateral which under the provisions of this Section 11.4 may be sold, exchanged or otherwise disposed of by the Company without any release or consent of the Collateral Agent or the Trustee, and the Company requests the Collateral Agent or the Trustee to furnish a written disclaimer, release or quitclaim of any interest in such property under any of the Security Documents, the Collateral Agent shall promptly execute (or, if so requested by the Company, shall promptly instruct the Trustee to execute) such an instrument upon delivery to the Trustee of (i) an Officers' Certificate by the Company reciting the sale, exchange or other disposition made or proposed to be made and describing in reasonable detail the property affected thereby, and stating and demonstrating that such property is property which by the provisions of this Section 11.4 may be sold, exchanged or otherwise disposed of or dealt with by the Company without any release or consent of the Collateral Agent or the Trustee and (ii) an Opinion of Counsel stating that the sale, exchange or other disposition made or proposed to be made was duly made by the Company in conformity with Section 11.4(a) and that the execution of such written disclaimer, release or quitclaim is appropriate to confirm the propriety of such sale, exchange or other disposition under this Section 11.4. Notwithstanding the preceding sentence, all purchasers and grantees of any property or rights purporting to be released herefrom shall be entitled to rely upon any release executed by the Collateral Agent or the Trustee hereunder as sufficient for the purposes of this Indenture. SECTION 11.5. EMINENT DOMAIN AND OTHER GOVERNMENT TAKINGS. Subject to the provisions of the Security Documents, upon the occurrence of a Taking or should any of the Collateral be sold pursuant to the exercise by the United States of America or any State, municipality or other governmental authority of any right which any of them may then have to purchase, or to designate a purchaser or order a sale of, all or any part of the Collateral, the Trustee shall release the property subject to such Taking or purchase, but only upon receipt by the Trustee of the following: (a) an Officers' Certificate stating that a Taking has occurred with respect to such property and the amount of the Net Award therefor, or that such property has been sold pursuant to a right vested in the United States of America or a state, municipality or other governmental authority to purchase, or to designate a purchaser or order a sale of, such property and the amount of the proceeds of such sale, and that all conditions precedent herein provided for relating to such release have been complied with; and (b) an Opinion of Counsel substantially to the effect: (i) that a Taking has occurred with respect to such property or such property has been sold pursuant to the exercise of a right vested in the United States of America or a State, municipality or other governmental authority to purchase, or to designate a purchaser or order a sale of, such property; (ii) in the case of any Taking, that the Net Award for the property so taken has become final or that the Board has determined that an appeal from such award is not advisable in the interests of the Company or the Holders of the Notes; (iii) in the case of any such sale, that the amount of the proceeds of the property so sold is not less than the amount to which the Company is legally entitled under the terms of such right to purchase or designate a purchaser, or under the order or orders directing such sale, as the case may be; (iv) in the event that, pursuant to Section 11.5(b), the Net Award for such property or the proceeds of such sale, or a specified portion thereof, shall be certified to have been deposited with the trustee, mortgagee or other holder of a Prior Lien, that the property to be released, or a specified portion thereof, is or immediately before such Taking or purchase was subject to such Prior Lien, and that such deposit is required by such Prior Lien; and (v) that the instrument or the instruments and the Net Award or proceeds of such sale which have been or are therewith delivered to and deposited with the Trustee conform to the requirements of this Indenture and any of the Security Documents and that, upon the basis of such application, the Collateral Agent and the Trustee are permitted by the terms hereof and of the Security Documents to execute and deliver the release requested, and that all conditions precedent herein provided for relating to such release have been complied with. In any proceedings for the Taking or purchase or sale of any part of the Collateral, by eminent domain or by virtue of any such right to purchase or designate a purchaser or to order a sale, the Trustee may be represented by counsel who may be counsel for the Company. Subject to the provisions of the Security Documents, all purchase money and other obligations received by the Trustee pursuant to this Section 11.5 shall be held by the Trustee as Collateral subject to application as provided in Section 11.13. SECTION 11.6. TRUST INDENTURE ACT REQUIREMENTS. The release of any Collateral pursuant to any provision of this Article XI from any of the Security Documents or the release of, in whole or in part, the Liens created by any of the Security Documents, will not be deemed to impair the Lien of the Security Documents in contravention of the provisions hereof if and to the extent the Collateral or Liens are released pursuant to the applicable Security Documents and pursuant to the terms hereof. The Trustee and each of the Holders acknowledge that a release