SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): December 1,1999
CITATION CORPORATION
(Exact name of registrant as specified in its Charter)
Delaware 0-24492 63-0828225
(State of Incorporation) (Commission File Number) (IRS Employer I.D. No.)
2 Office Park Circle, Suite 204
Birmingham, Alabama 35223
(Address of principal executive offices)
(205) 871-5731
(Registrant's telephone number)
ITEM 1. CHANGES IN CONTROL OF REGISTRANT.
On December 1, 1999, RSJ Acquisition Co., a Delaware corporation ("Merger
Co."), and an affiliate of Kelso & Company, was merged (the "Merger") with and
into Citation Corporation, a Delaware corporation ("Citation"or the "Company"),
pursuant to an Agreement and Plan of Merger and Recapitalization dated as of
June 24, 1999, as amended (the "Merger Agreement"), by and between Merger Co.
and the Company. The Company was the surviving corporation in the Merger. In
connection with the consummation of the Merger, certain investment partnerships
and other persons affiliated with Kelso & Company invested $240.0 million in
Merger Co., as a result of which such stockholders now own approximately 93.0%
of the outstanding common stock of the Company. Pursuant to the Merger
Agreement, certain existing holders of Citation common stock at the effective
time of the Merger (the "Effective Time") elected to retain an aggregate of
1,062,619 shares of Citation common stock in the Merger, constituting
approximately 7.0% of the outstanding common stock of the Company. All remaining
shares of Citation common stock issued and outstanding at the Effective Time,
other than treasury shares, were converted into the right to receive cash in the
amount of $17.00 per share.
At the Effective Time the Kelso-affiliated stockholders and certain
stockholders of the Company who retained their shares in the Merger entered into
a Stockholders Agreement and a Registration Rights Agreement. The Stockholders
Agreement provides that shares of Citation common stock that were retained in
connection with the Merger may be freely transferred, subject only to a right of
first refusal in favor of the Company and certain of its designees. The
Stockholders Agreement restricts the transfer of any other shares of common
stock owned by officers and employees of the Company who are or who become
parties to the Stockholders Agreement. Exceptions to this restriction include
transfers for estate planning purposes or transfers in connection with certain
pledges, so long as the transferee agrees to be bound by the terms of the
Stockholders Agreement. In addition, stockholders will have"tag-along" rights
to sell their shares on a pro rata basis with the affiliates of Kelso & Company
whenever those stockholders are selling their shares to third parties.
Similarly, affiliates of Kelso & Company will have "drag-along"rights to cause
each executive officer, employee or other stockholder who is or who becomes a
party to sell his shares of the Company on a pro rata basis with the Kelso-
affiliated stockholders to a third party that has made an offer to purchase the
shares of the Company owned by the Kelso-affiliated stockholders. To the extent
that the stockholders who are or will be parties acquire any shares of Citation
common stock in addition to their retained shares, the new shares so acquired,
including shares acquired pursuant to the exercise of any stock options, will
also be subject to "put" and "call" rights, which will entitle the Company to
purchase from the stockholder, and will entitle the stockholder to sell to the
Company, such common stock upon any termination of such stockholder's employment
with the Company, at differing prices, depending upon the circumstances
surrounding such termination. The Registration Rights Agreement provides that in
the event that the Company is registering its shares under the Securities Act of
1933, as amended (except for registrations related to exchange offers or benefit
plans), and any Kelso-affiliated stockholder is selling its shares in connection
with such registration, the executive officers, employees and other parties to
the agreement who are not affiliated with Kelso &
Company will have the right to have their shares concurrently registered and
sold, in most cases, on a pro rata basis with those of the Kelso-affiliated
stockholders.
In connection with the Merger, the Company entered into a senior credit
facility in the aggregate amount of $360.0 million (the "Credit Facility") with
The Chase Manhattan Bank, First Union National Bank and certain other lenders,
providing for (i) Tranche A term loans in the amount of $50.0 million; (ii)
Tranche B term loans in the amount of $210.0 million; and (iii) a revolving
credit facility in the amount of $100.0 million. The obligations under the
Credit Facility are guaranteed by each of the Company's domestic subsidiaries.
In addition, the Credit Facility and the guarantees are secured by substantially
all of the assets of the Company and its subsidiaries. The Tranche A term loans
will be repayable in quarterly principal payments, with the balance payable six
years after the closing date. The Tranche A term loans bear interest at a rate
per annum equal to (at the option of the Company): (i) an adjusted London
interbank offered rate ("Adjusted LIBOR") plus 3.0% or (ii) a rate equal to the
greater of The Chase Manhattan Bank's prime rate, a certificate of deposit rate
plus 1% and the Federal Funds effective rate plus 1% (the "Alternate Base Rate")
plus 2.00%, in each case subject to certain reductions based on financial
performance. The Tranche B term loans will be repayable in nominal quarterly
principal payments over six years, and, commencing on the sixth anniversary of
the closing date, in quarterly principal payments beginning at $20.0 million and
increasing over two years, with the balance of the Tranche B term loans payable
eight years after the closing date. The Tranche B term loans bear interest at a
rate per annum equal to (at the option of the Company): (i) Adjusted LIBOR plus
3.75% or (ii) the Alternate Base Rate plus 2.75%. The revolving credit facility
is a six-year facility and outstanding balances thereunder bear interest at a
rate per annum equal (at the option) to (i) Adjusted LIBOR plus 3.0% or (ii) the
Alternate Base Rate plus 2.00%, in each case subject to certain reductions based
on financial performance.