of Collateral or Liens strictly in accordance with the terms of the Security Documents and the terms hereof will not be deemed for any purpose to be an impairment of the Liens created pursuant to the Security Documents in contravention of the terms of this Indenture. Without limitation, the Company and each other obligor on the Notes shall cause TIA ss. 314(d) relating to the release of property or securities from the Liens of each hereof and of the Security Documents to be complied with to the extent such provision is otherwise applicable hereto. In any such event, any certificate or opinion required by TIA ss. 314(d), if applicable, may be made by an officer of the Company, except for cases in which TIA ss. 314(d) requires that such certificate or opinion be made by an independent person. SECTION 11.7. SUITS TO PROTECT COLLATERAL. Subject to the provisions of the Security Documents, the Trustee shall have power to institute and to maintain such suits and proceedings as it may deem expedient to prevent any impairment of the Collateral by any acts which may be unlawful or in violation of any of the Security Documents or this Indenture, and such suits and proceedings as the Trustee may deem expedient to preserve or protect its interests and the interests of the Holders in the Collateral (including power to institute and maintain suits or proceedings to restrain the enforcement of or compliance with any legislative or other governmental enactment, rule or order that may be unconstitutional or otherwise invalid if the enforcement of, or compliance with, such enactment, rule or order would impair the Collateral or be prejudicial to the interests of the Holders or the Trustee). SECTION 11.8. PURCHASER PROTECTED. In no event shall any purchaser in good faith of any property purported to be released hereunder be bound to ascertain the authority of the Collateral Agent or the Trustee to execute the release or to inquire as to the satisfaction of any conditions required by the provisions hereof for the exercise of such authority or to see to the application of any consideration given by such purchaser or other transferee; nor shall any purchaser or other transferee of any property or rights permitted by this Article XI to be sold be under obligation to ascertain or inquire into the authority of the Company to make any such sale or other transfer. SECTION 11.9. POWERS EXERCISABLE BY RECEIVER OR TRUSTEE. In case the Collateral shall be in the possession of a receiver or trustee, lawfully appointed, the powers conferred in this Article XI upon the Company with respect to the release, sale or other disposition of such property may be exercised by such receiver or trustee, and an instrument signed by such receiver or trustee shall be deemed the equivalent of any similar instrument of the Company or of any officer or officers thereof required by the provisions of this Article XI. SECTION 11.10. DETERMINATIONS RELATING TO COLLATERAL. In the event (i) the Trustee or the Collateral Agent shall receive any written request from the Company under any Security Document for consent or approval with respect to any matter or thing relating to any Collateral or the Company's obligations with respect thereto or (ii) there shall be due to or from the Trustee or the Collateral Agent under the provisions of any Security Document any performance or the delivery of any instrument or (iii) the Trustee or the Collateral Agent shall become aware of any nonperformance by the Company of any covenant or any breach of any representation or warranty of the Company set forth in any Security Document, then, in each such event, the Trustee or the Collateral Agent, as applicable, shall be entitled to hire experts, consultants, agents and attorneys to advise the Trustee on the manner in which the Trustee should respond to such request or render any requested performance or response to such nonperformance or breach. The Trustee shall be fully protected in the taking of any action recommended or approved by any such expert, consultant, agent or attorney or agreed to by a majority of Holders pursuant to Section 7.5. SECTION 11.11. FORM AND SUFFICIENCY OF RELEASE. In the event that the Company has sold, exchanged, or otherwise disposed of or proposes to sell, exchange or otherwise dispose of any portion of the Collateral which under the provisions of Sections 11.3 and 11.5 may be sold, exchanged or otherwise disposed of by the Company, and the Company requests the Trustee or the Collateral Agent to furnish a written disclaimer, release or quitclaim of any interest in such property under any of the Security Documents, the Collateral Agent shall promptly execute (or, if so requested by the Company, shall promptly instruct the Trustee to execute) such an instrument promptly after satisfaction of the conditions set forth herein for delivery of such release. Notwithstanding the preceding sentence, all purchasers and grantees of any property or rights purporting to be released herefrom shall be entitled to rely upon any release executed by the Trustee hereunder as sufficient for the purposes of this Indenture and as constituting a good and valid release of the property therein described from the Lien of this Indenture and the Security Documents. SECTION 11.12. POSSESSION AND USE OF COLLATERAL. Subject to and in accordance with the provisions of this Indenture and the Security Documents, so long as no Default or Event of Default shall have occurred and be continuing, the Company shall have the right to remain in possession and retain exclusive control of the Collateral, to operate, manage, develop, use and enjoy the Collateral and to collect, receive, use, invest and dispose of the reversions, remainders, rates, interest, rents, issues, profits, revenues, proceeds and other income thereof. SECTION 11.13. DISPOSITION OF OBLIGATIONS RECEIVED. All purchase money or other obligations received by the Trustee under this Article XI shall be held by the Trustee, as a part of the Collateral. Upon payment in cash or Cash Equivalents by or on behalf of the Company or the obligor thereof to the Trustee of the entire unpaid principal amount of any such obligation, the Trustee shall promptly release and transfer such obligation and any mortgage securing the same upon receipt of any documentation that the Trustee may reasonably require. Any cash or Cash Equivalents received by the Trustee in respect of the principal of any such obligations shall be held by the Trustee in accordance with the provisions of Section 9.2 hereof. Unless and until the Notes are accelerated pursuant to Section 7.2, all interest and other income on any such obligations, when received by the Trustee, shall be paid to the Company from time to time. If the Notes have been accelerated pursuant to Section 7.2, any such interest or other income not theretofore paid, when collected by the Trustee, shall be applied by the Trustee, as the case may be, in accordance with Section 7.10. This Section 11.13 shall be subject to Article III hereof. SECTION 11.14. RELEASE UPON TERMINATION OF THE COMPANY'S OBLIGATIONS. In the event that the Company delivers an Officers' Certificate certifying that the provisions of Section 9.1 have been complied with, the Trustee shall (i) execute and deliver such releases, termination statements and other instruments as the Company may reasonably request evidencing the termination of the Liens created by the Security Documents and (ii) not be deemed to hold the Liens for the benefit of the Holders. ARTICLE XII. MISCELLANEOUS SECTION 12.1. TRUST INDENTURE ACT CONTROL. In the event that the TIA shall require this Indenture to be qualified thereunder, this Indenture thereafter shall be subject to, and shall be governed by, the provisions of the TIA required to be part of and to govern indentures qualified under the TIA; provided, however, that this Section 12.1 shall not require this Indenture or the Trustee to be qualified under the TIA prior to the time such qualification is in fact required under the terms of the TIA, nor shall it constitute any admission or acknowledgment by any party to any supplemental indenture pertaining to the qualification of this Indenture that any such qualification is required prior to the time such qualification is in fact required under the terms of the TIA. If any provision hereof limits, qualifies or conflicts with another provision hereof which is required to be included in an indenture qualified under the TIA, such required provision shall control to the extent that the TIA is otherwise applicable hereto. SECTION 12.2. NOTICES. Any notice or communication by the Company or the Trustee to others is duly given if in writing and delivered in Person or 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: Keystone Consolidated Industries, Inc. Three Lincoln Centre 5430 LBJ Freeway Suite 1740 Dallas, Texas 75240-2697 Attention: Chief Financial Officer Fax: (972) 458-8108 With a copy to: Keystone Consolidated Industries, Inc. Three Lincoln Centre 5430 LBJ Freeway Suite 1740 Dallas, Texas 75240-2697 Attention: Mark Hollingsworth, Esq. Fax: (972) 458-8108 If to the Trustee: U.S. Bank National Association 555 Southwest Oak Street, PL-6 Portland, Oregon 97204 Attention: Corporate Trust Services Fax: (503) 275-5738 The Company 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. Any notice or communication to a Holder, including any notice delivered in connection with TIA ss.ss. 310(b), 3.13(c), 3.14(a) and 3.15(b), shall be mailed by first class mail 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, if applicable. 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 12.3. COMMUNICATION BY HOLDERS OF NOTES WITH OTHER HOLDERS OF NOTES. Holders may communicate pursuant to TIA ss. 312(b), if applicable, 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), if applicable. SECTION 12.4. 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 furnish to the Trustee: (a) an Officers' Certificate of the Company in form and substance reasonably satisfactory to the Trustee (which shall include the statements set forth in Section 12.5 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 12.5 hereof) stating that, in the opinion of such counsel, all such conditions precedent and covenants have been satisfied. SECTION 12.5. 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) to the extent such provision is applicable hereto 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. SECTION 12.6. 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 12.7. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS. No past, present or future director, officer, employee, incorporator or stockholder of the Company, as such, shall have any liability for any obligations of the Company under the Notes or this 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. SECTION 12.8. GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL. THIS INDENTURE AND THE NOTES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, BUT OTHERWISE WITHOUT REGARD TO CONFLICT OF LAW RULES. THE COMPANY HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY NEW YORK STATE COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK OR ANY FEDERAL COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS INDENTURE AND THE NOTES, AND IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, JURISDICTION OF THE AFORESAID COURTS. THE COMPANY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT THAT IT MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW, TRIAL BY JURY AND ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE TRUSTEE OR ANY HOLDER OF THE NOTES TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE COMPANY IN ANY OTHER JURISDICTION. SECTION 12.9. 