In addition to the borrowings under the Credit Facility, at the Effective
Time the Company incurred $135.0 million in bridge financing indebtedness,
consisting of (i) senior subordinated increasing rate bridge notes (the "Bridge
Notes") issued to Citation Funding, Inc. and First Union Investors, Inc. in a
private placement in the aggregate principal amount of $101,250,000 and (ii) a
loan from The Chase Manhattan Bank in the principal amount of $33,750,000 (the
"Bridge Loan" and, collectively with the Notes, the "Obligations"). The
Obligations are general unsecured obligations of Citation, junior to all
existing and future permitted senior indebtedness of Citation and equal in right
of payment to all other existing and future senior subordinated indebtedness of
Citation. The interest rate on the Obligations for the first three months
following the issuance of the Notes and the making of the Loan will be 13.25%
per annum. The interest rate for each three-month period following the first
three-month period will be the greatest of (x) (i) 13.0%, (ii) the prime rate as
announced from time to time by The Bank of New York, plus 4.75%, (iii) the 10-
year Treasury rate plus 6.95% and (iv) the DLJ High Yield Index Rate plus 0.98%,
plus an additional 0.5% at the end of each three-month period and (y) an amount
equal to the initial interest rate plus the product of 0.5% and the number of
complete three-month periods since the closing. Interest, which is to be paid
quarterly, may not exceed 17.0% per annum. The Obligations will mature on
December 1, 2000, but may be extended under certain conditions until the date
which is six months after the date of the original final stated maturity of the
Credit Facility. The Obligations may be redeemed or repaid in whole or in part
by Citation at any time,
for an amount equal to the outstanding principal amount of the Obligations plus,
in certain circumstances, 3.0% of the principal amount of Obligations to be
redeemed or repaid, and will be subject to mandatory redemption under certain
circumstances. In connection with the issuance of the Obligations, Citation also
issued warrants, equal to 5.0% of its fully diluted common stock, which have
been deposited into an escrow account and are to be used in connection with
selling, transferring, assigning or refinancing the Obligations after the first
anniversary of the Effective Time. The warrants will be exercisable at $0.01 per
share for a period of seven years from the date of release from escrow. The
warrants have customary anti-dilution provisions, tag-along rights and demand
and "piggy-back" registration rights. Any warrants issued in connection with any
selling, transferring, assigning or refinancing the Obligations will be released
from escrow, pro rata over the next four quarterly periods, to the holders of
the Obligations.
The sources of funds for the Merger were the proceeds from (i) the $240.0
million equity contribution described above, (ii) borrowings of $260.0 million
under the Credit Facility, (iii) the $135.0 million in Bridge Financing and (iv)
available cash of the Company.
Pursuant to the Merger Agreement, the directors of Merger Co. at the
Effective Time, Thomas R. Wall, IV and Frank K. Bynum, Jr., became the directors
of the Company, and Frederick F. Sommer, the President and Chief Executive
Officer of the Company, was also elected to the Board of Directors. To the best
of the Company's knowledge, there are no known arrangements other than those
described herein which may at a subsequent date result in a change in control of
the Company.
On December 1, 1999, Citation issued a press release announcing the
consummation of the Merger, a copy of which is attached hereto as an exhibit and
is incorporated by referenced herein. The Merger and the relevant matters
relating thereto were also described in the Proxy Statement/Prospectus dated
October 29, 1999 filed in connection with Citation's Registration Statement on
Form S-4 (Registration No. 333-89431), which is incorporated by reference
herein.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Not applicable
(b) Not applicable
(c) Exhibits
2.1(a) Agreement and Plan of Merger and Recapitalization, dated as of
June 24, 1999, between RSJ Acquisition Co. and Citation
Corporation (incorporated by reference to Annex A to the proxy
statement/prospectus constituting Part I of the Company's
Registration Statement on Form S-4 (Commission File No. 333-
89431) dated October 21, 1999)
2.1(b) Amendment No. 1 to Agreement and Plan of Merger dated as of
September 3, 1999 (incorporated by reference to Annex A to the
proxy statement/prospectus constituting Part I of the
Company's Registration Statement on Form S-4 (Commission File
No. 333-89431) dated October 21, 1999)
2.1(c) Amendment No. 2 to Agreement and Plan of Merger and
Recapitalization dated as of October 12, 1999 (incorporated by
reference to Annex A to the proxy statement/prospectus
constituting Part I of the Company's Registration Statement on
Form S-4 (Commission File No. 333-89431) dated October 21,
1999)
99.1 Press release dated December 1, 1999
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: December 10, 1999 /s/ Stanley B. Atkins
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STANLEY B. ATKINS
Vice President and Secretary