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 12.10. SUCCESSORS. All agreements of the Company in this Indenture and the Notes shall bind their successors. All agreements of the Trustee in this Indenture shall bind its successors. SECTION 12.11. 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 12.12. COUNTERPART ORIGINALS. The parties may sign any number of copies of this Indenture in counterpart. Each signed copy shall be an original, but all of them together represent the same agreement. SECTION 12.13. TABLE OF CONTENTS, HEADINGS, ETC. The Table of Contents, Cross-Reference Table and Headings of the Articles and Sections of this Indenture, which 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. [Signatures on following page.] SIGNATURES IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, by one of their duly authorized officers, all as of the date first above written. KEYSTONE CONSOLIDATED INDUSTRIES, INC. By: ----------------------------------------- Name: ----------------------------------------- Title: ----------------------------------------- U.S. BANK NATIONAL ASSOCIATION, as Trustee By: ---------------------------------------- Name: ---------------------------------------- Title: ---------------------------------------- ** This Table of Contents shall not, for any purpose, be deemed a part of the Indenture. EX-10.1 23 exh101kci.txt INTERCORPORATE SERVICES AGREEMENT This INTERCORPORATE SERVICES AGREEMENT (the "Agreement"), effective as of January 1, 2001, amends and supersedes that certain Intercorporate Services Agreement effective as of January 1, 2000 between CONTRAN CORPORATION, a Delaware corporation ("Contran"), and KEYSTONE CONSOLIDATED INDUSTRIES, INC., a Delaware corporation ("Recipient"). Recitals A. Employees and agents of Contran and affiliates of Contran, including Harold C. Simmons, perform management, financial and administrative functions for Recipient without direct compensation from Recipient. B. Recipient does not separately maintain the full internal capability to perform all necessary management, financial and administrative functions that Recipient requires. C. The cost of maintaining the additional personnel by Recipient necessary to perform the functions provided for by this Agreement would exceed the fee set forth in Section 3 of this Agreement and that the terms of this Agreement are no less favorable to Recipient than could otherwise be obtained from a third party for comparable services. D. Recipient desires to continue receiving the management, financial and administrative services presently provided by Contran and affiliates of Contran and Contran is willing to continue to provide such services under the terms of this Agreement. Agreement For and in consideration of the mutual premises, representations and covenants herein contained, the parties hereto mutually agree as follows: Section 1. Services to be Provided. Contran agrees to make available to Recipient, upon request, the following services (the "Services") to be rendered by the internal staff of Contran and affiliates of Contran: (a) Consultation and assistance in the development and implementation of Recipient's corporate business strategies, plans and objectives; (b) Consultation and assistance in management and conduct of corporate affairs and corporate governance consistent with the charter and bylaws of Recipient; (c) Consultation and assistance in maintenance of financial records and controls, including preparation and review of periodic financial statements and reports to be filed with public and regulatory entities and those required to be prepared for financial institutions or pursuant to indentures and credit agreements; (d) Consultation and assistance in cash management and in arranging financing necessary to implement the business plans of Recipient; (e) Consultation and assistance in tax management and administration, including, without limitation, preparation and filing of tax returns, tax reporting, examinations by government authorities and tax planning; (f) Consultation and assistance in performing internal audit and control functions; (g) Consultation and assistance with respect to insurance and risk management; (h) Consultation and assistance with respect to employee benefit plans and incentive compensation arrangements; and (i) Such other services as may be requested by Recipient from time to time. This Agreement does not apply to, and the Services provided for herein do not include, any services that Glenn R. Simmons or Steven L. Watson may provide to Recipient in their roles as members of Recipient's board of directors or any other activity related to such board of directors. Section 2. Miscellaneous Services. It is the intent of the parties hereto that Contran provide only the Services requested by Recipient in connection with routine management, financial and administrative functions related to the ongoing operations of Recipient and not with respect to special projects, including corporate investments, acquisitions and divestitures. The parties hereto contemplate that the Services rendered in connection with the conduct of Recipient's business will be on a scale compared to that existing on the effective date of this Agreement, adjusted for internal corporate growth or contraction, but not for major corporate acquisitions or divestitures, and that adjustments may be required to the terms of this Agreement in the event of such major corporate acquisitions, divestitures or special projects. Recipient will continue to bear all other costs required for outside services including, but not limited to, the outside services of attorneys, auditors, trustees, consultants, transfer agents and registrars, and it is expressly understood that Contran assumes no liability for any expenses or services other than those stated in Section 1. In addition to the fee paid to Contran by Recipient for the Services provided pursuant to this Agreement, Recipient will pay to Contran the amount of out-of-pocket costs incurred by Contran in rendering such Services. Section 3. Fee for Services. Recipient agrees to pay to Contran $251,250 quarterly, commencing as of January 1, 2001, pursuant to this Agreement. Section 4. Original Term. Subject to the provisions of Section 5 hereof, the original term of this Agreement shall be from January 1, 2001 to December 31, 2001. Section 5. Extensions. This Agreement shall be extended on a quarter-to-quarter basis after the expiration of its original term unless written notification is given by Contran or Recipient thirty (30) days in advance of the first day of each successive quarter or unless it is superseded by a subsequent written agreement of the parties hereto. Section 6. Limitation of Liability. In providing its Services hereunder, Contran shall have a duty to act, and to cause its agents to act, in a reasonably prudent manner, but neither Contran nor any officer, director, employee or agent of Contran or its affiliates shall be liable to Recipient for any error of judgment or mistake of law or for any loss incurred by Recipient in connection with the matter to which this Agreement relates, except a loss resulting from willful misfeasance, bad faith or gross negligence on the part of Contran. Section 7. Indemnification of Contran by Recipient. Recipient shall indemnify and hold harmless Contran, its affiliates and their respective officers, directors and employees from and against any and all losses, liabilities, claims, damages, costs and expenses (including attorneys' fees and other expenses of litigation) to which Contran or any such person may become subject arising out of the Services provided by Contran to Recipient hereunder, provided that such indemnity shall not protect any person against any liability to which such person would otherwise be subject by reason of willful misfeasance, bad faith or gross negligence on the part of such person. Section 8. Further Assurances. Each of the parties will make, execute, acknowledge and deliver such other instruments and documents, and take all such other actions, as the other party may reasonably request and as may reasonably be required in order to effectuate the purposes of this Agreement and to carry out the terms hereof. Section 9. Notices. All communications hereunder shall be in writing and shall be addressed, if intended for Contran, to Three Lincoln Centre, 5430 LBJ Freeway, Suite 1700, Dallas, Texas 75240, Attention: President, or such other address as it shall have furnished to Recipient in writing, and if intended for Recipient, to Three Lincoln Centre, 5430 LBJ Freeway, Suite 1740, Dallas, Texas 75240, Attention: Chairman of the Board, or such other address as it shall have furnished to Contran in writing. Section 10. Amendment and Modification. Neither this Agreement nor any term hereof may be changed, waived, discharged or terminated other than by agreement in writing signed by the parties hereto. Section 11. Successor and Assigns. This Agreement shall be binding upon and inure to the benefit of Contran and Recipient and their respective successors and assigns, except that neither party may assign its rights under this Agreement without the prior written consent of the other party. Section 12. Governing Law. This Agreement shall be governed by, and construed and interpreted in accordance with, the laws of the state of Texas. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered as of the date first above written. CONTRAN CORPORATION By: --------------------------------------- Steven L. Watson President KEYSTONE CONSOLIDATED INDUSTRIES, INC. By: --------------------------------------- Glenn R. Simmons Chairman of the Board EX-10.8 24 exh108kci.txt ACCOUNT RECONCILIATION AGREEMENT THIS ACCOUNT RECONCILIATION AGREEMENT (the "Agreement") is made and entered into as of the 12th day of March, 2002, by and between KEYSTONE CONSOLIDATED INDUSTRIES, INC. d/b/a KEYSTONE STEEL & WIRE COMPANY, a Delaware corporation ("Keystone"), and CENTRAL ILLINOIS LIGHT COMPANY, an Illinois corporation ("CILCO"). W I T N E S S E T H: - - - - - - - - - - WHEREAS, Keystone and CILCO are parties to that certain Gas Service Agreement dated as of June 30, 1999, that certain Electric Agreement dated as of March 28, 2000, that certain Interruptible Electric Service Contract dated as of March 28, 2000, that certain Electric Agreement dated as of December 31, 2001, and that certain Interruptible Electric Service Contract dated as of December 31, 2001 (all of the foregoing, together with any amendments or supplements thereto, are referred to collectively herein as the "Utility Agreements"); WHEREAS, pursuant to the Utility Agreements, from time to time CILCO sold to Keystone and Keystone purchased from CILCO natural gas and electrical utility services; WHEREAS, Keystone is currently pursuing an out-of-court restructuring of its obligations and capital structure; WHEREAS, pursuant to the agreement of the parties, for several months Keystone has made prepayments with respect to its anticipated current usage under the Utility Agreements and deferred payment with respect to certain past due amounts for prior usage; WHEREAS, Keystone and CILCO hereby expressly acknowledge and agree that the past due amounts owed by Keystone to CILCO for utility services previously provided pursuant to the Utility Agreements equal in the aggregate $4,845,142 (the "Outstanding Balance"); and WHEREAS, the parties desire to provide for the payment in full of the Outstanding Balance and other amounts becoming due between them upon the terms and subject to the conditions hereinafter set forth. NOW, THEREFORE, in consideration of the premises and mutual covenants and agreements herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the parties hereto, it is hereby agreed as follows: Section 1. Payment of the Outstanding Balance. As full and complete satisfaction of all past due amounts owed by Keystone to CILCO under the Utility Agreements as of the date hereof, Keystone hereby promises to pay the Outstanding Balance to CILCO by making a payment of $79,462 on or before March 31, 2002, followed by sixty-two (60) equal monthly payments of $79,428 each on or before the last day of each and every month thereafter through and including March 31, 2007. The Outstanding Balance shall not bear interest and may be prepaid in whole or in part at any time without penalty. In the event Keystone Fails to pay in a timely manner any of the payments on the due dates set forth in Section 1, CILCO shall have the right to exercise any of the remedies set forth in Paragraph 5(f) of that certain Electric Agreement between CILCO and Keystone dated the 31st day of December 2001 until the entire Outstanding Balance is paid in full, even if the Electric Agreement has expired or otherwise been terminated. Section 2. Payment for Current Usage. Keystone shall make payment for current utility usage consistent with the terms set forth in Paragraph 5(f) of that certain Electric Agreement between CILCO and Keystone dated the 31st day of December 2001. Section 3. Additional Required Payment. In the event that the EBITDA (as hereinafter defined) of Keystone in any fiscal year shall exceed $20,000,000 (any such amount, the "Excess EBITDA"), Keystone shall pay to CILCO on or before April 15 of the following year an amount equal to the product of such Excess EBITDA multiplied by 5.86%, limited to the extent of the unpaid Outstanding Balance as of the date such payment is made. Notwithstanding the foregoing, in the event that any such payment pursuant to this Section 3 would result in an event of default under any of Keystone's various credit agreements, Keystone shall be permitted to defer such payment until such time as payment is permitted under all applicable covenants of such credit agreements. For purposes of this Section 3, "EBITDA" for any fiscal year shall be the amount determined based upon Income (loss) before income taxes, plus Depreciation and Amortization expense, plus Interest Expense, less overfunded defined benefit pension credit or plus defined benefit pension expense, as the case may be, all as reported in Keystone's Annual Report on Form 10-K with respect to such year. Section 4. Priority; No Further Obligations. To the extent the terms and conditions of this Agreement alter or vary the terms of the Parties' Letter Agreement dated November 12, 2001, a copy of which is attached as Exhibit A, the parties hereto agree that the terms and conditions of this Agreement shall be deemed to have modified, amended and superseded the applicable portions of the Parties' November 12, 2001 Letter Agreement. Section 5. Notices. All notices or other communications which are required or permitted hereunder shall be in writing and sufficient if delivered by hand, by facsimile transmission, by registered or certified mail, postage pre-paid, or by courier or overnight carrier to the persons at the addresses set forth below (or at such other address as may be provided hereunder), and shall have been deemed to have been delivered as of the date so delivered: If to Keystone: Keystone Steel & Wire Company 7000 S.W. Adams Street Peoria, Illinois 61641 Attention: Vice President Finance Fax: (309) 697-7120 and: Keystone Consolidated Industries, Inc. Three Lincoln Centre 5430 LBJ Freeway Suite 1740 Dallas, Texas 75240-2697 Attention: Chief Financial Officer Fax: (972) 448-1408 If to CILCO: Central Illinois Light Company Major Accounts, Energy Sales 300 Liberty Street Peoria, Illinios 61602 Attention: Sr. Vice President Fax: (309) 677-5458 Section 6. Further Assurances. The parties hereto shall execute and deliver, and file and record, as the case may be, such further or additional documents, agreements or instruments as the other party hereto shall reasonably require to consummate the transactions contemplated herein. Section 7. Binding Effect; Construction. The covenants contained herein shall bind, and the benefits hereof shall inure to the benefit of, the respective heirs, personal representatives, administrators, and successors and permitted assigns, to the extent applicable, of the parties hereto. Section 8. Entire Agreement; Severability. This Agreement contains the entire agreement among the parties hereto relating to the matters provided herein, and no representations, promises or agreements, oral or otherwise, not expressly contained or incorporated by reference herein or therein shall be binding on the parties hereto. The provisions of this Agreement are severable and the invalidity of one or more of the provisions herein shall not have any effect upon the validity or enforceability of any other provision hereof. Section 9. Governing Law. This Agreement shall be governed by, construed and enforced in accordance with the laws of the State of Illinois, without giving effect to any principles of conflict of laws. Section 10. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and may be delivered via facsimile or otherwise, and all of which together shall constitute one and the same agreement. [Signatures on following page.] IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by the undersigned as of the date first written above. KEYSTONE CONSOLIDATED INDUSTRIES, INC. d/b/a KEYSTONE STEEL & WIRE COMPANY By: -------------------------------------- Name: -------------------------------------- Title: -------------------------------------- CENTRAL ILLINOIS LIGHT COMPANY By: -------------------------------------- Name: -------------------------------------- Title: -------------------------------------- EX-10.9 25 exh109kci.txt ACCOUNT RECONCILIATION AGREEMENT THIS ACCOUNT RECONCILIATION AGREEMENT (the "Agreement") is made and entered into as of the 11th day of March, 2002, by and between KEYSTONE CONSOLIDATED INDUSTRIES, INC. d/b/a KEYSTONE STEEL & WIRE COMPANY, a Delaware corporation ("Keystone"), and PSC METALS, INC., an Ohio corporation ("PSC"). W I T N E S S E T H: - - - - - - - - - - WHEREAS, pursuant to a Scrap Supply and Consignment Agreement dated as of January 31, 2001 (the "Consignment Agreement"), PSC is a critical supplier of scrap metal and pig iron ("Scrap") from which Keystone regularly purchases Scrap for use in its business operations; WHEREAS, Keystone is currently pursuing an out-of-court restructuring of its obligations and capital structure (the "Restructuring"); WHEREAS, in connection with Keystone's efforts in furtherance of the Restructuring, PSC previously agreed that Keystone could defer payment of certain past due amounts owed by Keystone to PSC (collectively, the "Past Due Amounts") for past purchases of Scrap until completion of the Restructuring and that for current usage, Keystone would prepay PSC $1,000,000 on each Monday; as outlined in an October 18, 2001 letter from Frederick J. Smith, President, PSC to Bob Singer, President and CEO, Keystone; WHEREAS, PSC and Keystone hereby expressly acknowledge and agree that PSC owes Keystone $133,000 for mill scale sales and $256,000 related to scrap sales by Keystone to PSC, for an aggregate amount owed to Keystone of $389,000 (the "Receivable Balance"); WHEREAS, PSC and Keystone hereby expressly acknowledge and agree that the Past Due Amounts as reduced by the Receivable Balance result in a net amount owed by Keystone to PSC of $11,290,822.90 (the "Outstanding Balance"); and WHEREAS, the parties desire to provide for the payment in full of the Outstanding Balance and other amounts becoming due between them upon the terms and subject to the conditions hereinafter set forth. NOW, THEREFORE, in consideration of the premises and mutual covenants and agreements herein contained, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged by the parties hereto, it is hereby agreed as follows: Section 1. Payment for New Purchases. Consistent with Keystone's continuing reliance on PSC as a critical supplier (see Section 7(g) of the Consignment Agreement), and, and for so long as any portion of the Outstanding Balance remains unpaid, Keystone will pay to PSC by wire transfer on the morning of each and every Monday (or next business day thereafter in the event a particular Monday is not a business day) from and after the date hereof an amount determined based upon the estimated Scrap usage for the then current week (currently estimated at $1,100,000 as of the date of this Agreement) as prepayment for purchases of Scrap to be made by Keystone with respect to such week. The foregoing prepayment amount as made each Monday (or subsequent business day) shall be increased or decreased, as the case may be, to account for the difference between the prepayment made with respect to the immediately preceding week and the actual cost of Scrap acquired by Keystone from PSC in such week. Section 2. Imposition and Application of Surcharge. From and after the date of the Agreement and for so long as any portion of the Outstanding Balance remains unpaid, and in addition to the then current market price charged by PSC for Scrap, PSC shall charge Keystone and Keystone shall pay PSC a surcharge (the "Surcharge") equal to $3.00 per gross ton of Scrap purchased by Keystone from PSC. PSC shall apply all amounts of the Surcharge provided in this Section 2 and collected by it from Keystone to the payment of the Outstanding Balance, which shall be reduced dollar-for-dollar by the amount of such Surcharge collections. Section 3. Payment of the Outstanding Balance. In addition to any Surcharge or other payment obligation imposed upon Keystone pursuant to this Agreement, Keystone hereby promises to pay the Outstanding Balance to PSC as follows: (a) in the event that the unpaid portion of the Outstanding Balance on March 31, 2003 exceeds 80% of the Outstanding Balance as of the date hereof, Keystone shall promptly pay such excess Outstanding Balance amount in full; (b) in the event that the unpaid portion of the Outstanding Balance on March 31, 2004 exceeds 60% of the Outstanding Balance as of the date hereof, Keystone shall promptly pay such excess Outstanding Balance amount in full; (c) in the event that the unpaid portion of the Outstanding Balance on March 31, 2005 exceeds 40% of the Outstanding Balance as of the date hereof, Keystone shall promptly pay such excess Outstanding Balance amount in full; (d) in the event that the unpaid portion of the Outstanding Balance on March 31, 2006 exceeds 20% of the Outstanding Balance as of the date hereof, Keystone shall promptly pay such excess Outstanding Balance amount in full; and (e) Keystone shall pay in full on March 31, 2007 any unpaid portion of the Outstanding Balance as of such date. The Outstanding Balance shall not bear interest and may be prepaid in whole or in part at any time without penalty. Section 4. Additional Required Payment. In the event that the EBITDA (as hereinafter defined) of Keystone in any fiscal year shall exceed $20,000,000 (any such amount, the "Excess EBITDA"), Keystone shall pay to PSC on or before April 15 of the following year an amount equal to the product of such Excess EBITDA multiplied by 14.14%, limited to the extent of the unpaid Outstanding Balance as of the date such payment is made. Notwithstanding the foregoing, in the event that any such payment pursuant to this Section 4 would result in an event of default under any of Keystone's various credit agreements, Keystone shall be permitted to defer such payment until such time as payment is permitted under all applicable covenants of such credit agreements. For purposes of this Section 4, "EBITDA" for any fiscal year shall be the amount determined based upon Income (loss) before income taxes, plus Depreciation and Amortization expense, plus Interest Expense, less overfunded defined benefit pension credit or plus defined benefit pension expense, as the case may be, all as reported in Keystone's Annual Report on Form 10-K with respect to such year. Section 5. Priority; No Further Obligations. To the extent the terms and conditions of this Agreement alter or vary the terms and conditions of any agreement between the parties hereto, the parties hereto agree that the terms and conditions of this Agreement shall be deemed to have modified, amended and superseded the terms and conditions of such agreement, notwithstanding any terms or conditions therein to the contrary. Notwithstanding anything in this Agreement to the contrary, the Consignment Agreement, as amended by the terms of this Agreement, shall remain in full force and effect until terminated in writing by the parties. Section 6. Notices. All notices or other communications which are required or permitted hereunder shall be in writing and sufficient if delivered by hand, by facsimile transmission, by registered or certified mail, postage pre-paid, or by courier or overnight carrier to the persons at the addresses set forth below (or at such other address as may be provided hereunder), and shall have been deemed to have been delivered as of the date so delivered: If to Keystone: Keystone Consolidated Industries, Inc. Three Lincoln Centre 5430 LBJ Freeway Suite 1740 Dallas, Texas 75240-2697 Attention: Chief Financial Officer Fax: (972) 448-1408 If to PSC: PSC Metals, Inc. P.O. Box 931393N Cleveland, Ohio 44193 Attention: Chief Financial Officer Fax: 216-752-9562 Section 7. Further Assurances. The parties hereto shall execute and deliver, and file and record, as the case may be, such further or additional documents, agreements or instruments as the other party hereto shall reasonably require to consummate the transactions contemplated herein. Section 8. Binding Effect; Construction. The covenants contained herein shall bind, and the benefits hereof shall inure to the benefit of, the respective heirs, personal representatives, administrators, and successors and permitted assigns, to the extent applicable, of the parties hereto. Section 9. Entire Agreement; Severability. This Agreement and the Consignment Agreement contain the entire agreement among the parties hereto relating to the matters provided herein, and no representations, promises or agreements, oral or otherwise, not expressly contained or incorporated by reference herein or therein shall be binding on the parties hereto. The provisions of this Agreement are severable and the invalidity of one or more of the provisions herein shall not have any effect upon the validity or enforceability of any other provision hereof. Section 10. Governing Law. This Agreement shall be governed by, construed and enforced in accordance with the laws of the State of Illinois applicable to agreements made wholly within that State and without giving effect to any principles of conflict of laws. Section 11. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and may be delivered via facsimile or otherwise, and all of which together shall constitute one and the same agreement. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by the undersigned as of the date first written above. KEYSTONE CONSOLIDATED INDUSTRIES, INC. d/b/a KEYSTONE STEEL & WIRE COMPANY By: ----------------------------------------------- Name: ----------------------------------------------- Title: ----------------------------------------------- PSC METALS, INC. By: ----------------------------------------------- Name: ----------------------------------------------- Title: ----------------------------------------------- EX-23.1 26 exh231kci.txt EXHIBIT 23.1 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (No. 333-71441, 333-55891, 333-55865, 333-55867, 33-30137, 33-63086 and 2-93666) of Keystone Consolidated Industries, Inc. of our report dated March 29, 2002 relating to the financial statements and financial statement schedule, which appears in this Form 10-K. Dallas, Texas April 15, 2002 -----END PRIVACY-ENHANCED MESSAGE-----